<PAGE>
PROSPECTUS January 22, 1996
EVERGREEN(SM) PENNSYLVANIA TAX-FREE (Evergreen Tree Logo)
MONEY MARKET FUND
CLASS A SHARES
The EVERGREEN PENNSYLVANIA TAX-FREE MONEY MARKET FUND (the "Fund")
is designed to provide investors with current income, stability of
principal and liquidity. This Prospectus provides information regarding the
Class A offered by the Fund. The Fund is a series of an open-end,
diversified, management investment company. This Prospectus sets forth
concise information about the Fund that a prospective investor should know
before investing. The address of the Fund is 2500 Westchester Avenue,
Purchase, New York 10577.
A "Statement of Additional Information" for the Fund and certain
other Evergreen mutual funds dated January 22, 1996 has been filed with the
Securities and Exchange Commission and is incorporated by reference herein.
The Statement of Additional Information provides information regarding
certain matters discussed in this Prospectus and other matters which may be
of interest to investors, and may be obtained without charge by calling the
Fund at (800) 807-2940. There can be no assurance that the investment
objective of the Fund will be achieved. Investors are advised to read this
Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, ARE NOT INSURED OR
OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE INVESTMENT RISKS.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUND 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 4
DESCRIPTION OF THE FUND 5
Investment Objective and Policies 5
Investment Practices and Restrictions 9
MANAGEMENT OF THE FUND 10
Investment Adviser 10
Distribution Plan and Agreement 10
PURCHASE AND REDEMPTION OF SHARES 11
How to Buy Shares 11
How to Redeem Shares 12
Exchange Privilege 14
Shareholder Services 14
Effect of Banking Laws 15
OTHER INFORMATION 15
Dividends, Distributions and Taxes 15
General Information 16
</TABLE>
OVERVIEW OF THE FUND
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Fund" and "Management of the Fund".
The Capital Management Group ("CMG") First Union National Bank of North
Carolina ("FUNB") serves as investment adviser to EVERGREEN PENNSYLVANIA
TAX-FREE MONEY MARKET FUND. FUNB is a subsidiary of First Union Corporation, the
sixth largest bank holding company in the United States.
EVERGREEN PENNSYLVANIA TAX-FREE MONEY MARKET FUND invests in high quality
Pennsylvania securities that are exempt from Federal and Pennsylvania personal
income taxes in the opinion of bond counsel to the issuer, and which have
remaining maturities of thirteen months or less.
The Fund seeks to maintain a stable net asset value of $1.00 per share
although no assurances can be given that such a stable net asset value will be
maintained.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF THE FUND WILL BE
ACHIEVED.
2
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EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in Class A shares of the Fund. For further
information see "Purchase and Redemption of Shares" and "General
Information -- Other Classes of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases None
(as a % of offering price)
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge (as a % of None
original purchase price or redemption
proceeds, whichever is lower)
Redemption Fee None
Exchange Fee None
</TABLE>
The following tables show for the Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable, together with
examples of the cumulative effect of such expenses on a hypothetical $1,000
investment in each Class for the periods specified assuming (i) a 5% annual
return, and (ii) redemption at the end of each period.
EVERGREEN PENNSYLVANIA TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
ANNUAL OPERATING Redemption
EXPENSES** at End of Period
Class A Class A
<S> <C> <C> <C>
Management
Fees .40% After 1 Year $ 12
After 3 Years $ 37
12b-1 Fees* .30%
After 5 Years $ 64
Other
Expenses .53% After 10 Years $142
Total 1.23%
</TABLE>
*The estimated operating expenses and examples do not reflect fee waivers
and expense reimbursements for the most recent fiscal period. Actual expenses,
net of fee waivers and expense reimbursements for the fiscal period ended
February 28, 1995 for Class A Shares were .21%.
From time to time, the Fund's investment adviser may, at its discretion,
waive its fee or reimburse the Fund for certain of its expenses in order to
reduce the Fund's expense ratio. The investment adviser may cease these
voluntary waivers or reimbursements at any time.
**Class A Shares can pay up to .35 of 1% of average net assets as a 12b-1
Fee. For the foreseeable future, the Class A Share's 12b-1 Fees will be limited
to .30 of 1% of average net assets.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in Class A Shares
of the Fund will bear directly or indirectly. The amounts set forth under "Other
Expenses" as well as the amounts set forth in the examples are estimated amounts
based on historical experience for the most recent fiscal period. Such expenses
have been restated to reflect current fee arrangements. THE EXAMPLES SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN.
ACTUAL EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a
more complete description of the various costs and expenses borne by the Fund
see "Management of the Fund".
3
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FINANCIAL HIGHLIGHTS
The information on the following pages present financial highlights for a
share outstanding throughout each period indicated. The information in the
tables for each of the years in the two-year period ended February 28, 1995 have
been audited by KPMG Peat Marwick LLP, the Fund's current independent auditors.
The information in the tables for February 28, 1993 and prior periods have been
audited by Price Waterhouse LLP, the Fund's prior independent auditors. A report
of KPMG Peat Marwick LLP or Price Waterhouse LLP, as the case may be, on the
audited information with respect to the Fund is incorporated by reference in the
Fund's Statement of Additional Information. The following information should be
read in conjunction with the financial statements and related notes which are
incorporated by reference in the Fund's Statement of Additional Information.
Further information about the Fund's performance is contained in the
Fund's annual report to shareholders, which may be obtained without charge.
EVERGREEN PENNSYLVANIA TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS Y SHARES
AUGUST 22,* SIX MONTHS
THROUGH ENDED
AUGUST 31, AUGUST 31,
1995 1995 YEAR ENDED FEBRUARY 28,
(UNAUDITED) (UNAUDITED) 1995
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period............... $1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income.............................. .02 .02 .03
Less distributions to shareholders from
investment income................................ (.02) (.02) (.03)
Net asset value, end of period..................... $1.00 $ 1.00 $ 1.00
TOTAL RETURN+...................................... 1.9% 1.9% 2.8%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).......... $120 $99,513 $43,539
Ratios to average net assets:
Expenses **...................................... .21%++ .21%++ .33%
Net investment income **......................... 3.66%++ 3.66%++ 3.09%
<CAPTION>
AUGUST 15, 1991*
THROUGH
FEBRUARY 29,
YEAR ENDED FEBRUARY 28,
1994 1993 1992
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period............... $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income.............................. .02 .03 .02
Less distributions to shareholders from
investment income................................ (.02) (.03) (.02)
Net asset value, end of period..................... $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN+...................................... 2.1% 2.7% 4.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).......... $14,383 $15,999 $20,699
Ratios to average net assets:
Expenses **...................................... .47% .35% .19%++
Net investment income **......................... 2.10% 2.62% 3.90%++
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS Y SHARES
SIX MONTHS SIX MONTHS
ENDED ENDED
AUGUST 31, 1995 AUGUST 31, 1995 YEAR ENDED FEBRUARY 28,
(UNAUDITED) (UNAUDITED) 1995 1994
<S> <C> <C> <C> <C>
Expenses................................... .79% .79% 1.05% 1.26%
Net investment income...................... 3.66% 3.08% 2.37% 1.31%
<CAPTION>
AUGUST 15, 1991*
CLASS Y SHARES THROUGH
YEAR ENDED FEBRUARY 28, FEBRUARY 29,
1993 1992
<S> <C> <C>
Expenses................................... 1.07% .77%
Net investment income...................... 1.90% 3.32%
</TABLE>
4
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DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek to provide investors with
as high a level of current income as is consistent with preservation of capital
and liquidity. There is no assurance that this objective will be achieved.
To obtain its objective the Fund invests at least 80% of its net assets
in municipal obligations issued by the Commonwealth of Pennsylvania or its
counties, municipalities, authorities or other political subdivisions, and
municipal obligations issued by territories or possessions of the United States,
such as Puerto Rico (collectively, "Municipal Obligations"), the interest on
which, in the opinion of bond counsel, is exempt from Federal and Pennsylvania
personal income taxes. The Fund limits its investments to Municipal Obligations
with remaining maturities of thirteen months or less and will maintain a
dollar-weighted average portfolio maturity of 90 days or less.
Normally, the Fund will seek to invest substantially all of its assets in
short-term Municipal Obligations. However, under certain unusual circumstances,
such as a temporary decline in the issuance of Pennsylvania obligations, the
Fund may invest up to 20% of its assets in the following: short-term municipal
securities issued outside of Pennsylvania (the income from which may be subject
to Pennsylvania income taxes) or certain taxable fixed income securities (the
income from which may be subject to Federal and Pennsylvania personal income
taxes). In most instances, however, the Fund will seek to avoid such holdings in
an effort to provide income that is fully exempt from Federal and Pennsylvania
personal income taxes.
The Fund may also invest in Municipal Obligations issued to finance
private activities, whose interest is a preference item for purposes of the
Federal alternative minimum tax. Such "private activity bonds" might include
industrial development bonds and securities issued to finance projects such as
solid waste disposal facilities, student loans or water and sewage projects. The
Fund currently intends to treat "private activity bonds" as not federally tax
exempt and, accordingly, to limit investments in "private activity bonds" to no
more than 20% of assets. See "Other Information -- Dividends, Distributions and
Taxes".
The Fund will not invest in options, financial futures transactions or
other similar "derivative" instruments except as otherwise provided herein.
Shares of the Fund are not insured or guaranteed by the United States
government. The Fund will only purchase securities: (i) rated within the two
highest rating categories by Moody's Investors Service Inc., ("Moody's") and
Standard & Poors Ratings Group ("S & P") or in a comparable rating category by
any two of the nationally recognized statistical rating organizations that have
rated the securities; (ii) rated in a comparable rating category by only one
such organization that has rated the securities, or (iii) which, if unrated, are
deemed to be of equivalent quality as determined by the investment adviser
pursuant to guidelines established by the Board of Trustees. The types of
Municipal Obligations in which the Fund may invest include the following:
Municipal Bonds. Municipal bonds generally have a maturity at the time of
issuance of more than one year. Municipal bonds may be issued to raise money for
various public purposes -- such as constructing public facilities and resource
recovery projects and making loans to public institutions. There are generally
two types of municipal bonds: general obligation bonds and revenue bonds.
General obligation bonds are backed by the taxing power of the issuing
municipality and are considered the safest type of municipal bond. Revenue bonds
are backed by the revenues of a project or facility -- tolls from a toll bridge,
for example. Industrial development revenue bonds (which are private activity
bonds) are a specific type of revenue bond backed by the credit and security of
a private user, and therefore investments in these bonds have more potential
risk. Certain types of municipal bonds are issued to obtain funding for
privately operated facilities. Municipal bonds generally have a maturity at the
time of issuance of more than one year.
Municipal Notes. Municipal notes are generally sold as interim financing in
anticipation of the collection of taxes, a bond sale or receipt of other
revenue. Municipal notes generally have maturities at the time of issuance of
one year or less. Investments in municipal notes are limited to notes which are
rated at the date of purchase: (i)"MIG 1" or "MIG 2" by Moody's and in a
comparable rating category by at least one other nationally recognized
statistical rating organization that has rated the notes, or (ii) in a
comparable rating category by only one such organization, including Moody's, if
it is the only organization that has rated the notes, or (iii) if not rated,
are, in the opinion of the
5
<PAGE>
investment adviser, of comparable investment quality and within the credit
quality policies and guidelines established by the Board of Trustees.
Notes rated "MIG 1" are judged to be of the "best quality" and carry the
smallest amount of investment risk. Notes rated "MIG 2" are judged to be of
"high quality", with margins of protection ample although not as large as in the
preceding group.
Municipal Commercial Paper. Municipal commercial paper is a debt obligation with
a stated maturity of one year or less which is issued to finance seasonal
working capital needs or as short-term financing in anticipation of longer-term
debt. Investments in municipal commercial paper are limited to commercial paper
which is rated at the date of purchase: (i) "P-1" or "P-2" by Moody's and "A-1",
"A-1 +" or "A-2" by S&P or (ii) in a comparable rating category by any two of
the nationally recognized statistical ratings organizations that have rated
commercial paper or (iii) in a comparable rating category by only one such
organization if it is the only organization that has rated the commercial paper
or (iv) if not rated, is, in the opinion of the investment adviser, of
comparable investment quality and within the credit quality policies and
guidelines established by the Board of Trustees.
Issuers of municipal (and taxable) commercial paper rated "P-1" have a
"superior capacity for repayment of short-term promissory obligations". The
"A-1" rating for commercial paper under the S&P classification indicates that
the "degree of safety regarding timely payment is either overwhelming or very
strong". Commercial paper with "overwhelming safety characteristics" will be
rated "A1+". Commercial paper receiving a "P-2" rating has a strong capacity for
repayment of short-term promissory obligations. Commercial paper rated "A-2" has
the capacity for timely payment although the relative degree of safety is not as
overwhelming as for issues designated "A-1". See the Statement of Additional
Information for a more complete description of securities ratings.
