Registration Nos. 33-2010
811-4510
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
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Pre-Effective Amendment No. __ / /
Post-Effective Amendment No. 23 /x/
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 24 /x/
FFB FUNDS TRUST
(Exact Name of Registration as Specified in Charter)
237 Park Avenue, New York, New York 10017
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 808-3900
Steven R. Howard Michael C. Petrycki
Baker & McKenzie 237 Park Avenue
805 Third Avenue New York, New York 10017
New York, New York 10022
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
/ / Immediately upon filing pursuant to paragraph (b) or
/ / on (date) pursuant to paragraph (b) or
/X/ 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 or about April 30, 1995; 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 THE FFB FUNDS TRUST (the
"Trust"), relates to two of the Trust's portfolios: (1) THE FFB PENNSYLVANIA TAX
FREE MONEY MARKET FUND, which after January 19, 1996 is expected to be renamed
the EVERGREEN PENNSYLVANIA TAX FREE MONEY MARKET FUND, and (2) THE FFB NEW
JERSEY TAX FREE INCOME FUND, which after January 19, 1996 is expected to be
renamed the EVERGREEN NEW JERSEY TAX FREE INCOME FUND.
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 5A. Management's Discussion Management's Discussion of
Fund Performance
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.
*******************************************************************************
AB MONEY MARKET
<PAGE>
PROSPECTUS January 22, 1996
(Evergreen tree logo appears here)
EVERGREEN(SM)PENNSYLVANIA TAX FREE MONEY MARKET FUND
CLASS A SHARES
The EVERGREEN PENNSYLVANIA TAX FREE MONEY MARKET FUND (the "Fund") is
designed to provide investors with current income, stability of principal and
liquidity. This Prospectus provides information regarding the Class A offered by
the Fund. The Fund 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 Fund and certain other
funds in the Evergreen group of mutual funds dated January 22, 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 FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND 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
OVERVIEW OF THE FUND
EXPENSE INFORMATION
FINANCIAL HIGHLIGHTS
DESCRIPTION OF THE FUND
Investment Objectives and Policies
Investment Restrictions
MANAGEMENT OF THE FUND
Investment Adviser
Distribution Plan and Agreement
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares
How to Redeem Shares
Exchange Privilege
Shareholder Services
Effect of Banking Laws
OTHER INFORMATION
Dividends, Distributions and Taxes
General Information
OVERVIEW OF THE FUND
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 Fund".
The Capital Management Group of First Union National Bank of North Carolina
("CMG") serves as investment adviser to EVERGREEN PENNSYLVANIA TAX FREE MONEY
MARKET FUND. First Union National Bank of North Carolina ("FUNB") is a
subsidiary of First Union Corporation, one of the ten largest bank holding
companies in the United States.
EVERGREEN PENNSYLVANIA TAX-FREE MONEY MARKET FUND invests in high quality
Pennsylvania securities that are exempt from Federal and Pennsylvania personal
income taxes in the opinion of bond counsel to the issuer with remaining
maturities of thirteen months or less.
The 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 THE FUND WILL BE
ACHIEVED.
<PAGE>
EXPENSE INFORMATION The table set forth below summarizes the shareholder
transaction costs associated with an investment in Class A shares of the Fund.
For further information see "Purchase and Redemption of Shares" and "General
Information -- Other Classes of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge (as a % of None
original purchase price or redemption
proceeds, whichever is lower)
Redemption Fee None
Exchange Fee None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to 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.
EVERGREEN PENNSYLVANIA TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
EXAMPLE
ANNUAL OPERATING
EXPENSES*
Class A Class A
<S> <C> <C> <C>
Management Fees .50%
After 1 Year $ 10
12b-1 Fees ** .30%
After 3 Years $ 32
Other Expenses .22%
After 5 Years $ 56
After 10 Years $ 125
Total 1.02%
</TABLE>
<PAGE>
The investment adviser has agreed to reimburse the 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 XXX of 1% of average net assets for Class A Shares for the fiscal
period ended February 28, 1995.
**Class A Shares can pay up to .50 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. 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, the Fund's investment adviser may, at its discretion, waive
its fee or reimburse a Fund for certain of its expenses in order to reduce the
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. Such expenses have been restated
to reflect current fee arrangements. 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.
FINANCIAL HIGHLIGHTS
[TO BE ADDED BY AMENDMENT]
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Fund is to seek to provide investors with
as high a level of current income as is consistent with preservation of capital
and liquidity. There is no assurance that this objective will be achieved.
To obtain its objective the Fund invests at least 80% of its net assets in
municipal obligations issued by the Commonwealth of Pennsylvania or its
counties, municipalities, authorities or other political subdivisions, and
municipal obligations 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 (collectively, "Municipal Obligations") and Pennsylvania
personal income taxes. The Fund limits its investments to Municipal Obligations
with remaining maturities of thirteen months or less and will maintain a
dollar-weighted average portfolio maturity of 90 days or less.
Normally, the Fund will seek to invest substantially all of its assets in
short-term Municipal Obligations. However, under certain unusual circumstances,
such as a temporary decline in the issuance of Pennsylvania obligations, the
Fund may invest up to 20% of its assets in the following: short-term municipal
securities issued outside of Pennsylvania (the income from which may be subject
to Pennsylvania income taxes) or certain taxable fixed income securities (the
income from which may be subject to Federal and Pennsylvania personal income
taxes). In most instances, however, the Fund will seek to avoid such holdings in
an effort to provide income that is fully exempt from Federal and Pennsylvania
personal income taxes.
The Fund may also invest in Municipal Obligations 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 "Federal Taxes" for further information.
The Fund will not invest in options, financial futures transactions or
other similar "derivative" instruments except as otherwise provided herein.
Shares of the fund are not insured or guaranteed by the United States
Government. The Fund will only purchase securities: (i) rated within the two
highest rating categories by Moody's Investors Service Inc., ("Moody's") and
Standard & Poors Ratings Group ("S & P") or in a comparable rating category by
any two of the nationally recognized statistical rating organizations that have
rated the securities; (ii) rated in a comparable rating category by only one
such organization that has rated the securities, or (iii) which, if unrated, are
deemed to be of equivalent quality as determined by the investment adviser
pursuant to guidelines established by the Board of Trustees. The types of
Municipal Obligations in which the Fund may invest include the following:
MUNICIPAL BONDS. Municipal bonds generally have a maturity at the time of
issuance of more than one year. Municipal bonds may be issued to raise money for
various public purposes -- such as constructing public facilities and resource
recovery projects and making loans to public institutions. There are generally
two types of municipal bonds: general obligation bonds and revenue bonds.
General obligation bonds are backed by the taxing power of the issuing
municipality and are considered the safest type of municipal bond. Revenue bonds
are backed by the revenues of a project or facility -- tolls from a toll bridge,
for example. Industrial development revenue bonds (which are private activity
bonds) are a specific type of revenue bond backed by the credit and security of
a private user, and therefore investments in these bonds have more potential
risk. Certain types of municipal bonds are issued to obtain funding for
privately operated facilities. Municipal bonds generally have a maturity at the
time of issuance of more than one year.
MUNICIPAL NOTES. Municipal notes are generally sold as interim financing in
anticipation of the collection of taxes, a bond sale or receipt of other
revenue. Municipal notes generally have maturities at the time of issuance of
one year or less. Investments in municipal notes are limited to notes which are
rated at the date of purchase: (i)" MIG 1" or "MIG 2" by Moody's and in a
comparable rating category by at least one other nationally recognized
statistical rating organization that has rated the notes, or (ii) in a
comparable rating category by only one such organization, including Moody's,
if it is the only organization that has rated the notes, or (iii) if not
rated, are, in the opinion of the Adviser, of comparable investment quality
and within the credit quality policies and guidelines established by the Board
of Trustees.
Notes rated "MIG 1" are judged to be of the "best quality" and carry the
smallest amount of investment risk. Notes rated "MIG 2" are judged to be of
"high quality", with margins of protection ample although not as large as in the
preceding group.
MUNICIPAL COMMERCIAL PAPER. Municipal commercial paper is a debt obligation
with a stated maturity of one year or less which is issued to finance seasonal
working capital needs or as short-term financing in anticipation of longer-term
debt. Investments in municipal commercial paper are limited to commercial paper
which is rated at the date of purchase: (i) "P-1" or "P-2" by Moody's and "A-1",
"A-1 +" or "A-2" by S&P or (ii) in a comparable rating category by any two of
the nationally recognized statistical ratings organizations that have rated
commercial paper or (iii) in a comparable rating category by only one such
organization if it is the only organization that has rated the commercial paper
or (iv) if not rated, is, in the opinion of the Adviser, of comparable
investment quality and within the credit quality policies and guidelines
established by the Board of Trustees.
Issuers of municipal (and taxable) commercial paper rated "P-1" have a
"superior capacity for repayment of short-term promissory obligations". The
"A-1" rating for commercial paper under the S&P classification indicates that
the "degree of safety regarding timely payment is either overwhelming or very
strong". Commercial paper with "overwhelming safety characteristics" will be
rated "A1+". Commercial paper receiving a "P-2" rating has a strong capacity for
repayment of short-term promissory obligations. Commercial paper rated "A-2" has
the capacity for timely payment although the relative degree of safety is not as
overwhelming as for issues designated "A-1". See the Appendix for a more
complete description of securities ratings.
WHEN-ISSUED SECURITIES. The Fund may purchase Municipal Obligations on a
when-issued basis, in which case delivery and payment normally take place 15 to
45 days after the date of the commitment to purchase. The Fund will only make
commitments to purchase Municipal Obligations on a when-issued basis with the
intention of actually acquiring the securities but may sell them before the
settlement date if it is deemed advisable. Any gains realized in such sales
would produce taxable income. The when-issued securities are subject to market
fluctuation and no interest accrues to the purchaser during this period. The
payment obligation and the interest rate that will be received on the securities
are each fixed at the time the purchaser enters into the commitment. For
purposes of determining the Fund's weighted average maturity, the maturity of a
when-issued security is calculated from its commitment date. Purchasing
Municipal Obligations on a when-issued basis is a form of leveraging and can
involve a risk that the yields available in the market when the delivery takes
place may actually be higher than those obtained in the transaction itself in
which case there could be an unrealized loss at the time of delivery.
The Fund will establish a segregated account with its custodian in which it
will maintain cash, United States government securities, or other liquid, high
quality debt instruments in an amount at least equal in value to the Fund's
commitments to purchase when-issued securities. If the value of these assets
declines, the Fund will place additional liquid assets in the account on a daily
basis so that the value of the assets in the account is equal to the amount of
such commitments.
SECURITIES WITH PUT OR DEMAND RIGHTS. The Fund has the ability to enter
into put transactions, sometimes referred to as stand-by commitments, with
respect to Municipal Obligations held in its portfolio or to purchase securities
which carry a demand feature or put option which permit the 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 the Fund
for all such transactions.
The amount payable to the 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, the 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.
The 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. The 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 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 Adviser, present minimal credit risks. The Adviser
will monitor periodically the creditworthiness of issuers of such obligations
held by the Fund. The 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 or bank should
default on its obligation to purchase an underlying security, the Fund might be
unable to recover all or a portion of any loss sustained from having to sell the
security elsewhere. The Fund intends to enter into put transactions solely to
maintain portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes.
For a detailed description of put transactions, see "Investment Policies --
Securities with Put Rights" in the Statement of Additional Information.
TAXABLE SECURITIES. Under normal market conditions, the Fund may at times
elect to invest temporarily up to 20% of the current value of its net assets in
taxable securities of the type described below pending the investment in
Municipal Obligations of proceeds of sales of Fund shares or proceeds from the
sale of portfolio securities or in anticipation of redemptions. However, at all
times under normal market conditions the percentage of the Fund's income and
corresponding distributions which is tax-exempt will be very close to 100%. In
addition, for temporary defensive purposes, the Fund may invest up to 100% of
its total assets in such taxable securities when, in the opinion of the Adviser,
it is advisable to do so because of market conditions. The types of taxable
securities in which the Fund may invest are limited to the following money
market instruments which have remaining maturities not exceeding thirteen
months; (i) obligations of the United States Government, its agencies or
instrumentalities; (ii) negotiable certificates of deposit and bankers'
acceptances of United States banks which have more than $1 billion in total
assets at the time of investment and are members of the Federal Reserve System
or are examined by the Comptroller of the Currency or whose deposits are insured
by the Federal Deposit Insurance Corporation; (iii) domestic and foreign U.S.
dollar-denominated commercial paper rated "P-1" by Moody's or "A-1" or "A-1+" by
S&P; and (iv) repurchase agreements with respect to any of the foregoing
portfolio securities. The Fund also has the right to hold up to 100% of its
total assets in cash as the Adviser deems necessary for temporary defensive
purposes.
Investments of the Fund in U.S. dollar-denominated foreign commercial
paper may involve certain risks not applicable to investment by the Fund in the
obligations of domestic issuers. These risks may include risks of foreign
political or economic instability, difficulties in enforcing a judgment against
a foreign issuer should it default, the imposition or tightening of exchange
controls and changes in foreign governmental attitudes toward private
investment, including the possibility of increased taxation, nationalization or
expropriation of Fund assets. Foreign issuers of securities may also be subject
to different accounting and disclosure systems, which may affect the type and
quality of information available about an issuer. The rating services used by
the Fund take these factors into consideration when assigning a rating to a
particular security, and therefore the additional risk to the Fund of investing
in foreign securities with the same ratings as a domestic security is not
expected to be significant.
The Fund will not invest in any obligations of or loan any of its portfolio
securities to the First Union National Bank of North Carolina ("FUNB") or its
affiliates as defined in the 1940 Act or any affiliates of the Fund.
Subject to the limitations described, the Fund is permitted to invest in
obligations of correspondent banks of FUNB (banks with which the FUNB
maintains a special bank servicing relationship) which are not affiliates of
the Trust, its Adviser or its Distributor, but the Fund will not give
preference in its investment selections to those obligations.
After purchase by the Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Fund. Neither
event will require a sale of such security by the Fund. However, the
Adviser will consider such event in its determination of whether the Fund
should continue to hold the security. To the extent the ratings given by Moody's
or S&P may change as a result of changes in such organizations of their rating
systems, the Fund will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained in this
Prospectus and in the SAI.
Opinions relating to the validity of Municipal Obligations and to the
exclusion of interest thereon from Federal and Pennsylvania personal income
taxes are rendered by bond counsel to the respective issuers at the time of
issuance. Neither the Fund, the Trust nor the Adviser will review the
proceedings relating to the issuance of Municipal Obligations or the basis for
such opinions.
MUNICIPAL LEASE OBLIGATIONS. Municipal lease obligations are financing
arrangements secured by leases of property to a municipality. These obligations
are considered to be illiquid securities and typically are not fully backed by
the municipality's credit. Interest from a municipal lease obligation may become
taxable if the lease is assigned. If the governmental user does not appropriate
sufficient funds for the following year's lease payments, the lease will
terminate, with the possibility of default on the lease obligations and
significant loss to the Fund. The Fund will not purchase any municipal lease
obligation that is not covered by a legal opinion (typically from the issuer's
counsel) to the effect that, as of the effective date of such lease, the lease
is the valid and binding obligation of the governmental issuer. For a more
detailed description of Municipal Leases, see "Investment Policies -- Municipal
Leases" in the Statement of Additional Information.
RESOURCE RECOVERY BONDS. Resource recovery bonds 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.
VARIABLE AND FLOATING RATE OBLIGATIONS. Certain of the Municipal
Obligations which the Fund may purchase have a floating or variable rate of
interest. Such obligations bear interest at rates which are not fixed, but which
vary with changes in specified market rates or indices, such as a Federal
Reserve composite index. Certain of such obligations may carry a demand feature
or put option which would permit the Fund, as holder, to tender them back to
the issuer or a third party prior to maturity ("demand instruments"). The Fund
may invest in floating and variable rate Municipal Obligations even if they
carry stated maturities in excess of one year. Obligations with a demand feature
generally receive two ratings, one representing an evaluation of the degree of
risk associated with scheduled interest and principal payments and the other
representing an evaluation of the degree of risk associated with the demand
feature. The two highest ratings assigned to the demand feature by Moody's are
"VMIG 1" and "VMIG 2" which have generally the same characteristics as Moody's
"MIG 1" and "MIG 2" ratings. Investments in variable and floating rate
obligations are limited to those that are rated "VMIG" 1 by Moody's or, if not
rated, are, in the opinion of the Adviser, of comparable investment quality. The
Adviser will monitor on an ongoing basis the earning power, cash flow and other
liquidity ratios of the issuers of such obligations and will similarly monitor
the ability of an issuer of a demand instrument to pay principal and interest on
demand. The Fund's right to obtain payment at par on a demand instrument could
be affected by events occurring between the date the Fund elects to demand
payment and the date payment is due which may adversely affect the ability of
the issuer of the instrument to make payment when due.
The Fund does not intend to concentrate its investments in any one
industry. Thus, from time to time, the Fund may invest 25% or more of its
assets in Municipal Obligations which are related in such a way that an
economic, business or political development or change affecting one such
Obligation would also affect the other Obligations; for example, Municipal
Obligations, the interest on which is paid from revenues of similar type
projects or Municipal Obligations whose issuers are located in the same state.
Because the taxable money market is a broader and more liquid market with a
greater number of investors, issuers and market makers than is the market for
short-term tax-exempt municipal obligations, the liquidity of the Fund may not
be equal to that of a money market fund which invests exclusively in short-term
taxable money market instruments. The more limited marketability of short-term
tax-exempt municipal obligations may make it difficult in certain circumstances
to dispose of large investments advantageously. In general, tax-exempt municipal
obligations are also subject to credit risks such as the loss of credit ratings
or possible default. In addition, an issuer of tax-exempt municipal obligations
may lose its tax-exempt status in the event of a change in the current tax laws.
RISK FACTORS: INVESTING IN PENNSYLVANIA MUNICIPAL OBLIGATIONS. Each
investor should consider carefully the special risks inherent in the Fund's
investment in Pennsylvania Municipal Obligations. Pennsylvania has been
historically identified as a heavy industry state although that reputation has
recently changed as the industrial composition of Pennsylvania diversified when
the coal, steel, and railroad industries began to decline. This diversification
was necessary when the traditionally strong industries in Pennsylvania declined
as a long-term shift in jobs, investment and workers away from the northeast
part of the nation took place. The major new sources of growth are in the
service sector, including trade, medical and health services, education and
financial institutions. Pennsylvania is highly urbanized, with approximately 50%
of the Commonwealth's population contained in the metropolitan areas which
include the cities of Philadelphia and Pittsburgh.
It should be noted that Pennsylvania Municipal Obligations may be adversely
affected by local political and economic conditions and developments within
Pennsylvania. For example, adverse conditions in a significant industry within
Pennsylvania may from time to time have a correspondingly adverse effect on
specific issuers within Pennsylvania or on anticipated revenue to the
Commonwealth itself; conversely, an improving economic outlook for a significant
industry may have a positive effect on such issuers or revenues. An expanded
discussion of the risks associated with the purchase of Pennsylvania issues is
contained in the SAI.
INVESTMENT COMPANY SECURITIES. The Fund may invest in securities issued by
other investment companies. Such securities will be acquired by Fund within the
limits prescribed by the Act, which include a prohibition against the Fund
investing more than 10% of the value of its total assets in such securities.
Investments in securities issued by other investment companies will subject
shareholders to the imposition of duplicative fees and expenses.
The Fund may engage in the following portfolio transactions:
LOANS OF PORTFOLIO SECURITIES. The Fund may loan its portfolio securities
to brokers, dealers, and financial institutions to increase current income. All
loans of securities must be continuously secured by collateral consisting of
United States Government securities, cash or letters of credit maintained on a
daily mark-to-market basis in an amount at least equal to the current market
value of the securities loaned plus the interest payable with respect to the
loan.
As a condition of the loan, the Fund must have the right to call the loan
and obtain the return of the securities loaned within five business days.
Moreover, the Fund will receive any interest or dividends paid on the loaned
securities. The Fund will not lend portfolio securities to FUNB, or to
any affiliate of the FUNB or to any other affiliate of the Fund. Loans of
securities involve a risk that the borrower may fail to return the securities or
may fail to provide additional collateral.
