1933 Act File No. 2-94560
1940 Act File No. 811-4154
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 47 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 47 X
EVERGREEN INVESTMENT TRUST
(formerly First Union Funds)
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(914) 694-2020
(Registrant's Telephone Number)
James P. Wallin, Esquire,
2500 Westchester Avenue
Purchase, New York 10577
(Name and Address of Agent for Service)
Copies to:
John A. Dudley, Esquire
Sullivan & Worcester
1025 Connecticut Ave., N.W.
Washington, D.C. 20036
It is proposed that this filing will become effective (check appropriate box)
/X/ Immediately upon filing pursuant to paragraph (b) or
/ / on (date) pursuant to paragraph (b) or
/ / 60 days after filing pursuant to paragraph (a)(i) or
/ / on (date) pursuant to paragraph (a)(i) or / / 75 days after filing
pursuant to paragraph (a)(ii) or
/ / on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
/ / 60 days after filing pursuant to paragraph (a)(i) / / on (date) pursuant to
paragraph (a)(i)
Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and:
/X/ filed the Notice required by that Rule on October 31, 1996; or
/ / intends to file the Notice required by that Rule on or about (date); or
/ / during the most recent fiscal year did not sell any securities pursuant to
Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to Rule
24f-2(b)(2), need not file the Notice.
CROSS REFERENCE SHEET
This Amendment to the Registration Statement of EVERGREEN INVESTMENT TRUST,
formerly known as FIRST UNION FUNDS, is comprised of seven of the Trust's
portfolios: (1) Evergreen High Grade Tax Free Fund (formerly, First Union High
Grade Tax Free Portfolio), (2) Evergreen Treasury Money Market Fund (formerly,
First Union Treasury Money Market Portfolio), (3) Evergreen North Carolina
Municipal Bond Fund (formerly, First Union North Carolina Municipal Bond
Portfolio), (4) Evergreen Florida Municipal Bond Fund (formerly, First Union
Florida Municipal Bond Portfolio), (5) Evergreen Georgia Municipal Bond Fund
(formerly, First Union Georgia Municipal Bond Portfolio), (6) Evergreen Virginia
Municipal Bond Fund (formerly, First Union Virginia Municipal Bond
Portfolio),and (7) Evergreen South Carolina Municipal Bond Fund (formerly, First
Union South Carolina Municipal Bond Portfolio). Each of the portfolios consist
of three separate classes of shares: (a) Class Y Shares, (b) Class A Shares, and
(c) Class B Shares, with the following exception: Evergreen Treasury Money
Market Fund, which consists of: (a) Class Y Shares and (b) Class A Shares.
CROSS REFERENCE SHEET
(as required by Rule 481(a))
N-1A Item No. Location in Prospectus(es)
Part A
Item 1. Cover Page Cover Page
Item 2. Synopsis and Fee Table Overview of the Fund(s);
Expense Information
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Cover Page; Description of
the Funds; General
Information
Item 5. Management of the Fund Management of the Fund(s);
General Information
Item 6. Capital Stock and Other Securities Dividends, Distributions and
Taxes; General
Information
Item 7. Purchase of Securities Being Offered Purchase and Redemption of
Shares
Item 8. Redemption or Repurchase Purchase and Redemption of
Shares
Item 9. Pending Legal Proceedings Not Applicable
Location in Statement of
Part B Additional Information
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Policies Investment Objectives and
Policies;Investment
Restrictions; Other
Restrictions and
Operating Policies
Item 14. Management of the Fund Management
Item 15. Control Persons and Principal Management
Holders of Securities
Item 16. Investment Advisory and Other Services Investment Adviser;
Purchase of Shares
Item 17. Brokerage Allocation Allocation of Brokerage
Item 18. Capital Stock and Other Securities Purchase of Shares
Item 19. Purchase, Redemption and Pricing of Distribution Plans; Purchase
Securities Being Offered of Shares; Net Asset Value
Item 20. Tax Status Additional Tax Information
Item 21. Underwriters Distribution Plans; Purchase
of Shares
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
*******************************************************************************
<PAGE>
PROSPECTUS October 31, 1996
EVERGREEN(SM) STATE SPECIFIC TAX-FREE FUNDS (Evergreen tree logo)
EVERGREEN FLORIDA MUNICIPAL BOND FUND
EVERGREEN GEORGIA MUNICIPAL BOND FUND
EVERGREEN NEW JERSEY TAX-FREE INCOME 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
CLASS A SHARES
CLASS B SHARES
The Evergreen State Specific Tax-Free Funds (the "Funds") are
designed to provide investors with current income exempt from Federal
income tax and certain state income tax. This Prospectus provides
information regarding the Class A and Class B shares offered by the Funds.
Each Fund is, or is a series of, an open-end, non-diversified, management
investment company except for EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND
FUND which is diversified. This Prospectus sets forth concise information
about the Funds that a prospective investor should know before investing.
The address of the Funds is 2500 Westchester Avenue, Purchase, New York
10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen group of mutual funds dated October 31, 1996
has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus
and other matters which may be of interest to investors, and may be
obtained without charge by calling the Funds at (800) 807-2940. There can
be no assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, ARE NOT INSURED OR
OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE INVESTMENT RISKS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND WILL INVEST AT LEAST 65%
OF THE VALUE OF ITS TOTAL ASSETS IN MUNICIPAL SECURITIES CONSISTING OF HIGH
YIELD (I.E., HIGH RISK), MEDIUM, LOWER RATED AND UNRATED BONDS. SUCH
SECURITIES ARE COMMONLY CALLED JUNK BONDS AND ARE SUBJECT TO GREATER MARKET
FLUCTUATIONS AND RISK OF LOSS OF INCOME AND PRINCIPAL THAN HIGHER RATED
SECURITIES. LOWER QUALITY SECURITIES INVOLVE A GREATER RISK OF DEFAULT AND,
CONSEQUENTLY, SHARES OF THE EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND
FUND ARE SPECULATIVE SECURITIES.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 6
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 18
Investment Practices and Restrictions 21
MANAGEMENT OF THE FUNDS
Investment Adviser 26
Portfolio Managers 27
Distribution Plans and Agreements 28
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 29
How to Redeem Shares 31
Exchange Privilege 32
Shareholder Services 32
Effect of Banking Laws 33
OTHER INFORMATION
Dividends, Distributions and Taxes 33
General Information 35
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Capital Management Group of First Union National Bank of North
Carolina serves as investment adviser to the Evergreen State Specific Tax-Free
Funds which include: EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA
MUNICIPAL BOND FUND, EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, EVERGREEN NORTH
CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND,
EVERGREEN VIRGINIA MUNICIPAL BOND FUND and EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND. First Union National Bank of North Carolina is a subsidiary
of First Union Corporation, the sixth largest bank holding company in the United
States.
EVERGREEN FLORIDA MUNICIPAL BOND FUND seeks current income exempt from
federal income tax consistent with preservation of capital. In addition, the
Fund intends to qualify as an investment exempt from the Florida state
intangibles tax.
EVERGREEN GEORGIA MUNICIPAL BOND FUND seeks current income exempt from
federal income tax and Georgia state income tax, consistent with preservation of
capital.
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND seeks a high level of income,
exempt from federal and New Jersey personal income taxes.
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND seeks current income exempt
from federal income tax and North Carolina state income tax, consistent with
preservation of capital. In addition, the Fund intends to qualify as an
investment substantially exempt from the North Carolina intangible personal
property tax.
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND seeks current income exempt
from federal income tax and South Carolina state income tax.
EVERGREEN VIRGINIA MUNICIPAL BOND FUND seeks current income exempt from
federal income tax and Virginia state income tax, consistent with preservation
of capital.
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND seeks to provide a high
level of current income exempt from federal income tax. Under normal
circumstances, the Fund will invest at least 65% of the value of its total
assets in municipal securities consisting of high yield (i.e., high risk),
medium, lower rated and unrated bonds.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in Class A and Class B Shares of a Fund. For
further information see "Purchase and Redemption of Fund Shares" and "General
Information -- Other Classes of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares Class B Shares
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases 4.75% None
(as a % of offering price)
Sales Charge on Dividend Reinvestments None None
Contingent Deferred Sales Charge (as a % of original purchase None 5% during the first year, 4% during the
price or redemption proceeds, whichever is lower) second year, 3% during the third and fourth
years, 2% during the fifth year, 1% during
the sixth year and 0% after the sixth year
Redemption Fee None None
Exchange Fee None None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to each Class of
Shares, together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment in each Class for the periods specified assuming
(i) a 5% annual return and (ii) redemption at the end of each period and,
additionally for Class B shares, no redemption at the end of each period.
In the following examples (i) the expenses for Class A Shares assume
deduction of the maximum 4.75% sales charge at the time of purchase, (ii) the
expenses for Class B Shares assume deduction at the time of redemption (if
applicable) of the maximum contingent deferred sales charge applicable for that
time period, and (iii) the expenses for Class B Shares reflect the conversion to
Class A Shares eight years after purchase (years eight through ten, therefore,
reflect Class A expenses).
<TABLE>
<CAPTION>
EVERGREEN FLORIDA MUNICIPAL BOND FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50%
After 1 Year $ 57 $ 68 $ 18
12b-1 Fees* .25% .75%
After 3 Years $ 78 $ 86 $ 56
Shareholder Service Fees -- .25%
After 5 Years $ 101 $ 116 $ 96
Other Expenses .27% .27%
After 10 Years $ 166 $ 179 $179
Total 1.02% 1.77%
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN GEORGIA MUNICIPAL BOND FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES** at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50%
After 1 Year $ 60 $ 70 $ 20
12b-1 Fees* .25% .75%
After 3 Years $ 85 $ 93 $ 63
Shareholder Service Fees -- .25%
After 5 Years $ 113 $ 128 $108
Other Expenses .50% .50%
After 10 Years $ 191 $ 204 $204
Total 1.25% 2.00%
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50%
After 1 Year $ 58 $ 69 $ 19
12b-1 Fees* .25% .75%
After 3 Years $ 81 $ 89 $ 59
Shareholder Service Fees -- .25%
After 5 Years $ 106 $ 121 $101
Other Expenses .37% .37%
After 10 Years $ 177 $ 190 $190
Total 1.12% 1.87%
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES** at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50%
After 1 Year $ 60 $ 70 $ 20
12b-1 Fees* .25% .75%
After 3 Years $ 85 $ 93 $ 63
Shareholder Service Fees -- .25%
After 5 Years $ 113 $ 128 $108
Other Expenses .50% .50%
After 10 Years $ 191 $ 204 $204
Total 1.25% 2.00%
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES** at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50%
After 1 Year $ 60 $ 70 $ 20
12b-1 Fees* .25% .75%
After 3 Years $ 85 $ 93 $ 63
Shareholder Service Fees -- .25%
After 5 Years $ 113 $ 128 $108
Other Expenses .50% .50%
After 10 Years $ 191 $ 204 $204
Total 1.25% 2.00%
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES** at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50%
After 1 Year $ 60 $ 70 $ 20
12b-1 Fees* .25% .75%
After 3 Years $ 85 $ 93 $ 63
Shareholder Service Fees -- .25%
After 5 Years $ 113 $ 128 $108
Other Expenses .50% .50%
After 10 Years $ 191 $ 204 $204
Total 1.25% 2.00%
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees .60% .60%
After 1 Year $ 59 $ 69 $ 19
12b-1 Fees* .25% 1.00%
After 3 Years $ 82 $ 89 $ 59
Other Expenses .29% .29%
After 5 Years $ 107 $ 122 $102
After 10 Years $ 180 $ 192 $192
Total 1.14% 1.89%
</TABLE>
From time to time each Fund's adviser may, at its discretion, reduce or waive
its fees or reimburse these Funds for certain of their other expenses in order
to reduce their expense ratios. Each Fund's adviser may cease these voluntary
waivers and reimbursements at any time.
* Class A Shares can pay up to .75 of 1% of average annual net assets as a 12b-1
Fee. For the forseeable future, the Class A Shares 12b-1 Fees will be limited
to .25 of 1% of average annual net assets. For Class B Shares of EVERGREEN
FLORIDA HIGH INCOME MUNICIPAL BOND FUND, a portion of the 12b-1 Fees
equivalent to .25 of 1% of average annual assets will be shareholder
servicing-related. Distribution-related 12b-1 Fees will be limited to
.75 of 1% of average annual assets as permitted under the rules of the
National Association of Securities Dealers, Inc.
4
<PAGE>
The estimated annual operating expenses and examples do not reflect
fee waivers and expense reimbursements for the most recent fiscal period.
Actual expenses for Class A and B Shares net of fee waivers and expense
reimbursements for the fiscal period ended August 31, 1996 were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
EVERGREEN FLORIDA MUNICIPAL BOND FUND .63% 1.56%
EVERGREEN GEORGIA MUNICIPAL BOND FUND .88% 1.63%
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND .34% 1.28%
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND 1.08% 1.83%
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND .86% 1.61%
EVERGREEN VIRGINIA MUNICIPAL BOND FUND .93% 1.68%
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND .85% 1.59%
</TABLE>
** Reflects agreements by the investment adviser to limit aggregate operating
expenses (including the investment advisory fees, but excluding interest,
taxes, brokerage commissions, Rule 12b-1 Fees, shareholder servicing fees
and extraordinary expenses) of EVERGREEN GEORGIA MUNICIPAL BOND FUND,
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA
MUNICIPAL BOND FUND and EVERGREEN VIRGINIA MUNICIPAL BOND FUND to 1% of
average net assets for the foreseeable future. Absent such agreements, the
estimated annual operating expenses for the Funds would be as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
EVERGREEN GEORGIA MUNICIPAL BOND FUND 2.82% 3.54%
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND 1.35% 2.10%
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND 4.00% 4.76%
EVERGREEN VIRGINIA MUNICIPAL BOND FUND 3.47% 4.23%
</TABLE>
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for its most recent fiscal period. THE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL
EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more
complete description of the various costs and expenses borne by the Funds see
"Management of the Funds." As a result of asset-based sales charges, long-term
shareholders may pay more than the economic equivalent of the maximum front-end
sales charges permitted under the rules of the National Association of
Securities Dealers, Inc.
5
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter for EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN NORTH
CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND and
EVERGREEN VIRGINIA MUNICIPAL BOND FUND has been audited by KPMG Peat Marwick
LLP, each Fund's independent auditors. The information in the tables for
EVERGREEN FLORIDA MUNICIPAL BOND FUND for the periods ended August 31, 1996 and
August 31, 1995 has been audited by KPMG Peat Marwick LLP, the Fund's current
independent auditors. The information in the tables for each of the years in the
three-year period ended April 30, 1995 was audited by Tait, Weller & Baker, the
Fund's prior independent auditors. The information in the tables for EVERGREEN
NEW JERSEY TAX-FREE INCOME FUND for each of the periods from March 1, 1993
through August 31, 1996 has been audited by KPMG Peat Marwick LLP, the Fund's
current independent auditors. The information in the tables for EVERGREEN NEW
JERSEY TAX-FREE INCOME FUND for the year ended February 28, 1993 has been
audited by Price Waterhouse LLP, the Fund's prior independent auditors. The
information in the tables for EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
for each of the periods from May 1, 1995 through August 31, 1996 has been
audited by Price Waterhouse LLP, the Fund's current independent auditors. The
information in the tables for EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
for each of the years in the two-year period ended April 30, 1995 and for the
period June 17, 1992 (commencement of operations) through April 30, 1993 was
audited by Tait, Weller & Baker, the Fund's prior independent auditors. A report
of KPMG Peat Marwick LLP, Price Waterhouse LLP or Tait, Weller & Baker, as the
case may be, on the audited information with respect to each Fund is
incorporated by reference in the Fund's Statement of Additional Information. The
following information for each Fund should be read in conjunction with the
financial statements and related notes which are incorporated by reference in
the Fund's Statement of Additional Information.
Further information about each Fund's performance is contained in the
Fund's annual report to shareholders, which may be obtained without charge.
EVERGREEN FLORIDA MUNICIPAL BOND FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
FOUR
MONTHS
YEAR ENDED ENDED
AUGUST 31, AUGUST 31, YEAR ENDED APRIL 30,
1996 1995#++ 1995++ 1994++ 1993++ 1992++ 1991++ 1990++
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period............................ $9.74 $9.61 $9.52 $9.95 $9.35 $9.21 $8.80 $9.09
Income (loss) from investment
operations:
Net investment income............... .54 .19 .54 .56 .56 .61 .66 .58
Net realized and unrealized gain
(loss) on investments............. (.04) .22 .11 (.36) .67 .22 .43 (.24)
Total from investment
operations...................... .50 .41 .65 .20 1.23 .83 1.09 .34
Less distributions to shareholders
from:
Net investment income............... (.54) (.19) (.54) (.56) (.56) (.61) (.68) (.59)
Distributions in excess of net
investment income................. -- (.03) -- -- -- -- -- --
Net realized gains.................. -- (.06) (.02) (.07) (.07) (.04) -- (.04)
Paid-in capital..................... -- -- -- -- -- (.04) -- --
Total distributions............... (.54) (.28) (.56) (.63) (.63) (.69) (.68) (.63)
Net asset value, end of period.... $9.70 $9.74 $9.61 $9.52 $9.95 $9.35 $9.21 $8.80
TOTAL RETURN+....................... 5.1% 4.2% 7.1% 1.9% 13.6% 9.3% 12.9% 3.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted).......................... $115,723 $136,449 $168,542 $199,612 $198,286 $147,996 $75,791 $7,286
Ratios to average net assets:
Expenses.......................... .63%** .82%++** .61% .56% .58% .41%** .10%** .10%**
Net investment income............. 5.46%** 4.89%++** 5.73% 5.37% 5.66% 6.12%** 6.55%** 6.15%**
Portfolio turnover rate............. 30% 29% 53% 32% 24% 24% 66% 82%
<CAPTION>
MAY 11,
1988*
THROUGH
APRIL 30,
1989++
<S> <C>
PER SHARE DATA:
Net asset value, beginning of
period............................ $8.82
Income (loss) from investment
operations:
Net investment income............... .47
Net realized and unrealized gain
(loss) on investments............. .22
Total from investment
operations...................... .69
Less distributions to shareholders
from:
Net investment income............... (.42)
Distributions in excess of net
investment income................. --
Net realized gains.................. --
Paid-in capital..................... --
Total distributions............... (.42)
Net asset value, end of period.... $9.09
TOTAL RETURN+....................... 9.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted).......................... $717
Ratios to average net assets:
Expenses.......................... .30%**++
Net investment income............. 5.30%**++
Portfolio turnover rate............. 2%
</TABLE>
# The Fund changed its fiscal year-end from April 30 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
YEAR MAY 11, 1988*
ENDED FOUR MONTHS THROUGH
AUGUST 31, ENDED YEAR ENDED APRIL 30, APRIL 30,
1996 AUGUST 31, 1995# 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Expenses.................................. .95% 1.05% .68% .88% 5.14% 20.40%
Net investment income (loss).............. 5.14% 4.66% 5.85% 5.77% 1.01% (14.80%)
</TABLE>
++ On June 30, 1995, ABT Florida Tax-Free Fund sold its net assets to First
Union Florida Municipal Bond Portfolio which was subsequently renamed
Evergreen Florida Municipal Bond Fund. ABT Florida Tax-Free Fund was the
accounting survivor in the combination. Accordingly, the information stated
in the above table prior to the combination reflects the results of ABT
Florida Tax-Free Fund. The net asset values per share and related per share
data have been restated to reflect the conversion of shares.
6
<PAGE>
EVERGREEN FLORIDA MUNICIPAL BOND FUND -- CLASS B AND Y SHARES
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
JUNE 30, JUNE 30,
1995* 1995*
YEAR ENDED THROUGH YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1996 1995#| 1996 1995#|
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period..................................... $9.74 $9.67 $9.74 $9.67
Income (loss) from investment operations:
Net investment income.................................................... .44 .07 .53 .09
Net realized and unrealized gain (loss) on investments................... (.04) .10 (.03) .10
Total from investment operations....................................... .40 .17 .50 .19
Less distributions to shareholders from:
Net investment income.................................................... (.44) (.07) (.54) (.09)
Distributions in excess of net investment income......................... -- (.03) -- (.03)
Net realized gains....................................................... -- -- -- --
Paid-in capital.......................................................... -- -- -- --
Total distributions.................................................... (.44) (.10) (.54) (.12)
Net asset value, end of period......................................... $9.70 $9.74 $9.70 $9.74
TOTAL RETURN+............................................................ 4.2% 1.5% 5.2% 1.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................................ $ 28,849 $ 27,351 $ 12,259 $3,602
Ratios to average net assets:
Expenses............................................................... 1.56%** 1.44%** .57%** .59%**++
Net investment income.................................................. 4.52%** 3.22%** 5.55%** 4.93%**++
Portfolio turnover rate.................................................. 30% 29% 30% 29%
</TABLE>
# The Fund changed its fiscal year-end from April 30 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
JUNE 30, JUNE 30,
1995* 1995*
YEAR ENDED THROUGH YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Expenses................................................................. 1.76% 1.64% .77% .79%
Net investment income.................................................... 4.32% 3.02% 5.35% 4.73%
</TABLE>
| On June 30, 1995, ABT Florida Tax-Free Fund sold its net assets to First
Union Florida Municipal Bond Portfolio which was subsequently renamed
Evergreen Florida Municipal Bond Fund. ABT Florida Tax-Free Fund was the
accounting survivor in the combination. Accordingly, the information stated
in the above table prior to the combination reflects the results of ABT
Florida Tax-Free Fund. The net asset values per share and related per share
data have been restated to reflect the conversion of shares.
7
<PAGE>
EVERGREEN GEORGIA MUNICIPAL BOND FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
EIGHT MONTHS JULY 2, 1993*
YEAR ENDED ENDED YEAR ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995# DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.......... $9.47 $8.74 $ 10.19 $ 10.00
Income (loss) from investment operations......
Net investment income......................... .48 .33 .48 .20
Net realized and unrealized gain (loss) on
investments................................. .10 .73 (1.45) .19
Total from investment operations............ .58 1.06 (.97) .39
Less distributions to shareholders from net
investment income........................... (.48) (.33) (.48) (.20)
Net asset value, end of period.............. $9.57 $9.47 $8.74 $10.19
TOTAL RETURN+................................. 6.2% 12.3% (9.6%) 4.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)..... $1,954 $2,098 $1,387 $817
Ratios to average net assets:
Expenses**.................................. .88% .71%++ .53% .25%++
Net investment income**..................... 4.96% 5.39%++ 5.26% 4.71%++
Portfolio turnover rate....................... 21% 91% 147% 15%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
EIGHT MONTHS JULY 2, 1993*
YEAR ENDED ENDED AUGUST 31, YEAR ENDED THROUGH
AUGUST 31, 1996 1995# DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C> <C> <C> <C>
Expense....................................... 2.82% 2.83% 3.61% 6.82%
Net investment income (loss).................. 3.02% 3.27% 2.18% (1.86%)
</TABLE>
8
<PAGE>
EVERGREEN GEORGIA MUNICIPAL BOND FUND -- CLASS B AND Y SHARES
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
EIGHT JULY 2, EIGHT FEBRUARY 28,
MONTHS 1993* MONTHS 1994*
YEAR ENDED ENDED YEAR ENDED THROUGH YEAR ENDED ENDED THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31, AUGUST 31, DECEMBER 31,
1996 1995# 1994 1993 1996 1995# 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $9.47 $8.74 $10.19 $10.00 $9.47 $8.74 $9.83
Income (loss) from
investment
operations.............
Net investment income.... .41 .28 .43 .18 .50 .35 .42
Net realized and
unrealized gain (loss)
on investments......... .10 .73 (1.45) .19 .10 .73 (1.09)
Total from investment
operations........... .51 1.01 (1.02) .37 .60 1.08 (.67)
Less distributions to
shareholders from net
investment income...... (.41) (.28) (.43) (.18) (.50) (.35) (.42)
Net asset value, end of
period................. $9.57 $9.47 $8.74 $10.19 $9.57 $9.47 $8.74
TOTAL RETURN+............ 5.4% 11.7% (10.2%) 3.7% 6.5% 12.5% (6.9%)
RATIOS & SUPPLEMENTAL
DATA:
Net assets, end of period
(000's omitted)........ $9,271 $7,538 $6,912 $3,692 $1,620 $1,339 $284
Ratios to average net
assets:
Expenses**............. 1.63% 1.46%++ 1.13% .75%++ .63% .46%++ .31%++
Net investment
income**............. 4.21% 4.64%++ 4.66% 4.15%++ 5.21% 5.64%++ 5.68%++
Portfolio turnover
rate................... 21% 91% 147% 15% 21% 91% 147%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
EIGHT JULY 2, EIGHT FEBRUARY 28,
MONTHS 1993* MONTHS 1994*
YEAR ENDED ENDED YEAR ENDED THROUGH YEAR ENDED ENDED THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31, AUGUST 31, DECEMBER 31,
1996 1995# 1994 1993 1996 1995# 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Expense................. 3.54% 3.58% 4.21% 7.32% 2.51% 2.58% 3.39%
Net investment income
(loss)................ 2.30% 2.52% 1.58% (2.42%) 3.33% 3.52% 2.60%
</TABLE>
9
<PAGE>
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
JULY 16, 1991*
SIX MONTHS THROUGH
ENDED YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 29,
AUGUST 31, 1996# FEBRUARY 29, 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.... $11.01 $10.53 $10.99 $11.01 $10.22 $10.00
Income (loss) from investment
operations:
Net investment income................... .28 .56 .57 .60 .63 .38
Net realized and unrealized gain (loss)
on investments........................ (.26) .48 (.46) (.02) .79 .22
Total from investment operations...... .02 1.04 .11 .58 1.42 .60
Less distributions to shareholders from
net investment income................. (1.28) (.56) (.57) (.60) (.63) (.38)
Net asset value, end of period........ $10.75 $11.01 $10.53 $10.99 $11.01 $10.22
TOTAL RETURN+........................... .2% 10.1% 1.4% 5.3% 14.5% 9.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted).............................. $ 32,377 $41,762 $34,852 $42,783 $30,863 $ 13,129
Ratios to average net assets:
Expenses**............................ .34%++ .36% .25% .14% .00% .01%++
Net investment income**............... 5.08%++ 5.15% 5.52% 5.31% 5.97% 5.89%++
Portfolio turnover rate................. 0% 4% 8% 2% 5% 5%
</TABLE>
# The Fund changed its fiscal year end from February 28 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment advisor, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
JULY 16, 1991*
SIX MONTHS YEAR ENDED FEBRUARY 28, THROUGH
ENDED YEAR ENDED FEBRUARY 29,
AUGUST 31, 1996# FEBRUARY 29, 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Expenses.................................... 1.11% 1.03% 1.04% 1.05% 1.16% 1.20%
Net investment income....................... 4.31% 4.48% 4.73% 4.40% 4.81% 4.70%
</TABLE>
10
<PAGE>
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND -- CLASS B AND Y SHARES
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
SIX MONTHS JANUARY 30, 1996* SIX MONTHS FEBRUARY 8, 1996*
ENDED THROUGH ENDED THROUGH
AUGUST 31, 1996# FEBRUARY 29, 1996 AUGUST 31, 1996# FEBRUARY 29, 1996
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........... $11.01 $11.08 $11.01 $11.14
Income (loss) from investment operations:
Net investment income.......................... .24 .05 .28 .03
Net realized and unrealized gain (loss) on
investments.................................. (.26) (.07) (.26) (.13)
Total from investment operations........... (.02) (.02) .02 (.10)
Less distributions to shareholders from net
investment income............................ (.24) (.05) (.28) (.03)
Net asset value, end of period............... $10.75 $11.01 $10.75 $11.01
TOTAL RETURN+.................................. (.2%) (.2%) .2% (.9%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)...... $2,709 $186 $9,076 $18
Ratios to average net assets:
Expenses**++................................. 1.28% .31% .31% .31%
Net investment income**++.................... 4.14% 5.23% 5.12% 5.28%
Portfolio turnover rate........................ 0% 4% 0% 4%
</TABLE>
# The Fund changed its fiscal year end from February 28 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
SIX MONTHS JANUARY 30, 1996* SIX MONTHS FEBRUARY 8, 1996*
ENDED THROUGH ENDED THROUGH
AUGUST 31, 1996# FEBRUARY 29, 1996 AUGUST 31, 1996# FEBRUARY 29, 1996
<S> <C> <C> <C> <C>
Expenses....................................... 1.85% 1.66% .87% .88%
Net investment income.......................... 3.57% 3.88% 4.56% 4.71%
</TABLE>
11
<PAGE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
EIGHT MONTHS JANUARY 11,
YEAR ENDED ENDED YEAR ENDED 1993* THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31,
1996 1995# 1994 1993
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period............................ $9.95 $9.16 $10.61 $10.00
Income (loss) from investment operations:
Net investment income........................................... .49 .33 .49 .46
Net realized and unrealized (loss) on investments............... .02 .79 (1.45) .64
Total from investment operations.............................. .51 1.12 (.96) 1.10
Less distributions to shareholders from:
Net investment income........................................... (.48) (.33) (.49) (.46)
Net realized gains.............................................. -- -- -- (.03)
Total distributions........................................... (.48) (.33) (.49) (.49)
Net asset value, end of period................................ $9.98 $9.95 $9.16 $10.61
TOTAL RETURN+................................................... 5.2% 12.3% (9.1%) 11.3%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)....................... $7,989 $8,279 $7,979 $12,739
Ratios to average net assets:
Expenses**.................................................... 1.08% .92%++ .79% .32%++
Net investment income**....................................... 4.81% 5.09%++ 5.11% 4.91%++
Portfolio turnover rate......................................... 86% 117% 126% 57%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were reimbursed or waived by the investment adviser, the annualized
ratios of expenses and net investment income to average net assets would have
been the following:
<TABLE>
<CAPTION>
EIGHT MONTHS JANUARY 11,
YEAR ENDED ENDED YEAR ENDED 1993* THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31,
1996 1995# 1994 1993
<S> <C> <C> <C> <C>
Expenses................................................................. 1.35% 1.27% 1.18% 1.25%
Net investment income.................................................... 4.54% 4.74% 4.72% 3.98%
</TABLE>
12
<PAGE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND -- CLASS B AND Y SHARES
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y
EIGHT MONTHS JANUARY 11, SHARES
YEAR ENDED ENDED YEAR ENDED 1993* THROUGH YEAR ENDED
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31,
1996 1995# 1994 1993 1996
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................... $9.95 $9.16 $10.61 $10.00 $9.95
Income (loss) from investment operations:
Net investment income.................................. .42 .28 .44 .42 .51
Net realized and unrealized (loss) on investments...... .02 .79 (1.45) .64 .03
Total from investment operations...................... .44 1.07 (1.01) 1.06 .54
Less distributions to shareholders from:
Net investment income.................................. (.41) (.28) (.44) (.42) (.51)
Net realized gains..................................... -- -- -- (.03) --
Total distributions................................... (.41) (.28) (.44) (.45) (.51)
Net asset value, end of period........................ $9.98 $9.95 $9.16 $10.61 $9.98
TOTAL RETURN+.......................................... 4.4% 11.8% (9.6%) 10.8% 5.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).............. $ 49,382 $49,040 $ 44,616 $45,168 $3,771
Ratios to average net assets:
Expenses**............................................ 1.83% 1.67%++ 1.37% .79%++ .84%
Net investment income**............................... 4.06% 4.34%++ 4.53% 4.47%++ 5.05%
Portfolio turnover rate................................ 86% 117% 126% 57% 86%
<CAPTION>
EIGHT MONTHS FEBRUARY 28,
ENDED 1994* THROUGH
AUGUST 31, DECEMBER 31,
1995# 1994
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................... $9.16 $10.31
Income (loss) from investment operations:
Net investment income.................................. .35 .43
Net realized and unrealized (loss) on investments...... .79 (1.15)
Total from investment operations...................... 1.14 (.72)
Less distributions to shareholders from:
Net investment income.................................. (.35) (.43)
Net realized gains..................................... -- --
Total distributions................................... (.35) (.43)
Net asset value, end of period........................ $9.95 $9.16
TOTAL RETURN+.......................................... 12.5% (7.0%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).............. $1,006 $642
Ratios to average net assets:
Expenses**............................................ .67%++ .59%++
Net investment income**............................... 5.34%++ 5.58%++
Portfolio turnover rate................................ 117% 126%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were reimbursed or waived by the investment adviser, the annualized
ratios of expenses and net investment income to average net assets would have
been the following:
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y
EIGHT MONTHS JANUARY 11, SHARES
YEAR ENDED ENDED YEAR ENDED 1993* THROUGH YEAR ENDED
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31,
1996 1995# 1994 1993 1996
<S> <C> <C> <C> <C> <C>
Expenses............................................... 2.10% 2.02% 1.76% 1.74% 1.07%
Net investment income.................................. 3.79% 3.99% 4.14% 3.52% 4.82%
<CAPTION>
EIGHT MONTHS FEBRUARY 28,
ENDED 1994* THROUGH
AUGUST 31, DECEMBER 31,
1995# 1994
<S> <C> <C>
Expenses............................................... 1.02% .98%
Net investment income.................................. 4.99% 5.19%
</TABLE>
13
<PAGE>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y SHARES
YEAR EIGHT MONTHS JANUARY 3, YEAR EIGHT MONTHS JANUARY 3, YEAR EIGHT MONTHS
ENDED ENDED 1994* THROUGH ENDED ENDED 1994* THROUGH ENDED ENDED
AUGUST 31, AUGUST 31, DECEMBER 31, AUGUST 31, AUGUST 31, DECEMBER 31, AUGUST 31, AUGUST 31,
1996 1995# 1994 1996 1995# 1994 1996 1995#
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period.... $9.59 $8.62 $10.00 $9.59 $8.62 $10.00 $9.59 $8.62
Income (loss) from
investment operations:
Net investment income... .49 .34 .46 .41 .29 .41 .51 .35
Net realized and
unrealized gain (loss)
on
investments............ .10 .97 (1.38) .10 .97 (1.38) .10 .97
Total from investment
operations........... .59 1.31 (.92) .51 1.26 (.97) .61 1.32
Less distributions to
shareholders from net
investment income...... (.49) (.34) (.46) (.41) (.29) (.41) (.51) (.35)
Net asset value, end of
period................. $9.69 $9.59 $8.62 $9.69 $9.59 $8.62 $9.69 $9.59
TOTAL RETURN+........... 6.2% 15.4% (9.3%) 5.4% 14.8% (9.8%) 6.5% 15.5%
RATIOS & SUPPLEMENTAL
DATA:
Net assets, end of
period (000's
omitted)............... $841 $610 $312 $4,282 $3,542 $2,456 $4,555 $1,673
Ratios to average net
assets:
Expenses**............. .86% .53%++ .25%++ 1.61% 1.28%++ .87%++ .62% .28%++
Net investment
income**............. 4.98% 5.41%++ 5.57%++ 4.23% 4.66%++ 4.88%++ 5.22% 5.66%++
Portfolio turnover
rate................... 37% 66% 23% 37% 66% 23% 37% 66%
<CAPTION>
FEBRUARY 28,
1994* THROUGH
DECEMBER 31,
1994
<S> <C>
PER SHARE DATA:
Net asset value,
beginning of period.... $9.74
Income (loss) from
investment operations:
Net investment income... .43
Net realized and
unrealized gain (loss)
on
investments............ (1.12)
Total from investment
operations........... (.69)
Less distributions to
shareholders from net
investment income...... (.43)
Net asset value, end of
period................. $8.62
TOTAL RETURN+........... (7.1%)
RATIOS & SUPPLEMENTAL
DATA:
Net assets, end of
period (000's
omitted)............... $92
Ratios to average net
assets:
Expenses**............. .00%++
Net investment
income**............. 5.92%++
Portfolio turnover
rate................... 23%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y SHARES
YEAR EIGHT MONTHS JANUARY 3, YEAR EIGHT MONTHS JANUARY 3, YEAR EIGHT MONTHS
ENDED ENDED 1994* THROUGH ENDED ENDED 1994* THROUGH ENDED ENDED
AUGUST 31, AUGUST 31, DECEMBER 31, AUGUST 31, AUGUST 31, DECEMBER 31, AUGUST 31, AUGUST 31,
1996 1995# 1994 1996 1995# 1994 1996 1995#
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses................ 4.00% 6.50% 10.71% 4.76% 7.25% 11.33% 3.70% 6.25%
Net investment
income (loss).......... 1.84% (.56%) (4.89%) 1.08% (1.31%) (5.58%) 2.14% (.31%)
<CAPTION>
FEBRUARY 28,
1994* THROUGH
DECEMBER 31,
1994
<S> <C>
Expenses................ 10.46%
Net investment
income (loss).......... (4.54%)
</TABLE>
14
<PAGE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
JULY 2,
YEAR EIGHT MONTHS 1993*
ENDED ENDED YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31,
1996 1995# 1994 1993
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period....................................... $9.67 $8.85 $10.19 $10.00
Income (loss) from investment operations:
Net investment income...................................................... .48 .33 .47 .20
Net realized and unrealized gain (loss) on investments..................... .01 .82 (1.34) .19
Total from investment operations......................................... .49 1.15 (.87) .39
Less distributions to shareholders from net investment income.............. (.48) (.33) (.47) (.20)
Net asset value, end of period........................................... $9.68 $9.67 $8.85 $10.19
TOTAL RETURN+.............................................................. 5.1% 13.1% (8.6%) 3.9%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).................................. $2,892 $1,983 $1,606 $1,306
Ratios to average net assets:
Expenses**............................................................... .93% .72%++ .53% .25%++
Net investment income**.................................................. 4.83% 5.17%++ 5.11% 4.64%++
Portfolio turnover rate.................................................... 68% 87% 59% 0%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
JULY 2,
YEAR EIGHT MONTHS 1993*
ENDED ENDED YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31,
1996 1995# 1994 1993
<S> <C> <C> <C> <C>
Expenses................................................................... 3.47% 3.83% 5.14% 7.75%
Net investment income (loss)............................................... 2.29% 2.06% .50% (2.86%)
</TABLE>
15
<PAGE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND -- CLASS B AND Y SHARES
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y
JULY 2, SHARES
YEAR EIGHT MONTHS 1993* YEAR
ENDED ENDED YEAR ENDED THROUGH ENDED
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31,
1996 1995# 1994 1993 1996
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................. $9.67 $8.85 $10.19 $10.00 $9.67
Income (loss) from investment operations:
Net investment income................................ .41 .28 .42 .17 .50
Net realized and unrealized gain (loss) on
investments......................................... .01 .82 (1.34) .19 .01
Total from investment operations.................... .42 1.10 (.92) .36 .51
Less distributions to shareholders from:
Net investment income................................ (.41) (.28) (.42) (.17) (.50)
Net asset value, end of period....................... $9.68 $9.67 $8.85 $10.19 $9.68
TOTAL RETURN+........................................ 4.3% 12.5% (9.1%) 3.7% 5.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............ $5,963 $ 5,803 $3,817 $2,235 $4,266
Ratios to average net assets:
Expenses**.......................................... 1.68% 1.47%++ 1.12% .75%++ .70%
Net investment income**............................. 4.09% 4.42%++ 4.54% 4.25%++ 5.05%
Portfolio turnover rate.............................. 68% 87% 59% 0% 68%
<CAPTION>
EIGHT MONTHS FEBRUARY 28,
ENDED 1994* THROUGH
AUGUST 31, DECEMBER 31,
1995# 1994
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................. $8.85 $9.83
Income (loss) from investment operations:
Net investment income................................ .34 .41
Net realized and unrealized gain (loss) on
investments......................................... .82 (.98)
Total from investment operations.................... 1.16 (.57)
Less distributions to shareholders from:
Net investment income................................ (.34) (.41)
Net asset value, end of period....................... $9.67 $8.85
TOTAL RETURN+........................................ 13.3% (5.8%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............ $965 $344
Ratios to average net assets:
Expenses**.......................................... .47%++ .28%++
Net investment income**............................. 5.42%++ 5.54%++
Portfolio turnover rate.............................. 87% 59%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y
JULY 2, SHARES
YEAR EIGHT MONTHS 1993* YEAR
ENDED ENDED YEAR ENDED THROUGH ENDED
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31,
1996 1995# 1994 1993 1996
<S> <C> <C> <C> <C> <C>
Expenses.............................................. 4.23% 4.58% 5.73% 8.25% 3.24%
Net investment income (loss).......................... 1.54% 1.31% (.07%) (3.25%) 2.51%
<CAPTION>
EIGHT MONTHS
ENDED FEBRUARY 28,
AUGUST 31, 1994* THROUGH
1995# DECEMBER 31, 1994
<S> <C> <C>
Expenses.............................................. 3.58% 4.89%
Net investment income (loss).......................... 2.31% .93%
</TABLE>
16
<PAGE>
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES
<TABLE>
<CAPTION>
CLASS A SHARES
JUNE 17,
1992* CLASS B SHARES
YEAR FOUR MONTHS THROUGH YEAR JULY 10, 1995*
ENDED ENDED YEAR ENDED APRIL ENDED THROUGH
AUGUST 31, AUGUST 31, APRIL 30, 30, AUGUST 31, AUGUST 31,
1996 1995# 1995# 1994# 1993# 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.......... $10.40 $10.16 $10.08 $10.36 $10.00 $10.40 $10.41
Income (loss) from investment operations:
Net investment income......................... .63 .21 .65 .68 .61 .55 .08
Net realized and unrealized gain (loss) on
investments.................................. .02 .24 .08 (.26) .39 .02 (.01)
Total from investment operations............. .65 .45 .73 .42 1.00 .57 .07
Less distributions to shareholders from:
Net investment income......................... (.63) (.21) (.65) (.68) (.61 ) (.55) (.08)
Net realized gains............................ -- -- -- (.02) (.03 ) -- --
Total distributions.......................... (.63) (.21) (.65) (.70) (.64 ) (.55) (.08)
Net asset value at end of period............. $10.42 $10.40 $10.16 $10.08 $10.36 $10.42 $10.40
TOTAL RETURN+................................. 6.4% 4.4% 7.6% 3.3% 10.3% 5.6% .6%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)..... $76,267 $59,551 $65,043 $72,683 $33,541 $19,219 $3,137
Ratios to average net assets:
Expenses..................................... .85%** 1.07%++** .60%** .14%** .00%**++ 1.59%**++ 1.09%++
Net investment income........................ 6.02%** 5.92%++** 6.52%** 6.16%** 5.92%**++ 5.27%** 3.40%++
Portfolio turnover rate....................... 42% 14% 28% 31% 50% 42% 14%
<CAPTION>
CLASS Y
SHARES
SEPTEMBER
20, 1995*
THROUGH
AUGUST 31,
1996
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period.......... $10.48
Income (loss) from investment operations:
Net investment income......................... .63
Net realized and unrealized gain (loss) on
investments.................................. (.06)
Total from investment operations............. .57
Less distributions to shareholders from:
Net investment income......................... (.63)
Net realized gains............................ --
Total distributions.......................... (.63)
Net asset value at end of period............. $10.42
TOTAL RETURN+................................. 6.3%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)..... $1,970
Ratios to average net assets:
Expenses..................................... .59%**++
Net investment income........................ 6.27%**++
Portfolio turnover rate....................... 42%
</TABLE>
# Effective June 30, 1995, Evergreen Florida High Income Municipal Bond Fund, a
new series of the Evergreen Municipal Trust, acquired substantially all of
the net assets of ABT Florida High Income Municipal Bond Fund. ABT Florida
High Income Municipal Bond Fund, which had a fiscal year that ended on April
30, was the accounting survivor in the combination. Accordingly, the
information above includes the results of operations of ABT Florida High
Income Municipal Bond Fund prior to June 30, 1995.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge and contingent deferred
sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
CLASS B
CLASS A SHARES SHARES
YEAR FOUR MONTHS JUNE 17, 1992* YEAR
ENDED ENDED YEAR ENDED THROUGH ENDED
AUGUST 31, AUGUST 31, APRIL 30, APRIL 30, AUGUST 31,
1996 1995# 1995# 1994# 1993# 1996
<S> <C> <C> <C> <C> <C> <C>
Expenses................................... 1.15% 1.42% 1.26% 1.12% 1.12% 1.89%
Net investment income...................... 5.72% 5.57% 5.86% 5.18% 4.80% 4.97%
<CAPTION>
CLASS Y
SHARES
SEPTEMBER
20, 1995*
THROUGH
AUGUST 31,
1996
<S> <C>
Expenses................................... .89%
Net investment income...................... 5.97%
</TABLE>
17
<PAGE>
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVES AND POLICIES
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
The Funds seek current income exempt from federal regular income tax and,
where applicable, state income taxes, consistent with preservation of capital.
In addition, the EVERGREEN FLORIDA MUNICIPAL BOND FUND intends to qualify as an
investment exempt from the Florida state intangibles tax. Florida does not
currently tax personal income.
Each Fund's investment objective is fundamental and cannot be changed
without shareholder approval. While there is no assurance that each objective
will be achieved, the Funds will endeavor to do so by following the investment
policies detailed below. Unless otherwise indicated, the investment policies of
a Fund may be changed by the Board of Trustees ("Trustees") without the approval
of shareholders. Shareholders will be notified before any material change in
these policies becomes effective.
As a matter of fundamental investment policy, which may not be changed
without shareholder approval, each Fund will normally invest its assets so that
at least 80% of its annual interest income is, or at least 80% of its net assets
are, invested in obligations which provide interest income which is exempt from
federal regular income taxes. The interest retains its tax-free status when
distributed to the Funds' shareholders. In addition, at least 65% of the value
of each Fund's total assets will be invested in municipal bonds of the
particular state after which the Fund is named. To qualify as an investment
exempt from the Florida state intangibles tax, the Evergreen Florida Municipal
Bond Fund's portfolio must consist entirely of investments exempt from the
Florida state intangibles tax on the last business day of the calendar year.
Each Fund seeks to achieve its investment objective by investing
principally in municipal bonds, including industrial development bonds, of its
designated state. In addition, the Funds may invest in obligations issued by or
on behalf of any state, territory, or possession of the United States, including
the District of Columbia, or their political subdivisions or agencies and
instrumentalities, the interest from which is exempt from federal (regular, if
applicable) income tax. It is likely that shareholders who are subject to the
alternative minimum tax will be required to include interest from a portion of
the municipal securities owned by a Fund in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
Municipal bonds are debt obligations issued by the state or local
entities to support a government's general financial needs or special projects,
such as housing projects or sewer works. Municipal bonds include industrial
development bonds issued by or on behalf of public authorities to provide
financing aid to acquire sites or construct or equip facilities for privately or
publicly owned corporations.
The two principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Revenue bonds are paid off only with the revenue
generated by the project financed by the bond or other specified sources of
revenue. For example, in the case of a bridge project, proceeds from the tolls
would go directly to retiring the bond issue. Thus, unlike general obligation
bonds, revenue bonds do not represent a pledge of credit or create any debt of
or charge against the general revenues of a municipality or public authority.
The municipal bonds in which the Funds will invest are subject to one or
more of the following quality standards: rated Baa or better by Moody's
Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's
Ratings Group ("S&P") or, if unrated, are determined by the Fund's investment
adviser to be of comparable quality to such ratings; insured by a municipal bond
insurance company which is rated Aa by Moody's or AA by S&P; guaranteed at the
time of purchase by the U.S. government as to the payment of principal and
interest; or fully collateralized by an escrow of U.S. government securities.
Bonds rated BBB by S&P or Baa by Moody's have speculative characteristics.
Changes in economic conditions or other circumstances are more likely to lead to
weakened capacity to make principal and interest payments than higher rated
bonds. However, like the higher
18
<PAGE>
rated bonds, these securities are considered to be investment grade. If any
security owned 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. If ratings made by Moody's or S&P
change because of changes in those organizations or their ratings systems, the
Funds will try to use comparable ratings as standards in accordance with the
Funds' investment objectives. A description of the rating categories is
contained in an Appendix to the Statement of Additional Information.
The Funds may also invest in:
participation interests in any of the above obligations.
(Participation interests may be purchased from financial institutions such
as commercial banks, savings and loan associations and insurance companies,
and give a Fund an undivided interest in particular municipal securities.);
variable rate municipal securities. (Variable rate securities
offer interest rates which are tied to a money market rate, usually a
published interest rate or interest rate index or the 91-day U.S. Treasury
bill rate. Many of these securities are subject to prepayment of principal
on demand by the Fund, usually in seven days or less.); and
municipal leases as described in "Investment Practices and
Restrictions", below.
During periods when, in the opinion of the Funds investment adviser, a
temporary defensive position in the market is appropriate, a Fund may
temporarily invest in short-term tax-exempt or taxable investments. These
temporary investments include: notes issued by or on behalf of municipal or
corporate issuers; obligations issued or guaranteed by the U.S. government, its
agencies, or instrumentalities; other debt securities; commercial paper; bank
certificates of deposit; shares of other investment companies; and repurchase
agreements. There are no rating requirements applicable to temporary
investments. However, the Funds investment adviser will limit temporary
investments to those it considers to be of comparable quality to the Funds'
primary investments.
Although the Funds are permitted to make taxable, temporary investments,
there is no current intention of generating income subject to federal regular
income tax, where applicable. However, certain temporary investments will
generate income which is subject to state taxes. The Funds may employ certain
additional investment strategies which are discussed in "Investment Practices
and Restrictions", below.
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
The objective of the EVERGREEN NEW JERSEY TAX-FREE INCOME FUND is to seek
a high level of income, exempt from federal and New Jersey personal income
taxes. The Fund is available only to investors who reside in New Jersey. There
is no assurance that the Fund will achieve its stated objective. The investment
objective of the Fund is fundamental and so may not be changed without the
approval of a majority of the Fund's shareholders.
To attain its objective, the EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
invests at least 80% of its net assets in municipal securities issued by the
State of New Jersey or its counties, municipalities, authorities or other
political subdivisions and municipal securities issued by territories or
possessions of the United States, such as Puerto Rico, the interest on which, in
the opinion of bond counsel, is exempt from federal and New Jersey personal
income taxes. The Fund normally invests in intermediate and long-term municipal
securities. Intermediate-term municipal securities generally mature in three to
ten years. Long-term municipal securities generally mature in ten to thirty
years. The Fund has no maximum or minimum maturity for any individual municipal
securities, however, it will maintain a dollar-weighted average portfolio
maturity of twenty years or less. If its investment adviser determines that
market conditions warrant a shorter average maturity, the Fund's investments
will be adjusted accordingly.
The Fund will only purchase securities rated within the three highest
rating categories by Moody's or by S&P and unrated securities of equivalent
quality as determined by the investment adviser pursuant to guidelines
established by the Trustees. See the Statement of Additional Information for
further information in regard to ratings.
The Fund will seek to invest substantially all of its assets in
intermediate and long-term municipal securities. However, under certain
circumstances, such as a temporary decline in the issuance of New Jersey
obligations, the Fund may invest up to 20% of its assets in the following:
short-term municipal securities issued outside of New Jersey (the income from
which may be subject to New Jersey income taxes) or certain taxable fixed income
securities (the income from which may be subject to federal and New Jersey
personal income taxes).
19
<PAGE>
In addition, under unusual circumstances the Fund reserves the right to
invest more than 20% of its assets in securities other than New Jersey municipal
securities such as taxable fixed income securities, the interest from which may
be subject to Federal and New Jersey personal income taxes. In most instances,
however, the Fund will seek to avoid holdings in an effort to provide income
that is fully exempt from federal and New Jersey personal income taxes.
The Fund may also invest in municipal securities issued to finance
private activities, whose interest is a preference item for purposes of the
Federal alternative minimum tax. Such "private activity bonds" might include
industrial development bonds and securities issued to finance projects such as
solid waste disposal facilities, student loans or water and sewage projects. The
Fund currently intends to treat "private activity bonds" as not federally
tax-exempt and accordingly to limit income from "private activity bonds" to no
more than 20%. See "Other Information-Dividends, Distributions and Taxes" for
further information. The Fund may invest in other municipal securities and may
employ additional investment strategies which are discussed in "Investment
Practices and Restrictions" below.
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND seeks to provide a high
level of current income which is exempt from federal income taxes. This
objective is fundamental and may not be changed without shareholder approval.
The term "high-level" indicates that the Fund seeks to achieve an income level
that exceeds that which an investor would expect from an investment grade
portfolio with similar maturity characteristics. EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND invests primarily in high yield, medium and lower rated (Baa
through C by Moody's and BBB through C1 by S&P) and unrated municipal
securities. To varying degrees, medium and lower rated municipal securities, as
well as unrated municipal securities, are considered to have speculative
characteristics and are subject to greater market fluctuations and risk of loss
of income and principal than higher rated securities. To the extent that an
investor realizes a yield in excess of that which could be expected from a fund
which invests primarily in investment grade securities, the investor should
expect to bear increased risk due to the fact that the risk of principal and/or
interest not being repaid with respect to the high yield securities described
above is significantly greater than that which exists in connection with
investment grade securities. In assessing the risk involved in purchasing medium
and lower rated and unrated securities, the Fund's investment adviser will use
nationally recognized statistical rating organizations such as Moody's and S&P,
and will also rely heavily on credit analysis it develops internally. Under
normal circumstances, the Fund's dollar-weighted average maturity generally will
be fifteen years or more. However, the Fund may invest in securities of any
maturity, and if the Fund's investment adviser determines that market conditions
warrant a shorter average maturity, the Fund's investments will be adjusted
accordingly. In pursuit of its investment objective, EVERGREEN FLORIDA HIGH
INCOME MUNICIPAL BOND FUND will, under normal market conditions, invest at least
65% of its total assets in such medium and lower rated municipal securities or
unrated municipal securities of comparable quality to such rated municipal
bonds. Investors should note that such a policy is not a fundamental policy of
the Fund and shareholder approval is not necessary to change such policy. There
is no assurance that EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND can
achieve its investment objective.
The Fund will not invest in municipal securities which are in default,
i.e., securities rated D by S&P. Investments may also be made by EVERGREEN
FLORIDA HIGH INCOME MUNICIPAL BOND FUND in higher quality municipal bonds and,
for temporary defensive purposes, the Fund may invest less than 65% of its total
assets in the medium and lower quality municipal securities described above. The
Fund may assume a defensive position if, for example, yield spreads between
lower grade and investment grade municipal bonds are narrow and the yields
available on lower quality municipal securities do not justify the increased
risk associated with an investment in such securities or when there is a lack of
medium and lower quality issues in which to invest. EVERGREEN FLORIDA HIGH
INCOME MUNICIPAL BOND FUND may also invest primarily in higher quality municipal
obligations if its net assets are at a level that would not permit the Fund to
invest in medium and lower rated municipal bonds and at the same time maintain
adequate diversification and liquidity. Investing in this manner may result in
yields lower than those normally associated with a fund that invests primarily
in medium and lower quality municipal securities.
20
<PAGE>
During the fiscal year ended August 31, 1996 EVERGREEN FLORIDA HIGH
INCOME MUNICIPAL BOND FUND'S holdings had the following average credit quality
characteristics:
<TABLE>
<CAPTION>
Percent of
Rating Net Assets
<S> <C>
Aaa or AAA 3.31%
Aa or AA --
A 4.66%
Baa or BBB 15.93%
Ba or BB 6.92%
B 0.67%
Non-rated 63.71%
Total 95.20%
</TABLE>
The Fund may purchase industrial development bonds only if the interest
on such bonds is, in the opinion of counsel, exempt from Federal income taxes.
It is anticipated that the annual portfolio turnover rate for the Fund may
exceed 100%. The Fund may invest in other municipal securities and may employ
certain additional investment strategies which are discussed in "Investment
Practices and Restrictions", below. Also, see the Statement of Additional
Information for further information in regard to ratings.
INVESTMENT PRACTICES AND RESTRICTIONS
Risk Factors. Bond yields are dependent on several factors including market
conditions, the size of an offering, the maturity of the bond, ratings of the
bond and the ability of issuers to meet their obligations. There is no limit on
the maturity of the bonds purchased by the Funds. Because the prices of bonds
fluctuate inversely in relation to the direction of interest rates, the prices
of longer term bonds fluctuate more widely in response to market interest rate
changes. A Fund's concentration in securities issued by its designated state and
that state's political subdivisions provides a greater level of risk than a fund
which is diversified across numerous states and municipal entities.
Although the Funds, other than EVERGREEN FLORIDA HIGH INCOME MUNICIPAL
BOND FUND, will not purchase securities rated below BBB by S&P or Baa by Moody's
(i.e., junk bonds), the Funds are not required to dispose of securities that
have been downgraded subsequent to their purchase. If the municipal obligations
held by a Fund (because of adverse economic conditions in a particular state,
for example) are downgraded, the Fund's concentration in securities of that
state may cause the Fund to be subject to the risks inherent in holding material
amounts of low-rated debt securities in its portfolio. As stated above,
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND invests primarily in high
yield, medium and lower rated (Baa through C by Moody's and BBB through C1 by
S&P) and unrated securities. Additional risk factors relating to the investment
by EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND in high yield, medium and
lower rated (Baa through C by Moody's and BBB through C1 by S&P) and unrated
securities are discussed below.
Portfolio Turnover. A portfolio turnover rate of 100% would occur if all of a
Fund's portfolio securities were replaced in one year. The portfolio turnover
rate experienced by a Fund directly affects the transaction costs relating to
the purchase and sale of securities which a Fund bears directly. A high rate of
portfolio turnover will increase such costs. See the Statement of Additional
Information for further information regarding the practices of the Funds
affecting portfolio turnover.
Non-Diversification. Each of EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN
GEORGIA MUNICIPAL BOND FUND, EVERGREEN NEW JERSEY TAX-FREE INCOME FUND,
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL
BOND FUND and EVERGREEN VIRGINIA MUNICIPAL BOND FUND is a non-diversified
portfolio of an investment company and, as such, there is no limit on the
percentage of assets which can be invested in any single issuer. An investment
in a Fund, therefore, will entail greater risk than would exist in a diversified
investment company because the higher percentage of investments among fewer
issuers may result in greater fluctuation in the total market value of the
Fund's portfolio. Each of the Funds intends to comply with Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code") which requires that at
the end of each quarter of each taxable year, with regard to at least 50% of the
Fund's total assets, no more than 5% of the total assets may be invested in the
securities of a single issuer and that with respect to the remainder of the
Fund's total assets, no more than 25% of its total assets are invested in the
securities of a single issuer.
21
<PAGE>
Repurchase Agreements. The Funds may invest in repurchase agreements. Repurchase
agreements are agreements by which a Fund purchases a security (usually U.S.
government securities) for cash and obtains a simultaneous commitment from the
seller (usually a bank or broker/dealer) to repurchase the security at an
agreed-upon price and specified future date. The repurchase price reflects an
agreed-upon interest rate for the time period of the agreement. The Funds risk
is the inability of the seller to pay the agreed-upon price on the delivery
date. However, this risk is tempered by the ability of the Funds to sell the
security in the open market in the case of a default. In such a case, the Funds
may incur costs in disposing of the security which would increase Fund expenses.
The Funds investment adviser will monitor the creditworthiness of the firms with
which the Funds enter into repurchase agreements.
When-Issued And Delayed Delivery Transactions. The Funds may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Funds purchase securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Funds to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Funds may pay more or less than the market value of the
securities on the settlement date. The Funds may dispose of a commitment prior
to settlement if the Funds investment adviser deems it appropriate to do so. In
addition, the Funds may enter into transactions to sell their purchase
commitments to third parties at current market values and simultaneously acquire
other commitments to purchase similar securities at later dates. The Funds may
realize short-term profits or losses upon the sale of such commitments.
Lending Of Portfolio Securities. In order to generate additional income, the
Funds may lend their portfolio securities on a short-term or long-term basis to
broker/dealers, banks, or other institutional borrowers of securities. The Funds
will only enter into loan arrangements with creditworthy borrowers and will
receive collateral in the form of cash or U.S. government securities equal to at
least 100% of the value of the securities loaned. As a matter of fundamental
investment policy, which cannot be changed without shareholder approval, the
Funds will not lend any of their assets except portfolio securities up to
one-third of the value of their total assets, except for EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND, which will only lend up to 5% of the value of its net
assets. There is the risk that when lending portfolio securities, the securities
may not be available to a Fund on a timely basis and the Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In addition,
in the event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
Investing In Securities Of Other Investment Companies. Each Fund may invest in
the securities of other investment companies. This is a short-term measure to
invest cash which has not yet been invested in other portfolio instruments and
is subject to the following limitations: (1) no Fund will own more than 3% of
the total outstanding voting stock of any one investment company, (2) no Fund
may invest more than 5% of its total assets in any one investment company, and
(3) no Fund may invest more than 10% of its total assets in investment companies
in general. Each Fund's investment adviser will waive its investment advisory
fee on assets invested in securities of other open end investment companies.
Borrowing. As a matter of fundamental policy, which may not be changed without
shareholder approval, the Funds may not borrow money except as a temporary
measure to facilitate redemption requests which might otherwise require the
untimely disposition of portfolio investments and for extraordinary or emergency
purposes, provided that the aggregate amount of such borrowings shall not exceed
one-third of the value of the total net assets at the time of such borrowing.
Illiquid Securities. The Funds may invest up to 15% of their net assets in
illiquid securities and other securities which are not readily marketable.
Repurchase agreements with maturities longer than seven days will be included
for the purpose of the foregoing 15% limit. Securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933, which have been
determined to be liquid, will not be considered by the Funds investment adviser
to be illiquid or not readily marketable and, therefore, are not subject to the
aforementioned 15% limit. The inability of a Fund to dispose of illiquid or not
readily marketable investments readily or at a reasonable price could impair a
Fund's ability to raise cash for redemptions or other purposes. The liquidity of
securities purchased by a Fund which are eligible for resale pursuant to Rule
144A will be monitored by the Funds investment adviser on an ongoing basis,
subject to the oversight of the Trustees. In the event that such a security is
deemed to be no longer liquid, a Fund's holdings will be reviewed to determine
what action, if any, is required to ensure that the retention of such security
does not result in a Fund having more than 15% of its net assets invested in
illiquid or not readily marketable securities.
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Unseasoned Issuers. The Funds will not invest more than 5% of the value of their
total assets in securities of issuers (or guarantors, where applicable) which
have records of less than three years of continuous operations, including the
operation of any predecessor.
Risk Factors Associated with Medium and Lower Rated and Unrated Municipal
Obligations. EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND will invest in
medium and lower rated or unrated municipal securities. The market for high
yield, high risk debt securities rated in the medium and lower rating
categories, or which are unrated, is relatively new and its growth has
paralleled a long economic expansion. Past experience may not, therefore,
provide an accurate indication of future performance of this market,
particularly during periods of economic recession. An economic downturn or
increase in interest rates is likely to have a greater negative effect on this
market, the value of high yield debt securities in the Fund's portfolio, the
Fund's net asset value and the ability of the bonds' issuers to repay principal
and interest, meet projected business goals and obtain additional financing,
than would be the case if investments by the Fund were limited to higher rated
securities. These circumstances also may result in a higher incidence of
defaults. Yields on medium or lower-rated municipal bonds may not fully reflect
the higher risks of such bonds. Therefore, the risk of a decline in market
value, should interest rates increase or credit quality concerns develop, may be
higher than has historically been experienced with such investments. An
investment in EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND may be
considered more speculative than investment in shares of another fund which
invests primarily in higher rated debt securities.
Prices of high yield debt securities may be more sensitive to adverse
economic changes or corporate developments than higher rated investments. Debt
securities with longer maturities, which may have higher yields, may increase or
decrease in value more than debt securities with shorter maturities. Market
prices of high yield debt securities structured as zero coupon or pay-in-kind
securities are affected to a greater extent by interest rate changes and may be
more volatile than securities which pay interest periodically and in cash. Where
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND deems it appropriate and in
the best interests of its shareholders, it may incur additional expenses to seek
recovery on a debt security on which the issuer has defaulted and to pursue
litigation to protect the interests of security holders of its portfolio
entities.
Because the market for medium or lower rated securities may be thinner
and less active than the market for higher rated securities, there may be market
price volatility for these securities and limited liquidity in the resale
market. Unrated securities are usually not as attractive to as many buyers as
are rated securities, a factor which may make unrated securities less
marketable. These factors may have the effect of limiting the availability of
the securities for purchase by the EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND
FUND and may also limit the ability of the Fund to sell such securities at their
fair value either to meet redemption requests or in response to changes in the
economy or the financial markets. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the values and
liquidity of medium or lower rated debt securities, especially in a thinly
traded market. To the extent the Fund owns or may acquire illiquid or restricted
high yield securities, these securities may involve special registration
responsibilities, liabilities and costs, and liquidity and valuation
difficulties. Changes in values of debt securities which the Fund owns will
affect the Fund's net asset value per share. If market quotations are not
readily available for the Fund's lower rated or unrated securities, these
securities will be valued by a method that the Trustees believes accurately
reflects fair value. Valuation becomes more difficult and judgment plays a
greater role in valuing high yield debt securities than with respect to
securities for which more external sources of quotations and last sale
information are available.
Special tax considerations are associated with investing in high yield
debt securities structured as zero coupon or pay-in-kind securities. A Fund
investing in such securities accrues income on these securities prior to the
receipt of cash payments. EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND must
distribute substantially all of its income to shareholders to qualify for pass
through treatment under the tax laws and may, therefore, have to dispose of
portfolio securities to satisfy distribution requirements.
While credit ratings are only one factor EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND'S investment adviser relies on in evaluating high yield debt
securities, certain risks are associated with using credit ratings. Credit
ratings evaluate the safety of principal and interest payments, not market value
risk. Credit rating agencies may fail to change in timely manner the credit
ratings to reflect subsequent events; however, the Fund's investment adviser
continuously monitors the issuers of high yield debt securities in the Fund's
portfolio in an attempt to determine if the issuers will have sufficient cash
flow and profits to meet required principal and interest payments. Achievement
of EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND'S investment objective may
be more dependent upon the Fund's investment adviser and the credit analysis
capability of the Fund's investment adviser, than is the case for funds which
hold higher quality debt securities. Credit ratings for individual securities
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may change from time to time and EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND
FUND may retain a portfolio security whose rating has been changed. See the
Statement of Additional Information for a description of bond and note ratings.
Transactions in Options and Futures. The Funds, other than EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND, may engage in options and futures transactions. Options
and futures transactions are intended to enable a Fund to manage market or
interest rate risk, and the Funds do not use these transactions for speculation
or leverage. The Funds, other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND,
may attempt to hedge all or a portion of their portfolios through the purchase
of both put and call options on their portfolio securities and listed put
options on financial futures contracts for portfolio securities. The Funds may
also write covered call options on their portfolio securities to attempt to
increase their current income. The Funds will maintain their positions in
securities, option rights, and segregated cash subject to puts and calls until
the options are exercised, closed, or have expired. An option position may be
closed out only on an exchange which provides a secondary market for an option
of the same series. The Funds may purchase listed put options on financial
futures contracts. These options will be used only to protect portfolio
securities against decreases in value resulting from market factors such as an
anticipated increase in interest rates.
The Funds, other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, may
write (i.e., sell) covered call and put options. By writing a call option, a
Fund becomes obligated during the term of the option to deliver the securities
underlying the option upon payment of the exercise price. By writing a put
option, a Fund becomes obligated during the term of the option to purchase the
securities underlying the option at the exercise price if the option is
exercised. The Funds also may write straddles (combinations of covered puts and
calls on the same underlying security). The Funds may only write "covered"
options. This means that so long as a Fund is obligated as the writer of a call
option, it will own the underlying securities subject to the option or, in the
case of call options on U.S. Treasury bills, the Fund might own substantially
similar U.S. Treasury bills. A Fund will be considered "covered" with respect to
a put option it writes if, so long as it is obligated as the writer of the put
option, it deposits and maintains with its custodian in a segregated account
liquid assets having a value equal to or greater than the exercise price of the
option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised. By
writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Funds might become obligated to purchase the underlying securities for more than
their current market price upon exercise.
A futures contract is a firm commitment by two parties: the seller, who
agrees to make delivery of the specific type of instrument called for in the
contract ("going short"), and the buyer, who agrees to take delivery of the
instrument ("going long") at a certain time in the future. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities of
the U.S. government. If a Fund would enter into financial futures contracts
directly to hedge its holdings of fixed income securities, it would enter into
contracts to deliver securities at an undetermined price (i.e., "go short") to
protect itself against the possibility that the prices of its fixed income
securities may decline during the Fund's anticipated holding period. A Fund
would "go long" (agree to purchase securities in the future at a predetermined
price) to hedge against a decline in market interest rates.
The Funds, other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, may also
enter into financial futures contracts and write options on such contracts. The
Funds intend to enter into such contracts and related options for hedging
purposes. The Funds will enter into futures on securities or index-based futures
contracts in order to hedge against changes in interest rates or securities
prices. A futures contract on securities is an agreement to buy or sell
securities during a designated month at whatever price exists at that time. A
futures contract on a securities index does not involve the actual delivery of
securities, but merely requires the payment of a cash settlement based on
changes in the securities index. The Funds do not make payment or deliver
securities upon entering into a futures contract. Instead, they put down a
margin deposit, which is adjusted to reflect changes in the value of the
contract and which remains in effect until the contract is terminated.
The Funds, other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, may sell
or purchase other financial futures contracts. When a futures contract is sold
by a Fund, the profit on the contract will tend to rise when the value of the
underlying securities declines and to fall when the value of such securities
increases. Thus, the Funds sell futures contracts in order to offset a possible
decline in the profit on their securities. If a futures
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contract is purchased by a Fund, the value of the contract will tend to rise
when the value of the underlying securities increases and to fall when the value
of such securities declines. The Funds may enter into closing purchase and sale
transactions in order to terminate a futures contract and may buy or sell put
and call options for the purpose of closing out their options positions. The
Funds' ability to enter into closing transactions depends on the development and
maintenance of a liquid secondary market. There is no assurance that a liquid
secondary market will exist for any particular contract or at any particular
time. As a result, there can be no assurance that the Funds will be able to
enter into an offsetting transaction with respect to a particular contract at a
particular time. If the Funds are not able to enter into an offsetting
transaction, the Funds will continue to be required to maintain the margin
deposits on the contract and to complete the contract according to its terms, in
which case it would continue to bear market risk on the transaction.
Risk Characteristics of Options and Futures. Although options and futures
transactions are intended to enable the Funds to manage market or interest rate
risks, these investment devices can be highly volatile, and the Funds use of
them can result in poorer performance (i.e., the Funds return may be reduced).
The Funds attempt to use such investment devices for hedging purposes may not be
successful. Successful futures strategies require the ability to predict future
movements in securities prices, interest rates and other economic factors. When
the Funds use financial futures contracts and options on financial futures
contracts as hedging devices, there is a risk that the prices of the securities
subject to the financial futures contracts and options on financial futures
contracts may not correlate perfectly with the prices of the securities in the
Funds' portfolios. This may cause the financial futures contract and any related
options to react to market changes differently than the portfolio securities. In
addition, the Funds investment adviser could be incorrect in its expectations
and forecasts about the direction or extent of market factors, such as interest
rates, securities price movements, and other economic factors. Even if the Funds
investment adviser correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of a Fund's futures position did not
correspond to changes in the value of its investments. In these events, the
Funds may lose money on the financial futures contracts or the options on
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although the Funds investment adviser will
consider liquidity before entering into financial futures contracts or options
on financial futures contracts transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular financial futures
contract or option on a financial futures contract at any particular time. The
Funds' ability to establish and close out financial futures contracts and
options on financial futures contract positions depends on this secondary
market. If a Fund is unable to close out its position due to disruptions in the
market or lack of liquidity, the Fund may lose money on the futures contract or
option, and the losses to the Fund could be significant.
Municipal Lease Obligations. Each Fund may purchase municipal leases, which are
issued by state and local governments or authorities to finance the acquisition
of equipment and facilities. The Funds may purchase municipal securities in the
form of participation interests which represent undivided proportional interests
in lease payments by a governmental or non-profit entity. The lease payments and
other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal charter or the
nature of the appropriation for the lease. In particular, lease obligations may
be subject to periodic appropriation. If the entity does not appropriate funds
for future lease payments, the entity cannot be compelled to make such payments.
Furthermore, a lease may provide that the certificate trustee cannot accelerate
lease obligations upon default. The trustee would only be able to enforce lease
payments as they become due. In the event of a default or failure of
appropriation, it is unlikely that the trustee would be able to obtain an
acceptable substitute source of payment or that the substitute source of payment
would generate tax-exempt income.
Resource Recovery Bonds. Each Fund may purchase resource recovery bonds, which
may be general obligations of the issuing municipality or supported by corporate
or bank guarantees. The viability of the resource recovery project,
environmental protection regulations and project operator tax incentives may
affect the value and credit quality of resource recovery bonds.
Zero Coupon Debt Securities. The Funds may purchase zero coupon debt securities.
These securities do not make regular interest payments. Instead, they are sold
at a deep discount from their face value. In calculating their daily dividends,
each day the Fund takes into account as income a portion of the difference
between these securities' purchase price and their face value. Because they do
not pay current income, the prices of zero coupon debt securities can be very
volatile when interest rates change.
Securities with Put or Demand Rights. The Funds have the ability to enter into
put transactions, sometimes referred to as stand-by commitments, with respect to
Municipal Obligations held in their portfolio or to purchase
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securities which carry a demand feature or put option which permit a Fund, as
holder, to tender them back to the issuer or a third party prior to maturity and
receive payment within seven days. Segregated accounts will be maintained by
each Fund for all such transactions. For a detailed description of put
transactions, see "Investment Policies -- Securities with Put Rights" in the
Statement of Additional Information.
The amount payable to a Fund by the seller upon its exercise of a put
will normally be (i) the Funds' acquisition cost of the securities (excluding
any accrued interest which the Funds paid on their acquisition), less any
amortized market premium plus any amortized market or original issue discount
during the period a Fund owned the securities, plus (ii) all interest accrued on
the securities since the last interest payment date during the period the
securities were owned by a Fund. Accordingly, the amount payable by a
broker-dealer or bank during the time a put is exercisable will be substantially
the same as the value of the underlying securities.
A Fund's right to exercise a put is unconditional and unqualified. A put
is not transferable by a Fund, although each Fund may sell the underlying
securities to a third party at any time. The Funds expect that puts will
generally be available without any additional direct or indirect cost. However,
if necessary and advisable, a Fund may pay for certain puts either separately in
cash or by paying a higher price for portfolio securities which are acquired
subject to such a put (thus reducing the yield to maturity otherwise available
to the same securities). Thus, the aggravate price paid for securities with put
rights may be higher than the price that would otherwise be paid.
A Fund may enter into put transactions only with broker-dealers (in
accordance with the rules of the Securities and Exchange Commission) and banks
which, in the opinion of the Funds investment adviser, present minimal credit
risks. The Funds' investment adviser will monitor periodically the
creditworthiness of issuers of such obligations held by each Fund. The Funds'
ability to exercise a put will depend on the ability of the broker-dealer or
bank to pay for the underlying securities at the time the put is exercised. In
the event that a broker-dealer should default on its obligation to purchase an
underlying security, a Fund might be unable to recover all or a portion of any
loss sustained from having to sell the security elsewhere. The Funds intend to
enter into put transactions solely to maintain portfolio liquidity and do not
intend to exercise their rights thereunder for trading purposes.
SPECIAL RISK FACTORS RELATED TO INVESTING IN MUNICIPAL SECURITIES
It should be noted that municipal securities may be adversely affected by
local political and economic conditions and developments within a state. For
example, adverse conditions in a significant industry within New Jersey may from
time to time have a correspondingly adverse effect on specific issuers within
New Jersey or on anticipated revenue to the State itself; conversely, an
improving economic outlook for a significant industry may have a positive effect
on such issuers or revenues.
The value of municipal securities may also be affected by general
conditions in the money markets or the municipal bond markets, the levels of
federal and state income tax rates, the supply of tax-exempt bonds, the size of
the particular offering, the maturity of the obligation, the credit quality and
rating of the issue, and perceptions with respect to the level of interest
rates. In general, the value of bonds tends to appreciate when interest rates
decline and depreciate when interest rates rise. An expanded discussion of the
risks associated with the purchase of securities issued in certain states is
contained in the Statement of Additional Information.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER
The management of each Fund is supervised by the Trustees of the Trust
under which each Fund has been established ("Trustees"). The Capital Management
Group of First Union National Bank of North Carolina ("CMG") serves as
investment adviser to EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA
MUNICIPAL BOND FUND, EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, EVERGREEN NORTH
CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND,
EVERGREEN VIRGINIA MUNICIPAL BOND FUND and EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND. First Union National Bank of North Carolina ("FUNB") is a
subsidiary of First Union Corporation ("First Union"), the sixth largest bank
holding company in the United States. First Union is headquartered in Charlotte,
North Carolina, and had $139.9 billion in consolidated assets as of June 30,
1996. First Union and its subsidiaries provide a broad range of financial
services to individuals and businesses throughout the United States. CMG manages
or otherwise oversees the investment of over $42.1 billion in assets
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belonging to a wide range of clients, including all the series of Evergreen
Investment Trust, the two series of The Evergreen Lexicon Fund (formerly The FFB
Lexicon Fund) and the two series of Evergreen Tax-Free Trust (formerly FFB Funds
Trust). First Union Brokerage Services, Inc., a wholly-owned subsidiary of FUNB,
is a registered broker-dealer that is principally engaged in providing retail
brokerage services consistent with its federal banking authorizations. First
Union Capital Markets Corp., a wholly-owned subsidiary of First Union, is a
registered broker-dealer principally engaged in providing, consistent with its
federal banking authorizations, private placement, securities dealing, and
underwriting services.
CMG manages investments and supervises the daily business affairs of each
Fund and, as compensation therefor, is entitled to receive an annual fee equal
to .50 of 1% of the average daily net assets of EVERGREEN FLORIDA MUNICIPAL BOND
FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN NORTH CAROLINA MUNICIPAL
BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND and EVERGREEN VIRGINIA
MUNICIPAL BOND FUND, .60 of 1% of the average daily net assets of EVERGREEN
FLORIDA HIGH INCOME MUNICIPAL BOND FUND and, from EVERGREEN NEW JERSEY TAX-FREE
INCOME FUND, .50 of 1% of the average daily net assets up to $500 million, .45
of 1% of the next $500 million of assets, .40 of 1% of assets in excess of $1
billion but not exceeding $1.5 billion, and .35 of 1% of assets in excess of
$1.5 billion. The total annualized operating expenses of EVERGREEN FLORIDA
MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND, EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN
SOUTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN VIRGINIA MUNICIPAL BOND FUND and
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND for the fiscal year ended
August 31, 1996 are set forth in the section entitled "Financial Highlights".
Evergreen Asset Management Corp. ("Evergreen Asset"), a subsidiary of
FUNB, serves as administrator to each Fund and is entitled to receive a fee
based on the average daily net assets of each Fund at a rate based on the total
assets of the mutual funds administered by Evergreen Asset for which CMG or
Evergreen Asset also serve as investment adviser, calculated in accordance with
the following schedule: .050% of the first $7 billion; .035% on the next $3
billion; .030% on the next $5 billion; .020% on the next $10 billion; .015% on
the next $5 billion; and .010% on assets in excess of $30 billion. Furman Selz
LLC, an affiliate of Evergreen Funds Distributor, Inc., distributor for the
Evergreen group of mutual funds, serves as sub-administrator for each Fund and
is entitled to receive a fee from each Fund calculated on the average daily net
assets of each Fund at a rate based on the total assets of the mutual funds
administered by Evergreen Asset for which CMG or Evergreen Asset also serve as
investment adviser, calculated in accordance with the following schedule: .0100%
of the first $7 billion; .0075% on the next $3 billion; .0050% on the next $15
billion; and .0040% on assets in excess of $25 billion. The total assets of the
mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset
serve as investment adviser were approximately $15.2 billion as of June 30,
1996. Prior to January 1, 1996, First Fidelity Bank, N.A. ("First Fidelity")
served as investment adviser to EVERGREEN NEW JERSEY TAX-FREE INCOME FUND. CMG
succeeded to the mutual funds advisory business of First Fidelity in connection
with the acquisition of First Fidelity by a subsidiary of First Union.
PORTFOLIO MANAGERS
Robert S. Drye is a Vice President of FUNB, and has been with FUNB since
1968. Since 1989, Mr. Drye has served as a portfolio manager for several of the
series of Evergreen Investment Trust and for certain common trust funds. Prior
to 1989, Mr. Drye was a marketing specialist with First Union Brokerage
Services, Inc. Mr. Drye has managed the EVERGREEN SOUTH CAROLINA MUNICIPAL BOND
FUND since its inception in 1994 and the EVERGREEN FLORIDA MUNICIPAL BOND FUND
since its inception in 1993. Richard K. Marrone is a Vice President of FUNB. Mr.
Marrone joined FUNB in 1993 with eleven years experience managing fixed income
assets at Woodbridge Capital Management, a subsidiary of Comerica Bank, N.A. Mr.
Marrone is responsible for the portfolio management of several series of
Evergreen Investment Trust and certain common trust funds. Mr. Marrone has
served as portfolio manager of the EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
since 1993, the EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND since its
inception in 1995 and EVERGREEN GEORGIA MUNICIPAL BOND FUND since its inception
in 1993. Charles E. Jeanne joined FUNB in 1993. Prior to joining FUNB, Mr.
Jeanne served as a trader/portfolio manager for First American Bank where he was
responsible for individual accounts and common trust funds. Mr. Jeanne has been
the portfolio manager for the EVERGREEN VIRGINIA MUNICIPAL BOND FUND since its
inception in 1993. Jocelyn Turner is a Municipal Bond Portfolio Manager for CMG
and has managed the EVERGREEN NEW JERSEY TAX-FREE INCOME FUND since 1992. Ms.
Turner was previously employed as a Vice President, Municipal Bond Portfolio
Manager at One Federal Asset Management, Boston, MA from 1987 to 1991.
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DISTRIBUTION PLANS AND AGREEMENTS
Rule 12b-1 under the Investment Company Act of 1940 permits an investment
company to pay expenses associated with the distribution of its shares in
accordance with a duly adopted plan. Each Fund has adopted for each of its Class
A and Class B shares a Rule 12b-1 plan (each, a "Plan" or collectively the
"Plans"). Under the Plans, each Fund may incur distribution-related and
shareholder servicing-related expenses which may not exceed an annual rate of
.75 of 1% of the aggregate average daily net assets attributable to the Class A
shares of each Fund other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, .35 of
1% of the aggregate average daily net assets attributable to the Class A shares
of EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, 1.00% of the aggregate average
daily net assets attributable to the Class B shares of EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND and EVERGREEN FLORIDA HIGH INCOME MUNICIPAL FUND, and .75
of 1% of the aggregate average daily net assets attributable to the Class B
shares of EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL
BOND FUND, EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH
CAROLINA MUNICIPAL BOND FUND and EVERGREEN VIRGINIA MUNICIPAL BOND FUND.
Payments under the Plans adopted with respect to Class A shares are currently
voluntarily limited to .25 of 1% of each Fund's aggregate average daily net
assets attributable to Class A shares. The Plans provide that a portion of the
fee payable thereunder may constitute a service fee to be used for providing
ongoing personal services and/or the maintenance of shareholder accounts.
EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND,
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL
BOND FUND and EVERGREEN VIRGINIA MUNICIPAL BOND FUND have, in addition to the
Plans adopted with respect to their Class B shares, adopted a shareholder
service plan ("Service Plans") relating to the Class B shares which permit each
Fund to incur a fee of up to .25 of 1% of the aggregate average daily net assets
attributable to the Class B shares for ongoing personal services and/or the
maintenance of shareholder accounts. Such service fee payments to financial
intermediaries for such purposes, whether pursuant to a Plan or Service Plans,
will not exceed .25 of 1% of the aggregate average daily net assets attributable
to each Class of shares of each Fund.
Each Fund has also entered into a distribution agreement (each a
"Distribution Agreement" or collectively the "Distribution Agreements") with
Evergreen Funds Distributor, Inc. ("EFD"). Pursuant to the Distribution
Agreements, each Fund will compensate EFD for its services as distributor at a
rate which may not exceed an annual rate of .25 of 1% of a Fund's aggregate
average daily net assets attributable to Class A shares, and .75 of 1% of a
Fund's aggregate average daily net assets attributable to the Class B shares.
The Distribution Agreements provide that EFD will use the distribution fee
received from a Fund for payments (i) to compensate broker-dealers or other
persons for distributing shares of the Funds, including interest and principal
payments made in respect of amounts paid to broker-dealers or other persons that
have been financed (EFD may assign its rights to receive compensation under the
Plans to secure such financings), (ii) to otherwise promote the sale of shares
of the Fund, and (iii) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative, accounting and
other services with respect to the Fund's shareholders. The financing of
payments made by EFD to compensate broker-dealers or other persons for
distributing shares of the Funds may be provided by FUNB or its affiliates. The
Funds may also make payments under the Plans (and in the case of EVERGREEN
FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN
NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
and EVERGREEN VIRGINIA MUNICIPAL BOND FUND, the Service Plans), in amounts up to
.25 of 1% of a Fund's aggregate average daily net assets on an annual basis
attributable to Class B shares, to compensate organizations, which may include
EFD and each Fund's investment adviser or their affiliates, for personal
services rendered to shareholders and/or the maintenance of shareholder
accounts.
The Funds may not pay any distribution or services fees during any fiscal
period in excess of the amounts set forth above. Since EFD's compensation under
the Distribution Agreements is not directly tied to the expenses incurred by
EFD, the amount of compensation received by it under the Distribution Agreements
during any year may be more or less than its actual expenses and may result in a
profit to EFD. Distribution expenses incurred by EFD in one fiscal year that
exceed the level of compensation paid to EFD for that year may be paid from
distribution fees received from a Fund in subsequent fiscal years.
The Plans and Service Plans are in compliance with rules of the National
Association of Securities Dealers, Inc. which effectively limit the annual
asset-based sales charges and service fees that a mutual fund may pay on a class
of shares to .75 of 1% and .25 of 1%, respectively, of the average annual net
assets attributable to that class. The rules also limit the aggregate of all
front-end, deferred and asset-based sales charges imposed with respect to a
class of shares by a mutual fund that also charges a service fee to 6.25% of
cumulative gross sales of shares of that class, plus interest at the prime rate
plus 1% per annum.
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PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
You can purchase shares of any of the Funds through broker-dealers, banks
or other financial intermediaries, or directly through EFD. The minimum initial
investment is $1,000, which may be waived in certain situations. There is no
minimum for subsequent investments. Investments of $25 or more are allowed under
the Systematic Investment Program. Share certificates are not issued. In states
where EFD is not registered as a broker-dealer shares of a Fund will only be
sold through Furman Selz LLC, other broker-dealers or other financial
institutions that are registered. See the Share Purchase Application and
Statement of Additional Information for more information. Only Class A and Class
B shares are offered through this Prospectus (see "General
Information" -- "Other Classes of Shares").
Class A Shares-Front-End Sales Charge Alternative. You can purchase Class A
shares at net asset value plus an initial sales charge on purchases under
$1,000,000. On purchases of $1,000,000 or more, a contingent deferred sales
charge ("CDSC") equal to the lesser of 1% of the purchase price or redemption
value will be imposed on shares redeemed during the first year after purchase.
The schedule of charges for Class A Shares is as follows:
Initial Sales Charge
<TABLE>
<CAPTION>
as a % of the Net as a % of the Commission to Dealer/Agent
Amount of Purchase Amount Invested Offering Price as a % of Offering Price
<S> <C> <C> <C> <C>
Less than $ 50,000 4.99% 4.75% 4.25%
$ 50,000 - $ 99,000 4.71% 4.50% 4.25%
$ 100,000 - $ 249,999 3.90% 3.75% 3.25%
$ 250,000 - $ 499,999 2.56% 2.50% 2.00%
$ 500,000 - $ 999,999 2.04% 2.00% 1.75%
$ 1,000,000 - $ 2,999,999 None None 1.00%
$ 3,000,000 - $ 4,999,999 None None .50%
Over $ 5,000,000 None None .25%
</TABLE>
No front-end sales charges are imposed on Class A shares purchased by:
institutional investors, which may include bank trust departments and registered
investment advisers; investment advisers, consultants or financial planners who
place trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee; clients of
investment advisers or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisers or financial planners on the books of the broker-dealer through whom
shares are purchased; institutional clients of broker-dealers, including
retirement and deferred compensation plans and the trusts used to fund these
plans, which place trades through an omnibus account maintained with a Fund by
the broker-dealer; shareholders of record on October 12, 1990 in any series of
Evergreen Investment Trust in existence on that date, and the members of their
immediate families; current and retired employees of FUNB and its affiliates,
EFD and any broker-dealer with whom EFD has entered into an agreement to sell
shares of the Funds, and members of the immediate families of such employees;
and upon the initial purchase of an Evergreen mutual fund by investors
reinvesting the proceeds from a redemption within the preceding thirty days of
shares of other mutual funds, provided such shares were initially purchased with
a front-end sales charge or subject to a CDSC. Certain broker-dealers or other
financial institutions may impose a fee on transactions in shares of the Funds.
When Class A shares are sold, EFD will normally retain a portion of the
applicable sales charge and pay the balance to the broker-dealer or other
financial intermediary through whom the sale was made. EFD may also pay fees to
banks from sales charges for services performed on behalf of the bank's
customers in connection with the purchase of shares of the Funds. In addition to
compensation paid at the time of sale, entities whose clients have purchased
Class A shares may receive a trailing commission equal to .25 of 1% of the
aggregate average daily net assets attributable to Class A shares of each Fund
held by their clients. Certain purchases of Class A shares may qualify for
reduced sales charges in accordance with a Fund's Combined Purchase Privilege,
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<PAGE>
Cumulative Quantity Discount, Statement of Intention, Privilege for Certain
Retirement Plans and Reinstatement Privilege. Consult the Share Purchase
Application and Statement of Additional Information for additional information
concerning these reduced sales charges.
Class B Shares-Deferred Sales Charge Alternative. You can purchase Class B
shares at net asset value without an initial sales charge. However, you may pay
a CDSC if you redeem shares within seven years after purchase. Shares obtained
from dividend or distribution reinvestment are not subject to the CDSC. The
amount of the CDSC (expressed as a percentage of the lesser of the current net
asset value or original cost) will vary according to the number of years from
the purchase of Class B shares as set forth below.
<TABLE>
<CAPTION>
Year Since Purchase Contingent Deferred Sales Charge
<S> <C> <C>
FIRST 5%
SECOND 4%
THIRD and FOURTH 3%
FIFTH 2%
SIXTH 1%
</TABLE>
The CDSC is deducted from the amount of the redemption and is paid to
EFD. The CDSC will be waived on redemptions of shares following the death or
disability of a shareholder, to meet distribution requirements for certain
qualified retirement plans or in the case of certain redemptions made under a
Fund's Systematic Cash Withdrawal Plan. Class B shares are subject to higher
distribution and/or shareholder service fees than Class A shares for a period of
seven years (after which they convert to Class A shares). The higher fees mean a
higher expense ratio, so Class B shares pay correspondingly lower dividends and
may have a lower net asset value than Class A shares. See the Statement of
Additional Information for further details.
With respect to Class B shares, no CDSC will be imposed on: (1) the
portion of redemption proceeds attributable to increases in the value of the
account due to increases in the net asset value per share, (2) shares acquired
through reinvestment of dividends and capital gains, (3) shares held for more
than seven years after the end of the calendar month of acquisition, (4)
accounts following the death or disability of a shareholder, or (5) minimum
required distributions to a shareholder over the age of 70 1/2 from an IRA or
other retirement plan.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the outstanding shares of that Class.
Shares are valued each day the New York Stock Exchange (the "Exchange") is open
as of the close of regular trading (currently 4:00 p.m. Eastern time). The
Exchange is closed on New Year's Day, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The securities
in a Fund are valued at their current market value determined on the basis of
market quotations or, if such quotations are not readily available, such other
methods as the Trustees of each Trust under which each Fund operates believe
would accurately reflect fair value.
General. The decision as to which Class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A shares, which
incur lower ongoing distribution and/or shareholder service fees, after seven
years. The compensation received by dealers and agents may differ depending on
whether they sell Class A or Class B shares. There is no size limit on purchases
of Class A shares.
In addition to the discount or commission paid to dealers, EFD will from
time to time pay to dealers additional cash or other incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of a
Fund and/or other Evergreen mutual funds. Such incentives will take the form of
payment for attendance at seminars, lunches, dinners, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer and their immediate
family members to urban or resort locations within or outside the United States.
Such a dealer may elect to receive cash incentives of equivalent amount in lieu
of such payments. EFD may also limit the availability of such incentives to
certain specified dealers. EFD from time to time sponsors promotions involving
First Union Brokerage Services, Inc. ("FUBS"), an affiliate of each Fund's
investment adviser, and select broker-dealers, pursuant to which incentives are
paid, including gift certificates and payments in amounts up to .25 of 1% of the
dollar amount of shares of a Fund sold. Awards may also be made based on the
opening of a minimum number of accounts.
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<PAGE>
Such promotions are not being made available to all dealers. Certain
broker-dealers may also receive payments from EFD or a Fund's investment adviser
over and above the usual trail commissions or shareholder servicing payments
applicable to a given Class of shares.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from an investor's account to reimburse the Fund or the Fund's investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen mutual funds.
The Funds will not accept third party checks other than those payable directly
to a shareholder whose account has been in existence at least thirty days.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any day
the Exchange is open, either directly or through your financial intermediary.
The price you will receive is the net asset value (less any applicable CDSC for
Class B shares) next calculated after the Fund receives your request in proper
form. Proceeds generally will be sent to you within seven days. However, for
shares recently purchased by check, a Fund will not send proceeds until it is
reasonably satisfied that the check has been collected (which may take up to ten
days). Once a redemption request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value (less any applicable CDSC for
Class B shares). Your financial intermediary is responsible for furnishing all
necessary documentation to a Fund and may charge you for this service. Certain
financial intermediaries may require that you give instructions earlier than
4:00 p.m. (Eastern time).
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street Bank and Trust Company ("State
Street") which is the registrar, transfer agent and dividend-disbursing agent
for each Fund. Stock power forms are available from your financial intermediary,
State Street, and many commercial banks. Additional documentation is required
for the sale of shares by corporations, financial intermediaries, fiduciaries
and surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling the telephone number on the front page of this Prospectus between the
hours of 8:00 a.m. and 5:30 p.m. (Eastern time) each business day (i.e., any
weekday exclusive of days on which the Exchange or State Street's offices are
closed). The Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund or State Street by telephone should
follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Funds will employ reasonable procedures to verify that
telephone requests are genuine. These procedures
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<PAGE>
include requiring some form of personal identification prior to acting upon
instructions and tape recording of conversations. If the Fund fails to follow
such procedures, it may be liable for any losses due to unauthorized or
fraudulent instructions. The Fund shall not be liable for following telephone
instructions reasonably believed to be genuine. Also, the Fund reserves the
right to refuse a telephone redemption request, if it is believed advisable to
do so. Financial intermediaries may charge a fee for handling telephonic
requests. The telephone redemption option may be suspended or terminated at any
time without notice.
General. The sale of shares is a taxable transaction for federal tax purposes.