When-Issued Securities. The Fund may purchase Municipal Obligations on a
when-issued basis, in which case delivery and payment normally take place 15 to
45 days after the date of the commitment to purchase. The Fund will only make
commitments to purchase Municipal Obligations on a when-issued basis with the
intention of actually acquiring the securities but may sell them before the
settlement date if it is deemed advisable. Any gains realized in such sales
would produce taxable income. The when-issued securities are subject to market
fluctuation and no interest accrues to the purchaser during this period. The
payment obligation and the interest rate that will be received on the securities
are each fixed at the time the purchaser enters into the commitment. For
purposes of determining the Fund's weighted average maturity, the maturity of a
when-issued security is calculated from its commitment date. Purchasing
Municipal Obligations on a when-issued basis is a form of leveraging and can
involve a risk that the yields available in the market when the delivery takes
place may actually be higher than those obtained in the transaction itself in
which case there could be an unrealized loss at the time of delivery.
The Fund will establish a segregated account with its custodian in which
it will maintain cash, United States government securities, or other liquid,
high quality debt instruments in an amount at least equal in value to the Fund's
commitments to purchase when-issued securities. If the value of these assets
declines, the Fund will place additional liquid assets in the account on a daily
basis so that the value of the assets in the account is equal to the amount of
such commitments.
Securities With Put or Demand Rights. The Fund has the ability to enter into put
transactions, sometimes referred to as stand-by commitments, with respect to
Municipal Obligations held in its portfolio or to purchase securities which
carry a demand feature or put option which permit the Fund, as holder, to tender
them back to the issuer or a third party prior to maturity and receive payment
within seven days. Segregated accounts will be maintained by the Fund for all
such transactions.
The amount payable to the Fund by the seller upon its exercise of a put
will normally be (i) the Fund's acquisition cost of the securities (excluding
any accrued interest which the Fund paid on their acquisition), less any
amortized market premium plus any amortized market or original issue discount
during the period the Fund owned the securities, plus (ii) all interest accrued
on the securities since the last interest payment date during the period the
securities were owned by the Fund. Absent unusual circumstances, the Fund values
the underlying securities at their amortized cost. Accordingly, the amount
payable by a broker dealer or bank during the time a put is exercisable will be
substantially the same as the value of the underlying securities.
The Fund's right to exercise a put is unconditional and unqualified. A
put is not transferable by the Fund, although the Fund may sell the underlying
securities to a third party at any time. The Fund expects that puts will
generally be available without any additional direct or indirect cost. However,
if necessary and advisable, the Fund may pay for certain puts either separately
in cash or by paying a higher price for portfolio securities which are
6
<PAGE>
acquired subject to such a put (thus reducing the yield to maturity otherwise
available to the same securities). Thus, the aggregate price paid for securities
with put rights may be higher than the price that would otherwise be paid.
The Fund may enter into put transactions only with broker dealers (in
accordance with the rules of the Securities and Exchange Commission) and banks
which, in the opinion of the investment adviser, present minimal credit risks.
The investment adviser will monitor periodically the creditworthiness of issuers
of such obligations held by the Fund. The Fund's ability to exercise a put will
depend on the ability of the broker-dealer or bank to pay for the underlying
securities at the time the put is exercised. In the event that a broker-dealer
or bank should default on its obligation to purchase an underlying security, the
Fund might be unable to recover all or a portion of any loss sustained from
having to sell the security elsewhere. The Fund intends to enter into put
transactions solely to maintain portfolio liquidity and does not intend to
exercise its rights thereunder for trading purposes.
For a detailed description of put transactions, see "Investment
Policies -- Securities with Put Rights" in the Statement of Additional
Information.
Taxable Securities. Under normal market conditions, the Fund may at times elect
to invest temporarily up to 20% of the current value of its net assets in
taxable securities of the type described below pending the investment in
Municipal Obligations of proceeds of sales of Fund shares or proceeds from the
sale of portfolio securities or in anticipation of redemptions. However, at all
times under normal market conditions the percentage of the Fund's income and
corresponding distributions which is tax-exempt will be very close to 100%. In
addition, for temporary defensive purposes, the Fund may invest up to 100% of
its total assets in such taxable securities when, in the opinion of the
investment adviser, it is advisable to do so because of market conditions. The
types of taxable securities in which the Fund may invest are limited to the
following money market instruments which have remaining maturities not exceeding
thirteen months; (i) obligations of the United States government, its agencies
or instrumentalities; (ii) negotiable certificates of deposit and bankers'
acceptances of United States banks which have more than $1 billion in total
assets at the time of investment and are members of the Federal Reserve System
or are examined by the Comptroller of the Currency or whose deposits are insured
by the Federal Deposit Insurance Corporation; (iii) domestic and foreign U.S.
dollar-denominated commercial paper rated "P-1" by Moody's or "A-1" or "A-1+" by
S&P; and (iv) repurchase agreements with respect to any of the foregoing
portfolio securities. The Fund also has the right to hold up to 100% of its
total assets in cash as the investment adviser deems necessary for temporary
defensive purposes.
Investments of the Fund in U.S. dollar-denominated foreign commercial
paper may involve certain risks not applicable to investment by the Fund in the
obligations of domestic issuers. These risks may include risks of foreign
political or economic instability, difficulties in enforcing a judgment against
a foreign issuer should it default, the imposition or tightening of exchange
controls and changes in foreign governmental attitudes toward private
investment, including the possibility of increased taxation, nationalization or
expropriation of Fund assets. Foreign issuers of securities may also be subject
to different accounting and disclosure systems, which may affect the type and
quality of information available about an issuer. The rating services used by
the Fund take these factors into consideration when assigning a rating to a
particular security, and therefore the additional risk to the Fund of investing
in foreign securities with the same ratings as a domestic security is not
expected to be significant.
The Fund will not invest in any obligations of or loan any of its
portfolio securities to FUNB or its affiliates as defined in the Investment
Company Act of 1940, as amended (the "1940 Act") or any affiliates of the Fund.
Subject to the limitations described, the Fund is permitted to invest in
obligations of correspondent banks of FUNB (banks with which the FUNB maintains
a special bank servicing relationship) which are not affiliates of Evergreen
Tax-Free Trust, its investment adviser or its distributor, but the Fund will not
give preference in its investment selections to those obligations.
After purchase by the Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require a sale of such security by the Fund. However, the
investment adviser will consider such event in its determination of whether the
Fund should continue to hold the security. To the extent the ratings given by
Moody's or S&P may change as a result of changes in such organizations of their
rating systems, the Fund will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained in this
Prospectus and in the Statement of Additional Information.
Opinions relating to the validity of Municipal Obligations and to the
exclusion of interest thereon from Federal and Pennsylvania personal income
taxes are rendered by bond counsel to the respective issuers at the
7
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time of issuance. Neither the Fund, the Evergreen Tax-Free Trust nor the
investment adviser will review the proceedings relating to the issuance of
Municipal Obligations or the basis for such opinions.
Municipal Lease Obligations. Municipal lease obligations are financing
arrangements secured by leases of property to a municipality. These obligations
are considered to be illiquid securities and typically are not fully backed by
the municipality's credit. Interest from a municipal lease obligation may become
taxable if the lease is assigned. If the governmental user does not appropriate
sufficient funds for the following year's lease payments, the lease will
terminate, with the possibility of default on the lease obligations and
significant loss to the Fund. The Fund will not purchase any municipal lease
obligation that is not covered by a legal opinion (typically from the issuer's
counsel) to the effect that, as of the effective date of such lease, the lease
is the valid and binding obligation of the governmental issuer. For a more
detailed description of Municipal Leases, see "Investment Policies -- Municipal
Leases" in the Statement of Additional Information.
Resource Recovery Bonds. Resource recovery bonds may be general obligations of
the issuing municipality or supported by corporate or bank guarantees. The
viability of the resource recovery project, environmental protection regulations
and project operator tax incentives may affect the value and credit quality of
resource recovery bonds.
Variable and Floating Rate Obligations. Certain of the Municipal Obligations
which the Fund may purchase have a floating or variable rate of interest. Such
obligations bear interest at rates which are not fixed, but which vary with
changes in specified market rates or indices, such as a Federal Reserve
composite index. Certain of such obligations may carry a demand feature or put
option which would permit the Fund, as holder, to tender them back to the issuer
or a third party prior to maturity ("demand instruments"). The Fund may invest
in floating and variable rate Municipal Obligations even if they carry stated
maturities in excess of one year. Obligations with a demand feature generally
receive two ratings, one representing an evaluation of the degree of risk
associated with scheduled interest and principal payments and the other
representing an evaluation of the degree of risk associated with the demand
feature. The two highest ratings assigned to the demand feature by Moody's are
"VMIG 1" and "VMIG 2" which have generally the same characteristics as Moody's
"MIG 1" and "MIG 2" ratings. Investments in variable and floating rate
obligations are limited to those that are rated "VMIG" 1 by Moody's or, if not
rated, are, in the opinion of the investment adviser, of comparable investment
quality. The investment adviser will monitor on an ongoing basis the earning
power, cash flow and other liquidity ratios of the issuers of such obligations
and will similarly monitor the ability of an issuer of a demand instrument to
pay principal and interest on demand. The Fund's right to obtain payment at par
on a demand instrument could be affected by events occurring between the date
the Fund elects to demand payment and the date payment is due which may
adversely affect the ability of the issuer of the instrument to make payment
when due.
The Fund does not intend to concentrate its investments in any one
industry. Thus, from time to time, the Fund may invest 25% or more of its assets
in Municipal Obligations which are related in such a way that an economic,
business or political development or change affecting one such Obligation would
also affect the other Obligations; for example, Municipal Obligations, the
interest on which is paid from revenues of similar type projects or Municipal
Obligations whose issuers are located in the same state.
Because the taxable money market is a broader and more liquid market with
a greater number of investors, issuers and market makers than is the market for
short-term tax-exempt municipal obligations, the liquidity of the Fund may not
be equal to that of a money market fund which invests exclusively in short-term
taxable money market instruments. The more limited marketability of short-term
tax-exempt municipal obligations may make it difficult in certain circumstances
to dispose of large investments advantageously. In general, tax-exempt municipal
obligations are also subject to credit risks such as the loss of credit ratings
or possible default. In addition, an issuer of tax-exempt municipal obligations
may lose its tax-exempt status in the event of a change in the current tax laws.
Risk Factors: Investing in Pennsylvania Municipal Obligations. Each investor
should consider carefully the special risks inherent in the Fund's investment in
Pennsylvania Municipal Obligations. Pennsylvania has been historically
identified as a heavy industry state although that reputation has recently
changed as the industrial composition of Pennsylvania diversified when the coal,
steel, and railroad industries began to decline. This diversification was
necessary when the traditionally strong industries in Pennsylvania declined as a
long-term shift in jobs, investment and workers away from the northeast part of
the nation took place. The major new sources of growth are in the service
sector, including trade, medical and health services, education and financial
institutions. Pennsylvania is highly urbanized, with approximately 50% of the
Commonwealth's population contained in the metropolitan areas which include the
cities of Philadelphia and Pittsburgh.
8
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It should be noted that Pennsylvania Municipal Obligations may be
adversely affected by local political and economic conditions and developments
within Pennsylvania. For example, adverse conditions in a significant industry
within Pennsylvania may from time to time have a correspondingly adverse effect
on specific issuers within Pennsylvania or on anticipated revenue to the
Commonwealth itself; conversely, an improving economic outlook for a significant
industry may have a positive effect on such issuers or revenues. An expanded
discussion of the risks associated with the purchase of Pennsylvania issues is
contained in the Statement of Additional Information.
Investment Company Securities. The Fund may invest in securities issued by other
investment companies. Such securities will be acquired by Fund within the limits
prescribed by the 1940 Act, which include a prohibition against the Fund
investing more than 10% of the value of its total assets in such securities.
Investments in securities issued by other investment companies will subject
shareholders to the imposition of duplicative fees and expenses.
The Fund may engage in the following portfolio transactions:
Loans of Portfolio Securities. The Fund may loan its portfolio securities to
brokers, dealers, and financial institutions to increase current income. All
loans of securities must be continuously secured by collateral consisting of
United States government securities, cash or letters of credit maintained on a
daily mark-to-market basis in an amount at least equal to the current market
value of the securities loaned plus the interest payable with respect to the
loan.
As a condition of the loan, the Fund must have the right to call the loan
and obtain the return of the securities loaned within five business days.
Moreover, the Fund will receive any interest or dividends paid on the loaned
securities. The Fund will not lend portfolio securities to FUNB, or to any
affiliate of the FUNB or to any other affiliate of the Fund. Loans of securities
involve a risk that the borrower may fail to return the securities or may fail
to provide additional collateral.
Repurchase Agreements. Securities held by the Fund may be subject to repurchase
agreements. A repurchase agreement is a transaction in which the seller of a
security commits itself at the time of the sale to repurchase that security from
the buyer at a mutually agreed upon time and price. The Fund will enter into
repurchase agreements only with dealers, domestic banks or recognized financial
institutions which, in the opinion of the investment adviser, present minimal
credit risks. The Fund will enter into repurchase agreements only with respect
to obligations which could otherwise be purchased by the Fund or any other
obligations backed by the full faith and credit of the United States. Where the
securities underlying a repurchase agreement are not U.S. government securities,
they must be of the highest quality at the time the repurchase agreement is
entered into (e.g., a long-term debt security would be required to be rated by
S&P as "AAA" or its equivalent). While the maturity of the underlying securities
in a repurchase agreement transaction may be more than one year, the term of the
repurchase agreement is always less than one year. The maturities of the
underlying securities will have to be taken into account in calculating the
Fund's dollar weighted average portfolio maturity if the seller of the
repurchase agreement fails to perform under such agreement. In the event of
default by the seller under the repurchase agreement, the Fund may experience a
loss of income from the loaned securities and a decrease in the value of any
collateral maintained, problems in exercising its rights to the underlying
securities and costs and time delays in connection with the disposition of such
securities. The Fund will invest no more than 10% of its net assets in
repurchase agreements maturing in more than seven days and other illiquid
investments.