REPURCHASE AGREEMENTS. Securities held by the Fund may be subject to
repurchase agreements. A repurchase agreement is a transaction in which the
seller of a security commits itself at the time of the sale to repurchase that
security from the buyer at a mutually agreed upon time and price. The Fund will
enter into repurchase agreements only with dealers, domestic banks or recognized
financial institutions which, in the opinion of the Adviser, present minimal
credit risks. The Fund will enter into repurchase agreements only with respect
to obligations which could otherwise be purchased by the Fund or any other
obligations backed by the full faith and credit of the United States. Where the
securities underlying a repurchase agreement are not U.S. Government securities,
they must be of the highest quality at the time the repurchase agreement is
entered into (e.g., a long-term debt security would be required to be rated by
S&P as "AAA" or its equivalent). While the maturity of the underlying securities
in a repurchase agreement transaction may be more than one year, the term of the
repurchase agreement is always less than one year. The maturities of the
underlying securities will have to be taken into account in calculating the
Fund's dollar weighted average portfolio maturity if the seller of the
repurchase agreement fails to perform under such agreement. In the event of
default by the seller under the repurchase agreement, the Fund may experience a
loss of income from the loaned securities and a decrease in the value of any
collateral maintained, problems in exercising its rights to the underlying
securities and costs and time delays in connection with the disposition of such
securities. The Fund will invest no more than 10% of its net assets in
repurchase agreements maturing in more than seven days and other illiquid
investments.
INVESTMENT RESTRICTIONS
The investment objective of the Fund and its policy of investing at least
80% of its net assets in Municipal Obligations are fundamental policies and
except for policies with respect to repurchase agreements and securities with
put rights, which are also fundamental policies of the Fund and subject to the
investment restrictions set forth below, the Fund's investment policies and the
Adviser's discretion to make use of a particular investment technique or
activity are not fundamental and may be changed by the Board of Trustees of the
Trust without the approval of shareholders.
The Fund may not: (1) borrow money or pledge or mortgage its assets, except
that the Fund may borrow from banks up to 10% of the current value of its total
net assets for temporary purposes only in order to meet redemptions,
and those borrowings may be secured by the pledge of not more than 10% of the
current value of its total net assets (but investments may not be
purchased by the Fund while any such borrowings exist); (2) make loans, except
loans of portfolio securities having a value of not more than 10% of the Fund's
current assets and except that the Fund may purchase a portion of an issue of
publicly distributed bonds, debentures or other obligations, make deposits with
banks and enter into repurchase agreements with respect to its portfolio
securities; or (3) invest an amount equal to 10% or more of the current value of
the Fund's net assets in illiquid securities, including those securities which
do not have readily available market quotations and repurchase agreements having
maturities of more than seven calendar days. Investments in restricted
securities eligible for resale pursuant to Rule 144A of the Securities Act of
1933 which have been determined to be liquid by the Board of Trustees based upon
the trading markets for the securities will not be included for purposes of this
limitation. However, investing in Rule 144A securities could have the effect of
increasing the level of fund illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing such
securities. The foregoing investment restrictions and those
described in the SAI are fundamental policies which may be changed only when
permitted by law and approved by the holders of a majority of the outstanding
voting securities of the Fund, as described under "Other Information" in the
SAI.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER
The management of the Fund is supervised by the Trustees of Evergreen Tax
Free Trust. The Capital Management Group of First Union National Bank of North
Carolina ("CMG") serves as investment adviser to each Fund. First Union National
Bank of North Carolina ("FUNB") is a subsidiary of First Union Corporation
("First Union"), one of the ten largest bank holding companies in the United
States. First Union is headquartered in Charlotte, North Carolina, and had $83.1
billion in consolidated assets as of June 30, 1995. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses through offices in 36 states. The Capital Management Group of FUNB
manages or otherwise oversees the investment of over $36 billion in assets
belonging to a wide range of clients, including the fifteen series of Evergreen
Investment Trust (formerly known as First Union Funds). 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. Prior to December XXX, 1995, First Fidelity Bank, N.A. ("FFB") served
as investment adviser to the Fund. CMG succeeded to the mutual funds advisory
business of FFB in connection with the acquisition of FFB by a subsidiary of
First Union.
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 .40 of 1% of the average daily net assets of the Fund up to $500 million, .36
of 1% of the next $500 million of assets, .32 of 1% of assets in excess of $1
billion but not exceeding $1.5 billion, and .28 of 1% of assets in excess of
$1.5 billion. The total annualized operating expenses of the Fund for its most
recent fiscal period 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
Incorporated, 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 the Funds 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 $XXXX billion as of December 30,
1995.
<PAGE>
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. The Fund has adopted for its Class A shares
a "Rule 12b-1 plan" (each, a "Plan"or collectively the "Plans"). Pursuant to the
Plan, the Fund may incur distribution-related and shareholder servicing-related
expenses which may not exceed an annual rate of .35 of 1% of the Fund's
aggregate average daily net assets attributable to Class A 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 the Fund's aggregate
average daily net assets attributable to Class A 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 Fund may also make
payments, 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.
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES You can purchase shares of the Fund 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 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
the Fund are offered through this Prospectus. (See "General Information" --
"Other Classes of Shares".) Class A shares of the Fund can be purchased at net
asset value without an initial sales charge. Certain broker-dealers or other
financial institutions may impose a fee in connection with purchases at net
asset value.
How the Fund Values its Shares. The net asset value of the 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 the Fund's investment adviser, are accrued daily. The securities
in the 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 the 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. The 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 the 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 the Fund's $1.00 per
share net asset value, or if there were other deviations which the Trustees
believed would result in a material dilution to shareholders or purchasers, the
Trustees would promptly consider what action, if any, should be initiated.
Additional Purchase Information. As a condition of this offering, if a
purchase is canceled due to nonpayment or because an investor's check does not
clear, the investor will be responsible for any loss the Fund or the Fund's
investment adviser incurs. If such investor is an existing shareholder, the Fund
may redeem shares from his or her 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.
Shares of the Fund 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 phone number on the front page of this Prospectus for
additional information on same day purchases by telephone. Investment checks
received at State Street will be invested on the date of receipt. Shareholders
will begin earning dividends the following business day.
A Fund cannot accept investments specifying a certain price or date and
reserves the right to reject any specific purchase order, including orders in
connection with exchanges from the other Evergreen Funds. Although not currently
anticipated, each Fund reserves the right to suspend the offer of shares for a
period of time.
General. In addition to 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.
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 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. 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.
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. 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.
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, the 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 Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940 pursuant to which the Fund is obligated to redeem shares
solely in cash, up to the lesser of $250,000 of 1% of the 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. An exchange
which represents an initial investment in another Evergreen mutual fund must
amount to at least $1,000. Once an exchange request has been telephoned or
mailed, it is irrevocable and may not be modified or canceled. Exchanges will be
made on the basis of the relative net asset values of the shares exchanged next
determined after an exchange request is received. Exchanges are subject to
minimum investment and suitability requirements.
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.
Exchanges Through Your Financial Intermediary. The 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 the 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 Fund offers 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.
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.
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 $100. 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.
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. If you elect to receive
dividends and distributions in cash and the U.S. Postal Service cannot deliver
the checks, or if the checks remain uncashed for six months, the checks will be
reinvested into your account at the then current net asset value.
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 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 Fund declares substantially all of
its 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 the 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".)
The 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. The Fund anticipates meeting such distribution requirements.
The excise tax generally does not apply to the tax exempt income of a regulated
investment company that pays exempt interest dividends.
The Fund will designate and pay exempt-interest dividends derived from
interest earned on qualifying tax exempt obligations. Such exempt-interest
dividends may be excluded by shareholders of the Fund from their gross income
for Federal income tax purposes, however, (1) all or a portion of such
exempt-interest dividends may be a specific preference item for purposes of the
Federal individual and corporate alternative minimum taxes to the extent that
they are derived from certain types of private activity bonds issued after
August 7, 1986, and (2) all exempt-interest dividends will be a component of
"adjusted current earnings" for purposes of the Federal corporate alternative
minimum tax. Dividends paid from taxable income, if any, and distributions of
any net realized short-term capital gains (whether from tax exempt or taxable
obligations) are taxable as ordinary income, even though received in additional
Fund shares. Market discount recognized on taxable and tax-free bonds is taxable
as ordinary income, not as excludable income.
Following the end of each calendar year, every shareholder of the Fund
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.
The 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 Fund is a separate investment series of Evergreen Tax
Free Trust, a Massachusetts business trust organized in 1985. The Fund does 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.
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 registrar, transfer agent and dividend-disbursing agent for 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 Incorporated, located
230 Park Avenue, New York, New York 10169, is the principal underwriter of the
Funds. Furman Selz Incorporated also acts as sub-administrator to the Fund.
Other Classes of Shares. The Fund offers two classes of shares, Class A and
Class Y. 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 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 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.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which
Funds operate provide that no trustee or shareholder will be personally liable
for the obligations of the trust and that every written contract made by the
trust contain a provision to that effect. If any trustee or shareholder were
required to pay any liability of the trust, that person would be entitled to
reimbursement from the general assets of the trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
INVESTMENT ADVISER
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick, LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 230 Park Avenue, New York, New York 10169
******************************************************************************
*******************************************************************************
Y MONEY MARKET
PROSPECTUS January 22, 1996
(Evergreen tree logo appears here)
EVERGREEN(SM)PENNSYLVANIA TAX FREE MONEY MARKET FUND
CLASS A SHARES
The EVERGREEN PENNSYLVANIA TAX FREE MONEY MARKET FUND (the "Fund") is
designed to provide investors with current income, stability of principal and
liquidity. This Prospectus provides information regarding the Class Y offered by
the Fund. The Fund 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 Fund and certain other
funds in the Evergreen group of mutual funds dated January 22, 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 FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND 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
OVERVIEW OF THE FUND
EXPENSE INFORMATION
FINANCIAL HIGHLIGHTS
DESCRIPTION OF THE FUND
Investment Objectives and Policies
Investment Restrictions
MANAGEMENT OF THE FUND
Investment Adviser
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares
How to Redeem Shares
Exchange Privilege
Shareholder Services
Effect of Banking Laws
OTHER INFORMATION
Dividends, Distributions and Taxes
General Information
OVERVIEW OF THE FUND
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 Fund".
The Capital Management Group of First Union National Bank of North Carolina
("CMG") serves as investment adviser to EVERGREEN PENNSYLVANIA TAX FREE MONEY
MARKET FUND. First Union National Bank of North Carolina ("FUNB") is a
subsidiary of First Union Corporation, one of the ten largest bank holding
companies in the United States.
EVERGREEN PENNSYLVANIA TAX-FREE MONEY MARKET FUND invests in high quality
Pennsylvania securities that are exempt from Federal and Pennsylvania personal
income taxes in the opinion of bond counsel to the issuer with remaining
maturities of thirteen months or less.
The 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 THE FUND WILL BE
ACHIEVED.
<PAGE>
EXPENSE INFORMATION The table set forth below summarizes the shareholder
transaction costs associated with an investment in Class Y shares of the Fund.
For further information see "Purchase and Redemption of Shares" and "General
Information -- Other Classes of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge (as a % of None
original purchase price or redemption
proceeds, whichever is lower)
Redemption Fee None
Exchange Fee None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to 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.
EVERGREEN PENNSYLVANIA TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
EXAMPLE
ANNUAL OPERATING
EXPENSES*
Class Y Class Y
<S> <C> <C> <C>
Management Fees .50%
After 1 Year $ 10
12b-1 Fees ** .30%
After 3 Years $ 32
Other Expenses .22%
After 5 Years $ 56
After 10 Years $ 125
Total 1.02%
</TABLE>
<PAGE>
The investment adviser has agreed to reimburse the 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 XXX of 1% of average net assets for Class A Shares for the fiscal
period ended February 28, 1995.
**Class A Shares can pay up to .50 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. 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, the Fund's investment adviser may, at its discretion, waive
its fee or reimburse a Fund for certain of its expenses in order to reduce the
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. Such expenses have been restated
to reflect current fee arrangements. 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.
FINANCIAL HIGHLIGHTS
[TO BE ADDED BY AMENDMENT]
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Fund is to seek to provide investors with
as high a level of current income as is consistent with preservation of capital
and liquidity. There is no assurance that this objective will be achieved.
To obtain its objective the Fund invests at least 80% of its net assets in
municipal obligations issued by the Commonwealth of Pennsylvania or its
counties, municipalities, authorities or other political subdivisions, and
municipal obligations 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 (collectively, "Municipal Obligations") and Pennsylvania
personal income taxes. The Fund limits its investments to Municipal Obligations
with remaining maturities of thirteen months or less and will maintain a
dollar-weighted average portfolio maturity of 90 days or less.
Normally, the Fund will seek to invest substantially all of its assets in
short-term Municipal Obligations. However, under certain unusual circumstances,
such as a temporary decline in the issuance of Pennsylvania obligations, the
Fund may invest up to 20% of its assets in the following: short-term municipal
securities issued outside of Pennsylvania (the income from which may be subject
to Pennsylvania income taxes) or certain taxable fixed income securities (the
income from which may be subject to Federal and Pennsylvania personal income
taxes). In most instances, however, the Fund will seek to avoid such holdings in
an effort to provide income that is fully exempt from Federal and Pennsylvania
personal income taxes.
The Fund may also invest in Municipal Obligations 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 "Federal Taxes" for further information.
The Fund will not invest in options, financial futures transactions or
other similar "derivative" instruments except as otherwise provided herein.
Shares of the fund are not insured or guaranteed by the United States
Government. The Fund will only purchase securities: (i) rated within the two
highest rating categories by Moody's Investors Service Inc., ("Moody's") and
Standard & Poors Ratings Group ("S & P") or in a comparable rating category by
any two of the nationally recognized statistical rating organizations that have
rated the securities; (ii) rated in a comparable rating category by only one
such organization that has rated the securities, or (iii) which, if unrated, are
deemed to be of equivalent quality as determined by the investment adviser
pursuant to guidelines established by the Board of Trustees. The types of
Municipal Obligations in which the Fund may invest include the following:
MUNICIPAL BONDS. Municipal bonds generally have a maturity at the time of
issuance of more than one year. Municipal bonds may be issued to raise money for
various public purposes -- such as constructing public facilities and resource
recovery projects and making loans to public institutions. There are generally
two types of municipal bonds: general obligation bonds and revenue bonds.
General obligation bonds are backed by the taxing power of the issuing
municipality and are considered the safest type of municipal bond. Revenue bonds
are backed by the revenues of a project or facility -- tolls from a toll bridge,
for example. Industrial development revenue bonds (which are private activity
bonds) are a specific type of revenue bond backed by the credit and security of
a private user, and therefore investments in these bonds have more potential
risk. Certain types of municipal bonds are issued to obtain funding for
privately operated facilities. Municipal bonds generally have a maturity at the
time of issuance of more than one year.
MUNICIPAL NOTES. Municipal notes are generally sold as interim financing in
anticipation of the collection of taxes, a bond sale or receipt of other
revenue. Municipal notes generally have maturities at the time of issuance of
one year or less. Investments in municipal notes are limited to notes which are
rated at the date of purchase: (i)" MIG 1" or "MIG 2" by Moody's and in a
comparable rating category by at least one other nationally recognized
statistical rating organization that has rated the notes, or (ii) in a
comparable rating category by only one such organization, including Moody's,
if it is the only organization that has rated the notes, or (iii) if not
rated, are, in the opinion of the Adviser, of comparable investment quality
and within the credit quality policies and guidelines established by the Board
of Trustees.
Notes rated "MIG 1" are judged to be of the "best quality" and carry the
smallest amount of investment risk. Notes rated "MIG 2" are judged to be of
"high quality", with margins of protection ample although not as large as in the
preceding group.
MUNICIPAL COMMERCIAL PAPER. Municipal commercial paper is a debt obligation
with a stated maturity of one year or less which is issued to finance seasonal
working capital needs or as short-term financing in anticipation of longer-term
debt. Investments in municipal commercial paper are limited to commercial paper
which is rated at the date of purchase: (i) "P-1" or "P-2" by Moody's and "A-1",
"A-1 +" or "A-2" by S&P or (ii) in a comparable rating category by any two of
the nationally recognized statistical ratings organizations that have rated
commercial paper or (iii) in a comparable rating category by only one such
organization if it is the only organization that has rated the commercial paper
or (iv) if not rated, is, in the opinion of the Adviser, of comparable
investment quality and within the credit quality policies and guidelines
established by the Board of Trustees.
Issuers of municipal (and taxable) commercial paper rated "P-1" have a
"superior capacity for repayment of short-term promissory obligations". The
"A-1" rating for commercial paper under the S&P classification indicates that
the "degree of safety regarding timely payment is either overwhelming or very
strong". Commercial paper with "overwhelming safety characteristics" will be
rated "A1+". Commercial paper receiving a "P-2" rating has a strong capacity for
repayment of short-term promissory obligations. Commercial paper rated "A-2" has
the capacity for timely payment although the relative degree of safety is not as
overwhelming as for issues designated "A-1". See the Appendix for a more
complete description of securities ratings.
WHEN-ISSUED SECURITIES. The Fund may purchase Municipal Obligations on a
when-issued basis, in which case delivery and payment normally take place 15 to
45 days after the date of the commitment to purchase. The Fund will only make
commitments to purchase Municipal Obligations on a when-issued basis with the
intention of actually acquiring the securities but may sell them before the
settlement date if it is deemed advisable. Any gains realized in such sales
would produce taxable income. The when-issued securities are subject to market
fluctuation and no interest accrues to the purchaser during this period. The
payment obligation and the interest rate that will be received on the securities
are each fixed at the time the purchaser enters into the commitment. For
purposes of determining the Fund's weighted average maturity, the maturity of a
when-issued security is calculated from its commitment date. Purchasing
Municipal Obligations on a when-issued basis is a form of leveraging and can
involve a risk that the yields available in the market when the delivery takes
place may actually be higher than those obtained in the transaction itself in
which case there could be an unrealized loss at the time of delivery.
The Fund will establish a segregated account with its custodian in which it
will maintain cash, United States government securities, or other liquid, high
quality debt instruments in an amount at least equal in value to the Fund's
commitments to purchase when-issued securities. If the value of these assets
declines, the Fund will place additional liquid assets in the account on a daily
basis so that the value of the assets in the account is equal to the amount of
such commitments.
SECURITIES WITH PUT OR DEMAND RIGHTS. The Fund has the ability to enter
into put transactions, sometimes referred to as stand-by commitments, with
respect to Municipal Obligations held in its portfolio or to purchase securities
which carry a demand feature or put option which permit the 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 the Fund
for all such transactions.
The amount payable to the 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, the 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.
The 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. The 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 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 Adviser, present minimal credit risks. The Adviser
will monitor periodically the creditworthiness of issuers of such obligations
held by the Fund. The 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 or bank should
default on its obligation to purchase an underlying security, the Fund might be
unable to recover all or a portion of any loss sustained from having to sell the
security elsewhere. The Fund intends to enter into put transactions solely to
maintain portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes.
For a detailed description of put transactions, see "Investment Policies --
Securities with Put Rights" in the Statement of Additional Information.
TAXABLE SECURITIES. Under normal market conditions, the Fund may at times
elect to invest temporarily up to 20% of the current value of its net assets in
taxable securities of the type described below pending the investment in
Municipal Obligations of proceeds of sales of Fund shares or proceeds from the
sale of portfolio securities or in anticipation of redemptions. However, at all
times under normal market conditions the percentage of the Fund's income and
corresponding distributions which is tax-exempt will be very close to 100%. In
addition, for temporary defensive purposes, the Fund may invest up to 100% of
its total assets in such taxable securities when, in the opinion of the Adviser,
it is advisable to do so because of market conditions. The types of taxable
securities in which the Fund may invest are limited to the following money
market instruments which have remaining maturities not exceeding thirteen
months; (i) obligations of the United States Government, its agencies or
instrumentalities; (ii) negotiable certificates of deposit and bankers'
acceptances of United States banks which have more than $1 billion in total
assets at the time of investment and are members of the Federal Reserve System
or are examined by the Comptroller of the Currency or whose deposits are insured
by the Federal Deposit Insurance Corporation; (iii) domestic and foreign U.S.
dollar-denominated commercial paper rated "P-1" by Moody's or "A-1" or "A-1+" by
S&P; and (iv) repurchase agreements with respect to any of the foregoing
portfolio securities. The Fund also has the right to hold up to 100% of its
total assets in cash as the Adviser deems necessary for temporary defensive
purposes.
Investments of the Fund in U.S. dollar-denominated foreign commercial
paper may involve certain risks not applicable to investment by the Fund in the
obligations of domestic issuers. These risks may include risks of foreign
political or economic instability, difficulties in enforcing a judgment against
a foreign issuer should it default, the imposition or tightening of exchange
controls and changes in foreign governmental attitudes toward private
investment, including the possibility of increased taxation, nationalization or
expropriation of Fund assets. Foreign issuers of securities may also be subject
to different accounting and disclosure systems, which may affect the type and
quality of information available about an issuer. The rating services used by
the Fund take these factors into consideration when assigning a rating to a
particular security, and therefore the additional risk to the Fund of investing
in foreign securities with the same ratings as a domestic security is not
expected to be significant.
