<PAGE>
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Evergreen Pennsylvania Tax Free Money Market Fund - Annual Report Follows
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EVERGREEN(Service Mark)
PENNSYLVANIA TAX-FREE
MONEY MARKET FUND
(Boxed shape of Pennslyvania map appears here)
(Cover photo of brick building with high tower appears)
1996 ANNUAL REPORT
_____________________________
(Boxed Evergreen tree logo appears here)
Evergreen Funds
(All above appears as an inset down the middle of large photo
with many power lines)
<PAGE>
EVERGREEN PENNSYLVANIA TAX-FREE
MONEY MARKET FUND
(FORMERLY FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<C> <S> <C>
(Boxed shape of A Review of the Past Year and Prospects for the Future...................... 1
Pennslyvania map A Report From Your Portfolio Manager........................................ 3
appears here) Statement of Investments.................................................... 4
Statement of Assets and Liabilities......................................... 7
Statement of Operations..................................................... 8
Statement of Changes in Net Assets.......................................... 9
Notes to Financial Statements............................................... 10
Financial Highlights........................................................ 14
Independent Auditors' Report -- KPMG Peat Marwick LLP....................... 15
Trustees and Officers............................................Inside Back Cover
</TABLE>
EVERGREEN(Service Mark) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
EVERGREEN PENNSYLVANIA TAX-FREE
MONEY MARKET FUND
(FORMERLY FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND)
A REVIEW OF THE PAST YEAR
AND PROSPECTS FOR THE FUTURE
BY STEPHEN A. LIEBER, CHAIRMAN OF
EVERGREEN ASSET MANAGEMENT CORP.
The volatility of investment markets during the (Photo of Stephen A.
first quarter of 1996 reflected a virtually constant Lieber appears here)
reappraisal of economic prospects. The prospects of
sporadic commodity inflation, evidence of resurgent
employment trends, failure of
political negotiations to achieve a balanced budget agreement, declining demand
in personal computer-based technological products, sizable consumer credit
growth and greater credit card losses, the increase in imports without
concomitant increases in exports, and the rise of the dollar, all drove the
markets to mirror the fast changing trends of new statistics. The question of
whether inflation might be reappearing was central to the investor reaction to
these concerns. Fears of inflation increased through the first quarter, as
evidenced by the sizable rise in bond market yields. By early April, long-term
U.S. Treasury bond yields reached 7%, a level last seen in August 1995, and up
more than one full percentage point from the beginning of the year. Clearly,
investors were demanding more of an inflation premium in interest rates.
The background with which this year has begun is inconclusive in its trends.
We have previously held to the view that a wage-driven inflation is unlikely in
the present economic environment due to the easy substitution of imported goods
for many domestic goods, while competitive pressures for U.S. and world markets
mount from the broadening dispersion of technology, capital, and capital goods.
The strength of American industry, it is generally held, must come from its
product innovation, its quality, and the rising productivity of its work force.
These internal and external pressures have had a major impact in restraining
wage-driven inflation. Monetary inflation has shown improving trends as the
budget deficit, as a percentage of gross domestic product, continues to decline.
Attention, however, must still be given to the longer term issues of potentially
destabilized Federal budgeting due to entitlements. While no solution to this
issue of government deficit control emerged from this year's political
negotiations, it is at least better established on the political agenda than
ever before.
Investment markets demand a risk premium when faced with elements of
uncertainty. The risk premium lately built into the fixed income markets not
only reflects the arguable issue of whether there is a risk of wage inflation in
the United States, but also the sharp recent increases in some key commodity
prices. The combination of a dearth of rainfall and reduced acreage in key
agricultural states has spiked up major food commodity prices. Similarly, the
draining of oil inventories because of the heat requirements of the abnormally
long and cold winter in northern states, together with the cautious inventory
policies of the oil industry faced with the possibility that Iraqi supplies
might return to the market, has caused prices of oil and refined products to
rise. Many watchers for inflationary trends have jumped on these commodity
rises, which have lead them to conclude that the inflation rate will rise and,
therefore, that bond yields have to go up. The dissent is widespread, arguing
that these are temporary interruptions, which will in the long run serve more to
shrink profit margins than to raise prices and arguing that these are only
interruptions to a fundamentally steady low inflation trend. They point to the
2.8% increase in the Consumer Price Index for the twelve months ended March 31.
More important in the analysis of the potentials for bond yields, many
economists argue, is the current trend toward the reduction of interest rates in
Europe, led by the recent half percent discount rate cut by the German
Bundesbank. The revival of economic growth in Europe, it is felt, requires lower
interest rates which in turn will facilitate a decline in rates in the United
States, merely from reduced competitive investment pressures. We conclude that
negative trends which have dominated the bond market in the first months of the
year, as marked by the sharp rise in yields, may well reflect shorter-term
factors rather than long-term
1
<PAGE>
EVERGREEN PENNSYLVANIA TAX-FREE
MONEY MARKET FUND
(FORMERLY FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND)
A REVIEW OF THE PAST YEAR AND
PROSPECTS FOR THE FUTURE -- (CONTINUED)
trends. Federal Reserve Bank Governors in numerous recent speeches and
interviews have made the point that they are confident about the underlying
trend of well-controlled inflation, suggesting that they are not aiming to
increase the discount rates or to put any pressures to slow the economy. We
conclude that the Federal Reserve is not aiming to stimulate the economy at this
time, but will act to sustain a reasonable growth in the better than 2% range if
there is any further evidence of broadly slowing economic activity.
International competitive interest rate pressures are diminishing, the trade
balance is improving and the economy has remained resilient in the recent period
of inventory correction. These are all factors suggesting a period of
comparative stability for the months ahead.
The tax-exempt securities markets in late 1994 and 1995, and again in early
1996, were negatively affected by the flat tax proposals. The differential
between the yields of taxable fixed income debt and tax-exempt debt shrank to
record lows for recent years. For those who were convinced that a flat tax, or a
substantially reduced income tax level, was not to be expected in the near-term,
the tax-exempt fixed income market presented an outstanding comparative
investment opportunity. The loss in the Presidential primaries of the one
candidacy which featured a flat tax has already restored considerable confidence
in the continuation of the present tax structure, and increased the spread
between taxable and tax-exempt bonds. As the fall election campaign nears, the
comparative strength of the tax-exempt market will reflect the positions of the
candidates. Unless there is a major surprise in the conventions, tax-exempt
obligations seem favorably situated.
Credit issues in the tax-exempt market have not been paramount since the rare
case of the Orange County, California default. The ripple effect of that default
was shorter lived than many expected, and the resolution of Orange County's
fiscal difficulties is well underway. Its positive impact was to develop
pressure for many municipalities and agencies to tighten their controls on cash
management policies and shift to a more prudent, credit worthy structure than
had often been used.
With our overall expectation of a gradual reduction in interest rates as the
inflation premium recently built into the market is reduced, we anticipate an
attractive total return for high-quality fixed income investments, and further
relative gains for the tax-exempt securities market.
2
<PAGE>
EVERGREEN PENNSYLVANIA TAX-FREE
MONEY MARKET FUND
(FORMERLY FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND)
(Boxed shape of Pennsylvania appears here)
A REPORT FROM YOUR
PORTFOLIO MANAGER
RICHARD K. MARRONE
With the changing economic and political climate, 1995 saw a
good deal of volatility. Last February, the two increases in the (Photo of
Fed Fund's rate of 25 basis points each had little net effect on Richard K.
the tax exempt money market rates. The yield curve flattened as Marrone
the markets continued to anticipate no further Fed tightening. appears
The Fund's weighted average portfolio maturity at February 29, here)
1996 was shorter than that of the Donoghue's* average of the 8
Stockbroker and General Purpose Pennsylvania Tax Free money
market funds tracked by Donoghue's during that time, so that the
Fund could adjust to the changing rate environment.
By the second quarter, it was apparent that the earlier Fed
tightening had slowed economic growth to a sustainable level. However, by the
end of June, evidence of slowing growth prompted fears that a Fed ease was
imminent. The yield curve continued to flatten dramatically, and at one point
inverted as participants built a 50-basis-point Fed Fund's rate drop into the
market. We extended the Fund's weighted average maturity to match that of the
Donoghue's average which had extended for the first time in the year. In July,
the Fed lowered the Fed funds rate by 25 basis points after improved inflation
numbers were released. Indications surfaced that housing and auto sales were
beginning to revive as a result of sharp interest rate declines in the first
part of the year. The markets traded in a narrow range due to conflicting
economic data.
In July, with the lowering of the Fed Funds rate, the Fund's average maturity
remained close to that of the Donoghue's average referenced above. Economic
growth in the fourth quarter slowed to a modest rate. The Federal Reserve
lowered the Fed Funds rate by 25 basis points upon the release of good
inflationary outlook and slowing economic growth. Short-term rates continued to
reflect anticipation of further Fed easing. The tax exempt yield curve continued
to flatten with the short end actually inverted out to one year. Demand for one-
year paper was high to lock in yields in anticipation of further easing.
Short-term rates are affected not only by market fundamentals, but also by
the technical factors of supply and demand. This is especially true for a
state-specific tax free money market fund. Pennsylvania short-term paper supply
is scarce but should build to the traditional note season at the end of June.
The supply of long-term Pennsylvania municipals is abundant causing the yields
to be attractive. However the demand for first maturities is very competitive
and will result in lower yield. The Fund's weighted average portfolio maturity
at fiscal year-end was 44 days. Short-term rates are anticipated to stay in the
current range in the near-term with no Fed intervention expected.
* Donoghue's is an independent money market mutual fund performance monitor.
3
<PAGE>
EVERGREEN PENNSYLVANIA TAX-FREE
MONEY MARKET FUND
(FORMERLY FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND)
(Boxed shape of Pennsylvania map appears here)
STATEMENT OF INVESTMENTS
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
<C> <S> <C>
SHORT-TERM MUNICIPAL SECURITIES -- 100.5%
PENNSYLVANIA -- 99.5%
$ 1,000 Allegheny Cnty. Hosp. Dev. Auth. RB
(Allegheny Gen. Hosp.) Ser. B
3.20% -- VRDN
(LOC: Morgan Guaranty Trust Co.
of NY)................................ $ 1,000,000
1,000 Allegheny Cnty. Hosp. Dev. Auth. RB
(South Hills Health Sys. Proj.) Ser.
B, 3.25% -- VRDN
(LOC: PNC Bank)....................... 1,000,000
Allegheny Cnty. Hosp. Dev. Auth. RB
(Allegheny Health Ed. & Resh. Corp.),
3.25% -- VRDN
(LOC: PNC Bank)
800 Ser. A................................ 800,000
700 Ser. C................................ 700,000
Allegheny Cnty. Hosp. Dev. Auth. RB
(Presbyterian Univ. Hosp. Healthcare
Ctr.) 3.35% -- VRDN
(SPA: PNC Bank)
500 Ser. A................................ 500,000
1,300 Ser. C................................ 1,300,000
3,500 Allegheny Cnty. IDA Custodial Pur.