INVESTMENT PRACTICES AND RESTRICTIONS
The investment objective of the Fund and its policy of investing at least
80% of its net assets in Municipal Obligations are fundamental policies and
except for policies with respect to repurchase agreements and securities with
put rights, which are also fundamental policies of the Fund and subject to the
investment restrictions set forth below, the Fund's investment policies and the
investment adviser's discretion to make use of a particular investment technique
or activity are not fundamental and may be changed by the Board of Trustees
without the approval of shareholders.
The Fund may not: (1) borrow money or pledge or mortgage its assets,
except that the Fund may borrow from banks up to 10% of the current value of its
total net assets for temporary purposes only in order to meet redemptions, and
those borrowings may be secured by the pledge of not more than 10% of the
current value of its total net assets (but investments may not be purchased by
the Fund while any such borrowings exist); (2) make loans, except loans of
portfolio securities having a value of not more than 10% of the Fund's current
assets and except that the Fund may purchase a portion of an issue of publicly
distributed bonds, debentures or other obligations, make deposits with banks and
enter into repurchase agreements with respect to its portfolio securities;
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or (3) invest an amount equal to 10% or more of the current value of the Fund's
net assets in illiquid securities, including those securities which do not have
readily available market quotations and repurchase agreements having maturities
of more than seven calendar days. Investments in restricted securities eligible
for resale pursuant to Rule 144A of the Securities Act of 1933 which have been
determined to be liquid by the Board of Trustees based upon the trading markets
for the securities will not be included for purposes of this limitation.
However, investing in Rule 144A securities could have the effect of increasing
the level of fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing such securities. The foregoing
investment restrictions and those described in the Statement of Additional
Information are fundamental policies which may be changed only when permitted by
law and approved by the holders of a majority of the outstanding voting
securities of the Fund, as described under "Other Information" in the Statement
of Additional Information.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER
The management of the Fund is supervised by the Trustees of Evergreen
Tax-Free Trust. The Capital Management Group of First Union National Bank of
North Carolina ("CMG") serves as investment adviser to the Fund. First Union
National Bank of North Carolina ("FUNB") a subsidiary of First Union Corporation
("First Union"), the sixth largest bank holding company in the United States.
First Union is headquartered in Charlotte, North Carolina, and had $96.7 billion
in consolidated assets as of December 31, 1995. First Union and its subsidiaries
provide a broad range of financial services to individuals and businesses
throughout the United States. The Capital Management Group of FUNB manages or
otherwise oversees the investment of over $5.3 billion in assets belonging to a
wide range of clients, including the fifteen series of Evergreen Investment
Trust (formerly known as First Union Funds). First Union Brokerage Services,
Inc., a wholly-owned subsidiary of FUNB, is a registered broker-dealer that is
principally engaged in providing retail brokerage services consistent with its
federal banking authorizations. First Union Capital Markets Corp., a
wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services. Prior to January 1, 1996, First Fidelity Bank, N.A. ("FFB") served as
investment adviser to the Fund. CMG succeeded to the mutual funds advisory
business of First Fidelity in connection with the acquisition of First Fidelity
Bancorporation by a subsidiary of First Union.
CMG manages investments and supervises the daily business affairs of the
Fund and, as compensation therefor, is entitled to receive an annual fee equal
to .40 of 1% of the average daily net assets of the Fund up to $500 million, .36
of 1% of the next $500 million of assets, .32 of 1% of assets in excess of $1
billion but not exceeding $1.5 billion, and .28 of 1% of assets in excess of
$1.5 billion. The total annualized operating expenses of the Fund for its most
recent fiscal period are set forth in the section entitled "Financial
Highlights". Evergreen Asset Management Corp. ("Evergreen Asset"), a subsidiary
of FUNB, serves as administrator to the Fund and is entitled to receive a fee
based on the average daily net assets of the Fund at a rate based on the total
assets of the mutual funds administered by Evergreen Asset for which CMG or
Evergreen Asset also serve as investment adviser, calculated in accordance with
the following schedule: .050% of the first $7 billion; .035% on the next $3
billion; .030% on the next $5 billion; .020% on the next $10 billion; .015% on
the next $5 billion; and .010% on assets in excess of $30 billion. Furman Selz
Incorporated, an affiliate of Evergreen Funds Distributor, Inc., distributor for
the Evergreen group of mutual funds, serves as sub-administrator for the Fund
and is entitled to receive a fee from the Fund calculated on the average daily
net assets of the Fund at a rate based on the total assets of the mutual funds
administered by Evergreen Asset for which CMG or Evergreen Asset also serve as
investment adviser, calculated in accordance with the following schedule: .0100%
of the first $7 billion; .0075% on the next $3 billion; .0050% on the next $15
billion; and .0040% on assets in excess of $25 billion. The total assets of the
mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset
serve as investment adviser were approximately $10.4 billion as of December 31,
1995.
DISTRIBUTION PLANS AND AGREEMENTS
Rule 12b-1 under the 1940 Act permits an investment company to pay
expenses associated with the distribution of its shares in accordance with a
duly adopted plan. The Fund has adopted for its Class A shares a "Rule 12b-1
plan" (the "Plan"). Pursuant to the Plan, the Fund may incur
distribution-related and shareholder servicing-related expenses which may not
exceed an annual rate of .35 of 1% of the Fund's aggregate average daily net
assets attributable to Class A shares. Payments with respect to Class A shares
under the Plan are
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currently voluntarily limited to .30 of 1% of each Fund's aggregate average
daily net assets attributable to Class A shares. The Plan provides that a
portion of the fee payable thereunder may constitute a service fee to be used
for providing ongoing personal services and/or the maintenance of shareholder
accounts. Service fee payments to financial intermediaries for such purposes
will not exceed .25 of 1% of the aggregate average daily net assets attributable
to each Class of shares of the Fund.
The Fund has also entered into a distribution agreement (the
"Distribution Agreement") with Evergreen Funds Distributor, Inc. ("EFD").
Pursuant to the Distribution Agreement, the Fund will compensate EFD for its
services as distributor at a rate which may not exceed an annual rate of .30 of
1% of the Fund's aggregate average daily net assets attributable to Class A
shares. The Distribution Agreement provides that EFD will use the distribution
fee received from the Fund for payments (i) to compensate broker-dealers or
other persons for distributing shares of the Fund, including interest and
principal payments made in respect of amounts paid to broker-dealers or other
persons that have been financed (EFD may assign its rights to receive
compensation under the Plan to secure such financings), (ii) to otherwise
promote the sale of shares of the Fund, and (iii) to compensate broker-dealers,
depository institutions and other financial intermediaries for providing
administrative, accounting and other services with respect to the Fund's
shareholders. The financing of payments made by EFD to compensate broker-dealers
or other persons for distributing shares of the Fund may be provided by First
Union or its affiliates. The Fund may also make payments, in amounts up to .25
of 1% of the Fund's aggregate average daily net assets on an annual basis
attributable to Class B shares, to compensate organizations, which may include
EFD and Evergreen Asset or its affiliates, for personal services rendered to
shareholders and/or the maintenance of shareholder accounts or for engaging
others to render such services. The Fund may not pay any distribution or
services fees during any fiscal period in excess of the amounts set forth above.
Since EFD's compensation under the Distribution Agreement is not directly tied
to the expenses incurred by EFD, the amount of compensation received by it under
the Distribution Agreement during any year may be more or less than its actual
expenses and may result in a profit to EFD. Distribution expenses incurred by
EFD in one fiscal year that exceed the level of compensation paid to EFD for
that year may be paid from distribution fees received from the Fund in
subsequent fiscal years. The Plan is in compliance with rules of the National
Association of Securities Dealers, Inc. which effectively limit the annual
asset-based sales charges and service fees that a mutual fund may pay on a class
of shares to .75 of 1% and .25 of 1%, respectively, of the average annual net
assets attributable to that class. The rules also limit the aggregate of all
front-end, deferred and asset-based sales charges imposed with respect to a
class of shares by a mutual fund that also charges a service fee to 6.25% of
cumulative gross sales of shares of that class, plus interest at the prime rate
plus 1% per annum.
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
You can purchase shares of the Fund through broker-dealers, banks or
other financial intermediaries, or directly through EFD. The minimum initial
investment is $1,000, which may be waived in certain situations. There is no
minimum for subsequent investments. Share certificates are not issued. In states
where EFD is not registered as a broker-dealer shares of the Fund will only be
sold through other broker-dealers or other financial institutions that are
registered. See the Share Purchase Application and Statement of Additional
Information for more information. Only Class A shares of the Fund are offered
through this Prospectus. (See "General Information" -- "Other Classes of
Shares".) Class A shares of the Fund can be purchased at net asset value without
an initial sales charge. Certain broker-dealers or other financial institutions
may impose a fee in connection with purchases at net asset value.
How the Fund Values its Shares. The net asset value of the Fund's shares for
purposes of both purchases and redemptions is determined twice daily, at 12 noon
(Eastern time) and promptly after the regular close of the New York Stock
Exchange (the "Exchange") (currently 4:00 p.m. Eastern time) each business day
(i.e., any weekday exclusive of days on which the Exchange or State Street is
closed). The Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value per share is calculated by taking the sum of the values of
the Fund's investments and any cash and other assets, subtracting liabilities,
and dividing by the total number of shares outstanding. All expenses, including
the fees payable to the Fund's investment adviser, are accrued daily. The
securities in the Fund's portfolio are valued on an amortized cost basis. Under
this method of valuation, a security is initially valued at its acquisition
cost, and thereafter, a constant straight-line amortization of any discount or
premium is assumed each
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day regardless of the impact of fluctuating interest rates on the market value
of the security. The market value of the obligations in the Fund's portfolio can
be expected to vary inversely to changes in prevailing interest rates. As a
result, the market value of the obligations in the Fund's portfolio may vary
from the value determined using the amortized cost method. Securities which are
not rated are normally valued on the basis of valuations provided by a pricing
service when such prices are believed to reflect the fair value of such
securities. Other assets and securities for which no quotations are readily
available are valued at the fair value as determined in good faith by the
Trustees. The Fund attempts to maintain its net asset value at $1.00 per share.
Under most conditions, management believes this will be possible, although there
can be no assurance that this will be achieved. Calculations are periodically
made to compare the value of the Fund's portfolio valued at amortized cost with
market values. If a deviation of 1/2 of 1% or more were to occur between the net
asset value calculated by reference to market values and the Fund's $1.00 per
share net asset value, or if there were other deviations which the Trustees
believed would result in a material dilution to shareholders or purchasers, the
Trustees would promptly consider what action, if any, should be initiated.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss the Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, the Fund may redeem
shares from his or her account to reimburse the Fund or the Fund's investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen mutual funds.
Shares of the Fund are sold at the net asset value per share next
determined after a shareholder's investment has been converted to Federal funds.
Investments by Federal funds wire will be effective upon receipt. Qualified
institutions may telephone orders for the purchase of Fund shares. Shares
purchased by institutions via telephone will receive the dividend declared on
that day if the telephone order is placed by 12 noon (Eastern time), and federal
funds are received the same day by 4:00 p.m. (Eastern time). Institutions should
telephone the Fund at the phone number on the front page of this Prospectus for
additional information on same day purchases by telephone. Investment checks
received at State Street will be invested on the date of receipt. Shareholders
will begin earning dividends the following business day.
The Fund cannot accept investments specifying a certain price or date and
reserves the right to reject any specific purchase order, including orders in
connection with exchanges from the other Evergreen mutual funds. Although not
currently anticipated, the Fund reserves the right to suspend the offer of
shares for a period of time.
General. In addition to the discount or commission paid to dealers, EFD will
from time to time pay to dealers additional cash or other incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of a
Fund and/or other Evergreen Mutual Funds. Such incentives will take the form of
payment for attendance at seminars, lunches, dinners, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer and their immediate
family members to urban or resort locations within or outside the United States.
Such a dealer may elect to receive cash incentives of equivalent amount in lieu
of such payments. EFD may also limit the availability of such incentives to
certain specified dealers. EFD from time to time sponsors promotions involving
First Union Brokerage Services, Inc. ("FUBS"), an affiliate of each Fund's
investment adviser, and select broker-dealers, pursuant to which incentives are
paid, including gift certificates and payments in amounts up to 1% of the dollar
amount of shares of a Fund sold. Awards may also be made based on the opening of
a minimum number of accounts. Such promotions are not being made available to
all dealers.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in the Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value next calculated
after the Fund receives your request in proper form. Proceeds generally will be
sent to you within seven days. However, for shares recently purchased by check,
the Fund will not send proceeds until it is reasonably satisfied that the check
has been collected (which may take up to ten days). Once a redemption request
has been telephoned or mailed, it is irrevocable and may not be modified or
cancelled.