The Fund will not invest in any obligations of or loan any of its portfolio
securities to the First Union National Bank of North Carolina ("FUNB") or its
affiliates as defined in the 1940 Act or any affiliates of the Fund.
Subject to the limitations described, the Fund is permitted to invest in
obligations of correspondent banks of FUNB (banks with which the FUNB
maintains a special bank servicing relationship) which are not affiliates of
the Trust, its Adviser or its Distributor, but the Fund will not give
preference in its investment selections to those obligations.
After purchase by the Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Fund. Neither
event will require a sale of such security by the Fund. However, the
Adviser will consider such event in its determination of whether the Fund
should continue to hold the security. To the extent the ratings given by Moody's
or S&P may change as a result of changes in such organizations of their rating
systems, the Fund will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained in this
Prospectus and in the SAI.
Opinions relating to the validity of Municipal Obligations and to the
exclusion of interest thereon from Federal and Pennsylvania personal income
taxes are rendered by bond counsel to the respective issuers at the time of
issuance. Neither the Fund, the Trust nor the Adviser will review the
proceedings relating to the issuance of Municipal Obligations or the basis for
such opinions.
MUNICIPAL LEASE OBLIGATIONS. Municipal lease obligations are financing
arrangements secured by leases of property to a municipality. These obligations
are considered to be illiquid securities and typically are not fully backed by
the municipality's credit. Interest from a municipal lease obligation may become
taxable if the lease is assigned. If the governmental user does not appropriate
sufficient funds for the following year's lease payments, the lease will
terminate, with the possibility of default on the lease obligations and
significant loss to the Fund. The Fund will not purchase any municipal lease
obligation that is not covered by a legal opinion (typically from the issuer's
counsel) to the effect that, as of the effective date of such lease, the lease
is the valid and binding obligation of the governmental issuer. For a more
detailed description of Municipal Leases, see "Investment Policies -- Municipal
Leases" in the Statement of Additional Information.
RESOURCE RECOVERY BONDS. Resource recovery bonds 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.
VARIABLE AND FLOATING RATE OBLIGATIONS. Certain of the Municipal
Obligations which the Fund may purchase have a floating or variable rate of
interest. Such obligations bear interest at rates which are not fixed, but which
vary with changes in specified market rates or indices, such as a Federal
Reserve composite index. Certain of such obligations may carry a demand feature
or put option which would permit the Fund, as holder, to tender them back to
the issuer or a third party prior to maturity ("demand instruments"). The Fund
may invest in floating and variable rate Municipal Obligations even if they
carry stated maturities in excess of one year. Obligations with a demand feature
generally receive two ratings, one representing an evaluation of the degree of
risk associated with scheduled interest and principal payments and the other
representing an evaluation of the degree of risk associated with the demand
feature. The two highest ratings assigned to the demand feature by Moody's are
"VMIG 1" and "VMIG 2" which have generally the same characteristics as Moody's
"MIG 1" and "MIG 2" ratings. Investments in variable and floating rate
obligations are limited to those that are rated "VMIG" 1 by Moody's or, if not
rated, are, in the opinion of the Adviser, of comparable investment quality. The
Adviser will monitor on an ongoing basis the earning power, cash flow and other
liquidity ratios of the issuers of such obligations and will similarly monitor
the ability of an issuer of a demand instrument to pay principal and interest on
demand. The Fund's right to obtain payment at par on a demand instrument could
be affected by events occurring between the date the Fund elects to demand
payment and the date payment is due which may adversely affect the ability of
the issuer of the instrument to make payment when due.
The Fund does not intend to concentrate its investments in any one
industry. Thus, from time to time, the Fund may invest 25% or more of its
assets in Municipal Obligations which are related in such a way that an
economic, business or political development or change affecting one such
Obligation would also affect the other Obligations; for example, Municipal
Obligations, the interest on which is paid from revenues of similar type
projects or Municipal Obligations whose issuers are located in the same state.
Because the taxable money market is a broader and more liquid market with a
greater number of investors, issuers and market makers than is the market for
short-term tax-exempt municipal obligations, the liquidity of the Fund may not
be equal to that of a money market fund which invests exclusively in short-term
taxable money market instruments. The more limited marketability of short-term
tax-exempt municipal obligations may make it difficult in certain circumstances
to dispose of large investments advantageously. In general, tax-exempt municipal
obligations are also subject to credit risks such as the loss of credit ratings
or possible default. In addition, an issuer of tax-exempt municipal obligations
may lose its tax-exempt status in the event of a change in the current tax laws.
RISK FACTORS: INVESTING IN PENNSYLVANIA MUNICIPAL OBLIGATIONS. Each
investor should consider carefully the special risks inherent in the Fund's
investment in Pennsylvania Municipal Obligations. Pennsylvania has been
historically identified as a heavy industry state although that reputation has
recently changed as the industrial composition of Pennsylvania diversified when
the coal, steel, and railroad industries began to decline. This diversification
was necessary when the traditionally strong industries in Pennsylvania declined
as a long-term shift in jobs, investment and workers away from the northeast
part of the nation took place. The major new sources of growth are in the
service sector, including trade, medical and health services, education and
financial institutions. Pennsylvania is highly urbanized, with approximately 50%
of the Commonwealth's population contained in the metropolitan areas which
include the cities of Philadelphia and Pittsburgh.
It should be noted that Pennsylvania Municipal Obligations may be adversely
affected by local political and economic conditions and developments within
Pennsylvania. For example, adverse conditions in a significant industry within
Pennsylvania may from time to time have a correspondingly adverse effect on
specific issuers within Pennsylvania or on anticipated revenue to the
Commonwealth itself; conversely, an improving economic outlook for a significant
industry may have a positive effect on such issuers or revenues. An expanded
discussion of the risks associated with the purchase of Pennsylvania issues is
contained in the SAI.
INVESTMENT COMPANY SECURITIES. The Fund may invest in securities issued by
other investment companies. Such securities will be acquired by Fund within the
limits prescribed by the Act, which include a prohibition against the Fund
investing more than 10% of the value of its total assets in such securities.
Investments in securities issued by other investment companies will subject
shareholders to the imposition of duplicative fees and expenses.
The Fund may engage in the following portfolio transactions:
LOANS OF PORTFOLIO SECURITIES. The Fund may loan its portfolio securities
to brokers, dealers, and financial institutions to increase current income. All
loans of securities must be continuously secured by collateral consisting of
United States Government securities, cash or letters of credit maintained on a
daily mark-to-market basis in an amount at least equal to the current market
value of the securities loaned plus the interest payable with respect to the
loan.
As a condition of the loan, the Fund must have the right to call the loan
and obtain the return of the securities loaned within five business days.
Moreover, the Fund will receive any interest or dividends paid on the loaned
securities. The Fund will not lend portfolio securities to FUNB, or to
any affiliate of the FUNB or to any other affiliate of the Fund. Loans of
securities involve a risk that the borrower may fail to return the securities or
may fail to provide additional collateral.
REPURCHASE AGREEMENTS. Securities held by the Fund may be subject to
repurchase agreements. A repurchase agreement is a transaction in which the
seller of a security commits itself at the time of the sale to repurchase that
security from the buyer at a mutually agreed upon time and price. The Fund will
enter into repurchase agreements only with dealers, domestic banks or recognized
financial institutions which, in the opinion of the Adviser, present minimal
credit risks. The Fund will enter into repurchase agreements only with respect
to obligations which could otherwise be purchased by the Fund or any other
obligations backed by the full faith and credit of the United States. Where the
securities underlying a repurchase agreement are not U.S. Government securities,
they must be of the highest quality at the time the repurchase agreement is
entered into (e.g., a long-term debt security would be required to be rated by
S&P as "AAA" or its equivalent). While the maturity of the underlying securities
in a repurchase agreement transaction may be more than one year, the term of the
repurchase agreement is always less than one year. The maturities of the
underlying securities will have to be taken into account in calculating the
Fund's dollar weighted average portfolio maturity if the seller of the
repurchase agreement fails to perform under such agreement. In the event of
default by the seller under the repurchase agreement, the Fund may experience a
loss of income from the loaned securities and a decrease in the value of any
collateral maintained, problems in exercising its rights to the underlying
securities and costs and time delays in connection with the disposition of such
securities. The Fund will invest no more than 10% of its net assets in
repurchase agreements maturing in more than seven days and other illiquid
investments.
INVESTMENT RESTRICTIONS
The investment objective of the Fund and its policy of investing at least
80% of its net assets in Municipal Obligations are fundamental policies and
except for policies with respect to repurchase agreements and securities with
put rights, which are also fundamental policies of the Fund and subject to the
investment restrictions set forth below, the Fund's investment policies and the
Adviser's discretion to make use of a particular investment technique or
activity are not fundamental and may be changed by the Board of Trustees of the
Trust without the approval of shareholders.
The Fund may not: (1) borrow money or pledge or mortgage its assets, except
that the Fund may borrow from banks up to 10% of the current value of its total
net assets for temporary purposes only in order to meet redemptions,
and those borrowings may be secured by the pledge of not more than 10% of the
current value of its total net assets (but investments may not be
purchased by the Fund while any such borrowings exist); (2) make loans, except
loans of portfolio securities having a value of not more than 10% of the Fund's
current assets and except that the Fund may purchase a portion of an issue of
publicly distributed bonds, debentures or other obligations, make deposits with
banks and enter into repurchase agreements with respect to its portfolio
securities; or (3) invest an amount equal to 10% or more of the current value of
the Fund's net assets in illiquid securities, including those securities which
do not have readily available market quotations and repurchase agreements having
maturities of more than seven calendar days. Investments in restricted
securities eligible for resale pursuant to Rule 144A of the Securities Act of
1933 which have been determined to be liquid by the Board of Trustees based upon
the trading markets for the securities will not be included for purposes of this
limitation. However, investing in Rule 144A securities could have the effect of
increasing the level of fund illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing such
securities. The foregoing investment restrictions and those
described in the SAI are fundamental policies which may be changed only when
permitted by law and approved by the holders of a majority of the outstanding
voting securities of the Fund, as described under "Other Information" in the
SAI.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER
The management of the Fund is supervised by the Trustees of Evergreen Tax
Free Trust. The Capital Management Group of First Union National Bank of North
Carolina ("CMG") serves as investment adviser to each Fund. First Union National
Bank of North Carolina ("FUNB") is a subsidiary of First Union Corporation
("First Union"), one of the ten largest bank holding companies in the United
States. First Union is headquartered in Charlotte, North Carolina, and had $83.1
billion in consolidated assets as of June 30, 1995. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses through offices in 36 states. The Capital Management Group of FUNB
manages or otherwise oversees the investment of over $36 billion in assets
belonging to a wide range of clients, including the fifteen series of Evergreen
Investment Trust (formerly known as First Union Funds). 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. Prior to December XXX, 1995, First Fidelity Bank, N.A. ("FFB") served
as investment adviser to the Fund. CMG succeeded to the mutual funds advisory
business of FFB in connection with the acquisition of FFB by a subsidiary of
First Union.
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 .40 of 1% of the average daily net assets of the Fund up to $500 million, .36
of 1% of the next $500 million of assets, .32 of 1% of assets in excess of $1
billion but not exceeding $1.5 billion, and .28 of 1% of assets in excess of
$1.5 billion. The total annualized operating expenses of the Fund for its most
recent fiscal period 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
Incorporated, 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 the Funds 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 $XXXX billion as of December 30,
1995.
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 (currently 4:00 p.m. Eastern time) each business day (i.e., any weekday
exclusive of days on which the New York Stock Exchange (the "Exchange") or State
Street is closed). The Exchange is closed on New Year's Day, Presidents Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The net asset value per share is calculated by taking the sum of
the values of a Fund's investments and any cash and other assets, subtracting
liabilities, and dividing by the total number of shares outstanding. All
expenses, including the fees payable to 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 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
believed would result in a material dilution to shareholders or purchasers, the
Trustees would promptly consider what action, if any, should be initiated.
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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.
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 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 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
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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. An exchange which represents an initial investment in another
Evergreen mutual fund must amount to at least $1,000. Once an exchange request
has been telephoned or mailed, it is irrevocable and may not be modified or
canceled. Exchanges will be made on the basis of the relative net asset values
of the shares exchanged next determined after an exchange request is received.
Exchanges are subject to minimum investment and suitability requirements.
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 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
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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.
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.
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 $100. 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. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
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
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) 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 (formerly Evergreen Money Market
Trust) is a Massachusetts business trust organized in 1987. The EVERGREEN TAX
EXEMPT MONEY MARKET FUND is a separate investment series of The Evergreen
Municipal Trust, which is a Massachusetts business trust organized in 1988. The
Evergreen Treasury Money Market Fund is a separate investment series of
Evergreen Investment Trust (formerly First Union Funds), which is 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.
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 registrar, transfer agent and dividend-disbursing agent for 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 Incorporated, located
237 Park Avenue, New York, New York 10017, is the principal underwriter of the
Funds. Furman Selz Incorporated 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 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.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which
Funds operate provide that no trustee or shareholder will be personally liable
for the obligations of the trust and that every written contract made by the
trust contain a provision to that effect. If any trustee or shareholder were
required to pay any liability of the trust, that person would be entitled to
reimbursement from the general assets of the trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
22
<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 & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 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., 237 Park Avenue, New York, New York 10017
536128rev01
*******************************************************************************
ABC SINGLE STATE
<PAGE>
PROSPECTUS January 22, 1996
(Evergreen tree logo appears here)
EVERGREEN(SM) STATE SPECIFIC TAX FREE FUNDS
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 January 22, 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
OVERVIEW OF THE FUNDS
EXPENSE INFORMATION
FINANCIAL HIGHLIGHTS
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies
Investment Practices and Restrictions
MANAGEMENT OF THE FUNDS
Investment Adviser
Distribution Plans and Agreements
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares
How to Redeem Shares
Exchange Privilege
Shareholder Services
Effect of Banking Laws
OTHER INFORMATION
Dividends, Distributions and Taxes
General Information
APPENDIX
Florida Risk Considerations
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
("CMG") serves as investment adviser to Evergreen State Specific Tax Free Funds
which include: EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA
MUNICIPAL BOND FUND, EVERGREEN NEW JERSEY TAX FREE 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, the sixth
largest bank holding company in the United States.
EVERGREEN FLORIDA MUNICIPAL BOND FUND (formerly First Union Florida
Municipal Bond Portfolio, successor to ABT Florida Tax-Free 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 (formerly First Union Georgia
Municipal Bond Portfolio) 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 (formerly FFB 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 (formerly First Union North
Carolina Municipal Bond Portfolio) 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 (formerly First Union South
Carolina Municipal Bond Portfolio seeks current income exempt from federal
income tax and South Carolina state income tax.
EVERGREEN VIRGINIA MUNICIPAL BOND FUND (formerly First Union Virginia
Municipal Bond Portfolio) 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 (successor to ABT 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 4.75% None
Purchases (as a % of offering price)
Sales Charge on Dividend Reinvestments None None
Contingent Deferred Sales Charge None 5% during the first year, 4% during the
(as a % of original purchase second year, 3% during the third and fourth
price or redemption proceeds, years, 2% during the fifth year, 1% during
whichever is lower) the sixth and seventh years and 0% after the
seventh 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(a) .30% .30%
After 1 Year $ 53 $ 66 $ 16
12b-1 Fees(b) .06% .75%
After 3 Years $ 66 $ 79 $ 49
Shareholder Service Fees -- .25%
After 5 Years $ 80 $ 104 $ 84
Other Expenses .25% .25%
After 10 Years $ 120 $ 147 $147
Total .61% 1.55%
</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(b) .25% .75%
After 3 Years $ 85 $ 93 $ 63
Shareholder Service Fees -- .25%
After 5 Years $ 113 $ 128 $108
Other Expenses(c) .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 $ 60 $ 70 $ 20
12b-1 Fees(b) .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 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(b) .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>
3
<PAGE>
<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(b) .25% .75% After 3 Years $ 85 $ 93 $ 63
Shareholder Service Fees -- .25% After 5 Years $ 113 $ 128 $108
Other Expenses(c) .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(b) .25% .75% After 3 Years $ 85 $ 93 $ 63
Shareholder Service Fees -- .25% After 5 Years $ 113 $ 128 $108
Other Expenses(c) .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(a) .30% .30% After 1 Year $ 58 $ 68 $ 18
12b-1 Fees(b) .25% 1.00% After 3 Years $ 80 $ 87 $ 57
Other Expenses .52% .52% After 5 Years $ 104 $ 119 $ 99
Total 1.07% 1.82% After 10 Years $ 172 $ 185 $185
</TABLE>
(a) CMG has agreed to limit the Management Fee charged to EVERGREEN FLORIDA
MUNICIPAL BOND FUND and EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND to
.30 of 1% of average net assets until July 7, 1996.
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.
(b) 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.
EVERGREEN FLORIDA MUNICIPAL BOND FUND will not pay 12b-1 Fees to the extent
that the effect of such payment would be to cause the Fund's ratio of expenses
to average net assets for Class A Shares to exceed .61 of 1%. 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 period ended
August 31, 1995 as applicable were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
EVERGREEN FLORIDA MUNICIPAL BOND FUND .82% 1.44%
EVERGREEN GEORGIA MUNICIPAL BOND FUND .71% 1.46%
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND .92% 1.67%
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND .53% 1.28%
EVERGREEN VIRGINIA MUNICIPAL BOND FUND .72% 1.47%
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND 1.07% N/A
</TABLE>
(c) Reflects agreements by CMG 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 SOUTH CAROLINA
MUNICIPAL BOND FUND and EVERGREEN VIRGINIA MUNICIPAL BOND FUND to 1% of
average net assets for the
4
<PAGE>
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 2.83% 3.58%
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND 6.50% 7.25%
EVERGREEN VIRGINIA MUNICIPAL BOND FUND 3.83% 4.58%
</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. Such expenses have been restated
to reflect current fee arrangements and 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.
5
<PAGE>
FINANCIAL HIGHLIGHTS
[FINANCIAL HIGHLIGHTS TO BE ADDED BY AMENDMENT]
<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 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 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 issued by state and local governments or
authorities to finance the acquisition of equipment and
facilities. The Fund 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.
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 obligations issued by the
State of New Jersey or its counties, municipalities, authorities or other
political subdivisions and municipal obligations issued by territories or
possessions of the United States, such as Puerto Rico (collectively, "Municipal
Obligations"), the interests 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 Obligations. Intermediate-term Municipal
Obligations generally mature in three to ten years. Long-term Municipal
Obligations generally mature in ten to thirty years. The Fund has no maximum or
minimum maturity for any individual Municipal Obligation, 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 Obligations. 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).
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
Obligations 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 Obligations 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 project 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.
Other types of Municipal Obligations purchased by the Fund include:
Municipal lease obligations. Municipal lease obligations are financing
arrangements secured by leases of property to a municipality. These obligations
are considered to be illiquid securities and typically are not fully backed by
the municipality's credit. Interest from municipal lease obligation may become
taxable if the lease is assigned. If the governmental user does not appropriate
sufficient funds for the following year's lease payments, the lease will
terminate, with the possibility of default on the lease obligations and
significant loss to the Fund. The Fund will not purchase any municipal lease
obligation that is not covered by a legal opinion (typically from the issuer's
counsel) to the effect that, as of the effective date of such lease, the lease
is the valid binding obligation of government issuer.
Resource recovery bonds. Resource recovery bonds 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. Zero coupon debt 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 Fund has the ability to enter
into put transactions, sometimes referred to as stand-by commitments, with
respect to Municipal Obligations held in its portfolio or to purchase securities
which carry a demand feature or put option which permit the 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 the 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 the 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. 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.
The 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. The 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 aggravate price paid for securities with put
rights may be higher than the price that would otherwise be paid.
The 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 Fund's Adviser, present minimal credit risks. The
Fund's Adviser will monitor periodically the creditworthiness of issuers of such
obligations held by the Fund. The 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, the Fund might be
unable to recover all or a portion of any loss sustained from having to sell the
security elsewhere. The Fund intends to enter into put transactions solely to
maintain portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes.
Special Risk Factors Related to Investing In New Jersey Municipal Obligations
It should be noted that New Jersey Municipal Obligations may be
adversely affected by local political and economic conditions and developments
within the State of New Jersey. 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 New Jersey's Municipal Obligations may also be affected by
general conditions in the money markets or the municipal bond markets, the
levels of federal and New Jersey 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 New Jersey issues is
contained in the Statement of Additional Information.
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. 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 until its net assets reach a level that would permit the Fund to
begin investing 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.