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $1,000 for thirty days. Shareholders will receive sixty days' written
notice to increase the account value before the account is closed. The Funds
have elected to be governed by Rule 18f-1 under the Investment Company Act of
1940 pursuant to which each Fund is obligated to redeem shares solely in cash,
up to the lesser of $250,000 or 1% of a Fund's total net assets during any
ninety day period for any one shareholder. See the Statement of Additional
Information for further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen mutual funds through your financial
intermediary, or by telephone or mail as described below. Once an exchange
request has been telephoned or mailed, it is irrevocable and may not be modified
or canceled. Exchanges will be made on the basis of the relative net asset
values of the shares exchanged next determined after an exchange request is
received. An exchange, which represents an initial investment in another
Evergreen mutual fund, is subject to the minimum investment and suitability
requirements of each Fund.
Each of the Evergreen mutual funds has different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
No CDSC will be imposed in the event Class B shares are exchanged for
Class B shares of other Evergreen mutual funds. If you redeem shares, the CDSC
applicable to the Class B shares of the Evergreen mutual fund originally
purchased for cash is applied. Also, Class B shares will continue to age
following an exchange for purposes of conversion to Class A shares and
determining the amount of the applicable CDSC.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Exchanges by Telephone and Mail. You may exchange shares by telephone by calling
the telephone number on the front page of this Prospectus. Exchange requests
made after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach State Street by telephone. If you wish to use the
telephone exchange service you should indicate this on the Share Purchase
Application. As noted above, each Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares communicated
by telephone are genuine. A telephone exchange may be refused by a Fund or State
Street if it is believed advisable to do so. Procedures for exchanging Fund
shares by telephone may be modified or terminated at any time. Written requests
for exchanges should follow the same procedures outlined for written redemption
requests in the section entitled "How to Redeem Shares", however, no signature
guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more information
about these services or your account, contact your financial intermediary, EFD
or the toll-free number on the front page of this Prospectus. Some services are
described in more detail in the Share Purchase Application.
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<PAGE>
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25 per month or
$75 per quarter. Each Fund reserves the right to close an account that through
liquidation or termination of the Systematic Investment Plan has not reached a
minimum balance of $1,000 ($250 for retirement accounts) within 24 months of the
initial investment. You can open a Systematic Investment Plan in the EVERGREEN
FLORIDA MUNICIPAL BOND FUND for a minimum of only $50 per month with no initial
investment required.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Shares purchased under the Funds Systematic Investment Plan or Telephone
Investment Plan may not be redeemed for ten days from the date of investment.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Funds
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $75. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gain
distributions reinvested automatically. Any applicable Class B CDSC will be
waived with respect to redemptions occurring under a Systematic Cash Withdrawal
Plan during a calendar year to the extent that such redemptions do not exceed
10% of (i) the initial value of the account plus (ii) the value, at the time of
purchase, of any subsequent investments.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of a
Fund at the net asset value per share on the last business day of each month,
unless otherwise requested by a shareholder in writing. If the transfer agent
does not receive a written request for subsequent dividends and/or distributions
to be paid in cash at least three full business days prior to a given record
date, the dividends and/or distributions to be paid to a shareholder will be
reinvested.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG being prevented from continuing to
perform the services required under the investment advisory contract or from
acting as agent in connection with the purchase of shares of a Fund by its
customers. If CMG were prevented from continuing to provide the services called
for under the investment advisory agreement, it is expected that the Trustees
would identify, and call upon each Fund's shareholders to approve, a new
investment adviser. If this were to occur, it is not anticipated that the
shareholders of any Fund would suffer any adverse financial consequences.
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
Income dividends are declared daily and paid monthly. Distributions of
any net realized gains of a Fund will be made at least annually. Shareholders
will begin to earn dividends on the first business day after shares are
purchased unless shares were not paid for, in which case dividends are not
earned until the next business day after payment is received. Each Fund has
qualified and intends to continue to qualify to be treated as a regulated
investment company under the Code. While so qualified, so long as each Fund
distributes all of its investment company taxable income and any net realized
gains to shareholders, it is expected that the Funds will not be required to pay
any Federal income taxes. A 4% nondeductible excise tax will be imposed on a
Fund if it does not
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<PAGE>
meet certain distribution requirements by the end of each calendar year. Each
Fund anticipates meeting such distribution requirements.
The Funds will designate and pay exempt-interest dividends derived from
interest earned on qualifying tax-exempt obligations. Such exempt-interest
dividends may be excluded by shareholders of a Fund from their gross income for
federal income tax purposes, however (1) all or a portion of such
exempt-interest dividends may be a specific preference item for purposes of the
federal individual and corporate alternative minimum taxes to the extent that
they are derived from certain types of private activity bonds issued after
August 7, 1986, and (2) all exempt-interest dividends will be a component of the
"adjusted current earnings" for purposes of the federal corporate alternative
minimum tax.
Dividends paid from taxable income, if any, and distributions of any net
realized short-term capital gains (whether from tax exempt or taxable
obligations) are taxable as ordinary income and long-term capital gain
distributions are taxable as long-term capital gains, even though received in
additional shares of the Fund, and regardless of the investors holding period
relating to the shares with respect to which such gains are distributed. Market
discount recognized on taxable and tax-exempt bonds is taxable as ordinary
income, not as excludable income. Under current law, the highest federal income
tax rate applicable to net long-term gains realized by individuals is 28%. The
rate applicable to corporations is 35%.
Since each Fund's gross income is ordinarily expected to be tax exempt
interest income, it is not expected that the 70% dividends-received deduction
for corporations will be applicable. Specific questions should be addressed to
the investor's own tax adviser.
Each Fund is required by federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions (if any) and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, each investor must certify on the Share Purchase
Application, or on a separate form supplied by State Street, that the investor's
social security or taxpayer identification number is correct and that the
investor is not currently subject to backup withholding or is exempt from backup
withholding.
Set forth below are brief descriptions of the personal income tax status
of an investment in each of the Funds under Florida, Georgia, New Jersey, North
Carolina, South Carolina, and Virginia tax laws currently in effect. Income from
a Fund is not necessarily free from state income taxes in states other than its
designated state. State laws differ on this issue, and shareholders are urged to
consult their own tax advisers regarding the status of their accounts under
state and local laws.
EVERGREEN FLORIDA MUNICIPAL BOND FUND AND EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND. Florida does not currently impose an income tax on
individuals. Thus, individual shareholders of the Funds will not be subject to
any Florida state income tax on distributions received from the Funds. However,
certain distributions will be taxable to corporate shareholders which are
subject to Florida corporate income tax. Florida currently imposes an
intangibles tax at the annual rate of 0.20% on certain securities and other
intangible assets owned by Florida residents. Certain types of tax exempt
securities of Florida issuers, U.S. government securities and tax exempt
securities issued by certain U.S. territories and possessions are exempt from
this intangibles tax. Shares of the Funds will also be exempt from the Florida
intangibles tax if the portfolio consists exclusively of securities exempt from
the intangibles tax on the last business day of the calendar year. If the
portfolio consists of any assets which are not so exempt on the last business
day of the calendar year, however, only the portion of the shares of the Funds
which relate to securities issued by the United States and its possessions and
territories will be exempt from the Florida intangibles tax, and the remaining
portion of such shares will be fully subject to the intangibles tax, even if
they partly relate to Florida tax exempt securities.
EVERGREEN GEORGIA MUNICIPAL BOND FUND. Under existing Georgia law,
shareholders of the Fund will not be subject to individual or corporate Georgia
income taxes on distributions from the Fund to the extent that such
distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to (1) interest-bearing obligations issued by or
on behalf of the State of Georgia or its political subdivisions, or (2) interest
on obligations of the United States or of any other issuer whose obligations are
exempt from state income taxes under federal law. Distributions, if any, derived
from capital gains or other sources generally will be taxable for Georgia income
tax purposes to shareholders of the Fund who are subject to the Georgia income
tax.
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND. For individual shareholders in
any year in which the Fund satisfies the requirements for treatment as a
"qualified investment fund" under New Jersey law, distributions from the Fund
will be exempt from the New Jersey Gross Income Tax to the extent such
distributions are
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<PAGE>
attributable to interest or gains from (i) obligations issued by or on behalf of
the State of New Jersey or any county, municipality, school or other district,
agency, authority, commission, instrumentality, public corporation, body
corporate and politic or political subdivision of New Jersey or (ii) obligations
that are otherwise statutorily exempt from state or local taxation or under the
laws of the United States. Any gains realized on the sale or redemption of
shares held in a qualified investment fund are also exempt from the New Jersey
Gross Income Tax. Corporate shareholders will be subject to a corporate
franchise tax on distributions from and on gains from sales of the shares of the
Fund.
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND. Under existing North
Carolina law, shareholders of the Fund will not be subject to individual or
corporate North Carolina income taxes on distributions from the Fund to the
extent that such distributions represent exempt-interest dividends for federal
income tax purposes that are attributable to (1) interest on obligations issued
by North Carolina and political subdivisions thereof or (2) interest on
obligations of the United States or its territories or possessions. However, for
corporate shareholders, the exemption is limited to $15,000 per year, and
otherwise exempt income from funds is subject to a corporate income tax.
Distributions, if any, derived from capital gains or other sources generally
will be taxable for North Carolina income tax purposes to shareholders of the
Fund who are subject to the North Carolina income tax.
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND. Under existing South
Carolina law, shareholders of the Fund will not be subject to individual or
corporate South Carolina income taxes on Fund distributions to the extent that
such distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to (1) interest on obligations of the State of
South Carolina, or any of its political subdivisions, (2) interest on
obligations of the United States, or (3) interest on obligations of any agency
or instrumentality of the United States that is prohibited by federal law from
being taxed by a state or any political subdivision of a state. Distributions,
if any, derived from capital gains or other sources, generally will be taxable
for South Carolina income tax purposes to shareholders of the Fund who are
subject to South Carolina income tax.
EVERGREEN VIRGINIA MUNICIPAL BOND FUND. Under existing Virginia law,
shareholders of the Fund will not be subject to individual or corporate Virginia
income taxes on distributions received from the Fund to the extent that such
distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to interest earned on (1) obligations issued by
or on behalf of the Commonwealth of Virginia or any political subdivision
thereof, or (2) obligations issued by a territory or possession of the United
States or any subdivision thereof which federal law exempts from state income
taxes. Distributions, if any, derived from capital gains or other sources
generally will be taxable for Virginia income tax purposes to shareholders of
the Fund who are subject to Virginia income tax.
Statements describing the tax status of shareholders' dividends and
distributions will be mailed annually by the Funds. These statements will set
forth the amount of income exempt from federal and if applicable, state
taxation, and the amount, if any, subject to federal and state taxation.
Moreover, to the extent necessary, these statements will indicate the amount of
exempt-interest dividends which are a specific preference item for purposes of
the federal individual and corporate alternative minimum taxes. The exemption of
interest income for federal income tax purposes does not necessarily result in
exemption under the income or other tax law of any state or local taxing
authority. Investors should consult their own tax advisers about the status of
distributions from the Funds in their states and localities. Each Fund notifies
shareholders annually as to the interest exempt from federal taxes earned by the
Fund.
A shareholder who acquires Class A shares of a Fund and sells or otherwise
disposes of such shares within ninety days of acquisition may not be allowed to
include certain sales charges incurred in acquiring such shares for purposes of
calculating gain and loss realized upon a sale or exchange of shares of the
Fund.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND is a separate
investment series of The Evergreen Municipal Trust, a Massachusetts business
trust organized in 1988. EVERGREEN NEW JERSEY TAX-FREE INCOME FUND is a separate
investment series of The Evergreen Tax Free Trust (formerly FFB Funds Trust), a
Massachusetts business trust organized in 1985. EVERGREEN FLORIDA MUNICIPAL BOND
FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN NORTH CAROLINA MUNICIPAL
BOND FUND, EVERGREEN SOUTH CAROLINA
35
<PAGE>
MUNICIPAL BOND FUND and EVERGREEN VIRGINIA MUNICIPAL BOND FUND are each separate
investment series of Evergreen Investment Trust (formerly First Union Funds), a
Massachusetts business trust organized in 1984. The Funds do not intend to hold
annual shareholder meetings; shareholder meetings will be held only when
required by applicable law. Shareholders have available certain procedures for
the removal of Trustees.
A shareholder in each Class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional Classes of shares for any existing or future series. If an
additional series or Class were established in a Fund, each share of the series
or Class would normally be entitled to one vote for all purposes. Generally,
shares of each series and Class would vote together as a single class on
matters, such as the election of Trustees, that affect each series and Class in
substantially the same manner. Class A, B and Y shares have identical voting,
dividend, liquidation and other rights, except that each Class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific Class. Each
Class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate Class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Custodian, Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street
Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as
each Fund's custodian, registrar, transfer agent and dividend-disbursing agent.
State Street is compensated for its services as transfer agent by a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares.
Principal Underwriter. EFD, an affiliate of Furman Selz LLC, located at 230 Park
Avenue, New York, New York, 10169, is the principal underwriter of the Funds.
Furman Selz LLC also acts as sub-administrator to the Funds.
Other Classes of Shares. Each Fund currently offers three classes of shares,
Class A, Class B and Class Y, and may in the future offer additional classes.
Class Y shares are not offered by this Prospectus and are only available to (i)
persons who at or prior to December 31, 1994, owned shares in a mutual fund
advised by Evergreen Asset (ii) certain institutional investors and (iii)
investment advisory clients of CMG, Evergreen Asset or their affiliates. The
dividends payable with respect to Class A and Class B shares will be less than
those payable with respect to Class Y shares due to the distribution and
distribution related expenses borne by Class A and Class B shares and the fact
that such expenses are not borne by Class Y shares.
Performance Information. A Fund's performance may be quoted in advertising in
terms of yield or total return. Both types of performance are based on
Securities and Exchange Commission ("SEC") formulas and are not intended to
indicate future performance.
Yield is a way of showing the rate of income a Fund earns on its
investments as a percentage of the Fund's share price. A Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, a Fund's yield may not equal its
distribution rate, the income paid to your account or the income reported in a
Fund's financial statements. To calculate yield, a Fund takes the interest
income it earned from its portfolio of investments (as defined by the SEC
formula) for a 30-day period (net of expenses), divides it by the average number
of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on a Fund's share price at the end of the
30-day period. This yield does not reflect gains or losses from selling
securities.
Total returns are based on the overall dollar or percentage change in the
value of a hypothetical investment in a Fund. A Fund's total return shows its
overall change in value including changes in share prices and assumes all a
Fund's distributions are reinvested. A cumulative total return reflects a Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if a Fund's performance had been constant over
the entire period. Because average annual total returns tend to smooth out
variations in a Fund's return, you should recognize that they are not the same
as actual year-by-year results. To illustrate the components of overall
performance, a Fund may separate its cumulative and average annual total returns
into income results and realized and unrealized gain or loss.
36
<PAGE>
Each Fund may also quote tax-equivalent yields, which show the taxable
yields an investor would have to earn before taxes to equal the Fund's tax-free
yields. A tax-equivalent yield is calculated by dividing a Fund's tax-exempt
yield by the result of one minus a stated federal tax rate. If only a portion of
a Fund's income was tax-exempt, only that portion is adjusted in the
calculation.
Comparative performance information may also be used from time to time in
advertising or marketing a Fund's shares, including data from Lipper Analytical
Services, Inc., Morningstar and other industry publications. The Fund may also
advertise in items of sales literature an "actual distribution rate" which is
computed by dividing the total ordinary income distributed (which may include
the excess of short-term capital gains over losses) to shareholders for the
latest twelve month period by the maximum public offering price per share on the
last day of the period. Investors should be aware that past performance may not
be reflective of future results.
In marketing a Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering investment
alternatives. The information provided to investors may also include discussions
of other Evergreen mutual funds, products, and services, which may include:
retirement investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; and charitable
giving. In addition, the information provided to investors may quote financial
or business publications and periodicals, including model portfolios or
allocations, as they relate to fund management, investment philosophy, and
investment techniques. The Principal Underwriter may also reprint, and use as
advertising and sales literature, articles from EVERGREEN EVENTS, a quarterly
magazine provided to Evergreen mutual fund shareholders.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which
each Fund operates provide that no Trustee or shareholder will be personally
liable for the obligations of the Trust and that every written contract made by
the Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the SEC under the Securities Act of 1933, as amended. Copies of the
Registration Statements may be obtained at a reasonable charge from the SEC or
may be examined, without charge, at the offices of the SEC in Washington, D.C.
37
<PAGE>
INVESTMENT ADVISER
Capital Management Group of First Union National Bank of North Carolina, 201
South College Street, Charlotte, North Carolina 28288
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL BOND
FUND, EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, EVERGREEN NORTH CAROLINA
MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND,
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 230 Park Avenue, New York, New York 10169
45958 536336rev 03
*******************************************************************************
<PAGE>
PROSPECTUS October 31, 1996
EVERGREEN(SM) STATE SPECIFIC TAX-FREE FUNDS (Evergreen tree logo)
EVERGREEN FLORIDA MUNICIPAL BOND FUND
EVERGREEN GEORGIA MUNICIPAL BOND FUND
EVERGREEN NEW JERSEY TAX-FREE INCOME 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
CLASS Y SHARES
The Evergreen State Specific Tax-Free Funds (the "Funds") are
designed to provide investors with current income exempt from Federal
income tax and certain state income tax. This Prospectus provides
information regarding the Class Y shares offered by the Funds. Each Fund
is, or is a series of, an open-end, non-diversified, management investment
company except for EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND which
is diversified. This Prospectus sets forth concise information about the
Funds that a prospective investor should know before investing. The address
of the Funds is 2500 Westchester Avenue, Purchase, New York 10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen group of mutual funds dated October 31, 1996
has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus
and other matters which may be of interest to investors, and may be
obtained without charge by calling the Funds at (800) 235-0064. There can
be no assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, ARE NOT INSURED OR
OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE INVESTMENT RISKS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND WILL INVEST AT LEAST 65%
OF THE VALUE OF ITS TOTAL ASSETS IN MUNICIPAL SECURITIES CONSISTING OF HIGH
YIELD (I.E., HIGH RISK), MEDIUM, LOWER RATED AND UNRATED BONDS. SUCH
SECURITIES ARE COMMONLY CALLED JUNK BONDS AND ARE SUBJECT TO GREATER MARKET
FLUCTUATIONS AND RISK OF LOSS OF INCOME AND PRINCIPAL THAN HIGHER RATED
SECURITIES. LOWER QUALITY SECURITIES INVOLVE A GREATER RISK OF DEFAULT AND,
CONSEQUENTLY, SHARES OF THE EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND
FUND ARE SPECULATIVE SECURITIES.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 17
Investment Practices and Restrictions 20
MANAGEMENT OF THE FUNDS
Investment Adviser 25
Portfolio Managers 26
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 27
How to Redeem Shares 28
Exchange Privilege 28
Shareholder Services 29
Effect of Banking Laws 30
OTHER INFORMATION
Dividends, Distributions and Taxes 30
General Information 32
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Capital Management Group of First Union National Bank of North
Carolina serves as investment adviser to the Evergreen State Specific Tax-Free
Funds which include: EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA
MUNICIPAL BOND FUND, EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, EVERGREEN NORTH
CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND,
EVERGREEN VIRGINIA MUNICIPAL BOND FUND AND EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND. First Union National Bank of North Carolina is a subsidiary
of First Union Corporation, the sixth largest bank holding company in the United
States.
EVERGREEN FLORIDA MUNICIPAL BOND FUND seeks current income exempt from
federal income tax consistent with preservation of capital. In addition, the
Fund intends to qualify as an investment exempt from the Florida state
intangibles tax.
EVERGREEN GEORGIA MUNICIPAL BOND FUND seeks current income exempt from
federal income tax and Georgia state income tax, consistent with preservation of
capital.
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND seeks a high level of income,
exempt from federal and New Jersey personal income taxes.
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND seeks current income exempt
from federal income tax and North Carolina state income tax, consistent with
preservation of capital. In addition, the Fund intends to qualify as an
investment substantially exempt from the North Carolina intangible personal
property tax.
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND seeks current income exempt
from federal income tax and South Carolina state income tax.
EVERGREEN VIRGINIA MUNICIPAL BOND FUND seeks current income exempt from
federal income tax and Virginia state income tax, consistent with preservation
of capital.
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND seeks to provide a high
level of current income exempt from federal income taxes. Under normal
circumstances, the Fund will invest at least 65% of the value of its total
assets in municipal securities consisting of high yield (i.e., high risk),
medium, lower rated and unrated bonds.
THERE IS NO ASSURANCE THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in the Class Y Shares of the Fund. For further
information see "Purchase and Redemption of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Redemption Fee None
Exchange Fee (only applies after 4 exchanges per
year) $ 5.00
</TABLE>
The following table shows for the Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to Class Y Shares,
together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment for the periods specified assuming (i) a 5%
annual return and (ii) redemption at the end of each period.
EVERGREEN FLORIDA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES+ Class Y
<S> <C> <C> <C>
Management Fees .50%
After 1 Year $ 8
12b-1 Fees --
After 3 Years $ 25
Other Expenses .27%
After 5 Years $ 43
After 10 Years $ 95
Total .77%
</TABLE>
EVERGREEN GEORGIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES+ Class Y
<S> <C> <C> <C>
Management Fees .50%
After 1 Year $ 10
12b-1 Fees --
After 3 Years $ 32
Other Expenses** .50%
After 5 Years $ 55
After 10 Years $ 122
Total 1.00%
</TABLE>
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES+ Class Y
<S> <C> <C> <C>
Management Fees .50%
After 1 Year $ 9
12b-1 Fees --
After 3 Years $ 28
Other Expenses** .37%
After 5 Years $ 48
After 10 Years $ 107
Total .87%
</TABLE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES+ Class Y
<S> <C> <C> <C>
Management Fees .50%
After 1 Year $ 10
12b-1 Fees --
After 3 Years $ 32
Other Expenses .50%
After 5 Years $ 55
After 10 Years $ 122
Total 1.00%
</TABLE>
3
<PAGE>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES+ Class Y
<S> <C> <C> <C>
Management Fees .50%
After 1 Year $ 10
12b-1 Fees --
After 3 Years $ 32
Other Expenses** .50%
After 5 Years $ 55
After 10 Years $ 122
Total 1.00%
</TABLE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES+ Class Y
<S> <C> <C> <C>
Management Fees .50%
After 1 Year $ 10
12b-1 Fees --
After 3 Years $ 32
Other Expenses** .50%
After 5 Years $ 55
After 10 Years $ 122
Total 1.00%
</TABLE>
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES+ Class Y
<S> <C> <C> <C>
Management Fees .60%
After 1 Year $ 9
12b-1 Fees --
After 3 Years $ 28
Other Expenses .29%
After 5 Years $ 49
After 10 Years $ 110
Total .89%
</TABLE>
+ The estimated annual operating expenses and examples do not reflect fee
waivers and reimbursements for the most recent fiscal period. Actual expenses
for Class Y Shares, net of fee waivers and expense reimbursements for the
period ended August 31, 1996 were as follows:
<TABLE>
<S> <C>
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND .59%
EVERGREEN FLORIDA MUNICIPAL BOND FUND .57%
EVERGREEN GEORGIA MUNICIPAL BOND FUND .63%
EVERGREEN NEW JERSEY TAX FREE INCOME FUND .31%
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND .84%
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND .62%
EVERGREEN VIRGINIA MUNICIPAL BOND FUND .70%
</TABLE>
** Reflects agreements by the investment adviser to limit aggregate operating
expenses (including the management fees, but excluding interest, taxes,
brokerage commissions, Rule 12b-1 Fees, shareholder servicing fees and
extraordinary expenses) of EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN
NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND
FUND and EVERGREEN VIRGINIA MUNICIPAL BOND FUND to 1% of average net assets
for the foreseeable future. Absent such agreements, the estimated annual
operating expenses for these Funds would be as follows:
<TABLE>
<S> <C>
EVERGREEN GEORGIA MUNICIPAL BOND FUND 2.51%
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND 1.07%
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND 3.70%
EVERGREEN VIRGINIA MUNICIPAL BOND FUND 3.24%
</TABLE>
From time to time, each Fund's investment adviser may, at its discretion,
reduce or waive its fees or reimburse the Funds for certain of their expenses in
order to reduce their expense ratios. Each Fund's investment adviser may cease
these waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for the most recent fiscal period. THE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL
EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more
complete description of the various costs and expenses borne by the Funds see
"Management of the Funds".
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter for EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN NORTH
CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND and
EVERGREEN VIRGINIA MUNICIPAL BOND FUND has been audited by KPMG Peat Marwick
LLP, each Fund's independent auditors. The information in the tables for
EVERGREEN FLORIDA MUNICIPAL BOND FUND for the periods ended August 31, 1996 and
August 31, 1995 has been audited by KPMG Peat Marwick LLP, the Fund's current
independent auditors. The information in the tables for each of the years in the
three-year period ended April 30, 1995 was audited by Tait, Weller & Baker, the
Fund's prior independent auditors. The information in the tables for EVERGREEN
NEW JERSEY TAX-FREE INCOME FUND for each of the periods from March 1, 1993
through August 31, 1996 has been audited by KPMG Peat Marwick LLP, the Fund's
current independent auditors. The information in the tables for EVERGREEN NEW
JERSEY TAX-FREE INCOME FUND for the year ended February 28, 1993 has been
audited by Price Waterhouse LLP, the Fund's prior independent auditors. The
information in the tables for EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
for each of the periods from May 1, 1995 through August 31, 1996 has been
audited by Price Waterhouse LLP, the Fund's current independent auditors. The
information in the tables for EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
for each of the years in the two-year period ended April 30, 1995 and for the
period June 17, 1992 (commencement of operations) through April 30, 1993 was
audited by Tait, Weller & Baker, the Fund's prior independent auditors. A report
of KPMG Peat Marwick LLP, Price Waterhouse LLP or Tait, Weller & Baker, as the
case may be on the audited information with respect to each Fund is incorporated
by reference in the Fund's Statement of Additional Information. The following
information for each Fund should be read in conjunction with the financial
statements and related notes which are incorporated by reference in the Fund's
Statement of Additional Information.
Further information about each Fund's performance is contained in the
Fund's annual report to shareholders, which may be obtained without charge.
EVERGREEN FLORIDA MUNICIPAL BOND FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
FOUR
MONTHS
YEAR ENDED ENDED
AUGUST 31, AUGUST 31, YEAR ENDED APRIL 30,
1996 1995#|| 1995|| 1994|| 1993|| 1992|| 1991|| 1990||
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........ $9.74 $9.61 $9.52 $9.95 $9.35 $9.21 $8.80 $9.09
Income (loss) from investment operations:
Net investment income....................... .54 .19 .54 .56 .56 .61 .66 .58
Net realized and unrealized gain (loss) on
investments............................... (.04) .22 .11 (.36) .67 .22 .43 (.24)
Total from investment operations.......... .50 .41 .65 .20 1.23 .83 1.09 .34
Less distributions to shareholders from:
Net investment income....................... (.54) (.19) (.54) (.56) (.56) (.61) (.68) (.59)
Distributions in excess of net investment
income.................................... -- (.03) -- -- -- -- -- --
Net realized gains.......................... -- (.06) (.02) (.07) (.07) (.04) -- (.04)
Paid-in capital............................. -- -- -- -- -- (.04) -- --
Total distributions....................... (.54) (.28) (.56) (.63) (.63) (.69) (.68) (.63)
Net asset value, end of period............ $9.70 $9.74 $9.61 $9.52 $9.95 $9.35 $9.21 $8.80
TOTAL RETURN+............................... 5.1% 4.2% 7.1% 1.9% 13.6% 9.3% 12.9% 3.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)... $115,723 $136,449 $168,542 $199,612 $198,286 $147,996 $75,791 $7,286
Ratios to average net assets:
Expenses.................................. .63%** .82%++** .61% .56% .58% .41%** .10%** .10%**
Net investment income..................... 5.46%** 4.89%++** 5.73% 5.37% 5.66% 6.12%** 6.55%** 6.15%**
Portfolio turnover rate..................... 30% 29% 53% 32% 24% 24% 66% 82%
<CAPTION>
MAY 11,
1988*
THROUGH
APRIL 30,
1989||
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period........ $8.82
Income (loss) from investment operations:
Net investment income....................... .47
Net realized and unrealized gain (loss) on
investments............................... .22
Total from investment operations.......... .69
Less distributions to shareholders from:
Net investment income....................... (.42)
Distributions in excess of net investment
income.................................... --
Net realized gains.......................... --
Paid-in capital............................. --
Total distributions....................... (.42)
Net asset value, end of period............ $9.09
TOTAL RETURN+............................... 9.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)... $717
Ratios to average net assets:
Expenses.................................. .30%**++
Net investment income..................... 5.30%**++
Portfolio turnover rate..................... 30%
</TABLE>
# The Fund changed its fiscal year-end from April 30 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
FOUR MAY 11,
YEAR MONTHS 1988*
ENDED ENDED THROUGH
AUGUST 31, AUGUST 31, YEAR ENDED APRIL 30, APRIL 30,
1996 1995# 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Expenses............................................ .95% 1.05% .68% .88% 5.14% 20.40%
Net investment income (loss)........................ 5.14% 4.66% 5.85% 5.77% 1.01% (14.80%)
</TABLE>
|| On June 30, 1995, ABT Florida Tax-Free Fund sold its net assets to First
Union Florida Municipal Bond Portfolio which was subsequently renamed
Evergreen Florida Municipal Bond Fund. ABT Florida Tax-Free Fund was the
accounting survivor in the combination. Accordingly, the information stated
in the above table prior to the combination reflects the results of ABT
Florida Tax-Free Fund. The net asset values per share and related per share
data have been restated to reflect the conversion of shares.
5
<PAGE>
EVERGREEN FLORIDA MUNICIPAL BOND FUND -- CLASS B AND Y SHARES
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
JUNE 30, JUNE 30,
1995* 1995*
YEAR ENDED THROUGH YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1996 1995#|| 1996 1995#||
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period..................................... $9.74 $9.67 $9.74 $9.67
Income (loss) from investment operations:
Net investment income.................................................... .44 .07 .53 .09
Net realized and unrealized gain (loss) on investments................... (.04) .10 (.03) .10
Total from investment operations....................................... .40 .17 .50 .19
Less distributions to shareholders from:
Net investment income.................................................... (.44) (.07) (.54) (.09)
Distributions in excess of net investment income......................... -- (.03) -- (.03)
Net realized gains....................................................... -- -- -- --
Paid-in capital.......................................................... -- -- -- --
Total distributions.................................................... (.44) (.10) (.54) (.12)
Net asset value, end of period......................................... $9.70 $9.74 $9.70 $9.74
TOTAL RETURN+............................................................ 4.2% 1.5% 5.2% 1.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................................ $28,849 $27,351 $12,259 $3,602
Ratios to average net assets:
Expenses............................................................... 1.58%** 1.44%**++ .57%** .59%**++
Net investment income.................................................. 4.52%** 3.22%**++ 5.55%** 4.93%**++
Portfolio turnover rate.................................................. 30% 29% 30% 29%
</TABLE>
# The Fund changed its fiscal year-end from April 30 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
JUNE 30, JUNE 30,
YEAR 1995* YEAR 1995*
ENDED THROUGH ENDED THROUGH
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Expenses................................................................. 1.76% 1.64% .77% .79%
Net investment income.................................................... 4.32% 3.02% 5.35% 4.73%
</TABLE>
|| On June 30, 1995, ABT Florida Tax-Free Fund sold its net assets to First
Union Florida Municipal Bond Portfolio which was subsequently renamed
Evergreen Florida Municipal Bond Fund. ABT Florida Tax-Free Fund was the
accounting survivor in the combination. Accordingly, the information stated
in the above table prior to the combination reflects the results of ABT
Florida Tax-Free Fund. The net asset values per share and related per share
data have been restated to reflect the conversion of shares.
6
<PAGE>
EVERGREEN GEORGIA MUNICIPAL BOND FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
JULY 2,
EIGHT MONTHS 1993*
YEAR ENDED ENDED YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31,
1996 1995# 1994 1993
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period..................................... $9.47 $8.74 $10.19 $10.00
Income (loss) from investment operations.................................
Net investment income.................................................... .48 .33 .48 .20
Net realized and unrealized gain (loss) on investments................... .10 .73 (1.45) .19
Total from investment operations....................................... .58 1.06 (.97) .39
Less distributions to shareholders from net investment income............ (.48) (.33) (.48) (.20)
Net asset value, end of period......................................... $9.57 $9.47 $8.74 $10.19
TOTAL RETURN+............................................................ 6.2% 12.3% (9.6%) 4.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................................ $1,954 $2,098 $1,387 $817
Ratios to average net assets:
Expenses **............................................................ .88% .71%++ .53% .25%++
Net investment income **............................................... 4.96% 5.39%++ 5.26% 4.71%++
Portfolio turnover rate.................................................. 21% 91% 147% 15%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
JULY 2,
EIGHT MONTHS 1993*
YEAR ENDED ENDED YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31,
1996 1995# 1994 1993
<S> <C> <C> <C> <C>
Expense.................................................................. 2.82% 2.83% 3.61% 6.82%
Net investment income (loss)............................................. 3.02% 3.27% 2.18% (1.86%)
</TABLE>
7
<PAGE>
EVERGREEN GEORGIA MUNICIPAL BOND FUND -- CLASS B AND Y SHARES
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
JULY 2, FEBRUARY 28,
EIGHT MONTHS 1993* EIGHT MONTHS 1994*
YEAR ENDED ENDED YEAR ENDED THROUGH YEAR ENDED ENDED THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31, AUGUST 31, DECEMBER 31,
1996 1995# 1994 1993 1996 1995# 1994
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period.......................... $9.47 $8.74 $10.19 $10.00 $9.47 $8.74 $9.83
Income (loss) from investment
operations......................
Net investment income............. .41 .28 .43 .18 .50 .35 .42
Net realized and unrealized gain
(loss) on investments........... .10 .73 (1.45) .19 .10 .73 (1.09)
Total from investment
operations.................... .51 1.01 (1.02) .37 .60 1.08 (.67)
Less distributions to shareholders
from net investment income...... (.41) (.28) (.43) (.18) (.50) (.35) (.42)
Net asset value, end of
period.......................... $9.57 $9.47 $8.74 $10.19 $9.57 $9.47 $8.74
TOTAL RETURN+..................... 5.4% 11.7% (10.2%) 3.7% 6.5% 12.5% (6.9%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)........................ $9,271 $7,538 $6,912 $3,692 $1,620 $1,339 $284
Ratios to average net assets:
Expenses **..................... 1.63% 1.46%++ 1.13% .75%++ .63% .46%++ .31%++
Net investment income **........ 4.21% 4.64%++ 4.66% 4.15%++ 5.21% 5.64%++ 5.68%++
Portfolio turnover rate........... 21% 91% 147% 15% 21% 91% 147%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS B SHARES
JULY 2, CLASS Y SHARES
EIGHT MONTHS 1993* EIGHT MONTHS FEBRUARY 28,
YEAR ENDED ENDED YEAR ENDED THROUGH YEAR ENDED ENDED 1994* THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31, AUGUST 31, DECEMBER 31,
1996 1995# 1994 1993 1996 1995# 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Expense........................... 3.54% 3.58% 4.21% 7.32% 2.51% 2.58% 3.39%
Net investment income (loss)...... 2.30% 2.52% 1.58% (2.42%) 3.33% 3.52% 2.60%
</TABLE>
8
<PAGE>
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED YEAR ENDED FEBRUARY 28,
1996# FEBRUARY 29, 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period............. $11.01 $10.53 $10.99 $11.01 $10.22
Income (loss) from investment operations:
Net investment income............................ .28 .56 .57 .60 .63
Net realized and unrealized gain (loss) on
investments..................................... (.26) .48 (.46) (.02) .79
Total from investment operations................ .02 1.04 .11 .58 1.42
Less distributions to shareholders from net
investment income............................... (1.28) (.56) (.57) (.60) (.63)
Net asset value, end of period.................. $10.75 $11.01 $10.53 $10.99 $11.01
TOTAL RETURN+.................................... .2% 10.1% 1.4% 5.3% 14.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)........ $32,377 $41,762 $34,852 $42,783 $30,863
Ratios to average net assets:
Expenses**...................................... .34%++ .36% .25% .14% .00%
Net investment income**......................... 5.08%++ 5.15% 5.52% 5.31% 5.97%
Portfolio turnover rate.......................... 0% 4% 8% 2% 5%
<CAPTION>
JULY 16, 1991*
THROUGH
FEBRUARY 29,
1992
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period............. $10.00
Income (loss) from investment operations:
Net investment income............................ .38
Net realized and unrealized gain (loss) on
investments..................................... .22
Total from investment operations................ .60
Less distributions to shareholders from net
investment income............................... (.38)
Net asset value, end of period.................. $10.22
TOTAL RETURN+.................................... 9.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)........ $ 13,129
Ratios to average net assets:
Expenses**...................................... .01%++
Net investment income**......................... 5.89%++
Portfolio turnover rate.......................... 5%
</TABLE>
# The Fund changed its fiscal year end from February 28 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment advisor, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED YEAR ENDED FEBRUARY 28,
1996# FEBRUARY 29, 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Expenses......................................... 1.11% 1.03% 1.04% 1.05% 1.16%
Net investment income............................ 4.31% 4.48% 4.73% 4.40% 4.81%
<CAPTION>
JULY 16, 1991*
THROUGH
FEBRUARY 29,
1992
<S> <C>
Expenses......................................... 1.20%
Net investment income............................ 4.70%
</TABLE>
9
<PAGE>
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND -- CLASS B AND Y SHARES
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
SIX MONTHS JANUARY 30, 1996* SIX MONTHS
ENDED THROUGH ENDED
AUGUST 31, 1996# FEBRUARY 29, 1996 AUGUST 31, 1996#
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................... $11.01 $11.08 $11.01
Income (loss) from investment operations:
Net investment income.................................. .24 .05 .28
Net realized and unrealized gain (loss) on
investments........................................... (.26) (.07) (.26)
Total from investment operations...................... (.02) (.02) .02
Less distributions to shareholders from net investment
income................................................ (.24) (.05) (.28)
Net asset value, end of period........................ $10.75 $11.01 $10.75
TOTAL RETURN+.......................................... (.2%) (.2%) .2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).............. $2,709 $186 $9,076
Ratios to average net assets:
Expenses**++.......................................... 1.28% .31% .31%
Net investment income**++............................. 4.14% 5.23% 5.12%
Portfolio turnover rate................................ 0% 4% 0%
<CAPTION>
FEBRUARY 8, 1996*
THROUGH
FEBRUARY 29, 1996
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period................... $11.14
Income (loss) from investment operations:
Net investment income.................................. .03
Net realized and unrealized gain (loss) on
investments........................................... (.13)
Total from investment operations...................... (.10)
Less distributions to shareholders from net investment
income................................................ (.03)
Net asset value, end of period........................ $11.01
TOTAL RETURN+.......................................... (.9%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).............. $18
Ratios to average net assets:
Expenses**++.......................................... .31%
Net investment income**++............................. 5.28%
Portfolio turnover rate................................ 4%
</TABLE>
# The Fund changed its fiscal year end from February 28 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne aall
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
SIX MONTHS JANUARY 30, 1996* SIX MONTHS
ENDED THROUGH ENDED
AUGUST 31, 1996# FEBRUARY 29, 1996 AUGUST 31, 1996#
<S> <C> <C> <C>
Expenses............................................... 1.85% 1.66% .87%
Net investment income.................................. 3.57% 3.88% 4.56%
<CAPTION>
FEBRUARY 8, 1996*
THROUGH
FEBRUARY 29, 1996
<S> <C>
Expenses............................................... .88%
Net investment income.................................. 4.71%
</TABLE>
10
<PAGE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
EIGHT MONTHS
YEAR ENDED ENDED YEAR ENDED
AUGUST 31, AUGUST 31, DECEMBER 31,
1996 1995# 1994
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........................................... $9.95 $9.16 $10.61
Income (loss) from investment operations:
Net investment income.......................................................... .49 .33 .49
Net realized and unrealized (loss) on investments.............................. .02 .79 (1.45)
Total from investment operations.............................................. .51 1.12 (.96)
Less distributions to shareholders from:
Net investment income.......................................................... (.48) (.33) (.49)
Net realized gains............................................................. -- -- --
Total distributions........................................................... (.48) (.33) (.49)
Net asset value, end of period................................................ $9.98 $9.95 $9.16
TOTAL RETURN+.................................................................. 5.2% 12.3% (9.1%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)...................................... $7,989 $8,279 $7,979
Ratios to average net assets:
Expenses **................................................................... 1.08% .92%++ .79%
Net investment income **...................................................... 4.81% 5.09%++ 5.11%
Portfolio turnover rate........................................................ 86% 117% 126%
<CAPTION>
JANUARY 11,
1993* THROUGH
DECEMBER 31,
1993
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period........................................... $10.00
Income (loss) from investment operations:
Net investment income.......................................................... .46
Net realized and unrealized (loss) on investments.............................. .64
Total from investment operations.............................................. 1.10
Less distributions to shareholders from:
Net investment income.......................................................... (.46)
Net realized gains............................................................. (.03)
Total distributions........................................................... (.49)
Net asset value, end of period................................................ $10.61
TOTAL RETURN+.................................................................. 11.3%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)...................................... $12,739
Ratios to average net assets:
Expenses **................................................................... .32%++
Net investment income **...................................................... 4.91%++
Portfolio turnover rate........................................................ 57%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were reimbursed or waived by the investment adviser, the annualized
ratios of expenses and net investment income to average net assets would have
been the following:
<TABLE>
<CAPTION>
EIGHT MONTHS
YEAR ENDED ENDED YEAR ENDED
AUGUST 31, AUGUST 31, DECEMBER 31,
1996 1995# 1994
<S> <C> <C> <C>
Expenses....................................................................... 1.35% 1.27% 1.18%
Net investment income.......................................................... 4.54% 4.74% 4.72%
<CAPTION>
JANUARY 11,
1993* THROUGH
DECEMBER 31,
1993
<S> <C>
Expenses....................................................................... 1.25%
Net investment income.......................................................... 3.98%
</TABLE>
11
<PAGE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND -- CLASS B AND Y SHARES
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
EIGHT MONTHS JANUARY 11, EIGHT MONTHS
YEAR ENDED ENDED YEAR ENDED 1993* THROUGH YEAR ENDED ENDED
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31, AUGUST 31,
1996 1995# 1994 1993 1996 1995#
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........ $9.95 $9.16 $10.61 $10.00 $9.95 $9.16
Income (loss) from investment operations:
Net investment income....................... .42 .28 .44 .42 .51 .35
Net realized and unrealized (loss) on
investments................................ .02 .79 (1.45) .64 .03 .79
Total from investment operations........... .44 1.07 (1.01) 1.06 .54 1.14
Less distributions to shareholders from:
Net investment income....................... (.41) (.28) (.44) (.42) (.51) (.35)
Net realized gains.......................... -- -- -- (.03) -- --
Total distributions........................ (.41) (.28) (.44) (.45) (.51) (.35)
Net asset value, end of period............. $9.98 $9.95 $9.16 $10.61 $9.98 $9.95
TOTAL RETURN+............................... 4.4% 11.8% (9.6%) 10.8% 5.4% 12.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)... $ 49,382 $49,040 $ 44,616 $45,168 $3,771 $1,006
Ratios to average net assets:
Expenses **................................ 1.83% 1.67%++ 1.37% .79%++ .84% .67%++
Net investment income **................... 4.06% 4.34%++ 4.53% 4.47%++ 5.05% 5.34%++
Portfolio turnover rate..................... 86% 117% 126% 57% 86% 117%
<CAPTION>
FEBRUARY 28,
1994* THROUGH
DECEMBER 31,
1994
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period........ $10.31
Income (loss) from investment operations:
Net investment income....................... .43
Net realized and unrealized (loss) on
investments................................ (1.15)
Total from investment operations........... (.72)
Less distributions to shareholders from:
Net investment income....................... (.43)
Net realized gains.......................... --
Total distributions........................ (.43)
Net asset value, end of period............. $9.16
TOTAL RETURN+............................... (7.0%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)... $642
Ratios to average net assets:
Expenses **................................ .59%++
Net investment income **................... 5.58%++
Portfolio turnover rate..................... 126%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were reimbursed or waived by the investment adviser, the annualized
ratios of expenses and net investment income to average net assets would have
been the following:
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
EIGHT MONTHS JANUARY 11, EIGHT MONTHS
YEAR ENDED ENDED YEAR ENDED 1993* THROUGH YEAR ENDED ENDED
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31, AUGUST 31,
1996 1995# 1994 1993 1996 1995#
<S> <C> <C> <C> <C> <C> <C>
Expenses.................................... 2.10% 2.02% 1.76% 1.74% 1.07% 1.02%
Net investment income....................... 3.79% 3.99% 4.14% 3.52% 4.82% 4.99%
<CAPTION>
FEBRUARY 28,
1994* THROUGH
DECEMBER 31,
1994
<S> <C>
Expenses.................................... .98%
Net investment income....................... 5.19%
</TABLE>
12
<PAGE>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y SHARES
YEAR EIGHT MONTHS JANUARY 3, YEAR EIGHT MONTHS JANUARY 3, YEAR EIGHT MONTHS
ENDED ENDED 1994* THROUGH ENDED ENDED 1994* THROUGH ENDED ENDED
AUGUST 31, AUGUST 31, DECEMBER 31, AUGUST 31, AUGUST 31, DECEMBER 31, AUGUST 31, AUGUST 31,
1996 1995# 1994 1996 1995# 1994 1996 1995#
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period.... $9.59 $8.62 $10.00 $9.59 $8.62 $10.00 $9.59 $8.62
Income (loss) from
investment operations:
Net investment income... .49 .34 .46 .41 .29 .41 .51 .35
Net realized and
unrealized gain (loss)
on
investments............ .10 .97 (1.38) .10 .97 (1.38) .10 .97
Total from investment
operations........... .59 1.31 (.92) .51 1.26 (.97) .61 1.32
Less distributions to
shareholders from net
investment income...... (.49) (.34) (.46) (.41) (.29) (.41) (.51) (.35)
Net asset value, end of
period................. $9.69 $9.59 $8.62 $9.69 $9.59 $8.62 $9.69 $9.59
TOTAL RETURN+........... 6.2% 15.4% (9.3%) 5.4% 14.8% (9.8%) 6.5% 15.5%
RATIOS & SUPPLEMENTAL
DATA:
Net assets, end of
period (000's
omitted)............... $841 $610 $312 $4,282 $3,542 $2,456 $4,555 $1,673
Ratios to average net
assets:
Expenses **............ .86% .53%++ .25%++ 1.61% 1.28%++ .87%++ .62% .28%++
Net investment income
**................... 4.98% 5.41%++ 5.57%++ 4.23% 4.66%++ 4.88%++ 5.22% 5.66%++
Portfolio turnover
rate................... 37% 66% 23% 37% 66% 23% 37% 66%
<CAPTION>
FEBRUARY 28,
1994* THROUGH
DECEMBER 31,
1994
<S> <C>
PER SHARE DATA:
Net asset value,
beginning of period.... $9.74
Income (loss) from
investment operations:
Net investment income... .43
Net realized and
unrealized gain (loss)
on
investments............ (1.12)
Total from investment
operations........... (.69)
Less distributions to
shareholders from net
investment income...... (.43)
Net asset value, end of
period................. $8.62
TOTAL RETURN+........... (7.1%)
RATIOS & SUPPLEMENTAL
DATA:
Net assets, end of
period (000's
omitted)............... $92
Ratios to average net
assets:
Expenses **............ .00%++
Net investment income
**................... 5.92%++
Portfolio turnover
rate................... 23%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y SHARES
YEAR EIGHT MONTHS JANUARY 3, YEAR EIGHT MONTHS JANUARY 3, YEAR EIGHT MONTHS
ENDED ENDED 1994* THROUGH ENDED ENDED 1994* THROUGH ENDED ENDED
AUGUST 31, AUGUST 31, DECEMBER 31, AUGUST 31, AUGUST 31, DECEMBER 31, AUGUST 31, AUGUST 31,
1996 1995# 1994 1996 1995# 1994 1996 1995#
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses................ 4.00% 6.50% 10.71% 4.76% 7.25% 11.33% 3.70% 6.25%
Net investment income
(loss)................. 1.84% (.56%) (4.89%) 1.08% (1.31%) (5.58%) 2.14% (.31%)
<CAPTION>
FEBRUARY 28,
1994* THROUGH
DECEMBER 31,
1994
<S> <C>
Expenses................ 10.46%
Net investment income
(loss)................. (4.54%)
</TABLE>
13
<PAGE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR EIGHT MONTHS
ENDED ENDED YEAR ENDED
AUGUST 31, AUGUST 31, DECEMBER 31,
1996 1995# 1994
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................................... $9.67 $8.85 $10.19
Income (loss) from investment operations:
Net investment income.................................................. .48 .33 .47
Net realized and unrealized gain (loss) on investments................. .01 .82 (1.34)
Total from investment operations...................................... .49 1.15 (.87)
Less distributions to shareholders from net investment income.......... (.48) (.33) (.47)
Net asset value, end of period........................................ $9.68 $9.67 $8.85
TOTAL RETURN+.......................................................... 5.1% 13.1% (8.6%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).............................. $2,892 $1,983 $1,606
Ratios to average net assets:
Expenses **........................................................... .93% .72%++ .53%
Net investment income **.............................................. 4.83% 5.17%++ 5.11%
Portfolio turnover rate................................................ 68% 87% 59%
<CAPTION>
JULY 2,
1993*
THROUGH
DECEMBER 31,
1993
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period................................... $10.00
Income (loss) from investment operations:
Net investment income.................................................. .20
Net realized and unrealized gain (loss) on investments................. .19
Total from investment operations...................................... .39
Less distributions to shareholders from net investment income.......... (.20)
Net asset value, end of period........................................ $10.19
TOTAL RETURN+.......................................................... 3.9%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).............................. $1,306
Ratios to average net assets:
Expenses **........................................................... .25%++
Net investment income **.............................................. 4.64%++
Portfolio turnover rate................................................ 0%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
YEAR EIGHT MONTHS
ENDED ENDED YEAR ENDED
AUGUST 31, AUGUST 31, DECEMBER 31,
1996 1995# 1994
<S> <C> <C> <C>
Expenses............................................................... 3.47% 3.83% 5.14%
Net investment income (loss)........................................... 2.29% 2.06% .50%
<CAPTION>
JULY 2,
1993*
THROUGH
DECEMBER 31,
1993
<S> <C>
Expenses............................................................... 7.75%
Net investment income (loss)........................................... (2.86%)
</TABLE>
14
<PAGE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND -- CLASS B AND Y SHARES
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y
JULY 2, SHARES
YEAR EIGHT MONTHS 1993* YEAR
ENDED ENDED YEAR ENDED THROUGH ENDED
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31,
1996 1995# 1994 1993 1996
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period............................. $9.67 $8.85 $10.19 $10.00 $9.67
Income (loss) from investment
operations:
Net investment income............... .41 .28 .42 .17 .50
Net realized and unrealized gain
(loss) on investments.............. .01 .82 (1.34) .19 .01
Total from investment operations... .42 1.10 (.92) .36 .51
Less distributions to shareholders
from net investment income......... (.41) (.28) (.42) (.17) (.50)
Net asset value, end of period...... $9.68 $9.67 $8.85 $10.19 $9.68
TOTAL RETURN+....................... 4.3% 12.5% (9.1%) 3.7% 5.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)........................... $5,963 $5,803 $3,817 $2,235 $4,266
Ratios to average net assets:
Expenses **........................ 1.68% 1.47%++ 1.12% .75%++ .70%
Net investment income **........... 4.09% 4.42%++ 4.54% 4.25%++ 5.05%
Portfolio turnover rate............. 68% 87% 59% 0% 68%
<CAPTION>
EIGHT MONTHS FEBRUARY 28,
ENDED 1994* THROUGH
AUGUST 31, DECEMBER 31,
1995# 1994
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period............................. $8.85 $9.83
Income (loss) from investment
operations:
Net investment income............... .34 .41
Net realized and unrealized gain
(loss) on investments.............. .82 (.98)
Total from investment operations... 1.16 (.57)
Less distributions to shareholders
from net investment income......... (.34) (.41)
Net asset value, end of period...... $9.67 $8.85
TOTAL RETURN+....................... 13.3% (5.8%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)........................... $965 $344
Ratios to average net assets:
Expenses **........................ .47% .28%++
Net investment income **........... 5.42%++ 5.54%++
Portfolio turnover rate............. 87% 59%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y
JULY 2, SHARES
YEAR EIGHT MONTHS 1993* YEAR
ENDED ENDED YEAR ENDED THROUGH ENDED
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31,
1996 1995# 1994 1993 1996
<S> <C> <C> <C> <C> <C>
Expenses............................. 4.23% 4.58% 5.73% 8.25% 3.24%
Net investment income (loss)......... 1.54% 1.31% (.07%) (3.25%) 2.51%
<CAPTION>
EIGHT MONTHS
ENDED FEBRUARY 28,
AUGUST 31, 1994* THROUGH
1995# DECEMBER 31, 1994
<S> <C> <C>
Expenses............................. 3.58% 4.89%
Net investment income (loss)......... 2.31% .93%
</TABLE>
15
<PAGE>
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES
<TABLE>
<CAPTION>
CLASS A SHARES#
JUNE 17,
1992* CLASS B SHARES
YEAR FOUR MONTHS THROUGH YEAR JULY 10, 1995*
ENDED ENDED YEAR ENDED APRIL ENDED THROUGH
AUGUST 31, AUGUST 31, APRIL 30, 30, AUGUST 31, AUGUST 31,
1996 1995# 1995# 1994# 1993# 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.......... $10.40 $10.16 $10.08 $10.36 $10.00 $10.40 $10.41
Income (loss) from investment operations:
Net investment income......................... .63 .21 .65 .68 .61 .55 .08
Net realized and unrealized gain (loss) on
investments.................................. .02 .24 .08 (.26) .39 .02 (.01)
Total from investment operations............. .65 .45 .73 .42 1.00 .57 .07
Less distributions to shareholders from:
Net investment income......................... (.63) (.21) (.65) (.68) (.61 ) (.55) (.08)
Net realized gains............................ -- -- -- (.02) (.03 ) -- --
Total distributions.......................... (.63) (.21) (.65) (.70) (.64 ) (.55) (.08)
Net asset value at end of period............. $10.42 $10.40 $10.16 $10.08 $10.36 $10.42 $10.40
TOTAL RETURN+................................. 6.4% 4.4% 7.6% 3.3% 10.3% 5.6% .6%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)..... $76,267 $59,551 $65,043 $72,683 $33,541 $19,219 $3,137
Ratios to average net assets:
Expenses..................................... .85%** 1.07%++** .60%** .14%** .00%**++ 1.59%** 1.09%++
Net investment income........................ 6.02%** 5.92%++** 6.52%** 6.16%** 5.92%**++ 5.27%** 3.40%++
Portfolio turnover rate....................... 42% 14% 28% 31% 50% 42% 14%
<CAPTION>
CLASS Y
SHARES
SEPTEMBER
20, 1995*
THROUGH
AUGUST 31,
1996
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period.......... $10.48
Income (loss) from investment operations:
Net investment income......................... .63
Net realized and unrealized gain (loss) on
investments.................................. (.06)
Total from investment operations............. .57
Less distributions to shareholders from:
Net investment income......................... (.63)
Net realized gains............................ --
Total distributions.......................... (.63)
Net asset value at end of period............. $10.42
TOTAL RETURN+................................. 6.3%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)..... $1,970
Ratios to average net assets:
Expenses..................................... .59%**++
Net investment income........................ 6.27%**++
Portfolio turnover rate....................... 42%
</TABLE>
# Effective June 30, 1995, Evergreen Florida High Income Municipal Bond Fund, a
new series of the Evergreen Municipal Trust, acquired substantially all of
the net assets of ABT Florida High Income Municipal Bond Fund. ABT Florida
High Income Municipal Bond Fund, which had a fiscal year that ended on April
30, was the accounting survivor in the combination. Accordingly, the
information above includes the results of operations of ABT Florida High
Income Municipal Bond Fund prior to June 30, 1995.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge and contingent deferred
sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
CLASS B
CLASS A SHARES SHARES
YEAR FOUR MONTHS JUNE 17, 1992* YEAR
ENDED ENDED YEAR ENDED THROUGH ENDED
AUGUST 31, AUGUST 31, APRIL 30, APRIL 30, AUGUST 31,
1996 1995# 1995# 1994# 1993# 1996
<S> <C> <C> <C> <C> <C> <C>
Expenses................................... 1.15% 1.42% 1.26% 1.12% 1.12% 1.89%
Net investment income...................... 5.72% 5.57% 5.86% 5.18% 4.80% 4.97%
<CAPTION>
CLASS Y
SHARES
SEPTEMBER
20, 1995*
THROUGH
AUGUST 31,
1996
<S> <C>
Expenses................................... .89%
Net investment income...................... 5.97%
</TABLE>
16
<PAGE>
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVES AND POLICIES
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
The Funds seek current income exempt from federal regular income tax and,
where applicable, state income taxes, consistent with preservation of capital.
In addition, the EVERGREEN FLORIDA MUNICIPAL BOND FUND intends to qualify as an
investment exempt from the Florida state intangibles tax. Florida does not
currently tax personal income.
Each Fund's investment objective is fundamental and cannot be changed
without shareholder approval. While there is no assurance that each objective
will be achieved, the Funds will endeavor to do so by following the investment
policies detailed below. Unless otherwise indicated, the investment policies of
a Fund may be changed by the Board of Trustees ("Trustees") without the approval
of shareholders. Shareholders will be notified before any material change in
these policies becomes effective.
As a matter of fundamental investment policy, which may not be changed
without shareholder approval, each Fund will normally invest its assets so that
at least 80% of its annual interest income is, or at least 80% of its net assets
are, invested in obligations which provide interest income which is exempt from
federal regular income taxes. The interest retains its tax-free status when
distributed to the Funds' shareholders. In addition, at least 65% of the value
of each Fund's total assets will be invested in municipal bonds of the
particular state after which the Fund is named. To qualify as an investment
exempt from the Florida state intangibles tax, the EVERGREEN FLORIDA MUNICIPAL
BOND FUND'S portfolio must consist entirely of investments exempt from the
Florida state intangibles tax on the last business day of the calendar year.
Each Fund seeks to achieve its investment objective by investing
principally in municipal bonds, including industrial development bonds, of its
designated state. In addition, the Funds may invest in obligations issued by or
on behalf of any state, territory, or possession of the United States, including
the District of Columbia, or their political subdivisions or agencies and
instrumentalities, the interest from which is exempt from federal (regular, if
applicable) income tax. It is likely that shareholders who are subject to the
alternative minimum tax will be required to include interest from a portion of
the municipal securities owned by a Fund in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
Municipal bonds are debt obligations issued by the state or local
entities to support a government's general financial needs or special projects,
such as housing projects or sewer works. Municipal bonds include industrial
development bonds issued by or on behalf of public authorities to provide
financing aid to acquire sites or construct or equip facilities for privately or
publicly owned corporations.
The two principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Revenue bonds are paid off only with the revenue
generated by the project financed by the bond or other specified sources of
revenue. For example, in the case of a bridge project, proceeds from the tolls
would go directly to retiring the bond issue. Thus, unlike general obligation
bonds, revenue bonds do not represent a pledge of credit or create any debt of
or charge against the general revenues of a municipality or public authority.
The municipal bonds in which the Funds will invest are subject to one or
more of the following quality standards: rated Baa or better by Moody's
Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's
Ratings Group ("S&P") or, if unrated, are determined by the Fund's investment
adviser to be of comparable quality to such ratings; insured by a municipal bond
insurance company which is rated Aa by Moody's or AA by S&P; guaranteed at the
time of purchase by the U.S. government as to the payment of principal and
interest; or fully collateralized by an escrow of U.S. government securities.
Bonds rated BBB by S&P or Baa by Moody's have speculative characteristics.
Changes in economic conditions or other circumstances are more likely to lead to
weakened capacity to make principal and interest payments than higher rated
bonds. However, like the higher
17
<PAGE>
rated bonds, these securities are considered to be investment grade. If any
security owned 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. If ratings made by Moody's or S&P
change because of changes in those organizations or their ratings systems, the
Funds will try to use comparable ratings as standards in accordance with the
Funds' investment objectives. A description of the rating categories is
contained in an Appendix to the Statement of Additional Information.
The Funds may also invest in:
participation interests in any of the above obligations.
(Participation interests may be purchased from financial institutions such
as commercial banks, savings and loan associations and insurance companies,
and give a Fund an undivided interest in particular municipal securities.);
variable rate municipal securities. (Variable rate securities
offer interest rates which are tied to a money market rate, usually a
published interest rate or interest rate index or the 91-day U.S. Treasury
bill rate. Many of these securities are subject to prepayment of principal
on demand by the Fund, usually in seven days or less.); and
municipal leases as described in "Investment Practices and
Restrictions", below.
During periods when, in the opinion of the Funds investment adviser, a
temporary defensive position in the market is appropriate, a Fund may
temporarily invest in short-term tax-exempt or taxable investments. These
temporary investments include: notes issued by or on behalf of municipal or
corporate issuers; obligations issued or guaranteed by the U.S. government, its
agencies, or instrumentalities; other debt securities; commercial paper; bank
certificates of deposit; shares of other investment companies; and repurchase
agreements. There are no rating requirements applicable to temporary
investments. However, the Funds investment adviser will limit temporary
investments to those it considers to be of comparable quality to the Funds'
primary investments.
Although the Funds are permitted to make taxable, temporary investments,
there is no current intention of generating income subject to federal regular
income tax, where applicable. However, certain temporary investments will
generate income which is subject to state taxes. The Funds may employ certain
additional investment strategies which are discussed in "Investment Practices
and Restrictions", below.
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
The objective of the EVERGREEN NEW JERSEY TAX-FREE INCOME FUND is to seek
a high level of income, exempt from federal and New Jersey personal income
taxes. The Fund is available only to investors who reside in New Jersey. There
is no assurance that the Fund will achieve its stated objective. The investment
objective of the Fund is fundamental and so may not be changed without the
approval of a majority of the Fund's shareholders.
To attain its objective, the EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
invests at least 80% of its net assets in municipal securities issued by the
State of New Jersey or its counties, municipalities, authorities or other
political subdivisions and municipal securities issued by territories or
possessions of the United States, such as Puerto Rico, the interest on which, in
the opinion of bond counsel, is exempt from federal and New Jersey personal
income taxes. The Fund normally invests in intermediate and long-term municipal
securities. Intermediate-term municipal securities generally mature in three to
ten years. Long-term municipal securities generally mature in ten to thirty
years. The Fund has no maximum or minimum maturity for any individual municipal
securities, however, it will maintain a dollar-weighted average portfolio
maturity of twenty years or less. If its investment adviser determines that
market conditions warrant a shorter average maturity, the Fund's investments
will be adjusted accordingly.
The Fund will only purchase securities rated within the three highest
rating categories by Moody's or by S&P and unrated securities of equivalent
quality as determined by the investment adviser pursuant to guidelines
established by the Trustees. See the Statement of Additional Information for
further information in regard to ratings.
The Fund will seek to invest substantially all of its assets in
intermediate and long-term municipal securities. However, under certain
circumstances, such as a temporary decline in the issuance of New Jersey
obligations, the Fund may invest up to 20% of its assets in the following:
short-term municipal securities issued outside of New Jersey (the income from
which may be subject to New Jersey income taxes) or certain taxable fixed income
securities (the income from which may be subject to federal and New Jersey
personal income taxes).
18
<PAGE>
In addition, under unusual circumstances the Fund reserves the right to
invest more than 20% of its net assets in securities other than New Jersey
municipal securities such as taxable fixed income securities, the interest from
which may be subject to federal and New Jersey personal income taxes. In most
instances, however, the Fund will seek to avoid holdings in an effort to provide
income that is fully exempt from federal and New Jersey personal income taxes.
The Fund may also invest in municipal securities issued to finance
private activities, whose interest is a preference item for purposes of the
Federal alternative minimum tax. Such "private activity bonds" might include
industrial development bonds and securities issued to finance projects such as
solid waste disposal facilities, student loans or water and sewage projects. The
Fund currently intends to treat "private activity bonds" as not federally
tax-exempt and accordingly to limit income from "private activity bonds" to no
more than 20%. See "Other Information-Dividends, Distributions and Taxes" for
further information. The Fund may invest in other municipal securities and may
employ additional investment strategies which are discussed in "Investment
Practices and Restrictions" below.
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND seeks to provide a high
level of current income which is exempt from federal income taxes. This
objective is fundamental and may not be changed without shareholder approval.
The term "high-level" indicates that the Fund seeks to achieve an income level
that exceeds that which an investor would expect from an investment grade
portfolio with similar maturity characteristics. EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND invests primarily in high yield, medium and lower rated (Baa
through C by Moody's and BBB through C1 by S&P) and unrated municipal
securities. To varying degrees, medium and lower rated municipal securities, as
well as unrated municipal securities, are considered to have speculative
characteristics and are subject to greater market fluctuations and risk of loss
of income and principal than higher rated securities. To the extent that an
investor realizes a yield in excess of that which could be expected from a fund
which invests primarily in investment grade securities, the investor should
expect to bear increased risk due to the fact that the risk of principal and/or
interest not being repaid with respect to the high yield securities described
above is significantly greater than that which exists in connection with
investment grade securities. In assessing the risk involved in purchasing medium
and lower rated and unrated securities, the Fund's investment adviser will use
nationally recognized statistical rating organizations such as Moody's and S&P,
and will also rely heavily on credit analysis it develops internally. Under
normal circumstances, the Fund's dollar-weighted average maturity generally will
be fifteen years or more. However, the Fund may invest in securities of any
maturity, and if the Fund's investment adviser determines that market conditions
warrant a shorter average maturity, the Fund's investments will be adjusted
accordingly. In pursuit of its investment objective, EVERGREEN FLORIDA HIGH
INCOME MUNICIPAL BOND FUND will, under normal market conditions, invest at least
65% of its total assets in such medium and lower rated municipal securities or
unrated municipal securities of comparable quality to such rated municipal
bonds. Investors should note that such a policy is not a fundamental policy of
the Fund and shareholder approval is not necessary to change such policy. There
is no assurance that EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND can
achieve its investment objective.
The Fund will not invest in municipal securities which are in default,
i.e., securities rated D by S&P. Investments may also be made by EVERGREEN
FLORIDA HIGH INCOME MUNICIPAL BOND FUND in higher quality municipal bonds and,
for temporary defensive purposes, the Fund may invest less than 65% of its total
assets in the medium and lower quality municipal securities described above. The
Fund may assume a defensive position if, for example, yield spreads between
lower grade and investment grade municipal bonds are narrow and the yields
available on lower quality municipal securities do not justify the increased
risk associated with an investment in such securities or when there is a lack of
medium and lower quality issues in which to invest. EVERGREEN FLORIDA HIGH
INCOME MUNICIPAL BOND FUND may also invest primarily in higher quality municipal
obligations if its net assets are at a level that would not permit the Fund to
invest in medium and lower rated municipal bonds and at the same time maintain
adequate diversification and liquidity. Investing in this manner may result in
yields lower than those normally associated with a fund that invests primarily
in medium and lower quality municipal securities.
19
<PAGE>
During the fiscal year ended August 31, 1996 EVERGREEN FLORIDA HIGH
INCOME MUNICIPAL BOND FUND'S holdings had the following average credit quality
characteristics:
<TABLE>
<CAPTION>
Percent of
Rating Net Assets
<S> <C>
Aaa or AAA 3.31%
Aa or AA --
A 4.66%
Baa or BBB 15.93%
Ba or BB 6.92%
B 0.67%
Non-rated 63.71%
Total 95.20%
</TABLE>
The Fund may purchase industrial development bonds only if the interest
on such bonds is, in the opinion of counsel, exempt from Federal income taxes.
It is anticipated that the annual portfolio turnover rate for the Fund may
exceed 100%. The Fund may invest in other municipal securities and may employ
certain additional investment strategies which are discussed in "Investment
Practices and Restrictions", below. Also, see the Statement of Additional
Information for further information in regard to ratings.
INVESTMENT PRACTICES AND RESTRICTIONS
Risk Factors. Bond yields are dependent on several factors including market
conditions, the size of an offering, the maturity of the bond, ratings of the
bond and the ability of issuers to meet their obligations. There is no limit on
the maturity of the bonds purchased by the Funds. Because the prices of bonds
fluctuate inversely in relation to the direction of interest rates, the prices
of longer term bonds fluctuate more widely in response to market interest rate
changes. A Fund's concentration in securities issued by its designated state and
that state's political subdivisions provides a greater level of risk than a fund
which is diversified across numerous states and municipal entities.
Although the Funds, other than EVERGREEN FLORIDA HIGH INCOME MUNICIPAL
BOND FUND, will not purchase securities rated below BBB by S&P or Baa by Moody's
(i.e., junk bonds), the Funds are not required to dispose of securities that
have been downgraded subsequent to their purchase. If the municipal obligations
held by a Fund (because of adverse economic conditions in a particular state,
for example) are downgraded, the Fund's concentration in securities of that
state may cause the Fund to be subject to the risks inherent in holding material
amounts of low-rated debt securities in its portfolio. As stated above,
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND invests primarily in high
yield, medium and lower rated (Baa through C by Moody's and BBB through C1 by
S&P) and unrated securities. Additional risk factors relating to the investment
by EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND in high yield, medium and
lower rated (Baa through C by Moody's and BBB through C1 by S&P) and unrated
securities are discussed below.
Portfolio Turnover. A portfolio turnover rate of 100% would occur if all of a
Fund's portfolio securities were replaced in one year. The portfolio turnover
rate experienced by a Fund directly affects the transaction costs relating to
the purchase and sale of securities which a Fund bears directly. A high rate of
portfolio turnover will increase such costs. See the Statement of Additional
Information for further information regarding the practices of the Funds
affecting portfolio turnover.
Non-Diversification. Each of EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN
GEORGIA MUNICIPAL BOND FUND, EVERGREEN NEW JERSEY TAX-FREE INCOME FUND,
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL
BOND FUND and EVERGREEN VIRGINIA MUNICIPAL BOND FUND is a non-diversified
portfolio of an investment company and, as such, there is no limit on the
percentage of assets which can be invested in any single issuer. An investment
in a Fund, therefore, will entail greater risk than would exist in a diversified
investment company because the higher percentage of investments among fewer
issuers may result in greater fluctuation in the total market value of the
Fund's portfolio. Each of the Funds intends to comply with Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code") which requires that at
the end of each quarter of each taxable year, with regard to at least 50% of the
Fund's total assets, no more than 5% of the total assets may be invested in the
securities of a single issuer and that with respect to the remainder of the
Fund's total assets, no more than 25% of its total assets are invested in the
securities of a single issuer.
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Repurchase Agreements. The Funds may invest in repurchase agreements. Repurchase
agreements are agreements by which a Fund purchases a security (usually U.S.
government securities) for cash and obtains a simultaneous commitment from the
seller (usually a bank or broker/dealer) to repurchase the security at an
agreed-upon price and specified future date. The repurchase price reflects an
agreed-upon interest rate for the time period of the agreement. The Funds risk
is the inability of the seller to pay the agreed-upon price on the delivery
date. However, this risk is tempered by the ability of the Funds to sell the
security in the open market in the case of a default. In such a case, the Funds
may incur costs in disposing of the security which would increase Fund expenses.
The Funds investment adviser will monitor the creditworthiness of the firms with
which the Funds enter into repurchase agreements.
When-Issued And Delayed Delivery Transactions. The Funds may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Funds purchase securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Funds to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Funds may pay more or less than the market value of the
securities on the settlement date. The Funds may dispose of a commitment prior
to settlement if the Funds investment adviser deems it appropriate to do so. In
addition, the Funds may enter into transactions to sell their purchase
commitments to third parties at current market values and simultaneously acquire
other commitments to purchase similar securities at later dates. The Funds may
realize short-term profits or losses upon the sale of such commitments.
Lending Of Portfolio Securities. In order to generate additional income, the
Funds may lend their portfolio securities on a short-term or long-term basis to
broker/dealers, banks, or other institutional borrowers of securities. The Funds
will only enter into loan arrangements with creditworthy borrowers and will
receive collateral in the form of cash or U.S. government securities equal to at
least 100% of the value of the securities loaned. As a matter of fundamental
investment policy, which cannot be changed without shareholder approval, the
Funds will not lend any of their assets except portfolio securities up to
one-third of the value of their total assets, except for EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND, which will only lend up to 5% of the value of its net
assets. There is the risk that when lending portfolio securities, the securities
may not be available to a Fund on a timely basis and the Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In addition,
in the event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
Investing In Securities Of Other Investment Companies. Each Fund may invest in
the securities of other investment companies. This is a short-term measure to
invest cash which has not yet been invested in other portfolio instruments and
is subject to the following limitations: (1) no Fund will own more than 3% of
the total outstanding voting stock of any one investment company, (2) no Fund
may invest more than 5% of its total assets in any one investment company, and
(3) no Fund may invest more than 10% of its total assets in investment companies
in general. Each Fund's investment adviser will waive its investment advisory
fee on assets invested in securities of other open end investment companies.
Borrowing. As a matter of fundamental policy, which may not be changed without
shareholder approval, the Funds may not borrow money except as a temporary
measure to facilitate redemption requests which might otherwise require the
untimely disposition of portfolio investments and for extraordinary or emergency
purposes, provided that the aggregate amount of such borrowings shall not exceed
one-third of the value of the total net assets at the time of such borrowing.
Illiquid Securities. The Funds may invest up to 15% of their net assets in
illiquid securities and other securities which are not readily marketable.
Repurchase agreements with maturities longer than seven days will be included
for the purpose of the foregoing 15% limit. Securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933, which have been
determined to be liquid, will not be considered by the Funds investment adviser
to be illiquid or not readily marketable and, therefore, are not subject to the
aforementioned 15% limit. The inability of a Fund to dispose of illiquid or not
readily marketable investments readily or at a reasonable price could impair a
Fund's ability to raise cash for redemptions or other purposes. The liquidity of
securities purchased by a Fund which are eligible for resale pursuant to Rule
144A will be monitored by the Funds investment adviser on an ongoing basis,
subject to the oversight of the Trustees. In the event that such a security is
deemed to be no longer liquid, a Fund's holdings will be reviewed to determine
what action, if any, is required to ensure that the retention of such security
does not result in a Fund having more than 15% of its net assets invested in
illiquid or not readily marketable securities.
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Unseasoned Issuers. The Funds will not invest more than 5% of the value of their
total assets in securities of issuers (or guarantors, where applicable) which
have records of less than three years of continuous operations, including the
operation of any predecessor.
Risk Factors Associated with Medium and Lower Rated and Unrated Municipal
Obligations. EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND will invest in
medium and lower rated or unrated municipal securities. The market for high
yield, high risk debt securities rated in the medium and lower rating
categories, or which are unrated, is relatively new and its growth has
paralleled a long economic expansion. Past experience may not, therefore,
provide an accurate indication of future performance of this market,
particularly during periods of economic recession. An economic downturn or
increase in interest rates is likely to have a greater negative effect on this
market, the value of high yield debt securities in the Fund's portfolio, the
Fund's net asset value and the ability of the bonds' issuers to repay principal
and interest, meet projected business goals and obtain additional financing,
than would be the case if investments by the Fund were limited to higher rated
securities. These circumstances also may result in a higher incidence of
defaults. Yields on medium or lower-rated municipal bonds may not fully reflect
the higher risks of such bonds. Therefore, the risk of a decline in market
value, should interest rates increase or credit quality concerns develop, may be
higher than has historically been experienced with such investments. An
investment in EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND may be
considered more speculative than investment in shares of another fund which
invests primarily in higher rated debt securities.
Prices of high yield debt securities may be more sensitive to adverse
economic changes or corporate developments than higher rated investments. Debt
securities with longer maturities, which may have higher yields, may increase or
decrease in value more than debt securities with shorter maturities. Market
prices of high yield debt securities structured as zero coupon or pay-in-kind
securities are affected to a greater extent by interest rate changes and may be
more volatile than securities which pay interest periodically and in cash. Where
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND deems it appropriate and in
the best interests of its shareholders, it may incur additional expenses to seek
recovery on a debt security on which the issuer has defaulted and to pursue
litigation to protect the interests of security holders of its portfolio
entities.
Because the market for medium or lower rated securities may be thinner
and less active than the market for higher rated securities, there may be market
price volatility for these securities and limited liquidity in the resale
market. Unrated securities are usually not as attractive to as many buyers as
are rated securities, a factor which may make unrated securities less
marketable. These factors may have the effect of limiting the availability of
the securities for purchase by the EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND
FUND and may also limit the ability of the Fund to sell such securities at their
fair value either to meet redemption requests or in response to changes in the
economy or the financial markets. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the values and
liquidity of medium or lower rated debt securities, especially in a thinly
traded market. To the extent the Fund owns or may acquire illiquid or restricted
high yield securities, these securities may involve special registration
responsibilities, liabilities and costs, and liquidity and valuation
difficulties. Changes in values of debt securities which the Fund owns will
affect the Fund's net asset value per share. If market quotations are not
readily available for the Fund's lower rated or unrated securities, these
securities will be valued by a method that the Trustees believe accurately
reflects fair value. Valuation becomes more difficult and judgment plays a
greater role in valuing high yield debt securities than with respect to
securities for which more external sources of quotations and last sale
information are available.
Special tax considerations are associated with investing in high yield
debt securities structured as zero coupon or pay-in-kind securities. A Fund
investing in such securities accrues income on these securities prior to the
receipt of cash payments. EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND must
distribute substantially all of its income to shareholders to qualify for pass
through treatment under the tax laws and may, therefore, have to dispose of
portfolio securities to satisfy distribution requirements.
While credit ratings are only one factor EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND'S investment adviser relies on in evaluating high yield debt
securities, certain risks are associated with using credit ratings. Credit
ratings evaluate the safety of principal and interest payments, not market value
risk. Credit rating agencies may fail to change in timely manner the credit
ratings to reflect subsequent events; however, the Fund's investment adviser
continuously monitors the issuers of high yield debt securities in the Fund's
portfolio in an attempt to determine if the issuers will have sufficient cash
flow and profits to meet required principal and interest payments. Achievement
of EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND'S investment objective may
be more dependent upon the Fund's investment adviser and the credit analysis
capability of the Fund's investment adviser, than is the case for higher quality
debt securities. Credit ratings for individual securities may change from
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time to time and EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND may retain a
portfolio security whose rating has been changed. See the Statement of
Additional Information for a description of bond and note ratings.
Transactions in Options and Futures. The Funds, other than EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND, may engage in options and futures transactions. Options
and futures transactions are intended to enable a Fund to manage market or
interest rate risk. The Funds do not use these transactions for speculation or
leverage. The Funds, other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, may
attempt to hedge all or a portion of their portfolios through the purchase of
both put and call options on their portfolio securities and listed put options
on financial futures contracts for portfolio securities. The Funds may also
write covered call options on their portfolio securities to attempt to increase
their current income. The Funds will maintain their positions in securities,
option rights, and segregated cash subject to puts and calls until the options
are exercised, closed, or have expired. An option position may be closed out
only on an exchange which provides a secondary market for an option of the same
series. The Funds may purchase listed put options on financial futures
contracts. These options will be used only to protect portfolio securities
against decreases in value resulting from market factors such as an anticipated
increase in interest rates.
The Funds, other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, may
write (i.e., sell) covered call and put options. By writing a call option, a
Fund becomes obligated during the term of the option to deliver the securities
underlying the option upon payment of the exercise price. By writing a put
option, a Fund becomes obligated during the term of the option to purchase the
securities underlying the option at the exercise price if the option is
exercised. The Funds also may write straddles (combinations of covered puts and
calls on the same underlying security). The Funds may only write "covered"
options. This means that so long as a Fund is obligated as the writer of a call
option, it will own the underlying securities subject to the option or, in the
case of call options on U.S. Treasury bills, the Fund might own substantially
similar U.S. Treasury bills. A Fund will be considered "covered" with respect to
a put option it writes if, so long as it is obligated as the writer of the put
option, it deposits and maintains with its custodian in a segregated account
liquid assets having a value equal to or greater than the exercise price of the
option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised. By
writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Funds might become obligated to purchase the underlying securities for more than
their current market price upon exercise.
A futures contract is a firm commitment by two parties: the seller, who
agrees to make delivery of the specific type of instrument called for in the
contract ("going short"), and the buyer, who agrees to take delivery of the
instrument ("going long") at a certain time in the future. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities of
the U.S. government. If a Fund would enter into financial futures contracts
directly to hedge its holdings of fixed income securities, it would enter into
contracts to deliver securities at an undetermined price (i.e., "go short") to
protect itself against the possibility that the prices of its fixed income
securities may decline during the Fund's anticipated holding period. A Fund
would "go long" (agree to purchase securities in the future at a predetermined
price) to hedge against a decline in market interest rates.
The Funds, other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, may also
enter into financial futures contracts and write options on such contracts. The
Funds intend to enter into such contracts and related options for hedging
purposes. The Funds will enter into futures on securities or index-based futures
contracts in order to hedge against changes in interest rates or securities
prices. A futures contract on securities is an agreement to buy or sell
securities during a designated month at whatever price exists at that time. A
futures contract on a securities index does not involve the actual delivery of
securities, but merely requires the payment of a cash settlement based on
changes in the securities index. The Funds do not make payment or deliver
securities upon entering into a futures contract. Instead, they put down a
margin deposit, which is adjusted to reflect changes in the value of the
contract and which remains in effect until the contract is terminated.
The Funds, other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, may sell
or purchase other financial futures contracts. When a futures contract is sold
by a Fund, the profit on the contract will tend to rise when the value of the
underlying securities declines and to fall when the value of such securities
increases. Thus, the Funds sell futures contracts in order to offset a possible
decline in the profit on their securities. If a futures contract is purchased by
a Fund, the value of the contract will tend to rise when the value of the
underlying
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securities increases and to fall when the value of such securities declines. The
Funds may enter into closing purchase and sale transactions in order to
terminate a futures contract and may buy or sell put and call options for the
purpose of closing out their options positions. The Funds' ability to enter into
closing transactions depends on the development and maintenance of a liquid
secondary market. There is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. As a result, there
can be no assurance that the Funds will be able to enter into an offsetting
transaction with respect to a particular contract at a particular time. If the
Funds are not able to enter into an offsetting transaction, the Funds will
continue to be required to maintain the margin deposits on the contract and to
complete the contract according to its terms, in which case it would continue to
bear market risk on the transaction.
Risk Characteristics of Options and Futures. Although options and futures
transactions are intended to enable the Funds to manage market or interest rate
risks, these investment devices can be highly volatile, and the Funds use of
them can result in poorer performance (i.e., the Funds return may be reduced).
The Funds attempt to use such investment devices for hedging purposes may not be
successful. Successful futures strategies require the ability to predict future
movements in securities prices, interest rates and other economic factors. When
the Funds use financial futures contracts and options on financial futures
contracts as hedging devices, there is a risk that the prices of the securities
subject to the financial futures contracts and options on financial futures
contracts may not correlate perfectly with the prices of the securities in the
Funds' portfolios. This may cause the financial futures contract and any related
options to react to market changes differently than the portfolio securities. In
addition, the Funds investment adviser could be incorrect in its expectations
and forecasts about the direction or extent of market factors, such as interest
rates, securities price movements, and other economic factors. Even if the Funds
investment adviser correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of a Fund's futures position did not
correspond to changes in the value of its investments. In these events, the
Funds may lose money on the financial futures contracts or the options on
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although the Funds investment adviser will
consider liquidity before entering into financial futures contracts or options
on financial futures contracts transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular financial futures
contract or option on a financial futures contract at any particular time. The
Funds' ability to establish and close out financial futures contracts and
options on financial futures contract positions depends on this secondary
market. If a Fund is unable to close out its position due to disruptions in the
market or lack of liquidity, the Fund may lose money on the futures contract or
option, and the losses to the Fund could be significant.
Municipal Lease Obligations. Each Fund may purchase municipal leases, which are
issued by state and local governments or authorities to finance the acquisition
of equipment and facilities. The Funds may purchase municipal securities in the
form of participation interests which represent undivided proportional interests
in lease payments by a governmental or non-profit entity. The lease payments and
other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal charter or the
nature of the appropriation for the lease. In particular, lease obligations may
be subject to periodic appropriation. If the entity does not appropriate funds
for future lease payments, the entity cannot be compelled to make such payments.
Furthermore, a lease may provide that the certificate trustee cannot accelerate
lease obligations upon default. The trustee would only be able to enforce lease
payments as they become due. In the event of a default or failure of
appropriation, it is unlikely that the trustee would be able to obtain an
acceptable substitute source of payment or that the substitute source of payment
would generate tax-exempt income.
Resource Recovery Bonds. Each Fund may purchase resource recovery bonds, which
may be general obligations of the issuing municipality or supported by corporate
or bank guarantees. The viability of the resource recovery project,
environmental protection regulations and project operator tax incentives may
affect the value and credit quality of resource recovery bonds.
Zero Coupon Debt Securities. The Funds may purchase zero coupon debt securities.
These securities do not make regular interest payments. Instead, they are sold
at a deep discount from their face value. In calculating their daily dividends,
each day the Fund takes into account as income a portion of the difference
between these securities' purchase price and their face value. Because they do
not pay current income, the prices of zero coupon debt securities can be very
volatile when interest rates change.
Securities with Put or Demand Rights. The Funds have the ability to enter into
put transactions, sometimes referred to as stand-by commitments, with respect to
Municipal Obligations held in their portfolio or to purchase securities which
carry a demand feature or put option which permit a Fund, as holder, to tender
them back to the
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issuer or a third party prior to maturity and receive payment within seven days.
Segregated accounts will be maintained by each Fund for all such transactions.
For a detailed description of put transactions, see "Investment
Policies -- Securities with Put Rights" in the Statement of Additional
Information.
The amount payable to a Fund by the seller upon its exercise of a put
will normally be (i) the Funds' acquisition cost of the securities (excluding
any accrued interest which the Funds paid on their acquisition), less any
amortized market premium plus any amortized market or original issue discount
during the period a Fund owned the securities, plus (ii) all interest accrued on
the securities since the last interest payment date during the period the
securities were owned by a Fund. Accordingly, the amount payable by a
broker-dealer or bank during the time a put is exercisable will be substantially
the same as the value of the underlying securities.
A Fund's right to exercise a put is unconditional and unqualified. A put
is not transferable by a Fund, although each Fund may sell the underlying
securities to a third party at any time. The Funds expect that puts will
generally be available without any additional direct or indirect cost. However,
if necessary and advisable, a Fund may pay for certain puts either separately in
cash or by paying a higher price for portfolio securities which are acquired
subject to such a put (thus reducing the yield to maturity otherwise available
to the same securities). Thus, the aggravate price paid for securities with put
rights may be higher than the price that would otherwise be paid.
A Fund may enter into put transactions only with broker-dealers (in
accordance with the rules of the Securities and Exchange Commission) and banks
which, in the opinion of the Funds investment adviser, present minimal credit
risks. Each Fund's investment adviser will monitor periodically the
creditworthiness of issuers of such obligations held by each Fund. A Fund's
ability to exercise a put will depend on the ability of the broker-dealer or
bank to pay for the underlying securities at the time the put is exercised. In
the event that a broker-dealer should default on its obligation to purchase an
underlying security, a Fund might be unable to recover all or a portion of any
loss sustained from having to sell the security elsewhere. The Funds intend to
enter into put transactions solely to maintain portfolio liquidity and do not
intend to exercise their rights thereunder for trading purposes.
SPECIAL RISK FACTORS RELATED TO INVESTING IN MUNICIPAL SECURITIES
It should be noted that municipal securities may be adversely affected by
local political and economic conditions and developments within a state. For
example, adverse conditions in a significant industry within New Jersey may from
time to time have a correspondingly adverse effect on specific issuers within
New Jersey or on anticipated revenue to the State itself; conversely, an
improving economic outlook for a significant industry may have a positive effect
on such issuers or revenues.
The value of municipal securities may also be affected by general
conditions in the money markets or the municipal bond markets, the levels of
federal and state income tax rates, the supply of tax-exempt bonds, the size of
the particular offering, the maturity of the obligation, the credit quality and
rating of the issue, and perceptions with respect to the level of interest
rates. In general, the value of bonds tends to appreciate when interest rates
decline and depreciate when interest rates rise. An expanded discussion of the
risks associated with the purchase of securities issued in certain states is
contained in the Statement of Additional Information.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER
The management of each Fund is supervised by the Trustees of the Trust
under which each Fund has been established ("Trustees"). The Capital Management
Group of First Union National Bank of North Carolina ("CMG") serves as
investment adviser to EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA
MUNICIPAL BOND FUND, EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, EVERGREEN NORTH
CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND,
EVERGREEN VIRGINIA MUNICIPAL BOND FUND AND EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND. First Union National Bank of North Carolina ("FUNB") is a
subsidiary of First Union Corporation ("First Union"), the sixth largest bank
holding company in the United States. First Union is headquartered in Charlotte,
North Carolina, and had $139.9 billion in consolidated assets as of June 30,
1996. First Union and its subsidiaries provide a broad range of financial
services to individuals and businesses throughout the United States. CMG manages
or otherwise oversees the investment of over $42.1 billion in assets belonging
to a wide range of clients, including all the series of Evergreen Investment
Trust , the two
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series of The Evergreen Lexicon Fund (formerly The FFB Lexicon Fund) and the two
series of Evergreen Tax-Free Trust (formerly FFB Funds Trust). First Union
Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered
broker-dealer that is principally engaged in providing retail brokerage services
consistent with its federal banking authorizations. First Union Capital Markets
Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
CMG manages investments and supervises the daily business affairs of each
Fund and, as compensation therefor, is entitled to receive an annual fee equal
to .50 of 1% of the average daily net assets of EVERGREEN FLORIDA MUNICIPAL BOND
FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN NORTH CAROLINA MUNICIPAL
BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND and EVERGREEN VIRGINIA
MUNICIPAL BOND FUND, .60 of 1% of average daily net assets of EVERGREEN FLORIDA
HIGH INCOME MUNICIPAL BOND FUND, and from EVERGREEN NEW JERSEY TAX-FREE INCOME
FUND .50 of 1% of average daily net assets up to $500 million, .45 of 1% of the
next $500 million of assets, .40 of 1% of assets in excess of $1 billion but not
exceeding $1.5 billion, and .35 of 1% of assets in excess of $1.5 billion. The
total annualized operating expenses of EVERGREEN FLORIDA MUNICIPAL BOND FUND,
EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN NEW JERSEY TAX-FREE INCOME
FUND, EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA
MUNICIPAL BOND FUND, EVERGREEN VIRGINIA MUNICIPAL BOND FUND and EVERGREEN
FLORIDA HIGH INCOME MUNICIPAL BOND FUND for the fiscal year ended August 31,
1996 are set forth in the section entitled "Financial Highlights".
Evergreen Asset Management Corp. ("Evergreen Asset"), a subsidiary of
FUNB, serves as administrator to each Fund and is entitled to receive a fee
based on the average daily net assets of each Fund at a rate based on the total
assets of the mutual funds administered by Evergreen Asset for which CMG or
Evergreen Asset also serve as investment adviser, calculated in accordance with
the following schedule: .050% of the first $7 billion; .035% on the next $3
billion; .030% on the next $5 billion; .020% on the next $10 billion; .015% on
the next $5 billion; and .010% on assets in excess of $30 billion. Furman Selz
LLC, an affiliate of Evergreen Funds Distributor, Inc., distributor for the
Evergreen group of mutual funds, serves as sub-administrator for each Fund and
is entitled to receive a fee from each Fund calculated on the average daily net
assets of each Fund at a rate based on the total assets of the mutual funds
administered by Evergreen Asset for which CMG or Evergreen Asset also serve as
investment adviser, calculated in accordance with the following schedule: .0100%
of the first $7 billion; .0075% on the next $3 billion; .0050% on the next $15
billion; and .0040% on assets in excess of $25 billion. The total assets of the
mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset
serve as investment adviser were approximately $15.2 billion as of June 30,
1996. Prior to January 1, 1996, First Fidelity Bank, N.A. ("First Fidelity")
served as investment adviser to EVERGREEN NEW JERSEY TAX-FREE INCOME FUND. CMG
succeeded to the mutual funds advisory business of First Fidelity in connection
with the acquisition of First Fidelity by a subsidiary of First Union.
PORTFOLIO MANAGERS
Robert S. Drye is a Vice President of FUNB, and has been with FUNB since
1968. Since 1989, Mr. Drye has served as a portfolio manager for several of the
series of Evergreen Investment Trust and for certain common trust funds. Prior
to 1989, Mr. Drye was a marketing specialist with First Union Brokerage
Services, Inc. Mr. Drye has managed the EVERGREEN SOUTH CAROLINA MUNICIPAL BOND
FUND since its inception in 1994 and the EVERGREEN FLORIDA MUNICIPAL BOND FUND
since its inception in 1993. Richard K. Marrone is a Vice President of FUNB. Mr.
Marrone joined FUNB in 1993 with eleven years experience managing fixed income
assets at Woodbridge Capital Management, a subsidiary of Comerica Bank, N.A. Mr.
Marrone is responsible for the portfolio management of several series of
Evergreen Investment Trust and certain common trust funds. Mr. Marrone has
served as portfolio manager of the EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
since 1993, the EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND since its
inception in 1995 and EVERGREEN GEORGIA MUNICIPAL BOND FUND since its inception
in 1993. Charles E. Jeanne joined FUNB in 1993. Prior to joining FUNB, Mr.
Jeanne served as a trader/portfolio manager for First American Bank where he was
responsible for individual accounts and common trust funds. Mr. Jeanne has been
the portfolio manager for the EVERGREEN VIRGINIA MUNICIPAL BOND FUND since its
inception in 1993. Jocelyn Turner is a Municipal Bond Portfolio Manager for CMG
and has managed the EVERGREEN NEW JERSEY TAX-FREE INCOME FUND since 1992. Ms.
Turner was previously employed as a Vice President, Municipal Bond Portfolio
Manager at One Federal Asset Management, Boston, MA from 1987 to 1991.
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PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
Eligible investors may purchase Fund shares at net asset value by mail or
wire as described below. The Funds impose no sales charges on Class Y shares.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) persons who at or prior to December 31, 1994 owned shares
in a mutual fund advised by Evergreen Asset, (ii) certain institutional
investors and (iii) investment advisory clients of CMG, Evergreen Asset or their
affiliates. The minimum initial investment is $1,000, which may be waived in
certain situations. There is no minimum for subsequent investments. Investors
may make subsequent investments by establishing a Systematic Investment Plan or
a Telephone Investment Plan.
Purchases by Mail or Wire. Each investor must complete the Share Purchase
Application and mail it, together with a check made payable to the Fund whose
shares are being purchased, to State Street Bank and Trust Company ("State
Street") at P.O. Box 9021, Boston, Massachusetts 02205-9827. Checks not drawn on
U.S. banks will be subject to foreign collection which will delay an investor's
investment date and will be subject to processing fees.
When making subsequent investments, an investor should either enclose the
return remittance portion of the statement, or indicate on the face of the
check, the name of the Fund in which an investment is to be made, the exact
title of the account, the address, and the Fund account number. Purchase
requests should not be sent to a Fund in New York. If they are, the Fund must
forward them to State Street, and the request will not be effective until State
Street receives them.