Redeeming Shares Through Your Financial Intermediary. The Fund must receive
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to the Fund and may
charge you for this service. Certain financial intermediaries may require that
you give instructions earlier than 4:00 p.m.
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Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street Bank and Trust Company ("State
Street") which is the registrar, transfer agent and dividend-disbursing agent
for the Fund. Stock power forms are available from your financial intermediary,
State Street, and many commercial banks. Additional documentation is required
for the sale of shares by corporations, financial intermediaries, fiduciaries
and surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling the telephone number on the front page of this Prospectus between the
hours of 8:00 a.m. to 5:30 p.m. (Eastern time) each business day (i.e., any
weekday exclusive of days on which the Exchange or State Street's offices are
closed). The Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with the
Fund, and the account number. During periods of drastic economic or market
changes, shareholders may experience difficulty in effecting telephone
redemptions. Shareholders who are unable to reach the Fund or State Street by
telephone should follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in
the Fund at a designated commercial bank. State Street currently deducts a $5.00
wire charge from all redemption proceeds wired. This charge is subject to change
without notice. Redemption proceeds will be wired on the same day if the request
is made prior to 12 noon (Eastern time). Such shares, however, will not earn
dividends for that day. Redemption requests received after 12 noon will earn
dividends for that day, and the proceeds will be wired on the following business
day. A shareholder who decides later to use this service, or to change
instructions already given, should fill out a Shareholder Services Form and send
it to State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827, with such shareholder's signature guaranteed by a bank or trust
company (not a Notary Public), a member firm of a domestic stock exchange or by
other financial institutions whose guarantees are acceptable to State Street.
Shareholders should allow approximately ten days for such form to be processed.
The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. These procedures include requiring some
form of personal identification prior to acting upon instructions and tape
recording of telephone instructions. If the Fund fails to follow such
procedures, it may be liable for any losses due to unauthorized or fraudulent
instructions. The Fund will not be liable for following telephone instructions
reasonably believed to be genuine. The Fund reserves the right to refuse a
telephone redemption if it is believed advisable to do so. Financial
intermediaries may charge a fee for handling telephonic requests. Procedures for
redeeming Fund shares by telephone may be modified or terminated without notice
at any time.
Redemptions by Check. Upon request, the Fund will provide holders of Class A
shares, without charge, with checks drawn on the Fund that will clear through
State Street. Shareholders will be subject to State Street's rules and
regulations governing such checking accounts. Checks will be sent usually within
ten business days following the date the account is established. Checks may be
made payable to the order of any payee in an amount of $250 or more. The payee
of the check may cash or deposit it like a check drawn on a bank. (Investors
should be aware that, as in the case with regular bank checks, certain banks may
not provide cash at the time of deposit, but will wait until they have received
payment from State Street.) When such a check is presented to State Street for
payment, State Street, as the shareholder's agent, causes the Fund to redeem a
sufficient number of full and fractional shares in the shareholder's account to
cover the amount of the check. Checks will be returned by State Street if there
are insufficient or uncollectable shares to meet the withdrawal amount. The
check writing procedure for withdrawal enables shareholders to continue earning
income on the shares to be redeemed up to but not including the date the
redemption check is presented to State Street for payment.
Shareholders wishing to use this method of redemption, should fill out
the appropriate part of the Share Purchase Application (including the Signature
Card) and mail the completed form to State Street Bank and Trust Company, P.O.
Box 9021, Boston, Massachusetts 02205-9827. Shareholders requesting this service
after an
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account has been opened must contact State Street since additional documentation
will be required. Currently, there is no charge either for checks or for the
clearance of any checks. This service may be terminated or altered at any time.
General. Under unusual circumstances, the Fund may suspend redemptions or
postpone payment for up to seven days or longer, as permitted by Federal
securities law. The Fund reserves the right to close an account that through
redemption has remained below $1,000 for thirty days. Shareholders will receive
sixty days' written notice to increase the account value before the account is
closed. The Fund has elected to be governed by Rule 18f-1 under the 1940 Act
pursuant to which the Fund is obligated to redeem shares solely in cash, up to
the lesser of $250,000 of 1% of the Fund's total net assets during any ninety
day period for any one shareholder. See the Statement of Additional Information
for further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class of the other Evergreen mutual funds through your financial
intermediary, or by telephone or mail as described below. An exchange which
represents an initial investment in another Evergreen mutual fund must amount to
at least $1,000. Once an exchange request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled. Exchanges will be made on the
basis of the relative net asset values of the shares exchanged next determined
after an exchange request is received. Exchanges are subject to minimum
investment and suitability requirements.
Each of the Evergreen mutual funds has different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be materially modified or
discontinued at any time by the Fund upon sixty days' notice to shareholders and
is only available in states in which shares of the fund being acquired may
lawfully be sold.
Exchanges Through Your Financial Intermediary. The Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to the Fund and may
charge you for this service.
Exchanges by Telephone and Mail. You may exchange shares by telephone by calling
the telephone number on the front page of this Prospectus. Exchange requests
made after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach State Street by telephone. If you wish to use the
telephone exchange service you should indicate this on the Share Purchase
Application. As noted above, the Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares communicated
by telephone are genuine. A telephone exchange may be refused by the Fund or
State Street if it is believed advisable to do so. Procedures for exchanging
Fund shares by telephone may be modified or terminated at any time. Written
requests for exchanges should follow the same procedures outlined for written
redemption requests in the section entitled "How to Redeem Shares", however, no
signature guarantee is required.
SHAREHOLDER SERVICES
The Fund offers the following shareholder services. For more information
about these services or your account, contact EFD or the toll-free number on the
front page of this Prospectus. Some services are described in more detail in the
Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25 per month or
$75 per quarter. Each Fund reserves the right to close an account that through
liquidation or termination of the systematic investment plan has not reached a
minimum balance of $1,000 ($250 for retirement accounts) within 24 months of the
initial investment.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $25,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account two business days after the request
is received.
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Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $75. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gain
distributions reinvested automatically.
Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified benefit and savings plans may make shares of the Fund and the
other Evergreen mutual funds available to their participants. The Fund's
investment adviser may provide compensation to organizations providing
administrative and recordkeeping services to plans which make shares of the
Evergreen mutual funds available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the last
business day of each month, unless otherwise requested by a shareholder in
writing. If the transfer agent does not receive a written request for subsequent
dividends and/or distributions to be paid in cash at least three full business
days prior to a given record date, the dividends and/or distributions to be paid
to a shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Fund. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG being prevented from continuing to
perform the services required under the investment advisory contract or from
acting as agent in connection with the purchase of shares of the Fund by its
customers. If CMG was prevented from continuing to provide the services called
for under the investment advisory agreement, it is expected that the Trustees
would identify, and call upon the Fund's shareholders to approve, a new
investment adviser. If this were to occur, it is not anticipated that the
shareholders of the Fund would suffer any adverse financial consequences.
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund declares substantially all of its net income as dividends on
each business day. Such dividends are paid monthly. Net income, for dividend
purposes, includes accrued interest and any market discount or premium that day,
less the estimated expenses of the Fund. Gains or losses realized upon the sale
of portfolio securities are not included in net income, but are reflected in the
net asset value of the Fund's shares. Distributions of any net realized capital
gains will be made annually or more frequently as required by the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"). The amount of
dividends may fluctuate from day to day, and the dividend may be omitted on a
day where Fund expenses exceed net investment income. Dividends and
15
<PAGE>
distributions generally are taxable in the year in which they are paid, except
any dividends paid in January that were declared in the previous calendar
quarter may be treated as paid in the immediately preceding December.
Such dividends will be automatically reinvested in full and fractional
shares of the Fund on the last business day of each month. However, shareholders
who so inform the transfer agent in writing may have their dividends paid out in
cash monthly. Shareholders who invest by check will be credited with a dividend
on the business day following initial investment. Shareholders will receive
dividends on investments made by Federal funds bank wire the same day the wire
is received provided that wire purchases are received by State Street by 12 noon
(Eastern time). Shares purchased by qualified institutions via telephone as
described in "How to Purchase Shares" will receive the dividend declared on that
day if the telephone order is placed by 12 noon (Eastern time), and Federal
funds are received by 4:00 p.m. (Eastern time). All other wire purchases
received after 12 noon (Eastern time) will earn dividends beginning the
following business day. Dividends accruing on the day of redemption will be paid
to redeeming shareholders except for redemptions by check and where proceeds are
wired the same day. (See "How to Redeem Shares".)
The Fund has qualified and intends to continue to qualify to be treated
as a regulated investment company under the Code. While so qualified, it is
expected that the Fund will not be required to pay any Federal income taxes on
that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Fund, to
the extent they do not meet certain distribution requirements by the end of each
calendar year. The Fund anticipates meeting such distribution requirements. The
excise tax generally does not apply to the tax exempt income of a regulated
investment company that pays exempt interest dividends.
The Fund will designate and pay exempt-interest dividends derived from
interest earned on qualifying tax exempt obligations. Such exempt-interest
dividends may be excluded by shareholders of the Fund from their gross income
for Federal income tax purposes, however, (1) all or a portion of such
exempt-interest dividends may be a specific preference item for purposes of the
Federal individual and corporate alternative minimum taxes to the extent that
they are derived from certain types of private activity bonds issued after
August 7, 1986, and (2) all exempt-interest dividends will be a component of
"adjusted current earnings" for purposes of the Federal corporate alternative
minimum tax. Dividends paid from taxable income, if any, and distributions of
any net realized short-term capital gains (whether from tax exempt or taxable
obligations) are taxable as ordinary income, even though received in additional
Fund shares. Market discount recognized on taxable and tax-free bonds is taxable
as ordinary income, not as excludable income.
Following the end of each calendar year, every shareholder of the Fund
will be sent applicable tax information and information regarding the dividends
and capital gain distributions made during the calendar year. Under current law,
the highest Federal income tax rate applicable to net long-term capital gains
realized by individuals is 28%. The rate applicable to corporations is 35%.
Since the Fund's gross income is ordinarily expected to be interest income, it
is not expected that the 70% dividends-received deduction for corporations will
be applicable. Specific questions should be addressed to the investor's own tax
adviser.
The Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions, if any, and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that the investor's social security
or taxpayer identification number is correct and that the investor is not
currently subject to backup withholding or is exempt from backup withholding.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, the Fund may consider sales of its shares as a factor in
the selection of dealers to enter into portfolio transactions with the Fund.
Organization. The Fund is a separate investment series of Evergreen Tax-Free
Trust (formerly known as FFB Funds Trust), a Massachusetts business trust
organized in 1985. The Fund does not intend to hold annual shareholder meetings;
shareholder meetings will be held only when required by applicable law.
Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each Class of the Fund will be entitled to his or her
share of all dividends and distributions from the Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and,
16
<PAGE>
upon redeeming shares, will receive the then current net value of the Class of
shares of the Fund represented by the redeemed shares less any applicable
contingent deferred sales charge. The Trust is empowered to establish, without
shareholder approval, additional series, which may have different investment
objectives, and additional Classes of shares for any existing or future series.
If an additional series were established in the Fund, each share of the series
or Class would normally be entitled to one vote for all purposes. Generally,
shares of each series and Class would vote together as a single Class on
matters, such as the election of Trustees, that affect each series and Class in
substantially the same manner. Class A, and Class Y shares have identical
voting, dividend, liquidation and other rights, except that each Class bears, to
the extent applicable, its own distribution and transfer agency expenses as well
as any other expenses applicable only to a specific Class. Each Class of shares
votes separately with respect to Rule 12b-1 distribution plans and other matters
for which separate Class voting is appropriate under applicable law. Shares are
entitled to dividends as determined by the Trustees and, in liquidation of the
Fund, are entitled to receive the net assets of the Fund.
Custodian, Registrar, Transfer Agent And Dividend-Disbursing Agent. State Street
Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as
the Fund's custodian, registrar, transfer agent and dividend-disbursing agent
for a fee based upon the number of shareholder accounts maintained for the Fund.
Principal Underwriter. EFD, an affiliate of Furman Selz LLC., located 230 Park
Avenue, New York, New York 10169, is the principal underwriter of the Fund.
Furman Selz Incorporated also acts as sub-administrator to the Fund.
Other Classes of Shares. The Fund offers two classes of shares, Class A and
Class Y. Class Y shares are not offered by this Prospectus and are only
available to (i) persons who at or prior to December 31, 1994, owned shares in a
mutual fund advised by Evergreen Asset, (ii) certain institutional investors and
(iii) investment advisory clients of CMG, Evergreen Asset or their affiliates.
The dividends payable with respect to Class A shares will be less than those
payable with respect to Class Y shares due to the distribution and distribution
and shareholder servicing related expenses borne by Class A shares and the fact
that such expenses are not borne by Class Y shares.