Environmental Imp. RB (US Steel) --
TECP, 3.30%, 3/21/96
(LOC: Norinchukin Bank)............... 3,500,000
2,000 Allegheny Cnty. Port Auth. Grant
Anticipation Notes Ser. A,
3.875%, 6/28/96 (LOC: PNC Bank)....... 1,999,765
2,000 Beaver Cnty. IDA, PCR (Duquesne
Light Co., Beaver Vly. Proj.) -- TECP
Ser. C, 3.40%, 4/4/96
(LOC: Barclays' Bank PLC)............. 2,000,000
2,000 Beaver Cnty. IDA, PCR
(Toledo Edison) Ser. E -- TECP
3.85%, 3/6/96
(LOC -- Toronto Dominion Bank)........ 2,000,000
300 Beaver Cnty. IDA, PCR (Duquesne Light
Co., Beaver Vly. Proj.)
Ser. A, 3.25% -- VRDN
(LOC: Barclay's Bank PLC)............. 300,000
1,000 Bedford Cnty. IDA, IDR (Sepa Inc.
Facs. Proj.), 3.30% -- VRDN
(LOC: Banque Paribas)................. 1,000,000
225 Bethlehem GO
Ser. A, 3.75%, 5/1/96 (AMBAC)......... 225,000
100 Bucks Cnty. IDA RB (SHV Real Estate
Inc.) 3.20% -- VRDN
(LOC: ABN -- Amro Bank)............... 100,000
PRINCIPAL
AMOUNT
(000) VALUE
$ 983 Chester Cnty. IDA Coml. Dev. RB
(Plaza Assn. Proj.) Ser. A,
3.70% -- VRDN
(LOC: First Trust Savings)............ $ 983,000
2,000 Dauphin Cnty. Gen. Auth. Hosp. RB
(Hapsco Group -- Jameson Mem. Proj.)
Ser. B, 3.30% -- VRDN
(LOC: PNC Bank)....................... 2,000,000
1,100 Dauphin Cnty. Gen. Auth. RB
Prerefunded @ 103, 7.60%, 7/1/96...... 1,141,906
Delaware Cnty. IDA Solid Waste RB
(Scott Paper Co.)
3.85% -- VRDN
(LOC: Fuji Bank, Ltd.)
600 Ser. A................................ 600,000
700 Ser. C................................ 700,000
Delaware Cnty. IDA Solid Waste RB
(Scott Paper Co. Proj.)
3.30% -- VRDN (LOC: National
Westminster Bank PLC)
300 Ser. D................................ 300,000
1,700 Ser. E................................ 1,700,000
Delaware Cnty. IDA, PCR (Philadelphia
Elec. Co. Proj.),
(SBPA: FGIC Sec. Purch.) -- TECP
1,000 3.10%, 3/28/96........................ 1,000,000
1,000 3.15%, 4/29/96........................ 1,000,000
500 Delaware Cnty. IDA, IDR
(Res. Recovery Proj.) Ser. G, -- ARB,
4.25%, 12/1/96 (GE Capital Corp.)..... 503,483
Delaware Vly. Regl. Fin. Auth.
Local Govt. RB, 3.20% -- VRDN
(LOC: Midland Bank PLC)
1,000 Ser. A................................ 1,000,000
700 Ser. B................................ 700,000
2,100 Delaware Vly. Regl. Fin. Auth.
Local Govt. RB, 3.20% -- VRDN
(LOC: Midland Bank PLC)............... 2,100,000
500 East Stroudsburg Area Sch. Dist. GO
Prerefunded @ 100,
6.90%, 5/15/96........................ 503,222
200 Emmaus Gen. Auth. Local Govt. RB
Bd. Pool Pgm. Ser. H,
3.35% -- VRDN......................... 200,000
</TABLE>
4
<PAGE>
EVERGREEN PENNSYLVANIA TAX-FREE
MONEY MARKET FUND
(FORMERLY FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND)
(Boxed shape of Pennsylvania map appears here)
STATEMENT OF INVESTMENTS -- (CONTINUED)
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
SHORT-TERM MUNICIPAL SECURITIES -- CONTINUED
<C> <S> <C>
Emmaus Gen. Auth. Local Govt. RB
Bd. Pool Pgm. -- VRDN
(LIQ: Midland Band PLC)
$ 200 Subsrs. B-12, 3.35%................... $ 200,000
2,000 Subsrs. C-8, 3.40%.................... 2,000,000
1,400 Subsrs. D-11, 3.40%................... 1,400,000
425 Subsrs. E-9, 3.40%.................... 425,000
2,000 Subsrs. F-5, 3.40%.................... 2,000,000
400 Emmaus Gen. Auth. Local
Govt. RB, Bd. Pool Pgm.
(LOC: Canadian Imperial Bank of
Commerce) 3.35% -- VRDN............... 400,000
200 Erie Swr. Auth. Swr. RB
(Erie Utilities), 3.90%, 6/1/96
(Ins. by: AMBAC)...................... 200,000
165 Gettysburg Area IDA, IDR
(Dal-Tile Corp. Proj.) Ser. B,
3.30% -- VRDN
(LOC: Credit Suisse).................. 165,000
400 Harrisburg Unlimited Tax GO
Ser. A, 3.70%, 4/15/96 (AMBAC)........ 400,000
500 Lancaster Higher Ed. Auth. College RB
(Franklin & Marshall College Proj.),
3.45% -- VRDN......................... 500,000
3,500 Lehigh Cnty. Gen. Purp. Auth. RB
(Hosp. Cent. Services Cap. Asset Fing.
Pgm.) -- TECP
Ser. A, 3.20%, 4/10/96
(BPA: PNC Bank)....................... 3,500,000
520 Lehigh Cnty. Auth. Wtr. RB,
3.05% -- VRDN
(SPA: ABN-Amro Bank).................. 520,000
200 Lehigh Cnty. IDA, PCR
(Allegheny Elec. Coop Inc.)
Ser. A, 3.20% -- VRDN
(LOC: Rabobank Nederland)............. 200,000
290 Lower Merion Twp. GO
Ser. B -- WI, 3.20%, 12/1/96.......... 290,000
1,335 Lycoming Cnty. Auth. Hosp. RB
Williamsport Hosp. Obligated Group,
3.90%, 11/15/96
(Ins. by: Connie Lee)................. 1,335,000
1,600 Montgomery Cnty. Higher Ed. & Health
Auth. Hosp. RB,
3.05% -- VRDN
(SPA: Swiss Bank Corp.)............... 1,600,000
PRINCIPAL
AMOUNT
(000) VALUE
Montgomery Cnty. IDA, PCR
(Philadelphia Elec. Co. Proj.)
Ser A -- TECP, 3.10%
(LOC: Deutsche Bank AG)
$ 1,700 3/6/96................................ $ 1,700,000
2,000 4/9/96................................ 2,000,000
2,000 4/10/96............................... 2,000,000
100 New Castle Area Sch. Dist. GO,
4.00%, 9/1/96 (Ins. by: Asset
Guaranty)............................. 100,000
1,000 Northeastern Pennsylvania Hosp. & Ed.
Auth. Health Care RB
(Wyoming Vly. Health Care Proj.)
Ser. A, 3.55% -- VRDN
(SPA: Industrial Bank of Japan,
Ltd., NY)............................. 1,000,000
2,000 Northeastern Pennsylvania Hosp. & Ed.
Auth. RB (Hosp. Cent. Svcs Cap. Asset
Fing. Proj.) Ser. B -- TECP
3.20%, 4/10/96
(BPA: PNC Bank)....................... 2,000,000
930 Northern Tioga Sch. Dist.,
3.50%, 9/1/96 (AMBAC)................. 929,158
585 Pennsylvania Hsg. Fin. Agy.
Ser. J -- ARB, 5.00%, 4/1/96,
(LIQ: Sakura Bank, Ltd.).............. 585,000
400 Pennsylvania Higher Ed. Facs. Auth.
Health Svc. RB (Univ. of Pa.)
Ser. B, 3.20% -- VRDN................. 400,000
2,000 Pennsylvania Higher Ed. Facs. Auth. RB
(Thomas Jefferson Univ.)
Ser. B, 3.30%, 8/26/96
(SPA: Credit Suisse).................. 2,000,000
800 Pennsylvania Tax
Antic. Nts., 4.50%, 6/28/96........... 803,366
2,200 Pennsylvania Tpk. Commn. Tpk. RB
Ser. A, Prerefunded @ 102,
7.875%, 12/1/96....................... 2,318,042
1,000 Philadelphia Gas Works RB
10th Sers., Prerefunded @ 102,
7.10%, 7/1/96......................... 1,030,430
1,200 Philadelphia Hosp. & Higher Ed. Auth.
RB Pa. Hosp. Ser. C,
3.85%, 7/1/96 -- ARB,
(SPA: PNC Bank)....................... 1,200,000
750 Philadelphia IDA Multifamily Hsg. Ref.
RB (Harbor View Towers Proj.)
3.65% -- VRDN
(LOC: Sumitomo Bank, Ltd.)............ 750,000
1,000 Philadelphia Sch. Dist. Tax Rev.
Antic. Nts., 4.50%, 6/28/96........... 1,002,114
</TABLE>
5
<PAGE>
EVERGREEN PENNSYLVANIA TAX-FREE
MONEY MARKET FUND
(FORMERLY FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND)
(Boxed shape of Pennsylvania map appears here)
STATEMENT OF INVESTMENTS -- (CONTINUED)
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
SHORT-TERM MUNICIPAL SECURITIES -- CONTINUED
<C> <S> <C>
Sayre Health Care Facs. Auth. RB
Cap. Fing. Pgm., 3.20% -- VRDN
(SPA: Mellon Bank PLC)
$ 400 Ser. A................................ $ 400,000
400 Ser. M................................ 400,000
4,200 Schuykill Cnty. IDA Res.
Recovery RB -- VRDN
(Gilberton Pwr. Proj.),
3.20% (LOC: Mellon Bank PLC).......... 4,200,000
5,000 Schuykill Cnty. IDA Res.
Recovery RB -- VRDN
(Northeastern Pwr. Co.),
3.55% (LOC: Sumitomo Bank, Ltd.)...... 5,000,000
4,200 Schuykill Cnty. IDA Res.
Recovery RB -- VRDN
(Westwood Energy Ppty. LP Proj.),
3.70% (LOC: Fuji Bank, Ltd.).......... 4,200,000
1,000 Temple Univ. of the Comwlth.
Sys. of Higher Ed. Univ. Fdg.
Obligs. RB, 5.00%, 5/22/96............ 1,001,443
1,700 Washington Cnty. Pa. Auth. Higher Ed.
Pooled Equip. Lease RB, Ser. A,
3.45% -- VRDN
(LOC: Sanwa Bank, Ltd.)............... 1,700,000
4,600 York Cnty. IDA, IDR
(Preston Trucking Co. Proj.),
3.35% -- VRDN
(LOC: Mellon Bank PLC)................ 4,600,000
87,310,929
PUERTO RICO -- 1.0%
875 Puerto Rico Indl.,
Med. & Environmental Pollution Control
Facs. Fing. Auth. RB
(Merck & Co., Inc.)
