EVERGREEN STATE SPECIFIC TAX-FREE FUNDS June 28, 1996
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
SUPPLEMENT TO PROSPECTUS DATED JANUARY 22, 1996
Class A Shares -- Class B Shares. The Annual Operating Expenses table
(and accompanying notes) on page 3 of the EVERGREEN NEW JERSEY TAX-FREE INCOME
FUND'S Class A and Class B Prospectus dated January 22, 1996, and the table
giving examples of the annual expenses to be borne by the Fund's Class A and
Class B shareholders, have been updated as of the Fund's fiscal year ended
February 29, 1996, as follows:
<TABLE>
<CAPTION>
EXAMPLES
ASSUMING ASSUMING
ANNUAL OPERATING REDEMPTION NO
EXPENSES* AT END OF PERIOD REDEMPTION
CLASS A CLASS B CLASS A CLASS B CLASS B
<S> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50%
After 1 Year $ 59 $ 69 $ 19
12b-1 Fees** .25% .75%
After 3 Years $ 83 $ 90 $ 60
Shareholder Service Fees -- .25%
After 5 Years $ 108 $ 123 $103
Other Expenses .41% .41%
After 10 Years $ 182 $ 195 $195
Total 1.16% 1.91%
</TABLE>
* THE ESTIMATED ANNUAL OPERATING EXPENSES AND EXAMPLES DO NOT REFLECT FEE
WAIVERS AND EXPENSE REIMBURSEMENTS FOR THE MOST RECENT FISCAL PERIOD. ACTUAL
EXPENSES FOR CLASS A AND CLASS B SHARES, NET OF FEE WAIVERS AND EXPENSE
REIMBURSEMENTS FOR THE FISCAL PERIOD ENDED FEBRUARY 29, 1996, WERE .36% AND
.31%, RESPECTIVELY.
** CLASS A SHARES CAN PAY UP TO .75 OF 1% OF AVERAGE NET ASSETS AS A 12B-1 FEE.
FOR THE FORESEEABLE FUTURE, THE CLASS A SHARES 12B-1 FEES WILL BE LIMITED TO
.25 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 each Class of
Shares of the Fund will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of the Fund for its most recent fiscal period. Such expenses have been restated
to reflect current fee arrangements and in the case of Funds that did not offer
all of the above referenced Classes of shares during all or part of such
periods, the amounts set forth in the tables are based on the expenses incurred
by the Classes which were offered. THE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND
ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete
description of the various costs and expenses borne by the Fund see "Management
of Funds". As a result of asset-based sales charges, long-term shareholders may
pay more than the economic equivalent of the maximum front-end sales charges
permitted under the rules of the National Association of Securities Dealers,
Inc.
The tables beginning on page 8 of the Prospectus dated January 22, 1996,
presenting financial highlights of the EVERGREEN NEW JERSEY TAX-FREE INCOME
FUND, have been amended as follows to include audited financial information for
each Class of shares for the fiscal year ended February 29, 1996.
Class A/B -- P. 1
<PAGE>
FINANCIAL HIGHLIGHTS
The information in the tables for EVERGREEN NEW JERSEY TAX-FREE INCOME
FUND for each of the years in the three-year period ended February 29, 1996, has
been audited by KPMG Peat Marwick LLP, the Fund's current independent auditors.
The information in the tables for the Fund for each of the periods from July 16,
1991 (commencement of operations) through February 28, 1993, has been audited by
Price Waterhouse LLP, the Fund's prior independent auditors. A report of KPMG
Peat Marwick LLP 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.
<TABLE>
<CAPTION>
CLASS A SHARES
JULY 16, 1991
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1996 1995 1994 1993 1992*
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........... $ 10.53 $ 10.99 $ 11.01 $ 10.22 $ 10.00
Income (loss) from investment operations:
Net investment income........................ .56 .57 .60 .63 .38
Net realized and unrealized gain (loss) on
investments................................ .48 (.46) (.02) .79 .22
Total from investment operations........... 1.04 .11 .58 1.42 .60
Less distributions to shareholders from net
investment income............................ (.56) (.57) (.60) (.63) (.38)
Net asset value, end of period................. $ 11.01 $ 10.53 $ 10.99 $ 11.01 $ 10.22
TOTAL RETURN+.................................. 10.1% 1.4% 5.3% 14.5% 9.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)...... $ 41,762 $ 34,852 $ 42,783 $ 30,863 $ 13,129
Ratios to average net assets:
Expenses..................................... .36%** .25%** .14%** .00%** .01%++**
Net investment income........................ 5.15%** 5.52%** 5.31%** 5.97%** 5.89%++**
Portfolio turnover rate........................ 4% 8% 2% 5% 5%
</TABLE>
* COMMENCEMENT OF CLASS OPERATIONS.
+ TOTAL RETURN IS CALCULATED ON NET ASSET VALUE PER SHARE FOR THE PERIODS
INDICATED AND IS NOT ANNUALIZED. INITIAL SALES CHARGE IS NOT REFLECTED.
++ ANNUALIZED.