Performance Information. From time to time, the Fund may quote its yield in
advertisements or in reports to shareholders. Yield information may be useful in
reviewing the performance of the Fund and for providing a basis for comparison
with other investment alternatives. However, since net investment income of the
Fund changes in response to fluctuations in interest rates and Fund expenses,
any given yield quotation should not be considered representative of the Fund's
yields for any future period. The method of calculating the Fund's yield is set
forth in the Statement of Additional Information. Before investing in the Fund,
the investor may want to determine which investment -- tax-free or
taxable -- will result in a higher after-tax return. To do this, the yield on
the tax-free investment should be divided by the decimal determined by
subtracting from 1 the highest Federal tax rate to which the investor currently
is subject. For example, if the tax-free yield is 6% and the investor's maximum
tax bracket is 36%, the computation is: 6% Tax-Free Yield /(1 - .36 Tax Rate) =
6/.64 = 9.38% Taxable Yield. In this example, the investor's after-tax return
will be higher from the 6% tax-free investment if available taxable yields are
below 9.38%. Conversely, the taxable investment will provide a higher return
when taxable yields exceed 9.38%. This is only an example and is not necessarily
reflective of the Fund's yield. The tax equivalent yield will be lower for
investors in the lower income brackets.
Comparative performance information may also be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., IBC/Donoghue's Money Fund Report, Bank Rate Monitor
and other industry publications.
In marketing a Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering investment
alternatives. The information provided to investors may also include discussions
of other Evergreen mutual funds, products, and services, which may include:
retirement investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; and charitable
giving. In addition, the information provided to investors may quote financial
or business publications and periodicals, including model portfolios or
allocations, as they relate to fund management, investment philosophy, and
investment techniques. The materials may also reprint, and use as advertising
and sales literature, articles from Evergreen Events, a quarterly magazine
provided free of charge to Evergreen Mutual fund shareholders.
17
<PAGE>
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declaration of Trust under which the
Fund operates provide that no trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statement filed by the Trust
with the Securities and Exchange Commission ("SEC") under the Securities Act of
1933, as amended. Copies of the Registration Statements may be obtained at a
reasonable charge from the SEC or may be examined, without charge, at the
offices of the SEC in Washington, D.C.
18
<PAGE>
INVESTMENT ADVISER
Capital Management Group of First Union National Bank of North Carolina, 201
South College Street, Charlotte, North Carolina 28288
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036
INDEPENDENT AUDITORS
KPMG Peat Marwick, LLP One Mellon Bank Center Pittsburgh, Pennsylvania 15219
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 230 Park Avenue, New York, New York 10169
537627 1/96
********************************************************************************
********************************************************************************
<PAGE>
PROSPECTUS January 22, 1996
EVERGREEN(SM) PENNSYLVANIA TAX-FREE (Evergreen Tree Logo)
MONEY MARKET FUND
CLASS Y SHARES
The Evergreen Pennsylvania Tax-Free Money Market Fund (the "Fund")
is designed to provide investors with current income, stability of
principal and liquidity. This Prospectus provides information regarding the
Class Y shares offered by the Fund. The Fund is a series of open-end,
diversified, management investment company. This Prospectus sets forth
concise information about the Fund that a prospective investor should know
before investing. The address of the Fund is 2500 Westchester Avenue,
Purchase, New York 10577.
A "Statement of Additional Information" for the Fund dated January
22, 1996 has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus
and other matters which may be of interest to investors, and may be
obtained without charge by calling the Fund at (800) 235-0064. There can be
no assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, ARE NOT INSURED OR
OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY, AND
INVOLVE INVESTMENT RISKS.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUND 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 4
DESCRIPTION OF THE FUND
Investment Objectives and Policies 5
INVESTMENT PRACTICES AND RESTRICTIONS 9
MANAGEMENT OF THE FUND
Investment Adviser 10
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 10
How to Redeem Shares 12
Exchange Privilege 13
Shareholder Services 14
Effect of Banking Laws 14
OTHER INFORMATION
Dividends, Distributions and Taxes 15
General Information 16
</TABLE>
OVERVIEW OF THE FUND
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Fund" and "Management of the Fund".
The Capital Management Group of First Union National Bank of North
Carolina ("FUNB") ("CMG") serves as investment adviser to Evergreen Pennsylvania
Tax-Free Money Market Fund. FUNB is a subsidiary of First Union Corporation, the
sixth largest bank holding company in the United States.
EVERGREEN PENNSYLVANIA TAX-FREE MONEY MARKET FUND invests in high quality
Pennsylvania securities that are exempt from Federal and Pennsylvania personal
income taxes in the opinion of bond counsel to the issuer with remaining
maturities of thirteen months or less.
The Fund seeks to maintain a stable net asset value of $1.00 per share
although no assurances can be given that such a stable net asset value will be
maintained.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF THE FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in the Class Y Shares of the Fund. For further
information see "Purchase and Redemption of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Redemption Fee None
Exchange Fee (only applies after 4 exchanges per
year) $ 5.00
</TABLE>
The following table shows for the Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to Class Y Shares,
together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment for the periods specified assuming (i) a 5%
annual return and (ii) redemption at the end of each period.
EVERGREEN PENNSYLVANIA TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES Class Y
<S> <C> <C> <C>
Management Fees .40%
After 1 Year $ 9
12b-1 Fees -- After 3 Years
After 3 Years $ 30
Other Expenses .53%
After 5 Years $ 51
After 10 Years $ 114
Total .93%
</TABLE>
The estimated operating expenses and examples do not reflect fee waivers
and expense reimbursements for the most recent fiscal period. Actual expenses
net of fee waivers and expense reimbursements for the fiscal year ended February
28, 1995 for Class Y Shares were .21%.
From time to time the Fund's investment adviser may at its discretion
waive its fee or reimburse the Fund for certain of its expenses in order to
reduce the Fund's expense ratio. The investment adviser may cease these
voluntary waivers or reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in Class Y Shares
of the Funds will bear directly or indirectly. The amounts set forth under
"Other Expenses" as well as the amounts set forth in the examples are estimated
amounts based on historical experience for the most recent fiscal period. Such
expenses have been restated to reflect current fee arrangements. THE EXAMPLES
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL
RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE
SHOWN. For a more complete description of the various costs and expenses borne
by the Funds see "Management of the Funds."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The information on the following pages present financial highlights for a
share outstanding throughout each period indicated. The information in the
tables for each of the years in the two-year period ended February 28, 1995 have
been audited by KPMG Peat Marwick LLP, the Fund's current independent auditors.
The information in the tables for February 28, 1993 and prior periods have been
audited by Price Waterhouse LLP, the Fund's prior independent auditors. A report
of KPMG Peat Marwick LLP or Price Waterhouse LLP, as the case may be, on the
audited information with respect to the Fund is incorporated by reference in the
Fund's Statement of Additional Information. The following information should be
read in conjunction with the financial statements and related notes which are
incorporated by reference in the Fund's Statement of Additional Information.
Further information about the Fund's performance is contained in the
Fund's annual report to shareholders, which may be obtained without charge.
EVERGREEN PENNSYLVANIA TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
CLASS A
SHARES
AUGUST 22,* CLASS Y SHARES
THROUGH SIX MONTHS AUGUST 15, 1991*
AUGUST 31, ENDED THROUGH
1995 AUGUST 31, 1995 YEAR ENDED FEBRUARY 28, FEBRUARY 29,
(UNAUDITED) (UNAUDITED) 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income....................... .02 .02 .03 .02 .03 .02
Less distributions to shareholders from
investment income......................... (.02) (.02) (.03) (.02) (.03) (.02)
Net asset value, end of period.............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+............................... 1.9% 1.9% 2.8% 2.1% 2.7% 4.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)... $120 $99,513 $43,383 $14,383 $15,999 $20,699
Ratios to average net assets:
Expenses **............................... .21%++ .21%++ .33% .47% .35% .19%++
Net investment income **.................. 3.66%++ 3.09% 2.10% 2.62% 3.90%++ 3.66%++
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
CLASS A
SHARES CLASS Y SHARES
SIX MONTHS SIX MONTHS
ENDED ENDED AUGUST 15, 1991*
AUGUST 31, AUGUST 31, YEAR ENDED THROUGH
1995 1995 FEBRUARY 28, FEBRUARY 29,
(UNAUDITED) (UNAUDITED) 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Expenses.......................................... .79% .79% 1.05% 1.26% 1.07% .77%
Net investment income............................. 3.08% 3.08% 2.37% 1.31% 1.90% 3.32%
</TABLE>
4
<PAGE>
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek to provide investors with
as high a level of current income as is consistent with preservation of capital
and liquidity. There is no assurance that this objective will be achieved. To
obtain its objective the Fund invests at least 80% of its net assets in
municipal obligations issued by the Commonwealth of Pennsylvania or its
counties, municipalities, authorities or other political subdivisions, and
municipal obligations issued by territories or possessions of the United States,
such as Puerto Rico (collectively, "Municipal Obligations"), the interest on
which, in the opinion of bond counsel, is exempt from Federal and Pennsylvania
personal income taxes. The Fund limits its investments to Municipal Obligations
with remaining maturities of thirteen months or less and will maintain a
dollar-weighted average portfolio maturity of 90 days or less.
Normally, the Fund will seek to invest substantially all of its assets in
short-term Municipal Obligations. However, under certain unusual circumstances,
such as a temporary decline in the issuance of Pennsylvania obligations, the
Fund may invest up to 20% of its assets in the following: short-term municipal
securities issued outside of Pennsylvania (the income from which may be subject
to Pennsylvania income taxes) or certain taxable fixed income securities (the
income from which may be subject to Federal and Pennsylvania personal income
taxes). In most instances, however, the Fund will seek to avoid such holdings in
an effort to provide income that is fully exempt from Federal and Pennsylvania
personal income taxes.
The Fund may also invest in Municipal Obligations issued to finance
private activities, whose interest is a preference item for purposes of the
Federal alternative minimum tax. Such "private activity bonds" might include
industrial development bonds and securities issued to finance projects such as
solid waste disposal facilities, student loans or water and sewage projects. The
Fund currently intends to treat "private activity bonds" as not federally tax
exempt and, accordingly, to limit investments in "private activity bonds" to no
more than 20% of assets. See "Other Information -- Dividends, Distributions and
Taxes".
The Fund will not invest in options, financial futures transactions or
other similar "derivative" instruments except as otherwise provided herein.
Shares of the Fund are not insured or guaranteed by the United States
government. The Fund will only purchase securities: (i) rated within the two
highest rating categories by Moody's Investors Service Inc., ("Moody's") and
Standard & Poors Ratings Group ("S & P") or in a comparable rating category by
any two of the nationally recognized statistical rating organizations that have
rated the securities; (ii) rated in a comparable rating category by only one
such organization that has rated the securities, or (iii) which, if unrated, are
deemed to be of equivalent quality as determined by the investment adviser
pursuant to guidelines established by the Board of Trustees. The types of
Municipal Obligations in which the Fund may invest include the following:
Municipal Bonds. Municipal bonds generally have a maturity at the time of
issuance of more than one year. Municipal bonds may be issued to raise money for
various public purposes -- such as constructing public facilities and resource
recovery projects and making loans to public institutions. There are generally
two types of municipal bonds: general obligation bonds and revenue bonds.
General obligation bonds are backed by the taxing power of the issuing
municipality and are considered the safest type of municipal bond. Revenue bonds
are backed by the revenues of a project or facility -- tolls from a toll bridge,
for example. Industrial development revenue bonds (which are private activity
bonds) are a specific type of revenue bond backed by the credit and security of
a private user, and therefore investments in these bonds have more potential
risk. Certain types of municipal bonds are issued to obtain funding for
privately operated facilities. Municipal bonds generally have a maturity at the
time of issuance of more than one year.
Municipal Notes. Municipal notes are generally sold as interim financing in
anticipation of the collection of taxes, a bond sale or receipt of other
revenue. Municipal notes generally have maturities at the time of issuance of
one year or less. Investments in municipal notes are limited to notes which are
rated at the date of purchase: (i)"MIG 1" or "MIG 2" by Moody's and in a
comparable rating category by at least one other nationally recognized
statistical rating organization that has rated the notes, or (ii) in a
comparable rating category by only one such organization, including Moody's, if
it is the only organization that has rated the notes, or (iii) if not rated,
are, in the opinion of the
5
<PAGE>
investment adviser, of comparable investment quality and within the credit
quality policies and guidelines established by the Board of Trustees.
Notes rated "MIG 1" are judged to be of the "best quality" and carry the
smallest amount of investment risk. Notes rated "MIG 2" are judged to be of
"high quality", with margins of protection ample although not as large as in the
preceding group.
Municipal Commercial Paper. Municipal commercial paper is a debt obligation with
a stated maturity of one year or less which is issued to finance seasonal
working capital needs or as short-term financing in anticipation of longer-term
debt. Investments in municipal commercial paper are limited to commercial paper
which is rated at the date of purchase: (i) "P-1" or "P-2" by Moody's and "A-1",
"A-1 +" or "A-2" by S&P or (ii) in a comparable rating category by any two of
the nationally recognized statistical ratings organizations that have rated
commercial paper or (iii) in a comparable rating category by only one such
organization if it is the only organization that has rated the commercial paper
or (iv) if not rated, is, in the opinion of the investment adviser, of
comparable investment quality and within the credit quality policies and
guidelines established by the Board of Trustees.