Initial investments may also be made by wire by (i) calling State Street
at 800-423-2615 for an account number and (ii) instructing your bank, which may
charge a fee, to wire federal funds to State Street, as follows: State Street
Bank and Trust Company, ABA No.0110-0002-8, Attn: Custodian and Shareholder
Services. The wire must include references to the Fund in which an investment is
being made, account registration, and the account number. A completed
Application must also be sent to State Street indicating that the shares have
been purchased by wire, giving the date the wire was sent and referencing the
account number. Subsequent wire investments may be made by existing shareholders
by following the instructions outlined above. It is not necessary, however, for
existing shareholders to call for another account number.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the outstanding shares of that Class.
Shares are valued each day the New York Stock Exchange (the "Exchange") is open
as of the close of regular trading (currently 4:00 p.m. Eastern time). The
Exchange is closed on New Year's Day, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The securities
in a Fund are valued at their current market value determined on the basis of
market quotations or, if such quotations are not readily available, such other
methods as the Trustees of each Trust under which each Fund operates believe
would accurately reflect fair market value.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from an investor's account to reimburse the Fund or the Fund's investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen mutual funds.
The Funds will not accept third party checks other than those payable directly
to an account which has been in existence at least thirty days.
A Fund cannot accept investments specifying a certain price or date and
reserves the right to reject any specific purchase order, including orders in
connection with exchanges from the other Evergreen mutual funds. Although not
currently anticipated, each Fund reserves the right to suspend the offer of
shares for a period of time.
Shares of each Fund are sold at the net asset value per share next
determined after a shareholder's order is received. Investments by federal funds
wire or by check will be effective upon receipt by State Street. Qualified
institutions may telephone orders for the purchase of Fund shares. Investors may
also purchase shares through a broker/dealer, which may charge a fee for the
service.
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HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any day
the Exchange is open, either directly or through your financial intermediary.
The price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, a Fund will
not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to ten days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street which is the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, State Street, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, financial intermediaries, fiduciaries and surviving joint owners.
Signature guarantees are required for all redemption requests for shares with a
value of more than $10,000 or where the redemption proceeds are to be mailed to
an address other than that shown in the account registration. A signature
guarantee must be provided by a bank or trust company (not a Notary Public), a
member firm of a domestic stock exchange or by other financial institutions
whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling State Street (800-423-2615) between the hours of 8:00 a.m. and 5:30
p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on
which the Exchange or State Street's offices are closed). The Exchange is closed
on New Year's Day, Presidents Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Redemption requests made after
4:00 p.m. (Eastern time) will be processed using the net asset value determined
on the next business day. Such redemption requests must include the
shareholder's account name, as registered with a Fund, and the account number.
During periods of drastic economic or market changes, shareholders may
experience difficulty in effecting telephone redemptions. Shareholders who are
unable to reach a Fund or State Street by telephone should follow the procedures
outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Funds will employ reasonable procedures to verify that
telephone requests are genuine. These procedures include requiring some form of
personal identification prior to acting upon instructions and tape recording of
conversations. If a Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Funds shall not
be liable for following telephone instructions reasonably believed to be
genuine. Also, the Funds reserve the right to refuse a telephone redemption
request, if it is believed advisable to do so. Financial intermediaries may
charge a fee for handling telephonic requests. The telephone redemption option
may be suspended or terminated at any time without notice.
General. The sale of shares is a taxable transaction for Federal tax purposes.
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by Federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $1,000 for thirty days. Shareholders will receive sixty days' written
notice to increase the account value before the account is closed. The Funds
have elected to be governed by Rule 18f-1 under the Investment Company Act of
1940 pursuant to which each Fund is obligated to redeem shares solely in cash,
up to the lesser of $250,000 or 1% of a Fund's total net assets during any
ninety day period for any one shareholder. See the Statement of Additional
Information for further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen mutual funds by telephone or mail as
described below. Once an exchange request has been telephoned
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or mailed, it is irrevocable and may not be modified or canceled. Exchanges will
be made on the basis of the relative net asset values of the shares exchanged
next determined after an exchange request is received. An exchange, which
represents an initial investment in another Evergreen mutual fund, is subject to
the minimum investment and suitability requirements of each Fund.
Each of the Evergreen mutual funds has different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Each Fund imposes a
fee of $5 per exchange on shareholders who exchange in excess of four times per
calendar year. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling State Street (800-423-2615). Exchange requests
made after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach State Street by telephone. If you wish to use the
telephone exchange service you should indicate this on the Share Purchase
Application. As noted above, each Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares communicated
by telephone are genuine. A telephone exchange may be refused by a Fund or State
Street if it is believed advisable to do so. Procedures for exchanging Fund
shares by telephone may be modified or terminated at any time. Written requests
for exchanges should follow the same procedures outlined for written redemption
requests in the section entitled "How to Redeem Shares", however, no signature
guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more information
about these services or your account, contact your financial intermediary,
Evergreen Funds Distributor, Inc. ("EFD"), the distributor of the Funds, or the
toll-free number on the front page of this Prospectus. Some services are
described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25 per month or
$75 per quarter. Each Fund reserves the right to close an account that through
liquidation or termination of the Systematic Investment Plan has not reached a
minimum balance of $1,000 ($250 for retirement accounts) within 24 months of the
initial investment. You can open a Systematic Investment Plan in the EVERGREEN
FLORIDA MUNICIPAL BOND FUND for a minimum of only $50 per month with no initial
investment required.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Shares purchased under the Funds Systematic Investment Plan or Telephone
Investment Plan may not be redeemed for ten days from the date of investment.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Funds
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $75. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gain
distributions reinvested automatically.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of a
Fund at the net asset value per share on the last business day of each month,
unless otherwise requested by a shareholder in writing. If the transfer agent
does not receive a written request for subsequent dividends and/or distributions
to be paid in cash at least three full business days prior to a given record
date, the dividends and/or distributions to be paid to a shareholder will be
reinvested.
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EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG being prevented from continuing to
perform the services required under the investment advisory contract or from
acting as agent in connection with the purchase of shares of a Fund by its
customers. If CMG were prevented from continuing to provide the services called
for under the investment advisory agreement, it is expected that the Trustees
would identify, and call upon each Fund's shareholders to approve, a new
investment adviser. If this were to occur, it is not anticipated that the
shareholders of any Fund would suffer any adverse financial consequences.
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
Income dividends are declared daily and paid monthly. Distributions of
any net realized gains of a Fund will be made at least annually. Shareholders
will begin to earn dividends on the first business day after shares are
purchased unless shares were not paid for, in which case dividends are not
earned until the next business day after payment is received. Each Fund has
qualified and intends to continue to qualify to be treated as a regulated
investment company under the Code. While so qualified, so long as each Fund
distributes all of its investment company taxable income and any net realized
gains to shareholders, it is expected that the Funds will not be required to pay
any Federal income taxes. A 4% nondeductible excise tax will be imposed on a
Fund if it does not meet certain distribution requirements by the end of each
calendar year. Each Fund anticipates meeting such distribution requirements.
The Funds will designate and pay exempt-interest dividends derived from
interest earned on qualifying tax-exempt obligations. Such exempt-interest
dividends may be excluded by shareholders of a Fund from their gross income for
Federal income tax purposes, however (1) all or a portion of such
exempt-interest dividends may be a specific preference item for purposes of the
Federal individual and corporate alternative minimum taxes to the extent that
they are derived from certain types of private activity bonds issued after
August 7, 1986, and (2) all exempt-interest dividends will be a component of the
"adjusted current earnings" for purposes of the Federal corporate alternative
minimum tax.
Dividends paid from taxable income, if any, and distributions of any net
realized short-term capital gains (whether from tax exempt or taxable
obligations) are taxable as ordinary income and long-term capital gain
distributions are taxable as long-term capital gains, even though received in
additional shares of the Fund, and regardless of the investors holding period
relating to the shares with respect to which such gains are distributed. Market
discount recognized on taxable and tax-exempt bonds is taxable as ordinary
income, not as excludable income. Under current law, the highest Federal income
tax rate applicable to net long-term gains realized by individuals is 28%. The
rate applicable to corporations is 35%.
Since each Fund's gross income is ordinarily expected to be tax exempt
interest income, it is not expected that the 70% dividends-received deduction
for corporations will be applicable. Specific questions should be addressed to
the investor's own tax adviser.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions (if any) and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, each investor must certify on the Share Purchase
Application, or on a separate form supplied by State Street, that the investor's
social security or taxpayer identification number is correct and that the
investor is not currently subject to backup withholding or is exempt from backup
withholding.
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EVERGREEN FLORIDA MUNICIPAL BOND FUND AND EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND. Florida does not currently impose tax on individuals. Thus,
individual shareholders of the Funds will not be subject to any Florida state
income tax on distributions received from the Funds. However, certain
distributions will be taxable to corporate shareholders which are subject to
Florida corporate income tax. Florida currently imposes an intangible tax at the
annual rate of 0.20% on certain securities and other intangible assets owned by
Florida residents. Certain types of tax exempt securities of Florida issuers,
U.S. government securities and tax exempt securities issued by certain U.S.
territories and possessions are exempt from this intangible tax. Shares of the
Funds will also be exempt from the Florida intangible tax if the portfolio
consists exclusively of securities which are not so exempt on the last business
day of the calendar year, however, only the portion of the shares of the Funds
which relate to securities issued by the United States and its possessions and
territories will be exempt from the Florida intangible tax, and the remaining
portion of such shares will be fully subject to the intangible tax, even if they
partly relate to Florida tax exempt securities.
EVERGREEN GEORGIA MUNICIPAL BOND FUND. Under existing Georgia law,
shareholders of the Fund will not be subject to individual or corporate Georgia
income taxes on distributions from the Fund to the extent that such
distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to (1) interest-bearing obligations issued by or
on behalf of the State of Georgia or its political subdivisions, or (2) interest
on obligations of the United States or of any other issuer whose obligations are
exempt from state income taxes under federal tax. Distributions, if any, derived
from capital gains or other sources generally will be taxable for Georgia income
tax purposes to shareholders of the Fund who are subject to the Georgia income
tax.
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND. For individual shareholders in
any year in which the Fund satisfies the requirements for treatment as a
"qualified investment fund" under New Jersey law, distribution from the Fund
will be exempt from the New Jersey Gross Income Tax to the extent such
distributions are attributable to interest or gains from (i) obligations issued
by or on behalf of the State of New Jersey or any country, municipality, school
or other district, agency, authority, commission, instrumentality, public
corporation, body corporate and politic or political subdivision of New Jersey
or (ii) obligations that are otherwise statutorily exempt from state or local
taxation or under the laws of the United States. Any gains realized on the sale
or redemption of shares held in a qualified investment fund are also exempt from
the New Jersey Gross Income Tax. Corporate shareholders will be subject to a
corporate franchise tax on distributions from and on gains from sales of shares
of the Fund.
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND. Under existing North
Carolina law, shareholders of the Fund will not be subject to individual or
corporate North Carolina income taxes on distributions from the Fund to the
extend that such distributions represent exempt-interest dividends for federal
income tax purposes that are attributable to (1) interest on obligations issued
by North Carolina and political subdivisions thereof or (2) interest on
obligations of the United States or its territories or possessions. However, for
corporate shareholders, the exemption is limited to $15,000 per year, and
otherwise exempt income from funds is subject to a corporate income tax.
Distributions, if any, derived from capital gains or other sources generally
will be taxable for North Carolina income tax purposes to shareholders of the
Fund who are subject to the North Carolina income tax.
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND. Under existing South
Carolina law, shareholders of the Fund will not be subject to individual or
corporate South Carolina income taxes on Fund distributions to the extent that
such distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to (1) interest on obligations of the State of
South Carolina, or any of its political subdivisions, (2) interest on
obligations of the United States, or (3) interest on obligations of any agency
or instrumentality of the United States that is prohibited by federal law from
being taxed by a state or any political subdivision of a state. Distributions,
if any, derived from capital gains or other sources, generally will be taxable
for South Carolina income tax purposes to shareholders of the Fund who are
subject to South Carolina income tax.
EVERGREEN VIRGINIA MUNICIPAL BOND FUND. Under existing Virginia law,
shareholders of the Fund will not be subject to individual or corporate Virginia
income taxes on distributions received from the Fund to the extent that such
distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to interest earned on (1) obligations issued by
or on behalf of the Commonwealth of Virginia or any political subdivision
thereof, or (2) obligations issued by a territory or possession of the United
States or any subdivision thereof which federal law exempts from state income
taxes. Distributions, if any, derived from capital gains or other sources
generally will be taxable for Virginia income tax purposes to shareholders of
the Fund who are subject to Virginia income tax.
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Statements describing the tax status of shareholders' dividends and
distributions will be mailed annually by the Funds. These statements will set
forth the amount of income exempt from federal and if applicable, state
taxation, and the amount, if any, subject to federal and state taxation.
Moreover, to the extent necessary, these statements will indicate the amount of
exempt-interest dividends which are a specific preference item for purposes of
the federal individual and corporate alternative minimum taxes. The exemption of
interest income for federal income tax purposes does not necessarily result in
exemption under the income or other tax law of any state or local taxing
authority. Investors should consult their own tax advisers about the status of
distributions from the Funds in their states and localities. Each Fund notifies
shareholders annually as to the interest exempt from Federal taxes earned by the
Fund.
A shareholder who acquires Class A shares of a Fund and sells or
otherwise disposes of such shares within ninety days of acquisition may not be
allowed to include certain sales charges incurred in acquiring such shares for
purposes of calculating gain and loss realized upon a sale or exchange of shares
of the Fund.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND is a separate
investment series of The Evergreen Municipal Trust, a Massachusetts business
trust organized in 1988. EVERGREEN NEW JERSEY TAX-FREE INCOME FUND is a separate
investment series of The Evergreen Tax Free Trust (formerly FFB Funds Trust), a
Massachusetts business trust organized in 1985. EVERGREEN FLORIDA MUNICIPAL BOND
FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN NORTH CAROLINA MUNICIPAL
BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND AND EVERGREEN VIRGINIA
MUNICIPAL BOND FUND are each separate investment series of Evergreen Investment
Trust (formerly First Union Funds), a Massachusetts business trust organized in
1984. The Funds do not intend to hold annual shareholder meetings; shareholder
meetings will be held only when required by applicable law. Shareholders have
available certain procedures for the removal of Trustees.
A shareholder in each Class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional Classes of shares for any existing or future series. If an
additional series or Class were established in a Fund, each share of the series
or Class would normally be entitled to one vote for all purposes. Generally,
shares of each series and Class would vote together as a single Class on
matters, such as the election of Trustees, that affect each series and Class in
substantially the same manner. Class A, B and Y shares have identical voting,
dividend, liquidation and other rights, except that each Class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific Class. Each
Class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate Class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Custodian, Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street
Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as
each Fund's custodian, registrar, transfer agent and dividend-disbursing agent.
State Street is compensated for its services as transfer agent by a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares.
Principal Underwriter. EFD, an affiliate of Furman Seiz LLC, located 230 Park
Avenue, New York, New York 10169, is the principal underwriter of the Funds.
Furman Selz LLC also acts as sub-administrator to the Funds.
Other Classes of Shares. Each Fund currently offers three classes of shares,
Class A, Class B and Class Y, and may in the future offer additional classes.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) persons who at or prior to December 31, 1994, owned shares
in a mutual fund advised by Evergreen Asset, (ii) certain institutional
investors and (iii) investment advisory clients of CMG, Evergreen Asset or their
affiliates. The dividends payable with respect to Class A and Class B shares
will be less than those payable with respect to Class Y shares due to the
distribution and distribution related expenses borne by Class A and Class B
shares and the fact that such expenses are not borne by Class Y shares.
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Performance Information. A Fund's performance may be quoted in advertising in
terms of yield or total return. Both types of performance are based on
Securities and Exchange Commission ("SEC") formulas and are not intended to
indicate future performance.
Yield is a way of showing the rate of income a Fund earns on its
investments as a percentage of the Fund's share price. A Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, a Fund's yield may not equal its
distribution rate, the income paid to your account or the income reported in a
Fund's financial statements. To calculate yield, a Fund takes the interest
income it earned from its portfolio of investments (as defined by the SEC
formula) for a 30-day period (net of expenses), divides it by the average number
of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on a Fund's share price at the end of the
30-day period. This yield does not reflect gains or losses from selling
securities.
Total returns are based on the overall dollar or percentage change in the
value of a hypothetical investment in a Fund. A Fund's total return shows its
overall change in value including changes in share prices and assumes all a
Fund's distributions are reinvested. A cumulative total return reflects a Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if a Fund's performance had been constant over
the entire period. Because average annual total returns tend to smooth out
variations in a Fund's return, you should recognize that they are not the same
as actual year-by-year results. To illustrate the components of overall
performance, a Fund may separate its cumulative and average annual total returns
into income results and realized and unrealized gain or loss.
A Fund may also quote tax-equivalent yields, which show the taxable
yields an investor would have to earn before taxes to equal the Fund's tax-free
yields. A tax-equivalent yield is calculated by dividing a Fund's tax-exempt
yield by the result of one minus a stated federal tax rate. If only a portion of
a Fund's income was tax-exempt, only that portion is adjusted in the
calculation.
Comparative performance information may also be used from time to time in
advertising or marketing a Fund's shares, including data from Lipper Analytical
Services, Inc., Morningstar and other industry publications. The Fund may also
advertise in items of sales literature an "actual distribution rate" which is
computed by dividing the total ordinary income distributed (which may include
the excess of short-term capital gains over losses) to shareholders for the
latest twelve month period by the maximum public offering price per share on the
last day of the period. Investors should be aware that past performance may not
be reflective of future results.
In marketing a Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering investment
alternatives. The information provided to investors may also include discussions
of other Evergreen mutual funds, products, and services, which may include:
retirement investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; and charitable
giving. In addition, the information provided to investors may quote financial
or business publications and periodicals, including model portfolios or
allocations, as they relate to fund management, investment philosophy, and
investment techniques. The Principal Underwriter may also reprint, and use as
advertising and sales literature, articles from EVERGREEN EVENTS, a quarterly
magazine provided to Evergreen mutual fund shareholders.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which
each Fund operates provide that no Trustee or shareholder will be personally
liable for the obligations of the Trust and that every written contract made by
the Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the SEC under the Securities Act of 1933, as amended. Copies of the
Registration Statements may be obtained at a reasonable charge from the SEC or
may be examined, without charge, at the offices of the SEC in Washington, D.C.
33
<PAGE>
INVESTMENT ADVISER
Capital Management Group of First Union National Bank of North Carolina, 201
South College Street, Charlotte, North Carolina 28288
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL BOND
FUND, EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, EVERGREEN NORTH CAROLINA
MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND,
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 230 Park Avenue, New York, New York 10169
45811 536123rev.03
*******************************************************************************
<PAGE>
PROSPECTUS October 31, 1996
EVERGREEN(SM) TAX-FREE FUNDS (Evergreen Tree Logo appears here)
EVERGREEN HIGH GRADE TAX FREE FUND
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA
CLASS A SHARES
CLASS B SHARES
The Evergreen Tax-Free Funds (the "Funds") are designed to provide
investors with income exempt from Federal income taxes. This Prospectus
provides information regarding the Class A and Class B shares offered by
the Funds. Each Fund is, or is a series of, an open-end, diversified,
management investment company. This Prospectus sets forth concise
information about the Funds that a prospective investor should know before
investing. The address of the Funds is 2500 Westchester Avenue, Purchase,
New York 10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen group of mutual funds dated October 31, 1996
has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus
and other matters which may be of interest to investors, and may be
obtained without charge by calling the Funds at (800) 807-2940. There can
be no assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, ARE NOT INSURED OR
OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE INVESTMENT RISKS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 8
Investment Practices and Restrictions 9
MANAGEMENT OF THE FUNDS
Investment Advisers 12
Portfolio Managers 13
Sub-Adviser 13
Distribution Plans and Agreements 13
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 14
How to Redeem Shares 17
Exchange Privilege 18
Shareholder Services 19
Effect of Banking Laws 19
OTHER INFORMATION
Dividends, Distributions and Taxes 20
General Information 21
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The investment adviser to EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND and
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA is Evergreen Asset
Management Corp. which, with its predecessors, has served as an investment
adviser to the Evergreen mutual funds since 1971. Evergreen Asset Management
Corp. is a wholly-owned subsidiary of First Union National Bank of North
Carolina, which in turn is a subsidiary of First Union Corporation, the sixth
largest bank holding company in the United States. The Capital Management Group
of First Union National Bank of North Carolina serves as investment adviser to
EVERGREEN HIGH GRADE TAX FREE FUND.
EVERGREEN HIGH GRADE TAX FREE FUND seeks to provide a high level of
federally tax-free income that is consistent with preservation of capital.
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND seeks as high a level of
current income, exempt from Federal income tax other than the Federal
alternative minimum tax, as is consistent with preserving capital and providing
liquidity. The Fund invests substantially all of its assets in short and
intermediate-term municipal securities with a dollar weighted average portfolio
maturity of two to five years.
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA seeks as high a
level of current income exempt from Federal and California income taxes as is
consistent with preserving capital and providing liquidity. The Fund invests
substantially all of its assets in short and intermediate-term municipal
securities with a dollar weighted average portfolio maturity of two to five
years.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in Class A and Class B Shares of a Fund. For
further information see "Purchase and Redemption of Fund Shares" and "General
Information -- Other Classes of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares Class B Shares
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases 4.75% for High Grade, None
(as a % of offering price) 3.25% for others
Sales Charge on Dividend Reinvestments None None
Contingent Deferred Sales Charge (as a % of original None 5% during the first year, 4% during the
purchase price or redemption proceeds, whichever is second year, 3% during the third and fourth
lower) year, 2% during the fifth year, 1% during the
sixth year and 0% after the sixth year
Redemption Fee None None
Exchange Fee None None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to each Class of
Shares, together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment in each Class for the periods specified assuming
(i) a 5% annual return and (ii) redemption at the end of each period and,
additionally for Class B shares, no redemption at the end of each period.
In the following examples (i) the expenses for Class A Shares assume
deduction of the maximum sales charge at the time of purchase, (ii) the expenses
for Class B Shares assume deduction at the time of redemption (if applicable) of
the maximum contingent deferred sales charge applicable for that time period,
and (iii) the expenses for Class B Shares reflect the conversion to Class A
Shares eight years after purchase (years eight through ten, therefore, reflect
Class A expenses).
EVERGREEN HIGH GRADE TAX FREE FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES** at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50%
After 1 Year $ 58 $ 69 $ 19
12b-1 Fees* .25% .75%
After 3 Years $ 81 $ 88 $ 58
Shareholder Service Fees -- .25%
After 5 Years $ 105 $ 120 $100
Other Expenses .34% .34%
After 10 Years $ 174 $ 187 $187
Total 1.09% 1.84%
</TABLE>
EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES** at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50%
After 1 Year $ 43 $ 70 $ 20
12b-1 Fees* .10% 1.00%
After 3 Years $ 65 $ 91 $ 61
Other Expenses .44% .44%
After 5 Years $ 88 $ 125 $105
After 10 Years $ 155 $ 192 $192
Total 1.04% 1.94%
</TABLE>
EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA
<TABLE>
<CAPTION>
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES** at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees .55% .55%
After 1 Year $ 43 $ 70 $ 20
12b-1 Fees* .10% 1.00%
After 3 Years $ 66 $ 93 $ 63
Other Expenses .45% .45%
After 5 Years $ 91 $ 128 $108
After 10 Years $ 162 $ 199 $199
Total 1.10% 2.00%
</TABLE>
3
<PAGE>
*Class A Shares can pay up to .75 of 1% of average net assets as a 12b-1 fee.
For the forseeable future, the Class A Shares 12b-1 fees will be limited to .25
of 1% of average net assets for Evergreen High Grade Tax Free Fund and .10 of 1%
of Evergreen Short-Intermediate Municipal Fund and Evergreen Short-Intermediate
Municipal Fund -- California. For Class B Shares for EVERGREEN SHORT
INTERMEDIATE MUNICIPAL FUND and EVERGREEN SHORT INTERMEDIATE MUNICIPAL
FUND -- CALIFORNIA, a portion of the 12b-1 Fees equivalent to .25 of 1% of
average net assets will be shareholder servicing-related. Distribution-related
12b-1 Fees will be limited to .75 of 1% of average net assets as permitted under
the rules of the National Association of Securities Dealers, Inc.
**Estimated annual expenses for EVERGREEN HIGH GRADE TAX FREE FUND, EVERGREEN
SHORT INTERMEDIATE MUNICIPAL FUND and EVEGREEN SHORT INTERMEDIATE MUNICIPAL
FUND -- CALIFORNIA do not reflect a fee waiver of .20 of 1%, .20 of 1% and .25
of 1%, respectively, of average net assets for the year ended August 31, 1996.
Evergreen Asset has agreed to reimburse EVERGREEN SHORT-INTERMEDIATE MUNICIPAL
FUND and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA to the extent
that their aggregate operating expenses (including the investment adviser's fee,
but excluding taxes, interest, brokerage commissions, Rule 12b-1 distribution
fees and shareholder servicing fees and extraordinary expenses) exceed 1% of the
average net assets.
Absent this agreement, the estimated annual operating expenses for Evergreen
Short-Intermediate Municipal Fund -- California for Class A Shares and Class B
Shares would be 1.19% and 2.09%, respectively.
From time to time each Fund's investment adviser may, at its discretion, reduce
or waive its fees or reimburse these Funds for certain of their other expenses
in order to reduce their expense ratios. Each Fund's investment adviser may
cease these voluntary waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for its most recent fiscal period. In the case of Funds that did
not offer all of the above-referenced Classes of shares during such periods, the
amounts set forth in the tables are based on the expenses incurred by the
Classes which were offered. THE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND
ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete
description of the various costs and expenses borne by the Funds see "Management
of the Funds." As a result of asset-based sales charges, long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales charges
permitted under the rules of the National Association of Securities Dealers,
Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or life of the
fund if shorter for EVERGREEN HIGH GRADE TAX FREE FUND has been audited by KPMG
Peat Marwick LLP, the Fund's independent auditors; for EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL
FUND -- CALIFORNIA has been audited by Price Waterhouse LLP, each Fund's
independent auditors. A report of KPMG Peat Marwick LLP or Price Waterhouse LLP,
as the case may be, on the audited information with respect to each Fund is
incorporated by reference in the Fund's Statement of Additional Information. The
following information for each Fund should be read in conjunction with the
financial statements and related notes which are incorporated by reference in
the Fund's Statement of Additional Information.
No Financial Highlights are shown for Class A or B of EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA since these classes did not have
any operations prior to August 31, 1996.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN HIGH GRADE TAX FREE FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
EIGHT FEBRUARY 21, EIGHT
MONTHS 1992* MONTHS
YEAR ENDED ENDED YEAR ENDED THROUGH YEAR ENDED ENDED YEAR ENDED
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31, AUGUST 31, DECEMBER 31,
1996 1995# 1994 1993 1992 1996 1995# 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning
of period................ $10.69 $9.79 $11.16 $10.42 $10.00 $10.69 $9.79 $11.16
Income (loss) from
investment operations:
Net investment income..... .52 .34 .52 .54 .51 .44 .29 .46
Net realized and
unrealized gain (loss) on
investments.............. .03 .90 (1.37) .81 .42 .03 .90 (1.37)
Total from investment
operations............. .55 1.24 (.85) 1.35 .93 .47 1.19 (.91)
Less distributions to
shareholders from:
Net investment income..... (.52) (.34) (.52) (.54) (.51) (.44) (.29) (.46)
Net realized gains........ -- -- -- (.07) -- -- -- --
Total distributions...... (.52) (.34) (.52) (.61) (.51) (.44) (.29) (.46)
Net asset value, end of
period................... $10.72 $10.69 $9.79 $11.16 $10.42 $10.72 $10.69 $9.79
TOTAL RETURN+............. 5.2% 12.8% (7.7%) 13.3% 9.4% 4.4% 12.3% (8.2%)
RATIOS & SUPPLEMENTAL
DATA:
Net assets, end of period
(000's omitted).......... $ 50,569 $ 58,751 $57,676 $101,352 $ 90,738 $ 32,221 $ 34,206 $ 32,435
Ratios to average net
assets:
Expenses **.............. .89% 1.06%++ 1.01% .85% .49%++ 1.64% 1.81%++ 1.58%
Net investment
income **.............. 4.78% 4.93%++ 5.04% 4.99% 5.79%++ 4.03% 4.18%++ 4.47%
Portfolio turnover rate... 65% 27% 53% 14% 7% 65% 27% 53%
<CAPTION>
CLASS Y SHARES
JANUARY 11, EIGHT FEBRUARY 28,
1993* MONTHS 1994*
THROUGH YEAR ENDED ENDED THROUGH
DECEMBER 31, AUGUST 31, AUGUST 31, DECEMBER 31,
1993 1996 1995# 1994
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning
of period................ $10.42 $10.69 $9.79 $10.93
Income (loss) from
investment operations:
Net investment income..... .47 .55 .36 .46
Net realized and
unrealized gain (loss) on
investments.............. .81 .03 .90 (1.14)
Total from investment
operations............. 1.28 .58 1.26 (.68)
Less distributions to
shareholders from:
Net investment income..... (.47) (.55) (.36) (.46)
Net realized gains........ (.07) -- -- --
Total distributions...... (.54) (.55) (.36) (.46)
Net asset value, end of
period................... $11.16 $10.72 $10.69 $9.79
TOTAL RETURN+............. 12.4% 5.4% 13.0% (6.3%)
RATIOS & SUPPLEMENTAL
DATA:
Net assets, end of period
(000's omitted).......... $ 41,030 $ 25,112 $ 25,079 $4,318
Ratios to average net
assets:
Expenses **.............. 1.35%++ .64% .81%++ .76%++
Net investment
income **.............. 4.44%++ 5.03% 5.18%++ 5.46%++
Portfolio turnover rate... 14% 65% 27% 53%
</TABLE>
# The Fund has changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
EIGHT FEBRUARY 21, EIGHT JANUARY 11,
MONTHS 1992* MONTHS 1993*
YEAR ENDED ENDED YEAR ENDED THROUGH YEAR ENDED ENDED YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31,
1996 1995# 1994 1993 1992 1996 1995# 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses............... 1.09% 1.09% 1.02% 1.07% 1.11% 1.84% 1.84% 1.59% 1.57%
Net investment
income................ 4.58% 4.90% 5.03% 4.77% 5.17% 3.83% 4.15% 4.46% 4.22%
<CAPTION>
CLASS Y SHARES
EIGHT FEBRUARY 28,
MONTHS 1994*
YEAR ENDED ENDED THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31,
1996 1995# 1994
<S> <C> <C> <C>
Expenses............... .84% .84% .77%
Net investment
income................ 4.83% 5.15% 5.45%
</TABLE>
5
<PAGE>
EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y SHARES
JANUARY 5, JANUARY 5,
1995* 1995*
YEAR ENDED THROUGH YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, YEAR ENDED AUGUST 31,
1996 1995 1996 1995 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period....... $10.17 $9.97 $10.17 $9.97 $10.17 $10.21 $10.58
Income (loss) from investment operations:
Net investment income...................... .43 .30 .34 .24 .43 .46 .47
Net realized and unrealized gain (loss) on
investments............................... (.09) .20 (.09) .20 (.10) (.04) (.32)
Total from investment operations.......... .34 .50 .25 .44 .33 .42 .15
Less distributions to shareholders from:
Net investment income...................... (.43) (.30) (.34) (.24) (.43) (.46) (.47)
Net realized gains......................... -- -- -- (.03)
In excess of net realized gains............ -- -- -- (.02)
Total distributions....................... (.43) (.30) (.34) (.24) (.43) (.46) (.52)
Net asset value, end of period............. $10.08 $10.17 $10.08 $10.17 $10.07 $10.17 $10.21
TOTAL RETURN+.............................. 3.4% 5.1% 2.4% 4.5% 3.3% 4.2% 1.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted).................................. $27,722 $6,820 $7,413 $6,050 $34,893 $40,581 $53,417
Ratios to average net assets:
Expenses **............................... .80% .70%++ 1.67% 1.58%++ .70% .74% .58%
Net investment income **.................. 4.05% 4.32%++ 3.28% 3.50%++ 4.27% 4.52% 4.54%
Portfolio turnover rate.................... 29% 80% 29% 80% 29% 80% 32%
<CAPTION>
JULY 17, 1991*
THROUGH
AUGUST 31,
1993 1992++ 1991++
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period....... $10.33 $10.00 $10.00
Income (loss) from investment operations:
Net investment income...................... .49 .51 .06
Net realized and unrealized gain (loss) on
investments............................... .25 .33 --
Total from investment operations.......... .74 .84 .06
Less distributions to shareholders from:
Net investment income...................... (.49) (.51) (.06)
Net realized gains......................... -- -- --
In excess of net realized gains............ -- -- --
Total distributions....................... (.49) (.51) (.06)
Net asset value, end of period............. $10.58 $10.33 $10.00
TOTAL RETURN+.............................. 7.4% 8.6% .6%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted).................................. $66,607 $54,470 $4,025
Ratios to average net assets:
Expenses **............................... .40% .17% 0%++
Net investment income **.................. 4.73% 4.85% 4.93%++
Portfolio turnover rate.................... 37% 57% --
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value for the periods indicated and
is not annualized. Initial sales charge or contingent deferred sales charges
are not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y SHARES
JANUARY 5, JANUARY 5,
1995* 1995*
YEAR ENDED THROUGH YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, YEAR ENDED AUGUST 31,
1996 1995 1996 1995 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses.............................. 1.11% 1.14% 2.07% 2.26% .90% .86% .83% .81%
Net investment income................. 3.74% 3.88% 2.88% 2.82% 4.07% 4.40% 4.29% 4.32%
<CAPTION>
JULY 17, 1991*
THROUGH
AUGUST 31,
1992++ 1991
<S> <C> <C>
Expenses.............................. .86% 1.40%
Net investment income................. 4.16% 3.53%
</TABLE>
6
<PAGE>
EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA -- CLASS Y SHARES
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1996 1995 1994 1993++ 1992++ 1991++ 1990++
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period...... $10.06 $10.09 $10.34 $10.00 $10.00 $10.00 $10.00
Income (loss) from investment operations:
Net investment income..................... .40 .41 .43 .41 .33 .47 .55
Net realized and unrealized gain (loss) on
investments............................. (.08) -- (.24) .34 -- -- --
Total from investment operations........ .32 .41 .19 .75 .33 .47 .55
Less distributions to shareholders from:
Net investment income..................... (.40) (.41) (.43) (.41) (.33) (.47) (.55)
Net realized gains........................ -- (.03) (.01) -- -- -- --
Total distributions..................... (.40) (.44) (.44) (.41) (.33) (.47) (.55)
Net asset value, end of period............ $9.98 $10.06 $10.09 $10.34 $10.00 $10.00 $10.00
TOTAL RETURN+............................. 3.2% 4.2% 1.8% 7.6% 3.4% 4.8% 5.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)................................ $18,915 $21,362 $28,433 $30,136 $34,452 $42,022 $37,291
Ratios to average net assets:
Expenses **............................. .84% .79% .52% .30% .40% .37% .29%
Net investment income **................ 3.97% 4.10% 4.20% 3.96% 3.36% 4.66% 5.52%
Portfolio turnover rate................... 44% 29% 12% 37% -- -- --
<CAPTION>
NOVEMBER 2,
1988* THROUGH
AUGUST 31, 1989++
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period...... $10.00
Income (loss) from investment operations:
Net investment income..................... .51
Net realized and unrealized gain (loss) on
investments............................. --
Total from investment operations........ .51
Less distributions to shareholders from:
Net investment income..................... (.51)
Net realized gains........................ --
Total distributions..................... (.51)
Net asset value, end of period............ $10.00
TOTAL RETURN+............................. 5.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)................................ $ 28,266
Ratios to average net assets:
Expenses **............................. .24%++
Net investment income **................ 6.40%++
Portfolio turnover rate................... --
</TABLE>
* Commencement of class operations.
++ On October 16, 1992, the Fund was converted to a short-intermediate
municipal fund with a fluctuating net asset value per share from a money
market fund with a stable net asset value per share. The shares outstanding
and the related per share data for the fiscal years ended August 31, 1990
through August 31, 1992 are restated to reflect the 1 for 10 reverse share
split on October 21, 1992. Total return calculated after October 16, 1992
reflects the fluctuation in net asset value per share.
+ Total return is calculated on net asset value for the period indicated and is
not annualized.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1996 1995 1994 1993++ 1992++ 1991++ 1990++
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses................................ 1.09% .99% .95% .98% .84% .85% .88%
Net investment income................... 3.72% 3.90% 3.77% 3.28% 2.92% 4.18% 4.93%
<CAPTION>
NOVEMBER 2,
1988* THROUGH
AUGUST 31, 1989++
<S> <C>
Expenses................................ .93%
Net investment income................... 5.71%
</TABLE>
7
<PAGE>
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVES AND POLICIES
In addition to the investment policies detailed below, each Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions".
EVERGREEN HIGH GRADE TAX FREE FUND
The EVERGREEN HIGH GRADE TAX FREE FUND seeks a high level of Federally
tax free income that is consistent with preservation of capital. At least 65% of
the value of the total assets of EVERGREEN HIGH GRADE TAX FREE FUND will be
invested in high grade bonds. High grade bonds mean: bonds insured by a
municipal bond insurance company which is rated AAA by Standard & Poor's Ratings
Group ("S&P") and/or Aaa by Moody's Investors Service, Inc. ("Moody's"); bonds
rated A or better by S&P or Moody's; or, if unrated, of comparable quality as
determined by the Fund's investment adviser. The insurance guarantees the timely
payment of principal and interest, but not the value of the municipal bonds or
the shares of the Fund. See the section "Investment Practices and
Restrictions" -- "Municipal Bond Insurance" for further information.
The EVERGREEN HIGH GRADE TAX FREE FUND may also purchase instruments
having variable rates of interest. One example is variable amount demand master
notes. These notes represent a borrowing arrangement between a commercial paper
issuer (borrower) and an institutional lender, such as the Fund, and are payable
upon demand. The underlying amount of the loan may vary during the course of the
contract, as may the interest on the outstanding amount, depending on a stated
short-term interest rate index.
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND
The investment objective of EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND
is to achieve as high a level of current income, exempt from Federal income tax
other than the Federal alternative minimum tax ("AMT") for individuals and
corporations, as is consistent with preserving capital and providing liquidity.
Under normal circumstances, it is anticipated that the Fund will invest its
assets so that at least 80% of its annual interest income is exempt from Federal
income tax other than the AMT. The Fund will seek to achieve its objective by
investing substantially all of its assets in a diversified portfolio of short
and intermediate-term debt obligations issued by states, territories and
possessions of the United States and by the District of Columbia, and their
political subdivisions and duly constituted authorities, the interest from which
is exempt from Federal income tax other than the AMT. Such securities are
generally known as Municipal Securities (see "Investment Practices and
Restrictions" -- "Municipal Securities" below). As a matter of policy, the
Trustees will not change the Fund's investment objective without shareholder
approval.
Under current tax law, a distinction is drawn between Municipal
Securities issued to finance certain "private activities" and other Municipal
Securities. Such private activity bonds include bonds issued to finance such
projects as airports, housing projects, resource recovery programs, solid waste
disposal facilities, student loan programs, and water and sewage projects.
Interest income from such "private activity bonds" ("AMT-Subject Bonds") becomes
an item of "tax preference" which is subject to the alternative minimum tax when
received by a person in a tax year during which he is subject to that tax.
Because interest income on AMT-Subject Bonds is taxable to certain investors, it
is expected, although there can be no guarantee, that such Municipal Securities
generally will provide somewhat higher yields than other Municipal Securities of
comparable quality and maturity. The Fund may invest up to 50% of its total
assets in AMT-Subject Bonds.
The Fund intends to maintain a dollar-weighted average portfolio maturity
of two to five years. The Fund may consider an obligation's maturity to be
shorter than its stated maturity if the Fund has the right to sell the
obligation at a price approximating par value before its stated maturity date.
This is a liquidity put and is exercisable to the issuer or some third party.
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA
The investment objective of EVERGREEN SHORT-INTERMEDIATE MUNICIPAL
FUND-CALIFORNIA is to achieve as high a level of current income exempt from
Federal and California income taxes, as is consistent with preserving capital
and providing liquidity. The Fund will seek to achieve its objective by
investing at least 80% of the value of
8
<PAGE>
its total assets in a diversified portfolio of short and intermediate-term debt
obligations issued by the State of California, its political subdivisions and
duly constituted authorities, the interest from which is exempt from Federal and
California income taxes. Such securities are generally known as Municipal
Securities (see "Investment Practices and Restrictions" -- "Municipal
Securities" below).
Interest income on certain types of bonds issued after August 7, 1986, to
finance nongovernmental activities is an item of "tax preference" subject to
AMT. To the extent the Fund invests in these "private activity" bonds (some of
which were formerly referred to as "industrial development" bonds), individual
and corporate shareholders, depending on their status, may be subject to AMT on
the part of the Fund's distributions derived from the bonds. As a matter of
fundamental policy, which may not be changed without shareholder approval, the
Fund will invest at least 80% of its total assets in Municipal Securities, the
interest from which is not subject to AMT.
The Fund intends to maintain a dollar-weighted average portfolio maturity
of two to five years. The Fund may consider an obligation's maturity to be
shorter than its stated maturity if the Fund has the right to sell the
obligation at a price approximating par value before its stated maturity date.
This is a liquidity put and is exercisable to the issuer or some third party.
INVESTMENT PRACTICES AND RESTRICTIONS
Except where noted, each Fund may engage in the investment practices
described below. Each Fund is also subject to certain investment restrictions
more fully described in the Statement of Additional Information.
General. EVERGREEN HIGH GRADE TAX FREE FUND, EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA will
invest in Municipal Securities so long as they are determined to be of high or
upper medium quality. Municipal Securities meeting this criteria include bonds
rated A or higher by S&P, Moody's or another nationally recognized statistical
rating organization ("SRO"); notes rated
SP-1 or SP-2 by S&P or MIG-1 or MIG-2 by Moody's or rated VMIG-1 or VMIG-2 by
Moody's in the case of variable rate demand notes or having comparable ratings
from another SRO; and commercial paper rated A-1 or A-2 by S&P or Prime-1 or
Prime-2 by Moody's or having comparable ratings from another SRO. EVERGREEN HIGH
GRADE TAX FREE FUND may also invest in general obligation bonds which are rated
BBB by S&P, Baa by Moody's or bear a similar rating from another SRO. Medium
grade bonds are more susceptible to adverse economic conditions or changing
circumstances than higher grade bonds. However, like the higher rated bonds,
these securities are considered to be investment grade. For a description of
such ratings see the Statement of Additional Information. The Funds may also
purchase Municipal Securities which are unrated at the time of purchase, if such
securities are determined by the Funds' investment advisers to be of comparable
quality. Certain Municipal Securities (primarily variable rate demand notes) may
be entitled to the benefit of standby letters of credit or similar commitments
issued by banks and, in such instances, the Funds' investment advisers will take
into account the obligation of the bank in assessing the quality of such
security. Investments by EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA
in unrated securities are limited to 20% of total assets.
The ability of the Funds to meet their investment objectives is
necessarily subject to the ability of municipal issuers to meet their payment
obligations. In addition, the portfolios of the Funds will be affected by
general changes in interest rates which will result in increases or decreases in
the value of the obligations held by the Funds. Investors should recognize that,
in periods of declining interest rates, the yield of the Funds will tend to be
somewhat higher than prevailing market rates, and in periods of rising interest
rates, the yield of the Funds will tend to be somewhat lower. Also, when
interest rates are falling, the inflow of net new money to the Funds from the
continuous sale of its shares will likely be invested in portfolio instruments
producing lower yields than the balance of each Fund's portfolio, thereby
reducing the current yield of the Funds. In periods of rising interest rates,
the opposite can be expected to occur. In addition, since EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA will invest primarily in California
Municipal Securities, there are certain specific factors and considerations
concerning California which may affect the credit and market risk of the
Municipal Securities that EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA
purchases. These factors are described in the Appendix to this Prospectus.
Municipal Securities . As noted above, the Funds will invest substantially all
of their assets in Municipal Securities. These include municipal bonds,
short-term municipal notes and tax exempt commercial paper. "Municipal
Securities" are debt obligations issued to obtain funds for various public
purposes that are exempt from Federal income tax in the opinion of issuer's
counsel. The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith, credit
9
<PAGE>
and taxing power for the payment of principal and interest. Revenue bonds are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific source such as from the user of the facility being financed. The term
"Municipal Securities" also includes "moral obligation" issues which are
normally issued by special purpose authorities. Industrial development bonds
("IDBs") and private activity bonds ("PABs") are in most cases revenue bonds and
are not payable from the unrestricted revenues of the issuer. The credit quality
of IDBs and PABs is usually directly related to the credit standing of the
corporate user of the facilities being financed. Participation interests are
interests in Municipal Securities, including IDBs and PABs, and floating and
variable rate obligations that are owned by banks. These interests carry a
demand feature permitting the holder to tender them back to the bank, which
demand feature is backed by an irrevocable letter of credit or guarantee of the
bank. A put bond is a municipal bond which gives the holder the unconditional
right to sell the bond back to the issuer at a specified price and exercise
date, which is typically well in advance of the bond's maturity date.
"Short-term municipal notes" and "tax exempt commercial paper" include tax
anticipation notes, bond anticipation notes, revenue anticipation notes and
other forms of short-term loans. Such notes are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements and other revenues.
Municipal Bond Insurance. The EVERGREEN HIGH GRADE TAX FREE FUND will require
municipal bond insurance when purchasing Municipal Securities which would not
otherwise meet the Fund's quality standards. The EVERGREEN HIGH GRADE TAX FREE
FUND may also require insurance when, in the opinion of the Fund's investment
adviser, such insurance would benefit the Fund (for example, through improvement
of portfolio quality or increased liquidity of certain securities). The purpose
of municipal bond insurance is to guarantee the timely payment of principal at
maturity and interest.
Securities in the EVERGREEN HIGH GRADE TAX FREE FUND'S portfolio may be
insured in one of two ways: (1) by a policy applicable to a specific security,
obtained by the issuer of the security or by a third party ("Issuer-Obtained
Insurance") or (2) under master insurance policies issued by municipal bond
insurers, purchased by the Fund (the "Policies"). If a security's coverage is
Issuer-Obtained, then that security does not need to be covered in the Policies.
The Fund may purchase Policies from Municipal Bond Investors Assurance Corp.,
AMBAC Indemnity Corporation, and Financial Guaranty Insurance Company, or any
other municipal bond insurer which is rated Aaa by Moody's or AAA by S&P. A more
detailed description of these insurers may be found in the Statement of
Additional Information. Annual premiums for these Policies are paid by the Fund
and are estimated to range from 0.10% to 0.25% of the value of the municipal
securities covered under the Policies, with an average annual premium rate of
approximately 0.175%. While the insurance feature reduces financial risk, the
cost thereof and the restrictions on investments imposed by the guidelines in
the Policies reduce the yield to shareholders.
Floating Rate and Variable Rate Obligations. Municipal Securities also include
certain variable rate and floating rate municipal obligations with or without
demand features. These variable rate securities do not have fixed interest
rates; rather, those rates fluctuate based upon changes in specified market
rates, such as the prime rate, or are adjusted at predesignated periodic
intervals. Certain of these obligations may carry a demand feature that gives
the Funds the right to demand prepayment of the principal amount of the security
prior to its maturity date. The demand obligation may or may not be backed by
letters of credit or other guarantees of banks or other financial institutions.
Such guarantees may enhance the quality of the security. The Funds will limit
the value of their investments in any floating or variable rate securities which
are not readily marketable to 10% or less of their net assets.
When-Issued Securities. The Funds may purchase securities on a "when-issued"
basis (i.e., for delivery beyond the normal settlement date at a stated price
and yield). A Fund generally would not pay for such securities or start earning
interest on them until they are received. However, when a Fund purchases
securities on a when-issued basis, it assumes the risks of ownership at the time
of purchase, not at the time of receipt. Failure of the issuer to deliver a
security purchased by a Fund on a when-issued basis may result in the Fund
incurring a loss or missing an opportunity to make an alternative investment.
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND do not expect that commitments to purchase
when-issued securities will normally exceed 25% of their total assets and
EVERGREEN HIGH GRADE TAX FREE FUND does not expect that such commitments will
exceed 20% of its total assets. The Funds do not intend to purchase when-issued
securities for speculative purposes but only in furtherance of their investment
objective.
Stand-by Commitments. The Funds may also acquire "stand-by commitments" with
respect to Municipal Securities held in their portfolio. Under a stand-by
commitment, a dealer agrees to purchase, at a Fund's option, specified Municipal
Securities at a specified price. Failure of the dealer to purchase such
Municipal Securities may result in a
10
<PAGE>
Fund incurring a loss or missing an opportunity to make an alternative
investment. Each Fund expects that stand-by commitments generally will be
available without the payment of direct or indirect consideration. However, if
necessary and advisable, a Fund may pay for stand-by commitments either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to such a commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid in either
manner for outstanding stand-by commitments held in each Fund's portfolio will
not exceed 10% of the value of the Fund's total assets calculated immediately
after each stand-by commitment is acquired. The Funds will maintain cash or
liquid high grade debt obligations in a segregated account with its custodian in
an amount equal to such commitments. The Funds will enter into stand-by
commitments only with banks and broker-dealers that, in the judgment of the
Funds' investment advisers, present minimal credit risks.
Taxable Investments. EVERGREEN HIGH GRADE TAX FREE FUND and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA may temporarily invest up to 20% of
their total assets in taxable securities, and EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND may temporarily invest its assets so that not more than 20% of
its annual interest income will be derived from taxable securities, under any
one or more of the following circumstances: (a) pending investment of proceeds
of sale of Fund shares or of portfolio securities, (b) pending settlement of
purchases of portfolio securities, and (c) to maintain liquidity for the purpose
of meeting anticipated redemptions. In addition, each such Fund may temporarily
invest more than 20% of its total assets in taxable securities for defensive
purposes. Each Fund may invest for defensive purposes during periods when each
Fund's assets available for investment exceed the available Municipal Securities
that meet each Fund's quality and other investment criteria. Taxable securities
in which the Funds may invest on a short-term basis include obligations of the
United States Government, its agencies or instrumentalities, including
repurchase agreements with banks or securities dealers involving such
securities; time deposits maturing in not more than seven days; other debt
securities rated within the two highest ratings assigned by any major rating
service; commercial paper rated in the highest grade by Moody's, S&P or any SRO;
and certificates of deposit issued by United States branches of United States
banks with assets of $1 billion or more.
Repurchase Agreements. The Funds may enter into repurchase agreements with
member banks of the Federal Reserve System, including State Street Bank and
Trust Company, the Funds custodian ("State Street" or the "Custodian"), or
"primary dealers" (as designated by the Federal Reserve Bank of New York) in
United States Government securities. A repurchase agreement is an arrangement
pursuant to which a buyer purchases a security and simultaneously agrees to
resell it to the vendor at a price that results in an agreed-upon market rate of
return which is effective for the period of time (which is normally one to seven
days, but may be longer) the buyer's money is invested in the security. The
arrangement results in a fixed rate of return that is not subject to market
fluctuations during a Fund's holding period. Each Fund requires continued
maintenance of collateral with its Custodian in an amount equal to, or in excess
of, the market value of the securities, including accrued interest, which are
the subject of a repurchase agreement. In the event a vendor defaults on its
repurchase obligation, the Fund might suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
the vendor becomes the subject of bankruptcy proceedings, a Fund might be
delayed in selling the collateral. Each Fund's investment adviser will review
and continually monitor the creditworthiness of each institution with which a
Fund enters into a repurchase agreement to evaluate these risks. EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND may not enter into repurchase agreements if, as a result, more
than 10% of either Fund's net assets would be invested in repurchase agreements
maturing in more than seven days and EVERGREEN HIGH GRADE TAX FREE FUND may not
so invest more than 15% of its net assets.
Illiquid Securities. The Funds may invest up to 15% of their net assets in
illiquid securities and other securities which are not readily marketable,
except that EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND may only invest up to 10% of their net assets
in repurchase agreements with maturities longer than seven days. In the case of
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, which have been determined to be
liquid, will not be considered by each Fund's investment adviser to be illiquid
or not readily marketable and, therefore, are not subject to the aforementioned
15% limit. EVERGREEN HIGH GRADE TAX FREE FUND may invest up to 10% of its net
assets in securities subject to restrictions on resale under the Federal
securities laws. The inability of a Fund to dispose of illiquid or not readily
marketable investments readily or at a reasonable price could impair the Fund's
ability to raise cash for redemptions or other purposes. The liquidity of
securities purchased by a Fund which are eligible for resale pursuant to Rule
144A will be monitored by each Fund's investment adviser on an ongoing basis,
subject to the oversight of the Trustees. In the event that such a security is
deemed to be no longer liquid, a Fund's holdings
11
<PAGE>
will be reviewed to determine what action, if any, is required to ensure that
the retention of such security does not result in a Fund having more than 15% of
its net assets invested in illiquid or not readily marketable securities.
Other Investment Policies. The Funds may borrow funds and agree to sell
portfolio securities to financial institutions such as banks and broker-dealers
and to repurchase them at a mutually agreed upon date and price (a "reverse
repurchase agreement") for temporary or emergency purposes. In the case of
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND borrowings may be in amounts up to 10% of the
value of each Fund's net assets at the time of such borrowing. EVERGREEN HIGH
GRADE TAX FREE FUND may borrow in amounts up to one-third of its net assets. At
the time a Fund enters into a reverse repurchase agreement, it will place in a
segregated custodial account cash, United States Government securities or liquid
high grade debt obligations having a value equal to the repurchase price
(including accrued interest) and will subsequently monitor the account to ensure
that such equivalent value is maintained. Reverse repurchase agreements involve
the risk that the market value of the securities sold by a Fund may decline
below the repurchase price of those securities. EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA will
not enter into reverse repurchase agreements exceeding 5% of the value of its
total assets and will not purchase any securities whenever any borrowings
(including reverse repurchase agreements) are outstanding.
In order to generate income and to offset expenses, the Funds may lend
portfolio securities to brokers, dealers and other financial organizations. Each
Fund's investment adviser will monitor the creditworthiness of such borrowers.
Loans of securities by a Fund, if and when made, may not exceed 30% of the total
assets of EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA, or 15% of the total assets of
EVERGREEN HIGH GRADE TAX FREE FUND, and will be collateralized by cash, letters
of credit or United States government securities that are maintained at all
times in an amount equal to at least 100% of the current market value of the
loaned securities, including accrued interest. While such securities are on
loan, the borrower will pay a Fund any income accruing thereon, and the Fund may
invest the cash collateral, thereby increasing its return. A Fund will have the
right to call any such loan and obtain the securities loaned at any time on five
days' notice. Any gain or loss in the market price of the loaned securities
which occurs during the term of the loan would affect a Fund and its investors.
A Fund may pay reasonable fees in connection with such loans.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which each Fund has been established ("Trustees"). Evergreen Asset
Management Corp. ("Evergreen Asset") has been retained by EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL
FUND-CALIFORNIA as investment adviser. Evergreen Asset succeeded on June 30,
1994 to the advisory business of a corporation with the same name, but under
different ownership, which was organized in 1971. Evergreen Asset, with its
predecessors, has served as investment adviser to the Evergreen mutual funds
since 1971. Evergreen Asset is a wholly-owned subsidiary of First Union National
Bank of North Carolina ("FUNB"). The address of Evergreen Asset is 2500
Westchester Avenue, Purchase, New York 10577. FUNB is a subsidiary of First
Union Corporation ("First Union"), the sixth largest bank holding company in the
United States. Stephen A. Lieber and Nola Maddox Falcone serve as the chief
investment officers of Evergreen Asset and, along with Theodore J. Israel, Jr.,
were the owners of Evergreen Asset's predecessor and the former general partners
of Lieber & Company, which, as described below, provides certain subadvisory
services to Evergreen Asset in connection with its duties as investment adviser
to the Funds. The Capital Management Group of FUNB ("CMG") serves as investment
adviser to EVERGREEN HIGH GRADE TAX FREE FUND.
First Union is headquartered in Charlotte, North Carolina, and had $139.9
billion in consolidated assets as of June 30, 1996. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States. CMG manages or otherwise oversees the
investment of over $42.1 billion in assets belonging to a wide range of clients,
including all the series of Evergreen Investment Trust (formerly known as First
Union Funds), the two series of The Evergreen Lexicon Fund (formerly The FFB
Lexicon Fund) and the two series of Evergreen Tax-Free Trust (formerly FFB Funds
Trust). First Union Brokerage Services, Inc., a wholly-owned subsidiary of FUNB,
is a registered broker-dealer that is principally engaged in providing retail
brokerage services consistent with its federal banking authorizations. First
Union Capital Markets Corp., a wholly-
12
<PAGE>
owned subsidiary of First Union, is a registered broker-dealer principally
engaged in providing, consistent with its federal banking authorizations,
private placement, securities dealing, and underwriting services.
Evergreen Asset manages investments, provides various administrative
services and supervises the daily business affairs of EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL
FUND-CALIFORNIA, subject to the authority of the Trustees. Under its investment
advisory agreement with EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA
Evergreen Asset is entitled to receive an annual fee equal to .55 of 1% of the
Fund's average daily net assets. Under its investment advisory agreement with
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND, Evergreen Asset is entitled to
receive an annual fee equal to .50 of 1% of the Fund's average daily net assets.
CMG manages investments and supervises the daily business affairs of EVERGREEN
HIGH GRADE TAX FREE FUND and, as compensation therefor, is entitled to receive
an annual fee equal to .50 of 1% of average daily net assets of the Fund. The
total expense ratios of EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND, EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN HIGH GRADE TAX FREE
FUND for the fiscal year ended August 31, 1996, are set forth in the section
entitled "Financial Highlights".
Evergreen Asset serves as administrator to EVERGREEN HIGH GRADE TAX FREE
FUND and is entitled to receive a fee based on the average daily net assets of
the Fund at a rate based on the total assets of the mutual funds administered by
Evergreen Asset for which CMG or Evergreen Asset also serve as investment
adviser, calculated in accordance with the following schedule: .050% of the
first $7 billion; .035% on the next $3 billion; .030% on the next $5 billion;
.020% on the next $10 billion; .015% on the next $5 billion; and .010% on assets
in excess of $30 billion. Furman Selz LLC, an affiliate of Evergreen Funds
Distributor, Inc., distributor for the Evergreen group of mutual funds, serves
as sub-administrator TO EVERGREEN HIGH GRADE TAX FREE FUND and is entitled to
receive a fee from the Fund calculated on the average daily net assets of the
Fund at a rate based on the total assets of the mutual funds administered by
Evergreen Asset for which CMG or Evergreen Asset also serve as investment
adviser, calculated in accordance with the following schedule: .0100% of the
first $7 billion; .0075% on the next $3 billion; .0050% on the next $15 billion;
and .0040% on assets in excess of $25 billion. The total assets of the mutual
funds administered by Evergreen Asset for which CMG or Evergreen Asset serve as
investment adviser were approximately $15.2 billion as of June 30, 1996.
PORTFOLIO MANAGERS
The portfolio manager of EVERGREEN HIGH GRADE TAX FREE FUND is James T.
Colby, III. Mr. Colby is a Vice President of CMG and has been associated with
Evergreen Asset and its predecessor since 1992. He has served as portfolio
manager of the Fund since 1995 and was portfolio manager of Evergreen National
Tax Free Fund, whose assets were acquired by the Fund on July 7, 1995, since
that Fund's inception in 1992. Prior to joining Evergreen Asset, Mr. Colby
served as Vice President-Investments at American Express Company from 1987 to
1992. The portfolio manager for EVERGREEN SHORT-INTERMEDIATE MUNICIPAL
FUND-CALIFORNIA and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND is Steven C.
Shachat. Mr. Shachat has been associated with Evergreen Asset and its
predecessor since 1988 and has served as portfolio manager of these Funds since
their inception.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provide that Lieber & Company's research department and staff will
furnish Evergreen Asset with information, investment recommendations, advice and
assistance, and will be generally available for consultation on the portfolios
of EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND. Lieber & Company will be reimbursed by
Evergreen Asset in connection with the rendering of services on the basis of the
direct and indirect costs of performing such services. There is no additional
charge to EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND for the services provided by Lieber & Company.
The address of Lieber & Company is 2500 Westchester Avenue, Purchase, New York
10577. Lieber & Company is an indirect, wholly-owned, subsidiary of First Union.
DISTRIBUTION PLANS AND AGREEMENTS
Rule 12b-1 under the Investment Company Act of 1940 permits an investment
company to pay expenses associated with the distribution of its shares in
accordance with a duly adopted plan. Each Fund has adopted for each of its Class
A and Class B shares a Rule 12b-1 plan (each a "Plan" or collectively the
"Plans"). Under the Plans, each Fund may incur distribution-related and
shareholder servicing-related expenses which may not exceed an annual rate of
.75 of 1% of the aggregate average daily net assets attributable to each Fund's
Class A shares,
13
<PAGE>
1.00% of the aggregate average daily net assets attributable to the Class B
shares of EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND, and .75 of 1% of the aggregate average daily
net assets attributable to the Class B shares of EVERGREEN HIGH GRADE MUNICIPAL
FUND. Payments under the Plans adopted with respect to Class A shares are
currently voluntarily limited to .10 of 1% and .25 of 1% of the aggregate
average daily net assets of EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND and
EVERGREEN HIGH GRADE TAX FREE FUND, respectively, attributable to Class A
shares. The Plans provide that a portion of the fee payable thereunder may
constitute a service fee to be used for providing ongoing personal services
and/or the maintenance of shareholder accounts. EVERGREEN HIGH GRADE TAX FREE
FUND has, in addition to the Plans adopted with respect to its Class B shares,
adopted a shareholder service plan ("Service Plan") relating to the Class B
shares which permit the Fund to incur a fee of up to .25 of 1% of the aggregate
average daily net assets attributable to the Class B shares for ongoing personal
services and/or the maintenance of shareholder accounts. Such service fee
payments to financial intermediaries for such purposes, whether pursuant to a
Plan or Service Plan, will not exceed .25 of 1% of the aggregate average daily
net assets attributable to each Class of shares of each Fund.
Each Fund has also entered into a distribution agreement (each a
"Distribution Agreement" or collectively the "Distribution Agreements") with
Evergreen Funds Distributor, Inc. ("EFD"). Pursuant to the Distribution
Agreements, each Fund will compensate EFD for its services as distributor at a
rate which may not exceed an annual rate of .25 of 1% of a Fund's aggregate
average daily net assets attributable to Class A shares, and .75 of 1% of a
Fund's aggregate average daily net assets attributable to the Class B shares.
The Distribution Agreements provide that EFD will use the distribution fee
received from a Fund for payments (i) to compensate broker-dealers or other
persons for distributing shares of the Funds, including interest and principal
payments made in respect of amounts paid to broker-dealers or other persons that
have been financed (EFD may assign its rights to receive compensation under the
Plans to secure such financings), (ii) to otherwise promote the sale of shares
of the Fund, and (iii) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative, accounting and
other services with respect to the Fund's shareholders. The financing of
payments made by EFD to compensate broker-dealers or other persons for
distributing shares of the Funds may be provided by First Union or its
affiliates. The Funds may also make payments under the Plans (and in the case of
EVERGREEN HIGH GRADE TAX FREE FUND, the Service Plan), in amounts up to .25 of
1% of a Fund's aggregate average daily net assets on an annual basis
attributable to Class B shares, to compensate organizations, which may include
EFD and each Fund's investment adviser or their affiliates, for personal
services rendered to shareholders and/or the maintenance of shareholder
accounts.
The Funds may not pay any distribution or services fees during any fiscal
period in excess of the amounts set forth above. Since EFD's compensation under
the Distribution Agreements is not directly tied to the expenses incurred by
EFD, the amount of compensation received by it under the Distribution Agreements
during any year may be more or less than its actual expenses and may result in a
profit to EFD. Distribution expenses incurred by EFD in one fiscal year that
exceed the level of compensation paid to EFD for that year may be paid from
distribution fees received from a Fund in subsequent fiscal years.
The Plans and Service Plan are in compliance with rules of the National
Association of Securities Dealers, Inc. which effectively limit the annual
asset-based sales charges and service fees that a mutual fund may pay on a class
of shares to .75 of 1% and .25 of 1%, respectively, of the average annual net
assets attributable to that class. The rules also limit the aggregate of all
front-end, deferred and asset-based sales charges imposed with respect to a
class of shares by a mutual fund that also charges a service fee to 6.25% of
cumulative gross sales of shares of that class, plus interest at the prime rate
plus 1% per annum.
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
You can purchase shares of any of the Funds through broker-dealers, banks
or other financial intermediaries, or directly through EFD. The minimum initial
investment is $1,000, which may be waived in certain situations. There is no
minimum for subsequent investments. Investments of $25 or more are allowed under
the Systematic Investment Plan. Share certificates are not issued. In states
where EFD is not registered as a broker-dealer shares of a Fund will only be
sold through Furman Selz LLC, other broker-dealers or other financial
institutions that are registered. See the Share Purchase Application and
Statement of Additional Information for
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more information. Only Class A and Class B shares are offered through this
Prospectus (see "General Information" -- "Other Classes of Shares").
Class A Shares-Front-End Sales Charge Alternative. You can purchase Class A
shares at net asset value plus an initial sales charge on purchases under
$1,000,000. On purchases of $1,000,000 or more, a contingent deferred sales
charge ("CDSC") equal to the lesser of 1% of the purchase price or the
redemption value will be imposed on shares redeemed during the first year after
purchase. The schedule of charges for Class A shares is as follows:
Initial Sales Charge
EVERGREEN HIGH GRADE TAX FREE FUND
<TABLE>
<CAPTION>
as a % of the Net as a % of the Commission to Dealer/Agent
Amount of Purchase Amount Invested Offering Price as a % of Offering Price
<S> <C> <C> <C>
Less than $ 50,000 4.99% 4.75% 4.25%
$ 50,000 - $ 99,000 4.71% 4.50% 4.25%
$ 100,000 - $ 249,999 3.90% 3.75% 3.25%
$ 250,000 - $ 499,999 2.56% 2.50% 2.00%
$ 500,000 - $ 999,999 2.04% 2.00% 1.75%
$1,000,000 - $2,999,999 None None 1.00%
$3,000,000 - $4,999,999 None None .50%
Over $5,000,000 None None .25%
</TABLE>
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA
<TABLE>
<CAPTION>
as a % of the Net as a % of the Commission to Dealer/Agent
Amount of Purchase Amount Invested Offering Price as a % of Offering Price
<S> <C> <C> <C>
Less than $ 50,000 3.36% 3.25% 2.75%
$ 50,000 - $ 99,000 3.09% 3.00% 2.75%
$ 100,000 - $ 249,999 2.56% 2.50% 2.25%
$ 250,000 - $ 499,999 2.04% 2.00% 1.75%
$ 500,000 - $ 999,999 1.52% 1.50% 1.25%
$1,000,000 - $2,999,999 None None 1.00%
$3,000,000 - $4,999,999 None None .50%
Over $5,000,000 None None .25%
</TABLE>
When Class A shares are sold, EFD will normally retain a portion of the
applicable sales charge and pay the balance to the broker-dealer or other
financial intermediary through whom the sale was made. EFD may also pay fees to
banks from sales charges for services performed on behalf of the bank's
customers in connection with the purchase of shares of the Funds. In addition to
compensation paid at the time of sale, entities whose clients have purchased
Class A shares may receive a trailing commission equal to .10 of 1% of the
aggregate average daily net assets attributable to Class A shares of EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND held by their clients, and .25 of 1% of aggregate average daily
net assets attributable to Class A shares of EVERGREEN HIGH GRADE TAX FREE FUND
held by their clients. Certain purchases of Class A shares may qualify for
reduced sales charges in accordance with a Fund's Combined Purchase Privilege,
Cumulative Quantity Discount, Statement of Intention, Privilege for Certain
Retirement Plans and Reinstatement Privilege. Consult the Share Purchase
Application and Statement of Additional Information for additional information
concerning these reduced sales charges.
No front-end sales charges are imposed on Class A shares purchased by:
institutional investors, which may include bank trust departments and registered
investment advisers; investment advisers, consultants or financial planners who
place trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee; clients of
investment advisers or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisers or financial planners on the books of the broker-dealer through whom
shares are purchased; institutional clients of broker-dealers, including
retirement and deferred compensation plans and the trusts used to fund these
plans,
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<PAGE>
which place trades through an omnibus account maintained with a Fund by the
broker-dealer; shareholders of record on October 12, 1990 in any series of
Evergreen Investment Trust in existence on that date, and the members of their
immediate families; current and retired employees of FUNB and its affiliates,
EFD and any broker-dealer with whom EFD has entered into an agreement to sell
shares of the Funds, and members of the immediate families of such employees;
and upon the initial purchase of an Evergreen mutual fund by investors
reinvesting the proceeds from a redemption within the preceding thirty days of
shares of other mutual funds, provided such shares were initially purchased with
a front-end sales charge or subject to a CDSC. Certain broker-dealers or other
financial institutions may impose a fee on transactions in shares of the Funds.
Class B Shares-Deferred Sales Charge Alternative. You can purchase Class B
shares at net asset value without an initial sales charge. However, you may pay
a CDSC if you redeem shares within seven years after purchase. Shares obtained
from dividend or distribution reinvestment are not subject to the CDSC. The
amount of the CDSC (expressed as a percentage of the lesser of the current net
asset value or original cost) will vary according to the number of years from
the purchase of Class B shares as set forth below.
<TABLE>
<CAPTION>
Year Since
Purchase Contingent Deferred Sales Charge
<S> <C>
FIRST 5%
SECOND 4%
THIRD and FOURTH 3%
FIFTH 2%
SIXTH 1%
</TABLE>
The CDSC is deducted from the amount of the redemption and is paid to EFD. The
CDSC will be waived on redemptions of shares following the death or disability
of a shareholder, to meet distribution requirements for certain qualified
retirement plans or in the case of certain redemptions made under a Fund's
Systematic Cash Withdrawal Plan. Class B shares are subject to higher
distribution and/or shareholder service fees than Class A shares for a period of
seven years (after which they convert to Class A shares). The higher fees mean a
higher expense ratio, so Class B shares pay correspondingly lower dividends and
may have a lower net asset value than Class A shares. See the Statement of
Additional Information for further details.
With respect to Class B shares, no CDSC will be imposed on: (1) the
portion of redemption proceeds attributable to increases in the value of the
account due to increases in the net asset value per share, (2) shares acquired
through reinvestment of dividends and capital gains, (3) shares held for more
than seven years after the end of the calendar month of acquisition, (4)
accounts following the death or disability of a shareholder, or (5) minimum
required distributions to a shareholder over the age of 70 1/2 from an IRA or
other retirement plan.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the outstanding shares of that Class.
Shares are valued each day the New York Stock Exchange (the "Exchange") is open
as of the close of regular trading (currently 4:00 p.m. Eastern time). The
Exchange is closed on New Year's Day, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The securities
in a Fund are valued at their current market value determined on the basis of
market quotations or, if such quotations are not readily available, such other
methods as the Trustees of each Trust under which each Fund operates believe
would accurately reflect fair value.
General. The decision as to which Class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A shares, which
incur lower ongoing distribution and/or shareholder service fees, after seven
years. The compensation received by dealers and agents may differ depending on
whether they sell Class A or Class B shares. There is no size limit on purchases
of Class A shares.
In addition to the discount or commission paid to dealers, EFD will from
time to time pay to dealers additional cash or other incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of a
Fund and/or other Evergreen mutual funds. Such incentives will take the form of
payment for attendance at seminars, lunches, dinners, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer and their immediate
family members to urban or resort locations within or outside the United States.
Such a dealer may elect to receive
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<PAGE>
cash incentives of equivalent amount in lieu of such payments. EFD may also
limit the availability of such incentives to certain specified dealers. EFD from
time to time sponsors promotions involving First Union Brokerage Services, Inc.
("FUBS"), an affiliate of each Fund's investment adviser, and other selected
dealers, pursuant to which incentives are paid, including gift certificates and
payments in amounts up to 1% of the dollar amount of shares of a Fund sold.
Awards may also be made based on the opening of a minimum number of accounts.
Such promotions are not being made available to all dealers. Certain
broker-dealers may also receive payments from EFD or a Fund's investment adviser
over and above the usual trail commissions or shareholder servicing payments
applicable to a given Class of shares.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from an investor's account to reimburse the Fund or the Fund's investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen mutual funds.
The Funds will not accept third party checks other than those payable directly
to a shareholder whose account has been in existence at least thirty days.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any day
the Exchange is open, either directly or through your financial intermediary.
The price you will receive is the net asset value (less any applicable CDSC for
Class B shares) next calculated after the Fund receives your request in proper
form. Proceeds generally will be sent to you within seven days. However, for
shares recently purchased by check, a Fund will not send proceeds until it is
reasonably satisfied that the check has been collected (which may take up to ten
days). Once a redemption request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value (less any applicable CDSC for
Class B shares). Your financial intermediary is responsible for furnishing all
necessary documentation to a Fund and may charge you for this service. Certain
financial intermediaries may require that you give instructions earlier than
4:00 p.m. (Eastern time).
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street Bank and Trust Company ("State
Street") which is the registrar, transfer agent and dividend-disbursing agent
for each Fund. Stock power forms are available from your financial intermediary,
State Street, and many commercial banks. Additional documentation is required
for the sale of shares by corporations, financial intermediaries, fiduciaries
and surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling the telephone number on the front page of this Prospectus between the
hours of 8:00 a.m. and 5:30 p.m.(Eastern time) each business day (i.e., any
weekday exclusive of days on which the Exchange or State Street's offices are
closed). The Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund or State Street by telephone should
follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a
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<PAGE>
Shareholder Services Form and send it to State Street Bank and Trust Company,
P.O. Box 9021, Boston, Massachusetts 02205-9827, with such shareholder's
signature guaranteed by a bank or trust company (not a Notary Public), a member
firm of a domestic stock exchange or by other financial institutions whose
guarantees are acceptable to State Street. Shareholders should allow
approximately ten days for such form to be processed. The Funds will employ
reasonable procedures to verify that telephone requests are genuine. These
procedures include requiring some form of personal identification prior to
acting upon instructions and tape recording of conversations. If a Fund fails to
follow such procedures, it may be liable for any losses due to unauthorized or
fraudulent instructions. A Fund shall not be liable for following telephone
instructions reasonably believed to be genuine. Also, the Funds reserve the
right to refuse a telephone redemption request, if it is believed advisable to
do so. Financial intermediaries may charge a fee for handling telephonic
requests. The telephone redemption option may be suspended or terminated at any
time without notice.
General. The sale of shares is a taxable transaction for Federal tax purposes.
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by Federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $1,000 for thirty days. Shareholders will receive sixty days' written
notice to increase the account value before the account is closed. The Funds
have elected to be governed by Rule 18f-1 under the Investment Company Act of
1940 pursuant to which each Fund is obligated to redeem shares solely in cash,
up to the lesser of $250,000 or 1% of a Fund's total net assets during any
ninety day period for any one shareholder. See the Statement of Additional
Information for further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen mutual funds through your financial
intermediary, or by telephone or mail as described below. Once an exchange
request has been telephoned or mailed, it is irrevocable and may not be modified
or canceled. Exchanges will be made on the basis of the relative net asset
values of the shares exchanged next determined after an exchange request is
received. An exchange, which represents an initial investment in another
Evergreen mutual fund, is subject to the minimum investment and suitability
requirements of each Fund.
Each of the Evergreen mutual funds has different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
No CDSC will be imposed in the event Class B shares are exchanged for
Class B shares of other Evergreen mutual funds. If you redeem shares, the CDSC
applicable to the Class B shares of the Evergreen mutual fund originally
purchased for cash is applied. Also, Class B shares will continue to age
following an exchange for purposes of conversion to Class A shares and
determining the amount of the applicable CDSC.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling the telephone number on the front page of this
Prospectus. Exchange requests made after 4:00 p.m. (Eastern time) will be
processed using the net asset value determined on the next business day. During
periods of drastic economic or market changes, shareholders may experience
difficulty in effecting telephone exchanges. You should follow the procedures
outlined below for exchanges by mail if you are unable to reach State Street by
telephone. If you wish to use the telephone exchange service you should indicate
this on the Share Purchase Application. As noted above, each Fund will employ
reasonable procedures to confirm that instructions for the redemption or
exchange of shares communicated by telephone are genuine. A telephone exchange
may be refused by a Fund or State Street if it is believed advisable to do so.
Procedures for exchanging Fund shares by telephone may be modified or terminated
at any time. Written requests for exchanges should follow the same procedures
outlined for written redemption requests in the section entitled "How to Redeem
Shares", however, no signature guarantee is required.
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<PAGE>
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more information
about these services or your account, contact your financial intermediary, EFD
or the toll-free number the phone number on the front page of this Prospectus.
Some services are described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25 per month or
$75 per quarter. Each Fund reserves the right to close an account that through
liquidation of the Systematic Investment Plan has not reached a minimum balance
of $1,000 ($250 for retirement accounts) within twenty-four months of the
initial investment. You can open a Systematic Investment Plan in the EVERGREEN
HIGH GRADE TAX FREE FUND for a minimum of only $50 per month with no initial
investment required.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Shares purchased under the Funds Systematic Investment Plan or Telephone
Investment Plan may not be redeemed for ten days from the date of investment.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Funds
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $75. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gain
distributions reinvested automatically. Any applicable Class B CDSC will be
waived with respect to redemptions occurring under a Systematic Cash Withdrawal
Plan during a calendar year to the extent that such redemptions do not exceed
10% of (i) the initial value of the account plus (ii) the value, at the time of
purchase, of any subsequent investments.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of a
Fund at the net asset value per share on the last business day of each month,
unless otherwise requested by a shareholder in writing. If the transfer agent
does not receive a written request for subsequent dividends and/or distributions
to be paid in cash at least three full business days prior to a given record
date, the dividends and/or distributions to be paid to a shareholder will be
reinvested.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
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OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
Income dividends are declared daily and paid monthly. Distributions of
any net realized gains of a Fund will be made at least annually. Shareholders
will begin to earn dividends on the first business day after shares are
purchased unless shares were not paid for, in which case dividends are not
earned until the next business day after payment is received. Each Fund has
qualified and intends to continue to qualify to be treated as a regulated
investment company under the Internal Revenue Code (the "Code"). While so
qualified, so long as each Fund distributes all of its investment company
taxable income and any net realized gains to shareholders, it is expected that
the Funds will not be required to pay any Federal income taxes. A 4%
nondeductible excise tax will be imposed on a Fund if it does not meet certain
distribution requirements by the end of each calendar year. Each Fund
anticipates meeting such distribution requirements.
The Funds will designate and pay exempt-interest dividends derived from
interest earned on qualifying tax-exempt obligations. Such exempt-interest
dividends may be excluded by shareholders of a Fund from their gross income for
Federal income tax purposes, however (1) all or a portion of such
exempt-interest dividends may be a specific preference item for purposes of the
Federal individual and corporate alternative minimum taxes to the extent that
they are derived from certain types of private activity bonds issued after
August 7, 1986, and (2) all exempt-interest dividends will be a component of the
"adjusted current earnings" for purposes of the Federal corporate alternative
minimum tax.
Dividends paid from taxable income, if any, and distributions of any net
realized short-term capital gains (whether from tax exempt or taxable
obligations) are taxable as ordinary income and long-term capital gain
distributions are taxable as long-term capital gains, even though received in
additional shares of the Fund, and regardless of the investors holding period
relating to the shares with respect to which such gains are distributed. Market
discount recognized on taxable and tax-exempt bonds is taxable as ordinary
income, not as excludable income. Under current law, the highest Federal income
tax rate applicable to net long-term gains realized by individuals is 28%. The
rate applicable to corporations is 35%.
Since each Fund's gross income is ordinarily expected to be tax exempt
interest income, it is not expected that the 70% dividends-received deduction
for corporations will be applicable. Specific questions should be addressed to
the investor's own tax adviser.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions (if any) and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, each investor must certify on the Share Purchase
Application, or on a separate form supplied by State Street, that the investor's
social security or taxpayer identification number is correct and that the
investor is not currently subject to backup withholding or is exempt from backup
withholding.
For EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA, so long as
the Fund remains qualified under Subchapter M of the Code for Federal purposes
and qualified as a diversified management investment company, then under current
California law, the Fund is entitled to pass through to its shareholders the
tax-exempt income it earns. To the extent that Fund dividends are derived from
earnings on California Municipal Securities, such dividends will be exempt from
California personal income taxes when received by the Fund's shareholders,
provided the Fund has complied with the requirement that at least 50% of its
assets be invested in California Municipal Securities. For California income tax
purposes, long-term capital gains distributions are taxable as ordinary income.
Statements describing the tax status of shareholders' dividends and
distributions will be mailed annually by the Funds. These statements will set
forth the amount of income exempt from Federal and, if applicable, state
taxation (including California), and the amount, if any, subject to Federal and
state taxation. Moreover, to the extent necessary, these statements will
indicate the amount of exempt-interest dividends which are a specific preference
item for purposes of the Federal individual and corporate alternative minimum
taxes. The exemption of interest income for Federal income tax purposes does not
necessarily result in exemption under the income or other tax law of any state
or local taxing authority. Investors should consult their own tax advisers about
the status of distributions from the Funds in their states and localities. Each
Fund notifies shareholders annually as to the interest exempt from Federal taxes
earned by the Fund.
20
<PAGE>
A shareholder who acquires Class A shares of a Fund and sells or
otherwise disposes of such shares within 90 days of acquisition may not be
allowed to include certain sales charges incurred in acquiring such shares for
purposes of calculating gain and loss realized upon a sale or exchange of shares
of the Fund.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA are separate investment series of
The Evergreen Municipal Trust, a Massachusetts business trust organized in 1988.
EVERGREEN HIGH GRADE TAX FREE FUND is a separate investment series of Evergreen
Investment Trust (formerly First Union Funds), a Massachusetts business trust
organized in 1984. The Funds do not intend to hold annual shareholder meetings;
shareholder meetings will be held only when required by applicable law.
Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each Class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional Classes of shares for any existing or future series. If an
additional series or Class were established in a Fund, each share of the series
or Class would normally be entitled to one vote for all purposes. Generally,
shares of each series and Class would vote together as a single Class on
matters, such as the election of Trustees, that affect each series and Class in
substantially the same manner. Class A, B and Y shares have identical voting,
dividend, liquidation and other rights, except that each Class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific Class. Each
Class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate Class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Custodian, Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street
Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as
each Fund's custodian, registrar, transfer agent and dividend-disbursing agent.
State Street is compensated for its services as transfer agent by a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares.
Principal Underwriter. EFD, an affiliate of Furman Selz LLC, located 230 Park
Avenue, New York, New York 10017, is the principal underwriter of the Funds.
Furman Selz LLC also acts as sub-administrator to EVERGREEN HIGH GRADE TAX FREE
FUND and provides certain sub-administrative services to Evergreen Asset in
connection with its role as investment adviser to EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA,
including providing personnel to serve as officers of the Funds.
Other Classes of Shares. Each Fund currently offers three classes of shares,
Class A, Class B and Class Y, and may in the future offer additional classes.
Class Y shares are not offered by this Prospectus and are only available to (i)
persons who at or prior to December 31, 1994, owned shares in a mutual fund
advised by Evergreen Asset, (ii) certain institutional investors and (iii)
investment advisory clients of CMG, Evergreen Asset or their affiliates. The
dividends payable with respect to Class A and Class B shares will be less than
those payable with respect to Class Y shares due to the distribution and
distribution related expenses borne by Class A and Class B shares and the fact
that such expenses are not borne by Class Y shares.
Performance Information. A Fund's performance may be quoted in advertising in
terms of yield or total return. Both types of performance are based on
Securities and Exchange Commission ("SEC") formulas and are not intended to
indicate future performance.
Yield is a way of showing the rate of income a Fund earns on its
investments as a percentage of the Fund's share price. A Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, a Fund's yield may not equal its
distribution rate, the income paid to your account or the income reported
21
<PAGE>
in a Fund's financial statements. To calculate yield, a Fund takes the interest
income it earned from its portfolio of investments (as defined by the SEC
formula) for a 30-day period (net of expenses), divides it by the average number
of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on a Fund's share price at the end of the
30-day period. This yield does not reflect gains or losses from selling
securities.
A Fund may also quote tax-equivalent yields, which show the taxable
yields an investor would have to earn before taxes to equal the Fund's tax-free
yields. A tax-equivalent yield is calculated by dividing a Fund's tax-exempt
yield by the result of one minus a stated Federal tax rate. If only a portion of
a Fund's income was tax-exempt, only that portion is adjusted in the
calculation.
Total returns are based on the overall dollar or percentage change in the
value of a hypothetical investment in a Fund. A Fund's total return shows its
overall change in value including changes in share prices and assumes all a
Fund's distributions are reinvested. A cumulative total return reflects a Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if a Fund's performance had been constant over
the entire period. Because average annual total returns tend to smooth out
variations in a Fund's return, you should recognize that they are not the same
as actual year-by-year results. To illustrate the components of overall
performance, a Fund may separate its cumulative and average annual total returns
into income results and realized and unrealized gain or loss.
Comparative performance information may also be used from time to time in
advertising or marketing a Fund's shares, including data from Lipper Analytical
Services, Inc., Morningstar and other industry publications. The Fund may also
advertise in items of sales literature an "actual distribution rate" which is
computed by dividing the total ordinary income distributed (which may include
the excess of short-term capital gains over losses) to shareholders for the
latest twelve month period by the maximum public offering price per share on the
last day of the period. Investors should be aware that past performance may not
be reflective of future results.
In marketing a Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering investment
alternatives. The information provided to investors may also include discussions
of other Evergreen mutual funds, products, and services, which may include:
retirement investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; and charitable
giving. In addition, the information provided to investors may quote financial
or business publications and periodicals, including model portfolios or
allocations, as they relate to fund management, investment philosophy, and
investment techniques. The Principal Underwriter may also reprint, and use as
advertising and sales literature, articles from EVERGREEN EVENTS, a quarterly
magazine provided to Evergreen mutual fund shareholders.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which
each Fund operates provide that no Trustee or shareholder will be personally
liable for the obligations of the Trust and that every written contract made by
the Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the SEC under the Securities Act. Copies of the Registration Statements may
be obtained at a reasonable charge from the SEC or may be examined, without
charge, at the offices of the SEC in Washington, D.C.
22
<PAGE>
INVESTMENT ADVISER
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND, EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND-CALIFORNIA
Capital Mangement Group of First Union National Bank of North Carolina, 201
South College Street, Charlotte, North Carolina 28288
EVERGREEN HIGH GRADE TAX FREE FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036
INDEPENDENT AUDITORS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND,
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN HIGH GRADE TAX FREE FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 230 Park Avenue, New York, New York 10017
45959 536119rev02
********************************************************************************
<PAGE>
PROSPECTUS October 31, 1996
EVERGREEN(SM) TAX-FREE FUNDS (Evergreen tree logo)
EVERGREEN HIGH GRADE TAX FREE FUND
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA
CLASS Y SHARES
The Evergreen Tax-Free Funds (the "Funds") are designed to provide
investors with income exempt from Federal income taxes. This Prospectus
provides information regarding the Class Y shares offered by the Funds.
Each Fund is, or is a series of, an open-end, diversified, management
investment company. This Prospectus sets forth concise information about
the Funds that a prospective investor should know before investing. The
address of the Funds is 2500 Westchester Avenue, Purchase, New York 10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen group of mutual funds dated October 31, 1996
has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus
and other matters which may be of interest to investors, and may be
obtained without charge by calling the Funds at (800) 235-0064. There can
be no assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, ARE NOT INSURED OR
OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE INVESTMENT RISKS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 9
Investment Practices and Restrictions 10
MANAGEMENT OF THE FUNDS
Investment Advisers 13
Portfolio Managers 14
Sub-Adviser 14
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 15
How to Redeem Shares 16
Exchange Privilege 16
Shareholder Services 17
Effect of Banking Laws 18
OTHER INFORMATION
Dividends, Distributions and Taxes 18
General Information 19
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The investment adviser to EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND and
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA is Evergreen Asset
Management Corp. which, with its predecessors, has served as an investment
adviser to the Evergreen mutual funds since 1971. Evergreen Asset Management
Corp. is a wholly-owned subsidiary of First Union National Bank of North
Carolina, which in turn is a subsidiary of First Union Corporation, the sixth
largest bank holding company in the United States. The Capital Management Group
of First Union National Bank of North Carolina serves as investment adviser to
EVERGREEN HIGH GRADE TAX FREE FUND.
EVERGREEN HIGH GRADE TAX FREE FUND seeks to provide a high level of
federally tax-free income that is consistent with preservation of capital.
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND seeks as high a level of
current income, exempt from Federal income tax other than the Federal
alternative minimum tax, as is consistent with preserving capital and providing
liquidity. The Fund invests substantially all of its assets in short and
intermediate-term municipal securities with a dollar weighted average portfolio
maturity of two to five years.
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA seeks as high a
level of current income exempt from Federal and California income taxes as is
consistent with preserving capital and providing liquidity. The Fund invests
substantially all of its assets in short and intermediate-term municipal
securities with a dollar weighted average portfolio maturity of two to five
years.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in the Class Y Shares of the Fund. For further
information see "Purchase and Redemption of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Redemption Fee None
Exchange Fee (only applies after 4 exchanges per
year) $ 5.00
</TABLE>
The following table shows for the Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to Class Y Shares,
together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment for the periods specified assuming (i) a 5%
annual return and (ii) redemption at the end of each period.
EVERGREEN HIGH GRADE TAX FREE FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES* EXAMPLE
<S> <C> <C> <C>
Management Fees .50%
After 1 Year $ 9
12b-1 Fees --
After 3 Years $ 27
Other Expenses .34%
After 5 Years $ 47
After 10 Years $ 104
Total .84%
</TABLE>
EVERGREEN SHORT INTERMEDIATE FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES* EXAMPLE
<S> <C> <C> <C>
Management Fees .50%
After 1 Year $ 10
12b-1 Fees --
After 3 Years $ 30
Other Expenses .44%
After 5 Years $ 52
After 10 Years $ 115
Total .94%
</TABLE>
EVERGREEN SHORT INTERMEDIATE FUND -- CALIFORNIA
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES* EXAMPLE
<S> <C> <C> <C>
Management Fees .55%
After 1 Year $ 10
12b-1 Fees --
After 3 Years $ 32
Other Expenses .45%
After 5 Years $ 55
After 10 Years $ 122
Total 1.00%
</TABLE>
3
<PAGE>
* The annual operating expenses and examples do not reflect fee waivers and
expense reimbursements for the most recent fiscal period. Actual expenses for
Class Y Shares net of fee waivers and expense reimbursements for the fiscal
period ended August 31, 1996, were as follows:
<TABLE>
<S> <C>
EVERGREEN HIGH GRADE TAX FREE FUND............................................... .64%
EVERGREEN SHORT INTERMEDIATE FUND................................................ .70%
EVERGREEN SHORT INTERMEDIATE FUND -- CALIFORNIA.................................. .84%
</TABLE>
Evergreen Asset has agreed to reimburse EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA to
the extent that their aggregate operating expenses (including the investment
adviser's fee, but excluding taxes, interest, brokerage commissions, Rule 12b-1
distribution fees and shareholder servicing fees and extraordinary expenses)
exceed 1% of the average net assets. Absent this agreement, the estimated annual
operating expenses for EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA
would be 1.09%.
From time to time, each Fund's investment adviser may, at its discretion,
reduce or waive its fees or reimburse the Funds for certain of their expenses in
order to reduce their expense ratios. Each Fund's investment adviser may cease
these waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in Class Y shares
will bear directly or indirectly. The amounts set forth both in the tables and
in the examples are estimated amounts based on the experience of each Fund for
the most recent fiscal period. THE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND
ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete
description of the various costs and expenses borne by the Funds see "Management
of the Funds".
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter for EVERGREEN HIGH GRADE TAX FREE FUND has been audited by
KPMG Peat Marwick LLP, the Fund's independent auditors; for EVERGREEN SHORT
INTERMEDIATE MUNICIPAL FUND and EVERGREEN SHORT INTERMEDIATE MUNICIPAL
FUND -- CALIFORNIA has been audited by Price Waterhouse LLP, each Fund's
independent auditors. A report of KPMG Peat Marwick LLP or Price Waterhouse LLP,
as the case may be, on the audited information with respect to each Fund is
incorporated by reference in the Fund's Statement of Additional Information. The
following information for each Fund should be read in conjunction with the
financial statements and related notes which are incorporated by reference in
the Fund's Statement of Additional Information.