Ser. A, 4.00%, 12/1/96................ 877,496
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS
(COST $88,188,425)............. 100.5% 88,188,425
OTHER ASSETS AND
LIABILITIES -- NET............. (.5) (457,896)
NET ASSETS..................... 100.0% $87,730,529
</TABLE>
Summary of abbreviations:
AMBAC -- American Municipal Bond Assurance Corp.
ARB -- Adjustable Rate Bonds
BPA -- Bond Purchase Agreement
FGIC -- Financial Guaranty Insurance Co.
GO -- General Obligations
IDA -- Industrial Development Authority
IDR -- Industrial Development Revenue Bond
LIQ -- Liquidity
LOC -- Letter of Credit
PCR -- Pollution Control Revenue Bond
RB -- Revenue Bond
SBPA -- Standby Bond Purchase Agreement
SPA -- Standby Purchase Agreement
TECP -- Tax Exempt Commercial Paper
VRDN -- Variable Rate Demand Notes
Adjustable Rate Bonds are putable back to the issuer or other parties not
affiliated with the issuer at par on the interest reset dates. Interest rates
are determined and set by the issuer quarterly, semi-annually or annually
depending upon the terms of the security. Interest rates presented for these
securities are those in effect at February 29, 1996. These securities represent
3% of total investments at February 29, 1996.
Variable Rate Demand Notes are payable on demand on no more than seven calendar
days notice given by the Fund to the issuer or other parties not affiliated with
the issuer. Interest rates are determined and reset by the issuer daily, weekly
or monthly depending upon the terms of the security. Interest rates presented
for these securities are those in effect at February 29, 1996. These securities
represent 56% of total investments at February 29, 1996.
Certain obligations held in the portfolio have credit enhancements or liquidity
features that may, under certain circumstances, provide for repayment of
principal and interest on the obligation upon demand date, interest rate reset
date or final maturity. These enhancements include: letters of credit; liquidity
guarantees; standby bond purchase agreements; tender option purchase agreements;
tender option purchase agreements; and third party insurance (i.e. AMBIC, and
FGIC).
Adjustable rate bonds and variable rate demand notes held in the portfolio may
be considered derivative securities. Management has determined that these
securities comply with the standards imposed by the Securities and Exchange
Commission under Rule 2a-7 which were designed to minimize both credit and
market risk.
See accompanying notes to financial statements.
6
<PAGE>
EVERGREEN PENNSYLVANIA TAX-FREE
MONEY MARKET FUND
(FORMERLY FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND)
(Boxed shape of Pennsylvania map appears here)
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (amortized cost $88,188,425).............................................................. $88,188,425
Interest receivable............................................................................................ 464,879
Prepaid expenses............................................................................................... 167
Total assets............................................................................................. 88,653,471
LIABILITIES:
Due to custodian bank.......................................................................................... 497,530
Payable for investment securities purchased.................................................................... 290,129
Accrued expenses............................................................................................... 77,476
Dividend payable............................................................................................... 52,453
Accrued advisory fee........................................................................................... 5,354
Total liabilities........................................................................................ 922,942
NET ASSETS........................................................................................................ $87,730,529
NET ASSETS CONSIST OF:
Paid-in capital................................................................................................ $87,736,568
Undistributed net investment income............................................................................ 3,800
Accumulated net realized loss on investment transactions....................................................... (9,839)
Net assets............................................................................................... $87,730,529
CALCULATION OF NET ASSET VALUE PER SHARE:
Class A Shares ($4,332,804 (division sign) 4,332,812 shares of beneficial interest outstanding)................... $1.00
Class Y Shares ($83,397,725 (division sign) 83,403,756 shares of beneficial interest outstanding)................. $1.00
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
EVERGREEN PENNSYLVANIA TAX-FREE
MONEY MARKET FUND
(FORMERLY FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND)
(Boxed shape of Pennsylvania map appears here)
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 29, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest........................................................................................ $2,959,189
EXPENSES:
Advisory fee.................................................................................... $ 312,440
Administration fee.............................................................................. 107,337
Distribution fee................................................................................ 17,868
Custodian fee................................................................................... 46,028
Registration and filing fees.................................................................... 32,033
Professional fees............................................................................... 20,532
Transfer agent fee.............................................................................. 8,950
Reports and notices to shareholders............................................................. 6,565
Trustees' fees and expenses..................................................................... 6,262
Insurance....................................................................................... 1,167
Miscellaneous................................................................................... 13,222
572,404
Less fee waivers and expense reimbursements..................................................... (279,201)
Net expenses.............................................................................. 293,203
Net investment income.............................................................................. 2,665,986
Net realized loss on investments................................................................... (189)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................... $2,665,797
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
EVERGREEN PENNSYLVANIA TAX-FREE
MONEY MARKET FUND
(FORMERLY FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND)
(Boxed shape of Pennsylvania map appears here)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
FEBRUARY 29, FEBRUARY 28,
1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income...................................................................... $ 2,665,986 $ 656,169
Net realized loss on investments........................................................... (189) (5,850)
Net increase in net assets resulting from operations.................................... 2,665,797 650,319
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A Shares............................................................................. (9,466) --
Class Y Shares............................................................................. (2,656,520) (656,169)
Total distributions to shareholders..................................................... (2,665,986) (656,169)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold.................................................................. 179,632,522 72,181,908
Proceeds from reinvestment of distributions................................................ 1,766,790 437,609
Payments for shares redeemed............................................................... (137,207,686) (43,458,037)
Net increase resulting from Fund share transactions..................................... 44,191,626 29,161,480
Net increase in net assets.............................................................. 44,191,437 29,155,630
NET ASSETS:
Beginning of year.......................................................................... 43,539,092 14,383,462
End of year (including undistributed net investment income of $3,800 and $0,
respectively)............................................................................ $ 87,730,529 $ 43,539,092
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND NATURE OF OPERATIONS
Evergreen Pennsylvania Tax-Free Money Market Fund (the "Fund") is a series
of Evergreen Tax-Free Trust (formerly FFB Funds Trust), an open-end management
company registered under the Investment Company Act of 1940, as amended (the
"Act"). The investment objective of the Fund is to provide investors with as
high a level of income as is consistent with preservation of capital and
liquidity.
Effective January 1, 1996, First Union Corporation, the corporate parent of
First Union National Bank of North Carolina ("First Union"), the Fund's current
investment adviser, consummated a merger (the "Bank Merger") with First Fidelity
Bancorporation, the corporate parent of First Fidelity Bank, N.A. ("FFB"), the
Fund's prior investment adviser. Effective January 19, 1996, each of the funds
in FFB Funds Trust, including the FFB Pennsylvania Tax-Free Money Market Fund
(the "FFB Fund"), joined the Evergreen Funds (the "Fund Combinations"). The FFB
Fund was renamed Evergreen Pennsylvania Tax-Free Money Market Fund. Shares of
the FFB Fund's class previously known as the Institutional Class were
redesignated the Fund's Class Y Shares. Shares of the FFB Fund's class
previously known as the Service class were redesignated the Fund's Class A
Shares. See Note 4 for a description of each of the classes.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. These policies are in
conformity with generally accepted accounting principles.
SECURITY VALUATIONS -- Portfolio securities are valued at amortized cost
which approximates market value. The amortized cost method involves valuing a
security at cost on the date of purchase and thereafter assuming a straight-line
amortization of any discount or premium to maturity.
SECURITY TRANSACTIONS -- Security transactions are accounted for on the
date purchased or sold. Net realized gains or losses are determined on the
identified cost basis.
INVESTMENT INCOME AND EXPENSES -- Interest income and expenses are accrued
daily. Premiums and discounts paid on securities are amortized or accreted into
interest income.
WHEN ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Fund records
when-issued or delayed delivery transactions on the trade date and maintains
security positions such that sufficient liquid assets will be available to make
payment for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis begin earning interest on the settlement date.
DIVIDENDS TO SHAREHOLDERS -- Dividends from net investment income are
declared daily and paid monthly. Dividends from net realized capital gains on
investments, if any, will be distributed at least annually. Income distributions
and capital gain distributions are determined in accordance with income tax
regulations which may differ from the amounts available for distribution under
generally accepted accounting principles. To the extent these differences are
permanent in nature, such amounts are reclassified within the components of net
assets.
At February 29, 1996, a reclassification was made to increase undistributed
net investment income by $3,800 and increase accumulated net investment loss on
investment transactions by $3,800.
INCOME TAXES -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable and other net income to its
shareholders. Accordingly, no provisions for Federal income or excise taxes are
necessary.
At February 29, 1996, the Fund had a capital loss carryforward of $9,839,
of which $3,800 and $6,039 will expire in the fiscal years ending in 2002 and
2004, respectively. To the extent that realized capital gains can be offset by
capital loss carryforwards, it is the Fund's policy not to distribute such
gains.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- continued
ALLOCATION OF EXPENSES -- Expenses specifically identifiable to a class of
shares are charged to that class. Expenses common to a Trust as a whole are
allocated to the funds in that Trust. Net investment income (other than class
specific expenses) and realized and unrealized gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
of each class.
USE OF ESTIMATES -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
NOTE 3 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AGREEMENTS -- Prior to the Bank Merger described in
Note 1, FFB served as the Fund's investment adviser, and was entitled to an
annual advisory fee, paid monthly, based on the Fund's average daily net assets
in accordance with the following schedule:
<TABLE>
<CAPTION>
ADVISORY FEE AVERAGE DAILY NET ASSETS
<S> <C>
0.400% on the first $500 million
0.360% on the next $500 million
0.320% on the next $500 million
0.280% in excess of $1.5 billion
</TABLE>
Effective January 1, 1996, the date of the Bank Merger, First Union became
investment adviser pursuant to the advisory fee schedule shown above. For the
year ended February 29, 1996, First Union and its predecessor FFB, voluntarily
waived $241,213 of its advisory fee. First Union can modify or terminate this
voluntary waiver at any time.
ADMINISTRATION AGREEMENTS -- Through the date of the Fund Combinations,
Furman Selz LLC ("Furman Selz") served as the Fund's administrator. Pursuant to
its administration agreement, Furman Selz was entitled to an annual fee, paid
monthly, based on the Fund's average daily net assets in accordance with the
following schedule:
<TABLE>
<CAPTION>
ADMINISTRATION FEE AVERAGE DAILY NET ASSETS
<S> <C>
0.150% on the first $500 million
0.135% on the next $500 million
0.120% on the next $500 million
0.105% in excess of $1.5 billion
</TABLE>
Furman Selz was entitled to $102,812 under this agreement, of which $37,243
was waived.
After the date of the Fund Combinations, Evergreen Asset Management Corp.