During the fiscal year ended August 31, 1995 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> <C>
Aaa or AAA 5.4%
Aa or AA --
A 1.9
Baa or BBB 18.3
Ba or BB 8.0
Non-rated 61.5
Total 95.1%
</TABLE>
The Fund may purchase industrial development bonds only if the interest
on such bonds is, in the opinion of bond counsel, exempt from federal income
taxes. It is anticipated that the annual portfolio turnover rate for the Fund
may exceed 100%. The Fund 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. An expanded
discussion of the risks associated with the purchase of the designated state's
municipal bonds is contained in the Statements of Additional Information.
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.
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 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. The Funds 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 assets invested in
illiquid or not readily marketable securities.
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 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 higher quality
debt securities. Credit ratings for individual securities 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 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.
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 $83 billion in consolidated assets as of
December 31, 1995. First Union and its subsidiaries provide a broad range of
financial services to individuals and businesses through offices in 36 states.
The Capital Management Group of FUNB manages or otherwise oversees the
investment of over $36 billion in assets belonging to a wide range of clients,
including all the series of Evergreen Investment Trust (formerly known as First
Union Funds). 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
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 and,
as compensation therefor, is entitled to receive an annual fee equal to .50 of
1% of the average daily net assets of each Fund, other than EVERGREEN FLORIDA
HIGH INCOME MUNICIPAL BOND FUND, from which it is entitled to receive an annual
fee equal to .60 of 1% of average daily net assets and EVERGREEN NEW JERSEY TAX
FREE INCOME FUND, from which it is entitled to receive an annual fee based on
the average daily net assets of the Fund calculated as follows: up to $500
million-.50 of 1%; in excess of $500 million up to $1 million- .45 of 1%; in
excess of $ billion up to $ 1.5 million = .35 of 1%. 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, 1995 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 Incorporated, 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 $1 billion as of September 30, 1995. Prior to December XXX,
1995, 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.
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. [ADD NEW JERSEY PORTFOLIO MANAGER]
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 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.
<PAGE>
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 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, 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>
Less than $100,000 4.99% 4.75% 4.25%
$100,000 - $249,999 3.90% 3.75% 3.25%
$250,000 - $499,999 3.09% 3.00% 2.50%
$500,000 - $999,999 2.04% 2.00% 1.75%
$1,000,000 - $2,499,999 1.01% 1.00% 1.00%
Over $2,500,000 .25% .25% .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; 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 contingent deferred sales charge. 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,
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 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> <C>
FIRST 5%
SECOND 4%
THIRD and FOURTH 3%
FIFTH 2%
SIXTH and SEVENTH 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 believe would accurately reflect fair market 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.
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 its
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.
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.
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 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. An exchange
which represents an initial investment in another Evergreen mutual fund must
amount to at least $1,000. Once an exchange request has been telephoned or
mailed, it is irrevocable and may not be modified or canceled. Exchanges will be
made on the basis of the relative net asset values of the shares exchanged next
determined after an exchange request is received. Exchanges are subject to
minimum investment and suitability requirements.
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.
Systematic Investment Plan. You may make monthly or quarterly investments
into an existing account automatically in amounts of not less than $25.
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.
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 $100. 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. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
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 of 1986, as amended (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.
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. For purposes of the Georgia intangibles tax, shares of the Fund likely are
taxable (at the rate of 10 cents per $1,000 in value of the shares held on
January 1 of each year) to shareholders who are otherwise subject to such tax.
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. 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.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
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.
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 registrar, transfer agent and dividend-disbursing agent for 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 Incorporated
located 237 Park Avenue, New York, New York 10169, is the principal underwriter
of the Funds. Furman Selz Incorporated 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.
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.
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 Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
APPENDIX A -- FLORIDA RISK CONSIDERATIONS
The following is a summary of economic factors which may affect the ability
of the municipal issuers of Florida obligations to repay general obligation and
revenue bonds. Such information is derived from sources that are generally
available to investors and is believed by the Funds to be accurate, but has not
been independently verified and may not be complete. Under current law, the
State of Florida is required to maintain a balanced budget such that current
expenses are met from current revenues. Florida does not currently impose a tax
on personal income but does impose taxes on corporate income derived from
activities within the state. In addition, Florida imposes an ad valorem tax as
well as sales and use taxes. These taxes are the principal sources of funds to
meet state expenses, including repayment of, and interest on, obligations backed
solely by the full faith and credit of the state, without recourse to any
specific project or related revenue source.
On November 3, 1992, Florida voters approved an amendment to the state
constitution which limits the annual growth in the assessed valuation of
residential property and which, over time, could constrain the growth in
property taxes, a major revenue source for local governments. The amendment
restricts annual increases in assessed valuation to the lesser of 3% or the
Consumer Price Index. The amendment applies only to residential properties
eligible for the homestead exemption and does not affect the valuation of
rental, commercial, or industrial properties. When sold, residential property
would be reassessed at market value. The amendment became effective January 1,
1993. While no immediate ratings implications are expected, the amendment could
have a negative impact on the financial performance of local governments over
time and lead to ratings revisions which may have a negative impact on the
prices of affected bonds.
Many of the bonds in which the Funds invest were issued by various units of
local government in the State of Florida. In addition, most of these bonds are
revenue bonds where the security interest of the bond holders typically is
limited to the pledge of revenues or special assessments flowing from the
project financed by the bonds. Projects include, but are not limited to, water
and waste water utilities, drainage systems, roadways, and other
development-related infrastructures. Therefore, the capacity of these issuers to
repay their obligations may be affected by variations in the Florida economy.
Since 1970, Florida has been one of the fastest growing states in the
nation. Average annual population growth over the last 20 years was 320,000.
During this period only California and Texas grew more rapidly. In terms of
total population, Florida moved from the ninth most populous state in 1970 to
fourth today.
This rapid and sustained pace of population growth has given rise to
sharp increases in construction activity and to the need for roads, drainage
systems, and utilities to serve the burgeoning population. In turn this has
driven the growth in the volume of revenue bond debt outstanding.
The pace of growth, however, has not been steady. During economic
expansions, Florida's population growth has exceeded 500,000 people per year,
but in recessions growth has slowed to 120,000 per year. The variations in
construction activity over the course of business cycles is also very large.
Although the amplitude of the swings during business cycles is large, the
duration of downturns in Florida's growth has been short. Historically,
depressed levels of growth have lasted only a year or two at most. Furthermore,
Florida's cycles have not been periods of growth or decline. Instead, what has
occurred are periods of more growth or less growth.
Florida's ability to meet increasing expenses will be dependent in part
upon the state's ability to foster business and economic growth. During the past
decade, Florida has experienced significant increases in the technology-based
and other light industries and in the service sector. This growth has
diversified the state's overall economy, which at one time was dominated by the
citrus and tourism industries. The state's economic and business growth could be
restricted, however, by the natural limitations of environmental resources and
the state's ability to finance adequate public facilities such as roads and
schools.
29
<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 & 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 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
536118rev0
*******************************************************************************
Y SINGLE STATE
<PAGE>
PROSPECTUS January 22, 1996
(Evergreen tree logo appears here)
EVERGREEN(SM) STATE SPECIFIC TAX FREE FUNDS
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 January 22, 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
OVERVIEW OF THE FUNDS
EXPENSE INFORMATION
FINANCIAL HIGHLIGHTS
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies
Investment Practices and Restrictions
MANAGEMENT OF THE FUNDS
Investment Adviser
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares
How to Redeem Shares
Exchange Privilege
Shareholder Services
Effect of Banking Laws
OTHER INFORMATION
Dividends, Distributions and Taxes
General Information
APPENDIX
Florida Risk Considerations
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
("CMG") serves as investment adviser to Evergreen State Specific Tax Free Funds
which include: EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA
MUNICIPAL BOND FUND, EVERGREEN NEW JERSEY TAX FREE 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, the sixth
largest bank holding company in the United States.
EVERGREEN FLORIDA MUNICIPAL BOND FUND (formerly First Union Florida
Municipal Bond Portfolio, successor to ABT Florida Tax-Free 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 (formerly First Union Georgia
Municipal Bond Portfolio) 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 (formerly FFB 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 (formerly First Union North
Carolina Municipal Bond Portfolio) 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 (formerly First Union South
Carolina Municipal Bond Portfolio seeks current income exempt from federal
income tax and South Carolina state income tax.
EVERGREEN VIRGINIA MUNICIPAL BOND FUND (formerly First Union Virginia
Municipal Bond Portfolio) 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 (successor to ABT 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 Y 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 Y Shares
<S> <C>
Maximum Sales Charge Imposed on 4.75%
Purchases (as a % of offering price)
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
(as a % of original purchase
price or redemption proceeds,
whichever is lower)
Redemption Fee None
Exchange Fee None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to 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).
[TO BE ADDED]
<PAGE>
FINANCIAL HIGHLIGHTS
[FINANCIAL HIGHLIGHTS TO BE ADDED BY AMENDMENT]
<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 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 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 issued by state and local governments or
authorities to finance the acquisition of equipment and
facilities. The Fund 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.
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 obligations issued by the
State of New Jersey or its counties, municipalities, authorities or other
political subdivisions and municipal obligations issued by territories or
possessions of the United States, such as Puerto Rico (collectively, "Municipal
Obligations"), the interests 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 Obligations. Intermediate-term Municipal
Obligations generally mature in three to ten years. Long-term Municipal
Obligations generally mature in ten to thirty years. The Fund has no maximum or
minimum maturity for any individual Municipal Obligation, 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 Obligations. 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).
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
Obligations 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 Obligations 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 project 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.
Other types of Municipal Obligations purchased by the Fund include:
Municipal lease obligations. Municipal lease obligations are financing
arrangements secured by leases of property to a municipality. These obligations
are considered to be illiquid securities and typically are not fully backed by
the municipality's credit. Interest from municipal lease obligation may become
taxable if the lease is assigned. If the governmental user does not appropriate
sufficient funds for the following year's lease payments, the lease will
terminate, with the possibility of default on the lease obligations and
significant loss to the Fund. The Fund will not purchase any municipal lease
obligation that is not covered by a legal opinion (typically from the issuer's
counsel) to the effect that, as of the effective date of such lease, the lease
is the valid binding obligation of government issuer.
Resource recovery bonds. Resource recovery bonds 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. Zero coupon debt 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 Fund has the ability to enter
into put transactions, sometimes referred to as stand-by commitments, with
respect to Municipal Obligations held in its portfolio or to purchase securities
which carry a demand feature or put option which permit the 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 the 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 the 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. 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.
The 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. The 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 aggravate price paid for securities with put
rights may be higher than the price that would otherwise be paid.
The 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 Fund's Adviser, present minimal credit risks. The
Fund's Adviser will monitor periodically the creditworthiness of issuers of such
obligations held by the Fund. The 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, the Fund might be
unable to recover all or a portion of any loss sustained from having to sell the
security elsewhere. The Fund intends to enter into put transactions solely to
maintain portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes.
Special Risk Factors Related to Investing In New Jersey Municipal Obligations
It should be noted that New Jersey Municipal Obligations may be
adversely affected by local political and economic conditions and developments
within the State of New Jersey. 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 New Jersey's Municipal Obligations may also be affected by
general conditions in the money markets or the municipal bond markets, the
levels of federal and New Jersey 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 New Jersey issues is
contained in the Statement of Additional Information.
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. 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 until its net assets reach a level that would permit the Fund to
begin investing 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.
During the fiscal year ended August 31, 1995 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> <C>
Aaa or AAA 5.4%
Aa or AA --
A 1.9
Baa or BBB 18.3
Ba or BB 8.0
Non-rated 61.5
Total 95.1%
</TABLE>
The Fund may purchase industrial development bonds only if the interest
on such bonds is, in the opinion of bond counsel, exempt from federal income
taxes. It is anticipated that the annual portfolio turnover rate for the Fund
may exceed 100%. The Fund 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. An expanded
discussion of the risks associated with the purchase of the designated state's
municipal bonds is contained in the Statements of Additional Information.
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.
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 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. The Funds 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 assets invested in
illiquid or not readily marketable securities.
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 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 higher quality
debt securities. Credit ratings for individual securities 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 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.
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 $83 billion in consolidated assets as of
December 31, 1995. First Union and its subsidiaries provide a broad range of
financial services to individuals and businesses through offices in 36 states.
The Capital Management Group of FUNB manages or otherwise oversees the
investment of over $36 billion in assets belonging to a wide range of clients,
including all the series of Evergreen Investment Trust (formerly known as First
Union Funds). 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
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 and,
as compensation therefor, is entitled to receive an annual fee equal to .50 of
1% of the average daily net assets of each Fund, other than EVERGREEN FLORIDA
HIGH INCOME MUNICIPAL BOND FUND, from which it is entitled to receive an annual
fee equal to .60 of 1% of average daily net assets and EVERGREEN NEW JERSEY TAX
FREE INCOME FUND, from which it is entitled to receive an annual fee based on
the average daily net assets of the Fund calculated as follows: up to $500
million-.50 of 1%; in excess of $500 million up to $1 million- .45 of 1%; in
excess of $ billion up to $ 1.5 million = .35 of 1%. 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, 1995 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 Incorporated, 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 $1 billion as of September 30, 1995. Prior to December XXX,
1995, 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.
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. [ADD NEW JERSEY PORTFOLIO MANAGER]
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
13
<PAGE>
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 a Fund's Trustees 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.
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.
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. An exchange which represents an initial investment in another
Evergreen mutual fund must amount to at least $1,000. Once an exchange request
has been telephoned or mailed, it is irrevocable and may not be modified or
canceled. Exchanges will be made on the basis of the relative net asset values
of the shares exchanged next determined after an exchange request is received.
Exchanges are subject to minimum investment and suitability requirements.
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.
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.
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 $100. 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. If you elect to receive dividends and distributions in cash and the
U.S. Postal Service cannot deliver the checks, or if the checks remain uncashed
for six months, the checks will be reinvested into your account at the then
current net asset value.
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
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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 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
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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.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Evergreen Short-Intermediate Municipal
Fund, Evergreen Short-Intermediate Municipal Fund-California and Evergreen High
Grade Tax Free Fund is contained in the annual report of each Fund for the
fiscal year ended August 31, 1995.
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.
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 registrar, transfer agent and dividend-disbursing agent for 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 Incorporated,
located 237 Park Avenue, New York, New York 10017, is the principal underwriter
of the Funds. Furman Selz Incorporated 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.
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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.
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.
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 Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
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APPENDIX -- CALIFORNIA RISK CONSIDERATIONS
The following information as to certain California risk factors is given
to investors in view of the policy of EVERGREEN SHORT-INTERMEDIATE MUNICIPAL
FUND-CALIFORNIA 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.
Changes in California constitutional and other laws during the last
several years have raised questions about the ability of California state and
municipal issuers to obtain sufficient revenue to pay their bond obligations. In
1978, California voters approved an amendment to the California Constitution
known as Proposition 13. Proposition 13 limits ad valorem taxes on real property
and restricts the ability of taxing entities to increase real property taxes.
Legislation passed subsequent to Proposition 13, however, provided for the
redistribution of California's General Fund surplus to local agencies, the
reallocation of revenues to local agencies, and the assumption of certain local
obligations by the state so as to help California municipal issuers to raise
revenue to pay their bond obligations. It is unknown, however, whether
additional revenue redistribution legislation will be enacted in the future and
whether, if enacted, such legislation would provide sufficient revenue for such
California issuers to pay their obligations. The state is also subject to
another constitutional amendment, Article XIIIB, which may have an adverse
impact on California state and municipal issuers. Article XIIIB restricts the
state from spending certain appropriations in excess of an appropriations limit
imposed for each state and local government entity. If revenues exceed such
appropriations limit, such revenues must be returned either as revisions in the
tax rates or fee schedules. Because of the uncertain impact of the
aforementioned statutes and cases, the possible inconsistencies in the
respective terms of the statutes and the impossibility of predicting the level
of future appropriations and applicability of related statutes to such
questions, it is not currently possible to assess the impact of such
legislation, cases and policies on the long-term ability of California state and
municipal issuers to pay interest or repay principal on their obligations.
California's economy is larger than many sovereign nations. During the
1980s, California experienced growth rates well in excess of the rest of the
nation. The state's major employment sectors are services, trade, and
manufacturing. Industrial concentration is in electronics, aerospace, and
non-electrical equipment. Also significant are agriculture and oil production.
Key sectors of California's economy have been severely affected by the
recession. Since May of 1990, job losses total over 850,000. Declines in the
aerospace and high technology sectors have been especially severe. The
continuing drive in population and labor force growth has produced higher
unemployment rates in the state. Although total job loss has declined, weakness
continues in key areas of California's economy, including government, real
estate and aerospace. Wealth levels still remain high in the state, although the
difference between state and national levels continues to narrow.
In July of 1994, both S&P and Moody's lowered the general obligation bond
ratings of the state of California. These revisions reflect the state's heavy
reliance on the short-term note market to finance its cash imbalance and the
likelihood that this exposure will persist for at least another two years. For
more information on these ratings revisions and the state's current budget,
please refer to the Statement of Additional Information.
Orange County Bankruptcy. On December 6, 1994, Orange County, California,
petitioned for bankruptcy based on losses in the Orange County Investment Fund
which at the time were estimated to be approximately $2 billion. At the time of
the petition, the Orange County Investment Fund held monies belonging to Orange
County as well as other municipal issuers located in Orange County and other
parts of California. Although the ultimate resolution of this matter is
uncertain, one possible result is that the ability of municipal issuers
investing in the Orange County Investment Fund to service some or all of their
outstanding debt obligations may be severely impaired.
As of December 6, 1994, EVERGREEN SHORT-INTERMEDIATE MUNICIPAL
FUND -- CALIFORNIA did not hold debt obligations of Orange County or other
issuers that the Fund is aware had invested in the Orange County Investment
Fund. Although it has no current intention to do so, if it deems it advisable,
the Fund reserves the right from time to time to make investments in municipal
issuers who maintain assets in the Orange County Investment Fund.
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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 & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 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., 237 Park Avenue, New York, New York 10017
*******************************************************************************
STATEMENT OF ADDITIONAL INFORMATION
January 22, 1996
THE EVERGREEN MONEY MARKET FUNDS
2500 Westchester Avenue, Purchase, New York 10577
800-807-2940
The 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")
This Statement of Additional Information pertains to all classes of shares of
the Funds listed below. It is not a prospectus and should be read in conjunction
with the Prospectus dated January 22, 1995 for the Fund in which you are making
or contemplating an investment. The Evergreen Money Market Funds are offered
through two separate prospectuses: one offering Class A and Class B shares of
Money Market and Class A shares of Tax Exempt and Treasury and a separate
prospectus offering Class Y shares of each Fund. Copies of each Prospectus may
be obtained without charge by calling the number listed above.
TABLE OF CONTENTS
Investment Objectives and Policies................................
Investment Restrictions...........................................
Certain Risk Considerations.......................................
Management........................................................
Investment Adviser................................................
Distribution Plans................................................
Allocation of Brokerage...........................................
Additional Tax Information........................................
Net Asset Value...................................................
Purchase of Shares................................................
Performance Information...........................................
Financial Statements..............................................
Appendix A - Description of Bond Municipal Note And Commercial Paper Ratings
Appendix B - Special Considerations Relating to Investment In Pennsylvania
Municipal Issuers
1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
(See also "Description of the Funds - Investment Objective 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 Objective and Policies" in the relevant Prospectus. The following
expands upon the discussion in the Prospectus regarding certain investments of
each Fund.
Evergreen Pennsylvania Tax-Free Money Market Fund
To attain its objectives, Pennsylvania invest s primarily in high quality
Municipal Obligations which have remaining maturities not exceeding thirteen
months. The 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 various of the Fund's 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 obliga tion" 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), construc tion 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 obliga tions of the issuer. Project notes are
issued by local housing authorities to finance urban renewal and public housing
projects and are secured by the full faith and credit of the U.S. Government.
Municipal Commercial Paper. Municipal commercial paper is issued to finance
seasonal working capital needs or as short-term financing in anticipation of
longer-term debt. It is paid from the general revenues of the issuer or
refinanced with additional issuances of commercial paper or long-term debt.