No financial highlights are shown for Class A or B of EVERGREEN SHORT
INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA since these classes did not have any
operations prior to August 31, 1996.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN HIGH GRADE TAX FREE FUND
<TABLE>
<CAPTION>
CLASS A SHARES
EIGHT FEBRUARY 21,
MONTHS 1992*
YEAR ENDED ENDED YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31,
1996 1995# 1994 1993 1992
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period...................................... $10.69 $9.79 $11.16 $10.42 $10.00
Income (loss) from investment operations:
Net investment income..................................................... .52 .34 .52 .54 .51
Net realized and unrealized gain (loss) on
investments............................................................. .03 .90 (1.37) .81 .42
Total from investment operations........................................ .55 1.24 (.85) 1.35 .93
Less distributions to shareholders from:
Net investment income..................................................... (.52) (.34) (.52) (.54) (.51)
Net realized gains........................................................ -- -- -- (.07) --
Total distributions..................................................... (.52) (.34) (.52) (.61) (.51)
Net asset value, end of period............................................ $10.72 $10.69 $9.79 $11.16 $10.42
TOTAL RETURN+............................................................. 5.2% 12.8% (7.7%) 13.3% 9.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)......................................................... $ 50,569 $ 58,751 $57,676 $101,352 $ 90,738
Ratios to average net assets:
Expenses **............................................................. .89% 1.06%++ 1.01% .85% .49%++
Net investment income **................................................ 4.78% 4.93%++ 5.04% 4.99% 5.79%++
Portfolio turnover rate................................................... 65% 27% 53% 14% 7%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES
FEBRUARY 21,
EIGHT 1992*
YEAR ENDED MONTHS YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31,
1996 1995# 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Expenses................................................................. 1.09% 1.09% 1.02% 1.07% 1.11%
Net investment income.................................................... 4.58% 4.90% 5.03% 4.77% 5.17%
</TABLE>
5
<PAGE>
EVERGREEN HIGH GRADE TAX FREE FUND
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
EIGHT JANUARY 11, EIGHT FEBRUARY 28,
MONTHS 1993* MONTHS 1994*
YEAR ENDED ENDED YEAR ENDED THROUGH YEAR ENDED ENDED THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31, AUGUST 31, DECEMBER 31,
1996 1995# 1994 1993 1996 1995# 1994
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period.............................. $10.69 $9.79 $11.16 $10.42 $10.69 $9.79 $10.93
Income (loss) from investment
operations:
Net investment income................. .44 .29 .46 .47 .55 .36 .46
Net realized and unrealized gain
(loss) on
investments......................... .03 .90 (1.37) .81 .03 .90 (1.14)
Total from investment operations.... .47 1.19 (.91) 1.28 .58 1.26 (.68)
Less distributions to shareholders
from:
Net investment income................. (.44) (.29) (.46) (.47) (.55) (.36) (.46)
Net realized gains.................... -- -- -- (.07) -- -- --
Total distributions................. (.44) .29 (.46) (.54) (.55) (.36) (.46)
Net asset value, end of period........ $10.72 $10.69 $9.79 $11.16 $10.72 $10.69 $9.79
TOTAL RETURN+......................... 4.4% 12.3% (8.2%) 12.4% 5.4% 13.0% (6.3%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)..................... $ 32,221 $ 34,206 $ 32,435 $ 41,030 $ 25,112 $ 25,079 $4,318
Ratios to average net assets:
Expenses **......................... 1.64% 1.81%++ 1.58% 1.35%++ .64% .81%++ .76%++
Net investment income **............ 4.03% 4.18%++ 4.47% 4.44%++ 5.03% 5.18%++ 5.46%++
Portfolio turnover rate............... 65% 27% 53% 14% 65% 27% 53%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
JANUARY 11, FEBRUARY 28,
EIGHT 1993* EIGHT 1994*
YEAR ENDED MONTHS YEAR ENDED THROUGH YEAR ENDED MONTHS THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31, AUGUST 31, DECEMBER 31,
1996 1995# 1994 1993 1996 1995# 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses................................ 1.84% 1.84% 1.59% 1.57% .84% .84% .77%
Net investment income................... 3.83% 4.15% 4.46% 4.22% 4.83% 5.15% 5.45%
</TABLE>
6
<PAGE>
EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
JANUARY 5, JANUARY 5, CLASS Y SHARES
1995* 1995*
YEAR ENDED THROUGH YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, YEAR ENDED AUGUST 31,
1996 1995 1996 1995 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period..... $10.17 $9.97 $10.17 $9.97 $10.17 $10.21 $10.58 $10.33
Income (loss) from
investment operations:
Net investment income.... .43 .30 .34 .24 .43 .46 .47 .49
Net realized and
unrealized gain (loss)
on investments.......... (.09) .20 (.09) .20 (.10) (.04) (.32) .25
Total from investment
operations............ .34 .50 .25 .44 .33 .42 .15 .74
Less distributions to
shareholders from:
Net investment income.... (.43) (.30) (.34) (.24) (.43) (.46) (.47) (.49)
Net realized gains....... -- -- -- -- -- -- (.03) --
In excess of net realized
gains................... -- -- -- -- -- -- (.02) --
Total distributions..... (.43) (.30) (.34) (.24) (.43) (.46) (.52) (.49)
Net asset value, end of
period.................. $10.08 $10.17 $10.08 $10.17 $10.07 $10.17 $10.21 $10.58
TOTAL RETURN+............ 3.4% 5.1% 2.4% 4.5% 3.3% 4.2% 1.4% 7.4%
RATIOS & SUPPLEMENTAL
DATA:
Net assets, end of period
(000's omitted)......... $ 27,722 $ 6,820 $ 7,413 $ 6,050 $34,893 $40,581 $53,417 $66,607
Ratios to average net
assets:
Expenses **............. .80% .70%++ 1.67% 1.58%++ .70% .74% .58% .40%
Net investment income
**.................... 4.05% 4.32%++ 3.28% 3.50%++ 4.27% 4.52% 4.54% 4.73%
Portfolio turnover
rate.................... 29% 80% 29% 80% 29% 80% 32% 37%
<CAPTION>
JULY 17, 1991*
THROUGH
1992++ AUGUST 31, 1991||
<S> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period..... $10.00 $10.00
Income (loss) from
investment operations:
Net investment income.... .51 .06
Net realized and
unrealized gain (loss)
on investments.......... .33 --
Total from investment
operations............ .84 .06
Less distributions to
shareholders from:
Net investment income.... (.51) (.06)
Net realized gains....... -- --
In excess of net realized
gains................... -- --
Total distributions..... (.51) (.06)
Net asset value, end of
period.................. $10.33 $10.00
TOTAL RETURN+............ 8.6% .6%
RATIOS & SUPPLEMENTAL
DATA:
Net assets, end of period
(000's omitted)......... $54,470 $4,025
Ratios to average net
assets:
Expenses **............. .17% 0%++
Net investment income
**.................... 4.85% 4.93%++
Portfolio turnover
rate.................... 57% --
</TABLE>
* Commencement of class operations.
|| On November 18, 1991, the Fund was changed to a diversified municipal bond
fund with a fluctuating net asset value per share from a non-diversified
money market fund with a stable net asset value per share. The shares
outstanding at August 31, 1991 and the related per share data are restated
to reflect both a 1 for 2 reverse share split on October 30, 1991 and a 1
for 5 reverse share split on August 19, 1992. Total return calculated after
November 18, 1991 reflects the fluctuation in net asset value per share.
+ Total return is calculated on net asset value for the periods indicated and
is not annualized. Initial sales charge or contingent deferred sales charge
is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
JANUARY 5, JANUARY 5, CLASS Y SHARES
1995* 1995*
YEAR ENDED THROUGH YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, YEAR ENDED AUGUST 31,
1996 1995 1996 1995 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses.................. 1.11% 1.14% 2.07% 2.26% .90% .86% .83%
Net investment income..... 3.74% 3.88% 2.88% 2.82% 4.07% 4.40% 4.29%
<CAPTION>
JULY 17, 1991*
THROUGH
1993 1992 AUGUST 31, 1991
<S> <C> <C> <C>
Expenses.................. .81% .86% 1.40%
Net investment income..... 4.32% 4.16% 3.53%
</TABLE>
7
<PAGE>
EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA -- CLASS Y SHARES
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1996 1995 1994 1993|| 1992|| 1991|| 1990||
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........... $10.06 $10.09 $10.34 $10.00 $10.00 $10.00 $10.00
Income (loss) from investment operations:
Net investment income.......................... .40 .41 .43 .41 .33 .47 .55
Net realized and unrealized gain (loss) on
investments................................... (.08) -- (.24) .34 -- -- --
Total from investment operations.............. .32 .41 .19 .75 .33 .47 .55
Less distributions to shareholders from:
Net investment income.......................... (.40) (.41) (.43) (.41) (.33) (.47) (.55)
Net realized gains............................. -- (.03) (.01) -- -- -- --
Total distributions........................... (.40) (.44) (.44) (.41) (.33) (.47) (.55)
Net asset value, end of period................. $9.98 $10.06 $10.09 $10.34 $10.00 $10.00 $10.00
TOTAL RETURN+.................................. 3.2% 4.2% 1.8% 7.6% 3.4% 4.8% 5.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)...... $18,915 $21,362 $28,433 $30,136 $34,452 $42,022 $37,291
Ratios to average net assets:
Expenses **................................... .84% .79 .52% .30% .40% .37% .29%
Net investment income **...................... 3.97% 4.10 4.20% 3.96% 3.36% 4.66% 5.52%
Portfolio turnover rate........................ 44% 29% 12% 37% -- -- --
<CAPTION>
NOVEMBER 2,
1988* THROUGH
AUGUST 31, 1989||
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period........... $10.00
Income (loss) from investment operations:
Net investment income.......................... .51
Net realized and unrealized gain (loss) on
investments................................... --
Total from investment operations.............. .51
Less distributions to shareholders from:
Net investment income.......................... (.51)
Net realized gains............................. --
Total distributions........................... (.51)
Net asset value, end of period................. $10.00
TOTAL RETURN+.................................. 5.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)...... $28,266
Ratios to average net assets:
Expenses **................................... .24%++
Net investment income **...................... 6.40++
Portfolio turnover rate........................ --
</TABLE>
* Commencement of class operations.
|| On October 16, 1992, the Fund was converted to a short-intermediate
municipal fund with a fluctuating net asset value per share from a money
market fund with a stable net asset value per share. The shares outstanding
and the related per share data for the fiscal years ended August 31, 1990
through August 31, 1992 are restated to reflect the 1 for 10 reverse share
split on October 21, 1992. Total return calculated after October 16, 1992
reflects the fluctuation in net asset value per share.
+ Total return is calculated on net asset value for the period indicated and is
not annualized.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses................................... 1.09% .99% .95% .98% .84% .85% .88%
Net investment income...................... 3.72% 3.90% 3.77% 3.28% 2.92% 4.18% 4.93%
<CAPTION>
NOVEMBER 2,
1988* THROUGH
AUGUST 31, 1989
<S> <C>
Expenses................................... .93%
Net investment income...................... 5.71%
</TABLE>
8
<PAGE>
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVES AND POLICIES
In addition to the investment policies detailed below, each Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions".
EVERGREEN HIGH GRADE TAX FREE FUND
The EVERGREEN HIGH GRADE TAX FREE FUND seeks a high level of Federally
tax free income that is consistent with preservation of capital. At least 65% of
the value of the total assets of EVERGREEN HIGH GRADE TAX FREE FUND will be
invested in high grade bonds. High grade bonds mean: bonds insured by a
municipal bond insurance company which is rated AAA by Standard & Poor's Ratings
Group ("S&P") and/or Aaa by Moody's Investors Service, Inc. ("Moody's"); bonds
rated A or better by S&P or Moody's; or, if unrated, of comparable quality as
determined by the Fund's investment adviser. The insurance guarantees the timely
payment of principal and interest, but not the value of the municipal bonds or
the shares of the Fund. See the section "Investment Practices and
Restrictions" -- "Municipal Bond Insurance" for further information.
The EVERGREEN HIGH GRADE TAX FREE FUND may also purchase instruments
having variable rates of interest. One example is variable amount demand master
notes. These notes represent a borrowing arrangement between a commercial paper
issuer (borrower) and an institutional lender, such as the Fund, and are payable
upon demand. The underlying amount of the loan may vary during the course of the
contract, as may the interest on the outstanding amount, depending on a stated
short-term interest rate index.
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND
The investment objective of EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND
is to achieve as high a level of current income, exempt from Federal income tax
other than the Federal alternative minimum tax ("AMT") for individuals and
corporations, as is consistent with preserving capital and providing liquidity.
Under normal circumstances, it is anticipated that the Fund will invest its
assets so that at least 80% of its annual interest income is exempt from Federal
income tax other than the AMT. The Fund will seek to achieve its objective by
investing substantially all of its assets in a diversified portfolio of short
and intermediate-term debt obligations issued by states, territories and
possessions of the United States and by the District of Columbia, and their
political subdivisions and duly constituted authorities, the interest from which
is exempt from Federal income tax other than the AMT. Such securities are
generally known as Municipal Securities (see "Investment Practices and
Restrictions" -- "Municipal Securities" below). As a matter of policy, the
Trustees will not change the Fund's investment objective without shareholder
approval.
Under current tax law, a distinction is drawn between Municipal
Securities issued to finance certain "private activities" and other Municipal
Securities. Such private activity bonds include bonds issued to finance such
projects as airports, housing projects, resource recovery programs, solid waste
disposal facilities, student loan programs, and water and sewage projects.
Interest income from such "private activity bonds" ("AMT-Subject Bonds") becomes
an item of "tax preference" which is subject to the alternative minimum tax when
received by a person in a tax year during which he is subject to that tax.
Because interest income on AMT-Subject Bonds is taxable to certain investors, it
is expected, although there can be no guarantee, that such Municipal Securities
generally will provide somewhat higher yields than other Municipal Securities of
comparable quality and maturity. The Fund may invest up to 50% of its total
assets in AMT-Subject Bonds.
The Fund intends to maintain a dollar-weighted average portfolio maturity
of two to five years. The Fund may consider an obligation's maturity to be
shorter than its stated maturity if the Fund has the right to sell the
obligation at a price approximating par value before its stated maturity date.
This is a liquidity put and is exercisable to the issuer or some third party.
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA
The investment objective of EVERGREEN SHORT-INTERMEDIATE MUNICIPAL
FUND-CALIFORNIA is to achieve as high a level of current income exempt from
Federal and California income taxes, as is consistent with preserving capital
and providing liquidity. The Fund will seek to achieve its objective by
investing at least 80% of the value of
9
<PAGE>
its total assets in a diversified portfolio of short and intermediate-term debt
obligations issued by the State of California, its political subdivisions and
duly constituted authorities, the interest from which is exempt from Federal and
California income taxes. Such securities are generally known as Municipal
Securities (see "Investment Practices and Restrictions" -- "Municipal
Securities" below).
Interest income on certain types of bonds issued after August 7, 1986, to
finance nongovernmental activities is an item of "tax preference" subject to
AMT. To the extent the Fund invests in these "private activity" bonds (some of
which were formerly referred to as "industrial development" bonds), individual
and corporate shareholders, depending on their status, may be subject to AMT on
the part of the Fund's distributions derived from the bonds. As a matter of
fundamental policy, which may not be changed without shareholder approval, the
Fund will invest at least 80% of its total assets in Municipal Securities, the
interest from which is not subject to AMT.
The Fund intends to maintain a dollar-weighted average portfolio maturity
of two to five years. The Fund may consider an obligation's maturity to be
shorter than its stated maturity if the Fund has the right to sell the
obligation at a price approximating par value before its stated maturity date.
This is a liquidity put and is exercisable to the issuer or some third party.
INVESTMENT PRACTICES AND RESTRICTIONS
Except where noted, each Fund may engage in the investment practices
described below. Each Fund is also subject to certain investment restrictions
more fully described in the Statement of Additional Information.
General. EVERGREEN HIGH GRADE TAX FREE FUND, EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA will
invest in Municipal Securities so long as they are determined to be of high or
upper medium quality. Municipal Securities meeting this criteria include bonds
rated A or higher by S&P, Moody's or another nationally recognized statistical
rating organization ("SRO"); notes rated SP -1 or SP-2 by S&P or MIG-1 or MIG-2
by Moody's or rated VMIG-1 or VMIG-2 by Moody's in the case of variable rate
demand notes or having comparable ratings from another SRO; and commercial paper
rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's or having comparable
ratings from another SRO. EVERGREEN HIGH GRADE TAX FREE FUND may also invest in
general obligation bonds which are rated BBB by S&P, Baa by Moody's or bear a
similar rating from another SRO. Medium grade bonds are more susceptible to
adverse economic conditions or changing circumstances than higher grade bonds.
However, like the higher rated bonds, these securities are considered to be
investment grade. For a description of such ratings see the Statement of
Additional Information. The Funds may also purchase Municipal Securities which
are unrated at the time of purchase, if such securities are determined by the
Funds' investment advisers to be of comparable quality. Certain Municipal
Securities (primarily variable rate demand notes) may be entitled to the benefit
of standby letters of credit or similar commitments issued by banks and, in such
instances, the Funds' investment advisers will take into account the obligation
of the bank in assessing the quality of such security. Investments by EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA in unrated securities are limited
to 20% of total assets.
The ability of the Funds to meet their investment objectives is
necessarily subject to the ability of municipal issuers to meet their payment
obligations. In addition, the portfolios of the Funds will be affected by
general changes in interest rates which will result in increases or decreases in
the value of the obligations held by the Funds. Investors should recognize that,
in periods of declining interest rates, the yield of the Funds will tend to be
somewhat higher than prevailing market rates, and in periods of rising interest
rates, the yield of the Funds will tend to be somewhat lower. Also, when
interest rates are falling, the inflow of net new money to the Funds from the
continuous sale of its shares will likely be invested in portfolio instruments
producing lower yields than the balance of each Fund's portfolio, thereby
reducing the current yield of the Funds. In periods of rising interest rates,
the opposite can be expected to occur. In addition, since EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA will invest primarily in California
Municipal Securities, there are certain specific factors and considerations
concerning California which may affect the credit and market risk of the
Municipal Securities that EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA
purchases. These factors are described in the Appendix to this Prospectus.
Municipal Securities . As noted above, the Funds will invest substantially all
of their assets in Municipal Securities. These include municipal bonds,
short-term municipal notes and tax exempt commercial paper. "Municipal
Securities" are debt obligations issued to obtain funds for various public
purposes that are exempt from Federal income tax in the opinion of issuer's
counsel. The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith, credit
10
<PAGE>
and taxing power for the payment of principal and interest. Revenue bonds are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific source such as from the user of the facility being financed. The term
"Municipal Securities" also includes "moral obligation" issues which are
normally issued by special purpose authorities. Industrial development bonds
("IDBs") and private activity bonds ("PABs") are in most cases revenue bonds and
are not payable from the unrestricted revenues of the issuer. The credit quality
of IDBs and PABs is usually directly related to the credit standing of the
corporate user of the facilities being financed. Participation interests are
interests in Municipal Securities, including IDBs and PABs, and floating and
variable rate obligations that are owned by banks. These interests carry a
demand feature permitting the holder to tender them back to the bank, which
demand feature is backed by an irrevocable letter of credit or guarantee of the
bank. A put bond is a municipal bond which gives the holder the unconditional
right to sell the bond back to the issuer at a specified price and exercise
date, which is typically well in advance of the bond's maturity date.
"Short-term municipal notes" and "tax exempt commercial paper" include tax
anticipation notes, bond anticipation notes, revenue anticipation notes and
other forms of short-term loans. Such notes are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements and other revenues.
Municipal Bond Insurance. The EVERGREEN HIGH GRADE TAX FREE FUND will require
municipal bond insurance when purchasing Municipal Securities which would not
otherwise meet the Fund's quality standards. The EVERGREEN HIGH GRADE TAX FREE
FUND may also require insurance when, in the opinion of the Fund's investment
adviser, such insurance would benefit the Fund (for example, through improvement
of portfolio quality or increased liquidity of certain securities). The purpose
of municipal bond insurance is to guarantee the timely payment of principal at
maturity and interest.
Securities in the EVERGREEN HIGH GRADE TAX FREE FUND'S portfolio may be
insured in one of two ways: (1) by a policy applicable to a specific security,
obtained by the issuer of the security or by a third party ( "Issuer-Obtained
Insurance") or (2) under master insurance policies issued by municipal bond
insurers, purchased by the Fund (the "Policies"). If a security's coverage is
Issuer-Obtained, then that security does not need to be covered in the Policies.
The Fund may purchase Policies from Municipal Bond Investors Assurance Corp.,
AMBAC Indemnity Corporation, and Financial Guaranty Insurance Company, or any
other municipal bond insurer which is rated Aaa by Moody's or AAA by S&P. A more
detailed description of these insurers may be found in the Statement of
Additional Information. Annual premiums for these Policies are paid by the Fund
and are estimated to range from 0.10% to 0.25% of the value of the municipal
securities covered under the Policies, with an average annual premium rate of
approximately 0.175%. While the insurance feature reduces financial risk, the
cost thereof and the restrictions on investments imposed by the guidelines in
the Policies reduce the yield to shareholders.
Floating Rate and Variable Rate Obligations. Municipal Securities also include
certain variable rate and floating rate municipal obligations with or without
demand features. These variable rate securities do not have fixed interest
rates; rather, those rates fluctuate based upon changes in specified market
rates, such as the prime rate, or are adjusted at predesignated periodic
intervals. Certain of these obligations may carry a demand feature that gives
the Funds the right to demand prepayment of the principal amount of the security
prior to its maturity date. The demand obligation may or may not be backed by
letters of credit or other guarantees of banks or other financial institutions.
Such guarantees may enhance the quality of the security. The Funds will limit
the value of their investments in any floating or variable rate securities which
are not readily marketable to 10% or less of their net assets.
When-Issued Securities. The Funds may purchase securities on a "when-issued"
basis (i.e., for delivery beyond the normal settlement date at a stated price
and yield). A Fund generally would not pay for such securities or start earning
interest on them until they are received. However, when a Fund purchases
securities on a when-issued basis, it assumes the risks of ownership at the time
of purchase, not at the time of receipt. Failure of the issuer to deliver a
security purchased by a Fund on a when-issued basis may result in the Fund
incurring a loss or missing an opportunity to make an alternative investment.
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND do not expect that commitments to purchase
when-issued securities will normally exceed 25% of their total assets and
EVERGREEN HIGH GRADE TAX FREE FUND does not expect that such commitments will
exceed 20% of its total assets. The Funds do not intend to purchase when-issued
securities for speculative purposes but only in furtherance of their investment
objective.
Stand-by Commitments. The Funds may also acquire "stand-by commitments" with
respect to Municipal Securities held in their portfolio. Under a stand-by
commitment, a dealer agrees to purchase, at a Fund's option, specified Municipal
Securities at a specified price. Failure of the dealer to purchase such
Municipal Securities may result in a
11
<PAGE>
Fund incurring a loss or missing an opportunity to make an alternative
investment. Each Fund expects that stand-by commitments generally will be
available without the payment of direct or indirect consideration. However, if
necessary and advisable, a Fund may pay for stand-by commitments either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to such a commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid in either
manner for outstanding stand-by commitments held in each Fund's portfolio will
not exceed 10% of the value of the Fund's total assets calculated immediately
after each stand-by commitment is acquired. The Funds will maintain cash or
liquid high grade debt obligations in a segregated account with its custodian in
an amount equal to such commitments. The Funds will enter into stand-by
commitments only with banks and broker-dealers that, in the judgment of the
Funds' investment advisers, present minimal credit risks.
Taxable Investments. EVERGREEN HIGH GRADE TAX FREE FUND and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA may temporarily invest up to 20% of
their total assets in taxable securities, and EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND may temporarily invest its assets so that not more than 20% of
its annual interest income will be derived from taxable securities, under any
one or more of the following circumstances: (a) pending investment of proceeds
of sale of Fund shares or of portfolio securities, (b) pending settlement of
purchases of portfolio securities, and (c) to maintain liquidity for the purpose
of meeting anticipated redemptions. In addition, each such Fund may temporarily
invest more than 20% of its total assets in taxable securities for defensive
purposes. Each Fund may invest for defensive purposes during periods when each
Fund's assets available for investment exceed the available Municipal Securities
that meet each Fund's quality and other investment criteria. Taxable securities
in which the Funds may invest on a short-term basis include obligations of the
United States Government, its agencies or instrumentalities, including
repurchase agreements with banks or securities dealers involving such
securities; time deposits maturing in not more than seven days; other debt
securities rated within the two highest ratings assigned by any major rating
service; commercial paper rated in the highest grade by Moody's, S&P or any SRO;
and certificates of deposit issued by United States branches of United States
banks with assets of $1 billion or more.
Repurchase Agreements. The Funds may enter into repurchase agreements with
member banks of the Federal Reserve System, including State Street Bank and
Trust Company, the Funds custodian ("State Street" or the "Custodian"), or
"primary dealers" (as designated by the Federal Reserve Bank of New York) in
United States Government securities. A repurchase agreement is an arrangement
pursuant to which a buyer purchases a security and simultaneously agrees to
resell it to the vendor at a price that results in an agreed-upon market rate of
return which is effective for the period of time (which is normally one to seven
days, but may be longer) the buyer's money is invested in the security. The
arrangement results in a fixed rate of return that is not subject to market
fluctuations during a Fund's holding period. Each Fund requires continued
maintenance of collateral with its Custodian in an amount equal to, or in excess
of, the market value of the securities, including accrued interest, which are
the subject of a repurchase agreement. In the event a vendor defaults on its
repurchase obligation, the Fund might suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
the vendor becomes the subject of bankruptcy proceedings, a Fund might be
delayed in selling the collateral. Each Fund's investment adviser will review
and continually monitor the creditworthiness of each institution with which a
Fund enters into a repurchase agreement to evaluate these risks. EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND may not enter into repurchase agreements if, as a result, more
than 10% of either Fund's net assets would be invested in repurchase agreements
maturing in more than seven days and EVERGREEN HIGH GRADE TAX FREE FUND may not
so invest more than 15% of its net assets.
Illiquid Securities. The Funds may invest up to 15% of their net assets in
illiquid securities and other securities which are not readily marketable,
except that EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND may only invest up to 10% of their net assets
in repurchase agreements with maturities longer than seven days. In the case of
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, which have been determined to be
liquid, will not be considered by each Fund's investment adviser to be illiquid
or not readily marketable and, therefore, are not subject to the aforementioned
15% limit. EVERGREEN HIGH GRADE TAX FREE FUND may invest up to 10% of its net
assets in securities subject to restrictions on resale under the Federal
securities laws. The inability of a Fund to dispose of illiquid or not readily
marketable investments readily or at a reasonable price could impair the Fund's
ability to raise cash for redemptions or other purposes. The liquidity of
securities purchased by a Fund which are eligible for resale pursuant to Rule
144A will be monitored by each Fund's investment adviser on an ongoing basis,
subject to the oversight of the Trustees. In the event that such a security is
deemed to be no longer liquid, a Fund's holdings
12
<PAGE>
will be reviewed to determine what action, if any, is required to ensure that
the retention of such security does not result in a Fund having more than 15% of
its net assets invested in illiquid or not readily marketable securities.
Other Investment Policies. The Funds may borrow funds and agree to sell
portfolio securities to financial institutions such as banks and broker-dealers
and to repurchase them at a mutually agreed upon date and price (a "reverse
repurchase agreement") for temporary or emergency purposes. In the case of
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND borrowings may be in amounts up to 10% of the
value of each Fund's net assets at the time of such borrowing. EVERGREEN HIGH
GRADE TAX FREE FUND may borrow in amounts up to one-third of its net assets. At
the time a Fund enters into a reverse repurchase agreement, it will place in a
segregated custodial account cash, United States Government securities or liquid
high grade debt obligations having a value equal to the repurchase price
(including accrued interest) and will subsequently monitor the account to ensure
that such equivalent value is maintained. Reverse repurchase agreements involve
the risk that the market value of the securities sold by a Fund may decline
below the repurchase price of those securities. EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA will
not enter into reverse repurchase agreements exceeding 5% of the value of its
total assets and will not purchase any securities whenever any borrowings
(including reverse repurchase agreements) are outstanding.
In order to generate income and to offset expenses, the Funds may lend
portfolio securities to brokers, dealers and other financial organizations. Each
Fund's investment adviser will monitor the creditworthiness of such borrowers.
Loans of securities by a Fund, if and when made, may not exceed 30% of the total
assets of EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA, or 15% of the total assets of
EVERGREEN HIGH GRADE TAX FREE FUND, and will be collateralized by cash, letters
of credit or United States Government securities that are maintained at all
times in an amount equal to at least 100% of the current market value of the
loaned securities, including accrued interest. While such securities are on
loan, the borrower will pay a Fund any income accruing thereon, and the Fund may
invest the cash collateral, thereby increasing its return. A Fund will have the
right to call any such loan and obtain the securities loaned at any time on five
days' notice. Any gain or loss in the market price of the loaned securities
which occurs during the term of the loan would affect a Fund and its investors.
A Fund may pay reasonable fees in connection with such loans.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which each Fund has been established ("Trustees"). Evergreen Asset
Management Corp. ("Evergreen Asset") has been retained by EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL
FUND-CALIFORNIA as investment adviser. Evergreen Asset succeeded on June 30,
1994 to the advisory business of a corporation with the same name, but under
different ownership, which was organized in 1971. Evergreen Asset, with its
predecessors, has served as investment adviser to the Evergreen mutual funds
since 1971. Evergreen Asset is a wholly-owned subsidiary of First Union National
Bank of North Carolina ("FUNB"). The address of Evergreen Asset is 2500
Westchester Avenue, Purchase, New York 10577. FUNB is a subsidiary of First
Union Corporation ("First Union"), the sixth largest bank holding company in the
United States. Stephen A. Lieber and Nola Maddox Falcone serve as the chief
investment officers of Evergreen Asset and, along with Theodore J. Israel, Jr.,
were the owners of Evergreen Asset's predecessor and the former general partners
of Lieber & Company, which, as described below, provides certain subadvisory
services to Evergreen Asset in connection with its duties as investment adviser
to the Funds. The Capital Management Group of FUNB ("CMG") serves as investment
adviser to EVERGREEN HIGH GRADE TAX FREE FUND.
First Union is headquartered in Charlotte, North Carolina, and had $139.9
billion in consolidated assets as of June 30, 1996. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States. CMG manages or otherwise oversees the
investment of over $42.1 billion in assets belonging to a wide range of clients,
including all the series of Evergreen Investment Trust (formerly known as First
Union Funds), the two series of The Evergreen Lexicon Fund (formerly The FFB
Lexicon Fund) and the two series of Evergreen Tax-Free Trust (formerly FFB Funds
Trust). First Union Brokerage Services, Inc., a wholly-owned subsidiary of FUNB,
is a registered broker-dealer that is principally engaged in providing retail
brokerage services consistent with its federal banking authorizations. First
Union Capital Markets Corp., a wholly-
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owned subsidiary of First Union, is a registered broker-dealer principally
engaged in providing, consistent with its Federal banking authorizations,
private placement, securities dealing, and underwriting services.
Evergreen Asset manages investments, provides various administrative
services and supervises the daily business affairs of EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL
FUND-CALIFORNIA, subject to the authority of the Trustees. Under its investment
advisory agreement with EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA,
Evergreen Asset is entitled to receive an annual fee equal to .55 of 1% of the
Fund's average daily net assets. Under its investment advisory agreement with
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND, Evergreen Asset is entitled to
receive an annual fee equal to .50 of 1% of the Fund's average daily net assets.
CMG manages investments and supervises the daily business affairs of EVERGREEN
HIGH GRADE TAX FREE FUND and, as compensation therefor, is entitled to receive
an annual fee equal to .50 of 1% of average daily net assets of the Fund. The
total expense ratios of EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND, EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN HIGH GRADE TAX FREE
FUND for the fiscal year ended August 31, 1996, are set forth in the section
entitled "Financial Highlights".
Evergreen Asset serves as administrator to EVERGREEN HIGH GRADE TAX FREE
FUND and is entitled to receive a fee based on the average daily net assets of
the Fund at a rate based on the total assets of the mutual funds administered by
Evergreen Asset for which CMG or Evergreen Asset also serve as investment
adviser, calculated in accordance with the following schedule: .050% of the
first $7 billion; .035% on the next $3 billion; .030% on the next $5 billion;
.020% on the next $10 billion; .015% on the next $5 billion; and .010% on assets
in excess of $30 billion. Furman Selz LLC, an affiliate of Evergreen Funds
Distributor, Inc., distributor for the Evergreen group of mutual funds, serves
as sub-administrator to EVERGREEN HIGH GRADE TAX FREE FUND and is entitled to
receive a fee from the Fund calculated on the average daily net assets of the
Fund at a rate based on the total assets of the mutual funds administered by
Evergreen Asset for which CMG or Evergreen Asset also serve as investment
adviser, calculated in accordance with the following schedule: .0100% of the
first $7 billion; .0075% on the next $3 billion; .0050% on the next $15 billion;
and .0040% on assets in excess of $25 billion. The total assets of the mutual
funds administered by Evergreen Asset for which CMG or Evergreen Asset serve as
investment adviser were approximately $15.2 billion as of June 30, 1996.
PORTFOLIO MANAGERS
The portfolio manager of EVERGREEN HIGH GRADE TAX FREE FUND is James T.
Colby, III. Mr. Colby is a Vice President of CMG and has been associated with
Evergreen Asset and its predecessor since 1992. He has served as portfolio
manager of the Fund since 1995 and was portfolio manager of Evergreen National
Tax Free Fund, whose assets were acquired by the Fund on July 7, 1995, since
that fund's inception in 1992. Prior to joining Evergreen Asset, Mr. Colby
served as Vice President-Investments at American Express Company from 1987 to
1992. The portfolio manager for EVERGREEN SHORT-INTERMEDIATE MUNICIPAL
FUND-CALIFORNIA and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND is Steven C.
Shachat. Mr. Shachat has been associated with Evergreen Asset and its
predecessor since 1988 and has served as portfolio manager of these Funds since
their inception.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provide that Lieber & Company's research department and staff will
furnish Evergreen Asset with information, investment recommendations, advice and
assistance, and will be generally available for consultation on the portfolios
of EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND. Lieber & Company will be reimbursed by
Evergreen Asset in connection with the rendering of services on the basis of the
direct and indirect costs of performing such services. There is no additional
charge to EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND for the services provided by Lieber & Company.
The address of Lieber & Company is 2500 Westchester Avenue, Purchase, New York
10577. Lieber & Company is an indirect, wholly-owned, subsidiary of First Union.
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PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
Eligible investors may purchase Fund shares at net asset value by mail or
wire as described below. The Funds impose no sales charges on Class Y shares.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) persons who at or prior to December 31, 1994 owned shares
in a mutual fund advised by Evergreen Asset, (ii) certain institutional
investors and (iii) investment advisory clients of CMG, Evergreen Asset or their
affiliates. The minimum initial investment is $1,000, which may be waived in
certain situations. There is no minimum for subsequent investments. Investors
may make subsequent investments by establishing a Systematic Investment Plan or
a Telephone Investment Plan.
Purchases by Mail or Wire. Each investor must complete the Share Purchase
Application and mail it, together with a check made payable to the Fund whose
shares are being purchased, to State Street Bank and Trust Company ("State
Street") at P.O. Box 9021, Boston, Massachusetts 02205-9827. Checks not drawn on
U.S. banks will be subject to foreign collection which will delay an investor's
investment date and will be subject to processing fees.
When making subsequent investments, an investor should either enclose the
return remittance portion of the statement, or indicate on the face of the
check, the name of the Fund in which an investment is to be made, the exact
title of the account, the address, and the Fund account number. Purchase
requests should not be sent to a Fund in New York. If they are, the Fund must
forward them to State Street, and the request will not be effective until State
Street receives them.
Initial investments may also be made by wire by (i) calling State Street
at 800-423-2615 for an account number and (ii) instructing your bank, which may
charge a fee, to wire federal funds to State Street, as follows: State Street
Bank and Trust Company, ABA No.0110-0002-8, Attn: Custodian and Shareholder
Services. The wire must include references to the Fund in which an investment is
being made, account registration, and the account number. A completed
Application must also be sent to State Street indicating that the shares have
been purchased by wire, giving the date the wire was sent and referencing the
account number. Subsequent wire investments may be made by existing shareholders
by following the instructions outlined above. It is not necessary, however, for
existing shareholders to call for another account number.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The Exchange is closed on New Year's Day, Presidents Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The
securities in a Fund are valued at their current market value determined on the
basis of market quotations or, if such quotations are not readily available,
such other methods as the Trustees of each Trust under which each Fund operates
believe would accurately reflect fair value.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from an investor's account to reimburse the Fund or the Fund's investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen mutual funds.
The Funds will not accept third party checks other than those payable directly
to a shareholder whose account has been in existence at least thirty days.
A Fund cannot accept investments specifying a certain price or date and
reserves the right to reject any specific purchase order, including orders in
connection with exchanges from the other Evergreen mutual funds. Although not
currently anticipated, each Fund reserves the right to suspend the offer of
shares for a period of time.
Shares of each Fund are sold at the net asset value per share next
determined after a shareholder's order is received. Investments by federal funds
wire or by check will be effective upon receipt by State Street. Qualified
institutions may telephone orders for the purchase of Fund shares. Investors may
also purchase shares through a broker/dealer, which may charge a fee for the
service.
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HOW TO REDEEM SHARES
You may "redeem", i.e. sell, your shares in a Fund to the Fund on any day
the Exchange is open, either directly or through your financial intermediary.
The price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, a Fund will
not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to ten days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street which is the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, State Street, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, financial intermediaries, fiduciaries and surviving joint owners.
Signature guarantees are required for all redemption requests for shares with a
value of more than $10,000 or where the redemption proceeds are to be mailed to
an address other than that shown in the account registration. A signature
guarantee must be provided by a bank or trust company (not a Notary Public), a
member firm of a domestic stock exchange or by other financial institutions
whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling State Street (800-423-2615) between the hours of 8:00 a.m. and 5:30
p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on
which the Exchange or State Street's offices are closed). The Exchange is closed
on New Year's Day, Presidents Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Redemption requests made after
4:00 p.m. (Eastern time) will be processed using the net asset value determined
on the next business day. Such redemption requests must include the
shareholder's account name, as registered with a Fund, and the account number.
During periods of drastic economic or market changes, shareholders may
experience difficulty in effecting telephone redemptions. Shareholders who are
unable to reach a Fund or State Street by telephone should follow the procedures
outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Funds will employ reasonable procedures to verify that
telephone requests are genuine. These procedures include requiring some form of
personal identification prior to acting upon instructions and tape recording of
conversations. If a Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Funds shall not
be liable for following telephone instructions reasonably believed to be
genuine. Also, the Funds reserve the right to refuse a telephone redemption
request, if it is believed advisable to do so. Financial intermediaries may
charge a fee for handling telephonic requests. The telephone redemption option
may be suspended or terminated at any time without notice.
General. The sale of shares is a taxable transaction for Federal tax purposes.
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by Federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $1,000 for thirty days. Shareholders will receive sixty days' written
notice to increase the account value before the account is closed. The Funds
have elected to be governed by Rule 18f-1 under the Investment Company Act of
1940 pursuant to which each Fund is obligated to redeem shares solely in cash,
up to the lesser of $250,000 or 1% of a Fund's total net assets during any
ninety day period for any one shareholder. See the Statement of Additional
Information for further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen mutual funds by telephone or mail as
described below. Once an exchange request has been telephoned
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or mailed, it is irrevocable and may not be modified or canceled. Exchanges will
be made on the basis of the relative net asset values of the shares exchanged
next determined after an exchange request is received. An exchange, which
represents an initial investment in another Evergreen mutual fund, is subject to
the minimum investment and suitability requirements of each Fund.
Each of the Evergreen mutual funds has different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Each Fund imposes a
fee of $5 per exchange on shareholders who exchange in excess of four times per
calendar year. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling State Street (800-423-2615). Exchange requests
made after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach State Street by telephone. If you wish to use the
telephone exchange service you should indicate this on the Share Purchase
Application. As noted above, each Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares communicated
by telephone are genuine. A telephone exchange may be refused by a Fund or State
Street if it is believed advisable to do so. Procedures for exchanging Fund
shares by telephone may be modified or terminated at any time. Written requests
for exchanges should follow the same procedures outlined for written redemption
requests in the section entitled "How to Redeem Shares", however, no signature
guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more information
about these services or your account, contact your financial intermediary,
Evergreen Funds Distributor, Inc. ("EFD"), the distributor of the Funds, or the
toll-free number on the front page of this Prospectus. Some services are
described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25 per month or
$75 per quarter. Each Fund reserves the right to close an account that through
liquidation of the Systematic Investment Plan has not reached a minimum balance
of $1,000 ($250 for retirement accounts) within twenty-four months of the
initial investment. You can open a Systematic Investment Plan in the EVERGREEN
HIGH GRADE TAX FREE FUND for a minimum of only $50 per month with no initial
investment required.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Shares purchased under the Funds Systematic Investment Plan or Telephone
Investment Plan may not be redeemed for ten days from the date of investment.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Funds
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $75. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gain
distributions reinvested automatically.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of a
Fund at the net asset value per share on the last business day of each month,
unless otherwise requested by a shareholder in writing. If the transfer agent
does not receive a written request for subsequent dividends and/or distributions
to be paid in cash at least three full business days prior to a given record
date, the dividends and/or distributions to be paid to a shareholder will be
reinvested.
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EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
Income dividends are declared daily and paid monthly. Distributions of
any net realized gains of a Fund will be made at least annually. Shareholders
will begin to earn dividends on the first business day after shares are
purchased unless shares were not paid for, in which case dividends are not
earned until the next business day after payment is received. Each Fund has
qualified and intends to continue to qualify to be treated as a regulated
investment company under the Internal Revenue Code (the "Code"). While so
qualified, so long as each Fund distributes all of its investment company
taxable income and any net realized gains to shareholders, it is expected that
the Funds will not be required to pay any Federal income taxes. A 4%
nondeductible excise tax will be imposed on a Fund if it does not meet certain
distribution requirements by the end of each calendar year. Each Fund
anticipates meeting such distribution requirements.
The Funds will designate and pay exempt-interest dividends derived from
interest earned on qualifying tax-exempt obligations. Such exempt-interest
dividends may be excluded by shareholders of a Fund from their gross income for
Federal income tax purposes, however (1) all or a portion of such
exempt-interest dividends may be a specific preference item for purposes of the
Federal individual and corporate alternative minimum taxes to the extent that
they are derived from certain types of private activity bonds issued after
August 7, 1986, and (2) all exempt-interest dividends will be a component of the
"adjusted current earnings" for purposes of the Federal corporate alternative
minimum tax.
Dividends paid from taxable income, if any, and distributions of any net
realized short-term capital gains (whether from tax exempt or taxable
obligations) are taxable as ordinary income and long-term capital gain
distributions are taxable as long-term capital gains, even though received in
additional shares of the Fund, and regardless of the investors holding period
relating to the shares with respect to which such gains are distributed. Market
discount recognized on taxable and tax-exempt bonds is taxable as ordinary
income, not as excludable income. Under current law, the highest Federal income
tax rate applicable to net long-term gains realized by individuals is 28%. The
rate applicable to corporations is 35%.
Since each Fund's gross income is ordinarily expected to be tax exempt
interest income, it is not expected that the 70% dividends-received deduction
for corporations will be applicable. Specific questions should be addressed to
the investor's own tax adviser.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions (if any) and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, each investor must certify on the Share Purchase
Application, or on a separate
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form supplied by State Street, that the investor's social security or taxpayer
identification number is correct and that the investor is not currently subject
to backup withholding or is exempt from backup withholding.
For EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA, so long as
the Fund remains qualified under Subchapter M of the Code for Federal purposes
and qualified as a diversified management investment company, then under current
California law, the Fund is entitled to pass through to its shareholders the
tax-exempt income it earns. To the extent that Fund dividends are derived from
earnings on California Municipal Securities, such dividends will be exempt from
California personal income taxes when received by the Fund's shareholders,
provided the Fund has complied with the requirement that at least 50% of its
assets be invested in California Municipal Securities. For California income tax
purposes, long-term capital gains distributions are taxable as ordinary income.
Statements describing the tax status of shareholders' dividends and
distributions will be mailed annually by the Funds. These statements will set
forth the amount of income exempt from Federal and, if applicable, state
taxation (including California), and the amount, if any, subject to Federal and
state taxation. Moreover, to the extent necessary, these statements will
indicate the amount of exempt-interest dividends which are a specific preference
item for purposes of the Federal individual and corporate alternative minimum
taxes. The exemption of interest income for Federal income tax purposes does not
necessarily result in exemption under the income or other tax law of any state
or local taxing authority. Investors should consult their own tax advisers about
the status of distributions from the Funds in their states and localities. Each
Fund notifies shareholders annually as to the interest exempt from Federal taxes
earned by the Fund.
A shareholder who acquires Class A shares of a Fund and sells or
otherwise disposes of such shares within ninety days of acquisition may not be
allowed to include certain sales charges incurred in acquiring such shares for
purposes of calculating gain and loss realized upon a sale or exchange of shares
of the Fund.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND and EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA are separate investment series
of The Evergreen Municipal Trust, a Massachusetts business trust organized in
1988. EVERGREEN HIGH GRADE TAX FREE FUND is a separate investment series of
Evergreen Investment Trust (formerly First Union Funds) a Massachusetts business
trust organized in 1984. The Funds do not intend to hold annual shareholder
meetings; shareholder meetings will be held only when required by applicable
law. Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each Class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable
contingent deferred sales charge. Each Trust named above is empowered to
establish, without shareholder approval, additional investment series, which may
have different investment objectives, and additional Classes of shares for any
existing or future series. If an additional series or Class were established in
a Fund, each share of the series or Class would normally be entitled to one vote
for all purposes. Generally, shares of each series and Class would vote together
as a single Class on matters, such as the election of Trustees, that affect each
series and Class in substantially the same manner. Class A, B and Y shares have
identical voting, dividend, liquidation and other rights, except that each Class
bears, to the extent applicable, its own distribution, shareholder service and
transfer agency expenses as well as any other expenses applicable only to a
specific Class. Each Class of shares votes separately with respect to Rule 12b-1
distribution plans and other matters for which separate Class voting is
appropriate under applicable law. Shares are entitled to dividends as determined
by the Trustees and, in liquidation of a Fund, are entitled to receive the net
assets of the Fund.
Custodian, Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street
Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as
each Fund's custodian, registrar, transfer agent and dividend-disbursing agent.
State Street is compensated for its services as transfer agent by a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares.
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Principal Underwriter. EFD, an affiliate of Furman Selz LLC, located 230 Park
Avenue, New York, New York 10017, is the principal underwriter of the Funds.
Furman Selz LLC also acts as sub-administrator to EVERGREEN HIGH GRADE TAX FREE
FUND and provides certain sub-administrative services to Evergreen Asset in
connection with its role as investment adviser to EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA,
including providing personnel to serve as officers of the Funds.
Other Classes of Shares. Each Fund currently offers three classes of shares,
Class A, Class B and Class Y, and may in the future offer additional classes.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) persons who at or prior to December 31, 1994, owned shares
in a mutual fund advised by Evergreen Asset, (ii) certain institutional
investors and (iii) investment advisory clients of CMG, Evergreen Asset or their
affiliates. The dividends payable with respect to Class A and Class B shares
will be less than those payable with respect to Class Y shares due to the
distribution and distribution related expenses borne by Class A and Class B
shares and the fact that such expenses are not borne by Class Y shares.
Performance Information. A Fund's performance may be quoted in advertising in
terms of yield or total return. Both types of performance are based on
Securities and Exchange Commission ("SEC") formulas and are not intended to
indicate future performance.
Yield is a way of showing the rate of income a Fund earns on its
investments as a percentage of the Fund's share price. A Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, a Fund's yield may not equal its
distribution rate, the income paid to your account or the income reported in a
Fund's financial statements. To calculate yield, a Fund takes the interest
income it earned from its portfolio of investments (as defined by the SEC
formula) for a 30-day period (net of expenses), divides it by the average number
of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on a Fund's share price at the end of the
30-day period. This yield does not reflect gains or losses from selling
securities.
A Fund may also quote tax-equivalent yields, which show the taxable
yields an investor would have to earn before taxes to equal the Fund's tax-free
yields. A tax-equivalent yield is calculated by dividing a Fund's tax-exempt
yield by the result of one minus a stated Federal tax rate. If only a portion of
a Fund's income was tax-exempt, only that portion is adjusted in the
calculation.
Total returns are based on the overall dollar or percentage change in the
value of a hypothetical investment in a Fund. A Fund's total return shows its
overall change in value including changes in share prices and assumes all a
Fund's distributions are reinvested. A cumulative total return reflects a Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if a Fund's performance had been constant over
the entire period. Because average annual total returns tend to smooth out
variations in a Fund's return, you should recognize that they are not the same
as actual year-by-year results. To illustrate the components of overall
performance, a Fund may separate its cumulative and average annual total returns
into income results and realized and unrealized gain or loss.
Comparative performance information may also be used from time to time in
advertising or marketing a Fund's shares, including data from Lipper Analytical
Services, Inc., Morningstar and other industry publications. The Fund may also
advertise in items of sales literature an "actual distribution rate" which is
computed by dividing the total ordinary income distributed (which may include
the excess of short-term capital gains over losses) to shareholders for the
latest twelve month period by the maximum public offering price per share on the
last day of the period. Investors should be aware that past performance may not
be reflective of future results.
In marketing a Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering investment
alternatives. The information provided to investors may also include discussions
of other Evergreen mutual funds, products, and services, which may include:
retirement investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; and charitable
giving. In addition, the information provided to investors may quote financial
or business publications and periodicals, including model portfolios or
allocations, as they relate to fund management, investment philosophy, and
investment techniques.
20
<PAGE>
The Principal Underwriter may also reprint, and use as advertising and sales
literature, articles from EVERGREEN EVENTS, a quarterly magazine provided to
Evergreen mutual fund shareholders.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which
each Fund operates provide that no Trustee or shareholder will be personally
liable for the obligations of the Trust and that every written contract made by
the Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the SEC under the Act. Copies of the Registration Statements may be
obtained at a reasonable charge from the SEC or may be examined, without charge,
at the offices of the SEC in Washington, D.C.
21
<PAGE>
INVESTMENT ADVISER
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND, EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND-CALIFORNIA
Capital Mangement Group of First Union National Bank of North Carolina, 201
South College Street, Charlotte, North Carolina 28288
EVERGREEN HIGH GRADE TAX FREE FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036
INDEPENDENT AUDITORS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND,
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN HIGH GRADE TAX FREE FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 230 Park Avenue, New York, New York 10017
45813 536127rev02
*******************************************************************************
<PAGE>
PROSPECTUS October 31, 1996
EVERGREEN(SM) MONEY MARKET FUNDS (Evergreen tree logo)
EVERGREEN MONEY MARKET FUND
EVERGREEN TAX EXEMPT MONEY MARKET FUND
EVERGREEN TREASURY MONEY MARKET FUND
CLASS A SHARES
CLASS B SHARES
The EVERGREEN MONEY MARKET FUNDS (the "Funds") are designed to
provide investors with current income, stability of principal and
liquidity. This Prospectus provides information regarding the Class A
offered by the Funds and the Class B shares offered by the EVERGREEN MONEY
MARKET FUND. Each Fund is, or is a series of, an open-end, diversified,
management investment company. This Prospectus sets forth concise
information about the Funds that a prospective investor should know before
investing. The address of the Funds is 2500 Westchester Avenue, Purchase,
New York 10577.
A "Statement of Additional Information" for the Funds dated
October 31, 1996 has been filed with the Securities and Exchange Commission
and is incorporated by reference herein. The Statement of Additional
Information provides information regarding certain matters discussed in
this Prospectus and other matters which may be of interest to investors,
and may be obtained without charge by calling the Funds at (800) 807-2940.
There can be no assurance that the investment objective of any Fund will be
achieved. Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, ARE NOT INSURED OR
OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE INVESTMENT RISKS.
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 11
Investment Practices and Restrictions 14
MANAGEMENT OF THE FUNDS
Investment Advisers 15
Sub-Adviser 16
Distribution Plans and Agreements 17
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 18
How to Redeem Shares 20
Exchange Privilege 21
Shareholder Services 22
Effect of Banking Laws 22
OTHER INFORMATION
Dividends, Distributions and Taxes 23
General Information 24
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The investment adviser to EVERGREEN MONEY MARKET FUND and EVERGREEN TAX
EXEMPT MONEY MARKET FUND is Evergreen Asset Management Corp. which, with its
predecessors, has served as an investment adviser to the Evergreen Funds since
1971. Evergreen Asset Management Corp. is a wholly-owned subsidiary of First
Union National Bank of North Carolina, which in turn is a subsidiary of First
Union Corporation, the sixth largest bank holding company in the United States.
The Capital Management Group of First Union National Bank of North Carolina
serves as investment adviser to EVERGREEN TREASURY MONEY MARKET FUND.
EVERGREEN MONEY MARKET FUND seeks as high a level of current income as is
consistent with preserving capital and providing liquidity. The Fund will invest
only in high quality money market instruments.
EVERGREEN TAX EXEMPT MONEY MARKET FUND seeks as high a level of current
income exempt from Federal income tax as is consistent with preserving capital
and providing liquidity. The Fund invests substantially all of its assets in
short-term municipal securities, the interest from which is exempt from Federal
income tax.
EVERGREEN TREASURY MONEY MARKET FUND seeks to maintain stability of
principal and current income consistent with stability of principal.
Each Fund seeks to maintain a stable net asset value of $1.00 per share
although no assurances can be given that such a stable net asset value will be
maintained.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in Class A shares of each Fund, and in the case of
EVERGREEN MONEY MARKET FUND, Class B Shares. For further information see
"Purchase and Redemption of Shares" and "General Information -- Other Classes of
Shares".
<TABLE>
<CAPTION>
Class B Shares
SHAREHOLDER TRANSACTION EXPENSES Class A Shares (Evergreen Money Market Fund only)
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases None None
Sales Charge on Dividend Reinvestments None None
Contingent Deferred Sales Charge (as a % of None 5% during the first year, 4% during the
original purchase price or redemption second year, 3% during the third and fourth
proceeds, whichever is lower) years, 2% during the fifth year, 1% during
the sixth year and 0% after the sixth year
Redemption Fee None None
Exchange Fee None None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to each Class of
Shares, together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment in each Class for the periods specified assuming
(i) a 5% annual return, and (ii) redemption at the end of each period and,
additionally for Class B shares, no redemption at the end of each period.
In the following examples (i) the expenses for Class B Shares assume
deduction at the time of redemption (if applicable) of the maximum contingent
deferred sales charge applicable for that time period and (ii) the expenses for
Class B Shares reflect the conversion to Class A Shares eight years after
purchase (years eight through ten, therefore, reflect Class A expenses).
EVERGREEN MONEY MARKET FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES* at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees .48% .48%
After 1 Year $ 9 $ 66 $ 16
12b-1 Fees ** .30% 1.00%
After 3 Years $ 28 $ 80 $ 50
Other Expenses .11% .11%
After 5 Years $ 49 $ 107 $ 87
After 10 Years $ 110 $ 161 $161
Total .89% 1.59%
</TABLE>
EVERGREEN TAX EXEMPT MONEY MARKET FUND
<TABLE>
<CAPTION>
EXAMPLES
ANNUAL OPERATING Assuming Redemption
EXPENSES* at End of Period
Class A Class A
<S> <C> <C> <C>
Management Fees .49%
After 1 Year $ 9
12b-1 Fees ** .30%
After 3 Years $ 29
Other Expenses .11%
After 5 Years $ 50
After 10 Years $111
Total .90%
</TABLE>
EVERGREEN TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
EXAMPLES
ANNUAL OPERATING Assuming Redemption
EXPENSES* at End of Period
Class A Class A
<S> <C> <C> <C>
Management Fees .35%
After 1 Year $ 8
12b-1 Fees** .30%
After 3 Years $ 25
Other Expenses .12%
After 5 Years $ 43
After 10 Years $ 95
Total .77%
</TABLE>
3
<PAGE>
Evergreen Asset has agreed to reimburse Evergreen Money Market Fund and
Evergreen Tax Exempt Money Market Fund to the extent that the Fund's aggregate
annual operating expenses (including the investment adviser's fee, but excluding
taxes, interest, brokerage commissions, Rule 12b-1 distribution fees and
shareholder services fees and extraordinary expenses) exceed 1% of the average
net assets for any fiscal year.
*The annual operating expenses and examples do not reflect the voluntary fee
waivers of .14 of 1% of average net assets for Evergreen Money Market Fund and
.11 of 1% of average net assets for Evergreen Tax Exempt Money Market Fund and
.08 of 1% of average net assets for Evergreen Treasury Money Market Fund for the
fiscal year ended August 31, 1996.
**Class A Shares can pay up to .75 of 1% of average net assets as a 12b-1 Fee.
For the foreseeable future, the Class A Share's 12b-1 Fees will be limited to
.30 of 1% of average net assets. For Class B Shares of Evergreen Money Market
Fund, a portion of the 12b-1 Fees equivalent to .25 of 1% of average net assets
will be shareholder servicing related. Distribution related 12b-1 fees will be
limited to .75 of 1% of average net assets as permitted under the rules of the
National Association of Securities Dealers, Inc.
From time to time, each Fund's investment adviser may, at its discretion, waive
its fee or reimburse a Fund for certain of its expenses in order to reduce a
Fund's expense ratio. The investment adviser may cease these voluntary waivers
or reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for the most recent fiscal period. THE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL
EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more
complete description of the various costs and expenses borne by the Funds see
"Management of the Funds". As a result of asset-based sales charges, long-term
shareholders may pay more than the economic equivalent of the maximum front-end
sales charges permitted under the rules of the National Association of
Securities Dealers, Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the fund if shorter for EVERGREEN TREASURY MONEY MARKET FUND has been audited by
KPMG Peat Marwick LLP, the Fund's independent auditors; for EVERGREEN MONEY
MARKET FUND and EVERGREEN TAX EXEMPT MONEY MARKET FUND has been audited by Price
Waterhouse LLP, each Fund's independent auditors. A report of KPMG Peat Marwick
LLP or Price Waterhouse LLP, as the case may be, on the audited information with
respect to each Fund is incorporated by reference in the Fund's Statement of
Additional Information. The following information for each Fund should be read
in conjunction with the financial statements and related notes which are
incorporated by reference in the Fund's Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN MONEY MARKET FUND -- Y SHARES
<TABLE>
<CAPTION>
TEN MONTHS
YEAR ENDED ENDED
AUGUST 31, AUGUST 31, YEAR ENDED OCTOBER 31,
1996 1995 1994 # 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.................. $1.00 $1.00 $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income................................. .05 .05 .03 .03 .04 .07 .08 .09
Less distributions to shareholders from net investment
income.............................................. (.05) (.05) (.03) (.03) (.04) (.07) (.08) (.09)
Net asset value, end of period........................ $1.00 $1.00 $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+......................................... 5.3% 5.4% 2.9% 3.2% 4.2% 6.7% 8.4% 9.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)............... $671 $ 283 $273 $299 $358 $438 $458 $408
Ratios to average net assets:
Expenses **......................................... .45% .53% .32%++ .39% .36% .30% .35% .38%
Net investment income **............................ 5.16% 5.26% 3.46%++ 3.19% 4.18% 6.53% 8.08% 9.42%
<CAPTION>
NOVEMBER 2,
1987*
THROUGH
OCTOBER 31,
1988
<S> <C>
PER SHARE DATA
Net asset value, beginning of period.................. $1.00
Income from investment operations:
Net investment income................................. .07
Less distributions to shareholders from net investment
income.............................................. (.07)
Net asset value, end of period........................ $1.00
TOTAL RETURN+......................................... 7.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)............... $161
Ratios to average net assets:
Expenses **......................................... .43%++
Net investment income **............................ 7.26%++
</TABLE>
# On September 21, 1994, the Fund changed its fiscal year end from October 31
to August 31.
* Commencement of operations.
+ Total return is calculated for the periods indicated and is not annualized.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
TEN MONTHS
YEAR ENDED ENDED
AUGUST 31, AUGUST 31, YEAR ENDED OCTOBER 31,
1996 1995 1994 # 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses.............................................. .59% .73% .71% .71% .72% .70% .69% .75%
Net investment income................................. 5.02% 5.06% 3.07% 2.87% 3.82% 6.13% 7.74% 9.05%
<CAPTION>
NOVEMBER 2,
1987*
THROUGH
OCTOBER 31,
1988
<S> <C>
Expenses.............................................. .93%
Net investment income................................. 6.76%
</TABLE>
5
<PAGE>
EVERGREEN MONEY MARKET FUND -- CLASS A AND B SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
JANUARY 4, JANUARY 26,
YEAR ENDED 1995* YEAR ENDED 1995*
AUGUST 31, THROUGH AUGUST 31, THROUGH
1996 AUGUST 31, 1995 1996 AUGUST 31, 1995
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period......................... $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income...................................... .05 .03 .04 .03
Less distributions to shareholders from net investment
income..................................................... (.05 ) (.03) (.04) (.03)
Net asset value, end of period............................... $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+................................................ 5.0% 3.5% 4.3% 2.8%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).................... $1,755,267 $685,155 $10,218 $7,927
Ratios to average net assets:
Expenses **................................................ .75% .81%++ 1.45% 1.51%++
Net investment income **................................... 4.86% 5.26%++ 4.18% 4.54%++
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value. Contingent deferred sales
charge is not reflected. Total return is calculated for the periods indicated
and is not annualized.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
JANUARY 4, JANUARY 26,
YEAR ENDED 1995* YEAR ENDED 1995*
AUGUST 31, THROUGH AUGUST 31, THROUGH
1996 AUGUST 31, 1995 1996 AUGUST 31, 1995
<S> <C> <C> <C> <C>
Expenses..................................................... .89% 1.02% 1.59% 2.39%
Net investment income........................................ 4.72% 5.05% 4.04% 3.66%
</TABLE>
6
<PAGE>
EVERGREEN TAX EXEMPT MONEY MARKET FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period.............................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income............... .03 .04 .02 .03 .04 .05 .06
Less distributions to shareholders
from net investment income.......... (.03) (.04) (.02) (.03) (.04) (.05) (.06)
Net asset value, end of period........ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+......................... 3.5% 3.6% 2.5% 2.6% 3.7% 5.5% 6.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)........................... $617 $421 $402 $401 $417 $510 $311
Ratios to average net assets:
Expenses **......................... .49% .50% .34% .34% .32% .28% .31%
Net investment income **............ 3.44% 3.53% 2.47% 2.58% 3.72% 5.23% 5.94%
<CAPTION>
NOVEMBER 2,
1988* THROUGH
AUGUST 31, 1989
<S> <C>
PER SHARE DATA:
Net asset value, beginning of
period.............................. $1.00
Income from investment operations:
Net investment income............... .05
Less distributions to shareholders
from net investment income.......... (.05)
Net asset value, end of period........ $1.00
TOTAL RETURN+......................... 5.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)........................... $109
Ratios to average net assets:
Expenses **......................... .24%
Net investment income **............ 6.77%++
</TABLE>
* Commencement of operations.
+ Total return is calculated for the periods indicated and is not annualized.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
NOVEMBER 2,
YEAR ENDED AUGUST 31, 1988* THROUGH
1996 1995 1994 1993 1992 1991 1990 AUGUST 31, 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses.................................... .60% .63% .64% .63% .63% .66% .71% .79%
Net investment income....................... 3.33% 3.40% 2.17% 2.29% 3.41% 4.85% 5.54% 6.22%
</TABLE>
7
<PAGE>
EVERGREEN TAX EXEMPT MONEY MARKET FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
JANUARY 5, 1995*
YEAR ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period..................................................... $ 1.00 $ 1.00
Income from investment operations:
Net investment income.................................................................. .03 .02
Distributions to shareholders from net investment income................................. (.03) (.02)
Net asset value, end of period........................................................... $ 1.00 1.00
TOTAL RETURN+............................................................................ 3.2% 2.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................................................ $660,516 $554,924
Ratios to average net assets:
Expenses **............................................................................ .79% .78%++
Net investment income **............................................................... 3.14% 3.28%++
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
JANUARY 5, 1995*
YEAR ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
<S> <C> <C>
Expenses.............................................................................. .90% .90%
Net investment income................................................................. 3.03% 3.16%
</TABLE>
8
<PAGE>
EVERGREEN TREASURY MONEY MARKET FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
EIGHT MARCH 6,
MONTHS 1991*
YEAR ENDED ENDED YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31,
1996 1995# 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income................................. .05 .03 .04 .03 .03 .04
Less distributions to shareholders from net
investment income.................................... (.05) (.03) (.04) (.03) (.03) (.04)
Net asset value, end of period........................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+......................................... 5.0% 3.6% 3.8% 2.7% 3.4% 4.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (In millions)............... $2,608 $1,178 $755 $261 $209 $100
Ratios to average net assets:
Expenses **......................................... .69% .63%++ .50% .48% .48% .47%++
Net investment income **............................ 4.76% 5.30%++ 3.91% 2.70% 3.22% 4.95%++
</TABLE>
# The Fund changed its fiscal year end from December 31 to August 31.
* Commencement of operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
EIGHT MARCH 6,
MONTHS 1991*
YEAR ENDED ENDED YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31 DECEMBER 31,
1996 1995# 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Expenses...................................................... .77% .79% .78% .82% .82% 1.08%
Net investment income......................................... 4.68% 5.14% 3.63% 2.36% 2.88% 4.34%
</TABLE>
9
<PAGE>
EVERGREEN TREASURY MONEY MARKET FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
EIGHT MARCH 6,
MONTHS 1991*
YEAR ENDED ENDED YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31,
1996 1995# 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period............................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income............................................ .05 .04 .04 .03 .04 .05
Less distributions to shareholders from net
investment income............................................... (.05) (.04) (.04) (.03) (.04) (.05)
Net asset value, end of period................................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+.................................................... 5.3% 3.8% 4.1% 3.0% 3.7% 4.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (In millions).......................... $760 $277 $163 $366 $286 $265
Ratios to average net assets:
Expenses **.................................................... .39% .33%++ .20% .18% .17% .20%++
Net investment income **....................................... 5.12% 5.60%++ 3.78% 3.00% 3.61% 5.53%++
</TABLE>
# The Fund changed its fiscal year end from December 31 to August 31.
* Commencement of operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
EIGHT MARCH 6,
MONTHS 1991*
YEAR ENDED ENDED YEAR ENDED THROUGH
AUGUST 31, AUGUST 31, DECEMBER 31, DECEMBER 31,
1996 1995 # 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Expenses.................................................... .47% .49% .48% .52% .52% .52%
Net investment income....................................... 5.04% 5.44% 3.50% 2.66% 3.26% 5.21%
</TABLE>
10
<PAGE>
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVES AND POLICIES
In addition to the investment policies detailed below, each Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions".
EVERGREEN MONEY MARKET FUND
The investment objective of EVERGREEN MONEY MARKET FUND is to achieve as
high a level of current income as is consistent with preserving capital and
providing liquidity. This objective is a fundamental policy and may not be
changed without shareholder approval. The Fund invests in high quality money
market instruments, which are determined to be of eligible quality under
Securities and Exchange Commission ("SEC") rules and to present minimal credit
risk. Under SEC rules, eligible securities include First Tier Securities (i.e.,
securities rated in the highest short-term rating category) and Second Tier
Securities (i.e., securities which are otherwise eligible but not in the First
Tier). The rules prohibit the Fund from holding more than 5% of its value in
Second Tier Securities. The Fund's permitted investments include:
1. Marketable obligations of, or guaranteed by, the United States
Government, its agencies or instrumentalities, including issues of the United
States Treasury, such as bills, certificates of indebtedness, notes and bonds,
and issues of agencies and instrumentalities established under the authority of
an act of Congress. Some of these securities are supported by the full faith and
credit of the United States Government, others are supported by the right of the
issuer to borrow from the Treasury, and still others are supported only by the
credit of the agency or instrumentality. Agencies or instrumentalities whose
securities are supported by the full faith and credit of the United States
include, but are not limited to, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration and Government National Mortgage Association. Examples of
agencies or instrumentalities whose securities are supported by the right of the
issuer to borrow from the Treasury include, but are not limited to, the Federal
Home Loan Bank, Federal Intermediate Credit Banks, Federal National Mortgage
Association and Tennessee Valley Authority. Agencies or instrumentalities whose
securities are supported only by the credit of the agency or instrumentality
include the Interamerican Development Bank and the International Bank for
Reconstruction and Development. These obligations are supported by appropriated
but unpaid commitments of its member countries. There are no assurances that the
commitments will be undertaken in the future.
2. Commercial paper, including variable amount master demand notes, that
is rated in one of the two highest short-term rating categories by any two of
Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc.
("Moody's") or any other nationally recognized statistical rating organization
("SRO") (or by a single rating agency if only one of these agencies has assigned
a rating). The Fund will not invest more than 10% of its total assets, at the
time of the investment in question, in variable amount master demand notes. For
a description of these ratings see the Statement of Additional Information.
3. Corporate debt securities and bank obligations that are rated in one
of the two highest short-term rating categories by any two of S&P, Moody's and
any other SRO (or by a single rating agency if only one of these agencies has
assigned a rating).
4. Unrated corporate debt securities, commercial paper and bank
obligations that are issued by an issuer that has outstanding a class of
short-term debt instruments (i.e., instruments having a maturity of 366 days or
less) that (A) is comparable in priority and security to the unrated securities
and (B) meets the rating requirements of paragraphs 2 or 3 above.
5. Unrated corporate debt securities, commercial paper and bank
obligations issued by domestic and foreign companies which have an outstanding
long-term debt issue rated in the top two rating categories by a SRO and
determined by the investment adviser to be of comparable quality.
6. Unrated corporate debt securities, commercial paper and bank
obligations otherwise determined by the investment adviser to be of comparable
quality.
7. Repurchase agreements with respect to the securities described in
paragraphs 1 through 6 above.
11
<PAGE>
The Fund may invest up to 30% of its total assets in bank certificates of
deposit and bankers' acceptances payable in U.S. dollars and issued by foreign
banks (including U.S. branches of foreign banks) or by foreign branches of U.S.
banks. These investments involve risks that are different from investments in
domestic securities. These risks may include future unfavorable political and
economic developments, possible withholding taxes, seizure of foreign deposits,
currency controls, interest limitations or other governmental restrictions which
might affect the payment of principal or interest on the securities in the
Fund's portfolio. Additionally, there may be less publicly available information
about foreign issuers.
The Fund may invest in commercial paper and other short-term corporate
obligations which meet the rating criteria specified in paragraphs 3 and 4 above
which are issued in private placements pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the "Act"). Such securities are not
registered for purchase and sale by the public under the Act. The Fund has been
informed that the staff of the SEC does not consider such securities to be
readily marketable. The Fund will not invest more than 10% of its net assets in
securities which are not readily marketable (including private placement
securities) and in repurchase agreements maturing in more than seven days.
EVERGREEN TAX EXEMPT MONEY MARKET FUND
The investment objective of EVERGREEN TAX EXEMPT MONEY MARKET FUND is to
achieve as high a level of current income exempt from Federal income tax, as is
consistent with preserving capital and providing liquidity. This objective is a
fundamental policy and may not be changed without shareholder approval. The Fund
will seek to achieve its objective by investing substantially all of its assets
in a diversified portfolio of short-term (i.e., with remaining maturities not
exceeding 397 days) debt obligations issued by states, territories and
possessions of the United States and by the District of Columbia, and their
political subdivisions and duly constituted authorities, the interest from which
is exempt from Federal income tax. Such securities are generally known as
Municipal Securities. (See "Municipal Securities" below.)
The Fund will invest in Municipal Securities only if they are determined
to be of eligible quality under SEC rules and to present minimum credit risk.
Municipal Securities in which the Fund may invest include: (i) municipal
securities that are rated in one of the top two short-term rating categories by
any two of S&P, Moody's or any other nationally recognized SRO (or by a single
rating agency if only one of these agencies has assigned a rating); (ii)
municipal securities that are issued by an issuer that has outstanding a class
of short-term debt instruments (i.e., having a maturity of 366 days or less)
that (A) is comparable in priority and security to such instruments and (B)
meets the rating requirements above; and (iii) bonds with a remaining maturity
of 397 days or less that are rated no lower than one of the top two long-term
rating categories by any SRO and determined by the investment adviser to be of
comparable quality. For a description of such ratings see the Statement of
Additional Information. The Fund may also purchase Municipal Securities which
are unrated at the time of purchase up to a maximum of 20% of its total assets,
if such securities are determined by the Fund's investment adviser to be of
comparable quality. Certain Municipal Securities (primarily variable rate demand
notes) may be entitled to the benefit of standby letters of credit or similar
commitments issued by banks or other financial institutions and, in such
instances, the investment adviser will take into account the obligation of the
bank in assessing the quality of such security. Such commitments issued by banks
are not insured by the Federal Deposit Insurance Corporation or any other
agency. The ability of the Fund to meet its investment objective is necessarily
subject to the ability of municipal issuers to meet their payment obligations.
Interest income on certain types of bonds issued after August 7, 1986 to
finance nongovernmental activities is an item of "tax-preference" subject to the
Federal alternative minimum tax for individuals and corporations. To the extent
the Fund invests in these "private activity" bonds (some of which were formerly
referred to as "industrial development" bonds), individual and corporate
shareholders, depending on their status, may be subject to the alternative
minimum tax on the part of the Fund's distributions derived from the bonds. As a
matter of fundamental policy, which may not be changed without shareholder
approval, the Fund will invest at least 80% of its net assets in Municipal
Securities, the interest from which is not subject to the Federal alternative
minimum tax.
Municipal Securities. As noted above, the Fund will invest substantially all of
its assets in Municipal Securities. These include municipal bonds, short-term
municipal notes and tax exempt commercial paper. "Municipal bonds" are debt
obligations issued to obtain funds for various public purposes that are exempt
from Federal income tax in the opinion of issuer's counsel. The two principal
classifications of municipal bonds are "general obligation" and "revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue bonds
are payable only from the revenues derived from a
12
<PAGE>
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific source such as from the user of the
facility being financed. The term "municipal bonds" also includes "moral
obligation" issues which are normally issued by special purpose authorities.
Industrial development bonds ("IDBs") and private activity bonds ("PABs") are in
most cases revenue bonds and are not payable from the unrestricted revenues of
the issuer. The credit quality of IDBs and PABs is usually directly related to
the credit standing of the corporate user of the facilities being financed.
Participation interests are interests in municipal bonds, including IDBs and
PABs, and floating and variable rate obligations that are owned by banks. These
interests carry a demand feature permitting the holder to tender them back to
the bank, which demand feature is backed by an irrevocable letter of credit or
guarantee of the bank. A put bond is a municipal bond which gives the holder the
unconditional right to sell the bond back to the issuer at a specified price and
exercise date, which is typically well in advance of the bond's maturity date.
"Short-term municipal notes" and "tax exempt commercial paper" include tax
anticipation notes, bond anticipation notes, revenue anticipation notes and
other forms of short-term loans. Such notes are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements and other revenues.
Floating Rate and Variable Rate Obligations. Municipal Securities also include
certain variable rate and floating rate municipal obligations with or without
demand features. These variable rate securities do not have fixed interest
rates; rather, those rates fluctuate based upon changes in specified market
rates, such as the prime rate, or are adjusted at predesignated periodic
intervals. Such securities must comply with conditions established by the SEC
under which they may be considered to have remaining maturities of 397 days or
less. Certain of these obligations may carry a demand feature that gives the
Fund the right to demand prepayment of the principal amount of the security
prior to its maturity date. The demand obligation may or may not be backed by
letters of credit or other guarantees of banks or other financial institutions.
Such guarantees may enhance the quality of the security. As a matter of
fundamental policy, which may not be changed without shareholder approval, the
Fund will limit the value of its investments in any floating or variable rate
securities which are not readily marketable and in all other not readily
marketable securities to 10% or less of its net assets.
Stand-by Commitments. The Fund may also acquire "stand-by commitments" with
respect to Municipal Securities held in its portfolio. Under a stand-by
commitment, a dealer agrees to purchase, at the Fund's option, specified
Municipal Securities at a specified price. The Fund expects that stand-by
commitments generally will be available without the payment of direct or
indirect consideration. However, if necessary and advisable, the Fund may pay
for stand-by commitments either separately in cash or by paying a higher price
for portfolio securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities). The
total amount paid in either manner for outstanding stand-by commitments held in
the Fund's portfolio will not exceed 10% of the value of the Fund's total assets
calculated immediately after each stand-by commitment is acquired. The Fund will
enter into stand-by commitments only with banks and broker-dealers that, in the
judgment of the Fund's investment adviser, present minimal credit risks.
Taxable Investments. The Fund may temporarily invest up to 20% of the Fund's net
assets in taxable securities under any one or more of the following
circumstances: (a) pending investment of proceeds of sale of Fund shares or of
portfolio securities, (b) pending settlement of purchases of portfolio
securities, and (c) to maintain liquidity for the purpose of meeting anticipated
redemptions. In addition, the Fund may temporarily invest more than 20% of its
total assets in taxable securities for defensive purposes. The Fund may invest
for defensive purposes during periods when the Fund's assets available for
investment exceed the available Municipal Securities that meet the Fund's
quality and other investment criteria. Taxable securities in which the Fund may
invest on a short-term basis include obligations of the United States
Government, its agencies or instrumentalities, including repurchase agreements
with banks or securities dealers involving such securities; time deposits
maturing in not more than seven days; other debt securities rated within the two
highest ratings assigned by an SRO; commercial paper rated in the highest grade
by Moody's or S&P; and certificates of deposit issued by United States branches
of United States banks with assets of $1 billion or more.
EVERGREEN TREASURY MONEY MARKET FUND
The investment objective of EVERGREEN TREASURY MONEY MARKET FUND, which
is a matter of fundamental policy that may not be changed without shareholder
approval, is to maintain stability of principal while earning current income.The
Fund will only attempt to seek income to the extent consistent with stability of
principal and, therefore, investments will be made in short-term United States
Treasury obligations with an average dollar-weighted maturity of 90 days or less
and obligations the principal and interest of which are backed by the full faith
and credit of the United States Government, provided that the Fund shall, under
normal market conditions, invest
13
<PAGE>
at least 65% of its total assets in obligations issued directly by the U.S.
Treasury. The Fund also may enter into repurchase agreements collateralized by
the types of securities in which it may invest and lend its portfolio securities
to qualified institutional investors. As a matter of investment strategy, the
Fund's investment adviser intends to maintain a dollar-weighted average maturity
for the Fund of 60 days or less.
EVERGREEN TREASURY MONEY MARKET FUND is suitable for conservative
investors seeking high current yields plus relative safety. The Fund provides a
reasonable means of maximizing opportunities and minimizing risks resulting from
changing interest rates.
The short-term United States Treasury obligations in which the Fund
invests are issued by the U.S. Government and are fully guaranteed as to
principal and interest by the United States. Such securities will have a
maturity date that is 397 days or less from the date of acquisition unless they
are purchased under an agreement that provides for repurchase of the securities
from the Fund within 397 days from the date of acquisition. The Fund may also
retain Fund assets in cash.
INVESTMENT PRACTICES AND RESTRICTIONS
General. The Funds invest only in securities that have remaining maturities of
397 days (thirteen months) or less at the date of purchase. For this purpose,
floating rate or variable rate obligations (described under EVERGREEN TAX EXEMPT
MONEY MARKET FUND, above), which are payable on demand, but which may otherwise
have a stated maturity in excess of this period, will be deemed to have
remaining maturities of less than 397 days pursuant to conditions established by
the SEC. The Funds maintain a dollar-weighted average portfolio maturity of
ninety days or less. The Funds follow these policies to maintain a stable net
asset value of $1.00 per share, although there is no assurance they can do so on
a continuing basis. The market value of the obligations in a Fund's portfolio
can be expected to vary inversely to changes in prevailing interest rates. If a
portfolio security is no longer of eligible quality, a Fund shall dispose of
such security in an orderly fashion as soon as reasonably practicable, unless
the Trustees determine, in light of market conditions or other factors, that
disposal of the instrument would not be in the best interests of the Fund and
its shareholders.
The ability of each Fund to meet its investment objective is necessarily
subject to the ability of the issuers of securities in which the Funds invest to
meet their payment obligations. In addition, the portfolio of each Fund will be
affected by general changes in interest rates which will result in increases or
decreases in the value of the obligations held by the Fund. Investors should
recognize that, in periods of declining interest rates, the yield of a Fund will
tend to be somewhat higher than prevailing market rates, and in periods of
rising interest rates, the yield of a Fund will tend to be somewhat lower. Also,
when interest rates are falling, the inflow of net new money to a Fund from the
continuous sale of its shares will likely be invested in portfolio instruments
producing lower yields than the balance of the Fund's portfolio, thereby
reducing the current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
Repurchase Agreements. The Funds may enter into repurchase agreements. A
repurchase agreement is an arrangement pursuant to which a buyer purchases a
security and simultaneously agrees to resell it to the vendor at a price that
results in an agreed-upon market rate of return which is effective for the
period of time (which is normally one to seven days, but may be longer) the
buyer's money is invested in the security. The arrangement results in a fixed
rate of return that is not subject to market fluctuations during a Fund's
holding period. Repurchase agreements may be entered into with member banks of
the Federal Reserve System, including the Fund's custodian or "primary dealers"
(as designated by the Federal Reserve Bank of New York) in United States
Government securities. Each Fund will require continued maintenance of
collateral with its Custodian in an amount equal to, or in excess of, the
repurchase price (including accrued interest). In the event a vendor defaults on
its repurchase obligation, a Fund might suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
the vendor becomes the subject of bankruptcy proceedings, a Fund might be
delayed in selling the collateral. Each Fund's investment adviser will review
and continually monitor the creditworthiness of each institution with which the
Fund enters into a repurchase agreement to evaluate these risks. A Fund may not
enter into repurchase agreements if, as a result, more than 10% of a Fund's
total assets would be invested in repurchase agreements maturing in more than
seven days and in other securities that are not readily marketable.
Securities Lending. In order to generate income and to offset expenses, the
Funds may lend portfolio securities to brokers, dealers and other financial
organizations and enter into reverse repurchase agreements. Each Fund's
investment adviser will monitor the creditworthiness of such borrowers. Loans of
securities by the Funds, if and when made, may not exceed 30% of a Fund's total
assets and will be collateralized by cash, letters of credit or
14
<PAGE>
United States Government securities that are maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities, including accrued interest. While such securities are on loan, the
borrower will pay a Fund any income accruing thereon, and the Fund may invest
the cash collateral in portfolio securities, thereby increasing its return. A
Fund will have the right to call any such loan and obtain the securities loaned
at any time on five days' notice. Any gain or loss in the market price of the
loaned securities which occurs during the term of the loan would affect a Fund
and its investors. A Fund may pay reasonable fees in connection with such loans.
When-Issued Securities. EVERGREEN TAX EXEMPT MONEY MARKET FUND and EVERGREEN
TREASURY MONEY MARKET FUND may purchase securities on a "when-issued" basis
(i.e., for delivery beyond the normal settlement date at a stated price and
yield). A Fund generally would not pay for such securities or start earning
interest on them until they are received. However, when a Fund purchases
securities on a when-issued basis, it assumes the risks of ownership at the time
of purchase, not at the time of receipt. Failure of the issuer to deliver a
security purchased by a Fund on a when-issued basis may result in the Fund
incurring a loss or missing an opportunity to make an alternative investment.
EVERGREEN TAX EXEMPT MONEY MARKET FUND does not expect that commitments to
purchase when-issued securities will normally exceed 25% of its total assets and
EVERGREEN TREASURY MONEY MARKET FUND does not expect that such commitments will
exceed 20% of its total assets. The Funds do not intend to purchase when-issued
securities for speculative purposes but only in furtherance of their investment
objective.
Illiquid Securities. The Funds may invest up to 10% of their net assets in
illiquid securities and other securities which are not readily marketable,
including repurchase agreements with maturities longer than seven days. In the
case of EVERGREEN TAX EXEMPT MONEY MARKET FUND and EVERGREEN MONEY MARKET FUND,
securities eligible for resale pursuant to Rule 144A under the Act, which have
been determined to be liquid, will not be considered by each Fund's investment
adviser to be illiquid or not readily marketable and, therefore, are not subject
to the aforementioned 10% limit. The inability of a Fund to dispose of illiquid
or not readily marketable investments readily or at a reasonable price could
impair the Fund's ability to raise cash for redemptions or other purposes. The
liquidity of securities purchased by a Fund which are eligible for resale
pursuant to Rule 144A will be monitored by each Fund's investment adviser on an
ongoing basis, subject to the oversight of the Trustees. In the event that such
a security is deemed to be no longer liquid, a Fund's holdings will be reviewed
to determine what action, if any, is required to ensure that the retention of
such security does not result in a Fund having more than 10% of its net assets
invested in illiquid or not readily marketable securities.
Other Investment Policies. The Funds may borrow money for temporary or emergency
purposes in amounts not in excess of 10% of the value of a Fund's total assets
in the case of EVERGREEN TAX EXEMPT MONEY MARKET FUND and EVERGREEN MONEY MARKET
FUND and one-third of the value of EVERGREEN TREASURY MONEY MARKET FUND'S total
assets, including the amount borrowed. As another means of borrowing each Fund
may agree to sell portfolio securities to financial institutions such as banks
and broker-dealers and to repurchase them at a mutually agreed upon date and
price (a "reverse repurchase agreement") at the time of such borrowing in
amounts up to 5% of the value of their total assets. A Fund will not purchase
any securities whenever any borrowings (including reverse repurchase agreements)
are outstanding. If a Fund enters into a reverse repurchase agreement, it will
place in a segregated custodial account cash, United States Government
securities or liquid high grade debt obligations having a value equal to the
repurchase price (including accrued interest) and will subsequently monitor the
account to ensure that such equivalent value is maintained. Reverse repurchase
agreements involve the risk that the market value of the securities sold by a
Fund may decline below the repurchase price of those securities.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which each Fund has been established ("Trustees"). Evergreen Asset
Management Corp. ("Evergreen Asset") has been retained to serve as investment
adviser to EVERGREEN MONEY MARKET FUND and EVERGREEN TAX EXEMPT MONEY MARKET
FUND. Evergreen Asset succeeded on June 30, 1994 to the advisory business of a
corporation with the same name, but under different ownership, which was
organized in 1971. Evergreen Asset, with its predecessors, has served as
investment adviser to the Evergreen mutual funds since 1971. Evergreen Asset is
a wholly-owned
15
<PAGE>
subsidiary of First Union National Bank of North Carolina ("FUNB"). The address
of Evergreen Asset is 2500 Westchester Avenue, Purchase, New York 10577. FUNB is
a subsidiary of First Union Corporation ("First Union"), the sixth largest bank
holding company in the United States. Stephen A. Lieber and Nola Maddox Falcone
serve as the chief investment officers of Evergreen Asset and, along with
Theodore J. Israel, Jr., were the owners of Evergreen Asset's predecessor and
the former general partners of Lieber & Company, which, as described below,
provides certain subadvisory services to Evergreen Asset in connection with its
duties as investment adviser to the aforementioned Funds. The Capital Management
Group of FUNB ("CMG") serves as investment adviser to EVERGREEN TREASURY MONEY
MARKET FUND.
First Union is headquartered in Charlotte, North Carolina, and had $139.9
billion in consolidated assets as of June 30, 1996. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States. CMG manages or otherwise oversees the
investment of over $42.1 billion in assets belonging to a wide range of clients,
including all the series of Evergreen Investment Trust , the two series of The
Evergreen Lexicon Fund (formerly The FFB Lexicon Fund, and the two series of
Evergreen Tax-Free Trust (formerly FFB Funds Trust). First Union Brokerage
Services, Inc., a wholly-owned subsidiary of FUNB, is a registered broker-dealer
that is principally engaged in providing retail brokerage services consistent
with its federal banking authorizations. First Union Capital Markets Corp., a
wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
Evergreen Asset manages investments, provides various administrative
services and supervises the daily business affairs of EVERGREEN MONEY MARKET
FUND and EVERGREEN TAX EXEMPT MONEY MARKET FUND, subject to the authority of the
Trustees. Evergreen Asset is entitled to receive from each Fund an annual fee
equal to .50 of 1% of average daily net assets of each Fund on the first $1
billion in assets and .45 of 1% of average daily net assets in excess of $1
billion. However, Evergreen Asset has in the past, and may in the future,
voluntarily waived all or a portion of its fee for the purpose of reducing each
Fund's expense ratio. For the fiscal year ended August 31, 1996 Evergreen Asset
waived a portion of the advisory fee payable by the EVERGREEN MONEY MARKET FUND
and EVERGREEN TAX EXEMPT MONEY MARKET FUND as set forth in the section entitled
"Financial Highlights". The total expenses as a percentage of average daily net
assets on an annualized basis for EVERGREEN MONEY MARKET FUND and EVERGREEN TAX
EXEMPT MONEY MARKET FUND for the fiscal year ended August 31, 1996 are also set
forth in the section entitled "Financial Highlights".
CMG manages investments and supervises the daily business affairs of
EVERGREEN TREASURY MONEY MARKET FUND and, as compensation therefor, is entitled
to receive an annual fee equal to .35 of 1% of average daily net assets of the
Fund. For the fiscal year ended August 31, 1996 CMG waived a portion of the
advisory fee payable by the EVERGREEN TREASURY MONEY MARKET FUND as set forth in
the section entitled "Financial Highlights". The total annualized operating
expenses of EVERGREEN TREASURY MONEY MARKET FUND for its fiscal year ended
August 31, 1996 are also set forth in the section entitled "Financial
Highlights".
Evergreen Asset serves as administrator to EVERGREEN TREASURY MONEY
MARKET FUND and is entitled to receive a fee based on the average daily net
assets of the Fund at a rate based on the total assets of the mutual funds
administered by Evergreen Asset for which CMG or Evergreen Asset also serve as
investment adviser, calculated in accordance with the following schedule: .050%
of the first $7 billion; .035% on the next $3 billion; .030% on the next $5
billion; .020% on the next $10 billion; .015% on the next $5 billion; and .010%
on assets in excess of $30 billion. Furman Selz LLC, an affiliate of Evergreen
Funds Distributor, Inc., distributor for the Evergreen group of mutual funds,
serves as sub-administrator to EVERGREEN TREASURY MONEY MARKET FUND and is
entitled to receive a fee from the Fund calculated on the average daily net
assets of the Fund at a rate based on the total assets of the mutual funds
administered by Evergreen Asset for which CMG or Evergreen Asset also serve as
investment adviser, calculated in accordance with the following schedule: .0100%
of the first $7 billion; .0075% on the next $3 billion; .0050% on the next $15
billion; and .0040% on assets in excess of $25 billion. The total assets of the
mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset
serve as investment adviser were approximately $15.2 billion as of June 30,
1996.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provide that Lieber & Company's research department and staff will
furnish Evergreen Asset with information, investment recommendations, advice and
assistance, and will be generally available for consultation on the portfolios
of EVERGREEN MONEY MARKET FUND and EVERGREEN TAX EXEMPT MONEY MARKET FUND.
Lieber & Company will be
16
<PAGE>
reimbursed by Evergreen Asset in connection with the rendering of services on
the basis of the direct and indirect costs of performing such services. There is
no additional charge to EVERGREEN MONEY MARKET FUND and EVERGREEN TAX EXEMPT
MONEY MARKET FUND for the services provided by Lieber & Company. The address of
Lieber & Company is 2500 Westchester Avenue, Purchase, New York 10577. Lieber &
Company is an indirect, wholly-owned, subsidiary of First Union.
DISTRIBUTION PLANS AND AGREEMENTS
Rule 12b-1 under the Investment Company Act of 1940 permits an investment
company to pay expenses associated with the distribution of its shares in
accordance with a duly adopted plan. Each Fund has adopted for its Class A
shares and EVERGREEN MONEY MARKET FUND for its Class B shares, a "Rule 12b-1
plan" (each, a "Plan"or collectively the "Plans"). Pursuant to each Plan, a Fund
may incur distribution-related and shareholder servicing-related expenses which
may not exceed an annual rate of .75 of 1% of the Fund's aggregate average daily
net assets attributable to Class A shares and 1.00% of the Fund's aggregate
average daily net assets attributable to the Class B shares. Payments with
respect to Class A shares under the Plan are currently voluntarily limited to
.30 of 1% of each Fund's aggregate average daily net assets attributable to
Class A shares. The Plans provide that a portion of the fee payable thereunder
may constitute a service fee to be used for providing ongoing personal services
and/or the maintenance of shareholder accounts. Service fee payments to
financial intermediaries for such purposes will not exceed .25 of 1% of the
aggregate average daily net assets attributable to each Class of shares of each
Fund.
Each Fund has also entered into a distribution agreement (each a
"Distribution Agreement" or collectively the "Distribution Agreements") with
Evergreen Funds Distributor, Inc. ("EFD"). Pursuant to the Distribution
Agreements, each Fund will compensate EFD for its services as distributor at a
rate which may not exceed an annual rate of .30 of 1% of a Fund's aggregate
average daily net assets attributable to Class A shares, and .75 of 1% of
aggregate average daily net assets attributable to the Class B shares of the
EVERGREEN MONEY MARKET FUND. The Distribution Agreements provide that EFD will
use the distribution fee received from a Fund for payments (i) to compensate
broker-dealers or other persons for distributing shares of the Funds, including
interest and principal payments made in respect of amounts paid to
broker-dealers or other persons that have been financed (EFD may assign its
rights to receive compensation under the Plans to secure such financings), (ii)
to otherwise promote the sale of shares of the Fund, and (iii) to compensate
broker-dealers, depository institutions and other financial intermediaries for
providing administrative, accounting and other services with respect to the
Fund's shareholders. The financing of payments made by EFD to compensate
broker-dealers or other persons for distributing shares of the Funds may be
provided by First Union or its affiliates. The EVERGREEN MONEY MARKET FUND may
also make payments under its Class B Plan, in amounts up to .25 of 1% of the
Fund's aggregate average daily net assets on an annual basis attributable to
Class B shares, to compensate organizations, which may include EFD and Evergreen
Asset or its affiliates, for personal services rendered to shareholders and/or
the maintenance of shareholder accounts or for engaging others to render such
services.
The Funds may not pay any distribution or services fees during any fiscal
period in excess of the amounts set forth above. Since EFD's compensation under
the Distribution Agreements is not directly tied to the expenses incurred by
EFD, the amount of compensation received by it under the Distribution Agreements
during any year may be more or less than its actual expenses and may result in a
profit to EFD. Distribution expenses incurred by EFD in one fiscal year that
exceed the level of compensation paid to EFD for that year may be paid from
distribution fees received from a Fund in subsequent fiscal years.
The Plans are in compliance with rules of the National Association of
Securities Dealers, Inc. which effectively limit the annual asset-based sales
charges and service fees that a mutual fund may pay on a class of shares to .75
of 1% and .25 of 1%, respectively, of the average annual net assets attributable
to that class. The rules also limit the aggregate of all front-end, deferred and
asset-based sales charges imposed with respect to a class of shares by a mutual
fund that also charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per annum.
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PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
You can purchase shares of any of the Funds through broker-dealers, banks
or other financial intermediaries, or directly through EFD. The minimum initial
investment is $1,000, which may be waived in certain situations. There is no
minimum for subsequent investments. Share certificates are not issued. In states
where EFD is not registered as a broker-dealer shares of a Fund will only be
sold through Furman Selz LLC, other broker-dealers or other financial
institutions that are registered. See the Share Purchase Application and
Statement of Additional Information for more information. Only Class A shares of
EVERGREEN MONEY MARKET FUND, EVERGREEN TREASURY MONEY MARKET FUND and EVERGREEN
TAX EXEMPT MONEY MARKET FUND, and Class B shares of EVERGREEN MONEY MARKET FUND
are offered through this Prospectus. (See "General Information" -- "Other
Classes of Shares".)
Class A Shares. Class A shares of the Evergreen Money Market Funds can be
purchased at net asset value without an initial sales charge. Certain
broker-dealers or other financial institutions may impose a fee in connection
with purchases at net asset value.
Class B Shares-Deferred Sales Charge Alternative. You can purchase Class B
shares of the EVERGREEN MONEY MARKET FUND at net asset value without an initial
sales charge. However, you may pay a contingent deferred sales charge ("CDSC")
if you redeem shares within seven years after purchase. Shares obtained from
dividend or distribution reinvestment are not subject to the CDSC. The amount of
the CDSC (expressed as a percentage of the lesser of the current net asset value
or original cost) will vary according to the number of years from the purchase
of Class B shares as set forth below.
<TABLE>
<CAPTION>
Year Since
Purchase Contingent Deferred Sales Charge
<S> <C>
FIRST 5%
SECOND 4%
THIRD and FOURTH 3%
FIFTH 2%
SIXTH 1%
</TABLE>
The CDSC is deducted from the amount of the redemption and is paid to EFD. The
CDSC will be waived on redemptions of shares following the death or disability
of a shareholder, to meet distribution requirements for certain qualified
retirement plans or in the case of certain redemptions made under a Fund's
Systematic Cash Withdrawal Plan, and may be waived in other situations. Class B
shares are subject to higher distribution and/or shareholder service fees than
Class A shares for a period of seven years (after which they convert to Class A
shares). The higher fees mean a higher expense ratio, so Class B shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares. See the Statement of Additional Information for further details.