("Evergreen Asset"), a wholly owned subsidiary of First Union, became the Fund's
administrator and Furman Selz became sub-administrator. Evergreen Asset's and
Furman Selz' fees are based on the average daily net assets of all of the funds
administered by Evergreen Asset for which either First Union or Evergreen Asset
is also the investment adviser. These fees are calculated at the following
annual rates:
<TABLE>
<CAPTION>
ADMINISTRATION FEE AVERAGE DAILY NET ASSETS
<S> <C>
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% in excess of $30 billion
</TABLE>
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 3 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES -- continued
<TABLE>
<CAPTION>
SUB-ADMINISTRATION FEE AVERAGE DAILY NET ASSETS
<S> <C>
0.0100% on the first $7 billion
0.0075% on the next $3 billion
0.0050% on the next $15 billion
0.0040% in excess of $25 billion
</TABLE>
At February 29, 1996, assets for which Evergreen Asset was the
administrator for which either Evergreen Asset or First Union was the investment
adviser totaled approximately $14.4 billion. Evergreen Asset was entitled to
$4,764 under the administration agreement.
OTHER SERVICES WITH AFFILIATES -- Prior to the date of the Fund
Combinations, FFB was the Fund's transfer agent and dividend disbursing agent.
Furman Selz acted as sub-transfer agent and received an annual per account fee
plus reimbursement of out-of-pocket expenses. Furman Selz was entitled to
sub-transfer agent fees of $6,710.
PLANS OF DISTRIBUTION -- Prior to the date of the Fund Combinations, FFB
Funds Distributor, Inc. (the "Prior Distributor"), a wholly-owned subsidiary of
Furman Selz, acted as Distributor for the Fund. The Fund had adopted a
Distribution Plan pursuant to Rule 12b-1 under the Act. The plan provided for a
monthly payment to the Prior Distributor, such amounts that the Prior
Distributor presented for approval by the Board of Trustees, provided that each
payment was calculated at an annual rate not to exceed .35 of 1%. The payments
were voluntarily waived in total.
In connection with its Plan, the Fund has entered into a distribution
agreement with Evergreen Funds Distributor, Inc. ("EFD"), a subsidiary of Furman
Selz whereby the Fund will compensate EFD for its services at a rate which may
not exceed .30 of 1% of its Class A average daily net assets. No payments were
made under this agreement.
NOTE 4 -- SHARES OF BENEFICIAL INTEREST
The Fund has an unlimited number of $0.001 par value shares of beneficial
interest authorized divided into classes which are designated Class A and Class
Y. Class Y shares are available only to investment advisory clients of First
Union and its affiliates and certain institutional investors or Class Y
shareholders of record of certain other funds managed by the First Union and its
affiliates as of December 30, 1994. The classes have identical voting, dividend,
liquidation and other rights. Class A has exclusive voting rights with respect
to its distribution plan.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 4 -- SHARES OF BENEFICIAL INTEREST -- continued
Transactions in shares of beneficial interest (valued at $1.00 per share)
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
FEBRUARY 29, FEBRUARY 28,
1996 1995
<S> <C> <C>
CLASS A*
Shares sold...................................................................................... $ 4,636,845 --
Shares issued from reinvestment of distributions................................................. 3,934 --
Shares redeemed.................................................................................. (307,967) --
Net increase..................................................................................... 4,332,812 --
CLASS Y
Shares sold...................................................................................... 174,995,677 $ 72,181,908
Shares issued from reinvestment of distributions................................................. 1,762,856 437,609
Shares redeemed.................................................................................. (136,899,719) (43,458,037)
Net increase..................................................................................... 39,858,814 29,161,480
Total net increase resulting from Fund share transactions........................................ $ 44,191,626 $ 29,161,480
</TABLE>
* Class share activity reflects the period from commencement of class
operations, August 22, 1995, through February 29, 1996.
NOTE 5 -- CONCENTRATION OF CREDIT RISK
The Fund invests substantially all of its assets in debt obligations issues
by the Comonwealth of Pennsylvania and its authorities and agencies. The issuers
ability to met their obligations may be affected by economic or political
developments in the Commonwealth of Pennsylvania.
13
<PAGE>
EVERGREEN PENNSYLVANIA TAX-FREE
MONEY MARKET FUND
(FORMERLY FFB PENNSYLVANIA TAX-FREE MONEY MARKET FUND)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS Y SHARES
SHARES
AUGUST 22,
1995*
THROUGH YEAR ENDED
FEBRUARY 29, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1996 1996 1995 1994
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period....................... $1.00 $1.00 $1.00 $1.00
Net investment income...................................... .02 .03 .03 .02
Less distributions to shareholders from net investment
income................................................... (.02) (.03) (.03) (.02)
Net asset value, end of period............................. $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+.............................................. 1.7% 3.5% 2.8% 2.1%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).................. $4,333 $83,398 $43,539 $14,383
Ratios to average net assets:
Expenses**............................................... .47%++ .37% .33% .47%
Net investment income**.................................. 3.14%++ 3.42% 3.09% 2.10%
<CAPTION>
AUGUST 15,
1991*
THROUGH
FEBRUARY 28, FEBRUARY 29,
1993 1992
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period....................... $1.00 $1.00
Net investment income...................................... .03 .02
Less distributions to shareholders from net investment
income................................................... (.03) (.02)
Net asset value, end of period............................. $1.00 $1.00
TOTAL RETURN+.............................................. 2.7% 4.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).................. $15,999 $20,699
Ratios to average net assets:
Expenses**............................................... .35% .19%++
Net investment income**.................................. 2.62% 3.90%++
</TABLE>
+ Total return is calculated for the periods indicated and is not annualized.
++ Annualized.
* Commencement of class operations
** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were reimbursed or waived by the adviser, the annualized ratios of
expenses and net investment income to average net assets would have been the
following:
<TABLE>
<CAPTION>
CLASS A CLASS Y SHARES
SHARES
AUGUST 22,
1995*
THROUGH YEAR ENDED
FEBRUARY 29, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
1996 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Expenses................................................ 1.08%++ .73% 1.05% 1.26% 1.07%
Net investment income................................... 2.53%++ 3.06% 2.37% 1.31% 1.90%
<CAPTION>
AUGUST 15,
1991*
THROUGH
FEBRUARY 29,
1992
<S> <C>
Expenses................................................ .77%++
Net investment income................................... 3.32%++
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
EVERGREEN PENNSYLVANIA TAX-FREE MONEY MARKET FUND
We have audited the accompanying statement of assets and liabilities of
Evergreen Pennsylvania Tax-Free Money Market Fund (constituting one of the
portfolios of Evergreen Tax-Free Trust), including the statement of investments,
as of February 29, 1996, and the related statement of operations for the year
then ended and the statements of changes in net assets for each of the years in
the two-year period then ended and the financial highlights for each of the
years in the three-year period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for each of
the periods during the two-year period ended February 28, 1993 were audited by
other auditors whose reports expressed unqualified opinions on those financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of February 29, 1996, by correspondence with custodians and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Evergreen Pennsylvania Tax-Free Money Market Fund as of February 29, 1996, and
the results of its operations for the year then ended and the changes in its net
assets for each of the years in the two-year period then ended and its financial
highlights for each of the years in the three-year period then ended, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
New York, New York
April 22, 1996
15
<PAGE>
(This Page Left Blank Intentionally)
16
<PAGE>
TRUSTEES AND OFFICERS
TRUSTEES:
Laurence B. Ashkin
Foster Bam
James S. Howell, Chairman
Robert J. Jeffries
Gerald M. McDonnell
Thomas L. McVerry
William W. Pettit
Russell A. Salton, III M.D.
Michael S. Scofield
OFFICERS:
John J. Pileggi
President and Treasurer
Joan V. Fiore
Secretary
Sheryl Hirschfeld
Assistant Secretary
Donald E. Brostrom
Assistant Treasurer
Stephen W. St. Clair
Assistant Treasurer
FEDERAL INCOME TAX STATUS OF DIVIDENDS (UNAUDITED)
During the fiscal year ended February 29, 1996 the Fund distributed $2,588,797
of tax-exempt income to shareholders.
<PAGE>
(Green back cover appears here)
NOT FDIC May lose value
INSURED No bank guarantee
Evergreen Funds Distributor, Inc.
538362
42756 4/96
*******************************************************************************
Evergreen New Jersey Tax-Free Income Fund - Annual Report Follows
*******************************************************************************
EVERGREEN SM
NEW JERSEY
TAX-FREE INCOME FUND
(Logo of state of New Jersey appears here)
(Photograph of mountains and stream appears here)
1996 ANNUAL REPORT
(Evergreen tree logo appears here)
Evergreen
Funds
<PAGE>
EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND
(FORMERLY FFB NEW JERSEY TAX-FREE INCOME FUND)
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
(State of New Jersey A Review of the Past Year
logo appears here) and Prospects for the Future.............................................. 1
A Report From Your Portfolio Manager...................................... 3
Results to Date........................................................... 5
</TABLE>
<TABLE>
<C> <S> <C>
Statement of Investments.................................................. 6
Statement of Assets and Liabilities....................................... 9
Statement of Operations................................................... 10
Statement of Changes in Net Assets........................................ 11
</TABLE>
<TABLE>
<C> <S> <C>
Notes to Financial Statements............................................. 12
Financial Highlights...................................................... 16
Independent Auditors' Report -- KPMG Peat Marwick LLP..................... 18
Trustees and Officers.........................................Inside Back Cover
</TABLE>
EVERGREEN SM is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND
(FORMERLY FFB NEW JERSEY TAX-FREE INCOME FUND)
A REVIEW OF THE PAST YEAR
AND PROSPECTS FOR THE FUTURE
BY STEPHEN A. LIEBER, CHAIRMAN OF
EVERGREEN ASSET MANAGEMENT CORP.
The volatility of investment markets during the (Photograph of
first quarter of 1996 reflected a virtually constant Steven A. Lieber
reappraisal of economic prospects. The prospects of appears here)
sporadic commodity inflation, evidence of resurgent
employment trends, failure of
political negotiations to achieve a balanced budget agreement, declining demand
in personal computer-based technological products, sizable consumer credit
growth and greater credit card losses, the increase in imports without
concomitant increases in exports, and the rise of the dollar, all drove the
markets to mirror the fast changing trends of new statistics. The question of
whether inflation might be reappearing was central to the investor reaction to
these concerns. Fears of inflation increased through the first quarter, as
evidenced by the sizable rise in bond market yields. By early April, long-term
U.S. Treasury bond yields reached 7%, a level last seen in August 1995, and up
more than one full percentage point from the beginning of the year. Clearly,
investors were demanding more of an inflation premium in interest rates.
The background with which this year has begun is inconclusive in its trends.
We have previously held to the view that a wage-driven inflation is unlikely in
the present economic environment due to the easy substitution of imported goods
for many domestic goods, while competitive pressures for U.S. and world markets
mount from the broadening dispersion of technology, capital, and capital goods.
The strength of American industry, it is generally held, must come from its
product innovation, its quality, and the rising productivity of its work force.
These internal and external pressures have had a major impact in restraining
wage-driven inflation. Monetary inflation has shown improving trends as the
budget deficit, as a percentage of gross domestic product, continues to decline.