Issuers of municipal (and taxable) commercial paper rated "P-1" have a
"superior capacity for repayment of short-term promissory obligations". The
"A-1" rating for commercial paper under the S&P classification indicates that
the "degree of safety regarding timely payment is either overwhelming or very
strong". Commercial paper with "overwhelming safety characteristics" will be
rated "A1+". Commercial paper receiving a "P-2" rating has a strong capacity for
repayment of short-term promissory obligations. Commercial paper rated "A-2" has
the capacity for timely payment although the relative degree of safety is not as
overwhelming as for issues designated "A-1". See the Statement of Additional
Information, for a more complete description of securities ratings.
When-Issued Securities. The Fund may purchase Municipal Obligations on a
when-issued basis, in which case delivery and payment normally take place 15 to
45 days after the date of the commitment to purchase. The Fund will only make
commitments to purchase Municipal Obligations on a when-issued basis with the
intention of actually acquiring the securities but may sell them before the
settlement date if it is deemed advisable. Any gains realized in such sales
would produce taxable income. The when-issued securities are subject to market
fluctuation and no interest accrues to the purchaser during this period. The
payment obligation and the interest rate that will be received on the securities
are each fixed at the time the purchaser enters into the commitment. For
purposes of determining the Fund's weighted average maturity, the maturity of a
when-issued security is calculated from its commitment date. Purchasing
Municipal Obligations on a when-issued basis is a form of leveraging and can
involve a risk that the yields available in the market when the delivery takes
place may actually be higher than those obtained in the transaction itself in
which case there could be an unrealized loss at the time of delivery.
The Fund will establish a segregated account with its custodian in which
it will maintain cash, United States government securities, or other liquid,
high quality debt instruments in an amount at least equal in value to the Fund's
commitments to purchase when-issued securities. If the value of these assets
declines, the Fund will place additional liquid assets in the account on a daily
basis so that the value of the assets in the account is equal to the amount of
such commitments.
Securities With Put or Demand Rights. The Fund has the ability to enter into put
transactions, sometimes referred to as stand-by commitments, with respect to
Municipal Obligations held in its portfolio or to purchase securities which
carry a demand feature or put option which permit the Fund, as holder, to tender
them back to the issuer or a third party prior to maturity and receive payment
within seven days. Segregated accounts will be maintained by the Fund for all
such transactions.
The amount payable to the Fund by the seller upon its exercise of a put
will normally be (i) the Fund's acquisition cost of the securities (excluding
any accrued interest which the Fund paid on their acquisition), less any
amortized market premium plus any amortized market or original issue discount
during the period the Fund owned the securities, plus (ii) all interest accrued
on the securities since the last interest payment date during the period the
securities were owned by the Fund. Absent unusual circumstances, the Fund values
the underlying securities at their amortized cost. Accordingly, the amount
payable by a broker dealer or bank during the time a put is exercisable will be
substantially the same as the value of the underlying securities.
The Fund's right to exercise a put is unconditional and unqualified. A
put is not transferable by the Fund, although the Fund may sell the underlying
securities to a third party at any time. The Fund expects that puts will
generally be available without any additional direct or indirect cost. However,
if necessary and advisable, the Fund may pay for certain puts either separately
in cash or by paying a higher price for portfolio securities which are
6
<PAGE>
acquired subject to such a put (thus reducing the yield to maturity otherwise
available to the same securities). Thus, the aggregate price paid for securities
with put rights may be higher than the price that would otherwise be paid.
The Fund may enter into put transactions only with broker dealers (in
accordance with the rules of the Securities and Exchange Commission) and banks
which, in the opinion of the investment adviser, present minimal credit risks.
The investment adviser will monitor periodically the creditworthiness of issuers
of such obligations held by the Fund. The Fund's ability to exercise a put will
depend on the ability of the broker-dealer or bank to pay for the underlying
securities at the time the put is exercised. In the event that a broker-dealer
or bank should default on its obligation to purchase an underlying security, the
Fund might be unable to recover all or a portion of any loss sustained from
having to sell the security elsewhere. The Fund intends to enter into put
transactions solely to maintain portfolio liquidity and does not intend to
exercise its rights thereunder for trading purposes.
For a detailed description of put transactions, see "Investment Policies
-- Securities with Put Rights" in the Statement of Additional Information.
Taxable Securities. Under normal market conditions, the Fund may at times elect
to invest temporarily up to 20% of the current value of its net assets in
taxable securities of the type described below pending the investment in
Municipal Obligations of proceeds of sales of Fund shares or proceeds from the
sale of portfolio securities or in anticipation of redemptions. However, at all
times under normal market conditions the percentage of the Fund's income and
corresponding distributions which is tax-exempt will be very close to 100%. In
addition, for temporary defensive purposes, the Fund may invest up to 100% of
its total assets in such taxable securities when, in the opinion of the
investment adviser, it is advisable to do so because of market conditions. The
types of taxable securities in which the Fund may invest are limited to the
following money market instruments which have remaining maturities not exceeding
thirteen months; (i) obligations of the United States government, its agencies
or instrumentalities; (ii) negotiable certificates of deposit and bankers'
acceptances of United States banks which have more than $1 billion in total
assets at the time of investment and are members of the Federal Reserve System
or are examined by the Comptroller of the Currency or whose deposits are insured
by the Federal Deposit Insurance Corporation; (iii) domestic and foreign U.S.
dollar-denominated commercial paper rated "P-1" by Moody's or "A-1" or "A-1+" by
S&P; and (iv) repurchase agreements with respect to any of the foregoing
portfolio securities. The Fund also has the right to hold up to 100% of its
total assets in cash as the investment adviser deems necessary for temporary
defensive purposes.
Investments of the Fund in U.S. dollar-denominated foreign commercial
paper may involve certain risks not applicable to investment by the Fund in the
obligations of domestic issuers. These risks may include risks of foreign
political or economic instability, difficulties in enforcing a judgment against
a foreign issuer should it default, the imposition or tightening of exchange
controls and changes in foreign governmental attitudes toward private
investment, including the possibility of increased taxation, nationalization or
expropriation of Fund assets. Foreign issuers of securities may also be subject
to different accounting and disclosure systems, which may affect the type and
quality of information available about an issuer. The rating services used by
the Fund take these factors into consideration when assigning a rating to a
particular security, and therefore the additional risk to the Fund of investing
in foreign securities with the same ratings as a domestic security is not
expected to be significant.
The Fund will not invest in any obligations of or loan any of its
portfolio securities to the FUNB or its affiliates as defined in the Investment
Company Act of 1940, as amended (the "1940 Act") or any affiliates of the Fund.
Subject to the limitations described, the Fund is permitted to invest in
obligations of correspondent banks of FUNB (banks with which the FUNB maintains
a special bank servicing relationship) which are not affiliates of the Evergreen
Tax-Free Trust, its investment adviser or its distributor, but the Fund will not
give preference in its investment selections to those obligations.
After purchase by the Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require a sale of such security by the Fund. However, the
investment adviser will consider such event in its determination of whether the
Fund should continue to hold the security. To the extent the ratings given by
Moody's or S&P may change as a result of changes in such organizations of their
rating systems, the Fund will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained in this
Prospectus and in the Statement of Additional Information.
Opinions relating to the validity of Municipal Obligations and to the
exclusion of interest thereon from Federal and Pennsylvania personal income
taxes are rendered by bond counsel to the respective issuers at the
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time of issuance. Neither the Fund, the Evergreen Tax-Free Trust nor the
investment adviser will review the proceedings relating to the issuance of
Municipal Obligations or the basis for such opinions.
Municipal Lease Obligations. Municipal lease obligations are financing
arrangements secured by leases of property to a municipality. These obligations
are considered to be illiquid securities and typically are not fully backed by
the municipality's credit. Interest from a municipal lease obligation may become
taxable if the lease is assigned. If the governmental user does not appropriate
sufficient funds for the following year's lease payments, the lease will
terminate, with the possibility of default on the lease obligations and
significant loss to the Fund. The Fund will not purchase any municipal lease
obligation that is not covered by a legal opinion (typically from the issuer's
counsel) to the effect that, as of the effective date of such lease, the lease
is the valid and binding obligation of the governmental issuer. For a more
detailed description of Municipal Leases, see "Investment Policies -- Municipal
Leases" in the Statement of Additional Information.
Resource Recovery Bonds. Resource recovery bonds may be general obligations of
the issuing municipality or supported by corporate or bank guarantees. The
viability of the resource recovery project, environmental protection regulations
and project operator tax incentives may affect the value and credit quality of
resource recovery bonds.
Variable and Floating Rate Obligations. Certain of the Municipal Obligations
which the Fund may purchase have a floating or variable rate of interest. Such
obligations bear interest at rates which are not fixed, but which vary with
changes in specified market rates or indices, such as a Federal Reserve
composite index. Certain of such obligations may carry a demand feature or put
option which would permit the Fund, as holder, to tender them back to the issuer
or a third party prior to maturity ("demand instruments"). The Fund may invest
in floating and variable rate Municipal Obligations even if they carry stated
maturities in excess of one year. Obligations with a demand feature generally
receive two ratings, one representing an evaluation of the degree of risk
associated with scheduled interest and principal payments and the other
representing an evaluation of the degree of risk associated with the demand
feature. The two highest ratings assigned to the demand feature by Moody's are
"VMIG 1" and "VMIG 2" which have generally the same characteristics as Moody's
"MIG 1" and "MIG 2" ratings. Investments in variable and floating rate
obligations are limited to those that are rated "VMIG" 1 by Moody's or, if not
rated, are, in the opinion of the investment adviser, of comparable investment
quality. The investment adviser will monitor on an ongoing basis the earning
power, cash flow and other liquidity ratios of the issuers of such obligations
and will similarly monitor the ability of an issuer of a demand instrument to
pay principal and interest on demand. The Fund's right to obtain payment at par
on a demand instrument could be affected by events occurring between the date
the Fund elects to demand payment and the date payment is due which may
adversely affect the ability of the issuer of the instrument to make payment
when due.
The Fund does not intend to concentrate its investments in any one
industry. Thus, from time to time, the Fund may invest 25% or more of its assets
in Municipal Obligations which are related in such a way that an economic,
business or political development or change affecting one such Obligation would
also affect the other Obligations; for example, Municipal Obligations, the
interest on which is paid from revenues of similar type projects or Municipal
Obligations whose issuers are located in the same state.
Because the taxable money market is a broader and more liquid market with
a greater number of investors, issuers and market makers than is the market for
short-term tax-exempt municipal obligations, the liquidity of the Fund may not
be equal to that of a money market fund which invests exclusively in short-term
taxable money market instruments. The more limited marketability of short-term
tax-exempt municipal obligations may make it difficult in certain circumstances
to dispose of large investments advantageously. In general, tax-exempt municipal
obligations are also subject to credit risks such as the loss of credit ratings
or possible default. In addition, an issuer of tax-exempt municipal obligations
may lose its tax-exempt status in the event of a change in the current tax laws.
Risk Factors: Investing in Pennsylvania Municipal Obligations. Each investor
should consider carefully the special risks inherent in the Fund's investment in
Pennsylvania Municipal Obligations. Pennsylvania has been historically
identified as a heavy industry state although that reputation has recently
changed as the industrial composition of Pennsylvania diversified when the coal,
steel, and railroad industries began to decline. This diversification was
necessary when the traditionally strong industries in Pennsylvania declined as a
long-term shift in jobs, investment and workers away from the northeast part of
the nation took place. The major new sources of growth are in the service
sector, including trade, medical and health services, education and financial
institutions. Pennsylvania is highly urbanized, with approximately 50% of the
Commonwealth's population contained in the metropolitan areas which include the
cities of Philadelphia and Pittsburgh.
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It should be noted that Pennsylvania Municipal Obligations may be
adversely affected by local political and economic conditions and developments
within Pennsylvania. For example, adverse conditions in a significant industry
within Pennsylvania may from time to time have a correspondingly adverse effect
on specific issuers within Pennsylvania or on anticipated revenue to the
Commonwealth itself; conversely, an improving economic outlook for a significant
industry may have a positive effect on such issuers or revenues. An expanded
discussion of the risks associated with the purchase of Pennsylvania issues is
contained in the Statement of Additional Information.
Investment Company Securities. The Fund may invest in securities issued by other
investment companies. Such securities will be acquired by Fund within the limits
prescribed by the 1940 Act, which include a prohibition against the Fund
investing more than 10% of the value of its total assets in such securities.
Investments in securities issued by other investment companies will subject
shareholders to the imposition of duplicative fees and expenses.
The Fund may engage in the following portfolio transactions:
Loans of Portfolio Securities. The Fund may loan its portfolio securities to
brokers, dealers, and financial institutions to increase current income. All
loans of securities must be continuously secured by collateral consisting of
United States government securities, cash or letters of credit maintained on a
daily mark-to-market basis in an amount at least equal to the current market
value of the securities loaned plus the interest payable with respect to the
loan.
As a condition of the loan, the Fund must have the right to call the loan
and obtain the return of the securities loaned within five business days.
Moreover, the Fund will receive any interest or dividends paid on the loaned
securities. The Fund will not lend portfolio securities to FUNB, or to any
affiliate of the FUNB or to any other affiliate of the Fund. Loans of securities
involve a risk that the borrower may fail to return the securities or may fail
to provide additional collateral.