With respect to Class B shares, no CDSC will be imposed on: (1) the
portion of redemption proceeds attributable to increases in the value of the
account due to increases in the net asset value per share, (2) shares acquired
through reinvestment of dividends and capital gains, (3) shares held for more
than seven years after the end of the calendar month of acquisition, (4)
accounts following the death or disability of a shareholder, or (5) minimum
required distributions to a shareholder over the age of 70 1/2 from an IRA or
other retirement plan.
How the Funds Value Their Shares. The net asset value of each Fund's shares for
purposes of both purchases and redemptions is determined twice daily, at 12 noon
(Eastern time) and promptly after the regular close of the New York Stock
Exchange (the "Exchange") (currently 4:00 p.m. Eastern time) each business day,
i.e., any weekday exclusive of days on which the Exchange or State Street Bank
and Trust Company ("State Street") is closed. The Exchange is closed on New
Year's Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. The net asset value per share is
calculated by taking the sum of the values of a Fund's investments and any cash
and other assets, subtracting liabilities, and dividing by the total number of
shares outstanding. All expenses, including the fees payable to each Fund's
investment adviser, are accrued daily. The securities in a Fund's portfolio are
valued on an amortized cost basis. Under this method of valuation, a security is
initially valued at its acquisition cost, and thereafter a constant
straight-line amortization of any discount or premium is assumed each day
regardless of the impact of fluctuating interest rates on the market
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<PAGE>
value of the security. The market value of the obligations in a Fund's portfolio
can be expected to vary inversely to changes in prevailing interest rates. As a
result, the market value of the obligations in a Fund's portfolio may vary from
the value determined using the amortized cost method. Securities which are not
rated are normally valued on the basis of valuations provided by a pricing
service when such prices are believed to reflect the fair value of such
securities. Other assets and securities for which no quotations are readily
available are valued at the fair value as determined in good faith by the
Trustees.
Each Fund attempts to maintain its net asset value at $1.00 per share.
Under most conditions, management believes this will be possible, although there
can be no assurance that this will be achieved. Calculations are periodically
made to compare the value of a Fund's portfolio valued at amortized cost with
market values. If a deviation of 1/2 of 1% or more were to occur between the net
asset value calculated by reference to market values and a Fund's $1.00 per
share net asset value, or if there were other deviations which the Trustees of
each Trust under which each Fund operates believe would result in a material
dilution to shareholders or purchasers, the Trustees would promptly consider
what action, if any, should be initiated.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from his or her account to reimburse a Fund or the Fund's investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen mutual funds.
The Funds will not accept third party checks other than those payable directly
to a shareholder whose account has been in existence at least thirty days.
Shares of the Funds are sold at the net asset value per share next
determined after a shareholder's investment has been converted to Federal funds.
Investments by federal funds wire will be effective upon receipt. Qualified
institutions may telephone orders for the purchase of Fund shares. Shares
purchased by institutions via telephone will receive the dividend declared on
that day if the telephone order is placed by 12 noon (Eastern time), and federal
funds are received the same day by 4:00 p.m. (Eastern time). Institutions should
telephone the Fund at the telephone number on the front page of this Prospectus
for additional information on same day purchases by telephone. Investment checks
received at State Street will be invested on the date of receipt. Shareholders
will begin earning dividends the following business day.
The Share Purchase Application may not be used to invest in any of the
prototype retirement plans for which the EVERGREEN MONEY MARKET FUND is an
available investment. For information about the requirements to make such
investments, including copies of the necessary application forms, please call
the telephone number set forth on the cover page of this Prospectus. A Fund
cannot accept investments specifying a certain price or date and reserves the
right to reject any specific purchase order, including orders in connection with
exchanges from the other Evergreen mutual funds. Although not currently
anticipated, each Fund reserves the right to suspend the offer of shares for a
period of time.
General. The decision as to which Class of shares of EVERGREEN MONEY MARKET FUND
is more beneficial to you depends primarily on whether or not you wish to
exchange all or part of any Class B shares you purchase for Class B shares of
another Evergreen mutual fund at some future date. If you are not contemplating
such an exchange, it would probably be in your best interest to purchase Class A
shares. Consult your financial intermediary for further information. The
compensation received by dealers and agents may differ depending on whether they
sell Class A or Class B shares. There is no size limit on purchases of Class A
shares.
In addition to any discount or commission paid to dealers, EFD will from
time to time pay to dealers additional cash or other incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of a
Fund and/or other Evergreen mutual funds. Such incentives will take the form of
payment for attendance at seminars, lunches, dinners, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer and their immediate
family members to urban or resort locations within or outside the United States.
Such a dealer may elect to receive cash incentives of equivalent amount in lieu
of such payments. EFD may also limit the availability of such incentives to
certain specified dealers. EFD from time to time sponsors promotions involving
First Union Brokerage Servies, Inc. ("FUBS"), an affiliate of each Fund's
investment adviser, and other selected dealers, pursuant to which incentives are
paid, including gift certificates and payments in amounts up to 1% of the dollar
amount of shares of a Fund sold. Awards may also be made based on the opening of
a minimum number of accounts. Such promotions are not being made available to
all dealers. Certain broker-dealers may also receive payments from
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<PAGE>
EFD or a Fund's investment adviser over and above the usual trail commissions or
shareholder servicing payments applicable to a given Class of shares.
HOW TO REDEEM SHARES
You may "redeem", i.e. sell, your shares in a Fund to the Fund on any day
the Exchange is open, either directly or through your financial intermediary.
The price you will receive is the net asset value (less any applicable CDSC for
Class B shares) next calculated after the Fund receives your request in proper
form. Proceeds generally will be sent to you within seven days. However, for
shares recently purchased by check, a Fund will not send proceeds until it is
reasonably satisfied that the check has been collected (which may take up to ten
days). Once a redemption request has been telephoned or mailed, it is
irrevocable and may not be modified or cancelled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value (less any applicable CDSC for
Class B shares). Your financial intermediary is responsible for furnishing all
necessary documentation to a Fund and may charge you for this service. Certain
financial intermediaries may require that you give instructions earlier than
4:00 p.m. (Eastern time).
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street which is the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, State Street, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, financial intermediaries, fiduciaries and surviving joint owners.
Signature guarantees are required for all redemption requests for shares with a
value of more than $10,000 or where the redemption proceeds are to be mailed to
an address other than that shown in the account registration. A signature
guarantee must be provided by a bank or trust company (not a Notary Public), a
member firm of a domestic stock exchange or by other financial institutions
whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling the telephone number on the front page of this Prospectus between the
hours of 8:00 a.m. to 5:30 p.m. (Eastern time) each business day (i.e., any
weekday exclusive of days on which the Exchange or State Street's offices are
closed). The Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund or State Street by telephone should
follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5.00
wire charge from all redemption proceeds wired. This charge is subject to change
without notice. Redemption proceeds will be wired on the same day if the request
is made prior to 12 noon (Eastern time). Such shares, however, will not earn
dividends for that day. Redemption requests received after 12 noon will earn
dividends for that day, and the proceeds will be wired on the following business
day. A shareholder who decides later to use this service, or to change
instructions already given, should fill out a Shareholder Services Form and send
it to State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827, with such shareholder's signature guaranteed by a bank or trust
company (not a Notary Public), a member firm of a domestic stock exchange or by
other financial institutions whose guarantees are acceptable to State Street.
Shareholders should allow approximately ten days for such form to be processed.
The Funds will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. These procedures include requiring some
form of personal identification prior to acting upon instructions and tape
recording of telephone instructions. If a Fund fails to follow such procedures,
it may be liable for any losses due to unauthorized or fraudulent instructions.
The Funds will not be liable for following telephone instructions reasonably
believed to be genuine. The Funds reserve the right to refuse a telephone
redemption if it is believed advisable to do so. Financial intermediaries may
charge a fee for handling telephonic requests. Procedures for redeeming Fund
shares by telephone may be modified or terminated without notice at any time.
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<PAGE>
Redemptions by Check. Upon request, each Fund will provide holders of Class A
shares, without charge, with checks drawn on the Fund that will clear through
State Street. Class B shares cannot be redeemed by check. Shareholders will be
subject to State Street's rules and regulations governing such checking
accounts. Checks will be sent usually within ten business days following the
date the account is established. Checks may be made payable to the order of any
payee in an amount of $250 or more. The payee of the check may cash or deposit
it like a check drawn on a bank. (Investors should be aware that, as in the case
with regular bank checks, certain banks may not provide cash at the time of
deposit, but will wait until they have received payment from State Street.) When
such a check is presented to State Street for payment, State Street, as the
shareholder's agent, causes the Fund to redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the check.
Checks will be returned by State Street if there are insufficient or
uncollectable shares to meet the withdrawal amount. The check writing procedure
for withdrawal enables shareholders to continue earning income on the shares to
be redeemed up to but not including the date the redemption check is presented
to State Street for payment.
Shareholders wishing to use this method of redemption, should fill out
the appropriate part of the Share Purchase Application (including the Signature
Card) and mail the completed form to State Street Bank and Trust Company, P.O.
Box 9021, Boston, Massachusetts 02205-9827. Shareholders requesting this service
after an account has been opened must contact State Street since additional
documentation will be required. Currently, there is no charge either for checks
or for the clearance of any checks. This service may be terminated or altered at
any time.
General. Under unusual circumstances, a Fund may suspend redemptions or postpone
payment for up to seven days or longer, as permitted by Federal securities law.
The Funds reserve the right to close an account that through redemption has
remained below $1,000 for thirty days. Shareholders will receive sixty days'
written notice to increase the account value before the account is closed. The
Funds have elected to be governed by Rule 18f-1 under the Investment Company Act
of 1940 pursuant to which each Fund is obligated to redeem shares solely in
cash, up to the lesser of $250,000 of 1% of a Fund's total net assets during any
ninety day period for any one shareholder. See the Statement of Additional
Information for further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class of the other Evergreen mutual funds through your financial
intermediary, or by telephone or mail as described below. Once an exchange
request has been telephoned or mailed, it is irrevocable and may not be modified
or canceled. Exchanges will be made on the basis of the relative net asset
values of the shares exchanged next determined after an exchange request is
received. An exchange, which represents an initial investment in another
Evergreen mutual fund, is subject to the minimum investment and suitability
requirements of each Fund.
Each of the Evergreen mutual funds has different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be materially modified or
discontinued at any time by the Fund upon sixty days' notice to shareholders and
is only available in states in which shares of the fund being acquired may
lawfully be sold.
No CDSC will be imposed in the event Class B shares of the EVERGREEN
MONEY MARKET FUND are exchanged for Class B shares of other Evergreen mutual
funds. If you redeem shares, the CDSC applicable to the Class B shares of the
Evergreen mutual fund originally purchased for cash is applied. Also, Class B
shares will continue to age following an exchange for purposes of conversion to
Class A shares. An exchange of Class A shares of the Funds for Class A shares of
other Evergreen mutual funds not offered in this Prospectus would, to the extent
a waiver or reduction were not available, require the payment of the applicable
front-end sales charge.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Exchanges by Telephone and Mail. You may exchange shares by telephone by calling
the telephone number on the front page of this Prospectus. Exchange requests
made after 4:00 p.m. (Eastern time) will be processed using the
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<PAGE>
net asset value determined on the next business day. During periods of drastic
economic or market changes, shareholders may experience difficulty in effecting
telephone exchanges. You should follow the procedures outlined below for
exchanges by mail if you are unable to reach State Street by telephone. If you
wish to use the telephone exchange service you should indicate this on the Share
Purchase Application. As noted above, each Fund will employ reasonable
procedures to confirm that instructions for the redemption or exchange of shares
communicated by telephone are genuine. A telephone exchange may be refused by a
Fund or State Street if it is believed advisable to do so. Procedures for
exchanging Fund shares by telephone may be modified or terminated at any time.
Written requests for exchanges should follow the same procedures outlined for
written redemption requests in the section entitled "How to Redeem Shares",
however, no signature guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more information
about these services or your account, contact EFD or the toll-free number on the
front page of this Prospectus. Some services are described in more detail in the
Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25 per month or
$75 per quarter. Each Fund reserves the right to close an account that through
liquidation of the Systematic Investment Plan has not reached a minimum balance
of $1,000 ($250 for retirement accounts) within twenty-four months of the
initial investment.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $25,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account two business days after the request
is received.
Shares purchased under the Funds Systematic Investment Plan or Telephone
Investment Plan may not be redeemed for ten days from the date of investment.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Funds
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $75. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gain
distributions reinvested automatically. Any applicable Class B CDSC will be
waived with respect to redemptions occurring under a Systematic Cash Withdrawal
Plan during a calendar year to the extent that such redemptions do not exceed
10% of (i) the initial value of the account plus (ii) the value, at the time of
purchase, of any subsequent investments.
Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified benefit and savings plans may make shares of the Funds and the
other Evergreen mutual funds available to their participants. Each Fund's
investment adviser may provide compensation to organizations providing
administrative and recordkeeping services to plans which make shares of the
Evergreen mutual funds available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the last
business day of each month, unless otherwise requested by a shareholder in
writing. If the transfer agent does not receive a written request for subsequent
dividends and/or distributions to be paid in cash at least three full business
days prior to a given record date, the dividends and/or distributions to be paid
to a shareholder will be reinvested.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as
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<PAGE>
investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Funds declare substantially all of their net income as dividends on
each business day. Such dividends are paid monthly. Net income, for dividend
purposes, includes accrued interest and any market discount or premium that day,
less the estimated expenses of a Fund. Gains or losses realized upon the sale of
portfolio securities are not included in net income, but are reflected in the
net asset value of a Fund's shares. Distributions of any net realized capital
gains will be made annually or more frequently as required by the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"). The amount of
dividends may fluctuate from day to day, and the dividend may be omitted on a
day where Fund expenses exceed net investment income. Dividends and
distributions generally are taxable in the year in which they are paid, except
any dividends paid in January that were declared in the previous calendar
quarter may be treated as paid in the immediately preceding December.
Such dividends will be automatically reinvested in full and fractional
shares of a Fund on the last business day of each month. However, shareholders
who so inform the transfer agent in writing may have their dividends paid out in
cash monthly. Shareholders who invest by check will be credited with a dividend
on the business day following initial investment. Shareholders will receive
dividends on investments made by federal funds bank wire the same day the wire
is received provided that wire purchases are received by State Street by 12 noon
(Eastern time). Shares purchased by qualified institutions via telephone as
described in "How to Purchase Shares" will receive the dividend declared on that
day if the telephone order is placed by 12 noon (Eastern time), and federal
funds are received by 4:00 p.m. (Eastern time). All other wire purchases
received after 12 noon (Eastern time) will earn dividends beginning the
following business day. Dividends accruing on the day of redemption will be paid
to redeeming shareholders except for redemptions by check and where proceeds are
wired the same day. (See "How to Redeem Shares".)
Each Fund has qualified and intends to continue to qualify to be treated
as a regulated investment company under the Code. While so qualified, it is
expected that each Fund will not be required to pay any Federal income taxes on
that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. The excise tax generally does not apply to the tax exempt income
of a regulated investment company (such as EVERGREEN TAX EXEMPT MONEY MARKET
FUND) that pays exempt interest dividends. Except as noted below with respect to
EVERGREEN TAX EXEMPT MONEY MARKET FUND, most shareholders of the Funds normally
will have to pay Federal income taxes and any state or local taxes on the
dividends and distributions they receive from a Fund.
EVERGREEN TAX EXEMPT MONEY MARKET FUND will designate and pay
exempt-interest dividends derived from interest earned on qualifying tax exempt
obligations. Such exempt-interest dividends may be excluded by shareholders of
the Fund from their gross income for Federal income tax purposes, however, (1)
all or a portion of such exempt-interest dividends may be a specific preference
item for purposes of the Federal individual and corporate alternative minimum
taxes to the extent that they are derived from certain types of private activity
bonds issued after August 7, 1986, and (2) all exempt-interest dividends will be
a component of "adjusted current earnings" for purposes of the Federal corporate
alternative minimum tax. Dividends paid from taxable income, if any, and
distributions of any net realized short-term capital gains (whether from tax
exempt or taxable obligations)
23
<PAGE>
are taxable as ordinary income, even though received in additional Fund shares.
Market discount recognized on taxable and tax-free bonds is taxable as ordinary
income, not as excludable income.
Following the end of each calendar year, every shareholder of the Funds
will be sent applicable tax information and information regarding the dividends
and capital gain distributions made during the calendar year. Under current law,
the highest Federal income tax rate applicable to net long-term capital gains
realized by individuals is 28%. The rate applicable to corporations is 35%.
Since the Funds' gross income is ordinarily expected to be interest income, it
is not expected that the 70% dividends-received deduction for corporations will
be applicable. Specific questions should be addressed to the investor's own tax
adviser.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that the investor's social security
or taxpayer identification number is correct and that the investor is not
currently subject to backup withholding or is exempt from backup withholding.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. The EVERGREEN MONEY MARKET FUND is a separate investment series of
Evergreen Money Market Trust, a Massachusetts business trust organized in 1987.
The EVERGREEN TAX EXEMPT MONEY MARKET FUND is a separate investment series of
The Evergreen Municipal Trust, a Massachusetts business trust organized in 1988.
The EVERGREEN TREASURY MONEY MARKET FUND is a separate investment series of
Evergreen Investment Trust (formerly First Union Funds), a Massachusetts
business trust organized in 1984.
The Funds do not intend to hold annual shareholder meetings; shareholder
meetings will be held only when required by applicable law. Shareholders have
available certain procedures for the removal of Trustees.
A shareholder in each Class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
The Trusts are empowered to establish, without shareholder approval, additional
investment series, which may have different investment objectives, and
additional Classes of shares for any existing or future series. If an additional
series or Class were established in a Fund, each share of the series or Class
would normally be entitled to one vote for all purposes. Generally, shares of
each series and Class would vote together as a single Class on matters, such as
the election of Trustees, that affect each series and Class in substantially the
same manner. Class A, B and Y shares have identical voting, dividend,
liquidation and other rights, except that each Class bears, to the extent
applicable, its own distribution and transfer agency expenses as well as any
other expenses applicable only to a specific class. Each Class of shares votes
separately with respect to Rule 12b-1 distribution plans and other matters for
which separate Class voting is appropriate under applicable law. Shares are
entitled to dividends as determined by the Trustees and, in liquidation of a
Fund, are entitled to receive the net assets of the Fund.
Custodian, Registrar, Transfer Agent And Dividend-Disbursing Agent. State Street
Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as
each Fund's custodian, registrar, transfer agent and dividend-disbursing agent.
State Street is compensated for its services as transfer agent by a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares.
Principal Underwriter. EFD, an affiliate of Furman Selz LLC, located 230 Park
Avenue, New York, New York 10017, is the principal underwriter of the Funds.
Furman Selz LLC also acts as sub-administrator to EVERGREEN TREASURY MONEY
MARKET FUND and provides certain sub-administrative services to Evergreen Asset
in connection with its role as investment adviser to EVERGREEN TAX EXEMPT MONEY
MARKET FUND and EVERGREEN MONEY MARKET FUND, including providing personnel to
serve as officers of the Funds.
Other Classes of Shares. EVERGREEN MONEY MARKET FUND offers three classes of
shares, Class A, Class B and Class Y. EVERGREEN TAX EXEMPT MONEY MARKET FUND and
EVERGREEN TREASURY MONEY MARKET FUND each offer two classes of shares, Class A
and Class Y. Class Y shares are not offered by this Prospectus and are only
24
<PAGE>
available to (i) persons who at or prior to December 31, 1994, owned shares in a
mutual fund advised by Evergreen Asset, (ii) certain institutional investors and
(iii) investment advisory clients of CMG, Evergreen Asset or their affiliates.
The dividends payable with respect to Class A and Class B shares will be less
than those payable with respect to Class Y shares due to the distribution and
distribution and shareholder servicing related expenses borne by Class A and
Class B shares and the fact that such expenses are not borne by Class Y shares.
Performance Information. From time to time, a Fund may quote its yield in
advertisements or in reports to shareholders. Yield information may be useful in
reviewing the performance of a Fund and for providing a basis for comparison
with other investment alternatives. However, since net investment income of a
Fund changes in response to fluctuations in interest rates and Fund expenses,
any given yield quotation should not be considered representative of a Fund's
yields for any future period.
The method of calculating each Fund's yield is set forth in the Statement
of Additional Information. Before investing in the EVERGREEN TAX EXEMPT MONEY
MARKET FUND, the investor may want to determine which investment -- tax-free or
taxable -- will result in a higher after-tax return. To do this, the yield on
the tax-free investment should be divided by the decimal determined by
subtracting from 1 the highest Federal tax rate to which the investor currently
is subject. For example, if the tax-free yield is 6% and the investor's maximum
tax bracket is 36%, the computation is:
6% Tax-Free Yield /(1 - .36 Tax Rate) = 6/.64 = 9.38% Taxable Yield.
In this example, the investor's after-tax return will be higher from the
6% tax-free investment if available taxable yields are below 9.38%. Conversely,
the taxable investment will provide a higher return when taxable yields exceed
9.38%. This is only an example and is not necessarily reflective of a Fund's
yield. The tax equivalent yield will be lower for investors in the lower income
brackets.
Comparative performance information may also be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., IBC/Donoghue's Money Fund Report, Bank Rate Monitor
and other industry publications.
In marketing a Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profite; and an action plan offering investment
alternatives. The information provided to investors may also include discussions
of other Evergreen mutual funds, products, and services, which may include:
retirement investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; and charitable
giving. In addition, the information provided to investors may quote financial
or business publications and periodicals, including model portfolios or
allocations, as they relate to fund management, investment philosophy, and
investment techniques. The Principal Underwriter may also reprint, and use as
advertising and sales literature, articles from EVERGREEN EVENTS, a quarterly
magazine provided to Evergreen mutual fund shareholders.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the SEC under the Act. Copies of the Registration Statements may be
obtained at a reasonable charge from the SEC or may be examined, without charge,
at the offices of the SEC in Washington, D.C.
25
<PAGE>
INVESTMENT ADVISER
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN MONEY MARKET FUND, EVERGREEN TAX EXEMPT MONEY MARKET FUND
Capital Management Group of First Union National Bank of North Carolina, 201
South College Street, Charlotte, North Carolina 28288
EVERGREEN TREASURY MONEY MARKET FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036
INDEPENDENT AUDITORS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN MONEY MARKET FUND, EVERGREEN TAX EXEMPT MONEY MARKET FUND
KPMG Peat Marwick, LLP, One Mellon Bank Center Pittsburgh, Pennsylvania 15219
EVERGREEN TREASURY MONEY MARKET FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 230 Park Avenue, New York, New York 10017
45960 536120rev02
********************************************************************************
<PAGE>
PROSPECTUS October 31, 1996
EVERGREEN(SM) MONEY MARKET FUNDS (Evergreen tree logo)
EVERGREEN MONEY MARKET FUND
EVERGREEN TAX EXEMPT MONEY MARKET FUND
EVERGREEN TREASURY MONEY MARKET FUND
CLASS Y SHARES
The Evergreen Money Market Funds (the "Funds") are designed to
provide investors with current income, stability of principal and
liquidity. This Prospectus provides information regarding the Class Y
shares offered by the Funds. Each Fund is, or is a series of, an open-end,
diversified, management investment company. This Prospectus sets forth
concise information about the Funds that a prospective investor should know
before investing. The address of the Funds is 2500 Westchester Avenue,
Purchase, New York 10577.
A "Statement of Additional Information" for the Funds dated
October 31, 1996 has been filed with the Securities and Exchange Commission
and is incorporated by reference herein. The Statement of Additional
Information provides information regarding certain matters discussed in
this Prospectus and other matters which may be of interest to investors,
and may be obtained without charge by calling the Funds at (800) 235-0064.
There can be no assurance that the investment objective of any Fund will be
achieved. Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, ARE NOT INSURED OR
OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY, AND
INVOLVE INVESTMENT RISKS.
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 11
Investment Practices and Restrictions 14
MANAGEMENT OF THE FUNDS
Investment Advisers 15
Sub-Adviser 16
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 17
How to Redeem Shares 18
Exchange Privilege 19
Shareholder Services 20
Effect of Banking Laws 20
OTHER INFORMATION
Dividends, Distributions and Taxes 21
General Information 22
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The investment adviser to EVERGREEN MONEY MARKET FUND and EVERGREEN TAX
EXEMPT MONEY MARKET FUND is Evergreen Asset Management Corp. which, with its
predecessors, has served as an investment adviser to the Evergreen mutual funds
since 1971. Evergreen Asset Management Corp. is a wholly-owned subsidiary of
First Union National Bank of North Carolina, which in turn is a subsidiary of
First Union Corporation, the sixth largest bank holding company in the United
States. The Capital Management Group of First Union National Bank of North
Carolina serves as investment adviser to EVERGREEN TREASURY MONEY MARKET FUND.
EVERGREEN MONEY MARKET FUND seeks as high a level of current income as is
consistent with preserving capital and providing liquidity. The Fund will invest
only in high quality money market instruments.
EVERGREEN TAX EXEMPT MONEY MARKET FUND seeks as high a level of current
income exempt from Federal income tax as is consistent with preserving capital
and providing liquidity. The Fund invests substantially all of its assets in
short-term municipal securities, the interest from which is exempt from Federal
income tax.
EVERGREEN TREASURY MONEY MARKET FUND seeks to maintain stability of
principal and current income consistent with stability of principal.
Each Fund seeks to maintain a stable net asset value of $1.00 per share
although no assurances can be given that such a stable net asset value will be
maintained.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in the Class Y Shares of the Fund. For further
information see "Purchase and Redemption of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Redemption Fee None
Exchange Fee (only applies after 4 exchanges per
year) $ 5.00
</TABLE>
The following table shows for the Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to Class Y Shares,
together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment for the periods specified assuming (i) a 5%
annual return and (ii) redemption at the end of each period.
EVERGREEN MONEY MARKET FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES Class Y
<S> <C> <C> <C>
Management Fees .48%
After 1 Year $ 6
12b-1 Fees -- After 3 Years
After 3 Years $19
Other Expenses .11%
After 5 Years $33
After 10 Years $74
Total .59%
</TABLE>
EVERGREEN TAX EXEMPT MONEY MARKET FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES Class Y
<S> <C> <C> <C>
Management Fees .49%
After 1 Year $ 6
12b-1 Fees --
After 3 Years $19
Other Expenses .11%
After 5 Years $33
After 10 Years $75
Total .60%
</TABLE>
EVERGREEN TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES Class Y
<S> <C> <C> <C>
Management Fees .35%
After 1 Year $ 5
12b-1 Fees --
After 3 Years $15
Other Expenses .12%
After 5 Years $26
After 10 Years $59
Total .47%
</TABLE>
3
<PAGE>
Evergreen Asset has agreed to reimburse EVERGREEN MONEY MARKET FUND and
EVERGREEN TAX EXEMPT MONEY MARKET FUND to the extent that the Fund's aggregate
annual operating expenses (including the investment adviser's fee, but excluding
interest, taxes, brokerage commissions, Rule 12b-1 distribution fees and
shareholder services fees, and extraordinary expenses) exceed 1% of the Fund's
average net assets.
The estimated operating expenses and examples do not reflect fee waivers
and expense reimbursements for the most recent fiscal year. Actual expenses, net
of fee waivers and expense reimbursements for the year ended August 31, 1996 for
Class Y Shares were as follows:
<TABLE>
<S> <C>
EVERGREEN MONEY MARKET FUND .45%
EVERGREEN TAX EXEMPT MONEY MARKET FUND .49%
EVERGREEN TREASURY MONEY MARKET FUND .39%
</TABLE>
From time to time, each Fund's investment adviser may, at its discretion,
waive its fee or reimburse a Fund for certain of its expenses in order to reduce
a Fund's expense ratio. The investment adviser may cease these voluntary waivers
or reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in Class Y Shares
of the Funds will bear directly or indirectly. The amounts set forth under
"Other Expenses" as well as the amounts set forth in the examples are estimated
amounts based on historical experience for the most recent fiscal year. THE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR
ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN
THOSE SHOWN. For a more complete description of the various costs and expenses
borne by the Funds see "Management of the Funds".
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the fund if shorter for EVERGREEN TREASURY MONEY MARKET FUND has been audited by
KPMG Peat Marwick LLP, the Fund's independent auditors; for EVERGREEN MONEY
MARKET FUND and EVERGREEN TAX EXEMPT MONEY MARKET FUND has been audited by Price
Waterhouse LLP, each Fund's independent auditors. A report of KPMG Peat Marwick
LLP or Price Waterhouse LLP, as the case may be, on the audited information with
respect to each Fund is incorporated by reference in the Fund's Statement of
Additional Information. The following information for each Fund should be read
in conjunction with the financial statements and related notes which are
incorporated by reference in the Fund's Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN MONEY MARKET FUND -- Y SHARES
<TABLE>
<CAPTION>
TEN MONTHS
YEAR ENDED ENDED
AUGUST 31, AUGUST 31, YEAR ENDED OCTOBER 31,
1996 1995 1994# 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning
of period.................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
operations:
Net investment income.......... .05 .05 .03 .03 .04 .07 .08 .09
Less distributions to
shareholders from net
investment income............ (.05) (.05) (.03) (.03) (.04) (.07) (.08) (.09)
Net asset value, end of
period....................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+.................. 5.3% 5.4% 2.9% 3.2% 4.2% 6.7% 8.4% 9.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(in millions)................ $671 $283 $273 $299 $358 $438 $458 $408
Ratios to average net assets:
Expenses **.................. .45% .53% .32%++ .39% .36% .30% .35% .38%
Net investment income **..... 5.16% 5.26% 3.46%++ 3.19% 4.18% 6.53% 8.08% 9.42%
<CAPTION>
NOVEMBER 2, 1987*
THROUGH
OCTOBER 31, 1988
<S> <C>
PER SHARE DATA:
Net asset value, beginning
of period.................... $1.00
Income from investment
operations:
Net investment income.......... .07
Less distributions to
shareholders from net
investment income............ (.07)
Net asset value, end of
period....................... $1.00
TOTAL RETURN+.................. 7.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(in millions)................ $161
Ratios to average net assets:
Expenses **.................. .43%++
Net investment income **..... 7.26%++
</TABLE>
# The Fund changed its fiscal year end from October 31 to August 31.
* Commencement of operations.
+ Total return is calculated for the periods indicated and is not annualized.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were reimbursed or waived by the investment adviser, the annualized
ratios of expenses and net investment income to average net assets would have
been the following:
<TABLE>
<CAPTION>
TEN MONTHS
YEAR ENDED ENDED YEAR ENDED NOVEMBER 2, 1987*
AUGUST 31, AUGUST 31, OCTOBER 31, THROUGH
1996 1995 1994 # 1993 1992 1991 1990 1989 OCTOBER 31, 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses.................. .59% .73% .71% .71% .72% .70% .69% .75% .93%
Net investment income..... 5.02% 5.06% 3.07% 2.87% 3.82% 6.13% 7.74% 9.05% 6.76%
</TABLE>
5
<PAGE>
EVERGREEN MONEY MARKET FUND -- CLASS A AND B SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
YEAR ENDED JANUARY 4, 1995* YEAR ENDED JANUARY 26, 1995*
AUGUST 31, THROUGH AUGUST 31, THROUGH
1996 AUGUST 31, 1995 1996 AUGUST 31, 1995
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period....................... $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income...................................... .05 .03 .04 .03
Less distributions to shareholders from net investment
income................................................... (.05 ) (.03) (.04) (.03)
Net asset value, end of period............................. $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+.............................................. 5.0% 3.5% 4.3% 2.8%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).................. $1,755,267 $685,155 $10,218 $7,927
Ratios to average net assets:
Expenses **.............................................. .75% .81%++ 1.45% 1.51%++
Net investment income **................................. 4.86% 5.26%++ 4.18% 4.54%++
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value for the periods indicated and
is not annualized. Contingent deferred sales charge is not reflected.
++ Annualized.
* Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were reimbursed or waived by the investment adviser, the annualized
ratios of expenses and net investment income to average net assets would have
been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
YEAR ENDED JANUARY 4, 1995* YEAR ENDED JANUARY 26, 1995*
AUGUST 31, THROUGH AUGUST 31, THROUGH
1996 AUGUST 31, 1995 1996 AUGUST 31, 1995
<S> <C> <C> <C> <C>
Expenses................................................ .89% 1.02% 1.59% 2.39%
Net investment income................................... 4.72% 5.05% 4.04% 3.66%
</TABLE>
6
<PAGE>
EVERGREEN TAX EXEMPT MONEY MARKET FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
NOVEMBER 2,
YEAR ENDED AUGUST 31, 1988* THROUGH
1996 1995 1994 1993 1992 1991 1990 AUGUST 31, 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income................. .03 .04 .02 .03 .04 .05 .06 .05
Less distributions to shareholders from
net investment income................. (.03) (.04) (.02) (.03) (.04) (.05) (.06) (.05)
Net asset value, end of period.......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+........................... 3.5% 3.6% 2.5% 2.6% 3.7% 5.5% 6.2% 5.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)............................. $617 $421 $402 $401 $417 $510 $311 $109
Ratios to average net assets:
Expenses **........................... .49% .50% .34% .34% .32% .28% .31% .24%++
Net investment income **.............. 3.44% 3.53% 2.47% 2.58% 3.72% 5.23% 5.94% 6.77%++
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value for the periods indicated and
is not annualized.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were reimbursed or waived by the investment adviser, the annualized
ratios of expenses and net investment income to average net assets would have
been the following:
<TABLE>
<CAPTION>
NOVEMBER 2,
YEAR ENDED AUGUST 31, 1988* THROUGH
1996 1995 1994 1993 1992 1991 1990 AUGUST 31, 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses.................................... .60% .63% .64% .63% .63% .66% .71% .79%
Net investment income....................... 3.33% 3.40% 2.17% 2.29% 3.41% 4.85% 5.54% 6.22%
</TABLE>
7
<PAGE>
EVERGREEN TAX EXEMPT MONEY MARKET FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
JANUARY 5, 1995*
YEAR ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period..................................................... $1.00 $1.00
Income from investment operations:
Net investment income.................................................................... .03 .02
Distributions to shareholders from net investment income................................. (.03) (.02)
Net asset value, end of period........................................................... $1.00 $1.00
TOTAL RETURN+............................................................................ 3.2% 2.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................................................ $660,516 $554,924
Ratios to average net assets:
Expenses **............................................................................ .79% .78%++
Net investment income **............................................................... 3.14% 3.28%++
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were reimbursed or waived by the investment adviser, the annualized
ratios of expenses and net investment income to average net assets would have
been the following:
<TABLE>
<CAPTION>
JANUARY 5, 1995*
YEAR ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
<S> <C> <C>
Expenses................................................................................. .90% .90%
Net investment income.................................................................... 3.03% 3.16%
</TABLE>
8
<PAGE>
EVERGREEN TREASURY MONEY MARKET FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
MARCH 6,
EIGHT MONTHS 1991*
YEAR ENDED ENDED THROUGH
AUGUST 31, AUGUST 31, YEAR ENDED DECEMBER 31, DECEMBER 31,
1996 1995 # 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period............................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income.............................................. .05 .03 .04 .03 .03 .04
Less distributions to shareholders from net investment income...... (.05) (.03) (.04) (.03) (.03) (.04)
Net asset value,
end of period.................................................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+...................................................... 5.0% 3.6% 3.8% 2.7% 3.4% 4.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(in millions).................................................... $2,608 $1,178 $755 $261 $209 $100
Ratios to average net assets:
Expenses **...................................................... .69% .63%++ .50% .48% .48% .47%++
Net investment income **......................................... 4.76% 5.30%++ 3.91% 2.70% 3.22% 4.95%++
</TABLE>
# The Fund changed its fiscal year end from December 31 to August 31.
* Commencement of operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
MARCH 6,
EIGHT MONTHS 1991*
YEAR ENDED ENDED THROUGH
AUGUST 31, AUGUST 31, YEAR ENDED DECEMBER 31, DECEMBER 31,
1996 1995 # 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Expenses........................................................ .77% .79% .78% .82% .82% 1.08%
Net investment income........................................... 4.68% 5.14% 3.63% 2.36% 2.88% 4.34%
</TABLE>
9
<PAGE>
EVERGREEN TREASURY MONEY MARKET FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
MARCH 6,
EIGHT MONTHS 1991*
YEAR ENDED ENDED THROUGH
AUGUST 31, AUGUST 31, YEAR ENDED DECEMBER 31, DECEMBER 31,
1996 1995 # 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income............................................... .05 .04 .04 .03 .04 .05
Less distributions to shareholders from net investment income....... (.05) (.04) (.04) (.03) (.04) (.05)
Net asset value,
end of period..................................................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+....................................................... 5.3% 3.8% 4.1% 3.0% 3.7% 4.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(in millions)..................................................... $760 $277 $163 $366 $286 $265
Ratios to average net assets:
Expenses **....................................................... .39% .33%++ .20% .18% .17% .20%++
Net investment income **.......................................... 5.12% 5.60%++ 3.78% 3.00% 3.61% 5.53%++
</TABLE>
# The Fund changed its fiscal year end from December 31 to August 31.
* Commencement of operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
MARCH 6,
EIGHT MONTHS 1991*
YEAR ENDED ENDED THROUGH
AUGUST 31, AUGUST 31, YEAR ENDED DECEMBER 31, DECEMBER 31,
1996 1995 # 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Expenses......................................................... .47% .49% .48% .52% .52% .52%
Net investment income............................................ 5.04% 5.44% 3.50% 2.66% 3.26% 5.21%
</TABLE>
10
<PAGE>
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVES AND POLICIES
In addition to the investment policies detailed below, each Fund may
employ certain additional investment strategies, which are discussed in
"Investment Practices and Restrictions".
EVERGREEN MONEY MARKET FUND
The investment objective of EVERGREEN MONEY MARKET FUND is to achieve as
high a level of current income as is consistent with preserving capital and
providing liquidity. This objective is a fundamental policy and may not be
changed without shareholder approval. The Fund invests in high quality money
market instruments, which are determined to be of eligible quality under
Securities and Exchange Commission ("SEC") rules and to present minimal credit
risk. Under SEC rules, eligible securities include First Tier Securities (i.e.,
securities rated in the highest short-term rating category) and Second Tier
Securities (i.e., securities which are otherwise eligible but not in the First
Tier). The rules prohibit the Fund from holding more than 5% of its value in
Second Tier Securities. The Fund's permitted investments include:
1. Marketable obligations of, or guaranteed by, the United States
Government, its agencies or instrumentalities, including issues of the United
States Treasury, such as bills, certificates of indebtedness, notes and bonds,
and issues of agencies and instrumentalities established under the authority of
an act of Congress. Some of these securities are supported by the full faith and
credit of the United States Government, others are supported by the right of the
issuer to borrow from the Treasury, and still others are supported only by the
credit of the agency or instrumentality. Agencies or instrumentalities whose
securities are supported by the full faith and credit of the United States
include, but are not limited to, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration and Government National Mortgage Association. Examples of
agencies or instrumentalities whose securities are supported by the right of the
issuer to borrow from the Treasury include, but are not limited to, the Federal
Home Loan Bank, Federal Intermediate Credit Banks, Federal National Mortgage
Association and Tennessee Valley Authority. Agencies or instrumentalities whose
securities are supported only by the credit of the agency or instrumentality
include the Interamerican Development Bank and the International Bank for
Reconstruction and Development. These obligations are supported by appropriated
but unpaid commitments of its member countries. There are no assurances that the
commitments will be undertaken in the future.
2. Commercial paper, including variable amount master demand notes,
that is rated in one of the two highest short-term rating categories by any two
of Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc.
("Moody's") or any other nationally recognized statistical rating organization
("SRO") (or by a single rating agency if only one of these agencies has assigned
a rating). The Fund will not invest more than 10% of its total assets, at the
time of the investment in question, in variable amount master demand notes. For
a description of these ratings see the Statement of Additional Information.
3. Corporate debt securities and bank obligations that are rated in
one of the two highest short-term rating categories by any two of S&P, Moody's
and any other SRO (or by a single rating agency if only one of these agencies
has assigned a rating).
4. Unrated corporate debt securities, commercial paper and bank
obligations that are issued by an issuer that has outstanding a class of
short-term debt instruments (i.e., instruments having a maturity of 366 days or
less) that (A) is comparable in priority and security to the unrated securities
and (B) meets the rating requirements of paragraphs 2 or 3 above.
5. Unrated corporate debt securities, commercial paper and bank
obligations issued by domestic and foreign companies which have an outstanding
long-term debt issue rated in the top two rating categories by a SRO and
determined by the investment adviser to be of comparable quality.
6. Unrated corporate debt securities, commercial paper and bank
obligations otherwise determined by the investment adviser to be of comparable
quality.
7. Repurchase agreements with respect to the securities described
in paragraphs 1 through 6 above.
11
<PAGE>
The Fund may invest up to 30% of its total assets in bank certificates of
deposit and bankers' acceptances payable in U.S. dollars and issued by foreign
banks (including U.S. branches of foreign banks) or by foreign branches of U.S.
banks. These investments involve risks that are different from investments in
domestic securities. These risks may include future unfavorable political and
economic developments, possible withholding taxes, seizure of foreign deposits,
currency controls, interest limitations or other governmental restrictions which
might affect the payment of principal or interest on the securities in the
Fund's portfolio. Additionally, there may be less publicly available information
about foreign issuers.
The Fund may invest in commercial paper and other short-term corporate
obligations which meet the rating criteria specified in paragraphs 3 and 4 above
which are issued in private placements pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the "Act"). Such securities are not
registered for purchase and sale by the public under the Act. The Fund has been
informed that the staff of the SEC does not consider such securities to be
readily marketable. The Fund will not invest more than 10% of its net assets in
securities which are not readily marketable (including private placement
securities) and in repurchase agreements maturing in more than seven days.
EVERGREEN TAX EXEMPT MONEY MARKET FUND
The investment objective of EVERGREEN TAX EXEMPT MONEY MARKET FUND is to
achieve as high a level of current income exempt from Federal income tax, as is
consistent with preserving capital and providing liquidity. This objective is a
fundamental policy and may not be changed without shareholder approval. The Fund
will seek to achieve its objective by investing substantially all of its assets
in a diversified portfolio of short-term (i.e., with remaining maturities not
exceeding 397 days) debt obligations issued by states, territories and
possessions of the United States and by the District of Columbia, and their
political subdivisions and duly constituted authorities, the interest from which
is exempt from Federal income tax. Such securities are generally known as
Municipal Securities. (See "Municipal Securities" below.)
The Fund will invest in Municipal Securities only if they are determined
to be of eligible quality under SEC rules and to present minimum credit risk.
Municipal Securities in which the Fund may invest include: (i) municipal
securities that are rated in one of the top two short-term rating categories by
any two of S&P, Moody's or any other nationally recognized SRO (or by a single
rating agency if only one of these agencies has assigned a rating); (ii)
municipal securities that are issued by an issuer that has outstanding a class
of short-term debt instruments (i.e., having a maturity of 366 days or less)
that (A) is comparable in priority and security to such instruments and (B)
meets the rating requirements above; and (iii) bonds with a remaining maturity
of 397 days or less that are rated no lower than one of the top two long-term
rating categories by any SRO and determined by the investment adviser to be of
comparable quality. For a description of such ratings see the Statement of
Additional Information. The Fund may also purchase Municipal Securities which
are unrated at the time of purchase up to a maximum of 20% of its total assets,
if such securities are determined by the Fund's investment adviser to be of
comparable quality. Certain Municipal Securities (primarily variable rate demand
notes) may be entitled to the benefit of standby letters of credit or similar
commitments issued by banks or other financial institutions and, in such
instances, the investment adviser will take into account the obligation of the
bank in assessing the quality of such security. Such commitments issued by banks
are not insured by the Federal Deposit Insurance Corporation or any other
agency. The ability of the Fund to meet its investment objective is necessarily
subject to the ability of municipal issuers to meet their payment obligations.
Interest income on certain types of bonds issued after August 7, 1986 to
finance nongovernmental activities is an item of "tax-preference" subject to the
Federal alternative minimum tax for individuals and corporations. To the extent
the Fund invests in these "private activity" bonds (some of which were formerly
referred to as "industrial development" bonds), individual and corporate
shareholders, depending on their status, may be subject to the alternative
minimum tax on the part of the Fund's distributions derived from the bonds. As a
matter of fundamental policy, which may not be changed without shareholder
approval, the Fund will invest at least 80% of its net assets in Municipal
Securities, the interest from which is not subject to the Federal alternative
minimum tax.
Municipal Securities. As noted above, the Fund will invest substantially all of
its assets in Municipal Securities. These include municipal bonds, short-term
municipal notes and tax exempt commercial paper. "Municipal bonds"are debt
obligations issued to obtain funds for various public purposes that are exempt
from Federal income tax in the opinion of issuer's counsel. The two principal
classifications of municipal bonds are "general obligation" and "revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue bonds
are payable only from the revenues derived from a
12
<PAGE>
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific source such as from the user of the
facility being financed. The term "municipal bonds" also includes "moral
obligation" issues which are normally issued by special purpose authorities.
Industrial development bonds ("IDBs") and private activity bonds ("PABs") are in
most cases revenue bonds and are not payable from the unrestricted revenues of
the issuer. The credit quality of IDBs and PABs is usually directly related to
the credit standing of the corporate user of the facilities being financed.
Participation interests are interests in municipal bonds, including IDBs and
PABs, and floating and variable rate obligations that are owned by banks. These
interests carry a demand feature permitting the holder to tender them back to
the bank, which demand feature is backed by an irrevocable letter of credit or
guarantee of the bank. A put bond is a municipal bond which gives the holder the
unconditional right to sell the bond back to the issuer at a specified price and
exercise date, which is typically well in advance of the bond's maturity date.
"Short-term municipal notes" and "tax exempt commercial paper" include tax
anticipation notes, bond anticipation notes, revenue anticipation notes and
other forms of short-term loans. Such notes are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements and other revenues.
Floating Rate and Variable Rate Obligations. Municipal Securities also include
certain variable rate and floating rate municipal obligations with or without
demand features. These variable rate securities do not have fixed interest
rates; rather, those rates fluctuate based upon changes in specified market
rates, such as the prime rate, or are adjusted at predesignated periodic
intervals. Such securities must comply with conditions established by the SEC
under which they may be considered to have remaining maturities of 397 days or
less. Certain of these obligations may carry a demand feature that gives the
Fund the right to demand prepayment of the principal amount of the security
prior to its maturity date. The demand obligation may or may not be backed by
letters of credit or other guarantees of banks or other financial institutions.
Such guarantees may enhance the quality of the security. As a matter of
fundamental policy, which may not be changed without shareholder approval, the
Fund will limit the value of its investments in any floating or variable rate
securities which are not readily marketable and in all other not readily
marketable securities to 10% or less of its net assets.
Stand-by Commitments. The Fund may also acquire "stand-by commitments" with
respect to Municipal Securities held in its portfolio. Under a stand-by
commitment, a dealer agrees to purchase, at the Fund's option, specified
Municipal Securities at a specified price. The Fund expects that stand-by
commitments generally will be available without the payment of direct or
indirect consideration. However, if necessary and advisable, the Fund may pay
for stand-by commitments either separately in cash or by paying a higher price
for portfolio securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities). The
total amount paid in either manner for outstanding stand-by commitments held in
the Fund's portfolio will not exceed 10% of the value of the Fund's total assets
calculated immediately after each stand-by commitment is acquired. The Fund will
enter into stand-by commitments only with banks and broker-dealers that, in the
judgment of the Fund's investment adviser, present minimal credit risks.
Taxable Investments. The Fund may temporarily invest up to 20% of the Fund's net
assets in taxable securities under any one or more of the following
circumstances: (a) pending investment of proceeds of sale of Fund shares or of
portfolio securities, (b) pending settlement of purchases of portfolio
securities, and (c) to maintain liquidity for the purpose of meeting anticipated
redemptions. In addition, the Fund may temporarily invest more than 20% of its
total assets in taxable securities for defensive purposes. The Fund may invest
for defensive purposes during periods when the Fund's assets available for
investment exceed the available Municipal Securities that meet the Fund's
quality and other investment criteria. Taxable securities in which the Fund may
invest on a short-term basis include obligations of the United States
Government, its agencies or instrumentalities, including repurchase agreements
with banks or securities dealers involving such securities; time deposits
maturing in not more than seven days; other debt securities rated within the two
highest ratings assigned by an SRO; commercial paper rated in the highest grade
by Moody's or S&P; and certificates of deposit issued by United States branches
of United States banks with assets of $1 billion or more.
EVERGREEN TREASURY MONEY MARKET FUND
The investment objective of EVERGREEN TREASURY MONEY MARKET FUND, which
is a matter of fundamental policy that may not be changed without shareholder
approval, is to maintain stability of principal while earning current income.
The Fund will only attempt to seek income to the extent consistent with
stability of principal and, therefore, investments will be made in short-term
United States Treasury obligations with an average dollar-weighted maturity of
90 days or less and obligations the principal and interest of which are backed
by the full faith and credit of the United States Government, provided that the
Fund shall, under normal market conditions, invest at least 65% of its total
assets in obligations issued directly by the U.S. Treasury. The Fund also may
enter into
13
<PAGE>
repurchase agreements collateralized by the types of securities in which it may
invest and lend its portfolio securities to qualified institutional investors.
As a matter of investment strategy, the Fund's investment adviser intends to
maintain a dollar-weighted average maturity for the Fund of 60 days or less.
EVERGREEN TREASURY MONEY MARKET FUND is suitable for conservative
investors seeking high current yields plus relative safety. The Fund provides a
reasonable means of maximizing opportunities and minimizing risks resulting from
changing interest rates.
The short-term United States Treasury obligations in which the Fund
invests are issued by the U.S. Government and are fully guaranteed as to
principal and interest by the United States. Such securities will have a
maturity date that is 397 days or less from the date of acquisition unless they
are purchased under an agreement that provides for repurchase of the securities
from the Fund within 397 days from the date of acquisition. The Fund may also
retain Fund assets in cash.
INVESTMENT PRACTICES AND RESTRICTIONS
General. The Funds invest only in securities that have remaining maturities of
397 days (thirteen months) or less at the date of purchase. For this purpose,
floating rate or variable rate obligations (described under EVERGREEN TAX EXEMPT
MONEY MARKET FUND, above), which are payable on demand, but which may otherwise
have a stated maturity in excess of this period, will be deemed to have
remaining maturities of less than 397 days pursuant to conditions established by
the SEC. The Funds maintain a dollar-weighted average portfolio maturity of
ninety days or less. The Funds follow these policies to maintain a stable net
asset value of $1.00 per share, although there is no assurance they can do so on
a continuing basis. The market value of the obligations in a Fund's portfolio
can be expected to vary inversely to changes in prevailing interest rates. If a
portfolio security is no longer of eligible quality, a Fund shall dispose of
such security in an orderly fashion as soon as reasonably practicable, unless
the Trustees determine, in light of market conditions or other factors, that
disposal of the instrument would not be in the best interests of the Fund and
its shareholders.
The ability of each Fund to meet its investment objective is necessarily
subject to the ability of the issuers of securities in which the Funds invest to
meet their payment obligations. In addition, the portfolio of each Fund will be
affected by general changes in interest rates which will result in increases or
decreases in the value of the obligations held by the Fund. Investors should
recognize that, in periods of declining interest rates, the yield of a Fund will
tend to be somewhat higher than prevailing market rates, and in periods of
rising interest rates, the yield of a Fund will tend to be somewhat lower. Also,
when interest rates are falling, the inflow of net new money to a Fund from the
continuous sale of its shares will likely be invested in portfolio instruments
producing lower yields than the balance of the Fund's portfolio, thereby
reducing the current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
Repurchase Agreements. The Funds may enter into repurchase agreements. A
repurchase agreement is an arrangement pursuant to which a buyer purchases a
security and simultaneously agrees to resell it to the vendor at a price that
results in an agreed-upon market rate of return which is effective for the
period of time (which is normally one to seven days, but may be longer) the
buyer's money is invested in the security. The arrangement results in a fixed
rate of return that is not subject to market fluctuations during a Fund's
holding period. Repurchase agreements may be entered into with member banks of
the Federal Reserve System, including the Fund's custodian or "primary dealers"
(as designated by the Federal Reserve Bank of New York) in United States
Government securities. Each Fund will require continued maintenance of
collateral with its Custodian in an amount equal to, or in excess of, the
repurchase price (including accrued interest). In the event a vendor defaults on
its repurchase obligation, a Fund might suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
the vendor becomes the subject of bankruptcy proceedings, a Fund might be
delayed in selling the collateral. Each Fund's investment adviser will review
and continually monitor the creditworthiness of each institution with which the
Fund enters into a repurchase agreement to evaluate these risks. A Fund may not
enter into repurchase agreements if, as a result, more than 10% of a Fund's
total assets would be invested in repurchase agreements maturing in more than
seven days and in other securities that are not readily marketable.
Securities Lending. In order to generate income and to offset expenses, the
Funds may lend portfolio securities to brokers, dealers and other financial
organizations and enter into reverse repurchase agreements. Each Fund's
investment adviser will monitor the creditworthiness of such borrowers. Loans of
securities by the Funds if and when made, may not exceed 30% of a Fund's total
assets and will be collateralized by cash, letters of credit or United States
Government securities that are maintained at all times in an amount equal to at
least 100% of the
14
<PAGE>
current market value of the loaned securities, including accrued interest. While
such securities are on loan, the borrower will pay a Fund any income accruing
thereon, and the Fund may invest the cash collateral in portfolio securities,
thereby increasing its return. A Fund will have the right to call any such loan
and obtain the securities loaned at any time on five days' notice. Any gain or
loss in the market price of the loaned securities which occurs during the term
of the loan would affect a Fund and its investors. A Fund may pay reasonable
fees in connection with such loans.
When-Issued Securities. EVERGREEN TAX EXEMPT MONEY MARKET FUND and EVERGREEN
TREASURY MONEY MARKET FUND may purchase securities on a "when-issued" basis
(i.e., for delivery beyond the normal settlement date at a stated price and
yield). A Fund generally would not pay for such securities or start earning
interest on them until they are received. However, when a Fund purchases
securities on a when-issued basis, it assumes the risks of ownership at the time
of purchase, not at the time of receipt. Failure of the issuer to deliver a
security purchased by a Fund on a when-issued basis may result in the Fund
incurring a loss or missing an opportunity to make an alternative investment.
EVERGREEN TAX EXEMPT MONEY MARKET FUND does not expect that commitments to
purchase when-issued securities will normally exceed 25% of its total assets and
EVERGREEN TREASURY MONEY MARKET FUND does not expect that such commitments will
exceed 20% of its total assets. The Funds do not intend to purchase when-issued
securities for speculative purposes but only in furtherance of their investment
objective.
Illiquid Securities. The Funds may invest up to 10% of their net assets in
illiquid securities and other securities which are not readily marketable,
including repurchase agreements with maturities longer than seven days. In the
case of EVERGREEN TAX EXEMPT MONEY MARKET FUND and EVERGREEN MONEY MARKET FUND,
securities eligible for resale pursuant to Rule 144A under the Act, which have
been determined to be liquid, will not be considered by each Fund's investment
adviser to be illiquid or not readily marketable and, therefore, are not subject
to the aforementioned 10% limit. The inability of a Fund to dispose of illiquid
or not readily marketable investments readily or at a reasonable price could
impair the Fund's ability to raise cash for redemptions or other purposes. The
liquidity of securities purchased by a Fund which are eligible for resale
pursuant to Rule 144A will be monitored by each Fund's investment adviser on an
ongoing basis, subject to the oversight of the Trustees. In the event that such
a security is deemed to be no longer liquid, a Fund's holdings will be reviewed
to determine what action, if any, is required to ensure that the retention of
such security does not result in a Fund having more than 10% of its net assets
invested in illiquid or not readily marketable securities.
Other Investment Policies. The Funds may borrow money for temporary or emergency
purposes in amounts not in excess of 10% of the value of a Fund's total assets
in the case of EVERGREEN TAX EXEMPT MONEY MARKET FUND and EVERGREEN MONEY MARKET
FUND and one-third of the value of EVERGREEN TREASURY MONEY MARKET FUND'S total
assets, including the amount borrowed. As another means of borrowing each Fund
may agree to sell portfolio securities to financial institutions such as banks
and broker-dealers and to repurchase them at a mutually agreed upon date and
price (a "reverse repurchase agreement") at the time of such borrowing in
amounts up to 5% of the value of their total assets. A Fund will not purchase
any securities whenever any borrowings (including reverse repurchase agreements)
are outstanding. If a Fund enters into a reverse repurchase agreement, it will
place in a segregated custodial account cash, United States Government
securities or liquid high grade debt obligations having a value equal to the
repurchase price (including accrued interest) and will subsequently monitor the
account to ensure that such equivalent value is maintained. Reverse repurchase
agreements involve the risk that the market value of the securities sold by a
Fund may decline below the repurchase price of those securities.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which each Fund has been established ("Trustees"). Evergreen Asset
Management Corp. ("Evergreen Asset") has been retained to serve as investment
adviser to EVERGREEN MONEY MARKET FUND and EVERGREEN TAX EXEMPT MONEY MARKET
FUND. Evergreen Asset succeeded on June 30, 1994 to the advisory business of a
corporation with the same name, but under different ownership, which was
organized in 1971. Evergreen Asset, with its predecessors, has served as
investment adviser to the Evergreen mutual funds since 1971. Evergreen Asset is
a wholly-owned subsidiary of First Union National Bank of North Carolina
("FUNB"). The address of Evergreen Asset is 2500
15
<PAGE>
Westchester Avenue, Purchase, New York 10577. FUNB is a subsidiary of First
Union Corporation ("First Union"), the sixth largest bank holding company in the
United States. Stephen A. Lieber and Nola Maddox Falcone serve as the chief
investment officers of Evergreen Asset and, along with Theodore J. Israel, Jr.,
were the owners of Evergreen Asset's predecessor and the former general partners
of Lieber & Company, which, as described below, provides certain subadvisory
services to Evergreen Asset in connection with its duties as investment adviser
to the aforementioned Funds. The Capital Management Group of FUNB ("CMG") serves
as investment adviser to EVERGREEN TREASURY MONEY MARKET FUND.
First Union is headquartered in Charlotte, North Carolina, and had $139.9
billion in consolidated assets as of June 30, 1996. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States. CMG manages or otherwise oversees the
investment of over $42.1 billion in assets belonging to a wide range of clients,
including all the series of Evergreen Investment Trust, the two series of
Evergreen Lexicon Fund (formerly The FFB Lexicon Fund) and the two series of
Evergreen Tax-Free Trust (formerly FFB Funds Trust), First Union Brokerage
Services, Inc., a wholly-owned subsidiary of FUNB, is a registered broker-dealer
that is principally engaged in providing retail brokerage services consistent
with its federal banking authorizations. First Union Capital Markets Corp., a
wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
Evergreen Asset manages investments, provides various administrative
services and supervises the daily business affairs of EVERGREEN MONEY MARKET
FUND and EVERGREEN TAX EXEMPT MONEY MARKET FUND, subject to the authority of the
Trustees. Evergreen Asset is entitled to receive from each Fund an annual fee
equal to .50 of 1% of average daily net assets of each Fund on the first $1
billion in assets and .45 of 1% of average daily net assets in excess of $1
billion. However, Evergreen Asset has in the past, and may in the future,
voluntarily waived all or a portion of its fees for the purpose of reducing each
Fund's expense ratio. For the fiscal year ended August 31, 1996 Evergreen Asset
waived a portion of the advisory fee payable by the EVERGREEN MONEY MARKET FUND
and EVERGREEN TAX EXEMPT MONEY MARKET FUND as set forth in the section entitled
"Financial Highlights". The total expenses as a percentage of average daily net
assets on an annualized basis for EVERGREEN MONEY MARKET FUND and EVERGREEN TAX
EXEMPT MONEY MARKET FUND for the fiscal year ended August 31, 1996 are also set
forth in the section entitled "Financial Highlights".
CMG manages investments and supervises the daily business affairs of
EVERGREEN TREASURY MONEY MARKET FUND and, as compensation therefor, is entitled
to receive an annual fee equal to .35 of 1% of average daily net assets of the
Fund. For the fiscal year ended August 31, 1996 CMG waived a portion of the
advisory fee payable by the EVERGREEN TREASURY MONEY MARKET FUND as set forth in
the section entitled "Financial Highlights". The total annualized operating
expenses of EVERGREEN TREASURY MONEY MARKET FUND for its fiscal year ended
August 31, 1996 are also set forth in the section entitled "Financial
Highlights".
Evergreen Asset serves as administrator to EVERGREEN TREASURY MONEY
MARKET FUND and is entitled to receive a fee based on the average daily net
assets of the Fund at a rate based on the total assets of the mutual funds
administered by Evergreen Asset for which CMG or Evergreen Asset also serve as
investment adviser, calculated in accordance with the following schedule: .050%
of the first $7 billion; .035% on the next $3 billion; .030% on the next $5
billion; .020% on the next $10 billion; .015% on the next $5 billion; and .010%
on assets in excess of $30 billion. Furman Selz LLP, an affiliate of Evergreen
Funds Distributor, Inc., distributor for the Evergreen group of mutual funds,
serves as sub-administrator to EVERGREEN TREASURY MONEY MARKET FUND and is
entitled to receive a fee from the Fund calculated on the average daily net
assets of the Fund at a rate based on the total assets of the mutual funds
administered by Evergreen Asset for which CMG or Evergreen Asset also serve as
investment adviser, calculated in accordance with the following schedule: .0100%
of the first $7 billion; .0075% on the next $3 billion; .0050% on the next $15
billion; and .0040% on assets in excess of $25 billion. The total assets of the
mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset
serve as investment adviser were approximately $15.2 billion as of June 30,
1996.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provide that Lieber & Company's research department and staff will
furnish Evergreen Asset with information, investment recommendations, advice and
assistance, and will be generally available for consultation on the portfolios
of EVERGREEN MONEY MARKET FUND and EVERGREEN TAX EXEMPT MONEY MARKET FUND.
Lieber & Company will be reimbursed by Evergreen Asset in connection with the
rendering of services on the basis of the direct and indirect
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costs of performing such services. There is no additional charge to EVERGREEN
MONEY MARKET FUND and EVERGREEN TAX EXEMPT MONEY MARKET FUND for the services
provided by Lieber & Company. The address of Lieber & Company is 2500
Westchester Avenue, Purchase, New York 10577. Lieber & Company is an indirect,
wholly-owned, subsidiary of First Union.
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
Eligible investors may purchase Fund shares at net asset value by mail or
wire as described below. The Funds impose no sales charges on Class Y shares.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) persons who at or prior to December 30, 1994, owned shares
in a mutual fund advised by Evergreen Asset, (ii) certain institutional
investors and (iii) investment advisory clients of CMG, Evergreen Asset or their
affiliates. The minimum initial investment is $1,000, which may be waived in
certain situations. There is no minimum for subsequent investments. Investors
may make subsequent investments by establishing a Systematic Investment Plan or
a Telephone Investment Plan.
Purchases by Mail or Wire. Each investor must complete the Share Purchase
Application and mail it, together with a check made payable to the Fund whose
shares are being purchased, to State Street Bank and Trust Company ("State
Street") at P.O. Box 9021, Boston, Massachusetts 02205-9827. Checks not drawn on
U.S. banks will be subject to foreign collection which will delay an investor's
investment date and will be subject to processing fees.
When making subsequent investments, an investor should either enclose the
return remittance portion of the statement, or indicate on the face of the
check, the name of the Fund in which an investment is to be made, the exact
title of the account, the address, and the Fund account number. Purchase
requests should not be sent to a Fund in New York. If they are, the Fund must
forward them to State Street, and the request will not be effective until State
Street receives them.
Initial investments may also be made by wire by (i) calling State Street
at (800) 423-2615 for an account number and (ii) instructing your bank, which
may charge a fee, to wire federal funds to State Street, as follows: State
Street Bank and Trust Company, ABA No.0110-0002-8, Attn: Custodian and
Shareholder Services. The wire must include references to the Fund in which an
investment is being made, account registration, and the account number. A
completed Application must also be sent to State Street indicating that the
shares have been purchased by wire, giving the date the wire was sent and
referencing the account number. Subsequent wire investments may be made by
existing shareholders by following the instructions outlined above. It is not
necessary, however, for existing shareholders to call for another account
number.
How the Funds Value Their Shares. The net asset value of each Fund's shares for
purposes of both purchases and redemptions is determined twice daily, at 12 noon
(Eastern time) and promptly after the regular close of the New York Stock
Exchange (the "Exchange") (currently 4:00 p.m. Eastern time) each business day
(i.e., any weekday exclusive of days on which the Exchange or State Street is
closed). The Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value per share is calculated by taking the sum of the values of a
Fund's investments and any cash and other assets, subtracting liabilities, and
dividing by the total number of shares outstanding. All expenses, including the
fees payable to each Fund's Investment adviser, are accrued daily. The
securities in a Fund's portfolio are valued on an amortized cost basis. Under
this method of valuation, a security is initially valued at its acquisition
cost, and thereafter, a constant straight-line amortization of any discount or
premium is assumed each day regardless of the impact of fluctuating interest
rates on the market value of the security. The market value of the obligations
in a Fund's portfolio can be expected to vary inversely to changes in prevailing
interest rates. As a result, the market value of the obligations in a Fund's
portfolio may vary from the value determined using the amortized cost method.
Securities which are not rated are normally valued on the basis of valuations
provided by a pricing service when such prices are believed to reflect the fair
value of such securities. Other assets and securities for which no quotations
are readily available are valued at the fair value as determined in good faith
by the Trustees.
Each Fund attempts to maintain its net asset value at $1.00 per share.
Under most conditions, management believes this will be possible, although there
can be no assurance that this will be achieved. Calculations are periodically
made to compare the value of a Fund's portfolio valued at amortized cost with
market
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values. If a deviation of 1/2 of 1% or more were to occur between the net asset
value calculated by reference to market values and a Fund's $1.00 per share net
asset value, or if there were other deviations which the Trustees believe would
result in a material dilution to shareholders or purchasers, the Trustees would
promptly consider what action, if any, should be initiated.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from his or her account to reimburse a Fund or the Fund's investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen mutual funds.
The Funds will not accept third party checks other than those payable directly
to a shareholder whose account has been in existence at least thirty days.
Shares of the Funds are sold at the net asset value per share next
determined after a shareholder's investment has been converted to federal funds.
Investments by federal funds wire will be effective upon receipt. Qualified
institutions may telephone orders for the purchase of Fund shares. Shares
purchased by institutions via telephone will receive the dividend declared on
that day if the telephone order is placed by 12 noon (Eastern time), and federal
funds are received the same day by 4:00 p.m. (Eastern time). Institutions should
telephone the Fund at the number on the front page of this Prospectus for
additional information on same day purchases by telephone. Investment checks
received at State Street will be invested on the date of receipt. Shareholders
will begin earning dividends the following business day.
The Share Purchase Application may not be used to invest in any of the
prototype retirement plans for which the EVERGREEN MONEY MARKET FUND is an
available investment. For information about the requirements to make such
investments, including copies of the necessary application forms, please call
the telephone number set forth on the cover page of this Prospectus. A Fund
cannot accept investments specifying a certain price or date and reserves the
right to reject any specific purchase order, including orders in connection with
exchanges from the other Evergreen mutual funds . Although not currently
anticipated, each Fund reserves the right to suspend the offer of shares for a
period of time.
HOW TO REDEEM SHARES
You may "redeem", i.e. sell, your shares in a Fund to the Fund on any day
the Exchange is open, either directly or through your financial intermediary.
The price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, a Fund will
not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to ten days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or cancelled.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street which is the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, State Street, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, financial intermediaries, fiduciaries and surviving joint owners.
Signature guarantees are required for all redemption requests for shares with a
value of more than $10,000 or where the redemption proceeds are to be mailed to
an address other than that shown in the account registration. A signature
guarantee must be provided by a bank or trust company (not a Notary Public), a
member firm of a domestic stock exchange or by other financial institutions
whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling State Street at (800) 423-2615 between the hours of 8:00 a.m. to 5:30
p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on
which the Exchange or State Street's offices are closed). The Exchange is closed
on New Year's Day, Presidents Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Redemption requests made after
4:00 p.m. (Eastern time) will be processed using the net asset value determined
on the next business day. Such redemption requests must include the
shareholder's account name, as registered with a Fund, and the account number.
During periods of drastic economic or market changes, shareholders may
experience difficulty in effecting telephone redemptions. Shareholders who are
unable to reach a Fund or State Street by telephone should follow the procedures
outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose
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how the redemption proceeds are to be paid. Redemption proceeds will either (i)
be mailed by check to the shareholder at the address in which the account is
registered or (ii) be wired to an account with the same registration as the
shareholder's account in a Fund at a designated commercial bank. State Street
currently deducts a $5.00 wire charge from all redemption proceeds wired. This
charge is subject to change without notice. Redemption proceeds will be wired on
the same day if the request is made prior to 12 noon (Eastern time). Such
shares, however, will not earn dividends for that day. Redemption requests
received after 12 noon will earn dividends for that day, and the proceeds will
be wired on the following business day. A shareholder who decides later to use
this service, or to change instructions already given, should fill out a
Shareholder Services Form and send it to State Street Bank and Trust Company,
P.O. Box 9021, Boston, Massachusetts 02205-9827, with such shareholder's
signature guaranteed by a bank or trust company (not a Notary Public), a member
firm of a domestic stock exchange or by other financial institutions whose
guarantees are acceptable to State Street. Shareholders should allow
approximately ten days for such form to be processed. The Funds will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. These procedures include requiring some form of personal identification
prior to acting upon instructions and tape recording of telephone instructions.
If a Fund fails to follow such procedures, it may be liable for any losses due
to unauthorized or fraudulent instructions. The Funds will not be liable for
following telephone instructions reasonably believed to be genuine. The Funds
reserve the right to refuse a telephone redemption if it is believed advisable
to do so. Financial intermediaries may charge a fee for handling telephonic
requests. Procedures for redeeming Fund shares by telephone may be modified or
terminated without notice at any time.
Redemptions by Check. Upon request, each Fund will provide holders of Class Y
shares, without charge, with checks drawn on the Fund that will clear through
State Street. Shareholders will be subject to State Street's rules and
regulations governing such checking accounts. Checks will be sent usually within
ten business days following the date the account is established. Checks may be
made payable to the order of any payee in an amount of $250 or more. The payee
of the check may cash or deposit it like a check drawn on a bank. (Investors
should be aware that, as in the case with regular bank checks, certain banks may
not provide cash at the time of deposit, but will wait until they have received
payment from State Street.) When such a check is presented to State Street for
payment, State Street, as the shareholder's agent, causes the Fund to redeem a
sufficient number of full and fractional shares in the shareholder's account to
cover the amount of the check. Checks will be returned by State Street if there
are insufficient or uncollectable shares to meet the withdrawal amount. The
check writing procedure for withdrawal enables shareholders to continue earning
income on the shares to be redeemed up to but not including the date the
redemption check is presented to State Street for payment.
Shareholders wishing to use this method of redemption, should fill out
the appropriate part of the Share Purchase Application (including the Signature
Card) and mail the completed form to State Street Bank and Trust Company, P.O.
Box 9021, Boston, Massachusetts 02205-9827. Shareholders requesting this service
after an account has been opened must contact State Street since additional
documentation will be required. Currently, there is no charge either for checks
or for the clearance of any checks. This service may be terminated or altered at
any time.
General. Under unusual circumstances, a Fund may suspend redemptions or postpone
payment for up to seven days or longer, as permitted by Federal securities law.
The Funds reserve the right to close an account that through redemption has
remained below $1,000 for thirty days. Shareholders will receive sixty days'
written notice to increase the account value before the account is closed. The
Funds have elected to be governed by Rule 18f-1 under the Investment Company Act
of 1940 pursuant to which each Fund is obligated to redeem shares solely in
cash, up to the lesser of $250,000 or 1% of a Fund's total net assets during any
ninety day period for any one shareholder. See the Statement of Additional
Information for further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class of the other Evergreen mutual funds by telephone or mail as
described below. Once an exchange request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled. Exchanges will be made on the
basis of the relative net asset values of the shares exchanged next determined
after an exchange request is received. An exchange, which represents an initial
investment in another Evergreen mutual fund, is subject to the minimum
investment and suitability requirements of each Fund.
Each of the Evergreen mutual funds has different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange.
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An exchange is treated for Federal income tax purposes as a redemption and
purchase of shares and may result in the realization of a capital gain or loss.
Each Fund imposes a fee of $5 per exchange on shareholders who exchange in
excess of four times per calendar year. This exchange privilege may be
materially modified or discontinued at any time by the Fund upon sixty days'
notice to shareholders and is only available in states in which shares of the
fund being acquired may lawfully be sold.
Exchanges by Telephone and Mail. You may exchange shares by telephone by calling
State Street at (800) 423-2615. Exchange requests made after 4:00 p.m. (Eastern
time) will be processed using the net asset value determined on the next
business day. During periods of drastic economic or market changes, shareholders
may experience difficulty in effecting telephone exchanges. You should follow
the procedures outlined below for exchanges by mail if you are unable to reach
State Street by telephone. If you wish to use the telephone exchange service you
should indicate this on the Share Purchase Application. As noted above, each
Fund will employ reasonable procedures to confirm that instructions for the
redemption or exchange of shares communicated by telephone are genuine. A
telephone exchange may be refused by a Fund or State Street if it is believed
advisable to do so. Procedures for exchanging Fund shares by telephone may be
modified or terminated at any time. Written requests for exchanges should follow
the same procedures outlined for written redemption requests in the section
entitled "How to Redeem Shares", however, no signature guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more information
about these services or your account, contact your financial intermediary,
Evergreen Funds Distributor, Inc. ("EFD"), the distributor of the Funds' shares,
or the number on the front page of this Prospectus. Some services are described
in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25 per month or
$75 per quarter. Each Fund reserves the right to close an account that through
liquidation of the Systematic Investment Plan has not reached a minimum of
$1,000 ($250 for retirement accounts) within twenty-four months of the initial
investment.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $25,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account two business days after the request
is received.
Shares purchased under the Funds Systematic Investment Plan or Telephone
Investment Plan may not be redeemed for ten days from the date of investment.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Funds
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $75. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gain
distributions reinvested automatically.
Tax Sheltered Retirement Plans. Eligible investors may open a pension and profit
sharing account in any Evergreen mutual fund (except those funds having an
objective of providing tax free income) under the following prototype retirement
plans: (i) Individual Retirement Accounts ("IRAs") and Rollover IRAs; (ii)
Simplified Employee Pension (SEP) for sole proprietors, partnerships and
corporations; and (iii) Profit-Sharing and Money Purchase Pension Plans for
corporations and their employees.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Funds at the net asset value per share at the close of business on the last
business day of each month, unless otherwise requested by a shareholder in
writing. If the transfer agent does not receive a written request for subsequent
dividends and/or distributions to be paid in cash at least three full business
days prior to a given record date, the dividends and/or distributions to be paid
to a shareholder will be reinvested.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or
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distributing the shares of registered open-end investment companies such as the
Funds. Such laws and regulations also prohibit banks from issuing, underwriting
or distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Funds declare substantially all of their net income as dividends on
each business day. Such dividends are paid monthly. Net income, for dividend
purposes, includes accrued interest and any market discount or premium that day,
less the estimated expenses of a Fund. Gains or losses realized upon the sale of
portfolio securities are not included in net income, but are reflected in the
net asset value of a Fund's shares. Distributions of any net realized capital
gains will be made annually or more frequently as required by the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"). The amount of
dividends may fluctuate from day to day, and the dividend may be omitted on a
day where Fund expenses exceed net investment income. Dividends and
distributions generally are taxable in the year in which they are paid, except
any dividends paid in January that were declared in the previous calendar
quarter may be treated as paid in the immediately preceding December.
Such dividends will be automatically reinvested in full and fractional
shares of a Fund on the last business day of each month. However, shareholders
who so inform the transfer agent in writing may have their dividends paid out in
cash monthly. Shareholders who invest by check will be credited with a dividend
on the business day following initial investment. Shareholders will receive
dividends on investments made by federal funds bank wire the same day the wire
is received provided that wire purchases are received by State Street by 12 noon
(Eastern time). Shares purchased by qualified institutions via telephone as
described in "How to Purchase Shares" will receive the dividend declared on that
day if the telephone order is placed by 12 noon (Eastern time), and federal
funds are received by 4:00 p.m. (Eastern time). All other wire purchases
received after 12 noon (Eastern time) will earn dividends beginning the
following business day. Dividends accruing on the day of redemption will be paid
to redeeming shareholders except for redemptions by check and where proceeds are
wired the same day. (See "How to Redeem Shares".)
Each Fund has qualified and intends to continue to qualify to be treated
as a regulated investment company under the Code. While so qualified, it is
expected that each Fund will not be required to pay any Federal income taxes on
that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. The excise tax generally does not apply to the tax exempt income
of a regulated investment company (such as EVERGREEN TAX EXEMPT MONEY MARKET
FUND) that pays exempt interest dividends. Except as noted below with respect to
EVERGREEN TAX EXEMPT MONEY MARKET FUND, most shareholders of the Funds normally
will have to pay Federal income taxes and any state or local taxes on the
dividends and distributions they receive from a Fund.
EVERGREEN TAX EXEMPT MONEY MARKET FUND will designate and pay
exempt-interest dividends derived from interest earned on qualifying tax exempt
obligations. Such exempt-interest dividends may be excluded by shareholders of
the Fund from their gross income for Federal income tax purposes, however, (1)
all or a portion of such exempt-interest dividends may be a specific preference
item for purposes of the Federal individual and corporate alternative minimum
taxes to the extent that they are derived from certain types of private activity
bonds
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issued after August 7, 1986, and (2) all exempt-interest dividends will be a
component of "adjusted current earnings" for purposes of the Federal corporate
alternative minimum tax. Dividends paid from taxable income, if any, and
distributions of any net realized short-term capital gains (whether from tax
exempt or taxable obligations) are taxable as ordinary income, even though
received in additional Fund shares. Market discount recognized on taxable and
tax-free bonds is taxable as ordinary income, not as excludable income.
Following the end of each calendar year, every shareholder of the Funds
will be sent applicable tax information and information regarding the dividends
and capital gain distributions made during the calendar year. Under current law,
the highest Federal income tax rate applicable to net long-term capital gains
realized by individuals is 28%. The rate applicable to corporations is 35%.
Since the Funds gross income is ordinarily expected to be interest income, it is
not expected that the 70% dividends-received deduction for corporations will be
applicable. Specific questions should be addressed to the investor's own tax
adviser.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that the investor's social security
or taxpayer identification number is correct and that the investor is not
currently subject to backup withholding or is exempt from backup withholding.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. The EVERGREEN MONEY MARKET FUND is a separate investment series of
Evergreen Money Market Trust, a Massachusetts business trust organized in 1987.
The EVERGREEN TAX EXEMPT MONEY MARKET FUND is a separate investment series of
The Evergreen Municipal Trust, a Massachusetts business trust organized in 1988.
The EVERGREEN TREASURY MONEY MARKET FUND is a separate investment series of
Evergreen Investment Trust (formerly First Union Funds), a Massachusetts
business trust organized in 1984.
The Funds do not intend to hold annual shareholder meetings; shareholder
meetings will be held only when required by applicable law. Shareholders have
available certain procedures for the removal of Trustees.
A shareholder in each Class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable
contingent deferred sales charge. The Trusts are empowered to establish, without
shareholder approval, additional investment series, which may have different
investment objectives, and additional Classes of shares for any existing or
future series. If an additional series or Class were established in a Fund, each
share of the series or Class would normally be entitled to one vote for all
purposes. Generally, shares of each series and Class would vote together as a
single Class on matters, such as the election of Trustees, that affect each
series and Class in substantially the same manner. Class A, B and Y shares have
identical voting, dividend, liquidation and other rights, except that each Class
bears, to the extent applicable, its own distribution and transfer agency
expenses as well as any other expenses applicable only to a specific Class. Each
Class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate Class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Custodian, Registrar, Transfer Agent And Dividend-Disbursing Agent. State Street
Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as
each Fund's custodian, registrar, transfer agent and dividend-disbursing agent.
State Street is compensated for its services as transfer agent by a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares.
Principal Underwriter. EFD, an affiliate of Furman Selz LLC, located 230 Park
Avenue, New York, New York 10017, is the principal underwriter of the Funds.
Furman Selz LLC also acts as sub-administrator to EVERGREEN TREASURY MONEY
MARKET FUND and provides certain sub-administrative services to Evergreen Asset
in connection with its role as investment adviser to EVERGREEN TAX EXEMPT MONEY
MARKET FUND and EVERGREEN MONEY MARKET FUND, including providing personnel to
serve as officers of the Funds.
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Other Classes of Shares. EVERGREEN MONEY MARKET FUND offers three classes of
shares, Class A, Class B and Class Y. EVERGREEN TAX EXEMPT MONEY MARKET FUND and
EVERGREEN TREASURY MONEY MARKET FUND each offer two classes of shares, Class A
and Class Y. Class Y shares are the only Class offered by this Prospectus and
are only available to (i) persons who at or prior to December 31, 1994, owned
shares in a mutual fund advised by Evergreen Asset, (ii) certain institutional
investors and (iii) investment advisory clients of CMG, Evergreen Asset or their
affiliates. The dividends payable with respect to Class A and Class B shares
will be less than those payable with respect to Class Y shares due to the
distribution and distribution and shareholder servicing related expenses borne
by Class A and Class B shares and the fact that such expenses are not borne by
Class Y shares.
Performance Information. From time to time, a Fund may quote its yield in
advertisements or in reports to shareholders. Yield information may be useful in
reviewing the performance of a Fund and for providing a basis for comparison
with other investment alternatives. However, since net investment income of a
Fund changes in response to fluctuations in interest rates and Fund expenses,
any given yield quotation should not be considered representative of a Fund's
yields for any future period.
The method of calculating each Fund's yield is set forth in the Statement
of Additional Information. Before investing in the EVERGREEN TAX EXEMPT MONEY
MARKET FUND, the investor may want to determine which investment -- tax-free or
taxable -- will result in a higher after-tax return. To do this, the yield on
the tax-free investment should be divided by the decimal determined by
subtracting from 1 the highest Federal tax rate to which the investor currently
is subject. For example, if the tax-free yield is 6% and the investor's maximum
tax bracket is 36%, the computation is:
6% Tax-Free Yield /(1 - .36 Tax Rate) = 6/.64 = 9.38% Taxable Yield.
In this example, the investor's after-tax return will be higher from the
6% tax-free investment if available taxable yields are below 9.38%. Conversely,
the taxable investment will provide a higher return when taxable yields exceed
9.38%. This is only an example and is not necessarily reflective of a Fund's
yield. The tax equivalent yield will be lower for investors in the lower income
brackets.
Comparative performance information may also be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., IBC/Donoghue's Money Fund Report, Bank Rate Monitor
and other industry publications.
In marketing a Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering investment
alternatives. The information provided to investors may also include discussions
of other Evergreen mutual funds, products, and services, which may include:
retirement investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; and charitable
giving. In addition, the information provided to investors may quote financial
or business publications and periodicals, including model portfolios or
allocations, as they relate to fund management, investment philosophy, and
investment techniques. The Principal Underwriter may also reprint, and use as
advertising and sales literature, articles from EVERGREEN EVENTS, a quarterly
magazine provided to Evergreen mutual fund shareholders.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the SEC under the Act. Copies of the Registration Statements may be
obtained at a reasonable charge from the SEC or may be examined, without charge,
at the offices of the SEC in Washington, D.C.
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INVESTMENT ADVISER
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN MONEY MARKET FUND, EVERGREEN TAX EXEMPT MONEY MARKET FUND
Capital Management Group of First Union National Bank of North Carolina, 201
South College Street, Charlotte, North Carolina 28288
EVERGREEN TREASURY MONEY MARKET FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036
INDEPENDENT AUDITORS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN MONEY MARKET FUND, EVERGREEN TAX EXEMPT MONEY MARKET FUND
KPMG Peat Marwick, LLP One Mellon Bank Center Pittsburgh, Pennsylvania 15219
EVERGREEN TREASURY MONEY MARKET FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 230 Park Avenue, New York, New York 10017
45817 536128rev02
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STATEMENT OF ADDITIONAL INFORMATION
October 31, 1996
THE EVERGREEN TAX-FREE FUNDS
2500 Westchester Avenue, Purchase, New York 10577
800-807-2940
Evergreen Florida Municipal Bond Fund("Florida Municipal Bond")
Evergreen Georgia Municipal Bond Fund ("Georgia Municipal Bond")
Evergreen New Jersey Tax-Free Income Fund ("New Jersey Tax-Free")
Evergreen North Carolina Municipal Bond Fund ("North Carolina Municipal Bond")
Evergreen South Carolina Municipal Bond Fund ("South Carolina Municipal Bond")
Evergreen Virginia Municipal Bond Fund ("Virginia Municipal Bond")
Evergreen Florida High Income Municipal Bond Fund ("Florida High Income")
Evergreen High Grade Tax Free Fund ("High Grade")
Evergreen Short-Intermediate Municipal Fund ("Short-Intermediate")
Evergreen Short-Intermediate Municipal Fund-California ("Short-Intermediate-CA")
This Statement of Additional Information pertains to all classes of shares
of the Funds listed above. It is not a prospectus and should be read in
conjunction with the Prospectus dated October 31, 1996 for the Fund in which you
are making or contemplating an investment. The Evergreen Tax-Free Funds are
offered through four separate prospectuses: one offering Class A and Class B
shares, and a separate prospectus offering Class Y shares of Florida Municipal
Bond, Georgia Municipal Bond, New Jersey Tax-Free, North Carolina Municipal
Bond, South Carolina Municipal Bond, Virginia Municipal Bond and Florida High
Income; and one offering Class A and Class B shares and a separate prospectus
offering Class Y shares of High Grade, Short-Intermediate and
Short-Intermediate-CA. Copies of each Prospectus may be obtained without charge
by calling the number listed above.
TABLE OF CONTENTS
Investment Objectives and Policies................................ 2
Investment Restrictions........................................... 11
Non-Fundamental Operating Policies................................ 18
Management........................................................ 19
Investment Advisers............................................... 28
Distribution Plans................................................ 35
Allocation of Brokerage........................................... 38
Additional Tax Information........................................ 39
Net Asset Value................................................... 41
Purchase of Shares................................................ 42
Performance Information........................................... 56
Financial Statements.............................................. 62
Appendix A - Description of Bond, Municipal Note And Commercial Paper
Ratings -63
Appendix B - Additional Information Concerning California..... 68
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Appendix C - Additional Information Concerning Florida.......... 69
Appendix D - Additional Information Concerning Georgia........... 71
Appendix E - Additional Information Concerning North Carolina..... 72
Appendix F - Additional Information Concerning South Carolina. 73
Appendix G - Additional Information Concerning Virginia........... 74
INVESTMENT OBJECTIVES AND POLICIES
(See also "Description of the Funds - Investment Objectives
and Policies" in each Fund's Prospectus)
The investment objective of each Fund and a description of the
securities in which each Fund may invest is set forth under "Description of the
Funds- Investment Objectives and Policies" in the relevant Prospectus. The
investment objectives of Florida Municipal Bond, Georgia Municipal Bond, New
Jersey Tax- Free, North Carolina Municipal Bond, South Carolina Municipal Bond,
Virginia Municipal Bond and High Grade are fundamental and cannot be changed
without the approval of shareholders. The following expands the discussion in
the Prospectus regarding certain investments of each Fund.
Additional Information Regarding Investments that each Fund May Make
Participation Interests (All Funds)
Participation interests may take the form of participations, beneficial
interests, in a trust, partnership interests, or any other form of indirect
ownership that allows a Fund to treat the income from the investments as exempt
from federal and state tax. The financial institutions from which a Fund
purchases participation interests frequently provide or secure from another
financial institution irrevocable letters of credit or guarantees and give a
Fund the right to demand payment of the principal amounts of the participation
interests plus accrued interest on short notice (usually within seven days).
Variable Rate Municipal Securities (All Funds)
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital appreciation or
depreciation is less for variable rate municipal securities than for fixed
income obligations.
Many municipal securities with variable interest rates purchased by a Fund
are subject to repayment of principal (usually within seven days) on the Fund's
demand. The terms of these variable rates demand instruments require payment of
principal obligations by the issuer of the participation interests or a
guarantor of either issuer. All variable rate municipal securities will meet the
quality standards for a Fund. The Fund's investment adviser has been instructed
by the Board of Trustees (the "Trustees") to monitor the pricing, quality, and
liquidity of the variable rate municipal securities, including participation
interests held by a Fund, on the basis of published financial information and
reports of the rating agencies and other analytical services.
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Municipal Leases (All Funds)
When determining whether municipal leases purchased by a Fund will be
classified as a liquid or illiquid security, the Trustees have directed each
Fund's investment adviser to consider certain factors, such as: the frequency of
trades and quotes for the security; the volatility of quotations and trade
prices for the security, the number of dealers willing to purchase or sell the
security and the number of potential purchasers; dealer undertakings to make a
market in the security; the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer); the rating of the security
and the financial condition and prospects of the issuer of the security; whether
the lease can be terminated by the lessee; the potential recovery, if any, from
a sale of the leased property upon termination of the lease; the lessee's
general credit strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will discontinue
appropriating funding for the leased property because the property is no longer
deemed essential to its operations (e.g., the potential for an "event of
nonappropriation"); any credit enhancement or legal recourse provided upon an
event of nonappropriation or other termination of the lease; and such other
factors as may be relevant to the Fund's ability to dispose of the security.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for a Fund. No fees or other expenses, other than
normal transaction costs, are incurred. However, liquid assets of a Fund
sufficient to make payment for the securities to be purchased are segregated on
the Fund's records at the trade date. These assets are marked to market daily
and are maintained until the transaction has been settled. The Funds (other than
High Grade, Short-Intermediate and Short-Intermediate-CA) do not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
Short-Intermediate and Short-Intermediate-CA do not expect that commitments to
purchase when-issued securities will normally exceed 25% of their total assets
and High Grade does not expect that such commitments will exceed 20% of its
total assets.
Futures and Options Transactions (All Funds Except New Jersey Tax-
Free, High Grade, Short-Intermediate and Short-Intermediate-CA)
A Fund may attempt to hedge all or a portion of its portfolio by buying and
selling financial futures contracts and options on financial futures contracts.
Additionally, a Fund may buy and sell call and put options on portfolio
securities. The Funds do not intend to invest more than 5% of their assets in
options and futures.
Purchasing Put Options on Financial Futures Contracts
A Fund may purchase listed put and call options on financial futures
contracts for U.S. government securities. Unlike entering directly into a
futures contract, which requires the purchaser to buy a financial instrument on
a set date at a specified price, the purchase of a put option on a futures
contract entitles (but does not obligate) its purchaser to decide on or before a
future date whether to assume a short position at the specified price.
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A Fund may purchase put options on futures to protect portfolio securities
against decreases in value resulting from an anticipated increase in market
interest rates. Generally, if the hedged portfolio securities decrease in value
during the term of an option, the related futures contracts will also decrease
in value and the option will increase in value. In such an event, the Fund will
normally close out its option by selling an identical option. If the hedge is
successful, the proceeds received by a Fund upon the sale of the second option
will be large enough to offset both the premium paid by the Fund for the
original option plus the realized decrease in value of the hedged securities.
Alternatively, a Fund may exercise its put option. To do so, it would
simultaneously enter into a futures contract of the type underlying the option
(for a price less than the strike price of the option) and exercise the option.
A Fund would then deliver the futures contract in return for payment of the
strike price. If a Fund neither closes out nor exercises an option, the option
will expire on the date provided in the option contract, and the premium paid
for the contract will be lost.
Writing Call Options on Financial Futures Contracts
In addition to purchasing put options on futures, a Fund may write listed
call options on futures contracts for U.S. government securities to hedge its
portfolio against an increase in market interest rates. When a Fund writes a
call option on a futures contract, it is undertaking the obligation of assuming
a short futures position (selling a futures contract) at the fixed strike price
at any time during the life of the option, if the option is exercised. As market
interest rates rise, causing the prices of futures to go down, a Fund's
obligation under a call option on a future (to sell a futures contract) costs
less to fulfill, causing the value of the Fund's call option position to
increase.
In other words, as the underlying futures price goes down below the strike
price, the buyer of the option has no reason to exercise the call, so that the
Fund keeps the premium received for the option. This premium can offset the drop
in value of a Fund's fixed income portfolio which is occurring as interest rates
rise.
Prior to the expiration of a call written by a Fund, or exercise of it by
the buyer, a Fund may close out the option by buying an identical option. If the
hedge is successful, the cost of the second option will be less than the premium
received by the Fund for the initial option. The net premium income of a Fund
will then offset the decrease in value of the hedged securities.
Writing Put Options on Financial Futures Contracts
A Fund may write listed put options on financial futures contracts for U.S.
government securities to hedge its portfolio against a decrease in market
interest rates. When a Fund writes a put option on a futures contract, it
receives a premium for undertaking the obligation to assume a long futures
position (buying a futures contract) at a fixed price at any time during the
life of the option. As market interest rates decrease, the market price of the
underlying futures contract normally increases.
As the market value of the underlying futures contract increases, the buyer
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of the put option has less reason to exercise the put because the buyer can sell
the same futures contract at a higher price in the market. The premium received
by a Fund can then be used to offset the higher prices of portfolio securities
to be purchased in the future due to the decrease in the market interest rates.
Prior to the expiration of the put option or its exercise by the buyer, a
Fund may close out the option by buying an identical option. If the hedge is
successful, the cost of buying the second option will be less than the premium
received by the Fund for the initial option.
Purchasing Call Options on Financial Futures Contracts
An additional way in which a Fund may hedge against decreases in market
interest rates is to buy a listed call option on a financial futures contract
for U.S. government securities. When a Fund purchases a call option on a futures
contract, it is purchasing the right (not the obligation) to assume a long
futures position (buy a futures contract) at a fixed price at any time during
the life of the option. As market interest rates fall, the value of the
underlying futures contract will normally increase, resulting in an increase in
value of the Fund's option position. When the market price of the underlying
futures contract increases above the strike price plus premium paid, the Fund
could exercise its option and buy the futures contract below market price.
Prior to the exercise or expiration of the call option a Fund could sell an
identical call option and close out its position. If the premium received upon
selling the offsetting call is greater than the premium originally paid, the
Fund has completed a successful hedge.
Limitation on Open Futures Positions
A Fund will not maintain open positions in futures contracts it has sold or
call options it has written on futures contracts if, in the aggregate, the value
of the open positions (marked to market) exceeds the current market value of its
securities portfolio plus or minus the unrealized gain or loss on those open
positions, adjusted for the correlation of volatility between the hedged
securities and the futures contracts. If this limitation is exceeded at any
time, a Fund will take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within this
limitation.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, a Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, a Fund is
required to deposit an amount of "initial margin" in cash or U.S. Treasury bills
with its custodian (or the broker, if legally permitted). The nature of initial
margin in futures transactions is different from that of margin in securities
transactions in that futures contract initial margin does not involve the
borrowing of funds by a Fund to finance the transactions. Initial margin is in
the nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. A Fund may not purchase or sell
futures contracts or related options if immediately thereafter the sum of the
amount of margin deposits on the Fund's existing futures positions and premiums
paid for related options would exceed 5% of the market value of the Fund's total
assets.
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A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund pays
or receives cash, called "variation margin", equal to the daily change in value
of the futures contract. This process is known as "marking to market". Variation
margin does not represent a borrowing or loan by a Fund but is instead
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing its daily net asset value, the
Fund will mark-to-market its open futures positions.