Attention, however, must still be given to the longer term issues of potentially
destabilized Federal budgeting due to entitlements. While no solution to this
issue of government deficit control emerged from this year's political
negotiations, it is at least better established on the political agenda than
ever before.
Investment markets demand a risk premium when faced with elements of
uncertainty. The risk premium lately built into the fixed income markets not
only reflects the arguable issue of whether there is a risk of wage inflation in
the United States, but also the sharp recent increases in some key commodity
prices. The combination of a dearth of rainfall and reduced acreage in key
agricultural states has spiked up major food commodity prices. Similarly, the
draining of oil inventories because of the heat requirements of the abnormally
long and cold winter in northern states, together with the cautious inventory
policies of the oil industry faced with the possibility that Iraqi supplies
might return to the market, has caused prices of oil and refined products to
rise. Many watchers for inflationary trends have jumped on these commodity
rises, which have lead them to conclude that the inflation rate will rise and,
therefore, that bond yields have to go up. The dissent is widespread, arguing
that these are temporary interruptions, which will in the long run serve more to
shrink profit margins than to raise prices and arguing that these are only
interruptions to a fundamentally steady low inflation trend. They point to the
2.8% increase in the Consumer Price Index for the twelve months ended March 31.
More important in the analysis of the potentials for bond yields, many
economists argue, is the current trend toward the reduction of interest rates in
Europe, led by the recent half percent discount rate cut by the German
Bundesbank. The revival of economic growth in Europe, it is felt, requires lower
interest rates which in turn will facilitate a decline in rates in the United
States, merely from reduced competitive investment pressures. We conclude that
negative trends which have dominated the bond market in the first months of the
year, as marked by the sharp rise in yields, may well reflect shorter-term
factors rather than long-term trends. Federal Reserve Bank Governors in numerous
recent speeches and interviews have made the point that they are confident
1
<PAGE>
EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND
(FORMERLY FFB NEW JERSEY TAX-FREE INCOME FUND)
A REVIEW OF THE PAST YEAR AND
PROSPECTS FOR THE FUTURE -- (continued)
about the underlying trend of well-controlled inflation, suggesting that they
are not aiming to increase the discount rates or to put any pressures to slow
the economy. We conclude that the Federal Reserve is not aiming to stimulate the
economy at this time, but will act to sustain a reasonable growth in the better
than 2% range if there is any further evidence of broadly slowing economic
activity. International competitive interest rate pressures are diminishing, the
trade balance is improving and the economy has remained resilient in the recent
period of inventory correction. These are all factors suggesting a period of
comparative stability for the months ahead.
The tax-exempt securities markets in late 1994 and 1995, and again in early
1996, were negatively affected by the flat tax proposals. The differential
between the yields of taxable fixed income debt and tax-exempt debt shrank to
record lows for recent years. For those who were convinced that a flat tax, or a
substantially reduced income tax level, was not to be expected in the near-term,
the tax-exempt fixed income market presented an outstanding comparative
investment opportunity. The loss in the Presidential primaries of the one
candidacy which featured a flat tax has already restored considerable confidence
in the continuation of the present tax structure, and increased the spread
between taxable and tax-exempt bonds. As the fall election campaign nears, the
comparative strength of the tax-exempt market will reflect the positions of the
candidates. Unless there is a major surprise in the conventions, tax-exempt
obligations seem favorably situated.
Credit issues in the tax-exempt market have not been paramount since the rare
case of the Orange County, California default. The ripple effect of that default
was shorter lived than many expected, and the resolution of Orange County's
fiscal difficulties is well underway. Its positive impact was to develop
pressure for many municipalities and agencies to tighten their controls on cash
management policies and shift to a more prudent, credit worthy structure than
had often been used.
With our overall expectation of a gradual reduction in interest rates as the
inflation premium recently built into the market is reduced, we anticipate an
attractive total return for high-quality fixed income investments, and further
relative gains for the tax-exempt securities market.
2
<PAGE>
(State of New Jersey EVERGREEN NEW JERSEY
logo appears here) TAX-FREE INCOME FUND
(FORMERLY FFB NEW JERSEY TAX-FREE INCOME FUND)
A REPORT FROM YOUR
PORTFOLIO MANAGER
JOCELYN TURNER
Evergreen New Jersey Tax-Free Income Fund's total return (Photograph
(Class A shares at NAV) for the 12 months ended February 29, of Jocelyn
1996, was 10.08%* as compared with 9.47% for the Lipper New Turner appears
Jersey Municipal Debt Funds average of the 45 New Jersey here)
municipal debt funds tracked by Lipper Analytical Services**
during that time. The Fund's average annual compound return
since its inception on July 12, 1991, through February 29, 1996,
is 7.92%. (The Fund's Class A shares are subject to a 4.75%
front end sales charge which is not reflected in the Fund's
performance and if reflected, performance would be lower.) The
12-month total return through February 29, for the Lehman
Municipal Bond
Index*** was 11.05%. To put this in perspective, the yield on
the Bond Buyer 20 Bond Index ("BBI")*** declined 54 basis points from 6.11% in
February 1995, to 5.57% on February 29, 1996. Much of the municipal market's
volatility came after a four-year period over which interest rates were driven
to historical lows by the Federal Reserve's efforts to ease monetary policy and
stimulate economic growth.
The bond market rally kicked off the fiscal year of the Fund as anticipation
of economic slowdown drove down interest rates after a rough 1994. Municipal
bonds were in a real bargain position relative to treasuries, outperforming on a
relative basis in the first quarter of 1995. The Fund concentrated purchases on
bonds with lower coupon rates to take advantage of the price appreciation
potential afforded by declining interest rates.
The continued decline in rates was a result of both a succession of much
weaker than expected economic indicators and a more public commentary on the
current state of the economy from various Federal Reserve officials. Strong
demand for municipals and talk of severe supply shortages pushed the rally
further until talk of tax reform surfaced in May. The tax reform debate,
especially the talk of a flat tax, stalled the rally. Municipals severely
underperformed taxables as June continued. Tax reform talk succeeded in pushing
tax exempt yields up to a point where municipals were again yielding
approximately 90% of comparable taxable bonds. During this period, the Fund
sought to extend duration to capture price appreciation potential.
Interest rates continued to decline during the third quarter of 1995. The
municipal market underperformed relative to the Treasury market. The lack of
supply that supported municipal prices in the second quarter reversed as new
issuance increased and speculation grew over tax reform.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
* PERFORMANCE FIGURES INCLUDE REINVESTMENT OF INCOME DIVIDENDS AND CAPITAL
GAIN DISTRIBUTIONS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE.
INVESTORS' SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. TWELVE-MONTH PERFORMANCE FIGURES AND RANKINGS FOR THE FUND'S
CLASS B AND CLASS Y SHARES DO NOT EXIST AS THEY WERE NOT IN EXISTENCE FOR
THE FULL 12 MONTHS ENDED 2/29/96.
** SOURCE: LIPPER ANALYTICAL SERVICES, INC., AN INDEPENDENT MUTUAL FUNDS
PERFORMANCE MONITOR. LIPPER PERFORMANCE FIGURES AND RANKINGS DO NOT INCLUDE
THE EFFECT OF SALES CHARGES. IF INCLUDED, FIGURES WOULD BE LOWER AND
RANKINGS COULD BE DIFFERENT.
*** UNMANAGED INDEXES OF SELECTED SECURITIES.
3
<PAGE>
(State of New Jersey EVERGREEN NEW JERSEY
logo appears here) TAX-FREE INCOME FUND
(FORMERLY FFB NEW JERSEY TAX-FREE INCOME FUND)
A REPORT FROM YOUR
PORTFOLIO MANAGER -- (continued)
The last three months of 1995 saw that year's rally continue, as interest
rates declined another 50 to 70 basis points. A review of the fourth quarter
shows that there were several fundamental and technical factors that, when taken
together, supported continued lower interest rates and the growing consensus
view for moderate growth and low inflation.
Balanced budget talks drove the markets for much of the early part of 1996.
Administration proposals to eliminate the de minimis safe harbor which allows
corporations to own municipals, concerned the market. Later, the proposal was
modified to allow casualty companies, major institutional players in municipals,
to stay in the market. New issuance surged in January, but prices remained tepid
as investors still suffered rate shock and budget fears. Yields dropped, but not
as severely as the Treasury market, because of an unusually flat yield curve.
There was little advantage to extending out into longer maturities since 30-year
bonds traded only 15 basis points higher than 15-year bonds. Investors sought
short-term paper or discount bonds that provided good structure (i.e. call
protection).
We continue to focus on maintaining the duration for the Fund between 100%
and 105% and on purchasing bonds with defensive call protection. Of primary
importance will be to continue to monitor the credit quality of the Fund's
existing holdings and all future purchases.
4
<PAGE>
(State of New Jersey EVERGREEN NEW JERSEY
logo appears here) TAX-FREE INCOME FUND
(FORMERLY FFB NEW JERSEY TAX-FREE INCOME FUND)
RESULTS TO DATE
PERFORMANCE OF $10,000 INVESTED IN THE
EVERGREEN NEW JERSEY TAX FREE INCOME FUND
The graphs below compare a $10,000 investment in the Evergreen New Jersey
Tax Free Income Fund (Class A Shares) with a similar investment in the Lehman
Municipal Bond Index ("Index").
Class A Average Annual Total Return
One Year=4.9%
Since Inception=6.8%
7/16/91* 2/29/92 2/28/93 2/28/94 2/28/95 2/29/96
Evergreen New Jersey (Customer to provide numbers)
Tax Free Income Fund
Lehman Municipal Bond
Index
* Commencement of class operations.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE RESULTS. MUTUAL FUNDS
ARE
NOT OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK AND ARE NOT FEDERALLY INSURED.
For the purposes of the graphs and the accompanying tables, it has been
assumed that (a) the maximum sales charge of 4.75% was deducted from the initial
$10,000 investment in Class A Shares; (b) all recurring fees (including
investment advisory fees), net of fee waivers and reimbursements, were deducted;
and (c) all dividends and distributions were reinvested.
The Index is an unmanaged index and includes the reinvestment of income,
but does not reflect the payment of transaction costs and advisory fees
associated with an investment in the Fund.
The total return for Class B, net of maximum applicable contingent deferred
sales charge, for the period January 30, 1996* through February 29, 1996 was
(5.2%). The total return for Class Y for the period February 8, 1996* through
February 29, 1996 was (.9%).
5
<PAGE>
(State of New Jersey EVERGREEN NEW JERSEY
logo appears here) TAX-FREE INCOME FUND
(FORMERLY FFB NEW JERSEY TAX-FREE INCOME FUND)
STATEMENT OF INVESTMENTS
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
<C> <S> <C>
<CAPTION>
LONG-TERM MUNICIPAL SECURITIES -- 92.0%
<C> <S> <C>
NEW JERSEY -- 86.4%
$ 1,000 Bergen Cnty., Utils. Auth. Wtr. (Ser.