Repurchase Agreements. Securities held by the Fund may be subject to repurchase
agreements. A repurchase agreement is a transaction in which the seller of a
security commits itself at the time of the sale to repurchase that security from
the buyer at a mutually agreed upon time and price. The Fund will enter into
repurchase agreements only with dealers, domestic banks or recognized financial
institutions which, in the opinion of the investment adviser, present minimal
credit risks. The Fund will enter into repurchase agreements only with respect
to obligations which could otherwise be purchased by the Fund or any other
obligations backed by the full faith and credit of the United States. Where the
securities underlying a repurchase agreement are not U.S. government securities,
they must be of the highest quality at the time the repurchase agreement is
entered into (e.g., a long-term debt security would be required to be rated by
S&P as "AAA" or its equivalent). While the maturity of the underlying securities
in a repurchase agreement transaction may be more than one year, the term of the
repurchase agreement is always less than one year. The maturities of the
underlying securities will have to be taken into account in calculating the
Fund's dollar weighted average portfolio maturity if the seller of the
repurchase agreement fails to perform under such agreement. In the event of
default by the seller under the repurchase agreement, the Fund may experience a
loss of income from the loaned securities and a decrease in the value of any
collateral maintained, problems in exercising its rights to the underlying
securities and costs and time delays in connection with the disposition of such
securities. The Fund will invest no more than 10% of its net assets in
repurchase agreements maturing in more than seven days and other illiquid
investments.
INVESTMENT PRACTICES AND RESTRICTIONS
The investment objective of the Fund and its policy of investing at least
80% of its net assets in Municipal Obligations are fundamental policies and
except for policies with respect to repurchase agreements and securities with
put rights, which are also fundamental policies of the Fund and subject to the
investment restrictions set forth below, the Fund's investment policies and the
investment adviser's discretion to make use of a particular investment technique
or activity are not fundamental and may be changed by the Board of Trustees of
the Trust without the approval of shareholders.
The Fund may not: (1) borrow money or pledge or mortgage its assets,
except that the Fund may borrow from banks up to 10% of the current value of its
total net assets for temporary purposes only in order to meet redemptions, and
those borrowings may be secured by the pledge of not more than 10% of the
current value of its total net assets (but investments may not be purchased by
the Fund while any such borrowings exist); (2) make loans, except loans of
portfolio securities having a value of not more than 10% of the Fund's current
assets and except that the Fund may purchase a portion of an issue of publicly
distributed bonds, debentures or other obligations, make deposits with banks and
enter into repurchase agreements with respect to its portfolio securities;
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or (3) invest an amount equal to 10% or more of the current value of the Fund's
net assets in illiquid securities, including those securities which do not have
readily available market quotations and repurchase agreements having maturities
of more than seven calendar days. Investments in restricted securities eligible
for resale pursuant to Rule 144A of the Securities Act of 1933 which have been
determined to be liquid by the Board of Trustees based upon the trading markets
for the securities will not be included for purposes of this limitation.
However, investing in Rule 144A securities could have the effect of increasing
the level of fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing such securities. The foregoing
investment restrictions and those described in the Statement of Additional
Information are fundamental policies which may be changed only when permitted by
law and approved by the holders of a majority of the outstanding voting
securities of the Fund, as described under "Other Information" in the Statement
of Additional Information.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER
The management of the Fund is supervised by the Trustees of Evergreen
Tax-Free Trust. The Capital Management Group of First Union National Bank of
North Carolina ("CMG") serves as investment adviser to the Fund. First Union
National Bank of North Carolina ("FUNB") is a subsidiary of First Union
Corporation ("First Union"), the sixth largest bank holding company in the
United States. First Union is headquartered in Charlotte, North Carolina, and
had $96.7 billion in consolidated assets as of December 31, 1995. First Union
and its subsidiaries provide a broad range of financial services to individuals
and businesses throughout the United States. The Capital Management Group of
FUNB manages or otherwise oversees the investment of over $5.3 billion in assets
belonging to a wide range of clients, including the fifteen series of Evergreen
Investment Trust (formerly known as First Union Funds). First Union Brokerage
Services, Inc., a wholly-owned subsidiary of FUNB, is a registered broker-dealer
that is principally engaged in providing retail brokerage services consistent
with its federal banking authorizations. First Union Capital Markets Corp., a
wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services. Prior to January 1, 1996, First Fidelity Bank, N.A. ("First Fidelity")
served as investment adviser to the Fund. CMG succeeded to the mutual funds
advisory business of First Fidelity in connection with the acquisition of First
Fidelity Bancorporation by a subsidiary of First Union.
CMG manages investments and supervises the daily business affairs of the
Fund and, as compensation therefor, is entitled to receive an annual fee equal
to .40 of 1% of the average daily net assets of the Fund up to $500 million, .36
of 1% of the next $500 million of assets, .32 of 1% of assets in excess of $1
billion but not exceeding $1.5 billion, and .28 of 1% of assets in excess of
$1.5 billion. The total annualized operating expenses of the Fund for its most
recent fiscal period are set forth in the section entitled "Financial
Highlights". Evergreen Asset Management Corp. ("Evergreen Asset"), a subsidiary
of FUNB, serves as administrator to the Fund and is entitled to receive a fee
based on the average daily net assets of the Fund at a rate based on the total
assets of the mutual funds administered by Evergreen Asset for which CMG or
Evergreen Asset also serve as investment adviser, calculated in accordance with
the following schedule: .050% of the first $7 billion; .035% on the next $3
billion; .030% on the next $5 billion; .020% on the next $10 billion; .015% on
the next $5 billion; and .010% on assets in excess of $30 billion. Furman Selz
Incorporated, an affiliate of Evergreen Funds Distributor, Inc., distributor for
the Evergreen group of mutual funds, serves as sub-administrator for the Fund
and is entitled to receive a fee from the Fund calculated on the average daily
net assets of the Fund at a rate based on the total assets of the mutual funds
administered by Evergreen Asset for which CMG or Evergreen Asset also serve as
investment adviser, calculated in accordance with the following schedule: .0100%
of the first $7 billion; .0075% on the next $3 billion; .0050% on the next $15
billion; and .0040% on assets in excess of $25 billion. The total assets of the
mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset
serve as investment adviser were approximately $10.4 billion as of December 31,
1995.
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
Eligible investors may purchase Fund shares at net asset value by mail or
wire as described below. The Fund imposes no sales charges on Class Y shares.
Class Y shares are the only class of shares offered by this
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Prospectus and are only available to (i) persons who at or prior to December 30,
1994, owned shares in a mutual fund advised by Evergreen Asset, (ii) certain
institutional investors and (iii) investment advisory clients of CMG, Evergreen
Asset or their affiliates. The minimum initial investment is $1,000, which may
be waived in certain situations. There is no minimum for subsequent investments.
Investors may make subsequent investments by establishing a Systematic
Investment Plan or a Telephone Investment Plan.
Purchases by Mail or Wire. Each investor must complete the Share Purchase
Application and mail it, together with a check made payable to the Fund whose
shares are being purchased, to State Street Bank and Trust Company ("State
Street") at P.O. Box 9021, Boston, Massachusetts 02205-9827. Checks not drawn on
U.S. banks will be subject to foreign collection which will delay an investor's
investment date and will be subject to processing fees.
When making subsequent investments, an investor should either enclose the
return remittance portion of the statement, or indicate on the face of the
check, the name of the Fund in which an investment is to be made, the exact
title of the account, the address, and the Fund account number. Purchase
requests should not be sent to a Fund in New York. If they are, the Fund must
forward them to State Street, and the request will not be effective until State
Street receives them.
Initial investments may also be made by wire by (i) calling State Street
at (800) 423-2615 for an account number and (ii) instructing your bank, which
may charge a fee, to wire federal funds to State Street, as follows: State
Street Bank and Trust Company, ABA No.0110-0002-8, Attn: Custodian and
Shareholder Services. The wire must include references to the Fund in which an
investment is being made, account registration, and the account number. A
completed Application must also be sent to State Street indicating that the
shares have been purchased by wire, giving the date the wire was sent and
referencing the account number. Subsequent wire investments may be made by
existing shareholders by following the instructions outlined above. It is not
necessary, however, for existing shareholders to call for another account
number.
How the Fund Values Its Shares. The net asset value of the Fund's shares for
purposes of both purchases and redemptions is determined twice daily, at 12 noon
(Eastern time) and promptly after the regular close of the New York Stock
Exchange (currently 4:00 p.m. Eastern time) each business day (i.e., any weekday
exclusive of days on which the New York Stock Exchange (the "Exchange") or State
Street is closed). The Exchange is closed on New Year's Day, Presidents Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The net asset value per share is calculated by taking the sum of
the values of a Fund's investments and any cash and other assets, subtracting
liabilities, and dividing by the total number of shares outstanding. All
expenses, including the fees payable to the Fund's Investment adviser, are
accrued daily. The securities in the Fund's portfolio are valued on an amortized
cost basis. Under this method of valuation, a security is initially valued at
its acquisition cost, and thereafter, a constant straight-line amortization of
any discount or premium is assumed each day regardless of the impact of
fluctuating interest rates on the market value of the security. The market value
of the obligations in the Fund's portfolio can be expected to vary inversely to
changes in prevailing interest rates. As a result, the market value of the
obligations in the Fund's portfolio may vary from the value determined using the
amortized cost method. Securities which are not rated are normally valued on the
basis of valuations provided by a pricing service when such prices are believed
to reflect the fair value of such securities. Other assets and securities for
which no quotations are readily available are valued at the fair value as
determined in good faith by the Trustees.
The Fund attempts to maintain its net asset value at $1.00 per share.
Under most conditions, management believes this will be possible, although there
can be no assurance that this will be achieved. Calculations are periodically
made to compare the value of a Fund's portfolio valued at amortized cost with
market values. If a deviation of 1/2 of 1% or more were to occur between the net
asset value calculated by reference to market values and a Fund's $1.00 per
share net asset value, or if there were other deviations which the Trustees
believed would result in a material dilution to shareholders or purchasers, the
Trustees would promptly consider what action, if any, should be initiated.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss the Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, the Fund may redeem
shares from his or her account to reimburse the Fund or the Fund's investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen mutual funds.
Shares of the Fund are sold at the net asset value per share next
determined after a shareholder's investment has been converted to federal funds.
Investments by federal funds wire will be effective upon receipt.
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Qualified institutions may telephone orders for the purchase of Fund shares.
Shares purchased by institutions via telephone will receive the dividend
declared on that day if the telephone order is placed by 12 noon (Eastern time),
and federal funds are received the same day by 4:00 p.m. (Eastern time).
Institutions should telephone the Fund at the number on the front page of this
Prospectus for additional information on same day purchases by telephone.
Investment checks received at State Street will be invested on the date of
receipt. Shareholders will begin earning dividends the following business day.
The Fund cannot accept investments specifying a certain price or date and
reserves the right to reject any specific purchase order. Including orders in
connection with exchanges from the other Evergreen mutual funds. Although not
currently anticipated, the Fund reserves the right to suspend the offer of
shares for a period of time.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in the Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value next calculated
after the Fund receives your request in proper form. Proceeds generally will be
sent to you within seven days. However, for shares recently purchased by check,
the Fund will not send proceeds until it is reasonably satisfied that the check
has been collected (which may take up to ten days). Once a redemption request
has been telephoned or mailed, it is irrevocable and may not be modified or
cancelled.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street which is the registrar, transfer
agent and dividend-disbursing agent for the Fund. Stock power forms are
available from your financial intermediary, State Street, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, financial intermediaries, fiduciaries and surviving joint owners.
Signature guarantees are required for all redemption requests for shares with a
value of more than $10,000 or where the redemption proceeds are to be mailed to
an address other than that shown in the account registration. A signature
guarantee must be provided by a bank or trust company (not a Notary Public), a
member firm of a domestic stock exchange or by other financial institutions
whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling State Street at (800) 423-2615 between the hours of 8:00 a.m. to 5:30
p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on
which the Exchange or State Street's offices are closed). The Exchange is closed
on New Year's Day, Presidents Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Redemption requests made after
4:00 p.m. (Eastern time) will be processed using the net asset value determined
on the next business day. Such redemption requests must include the
shareholder's account name, as registered with the Fund, and the account number.
During periods of drastic economic or market changes, shareholders may
experience difficulty in effecting telephone redemptions. Shareholders who are
unable to reach the Fund or State Street by telephone should follow the
procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in
the Fund at a designated commercial bank. State Street currently deducts a $5.00
wire charge from all redemption proceeds wired. This charge is subject to change
without notice. Redemption proceeds will be wired on the same day if the request
is made prior to 12 noon (Eastern time). Such shares, however, will not earn
dividends for that day. Redemption requests received after 12 noon will earn
dividends for that day, and the proceeds will be wired on the following business
day. A shareholder who decides later to use this service, or to change
instructions already given, should fill out a Shareholder Services Form and send
it to State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827, with such shareholder's signature guaranteed by a bank or trust
company (not a Notary Public), a member firm of a domestic stock exchange or by
other financial institutions whose guarantees are acceptable to State Street.
Shareholders should allow approximately ten days for such form to be processed.