Municipal Leases. Municipal leases, which may take the form of a lease or
an installment purchase or conditional sale contract, are issued by state and
local governments and authorities to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, telecommunications equipment
and other capital assets. Municipal leases frequently have special risks not
normally associated with general obligation or revenue bonds. Leases and
installment purchases or conditional sale contracts (which normally provide for
title to the leased asset to pass eventually to the government issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. The debt-issuance limitations of many state constitutions and statutes
are deemed to be inapplicable because of the inclusion in many leases or
contracts of "non-appropriation" clauses that provide that the governmental
issuer has no obligation to make future payments under the lease or contract
unless money is appropriated for such purpose by the appropriate legislative
body on a yearly or other periodic basis. These types of municipal leases may be
considered illiquid and subject to the 10% limitation of investment in illiquid
securities set forth under "Investment Restrictions" contained herein. The Board
of Trustees may adopt guidelines and delegate to the Adviser 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 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-govern mental 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 the Prospectu, the Funds may, under limited circumstances,
elect to invest in certain taxable securi ties and repurchase agreements with
respect to those securities. The Funds will enter into repurchase agreements
only with broker-dealers, domestic banks or recognized financial institutions
which, in the opinion of the Funds' 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 Funds' Adviser will monitor the value of the underlying security
at the time the transaction is entered into and at all times during the term of
the repurchase agreement to ensure that the value of the security always equals
or exceeds the agreed upon repurchase price. Repurchase agreements may be
considered to be loans under the Act, collateralized by the underlying
securities.
The Fund may engage in the following investment activities:
Securities with Put Rights (or "stand-by commitments"). When
the 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 the 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, the 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.
The 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. The
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 the 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
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
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 and 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 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 nor 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 nor Tax-Exempt may invest in companies for the
purpose of exercising control or management.
4........Purchase of Securities on Margin
.........No Fund 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 may not invest more than 5% of its 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 may not invest more than 5% of its 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) the Fund may invest in obligations issued or guaranteed by the U.S.
government and its agencies or instrumentalities, and (ii) the Fund may invest
in municipal securities.
6........Underwriting
.........Money Market Pennsylvania and Tax-Exempt may not engage in the business
of underwriting the securities of other issuers; provided that the purchase by
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 nor 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 nor 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 and Tax-Exempt,
to municipal securities and certificates of deposit and bankers' acceptances
issued by domestic branches of U.S. banks.
9........Warrants
.........Tax-Exempt may not invest more than 5% of its 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 nor Tax-Exempt 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 nor Tax-Exempt may make short sales of securities
or maintain a short position; except that, in the case of Treasury, at all times
when a short position is open it owns an equal amount of such securities or of
securities which, without payment of any further consideration are convertible
into or exchangeable for securities of the same issue as, and equal in amount
to, the securities sold short.
12.......Lending of Funds and Securities
.........Tax-Exempt and Money Market may not lend their funds to other persons;
however, they may purchase issues of debt securities, enter into repurchase
agreements and, in the case of Tax-Exempt, acquire privately negotiated loans
made to municipal borrowers.
.........Money Market may not lend its funds to other persons, provided that it
may purchase money market securities or enter into repurchase agreements.
.........Treasury will not lend any of its assets, except that it may purchase
or hold U.S. Treasury obligations, including repurchase agreements.
.........Neither Money Market Pennsylvania nor 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 (10% in the
case of Pennsylvania).
13.......Commodities
.........Tax-Exempt and Money Market 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 may purchase, sell or invest in
marketable securities of companies holding real estate or interests in real
estate, including real estate investment trusts, and Tax-Exempt may purchase
municipal securities and other debt securities secured by real estate or
interests therein.
15.......Borrowing, Senior Securities, Reverse Repurchase Agreements
.........Tax-Exempt and Money Market may not borrow money, issue senior
securities or enter into reverse repurchase agreements, except for temporary or
emergency purposes, and not for leveraging, and then in amounts not in excess of
10% of the value of the Fund's total assets at the time of such borrowing; or
mortgage, pledge or hypothecate any assets except in connection with any such
borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of the Fund's total assets at the time of such
borrowing, provided that the Fund will not purchase any securities at times when
any borrowings (including reverse repurchase agreements) are outstanding. The
Funds will not enter into reverse repurchase agreements exceeding 5% of the
value of their total assets.
.........Pennsylvania shall not borrow money, issue senior securities, or
pledge, mortgage or hypothecate its assets, except that the Fund may borrow from
banks if immediately after each borrowing there is asset coverage of at least
300%.
.........Treasury will not issue senior securities except that the 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. The Fund will not purchase any securities while borrowings in
excess of 5% of the total value of its total assets are outstanding. The Fund
will not borrow money or engage in reverse repurchase agreements for investment
leverage purposes. Treasury will not mortgage, pledge or hypothecate any assets
except to secure permitted borrowings. In these cases, it 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 and Tax-Exempt may not write, purchase or sell put or call
options, or combinations thereof, except Money Market may do so as permitted
under "Description of the Funds - Investment Objective and Policies" in the
Prospectus and 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
.........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 Objective and Policies" in the 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* and Tax-Exempt* will purchase
securities of investment companies only in open-market transactions involving
customary broker's commissions. However, these limitations are not applicable if
the securities are acquired in a merger, consolidation or acquisition of assets.
It should be noted that investment companies incur certain expenses such as
management fees and therefore any investment by the Funds in shares of another
investment company would be subject to such duplicate expenses.
20........Other. In order to comply with certain state blue sky limitations:
-----
...........Money Market and Tax-Exempt interpret fundamental investment
restriction 7 to prohibit investments in oil, gas and mineral leases.
...........Money Market and Tax-Exempt interpret 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.
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 Objective and Policies"
in the Prospectus.
MANAGEMENT
The Trustees and executive officers of the Trusts, their ages, addresses
and principal occupations during the past five years are set forth below:
Laurence B. Ashkin (67), 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*(68), Greenwich Plaza, Greenwich, CT-Trustee. Partner in the law firm
of Cummings and Lockwood since 1968.
James S. Howell (71), 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.
Robert J. Jeffries (72), 2118 New Bedford Drive, Sun City Center, FL-Trustee.
Corporate consultant since 1967.
Gerald M. McDonnell (56), 821 Regency Drive, Charlotte, NC-Trustee. Sales
Representative with Nucor-Yamoto Inc. (steel producer) since 1988.
Thomas L. McVerry (57), 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*(40), Holcomb and Pettit, P.A., 207 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. (48), Primary Physician Care, 1515 Mockingbird
Lane, Charlotte, NC-Trustee. President, Primary Physician Care since 1990.
Michael S. Scofield (52), 212 S. Tryon Street Suite 980, Charlotte, NC-Trustee.
Attorney, Law Offices of Michael S. Scofield since prior to 1989.
John J. Pileggi (36), 237 Park Avenue, Suite 910, New York, NY-President and
Treasurer. Senior Managing Director, Furman Selz Incorporated since 1992,
Managing Director from 1984 to 1992.
Joan V. Fiore (39), 237 Park Avenue, Suite 910, New York, NY-Secretary. Managing
Director and Counsel, Furman Selz Incorporated since 1991; Staff Attorney,
Securities and Exchange Commission from 1986 to 1991.
Except for Messrs. Ashkin, Bam and Jeffries, who are not Trustees of
Evergreen Investment Trust, the Trustees and officers listed above hold the same
positions with a total of ten registered investment companies offering a total
of thirty-two investment funds within the Evergreen mutual fund complex.
- - --------
* Mr. Bam and 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 Incorporated. Furman Selz Incorporated 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 Trusts pay each Trustee who is not an
"affiliated person" an annual retainer and a fee per meeting attended, plus
expenses (and $500 for each telephone conference meeting) as follows:
Name of Trust/Fund Annual Retainer Meeting Fee
Money Market $4,000* $300
The Evergreen Municipal Trust $100
Tax Exempt $100
Evergreen Investment Trust $9,000** $1,500**
Treasury
* Allocated among the Evergreen Money Market Fund, which is not a series
fund, and the Evergreen Municipal Trust which offers four investment series, the
Evergreen Tax Exempt Money Market Fund, Evergreen Short-Intermediate Municipal
Fund, Evergreen Short-Intermediate Municipal Fund-California, and Evergreen
Florida High Income Municipal Bond Fund.
** Evergreen Investment Trust pays an annual retainer to each Trustee and a
per-meeting fee that are allocated among its fifteen series. Additionally, each
member of the Audit Committee receives $200 for attendance at each meeting of
the of the Audit Committee and an additional fee is paid to the Chairman of the
Board of $2,000.
*** Evergreen Tax Free Trust pays an annual retainer to each Trustee and a
per-meeting fee that are allocated among its XXXX series. Additionally, each
member of the Audit Committee receives $200 for attendance at each meeting of
the Audit Committee and an additional fee is paid to the Chairman of the Board
of $.
Set forth below for each of the Trustees is the aggregate compensation
paid to such Trustees by each Trust for the fiscal year ended August 31, 1995.
Total
Compensation
Aggregate Compensation From Trust From Trusts
& Fund
Name of Money Municipal Investment Complex Paid
Person Market Trust Trust* to Trustees
Laurence Ashkin 2,159 3,340 1,513 22,054
Foster Bam 2,165 3,306 1,524 22,092
James S. Howell 2,040 2,982 16,852 35,725
Robert J.
Jeffries 2,149 3,310 1,493 21,893
Gerald M.
McDonnell 2,040 2,982 14,343 33,215
Thomas L.
McVerry 2,040 3,032 15,818 34,740
William Walt
Pettit 2,040 2,982 15,618 34,490
Russell A.
Salton, III, M.D. 2,040 2,982 13,268 32,140
Michael S.
Scofield 2,040 2,982 14,343 33,215
* Formerly known as First Union Funds.
No officer or Trustee of the Trusts owned Class B shares of any Fund as
of the date hereof. The number and percent of outstanding shares of each Fund
owned by officers and Trustees as a group on October 4, 1995, is as follows:
No. of Shares Owned
By Officers and Ownership by Officers and
Trustees Trustees as a % of
Name of Fund as a Group Shares Outstanding
Money Market 7,908,377(Y) 2.42%
Tax Exempt 625,041(Y) .15%
Treasury 3,520(A) 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 9, 1995.
Name of % of
Name and Address* Fund/Class No. of Shares Class/Fund
- - ---------------- ---------- ------------- ----------
First Union National Bank of FL Money Market/A 308,357,624 40.07% / 3.05%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank of NC Money Market/A 114,159,956 14.83% /10.34%
Cap Account
Attn: Shelia Bryendon CMG 1164
One First Union Center
301 S. College Street
Charlotte, NC 28202-6000
First Union National Bank of VA Money Market/A 66,805,473 8.68% / 6.05%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank of SC Money Market/A 39,701,031 5.16% / 3.60%
Attn: Sheila Bryenton CMG 1164
One First Union Center
Charlotte NC 28288
First Union National Bank Money Market/Y 43,612,933 13.35% / .43%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank of FL Tax-Exempt/A 217,443,910 37.99% / 21.92%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank of NC Tax-Exempt/A 144,584,778 25.26% / 14.57%
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 33,908,058 5.92% / 3.42%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank of VA Tax-Exempt/A 33,956,691 5.93% / 3.42%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank Tax-Exempt/Y 87,310,599 20.80% / 8.80%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-151
301 S. Tyron Street
Charlotte, NC 28288
Jeri Jo Knitwear Tax-Exempt/Y 22,004,947 5.24% / 2.22%
Lieber & Company
2500 Westchester Avenue
Purchase, NY 10577
First Union National Bank of FL Treasury/A 400,667,561 32.82% / 27.0%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank of NC Treasury/A 223,263,807 18.29% / 15.04%
Attn: Cap Account Dept.
One First Union Center
301 S. College Street
Charlotte, NC 28202-6000
First Union National Bank of VA Treasury/A 137,647,371 11.28% / 9.27%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank of GA Treasury/A 86,359,098 7.07% / 5.82%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank Treasury/Y 263,326,227 99.92% / 17.74%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
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 of 74.87%
of Treasury, and 52.13% of Tax Exempt on October 9, 1995, First Union National
Bank of North Carolina and its affiliated banks may be deemed to "control" each
Fund as that term is defined in the 1940 Act.
As of June 9, 1995, the following persons owned of record or
beneficially 5% or more of the Fund's shares:
Shares Percentage
Owned Owned
First Fidelity Bank, N.A. N.J. 229,018 21.22%
c/o Asset Management/Rein A/C
Attn: Joanne Monteiro
Broad & Walnut Streets
Philadelphia, PA 19109
First Fidelity Bank, N.A. N.J. 229,018 21.22%
c/o Asset Management/Rein A/C
Attn: Joanne Monteiro
Broad & Walnut Streets
Philadelphia, PA 19109
First Fidelity Bank, N.A. N.J. 229,018 21.22%
c/o Asset Management/Rein A/C
Attn: Joanne Monteiro
Broad & Walnut Streets
Philadelphia, PA 19109
First Fidelity Bank, N.A. N.J. 229,018 21.22%
c/o Asset Management/Rein A/C
Attn: Joanne Monteiro
Broad & Walnut Streets
Philadelphia, PA 19109
INVESTMENT ADVISER
(See also "Management of the Fund" 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 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, Theodore J. Israel, Jr., Executive Vice President, Joseph J. McBrien,
Senior Vice President and General Counsel, and George R. Gaspari, Senior Vice
President and Chief Financial Officer.
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 Incorporated. 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 XXXXXXXXXXX, 199X, First Fidelity Bank, N.A. ("First Fidelity")
acted as investment adviser to Pennsylvania. On June 18, 1995, First Union
Corporation ("First Union") the corporate parent of FUNB, 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 First Fidelity with and
into a wholly-owned subsidiary of First Union. The Merger was consummated on
XXXXX, 199X. As a result of the Merger, FUNB and its wholly-owned subsidiary,
Evergreen Asset Management Corp., 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:
TAX EXEMPT Year Ended Year Ended Year Ended
8/31/95 8/31/94 8/31/93
Advisory Fee $2,329,035 $2,126,246 $2,028,966
Waiver (558,942) (1,256,653) (1,168,131)
--------- ---------- ----------
Net Advisory Fee $1,770,093 $869,593 $860,835
========= ========= =========
MONEY MARKET Year Ended Year Ended Year Ended
8/31/95 8/31/94 10/31/93
Advisory Fee $1,831,518 $1,245,513 $1,637,123
Waiver ( 732,723) (974,438) (1,047,935)
--------- --------- ----------
Net Advisory Fee $1,098,795 $271,075 $589,188
========= ========= =========
PENNSYLVANIA Year Ended Year Ended Year Ended
2/28/95 2/28/94 2/28/93
Advisory Fee $85,049 $59,080 $73,977
Waiver ( 85,049) (59,080) (73,977)
--------- --------- ----------
Net Advisory Fee $ 0 $ 0 $ 0
========= ========= =========
TREASURY Year Ended Year Ended Year Ended
8/31/95 12/31/94 12/31/93
Advisory Fee $2,814,251 $2,549,955 $1,977,645
Waiver (1,258,611) (1,948,237) (1,712,975)
--------- --------- ----------
Net Advisory Fee $1,555,640 $601,718 $264,670
========= ========= =========
In addition, for the fiscal year ended February 28, 1993, First Fidelity
and Furman Selz voluntarily agreed to reimburse expenses of Pennsylvania in the
amount of $14,000 and $6,000, respectively.
Expense Limitations
Each Adviser's fee will be reduced by, or the Adviser will reimburse
the Funds (except Money Market and Tax Exempt which have specific percentage
limitations described below) for any amount necessary to prevent such expenses
(exclusive of taxes, interest, brokerage commissions and extraordinary expenses,
but inclusive of the Adviser's fee) from exceeding the most restrictive of the
expense limitations imposed by state securities commissions of the states in
which the Funds' shares are then registered or qualified for sale.
Reimbursement, when necessary, will be made monthly in the same manner in which
the advisory fee is paid. Currently the most restrictive state expense
limitation is 2.5% of the first $30,000,000 of the Fund's average daily net
assets, 2% of the next $70,000,000 of such assets and 1.5% of such assets in
excess of $100,000,000.
With respect to Money Market and Tax Exempt, Evergreen Asset 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
Class A and Class B shares Rule 12b-1 distribution fees and shareholder
servicing fees payable) exceed 1.00% of their 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 Money Market and
Tax Exempt were approved by each Fund's shareholders on June 23, 1994, became
effective on June 30, 1994, and will continue in effect until June 30, 1996, 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 Treasury, 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 April 20, 1995 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 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 the Fund. With respect to Pennsylvania, the
Investment Advisory Agreement dated XXXXXXX, 199X were first approved by the
shareholders of the Fund on XXXXXXXX, 199X and will continue until June 30,
1997 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.
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 period ended June 30, 1995 and the years ended
December 31, 1994 and 1993. Treasury incurred $462,002 and $613,889 in
administrative service costs, of which $0 and $ 111,107 were waived,
respectively.
Prior to XXXXXX, 199X, Furman Selz acted as administrator for Pennsylvania.
For the fiscal years ended February 28, 1993, 1994 and 1995 Furman Selz waived
its entire administrative fee.
On July 1, 1995, Evergreen Asset, in the case of Treasury, and on XXXXXX,
199X, in the case of Pennsylvania, commenced providing administrative services
to each of the portfolios of Evergreen Investment 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 serve as investment advisor, 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 Incorporated, an affiliate of the Distributor, serves as
sub-administrator to Treasury and is entitled to receive a fee based on the
average daily net assets of Treasury 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 September 30,
1995 were approximately $10.1 billion.
DISTRIBUTION PLANS
Reference is made to "Management of the Fund - 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 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, and Class B shares (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.
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 Plans 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 XXXXXX, 199X. The Distribution Agreement
between Pennsylvania and the Distributor pursuant to which distribution fees are
paid under the Plans by Fixed Income and Intermediate Term Funds with respect to
their Class A, Class B and Class C shares were approved on XXXXXX, 199X 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 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 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. 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.
For the fiscal period from January 3, 1995 through August 31, 1995
Treasury incurred $1,896,720 in distribution services fees on behalf of Class A
shares.
For the fiscal period from January 3, 1995 through August 31, 1995,
Money Market and Tax Exempt incurred $280,287 and $241,973 respectively, in
distribution services fees on behalf of their Class A shares.
For the fiscal period from January 3, 1995 through August 31, 1995,
Money Market incurred $9,349 in distribution services fees on behalf of its
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.
It is anticipated that most purchase and sale transactions involving
fixed income securities will be with the issuer or an underwriter or with major
dealers in such securities acting as principals. Such transactions are normally
on a net basis and generally do not involve payment of brokerage commissions.
However, the cost of securities purchased from an underwriter usually includes a
commission paid by the issuer to the underwriter. Purchases or sales from
dealers will normally reflect the spread between bid and ask prices.
In selecting firms to effect securities transactions, the primary
consideration of each Fund shall be prompt execution at the most favorable
price. A Fund will also consider such factors as the price of the securities and
the size and difficulty of execution of the order. If these objectives may be
met with more than one firm, the Fund will also consider the availability of
statistical and investment data and economic facts and opinions helpful to the
Fund. To the extent that receipt of these services for which the Adviser or its
affiliates might otherwise have paid, it would tend to reduce their expenses.
Under Section 11(a) of the Securities Exchange Act of 1934, as amended,
and the rules adopted thereunder by the Securities and Exchange Commission,
Lieber may be compensated for effecting transactions in portfolio securities for
a Fund on a national securities exchange provided the conditions of the rules
are met. Each Fund advised by Evergreen Asset has entered into an agreement with
Lieber authorizing Lieber to retain compensation for brokerage services. In
accordance with such agreement, it is contemplated that Lieber, a member of the
New York and American Stock Exchanges, will, to the extent practicable, provide
brokerage services to the Fund with respect to substantially all securities
transactions effected on the New York and American Stock Exchanges. In such
transactions, a Fund will seek the best execution at the most favorable price
while paying a commission rate no higher than that offered to other clients of
Lieber or that which can be reasonably expected to be offered by an unaffiliated
broker-dealer having comparable execution capability in a similar transaction.
However, no Fund will engage in transactions in which Lieber would be a
principal. While no Fund advised by Evergreen Asset contemplates any ongoing
arrangements with other brokerage firms, brokerage business may be given from
time to time to other firms. In addition, the Trustees have adopted procedures
pursuant to Rule 17e-1 under the 1940 Act to ensure that all brokerage
transactions with Lieber, as an affiliated broker-dealer, are fair and
reasonable.
Any profits from brokerage commissions accruing to Lieber as a result
of portfolio transactions for the Fund will accrue to FUNB and to its ultimate
parent, First Union. The Investment Advisory Agreements do not provide for a
reduction of the Adviser's fee with respect to any Fund by the amount of any
profits earned by Lieber from brokerage commissions generated by portfolio
transactions of the Fund.