B), PCR,
5.75%, 12/15/05 (FGIC)................ $ 1,088,960
500 Burlington Cnty., Bridge
Commn. Sys. RB,
5.30%, 10/1/13........................ 496,025
750 Burlington Cnty., (Ser. A), GO,
4.40%, 3/15/01........................ 756,060
500 Burlington Cnty. GO,
4.875%, 11/15/09...................... 490,895
1,000 Burlington Cnty. GO,
6.95%, 9/15/97........................ 1,051,250
500 Camden Cnty., Impt.
Auth. Lease RB,
6.00%, 12/1/12........................ 516,085
500 Camden Cnty., Impt.
Auth. Lease RB,
5.625%, 10/1/15 (MBIA)................ 502,295
500 Camden Cnty., Muni. Utils.
Auth. Swr. RB,
5.125%, 7/15/17 (FGIC)................ 478,990
500 Cape May Cnty., Muni. Utils. Auth.
Swr. (Ser. A), RB,
5.75%, 1/1/16 (MBIA).................. 507,565
1,000 Delaware, River & Bay
Auth. RB,
5.00%, 1/1/17 (MBIA).................. 941,910
475 Delaware River, Joint Toll
Bridge Commn. RB,
6.25%, 7/1/12......................... 503,965
500 Delaware River, Port Auth. of
PA & NJ, RB,
5.40%, 1/1/15 (FGIC).................. 488,980
200 Edison Township, GO,
6.50%, 6/1/09......................... 226,098
600 Gloucester Cnty. GO,
6.30%, 2/1/12 (MBIA).................. 639,576
500 Gloucester Cnty. Utils.
Auth. Swr. RB,
6.50%, 1/1/21......................... 525,440
200 Hoboken, GO,
6.65%, 8/1/11......................... 222,476
685 Jersey City, Swr. Auth. GO,
7.00%, 1/1/19......................... 715,846
400 Lakewood Township,
School District, GO,
6.25%, 2/15/12 (AMBAC)................ 444,240
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
<C> <S> <C>
<CAPTION>
<C> <S> <C>
$ 500 Manalapan, Regl. Brd. Ed. GO,
5.00%, 5/1/05......................... $ 515,555
305 Mercer Cnty., Impt. Auth. RB,
6.05%, 1/1/11......................... 305,101
500 Middlesex Cnty. GO,
5.80%, 10/1/10........................ 525,560
150 Millburn Township, GO,
6.00%, 7/15/99........................ 159,969
800 Monmouth Cnty., Impt. Auth. GO,
(Correctional Facs. Monmouth Proj.),
6.40%, 8/1/08......................... 865,616
500 New Jersey, (Ser. D), GO,
5.25%, 2/15/01........................ 523,740
200 New Jersey, GO,
6.80%, 9/15/10........................ 226,904
500 New Jersey, Bldg. Auth. RB,
5.00%, 6/15/13........................ 474,965
300 New Jersey, Bldg. Auth. RB,
6.25%, 6/15/13........................ 324,624
225 New Jersey, Bldg. Auth. RB,
7.20%, 6/15/13........................ 241,938
1,000 New Jersey, Eco. Dev. Auth. RB, (Pub.
Schs. Small Proj. Loan Prog.)
5.40%, 8/15/13........................ 1,001,880
400 New Jersey, Eco. Dev. Auth.
Wtr. Facs. RB,
(NJ American Wtr. Co. Proj.-A),
5.35%, 6/1/23 (FGIC).................. 383,912
300 New Jersey, Eco. Dev. Auth. Wtr. Facs.
(Ser. A), RB,
6.60%, 8/1/21......................... 314,382
400 New Jersey, Edl. Facs. Auth. RB,
6.375%, 7/1/11 (MBIA)................. 426,984
325 New Jersey, Edl. Facs. Auth
(Ser. A), RB,
5.70%, 7/1/97......................... 334,428
250 New Jersey, Edl. Facs. Auth.
(Ser. B), RB,
6.50%, 7/1/11......................... 274,290
500 New Jersey, Edl. Facs. Auth.
(Ser. C), RB,
6.375%, 7/1/22........................ 540,820
500 New Jersey, Edl. Facs. Auth.
(Ser. D), RB,
6.20%, 7/1/17 (AMBAC)................. 529,625
300 New Jersey, Edl. Facs. Auth.
(Ser. C), RB,
6.50%, 7/1/11 (MBIA).................. 329,148
</TABLE>
6
<PAGE>
(State of New Jersey EVERGREEN NEW JERSEY
logo appears here) TAX-FREE INCOME FUND
(FORMERLY FFB NEW JERSEY TAX-FREE INCOME FUND)
STATEMENT OF INVESTMENTS -- (CONTINUED)
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
LONG-TERM MUNICIPAL SECURITIES -- CONTINUED
<C> <S> <C>
NEW JERSEY -- CONTINUED
$ 600 New Jersey, Edl. Facs. Auth.
(Ser. A), RB,
(Seton Hall Univ. Proj.)
6.25%, 7/1/10......................... $ 643,056
750 New Jersey, Health Care Edl.
Facs. Auth. RB,
(Atlantic City Med. Center),
6.80%, 7/1/05......................... 826,575
400 New Jersey, Health Care Edl.
Facs. Auth. RB,
(Burdett Tomlin Mem. Hosp.)
6.50%, 7/1/12......................... 438,664
750 New Jersey, Health Care Facs. Fing.
Auth. RB, (Hackensack Med Center),
6.625%, 7/1/17 (FGIC)................. 822,397
300 New Jersey, Health Care Facs.
Fing. Auth. (Ser. E), RB,
(Mercer Medical Center),
6.45%, 7/1/05 (MBIA).................. 329,493
500 New Jersey, Health Care Facs.
Fing. Auth.,
(Ser. E), RB, (Overlook Hosp. Assn.),
6.70%, 7/1/13 (FGIC).................. 527,555
200 New Jersey, Health Care Facs.
Fing. Auth.,
(Robert Wood Johnson Univ. Hosp.),
6.625%, 7/1/16 (MBIA)................. 219,802
500 New Jersey, Health Care Facs.
Fing. Auth.
(Shore Mem. Hosp. Health Care Sys.)
5.00%, 7/1/12 (MBIA).................. 478,435
500 New Jersey, Hwy. Auth. RB,
6.25%, 1/1/14......................... 537,185
1,000 New Jersey, Sports & Exposition, (Ser.
A), RB,
6.00%, 3/1/21......................... 1,021,690
190 New Jersey, State Turnpike RB,
6.75%, 1/1/09......................... 211,071
300 New Jersey, Tran. Corp. COP,
6.50%, 10/1/16 (FSA).................. 333,966
300 New Jersey, Turnpike Auth.
(Ser. A), RB,
6.40%, 1/1/02......................... 324,801
500 North Jersey, Dist. Wtr. Supply RB,
(Wanaque South Proj.),
6.00%, 7/1/12 (MBIA).................. 527,360
400 North Jersey, Dist. Wtr. Supply RB,
(Wanaque South Proj.),
6.50%, 7/1/21 (MBIA).................. 463,996
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
<C> <S> <C>
$ 350 North Jersey, Dist. Wtr. Supply
(Ser. B), RB,
(Wanaque North Proj.),
6.25%, 11/15/17 (MBIA)................ $ 371,245
500 Ocean Cnty. GO,
5.80%, 9/1/10......................... 524,680
500 Ocean Cnty. GO, Utils. Auth.
(Ser. A), RB,
5.75%, 1/1/18......................... 505,925
200 Old Bridge Township, GO,
6.55%, 7/15/09 (FGIC)................. 218,548
500 Old Bridge Township, Muni. Utils.
Auth. RB,
6.25%, 11/1/16 (FGIC)................. 535,150
500 Passaic Valley, Sew. Commrs.
(Ser. D), RB,
5.75%, 12/1/13 (AMBAC)................ 514,845
500 Pennsauken Township, School District,
GO,
5.00%, 3/1/10......................... 484,340
900 Port Authority, NY & NJ
(Ser. 102), RB,
6.75%, 8/1/26......................... 984,870
500 Port Authority, NY & NJ (Ser. 102),
RB,
5.625%, 10/15/13 (MBIA)............... 506,095
500 Rutgers State University,
(Ser. 1), RB,
5.25%, 5/1/12......................... 495,660
100 South Plainfield, GO,
6.625%, 8/1/12 (AMBAC)................ 108,866
500 Stafford, Muni Utils. Auth. Wtr. &
Swr. RB,
6.25%, 6/1/14 (MBIA).................. 536,045
500 Stony Brook, Regl. Sew. Auth.
(Ser. B), RB,
5.45%, 12/1/12........................ 504,450
500 Trenton, GO,
6.55%, 8/15/09 (MBIA)................. 559,320
500 University, Medicine & Dentistry (Ser.
E), RB,
6.50%, 12/1/18........................ 564,165
400 University, Medicine & Dentistry (Ser.
E), RB,
5.75%, 12/1/21........................ 429,896
200 Washington Township, Muni Utils Auth
Sys. (Ser. A) RB,
6.70%, 2/1/11 (AMBAC)................. 221,034
1,000 West Windsor, GO,
5.50%, 12/1/10 (FGIC)................. 1,027,820
</TABLE>
7
<PAGE>
(State of New Jersey EVERGREEN NEW JERSEY
logo appears here) TAX-FREE INCOME FUND
(FORMERLY FFB NEW JERSEY TAX-FREE INCOME FUND)
STATEMENT OF INVESTMENTS -- (CONTINUED)
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
LONG-TERM MUNICIPAL SECURITIES -- CONTINUED
<C> <S> <C>
NEW JERSEY -- CONTINUED
$ 500 Winslow Township, GO, 6.50%, 10/1/18
(FGIC)................................ $ 552,425
36,247,522
PUERTO RICO -- 5.6%
500 Puerto Rico, Commonwealth GO,
5.50%, 7/1/13......................... 491,195
500 Puerto Rico, Commonwealth,
(Ser. A), GO,
6.00%, 7/1/14......................... 512,130
500 Puerto Rico, Elec. Pwr. Auth.
(Ser. P), RB,
7.00%, 7/1/21......................... 574,570
300 Puerto Rico, Pub. Impt. GO,
6.80%, 7/1/21......................... 344,823
400 Puerto Rico, Pub. Bldgs. Auth. Gtd.
Health Facs., (Ser. J), RB,
7.00%, 7/1/19......................... 434,608
2,357,326
TOTAL LONG-TERM MUNICIPAL SECURITIES
(COST $36,606,898).................... 38,604,848
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
MUTUAL FUND SHARES -- 6.9%
1,295,271 Dreyfus New Jersey Municipal Money
Market Fund........................... $ 1,295,271
1,596,944 Federated New Jersey Municipal Cash
Trust................................. 1,596,944
TOTAL MUTUAL FUND SHARES (COST
$2,892,215)........................... 2,892,215
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS
(COST $39,499,113)............ 98.9% 41,497,063
OTHER ASSETS AND
LIABILITIES -- NET............ 1.1 469,396
NET ASSETS.................... 100.0% $41,966,459
</TABLE>
Summary of Abbreviations:
AMBAC -- Insured by American Municipal Bond Assurance Corp.