The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. These procedures include requiring some
form of personal identification prior to acting upon instructions and tape
recording of telephone instructions. If the Fund fails to follow such
procedures, it may be liable for any losses due to unauthorized or fraudulent
instructions. The Funds will not be liable for following telephone instructions
reasonably believed to be genuine. The Fund reserves the right to refuse a
telephone redemption if it is believed advisable to do so. Financial
intermediaries may
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charge a fee for handling telephonic requests. Procedures for redeeming Fund
shares by telephone may be modified or terminated without notice at any time.
Redemptions by Check. Upon request, the Fund will provide holders of Class Y
shares, without charge, with checks drawn on the Fund that will clear through
State Street. Shareholders will be subject to State Street's rules and
regulations governing such checking accounts. Checks will be sent usually within
ten business days following the date the account is established. Checks may be
made payable to the order of any payee in an amount of $250 or more. The payee
of the check may cash or deposit it like a check drawn on a bank. (Investors
should be aware that, as in the case with regular bank checks, certain banks may
not provide cash at the time of deposit, but will wait until they have received
payment from State Street.) When such a check is presented to State Street for
payment, State Street, as the shareholder's agent, causes the Fund to redeem a
sufficient number of full and fractional shares in the shareholder's account to
cover the amount of the check. Checks will be returned by State Street if there
are insufficient or uncollectable shares to meet the withdrawal amount. The
check writing procedure for withdrawal enables shareholders to continue earning
income on the shares to be redeemed up to but not including the date the
redemption check is presented to State Street for payment.
Shareholders wishing to use this method of redemption, should fill out
the appropriate part of the Share Purchase Application (including the Signature
Card) and mail the completed form to State Street Bank and Trust Company, P.O.
Box 9021, Boston, Massachusetts 02205-9827. Shareholders requesting this service
after an account has been opened must contact State Street since additional
documentation will be required. Currently, there is no charge either for checks
or for the clearance of any checks. This service may be terminated or altered at
any time.
General. Under unusual circumstances, the Fund may suspend redemptions or
postpone payment for up to seven days or longer, as permitted by Federal
securities law. The Fund reserves the right to close an account that through
redemption has remained below $1,000 for thirty days. Shareholders will receive
sixty days' written notice to increase the account value before the account is
closed. The Fund has elected to be governed by Rule 18f-1 under the 1940 Act
pursuant to which the Fund is obligated to redeem shares solely in cash, up to
the lesser of $250,000 or 1% of a Fund's total net assets during any ninety day
period for any one shareholder. See the Statement of Additional Information for
further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class of the other Evergreen mutual funds by telephone or mail as
described below. An exchange which represents an initial investment in another
Evergreen mutual fund must amount to at least $1,000. Once an exchange request
has been telephoned or mailed, it is irrevocable and may not be modified or
canceled. Exchanges will be made on the basis of the relative net asset values
of the shares exchanged next determined after an exchange request is received.
Exchanges are subject to minimum investment and suitability requirements.
Each of the Evergreen mutual funds has different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. The Fund imposes a
fee of $5 per exchange on shareholders who exchange in excess of four times per
calendar year. This exchange privilege may be materially modified or
discontinued at any time by the Fund upon sixty days' notice to shareholders and
is only available in states in which shares of the fund being acquired may
lawfully be sold.
Exchanges by Telephone and Mail. You may exchange shares by telephone by calling
State Street at (800) 423-2615. Exchange requests made after 4:00 p.m. (Eastern
time) will be processed using the net asset value determined on the next
business day. During periods of drastic economic or market changes, shareholders
may experience difficulty in effecting telephone exchanges. You should follow
the procedures outlined below for exchanges by mail if you are unable to reach
State Street by telephone. If you wish to use the telephone exchange service you
should indicate this on the Share Purchase Application. As noted above, each
Fund will employ reasonable procedures to confirm that instructions for the
redemption or exchange of shares communicated by telephone are genuine. A
telephone exchange may be refused by the Fund or State Street if it is believed
advisable to do so. Procedures for exchanging Fund shares by telephone may be
modified or terminated at any time. Written requests for exchanges should follow
the same procedures outlined for written redemption requests in the section
entitled "How to Redeem Shares", however, no signature guarantee is required.
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SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more information
about these services or your account, contact your financial intermediary,
Evergreen Funds Distributor, Inc. ("EFD"), the distributor of the Funds' shares,
or the number on the front page of this Prospectus. Some services are described
in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $50 per month or
$75 per quarter.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $25,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account two business days after the request
is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $75. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gain
distributions reinvested automatically.
Tax Sheltered Retirement Plans. Eligible investors may open a pension and profit
sharing account in any Evergreen mutual fund (except those funds having an
objective of providing tax free income) under the following prototype retirement
plans: (i) Individual Retirement Accounts ("IRAs") and Rollover IRAs; (ii)
Simplified Employee Pension (SEP) for sole proprietors, partnerships and
corporations; and (iii) Profit-Sharing and Money Purchase Pension Plans for
corporations and their employees.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the last
business day of each month, unless otherwise requested by a shareholder in
writing. If the transfer agent does not receive a written request for subsequent
dividends and/or distributions to be paid in cash at least three full business
days prior to a given record date, the dividends and/or distributions to be paid
to a shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Fund. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG being prevented from continuing to
perform the services required under the investment advisory contract or from
acting as agent in connection with the purchase of shares of the Fund by its
customers. If CMG was prevented from continuing to provide the services called
for under the investment advisory agreement, it is expected that the Trustees
would identify, and call upon the Fund's shareholders to approve, a new
investment adviser. If this were to occur, it is not anticipated that the
shareholders of the Fund would suffer any adverse financial consequences.
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OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund declares substantially all of its net income as dividends on
each business day. Such dividends are paid monthly. Net income, for dividend
purposes, includes accrued interest and any market discount or premium that day,
less the estimated expenses of the Fund. Gains or losses realized upon the sale
of portfolio securities are not included in net income, but are reflected in the
net asset value of the Fund's shares. Distributions of any net realized capital
gains will be made annually or more frequently as required by the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"). The amount of
dividends may fluctuate from day to day, and the dividend may be omitted on a
day where Fund expenses exceed net investment income. Dividends and
distributions generally are taxable in the year in which they are paid, except
any dividends paid in January that were declared in the previous calendar
quarter may be treated as paid in the immediately preceding December.
Such dividends will be automatically reinvested in full and fractional
shares of the Fund on the last business day of each month. However, shareholders
who so inform the transfer agent in writing may have their dividends paid out in
cash monthly. Shareholders who invest by check will be credited with a dividend
on the business day following initial investment. Shareholders will receive
dividends on investments made by federal funds bank wire the same day the wire
is received provided that wire purchases are received by State Street by 12 noon
(Eastern time). Shares purchased by qualified institutions via telephone as
described in "How to Purchase Shares" will receive the dividend declared on that
day if the telephone order is placed by 12 noon (Eastern time), and federal
funds are received by 4:00 p.m. (Eastern time). All other wire purchases
received after 12 noon (Eastern time) will earn dividends beginning the
following business day. Dividends accruing on the day of redemption will be paid
to redeeming shareholders except for redemptions by check and where proceeds are
wired the same day. (See "How to Redeem Shares".)
The Fund has qualified and intends to continue to qualify to be treated
as a regulated investment company under the Code. While so qualified, it is
expected that the Fund will not be required to pay any Federal income taxes on
that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. The excise tax generally does not apply to the tax exempt income
of a regulated investment company that pays exempt interest dividends.
The Fund will designate and pay exempt-interest dividends derived from
interest earned on qualifying tax exempt obligations. Such exempt-interest
dividends may be excluded by shareholders of the Fund from their gross income
for Federal income tax purposes, however, (1) all or a portion of such
exempt-interest dividends may be a specific preference item for purposes of the
Federal individual and corporate alternative minimum taxes to the extent that
they are derived from certain types of private activity bonds issued after
August 7, 1986, and (2) all exempt-interest dividends will be a component of
"adjusted current earnings" for purposes of the Federal corporate alternative
minimum tax. Dividends paid from taxable income, if any, and distributions of
any net realized short-term capital gains (whether from tax exempt or taxable
obligations) are taxable as ordinary income, even though received in additional
Fund shares. Market discount recognized on taxable and tax-free bonds is taxable
as ordinary income, not as excludable income.
Following the end of each calendar year, every shareholder of the Fund
will be sent applicable tax information and information regarding the dividends
and capital gain distributions made during the calendar year. Under current law,
the highest Federal income tax rate applicable to net long-term capital gains
realized by individuals is 28%. The rate applicable to corporations is 35%.
Since the Fund's gross income is ordinarily expected to be interest income, it
is not expected that the 70% dividends-received deduction for corporations will
be applicable. Specific questions should be addressed to the investor's own tax
adviser.
The Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions, if any, and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that the investor's social security
or taxpayer identification number is correct and that the investor is not
currently subject to backup withholding or is exempt from backup withholding.
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GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, the Fund may consider sales of its shares as a factor in
the selection of dealers to enter into portfolio transactions with the Fund.
Organization. The Fund is a separate investment series of Evergreen Tax Free
Trust, as Massachusetts business trust organized in 1985. The Fund does not
intend to hold annual shareholder meetings; shareholder meetings will be held
only when required by applicable law. Shareholders have available certain
procedures for the removal of Trustees.
A shareholder in each class of the Fund will be entitled to his or her
share of all dividends and distributions from the Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
The Trust is empowered to establish, without shareholder approval, additional
investment series, which may have different investment objectives, and
additional classes of shares for any existing or future series. If an additional
series or class were established in the Fund, each share of the series or class
would normally be entitled to one vote for all purposes. Generally, shares of
each series and class would vote together as a single class on matters, such as
the election of Trustees, that affect each series and class in substantially the
same manner. Class A and Y shares have identical voting, dividend, liquidation
and other rights, except that each class bears, to the extent applicable, its
own distribution and transfer agency expenses as well as any other expenses
applicable only to a specific class. Each class of shares votes separately with
respect to Rule 12b-1 distribution plans and other matters for which separate
class voting is appropriate under applicable law. Shares are entitled to
dividends as determined by the Trustees and, in liquidation of the Fund, are
entitled to receive the net assets of the Fund.
Custodian, Registrar, Transfer Agent And Dividend-Disbursing Agent. State Street
Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as
the Fund's custodian, registrar, transfer agent and dividend-disbursing agent
for a fee based upon the number of shareholder accounts maintained for the
Funds.
Principal Underwriter. EFD, an affiliate of Furman Selz LLC, located 230 Park
Avenue, New York, New York 10169, is the principal underwriter of the Fund.
Furman Selz LLC also acts as sub-administrator to the Fund.
Other Classes of Shares. ??????? offers two classes of shares, Class A and Class
Y. Class Y shares are the only Class offered by this Prospectus and are only
available to (i) persons who at or prior to December 31, 1994, owned shares in a
mutual fund advised by Evergreen Asset, (ii) certain institutional investors and
(iii) investment advisory clients of CMG, Evergreen Asset or their affiliates.
The dividends payable with respect to Class A shares will be less than those
payable with respect to Class Y shares due to the distribution and distribution
and shareholder servicing related expenses borne by Class A shares and the fact
that such expenses are not borne by Class Y shares.
Performance Information. From time to time, the Fund may quote its yield in
advertisements or in reports to shareholders. Yield information may be useful in
reviewing the performance of the Fund and for providing a basis for comparison
with other investment alternatives. However, since net investment income of the
Fund changes in response to fluctuations in interest rates and Fund expenses,
any given yield quotation should not be considered representative of a Fund's
yields for any future period.
The method of calculating the Fund's yield is set forth in the Statement
of Additional Information. Before investing in the Fund, the investor may want
to determine which investment -- tax-free or taxable -- will result in a
higher after-tax return. To do this, the yield on the tax-free investment should
be divided by the decimal determined by subtracting from 1 the highest Federal
tax rate to which the investor currently is subject. For example, if the
tax-free yield is 6% and the investor's maximum tax bracket is 36%, the
computation is: 6% Tax-Free Yield /(1 - .36 Tax Rate) = 6/.64 = 9.38% Taxable
Yield. In this example, the investor's after-tax return will be higher from the
6% tax-free investment if available taxable yields are below 9.38%. Conversely,
the taxable investment will provide a higher return when taxable yields exceed
9.38%. This is only an example and is not necessarily reflective of the Fund's
yield. The tax equivalent yield will be lower for investors in the lower income
brackets.
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Comparative performance information may also be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., IBC/Donoghue's Money Fund Report, Bank Rate Monitor
and other industry publications.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declaration of Trust under which the
Fund operates provides that no trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statement filed by the Trust
with the Securities and Exchange Commission ("SEC") under the Securities Act.
Copies of the Registration Statements may be obtained at a reasonable charge
from the SEC or may be examined, without charge, at the offices of the SEC in
Washington, D.C.
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INVESTMENT ADVISER
Capital Management Group of First Union National Bank of North Carolina, 201
South College Street, Charlotte, North Carolina 28288
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036
INDEPENDENT AUDITORS
KPMG Peat Marwick, LLP One Mellon Bank Center Pittsburgh, Pennsylvania 15219
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 230 Park Avenue, New York, New York 10169
537680