ADDITIONAL TAX INFORMATION
(See also "Taxes" in the Prospectus)
Each Fund has qualified and intends to continue to qualify for and
elect the tax treatment applicable to regulated investment companies ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). (Such qualification does not involve supervision of management or
investment practices or policies by the Internal Revenue Service.) In order to
qualify as a regulated investment company, a Fund must, among other things, (a)
derive at least 90% of its gross income from dividends, interest, payments with
respect to proceeds from securities loans, gains from the sale or other
disposition of securities or foreign currencies and other income (including
gains from options, futures or forward foreign contracts) derived with respect
to its business of investing in such securities; (b) derive less than 30% of its
gross income from the sale or other disposition of securities, options, futures
or forward contracts (other than those on foreign currencies), or foreign
currencies (or options, futures or forward contracts thereon) that are not
directly related to the RIC's principal business of investing in securities (or
options and futures with respect thereto) held for less than three months; and
(c) diversify its holdings so that, at the end of each quarter of its taxable
year, (i) at least 50% of the market value of the Fund's total assets is
represented by cash, U.S. government securities and other securities limited in
respect of any one issuer, to an amount not greater than 5% of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its total assets is invested in the securities of
any one issuer (other than U.S. government securities and securities of other
regulated investment companies). By so qualifying, a Fund is not subject to
Federal income tax if it timely distributes its investment company taxable
income and any net realized capital gains. A 4% nondeductible excise tax will be
imposed on a Fund to the extent it does not meet certain distribution
requirements by the end of each calendar year. Each Fund anticipates meeting
such distribution requirements.
Dividends paid by a Fund from investment company taxable income generally
will be taxed to the shareholders as ordinary income. Investment company taxable
income includes net investment income and net realized short-term gains (if
any). Any dividends received by a Fund from domestic corporations will
constitute a portion of the Fund's gross investment income.
Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to shareholders (who are not exempt from
tax) as long-term capital gain, regardless of the length of time the shares of a
Fund have been held by such shareholders. Short-term capital gains distributions
are taxable to shareholders who are not exempt from tax as ordinary income. Such
distributions are not eligible for the dividends-received deduction. Any loss
recognized upon the sale of shares of a Fund held by a shareholder for six
months or less will be treated as a long-term capital loss to the extent that
the shareholder received a long-term capital gain distribution with respect to
such shares.
Distributions of investment company taxable income and any net
short-term capital gains will be taxable as ordinary income as described above
to shareholders (who are not exempt from tax), whether made in shares or in
cash. Shareholders electing to receive distributions in the form of additional
shares will have a cost basis for Federal income tax purposes in each share so
received equal to the net asset value of a share of a Fund on the reinvestment
date.
Distributions by each Fund result in a reduction in the net asset value of
the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable as
ordinary income or capital gain as described above to shareholders (who are not
exempt from tax), even though, from an investment standpoint, it may constitute
a return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution. The price of
shares purchased at that time includes the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will then receive
what is in effect a return of capital upon the distribution which will
nevertheless be taxable to shareholders subject to taxes.
Upon a sale or exchange of its shares, a shareholder will realize a taxable
gain or loss depending on its basis in the shares. Such gains or losses will be
treated as a capital gain or loss if the shares are capital assets in the
investor's hands and will be a long-term capital gain or loss if the shares have
been held for more than one year. Generally, any loss realized on a sale or
exchange will be disallowed to the extent shares disposed of are replaced within
a period of sixty-one days beginning thirty days before and ending thirty days
after the shares are disposed of. Any loss realized by a shareholder on the sale
of shares of the Fund held by the shareholder for six months or less will be
disallowed to the extent of any exempt interest dividends received by the
shareholder with respect to such shares, and will be treated for tax purposes as
a long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
All distributions, whether received in shares or cash, must be reported by
each shareholder on his or her Federal income tax return. Each shareholder
should consult his or her own tax adviser to determine the state and local tax
implications of Fund distributions.
Shareholders who fail to furnish their taxpayer identification numbers
to a Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% Federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends or
capital gain distributions to these shareholders, whether taken in cash or
reinvested in additional shares, and any redemption proceeds will be reduced by
the amounts required to be withheld. Investors may wish to consult their own tax
advisers about the applicability of the backup withholding provisions.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). It does not reflect the special
tax consequences to certain taxpayers (e.g., banks, insurance companies, tax
exempt organizations and foreign persons). Shareholders are encouraged to
consult their own tax advisers regarding specific questions relating to Federal,
state and local tax consequences of investing in shares of a Fund. Each
shareholder who is not a U.S. person should consult his or her tax adviser
regarding the U.S. and foreign tax consequences of ownership of shares of a
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 31% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
Special Tax Considerations for Tax Exempt
With respect to Tax Exempt, 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
The following information supplements that set forth in each Prospectus
under the subheading "How to Buy Shares - How the Funds Value Their Shares" in
the Section entitled "Purchase and Redemption of Shares".
The public offering price of shares of a Fund is its net asset value.
On each Fund business day on which a purchase or redemption order is received by
a Fund and trading in the types of securities in which a Fund invests might
materially affect the value of Fund shares, the per share net asset value of
each such Fund is computed in accordance with the Declaration of Trust and
By-Laws governing each Fund twice daily, at 12 noon Eastern time and as of the
next close of regular trading on the New York Stock Exchange (the "Exchange")
(currently 4:00 p.m. Eastern time) by dividing the value of the Fund's total
assets, less its liabilities, by the total number of its shares then
outstanding. A Fund business day is any weekday, exclusive of national holidays
on which the Exchange is closed and Good Friday. Each Fund's securities are
valued at amortized cost. Under this method of valuation, a security is
initially valued at its acquisition cost and, thereafter, a constant straight
line amortization of any discount or premium is assumed each day regardless of
the impact of fluctuating interest rates on the market value of the security. If
accurate quotations are not available, securities will be valued at fair value
determined in good faith by the Board of Trustees.
PURCHASE OF SHARES
The following information supplements that set forth in each 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 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, as described below. Orders received by the Distributor prior to the
close of regular trading on the Exchange on each day the Exchange is open for
trading are priced at the net asset value computed as of the close of regular
trading on the Exchange on that day. In the case of orders for purchase of
shares placed through selected dealers or agents, the applicable public offering
price will be the net asset value as so determined, but only if the selected
dealer or agent receives the order prior to the close of regular trading on the
Exchange and transmits it to the Distributor prior to its close of business that
same day (normally 5:00 p.m. Eastern time). The selected dealer or agent is
responsible for transmitting such orders by 5:00 p.m. If the selected dealer or
agent fails to do so, the investor's right to that day's closing price must be
settled between the investor and the selected dealer or agent. If the selected
dealer or agent receives the order after the close of regular trading on the
Exchange, the price will be based on the net asset value determined as of the
close of regular trading on the Exchange on the next day it is open for trading.
Following the initial purchase of shares of a Fund, a shareholder may
place orders to purchase additional shares by telephone if the shareholder has
completed the appropriate portion of the Share Purchase Application. Payment for
shares purchased by telephone can be made only by Electronic Funds Transfer from
a bank account maintained by the shareholder at a bank that is a member of the
National Automated Clearing House Association ("ACH"). If a shareholder's
telephone purchase request is received before 3:00 p.m. New York time on a Fund
business day, the order to purchase shares is automatically placed the same Fund
business day for non-money market funds, and two days following the day the
order is received for money market funds, and the applicable public offering
price will be the public offering price determined as of the close of business
on such business day. Full and fractional shares are credited to a subscriber's
account in the amount of his or her subscription. As a convenience to the
subscriber, and to avoid unnecessary expense to a Fund, stock certificates are
not issued for any class of shares of any Fund, although such shares remain
in the shareholder's account on the records of a Fund. This facilitates later
redemption and relieves the shareholder of the responsibility for and
inconvenience of lost or stolen certificates.
Alternative Purchase Arrangements
Except as noted, each Fund issues three classes of shares: (i) Class A
shares, which are sold to investors choosing the no front-end sales charge or
contingent deferred sales charge alternative; (ii) Class B shares, which are
sold to investors choosing the deferred sales charge alternative and which are
not currently offered by Tax Exempt and Treasury; 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 bear the expense of the
deferred sales charge, (III) Class B shares bear the expense of a higher Rule
12b-1 distribution services fee than Class A shares and higher transfer agency
costs, (IV) with the exception of Class Y shares, each Class of each Fund has
exclusive voting rights with respect to provisions of the Rule 12b-1 Plan
pursuant to which its distribution services fee is paid which relates to a
specific Class and other matters for which separate Class voting is appropriate
under applicable law, provided that, if the Fund submits to a simultaneous vote
of Class A 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.
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.
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 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
eight years or Class B shares acquired pursuant to reinvestment of dividends or
distributions and third of Class B shares held longest during the eight-year
period.
To illustrate, assume that an investor purchased 1,000 Class B shares
at $1 per share (at a cost of $1,000) and, during such time, the investor has
acquired 100 additional Class B shares upon dividend reinvestment. If at such
time the investor makes his or her first redemption of 500 Class B shares, 100
Class B shares will not be subject to charge because of dividend reinvestment.
Therefore, of the $500 of the shares redeemed $400 of the redemption proceeds
(400 shares x $1 original purchase price) will be charged at a rate of 4.0% (the
applicable rate in the second year after purchase for a contingent deferred
sales charge of $16).
The contingent deferred sales charge is waived on redemptions of shares
(i) following the death or disability, as defined in the Code, of a shareholder,
or (ii) to the extent that the redemption represents a minimum required
distribution from an individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2.
Conversion Feature. At the end of the period ending seven years after
the end of the calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A shares and will
no longer be subject to a higher distribution services fee imposed on Class B
shares. Such conversion will be on the basis of the relative net asset values of
the two classes, without the imposition of any sales load, fee or other charge.
The purpose of the conversion feature is to reduce the distribution services fee
paid by holders of Class B shares that have been outstanding long enough for the
Distributor to have been compensated for the expenses associated with the sale
of such shares.
For purposes of conversion to Class A, Class B shares purchased through
the reinvestment of dividends and distributions paid in respect of Class B
shares in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's account (other
than those in the sub-account) convert to Class A, an equal pro-rata portion of
the Class B shares in the sub-account will also convert to Class A.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of an opinion of counsel to the effect that (i) the
assessment of the higher distribution services fee and transfer agency costs
with respect to Class B shares does not result in the dividends or distributions
payable with respect to other Classes of a Fund's shares being deemed
"preferential dividends" under the Code, and (ii) the conversion of Class B
shares to Class A shares does not constitute a taxable event under Federal
income tax law. The conversion of Class B shares to Class A shares may be
suspended if such an opinion is no longer available at the time such conversion
is to occur. In that event, no further conversions of Class B shares would
occur, and shares might continue to be subject to the higher distribution
services fee for an indefinite period which may extend beyond the period ending
eight 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
(See also "Other Information - General Information" in each Fund's Prospectus)
Capitalization and Organization
Evergreen Money Market Fund is a Massachusetts business trust. The
Evergreen Tax Exempt Money Market Fund is a 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 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.
Evergreen Tax Free Trust was organized as a Massachusetts business trust on
March 25, 1987, as a successor to FFB Money Trust, which was organized on
December 4, 1985. The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest having a
par value of $0.001 per share and which may be issued in series or classes.
Pursuant to that authority, the Board of Trustees has authorized the issuance of
two series of shares, one of which represent shares in Pennsylvania. The Board
of Trustees may, in the future, authorize the issuance of other series or
classes.
Money Market and Tax Exempt may issue an unlimited number of shares of
beneficial interest with a $0.0001 par value. Treasury may issue an unlimited
number of shares of beneficial interest without 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.
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"), 237 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 and Tax Exempt.
KPMG Peat Marwick LLP has been selected to be the independent auditors
of Treasury.
PERFORMANCE INFORMATION
YIELD CALCULATIONS
Money Market, Tax Exempt and Treasury 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:
Net Change in Account Value
Current Yield = Beginning Account Value x 365/7
Effective Yield = (1 + Total Dividend for 7 days) 365/7-1
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 today, and the yield stated for a particular past period is not
necessarily representative of its future yield. Since the Funds use the
amortized cost method of net asset value computation, it does not anticipate any
change in yield resulting from any unrealized gains or losses or unrealized
appreciation or depreciation not reflected in the yield computation, or change
in net asset value during the period used for computing yield. If any of these
conditions should occur, yield quotations would be suspended. A Fund's yield is
not guaranteed, and the principal is not insured.
Yield information is useful in reviewing a Fund's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in a Fund's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in the Funds'
investment portfolios, portfolio maturity, operating expenses and market
conditions.
It should be recognized that in periods of declining interest rates the
yields will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the yields will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to a Fund
from the continuous sale of its shares will likely be invested in instruments
producing lower yields than the balance of the Fund's investments, thereby
reducing the current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
The current yield and effective yield of each Fund for the seven-day
period ended August 31, 1995 for each Class of shares offered by the Funds is
set forth in the table below:
Current Effective
Yield Yield
Money Market
Class A 5.20% 5.33%
Class B 4.50% 4.60%
Class Y 5.49% 5.64%
Tax Exempt
Class A 3.30% 3.35%
Class Y 3.59% 3.65%
Treasury
Class A 5.16% 5.29%
Class Y 5.46% 5.61%
For the 7-day period ended February 28, 1995, the yield, effective
yield and tax equivalent yield of the Pennsylvania Tax-Free Fund was as
follows:
Effective yield -
Yield for 7 days -for-7-days----------Yield-for-7-days--
---------------------------------- -----------------------
Pa. Tax-Free Fund 4.07% 4.15% 6.03%*
27
GENERAL
From time to time, a Fund may quote its performance in advertising and other
types of literature as compared to the performance of the Bank Rate Monitor
National Index which publishes weekly average rates of 50 leading bank and
thrift institution money market deposit accounts. A Fund's performance may also
be compared to those of other mutual funds having similar objectives. This
comparative performance would be expressed as a ranking prepared by Lipper
Analytical Services, Inc., Donoghue's Money Fund Report or similar independent
services monitoring mutual fund performance. A Fund's performance will be
calculated by assuming, to the extent applicable, reinvestment of all capital
gains distributions and income dividends paid. Any such comparisons may be
useful to investors who wish to compare a Fund's past performance with that of
its competitors. Of course, past performance cannot be a guarantee of future
results.
Additional Information
Any shareholder inquiries may be directed to the shareholder's broker
or to each Adviser at the address or telephone number shown on the front cover
of this Statement of Additional Information. This Statement of Additional
Information does not contain all the information set forth in the Registration
Statement filed by the Trusts with the Securities and Exchange Commission under
the Securities Act of 1933. Copies of the Registration Statement may be obtained
at a reasonable charge from the Securities and Exchange Commission or may be
examined, without charge, at the offices of the Securities and Exchange
Commission in Washington, D.C.
FINANCIAL STATEMENTS
Each Fund's financial statements 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.
APPENDIX "A"
DESCRIPTION OF BOND RATINGS
Standard & Poor's Ratings Groups. 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.
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.
29
<PAGE>
B - Debt rated B has greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC - Debt rated CCC has a currently indefinable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC - The rating CC is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.
C - The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
C1 - The rating C1 is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. It is used when interest
payments or principal payments are not made on a due date even if the applicable
grace period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace periods; it will also be used upon a
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-) - To provide more detailed indications of credit
quality, the ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
NR - indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy. Debt
obligations of issuers outside the United States and its territories are rated
on the same basis as domestic corporate and municipal issues. The ratings
measure the credit worthiness of the obligor but do not take into account
currency exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in the top
four categories (AAA, AA, A, BBB, commonly known as "Investment Grade" ratings)
are generally regarded as eligible for bank investment. In addition, the Legal
Investment Laws of various states may impose certain rating or other standards
for obligations eligible for investment by savings banks, trust companies,
insurance companies and fiduciaries generally.
Moody's Investors Service. A brief description of the applicable Moody's
Investors Service rating symbols and their meanings follows:
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
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<PAGE>
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Some bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well. NOTE:
Bonds within the above categories which possess the strongest investment
attributes are designated by the symbol "1" following the rating.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca - bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C - bonds which are rated C are the lowest rated class of bonds and
issue so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Duff & Phelps: AAA-- highest credit quality, with negligible risk
factors; AA -- high credit quality, with strong protection factors and modest
risk, which
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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: AAA -- highest credit quality, with an
exceptionally strong ability to pay interest and repay principal; AA -- very
high credit quality, with very strong ablility to pay interest and repay
principal; A -- high credit quality, considered strong as regards principal and
interest protection, but may be more vulneralbe to adverse changes in economic
conditions and circumstances. The indicators "+" and "-" to the AA, A and BBB
categories indicate the relative position of credit within those rating
categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
A Standard & Poor's note rating reflects the liquidity concerns and
market access risks unique to notes. Notes due in three years or less will
likely receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment.
o Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
o Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note.)
Note rating symbols are as follows:
o SP-1 Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
o SP-2 Satisfactory capacity to pay principal and interest.
o SP-3 Speculative capacity to pay principal and interest.
Moody's Short-Term Loan Ratings - Moody's ratings for state and
municipal short-term obligations will be designated Moody's Investment Grade
(MIG). This distinction is in recognition of the differences between short-term
credit risk and long-term risk. Factors affecting the liquidity of the borrower
are uppermost in importance in short-term borrowing, while various factors of
major importance in bond risk are of lesser importance over the short run.
Rating symbols and their meanings follow:
o MIG 1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
o MIG 2 - This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
o MIG 3 - This designation denotes favorable quality. All security
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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: 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: F-1+ -- denotes exceptionally strong credit
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, caryying a satisfactory degree of assurance for timely payment.
33
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 7.1%,
respectively, which slightly exceeded the U.S. employment rate of 6.7%, 7.4% 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
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
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.
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.
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STATEMENT OF ADDITIONAL INFORMATION
January 22, 1996
THE EVERGREEN TAX FREE FUNDS
2500 Westchester Avenue, Purchase, New York 10577
800-807-2940
Evergreen Florida Municipal Bond Fund (formerly First Union Florida
Municipal Bond Portfolio) ("Florida Municipal Bond")
Evergreen Georgia Municipal Bond Fund (formerly First Union Georgia
Municipal Bond Portfolio) ("Georgia Municipal Bond")
Evergreen New Jersey Tax Free Income Fund (formerly FFB
New Jersey Tax Free Income Fund) ("New Jersey Tax Free")
Evergreen North Carolina Municipal Bond Fund (formerly First Union North
Carolina Municipal Bond Portfolio) ("North Carolina Municipal Bond")
Evergreen South Carolina Municipal Bond Fund (formerly First Union
South Carolina Municipal Bond Portfolio) ("South Carolina Municipal Bond")
Evergreen Virginia Municipal Bond Fund (formerly First Union Virginia
Municipal Bond Portfolio)("Virginia Municipal Bond")
Evergreen Florida High Income Municipal Bond Fund ("Florida High Income")
Evergreen High Grade Tax Free Fund (formerly First Union High Grade Tax Free
Portfolio) ("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 below. It is not a prospectus and should be read in
conjunction with the Prospectus dated January 22, 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................................
Investment Restrictions...........................................
Non-Fundamental Operating Policies................................
Management........................................................
Investment Adviser................................................
Distribution Plans................................................
Allocation of Brokerage...........................................
Additional Tax Information........................................
Net Asset Value...................................................
Purchase of Shares................................................
Performance Information...........................................
Financial Statements..............................................
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Appendix A - Description of Bond Municipal Note And Commercial Paper Ratings
Appendix B - Additional Information Concerning California
Appendix C - Additional Information Concerning Florida
Appendix D - Additional Information Concerning Georgia
Appendix E - Additional Information Concerning North Carolina
Appendix F - Additional Information Concerning South Carolina
Appendix G - Additional Information Concerning Virginia
INVESTMENT OBJECTIVES AND POLICIES
(See also "Description of the Funds - Investment Objective
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 Objective and Policies" in the relevant Prospectus. The investment
objectives of Florida Municipal Bond, Georgia Municipal Bond, 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.
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 High Grade,
New Jersey, 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.
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 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
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.
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 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
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 obligating 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)
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.
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
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 or AA
by 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.
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 Trustees 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 Trustees reserve 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
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.
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 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 Obligations 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
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, 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 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 Exempt, Short-Intermediate, nor
Short-Intermediate-CA 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 (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 Short-Intermediate-CA to certificates of deposit and bankers' acceptances
issued by domestic branches of U.S. banks.
.........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 its 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 its
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.
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.
.........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
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.
.........New Jersey Tax Free and 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.
15.......Borrowing, Senior Securities, Reverse Repurchase Agreements
.........Neither New Jersey Tax Free, 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
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).
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
.........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
securi ties 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 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 Objective 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.
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.
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 Trustees and executive officers of the Trusts, their ages, addresses
and principal occupations during the past five years are set forth below:
Laurence B. Ashkin (67), 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*(68), Greenwich Plaza, Greenwich, CT-Trustee. Partner in the law firm
of Cummings and Lockwood since 1968.
James S. Howell (71), 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.
Robert J. Jeffries (72), 2118 New Bedford Drive, Sun City Center, FL-Trustee.