A Fund is also required to deposit and maintain margin when it writes call
options on futures contracts.
Purchasing and Writing Put and Call Options on Portfolio Securities (All Funds,
except New Jersey Tax-Free, High Grade,Short-Intermediate and Short-Intermediate
- -CA).
A Fund may purchase put and call options on portfolio securities to protect
against price movements in particular securities. A put option gives the Fund,
in return for a premium, the right to sell the underlying security to the writer
(seller) at a specified price during the term of the option. A call option gives
the Fund, in return for a premium, the right to buy the underlying security from
the seller.
A Fund may generally purchase and write over-the-counter options on
portfolio securities in negotiated transactions with the writers or buyers of
the options since options on the portfolio securities held by the Fund are to be
traded on an exchange. A Fund purchases and writes options only with investment
dealers and other financial institutions (such as commercial banks or savings
and loan associations) deemed creditworthy by the Fund's adviser.
Over-the-counter options are two party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded options are
third party contracts with standardized strike prices and expiration dates and
are purchased from a clearing corporation. Exchange traded options have a
continuous liquid market while over-the-counter options may not.
Repurchase Agreements (All Funds)
Repurchase agreements are arrangements in which banks, broker/dealers, and
other recognized financial institutions sell U.S. government securities or other
securities to a Fund and agree at the time of sale to repurchase them at a
mutually agreed upon time and price within one year from the date of
acquisition. A Fund or its custodian will take possession of the securities
subject to repurchase agreements. To the extent that the original seller does
not repurchase the securities from a 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. Each Fund 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. A Fund may only enter into repurchase agreements with banks
and other recognized financial institutions, such as broker/dealers, which are
found by the Fund's investment adviser to be creditworthy pursuant to guidelines
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established by the Trustees.
Reverse Repurchase Agreements (All Funds)
A Fund may enter into reverse repurchase agreements. These transactions are
similar to borrowing cash. In a reverse repurchase agreement, a 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 a 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 a 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.
Lending of Portfolio Securities (All Funds)
The collateral received when a Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. A Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. A Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
Restricted Securities (All Funds)
With the expectations noted below, a Fund may invest in restricted
securities. Restricted securities are any securities in which a Fund may
otherwise invest pursuant to its investment objectives and policies but which
are subject to restrictions on resale under federal securities laws. A Fund will
not invest more than 15% (10% for High Grade) of the value of its net assets in
restricted securities; however, certain restricted securities which the Trustees
deem to be liquid will be excluded from this 15% limitation. New Jersey Tax-Free
may invest up to 10% of its net assets in restricted securities which are
determined to be liquid.
The ability of the Trustees to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange Commission
("SEC") Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive, safe-harbor
for certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
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qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under the
Rule 144A. Each Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities (eligible for resale
under Rule 144A) for determination by the Trustees. The Trustees consider the
following criteria in determining the liquidity of certain restricted
securities:
(i) the frequency of trades and quotes for the security;
(ii) the number of dealers willing to purchase or sell the security
and the number of other potential buyers;
(iii) dealer undertakings to make a market in the security; and
(iv) the nature of the security and the nature of the marketplace trades.
Municipal Bond Insurance (High Grade)
The Fund may purchase two types of municipal bond insurance policies
("Policies") issued by municipal bond insurers. One type of Policy covers
certain municipal securities only during the period in which they are in the
Fund's portfolio. In the event that a municipal security covered by such a
Policy is sold by the Fund, the insurer of the relevant Policy will be liable
only for those payments of interest and principal which are then due and owing
at the time of sale.
The other type of Policy covers municipal securities not only while they
remain in the Fund's portfolio but also until their final maturity, even if they
are sold out of the Fund's portfolio, so that the coverage may benefit all
subsequent holders of those municipal securities. The Fund will obtain insurance
which covers municipal securities until final maturity even after they are sold
out of the Fund's portfolio only if, in the judgment of the investment adviser,
the Fund would receive net proceeds from the sale of those securities, after
deducting the cost of such permanent insurance and related fees, significantly
in excess of the proceeds it would receive if such municipal securities were
sold without insurance. Payments received from municipal bond insurers may not
be tax-exempt income to shareholders of the Fund.
Depending upon the characteristics of the municipal security held by the
Fund, the annual premiums for the Policies are estimated to range from 0.10% to
0.25% of the value of the municipal securities covered under the Policies, with
an average annual premium rate of approximately 0.175%.
The Fund may purchase Policies from Municipal Bond Investors Assurance
Corp. ("MBIA"), AMBAC Indemnity Corporation ("AMBAC"), Financial Guaranty
Insurance Company ("FGIC"), each as described under "Municipal Bond Insurers",
or any other municipal bond insurer which is rated at least Aa by Moody's
Investors Service Inc ("Moody's") or AA by Standards & Poor's Ratings Service
("S&P"). Each Policy guarantees the payment of principal and interest on those
municipal securities it insures. The Policies will have the same general
characteristics and features. A municipal security will be eligible for coverage
if it meets certain requirements set forth in a Policy. In the event interest or
principal on an insured municipal security is not paid when due, the insurer
covering the security will be obligated under its Policy to make such payment
not later than 30 days after it has been notified by the Fund that such
non-payment has occurred.
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MBIA, AMBAC, and FGIC will not have the right to withdraw coverage on
securities insured by their Policies so long as such securities remain in the
Fund's portfolio, nor may MBIA, AMBAC, or FGIC cancel their Policies for any
reason except failure to pay premiums when due. MBIA, AMBAC, and FGIC will
reserve the right at any time upon 90 days' written notice to the Fund to refuse
to insure any additional municipal securities purchased by the Fund after the
effective date of such notice. The Fund's investment adviser will reserve the
right to terminate any of the Policies if it determines that the benefits to the
Fund of having its portfolio insured under such Policy are not justified by the
expense involved.
Additionally, the Fund's investment adviser reserves the right to enter
into contracts with insurance carriers other than MBIA, AMBAC, or FGIC, if such
carriers are rated Aaa by Moody's or AAA by S&P.
Under the Policies, municipal bond insurers unconditionally guarantee to
the Fund the timely payment of principal and interest on the insured municipal
securities when and as such payments shall become due but shall not be paid by
the issuer, except that in the event of any acceleration of the due date of the
principal by reason of mandatory or optional redemption (other than acceleration
by reason of mandatory sinking fund payments), default or otherwise, the
payments guaranteed will be made in such amounts and at such times as payments
of principal would have been due had there not been such acceleration. The
municipal bond insurers will be responsible for such payments less any amounts
received by the Fund from any trustee for the municipal bond holders or from any
other source. The Policies do not guarantee payment on an accelerated basis, the
payment of any redemption premium, the value for the shares of the Fund, or
payments of any tender purchase price upon the tender of the municipal
securities. The Policies also do not insure against nonpayment of principal of
or interest on the securities resulting from the insolvency, negligence or any
other act or omission of the trustee or other paying agent for the securities.
However, with respect to small issue industrial development municipal bonds and
pollution control revenue municipal bonds covered by the Policies, the municipal
bond insurers guarantee the full and complete payments required to be made by or
on behalf of an issuer of such municipal securities if there occurs any change
in the tax-exempt status of interest on such municipal securities, including
principal, interest or premium payments, if any, as and when required to be made
by or on behalf of the issuer pursuant to the terms of such municipal
securities. A when-issued municipal security will be covered under the Policies
upon the settlement date of the original issue of such when-issued municipal
securities. In determining whether to insure municipal securities held by the
Fund, each municipal bond insurer has applied its own standard, which
corresponds generally to the standards it has established for determining the
insurability of new issues of municipal securities. This insurance is intended
to reduce financial risk, but the cost thereof and compliance with investment
restrictions imposed under the Policies and these guidelines will reduce the
yield to shareholders of the Fund.
If a Policy terminates as to municipal securities sold by the Fund on the
date of sale, in which event municipal bond insurers will be liable only for
those payments of principal and interest that are then due and owing, the
provision for insurance will not enhance the marketability of securities held by
the Fund, whether or not the securities are in default or subject to significant
risk of default, unless the option to obtain permanent insurance is exercised.
On the other hand, since issuer-obtained insurance will remain in effect as long
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as the insured municipal securities are outstanding, such insurance may enhance
the marketability of municipal securities covered thereby, but the exact effect,
if any, on marketability cannot be estimated. The Fund generally intends to
retain any securities that are in default or subject to significant risk of
default and to place a value on the insurance, which ordinary will be the
difference between the market value of the defaulted security and the market
value of similar securities of minimum high grade (i.e., rated A by Moody's or
S&P) that are not in default. To the extent that the Fund holds defaulted
securities, it may be limited in its ability to manage its investment and to
purchase other municipal securities. Except as described above with respect to
securities that are in default or subject to significant risk of default, the
Fund will not place any value on the insurance in valuing the municipal
securities that it holds.
Municipal Bond Insurers (High Grade)
Municipal bond insurance may be provided by one or more of the following
insurers or any other municipal bond insurer which is rated at least Aaa by
Moody's or AAA by S&P.
Municipal Bond Investors Assurance Corp. (High Grade)
Municipal Bond Investors Assurance Corp. is a wholly-owned subsidiary of
MBIA, Inc., a Connecticut insurance company, which is owned by AEtna Life and
Casualty, Credit Local DeFrance CAECL, S.A., The Fund American Companies, and
the public. The investors of MBIA, Inc. are not obligated to pay the obligations
of MBIA. MBIA, domiciled in New York, is regulated by the New York State
Insurance Department and licensed to do business in various states. The address
of MBIA is 113 King Street, Armonk, New York, 10504, and its telephone number is
(914) 273-4345. S&P has rated the claims-paying ability of MBIA AAA.
AMBAC Indemnity Corporation (High Grade)
AMBAC Indemnity Corporation is a Wisconsin-domiciled stock insurance
company, regulated by the Insurance Department of Wisconsin, and licensed to do
business in various states. AMBAC is a wholly-owned subsidiary of AMBAC, Inc., a
financial holding company which is owned by the public. Copies of certain
statutorily required filings of AMBAC can be obtained from AMBAC. The address of
AMBAC's administrative offices is One State Street Plaza, 17th Floor, New York,
New York, 10004, and its telephone number is (212) 668-0340.
S&P has rated the claims-paying ability of AMBAC AAA.
Financial Guaranty Insurance Company (High Grade)
Financial Guaranty Insurance Company is a wholly-owned subsidiary of FGIC
Corporation, a Delaware holding company. FGIC Corporation is wholly-owned by
General Electric Capital Corporation. The investors of FGIC Corporation are not
obligated to pay the debts of or the claims against Financial Guaranty.
Financial Guaranty is subject to regulation by the state of New York Insurance
Department and is licensed to do business in various states. The address of
Financial Guaranty is 115 Broadway, New York, New York, 10006, and its telephone
number is (212) 312-3000. S&P has rated the claims-paying ability of Financial
Guaranty AAA.
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Municipal Bonds
The two principal classifications of municipal bonds are "general
obligation" bonds and "revenue bonds". General obligation bonds are secured by
the issuer's pledge of its full faith, credit and unlimited taxing power for the
payment of principal and interest. Revenue or special tax bonds are payable only
from the revenues derived from a particular facility or class of facilities or
projects or, in a few cases, from the proceeds of a special excise or other tax,
but are not supported by the issuer's power to levy general taxes. There are, of
course, variations in the security of municipal bonds, both within a particular
classification and between classifications, depending on numerous factors. The
yields of municipal bonds depend on, among other things, general money market
conditions, general conditions of the municipal bond market, size of a
particular offering, the maturity of the obligations and rating of the issue.
Since the Funds may invest in industrial development bonds, the Funds may
not be appropriate investment for entities which are "substantial users" of
facilities financed by industrial development bonds or for investors who are
"related persons". Generally, an individual will not be a "related person" under
the Internal Revenue Code of 1986 (the "Code") unless such investor or his
immediate family (spouse, brothers, sisters and lineal descendants) own directly
or indirectly in the aggregate more than 50 percent of the value of the equity
of a corporation or partnership which is a "substantial user" of a facility
financed from proceeds of "industrial development bonds". A "substantial user"
of such facilities is defined generally as a "non-exempt person who regularly
uses a part of a facility" financed from the proceeds of industrial development
bonds.
As set forth in the Prospectus, the Code establishes new unified volume
caps for most "private purpose" municipal bonds (such as industrial development
bonds and obligations to finance low-interest mortgages on owner-occupied
housing and student loans). The unified volume cap is not expected to affect
adversely the availability of municipal bonds for investment by the Funds;
however, it is possible that proposals will be introduced before Congress to
further restrict or eliminate the federal income tax exemption for interest on
Municipal Obligations. Any such proposals, if enacted, could adversely affect
the availability of municipal bonds for investment by the Funds and the value of
each Fund's portfolio might be affected. In that event, each Fund might
reevaluate its investment policies and restrictions and consider recommending to
its shareholders changes in both.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS
.........Except as noted, the investment restrictions set forth below are
fundamental and may not be changed with respect to each Fund without the
affirmative vote of a majority of the outstanding voting securities of the Fund.
Where an asterisk (*) appears after a Fund's name, the relevant policy is
non-fundamental with respect to that Fund and may be changed by the Fund's
investment adviser without shareholder approval, subject to review and approval
by the Trustees. As used in this Statement of Additional Information and in the
Prospectus, "a majority of the outstanding voting securities of the Fund" means
the lesser of (1) the holders of more than 50% of the outstanding shares of
beneficial interest of the Fund or (2) 67% of the shares present if more than
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50% of the shares are present at a meeting in person or by proxy.
1........Concentration of Assets in Any One Issuer
.........None of Florida High Income, Short-Intermediate or
Short-Intermediate-CA may invest more than 5% of its total assets, at the time
of the investment in question, in the securities of any one issuer other than
the U.S. government and its agencies or instrumentalities, except that up to 25%
of the value of each Fund's total assets may be invested without regard to such
5% limitation. For this purpose each political subdivision, agency, or
instrumentality and each multi-state agency of which a state is a member, and
each public authority which issues industrial development bonds on behalf of a
private entity, will be regarded as a separate issuer for determining the
diversification of each Fund's portfolio.
With respect to 75% of the value of its total assets, High Grade will not
purchase securities of any one issuer (other than cash, cash items or securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities)
if as a result more than 5% of the value of its total assets would be invested
in the securities of that issuer.
Under this limitation, each governmental subdivision, including states and
the District of Columbia, territories, possessions of the United States, or
their political subdivisions, agencies, authorities, instrumentalities, or
similar entities, will be considered a separate issuer if its assets and
revenues are separate from those of the governmental body creating it and the
security is backed only by its own assets and revenues.
Industrial development bonds, backed only by the assets and revenues of a
nongovernmental issuer, are considered to be issued solely by that issuer. If,
in the case of an industrial development bond or governmental-issued security, a
governmental or other entity guarantees the security, such guarantee would be
considered a separate security issued by the guarantor as well as the other
issuer, subject to limited exclusions allowed by the Investment Company Act of
1940.
2........Ten Percent Limitation on Securities of Any One Issuer
.........Short-Intermediate-CA, Florida High Income*, and Short-Intermediate may
not purchase more than 10% of any class of securities (voting securities in the
case of Florida High Income* and Short-Intermediate) of any one issuer other
than the U.S. government and its agencies or instrumentalities.
3........Investment for Purposes of Control or Management
.........None of Florida High Income, Short-Intermediate or
Short-Intermediate-CA may invest in companies for the purpose of exercising
control or management.
4........Purchase of Securities on Margin
.........None of Florida Municipal Bond, Georgia Municipal Bond, New Jersey Tax
Free, North Carolina Municipal Bond, South Carolina Municipal Bond, Virginia
Municipal Bond, Florida High Income*, High Grade, Short-Intermediate or
Short-Intermediate-CA may purchase securities on margin, except that each Fund
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may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by a Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin.
5........Unseasoned Issuers
.........None of Florida Municipal Bond*, Georgia Municipal Bond*, North
Carolina Municipal Bond*, South Carolina Municipal Bond*, Virginia Municipal
Bond* or High Grade* will invest more than 5% of its total assets in industrial
development bonds (and, in the case of High Grade, other municipal securities)
where the principal and interest are the responsibility of companies (or
guarantors, where applicable) with less than three years of continuous
operations, including the operation of any predecessor.
.........None of Florida High Income*, Short-Intermediate or
Short-Intermediate-CA may invest more than 5% of its total assets in securities
of unseasoned issuers (taxable securities of unseasoned issuers for
Short-Intermediate and Short-Intermediate-CA) that have been in continuous
operation for less than three years, including operating periods of their
predecessors, except that no such limitation shall apply to the extent that (i)
each Fund may invest in obligations issued or guaranteed by the U.S. government
and its agencies or instrumentalities, (ii) Short-Intermediate and
Short-Intermediate-CA may invest in municipal securities, and (iii) Florida High
Income* may invest in municipal bonds.
6........Underwriting
.........None of Florida Municipal Bond, Georgia Municipal Bond, New Jersey Tax-
Free, North Carolina Municipal Bond, South Carolina Municipal Bond, Virginia
Municipal Bond, High Grade, Florida High Income*, Short-Intermediate or
Short-Intermediate-CA may engage in the business of underwriting the securities
of other issuers, provided that the purchase of municipal securities or other
permitted investments, directly from the issuer thereof (or from an underwriter
for an issuer) and the later disposition of such securities in accordance with a
Fund's investment program shall not be deemed to be an underwriting.
7........Interests in Oil, Gas or Other Mineral Exploration or Development
Programs
.........Neither Florida High Income, Short-Intermediate nor
Short-Intermediate-CA may purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.
.........Florida Municipal Bond*, Georgia Municipal Bond*, North Carolina
Municipal Bond*, South Carolina Municipal Bond*, Virginia Municipal Bond*, or
High Grade will not purchase interests in or sell oil, gas or other mineral
exploration or development programs or leases, although they may purchase the
securities of issuers which invest in or sponsor such programs.
8........Concentration in Any One Industry
.........Neither New Jersey Tax Free, Short-Intermediate, nor
Short-Intermediate-CA may invest 25% or more of its total assets in the
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securities of issuers conducting their principal business activities in any one
industry; provided, that this limitation shall not apply (i) with respect to
each Fund, to obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities and to municipal securities, or (ii) with respect
to New Jersey Tax-Free and Short-Intermediate-CA to certificates of deposit and
bankers' acceptances issued by domestic branches of U.S. banks or (iii) with
respect to New Jersey Tax-Free to municipal obligations.
.........Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond, High
Grade and Florida High Income will not purchase securities if, as a result of
such purchase, 25% or more of the value of their total assets would be invested
in any one industry, or in industrial development bonds or other securities, the
interest upon which is paid from revenues of similar types of projects. However,
the Fund may invest as temporary investments more than 25% of the value of their
total assets in cash or cash items, securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or instruments secured by these
money market instruments, such as repurchase agreements.
9........Warrants
.........None of Florida High Income*, Short-Intermediate or
Short-Intermediate-CA may invest more than 5% of its total net assets in
warrants, and, of this amount, no more than 2% of each Fund's total net assets
may be invested in warrants that are listed on neither the New York nor the
American Stock Exchange.
10.......Ownership by Trustees/Officers
.........None of Florida Municipal Bond*, Georgia Municipal Bond*, North
Carolina Municipal Bond*, South Carolina Municipal Bond*, Virginia Municipal
Bond*, High Grade*, Florida High Income*, Short-Intermediate or
Short-Intermediate-CA may purchase or retain the securities of any issuer if (i)
one or more officers or Trustees of a Fund or its investment adviser
individually owns or would own, directly or beneficially, more than 1/2 of 1% of
the securities of such issuer, and (ii) in the aggregate, such persons own or
would own, directly or beneficially, more than 5% of such securities.
11.......Short Sales
.........High Grade and Florida High Income* will not make short sales of
securities or maintain a short position, unless at all times when a short
position is open a Fund owns an equal amount of such securities or of securities
which, without payment of any further consideration are convertible into or
exchangeable for securities of the same issue as, and equal in amount to, the
securities sold short. The use of short sales will allow the Funds to retain
certain bonds in their portfolios longer than it would without such sales. To
the extent that a Fund receives the current income produced by such bonds for a
longer period than it might otherwise, a Fund's investment objective is
furthered.
.........Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond,
Short-Intermediate and Short- Intermediate-CA will not sell any securities short
or maintain a short position.
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12.......Lending of Funds and Securities
.........None of Florida High Income, Short-Intermediate or
Short-Intermediate-CA may lend its funds to other persons, provided that each
Fund may purchase issues of debt securities, acquire privately negotiated loans
made to municipal borrowers and enter into repurchase agreements.
.........Neither Florida High Income* nor Short-Intermediate may lend its
portfolio securities, unless the borrower is a broker, dealer or financial
institution that pledges and maintains collateral with the Fund consisting of
cash or securities issued or guaranteed by the U.S. government having a value at
all times not less than 100% of the current market value of the loaned
securities, including accrued interest, provided that the aggregate amount of
such loans shall not exceed 30% of the Fund's total assets.
.........Short-Intermediate-CA may not lend its portfolio securities, unless the
borrower is a broker, dealer or financial institution that pledges and maintains
collateral with the Fund consisting of cash, letters of credit or securities
issued or guaranteed by the U.S. government having a value at all times not less
than 100% of the current market value of the loaned securities, including
accrued interest, provided that the aggregate amount of such loans shall not
exceed 30% of the Fund's total assets.
.........Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond and Virginia Municipal Bond will
not lend any of their assets, except portfolio securities up to one-third of the
value of their total assets. Each Fund may, however, acquire publicly or
non-publicly issued municipal bonds or temporary investments or enter into
repurchase agreements in accordance with its investment objective, policies and
limitations or the Declaration of Trust.
.........High Grade will not lend any of its assets except that it may purchase
or hold money market instruments, including repurchase agreements and variable
amount demand master notes in accordance with its investment objective, policies
and limitations and it may lend portfolio securities valued at not more than 15%
of its total assets to broker-dealers.
13.......Commodities
.........Florida High Income* may not purchase, sell or invest in physical
commodities unless acquired as a result of ownership of securities or other
instruments (but this shall not prevent the Fund from purchasing or selling
options and futures contracts or from investing in securities or other
instruments backed by physical commodities).
.........Neither Short-Intermediate nor Short-Intermediate-CA may purchase, sell
or invest in commodities, commodity contracts or financial futures contracts.
........New Jersey Tax-Free and High Grade will not purchase or sell
commodities or commodity contracts.
.........Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond and Virginia Municipal Bond will
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<PAGE>
not purchase or sell commodities. However, each Fund may purchase put and call
options on portfolio securities and on financial futures contracts. In addition,
each Fund reserves the right to hedge its portfolio by entering into financial
futures contracts and to sell puts and calls on financial futures contracts.
14.......Real Estate
.........Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond and Virginia Municipal Bond will
not buy or sell real estate, including limited partnership interests, although
each Fund may invest in municipal bonds secured by real estate or interests in
real estate.
.........Florida High Income* may not purchase, sell or invest in real estate or
interests in real estate, except that it may purchase, sell or invest in
marketable securities of companies holding real estate or interests in real
estate, including real estate investment trusts.
.........High Grade will not buy or sell real estate, although it may invest in
securities of companies whose business involves the purchase or sale of real
estate or in securities which are secured by real estate or interests in real
estate.
.........Neither Short-Intermediate nor Short-Intermediate-CA may purchase, sell
or invest in real estate or interests in real estate, except that each Fund may
purchase municipal securities and other debt securities secured by real estate
or interests therein.
.........New Jersey Tax-Free will not purchase or sell real estate except that
it may purchase municipal obligations or other securities issued by companies
which invest in real estate or securities issued by companies which invest in
real estate or interests therein.
15.......Borrowing, Senior Securities, Reverse Repurchase Agreements
.........Neither Short-Intermediate nor Short-Intermediate-CA nor Florida High
Income may borrow money, issue senior securities or enter into reverse
repurchase agreements, except for temporary or emergency purposes, and not for
leveraging, and then in amounts not in excess of 10% of the value of each Fund's
total assets at the time of such borrowing; or mortgage, pledge or hypothecate
any assets except in connection with any such borrowing and in amounts not in
excess of the lesser of the dollar amounts borrowed or 10% of the value of each
Fund's total assets at the time of such borrowing, provided that
Short-Intermediate and Short-Intermediate-CA will not purchase any securities at
any time when borrowings, including reverse repurchase agreements, are
outstanding. No Fund will enter into reverse repurchase agreements exceeding 5%
of the value of its total assets.
.........Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond and High
Grade will not issue senior securities, except each Fund may borrow money
directly or through reverse repurchase agreement as a temporary measure for
extraordinary or emergency purposes in an amount up to one-third of the value of
its total assets, including the amount borrowed, in order to meet redemption
requests without immediately selling portfolio instruments; and except to the
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extent a Fund will enter into futures contracts. Any such borrowings need not be
collateralized. No Fund will purchase any securities while borrowings in excess
of 5% of its total assets are outstanding. No Fund will borrow money or engage
in reverse repurchase agreements for investment leverage purposes. None of
Florida Municipal Bond*, Georgia Municipal Bond*, North Carolina Municipal
Bond*, South Carolina Municipal Bond*, Virginia Municipal Bond* or High Grade
will mortgage, pledge or hypothecate any assets except to secure permitted
borrowings. In those cases, High Grade may pledge assets having a market value
not exceeding the lesser of the dollar amounts borrowed or 15% of the value of
total assets at the time of borrowing. Margin deposits for the purchase and sale
of financial futures contracts and related options and segregation or collateral
arrangements made in connection with options activities and the purchase of
securities on a when-issued basis are not deemed to be a pledge.
16.......Joint Trading
.........Florida High Income may not participate on a joint or joint and several
basis in any trading account in any securities. (The "bunching of orders for the
purchase or sale of portfolio securities with its investment adviser or accounts
under its management to reduce brokerage commissions, to average prices among
them or to facilitate such transactions is not considered a trading account in
securities for purposes of this restriction).
.........New Jersey Tax-Free will not issue senior securities, borrow money or
pledge or mortgage its assets, except that the Fund may borrow from banks up to
10% of the value of its total net assets for temporary or emergency purposes
only to meet anticipated redemption requirements. The Fund will not purchase
securities while any such borrowings are outstanding.
17.......Options
.........Neither New Jersey Tax Free, Short-Intermediate nor
Short-Intermediate-CA may write, purchase or sell put or call options, or
combinations thereof, except that each Fund may purchase securities with rights
to put securities to the seller in accordance with its investment program.
18.......Investing in Securities of Other Investment Companies
.........Florida Municipal Bond*, Georgia Municipal Bond*, North Carolina
Municipal Bond*, South Carolina Municipal Bond*, Virginia Municipal Bond* and
High Grade will purchase securities of investment companies only in open-market
transactions involving customary broker's commissions. However, these
limitations are not applicable if the securities are acquired in a merger,
consolidation or acquisition of assets. It should be noted that investment
companies incur certain expenses such as management fees and therefore any
investment by a Fund in shares of another investment company would be subject to
such duplicate expenses.
.........Florida High Income*, New Jersey Tax-Free, Short-Intermediate* and
Short-Intermediate-CA* may not purchase the securities of other investment
companies, except to the extent such purchases are not prohibited by applicable
law.
19.......Restricted Securities
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.........High Grade will not invest more than 10% of its total assets in
securities subject to restrictions on resale under the Federal securities laws.
.........New Jersey Tax-Free will not purchase restricted securities, which are
securities that must be registered under the Securities Act of 1933 before they
may be offered or sold to the public. This restriction does not apply to
restricted securities which are determined to be liquid by the Fund's
investment adviser under supervision of the Board of Trustees.
20.......Investment in Municipal Securities
.........Neither Short-Intermediate nor Short-Intermediate-CA may invest more
than 20% of its total assets in securities other than, in the case of
Short-Intermediate, municipal securities, and in the case of
Short-Intermediate-CA, California municipal securities (as described under
"Description of the Funds - Investment Objectives and Policies" in the Funds'
Prospectus), unless extraordinary circumstances dictate a more defensive
posture.
.........Florida High Income will invest, under normal market conditions, at
least 80% of its net assets in municipal securities and at least 90% of such
assets will be invested in Florida obligations.
21.......Equity Securities
New Jersey Tax-Free may not purchase equity securities or securities
convertible into equity securities.
NON FUNDAMENTAL OPERATING POLICIES
.........Certain Funds have adopted additional non-fundamental operating
policies. Operating policies may be changed by the Board of Trustees without a
shareholder vote.
1........Securities Issued by Government Units; Industrial Development Bonds
.........Short-Intermediate has determined not to invest more than 25% of its
total assets (i) in securities issued by governmental units located in any one
state, territory or possession of the United States (but this limitation does
not apply to project notes backed by the full faith and credit of the U.S.
government) or (ii) industrial development bonds not backed by bank letters of
credit. In addition, Short-Intermediate-CA has determined not to invest more
than 25% of its total assets in industrial development bonds not backed by bank
letters of credit.
2........Illiquid Securities.
.........Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond, High
Grade, Short-Intermediate and Short-Intermediate-CA may not invest more than 15%
(10% in the case of High Grade) of their net assets in illiquid securities and
other securities which are not readily marketable, including repurchase
agreements which have a maturity of longer than seven days, but excluding
certain securities and municipal leases determined by the Trustees to be liquid.
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3........Other. In order to comply with certain state blue sky limitations:
-----
...........Each of Short-Intermediate and Short-Intermediate-CA interprets
fundamental investment restriction 7 to prohibit investments in oil, gas and
mineral leases.
...........Each of Short-Intermediate and Short-Intermediate-CA interprets
fundamental investment restriction 14 to prohibit investment in real estate
limited partnerships which are not readily marketable.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a violation
of such restriction.
The Funds (other than Short-Intermediate, Short-Intermediate-CA and Florida
High Income) have no present intention to borrow money or invest in reverse
repurchase agreements in excess of 5% of the value of their net assets during
the coming fiscal year. The Funds did not invest more than 5% of their net
assets in securities of other investment companies in the last fiscal year, and
have no present intent to do so during the coming year.
For purposes of their policies and limitations, the Funds consider
certificates of deposit and demand and time deposits issued by a U.S. branch of
a domestic bank or savings and loan having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be "cash items".
.........High Grade does not intend to invest more than 25% of the value of its
assets in any issuer in a single state.
MANAGEMENT
The age, address and principal occupation of the Trustees and executive
officers of The Evergreen Municipal Trust, the Evergreen Tax Free Trust
(formerly, FFB Funds Trust) and Evergreen Investment Trust (formerly, First
Union Funds) (each a "Trust") and collectively the "Trust") during the
past five years are set forth below.
Laurence B. Ashkin (68), 180 East Pearson Street, Chicago, IL-Trustee. Real
estate developer and construction consultant since 1980; President of Centrum
Equities since 1987 and Centrum Properties, Inc. since 1980.
Foster Bam (69), Greenwich Plaza, Greenwich, CT-Trustee. Partner in the law firm
of Cummings and Lockwood since 1968.
James S. Howell (72), 4124 Crossgate Road, Charlotte, NC-Chairman and Trustee.
Retired Vice President of Lance Inc. (food manufacturing); Chairman of the
Distribution Comm. Foundation for the Carolinas from 1989 to 1993.
Gerald M. McDonnell (57), 209 East Nucor Rd. Norfolk, NE, NC-Trustee.
Sales Representative with Nucor-Yamoto Inc. (steel producer) since 1988.
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Thomas L. McVerry (58), 4419 Parkview Drive, Charlotte, NC-Trustee. Director of
Carolina Cooperative Federal Credit Union since 1990 and Rexham Corporation from
1988 to 1990; Vice President of Rexham Industries, Inc. (diversified
manufacturer) from 1989 to 1990; Vice President-Finance and Resources, Rexham
Corporation from 1979 to 1990.
William Walt Pettit*(41), Holcomb and Pettit, P.A., 227 West Trade St.,
Charlotte, NC-Trustee. Partner in the law firm Holcomb and Pettit, P.A. since
1990; Attorney, Clontz and Clontz from 1980 to 1990.
Russell A. Salton, III, M.D. (49) 205 Regency Executive Park, Charlott,
NC-Trustee. Medical Director, U.S. Healthcare of Charlotte, North Carolina since
1995, President, Primary Physician Care from 1990 to 1996.
Michael S. Scofield (53), 212 S. Tryon Street Suite 1280, Charlotte, NC-Trustee.
Attorney, Law Offices of Michael S. Scofield since 1969.
Robert J. Jeffries (73), 2118 New Bedford Drive, Sun City Center, FL-Trustee
Emeritus. Corporate consultant since 1967.
John J. Pileggi (37), 237 Park Avenue, Suite 910, New York, NY-President and
Treasurer. Senior Managing Director, Furman Selz LLC since 1992, Managing
Director from 1984 to 1992.
Joan V. Fiore (40), 237 Park Avenue, Suite 910, New York, NY-Secretary. Managing
Director and Counsel, Furman Selz LLC since 1991; Staff Attorney, Securities and
Exchange Commission from 1986 to 1991.
The officers listed above hold the same positions with thirteen investment
companies offering a total of forty-three investment funds within the Evergreen
mutual fund complex. Messrs. Howell, Salton and Scofield are Trustees of all
thirteen investment companies. Messrs. McDonnell, McVerry and Pettit are
Trustees of twelve of the investment companies (excluded is Evergreen Variable
Trust). Messrs. Ashkin, Bam and Jeffries are Trustees of eleven of the
investment companies (excluded are Evergreen Variable Trust and Evergreen
Investment Trust).
- - --------
* Mr. Pettit may each be deemed to be an "interested person" within the
meaning of the Investment Company Act of 1940, as amended (the "1940 Act").
The officers of the Trusts are all officers and/or employees of Furman
Selz LLC. Furman Selz LLC is an affiliate of Evergreen Funds Distributor, Inc.,
the distributor of each Class of shares of each Fund.
The Funds do not pay any direct remuneration to any officer or Trustee
who is an "affiliated person" of either First Union National Bank of North
Carolina or Evergreen Asset Management Corp. or their affiliates. See
"Investment Adviser." Currently, none of the Trustees is an "affiliated person"
as defined in the 1940 Act. The Evergreen Municipal Trust and Evergreen
Investment Trust pay each Trustee who is not an "affiliated person" an annual
retainer and fee per meeting attended, plus expenses. The Evergreen Tax Free
Trust pays each Trustee who is not an "affiliated person a fee per meeting
attended, plus expenses, as follows:
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Name of Trust/Fund Annual Retainer Meeting Fee
The Evergreen Municipal Trust - $ 4,000*
Florida High Income $100
Short-Intermediate $100
Short-Intermediate-CA $100
Evergreen Investment Trust - $15,000** $2,000**
Florida Municipal Bond
Georgia Municipal Bond
North Carolina Municipal Bond
South Carolina Municipal Bond
Virginia Municipal Bond
High Grade
Evergreen Tax Free Trust $ 0 $100
New Jersey Tax-Free
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* Allocated among the Evergreen Money Market Trust, which offers three
investment series (Evergreen Money Market Fund, Evergreen Institutional Money
Market Fund and Evergreen Institutional Treasury Money Market Fund), and the
Evergreen Municipal Trust, which offers five investment series (Evergreen Tax
Exempt Money Market Fund, Evergreen Short-Intermediate Municipal Fund, Evergreen
Short-Intermediate Municipal Fund-California, Evergreen Florida High Income
Municipal Bond Fund and Evergreen Institutional Tax-Exempt Money Market Fund).
** The annual retainer and the per meeting fee paid by Evergreen Investment
Trust to each Trustee are allocated among its fourteen series.
In addition:
(1) Each non-affiliated Trustee is paid a fee of $500 for each special
telephonic meeting in which he participates, regardless of the number of Funds
for which the meeting is called.
(2) The Chairman of the Board of the Evergreen Group of mutual funds is paid an
annual retainer of $5,000, and the Chairman of the Audit Committee is paid an
annual retainer of $2,000. These retainers are allocated among all the funds in
the Evergreen group of mutual funds, based upon assets.
(3) Each member of the Audit Committee is paid an annual retainer of $500.
(4) Any individual who has been appointed as a Trustee Emeritus of one or more
funds in the Evergreen Group of mutual funds is paid one-half of the fees that
are payable to regular Trustees.
Set fourth below for each of the Trustees is the aggregate compensation
paid to such Trustees by each of The Evergreen Municipal Trust and Evergreen
Investment Trust for the fiscal year ended August 31, 1996, and by Evergreen Tax
Free Trust for the period January 19, 1996 (the date of their election as
Trustees )through August 31, 1996:
21
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Total
Compensation
Aggregate Compensation From Each Trust From Trusts
The Evergreen Evergreen Evergreen & Fund
Name of Municipal Investment Tax Free Complex Paid
Trustee Trust Trust* Trust to Trustees
Laurence Ashkin 3,522 -0- 611 26,475
Foster Bam 3,522 -0- 611 26,475
James S. Howell 3,771 22,029 606 53,000
Robert J.
Jeffries** 2,170 -0- 311 15,238
Gerald M.
McDonnell 3,447 19,916 606 45,975
Thomas L.
McVerry 3,537 20,456 606 47,100
William Walt
Pettit 3,411 19,737 606 45,600
Russell A.
Salton, III, M.D. 3,411 19,737 606 48,750
Michael S.
Scofield 3,411 19,737 606 48,750
* Formerly known as First Union Funds.
** Robert J. Jeffries has been serving as a Trustee Emeritus since January 1,
1996.
No officer or Trustee of the Trusts owned Class A or B shares of any Fund
as of the date hereof. The number and percent of outstanding Class Y shares of
of each Fund owned by officers and Trustees as a group on October 10, 1996 is as
follows:
No. of Shares Owned
By Officers and Ownership by Officers and
Trustees Trustees as a % of Class &
Name of Fund as a Group as a % of Fund
Florida Municipal Bond -0-
Georgia Municipal Bond -0-
North Carolina Municipal Bond 2,213 .24%
South Carolina Municipal Bond -0-
Virginia Municipal Bond -0-
Florida High Income -0-
High Grade 410,541 17.50%
Short-Intermediate 15,558 0.50%
Short-Intermediate-CA -0-
22
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New Jersey Tax-Free -0-
Set forth below is information with respect to each person, who, to
each Fund's knowledge, owned beneficially or of record more than 5% of a class
of each Fund's total outstanding shares and their aggregate ownership of the
Fund's total outstanding shares as of October 10, 1996.
Name of No. of % of
Name and Address Fund/Class Shares Class/Fund
- - ---------------- ---------- ------ ----------
First Union National Bank of NC North Carolina 347,331 90.93%/ 5.67%
Trust Accounts Municipal Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank of NC North Carolina 20,039 5.25%/ .33%
Trust Accounts Municipal Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo South Carolina 16,327 18.78%/ 1.40%
7RK0124218 Municipal Bond/A
Thomas B. Carr and
Louise R. Carr
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo South Carolina 5,943 6.84%/ .51%
Charles Dean Turner Municipal Bond/A
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo South Carolina 19,247 22.14%/ 1.65%
Mildred R. Robards Municipal Bond/A
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo South Carolina 5,407 6.22%/ .46%
Warren A. Ransom, Jr. Municipal Bond/A
Laurie P. Ransom
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo South Carolina 4,979 5.73%/ .43%
Virginia C. Thomas Municipal Bond/A
23
<PAGE>
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo South Carolina 28,220 6.44%/ 2.43%
Ruby B. Motsinger Municipal Bond/B
Joseph Glenn Motsinger
Tennants by Common
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank of NC* South Carolina 225,966 42.00%/ 19.42%
Trust Accounts Municipal Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank of NC* South Carolina 310,535 57.72%/ 26.69%
Trust Accounts Municipal Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Duff M. Green Virginia 22,596 7.57%/ 1.66%
c/o First Union National Bank Municipal Bond/A
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Virginia 17,966 6.02%/ 1.32%
David A. Hetzer and Municipal Bond/A
Iris L. Hetzer
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Virginia 41,533 6.75%/ 3.05%
Harry S. Williams Municipal Bond/B
Patsy Williams
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank of NC* Virginia 332,285 74.33%/ 24.41%
Trust Accounts Municipal Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
24
<PAGE>
First Union National Bank of NC* Virginia 111,321 24.90%/ 8.18%
Trust Accounts Municipal Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Merrill Lynch Pierce Fenner Florida
Private Client Group Municipal Bond/A 607,260 5.21%/ 3.81%
C/O FUBS
301 S. Tryon St.
Charlotte, NC 28288
First Union National Bank Florida 1,179,622 87.83%/ 7.40%
Trust Accounts Municipal Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank of NC* Florida 122,721 9.14%/ .77%
Trust Accounts Municipal Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Georgia 11,087 5.23%/ .82%
Yasmin M. Dharamsi Municipal Bond/A
Farid M Dharamsi
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Georgia 10,828 6.11/.76%
Yasmin M. Dharamsi Municipal Bond/A
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Georgia 10,966 5.17%/ .81%
William F. Hill Jr. and Municipal Bond/A
Marvin Hill
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank of NC Georgia 135,291 79.67%/ 9.95%
Trust Accounts Municipal Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
25
<PAGE>
First Union National Bank of NC Georgia 31,929 18.80%/12.35%
Trust Accounts Municipal Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank of NC Fl.High Income 165,822 80.86%/1.68%
Trust Accounts Muni Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank of NC Fl.High Income 11,845 5.78%/.12%
Trust Accounts Muni Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Merrill Lynch Fl.High Income 789,508 10.52%/8.02%
Trade House Account - Aid Muni Bond/A
c/o:FUBS & Co. FEBO
301 S.Tryon St.
Charlotte, NC 28288
First Union National Bank of NC High Grade/Y 515,367 22.07%/ 5.14%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Foster & Foster High Grade/Y 405,595 17.37%/ 4.05%
P.O. Box 1669
c/o Lieber & Co.
2500 Westchester Ave.
Purchase, NY 10577
Fubs & Co. Febo ** Short-Intermediate/A 1,984,127 72.66%/28.87%
Irwin Belk
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. FBO Short-Intermediate/B 37,083 5.40%/ .54%
Mark E. Smith
Melissa A. Smith JT TEN
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
26
<PAGE>
Fubs & Co. FBO Short-Intermediate/B 48,961 7.13%/ .71%
Carl R. Nodine and
Linda F. Nodine
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Band/EB/INT Short-Intermediate/Y 417,133 12.07%/6.07%
Trust Account
Attn: Trust Operation Fund Group
401 S. Tryon St.
Charlotte, NC 28202-1911
Fubs & Co. Febo New Jersey Tax-Free/Y 649,557 76.42%/15.57%
Trust Accounts
Attn: Ginny Batten CMG-1151-2
C/O First Union National Bank
401 S. Tryon Street
Charlotte, NC 28202-1911
Fubs & Co. Febo New Jersey Tax-Free/Y 200,425 23.58%/4.80%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo New Jersey Tax-Free/B 26,116 8.82%/ 63%
Dominick J. Huster and
Grace D. Huster
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo New Jersey Tax-Free/B 18,978 6.41%/45%
Ralph Gangemi and
Alice Gangemi
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank of North Carolina and its affiliates act in
various capacities for numerous accounts. As a result of its ownership on
October 10, 1996, it may be deemed to "control" the Funds listed below, as that
term is defined in the 1940 Act.
Fund % of Ownership - Class % of Ownership - Fund
- ---- ---------------------- ---------------------
Evergreen VA Muni Bond 99.23% - Class(Y) 32.59%
Evergreen SC Muni Bond 84.08% - Class(Y) 46.12%
27
<PAGE>
** As a result of his ownership of 72.66% of Class A shares and 28.87% overall
of Evergreen Short-Intermediate Municipal Fund on October 10, 1996, Irwin Belk
may be deemed to "control" the Fund as that each term is defined in the 1940
Act.
INVESTMENT ADVISERS
(See also "Management of the Funds" in each Fund's Prospectus)
The investment adviser of Short-Intermediate and Short-Intermediate-CA is
Evergreen Asset Management Corp., a New York corporation, with offices at 2500
Westchester Avenue, Purchase, New York ("Evergreen Asset" or the "Adviser").
Evergreen Asset is owned by First Union National Bank of North Carolina ("FUNB"
or the "Adviser") which, in turn, is a subsidiary of First Union Corporation
("First Union"), a bank holding company headquartered in Charlotte, North
Carolina. The investment adviser of Florida Municipal Bond, Georgia Municipal
Bond, New Jersey Tax Free, North Carolina Municipal Bond, South Carolina
Municipal Bond, Virginia Municipal Bond, Florida High Income and High Grade is
FUNB which provides investment advisory services through its Capital Management
Group. The Directors of Evergreen Asset are Richard K. Wagoner and Barbara I.
Colvin. The executive officers of Evergreen Asset are Stephen A. Lieber,
Chairman and Co-Chief Executive Officer, Nola Maddox Falcone, President and
Co-Chief Executive Officer and Theodore J. Israel, Jr., Executive Vice
President.
On June 30, 1994, Evergreen Asset and Lieber and Company ("Lieber")
were acquired by First Union through certain of its subsidiaries. Evergreen
Asset was acquired by FUNB, a wholly-owned subsidiary (except for directors'
qualifying shares) of First Union, by merger into EAMC Corporation ("EAMC") a
wholly-owned subsidiary of FUNB. EAMC then assumed the name "Evergreen Asset
Management Corp." and succeeded to the business of Evergreen Asset.
Contemporaneously with the succession of EAMC to the business of Evergreen Asset
and its assumption of the name "Evergreen Asset Management Corp.", Short-
Intermediate and Short-Intermediate-CA entered into a new investment advisory
agreement with EAMC and into a distribution agreement with Evergreen Funds
Distributor, Inc. (the "Distributor"), an affiliate of Furman Selz LLC. At that
time, EAMC also entered into a new sub-advisory agreement with Lieber pursuant
to which Lieber provides certain services to Evergreen Asset in connection with
its duties as investment adviser.
The partnership interests in Lieber, a New York general partnership,
were acquired by Lieber I Corp. and Lieber II Corp., which are both wholly-owned
subsidiaries of FUNB. The business of Lieber is being continued. The new
advisory and sub-advisory agreements were approved by the shareholders of
Short-Intermediate and Short-Intermediate-CA at their meeting held on June 23,
1994, and became effective on June 30, 1994. Florida High Income, which
commenced operations on June 30, 1995, entered into an advisory agreement with
FUNB on June 30, 1995.
Prior to January 1, 1996, First Fidelity Bank, N.A. ("First Fidelity")
acted as investment adviser to New Jersey Tax-Free. On June 18, 1995, First
Union entered into an Agreement and Plan of Merger (the "Merger Agreement")
with First Fidelity Bancorporation ("FFB"), the corporate parent of First
Fidelity which provided, among other things, for the merger (the "Merger") of
FFB with and into a wholly-owned subsidiary of First Union. The Merger was
28
<PAGE>
consummated on January 1, 1996. As a result of the Merger, FUNB and Evergreen
Asset, succeeded to the investment advisory and administrative functions
currently performed by various units of First Fidelity.
Under its Investment Advisory Agreement with each Fund, each Adviser has
agreed to furnish reports, statistical and research services and recommendations
with respect to each Fund's portfolio of investments. In addition, each Adviser
provides office facilities to the Funds and performs a variety of administrative
services. Each Fund pays the cost of all of its other expenses and liabilities,
including expenses and liabilities incurred in connection with maintaining their
registration under the Securities Act of 1933, as amended, and the 1940 Act,
printing prospectuses (for existing shareholders) as they are updated, state
qualifications, share certificates, mailings, brokerage, custodian and stock
transfer charges, printing, legal and auditing expenses, expenses of shareholder
meetings and reports to shareholders. Notwithstanding the foregoing, each
Adviser will pay the costs of printing and distributing prospectuses used for
prospective shareholders.
The method of computing the investment advisory fee for each Fund is
described in such Fund's Prospectus. The advisory fees paid by each Fund for the
three most recent fiscal periods reflected in its registration statement are set
forth below:
FLORIDA MUNICIPAL
BOND Year Ended Period Ended Year Ended
8/31/96 8/31/95 12/31/94
Advisory Fee $803,741 $243,413 $171,732
Waiver (321,496) (73,661) (171,732)
-------- -------- ---------
Net Advisory Fee 482,245 169,752 $ 0
========= ========== ==========
Expense
Reimbursement (152,334) (46,864) (90,218)
-------- -------- ---------
GEORGIA MUNICIPAL
BOND Year Ended Period Ended Year Ended
8/31/96 8/31/95 12/31/94
Advisory Fee $63,102 $ 32,646 $36,674
Waiver (63,102) (32,646) (36,674)
-------- -------- --------
Net Advisory Fee $ 0 $ 0 $ 0
======== ======== =========
Expense
Reimbursement (176,832) (105,409) (189,746)
---------- ---------
NEW JERSEY
TAX FREE Year Ended Period Ended Year Ended
8/31/96 2/28/96 2/28/95
Advisory Fee $107,212 $190,195 $191,038
29
<PAGE>
Waiver (107,212) (190,195) (191,038)
---------- --------- --------
Net Advisory Fee $ 0 $ 0 $ 0
========== ========== ==========
Expense
Reimbursement ($47,673) $ 63,918 $107,952
--------- ---------- ----------
NORTH CAROLINA
MUNICIPAL BOND Year Ended Period Ended Year Ended
8/31/96 8/31/95 12/31/94
Advisory Fee $306,892 $190,284 $287,040
Waiver (164,001) (132,051) (193,158)
--------- --------- ---------
Net Advisory Fee $142,891 $ 58,233 $93,882
========== ========== ==========
Expense
Reimbursement -0- -0- (28,121)
--------- ---------- ----------
SOUTH CAROLINA
MUNICIPAL BOND Year Ended Period Ended Year Ended
8/31/96 8/31/95 12/31/94
Advisory Fee $ 40,781 $ 13,154 $8,905
Waiver (40,781) (13,154) (8,905)
-------- -------- --------
Net Advisory Fee $ 0 $ 0 $ 0
======== ======== ========
Expense
Reimbursement (213,820) (144,430) (177,387)
--------- --------- ----------
VIRGINIA
MUNICIPAL BOND Year Ended Period Ended Year Ended
8/31/96 8/31/95 12/31/94
Advisory Fee $51,952 $ 23,156 $24,942
Waiver (51,952) ($ 23,156) ($24,942)
Net Advisory Fee 0 0 0
======== ======== ========
Expense
Reimbursement (209,667) (120,876) (205,073)
--------- --------- --------
FLORIDA HIGH
INCOME Year Ended Year Ended
8/31/96 8/31/95
Advisory Fee $477,128 $123,320
30
<PAGE>
Waiver (238,564) (71,690)
--------- --------
Net Advisory Fee 238,564 $ 51,630
======== ========
Expense
Reimbursement 0 0
HIGH GRADE Year Ended Period Ended Year Ended
8/31/96 8/31/95 12/31/94
Advisory Fee $575,456 $338,767 $599,854
Waiver (228,548) ( 20,456) (16,091)
--------- --------- --------
Net Advisory Fee 346,908 $318,311 $583,763
========= ========= ==========
SHORT-INTERMEDIATE Year Ended Year Ended Year Ended
8/31/96 8/31/95 8/31/94
Advisory Fee $287,149 $263,947 $301,565
Waiver (109,619) ( 63,612) (150,194)
--------- --------- --------
Net Advisory Fee 177,530 $200,335 $151,371
======== ======== ========
Expense
Reimbursement (30,962) ( 28,521) $ 0
-------- -------- -------
SHORT-INTERMEDIATE-
CA Year Ended Year Ended Year Ended
8/31/96 8/31/95 8/31/94
Advisory Fee $109,714 $134,625 $164,447
Waiver (49,870) ( 48,955) (129,952)
------- -------- ---------
Net Advisory Fee $59,844 $ 85,670 $34,495
======= ======= =======
Expense
Reimbursement 0 0 0
-------- ------- ------
South Carolina Municipal Bond and Florida High Grade commenced
operations on January 4, 1994, and June 30, 1995, respectively, and, therefore,
the first year's figures set forth in the table above reflect investment
advisory fees paid for the period from commencement of operations through
December 31, 1994 for South Carolina Municipal Bond and, with respect to Florida
High Income, for the period from commencement of operations through August 31,
1995.
Expense Limitations
With respect to Short-Intermediate and Short-Intermediate CA, Evergreen
31
<PAGE>
Asset has agreed to reimburse each Fund to the extent that the Fund's aggregate
operating expenses (including the Adviser's fee but excluding interest, taxes,
brokerage commissions and extraordinary expenses, and, for Class A and Class B
shares Rule 12b-1 distribution fees and shareholder servicing fees payable)
exceed 1% of its average net assets for any fiscal year.
The Investment Advisory Agreements are terminable, without the payment of
any penalty, on sixty days' written notice, by a vote of the holders of a
majority of each Fund's outstanding shares, or by a vote of a majority of each
Trust's Trustees or by the respective Adviser. The Investment Advisory
Agreements will automatically terminate in the event of their assignment. Each
Investment Advisory Agreement provides in substance that the Adviser shall not
be liable for any action or failure to act in accordance with its duties
thereunder in the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser or of reckless disregard of its obligations
thereunder. The Investment Advisory Agreements with respect to Florida High
Income, Short-Intermediate and Short-Intermediate-CA were approved by each
Fund's shareholders on June 23, 1994, became effective on June 30, 1994, (June
30, 1995 with respect to Florida High Income) was last approved on February
8,1996, and will continue in effect until April 30, 1997, (June 30, 1997 with
respect to Florida High Income) and thereafter from year to year provided that
their continuance is approved annually by a vote of a majority of the Trustees
of each Trust including a majority of those Trustees who are not parties thereto
or "interested persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting duly called for the purpose of voting on such approval or a
majority of the outstanding voting shares of each Fund. With respect to Florida
Municipal Bond, Georgia Municipal Bond, North Carolina Municipal Bond, South
Carolina Municipal Bond, Virginia Municipal Bond and High Grade, the Investment
Advisory Agreement dated February 28, 1985 and amended from time to time
thereafter was last approved by the Trustees of Evergreen Investment Trust
(formerly, First Union Funds) on February 8, 1996 and it will continue in effect
until April 30, 1997 and from year to year with respect to each Fund provided
that such continuance is approved annually by a vote of a majority of the
Trustees of Evergreen Investment Trust including a majority of those Trustees
who are not parties thereto or "interested persons" of any such party cast in
person at a meeting duly called for the purpose of voting on such approval or by
a vote of a majority of the outstanding voting securities of each Fund. With
respect to New Jersey Tax Free, the Investment Advisory Agreement dated January
1, 1996 was first approved by the shareholders of the Fund on December 12, 1995
and will continue until January 1, 1998 and from year to year with respect to
the Fund provided that such continuance is approved annually by a vote of a
majority of the Trustees of Evergreen Tax Free Trust including a majority of
those Trustees who are not parties thereto or "interested persons" of any such
party cast in person at a meeting duly called for the purpose of voting on such
approval or by a vote of a majority of the outstanding voting securities of the
Fund.
Certain other clients of each Adviser may have investment objectives
and policies similar to those of the Funds. Each Adviser (including the
sub-adviser) may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients simultaneously
with a Fund. If transactions on behalf of more than one client during the same
period increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price or quantity. It
is the policy of each Adviser to allocate advisory recommendations and the
placing of orders in a manner which is deemed equitable by the Adviser to the
32
<PAGE>
accounts involved, including the Funds. When two or more of the clients of the
Adviser (including one or more of the Funds) are purchasing or selling the same
security on a given day from the same broker-dealer, such transactions may be
averaged as to price.
Although the investment objectives of the Funds are not the same, and
their investment decisions are made independently of each other, they rely upon
the same resources for investment advice and recommendations. Therefore, on
occasion, when a particular security meets the different investment objectives
of the various Funds, they may simultaneously purchase or sell the same
security. This could have a detrimental effect on the price and quantity of the
security available to each Fund. If simultaneous transactions occur, the Adviser
attempts to allocate the securities, both as to price and quantity, in
accordance with a method deemed equitable to each Fund and consistent with their
different investment objectives. In some cases, simultaneous purchases or sales
could have a beneficial effect, in that the ability of one Fund to participate
in volume transactions may produce better executions for that Fund.
Each Fund has adopted procedures under Rule 17a-7 of the 1940 Act to
permit purchase and sales transactions to be effected between each Fund and the
other registered investment companies for which either Evergreen Asset or FUNB
acts as investment adviser or between the Fund and any advisory clients of
Evergreen Asset, FUNB or Lieber. Each Fund may from time to time engage in such
transactions but only in accordance with these procedures and if they are
equitable to each participant and consistent with each participant's investment
objectives.
Prior to July 1, 1995, Federated Administrative Services, a subsidiary of
Federated Investors, provided legal, accounting and other administrative
personnel and support services to each of the portfolios of Evergreen Investment
Trust. The Trust paid a fee for such services at the following annual rate: .15%
on the first $250 million average daily net assets of the Trust; .125% on the
next $250 million; .10% on the next $250 million and .075% on assets in excess
of $250 million. On July 1, 1995, Evergreen Asset commenced providing
administrative services to each of the portfolios of Evergreen Investment Trust
and on January 19, 1996 Evergreen Asset commenced providing administrative
services to each of the portfolios of Evergreen Tax Free Trust for a fee based
on the average daily net assets of each fund administered by Evergreen Asset for
which Evergreen Asset or FUNB also serves as investment adviser, calculated
daily and payable monthly at the following annual rates: .050% on the first $7
billion; .035% on the next $3 billion; .030% on the next $5 billion; .020% on
the next $10 billion; .015% on the next $5 billion; and .010% on assets in
excess of $30 billion.
Prior to January 1, 1996, Furman Selz LLC acted as administrator for
New Jersey Tax Free. For the fiscal years ended February 28, 1994, 1995 and the
fiscal period ended January 18, 1996, Furman Selz LLC waived its entire
administrative fee.
Furman Selz LLC, an affiliate of the Distributor, serves as
sub-administrator to Florida Municipal Bond, Georgia Municipal Bond, North
Carolina Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond,
High Grade and New Jersey Tax Free and is entitled to receive a fee from each
Fund calculated on the average daily net assets of each Fund at a rate based on
the total assets of the mutual funds administered by Evergreen Asset for which
FUNB or Evergreen Asset also serve as investment adviser, calculated in
accordance with the following schedule:
33
<PAGE>
.0100% of the first $7 billion; .0075% on the next $3 billion; .0050% on the
next $15 billion; and .0040% on assets in excess of $25 billion. The total
assets of mutual funds administered by Evergreen Asset for which Evergreen Asset
or FUNB serve as investment adviser as of September 30, 1996 were approximately
$16 billion.
For the fiscal year ended August 31, 1996, the fiscal period ended August
31, 1995, and the year ended December 31, 1994 Florida Municipal Bond incurred
$81,881, $38,751 and $75,397 respectively, in administrative service costs, all
of which were voluntarily waived for the year ended December 31, 1994. For the
fiscal year ended August 31, 1996, the fiscal period ended August 31, 1995 and
the fiscal year ended December 31, 1994, Georgia Municipal Bond incurred $4,159,
$3,901 and $75,479, respectively, in administrative service costs, all of which
were voluntarily waived. For the fiscal year ended August 31, 1996, the fiscal
period ended August 31, 1995 and the fiscal year ended December 31, 1994, North
Carolina Municipal Bond incurred $31,447, $23,309 and $75,476, respectively, in
administrative service costs, of which $ 0, $0 and $28,121, respectively were
voluntarily waived. For the fiscal year ended August 31, 1996, the fiscal period
ended August 31, 1995, and the period January 3, 1994 (commencement of
operations) to December 31, 1994, South Carolina Municipal Bond incurred $4,123,
$1,451 and $104,356, respectively in administrative service costs, all of which
were voluntarily waived. For the fiscal year ended August 31, 1996, the fiscal
period ended August 31, 1995 and the fiscal year ended December 31, 1994,
Virginia Municipal Bond incurred $5,136, $2,701 and $75,479 ,respectively, in
administrative service costs, all of which were voluntarily waived. For the
fiscal year ended August 31, 1996, the fiscal period ended August 31, 1995 and
the fiscal year ended December 31, 1994, High Grade incurred $59,073, $50,406
and $101,004, respectively, in administrative service costs. For the fiscal
period from January 19, 1996 through August 31, 1996 New Jersey Tax-Free
incurred $9,468, in administrative service costs.
DISTRIBUTION PLANS
Reference is made to "Management of the Funds - Distribution Plans and
Agreements" in the Prospectus of each Fund for additional disclosure regarding
the Funds' distribution arrangements. Distribution fees are accrued daily and
paid monthly on the Class A and B shares and are charged as class expenses, as
accrued. The distribution fees attributable to the Class B shares are designed
to permit an investor to purchase such shares through broker-dealers without the
assessment of a front-end sales charge, while at the same time permitting the
Distributor to compensate broker-dealers in connection with the sale of such
shares. In this regard the purpose and function of the combined contingent
deferred sales charge and distribution services fee on the Class B shares are
the same as those of the front-end sales charge and distribution fee with
respect to the Class A shares in that in each case the sales charge and/or
distribution fee provide for the financing of the distribution of the Fund's
shares.
Under the Rule 12b-1 Distribution Plans that have been adopted by each
Fund with respect to each of its Class A and Class B shares (each a "Plan" and
collectively, the "Plans"), the Treasurer of each Fund reports the amounts
expended under the Plan and the purposes for which such expenditures were made
to the Trustees of each Trust for their review on a quarterly basis. Also, each
Plan provides that the selection and nomination of Trustees who are not
"interested persons" of each Trust (as defined in the 1940 Act) are committed to
the discretion of such disinterested Trustees then in office.
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Each Adviser may from time to time and from its own funds or such other
resources as may be permitted by rules of the Securities and Exchange Commission
make payments for distribution services to the Distributor; the latter may in
turn pay part or all of such compensation to brokers or other persons for their
distribution assistance.
Short-Intermediate and Short-Intermediate-CA commenced offering Class A and
Class B shares on January 3, 1995 and Florida High Income commenced offering
Class A and Class B shares on June 30, 1995. Each Plan with respect to such
Funds became effective on December 30, 1994 (June 30, 1995 with respect to
Florida High Income) and was initially approved by the sole shareholder of each
Class of shares of each Fund with respect to which a Plan was adopted on that
date and by the unanimous vote of the Trustees of each Trust, including the
disinterested Trustees voting separately, at a meeting called for that purpose
and held on December 13, 1994 (April 20, 1995 with respect to Florida High
Income). The Distribution Agreements between each Fund and the Distributor,
pursuant to which distribution fees are paid under the Plans by each Fund with
respect to its Class A and Class B shares were also approved at the December 13,
1994 (April 20, 1995 with respect to Florida High Income) meeting by the
unanimous vote of the Trustees, including the disinterested Trustees voting
separately. Each Plan and Distribution Agreement will continue in effect for
successive twelve-month periods provided, however, that such continuance is
specifically approved at least annually by the Trustees of each Trust or by vote
of the holders of a majority of the outstanding voting securities (as defined in
the 1940 Act) of that Class, and, in either case, by a majority of the Trustees
of the Trust who are not parties to the Agreement or interested persons, as
defined in the 1940 Act, of any such party (other than as Trustees of the Trust)
and who have no direct or indirect financial interest in the operation of the
Plan or any agreement related thereto.
Prior to July 7, 1995, Federated Securities Corp., a subsidiary of
Federated Investors, served as the distributor for Florida Municipal Bond,
Georgia Municipal Bond, North Carolina Municipal Bond, South Carolina Municipal
Bond, Virginia Municipal Bond and High Grade as well as other portfolios of
Evergreen Investment Trust. The Distribution Agreements between each Fund and
the Distributor pursuant to which distribution fees are paid under the Plans by
each Fund with respect to its Class A and Class B shares were approved on April
20, 1995 by the unanimous vote of the Trustees including the disinterested
Trustees voting separately.
New Jersey Tax-Free commenced offering Class B shares on January 19,
1996. Prior to January 19, 1996, FFB Funds Distributor, Inc. served as
distributor to New Jersey Tax-Free. The Distribution Agreement between New
Jersey Tax-Free and the Distributor pursuant to which distribution fees are paid
under the Plan by New Jersey Tax-Free with respect to its Class A and Class B
shares was approved on January 19, 1996, by the unanimous vote of the Trustees
including the disinterested Trustees voting separately.
The Plans permit the payment of fees to brokers and others for
distribution and shareholder-related administrative services and to
broker-dealers, depository institutions, financial intermediaries and
administrators for administrative services as to Class A and Class B shares. The
Plans are designed to (i) stimulate brokers to provide distribution and
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administrative support services to each Fund and holders of Class A and Class B
shares and (ii) stimulate administrators to render administrative support
services to the Fund and holders of Class A and Class B shares. The
administrative services are provided by a representative who has knowledge of
the shareholder's particular circumstances and goals, and include, but are not
limited to providing office space, equipment, telephone facilities, and various
personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding Class
A and Class B shares; assisting clients in changing dividend options, account
designations, and addresses; and providing such other services as the Fund
reasonably requests for its Class A and Class B shares.
In addition to the Plans, Florida Municipal Bond, Georgia Municipal
Bond, North Carolina Municipal Bond, South Carolina Municipal Bond, Virginia
Municipal Bond, High Grade and New Jersey Tax-Free have each adopted a
Shareholder Services Plan whereby shareholder servicing agents may receive fees
from the Fund for providing services which include, but are not limited to,
distributing prospectuses and other information, providing shareholder
assistance, and communicating or facilitating purchases and redemptions of Class
B shares of the Fund.
In the event that a Plan or Distribution Agreement is terminated or not
continued with respect to one or more Classes of a Fund, (i) no distribution
fees (other than current amounts accrued but not yet paid) would be owed by the
Fund to the Distributor with respect to that Class or Classes, and (ii) the Fund
would not be obligated to pay the Distributor for any amounts expended under the
Distribution Agreement not previously recovered by the Distributor from
distribution services fees in respect of shares of such Class or Classes through
deferred sales charges.
All material amendments to any Plan or Distribution Agreement must be
approved by a vote of the Trustees of a Trust or the holders of the Fund's
outstanding voting securities, voting separately by Class, and in either case,
by a majority of the disinterested Trustees, cast in person at a meeting called
for the purpose of voting on such approval; and any Plan or Distribution
Agreement may not be amended in order to increase materially the costs that a
particular Class of shares of a Fund may bear pursuant to the Plan or
Distribution Agreement without the approval of a majority of the holders of the
outstanding voting shares of the Class affected. With respect to Florida
Municipal Bond, Georgia Municipal Bond, North Carolina Municipal Bond, South
Carolina Municipal Bond, Virginia Municipal Bond and High Grade, amendments to
the Shareholder Services Plan require a majority vote of the disinterested
Trustees but do not require a shareholders vote. Any Plan, Shareholder Services
Plan or Distribution Agreement may be terminated (a) by a Fund without penalty
at any time by a majority vote of the holders of the outstanding voting
securities of the Fund, voting separately by Class or by a majority vote of the
Trustees who are not "interested persons" as defined in the 1940 Act, or (b) by
the Distributor. To terminate any Distribution Agreement, any party must give
the other parties 60 days' written notice; to terminate a Plan only, the Fund
need give no notice to the Distributor. Any Distribution Agreement will
terminate automatically in the event of its assignment.
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Fees Paid Pursuant To Distribution Plans. The Funds incurred the following
distribution services fee:
Florida Municipal Bond. For the fiscal period from January 1, 1995 through
August 31, 1995, and the fiscal year ended August 31, 1996, $59,721 and
$240,978, respectively, on behalf of Class A shares; and $28,054 and $215,869,
respectively, on behalf of Class B shares.
Georgia Municipal Bond. For the fiscal period from January 1, 1995 through
August 31, 1995, and the fiscal year ended August 31, 1996, $2,856 and $5,047,
respectively, on behalf of Class A shares; and $37,476 and $63,447,
respectively, on behalf of Class B shares.
North Carolina Municipal Bond. For the fiscal period from January 1, 1995
through August 31, 1995,and the fiscal year ended August 31, 1996, $13,739 and
$20,833, respectively, on behalf of Class A shares; and $239,789 and $375,352,
respectively, on behalf of Class B shares.
South Carolina Municipal Bond. For the fiscal period from January 1, 1995
through August 31, 1995,and the fiscal year ended August 31, 1996, $788 and
$1,917, respectively, on behalf of Class A shares; and $15,094 and $29,922,
respectively, on behalf of Class B shares.
Virginia Municipal Bond. For the fiscal period from January 1, 1995 through
August 31, 1995,and the fiscal year ended August 31, 1996, $3,127 and $6,048,
respectively, on behalf of Class A shares; and $22,700 and $43,430,
respectively, on behalf of Class B shares.
High Grade. For the fiscal period from January 1, 1995 through August 31, 1995,
and the fiscal year ended August 31, 1996, $97,996 and $138,927, respectively,
on behalf of Class A shares; and $167,706 and $258,074, respectively, on behalf
of Class B shares.
New Jersey Tax-Free. For the fiscal periods from March 1, 1995 through February
29, 1996, and March 1, 1996 through August 31, 1996, $11,178 and $42,308,
respectively, on behalf of Class A shares; and $87 and $5,865 for the period
from January 19, 1996 through February 29, 1996 and March 1, 1996.
Short-Intermediate. For the fiscal period from January 3, 1995 through August
31, 1995, and the fiscal year ended August 31, 1996, $4,106 and $13,347,
respectively, on behalf of Class A shares; and $20,584 and $52,375,
respectively, on behalf of Class B shares.
Short-Intermediate-CA. For the fiscal period from January 3, 1995 through August
31, 1995,and the fiscal year ended August 31, 1996, $0 and $0, respectively, on
behalf of Class A shares; and $0 and $0, respectively, on behalf of Class B
shares.
Florida High Income. For the fiscal period from June 30, 1995 through August 31,
1995, and the fiscal year ended August 31, 1996, $41,690 and $169,651,
respectively, on behalf of Class A shares; and $1,565 and $80,050, respectively,
on behalf of Class B shares.
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Fee Paid Pursuant To Shareholder Services Plans.The Funds incurred the following
shareholder services fees:
Florida Municipal Bond. For the fiscal period from January 1, 1995 through
August 31, 1995, and the fiscal year ended August 31, 1996, $9,351 and $71,956,
respectively, on behalf of Class B shares.
Georgia Municipal Bond. For the fiscal period from January 1, 1995 through
August 31, 1995, and the fiscal year ended August 31, 1996, $12,492 and $21,149,
respectively, on behalf of Class B shares.
North Carolina Municipal Bond. For the fiscal period from January 1, 1995
through August 31, 1995, and the fiscal year ended August 31, 1996, $79,930 and
$125,117, respectively, on behalf of Class B shares.
South Carolina Municipal Bond. For the fiscal period from January 1, 1995
through August 31, 1995, and the fiscal year ended August 31, 1996, $5,031 and
$9,974, respectively, on behalf of Class B shares.
Virginia Municipal Bond. For the fiscal period from January 1, 1995 through
August 31, 1995, and the fiscal year ended August 31, 1996, $7,567 and $14,476,
respectively, on behalf of Class B shares.
High Grade. For the fiscal period from January 1, 1995 through August 31, 1995,
and the fiscal year ended August 31, 1996, $55,902 and $86,025, respectively, on
behalf of Class B shares.
Florida High Income. For the fiscal period from July 10, 1995 through August 31,
1995 and for the fiscal year ended August 31, 1996, $522 and $26,683,
respectively, on behalf of Class B shares.
Short Intermediate. For the fiscal period from January 5, 1995 and the fiscal
year ended August 31, 1996, $6861 and $17,458, respectively, on behalf of Class
B shares.
New Jersey Tax-Free. For the fiscal period January 30, 1996 through February 29,
1996 and March 1, 1996 throuth August 31, 1996, $29 and $1,949 on behalf of
Class B shares.
ALLOCATION OF BROKERAGE
Decisions regarding each Fund's portfolio are made by its Adviser,
subject to the supervision and control of the Trustees. Orders for the purchase
and sale of securities and other investments are placed by employees of the
Adviser, all of whom, in the case of Evergreen Asset, are associated with
Lieber. In general, the same individuals perform the same functions for the
other funds managed by the Adviser. A Fund will not effect any brokerage
transactions with any broker or dealer affiliated directly or indirectly with
the Adviser unless such transactions are fair and reasonable, under the
circumstances, to the Fund's shareholders. Circumstances that may indicate that
such transactions are fair or reasonable include the frequency of such
transactions, the selection process and the commissions payable in connection
with such transactions.
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It is anticipated that most of the Funds purchase and sale transactions
will be with the issuer or an underwriter or with major dealers in such
securities acting as principals. Such transactions are normally on a net basis
and generally do not involve payment of brokerage commissions. However, the cost
of securities purchased from an underwriter usually includes a commission paid
by the issuer to the underwriter. Purchases or sales from dealers will normally
reflect the spread between bid and ask prices.
In selecting firms to effect securities transactions, the primary
consideration of each Fund shall be prompt execution at the most favorable
price. A Fund will also consider such factors as the price of the securities and
the size and difficulty of execution of the order. If these objectives may be
met with more than one firm, the Fund will also consider the availability of
statistical and investment data and economic facts and opinions helpful to the
Fund. To the extent that receipt of these services for which the Adviser or its
affiliates might otherwise have paid, it would tend to reduce their expenses.
Except with respect to North Carolina Municipal Bond, the transactions
in which the Funds engage do not involve the payment of brokerage commissions
and are executed with dealers other than Lieber. For the fiscal year ended
August 31, 1996, the fiscal period ended August 31, 1995 and the fiscal year
ended December 31, 1994, North Carolina Municipal Bond paid $10, $ 0 and $
1,250, respectively, in commissions on brokerage transactions.
ADDITIONAL TAX INFORMATION
(See also "Taxes" in the Prospectus)
Each Fund has qualified and intends to continue to qualify for and
elect the tax treatment applicable to regulated investment companies ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). (Such qualification does not involve supervision of management or
investment practices or policies by the Internal Revenue Service.) In order to
qualify as a regulated investment company, a Fund must, among other things, (a)
derive at least 90% of its gross income from dividends, interest, payments with
respect to proceeds from securities loans, gains from the sale or other
disposition of securities or foreign currencies and other income (including
gains from options, futures or forward contracts) derived with respect to its
business of investing in such securities; (b) derive less than 30% of its gross
income from the sale or other disposition of securities, options, futures or
forward contracts (other than those on foreign currencies), or foreign
currencies (or options, futures or forward contracts thereon) that are not
directly related to the RIC's principal business of investing in securities (or
options and futures with respect thereto) held for less than three months; and
(c) diversify its holdings so that, at the end of each quarter of its taxable
year, (i) at least 50% of the market value of the Fund's total assets is
represented by cash, U.S. government securities and other securities limited in
respect of any one issuer, to an amount not greater than 5% of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its total assets is invested in the securities of
any one issuer (other than U.S. government securities and securities of other
regulated investment companies). By so qualifying, a Fund is not subject to
Federal income tax if it timely distributes its investment company taxable
income and any net realized capital gains. A 4% nondeductible excise tax will be
imposed on a Fund to the extent it does not meet certain distribution
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requirements by the end of each calendar year. Each Fund anticipates meeting
such distribution requirements.
Dividends paid by a Fund from investment company taxable income
generally will be taxed to the shareholders as ordinary income. Investment
company taxable income includes net investment income and net realized
short-term gains (if any). Any dividends received by a Fund from domestic
corporations will constitute a portion of the Fund's gross investment income. It
is anticipated that this portion of the dividends paid by a Fund (other than
distributions of securities profits) will qualify for the 70% dividends-received
deduction for corporations. Shareholders will be informed of the amounts of
dividends which so qualify.
Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to shareholders (who are not exempt from
tax) as long-term capital gain, regardless of the length of time the shares of a
Fund have been held by such shareholders. Short-term capital gains distributions
are taxable to shareholders who are not exempt from tax as ordinary income. Such
distributions are not eligible for the dividends-received deduction. Any loss
recognized upon the sale of shares of a Fund held by a shareholder for six
months or less will be treated as a long-term capital loss to the extent that
the shareholder received a long-term capital gain distribution with respect to
such shares.
Distributions of investment company taxable income and any net
short-term capital gains will be taxable as ordinary income as described above
to shareholders (who are not exempt from tax), whether made in shares or in
cash. Shareholders electing to receive distributions in the form of additional
shares will have a cost basis for Federal income tax purposes in each share so
received equal to the net asset value of a share of a Fund on the reinvestment
date.
Distributions by each Fund result in a reduction in the net asset value
of the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable as
ordinary income or capital gain as described above to shareholders (who are not
exempt from tax), even though, from an investment standpoint, it may constitute
a return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution. The price of
shares purchased at that time includes the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will then receive
what is in effect a return of capital upon the distribution which will
nevertheless be taxable to shareholders subject to taxes.
Upon a sale or exchange of its shares, a shareholder will realize a
taxable gain or loss depending on its basis in the shares. Such gains or losses
will be treated as a capital gain or loss if the shares are capital assets in
the investor's hands and will be a long-term capital gain or loss if the shares
have been held for more than one year. Generally, any loss realized on a sale or
exchange will be disallowed to the extent shares disposed of are replaced within
a period of sixty-one days beginning thirty days before and ending thirty days
after the shares are disposed of. Any loss realized by a shareholder on the sale
of shares of the Fund held by the shareholder for six months or less will be
disallowed to the extent of any exempt interest dividends received by the
shareholder with respect to such shares, and will be treated for tax purposes as
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a long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her Federal income tax return. Each shareholder
should consult his or her own tax adviser to determine the state and local tax
implications of Fund distributions.
Shareholders who fail to furnish their taxpayer identification numbers to a
Fund and to certify as to its correctness and certain other shareholders may be
subject to a 31% Federal income tax backup withholding requirement on dividends,
distributions of capital gains and redemption proceeds paid to them by the Fund.
If the withholding provisions are applicable, any such dividends or capital gain
distributions to these shareholders, whether taken in cash or reinvested in
additional shares, and any redemption proceeds will be reduced by the amounts
required to be withheld. Investors may wish to consult their own tax advisers
about the applicability of the backup withholding provisions.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). It does not reflect the special
tax consequences to certain taxpayers (e.g., banks, insurance companies, tax
exempt organizations and foreign persons). Shareholders are encouraged to
consult their own tax advisers regarding specific questions relating to Federal,
state and local tax consequences of investing in shares of a Fund. Each
shareholder who is not a U.S. person should consult his or her tax adviser
regarding the U.S. and foreign tax consequences of ownership of shares of a
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 31% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
Special Tax Considerations
To the extent that the Fund distributes exempt interest dividends to a
shareholder, interest on indebtedness incurred or continued by such shareholder
to purchase or carry shares of the Fund is not deductible. Furthermore, entities
or persons who are "substantial users" (or related persons) of facilities
financed by "private activity" bonds (some of which were formerly referred to as
"industrial development" bonds) should consult their tax advisers before
purchasing shares of the Fund. "Substantial user" is defined generally as
including a "non-exempt person" who regularly uses in its trade or business a
part of a facility financed from the proceeds of industrial development bonds.
The percentage of the total dividends paid by a Fund with respect to
any taxable year that qualifies as exempt interest dividends will be the same
for all shareholders of the Fund receiving dividends with respect to such year.
If a shareholder receives an exempt interest dividend with respect to any share
and such share has been held for six months or less, any loss on the sale or
exchange of such share will be disallowed to the extent of the exempt interest
dividend amount.
NET ASSET VALUE
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The following information supplements that set forth in each Fund's
Prospectus under the subheading "How to Buy Shares - How the Funds Value Their
Shares" in the Section entitled "Purchase and Redemption of Shares".
The public offering price of shares of a Fund is its net asset value,
plus, in the case of Class A shares, a sales charge which will vary depending on
the purchase alternative chosen by the investor, as more fully described in the
Prospectus. See "Purchase of Shares - Class A Shares - Front-End Sales Charge
Alternative. " On each Fund business day on which a purchase or redemption order
is received by a Fund and trading in the types of securities in which a Fund
invests might materially affect the value of Fund shares, the per share net
asset value of each such Fund is computed in accordance with the Declaration of
Trust and By-Laws governing each Fund as of the next close of regular trading on
the New York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern time)
by dividing the value of the Fund's total assets, less its liabilities, by the
total number of its shares then outstanding. A Fund business day is any weekday,
exclusive of national holidays on which the Exchange is closed and Good Friday.
For each Fund, securities for which the primary market is on a domestic or
foreign exchange and over-the-counter securities admitted to trading on the
NASDAQ National List are valued at the last quoted sale or, if no sale, at the
mean of closing bid and asked price and portfolio bonds are presently valued by
a recognized pricing service when such prices are believed to reflect the fair
value of the security. Over-the-counter securities not included in the NASDAQ
National List for which market quotations are readily available are valued at a
price quoted by one or more brokers. If accurate quotations are not available,
securities will be valued at fair value determined in good faith by the Board of
Trustees.
The respective per share net asset values of the Class A, Class B and
Class Y shares are expected to be substantially the same. Under certain
circumstances, however, the per share net asset values of the Class B shares may
be lower than the per share net asset value of the Class A shares (and, in turn,
that of Class A shares may be lower than Class Y shares) as a result of the
greater daily expense accruals, relative to Class A and Class Y shares, of Class
B shares relating to distribution services fees (and, with respect to Florida
Municipal Bond, Georgia Municipal Bond, New Jersey Tax-Free, North Carolina
Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond, Florida
High Income and High Grade, shareholder service fee) and, to the extent
applicable, transfer agency fees and the fact that Class Y shares bear no
additional distribution, shareholder service or transfer agency related fees.
While it is expected that, in the event each Class of shares of a Fund realizes
net investment income or does not realize a net operating loss for a period, the
per share net asset values of the three classes will tend to converge
immediately after the payment of dividends, which dividends will differ by
approximately the amount of the expense accrual differential among the Classes,
there is no assurance that this will be the case. In the event one or more
Classes of a Fund experiences a net operating loss for any fiscal period, the
net asset value per share of such Class or Classes will remain lower than that
of Classes that incurred lower expenses for the period.
PURCHASE OF SHARES
The following information supplements that set forth in each Prospectus
under the heading "Purchase and Redemption of Shares - How To Buy Shares".
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General
Shares of each Fund will be offered on a continuous basis at a price
equal to their net asset value plus an initial sales charge at the time of
purchase (the "front-end sales charge alternative"), or with a contingent
deferred sales charge (the deferred sales charge alternative"), as described
below. Class Y shares which, as described below, are not offered to the general
public, are offered without any front-end or contingent sales charges. Shares of
each Fund are offered on a continuous basis through (i) investment dealers that
are members of the National Association of Securities Dealers, Inc. and have
entered into selected dealer agreements with the Distributor ("selected
dealers"), (ii) depository institutions and other financial intermediaries or
their affiliates, that have entered into selected agent agreements with the
Distributor ("selected agents"), or (iii) the Distributor. The minimum for
initial investments is $1,000; there is no minimum for subsequent investments.
The subscriber may use the Share Purchase Application available from the
Distributor for his or her initial investment. Sales personnel of selected
dealers and agents distributing a Fund's shares may receive differing
compensation for selling Class A or Class B shares.
Investors may purchase shares of a Fund in the United States either
through selected dealers or agents or directly through the Distributor. A Fund
reserves the right to suspend the sale of its shares to the public in response
to conditions in the securities markets or for other reasons.
Each Fund will accept unconditional orders for its shares to be
executed at the public offering price equal to the net asset value next
determined (plus for Class A shares, the applicable sales charges), as described
below. Orders received by the Distributor prior to the close of regular trading
on the Exchange on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on the Exchange on
that day (plus for Class A shares the sales charges). In the case of orders for
purchase of shares placed through selected dealers or agents, the applicable
public offering price will be the net asset value as so determined, but only if
the selected dealer or agent receives the order prior to the close of regular
trading on the Exchange and transmits it to the Distributor prior to its close
of business that same day (normally 5:00 p.m. Eastern time). The selected dealer
or agent is responsible for transmitting such orders by 5:00 p.m. If the
selected dealer or agent fails to do so, the investor's right to that day's
closing price must be settled between the investor and the selected dealer or
agent. If the selected dealer or agent receives the order after the close of
regular trading on the Exchange, the price will be based on the net asset value
determined as of the close of regular trading on the Exchange on the next day it
is open for trading.
Following the initial purchase of shares of a Fund, a shareholder may
place orders to purchase additional shares by telephone if the shareholder has
completed the appropriate portion of the Share Purchase Application. Payment for
shares purchased by telephone can be made only by Electronic Funds Transfer from
a bank account maintained by the shareholder at a bank that is a member of the
National Automated Clearing House Association ("ACH"). If a shareholder's
telephone purchase request is received before 3:00 p.m. New York time on a Fund
business day, the order to purchase shares is automatically placed the same Fund
business day for non-money market funds, and two days following the day the
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order is received for money market funds, and the applicable public offering
price will be the public offering price determined as of the close of business
on such business day. Full and fractional shares are credited to a subscriber's
account in the amount of his or her subscription. As a convenience to the
subscriber, and to avoid unnecessary expense to a Fund, stock certificates
representing shares of a Fund are not issued for any class of shares of any
Fund. This facilitates later redemption and relieves the shareholder of the
responsibility for and inconvenience of lost or stolen certificates.
Alternative Purchase Arrangements
Each Fund issues three classes of shares: (i) Class A shares, which are
sold to investors choosing the front-end sales charge alternative; (ii) Class B
shares, which are sold to investors choosing the deferred sales charge
alternative; and (iii) Class Y shares, which are offered only to (a) persons who
at or prior to December 30, 1994 owned shares in a mutual fund advised by
Evergreen Asset, (b) certain investment advisory clients of the Advisers and
their affiliates, and (c) institutional investors. The three classes of shares
each represent an interest in the same portfolio of investments of the Fund,
have the same rights and are identical in all respects, except that (I) only
Class A and Class B shares are subject to a Rule 12b-1 distribution fee, (II)
Class B shares of Florida Municipal Bond, Georgia Municipal Bond, New Jersey
Tax- Free, North Carolina Municipal Bond, South Carolina Municipal Bond,
Virginia Municipal Bond and High Grade are subject to a shareholder service fee,
(III) Class A shares bear the expense of the front-end sales charge and Class B
shares bear the expense of the deferred sales charge, (IV) Class B shares bear
the expense of a higher Rule 12b-1 distribution services fee and shareholder
service fee than Class A shares and higher transfer agency costs, (V) with the
exception of Class Y shares, each Class of each Fund has exclusive voting rights
with respect to provisions of the Rule 12b-1 Plan pursuant to which its
distribution services (and, to the extent applicable, shareholder service) fee
is paid which relates to a specific Class and other matters for which separate
Class voting is appropriate under applicable law, provided that, if the Fund
submits to a simultaneous vote of Class A and Class B shareholders an amendment
to the Rule 12b-1 Plan that would materially increase the amount to be paid
thereunder with respect to the Class A shares, the Class A shareholders and the
Class B shareholders will vote separately by Class, and (VI) only the Class B
shares are subject to a conversion feature. Each Class has different exchange
privileges and certain different shareholder service options available.
The alternative purchase arrangements permit an investor to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the anticipated life of
their investment in the Fund, the accumulated distribution services (and, to the
extent applicable, shareholder service) fee and contingent deferred sales
charges on Class B shares prior to conversion would be less than the front-end
sales charge and accumulated distribution services fee on Class A shares
purchased at the same time, and to what extent such differential would be offset
by the higher return of Class A shares. Class B shares will normally not be
suitable for the investor who qualifies to purchase Class A shares at the lowest
applicable sales charge. For this reason, the Distributor will reject any order
(except orders for Class B shares from certain retirement plans) for more than
$2,500,000 for Class B shares.
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Class A shares are subject to a lower distribution services fee and no
shareholder service fee and, accordingly, pay correspondingly higher dividends
per share than Class B shares. However, because front-end sales charges are
deducted at the time of purchase, investors purchasing Class A shares would not
have all their funds invested initially and, therefore, would initially own
fewer shares. Investors not qualifying for reduced front-end sales charges who
expect to maintain their investment for an extended period of time might
consider purchasing Class A shares because the accumulated continuing
distribution (and, to the extent applicable, shareholder service) charges on
Class B shares may exceed the front-end sales charge on Class A shares during
the life of the investment. Again, however, such investors must weigh this
consideration against the fact that, because of such front-end sales charges,
not all their funds will be invested initially.
Other investors might determine, however, that it would be more
advantageous to purchase Class B shares in order to have all their funds
invested initially, although remaining subject to higher continuing distribution
services (and, to the extent applicable, shareholder service) fees and being
subject to a contingent deferred sales charge for a seven-year period. For
example, based on current fees and expenses, an investor subject to the 4.75%
front-end sales charge imposed by the Evergreen Equity and Long-Term Bond Funds,
(i.e., Florida Municipal Bond, Georgia Municipal Bond, New Jersey Tax-Free,
North Carolina Municipal Bond, South Carolina Municipal Bond, Virginia Municipal
Bond, Florida High Income and High Grade)or the 3.25% front end sales charge
imposed by the Evergreen Intermediate and Short-Term Bond Funds (i.e.,
Short-Intermediate and Short-Intermediate-CA) would have to hold his or her
investment approximately seven years for the Class B distribution services (and,
to the extent applicable, shareholders service) fees to exceed the front-end
sales charge plus the accumulated distribution services fee of Class A shares.
In this example, an investor intending to maintain his or her investment for a
longer period might consider purchasing Class A shares. This example does not
take into account the time value of money, which further reduces the impact of
the Class B distribution services (and, to the extent applicable, shareholder
service) fees on the investment, fluctuations in net asset value or the effect
of different performance assumptions.
With respect to each Fund, the Trustees have determined that currently
no conflict of interest exists between or among the Class A, Class B and Class Y
shares. On an ongoing basis, the Trustees, pursuant to their fiduciary duties
under the 1940 Act and state laws, will seek to ensure that no such conflict
arises.
Front-end Sales Charge Alternative--Class A Shares
The public offering price of Class A shares for purchasers choosing the
front-end sales charge alternative is the net asset value plus a sales charge as
set forth in the Prospectus for each Fund.
Shares issued pursuant to the automatic reinvestment of income
dividends or capital gains distributions are not subject to any sales charges.
The Fund receives the entire net asset value of its Class A shares sold to
investors. The Distributor's commission is the sales charge set forth in the
Prospectus for each Fund, less any applicable discount or commission "reallowed"
to selected dealers and agents. The Distributor will reallow discounts to
selected dealers and agents in the amounts indicated in the table in the
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Prospectus. In this regard, the Distributor may elect to reallow the entire
sales charge to selected dealers and agents for all sales with respect to which
orders are placed with the Distributor.
Set forth below is an example of the method of computing the offering
price of the Class A shares of each Fund. The example assumes a purchase of
Class A shares of a Fund aggregating less than $100,000 subject to the schedule
of sales charges set forth in the Prospectus at a price based upon the net asset
value of Class A shares of each Fund at the end of each Fund's latest fiscal
year.
Net Per Share Offering
Asset Sales Price
Value Charge Date Per Share
Florida
Municipal
Bond $ 9.70 $.48 8/31/96 $10.18
Georgia
Municipal
Bond $ 9.57 $.48 8/31/96 $10.05
New Jersey $10.75 $.54 8/31/96 $ 11.29
Tax-Free
North Carolina
Municipal Bond $ 9.98 $.50 8/31/96 $10.48
South Carolina
Municipal Bond $ 9.69 $.48 8/31/96 $10.17
Virginia
Municipal
Bond $ 9.68 $.48 8/31/96 $10.16
Florida
High Income $10.42 $.52 8/31/96 $10.94
High Grade $10.72 $.53 8/31/96 $11.25
Short-
Intermediate $10.08 $.34 8/31/96 $10.42
Short-
Intermediate-
CA $ 9.98 $.34 8/31/96 $10.32
Prior to January 3, 1995, shares of Short-Intermediate and Short-
Intermediate-CA were offered exclusively on a no-load basis and, accordingly, no
underwriting commissions were paid in respect of sales of shares of the Funds or
retained by the Distributor. In addition, since Class B shares were not offered
prior to January 3, 1995, contingent deferred sales charges have been paid to
the Distributor with respect to Class B shares only since January
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3, 1995.
With respect to Florida Municipal Bond, Georgia Municipal Bond, North
Carolina Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond
and High Grade for the periods indicated, the following commissions were paid to
and amounts were retained by Federated Securities Corp. through July 6, 1995,
which until such date was the principal underwriter of the portfolios of
Evergreen Investment Trust. For the period from July 7, 1995 through August 31,
1995, and the fiscal year ended August 31, 1996, commissions were paid to and
amounts were retained by the current Distributor as noted below :
Fiscal Year Period From Period From Year Ended
Ended 8/31/96 7/7/95-8/31/95 1/1/95-7/6/95 12/31/94
FLORIDA MUNICIPAL BOND
Commissions Received $49,589 $ 23,324 $ 64,431 $ 2,000
Commissions Retained 5,996 2,747 1,554 ___
GEORGIA MUNICIPAL BOND
Commissions Received $7,300 $ 9,947 $ 46,263 $103,000
Commissions Retained 875 1,747 2,473 6,000
VIRGINIA MUNICIPAL BOND
Commissions Received $20,400 $ 4,340 $ 41,373 $ 62,000
Commissions Retained 2,033 533 1,787 6,000
HIGH GRADE
Commissions Received $73,014.20 $ 5,767 $ 29,154 $ 82,000
Commissions Retained 9,050.09 712 1,515 5,000
NORTH CAROLINA MUNICIPAL
BOND
Commissions Received $16,557 $ 5,238 $117,937 $210,000
Commissions Retained 2,228 637 7,206 3,000
Fiscal Year Period From Period From Period From
Ended 8/31/96 7/7/95-8/31-95 1/1/95-7/6/95 1/3/94-
12/31/94
SOUTH CAROLINA MUNICIPAL
BOND
Commissions Received $1,447 $ 853 $ 34,388 $34,000
Commissions Retained 154 98 3,497 5,000
With respect to New Jersey Tax-Free, the following commissions were
paid to and amounts were retained by FFB Funds Distributor, Inc. through January
19, 1996, which until such date was the principal underwriter of portfolios of
Evergreen Tax Free Trust (formerly FFB Funds Trust). For the period from January
20, 1996, through August 31, 1996, commissions were paid to and amounts were
retained by the current Distributor as noted below:
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Period From Period From
3/1/96-8/31/96 1/20/96-2/29/96
New Jersey Tax-Free
Commissions Received $25,644 $ 5,982
Commissions Retained $ 2,316 $ 650
With respect to Florida High Income, for the period from June 30, 1995
(commencement of offering of Class A shares) through August 31, 1995, and the
fiscal year ended August 31, 1996, commissions were paid to and amounts were
retained by the current Distributor as noted below:
Fiscal Year Period From
Ended 8/31/96 6/30/95-8/31/95
FLORIDA HIGH INCOME
Commissions Received $276,615 $196,614
Commissions Retained $ 29,467 $ 24,672
With respect to Short-Intermediate and Short-Intermediate-CA, for the
period from January 3, 1995 (commencement of offering of Class A shares) through
August 31, 1995, and the fiscal year ended August 31, 1996, commissions were
paid to and amounts were retained by the current Distributor as noted below:
Fiscal Year Period From
Ended 8/31/96 1/5/95-8/31/95
SHORT-INTERMEDIATE
Commissions Received $33,816 $ 37,130
Commissions Retained 4,326 4,445
SHORT-INTERMEDIATE-CA
Commissions Received $ 0 $ 0
Commissions Retained $ 0 $ 0
Investors choosing the front-end sales charge alternative may under
certain circumstances be entitled to pay reduced sales charges. The
circumstances under which such investors may pay reduced sales charges are
described below.