COP -- Certificate of Participation
FGIC -- Insured by Federal Guaranty Insurance Co.
FSA -- Insured by Financial Security Assurance
GO -- General Obligation Bond
MBIA -- Insured by Municipal Bond Investors Assurance
PCR -- Pollution Control Revenue Bond
RB -- Revenue Bond
See accompanying notes to financial statements.
8
<PAGE>
(State of New Jersey EVERGREEN NEW JERSEY
logo appears here) TAX-FREE INCOME FUND
(FORMERLY FFB NEW JERSEY TAX-FREE INCOME FUND)
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $39,499,113)............................................................. $41,497,063
Interest receivable............................................................................................ 518,435
Receivable for investment securities sold...................................................................... 120,889
Prepaid expenses............................................................................................... 5,294
Total assets............................................................................................. 42,141,681
LIABILITIES:
Dividend payable............................................................................................... 89,372
Accrued expenses............................................................................................... 85,350
Payable for Fund shares repurchased............................................................................ 500
Total liabilities........................................................................................ 175,222
NET ASSETS........................................................................................................ $41,966,459
NET ASSETS CONSIST OF:
Paid-in capital................................................................................................ $40,354,233
Accumulated net realized loss on investment transactions....................................................... (401,239)
Undistributed net investment income............................................................................ 15,515
Net unrealized appreciation on investments..................................................................... 1,997,950
Net assets............................................................................................... $41,966,459
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($41,762,029 (division sign) 3,793,283 shares of beneficial interest outstanding).................. $ 11.01
Sales charge -- 4.75% of offering price........................................................................... .55
Maximum offering price......................................................................................... $ 11.56
Class B Shares ($186,049 (division sign) 16,901 shares of beneficial interest outstanding)........................ $ 11.01
Class Y Shares ($18,381 (division sign) 1,669 shares of beneficial interest outstanding).......................... $ 11.01
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
(State of New Jersey EVERGREEN NEW JERSEY
logo appears here) TAX-FREE INCOME FUND
(FORMERLY FFB NEW JERSEY TAX-FREE INCOME FUND)
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 29, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest........................................................................................... $2,104,083
EXPENSES:
Advisory fee....................................................................................... $190,195
Administrative personnel and service fees.......................................................... 52,624
Distribution fee -- Class A Shares................................................................. 11,178
Distribution fee -- Class B Shares................................................................. 87
Shareholder service fees -- Class B Shares......................................................... 29
Custodian fee...................................................................................... 57,890
Transfer agent fee................................................................................. 24,051
Reports and notices to shareholders................................................................ 18,060
Insurance expense.................................................................................. 10,886
Registration and filing fees....................................................................... 8,041
Trustees' fees and expenses........................................................................ 7,006
Professional fees.................................................................................. 6,034
Miscellaneous...................................................................................... 7,243
393,324
Less: Fee waivers and expense reimbursements....................................................... (254,113)
Net expenses.......................................................................................... 139,211
Net investment income................................................................................. 1,964,872
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investment transactions....................................................... 10,000
Net increase in unrealized appreciation of investments............................................. 1,701,539
Net gain on investments............................................................................... 1,711,539
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................................. $3,676,411
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
(State of New Jersey EVERGREEN NEW JERSEY
logo appears here) TAX-FREE INCOME FUND
(FORMERLY FFB NEW JERSEY TAX-FREE INCOME FUND)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
FEBRUARY 29, FEBRUARY 28,
1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income........................................................................ $ 1,964,872 $ 2,109,665
Net realized gain (loss) on investment transactions.......................................... 10,000 (411,239)
Net change in unrealized appreciation of investments......................................... 1,701,539 (1,552,745)
Net increase in net assets resulting from operations...................................... 3,676,411 145,681
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A Shares............................................................................... (1,964,372) (2,109,665)
Class B Shares............................................................................... (451) --
Class Y Shares............................................................................... (56) --
Total distributions to shareholders from net investment income............................ (1,964,879) (2,109,665)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold.................................................................... 11,064,767 5,289,013
Proceeds from reinvestment of distributions.................................................. 959,013 1,313,998
Payment for shares redeemed.................................................................. (6,620,815) (12,569,571)
Net increase (decrease) from Fund share transactions...................................... 5,402,965 (5,966,560)
Net increase (decrease) in net assets..................................................... 7,114,497 (7,930,544)
NET ASSETS:
Beginning of year............................................................................ 34,851,962 42,782,506
End of year (includes undistributed net investment income of $15,515 and $0, respectively)... $ 41,966,459 $ 34,851,962
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND NATURE OF OPERATIONS
Evergreen New Jersey Tax-Free Income Fund (the "Fund") is a series of
Evergreen Tax Free Trust (formerly FFB Funds Trust), an open-end management
company registered under the Investment Company Act of 1940, as amended (the
"Act"). The investment objective of the Fund is to provide investors with as
high a level of income as is consistent with preservation of capital and
liquidity.
Effective January 1, 1996, First Union Corporation, the corporate parent of
First Union National Bank of North Carolina ("First Union"), the Fund's current
investment adviser, consummated a merger (the "Bank Merger") with First Fidelity
Bancorporation, the corporate parent of First Fidelity Bank, N.A. ("FFB"), the
Fund's prior investment adviser. Effective January 19, 1996, each of the funds
in FFB Funds Trust, an open-end management company registered under the Act,
including the FFB New Jersey Tax-Free Income Fund (the "FFB Fund"), joined the
Evergreen Funds (the "Fund Combinations"). The FFB Fund was renamed Evergreen
New Jersey Tax-Free Income Fund. Shares of the FFB Fund were redesignated the
Fund's Class A Shares. Subsequent to the Fund Combinations, the Fund issued
Class Y Shares and Class B Shares. See Note 4 for a description of each of the
classes.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. These policies are in
conformity with generally accepted accounting principles.
SECURITY VALUATIONS -- Municipal bonds are valued by an independent pricing
service taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue and any other factors or market data it deems
relevant in determining valuations for normal institutional size trading units
of debt securities which it believes to reflect the current value of securities.
The independent pricing service does not rely exclusively on quoted prices.
Short-term securities purchased with remaining maturities of sixty days or less
are stated at amortized cost which approximates market value.
SECURITY TRANSACTIONS -- Security transactions are accounted for on the
date purchased or sold. Net realized gains or losses are determined on the
identified cost basis.
INVESTMENT INCOME AND EXPENSES -- Interest income and expenses are accrued
daily. Premiums and discounts paid on securities are amortized or accreted into
interest income.
WHEN ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Fund records
when-issued or delayed delivery transactions on the trade date and maintains
security positions such that sufficient liquid assets will be available to make
payment for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis begin earning interest on the settlement date.
DIVIDENDS TO SHAREHOLDERS -- Dividends from net investment income are
declared daily and paid monthly. Dividends from net realized capital gains on
investments, if any, will be distributed at least annually. Income distributions
and capital gain distributions are determined in accordance with income tax
regulations which may differ from the amounts available for distribution under
generally accepted accounting principles. To the extent these differences are
permanent in nature, such amounts are reclassified within the components of net
assets.
As of February 29, 1996, a reclassification entry was made to increase
undistributed net investment income by $15,522, increase accumulated loss on
investments by $15,548 with an offsetting adjustment of $26 made to paid in
capital.
INCOME TAXES -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable and other net income to its
shareholders. Accordingly, no provisions for Federal income or excise taxes are
necessary.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- continued
At February 29, 1996, the Fund had a capital loss carryforward in the
amount of $401,239, of which $266,437 and $134,802 expire in the fiscal years
ended 2003 and 2004, respectively. To the extent that realized capital gains can
be offset by capital loss carryforwards, it is the fund's policy not to
distribute such gains.
ALLOCATION OF EXPENSES -- Expenses specifically identifiable to a class of
shares or fund are charged to that class or fund. Expenses common to a Trust as
a whole are allocated to the funds in that Trust. Net investment income (other
than class specific expenses) and realized and unrealized gains and losses are
allocated daily to each class of shares based upon the relative proportion of
net assets of each class.
USE OF ESTIMATES -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
NOTE 3 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AGREEMENTS -- Prior to the Bank Merger described in
Note 1, FFB served as the Fund's investment adviser, and was entitled to an
annual advisory fee, paid monthly, based on the Fund's average daily net assets
in accordance with the following schedule:
<TABLE>
<CAPTION>
ADVISORY FEE AVERAGE DAILY NET ASSETS
<S> <C>
0.500% on the first $500 million
0.450% on the next $500 million
0.400% on the next $500 million
0.350% in excess of $1.5 billion
</TABLE>
Effective January 1, 1996, the date of the Bank Merger, First Union became
investment adviser pursuant to the advisory fee schedule noted above. For the
year ended February 29, 1996, First Union and its predecessor FFB, voluntarily
waived $190,195 of its advisory fee. First Union can modify or terminate this
voluntary waiver at any time.
ADMINISTRATION AGREEMENTS -- Through the date of the Fund Mergers, Furman
Selz LLC ("Furman Selz") served as the Fund's administrator. Pursuant to its
administration agreement, Furman Selz was entitled to an annual fee, paid
monthly, based on the Fund's average daily net assets in accordance with the
following schedule:
<TABLE>
<CAPTION>
ADMINISTRATION FEE AVERAGE DAILY NET ASSETS
<S> <C>
0.150% on the first $500 million
0.135% on the next $500 million
0.120% on the next $500 million
0.105% in excess of $1.5 billion
</TABLE>
Furman Selz was entitled to $50,337 under this agreement, all of which was
waived.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 3 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES -- continued
After the date of the Fund Combinations, Evergreen Asset Management Corp.
("Evergreen Asset"), a wholly owned subsidiary of First Union, became the Fund's
administrator and Furman Selz became sub-administrator. As sub-administrator,
Furman Selz provides the officers for the Fund. Evergreen Asset's and Furman
Selz' fees are based on the average daily net assets of all of the funds
administered by Evergreen Asset for which either First Union or Evergreen Asset
is also the investment adviser. These fees are calculated at the following
annual rates:
<TABLE>
<CAPTION>
ADMINISTRATION FEE AVERAGE DAILY NET ASSETS
<C> <S>
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% in excess of $30 billion
</TABLE>
<TABLE>
<CAPTION>
SUB-ADMINISTRATION FEE AVERAGE DAILY NET ASSETS
<C> <S>
0.0100% on the first $7 billion
0.0075% on the next $3 billion
0.0050% on the next $15 billion
0.0040% in excess of $25 billion
</TABLE>
At February 29, 1996, assets for which Evergreen Asset was the
administrator for which either Evergreen Asset or First Union was the investment
adviser totaled approximately $14.4 billion. Evergreen Asset was entitled to
$2,287 under the administration agreement, all of which was waived.