Corporate consultant since 1967.
Gerald M. McDonnell (56), 821 Regency Drive, Charlotte, NC-Trustee. Sales
Representative with Nucor-Yamoto Inc. (steel producer) since 1988.
Thomas L. McVerry (57), 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*(40), Holcomb and Pettit, P.A., 207 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. (48), Primary Physician Care, 1515 Mockingbird
Lane, Charlotte, NC-Trustee. President, Primary Physician Care since 1990.
Michael S. Scofield (52), 212 S. Tryon Street Suite 980, Charlotte, NC-Trustee.
Attorney, Law Offices of Michael S. Scofield since prior to 1989.
John J. Pileggi (36), 237 Park Avenue, Suite 910, New York, NY-President and
Treasurer. Senior Managing Director, Furman Selz Incorporated since 1992,
Managing Director from 1984 to 1992.
Joan V. Fiore (39), 237 Park Avenue, Suite 910, New York, NY-Secretary. Managing
Director and Counsel, Furman Selz Incorporated since 1991; Staff Attorney,
Securities and Exchange Commission from 1986 to 1991.
Except for Messrs. Ashkin, Bam and Jeffries, who are not Trustees of
Evergreen Investment Trust (formerly First Union Funds), the Trustees and
officers listed above hold the same positions with a total of ten registered
investment companies offering a total of thirty-two investment funds within the
Evergreen mutual fund complex.
- - --------
* Mr. Bam and 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 Incorporated. Furman Selz Incorporated 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 Trusts pay each Trustee who is not an
"affiliated person" an annual retainer and a fee per meeting attended, plus
expenses (and $500 for each telephone conference meeting) as follows:
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 - $ 9,000** $1,500**
Florida Municipal Bond
Georgia Municipal Bond
North Carolina Municipal Bond
South Carolina Municipal Bond
Virginia Municipal Bond
High Grade
- - ------------------------
* Allocated among the Evergreen Money Market Fund, which is not a series
fund, and the Evergreen Municipal Trust which offers four investment series, the
Evergreen Tax Exempt Money Market Fund, Evergreen Short-Intermediate Municipal
Fund, Evergreen Short-Intermediate Municipal Fund-California, and Evergreen
Florida High Income Municipal Bond Fund.
** Evergreen Investment Trust pays an annual retainer to each Trustee and a
per-meeting fee that are allocated among its fifteen series. Additionally, each
member of the Audit Committee receives $200 for attendance at each meeting of
the of the Audit Committee and an additional fee is paid to the Chairman of the
Board of $2,000.
*** Evergreen Tax Free Trust pays an annual retainer to each Trustee and a
per-meeting fee that are allocated among its XXXX series. Additionally, each
member of the Audit Committee receives $200 for attendance at each meeting of
the Audit Committee and an additional fee is paid to the Chairman of the Board
of $.
Set forth below for each of the Trustees is the aggregate compensation
paid to such Trustees by each Trust for the fiscal year ended August 31, 1995.
Total
Compensation
Aggregate Compensation From Trust From Trusts
& Fund
Name of Municipal Investment Complex Paid
Person Trust* Trust** to Trustees
Laurence Ashkin 3,340 1,513 22,054
Foster Bam 3,306 1,524 22,092
James S. Howell 2,982 16,852 35,725
Robert J. 3,310 1,493 21,893
Jeffries
Gerald M. 2,982 14,343 33,215
McDonnell
Thomas L. 3,032 15,818 39,740
McVerry
William Walt 2,982 15,618 34,490
Pettit
Russell A. 2,982 13,268 32,140
Salton, III, M.D.
Michael S. 2,982 14,343 33,215
Scofield
* Florida High Income commenced operations on June 30, 1995 and, therefore,
compensation with regard to such Fund covers the period from June 30, 1995
through August 31, 1995.
** Formerly known as First Union Funds.
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 4, 1995, 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
Florida Municipal Bond -0- -0-
Georgia Municipal Bond -0- -0-
North Carolina Municipal Bond 2,213 .27%
South Carolina Municipal Bond -0- -0-
Virginia Municipal Bond -0- -0-
Florida High Income -0- -0-
High Grade 427,000 18.63%
Short-Intermediate 96,659 2.52%
Short-Intermediate-CA -0- -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 9, 1995.
Name of No. of % of
Name and Address Fund/Class Shares Class/Fund
- - ---------------- ---------- ------ ----------
First Union National Bank North Carolina 193,070 95.14%/ 3.25%
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 16,326 26.03%/ 2.52%
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 5,656 9.02%/ .87%
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 5,464 8.71%/ .84%
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 5,146 8.20%/ .80%
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 4,135 6.59%/ .70%
Virginia S. Herring Municipal Bond/A
Oren L. Herring, Jr. JTWROS
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
<PAGE>
Fubs & Co. Febo South Carolina 3,985 6.35%/ .62%
Joan B. Sawyer Municipal Bond/A
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo South Carolina 3,401 5.42%/ .53%
Dale S. Wyatt Municipal Bond/A
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo South Carolina 3,140 5.01%/ .49%
First Union National Bank- Municipal Bond/A
SC F/B/O
Carolyn E Bickler "Loan Acct"
Attn: David Edmiston Loan Officer
C/O First Union National Bank
301 S Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo South Carolina 31,031 8.16%/ 4.80%
Ruby B. Motsinger Municipal Bond/B
Joseph Glenn Motsinger
Melvin L. Motsinger
Hilda M. Thompson
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank* South Carolina 95,854 47.07%/ 14.82%
Trust Accounts Municipal Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank* South Carolina 107,769 52.92%/ 16.66%
Trust Accounts Municipal Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Duff M. Green Virginia 21,528 10.42%/ 2.54%
c/o First Union National Bank Municipal Bond/A
301 S. Tryon Street
Charlotte, NC 28288-0001
<PAGE>
Fubs & Co. Febo Virginia 11,154 5.40%/ 1.31%
Howard S. Barger Municipal Bond/A
Dorothy M. Barger
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Virginia 10,694 5.18%/ 1.26%
Earl Wilson Watts, Jr., M.D. Municipal Bond/A
and Barbara A. Watts
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Virginia 39,866 7.37%/ 4.70%
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 Virginia 37,447 37.02%/ 4.41%
Trust Accounts Municipal Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Virginia 62,670 61.95%/ 7.38%
Trust Accounts Municipal Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Merrill Lunch Pierce Fenner Florida
Private Client Group Municipal Bond/A 714,623 5.33%/ 4.28%
C/O FUBS
301 S. Tryon St.
Charlotte, NC 28288
First Union National Bank Florida 429,145 93.53%/ 2.57%
Trust Accounts Municipal Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Georgia 14,825 6.94%/ 1.24%
Samuel A. Barber Municipal Bond/A
Velma H. Barber
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
<PAGE>
Fubs & Co. Febo Georgia 12,793 5.98%/ 1.07%
Mrs. Ralph Marlet Municipal Bond/A
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Georgia 158,856 91.63%/13.25%
Trust Accounts Municipal Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Georgia 14,502 8.36%/ 1.21%
Trust Accounts Municipal Bond/Y
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Fl.High Income 4,708 99 .80%/ .03%
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 665,779 11.17%/ 4.00%
Trade House Account - Aid Muni Bond/A
c/o:FUBS & Co. FEBO
301 S.Tryon St.
Charlotte, NC 28288
FUBS & Co. FEBO Fl.High Income 29,183 6.65%/ .17%
Robert David Butler Sr.and Muni Bond/B
Martha Lee Butler Trust
Robert & Martha Butler Ttees
U/A/D/ 3/29/90
301 S. Tryon St.
Charolotte, NC 28288
FUBS & Co. FEBO Fl.High Income 48,963 11.16%/ .29%
Don L. Waldron Muni Bond/B
Gladys M. Wood JT Ten
301 S. Tryon St.
Charolotte, NC 28288
FUBS & Co. FEBO Fl.High Income 28,256 6.44%/ .17%
Harlowe R. Zinn Trust Muni Bond/B
Harlowe R. Zinni and
Marjorie Z. Zinn Co.TTES
U/A/D/ 12/15/93
301 S. Tryon St.
Charolotte, NC 28288
25
<PAGE>
First Union National Bank High Grade/Y 342,656 14.95%/ 3.14%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Foster & Foster High Grade/Y 405,595 7.70%/ 3.72%
P.O. Box 1669
Greenwich, CT 06836-1669
Fubs & Co. Febo Short-Intermediate/A 131,696 6.76%/ 2.46%
Manuel Garcia and
Adeline Garcia
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Short-Intermediate/A 198,346 5.24%/ 3.70%
International Gem Society Inc.
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Short-Intermediate/A 254,140 2.34%/ 4.74%
First Union National Bank-
FL F/B/O
International Gem Society Inc
Att: Susan Weiner
"Loan Account"
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. FBO Short-Intermediate/B 35,906 5.52%/ .67%
Mark E. Smith
Melissa A. Smith JT TEN
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. FBO Short-Intermediate/B 47,407 7.29%/ .89%
Carl R. Nodine and
Linda F. Nodine
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
<PAGE>
INVESTMENT ADVISER
(See also "Management of the Fund" 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, Theodore J. Israel, Jr., Executive Vice President,
Joseph J. McBrien, Senior Vice President and General Counsel, and George R.
Gaspari, Senior Vice President and Chief Financial Officer.
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 Incorporated.
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 XXXXXXXXXXX, 199X, First Fidelity Bank, N.A. ("First Fidelity")
acted as investment adviser to New Jersey Tax Free. On June 18, 1995, First
Union Corporation ("First Union") the corporate parent of FUNB, 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 First Fidelity with and
into a wholly-owned subsidiary of First Union. The Merger was consummated on
XXXXX, 199X. As a result of the Merger, FUNB and its wholly-owned subsidiary,
Evergreen Asset Management Corp., 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 Period Ended Year Ended Year Ended
8/31/95 12/31/94 12/31/93
Advisory Fee $243,413 $171,732 $31,835
Waiver (73,661) (171,732) (31,835)
Net Advisory Fee 16,975 $ 0 $ 0
========= ========== ==========
Expense
Reinbursement (46,864) (90,218) (68,939)
-------- -------- ---------
GEORGIA MUNICIPAL
BOND Period Ended Year Ended Year Ended
8/31/95 12/31/94 12/31/93
Advisory Fee $ 32,646 $36,674 $5,416
Waiver (32,646) (36,674) (5,416)
Net Advisory Fee $ 0 $ 0 $ 0
======== ======== =========
Exspense
Reinbursement (105,409) (189,746) (65,758)
---------- --------- ---------
NEW JERSEY
TAX FREE Period Ended Year Ended Year Ended
2/28/95 2/28/94 2/28/93
Advisory Fee $191,038 $116,651 $116,651
Waiver (191,038) (116,651) (116,651)
Net Advisory Fee $ 0 $ 0 $ 0
========== ========== ==========
Exspense
Reinbursement -0- $33,402 $ 72,680
--------- ---------- ----------
NORTH CAROLINA
MUNICIPAL BOND Period Ended Year Ended Year Ended
8/31/95 12/31/94 12/31/93
Advisory Fee $190,284 $287,040 $170,496
Waiver (132,051) (193,158) (170,496)
Net Advisory Fee $ 58,233 $93,882 $ 0
========== ========== ==========
Exspense
Reinbursement -0- (28,121) (152,589)
--------- ---------- ----------
SOUTH CAROLINA
MUNICIPAL BOND Period Ended Year Ended
8/31/95 12/31/94
Advisory Fee $ 13,154 $8,905
Waiver (13,154) (8,905)
Net Advisory Fee $ 0 $ 0
======== ========
Expense
Reinbursement (144,430) (177,387)
--------- ----------
VIRGINIA
MUNICIPAL BOND Period Ended Year Ended Year Ended
8/31/95 12/31/94 12/31/93
Advisory Fee $ 23,156 $24,942 $4,283
-------- ------- -----
Waiver ($ 23,156) ($24,942) ($4,283)
Net Advisory Fee 0 0 0
======== ======== ========
Expense
Reinbursement (120,876) (205,073) (59,974)
--------- --------- --------
FLORIDA HIGH
INCOME Year Ended
8/31/95
Advisory Fee $123,320
---------
Waiver (71,690)
Net Advisory Fee $ 51,630
========
Expense
Reimbursement 0
HIGH GRADE Period Ended Year Ended Year Ended
8/31/95 12/31/94 12/31/93
Advisory Fee $338,767 $599,854 $643,946
-------- ------- -------
Waiver ( 20,456) (16,091) (280,300)
Net Advisory Fee $318,311 $583,763 $363,646
========= ========= ==========
SHORT-INTERMEDIATE Year Ended Year Ended Year Ended
8/31/95 8/31/94 8/31/93
Advisory Fee $263,947 $301,565 $313,180
-------- ------- -------
Waiver ( 63,612) (150,194) (256,324)
Net Advisory Fee $200,335 $151,371 $56,856
======== ======== ========
Expense
Reimbursement ( 28,521) $ 0 $ 0
-------- -------- -------
29
<PAGE>
SHORT-INTERMEDIATE-
CA Year Ended Year Ended Year Ended
8/31/95 8/31/94 8/31/93
Advisory Fee $134,625 $164,447 $158,025
--------- ------- -------
Waiver ( 48,955) (129,952) (150,551)
Net Advisory Fee $ 85,670 $34,495 $7,474
======= ======= =======
Expense
Reimbursement 0 0 $44,957
-------- ------- ------
Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond and
Florida High Grade commenced operations on July 2, 1993, July 2, 1993, January
11, 1993, January 4, 1994, July 2, 1993 and June 30, 1995, respectively, and,
therefore, the first year's figures set forth in the table above reflect for
Florida Municipal Bond, Georgia Municipal Bond, North Carolina Municipal Bond
and Virginia Municipal Bond investment advisory fees paid for the period from
commencement of operations through December 31, 1993, with respect to South
Carolina Municipal Bond, December 31, 1994 and, with respect to Florida High
Income, August 31, 1995.
Expense Limitations
Each Adviser's fee will be reduced by, or the Adviser will reimburse
the Funds (except Short-Intermediate and Short-Intermediate-CA, which have
specific percentage limitations described below) for any amount necessary to
prevent such expenses (exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, but inclusive of the Adviser's fee) from exceeding the
most restrictive of the expense limitations imposed by state securities
commissions of the states in which the Funds' shares are then registered or
qualified for sale. Reimbursement, when necessary, will be made monthly in the
same manner in which the advisory fee is paid. Currently the most restrictive
state expense limitation is 2.5% of the first $30,000,000 of the Fund's average
daily net assets, 2% of the next $70,000,000 of such assets and 1.5% of such
assets in excess of $100,000,000.
With respect to Short-Intermediate and Short-Intermediate CA, Evergreen
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) and will continue in effect until
June 30, 1996, (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 April 20, 1995 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 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 XXXXXXX, 199X were first approved by the shareholders of the Fund on
XXXXXXXX, 199X and will continue until June 30, 1997 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.
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. On July 1, 1995, Evergreen Asset commenced providing
administrative services to each of the portfolios of Evergreen Investment 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. Furman Selz Incorporated, 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 and High Grade 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: .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, 1995 were approximately $10.1 billion.
Prior to XXXXXX, 199X, Furman Selz acted as administrator for Pennsylvania.
For the fiscal years ended February 28, 1993, 1994 and 1995 Furman Selz waived
its entire administrative fee.
For the fiscal period ended August 31, 1995, the year ended December 31,
1994, and the period from July 2, 1993 (commencement of operations) to December
31, 1993, Florida Municipal Bond incurred $38,751, $75,397 and $24,932,
respectively, in administrative service costs, all of which were voluntarily
waived for the year ended December 31, 1994 and the period from July 2, 1993
(commencement of operations) to December 31, 1993. For the fiscal period ended
August 31, 1995, the fiscal year ended December 31, 1994, and the period from
July 2, 1993 (commencement of operations) to December 31, 1993, Georgia
Municipal Bond incurred $3,901, $75,479 and $24,931, respectively, in
administrative service costs, all of which were voluntarily waived. For the
fiscal period ended August 31, 1995, the fiscal year ended December 31, 1994,
and for the period from January 11, 1993 (commencement of operations) to
December 31, 1993, North Carolina Municipal Bond incurred $23,309, $75,476 and
$48,493, respectively, in administrative service costs, of which $0, $28,121 and
$48,493, respectively were voluntarily waived. For 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 $1,451 and $104,356,
respectively in administrative service costs, all of which were voluntarily
waived. For the fiscal period ended August 31, 1995, the fiscal year ended
December 31, 1994, and the period from July 2, 1993 (commencement of operations)
to December 31, 1993, Virginia Municipal Bond incurred $2,701, $75,479 and
$24,931, respectively, in administrative service costs, all of which were
voluntarily waived. For the fiscal period ended August 31, 1995 and the fiscal
years ended December 31, 1994 and 1993, High Grade incurred $39,697, $101,004
and $112,663, respectively, in administrative service costs.
DISTRIBUTION PLANS
Reference is made to "Management of the Fund - 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.
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.
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
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 and High Grade 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
36
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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.
For the fiscal period from January 1, 1995 through August 31, 1995,
Florida Municipal Bond, Georgia Municipal Bond, North Carolina Municipal Bond,
South Carolina Municipal Bond, Virginia Municipal Bond and High Grade incurred
$1, $2,856, $13,739, $788, $3,127, and $97,996, respectively, in distribution
services fees on behalf of their Class A shares.
For the fiscal period from January 1, 1995 through August 31, 1995,
Florida Municipal Bond, Georgia Municipal Bond, North Carolina Municipal Bond,
South Carolina Municipal Bond, Virginia Municipal Bond, and High Grade, incurred
$21.041, $37,476, $239,789, $15,094, $22,700, and $167,706, respectively, in
distribution services fees on behalf of their Class B shares.
For the fiscal period from January 3, 1995 through August 31, 1995,
Short- Intermediate and Short-Intermediate-CA incurred $4,106 and $0,
respectively, in distribution services fees on behalf of their Class A shares.
For the fiscal period from January 3, 1995 through August 31, 1995,
Short- Intermediate and Short-Intermediate-CA incurred $20,584 and $0,
respectively, in distribution services fees on behalf of their Class B shares.
For the fiscal period from June 30, 1995 through August 31, 1995,
Florida High Income incurred $ 41,690 in distribution services fees on behalf of
its Class A shares.
For the fiscal period from June 30, 1995 through August 31, 1995,
Florida High Income incurred $ 1,565 in distribution services fees on behalf of
its Class B shares.
Shareholder Services Plans
For the period ended August 31, 1995, Florida Municipal Bond incurred
shareholder services fees of $7,013 on behalf of its Class B shares; Georgia
Municipal Bond incurred shareholder services fees of $12,492 on behalf of its
Class B shares; North Carolina Municipal Bond incurred shareholder services fees
of $79,930 on behalf of its Class B shares; South Carolina Municipal Bond
incurred shareholder service fees of $5,031 on behalf of its Class B shares;
37
<PAGE>
Virginia Municipal Bond incurred shareholder service fees of $7,567 on behalf of
its Class B shares; and High Grade incurred shareholder service fees of $55,902
on behalf of its 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.
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 period ended
August 31, 1995, the fiscal year ended December 31, 1994, and for the period
from January 11, 1993 (commencement of operations) to December 31, 1993, North
Carolina Municipal Bond paid $ 0, $ 1,250 and $0, 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
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
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
The following information supplements that set forth in each 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, 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".
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
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 not
issued for any class of shares of any Fund. This facilitates later redemption
are 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, North Carolina
Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond and High
Grade and 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.