Combined Purchase Privilege. Certain persons may qualify for the sales
charge reductions by combining purchases of shares of one or more Evergreen
mutual fund other than money market funds into a single "purchase", if the
resulting "purchase" totals at least $100,000. The term "purchase" refers to:
(i) a single purchase by an individual, or to concurrent purchases, which in the
aggregate are at least equal to the prescribed amounts, by an individual, his or
her spouse and their children under the age of 21 years purchasing shares for
his, her or their own account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single fiduciary
account although more than one beneficiary is involved; or (iii) a single
purchase for the employee benefit plans of a single employer. The term
"purchase" also includes purchases by any "company", as the term is defined in
the 1940 Act, but does not include purchases by any such company which has not
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been in existence for at least six months or which has no purpose other than the
purchase of shares of a Fund or shares of other registered investment companies
at a discount. The term "purchase" does not include purchases by any group of
individuals whose sole organizational nexus is that the participants therein are
credit card holders of a company, policy holders of an insurance company,
customers of either a bank or broker-dealer or clients of an investment adviser.
A "purchase" may also include shares, purchased at the same time through a
single selected dealer or agent, of any Evergreen mutual fund. Currently, the
Evergreen mutual funds include:
Evergreen Trust
Evergreen Fund
Evergreen Aggressive Growth Fund
Evergreen Equity Trust:
Evergreen Global Real Estate Equity Fund
Evergreen U.S. Real Estate Equity Fund
Evergreen Global Leaders Fund
The Evergreen Limited Market Fund, Inc.
Evergreen Growth and Income Fund
The Evergreen Total Return Fund
The Evergreen American Retirement Trust:
Evergreen American Retirement Fund
Evergreen Small Cap Equity Income Fund
Evergreen Foundation Trust:
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
The Evergreen Municipal Trust:
Evergreen Short-Intermediate Municipal Fund
Evergreen Short-Intermediate Municipal Fund-CA
Evergreen Florida High Income Municipal Bond Fund
Evergreen Tax Exempt Money Market Fund
Evergreen Institutional Tax Exempt Money Market Fund
Evergreen Money Market Trust
Evergreen Money Market Fund
Evergreen Institutional Money Market Fund
Evergreen Institutional Treasury Money Market Fund
Evergreen Investment Trust
Evergreen Emerging Markets Growth Fund
Evergreen International Equity Fund
Evergreen Balanced Fund
Evergreen Value Fund
Evergreen Utility Fund
Evergreen Short-Intermediate Bond Fund
Evergreen U.S. Government Fund
Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund
Evergreen North Carolina Municipal Bond Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
Evergreen High Grade Tax Free Fund
Evergreen Treasury Money Market Fund
The Evergreen Lexicon Fund:
Evergreen Intermediate-Term Government Securities Fund
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Evergreen Intermediate-Term Bond Fund
Evergreen Tax Free Trust:
Evergreen Pennsylvania Tax Free Money Market Fund
Evergreen New Jersey Tax-Free Income Fund
Evergreen Variable Trust:
Evergreen VA Fund
Evergreen VA Growth and Income Fund
Evergreen VA Foundation Fund
Prospectuses for the Evergreen mutual funds may be obtained without
charge by contacting the Distributor or the Advisers at the telephone number
shown on the front cover of this Statement of Additional Information.
Cumulative Quantity Discount (Right of Accumulation). An investor's
purchase of additional Class A shares of a Fund may qualify for a Cumulative
Quantity Discount. The applicable sales charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on the
previous day) of (a) all Class A and Class B shares of the
Fund held by the investor and (b) all such shares of any other
Evergreen mutual fund held by the investor; and
(iii) the net asset value of all shares described in paragraph
(ii) owned by another shareholder eligible to combine his or
her purchase with that of the investor into a single
"purchase" (see above).
For example, if an investor owned Class A or B shares of an Evergreen
mutual fund worth $200,000 at their then current net asset value and
subsequently purchased Class A shares worth an additional $100,000, the sales
charge for the $100,000 purchase, in the case of any Evergreen Intermediate or
Short-Term Bond Fund (i.e., Short-Intermediate and Short-Intermediate-CA), would
be at the 2.00% rate applicable to a single $300,000 purchase rather than the
2.50% rate, or in the case of any Evergreen Equity or Long-term Bond Fund (i.e.,
Florida Municipal Bond, Georgia Municipal Bond, New Jersey Tax-Free, North
Carolina Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond,
Florida High Income and High Grade) at the 2.50% rate applicable to a single
$300,000 purchase rather than the 3.75% rate.
To qualify for the Combined Purchase Privilege or to obtain the
Cumulative Quantity Discount on a purchase through a selected dealer or agent,
the investor or selected dealer or agent must provide the Distributor with
sufficient information to verify that each purchase qualifies for the privilege
or discount.
Statement of Intention. Class A investors may also obtain the reduced
sales charges shown in the Prospectus by means of a written Statement of
Intention, which expresses the investor's intention to invest not less than
$100,000 within a period of 13 months in Class A shares (or Class A and Class B
shares) of the Fund or any other Evergreen mutual fund. Each purchase of shares
under a Statement of Intention will be made at the public offering price or
prices applicable at the time of such purchase to a single transaction of the
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dollar amount indicated in the Statement of Intention. At the investor's option,
a Statement of Intention may include purchases of Class A or B shares of the
Fund or any other Evergreen mutual fund made not more than 90 days prior to the
date that the investor signs a Statement of Intention; however, the 13-month
period during which the Statement of Intention is in effect will begin on the
date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege described
above may purchase shares of the Evergreen mutual funds under a single Statement
of Intention. For example, if at the time an investor signs a Statement of
Intention to invest at least $100,000 in Class A shares of the Fund, the
investor and the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to invest a total of
$60,000 during the following 13 months in shares of the Fund or any other
Evergreen mutual fund, to qualify for the 3.75% sales charge applicable to
purchases in an Evergreen Equity or Long-Term Bond Fund, (i.e., Florida
Municipal Bond, Georgia Municipal Bond, New Jersey Tax-Free, North Carolina
Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond, Florida
High Income and High Grade) or 2.50% applicable to purchases in an Evergreen
Intermediate or Short-Term Bond Fund (i.e., Short-Intermediate and
Short-Intermediate-CA) on the total amount being invested (the sales charge
applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation upon the
investor to purchase the full amount indicated. The minimum initial investment
under a Statement of Intention is 5% of such amount. Shares purchased with the
first 5% of such amount will be held in escrow (while remaining registered in
the name of the investor) to secure payment of the higher sales charge
applicable to the shares actually purchased if the full amount indicated is not
purchased, and such escrowed shares will be involuntarily redeemed to pay the
additional sales charge, if necessary. Dividends on escrowed shares, whether
paid in cash or reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow will be released.
To the extent that an investor purchases more than the dollar amount indicated
on the Statement of Intention and qualifies for a further reduced sales charge,
the sales charge will be adjusted for the entire amount purchased at the end of
the 13-month period. The difference in sales charge will be used to purchase
additional shares of the Fund subject to the rate of sales charge applicable to
the actual amount of the aggregate purchases.
Investors wishing to enter into a Statement of Intention in conjunction
with their initial investment in Class A shares of the Fund should complete the
appropriate portion of the Subscription Application found in the Prospectus
while current Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting a Fund at the address or telephone number
shown on the cover of this Statement of Additional Information.
Investments Through Employee Benefit and Savings Plans. Certain
qualified and non-qualified benefit and savings plans may make shares of the
Evergreen mutual funds available to their participants. Investments made by such
employee benefit plans may be exempt from any applicable front-end sales charges
if they meet the criteria set forth in the Prospectus under "Class A
Shares-Front End Sales Charge Alternative". The Advisers may provide
compensation to organizations providing administrative and record keeping
services to plans which make shares of the Evergreen mutual funds available to
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<PAGE>
their participants.
Reinstatement Privilege. A Class A shareholder who has caused any or
all of his or her shares of the Fund to be redeemed or repurchased may reinvest
all or any portion of the redemption or repurchase proceeds in Class A shares of
the Fund at net asset value without any sales charge, provided that such
reinvestment is made within 30 calendar days after the redemption or repurchase
date. Shares are sold to a reinvesting shareholder at the net asset value next
determined as described above. A reinstatement pursuant to this privilege will
not cancel the redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for Federal tax purposes except that no loss will
be recognized to the extent that the proceeds are reinvested in shares of the
Fund. The reinstatement privilege may be used by the shareholder only once,
irrespective of the number of shares redeemed or repurchased, except that the
privilege may be used without limit in connection with transactions whose sole
purpose is to transfer a shareholder's interest in the Fund to his or her
individual retirement account or other qualified retirement plan account.
Investors may exercise the reinstatement privilege by written request sent to
the Fund at the address shown on the cover of this Statement of Additional
Information.
Sales at Net Asset Value. In addition to the categories of investors
set forth in the Prospectus, each Fund may sell its Class A shares at net asset
value, i.e., without any sales charge, to: (i) certain investment advisory
clients of the Advisers or their affiliates; (ii) officers and present or former
Trustees of the Trusts; present or former trustees of other investment companies
managed by the Advisers; officers, directors and present or retired full-time
employees of the Adviser, the Distributor, and their affiliates; officers,
directors and present and full-time employees of selected dealers or agents; or
the spouse, sibling, direct ancestor or direct descendant (collectively
"relatives") of any such person; or any trust, individual retirement account or
retirement plan account for the benefit of any such person or relative; or the
estate of any such person or relative, if such shares are purchased for
investment purposes (such shares may not be resold except to the Fund); (iii)
certain employee benefit plans for employees of the Adviser, the Distributor.
and their affiliates; (iv) persons participating in a fee-based program,
sponsored and maintained by a registered broker-dealer and approved by the
Distributor, pursuant to which such persons pay an asset-based fee to such
broker-dealer, or its affiliate or agent, for service in the nature of
investment advisory or administrative services. These provisions are intended to
provide additional job-related incentives to persons who serve the Funds or work
for companies associated with the Funds and selected dealers and agents of the
Funds. Since these persons are in a position to have a basic understanding of
the nature of an investment company as well as a general familiarity with the
Fund, sales to these persons, as compared to sales in the normal channels of
distribution, require substantially less sales effort. Similarly, these
provisions extend the privilege of purchasing shares at net asset value to
certain classes of institutional investors who, because of their investment
sophistication, can be expected to require significantly less than normal sales
effort on the part of the Funds and the Distributor.
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative purchase Class
B shares at the public offering price equal to the net asset value per share of
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the Class B shares on the date of purchase without the imposition of a sales
charge at the time of purchase. The Class B shares are sold without a front-end
sales charge so that the full amount of the investor's purchase payment is
invested in the Fund initially.
Proceeds from the contingent deferred sales charge are paid to the
Distributor and are used by the Distributor to defray the expenses of the
Distributor related to providing distribution-related services to the Fund in
connection with the sale of the Class B shares, such as the payment of
compensation to selected dealers and agents for selling Class B shares. The
combination of the contingent deferred sales charge and the distribution
services fee (and, with respect to Florida Municipal Bond, Georgia Municipal
Bond, New Jersey Tax-Free, North Carolina Municipal Bond, South Carolina
Municipal Bond, Virginia Municipal Bond and High Grade, the shareholder service
fee) enables the Fund to sell the Class B shares without a sales charge being
deducted at the time of purchase. The higher distribution services fee (and,
with respect to Florida Municipal Bond, Georgia Municipal Bond, New Jersey Tax-
Free, North Carolina Municipal Bond, South Carolina Municipal Bond, Virginia
Municipal Bond and High Grade, the shareholder service fee) incurred by Class B
shares will cause such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares which are redeemed
within seven years of purchase will be subject to a contingent deferred sales
charge at the rates set forth in the Prospectus charged as a percentage of the
dollar amount subject thereto. The charge will be assessed on an amount equal to
the lesser of the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition, no
contingent deferred sales charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The amount of the
contingent deferred sales charge, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the time
of redemption of such shares.
In determining the contingent deferred sales charge applicable to a
redemption, it will be assumed that the redemption is first of any Class A
shares in the shareholder's Fund account, second of Class B shares held for over
seven years or Class B shares acquired pursuant to reinvestment of dividends or
distributions and third of Class B shares held longest during the seven-year
period.
To illustrate, assume that an investor purchased 100 Class B shares at
$10 per share (at a cost of $1,000) and in the second year after purchase, the
net asset value per share is $12 and, during such time, the investor has
acquired 10 additional Class B shares upon dividend reinvestment. If at such
time the investor makes his or her first redemption of 50 Class B shares, 10
Class B shares will not be subject to charge because of dividend reinvestment.
With respect to the remaining 40 Class B shares, the charge is applied only to
the original cost of $10 per share and not to the increase in net asset value of
$2 per share. Therefore, of the $600 of the shares redeemed $400 of the
redemption proceeds (40 shares x $10 original purchase price) will be charged at
a rate of 4.0% (the applicable rate in the second year after purchase for a
contingent deferred sales charge of $16).
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The contingent deferred sales charge is waived on redemptions of shares
(i) following the death or disability, as defined in the Code, of a shareholder,
or (ii) to the extent that the redemption represents a minimum required
distribution from an individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2.
Conversion Feature. At the end of the period ending seven years after
the end of the calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A shares and will
no longer be subject to a higher distribution services fee and the applicable
shareholder service fee imposed on Class B shares. Such conversion will be on
the basis of the relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose of the conversion
feature is to reduce the distribution services fee paid by holders of Class B
shares that have been outstanding long enough for the Distributor to have been
compensated for the expenses associated with the sale of such shares.
For purposes of conversion to Class A, Class B shares purchased through
the reinvestment of dividends and distributions paid in respect of Class B
shares in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's account (other
than those in the sub-account) convert to Class A, an equal pro-rata portion of
the Class B shares in the sub-account will also convert to Class A.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of an opinion of counsel to the effect that (i) the
assessment of the higher distribution services fee (and, with respect to Florida
Municipal Bond, Georgia Municipal Bond, New Jersey Tax-Free North Carolina
Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond and High
Grade, shareholder service fee) and transfer agency costs with respect to Class
B shares does not result in the dividends or distributions payable with respect
to other Classes of a Fund's shares being deemed "preferential dividends" under
the Code, and (ii) the conversion of Class B shares to Class A shares does not
constitute a taxable event under Federal income tax law. The conversion of Class
B shares to Class A shares may be suspended if such an opinion is no longer
available at the time such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might continue to be
subject to the higher distribution services fee (and, with respect to Florida
Municipal Bond Fund, Georgia Municipal Bond Fund, New Jersey Tax-Free, North
Carolina Municipal Bond Fund, South Carolina Municipal Bond Fund, Virginia
Municipal Bond Fund and High Grade, the shareholder services fee) for an
indefinite period which may extend beyond the period ending seven years after
the end of the calendar month in which the shareholder's purchase order was
accepted.
Class Y Shares
Class Y shares are not offered to the general public and are available
only to (i) persons who at or prior to December 30, 1994 owned shares in a
mutual fund advised by Evergreen Asset, (ii) certain investment advisory clients
of the Advisers and their affiliates, and (iii) institutional investors. Class Y
shares do not bear any Rule 12b-1 distribution expenses and are not subject to
any front-end or contingent deferred sales charges.
GENERAL INFORMATION ABOUT THE FUNDS
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(See also "Other Information - General Information" in each Fund's Prospectus)
Capitalization and Organization
The Evergreen Florida High Income Municipal Bond, Evergreen
Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal
Fund-California are each separate series of The Evergreen Municipal Trust, a
Massachusetts business trust. Florida High Income, which is a newly created
series of The Evergreen Municipal Trust, acquired substantially all of the
assets of ABT Florida High Income Municipal Bond Fund (the"ABT Fund") on June
30, 1995. The 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 and
Evergreen High Grade Tax Free Fund, are each separate series of Evergreen
Investment Trust, a Massachusetts business trust. On July 7, 1995, First Union
Funds changed its name to Evergreen Investment Trust. On December 14, 1992, The
Salem Funds changed its name to First Union Funds. The New Jersey Tax-Free
Income Fund is a separate series of Evergreen Tax Free Trust (formerly known as
FFB Funds Trust, a Massachusetts Business Trust organized on December 4, 1985.
The above-named Trusts are individually referred to in this Statement of
Additional Information as the "Trust" and collectively as the "Trusts". Each
Trust is governed by a board of trustees. Unless otherwise stated, references to
the "Board of Trustees" or "Trustees" in this Statement of Additional
Information refer to the Trustees of all the Trusts.
Each Fund, other than New Jersey Tax-Free, may issue an unlimited number of
shares of beneficial interest with a $0.0001 par value. New Jersey Tax-Free may
issue an unlimited number of shares of beneficial interest with a $0.001 par
value. All shares of these Funds have equal rights and privileges. Each share is
entitled to one vote, to participate equally in dividends and distributions
declared by the Funds and on liquidation to their proportionate share of the
assets remaining after satisfaction of outstanding liabilities. Shares of these
Funds are fully paid, nonassessable and fully transferable when issued and have
no pre-emptive, conversion or exchange rights. Fractional shares have
proportionally the same rights, including voting rights, as are provided for a
full share.
Under each Trust's Declaration of Trust, each Trustee will continue in
office until the termination of the Trust or his or her earlier death,
incapacity, resignation or removal. Shareholders can remove a Trustee upon a
vote of two-thirds of the outstanding shares of beneficial interest of the
Trust. Vacancies will be filled by a majority of the remaining Trustees, subject
to the 1940 Act. As a result, normally no annual or regular meetings of
shareholders will be held, unless otherwise required by the Declaration of Trust
of each Trust or the 1940 Act.
Shares have noncumulative voting rights, which means that the holders
of more than 50% of the shares voting for the election of Trustees can elect
100% of the Trustees if they choose to do so and in such event the holders of
the remaining shares so voting will not be able to elect any Trustees.
The Trustees of each Trust are authorized to reclassify and issue any
unissued shares to any number of additional series without shareholder approval.
Accordingly, in the future, for reasons such as the desire to establish one or
more additional portfolios of a Trust with different investment objectives,
policies or restrictions, additional series of shares may be created by one or
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more Trusts. Any issuance of shares of another series or class would be governed
by the 1940 Act and the law of the Commonwealth of Massachusetts. If shares of
another series of a Trust were issued in connection with the creation of
additional investment portfolios, each share of the newly created portfolio
would normally be entitled to one vote for all purposes. Generally, shares of
all portfolios would vote as a single series on matters, such as the election of
Trustees, that affected all portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of the Investment
Advisory Agreement and changes in investment policy, shares of each portfolio
would vote separately.
In addition any Fund may, in the future, create additional classes of
shares which represent an interest in that same investment portfolio. Except for
the different distribution related and other specific costs borne by such
additional classes, they will have the same voting and other rights described
for the existing classes of each Fund.
Procedures for calling a shareholders meeting for the removal of the
Trustees of each Trust, similar to those set forth in Section 16(c) of the 1940
Act, will be available to shareholders of each Fund. The rights of the holders
of shares of a series of a Fund may not be modified except by the vote of a
majority of the outstanding shares of such series.
An order has been received from the Securities and Exchange Commission
permitting the issuance and sale of multiple classes of shares representing
interests in each Fund. In the event a Fund were to issue additional Classes of
shares other than those described herein, no further relief from the Securities
and Exchange Commission would be required.
Distributor
Evergreen Funds Distributor, Inc. (the "Distributor"), 230 Park Avenue,
New York, New York 10169, serves as each Fund's principal underwriter, and as
such may solicit orders from the public to purchase shares of any Fund. The
Distributor is not obligated to sell any specific amount of shares and will
purchase shares for resale only against orders for shares. Under the Agreement
between each Fund and the Distributor, each Fund has agreed to indemnify the
Distributor, in the absence of its willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations thereunder, against certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended.
Counsel
Sullivan & Worcester LLP, Washington, D.C., serves as counsel to the
Funds.
Independent Auditors
Price Waterhouse LLP has been selected to be the independent auditors of
Florida High Income, Short-Intermediate and Short-Intermediate-CA.
KPMG Peat Marwick LLP has been selected to be the independent auditors of
Florida Municipal Bond, Georgia Municipal Bond, New Jersey Tax-Free, North
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Carolina Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond,
and High Grade.
PERFORMANCE INFORMATION
Total Return
From time to time a Fund may advertise its "total return". Computed
separately for each class, the Fund's "total return" is its average annual
compounded total return for recent one, five, and ten-year periods (or the
period since the Fund's inception). The Fund's total return for such a period is
computed by finding, through the use of a formula prescribed by the Securities
and Exchange Commission, the average annual compounded rate of return over the
period that would equate an assumed initial amount invested to the value of such
investment at the end of the period. For purposes of computing total return,
income dividends and capital gains distributions paid on shares of the Fund are
assumed to have been reinvested when paid and the maximum sales charge
applicable to purchases of Fund shares is assumed to have been paid. The Fund
will include performance data for Class A, Class B, and Class Y shares in any
advertisement or information including performance data of the Fund.
With respect to Short-Intermediate and Short-Intermediate-CA, the
shares of each Fund outstanding prior to January 3, 1995 have been reclassified
as Class Y shares. With respect to Florida High Income, the Fund is the
successor of the ABT Fund and the information presented is with respect to the
ABT Fund's Class A shares, the only outstanding class. The average annual
compounded total return for each Class of shares offered by the Funds for the
most recently completed one year fiscal periods and the period since each Fund's
inception is set forth in the table below.
1 Year Ended From Inception**
8/31/96 to 8/31/96
FLORIDA MUNICIPAL
BOND
Class A 5.15% 7.91%
Class B 4.17% 7.77%
Class Y 5.22% 7.92%
GEORGIA MUNICIPAL
BOND
Class A 6.22% 3.65%
Class B 5.44% 2.99%
Class Y 6.48% 4.45%
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NORTH CAROLINA
MUNICIPAL BOND
Class A 5.21% 5.02%
Class B 4.42% 4.37%
Class Y 5.40% 4.01%
SHORT-INTERMEDIATE
Class A .01% 4.23%
Class B (2.51%) 4.28%
Class Y 3.34% 4.94%
SHORT-INTERMEDIATE-
CA
Class A - -
Class B - -
Class Y 3.24% 4.23%
SOUTH CAROLINA
MUNICIPAL BOND
Class A 6.23% 4.03%
Class B 5.43% 3.33%
Class Y 6.49% 5.46%
VIRGINIA MUNICIPAL
BOND
Class A 5.12% 3.91%
Class B 4.34% 3.23%
Class Y 5.38% 4.79%
HIGH GRADE
Class A .21% 5.86%
Class B (.58%) 4.67%
Class Y 5.47% 4.51%
FLORIDA HIGH
INCOME
Class A 6.42% 7.78%
Class B 8.63% 7.56%
Class Y 6.68% 7.84%
NEW JERSEY TAX
FREE
Class A 5.24% 7.17%
Class B 4.83% 7.09%
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Class Y 5.25% 7.17%
** INCEPTION DATE
Florida Municipal Bond Class A May 11, 1988
Class B and Y July 1, 1995
Georgia Municipal Bond Class A and B June 1, 1993
Class Y February 28, 1994
North Carolina Municipal Class A and B January 12, 1993
Bond Class Y February 28, 1994
Short-Intermediate Class A and B January 3, 1995
Class Y November 18, 1991
Short-Intermediate-CA Class Y October 16, 1988
South Carolina Municipal Class A and B January 3, 1994
Bond Class Y February 28, 1994
Virginia Municipal Bond Class A and B June 1, 1993
Class Y February 28, 1994
High Grade Class A February 21, 1992
Class B January 11, 1993
Class Y February 28, 1994
Florida High Income Class A June 17, 1992
Class B July 10, 1995
Class Y September 20, 1995
New Jersey Tax-Free Class A July 16, 1991
Class B January 30, 1996
Class Y February 8, 1996
The performance numbers for Short-Intermediate and
Short-Intermediate-CA for the Class A, and Class B shares are hypothetical
numbers based on the performance for Class Y shares as adjusted for any
applicable front-end sales charge or contingent deferred sales charge. For
Florida High Income the performance numbers for the Class B and Class Y shares
are hypothetical numbers based upon the performance for the Class A shares as
adjusted for any applicable contingent deferred sales charge.
A Fund's total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and quality of the
securities in a Fund's portfolio and its expenses. Total return information is
useful in reviewing a Fund's performance but such information may not provide a
basis for comparison with bank deposits or other investments which pay a fixed
yield for a stated period of time. An investor's principal invested in a Fund is
not fixed and will fluctuate in response to prevailing market conditions.
YIELD CALCULATIONS
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From time to time, a Fund may quote its yield in advertisements or in
reports or other communications to shareholders. Yield quotations are expressed
in annualized terms and may be quoted on a compounded basis. Yields are computed
by dividing the Fund's interest income (as defined in the SEC yield formula) for
a given 30-day or one month period, net of expenses, by the average number of
shares entitled to receive distributions during the period, dividing this figure
by the Fund's net asset value per share at the end of the period and annualizing
the result (assuming compounding of income) in order to arrive at an annual
percentage rate. The formula for calculating yield is as follows:
YIELD = 2[(a-b+1)6-1]
cd
Where a = 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
Income is calculated for purposes of yield quotations in accordance
with standardized methods applicable to all stock and bond funds. Gains and
losses generally are excluded from the calculation. Income calculated for
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purposes of determining a Fund's yield differs from income as determined for
other accounting purposes. Because of the different accounting methods used, and
because of the compounding assumed in yield calculations, the yields quoted for
a Fund may differ from the rate of distributions a Fund paid over the same
period, or the net investment income reported in a Fund's financial statements.
Tax Equivalent Yield
The Funds invest principally in obligations the interest from which is
exempt from Federal income tax other than the AMT. In addition, the securities
in which state-specific Funds invest will also, to the extent practicable, be
exempt from such state's income taxes. However, from time to time the Funds may
make investment which generate taxable income. A Fund's tax-equivalent yield is
the rate an investor would have to earn from a fully taxable investment in order
to equal the Fund's yield after taxes. Tax-equivalent yields are calculated by
dividing a Fund's yield by the result of one minus a stated Federal or combined
Federal and state tax rate. (If only a portion of the Fund's yield is
tax-exempt, only that portion is adjusted in the calculation.) Of course, no
assurance can be given that a Fund will achieve any specific tax-exempt yield.
If only a portion of the Fund's yield is tax-exempt, only that portion is
adjusted in the calculation. Of course, no assurance can be given that the Fund
will achieve any specific tax-exempt yield.
The following formula is used to calculate Tax Equivalent Yield without taking
into account state tax:
Fund's Yield
1 - Fed Tax Rate
The following formula is used to calculate Tax Equivalent Yield taking into
account state tax:
Fund's Yield
1 - Fed Tax Rate + (State Tax Rate - [State Tax Rate x Fed Tax Rate])
Yield information is useful in reviewing a Fund's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in a Fund's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in the Funds'
investment portfolios, portfolio maturity, operating expenses and market
conditions.
It should be recognized that in periods of declining interest rates the
yields will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the yields will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to a Fund
from the continuous sale of its shares will likely be invested in instruments
producing lower yields than the balance of the Fund's investments, thereby
reducing the current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
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The tax exempt and tax equivalent yields of each Fund for the
thirty-day period ended August 31, 1996 for each Class of shares offered by the
Funds is set forth in the table below. The table assumes the following combined
Federal and state tax rate: California - 36%; Florida - 28%; Georgia - 34%;
North Carolina - 28%; South Carolina - 35%; Virginia - 33.25%; New Jersey -
33.5%.
Yield Tax Equivalent Yield
Florida High Income
Class A 5.94% 8.25%
Class B 5.43% 7.54%
Class Y 6.50% 9.03%
Short-Intermediate
Class A 3.58% 4.97%
Class B 2.80% 3.89%
Class Y 3.81% 5.29%
Short-Intermediate-CA
Class A - -
Class B - -
Class Y 3.71% 5.80%
Florida Municipal Bond
Class A 5.23% 7.26%
Class B 4.55% 6.32%
Class Y 5.56% 7.72%
Georgia Municipal Bond
Class A 4.91% 7.25%
Class B 4.39% 6.49%
Class Y 5.41% 7.99%
New Jersey Tax-Free
Class A 4.87% 7.16%
Class B 4.17% 6.13%
Class Y 5.17% 7.60%
North Carolina
Municipal Bond
Class A 4.51% 6.26%
Class B 3.97% 5.51%
Class Y 4.99% 6.93%
South Carolina
Municipal Bond
Class A 4.90% 7.32%
Class B 4.38% 6.54%
Class Y 5.40% 8.06%
Virginia Municipal
Bond
Class A 4.76% 6.98%
Class B 4.23% 6.20%
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Class Y 5.24% 7.68%
High Grade
Class A 4.62% 6.42%
Class B 4.09% 5.68%
Class Y 5.11% 7.10%
Non-Standardized Performance
In addition to the performance information described above, a Fund may
provide total return information for designated periods, such as for the most
recent six months or most recent twelve months. This total return information is
computed as described under "Total Return" above except that no annualization is
made.
GENERAL
From time to time, a Fund may quote its performance in advertising and
other types of literature as compared to the performance of the Standard &
Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, Lehman
Brothers General Obligations Municipal Bond Index or any other commonly quoted
index of common stock or municipal bond prices. The Standard & Poor's 500
Composite Stock Price Index and the Dow Jones Industrial Average are unmanaged
indices of selected common stock prices. The Lehman Brothers General Obligations
Municipal Bond Index is an unmanaged index of state general obligation debt
issues which are rated A or better and represent a variety of coupon ranges. A
Fund's performance may also be compared to those of other mutual funds having
similar objectives. This comparative performance would be expressed as a ranking
prepared by Lipper Analytical Services, Inc. or similar independent services
monitoring mutual fund performance. A Fund's performance will be calculated by
assuming, to the extent applicable, reinvestment of all capital gains
distributions and income dividends paid. Any such comparisons may be useful to
investors who wish to compare a Fund's past performance with that of its
competitors. Of course, past performance cannot be a guarantee of future
results.
Additional Information
Any shareholder inquiries may be directed to the shareholder's broker or to
each Adviser at the address or telephone number shown on the front cover of this
Statement of Additional Information. This Statement of Additional Information
does not contain all the information set forth in the Registration Statement
filed by the Trusts with the Securities and Exchange Commission under the
Securities Act of 1933. Copies of the Registration Statement may be obtained at
a reasonable charge from the Securities and Exchange Commission or may be
examined, without charge, at the offices of the Securities and Exchange
Commission in Washington, D.C.
FINANCIAL STATEMENTS
The financial statements of Florida Municipal Bond, Georgia Municipal
Bond, New Jersey Tax-Free, North Carolina Municipal Bond, South Carolina
Municipal Bond, Virginia Municipal Bond and High Grade, appearing in their most
current fiscal year
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Annual Report to Shareholders and the report thereon of KPMG Peat Marwick LLP,
independent auditors, appearing therein are incorporated by reference in this
Statement of Additional Information. The financial statements of
Short-Intermediate, Short-Intermediate-CA and Florida High Income, appearing in
their most current fiscal year Annual Report to Shareholders and the report
thereon of Price Waterhouse LLP, independent auditors, appearing therein are
incorporated by reference in this Statement of Additional Information. The
Annual Reports to Shareholders for each Fund, which contain the referenced
statements, are available upon request and without charge.
APPENDIX "A"
DESCRIPTION OF BOND, MUNICIPAL NOTE AND COMMERCIAL PAPER RATINGS
Standard & Poor's Ratings Group. A Standard & Poor's corporate or
municipal bond rating is a current assessment of the credit worthiness of an
obligor with respect to a specific obligation. This assessment of credit
worthiness may take into consideration obligers such as guarantors, insurers or
lessees. The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished to Standard &
Poor's by the issuer or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform any audit in connection
with the ratings and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of changes in,
unavailability of such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
1. Likelihood of default-capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance with the
terms of the obligation.
2. Nature of and provisions of the obligation.
3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or their arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA - This is the highest rating assigned by Standard & Poor's to a
debt obligation and indicates an extremely strong capacity to pay interest and
repay any principal.
AA - Debt rated AA also qualifies as high quality debt obligations.
Capacity to pay interest and repay principal is very strong and in the majority
of instances they differ from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay
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principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than is higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on a
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB - rating.
B - Debt rated B has greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC - Debt rated CCC has a currently indefinable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC - The rating CC is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.
C - The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
C1 - The rating C1 is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. It is used when interest
payments or principal payments are not made on a due date even if the applicable
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grace period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace periods; it will also be used upon a
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-) - To provide more detailed indications of credit
quality, the ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
NR - indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy. Debt
obligations of issuers outside the United States and its territories are rated
on the same basis as domestic corporate and municipal issues. The ratings
measure the credit worthiness of the obligor but do not take into account
currency exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in the top
four categories (AAA, AA, A, BBB, commonly known as "Investment Grade" ratings)
are generally regarded as eligible for bank investment. In addition, the Legal
Investment Laws of various states may impose certain rating or other standards
for obligations eligible for investment by savings banks, trust companies,
insurance companies and fiduciaries generally.
Moody's Investors Service, Inc. A brief description of the applicable
Moody's Investors Service, Inc. rating symbols and their meanings follows:
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Some bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well. NOTE:
Bonds within the above categories which possess the strongest investment
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attributes are designated by the symbol "1" following the rating.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca - bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C - bonds which are rated C are the lowest rated class of bonds and
issue so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Duff & Phelps, Inc.: AAA-- highest credit quality, with negligible
risk factors; AA -- high credit quality, with strong protection factors and
modest risk, which may vary very slightly form time to time because of economic
conditions; A--average credit quality with adequate protection factors, but with
greater and more variable risk factors in periods of economic stress. The
indicators "+" and "-" to the AA and A categories indicate the relative position
of a credit within those rating categories.
Fitch Investors Service, Inc.: AAA -- highest credit quality, with an
exceptionally strong ability to pay interest and repay principal; AA -- very
high credit quality, with very strong ability to pay interest and repay
principal; A -- high credit quality, considered strong as regards principal and
interest protection, but may be more vulnerable to adverse changes in economic
conditions and circumstances. The indicators "+" and "-" to the AA, A and BBB
categories indicate the relative position of credit within those rating
categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
A Standard & Poor's note rating reflects the liquidity concerns and
market access risks unique to notes. Notes due in three years or less will
likely receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment.
o Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
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o Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note.)
Note rating symbols are as follows:
oSP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
o SP-2 Satisfactory capacity to pay principal and interest.
o SP-3 Speculative capacity to pay principal and interest.
Moody's Short-Term Loan Ratings - Moody's ratings for state and
municipal short-term obligations will be designated Moody's Investment Grade
(MIG). This distinction is in recognition of the differences between short-term
credit risk and long-term risk. Factors affecting the liquidity of the borrower
are uppermost in importance in short-term borrowing, while various factors of
major importance in bond risk are of lesser importance over the short run.
Rating symbols and their meanings follow:
o MIG 1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
o MIG 2 - This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
o MIG 3 - This designation denotes favorable quality. All security
elements are accounted for but this is lacking the undeniable strength
of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
o MIG 4 - This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.
COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.: Commercial paper rated "Prime" carries the
smallest degree of investment risk. The modifiers 1, 2, and 3 are used to denote
relative strength within this highest classification.
Standard & Poor's Ratings Group: "A" is the highest commercial paper
rating category utilized by Standard & Poor's Ratings Group which uses the
numbers 1+, 1, 2 and 3 to denote relative strength within its "A"
classification.
Duff & Phelps, Inc.: Duff 1 is the highest commercial paper rating
category utilized by Duff & Phelps which uses + or - to denote relative strength
within this classification. Duff 2 represents good certainty of timely payment,
with minimal risk factors. Duff 3 represents satisfactory protection factors,
with risk factors larger and subject to more variation.
Fitch Investors Service, Inc.: F-1+ -- denotes exceptionally strong credit
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quality given to issues regarded as having strongest degree of assurance for
timely payment; F-1+ -- very strong credit quality, with only slightly less
degree of assurance for timely payment than F-1 -- very strong, with only
slightly less degree of assurance for timely payment than F-1+; F-2 -- good
credit quality, carrying a satisfactory degree of assurance for timely payment.
APPENDIX B - ADDITIONAL INFORMATION CONCERNING CALIFORNIA
The following information as to certain California risk factors is
given to investors in view of Short-Intermediate-CA's policy of investing
primarily in California state and municipal issuers. The information is based
primarily upon information derived from public documents relating to securities
offerings of California state and municipal issuers, from independent municipal
credit reports and historically reliable sources, but has not been independently
verified by the Fund
On June 6, 1978, California voters approved Proposition 13, which added
Article XIIIA to the California Constitution. The principal thrust of Article
XIIIA is to limit the amount of ad valorem taxes on real property to one percent
of the full cash value as determined by the county assessor. The assessed
valuation of all real property may be increased, but not in excess of two
percent per year, or decreased to reflect the rate of inflation or deflation as
shown by the consumer price index. Article XIIIA requires a vote of two thirds
of the qualified electorate to impose special taxes, and completely prohibits
the imposition of any additional ad valorem, sales or transaction tax on real
property (other than ad valorem taxes to repay general obligation bonds issued
to acquire or improve real property), and requires the approval of two-thirds of
all members of the State Legislature to change any state tax laws resulting in
increased tax revenues.
On November 6, 1979, California voters approved the initiative seeking
to amend the California Constitution entitled "Limitation of Government
Appropriations" which added Article XIIIB to the California Constitution. Under
Article XIIIB state and local governmental entities have an annual
appropriations limit and may not spend certain monies which are called
appropriations subject to limitations (consisting of tax revenues, state
subventions and certain other funds) in an amount higher than the appropriations
limit. Generally, the appropriations limit is to be based on certain 1978-79
expenditures, and is to be adjusted annually to reflect changes in consumer
prices, population and services provided by these entities.
Decreased in state and local revenues in future fiscal years as a
consequence of these initiatives may continue to result in reductions in
allocations of state revenues to California municipal issuers or reduce the
ability of such California issuers to pay their obligations.
With the apparent onset of recovery in California's economy, revenue
growth over the next few years could recommence at levels that would enable
California to restore fiscal stability. The political environment, however,
combined with pressures on the state's financial flexibility, may frustrate its
ability to reach this goal. Strong interests in long-established state programs
ranging from low-cost public higher education access to welfare and health
benefits join with the more recently emerging pressure for expanded prison
construction and a heightened awareness and concern over the state's business
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climate.
The fiscal 1994 budget, which was adopted on July 8, 1994 was
designed to address California'a accumulated deficit over a 22-month period. In
order to alleviate the California's cash needs the state issued $4 billion
revenue anticipation warrants that mature in April 1996 and $3 billion revenue
anticipation notes that matured in June 1995. The state's fiscal plan relies
upon aggressive assumptions of federal aid, projected at $2.8 billion in fiscal
year 1996, to compensate the state for its costs of providing service to illegal
immigrants. These assumptions, combined with fiscal year 1996 constitutionally
mandated increases in spending for K-14 education, and continued growth in
social services and corrections expenditures, are risky. To offset this risk,
the state has enacted a Budget Adjustment Law, known as the "trigger"
legislation, which established a set of backup budget adjustment mechanisms to
address potential shortfalls in cash. The trigger mechanism will be in effect
for both fiscal years 1995 and 1996. So far in fiscal 1996 state revenue
collections have been sufficiently strong so that no budget adjustments have
been required. However, the state is expected to issue another $2 billion of
notes for cash flow purposes prior to the maturity date of the revenue
anticipation warrants.
In July of 1994, S&P and Moody's lowered the general obligation bond
rating of the state of California. The rating agencies explained their actions
by citing the state's continuing deferral of substantial portions of its
estimated $3.8 billion accumulated deficit; continuing structural budgetary
constraints including a funding guarantee for K-14 education; overly optimistic
expectation of federal aid to balance fiscal year 1995's budget and fiscal year
1996's cash flow projections; and reliance upon a trigger mechanism to reduce
spending if the plan's federal aid assumptions prove to be inflated.
APPENDIX C - ADDITIONAL INFORMATION CONCERNING FLORIDA
Florida Municipal Bond and Florida High Income Fund invest in
obligations of Florida issuers, which results in each Fund's performance being
subject to risks associated with the overall conditions present within the
state. The following information is a brief summary of the recent prevailing
economic conditions and a general summary of the state's financial status. This
information is based on official statements relating to securities that have
been offered by Florida issuers and from other sources believed to be reliable,
but should not be relied upon as a complete description of all relevant
information.
Florida is the twenty-second largest state, with an area of 54,136
square miles and a water area of 4,424 square miles. The state is 447 miles long
and 361 miles wide with a tidal shoreline of almost 2,300 miles. According to
the U.S. Census Bureau, Florida moved past Illinois in 1986 to become the fourth
most populous state, and as of 1990, had an estimated population of 13.2
million.
Services and trade continue to be the largest components of the Florida
economy, reflecting the importance of tourism as well as the need to serve
Florida's rapidly growing population. Agriculture is also an important part of
the economy, particularly citrus fruits. Oranges have been the principal crop,
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accounting for 70% of the nation's output. Manufacturing, although of less
significance, is a rapidly growing component of the economy. The economy also
has substantial insurance, banking, and export participation. Unemployment rates
have historically been below national averages, but have recently risen above
the national rate.
Section 215.32 of the Florida Statutes provides that financial
operations of the State of Florida covering all receipts and expenditures be
maintained through the use of three funds - the General Revenue Fund, the Trust
Fund and the Working Capital Fund. The General Fund receives the majority of
state tax revenues. The Working Capital Fund receives revenues in excess of
appropriations and its balances are freely transferred to the General Revenue
Fund as necessary. In November, 1992, Florida voters approved a constitutional
amendment requiring the state to fund a Budget Stabilization Fund to 5% of
general revenues, with funding to be phased in over five years beginning in
fiscal 1995. The Working Capital Fund will become the Budget Stabilization Fund.
Major sources of tax revenues to the General Revenue Fund are the sales and use
tax, corporate income tax and beverage tax. The over- dependence on the
sensitive sales tax creates vulnerability to recession. Accordingly, financial
operations have been strained during the past few years, but the state has
responded in a timely manner to maintain budgetary control.
The state is highly vulnerable to hurricane damage. Hurricane Andrew
devastated portions of southern Florida in August, 1992, costing billions of
dollars in emergency relief, damage, and repair costs. However, the overall
financial condition of the major issuers of municipal bond debt in the state
were relatively unaffected by Hurricane Andrew, due to federal disaster
assistance payments and the over all level of private insurance. However, it is
possible that single revenue-based local bond issues could be severely impacted
by storm damage in certain circumstances.
Florida's debt structure is complex. Most state debt is payable from
specified taxes and additionally secured by the full faith and credit of the
state. Under the general obligation pledge, to the extent specified taxes are
insufficient, the state is unconditionally required to make payment on bonds
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from all non-dedicated taxes.
Each Fund's concentration in securities issued by the state and its
political subdivisions provides a greater level of risk than a fund which is
diversified across numerous states and municipal entities. The ability of the
state or its municipalities to meet their obligations will depend on the
availability of tax and other revenues; economic, political, and demographic
conditions within the state; and the underlying condition of the state, and its
municipalities.
APPENDIX D - ADDITIONAL INFORMATION CONCERNING GEORGIA
Because Georgia Municipal Bond will ordinarily invest 80% or more of
its net assets in Georgia obligations, it is more susceptible to factors
affecting Georgia issuers than is a comparable municipal bond fund not
concentrated in the obligations of issuers located in a single state.
Georgia's rating reflects the state's positive economic trends,
conservative financial management, improved financial position, and low debt
burden. The state's recovery from the recent economic recession has been steady;
the rate of recovery is better than regional trends, albeit half the rate of
earlier recoveries. While this recovery does not meet the explosive patterns set
in past cycles, recent state data reveal that Georgia ranks among the top five
states in the nation in employment and total population growth. Stronger
economic trends and conservative revenue forecasting resulted in the
continuation of improved financial results for the fiscal year ended June 30,
1994. The state's general fund closed fiscal 1994 with a total fund balance
position of $480.6 million, of which $249.5 million was in the revenue shortfall
reserve fund (3% of revenues), marking the second consecutive year of build-up
in that reserve. The mid-year adjustment reserve was fully funded at $89.1
million. The state's adopted budget fiscal 1995, called for an increase in state
spending to $9.8 billion, up 6.5% from the prior period. Estimating that
economic growth will be in the 6%-8% range for the second straight year, the
budget report forecasted general fund revenues to grow to $9.4 billion, an
increase of $490.0 million, or 5.5% above actual fiscal 1994 levels. Sales and
income taxes account for the majority of that increase, despite a $100 million
cut in personal income taxes. Additional revenues provided by lottery proceeds
($240 million) and indigent-care trust fund monies support the remaining
spending. Revenues for the first three months of the current year are running
nearly 8.4% above fiscal 1994 levels. Most of the increase is attributable to
the growth in personal and corporate income and sales taxes. As a result, the
state anticipates that fiscal 1995 will once again produce positive financial
results.
Except for the major building projects necessary for the 1996 Summer
Olympics, it appears unlikely that areas in and around metropolitan Atlanta will
experience the building construction rates of the mid to late 1980's. It further
appears that many of Georgia's other cities are poised to participate in the
recovery that inevitably will take place.
The classification of the Fund under the Investment Company Act of 1940
as a "non-diversified" investment company allows the Fund to invest more than 5%
of its assets in the securities of any issuer, subject to satisfaction of
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certain tax requirements. Because of the relatively small number of issues of
Georgia obligations, the Fund is likely to invest a greater percentage of its
assets in the securities of a single issuer than is an investment company which
invests in a broad range of municipal obligations. Therefore, the Fund would be
more susceptible than a diversified investment company to any single adverse
economic or political occurrence or development affecting Georgia issuers. The
Fund will also be subject to an increase risk of loss if the issuer is unable to
make interest or principal payments or if the market value of such securities
declines. It is also possible that there will not be sufficient availability of
suitable Georgia tax-exempt obligations for the Fund to achieve its objective of
providing income exempt from Georgia income tax.
APPENDIX E - ADDITIONAL INFORMATION CONCERNING NORTH CAROLINA
Because North Carolina Municipal Bond will ordinarily invest 80% or
more of its net assets in North Carolina obligations, it is more susceptible to
factors affecting North Carolina (or the "State") issuers than is a comparable
municipal bond fund not concentrated in the obligations of issuers located in a
single state.
North Carolina has an economy dependent on manufacturing and
agriculture; however, diversification into trade and service areas is occurring.
Historically, textiles and furniture dominated industry lines, but increased
activity in financial services, research, and high technology manufacturing is
now apparent. Tobacco remains the primary agricultural commodity. Economic
development continues, and long-term personal income trends indicate gains,
although wealth levels remain below those of the nation. Employment growth
accelerated over the past two years, and unemployment rates remain below those
of the nation.
North Carolina is characterized by moderate debt levels (albeit with
growing capital needs), favorable economic performance, and financial strengths
exhibited over the past several years. North Carolina is one of only several
states expected to sustain favorable economic expansion throughout the 1990s,
according to the U.S. Bureau of Economic Analysis indicators. Economic growth in
the State is bolstered by a lower-than-average cost of living, income levels at
about 90% of U.S. averages - though it is much higher in the metropolitan
centers - and a highly respected public and private higher education system,
including the University of North Carolina at Chapel Hill and Duke University in
Durham.
The North Carolina State Constitution requires that the total
expenditures of the State for a fiscal period shall not exceed the total of
receipts during the fiscal period and the surplus remaining in the State
Treasury at the beginning of the period. In certain of the past several years,
the State has had to restrict expenditures to comply with the State
Constitution. The State has long record of sound financial operations, and while
the revenue system is narrow, the budget balancing law is strong and appropriate
curbs are made when necessary.
The state's finances, which enjoyed surpluses and adequate reserves
throughout the 1980s, began reflecting economic downturn in fiscal 1990.
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Reserves were fully depleted during the recession, but through a combination of
tax and spending actions and more recently, with the aid of economic recovery,
have now been fully restored.
Financial operations have been restored to their historically healthy
position after a period of strain between fiscal years 1990 and 1992. Available
unreserved balances and budget stabilization reserve totaled $440 million at the
end of fiscal 1994 equivalent to 4.1% of annual expenditures. On a budgetary
basis, fiscal 1994 ended with an $887.5 million balance; however, a portion of
this balance has been appropriated for fiscal 1995 operations. Conservative
revenue assumptions and sound budgeting practices should result in a similar
balance at the end of 1995. The restoration of adequate reserve levels confirms
the state's longstanding commitment to a sound financial position.
Debt ratios are among the lowest in the country. State debt ratios will
remain below national medians even after all of the $300 million of currently
authorized debt is issued. Payout is rapid.
North Carolina ranks among the top ten states in terms of economic
growth, as measured by job and personal income growth. Diversification into
financial services, research, and high technology manufacturing is reducing
historical dependence on agriculture, textiles, and furniture manufacturing.
As of December 31, 1994, general obligations of the State of North
Carolina were rated Aaa/AAA/AAA by Moody's, S&P and Fitch Investors Service
("Fitch"), respectively. There can be no assurance that the economic conditions
on which these ratings are based will continue or that particular bond issues
may not be adversely affected by changes in economic, political or other
conditions.
North Carolina obligations also include obligations of the governments
of Puerto Rico, the Virgin Islands and Guam to the extent these obligations are
exempt from North Carolina State personal income taxes. The Fund will not invest
more than 5% of its net assets in the obligations of each of the Virgin Islands
and Guam, but may invest without limitation in the obligations of Puerto Rico.
Accordingly, the Fund may be adversely affected by local political and economic
conditions and developments within Puerto Rico affecting the issuers of such
obligations.
APPENDIX F - ADDITIONAL INFORMATION CONCERNING SOUTH CAROLINA
The State of South Carolina has an economy dominated from the early
1920s to the present by textile industry, with over one of every three
manufacturing workers directly or indirectly related to the textile industry.
However, since 1950 the economic bases of the State have become more
diversified, as the trade and service sectors and durable goods manufacturing
industries have developed. Currently, Moody's rates South Carolina general
obligations bonds "Aaa" and S&P rates such bonds "AAA". There can be no
assurance that the economic conditions on which those ratings are based will
continue or that particular bond issues may not be adversely affected by changes
in the economic or political conditions.
The South Carolina State Constitution mandates a balanced budget. If a
deficit occurs, the General Assembly must account for it in the succeeding
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fiscal year. In addition, if a deficit appears likely, the State Budget and
Control Board (the "State Board") may reduce appropriations during the current
fiscal year as necessary to prevent the deficit. The State Constitution limits
annual increases in State appropriations to the average growth rate of the
economy of the State and annual increases in the number of State employees to
the average growth of the population of the State.
The State Constitution requires a General Reserve Fund ("General Fund")
that equals three percent of General Fund revenue for the latest fiscal year.
When deficits have occurred, the State has funded them out of the General Fund.
The State Constitution also requires a Capital Reserve Fund ("Capital Fund")
equal to two percent of General Fund revenue. Before March 1st of each year, the
Capital Fund must be used to offset mid-year budget reductions before mandating
cuts in operating appropriations, and after March 1st, the Capital Fund may be
appropriated by a special vote of the General Assembly to finance previously
authorized capital improvements or other nonrecurring purposes. Monies in the
Capital Fund not appropriated or any appropriation for a particular project or
item that has been reduced due to application of the monies to a year-end
deficit must go back to the General Fund.
South Carolina Municipal Bond's concentration in securities issued by
the State or its subdivisions provides a greater level of risk than an
investment company which is diversified across a larger geographic area. For
example, the passage of the North American Free Trade Agreement could result in
increased competition for the State's textile industry due to the availability
of less-expensive foreign labor.
Presently, South Carolina subjects bonds issued by other states to its
income tax. If this tax was declared unconstitutional, the value of bonds in the
Fund could decline a small but measurable amount. Also, the Fund could become
slightly less attractive to potential future investors.
The Fund's investment adviser believes that the information summarized
above describes some of the more significant matters relating to the Fund. The
sources of the information are the official statements of issuers located in
South Carolina, other publicly available documents, and oral statements from
various State agencies. The Fund's investment adviser has not independently
verified any of the information contained in the official statement, other
publicly available documents, or oral statements from various State agencies.
APPENDIX G - ADDITIONAL INFORMATION CONCERNING VIRGINIA
Virginia Municipal Bond invests in obligations of Virginia issuers,
which results in the Fund's performance being subject to risks associated with
the overall conditions present within the State. The following information is a
brief summary of the recent prevailing economic conditions and a general summary
of the State's financial status. This information is based on official
statements relating to securities that have been offered by Virginia issuers and
from other sources believed to be reliable, but should not be relied upon as a
complete description of all relevant information.
Virginia's credit strength is derived from a diversified economy,
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relatively low unemployment rates, strong financial management, and low debt
burden. The State's economy benefits significantly from its proximity to
Washington D.C. Government is the State's third- largest employment sector,
comprising 21% of total employment. Other important sectors of the economy
include shipbuilding, tourism, construction, and agriculture.
Virginia is a very conservative debt issuer and has maintained debt
levels that are low in relation to its substantial resources. Conservative
policies also dominate the State's financial operations, and the State
administration continually demonstrates its ability and willingness to adjust
financial planning and budgeting to preserve financial balance. For example,
economic weakness in the State and the region caused personal income and sales
and corporate tax collections to fall below projected forecasts and placed the
State under budgetary strain. The State reacted by reducing its revenue
expectations for the 1990-92 biennium and preserved financial balance through a
series of transfers, appropriation reductions, and other budgetary revisions.
Management's actions resulted in a modest budget surplus for fiscal 1992, and
another modest surplus was reported for fiscal 1993, which ended June 30th. The
1994 Virginia budget experienced a significant surplus due to an improving
economy, including job growth of 3.0%/year overall. Overall, Virginia has a
stable credit outlook due mainly to its diverse economy and resource base, as
well as a conservative approach to financial operations. Revenue growth for 1994
was 6%. Budgets for 1995 and 1996 call for revenue growth of 6.1% and 5.8%,
respectively.
The Fund's concentration in securities issued by the State and its
political subdivisions provides a greater level of risk than a fund which is
diversified across numerous states and municipal entities. The ability of the
State or its municipalities to meet their obligations will depend on the
availability of tax and other revenues; economic, political, and demographic
conditions within the State; and the underlying fiscal condition of the State,
its countries, and its municipalities.
Virginia faces some economic uncertainties with respect to
defense-cutbacks. Although Virginia's unemployment rate of 4.9% (as of August,
1994) is well below the national rate of 5.9%, the State has been able to make
some gains in the services, government, and construction sectors when
manufacturing and trade were down slightly.
The effects of the most recent base-closing legislation were muted
because of consolidation from out-of-state bases to Virginia installations.
While military operations at the Pentagon are unlikely to be threatened, another
round of base-closings scheduled for 1995 may jeopardize a number of Virginia
installations.
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STATEMENT OF ADDITIONAL INFORMATION
October 31, 1996
THE EVERGREEN MONEY MARKET FUNDS
2500 Westchester Avenue, Purchase, New York 10577
800-807-2940
Evergreen Money Market Fund ("Money Market")
Evergreen Tax Exempt Money Market Fund ("Tax Exempt")
Evergreen Pennsylvania Tax-Free Money Market Fund (formerly FFB Pennsylvania
Tax-Free Money Market Fund)("Pennsylvania")
Evergreen Treasury Money Market Fund (formerly First Union Treasury Money
Market Portfolio)("Treasury")
Evergreen Institutional Money Market Fund ("Institutional Money Market")
Evergreen Institutional Tax Exempt Money Market Fund ("Institutional Tax
Exempt")
Evergreen Institutional Treasury Money Market Fund ("Institutional Treasury")
This Statement of Additional Information pertains to all classes of shares of
the Funds listed above. It is not a prospectus and should be read in conjunction
with the Prospectus dated October 31, 1996 for the Fund in which you are making
or contemplating an investment. The Evergreen Money Market Funds are offered
through six separate prospectuses: one offering Class A and Class B shares of
Money Market and Class A shares of Tax Exempt and Treasury, one offering Class A
shares of Pennsylvania, one offering Class Y shares of Money Market, Tax Exempt
and Treasury, one offering Class Y shares of Pennsylvania, one offering
Institutional Service shares of Institutional Money Market, Institutional Tax
Exempt and Institutional Treasury and one offering Institutional shares of
Institutional Money Market, Institutional Tax Exempt and Institutional Treasury.
Copies of each Prospectus may be obtained without charge by calling the number
listed above.
TABLE OF CONTENTS
Investment Objectives and Policies................................ 2
Investment Restrictions........................................... 4
Certain Risk Considerations....................................... 9
Management........................................................ 9
Investment Advisers............................................... 15
Distribution Plans................................................ 19
Allocation of Brokerage........................................... 22
Additional Tax Information........................................ 23
Net Asset Value................................................... 25
Purchase of Shares................................................ 26
Performance Information........................................... 32
Financial Statements.............................................. 34
Appendix A - Description of Bond, Municipal Note and Commercial Paper Ratings
Appendix B - Special Considerations Relating to Investment In Pennsylvania
Municipal Issuers
1
INVESTMENT OBJECTIVES AND POLICIES
(See also "Description of the Funds -Investment Objectives and Policies" in each
Fund's Prospectus)
The investment objective of each Fund and a description of the securities in
which each Fund may invest is set forth under "Description of the Funds -
Investment Objectives and Policies" in the relevant Prospectus. The following
expands upon the discussion in the Prospectus regarding certain investments of
the following Funds:
Tax Exempt, Pennsylvania and Institutional Tax Exempt
To attain its objectives, each Fund invests primarily in high quality Municipal
Obligations which have remaining maturities not exceeding thirteen months. Each
Fund maintains a dollar-weighted average portfolio maturity of 90 days or less.
For information concerning the investment quality of Municipal Obligations that
may be purchased by the Fund, see "Investment Objective and Policies" in the
Prospectus. The tax-exempt status of a Municipal Obligation is determined by the
issuer's bond counsel at the time of the issuance of the security.
For the purpose of certain requirements under the Investment Company Act of 1940
(the "1940 Act") and each Fund's various investment restrictions, identification
of the "issuer" of a municipal security depends on the terms and conditions of
the security. When the assets and revenues of a political subdivision are
separate from those of the government which created the subdivision and the
security is backed only by the assets and revenues of the subdivision, the
subdivision would be deemed to be the sole issuer. Similarly, in the case of an
industrial development bond, if that bond is backed only by the assets and
revenues of the non-governmental user, then the non-governmental user would be
deemed to be the sole issuer. If, however, in either case, the creating
government or some other entity guarantees the security, the guarantee would be
considered a separate security and would be treated as an issue of the
government or other agency.
Municipal bonds may be categorized as "general obligation" or "revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its faith, credit
and taxing power for the payment of principal and interest. Revenue bonds are
secured by the net revenue derived from a particular facility or group of
facilities or, in some cases, the proceeds of a special excise or other specific
revenue source, but not by the general taxing power. Industrial development
bonds are, in most cases, revenue bonds and do not generally carry the pledge of
the credit of the issuing municipality or public authority.
Municipal Notes. Municipal notes include, but are not limited to, tax
anticipation notes (TANs), bond anticipation notes (BANs), revenue anticipation
notes (RANs), construction loan notes and project notes. Notes sold as interim
financing in anticipation of collection of taxes, a bond sale or receipt of
other revenue are usually general obligations of the issuer. Project notes are
issued by local housing authorities to finance urban renewal and public housing
projects and are secured by the full faith and credit of the U.S. Government.
Municipal Commercial Paper. Municipal commercial paper is issued to finance
seasonal working capital needs or as short-term financing in anticipation of
longer-term debt. It is paid from the general revenues of the issuer or
2
refinanced with additional issuances of commercial paper or long-term debt.
Municipal Leases. Municipal leases, which may take the form of a lease or an
installment purchase or conditional sale contract, are issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, telecommunications equipment
and other capital assets. Municipal leases frequently have special risks not
normally associated with general obligation or revenue bonds. Leases and
installment purchases or conditional sale contracts (which normally provide for
title to the leased asset to pass eventually to the government issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. The debt-issuance limitations of many state constitutions and statutes
are deemed to be inapplicable because of the inclusion in many leases or
contracts of "non-appropriation" clauses that provide that the governmental
issuer has no obligation to make future payments under the lease or contract
unless money is appropriated for such purpose by the appropriate legislative
body on a yearly or other periodic basis. These types of municipal leases may be
considered illiquid and subject to the 10% limitation of investment in illiquid
securities set forth under "Investment Restrictions" contained herein. The Board
of Trustees of each Trust under which each Fund operates may adopt guidelines
and delegate to the Adviser (as defined below) the daily function of determining
and monitoring the liquidity of municipal leases. In making such determination,
the Board and the Adviser may consider such factors as the frequency of trades
for the obligations, the number of dealers willing to purchase or sell the
obligations and the number of other potential buyers and the nature of the
marketplace for the obligations, including the time needed to dispose of the
obligations and the method of soliciting offers. If the Board determines that
any municipal leases are illiquid, such leases will be subject to the 10%
limitation on investments in illiquid securities.
For purposes of diversification under the 1940 Act, the identification of the
issuer of Municipal Obligations depends on the terms and conditions of the
obligation. If the assets and revenues of an agency, authority, instrumentality
or other political subdivision are separate from those of the government
creating the subdivision and the obligation is backed only by the assets and
revenues of the subdivision, such subdivision would be regarded as the sole
issuer. Similarly, in the case of an industrial development bond, if the bond is
backed only by the assets and revenues of the non-governmental user, the
non-governmental user would be deemed to be the sole issuer. If in either case
the creating government or another entity guarantees an obligation, the
guarantee would be considered a separate security and be treated as an issue of
such government or entity.
As described in each Fund's Prospectus, the Fund may, under limited
circumstances, elect to invest in certain taxable securities and repurchase
agreements with respect to those securities. A Fund will enter into repurchase
agreements only with broker-dealers, domestic banks or recognized financial
institutions which, in the opinion of the Fund's Adviser, present minimal credit
risks. In the event of default by the seller under a repurchase agreement, a
Fund may have problems in exercising its rights to the underlying securities and
may incur costs and experience time delays in connection with the disposition of
such securities. The Fund's Adviser will monitor the value of the underlying
security at the time the transaction is entered into and at all times during the
term of the repurchase agreement to ensure that the value of the security always
3
equals or exceeds the agreed upon repurchase price. Repurchase agreements may be
considered to be loans under the 1940 Act, collateralized by the underlying
securities.
Each Fund may engage in the following investment activities:
Securities With Put Rights (or "stand-by commitments"). When a Fund purchases
Municipal Obligations it may obtain the right to resell them, or "put" them, to
the seller (a broker-dealer or bank) at an agreed upon price within a specific
period prior to their maturity date. The Fund does not limit the percentage of
its assets that may be invested in securities with put rights.
The amount payable to a Fund by the seller upon its exercise of a put will
normally be (i) the Fund's acquisition cost of the securities (excluding any
accrued interest which the Fund paid on their acquisition), less any amortized
market premium plus any amortized market or original issue discount during the
period the Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during the period the securities
were owned by the Fund. Absent unusual circumstances, each Fund values the
underlying securities at their amortized cost. Accordingly, the amount payable
by a broker-dealer or bank during the time a put is exercisable will be
substantially the same as the value of the underlying securities.
A Fund's right to exercise a put is unconditional and unqualified. A put is not
transferable by the Fund, although the Fund may sell the underlying securities
to a third party at any time. Each Fund expects that puts will generally be
available without any additional direct or indirect cost. However, if necessary
and advisable, the Fund may pay for certain puts either separately in cash or by
paying a higher price for portfolio securities which are acquired subject to
such a put (thus reducing the yield to maturity otherwise available to the same
securities). Thus, the aggregate price paid for securities with put rights may
be higher than the price that would otherwise be paid.
The acquisition of a put will not affect the valuation of the underlying
security, which will continue to be valued in accordance with the amortized cost
method. The actual put will be valued at zero in determining net asset value.
Where a Fund pays directly or indirectly for a put, its cost will be reflected
as an unrealized loss for the period during which the put is held by that Fund
and will be reflected in realized gain or loss when the put is exercised or
expires. If the value of the underlying security increases, the potential for
unrealized or realized gain is reduced by the cost of the put.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS
.........Except as noted, the investment restrictions set forth below are
fundamental and may not be changed with respect to each Fund without the
affirmative vote of a majority of the outstanding voting securities of the Fund.
Where an asterisk (*) appears after a Fund's name, the relevant policy is
non-fundamental with respect to that Fund and may be changed by the Fund's
Adviser without shareholder approval, subject to review and approval by the
Trustees. As used in this Statement of Additional Information and in the
Prospectus, "a majority of the outstanding voting securities of the Fund" means
4
the lesser of (1) the holders of more than 50% of the outstanding shares of
beneficial interest of the Fund or (2) 67% of the shares present if more than
50% of the shares are present at a meeting in person or by proxy.
1........Concentration of Assets in Any One Issuer
.........Tax Exempt, Pennsylvania, Money Market, Institutional Tax Exempt and
Institutional Money Market may not invest more than 5% of their total assets, at
the time of the investment in question, in the securities of any one issuer
other than the U.S. government and its agencies or instrumentalities, except
that up to 25% of the value of Tax Exempt's, Institutional Tax Exempt's and
Pennsylvania's total assets may be invested without regard to such 5%
limitation. For this purpose each political subdivision, agency, or
instrumentality and each multi-state agency of which a state is a member, and
each public authority which issues industrial development bonds on behalf of a
private entity, will be regarded as a separate issuer for determining the
diversification of each Fund's portfolio.
2........Ten Percent Limitation on Securities of Any One Issuer
.........Neither Money Market, Pennsylvania, Tax Exempt, Institutional Money
Market nor Institutional Tax Exempt may purchase more than 10% of any class of
securities of any one issuer other than the U.S. government and its agencies or
instrumentalities.
3........Investment for Purposes of Control or Management
.........Neither Money Market, Pennsylvania, Tax Exempt, Institutional Money
Market* nor Institutional Tax Exempt* may invest in companies for the purpose of
exercising control or management.
4........Purchase of Securities on Margin
.........Neither Money Market, Pennsylvania, Tax Exempt, Treasury, Institutional
Money Market*, Institutional Tax Exempt* nor Institutional Treasury* may
purchase securities on margin, except that each Fund may obtain such short-term
credits as may be necessary for the clearance of transactions. A deposit or
payment by a Fund of initial or variation margin in connection with financial
futures contracts or related options transactions is not considered the purchase
of a security on margin.
5........Unseasoned Issuers
.........Money Market and Institutional Money Market* may not invest more than
5% of their total assets in securities of unseasoned issuers that have been in
continuous operation for less than three years, including operating periods of
their predecessors.
.........Tax Exempt and Institutional Tax Exempt* may not invest more than 5% of
their total assets in taxable securities of unseasoned issuers that have been in
continuous operation for less than three years, including operating periods of
their predecessors, except that (i) each Fund may invest in obligations issued
or guaranteed by the U.S. government and its agencies or instrumentalities, and
(ii) each Fund may invest in municipal securities.
5
6........Underwriting
.........Money Market, Pennsylvania, Tax Exempt, Institutional Money Market and
Institutional Tax Exempt may not engage in the business of underwriting the
securities of other issuers; provided that the purchase by Tax Exempt and
Institutional Tax Exempt of municipal securities or other permitted investments,
directly from the issuer thereof (or from an underwriter for an issuer) and the
later disposition of such securities in accordance with the Fund's investment
program shall not be deemed to be an underwriting.
7........Interests in Oil, Gas or Other Mineral Exploration or Development
Programs
.........Neither Money Market, Pennsylvania, Tax Exempt, Institutional Money
Market* nor Institutional Tax Exempt* may purchase, sell or invest in interests
in oil, gas or other mineral exploration or development programs.
8........Concentration in Any One Industry
.........Neither Money Market, Pennsylvania, Tax Exempt, Institutional Money
Market nor Institutional Tax Exempt may invest 25% or more of its total assets
in the securities of issuers conducting their principal business activities in
any one industry; provided, that this limitation shall not apply to obligations
issued or guaranteed by the U.S. government or its agencies or
instrumentalities, or with respect to Pennsylvania, Tax Exempt and Institutional
Tax Exempt, to municipal securities and certificates of deposit and bankers'
acceptances issued by domestic branches of U.S.
banks.
9........Warrants
.........Tax Exempt and Institutional Tax Exempt* may not invest more than 5% of
their total net assets in warrants, and, of this amount, no more than 2% of the
Fund's total net assets may be invested in warrants that are listed on neither
the New York nor the American Stock Exchange.
10.......Ownership by Trustees/Officers
.........Neither Money Market, Tax Exempt, Treasury, Institutional Money
Market*, Institutional Tax Exempt* nor Institutional Treasury* may purchase or
retain the securities of any issuer if (i) one or more officers or Trustees of a
Fund or its investment adviser individually owns or would own, directly or
beneficially, more than 1/2 of 1% of the securities of such issuer, and (ii) in
the aggregate, such persons own or would own, directly or beneficially, more
than 5% of such securities.
11.......Short Sales
.........Neither Money Market, Tax Exempt, Treasury, Institutional Money
Market*, Institutional Tax Exempt* nor Institutional Treasury* may make short
sales of securities or maintain a short position; except that, in the case of
Treasury, Institutional Treasury, Institutional Tax Exempt and Institutional
Money Market, at all times when a short position is open it owns an equal amount
of such securities or of securities which, without payment of any further
consideration are convertible into or exchangeable for securities of the same
6
issue as, and equal in amount to, the securities sold short.
12.......Lending of Funds and Securities
.........Tax Exempt and Institutional Tax Exempt may not lend their funds to
other persons; however, they may purchase issues of debt securities, enter into
repurchase agreements and acquire privately negotiated loans made to municipal
borrowers.
.........Money Market and Institutional Money Market may not lend their funds to
other persons, provided that they may purchase money market securities or enter
into repurchase agreements.
.........Treasury and Institutional Treasury will not lend any of their assets,
except that they may purchase or hold U.S. Treasury obligations, including
repurchase agreements.
.........Neither Money Market, Pennsylvania, Tax Exempt, Institutional Money
Market nor Institutional Tax Exempt may lend its portfolio securities, unless
the borrower is a broker, dealer or financial institution that pledges and
maintains collateral with the Fund consisting of cash, letters of credit or
securities issued or guaranteed by the United States Government having a value
at all times not less than 100% of the current market value of the loaned
securities, including accrued interest, provided that the aggregate amount of
such loans shall not exceed 30% of the Fund's total assets (5% in the case of
Pennsylvania).
13.......Commodities
......... Money Market, Tax Exempt, Treasury*, Institutional Treasury*,
Institutional Money Market* and Institutional Tax Exempt* may not purchase, sell
or invest in commodities, commodity contracts or financial futures contracts.
14.......Real Estate
.........The Funds may not purchase, sell or invest in real estate or interests
in real estate, except that Money Market and Institutional Money Market may
purchase, sell or invest in marketable securities of companies holding real
estate or interests in real estate, including real estate investment trusts, Tax
Exempt and Institutional Tax Exempt may purchase municipal securities and other
debt securities secured by real estate or interests therein and Pennsylvania may
purchase securities secured by real estate or interests therein, or securities
issued by companies which invest in real estate or interests therein.
15.......Borrowing, Senior Securities, Reverse Repurchase Agreements
......... Money Market, Tax Exempt, Institutional Money Market and Institutional
Tax Exempt may not borrow money, issue senior securities or enter into reverse
repurchase agreements, except for temporary or emergency purposes, and not for
leveraging, and then in amounts not in excess of 10% of the value of the Fund's
total assets at the time of such borrowing; or mortgage, pledge or hypothecate
any assets except in connection with any such borrowing and in amounts not in
excess of the lesser of the dollar amounts borrowed or 10% of the value of the
Fund's total assets at the time of such borrowing, provided that the Fund will
not purchase any securities at times when any borrowings (including reverse
7
repurchase agreements) are outstanding. The Funds will not enter into reverse
repurchase agreements exceeding 5% of the value of their total assets.
.........Pennsylvania shall not borrow money, issue senior securities, or
pledge, mortgage or hypothecate its assets, except that the Fund may borrow from
banks if immediately after each borrowing there is asset coverage of at least
300%.
.........Treasury and Institutional Treasury will not issue senior securities
except that each Fund may borrow money directly, as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in excess of 5%
of the value of its total assets, or in an amount up to one- third of the value
of its total assets, including the amount borrowed, in order to meet redemption
requests without immediately selling portfolio instruments. Any such borrowings
need not be collateralized. Each Fund will not purchase any securities while
borrowings in excess of 5% of the total value of its total assets are
outstanding. Each Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage purposes. Treasury and Institutional Treasury
will not mortgage, pledge or hypothecate any assets except to secure permitted
borrowings. In these cases, Treasury and Institutional Treasury may pledge
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of total assets at the time of the pledge.
16.......Options
.........Money Market, Tax Exempt, Institutional Money Market* and Institutional
Tax Exempt* may not write, purchase or sell put or call options, or combinations
thereof, except Money Market and Institutional Money Market may do so as
permitted under "Description of the Funds - Investment Objective and Policies"
in each Fund's Prospectus and Tax Exempt and Institutional Tax Exempt may
purchase securities with rights to put securities to the seller in accordance
with its investment program.
.........Pennsylvania shall not write, purchase or sell puts, calls, warrants or
options or any combination thereof, except that the Fund may purchase securities
with put or demand rights.
17.......Investment in Municipal Securities
.........Pennsylvania, Tax Exempt and Institutional Tax Exempt may not invest
more than 20% of its total assets in securities other than municipal securities
(as described under "Description of Funds - Investment Objectives and Policies"
in each Fund's Prospectus), unless extraordinary circumstances dictate a more
defensive posture.
18.......Investment in Money Market Securities
.........Money Market may not purchase any securities other than money market
instruments(as described under "Description of Funds - Investment Objectives and
Policies" in the Fund's Prospectus).
19.......Investing in Securities of Other Investment Companies
.........Treasury*, Money Market*, Pennsylvania*, Tax Exempt*, Institutional
Treasury*, Institutional Money Market* and Institutional Tax Exempt* will
8
purchase securities of investment companies only in open-market transactions
involving customary broker's commissions. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation or
acquisition of assets. It should be noted that investment companies incur
certain expenses such as management fees and therefore any investment by the
Funds in shares of another investment company would be subject to such duplicate
expenses.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
CERTAIN RISK CONSIDERATIONS
...........There can be no assurance that a Fund will achieve its investment
objective and an investment in the Fund involves certain risks which are
described under "Description of the Funds - Investment Objectives and Policies"
in each Fund's Prospectus.
MANAGEMENT
The age, address and principal occupation of the Trustees and executive officers
of Evergreen Investment Trust (formerly First Union Funds), The Evergreen
Municipal Trust, Evergreen Tax Free Trust (formerly FFB Funds Trust) and
Evergreen Money Market Trust (each a "Trust" and collectively the "Trusts"),
during the past five years are set forth below:
Laurence B. Ashkin (68), 180 East Pearson Street, Chicago, IL-Trustee. Real
estate developer and construction consultant since 1980; President of Centrum
Equities since 1987 and Centrum Properties, Inc. since 1980.
Foster Bam (69), 2 Greenwich Plaza, Greenwich, CT-Trustee. Partner in the law
firm of Cummings and Lockwood since 1968.
James S. Howell (72), 4124 Crossgate Road, Charlotte, NC-Chairman and Trustee.
Retired Vice President of Lance Inc. (food manufacturing); Chairman of the
Distribution Comm. Foundation for the Carolinas from 1989 to 1993.
Gerald M. McDonnell (57), 209 Harris Drive, Norfolk, NE-Trustee. Sales
Representative with Nucor-Yamoto Inc. (steel producer) since 1988.
Thomas L. McVerry (58), 4419 Parkview Drive, Charlotte, NC-Trustee. Director of
Carolina Cooperative Federal Credit Union since 1990.
William Walt Pettit* (41), Holcomb and Pettit, P.A., 227 West Trade St.,
Charlotte, NC-Trustee. Partner in the law firm Holcomb and Pettit, P.A. since
1990.
Russell A. Salton, III, M.D. (49), 205 Regency Executive Park, Charlotte, NC-
Trustee. Medical Director, U.S. Healthcare of Charlotte, North Carolina since
1995; President, Primary Physician Care from 1990 to 1995.
Michael S. Scofield (53), 212 S. Tryon Street Suite 1280, Charlotte, NC-Trustee.
Attorney, Law Offices of Michael S. Scofield since 1969.
9
Robert J. Jeffries (73), 2118 New Bedford Drive, Sun City Center, FL-Trustee
Emeritus. Corporate consultant since 1967.
John J. Pileggi (37), 237 Park Avenue, Suite 910, New York, NY-President and
Treasurer. Senior Managing Director, Furman Selz LLC since 1992, Managing
Director from 1984 to 1992.
Joan V. Fiore (40), 237 Park Avenue, Suite 910, New York, NY-Secretary. Managing
Director and Counsel, Furman Selz LLC since 1991; Staff Attorney, Securities and
Exchange Commission from 1986 to 1991.
The officers listed above hold the same positions with thirteen investment
companies offering a total of forty-one investment funds within the Evergreen
mutual fund complex. Messrs. Howell, Salton and Scofield are Trustees of all
thirteen investment companies. Messrs. McDonnell, McVerry and Pettit are
Trustees of twelve of the investment companies (excluded is Evergreen Variable
Trust). Messrs. Ashkin, Bam and Jeffries are Trustees of eleven of the
investment companies (excluded are Evergreen Variable Trust and Evergreen
Investment Trust.)
- ----------
* Mr. Pettit may be deemed to be an "interested person" within the meaning of
the 1940 Act.
The officers of the Trusts are all officers and/or employees of Furman Selz LLC.
Furman Selz LLC is an affiliate of Evergreen Funds Distributor, Inc., the
distributor of each Class of shares of each Fund.
The Funds do not pay any direct remuneration to any officer or Trustee who is an
"affiliated person" of either First Union National Bank of North Carolina or
Evergreen Asset Management Corp. or their affiliates. See "Investment Adviser."
Currently, none of the Trustees is an "affiliated person" as defined in the 1940
Act. Evergreen Investment Trust, Evergreen Money Market Trust and The Evergreen
Municipal Trust pay each Trustee who is not an "affiliated person" an annual
retainer and a fee per meeting attended, plus expenses. The Evergreen Tax Free
Trust pays each Trustee who is not an "affiliated person" a fee per meeting
attended, plus expenses, as follows:
Name of Fund Annual Retainer Meeting Fee
Evergreen Investment Trust - $15,000* $2,000*
Treasury
Evergreen Money Market Trust - $4,000**
Money Market $100
Institutional Money Market $100
Institutional Treasury $100
The Evergreen Municipal Trust - **
Tax Exempt $100
Institutional Tax Exempt $100
Evergreen Tax Free Trust - -0-
Pennsylvania $100
10
- ---------------------------
* The annual retainer and the per meeting fee paid by Evergreen Investment Trust
to each Trustee are allocated among its fourteen series.
** Allocated among the Evergreen Money Market Trust (which offers three
investment series) and The Evergreen Municipal Trust (which offers five
investment series).
In addition:
(1) Each non-affiliated Trustee is paid a fee of $500 for each special
telephonic meeting in which he participates, regardless of the number
of Funds for which the meeting is called.
(2) The Chairman of the Board of the Evergreen group of mutual funds is
paid an annual retainer of $5,000, and the Chairman of the Audit
Committee is paid an annual retainer of $2,000. These retainers are
allocated among all the funds in the Evergreen group of mutual funds,
based upon assets.
(3) Each member of the Audit Committee is paid an annual retainer of $500.
(4) Any individual who has been appointed as a Trustee Emeritus of one or
more funds in the Evergreen group of mutual funds is paid one-half of
the fees that are payable to regular Trustees.
Set forth below for each of the Trustees is the aggregate compensation paid
to such Trustees by each of Evergreen Investment Trust, The Evergreen Municipal
Trust and Evergreen Money Market Trust for the fiscal year ended August 31, 1996
and by Evergreen Tax Free Trust for the period January 19, 1996 (the date of
their election as Trustees) through August 31, 1996.
Total
Aggregate Compensation From Trust Compensation
Evergreen The From Trusts
Money Evergreen Evergreen Evergreen & Fund
Name of Market Municipal Investment Tax Free Complex Paid
Trustee Trust Trust Trust Trust to Trustees
Laurence Ashkin $4,108 $4,038 0 $ 611 $33,050
Foster Bam 4,108 4,038 0 611 33,050
James S. Howell 4,466 4,287 25,779 606 62,825
Gerald M. 4,018 3,963 22,166 606 56,300
McDonnell
Thomas L. 4,190 4,053 22,706 606 57,425
McVerry
11
William Walt 3,968 3,927 21,987 606 55,925
Pettit
Russell A. 3,968 3,927 21,987 606 58,575
Salton, III, M.D.
Michael S. 3,968 3,927 21,987 606 58,575
Scofield
Robert Jeffries* 2,648 2,686 0 311 21,813
- --------------------
* Robert J. Jeffries has been serving as a Trustee Emeritus since January 1,
1996.
As of the date of this Statement of Additional Information, the officers
and Trustees of each of the Trusts as a group owned less than 1% of the
outstanding shares of any of the Funds.
Set forth below is information with respect to each person, who, to each
Fund's knowledge, owned beneficially or of record more than 5% of a class of
each Fund's total outstanding shares and their aggregate ownership of the Fund's
total outstanding shares as of August 31, 1996.
Name of % of
Name and Address* Fund/Class No. of Shares Class/Fund
- ------------------ ---------- ------------- ----------
First Union National Bank of FL Money Market/A 441,116,098 25.13% /16.73%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank of NC Money Market/A 189,391,713 10.70% / 7.18%
Cap Account
Attn: Shelia Bryendon CMG 1164
One First Union Center
301 S. College Street
Charlotte, NC 28202-6000
First Union National Bank of NJ Money Market/A 105,731,878 6.02% / 4.01%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank Money Market/A 212,302,903 12.09% / 8.05%
Trust Accounts
Attn Ginny Batten CMG 1151-2
401 Tryon Street 3rd Fl.
Charlotte NC 28288
First Union National Bank Money Market/Y 176,135,042 26.22% / 6.68%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union Insurance Group Money Market/Y 35,800,000 5.33% / 1.36%
Attn Harry Laderer
301 S. Tryon Street
Charlotte, NC 28288-0001
12
First Union National Bank of FL Tax-Exempt/A 194,707,088 29.47% / 15.23%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank of NC Tax-Exempt/A 148,212,559 22.43% / 11.60%
Cap Account
Attn: Shelia Bryendon CMG 1164
One First Union Center
301 S. College Street
Charlotte, NC 28288-0001
First Union National Bank of GA Tax-Exempt/A 38,452,170 5.82% / 3.01%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank Tax-Exempt/A 58,110,478 8.80% /14.55%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-151
301 S. Tryon Street
Charlotte, NC 28288
First Union National Bank Tax-Exempt/Y 105,527,990 17.09% /8.26%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-151
301 S. Tryon Street
Charlotte, NC 28288
St Joe Forest Prod Specl Acct Tax-Exempt/Y 71,030,564 11.50%/5.56%
Attn Susan Bacher Treas Mgr.
301 S. Tryon Street
Charlotte, NC 28288
St Joe Industries Inc. Special Tax-Exempt/Y 64,548,439 10.45%/5.05%
Attn David Childers III
301 S. Tryon Street
Charlotte, NC 28288
First Union National Bank of FL Treasury/A 441,570,610 16.03% / 13.11%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank of NC Treasury/A 270,046,253 10.36% / 8.02%
Attn: Cap Account Dept.
One First Union Center
301 S. College Street
Charlotte, NC 28202-6000
First Union National Bank of VA Treasury/A 152,550,548 5.85% / 4.53%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
13
First Union National Bank of NC Treasury/A 858,336,465 32.91% / 25.49%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank of NC Treasury/Y 685,143,280 90.15% / 20.34%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Dalick Feith & Pennsylvania/Y 2,849,082 5.89% / 4.04%
Rose Feith JT Ten
301 S. Tryon Street
Charlotte, NC 28288-0001
Johnathan B Detwiller Pennsylvania/Y 2,873,457 5.95%/ 4.07%
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Pennsylvania/Y 14,284,140 29.55%/20.25%
Trust Accounts
Attn Ginny Batten CMG 11512
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union Nation Bank of PA Pennsylvania/A 18,119,249 81.63%/25.69%
Attn Cap Account Dept.
One First Union Center
Charlotte NC 28288
Form Union National Bank of North Carolina and its affiliates act in
various capacities for numerous accounts. As a result of its ownership on August
31, 1996, of 90.15% of Class Y shares and 43.27% Class A shares of Treasury
Money Market Fund, 29.55% and 81.63%, respectively, of Class Y and Class A
shares of Pennsylvania Money Market Fund, 26.22% of Class Y and 54.04% of Class
A shares of Money Market Fund and 66.52% of Tax Exempt Money Market Fund, First
Union may be deemed to "control" those Funds as that term is defined in the 1940
Act.
14
INVESTMENT ADVISERS
(See also "Management of the Funds" in each Fund's Prospectus)
The investment adviser of Money Market and Tax Exempt is Evergreen Asset
Management Corp., a New York corporation, with offices at 2500 Westchester
Avenue, Purchase, New York ("Evergreen Asset" or the "Adviser."). Evergreen
Asset is owned by First Union National Bank of North Carolina ("FUNB" or the
"Adviser") which, in turn, is a subsidiary of First Union Corporation ("First
Union"), a bank holding company headquartered in Charlotte, North Carolina. The
investment adviser of Treasury, Institutional Treasury, Institutional Money
Market, Institutional Tax Exempt and Pennsylvania is FUNB which provides
investment advisory services through its Capital Management Group. The Directors
of Evergreen Asset are Richard K. Wagoner and Barbara I. Colvin. The executive
officers of Evergreen Asset are Stephen A. Lieber, Chairman and Co-Chief
Executive Officer, Nola Maddox Falcone, President and Co-Chief Executive
Officer, and Theodore J. Israel, Jr., Executive Vice President.
On June 30, 1994, Evergreen Asset and Lieber and Company ("Lieber") were
acquired by First Union through certain of its subsidiaries. Evergreen Asset was
acquired by FUNB, a wholly-owned subsidiary (except for directors' qualifying
shares) of First Union, by merger into EAMC Corporation ("EAMC") a wholly-owned
subsidiary of FUNB. EAMC then assumed the name "Evergreen Asset Management
Corp." and succeeded to the business of Evergreen Asset. Contemporaneously with
the succession of EAMC to the business of Evergreen Asset and its assumption of
the name "Evergreen Asset Management Corp.", Money Market and Tax Exempt entered
into a new investment advisory agreement with EAMC and into a distribution
agreement with Evergreen Funds Distributor, Inc. (the "Distributor"), an
affiliate of Furman Selz LLC. At that time, EAMC also entered into a new
sub-advisory agreement with Lieber pursuant to which Lieber provides certain
services to Evergreen Asset in connection with its duties as investment adviser.
The partnership interests in Lieber, a New York general partnership, were
acquired by Lieber I Corp. and Lieber II Corp., which are both wholly-owned
subsidiaries of FUNB. The business of Lieber is being continued. The new
advisory and sub-advisory agreements were approved by the shareholders of Money
Market and Tax Exempt at their meeting held on June 23, 1994, and became
effective on June 30, 1994.
Prior to January 1, 1996, First Fidelity Bank, N.A. ("First Fidelity") acted as
investment adviser to Pennsylvania. On June 18, 1995, First Union entered into
an Agreement and Plan of Merger (the "Merger Agreement") with First Fidelity
Bancorporation ("FFB"), the corporate parent of First Fidelity which provided,
among other things, for the merger (the "Merger") of FFB with and into a
wholly-owned subsidiary of First Union. The Merger was consummated on January 1,
1996. As a result of the Merger, FUNB and its wholly-owned subsidiary, Evergreen
Asset succeeded to the investment advisory and administrative functions
currently performed by various units of First Fidelity.
Under its Investment Advisory Agreement with each Fund, each Adviser has agreed
to furnish reports, statistical and research services and recommendations with
respect to each Fund's portfolio of investments. In addition, each Adviser
provides office facilities to the Funds and performs a variety of administrative
services. Each Fund pays the cost of all of its other expenses and liabilities,
including expenses and liabilities incurred in connection with maintaining their
15
registration under the Securities Act of 1933, as amended, and the 1940 Act,
printing prospectuses (for existing shareholders) as they are updated, state
qualifications, mailings, brokerage, custodian and stock transfer charges,
printing, legal and auditing expenses, expenses of shareholder meetings and
reports to shareholders. Notwithstanding the foregoing, each Adviser will pay
the costs of printing and distributing prospectuses used for prospective
shareholders.
The method of computing the investment advisory fee for each Fund is
described in such Fund's Prospectus. The advisory fees paid by each Fund for the
three most recent fiscal periods reflected in its registration statement are set
forth below:
TAX EXEMPT Year Ended Year Ended Year Ended
8/31/96 8/31/95 8/31/94
Advisory Fee $5,540,924 $2,329,035 $2,126,246
Waiver (1,243,131) (558,942) (1,256,653)
----------- --------- ----------
Net Advisory Fee $4,297,793 $1,770,093 $869,593
=========== ========= =========
MONEY MARKET Year Ended Year Ended Year Ended
8/31/96 8/31/95 8/31/94
Advisory Fee $8,346,173 $1,831,518 $1,245,513
Waiver (2,427,423) (732,723) (974,438)
----------- --------- ---------
Net Advisory Fee $5,918,750 $1,098,795 $271,075
========= ========= =========
PENNSYLVANIA Six Months Year Ended Year Ended
ended 8/31/96* 2/29/96 2/28/95
Advisory Fee $148,591 $312,440 $85,049
Waiver (59,186) (241,213) (85,049)
-------- --------- ---------
Net Advisory Fee $89,405 $ 71,227 $ 0
======= ========= =========
TREASURY Year Ended Eight Months Year Ended
Ended
8/31/96 8/31/95** 12/31/94
Advisory Fee $8,857,503 $2,814,251 $2,549,955
Waiver (2,109,068) (1,258,611) (1,948,237)
---------- --------- ---------
Net Advisory Fee $6,748,435 $1,555,640 $601,718
========= ========= =========
- --------------------
* The Fund changed its fiscal year from February 28 to August 31.
16
** The Fund changed its fiscal year from December 31 to August 31.
Expense Limitations
Evergreen Asset as Adviser to Money Market and Tax Exempt has, pursuant to each
Investment Advisery Agreement, agreed to reimburse each Fund to the extent that
any of these Funds' aggregate operating expenses (including the Adviser's fee,
but excluding interest, taxes, brokerage commissions, and extraordinary
expenses, and for such Funds Class A and Class B shares, as applicable, Rule
12b-1 distribution fees and shareholder servicing fees payable) exceed 1.00% of
their average net assets for any fiscal year. FUNB as Adviser to Institutional
Money Market, Institutional Tax Exempt and Institutional Treasury has
voluntarily agreed to reimburse each Fund to the extent that any of these Funds'
aggregate operating expenses (including the Adviser's fee, but excluding
interest, taxes, brokerage commissions, and extraordinary expenses, and for such
Funds Institutional Service shares Rule 12b-1 distribution fees and shareholder
servicing fees payable) exceed .20 of 1.00% of their average net assets for any
fiscal year for Institutional Class Shares and .45 of 10% for Insitutional
Service Class shares.
The Investment Advisory Agreements are terminable, without the payment of any
penalty, on sixty days' written notice, by a vote of the holders of a majority
of each Fund's outstanding shares, or by a vote of a majority of each Trust's
Trustees or by the respective Adviser. The Investment Advisory Agreements will
automatically terminate in the event of their assignment. Each Investment
Advisory Agreement provides in substance that the Adviser shall not be liable
for any action or failure to act in accordance with its duties thereunder in the
absence of willful misfeasance, bad faith or gross negligence on the part of the
Adviser or of reckless disregard of its obligations thereunder. The Investment
Advisory Agreements with respect to Money Market and Tax Exempt, dated June 30,
1994, were each last approved by the Trustees of each Trust on February 8, 1996
and will continue from year to year provided that such continuance is approved
annually by a vote of a majority of the Trustees of each Trust including a
majority of those Trustees who are not parties thereto or "interested persons"
(as defined in the 1940 Act) of any such party, cast in person at a meeting duly
called for the purpose of voting on such approval or a majority of the
outstanding voting shares of each Fund. With respect to Treasury, the Investment
Advisory Agreement dated February 28, 1985 and amended from time to time
thereafter was last approved by the Trustees on February 8, 1996 and it will
continue from year to year with respect to each Fund provided that such
continuance is approved annually by a vote of a majority of the Trustees
including a majority of those Trustees who are not parties thereto or
"interested persons" of any such party cast in person at a meeting duly called
for the purpose of voting on such approval or by a vote of a majority of the
outstanding voting securities of the Fund. With respect to Pennsylvania, the
Investment Advisory Agreement dated January 1, 1996 was first approved by the
shareholders of the Fund on December 12, 1995 and will continue until January 1,
1998 and from year to year with respect to the Fund provided that such
continuance is approved annually by a vote of a majority of the Trustees
including a majority of those Trustees who are not parties thereto or
"interested persons" of any such party cast in person at a meeting duly called
for the purpose of voting on such approval or by a vote of a majority of the
outstanding voting securities of the Fund. With respect to Institutional Money
17
Market, Institutional Tax Exempt and Institutional Treasury, the Investment
Advisory Agreements dated September 30, 1996 were approved by each Fund's
initial shareholder on September 30, 1996, and will continue in effect until
September 30, 1998, and thereafter from year to year provided that their
continuance is approved annually by a vote of a majority of the Trustees of each
Trust including a majority of those Trustees who are not parties thereto or
"interested persons" of any such party cast in person at a meeting duly called
for the purpose of voting on such approval or by a vote of a majority of the
outstanding voting securities of each Fund.
Certain other clients of each Adviser may have investment objectives and
policies similar to those of the Funds. Each Adviser (including the sub-adviser)
may, from time to time, make recommendations which result in the purchase or
sale of a particular security by its other clients simultaneously with a Fund.
If transactions on behalf of more than one client during the same period
increase the demand for securities being purchased or the supply of securities
being sold, there may be an adverse effect on price or quantity. It is the
policy of each Adviser to allocate advisory recommendations and the placing of
orders in a manner which is deemed equitable by the Adviser to the accounts
involved, including the Funds. When two or more of the clients of the Adviser
(including one or more of the Funds) are purchasing or selling the same security
on a given day from the same broker-dealer, such transactions may be averaged as
to price.
Although the investment objectives of the Funds are not the same, and their
investment decisions are made independently of each other, they rely upon the
same resources for investment advice and recommendations. Therefore, on
occasion, when a particular security meets the different investment objectives
of the various Funds, they may simultaneously purchase or sell the same
security. This could have a detrimental effect on the price and quantity of the
security available to each Fund. If simultaneous transactions occur, the Adviser
attempts to allocate the securities, both as to price and quantity, in
accordance with a method deemed equitable to each Fund and consistent with their
different investment objectives. In some cases, simultaneous purchases or sales
could have a beneficial effect, in that the ability of one Fund to participate
in volume transactions may produce better executions for that Fund.