OTHER SERVICES WITH AFFILIATES -- Prior to the date of the Fund
Combinations, FFB was the Fund's transfer agent and dividend disbursing agent.
Furman Selz acted as sub-transfer agent and received an annual per account fee
plus reimbursement of out-of-pocket expenses. Furman Selz was entitled to
sub-transfer agent fees of $21,404.
FFB also acted as the Fund's custodian. For furnishing these services, FFB
was paid a monthly fee at an annual rate based on average daily net assets plus
certain transaction and out-of-pocket expenses. For the period prior to the date
of the Fund Combinations, FFB was entitled to $9,309 in custody fees.
PLANS OF DISTRIBUTION -- Prior to the date of the Fund Combinations, FFB
Funds Distributor, Inc. (the "Prior Distributor"), a wholly-owned subsidiary of
Furman Selz, acted as Distributor for the Fund. The Fund had adopted a
Distribution Plan pursuant to Rule 12b-1 under the Act. The plan provided for a
monthly payment to the Prior Distributor, such amounts that the Prior
Distributor presented for approval by the Board of Trustees, provided that each
payment was calculated at an annual rate not to exceed .35 of 1%. Subsequent to
the date of the Fund Combinations, the Fund has adopted for its Class B Shares,
a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act (see Note
4). Under the terms of the Plan, the Fund may incur distribution-related
expenses which may not exceed .75 of 1% for Class B shares. The Rule 12b-1
payments for Class A and Class B Shares were voluntarily waived in total.
In connection with its Plan, the Fund has entered into a distribution
agreement with Evergreen Funds Distributor, Inc. ("EFD"), a subsidiary of Furman
Selz whereby the Fund will compensate EFD for its services at a rate which may
not exceed .25 of 1% of its Class A average daily net assets. No payments were
made under this agreement.
The Fund has entered into a Shareholder Services Agreement with First Union
Brokerage Services ("FUBS"), an affiliate of First Union, whereby they will
compensate FUBS up to an annual fee of .25 of 1% of Class B average daily net
assets for certain services provided to shareholders and/or maintenance of
shareholder accounts relating to each of the Fund's Class B Shares.
SALES CHARGES -- EFD has advised the Fund that it has retained $650 from
front-end sales charges resulting from sales of Class A Shares for the period
January 19, 1996 through February 29, 1996.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 4 -- SHARES OF BENEFICIAL INTEREST
The Fund has an unlimited number of $0.001 par value shares of beneficial
interest authorized are divided into classes which are designated Class A, Class
B and Class Y Shares. Class A Shares are sold with a front-end sales charge of
up to 4.75%. Class B Shares are sold with a contingent deferred sales charge
which declines from 5% to zero depending on the period of time the shares are
held. Class B Shares will convert to Class A shares seven years after the date
of purchase. Class Y shares are available only to investment advisory clients of
First Union and its affiliates and certain institutional investors or Class Y
shareholders of record of certain other funds managed by the First Union and its
affiliates as of December 30, 1994. The classes have identical voting, dividend,
liquidation and other rights, except that Class A and Class B shares bear
distribution expenses (see Note 3) and have exclusive voting rights with respect
to their distribution plans.
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED* YEAR ENDED
FEBRUARY 29, 1996 FEBRUARY 28, 1995
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A
Shares sold...................................................... 1,008,145 $ 10,858,775 511,886 $ 5,289,013
Shares issued from reinvestment of distributions................. 88,801 958,593 126,354 1,313,998
Shares redeemed.................................................. (614,448) (6,620,815) (1,220,022) (12,569,571)
Net increase (decrease).......................................... 482,498 5,196,553 (581,782) (5,966,560)
CLASS B*
Shares sold...................................................... 16,868 187,450 -- --
Shares issued from reinvestment of distributions................. 33 364 -- --
Net increase..................................................... 16,901 187,814 -- --
CLASS Y*
Shares sold...................................................... 1,664 18,542 -- --
Shares issued from reinvestment of distributions................. 5 56 -- --
Net increase..................................................... 1,669 18,598 -- --
Total net increase (decrease) resulting from Fund share
transactions................................................... 501,068 $ 5,402,965 (581,782) ($ 5,966,560)
</TABLE>
* Class share activity for Class B Shares reflects the period from commencement
of class operations, January 30, 1996, through February 29, 1996. Class share
activity for Class Y Shares reflects the period from commencement of class
operations, February 8, 1996, through February 29, 1996.
NOTE 5 -- INVESTMENT TRANSACTIONS
The cost of purchases and proceeds from sales of investments, excluding
short-term securities for the year ended February 29, 1996 were $4,645,991 and
$1,285,000, respectively.
On February 29, 1996, the aggregate cost of investments for federal tax
purposes was the same as for financial reporting purposes. The Fund had gross
unrealized appreciation and depreciation of $2,107,454 and $109,504,
respectively.
NOTE 6 -- CONCENTRATION OF CREDIT RISK
The Fund invests substantially all of its assets in debt obligations issues
by the State of New Jersey and its authorities and agencies. The issuers ability
to met their obligations may be affected by economic or political developments
in the State of New Jersey.
15
<PAGE>
EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND
(FORMERLY FFB NEW JERSEY TAX-FREE INCOME FUND)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A SHARES
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
1996 1995 1994 1993
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........................ $ 10.53 $ 10.99 $ 11.01 $ 10.22
Income (loss) from investment operations:
Net investment income..................................... .56 .57 .60 .63
Net realized and unrealized gain (loss) on investments.... .48 (.46) (.02) .79
Total from investment operations........................ 1.04 .11 .58 1.42
Less distributions to shareholders from net investment
income.................................................... (.56) (.57) (.60) (.63)
Net asset value, end of period.............................. $ 11.01 $ 10.53 $ 10.99 $ 11.01
TOTAL RETURN+............................................... 10.1% 1.4% 5.3% 14.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................... $ 41,762 $ 34,852 $ 42,783 $ 30,863
Ratios to average net assets:
Expenses.................................................. .36%** .25%** .14%** .00%**
Net investment income..................................... 5.15%** 5.52%** 5.31%** 5.97%**
Portfolio turnover rate..................................... 4% 8% 2% 5%
<CAPTION>
JULY 16, 1991
THROUGH
FEBRUARY 29,
1992*
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period........................ $ 10.00
Income (loss) from investment operations:
Net investment income..................................... .38
Net realized and unrealized gain (loss) on investments.... .22
Total from investment operations........................ .60
Less distributions to shareholders from net investment
income.................................................... (.38)
Net asset value, end of period.............................. $ 10.22
TOTAL RETURN+............................................... 9.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................... $ 13,129
Ratios to average net assets:
Expenses.................................................. .01%++**
Net investment income..................................... 5.89%++**
Portfolio turnover rate..................................... 5%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were reimbursed or waived by the investment adviser, the annualized
ratios of expenses and net investment income to average net assets would have
been the following:
<TABLE>
<CAPTION>
CLASS A SHARES
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Expenses.................................................... 1.03% 1.04% 1.05% 1.16%
Net investment income....................................... 4.48% 4.73% 4.40% 4.81%
<CAPTION>
JULY 16, 1991
THROUGH
FEBRUARY 29,
1992*
<S> <C>
Expenses.................................................... 1.20%
Net investment income....................................... 4.70%
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND
(FORMERLY FFB NEW JERSEY TAX-FREE INCOME FUND)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B SHARES
JANUARY 30, 1996*
THROUGH
FEBRUARY 29, 1996
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period.......................................................... $11.08
Income (loss) from investment operations:
Net investment income....................................................................... .05
Net realized and unrealized gain (loss) on investments...................................... (.07)
Total loss from investment operations..................................................... (.02)
Less distributions to shareholders from net investment income................................. (.05)
Net asset value, end of period................................................................ $11.01
TOTAL RETURN+................................................................................. (.2%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)..................................................... $186
Ratios to average net assets:
Expenses**.................................................................................. .31%++
Net investment income**..................................................................... 5.23%++
Portfolio turnover rate....................................................................... 4%
<CAPTION>
CLASS Y SHARES
FEBRUARY 8, 1996*
THROUGH
FEBRUARY 29, 1996
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period.......................................................... $11.14
Income (loss) from investment operations:
Net investment income....................................................................... .03
Net realized and unrealized gain (loss) on investments...................................... (.13)
Total loss from investment operations..................................................... (.10)
Less distributions to shareholders from net investment income................................. (.03)
Net asset value, end of period................................................................ $11.01
TOTAL RETURN+................................................................................. (.9%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)..................................................... $18
Ratios to average net assets:
Expenses**.................................................................................. .31%++
Net investment income**..................................................................... 5.28%++
Portfolio turnover rate....................................................................... 4%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charges are not
reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were reimbursed or waived by the investment adviser, the annualized
ratios of expenses and net investment income to average net assets would have
been the following:
<TABLE>
<CAPTION>
CLASS B SHARES
JANUARY 30, 1996*
THROUGH
FEBRUARY 29, 1996
<S> <C>
Expenses...................................................................................... 1.66%
Net investment income......................................................................... 3.88%
<CAPTION>
CLASS Y SHARES
FEBRUARY 8, 1996*
THROUGH
FEBRUARY 29, 1996
<S> <C>
Expenses...................................................................................... .88%
Net investment income......................................................................... 4.71%
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
We have audited the accompanying statement of assets and liabilities of
Evergreen New Jersey Tax-Free Income Fund (constituting one of the portfolios of
Evergreen Tax-Free Trust), including the statement of investments, as of
February 29, 1996, and the related statement of operations for the year then
ended and the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the three-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for each of the periods during the
two-year period ended February 28, 1993 were audited by other auditors whose
reports expressed unqualified opinions on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of February 29, 1996, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Evergreen New Jersey Tax-Free Income Fund, as of February 29, 1996, and the
results of its operations for the year then ended and the changes in its net
assets for each of the years in the two-year period then ended and the financial
highlights for each of the years in the three-year period then ended, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
New York, New York
April 22, 1996
18
<PAGE>
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19
<PAGE>
(This Page Left Blank Intentionally)
20
<PAGE>
TRUSTEES AND OFFICERS
TRUSTEES*:
Laurence B. Ashkin
Foster Bam
James S. Howell, Chairman
Robert J. Jeffries
Gerald M. McDonnell
Thomas L. McVerry
William W. Pettit
Russell A. Salton, III M.D.
Michael S. Scofield
OFFICERS*:
John J. Pileggi
President and Treasurer
Joan V. Fiore
Secretary
Sheryl Hirschfeld
Assistant Secretary
Donald E. Brostrom
Assistant Treasurer
Stephen W. St. Clair
Assistant Treasurer
*Effective January 19, 1996.
FEDERAL INCOME TAX STATUS OF DIVIDENDS (UNAUDITED)
During the fiscal year ended February 29, 1996 the Fund distributed $1,859,135
of tax-exempt income to shareholders.
<PAGE>
NOT May lose value
FDIC No bank guarantee
INSURED
Evergreen Funds Distributor, Inc. 538361
42981 4/96