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 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
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 $ 9.74 $.49 8/31/95 $10.23
Georgia
Municipal
Bond $ 9.47 $.47 8/31/95 $ 9.94
North Carolina
Municipal Bond $ 9.95 $.50 8/31/95 $10.45
South Carolina
Municipal Bond $ 9.59 $.48 8/31/95 $10.07
Virginia
Municipal
Bond $ 9.67 $.48 8/31/95 $10.15
Florida
High Income $10.40 $.52 8/31/95 $10.92
High Grade $10.69 $.53 8/31/95 $11.22
Short-
Intermediate $10.17 $.51 8/31/95 $10.68
Short-
Intermediate-
CA $10.06 $.50 8/31/95 $10.56
Prior to January 3, 1995, shares of the Funds other than Florida
Municipal Bond, Georgia Municipal Bond, North Carolina Municipal Bond, South
Carolina Municipal Bond, Virginia Municipal Bond and High Grade 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 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., which, prior to July 7,
1995, was the principal underwriter of portfolios of Evergreen Investment Trust:
Period from Period from Year Ended Perid from
July 7, 1995 to January 1, 1995 12/31/94 July 2, 1993 to
August 31, 1995 to July 6, 1995 December 31,1993
Florida Municipal
Bond Fund
Commissions Received $ 23, 324 $ 64,431 $ 2,000 $ 132,000
Commissions Retained 2, 747 1,554 --- 20,000
Georgia Municipal Bond
Commissions Received $ 9,947 $ 46,263 $103,000 $ 15,000
Commissions Retained 1,747 2,473 6,000 2,000
Virginia Municipal Bond
Commissions Received $ 4,340 $ 41,373 $ 62,000 $ 49,000
Commissions Retained 533 1,787 6,000 7,000
North Carolina Municipal
Bond
Period from Period from Year Ended Period from
July 7, 1995 to January 1, 1995 12/31/94 January 11, 1993
August 31, 1995 to July 6, 1995 to December 31,1995
Commissions Received $ 5,238 $ 117,937 $ 210,000 $ 35,000
Commissions Retained 637 7,206 3,000 5,000
* * * * * * * * * * * *
South Carolina Municipal
Bond Period from Period from Period from
July 7, 1995 to January 1, 1995 January 3, 1994 to
August 31, 1995 to July 6, 1995 December 31, 1994
Commissions Received $ 853 $ 34,388 $ 34,000
Commissions Retained 98 3,497 5,000
* * * * * * * * * * * *
High Grade
Period from Period from
July 7, 1995 to January 1, 1995 Year Ended Year Ended
August 31,1995 to July 6, 1995 12/31/94 12/31/93
Commissions Received $ 5,767 $ 29,154 $ 82,000 $ 549,000
Commissions Retained 712 1,515 5,000 82,000
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 funds 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
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 Fund
Evergreen Global Real Estate Equity Fund
Evergreen U.S. Real Estate Equity Fund
Evergreen Limited Market Fund, Inc.
Evergreen Growth and Income Fund
Evergreen Total Return Fund
Evergreen American Retirement Fund
Evergreen Small Cap Equity Income Fund
Evergreen Tax Strategic Foundation Fund
Evergreen Short-Intermediate Municipal Fund
Evergreen Short-Intermediate Municipal Fund-California
Evergreen Tax Exempt Money Market Fund
Evergreen Money Market Fund
Evergreen Foundation Fund
Evergreen Florida High Income Municipal Bond Fund
Evergreen Aggressive Growth
Fund Evergreen Balanced Fund*
Evergreen Utility Fund*
Evergreen Value Fund*
Evergreen U.S. Government Fund*
Evergreen Fixed Income Fund*
Evergreen Managed Bond Fund*
Evergreen Emerging Markets Growth Fund*
Evergreen International Equity 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*
Evergreen Virginia Municipal Bond Fund*
Evergreen High Grade Tax Free Fund*
* Prior to July 7, 1995, each Fund was named "First Union" instead of
"Evergreen."
Prospectuses for the Evergreen mutual funds may be obtained without
charge by contacting the Distributor or the Advisers at the address or 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 of a Fund worth an additional $100,000,
the sales charge for the $100,000 purchase would be at the 3.00% rate applicable
to a single $300,000 purchase of shares of the Fund, 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
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 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 recordkeeping
services to plans which make shares of the Evergreen mutual funds available to
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 Trust; present or former trustees of other investment companies
managed by the Advisers; present or retired full-time employees of the Adviser;
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
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, 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, 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
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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
eight years or Class B shares acquired pursuant to reinvestment of dividends or
distributions and third of Class B shares held longest during the eight-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).
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, with respect to Florida
Municipal Bond, Georgia Municipal Bond, 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
52
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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, 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 eight 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
(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 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 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.
Florida High Income, Short-Intermediate and Short-Intermediate-CA may issue
an unlimited number of shares of beneficial interest with a $0.0001 par value.
Florida Municipal Bond, Georgia Municipal Bond, North Carolina Municipal Bond,
South Carolina Municipal Bond, Virginia Municipal Bond and High Grade may issue
an unlimited number of shares of beneficial interest without 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.
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 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"), 237 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, North 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 and five year fiscal periods and the period since
each Fund's inception is set forth in the table below.
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FLORIDA MUNICIPAL 1 Year
BOND Ended From inception*
8/31/95 to 8/31/95
Class A 9.22% 8.37%
Class B (3 51%)
Class Y 1.67%
GEORGIA MUNICIPAL 1 Year
BOND Ended From inception**
8/31/95 to 8/31/95
Class A 2.48% .22%
Class B 1.80% .59%
Class Y 7.86% 3.13%
NORTH CAROLINA 1 Year
MUNICIPAL BOND Ended From inception***
8/31/95 to 8/31/95
Class A 3.84% 3.04%
Class B 3.21% 3.30%
Class Y 9.29% 3.04%
SHORT-INTERMEDIATE 1 Year From 11/18/91
Ended (inception)
8/31/95 to 8/31/95
Class A - .10%
Class B - ( .50%)
Class Y 4.21% 5.37%
SHORT-INTERMEDIATE- 1 Year From 10/16/92
CA Ended (inception)
8/31/95 to 8/31/95
Class A - -
Class B - -
Class Y 4.20% 4.59%
1 Year
SOUTH CAROLINA Ended From inception-
MUNICIPAL BOND 8/31/95 to 8/31/95
Class A 5.62% ( .23%)
Class B 5.07% ( .21%)
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Class Y 11.16% 4.78%
1 Year
VIRGINIA MUNICIPAL Ended From inception--
BOND 8/31/95 to 8/31/95
Class A 4.14% 1.05%
Class B 3.53% 1.42%
Class Y 9.61% 4.39%
HIGH GRADE 1 Year
Ended From inception---
8/31/95 to 8/31/95
Class A 3.27% 6.03%
Class B 2.62% 4.68%
Class Y 8.69% 3.87%
FLORIDA HIGH 1 Year From June 17, 1992
INCOME Ended (inception) to
8/31/95 8/31/95
Class A 8.97% 8.21%
Class B - (4.36%)
Class Y - -
* Inception date: Class A - July 5, 1993; Class B - July 1, 1993; Class Y -
February 28, 1994.
** Inception date: Class A - July 1, 1993; Class B - July 1, 1993; Class Y -
February 28, 1994.
*** Inception date: Class A - January 12, 1993; Class B - January 12, 1993;
Class Y - February 28, 1994.
- - - Inception date:Class A - January 3, 1994; Class B - January 3, 1994; Class Y
- - - February 28, 1994.
- - -- Inception date:Class A - July 7, 1993; Class B - July 1, 1993; Class Y -
February 28, 1994.
- - -- Inception date: Class A - February 25, 1992; Class B - January 12, 1993;
Class Y - February 28, 1994.
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
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
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.
The tax exempt and tax equivalent yields of each Fund for the
thirty-day period ended August 31, 1995 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%.
Yield Tax Equivalent Yield
Florida High Income
Class A 5.86% 8.14%
Class B 5.11% 7.10%
Class Y - -
Short-Intermediate
Class A 4.07% 5.65%
Class B 3.17% 4.40%
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Class Y 4.06% 5.64%
Short-Intermediate-CA
Class A - -
Class B - -
Class Y 3.97% 5.64%
Florida Municipal Bond
Class A 5.50% 7.94%
Class B 4.57% 6.35%
Class Y 5.56% 7.72%
Georgia Municipal Bond
Class A 5.24% 7.94%
Class B 4.50% 6.82%
Class Y 5.49% 8.32%
North Carolina
Municipal Bond
Class A 5.17% 7.18%
Class B 4.42% 6.14%
Class Y 5.40% 7.50%
South Carolina
Municipal Bond
Class A 5.24% 8.06%
Class B 4.49% 6.91%
Class Y 5.48% 8.43%
Virginia Municipal
Bond
Class A 5.14% 7.70%
Class B 4.39% 6.58%
Class Y 5.38% 8.06%
High Grade
Class A 4.99% 6.93%
Class B 4.24% 5.89%
Class Y 5.23% 7.26%
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.
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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
Each Fund's financial statements appearing in their most current fiscal
year Annual Report (or in the case of Florida High Income, to shareholders and
the report thereon of the independent auditors appearing therein, namely Price
Waterhouse LLP (in the case of Florida High Income, Short-Intermediate and
Short- Intermediate-CA), or KPMG Peat Marwick LLP (in the case of Florida
Municipal Bond, Georgia Municipal Bond, North Carolina Municipal Bond, South
Carolina Municipal Bond, Virginia Municipal Bond and High Grade) 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 MUNUCIPAL 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
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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.
3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or their arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA - This is the highest rating assigned by Standard & Poor's to a
debt obligation and indicates an extremely strong capacity to pay interest and
repay any principal.
AA - Debt rated AA also qualifies as high quality debt obligations.
Capacity to pay interest and repay principal is very strong and in the majority
of instances they differ from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than is higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on a
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB - rating.
B - Debt rated B has greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC - Debt rated CCC has a currently indefinable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC - The rating CC is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.
C - The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
C1 - The rating C1 is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. It is used when interest
payments or principal payments are not made on a due date even if the applicable
grace period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace periods; it will also be used upon a
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-) - To provide more detailed indications of credit
quality, the ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
NR - indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy. Debt
obligations of issuers outside the United States and its territories are rated
on the same basis as domestic corporate and municipal issues. The ratings
measure the credit worthiness of the obligor but do not take into account
currency exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in the top
four categories (AAA, AA, A, BBB, commonly known as "Investment Grade" ratings)
are generally regarded as eligible for bank investment. In addition, the Legal
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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. A brief description of the applicable Moody's
Investors Service rating symbols and their meanings follows:
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Some bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well. NOTE:
Bonds within the above categories which possess the strongest investment
attributes are designated by the symbol "1" following the rating.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca - bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
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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: 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: AAA -- highest credit quality, with an
exceptionally strong ability to pay interest and repay principal; AA -- very
high credit quality, with very strong ablility to pay interest and repay
principal; A -- high credit quality, considered strong as regards principal and
interest protection, but may be more vulneralbe to adverse changes in economic
conditions and circumstances. The indicators "+" and "-" to the AA, A and BBB
categories indicate the relative position of credit within those rating
categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
A Standard & Poor's note rating reflects the liquidity concerns and
market access risks unique to notes. Notes due in three years or less will
likely receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment.
o Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
o Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note.)
Note rating symbols are as follows:
o SP-1 Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
will be given a plus (+) designation.
o SP-2 Satisfactory capacity to pay principal and interest.
o SP-3 Speculative capacity to pay principal and interest.
Moody's Short-Term Loan Ratings - Moody's ratings for state and
municipal short-term obligations will be designated Moody's Investment Grade
(MIG). This distinction is in recognition of the differences between short-term
credit risk and long-term risk. Factors affecting the liquidity of the borrower
are uppermost in importance in short-term borrowing, while various factors of
major importance in bond risk are of lesser importance over the short run.
Rating symbols and their meanings follow:
o MIG 1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
o MIG 2 - This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
o MIG 3 - This designation denotes favorable quality. All security elements are
accounted for but this is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
o MIG 4 - This designation denotes adequate quality. 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: 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: F-1+ -- denotes exceptionally strong credit
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, caryying 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
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 sufficiantly 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
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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
19996'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,
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
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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
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.
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Except for the major building projects necessary for the 1996 Summer
Olympics, it appears unlikely that areas in and around metropolitan Atlanta will
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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
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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
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
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throughout the 1980s, began reflecting economic downturn in fiscal 1990.
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 "AA+." 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
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.
The effects of the most recent military base-closing and consolidation
legislation is having a negative effect on several sections of the State,
particularly the Charleston area. During 1995, the Charleston Naval Base and
Shipyard will begin closing down. The Navy has estimated that up to 38,000 jobs
will be lost over the next several years.
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,
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.
******************************************************************************
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
In Part A: Financial Highlights
[TO BE ADDED BY AMENDMENT]
In Part C: None.
(b) Exhibits
(1) Declaration of Trust of Registrant*
(2) By-Laws of Registrant*
(3) Not applicable
(4) Specimen certificate of shares of beneficial interest. of
Registrant**
(5) Advisory Contract*
(5)(a) Revised Form of Master Investment Advisory Contract
between Registrant and First Fidelity Bank, National
Association, New Jersey. (Supplements only)*****
(5)(b) Revised Form of Master Administrative Services Contract
between Registrant and Furman Selz Incorporated.
(Supplements only)*****
(6) Distribution Contract***
(6)(a) Revised Form of Master Distribution Contract between
Registrant and FFB Funds Distributor, Inc.
(Supplements only)*****
(7) Not applicable
(8) Custodian Agreement*
(9) (i) Transfer Agency*
(ii) Servicing Agreements*****
(10) Consent of Counsel
(11) Inapplicable
(12) Annual Reports of the Funds dated February 28, 1995;
Balance Sheet as of February 28, 1995 for Diversified
International Growth Fund******
(13) Not applicable
(14) Not applicable
(15) (i) Distribution Plan***
(ii) Administrative Services Contract*
15(a) Revised Form of Rule 12b-1 Distribution Plan and Agreement
between Registrant and FFB Funds Distributor, Inc.
(Supplement only)*****
16(a) Schedule showing computation of performance quotations
provided in response to Item 22 (unaudited)***
16(b) Power of Attorney of Benjamin Lobel******
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<PAGE>
* Filed with Post-Effective Amendment No. 2 to Registration Statement No.
33-2010 on March 25, 1987.
** Filed with Pre-Effective Amendment No. 1 to Registration Statement No.
33-2010 on March 10, 1986 and with Pre-Effective Amendments No. 1 of
predecessors FFB Equity Trust (Registration Statement No. 33-2012) and
FFB Tax-Free Trust (Registration Statement No. 33-2011) on April 30,
1986, and August 13, 1986, respectively.
*** Filed with Post-Effective Amendment No. 8 to Registration Statement No.
33-2010 on June 30, 1991.
**** Filed with Post-Effective Amendment No. 16 to Registration Statement No.
33-2010 on June 30, 1994.
***** Filed with Post-Effective Amendment No. 18 to Registration Statement No.
33-2010 on November 10, 1994.
****** Filed with Post-Effective Amendment No. 21.
- --------------------
Item 25. Persons Controlled by or Under Common Control with Registrant
No person is controlled by or under common control with the
Registrant.
Item 26. Number of Holders of Securities
Pennsylvania Tax-Free Money Market Fund 292
Cash Management Money Market Fund 565
U.S. Treasury Money Market Fund 1033
U.S. Government Money Market Fund 300
Tax-Free Money Market Fund 161
100% U.S. Treasury Money Market Fund 64
Equity Fund 189
U.S. Government Income Fund 88
Diversified International Growth Fund 12
New Jersey Tax-Free Income Fund 760
Item 27. Indemnification
Reference is made to Article IV of the Registrant's Declaration of Trust.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of
the Registrant by the Registrant pursuant to the Declaration of Trust or
otherwise, the Registrant is aware that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Act and, therefore, is unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by trustees, officers or
controlling persons of the Registrant in connection with the successful
defense of any act, suit or proceeding) is asserted by such trustees,
officers or controlling persons in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will
be governed by the final adjudication of such issues.
Item 28. Business and Other Connections of Investment Adviser
(a) First Fidelity Bank, National Association, New Jersey ("First
Fidelity"), the investment adviser to FFB Funds Trust and First
[NYCORP] 2106.1
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<PAGE>
Fidelity Investment Trust for Retirement Accounts, is a
wholly-owned subsidiary of First Fidelity Bancorporation,
550 Broad Street, Newark, N.J. 07101. First Fidelity's
directors and their business and other connections are as
follows:
Directors
Name Business and Other Connections
Louis E. Azzato Chairman and Chief Executive Officer Foster
Wheeler Corporation Perryville Corporate
Park
Clinton, NJ 08809-4000
Edward E. Barr Chairman, President and Chief Executive
Officer Sun Chemical Corporation
Roland K. Bullard, II Senior Executive Vice President
Lee A. Butz President
Alvin H. Butz, Inc.
Luther R. Campbell, Jr. Managing Partner
Campbell, Rappold & Yurasits
John Gilray Christy Chairman
Chestnut Capital Corporation
James G. Cullen President, Bell Atlantic Corporation
Robert R. Ferguson, Jr. Retired
E. James Ferland Chairman, President, and
Chief Executive Officer
Public Service Enterprise Group
Incorporated
80 Park Plaza
Newark, NJ 07101
Arthur M. Goldberg President and Chief Executive Officer
DiGiorgio Corporation; Chairman and Chief
Executive Officer Bally Manufacturing
Corporation
Leslie E. Goodman Senior Executive Vice President
Frank M. Henry President
Frank Martz Coach Company
John R. Kennedy President and Chief Executive
Officer Federal Paper Board Company,
Inc.
75 Chestnut Ridge Road P.0. Box 357
Montvale, NJ 07645
Rocco J. Marano Chairman, Blue Cross and Blue Shield of
N.J., Inc.; Retired Chairman,
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Bell Communications Research, Inc.
290 West Mount Pleasant Ave
Livingston, NJ 07039
James D. Morrissey, Jr. President and Chief Operating Officer
James D. Morrissey, Inc.
Joseph Neubauer Chairman, President and Chief Executive
Officer, The ARA Group, Inc.
Peter C. Palmieri Vice Chairman
Wolfgang Schoellkopf Vice Chairman
Robert Montgomery Scott, Esq. President and Chief Executive Officer
Philadelphia Museum of Art
Rebecca Stafford, Ph.D. President, Monmouth College
Sefton Stallard General Partner
North American Venture Capital
Fund, L.P.
Anthony P. Terracciano Chairman, President and Chief Executive
Officer
Bernard C. Watson, Ph.D. President and Chief Executive Officer
William Penn Foundation
The principal executive officers of First Fidelity and their
businesses and other connections are as follows:
Name Business and Other Connections
Jay Anglada Executive Vice President and Senior Trust
Officer
Anthony R. Burriesci Executive Vice President
Michael A. Gallagher Executive Vice President
William A. Karmen Executive Vice President
Michael L. LaRusso Executive Vice President
James L. Mitchell Executive Vice President
Donald C. Parcells Executive Vice President
Frederick H. Pennekamp Executive Vice President
The directors and principal executive officers of Blairlogie Capital
Management are as follows:
Name Business and Other Connections
Gavin R. Dobson Chief Executive Officer
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James G. Smith Chief Investment Officer
J. Robert Stephens Chief Financial Officer
Darren W. DeVore Vice President of North American Marketing
Steven T. Bailey Director
William D. Cvengros Director
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Audrey L. Milfs Director
Thomas C. Sutton Director
Item 29. Principal Underwriters
(a) None.
(b) Officers and Directors.
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
Michael C. Petrycki President and Executive Vice
Director President
Steven D. Blecher Vice President, Executive Vice
Secretary and President
Treasurer
Robert J. Miller Chief Financial None
Officer
(c) Not applicable
* The address of all directors and officers is 237 Park Avenue, New York, New
York 10017.
[NYCORP] 2106.1
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<PAGE>
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules thereunder are maintained
at the offices of First Fidelity Bank, National Association, New
Jersey, 765 Broad Street, Newark, New Jersey 07101 and Furman Selz
Incorporated, 237 Park Avenue, New York, New York 10017.
Item 31. Management Services
Not applicable
Item 32. Undertakings
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual
report upon request and without charge.
Registrant undertakes to call a meeting of shareholders for the
purpose of voting upon the removal of a trustee if requested to do so
by the holders of at least 10% of the Registrant's outstanding
shares.
Registrant undertakes to provide the support to shareholders
specified in Section 16(c) of the 1940 Act as though that section
applied to the Registrant.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 23 to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, and State of New York, on November 22, 1995.
FFB FUNDS TRUST (Registrant)
By: /s/John J. Pileggi
John J. Pileggi, Treasurer (Principal
Financial and Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
Signature Title Date
* Edmund A. Hajim Trustee and 11/22/95
Edmund A. Hajim President (Principal
Executive Officer)
*Robert H. Dunker Trustee 11/22/95
Robert H. Dunker
*T. Brock Saxe Trustee 11/22/95
T. Brock Saxe
**Benjamin Lobel Trustee 11/22/95
Benjamin Lobel
*Robert F. Kane Trustee 11/22/95
Robert F. Kane
*Walter J. Neppl Trustee 11/22/95
Walter J. Nepp1
/s/John J. Pileggi Treasurer 11/22/95
John J. Pileggi (Principal Financial
and Accounting Officer)
By: /s/John J. Pileggi
John J. Pileggi
Attorney-in-Fact
* Pursuant to power of attorney filed with Pre-Effective Amendment No. 1 to
Registration Statements No. 33-2010, 33-2011 and 33-2012.
** Pursuant to power of attorney filed with Post-Effective Amendment No. 21.
[NYCORP] 2106.1
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