Each Fund has adopted procedures under Rule 17a-7 of the 1940 Act to permit
purchase and sales transactions to be effected between each Fund and the other
registered investment companies for which either Evergreen Asset or FUNB acts as
investment adviser or between the Fund and any advisory clients of Evergreen
Asset, FUNB or Lieber. Each Fund may from time to time engage in such
transactions but only in accordance with these procedures and if they are
equitable to each participant and consistent with each participant's investment
objectives.
Prior to July 1, 1995, Federated Administrative Services, a subsidiary of
Federated Investors, provided legal, accounting and other administrative
personnel and support services to each of the portfolios of Evergreen Investment
Trust. The Trust paid a fee for such services at the following annual rate: .15%
on the first $250 million average daily net assets of the Trust; .125% on the
next $250 million; .10% on the next $250 million and .075% on assets in excess
of $250 million. For the fiscal year ended August 31, 1996, the fiscal period
ended August 31, 1995 and the fiscal year ended December 31, 1994, Treasury
incurred $1,264,550, $601,034 and $462,002, respectively, in administrative
18
service costs.
Prior to January 19, 1996, Furman Selz LLC acted as administrator for
Pennsylvania. For the fiscal period ended January 18, 1996 and the fiscal years
ended February 28, 1995 and 1994 Furman Selz LLC waived its entire
administrative fee.
On July 1, 1995, Evergreen Asset, in the case of each of the portfolios of
Evergreen Investment Trust, on January 19, 1996, in the case of Pennsylvania,
and on the date of this Statement of Additional Information in the case of
Institutional Treasury, Institutional Money Market and Institutional Tax Exempt,
commenced providing administrative services for a fee based on the average daily
net assets of each fund administered by Evergreen Asset for which Evergreen
Asset or FUNB also serve as investment adviser, calculated daily and payable
monthly at the following annual rates: .050% on the first $7 billion; .035% on
the next $3 billion; .030% on the next $5 billion; .020% on the next $10
billion; .015% on the next $5 billion; and .010% on assets in excess of $30
billion. Furman Selz LLC an affiliate of the Distributor, serves as
sub-administrator to Treasury, Institutional Treasury, Institutional Money
Market, Institutional Tax Exempt and Pennsylvania and is entitled to receive a
fee based on the average daily net assets of Treasury, Institutional Treasury,
Institutional Money Market, Institutional Tax Exempt and Pennsylvania at a rate
from the Fund calculated on the total assets of the mutual funds administered by
Evergreen Asset for which FUNB or Evergreen Asset also serve as investment
adviser, calculated in accordance with the following schedule: .0100% of the
first $7 billion; .0075% on the next $3 billion; .0050% on the next $15 billion;
.0040% on assets in excess of $25 billion. The total assets of mutual funds
administered by Evergreen Asset for which Evergreen Asset or FUNB serve as
investment adviser as of August 31, 1996 were approximately $15.7 billion.
DISTRIBUTION PLANS
Reference is made to "Management of the Funds - Distribution Plans and
Agreements" in the Prospectus of each Fund for additional disclosure regarding
the Funds' distribution arrangements. Distribution fees are accrued daily and
paid monthly on the Class A shares of Money Market, Tax Exempt, Treasury,
Pennsylvania, Institutional Service shares of Intitutional Treasury,
Institutional Money Market and Institutional Tax Exempt, and for Money Market,
its Class B shares and are charged as class expenses, as accrued. The
distribution fees attributable to the Class B shares are designed to permit an
investor to purchase such shares through broker-dealers without the assessment
of a front-end sales charge, while at the same time permitting the Distributor
to compensate broker-dealers in connection with the sale of such shares.
Under the Rule 12b-1 Distribution Plans that have been adopted by each Fund with
respect to each of its Class A, Institutional Service and Class B shares, as
applicable, (to the extent that each Fund offers such classes) (each a "Plan"
and collectively, the "Plans"), the Treasurer of each Fund reports the amounts
expended under the Plan and the purposes for which such expenditures were made
to the Trustees of each Trust for their review on a quarterly basis. Also, each
Plan provides that the selection and nomination of Trustees who are not
"interested persons" of each Trust (as defined in the 1940 Act) are committed to
the discretion of such disinterested Trustees then in office.
19
Each Adviser may from time to time and from its own funds or such other
resources as may be permitted by rules of the Securities and Exchange Commission
make payments for distribution services to the Distributor; the latter may in
turn pay part or all of such compensation to brokers or other persons for their
distribution assistance.
Money Market commenced offering Class A and Class B shares and Tax Exempt
commenced offering Class A shares, on January 3, 1995. Each Plan with respect to
such Funds became effective on December 30, 1994 and was initially approved by
the sole shareholder of each Class of shares of each Fund with respect to which
a Plan was adopted on that date and by the unanimous vote of the Trustees of
each Trust, including the disinterested Trustees voting separately, at a meeting
called for that purpose and held on December 13, 1994. The Distribution
Agreements between each Fund and the Distributor, pursuant to which distribution
fees are paid under the Plans by each Fund with respect to its Class A and Class
B shares were also approved at the December 13, 1994 meeting by the unanimous
vote of the Trustees, including the disinterested Trustees voting separately.
Each Plan and Distribution Agreement will continue in effect for successive
twelve-month periods provided, however, that such continuance is specifically
approved at least annually by the Trustees of each Trust or by vote of the
holders of a majority of the outstanding voting securities (as defined in the
1940 Act) of that Class, and, in either case, by a majority of the Trustees of
the Trust who are not parties to the Agreement or interested persons, as defined
in the 1940 Act, of any such party (other than as Trustees of the Trust) and who
have no direct or indirect financial interest in the operation of the Plan or
any agreement related thereto.
Prior to July 8, 1995, Federated Securities Corp., a subsidiary of Federated
Investors, served as the distributor for Treasury as well as other portfolios of
Evergreen Investment Trust. The Distribution Agreement between Treasury and the
Distributor pursuant to which distribution fees are paid under the Plan by
Treasury with respect to its Class A shares was approved on June 15, 1995 by the
unanimous vote of the Trustees including the disinterested Trustees voting
separately. In the case of Pennsylvania, FFB Funds Distributor, Inc. served as
distributor prior to January 19, 1996. The Distribution Agreement between
Pennsylvania and the Distributor pursuant to which distribution fees are paid
under the Plan by Pennsylvania with respect to its Class A shares was approved
on January 19, 1996 by the unanimous vote of the Trustees including the
disinterested Trustees voting separately.
On October 1, 1996 Institutional Money Market, Institutional Tax Exempt and
Institutional Treasury commenced the offering of each Fund's Institutional
Service shares. Each Plan with respect to such Funds became effective on August
1, 1996 and was initially approved by the sole shareholder of each Fund on
September 30, 1996 and by the unanimous vote of the Trustees of each Trust,
including the disinterested Trustees voting separately, at a meeting called for
that purpose and held on August 1, 1996. The Distribution Agreements between
each Fund and the Distributor, pursuant to which distribution fees are paid
under the Plans by each Fund with respect to its Institutional Service shares
were also approved at the August 1, 1996 meeting by the unanimous vote of the
disinterested Trustees voting separately. Each Plan and Distribution Agreement
will continue in effect for successive twelve-month periods provided, however,
that such continuance is specifically approved at least annually by the Trustees
of each Trust or by vote of the holders of a majority of the outstanding voting
securities (as defined in the 1940 Act) of that class and, in either case, by a
majority of the Trustees of the
20
Trust who are not parties to the Distribution Agreement or interested persons,
as defined in the 1940 Act, of any such party (other than as Trustees of the
Trust) and who have no direct or indirect financial interest in the operation of
the Plan or any agreement related thereto.
The Plans permit the payment of fees to brokers and others for distribution and
shareholder-related administrative services and to broker-dealers, depository
institutions, financial intermediaries and administrators for administrative
services as to each Fund's Class A, Institutional Service and Class B shares, as
applicable. The Plans are designed to (i) stimulate brokers to provide
distribution and administrative support services to the Funds and holders of
each Fund's Class A, Institutional Service, and Class B shares, as applicable
and (ii) stimulate administrators to render administrative support services to
the Funds and holders of such shares. The administrative services are provided
by a representative who has knowledge of the shareholder's particular
circumstances and goals, and include, but are not limited to providing office
space, equipment, telephone facilities, and various personnel including
clerical, supervisory, and computer, as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries regarding each Fund's Class A, Institutional
Service, and Class B shares, as applicable; assisting clients in changing
dividend options, account designations, and addresses; and providing such other
services as the Fund reasonably requests for its Class A, Institutional Service,
and Class B shares, as applicable.
In the event that a Plan or Distribution Agreement is terminated or not
continued with respect to one or more Classes of shares of a Fund, (i) no
distribution fees (other than current amounts accrued but not yet paid) would be
owed by the Fund to the Distributor with respect to that Class or Classes of
shares, and (ii) the Fund would not be obligated to pay the Distributor for any
amounts expended under the Distribution Agreement not previously recovered by
the Distributor from distribution services fees in respect of such Class or
Classes of shares through deferred sales charges.
All material amendments to any Plan or Distribution Agreement must be approved
by a vote of the Trustees of a Trust or the holders of the Fund's outstanding
voting securities, voting separately by Class, and in either case, by a
majority of the disinterested Trustees, cast in person at a meeting called for
the purpose of voting on such approval; and any Plan or Distribution Agreement
may not be amended in order to increase materially the costs that a particular
Class of shares of a Fund may bear pursuant to the Plan or Distribution
Agreement without the approval of a majority of the holders of the outstanding
voting shares of the Class affected. Any Plan or Distribution Agreement may be
terminated (a) by a Fund without penalty at any time by a majority vote of the
holders of the outstanding voting securities of the Fund, voting separately by
Class or by a majority vote of the Trustees who are not "interested persons" as
defined in the 1940 Act, or (b) by the Distributor. To terminate any
Distribution Agreement, any party must give the other parties 60 days' written
notice; to terminate a Plan only, the Fund need give no notice to the
Distributor. Any Distribution Agreement will terminate automatically in the
event of its assignment.
Fees Paid Pursuant to Distribution Plans. Treasury, Money Market, Tax Exempt
and Pennsylvania incurred the following distribution service fees:
Treasury. For the fiscal year ended August 31, 1996, $6,381,827 on behalf of
21
Class A shares.
Money Market. For the fiscal year ended August 31, 1996, $3,910,297 on behalf of
Class A shares and $68,566 behalf of Class B shares.
Tax Exempt. For the fiscal year ended August 31, 1996, $1,898,665 on behalf of
Class A shares.
Pennsylvania. For the six months ended August 31, 1996 (commencement of
operations), $24,476 on behalf of Class A shares.
Information pertaining to such fees for Institutional Money Market,
Institutional Tax Exempt and Institutional Treasury has not been included
because these Funds have not completed a full year of operation.
ALLOCATION OF BROKERAGE
Decisions regarding each Fund's portfolio are made by its Adviser, subject to
the supervision and control of the Trustees. Orders for the purchase and sale of
securities and other investments are placed by employees of the Adviser, all of
whom, in the case of Evergreen Asset, are associated with Lieber. In general,
the same individuals perform the same functions for the other funds managed by
the Adviser. A Fund will not effect any brokerage transactions with any broker
or dealer affiliated directly or indirectly with the Adviser unless such
transactions are fair and reasonable, under the circumstances, to the Fund's
shareholders. Circumstances that may indicate that such transactions are fair or
reasonable include the frequency of such transactions, the selection process and
the commissions payable in connection with such transactions.
It is anticipated that most purchase and sale transactions involving fixed
income securities will be with the issuer or an underwriter or with major
dealers in such securities acting as principals. Such transactions are normally
on a net basis and generally do not involve payment of brokerage commissions.
However, the cost of securities purchased from an underwriter usually includes a
commission paid by the issuer to the underwriter. Purchases or sales from
dealers will normally reflect the spread between bid and ask prices.
In selecting firms to effect securities transactions, the primary consideration
of each Fund shall be prompt execution at the most favorable price. A Fund will
also consider such factors as the price of the securities and the size and
difficulty of execution of the order. If these objectives may be met with more
than one firm, the Fund will also consider the availability of statistical and
investment data and economic facts and opinions helpful to the Fund. To the
extent that receipt of these services for which the Adviser or its affiliates
might otherwise have paid, it would tend to reduce their expenses.
Under Section 11(a) of the Securities Exchange Act of 1934, as amended, and the
rules adopted thereunder by the Securities and Exchange Commission, Lieber may
be compensated for effecting transactions in portfolio securities for a Fund on
a national securities exchange provided the conditions of the rules are met.
Each Fund advised by Evergreen Asset has entered into an agreement with Lieber
authorizing Lieber to retain compensation for brokerage services. In accordance
with such agreement, it is contemplated that Lieber, a member of the New York
and American Stock Exchanges, will, to the extent practicable, provide brokerage
22
services to the Fund with respect to substantially all securities transactions
effected on the New York and American Stock Exchanges. In such transactions, a
Fund will seek the best execution at the most favorable price while paying a
commission rate no higher than that offered to other clients of Lieber or that
which can be reasonably expected to be offered by an unaffiliated broker-dealer
having comparable execution capability in a similar transaction. However, no
Fund will engage in transactions in which Lieber would be a principal. While no
Fund advised by Evergreen Asset contemplates any ongoing arrangements with other
brokerage firms, brokerage business may be given from time to time to other
firms. In addition, the Trustees have adopted procedures pursuant to Rule 17e-1
under the 1940 Act to ensure that all brokerage transactions with Lieber, as an
affiliated broker-dealer, are fair and reasonable.
Any profits from brokerage commissions accruing to Lieber as a result of
portfolio transactions for the Fund will accrue to FUNB and to its ultimate
parent, First Union. The Investment Advisory Agreements do not provide for a
reduction of the Adviser's fee with respect to any Fund by the amount of any
profits earned by Lieber from brokerage commissions generated by portfolio
transactions of the Fund.
ADDITIONAL TAX INFORMATION
(See also "Taxes" in the Prospectus)
Each Fund other than Institutional Money Market, Institutional Tax Exempt and
Institutional Treasury has qualified and intends to continue to qualify, and
Institutional Money Market, Institutional Tax Exempt and Institutional Treasury
intend to qualify, for and elect the tax treatment applicable to regulated
investment companies ("RIC") under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). (Such qualification does not involve supervision
of management or investment practices or policies by the Internal Revenue
Service.) In order to qualify as a regulated investment company, a Fund must,
among other things, (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to proceeds from securities loans, gains from
the sale or other disposition of securities or foreign currencies and other
income (including gains from options, futures or forward foreign contracts)
derived with respect to its business of investing in such securities; (b) derive
less than 30% of its gross income from the sale or other disposition of
securities, options, futures or forward contracts (other than those on foreign
currencies), or foreign currencies (or options, futures or forward contracts
thereon) that are not directly related to the RIC's principal business of
investing in securities (or options and futures with respect thereto) held for
less than three months; and (c) diversify its holdings so that, at the end of
each quarter of its taxable year, (i) at least 50% of the market value of the
Fund's total assets is represented by cash, U.S. government securities and other
securities limited in respect of any one issuer, to an amount not greater than
5% of the Fund's total assets and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. government
securities and securities of other regulated investment companies). By so
qualifying, a Fund is not subject to Federal income tax if it timely distributes
its investment company taxable income and any net realized capital gains. A 4%
nondeductible excise tax will be imposed on a Fund to the extent it does not
meet certain distribution requirements by the end of each calendar year. Each
Fund anticipates meeting such distribution requirements.
23
Dividends paid by a Fund from investment company taxable income generally will
be taxed to the shareholders as ordinary income. Investment company taxable
income includes net investment income and net realized short-term gains (if
any). Any dividends received by a Fund from domestic corporations will
constitute a portion of the Fund's gross investment income.
Distributions of the excess of net long-term capital gain over net short-term
capital loss are taxable to shareholders (who are not exempt from tax) as
long-term capital gain, regardless of the length of time the shares of a Fund
have been held by such shareholders. Short-term capital gains distributions are
taxable to shareholders who are not exempt from tax as ordinary income. Such
distributions are not eligible for the dividends-received deduction. Any loss
recognized upon the sale of shares of a Fund held by a shareholder for six
months or less will be treated as a long-term capital loss to the extent that
the shareholder received a long-term capital gain distribution with respect to
such shares.
Distributions of investment company taxable income and any net short-term
capital gains will be taxable as ordinary income as described above to
shareholders (who are not exempt from tax), whether made in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for Federal income tax purposes in each share so received
equal to the net asset value of a share of a Fund on the reinvestment date.
Distributions by each Fund result in a reduction in the net asset value of the
Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable as
ordinary income or capital gain as described above to shareholders (who are not
exempt from tax), even though, from an investment standpoint, it may constitute
a return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution. The price of
shares purchased at that time includes the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will then receive
what is in effect a return of capital upon the distribution which will
nevertheless be taxable to shareholders subject to taxes.
Upon a sale or exchange of its shares, a shareholder will realize a taxable gain
or loss depending on its basis in the shares. Such gains or losses will be
treated as a capital gain or loss if the shares are capital assets in the
investor's hands and will be a long-term capital gain or loss if the shares have
been held for more than one year. Generally, any loss realized on a sale or
exchange will be disallowed to the extent shares disposed of are replaced within
a period of sixty-one days beginning thirty days before and ending thirty days
after the shares are disposed of. Any loss realized by a shareholder on the sale
of shares of the Fund held by the shareholder for six months or less will be
disallowed to the extent of any exempt interest dividends received by the
shareholder with respect to such shares, and will be treated for tax purposes as
a long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
All distributions, whether received in shares or cash, must be reported by each
shareholder on his or her Federal income tax return. Each shareholder should
consult his or her own tax adviser to determine the state and local tax
implications of Fund distributions.
24
Shareholders who fail to furnish their taxpayer identification numbers to a Fund
and to certify as to its correctness and certain other shareholders may be
subject to a 31% Federal income tax backup withholding requirement on dividends,
distributions of capital gains and redemption proceeds paid to them by the Fund.
If the withholding provisions are applicable, any such dividends or capital gain
distributions to these shareholders, whether taken in cash or reinvested in
additional shares, and any redemption proceeds will be reduced by the amounts
required to be withheld. Investors may wish to consult their own tax advisers
about the applicability of the backup withholding provisions.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). It does not reflect the special
tax consequences to certain taxpayers (e.g., banks, insurance companies, tax
exempt organizations and foreign persons). Shareholders are encouraged to
consult their own tax advisers regarding specific questions relating to Federal,
state and local tax consequences of investing in shares of a Fund. Each
shareholder who is not a U.S. person should consult his or her tax adviser
regarding the U.S. and foreign tax consequences of ownership of shares of a
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 31% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
Special Tax Considerations for Tax Exempt, Pennsylvania and Institutional Tax
Exempt
To the extent that a Fund distributes exempt interest dividends to a
shareholder, interest on indebtedness incurred or continued by such shareholder
to purchase or carry shares of the Fund is not deductible. Furthermore, entities
or persons who are "substantial users" (or related persons) of facilities
financed by "private activity" bonds (some of which were formerly referred to as
"industrial development" bonds) should consult their tax advisers before
purchasing shares of the Fund. "Substantial user" is defined generally as
including a "non-exempt person" who regularly uses in its trade or business a
part of a facility financed from the proceeds of industrial development bonds.
The percentage of the total dividends paid by a Fund with respect to any taxable
year that qualifies as exempt interest dividends will be the same for all
shareholders of the Fund receiving dividends with respect to such year. If a
shareholder receives an exempt interest dividend with respect to any share and
such share has been held for six months or less, any loss on the sale or
exchange of such share will be disallowed to the extent of the exempt interest
dividend amount.
NET ASSET VALUE
The following information supplements that set forth in each Fund's Prospectus
under the subheading "How to Buy Shares - How the Funds Value Their Shares" in
the Section entitled "Purchase and Redemption of Shares".
The public offering price of shares of a Fund is its net asset value. On each
Fund business day on which a purchase or redemption order is received by a Fund
and trading in the types of securities in which a Fund invests might materially
affect the value of Fund shares, the per share net asset value of each such Fund
25
is computed in accordance with the Declaration of Trust and By-Laws governing
each Fund twice daily, at 12 noon Eastern time and as of the next close of
regular trading on the New York Stock Exchange (the "Exchange") (currently 4:00
p.m. Eastern time) by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding. A Fund business
day is any weekday, exclusive of national holidays on which the Exchange is
closed and Good Friday. Each Fund's securities are valued at amortized cost.
Under this method of valuation, a security is initially valued at its
acquisition cost and, thereafter, a constant straight line amortization of any
discount or premium is assumed each day regardless of the impact of fluctuating
interest rates on the market value of the security. If accurate quotations are
not available, securities will be valued at fair value determined in good faith
by the Board of Trustees.
PURCHASE OF SHARES
The following information supplements that set forth in each Fund's Prospectus
under the heading "Purchase and Redemption of Shares - How To Buy Shares".
General
Shares of each Fund will be offered on a continuous basis at a price equal to
their net asset value without any front-end or contingent deferred sales charges
or with a contingent deferred sales charge (the "deferred sales charge
alternative") as described below. Class Y and Institutional shares which, as
described below, are not offered to the general public or which, in the case of
Institutional, are only available to investors having certain relationships with
the Adviser of its affiliates, are offered without any front-end or contingent
sales charges. Shares of each Fund are offered on a continuous basis through (i)
investment dealers that are members of the National Association of Securities
Dealers, Inc. and have entered into selected dealer agreements with the
Distributor ("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates, that have entered into selected
agent agreements with the Distributor ("selected agents"), or (iii) the
Distributor. For Money Market, Tax Exempt, Pennsylvania and Treasury, the
minimum for initial investments is $1,000; there is no minimum for subsequent
investments. For Institutional Money Market, Institutional Tax Exempt and
Institutional Treasury, the minimum amount for initial investments is
$1,000,000; there is no minimum for subsequent investments. The subscriber may
use the Share Purchase Application available from the Distributor for his or her
initial investment. Sales personnel of selected dealers and agents distributing
a Fund's shares may receive differing compensation for selling Class A,
Institutional Service or Class B shares.
Investors may purchase shares of a Fund in the United States either through
selected dealers or agents or directly through the Distributor. A Fund reserves
the right to suspend the sale of its shares to the public in response to
conditions in the securities markets or for other reasons.
Each Fund will accept unconditional orders for its shares to be executed at the
public offering price equal to the net asset value next determined, as described
below. Orders received by the Distributor prior to the close of regular trading
on the Exchange on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on the Exchange on
that day. In the case of orders for purchase of shares placed through selected
26
dealers or agents, the applicable public offering price will be the net asset
value as so determined, but only if the selected dealer or agent receives the
order prior to the close of regular trading on the Exchange and transmits it to
the Distributor prior to its close of business that same day (normally 5:00 p.m.
Eastern time). The selected dealer or agent is responsible for transmitting such
orders by 5:00 p.m. If the selected dealer or agent fails to do so, the
investor's right to that day's closing price must be settled between the
investor and the selected dealer or agent. If the selected dealer or agent
receives the order after the close of regular trading on the Exchange, the price
will be based on the net asset value determined as of the close of regular
trading on the Exchange on the next day it is open for trading.
Following the initial purchase of shares of a Fund, a shareholder may place
orders to purchase additional shares by telephone if the shareholder has
completed the appropriate portion of the Share Purchase Application. Payment for
shares purchased by telephone can be made only by Electronic Funds Transfer from
a bank account maintained by the shareholder at a bank that is a member of the
National Automated Clearing House Association ("ACH"). If a shareholder's
telephone purchase request is received before 3:00 p.m. New York time on a Fund
business day, the order to purchase shares is automatically placed the same Fund
business day for non-money market funds, and two days following the day the
order is received for money market funds, and the applicable public offering
price will be the public offering price determined as of the close of business
on such business day. Full and fractional shares are credited to a subscriber's
account in the amount of his or her subscription. As a convenience to the
subscriber, and to avoid unnecessary expense to a Fund, stock certificates are
not issued for any class of shares of any Fund, although such shares remain in
the shareholder's account on the records of a Fund. This facilitates later
redemption and relieves the shareholder of the responsibility for and
inconvenience of lost or stolen certificates.
Alternative Purchase Arrangements
The Funds issue the following classes of shares:
Pennsylvania, Money Market, Tax Exempt, and Treasury: Class A shares;
Money Market: Class B shares, which should only be purchased by investors
choosing the deferred sales charge alternative and who contemplate an exchange
into Class B shares of other Evergreen funds;
Pennsylvania, Money Market, Tax Exempt and Treasury: Class Y shares, which are
offered only to (a) persons who at or prior to December 30, 1994, owned shares
in a mutual fund advised by Evergreen Asset, (b) certain investment advisory
clients of the Advisers and their affiliates, and (c) institutional investors;
Institutional Money Market, Institutional Tax Exempt and Institutional Treasury:
Institutional Service shares, which are sold to institutional investors; and
Institutional Money Market, Institutional Tax Exempt and Institutional Treasury:
Institutional shares, which are sold to institutional investors who are clients
of the Adviser or its affiliates or who have a significant business relationship
with the Adviser or its affiliates.
The three classes of shares each represent an interest in the same portfolio of
investments of the Fund, have the same rights and are identical in all respects,
except that (I) only Class A and Class B shares are subject to a Rule 12b-1
distribution fee, (II) Class B shares bear the expense of the deferred sales
charge, (III) Class B shares bear the expense
27
of a higher Rule 12b-1 distribution services fee than Class A shares and higher
transfer agency costs, (IV) with the exception of Class Y shares, each Class of
each Fund has exclusive voting rights with respect to provisions of the Rule
12b-1 Plan pursuant to which its distribution services fee is paid which relates
to a specific Class and other matters for which separate Class voting is
appropriate under applicable law, provided that, if the Fund submits to a
simultaneous vote of Class A and Class B shareholders an amendment to the Rule
12b-1 Plan that would materially increase the amount to be paid thereunder with
respect to the Class A shares, the Class A shareholders and the Class B
shareholders will vote separately by Class, and (VI) only the Class B shares are
subject to a conversion feature. Each Class has different exchange privileges
and certain different shareholder service options available.
The alternative purchase arrangements permit an investor to choose the method of
purchasing shares that is most beneficial. The decision as to which Class of
shares of Money Market is more beneficial depends primarily on whether or not
the investor wishes to exchange all or part of any Class B shares purchased for
Class B shares of another Evergreen mutual fund at some future date. If the
investor does not contemplate such an exchange, it is probably in such
investor's best interest to purchase Class A shares. Class A shares are subject
to a lower distribution services fee and, accordingly, pay correspondingly
higher dividends per share than Class B shares.
The Trustees have determined that currently no conflict of interest exists
between or among the Class A, Class B and Class Y shares of Money Market, Tax
Exempt, Pennsylvania and Treasury, and the Institutional Service and
Institutional shares of Institutional Money Market, Institutional Tax Exempt and
Institutional Treasury. On an ongoing basis, the Trustees, pursuant to their
fiduciary duties under the 1940 Act and state laws, will seek to ensure that no
such conflict arises.
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative purchase Class B shares
at the public offering price equal to the net asset value per share of the Class
B shares on the date of purchase without the imposition of a sales charge at the
time of purchase. The Class B shares are sold without a front-end sales charge
so that the full amount of the investor's purchase payment is invested in the
Fund initially.
Proceeds from the contingent deferred sales charge are paid to the Distributor
and are used by the Distributor to defray the expenses of the Distributor
related to providing distribution-related services to the Fund in connection
with the sale of the Class B shares, such as the payment of compensation to
selected dealers and agents for selling Class B shares. The combination of the
contingent deferred sales charge and the distribution services fee enables the
Fund to sell the Class B shares without a sales charge being deducted at the
time of purchase. The higher distribution services fee incurred by Class B
shares will cause such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares which are redeemed within seven
years of purchase will be subject to a contingent deferred sales charge at the
rates set forth in the Prospectus charged as a percentage of the dollar amount
subject thereto. The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at the time of
redemption. Accordingly, no sales charge will be imposed on increases in net
28
asset value above the initial purchase price. In addition, no contingent
deferred sales charge will be assessed on shares derived from reinvestment of
dividends or capital gains distributions. The amount of the contingent deferred
sales charge, if any, will vary depending on the number of years from the time
of payment for the purchase of Class B shares until the time of redemption of
such shares.
In determining the contingent deferred sales charge applicable to a redemption,
it will be assumed, that the redemption is first of any Class A shares in the
shareholder's Fund account, second of Class B shares held for over seven years
or Class B shares acquired pursuant to reinvestment of dividends or
distributions and third of Class B shares held longest during the seven-year
period.
To illustrate, assume that an investor purchased 1,000 Class B shares at $1 per
share (at a cost of $1,000) and, during such time, the investor has acquired 100
additional Class B shares upon dividend reinvestment. If at such time the
investor makes his or her first redemption of 500 Class B shares, 100 Class B
shares will not be subject to charge because of dividend reinvestment.
Therefore, of the $500 of the shares redeemed $400 of the redemption proceeds
(400 shares x $1 original purchase price) will be charged at a rate of 4.0% (the
applicable rate in the second year after purchase for a contingent deferred
sales charge of $16).
The contingent deferred sales charge is waived on redemptions of shares (i)
following the death or disability, as defined in the Code, of a shareholder, or
(ii) to the extent that the redemption represents a minimum required
distribution from an individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2.
Conversion Feature. At the end of the period ending seven years after the end of
the calendar month in which the shareholder's purchase order was accepted, Class
B shares will automatically convert to Class A shares and will no longer be
subject to a higher distribution services fee imposed on Class B shares. Such
conversion will be on the basis of the relative net asset values of the two
classes, without the imposition of any sales load, fee or other charge. The
purpose of the conversion feature is to reduce the distribution services fee
paid by holders of Class B shares that have been outstanding long enough for the
Distributor to have been compensated for the expenses associated with the sale
of such shares.
For purposes of conversion to Class A, Class B shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B shares in
a shareholder's account will be considered to be held in a separate sub-account.
Each time any Class B shares in the shareholder's account (other than those in
the sub-account) convert to Class A, an equal pro-rata portion of the Class B
shares in the sub-account will also convert to Class A.
The conversion of Class B shares to Class A shares is subject to the continuing
availability of an opinion of counsel to the effect that (i) the assessment of
the higher distribution services fee and transfer agency costs with respect to
Class B shares does not result in the dividends or distributions payable with
respect to other Classes of a Fund's shares being deemed "preferential
dividends" under the Code, and (ii) the conversion of Class B shares to Class A
shares does not constitute a taxable event under Federal income tax law. The
29
conversion of Class B shares to Class A shares may be suspended if such an
opinion is no longer available at the time such conversion is to occur. In that
event, no further conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee for an indefinite
period which may extend beyond the period ending eight years after the end of
the calendar month in which the shareholder's purchase order was accepted.
GENERAL INFORMATION ABOUT THE FUNDS
(See also "Other Information - General Information" in each Fund's Prospectus)
Capitalization and Organization
Evergreen Money Market Fund, Evergreen Institutional Money Market Fund and
Evergreen Institutional Treasury Money Market Fund are each separate series of
Evergreen Money Market Trust, a Massachusetts business trust. Evergreen Tax
Exempt Money Market Fund and Evergreen Institutional Tax Exempt Money Market
Fund are each separate series of The Evergreen Municipal Trust, a Massachusetts
business trust. The Evergreen Treasury Money Market Fund (which prior to July 7,
1995 was known as the First Union Treasury Money Market Portfolio) is a separate
series of Evergreen Investment Trust, a Massachusetts business trust. On July 7,
1995, First Union Funds changed its name to Evergreen Investment Trust. On
December 14, 1992, The Salem Funds changed its name to First Union Funds. The
Evergreen Pennsylvania Tax Free Money Market Fund is a separate series of
Evergreen Tax Free Trust. Evergreen Tax Free Trust (formerly known as FFB Funds
Trust) is a Massachusetts business trust which was organized on December 4,
1985. Each Trust is governed by a board of trustees. Unless otherwise stated,
references to the "Board of Trustees" or "Trustees" in this Statement of
Additional Information refer to the Trustees of all the Trusts.
Each Fund, other than Pennsylvania, may issue an unlimited number of shares of
beneficial interest with a $0.0001 par value. Pennsylvania may issue an
unlimited number of shares of beneficial interest with a $.001 par value. All
shares of these Funds have equal rights and privileges. Each share is entitled
to one vote, to participate equally in dividends and distributions declared by
the Funds and on liquidation to their proportionate share of the assets
remaining after satisfaction of outstanding liabilities. Shares of these Funds
are fully paid, nonassessable and fully transferable when issued and have no
pre-emptive, conversion or exchange rights. Fractional shares have
proportionally the same rights, including voting rights, as are provided for a
full share.
Under each Trust's Declaration of Trust, each Trustee will continue in office
until the termination of the Fund or his or her earlier death, incapacity,
resignation or removal. Shareholders can remove a Trustee upon a vote of
two-thirds of the outstanding shares of beneficial interest of the Trust.
Vacancies will be filled by a majority of the remaining Trustees, subject to the
1940 Act. As a result, normally no annual or regular meetings of shareholders
will be held, unless otherwise required by the Declaration of Trust of each
Trust or the 1940 Act.
Shares have noncumulative voting rights, which means that the holders of more
than 50% of the shares voting for the election of Trustees can elect 100% of the
Trustees if they choose to do so and in such event the holders of the remaining
shares so voting will not be able to elect any Trustees.
30
The Trustees of each Trust are authorized to reclassify and issue any unissued
shares to any number of additional series without shareholder approval.
Accordingly, in the future, for reasons such as the desire to establish one or
more additional portfolios of a Trust with different investment objectives,
policies or restrictions, additional series of shares may be created by one or
more Funds. Any issuance of shares of another series or class would be governed
by the 1940 Act and the law of the Commonwealth of Massachusetts. If shares of
another series of a Trust were issued in connection with the creation of
additional investment portfolios, each share of the newly created portfolio
would normally be entitled to one vote for all purposes. Generally, shares of
all portfolios would vote as a single series on matters, such as the election of
Trustees, that affected all portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of the Investment
Advisory Agreement and changes in investment policy, shares of each portfolio
would vote separately.
In addition any Fund may, in the future, create additional classes of shares
which represent an interest in the same investment portfolio. Except for the
different distribution related and other specific costs borne by such additional
classes, they will have the same voting and other rights described for the
existing classes of each Fund.
Procedures for calling a shareholders meeting for the removal of the Trustees of
each Trust, similar to those set forth in Section 16(c) of the 1940 Act, will be
available to shareholders of each Fund. The rights of the holders of shares of a
series of a Fund may not be modified except by the vote of a majority of the
outstanding shares of such series.
An order has been received from the Securities and Exchange Commission
permitting the issuance and sale of multiple classes of shares representing
interests in each Fund. In the event a Fund were to issue additional classes of
shares other than those described herein, no further relief from the Securities
and Exchange Commission would be required.
Distributor
Evergreen Funds Distributor, Inc. (the "Distributor"), 230 Park Avenue, New
York, New York 10169, serves as each Fund's principal underwriter, and as such
may solicit orders from the public to purchase shares of any Fund. The
Distributor is not obligated to sell any specific amount of shares and will
purchase shares for resale only against orders for shares. Under the agreement
between each Fund and the Distributor, each Fund has agreed to indemnify the
Distributor, in the absence of its willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations thereunder, against certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended.
Counsel
Sullivan & Worcester LLP, Washington, D.C., serves as counsel to the Funds.
Independent Auditors
Price Waterhouse LLP has been selected to be the independent auditors of Money
Market, Tax Exempt, Institutional Money Market, Institutional Treasury and
31
Institutional Tax Exempt.
KPMG Peat Marwick LLP has been selected to be the independent auditors of
Treasury and Pennsylvania.
PERFORMANCE INFORMATION
YIELD CALCULATIONS
Each Fund may quote a "Current Yield" or "Effective Yield" from time to time.
The Current Yield is an annualized yield based on the actual total return for a
seven-day period. The Effective Yield is an annualized yield based on a
compounding of the Current Yield. These yields are each computed by first
determining the "Net Change in Account Value" for a hypothetical account having
a share balance of one share at the beginning of a seven-day period ("Beginning
Account Value"), excluding capital changes. The Net Change in Account Value will
generally equal the total dividends declared with respect to the account.
The yields are then computed as follows:
Current Yield = Beginning Account Value x 365/7
Effective Yield = (1 + Total Dividend for 7 days) 365/7-1
Tax Equivalent Yield =
Effective Yield
----------------------
1 - Fed Tax rate + [state Tax Rate - (state Tax Rate x Fed Tax Rate]
Yield fluctuations may reflect changes in a Fund's net investment income, and
portfolio changes resulting from net purchases or net redemptions of the Fund's
shares may affect the yield. Accordingly, a Fund's yield may vary from day to
day, and the yield stated for a particular past period is not necessarily
representative of its future yield. Since the Funds use the amortized cost
method of net asset value computation, it does not anticipate any change in
yield resulting from any unrealized gains or losses or unrealized appreciation
or depreciation not reflected in the yield computation, or change in net asset
value during the period used for computing yield. If any of these conditions
should occur, yield quotations would be suspended. A Fund's yield is not
guaranteed, and the principal is not insured.
Yield information is useful in reviewing a Fund's performance, but because
yields fluctuate, such information cannot necessarily be used to compare an
investment in a Fund's shares with bank deposits, savings accounts and similar
investment alternatives which often provide an agreed or guaranteed fixed yield
for a stated period of time. Shareholders should remember that yield is a
function of the kind and quality of the instruments in the Funds' investment
portfolios, portfolio maturity, operating expenses and market conditions.
It should be recognized that in periods of declining interest rates the yields
will tend to be somewhat higher than prevailing market rates, and in periods of
rising interest rates the yields will tend to be somewhat lower. Also, when
interest rates are falling, the inflow of net new money to a Fund from the
continuous sale of its shares will likely be invested in instruments producing
lower yields than the balance of the Fund's investments, thereby reducing the
current yield of the Fund. In periods of rising interest rates, the opposite can
be expected to occur.
32
The current yield and effective yield of each Fund (and for Tax Exempt and
Pennsylvania, the tax equivalent yield) for the seven-day period ended August
30, 1996 for each Class of shares offered by the Funds is set forth in the table
below. The table assumes a Federal tax rate of 36% for Tax Exempt, and a
combined Federal and state tax rate for Pennsylvania of 37.8%.
Current Effective Tax Equivalent
Yield Yield Yield
Money Market
Class A 4.83% 4.95%
Class B 4.12% 4.20%
Class Y 5.12% 5.25%
Tax Exempt
Class A 3.03% 3.08% 4.81%
Class Y 3.33% 3.38% 5.29%
Treasury
Class A 4.66% 4.77%
Class Y 4.96% 5.08%
Pennsylvania
Class A 3.07% 5.02% 8.07%
Class Y 3.15% 5.14% 8.26%
GENERAL
From time to time, a Fund may quote its performance in advertising and other
types of literature as compared to the performance of the Bank Rate Monitor
National Index which publishes weekly average rates of 50 leading bank and
thrift institution money market deposit accounts. A Fund's performance may also
be compared to those of other mutual funds having similar objectives. This
comparative performance would be expressed as a ranking prepared by Lipper
Analytical Services, Inc., Donoghue's Money Fund Report or similar independent
services monitoring mutual fund performance. A Fund's performance will be
calculated by assuming, to the extent applicable, reinvestment of all capital
gains distributions and income dividends paid. Any such comparisons may be
useful to investors who wish to compare a Fund's past performance with that of
its competitors. Of course, past performance cannot be a guarantee of future
results.
Additional Information
Any shareholder inquiries may be directed to the shareholder's broker or to each
Adviser at the address or telephone number shown on the front cover of this
Statement of Additional Information. This Statement of Additional Information
does not contain all the information set forth in the Registration Statement
filed by the Trusts with the Securities and Exchange Commission under the
Securities Act of 1933. Copies of the Registration Statement may be obtained at
a reasonable charge from the Securities and Exchange Commission or may be
examined, without charge, at the offices of the Securities and Exchange
Commission in Washington, D.C.
33
FINANCIAL STATEMENTS
The financial statements of Money Market, Tax Exempt, Treasury and Pennsylvania
appearing in their most current fiscal year Annual Report to shareholders and
the report thereon of the independent auditors appearing therein, namely Price
Waterhouse LLP (in the case of Money Market and Tax Exempt) or KPMG Peat Marwick
LLP (in the case of Pennsylvania and Treasury) are incorporated by reference in
this Statement of Additional Information. The Annual Reports to Shareholders for
each Fund, which contain the referenced statements, are available upon request
and without charge. The initial audited statements of Assets and Liabilities of
Institutional Money Market, Institutional Tax Exempt and Institutional Treasury
as of September 6, 1996 and the reports thereon of Price Waterhouse LLP
appearing therein are included in this Statement of Additional Information.
EVERGREEN INSTITUTI0NAL MONEY MARKET FUNDS
STATEMENT OF ASSETS AND LIABILITIES
September 6, 1996
Institutional
Institutional Treasury
Assets: Money Market Money Market
Fund Fund
Cash $ 10 $ 10
Deferred organizational expenses 13,700 13,700
------ -------
Total assets 13,710 13,710
------ ------
------ ------
Liabilities:
Organizational expenses payable 13,700 13,700
Net assets:
Paid-in Capital 10 10
--- --
Net assets 10 10
-- --
-- --
Net asset value per share based on (10
shares of beneficial interest issued
and outstanding, respectively,
unlimited share authorized of
$.0001 par value) $1.00 $1.00
See accompanying notes to financial statements.
EVERGREEN INSTITUTIONAL MONEY MARKET FUNDS
34
NOTES TO FINANCIAL STATEMENTS
September 6, 1996
Note 1 - Organization
The Evergreen Institutional Money Market Fund ("Money Market") and the
Evergreen Institutional Treasury Money Market Fund ("Treasury"), collectively
(the "Funds"), are newly organized separate investment series of Evergreen
Money Market Trust, an open end management investment company registered
under the Investment Company Act of 1940, as amended (the "Act"). Money Market
and Treasury are part of the Evergreen Institutional Money Market Funds. The
Funds have had no operations other than the sale of 10 shares of beneficial
interest of Money Market and Treasury to Evergreen Funds Distributors, Inc.
("EFD"), an affiliate of Furman Selz LLC ("Furman Selz").
Note 2 - Investment Advisory and Administration Agreements
Each Fund has agreed to enter into an investment advisory agreement with the
Capital Management Group of First Union Bank of North Carolina ("First Union"),
pursuant to which First Union will manage each Fund's investments. In
consideration of First Union performing its obligations, the Funds will pay to
First Union an investment advisory fee accrued daily and payable monthly, at an
annual rate of .15 of 1% of its daily net assets.
Each Fund has agreed to enter into an administrative services agreement with
Evergreen Asset Management Corp. ("Evergreen Asset"), a wholly owned subsidiary
of First Union, to provide administrative services and to supervise each Fund's
daily business affairs. Each Fund will pay Evergreen Asset an administration
fee accrued daily and payable monthly, at a rate based on the aggregate average
daily net assets of all of the Funds administered by Evergreen Asset for which
either Evergreen Asset or First Union serves as investment adviser. The fee is
calculated daily and payable monthly at the following annual rates: .050% on the
first $7 billion, .035% on the next $3 billion, .030% on the next $5 billion,
.020% on the next $10 billion, .015% on the next $5 billion and .010% on assets
in excess of $30 billion. As of September 6, 1996, the net assets for which
either Evergreen Asset or First Union served as investment adviser totaled
approximately $16.2 billion.
Furman Selz will serve as sub-administrator and will pay the cost of
compensation of the officers of the Funds. Each Fund will pay Furman Selz a fee
based on the aggregate average daily net assets of all of the Funds administered
by Evergreen Asset for which either Evergreen Asset or First Union serves as
investment adviser. The fee is calculated daily and payable monthly at the
following annual rates: .010% on the first $7 billion, .0075% on the next
$3 billion, .005% on the next $15 billion and .004% on assets in excess of
$25 billion.
EVERGREEN INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS
September 6, 1996
Note 3 - Organizational Costs
First Union has agreed to advance all of the costs incurred and to be incurred
in connection with the organization and initial registration of the Funds and
35
the Funds have agreed to reimburse First Union for such costs. These costs have
been deferred and will be amortized by each Fund over a period of benefit not to
exceed 60 months from the date each Fund commences operations.
Note 4 - Distribution Plans
In connection with distribution plans pursuant to Rule 12b-1 of the Act, each
Fund has agreed to enter into a distribution agreement (the "Agreements") with
EFD whereby each Fund will compensate EFD for its services at a rate which may
not exceed an annual rate of .20 of 1% of a Fund's aggregate average daily net
assets. The Agreements provides that EFD will use these fees (i) to compensate
broker-dealers or other persons for distributing shares of the Fund, (ii) to
otherwise promote the sale of shares of the Fund, (iii) to compensate
broker-dealers, depository institutions and other financial intermediaries for
providing administrative, accounting and other services with respect to the
Fund's shareholders.
EVERGREEN INSTITUTIONAL MONEY MARKET FUNDS
STATEMENT OF ASSETS AND LIABILITIES
September 6, 1996
Institutional
Tax Exempt
Assets: Money Market
Fund
Cash $ 10
Deferred organizational expenses 13,700
-------
Total assets 13,710
-------
-------
Liabilities:
Organizational expenses payable 13,700
36
Net assets:
Paid-in Capital 10
--
Net assets 10
--
--
Net asset value per share based on 10
shares of beneficial interest and
outstanding (unlimited shares
authorized of $.0001 par value) $1.00
See accompanying notes to financial statements.
EVERGREEN INSTITUTIONAL MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENT
September 6, 1996
Note 1 - Organization
The Evergreen Institutional Tax Exempt Market Fund (the "Fund") is a newly
organized separate investment series of The Evergreen Municipal Trust, an open
end management investment company registered under the Investment Company Act of
1940, as amended (the "Act"). The Fund is part of the Evergreen Institutional
Money Market Funds. The Fund has had no operations other than the sale of 10
shares of beneficial interest Evergreen Funds Distributors, Inc. (EFD) an
affiliate of Furman Selz LLC ("Furman Selz").
Note 2 - Investment Advisory and Administration Agreements
The Fund has agreed to enter into an investment advisory agreement with the
Capital Management Group of First Union Bank of North Carolina ("First Union"),
pursuant to which First Union will manage the Fund's investments. In
consideration of First Union performing its obligations, the Fund will pay to
First Union an investment advisory fee accrued daily and payable monthly, at an
annual rate of .15 of 1% of its' daily net assets.
The Fund has agreed to enter into an administrative services agreement with
Evergreen Asset Management Corp. ("Evergreen Asset"), a wholly owned subsidiary
of First Union, to provide administrative services and to supervise the Fund's
daily business affairs. The Fund will pay Evergreen Asset an administration
fee accrued daily and payable monthly, at a rate based on the aggregate average
daily net assets of all of the Funds administered by Evergreen Asset for which
either Evergreen Asset or First Union serves as investment adviser. The fee is
calculated daily and payable monthly at the following annual rates: .050% on the
first $7 billion, .035% on the next $3 billion, .030% on the next $5 billion,
.020% on the next $10 billion, .015% on the next $5 billion and .010% on assets
in excess of $30 billion. As of September 6, 1996, the net assets for which
either Evergreen Asset or First Union served as investment adviser totaled
approximately $16.2 billion.
Furman Selz will serve as sub-administrator and will pay the cost of
compensation of the officers of the Fund. The Fund will pay Furman Selz a fee
based on the aggregate average daily net assets of all of the Funds administered
by Evergreen Asset for which either Evergreen Asset or First Union serves as
investment adviser. The fee is calculated daily and payable monthly at the
37
following annual rates: .010% on the first $7 billion, .0075% on the next
$3 billion, .005% on the next $15 billion and .004% on assets in excess of
$25 billion.
Note 3 - Organizational Costs
First Union has agreed to advance all of the costs incurred and to be incurred
in connection with the organization and initial registration of the Fund and
the Fund has agreed to reimburse First Union for such costs. These costs have
been deferred and will be amortized by each Fund over a period of benefit not to
exceed 60 months from the date the Fund commences operations.
Note 4 - Distribution Plan
In connection with distribution plan pursuant to Rule 12b-1 of the Act, the Fund
has agreed to enter into a distribution agreement (the "Agreement") with EFD
whereby the Fund will compensate EFD for its services at a rate which may not
exceed an annual rate of .20 of 1% of the Fund's aggregate average daily net
assets. The Agreement provide that EFD will use this fee (i) to compensate
broker-dealers or other persons for distributing shares of the Fund, (ii) to
otherwise promote the sale of shares of the Fund, (iii) to compensate
broker-dealers, depository institutions and other financial intermediaries for
providing administrative, accounting and other services with respect to the
Fund's shareholders.
APPENDIX "A"
DESCRIPTION OF BOND RATINGS
Standard & Poor's Ratings Group. A Standard & Poor's corporate or municipal bond
rating is a current assessment of the credit worthiness of an obligor with
respect to a specific obligation. This assessment of credit worthiness may take
into consideration obligors such as guarantors, insurers or lessees. The debt
rating is not a recommendation to purchase, sell or hold a security, inasmuch as
it does not comment as to market price or suitability for a particular investor.
The ratings are based on current information furnished to Standard & Poor's by
the issuer or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform any audit in connection with the
ratings and may, on occasion, rely on unaudited financial information. The
ratings may be changed, suspended or withdrawn as a result of changes in,
unavailability of such information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation.
2. Nature of and provisions of the obligation.
38
3. Protection afforded by, and relative position of, the obligation in the event
of bankruptcy, reorganization or their arrangement under the laws of bankruptcy
and other laws affecting creditors' rights.
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay interest and repay
any principal.
AA - Debt rated AA also qualifies as high quality debt obligations. Capacity to
pay interest and repay principal is very strong and in the majority of instances
they differ from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than is higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on a balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB - rating.
B - Debt rated B has greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC - Debt rated CCC has a currently indefinable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC - The rating CC is typically applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating.
39
C - The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1 - The rating C1 is reserved for income bonds on which no interest is being
paid.
D - Debt rated D is in payment default. It is used when interest payments or
principal payments are not made on a due date even if the applicable grace
period has not expired, unless Standard & Poor's believes that such payments
will be made during such grace periods; it will also be used upon a filing of a
bankruptcy petition if debt service payments are jeopardized. Plus (+) or Minus
(-) - To provide more detailed indications of credit quality, the ratings from
AA to CCC may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
NR - indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy. Debt
obligations of issuers outside the United States and its territories are rated
on the same basis as domestic corporate and municipal issues. The ratings
measure the credit worthiness of the obligor but do not take into account
currency exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories (AAA, AA, A, BBB, commonly known as "Investment Grade" ratings) are
generally regarded as eligible for bank investment. In addition, the Legal
Investment Laws of various states may impose certain rating or other standards
for obligations eligible for investment by savings banks, trust companies,
insurance companies and fiduciaries generally.
Moody's Investors Service, Inc. A brief description of the applicable Moody's
Investors Service, Inc. rating symbols and their meanings follows:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
40
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Some bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. NOTE: Bonds within the above
categories which possess the strongest investment attributes are designated by
the symbol "1" following the rating.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Duff & Phelps, Inc.: AAA-- highest credit quality, with negligible risk factors;
AA -- high credit quality, with strong protection factors and modest risk, which
may vary very slightly from time to time because of economic conditions;
A--average credit quality with adequate protection factors, but with greater and
more variable risk factors in periods of economic stress. The indicators "+" and
"-" to the AA and A categories indicate the relative position of a credit within
those rating categories.
Fitch Investors Service Inc.: AAA -- highest credit quality, with an
exceptionally strong ability to pay interest and repay principal; AA -- very
high credit quality, with very strong ability to pay interest and repay
principal; A -- high credit quality, considered strong as regards principal and
interest protection, but may be more vulnerable to adverse changes in economic
conditions and circumstances. The indicators "+" and "-" to the AA, A and BBB
categories indicate the relative position of credit within those rating
categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
A Standard & Poor's note rating reflects the liquidity concerns and market
access risks unique to notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment.
41
o Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
o Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note.) Note rating symbols
are as follows:
o SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
o SP-2 Satisfactory capacity to pay principal and interest.
o SP-3 Speculative capacity to pay principal and interest.
Moody's Short-Term Loan Ratings - Moody's ratings for state and municipal
short-term obligations will be designated Moody's Investment Grade (MIG). This
distinction is in recognition of the differences between short-term credit risk
and long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while various factors of major
importance in bond risk are of lesser importance over the short run.
Rating symbols and their meanings follow:
o MIG 1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
o MIG 2 - This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
o MIG 3 - This designation denotes favorable quality. All security elements are
accounted for but this is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
o MIG 4 - This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk.
COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.: Commercial paper rated "Prime" carries the
smallest degree of investment risk. The modifiers 1, 2, and 3 are used to denote
relative strength within this highest classification.
Standard & Poor's Ratings Group: "A" is the highest commercial paper rating
category utilized by Standard & Poor's Ratings Group which uses the numbers 1+,
1, 2 and 3 to denote relative strength within its "A" classification.
Duff & Phelps, Inc.: Duff 1 is the highest commercial paper rating category
utilized by Duff & Phelps which uses + or - to denote relative strength within
this classification. Duff 2 represents good certainty of timely payment, with
minimal risk factors. Duff 3 represents satisfactory protection factors, with
42
risk factors larger and subject to more variation.
Fitch Investors Service Inc.: F-1+ -- denotes exceptionally strong credit
quality given to issues regarded as having strongest degree of assurance for
timely payment; F-1 -- very strong, with only slightly less degree of assurance
for timely payment than F-1+; F-2 -- good credit quality, carrying a
satisfactory degree of assurance for timely payment.
APPENDIX B
Special Considerations Relating to Investment In Pennsylvania Municipal Issuers
The following information as to certain Pennsylvania considerations is given to
investors in view of the Evergreen Pennsylvania Tax Free Money Market Fund's
policy of investing primarily in securities of Pennsylvania issuers. Such
information is derived from sources that are generally available to investors
and is believed by the Adviser to be accurate. Such information constitutes only
a brief summary, does not purport to be a complete description and is based on
information from official statements relating to securities offerings of
Pennsylvania issuers.
Employment. The industries traditionally strong in Pennsylvania, such as coal,
steel and railway, have declined and account for a decreasing share of total
employment. Service industries (including trade, health care, government and
finance) have grown, however, contributing increasing shares to the
Commonwealth's gross product and exceeding the manufacturing sector in each year
since 1985 as the largest single source of employment.
While the level of Pennsylvania's population increased 2.3% from 1985 through
1993, nonagricultural employment increased by 8.0% from 1983 through 1993. In
contrast, increases in U.S. nonagricultural employment have been greater for the
same period, with U.S. employment increasing by 13% from 1985 through 1993.
Trends in the unemployment rates of Pennsylvania and the U.S. have been similar
from 1985 through 1993. From 1986 to 1990, Pennsylvania's unemployment rate was
lower than the U.S. rate. For example, Pennsylvania's unemployment rate for 1989
and 1990 was 4.5% and 5.4%, respectively, while the unemployment rate for the
U.S. was 5.3% and 5.5% for the same years. In 1991, 1992 and 1993,
Pennsylvania's unemployment rate was 6.9%, 7.5% and 6.8% for the same years.
Commonwealth Debt. Debt service on general obligation bonds of Pennsylvania,
except those issued for highway purposes or the benefit of other special revenue
funds, is payable from Pennsylvania's general fund, the recipient of all
Commonwealth revenues that are not required to be deposited in other funds.
As of June 30, 1994, the Commonwealth had $5,076 million of long-term bonds
outstanding, with debt for capital projects constituting the largest dollar
amount. Although Pennsylvania's Constitution permits the issuance of an
aggregate amount of capital project debt equal to 1.75 times the average annual
tax revenues of the preceding five fiscal years, the General Assembly may
authorize and historically has authorized a smaller amount. This constitutional
limit does not apply to other types of Pennsylvania debt such as electorate
approved debt or debt issued to rehabilitate areas affected by disaster.
However, the former may be incurred only after the enactment of legislation
calling for a referendum and usually specifying the purpose and amount of such
debt, followed by electoral approval. Similarly, debt issued to rehabilitate a
43
disaster area must be authorized by legislation which sets the debt limits.
These statutory and constitutional limitations imposed on bonds are also
applicable to bond anticipation notes.
Pennsylvania cannot use tax anticipation notes or any other form of debt to fund
budget deficits between fiscal years. All year-end deficits must be funded
within the succeeding fiscal year's budget. Moreover, the principal amount of
tax anticipation notes issued and outstanding for the account of a fund during a
fiscal year may not exceed 20 percent of that fund's estimated revenues for that
fiscal year.
Moral Obligations. The debt of the Pennsylvania Housing Finance Agency ("PHFA"),
a state agency which provides housing for lower and moderate income families,
and certain obligations of The Hospitals and Higher Education Facilities
Authority of Philadelphia (the "Hospitals Authority") are the only debt bearing
Pennsylvania's moral obligation. PHFA's bonds, but not its notes, are partially
secured by a capital reserve fund required to be maintained by PHFA in an amount
equal to the maximum annual debt service on its outstanding bonds in any
succeeding calendar year. If there is a potential deficiency in the capital
reserve fund or if funds are necessary to avoid default on interest, principal
or sinking fund payments on bonds or notes of PHFA, the Governor must place in
Pennsylvania's budget for the next succeeding year an amount sufficient to make
up any such deficiency or to avoid any such default. The budget which the
General Assembly adopts may or may not include such amount. PHFA is not
permitted to borrow additional funds as long as any deficiency exists in the
capital reserve fund.
In fiscal 1976, the Commonwealth purchased $32.0 million principal amount of
notes from PHFA, issued for the purpose of redeeming all outstanding bond
anticipation notes and paying unfunded liabilities of PHFA. All such notes have
been redeemed by PHFA and the funds returned, with interest, to Pennsylvania. As
of December 31, 1994, PHFA had $2,300 million of bonds and notes outstanding.
The Hospitals Authority is a municipal authority organized by the City of
Philadelphia (the "City") to, inter alia, acquire and prepare various sites for
use as intermediate care facilities for the mentally retarded. In 1986 the
Hospitals Authority issued $20.4 million of bonds, which were refunded in 1993
by a $21.1 million bond issue of the Hospitals Authority (the "Hospitals
Authority Bonds") for such facilities for the City. The Hospitals Authority
Bonds are secured by leases with the City and a debt service reserve fund for
which the Pennsylvania Department of Public Welfare (the "Department") has
agreed with the Hospitals Authority to request in the Department's annual budget
submission to the Governor, an amount of funds sufficient to alleviate any
deficiency in the debt service reserve fund that may arise. The budget as
finally adopted may or may not include the amount requested. If funds are paid
to the Hospitals Authority, the Department will obtain certain rights in the
property financed with the Hospitals Authority Bonds in return for such payment.
In response to a delay in the availability of billable beds and the revenues
from these beds to pay debt service on the Hospitals Authority Bonds, PHFA
agreed in June 1989 to provide a $2.2 million low interest loan to the Hospitals
Authority. The loan enabled the Hospitals Authority to make all debt service
payments on the Hospitals Authority Bonds during 1990. Enough beds were
completed in 1991 to provide sufficient revenues to the Hospitals Authority to
meet its debt service payments and to begin repaying the loan from PHFA. As of
44
December 31, 1994, $1.64 million of the loan was outstanding.
Other Commonwealth Obligations; Pensions. Other obligations of Pennsylvania
include long-term agreements with public authorities to make lease payments that
are pledged as security for those authorities' revenue bonds and pension plans
covering state public school and other employees. The total unfunded accrued
liability under these pension plans for their fiscal years ended in 1994 was
$2,950 million.
Pennsylvania Agencies. Certain Pennsylvania-created agencies have statutory
authorization to incur debt for which legislation providing for state
appropriations to pay debt service thereon is not required. The debt of these
agencies is supported solely by assets of, or revenues derived from the various
projects financed and is not an obligation of Pennsylvania. Some of these
agencies, however, are indirectly dependent on Pennsylvania funds through
various state-assisted programs. There can be no assurance that in the future
assistance of the Commonwealth will be available to these agencies. These
entities are as follows: The Delaware River Joint Toll Bridge Commission,
Delaware River Port Authority, Pennsylvania Energy Development Authority,
Pennsylvania Higher Education Assistance Agency, Pennsylvania Infrastructure
Investment Authority, the Pennsylvania State Public School Building Authority,
the Pennsylvania Turnpike Commission, the Pennsylvania Higher Educational
Facilities Authority, the Pennsylvania Industrial Development Authority, the
Philadelphia Regional Port Authority and the Pennsylvania Economic Development
Financing Authority.
Debt of Political Subdivisions and their Authorities. The ability of
Pennsylvania's political subdivisions, such as counties, cites and school
districts, to engage in general obligation borrowing without electorate approval
is generally limited by their recent revenue collection experience, although
generally such subdivisions can levy real property taxes unlimited as to rate or
amount to repay general obligation borrowings.
Political subdivisions can issue revenue obligations which will not affect their
general obligation capacity, but only if such revenue obligations are either
limited as to repayment from a certain type of revenue other than tax revenues
or projected to be repaid solely from project revenues.
Industrial development and municipal authorities, although created by political
subdivisions, can only issue obligations payable solely from the revenues
derived from the financed project. If the user of the project is a political
subdivision, that subdivision's full faith and credit may back the repayment of
the obligations of the industrial development or municipal authority. Often the
user of the project is a nongovernmental entity, such as a not-for-profit
hospital or university, a public utility or an industrial corporation, and there
can be no assurance that it will meet its financial obligations or that the
pledge, if any, of property financed will be adequate. Factors affecting the
business of the user of the project, such as governmental efforts to control
health care costs (in the case of hospitals), declining enrollment and
reductions in governmental financial assistance (in the case of universities),
increasing capital and operational costs (in the case of public utilities) and
economic slowdowns (in the case of industrial corporations) may adversely affect
the ability of the project user to pay the debt service on revenue bonds issued
on its behalf.
45
Many factors affect the financial condition of the Commonwealth and its
counties, cities, school districts and other political subdivisions, such as
social, environmental and economic conditions, many of which are not within the
control of such entities. As is the case with many states and cities, many of
the programs of the Commonwealth and its political subdivisions, particularly
human services programs, depend in part upon federal reimbursements which have
been steadily declining. In recent years the Commonwealth and various of its
political subdivisions (including particularly the City of Philadelphia and the
City of Scranton) have encountered financial difficulty due to a slowdown in the
pace of economic activity in the Commonwealth and to other factors. The Fund is
unable to predict what effect, if any, such factors would have on the Fund's
investments.
46
*******************************************************************************
*******************************************************************************
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a)
Included in Part A of this Registration Statement:
Evergreen Treasury Money Market Fund
- ------------------------------------
Financial Highlights for the Class Y and Class A shares of the Evergreen
Treasury Money Market Fund for the fiscal period from March 6, 1991
(commencement of operations) through December 31, 1991, the fiscal years ended
December 31, 1992, 1993 and 1994, the eight months ended August 31, 1995* and
the fiscal year ended August 31, 1996.
Evergreen High Grade Tax-Free Fund
- ----------------------------------
Financial Highlights for the Class Y shares of the Evergreen High Grade Tax Free
Fund for the fiscal period from February 28, 1994 (commencement of class
operations) through December 31, 1994, the eight months ended August 31, 1995*
and the fiscal year ended August 31, 1996.
Financial Highlights for the Class A shares of the Evergreen High Grade Tax Free
Fund for the fiscal period from February 21, 1992 (commencement of class
operations) through December 31, 1992, the fiscal years ended December 31, 1993
and 1994, the eight months ended August 31, 1995* and the fiscal year ended
August 31, 1996.
Financial Highlights for the Class B shares of the Evergreen High Grade Tax Free
Fund for the fiscal period from January 11, 1993 (commencement of class
operaitons) through December 31, 1993, the fiscal year ended December 31, 1994,
the eight months ended August 31, 1995* and the fiscal year ended August 31,
1996.
Evergreen Florida Municipal Bond Fund
- -------------------------------------
Financial Highlights for the Class Y shares of the Evergreen Florida Muncipal
Bond Fund for the fiscal period from June 30, 1995 (commencement of class
operations) through August 31, 1995** and the fiscal year ended August 31, 1996.
Financial Highlights for the Class A shares of the Evergreen Florida Municipal
Bond Fund for the fiscal years ended April 30, 1992 through April 30, 1995, the
four months ended August 31, 1995** and the fiscal year ended August 31, 1996.
Financial Highlights for the Class B shares of the Evergreen Florida Municipal
Bond Fund for the fiscal period from June 30, 1995 (commencement of class
operations) through August 31, 1995** and the fiscal year ended August 31, 1996.
Evergreen Georgia Municipal Bond Fund
- -------------------------------------
Financial Highlights for the Class Y shares of the Evergreen Georgia Municipal
Bond Fund for the fiscal period February 28, 1994 (commencement of class
operations) through December 31, 1994, the eight months ended August 31, 1995*
and the fiscal year ended August 31, 1996.
Financial Highlights for the Class A and Class B shares of the Evergreen Georgia
Municipal Bond Fund for the fiscal period from July 2, 1993 (commencement of
class operations) through December 31, 1993, the fiscal year ended December 31,
1994, the eight months ended August 31, 1995* and the fiscal year ended August
31, 1996.
Evergreen North Carolina Municipal Bond Fund
- --------------------------------------------
Financial Highlights for the Class Y shares of the Evergreen North Carolina
Municipal Bond Fund for the fiscal period from February 28, 1994 (commencement
of class operations) through December 31, 1994, the eight months ended August
31, 1995* and the fiscal year ended August 31, 1996.
Financial Highlights for the Class A and Class B shares of the Evergreen North
Carolina Municipal Bond Fund for the fiscal period from January 11, 1993
(commencement of class operations) through December 31, 1993, the fiscal year
ended December 31, 1994, the eight months ended August 31, 1995* and the fiscal
year ended August 31, 1996.
Evergreen South Carolina Municipal Bond Fund
- --------------------------------------------
Financial Highlights for the Class Y shares of the Evergreen South Carolina
Municipal Bond Fund for the fiscal period from February 28, 1994 (commencement
of class operations) through December 31, 1994.
Financial Highlights for the Class A and Class B shares of the Evergreen South
Carolina Municipal Bond Fund for the fiscal period from January 3, 1994
(commencement of class operations) through December 31, 1994, the eight months
ended August 31, 1995* and the fiscal year ended August 31, 1996.
Evergreen Virginia Municipal Bond Fund
- --------------------------------------
Financial Highlights for the Class Y shares of the Evergreen Virginia Municipal
Bond Fund for the fiscal period from February 28, 1994 (commencement of class
operations) through December 31, 1994, the eight months ended August 31, 1995*
and the fiscal year ended August 31, 1996.
Financial Highlights for the Class A and Class B shares of the Evergreen
Virginia Municipal Bond Fund for the fiscal period from July 2, 1993
(commencement of operations) through December 31, 1993, the fiscal year ended
December 31, 1994, the eight months ended August 31, 1995* and the fiscal year
ended August 31, 1996.
________________________________
* The Fund changed its fiscal year end from December 31, to August 31
** The Fund changed its fiscal year-end from April 30, to August 31.
Included in Part B of this Registration Statement*:
Statements of Investments of Evergreen High Grade Tax Free Fund, Evergreen
Treasury Money Market Fund, Evergreen North Carolina Municipal Bond Fund,
Evergreen
<PAGE>
Florida Municipal Bond Fund, Evergreen Georgia Municipal Bond Fund, Evergreen
Virginia Municipal Bond Fund and Evergreen South Carolina Municipal Bond Fund
as of August 31, 1996.
Statements of Assets and Liabilities of Evergreen High Grade Tax Free Fund,
Evergreen Treasury Money Market Fund, Evergreen North Carolina Municipal Bond
Fund, Evergreen Florida Municipal Bond Fund, Evergreen Georgia Municipal Bond
Fund, Evergreen Virginia Municipal Bond Fund and Evergreen South Carolina
Municipal Bond Fund as of August 31, 1996.
Statements of Operations of Evergreen High Grade Tax Free Fund, Evergreen
Treasury Money Market Fund, Evergreen North Carolina Municipal Bond Fund,
Evergreen Florida Municipal Bond Fund, Evergreen Georgia Municipal Bond Fund,
Evergreen Virginia Municipal Bond Fund and Evergreen South Carolina Municipal
Bond Fund for the year ended August 31, 1996.
Statements of Changes in Net Assets of Evergreen High Grade Tax Free Fund,
Evergreen Treasury Money Market Fund, Evergreen Florida Municipal Bond Fund,
Evergreen Georgia Municipal Bond Fund, Evergreen Virginia Municipal Bond
and Evergreen South Carolina Municipal Bond Fund for the fiscal periods ended
August 31, 1995 and August 31, 1996.
Notes to Financial Statements of Evergreen High Grade Tax Free Fund, Evergreen
Treasury Money Market Fund, Evergreen North Carolina Municipal Bond Fund,
Evergreen Florida Municipal Bond Fund, Evergreen Georgia Municipal Bond Fund,
Evergreen Virginia Municipal Bond Fund and Evergreen South Carolina Municipal
Bond Fund.
Reports of Independent Auditors relating to each of the aforementioned financial
statements.
- -------------------------
* Incorporated by reference to the Annual Reports to Shareholders for the fiscal
year ended August 31, 1996, which have previously been filed with the
Commission, and the Annual and Semi-Annual Reports of Registrant on Form N-SAR
for the aforementioned periods.
<PAGE>
(b) Exhibits:
(1) Copy of Declaration of Trust of the Registrant (1); (i)
Copy of Amendment to Declaration of Trust (14); (ii)
Copy of Form of Amendment to Declaration of Trust(22)
(2) Copy of By-Laws of the Registrant (1);
(i) Copy of amendment to the By-Laws of the
Registrant (3);
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Beneficial
Interest of the Registrant (19);
(5) Conformed copy of Investment Advisory Contract of the
Registrant (21);
(i) Conformed copy of Sub-Advisory Agreement
between First Union National Bank of North
Carolina and Marvin & Palmer Associates, Inc.(21);
(ii) Conformed copy of Sub-Advisory Agreement
between First Union National Bank of North
Carolina and Boston International
Advisors, Inc. (21);
(6) Conformed copy of Distributor's Contract of the
Registrant (22);
(i) Conformed copy of the previous Distributors
Contract of the Registrant (21);
(7) Conformed copy of Administrative Agreement of the
Registrant (22);
(7a) Conformed copy of Sub-Administrator Agreement of the
Registrant (22);
(8) Conformed copy of Custodian Contract of the
Registrant (21);
(9) Conformed copy of the Fund Accounting and Shareholder
Recordkeeping Agreement of the Registrant (20);
(i) Conformed copy of the previous
Transfer Agency and Service Agreement of the
Registrant (21);
(ii) Conformed copy of Shareholder Services
Plan (21);
(iii) Conformed copy of Shareholder Services
Agreement (21);
(10) Copy of Opinion and Consent of Counsel as to
legality of shares being registered (8);
(11) Copy of Consent of Independent Auditors; + (12) Not
applicable; (13) Copy of Initial Capital Understanding (1);
(14) Model Plans used in establishment of Retirement
Plans (2);
(15) (i) Distribution Plan;
(a) Copy of First Union Emerging Markets
Growth Portfolio and First Union
International Equity Portfolio -
Class B Investment Shares (21);
(i) Copy of First Union South
Carolina Municipal Bond Portfolio -
Class B Investment Shares (21);
(ii) Copy of First Union Virginia
Municipal Bond Portfolio, First Union
Georgia Municipal Bond Portfolio,
First Union Florida Municipal Bond
Portfolio - Class B Investment Shares (21);
(iii) Copy of First Union Utility
Portfolio - Class B Investment Shares (21);
(b) First Union Funds - Class C
Investment Shares (17);
(i) Conformed copy of Exhibit to
Class C Investment Shares (21);
(c) Conformed copy of First Union Funds -
Class D Investment Shares (21);
(ii) Rule 12b-1 Agreement (14);
(iii) Copy of Amendment Number 5 to 12b-1 Agreement(21);
(16) Copy of Schedules for Computation of Fund
Performance Data (20.);
(17) Copy of Financial Data Schedules; +
(18) Not applicable;
(19) Conformed copy of the Power of Attorney (19).
+ All exhibits have been filed electronically.
(1) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A. (File Nos. 2-94560 and 811-4154).
(2) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A (File Nos. 2-94560 and 811-4154).
(5) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 filed on July 30, 1990 on Form N-1A (File Nos. 2-94560
and 811-4154).
(11) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 filed on August 26, 1992 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(14) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 28 filed on April 15, 1993 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(15) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 29 filed on April 30, 1993 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(16) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 filed on June 14, 1993 on Form N-1A (File Nos. 2-94560
and 811-4154).
(17) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 32 filed on November 2, 1993 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(18) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 33 filed on December 29, 1993 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(19) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 35 filed on February 25, 1994 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(20) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 36 filed on June 28, 1994 on Form N-1A (File Nos. 2-94560
and 811-4154).
(21) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 38 filed on December 30, 1994 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(22) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 40 filed on July 6, 1995 on Form N-14 (File Nos. 2-94560
and 811-4154).
Item 25. Persons Controlled by or Under Common Control with Registrant:
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of October 23, 1996
Shares of beneficial interest
Evergreen High Grade Tax Free Fund
a) Y Shares 626
b) Class A Shares 1,459
c) Class B Shares 969
Evergreen Treasury Money Market Fund
a) Y Shares 148
b) Class A Shares 4,601
Evergreen North Carolina Municipal Bond Fund
a) Y Shares 16
b) Class A Shares 308
c) Class B Shares 1,566
Evergreen Florida Municipal Bond Fund
a) Y Shares 19
b) Class A Shares 3,150
c) Class B Shares 765
Evergreen Georgia Municipal Bond Fund
a) Y Shares 7
b) Class A Shares 101
c) Class B Shares 390
Evergreen Virginia Municipal Bond Fund
a) Y Shares 9
b) Class A Shares 118
c) Class B Shares 244
Evergreen South Carolina Municipal Bond Fund
a) Y Shares 7
b) Class A Shares 34
c) Class B Shares 127
Item 27. Indemnification: (1.)
- --------------------------------------
(1.) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 35 filed on February 25, 1994 on Form N-1A
(File Nos. 2-94560 and 811-4154).
Item 28. Business and Other Connections of Investment Adviser:
(a) For a description of the other business of the investment
adviser, see the section entitled "Management of the
Funds-Investment Adviser" in Part A.
The Trustees and principal executive officers of the Fund's
Investment Adviser, and the Directors of the Fund's Manager, are
set forth in the following tables:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
BOARD OF DIRECTORS
Ben Mayo Boddie Raymond A. Bryan, Jr.
Chairman & CEO Chairman & CEO
Boddie-Noell Enterprises, Inc. T.A. Loving Company
P.O. Box 1908 P.O. Drawer 919
Rocky Mount, NC 27802 Goldsboro, NC 27530
John F.A.V. Cecil John W. Copeland
President President
Biltmore Dairy Farms, Inc. Ruddick Corporation
P.O. Box 5355 2000 Two First Union Center
Asheville, NC 28813 Charlotte, NC 28282
John Crosland, Jr. J. William Disher
Chairman of the Board Chairman & President
The Crosland Group, Inc. Lance Incorporated
135 Scaleybark Road P.O. Box 32368
Charlotte, NC 28209 Charlotte, NC 28232
Frank H. Dunn Malcolm E. Everett, III
Chairman and CEO President
First Union National Bank First Union National Bank
of North Carolina of North Carolina
One First Union Center 310 S. Tryon Street
Charlotte, NC 28288-0006 Charlotte, NC 28288-0156
James F. Goodmon Shelton Gorelick
President & Chief President
Executive Officer SGIC, Inc.
Capitol Broadcasting 741 Kenilworth Ave., Suite 200
Company, Inc. Charlotte, NC 28204
2619 Western Blvd.
Raleigh, NC 27605
Charles L. Grace James E. S. Hynes
President Chairman
Cummins Atlantic, Inc. Hynes Sales Company, Inc.
P.O. Box 240729 P.O. Box 220948
Charlotte, NC 28224-0729 Charlotte, NC 28222
Daniel W. Mathis Earl N. Phillips, Jr.
Vice Chairman President
First Union National Bank First Factors Corporation
of North Carolina P.O. Box 2730
One First Union Center High Point, NC 27261
Charlotte, NC 28288-0009
J. Gregory Poole, Jr. John P. Rostan, III
Chairman & President Senior Vice President
Gregory Poole Equipment Company Waldensian Bakeries, Inc.
P.O. Box 469 P.O. Box 220
Raleigh, NC 27602 Valdese, NC 28690
Nelson Schwab, III Charles M. Shelton, Sr.
Chairman & CEO Chairman & CEO
Paramount Parks The Shelton Companies, Inc
8720 Red Oak Boulevard, Suite 315 3600 One First Union Center
Charlotte, NC 28217 Charlotte, NC 28202
George Shinn Harley F. Shuford, Jr.
Owner and Chairman President and CEO
Shinn Enterprises, Inc. Shuford Industries
One Hive Drive P.O. Box 608
Charlotte, NC 28217 Hickory, NC 28603
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
EXECUTIVE OFFICERS
James Maynor, President, First Union Mortgage Corporation; Austin
A. Adams, Executive Vice President; Howard L. Arthur, Senior Vice
President; Robert T. Atwood, Executive Vice President and Chief
Financial Officer; Marion A. Cowell, Jr., Executive Vice
President, Secretary and General Counsel; Edward E. Crutchfield,
Jr., Chairman, CEO, First Union Corporation; Frank H. Dunn, Jr.,
Chairman and CEO; Malcolm E. Everett, III, President; John R.
Georgius, President, First Union Corporation; James Hatch, Senior
Vice President and Corporate Controller; Don R. Johnson,
Executive Vice President; Mark Mahoney, Senior Vice President;
Barbara K. Massa, Senior Vice President; Daniel W. Mathis, Vice
Chairman; H. Burt Melton, Executive Vice President; Malcolm T.
Murray, Jr., Executive Vice President; Alvin T. Sale, Executive
Vice President; Louis A. Schmitt, Jr., Executive Vice President;
Ken Stancliff, Senior Vice President and Corporate Treasurer;
Richard K. Wagoner, Executive Vice President and General Fund
Officer.
All of the Executive Officers are located at the following
address: First Union National Bank of North Carolina, One First
Union Center, Charlotte, NC 28288.
Item 29. Principal Underwriters
Evergreen Funds Distributor, Inc. The Director and principal
executive officers are:
Director Michael C. Petrycki
Officers Robert A. Hering President
Michael C. Petrycki Vice President
Gordon Forrester Vice President
Lawrence Wagner VP, Chief Financial Officer
Steven D. Blecher VP, Treasurer, Secretary
Elizabeth Q. Solazzo Assistant Secretary
Thalia M. Cody Assistant Secretary
Evergreen Funds Distributor, Inc. acts as Distributor for the
following registered investment companies or separate series thereof:
Evergreen Trust
Evergreen Fund
Evergreen Aggressive Growth Fund
Evergreen Equity Trust:
Evergreen Global Real Estate Equity Fund
Evergreen U.S. Real Estate Equity Fund
Evergreen Global Leaders Fund
The Evergreen Limited Market Fund, Inc.
Evergreen Growth and Income Fund
The Evergreen Total Return Fund
The Evergreen American Retirement Trust:
The Evergreen American Retirement Fund
Evergreen Small Cap Equity Income Fund
The Evergreen Foundation Trust:
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
The Evergreen Municipal Trust:
Evergreen Short-Intermediate Municipal Fund
Evergreen Short-Intermediate Municipal Fund-CA
Evergreen Florida High Income Municipal Bond Fund
Evergreen Tax Exempt Money Market Fund
Evergreen Institutional Tax Exempt Money Market Fund
Evergreen Money Market Trust
Evergreen Money Market Fund
Evergreen Institutional Money Market Fund
Evergreen Institutional Treasury Money Market Fund
Evergreen Investment Trust
Evergreen Emerging Markets Growth Fund*
Evergreen International Equity Fund*
Evergreen Balanced Fund*
Evergreen Value Fund*
Evergreen Utility Fund*
Evergreen Short-Intermediate Bond Fund (formerly Evergreen Fixed Income)
Evergreen U.S. Government Fund*
Evergreen Florida Municipal Bond Fund*
Evergreen Georgia Municipal Bond Fund*
Evergreen North Carolina Municipal Bond Fund*
Evergreen South Carolina Municipal Bond Fund*
Evergreen Virginia Municipal Bond Fund*
Evergreen High Grade Tax Free Fund*
Evergreen Treasury Money Market Fund*
The Evergreen Lexicon Fund:
Evergreen Intermediate-Term Government Securities Fund**
Evergreen Intermediate-Term Bond Fund**
Evergreen Tax Free Trust:
Evergreen Pennsylvania Tax Free Money Market Fund***
Evergreen New Jersey Tax Free Income Fund***
Evergreen Variable Trust:
Evergreen VA Fund
Evergreen VA Growth and Income Fund
Evergreen VA Foundation Fund
Evergreen VA Global Leaders Fund
* Prior to July 7, 1995,each Fund was named "First Union" instead of "Evergreen"
** Prior to January 19, 1996, each Fund was a series of the FFB Lexicon Fund.
*** Prior to January 19, 1996, each Fund was a series of FFB Funds Trust.
Item 30. Location of Accounts and Records
All accounts and records required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the Rules 31a-1 through 31a-3
promulgated thereunder are maintained at one of the following locations:
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase,
New York 10577.
First Union National Bank of North Carolina, One First Union Center,
301 S. College Street, Charlotte, North Carolina 28288.
State Street Bank and Trust Company, 2 Heritage Drive, North Quincy,
Massachusetts 02171.
Item 31. Management Services
All management-related service contracts entered into by Registrant are
discussed in Parts A and B of this Registration Statement.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provision of Section
16(c) of the 1940 Act with respect to the removal of Trustees and the
calling of special shareholder meetings by shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant certifies that it
has duly caused this Post-Effective Amendment No. 47 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on the 31st day of
October, 1996.
EVERGREEN INVESTMENT TRUST
/s/ John J. Pileggi
by-----------------------------
John J. Pileggi, President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 47 to the Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
Signatures Title Date
- ----------- ----- ----
/s/John J. Pileggi
- ----------------------- President and October 31, 1996
John J. Pileggi Treasurer
by James P. Wallin
Attorney - In - Fact
/s/Joan V. Fiore
- ----------------------- Secretary October 31, 1996
Joan V. Fiore
by James P. Wallin
Attorney - In - Fact
/s/ Foster Bam
- ----------------------- Trustee October 31, 1996
Foster Bam
by James P. Wallin
Attorney - In - Fact
/s/ Laurence B. Ashkin
- ----------------------- Trustee October 31, 1996
Laurence B. Ashkin
by James P. Wallin
Attorney - In - Fact
/s/James S. Howell
- ----------------------- Trustee October 31, 1996
James S. Howell
by James P. Wallin
Attorney - In - Fact
/s/Gerald M. McDonnell
- ----------------------- Trustee October 31, 1996
Gerald M. McDonnell
by James P. Wallin
Attorney - In - Fact
/s/Thomas L. McVerry
- ----------------------- Trustee October 31, 1996
Thomas L. McVerry
by James P. Wallin
Attorney - In - Fact
/s/William Walt Pettit
- ----------------------- Trustee October 31, 1996
William Walt Pettit
by James P. Wallin
Attorney - In - Fact
/s/Russell A. Salton, III, M.D
- ------------------------------ Trustee October 31, 1996
Russell A. Salton, III, M.D
by James P. Wallin
Attorney - In - Fact
/s/Michael S. Scofield
- ----------------------- Trustee October 31, 1996
Michael S. Scofield
by James P. Wallin
Attorney - In - Fact
<PAGE>
JAMES P. WALLIN, ESQ.
2500 WESTCHESTER AVENUE
Purchase, New York 10577
October 31, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re Post-Effective Amendment of
EVERGREEN INVESTMENT TRUST (formerly First Union Funds) on behalf of
its Evergreen High Grade Tax Free Fund, Evergreen Treasury Money Market
Fund, Evergreen Florida Municipal Bond Fund, Evergreen Georgia
Municipal Bond Fund Evergreen North Carolina Municipal Bond Fund,
Evergreen South Carolina Municipal Bond Fund, and Evergreen Virginia
Municipal Bond Fund
Registration No. 2-94560; Investment Company File No.811-4154
Commissioners:
I have acted as counsel to the above-referenced registrant which proposes
to file, pursuant to paragraph (b) of Rule 485 (the "Rule"), Post-Effective
Amendment No. 47 (the "Amendment") to its registration statement under the
Securities Act of 1933, as amended.
Pursuant to paragraph (b)(4) of the Rule, I represent that
the Amendment does not contain disclosures which would render it ineligible to
become effective pursuant to paragraph (b) of the Rule.
Very truly yours,
/s/James P. Wallin
---------------------
James P. Wallin
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
11 Consent of Independent Accountants
17 Financial Data Schedules
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Evergreen Investment Trust:
With respect to this Post-Effective Amendment No. 47 to the Registration
Statement (No. 2-94560) on Form N-1A of Evergreen Investment Trust, we consent
to the incorporation by reference of our reports, dated October 16, and to the
references to our Firm under the headings "Financial Highlights" in Part A
of the Registration Statement and "Financial Statements" in Part B of the
Registration Statement.
* Evergreen Florida Municipal Bond Fund
* Evergreen Georgia Municipal Bond Fund
* Evergreen North Carolina Municipal Bond Fund
* Evergreen South Carolina Municipal Bond Fund
* Evergreen Virginia Municipal Bond Fund
* Evergreen High Grade Tax Free Fund
* Evergreen Treasury Money Market Fund
By: KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
October 25, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen High Grade Tax Free Fund Cl. A
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Aug-31-1996
<PERIOD-START> Sep-01-1995
<PERIOD-END> Aug-31-1996
<INVESTMENTS-AT-COST> 105,676,851
<INVESTMENTS-AT-VALUE> 108,896,874
<RECEIVABLES> 1,442,806
<ASSETS-OTHER> 36,049
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 110,375,729
<PAYABLE-FOR-SECURITIES> 2,022,708
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 451,154
<TOTAL-LIABILITIES> 2,473,862
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 106,446,200
<SHARES-COMMON-STOCK> 4,715,330
<SHARES-COMMON-PRIOR> 5,495,203
<ACCUMULATED-NII-CURRENT> 115,656
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1,880,012)
<ACCUM-APPREC-OR-DEPREC> 3,220,023
<NET-ASSETS> 50,569,134
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,526,273
<OTHER-INCOME> 0
<EXPENSES-NET> 1,221,855
<NET-INVESTMENT-INCOME> 5,304,418
<REALIZED-GAINS-CURRENT> 1,622,360
<APPREC-INCREASE-CURRENT> (1,135,792)
<NET-CHANGE-FROM-OPS> 5,790,986
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,655,984
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 728,801
<NUMBER-OF-SHARES-REDEEMED> 1,652,697
<SHARES-REINVESTED> 144,023
<NET-CHANGE-IN-ASSETS> (10,134,344)
<ACCUMULATED-NII-PRIOR> 22,568
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (3,409,284)
<GROSS-ADVISORY-FEES> 575,456
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,450,403
<AVERAGE-NET-ASSETS> 55,570,806
<PER-SHARE-NAV-BEGIN> 10.69
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> 0.03
<PER-SHARE-DIVIDEND> (0.52)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.72
<EXPENSE-RATIO> 0.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen High Grade Tax Free Fund Cl. B
<SERIES>
<NUMBER> 52
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Aug-31-1996
<PERIOD-START> Sep-01-1995
<PERIOD-END> Aug-31-1996
<INVESTMENTS-AT-COST> 105,676,851
<INVESTMENTS-AT-VALUE> 108,896,874
<RECEIVABLES> 1,442,806
<ASSETS-OTHER> 36,049
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 110,375,729
<PAYABLE-FOR-SECURITIES> 2,022,708
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 451,154
<TOTAL-LIABILITIES> 2,473,862
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 106,446,200
<SHARES-COMMON-STOCK> 3,004,556
<SHARES-COMMON-PRIOR> 3,199,598
<ACCUMULATED-NII-CURRENT> 115,656
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1,880,012)
<ACCUM-APPREC-OR-DEPREC> 3,220,023
<NET-ASSETS> 32,220,447
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,526,273
<OTHER-INCOME> 0
<EXPENSES-NET> 1,221,855
<NET-INVESTMENT-INCOME> 5,304,418
<REALIZED-GAINS-CURRENT> 1,622,360
<APPREC-INCREASE-CURRENT> (1,135,792)
<NET-CHANGE-FROM-OPS> 5,790,986
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,385,989
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 420,508
<NUMBER-OF-SHARES-REDEEMED> 691,236
<SHARES-REINVESTED> 75,686
<NET-CHANGE-IN-ASSETS> (10,134,344)
<ACCUMULATED-NII-PRIOR> 22,568
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (3,409,284)
<GROSS-ADVISORY-FEES> 575,456
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,450,403
<AVERAGE-NET-ASSETS> 34,409,912
<PER-SHARE-NAV-BEGIN> 10.69
<PER-SHARE-NII> 0.44
<PER-SHARE-GAIN-APPREC> 0.03
<PER-SHARE-DIVIDEND> (0.44)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.72
<EXPENSE-RATIO> 1.64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen High Grade Tax Free Fund Cl. Y
<SERIES>
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<FISCAL-YEAR-END> Aug-31-1996
<PERIOD-START> Sep-01-1995
<PERIOD-END> Aug-31-1996
<INVESTMENTS-AT-COST> 105,676,851
<INVESTMENTS-AT-VALUE> 108,896,874
<RECEIVABLES> 1,442,806
<ASSETS-OTHER> 36,049
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 110,375,729
<PAYABLE-FOR-SECURITIES> 2,022,708
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 451,154
<TOTAL-LIABILITIES> 2,473,862
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 106,446,200
<SHARES-COMMON-STOCK> 2,341,584
<SHARES-COMMON-PRIOR> 2,345,841
<ACCUMULATED-NII-CURRENT> 115,656
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1,880,012)
<ACCUM-APPREC-OR-DEPREC> 3,220,023
<NET-ASSETS> 25,112,286
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,526,273
<OTHER-INCOME> 0
<EXPENSES-NET> 1,221,855
<NET-INVESTMENT-INCOME> 5,304,418
<REALIZED-GAINS-CURRENT> 1,622,360
<APPREC-INCREASE-CURRENT> (1,135,792)
<NET-CHANGE-FROM-OPS> 5,790,986
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,262,445
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 387,417
<NUMBER-OF-SHARES-REDEEMED> 455,583
<SHARES-REINVESTED> 63,909
<NET-CHANGE-IN-ASSETS> (10,134,344)
<ACCUMULATED-NII-PRIOR> 22,568
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (3,409,284)
<GROSS-ADVISORY-FEES> 575,456
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,450,403
<AVERAGE-NET-ASSETS> 25,109,774
<PER-SHARE-NAV-BEGIN> 10.69
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> 0.03
<PER-SHARE-DIVIDEND> (0.55)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.72
<EXPENSE-RATIO> 0.64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen Treasury Money Market Cl. A
<SERIES>
<NUMBER> 61
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Aug-31-1996
<PERIOD-START> Sep-01-1995
<PERIOD-END> Aug-31-1996
<INVESTMENTS-AT-COST> 3,559,111,898
<INVESTMENTS-AT-VALUE> 3,559,111,898
<RECEIVABLES> 23,454,918
<ASSETS-OTHER> 36,829
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,582,603,645
<PAYABLE-FOR-SECURITIES> 199,722,810
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15,217,147
<TOTAL-LIABILITIES> 214,939,957
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,367,614,048
<SHARES-COMMON-STOCK> 2,607,674,461
<SHARES-COMMON-PRIOR> 1,177,953,023
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 49,640
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,607,700,900
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 121,967,383
<OTHER-INCOME> 0
<EXPENSES-NET> 16,284,993
<NET-INVESTMENT-INCOME> 121,967,383
<REALIZED-GAINS-CURRENT> 161,674
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 122,129,057
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 101,441,299
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,255,326,974
<NUMBER-OF-SHARES-REDEEMED> 4,842,442,130
<SHARES-REINVESTED> 16,836,594
<NET-CHANGE-IN-ASSETS> 1,912,402,829
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,857,503
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 18,394,061
<AVERAGE-NET-ASSETS> 2,129,678,353
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.05
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen Treasury Money Market Cl. Y
<SERIES>
<NUMBER> 64
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Aug-31-1996
<PERIOD-START> Sep-01-1995
<PERIOD-END> Aug-31-1996
<INVESTMENTS-AT-COST> 3,559,111,898
<INVESTMENTS-AT-VALUE> 3,559,111,898
<RECEIVABLES> 23,454,918
<ASSETS-OTHER> 36,829
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,582,603,645
<PAYABLE-FOR-SECURITIES> 199,722,810
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15,217,147
<TOTAL-LIABILITIES> 214,939,957
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,367,614,048
<SHARES-COMMON-STOCK> 759,956,138
<SHARES-COMMON-PRIOR> 277,398,293
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 49,640
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 759,962,788
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 121,967,383
<OTHER-INCOME> 0
<EXPENSES-NET> 16,284,993
<NET-INVESTMENT-INCOME> 121,967,383
<REALIZED-GAINS-CURRENT> 161,674
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 122,129,057
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 20,526,084
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,613,972,832
<NUMBER-OF-SHARES-REDEEMED> 1,132,550,470
<SHARES-REINVESTED> 1,135,486
<NET-CHANGE-IN-ASSETS> 1,912,402,829
<ACCUMULATED-NII-PRIOR> 0
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen North Carolina Cl. A
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<NUMBER> 91
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen North Carolina Cl. B
<SERIES>
<NUMBER> 92
<PERIOD-TYPE> 12-MOS
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen North Carolina Cl. Y
<SERIES>
<NUMBER> 93
<PERIOD-TYPE> 12-MOS
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<PER-SHARE-NAV-END> 9.98
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen Florida Muni Cl. A
<SERIES>
<NUMBER> 111
<PERIOD-TYPE> 12-MOS
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen Florida Muni Cl. B
<SERIES>
<NUMBER> 112
<PERIOD-TYPE> 12-MOS
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen Florida Muni Cl. Y
<SERIES>
<NUMBER> 113
<PERIOD-TYPE> 12-MOS
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen Georgia Cl. A
<SERIES>
<NUMBER> 121
<PERIOD-TYPE> 12-MOS
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen Georgia Cl. B
<SERIES>
<NUMBER> 122
<PERIOD-TYPE> 12-MOS
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen Georgia Cl. Y
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen Virginia Cl. A
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen Virginia Cl. B
<SERIES>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen Virginia Cl. Y
<SERIES>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen South Carolina Cl. A
<SERIES>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen South Carolina Cl. B
<SERIES>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen South Carolina Cl. Y
<SERIES>
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<PERIOD-TYPE> 12-MOS
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</TABLE>