** NET OF EXPENSE WAIVERS AND REIMBURSEMENTS. IF THE FUND HAD BORNE ALL
EXPENSES THAT WERE REIMBURSED OR WAIVED BY THE INVESTMENT ADVISER, THE
ANNUALIZED RATIOS OF EXPENSES AND NET INVESTMENT INCOME TO AVERAGE NET
ASSETS WOULD HAVE BEEN THE FOLLOWING:
<TABLE>
<CAPTION>
CLASS A SHARES
JULY 16, 1991
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1996 1995 1994 1993 1992*
<S> <C> <C> <C> <C> <C>
Expenses....................................... 1.03% 1.04% 1.05% 1.16% 1.20%
Net investment income.......................... 4.48% 4.73% 4.40% 4.81% 4.70%
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
Class A/B -- P. 2
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
JANUARY 30, 1996* FEBRUARY 8, 1996*
THROUGH THROUGH
FEBRUARY 29, 1996 FEBRUARY 29, 1996
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................................................. $11.08 $11.14
Income (loss) from investment operations:
Net investment income.............................................................. .05 .03
Net realized and unrealized gain (loss) on investments............................. (.07) (.13)
Total loss from investment operations............................................ (.02) (.10)
Less distributions to shareholders from net investment income........................ (.05) (.03)
Net asset value, end of period....................................................... $11.01 $11.01
TOTAL RETURN+........................................................................ (.2%) (.9%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............................................ $186 $18
Ratios to average net assets:
Expenses**......................................................................... .31%++ .31%++
Net investment income**............................................................ 5.23%++ 5.28%++
Portfolio turnover rate.............................................................. 4% 4%
</TABLE>
* COMMENCEMENT OF CLASS OPERATIONS.
+ TOTAL RETURN IS CALCULATED ON NET ASSET VALUE PER SHARE FOR THE PERIODS
INDICATED AND IS NOT ANNUALIZED. CONTINGENT DEFERRED SALES CHARGES ARE NOT
REFLECTED.
++ ANNUALIZED.
** NET OF EXPENSE WAIVERS AND REIMBURSEMENTS. IF THE FUND HAD BORNE ALL
EXPENSES THAT WERE REIMBURSED OR WAIVED BY THE INVESTMENT ADVISER, THE
ANNUALIZED RATIOS OF EXPENSES AND NET INVESTMENT INCOME TO AVERAGE NET
ASSETS WOULD HAVE BEEN THE FOLLOWING:
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
JANUARY 30, 1996* FEBRUARY 8, 1996*
THROUGH THROUGH
FEBRUARY 29, 1996 FEBRUARY 29, 1996
<S> <C> <C>
Expenses............................................................................. 1.66% .88%
Net investment income................................................................ 3.88% 4.71%
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
******************************************************************************
<PAGE>
PROSPECTUS January 22, 1996
EVERGREEN(SM) STATE SPECIFIC TAX-FREE FUNDS (Evergreen Tree Logo)
EVERGREEN FLORIDA MUNICIPAL BOND FUND
EVERGREEN GEORGIA MUNICIPAL BOND FUND
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
CLASS A SHARES
CLASS B SHARES
The Evergreen State Specific Tax-Free Funds (the "Funds") are
designed to provide investors with current income exempt from Federal
income tax and certain state income tax. This Prospectus provides
information regarding the Class A and Class B shares offered by the Funds.
Each Fund is, or is a series of, an open-end, non-diversified, management
investment company except for EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND
FUND which is diversified. This Prospectus sets forth concise information
about the Funds that a prospective investor should know before investing.
The address of the Funds is 2500 Westchester Avenue, Purchase, New York
10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen group of mutual funds dated January 22, 1996
has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus
and other matters which may be of interest to investors, and may be
obtained without charge by calling the Funds at (800) 807-2940. There can
be no assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, ARE NOT INSURED OR
OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE INVESTMENT RISKS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND WILL INVEST AT LEAST 65%
OF THE VALUE OF ITS TOTAL ASSETS IN MUNICIPAL SECURITIES CONSISTING OF HIGH
YIELD (I.E., HIGH RISK), MEDIUM, LOWER RATED AND UNRATED BONDS. SUCH
SECURITIES ARE COMMONLY CALLED JUNK BONDS AND ARE SUBJECT TO GREATER MARKET
FLUCTUATIONS AND RISK OF LOSS OF INCOME AND PRINCIPAL THAN HIGHER RATED
SECURITIES. LOWER QUALITY SECURITIES INVOLVE A GREATER RISK OF DEFAULT AND,
CONSEQUENTLY, SHARES OF THE EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND
FUND ARE SPECULATIVE SECURITIES.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 6
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 13
Investment Practices and Restrictions 16
MANAGEMENT OF THE FUNDS
Investment Adviser 21
Distribution Plans and Agreements 22
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 24
How to Redeem Shares 26
Exchange Privilege 27
Shareholder Services 27
Effect of Banking Laws 28
OTHER INFORMATION
Dividends, Distributions and Taxes 28
General Information 30
APPENDIX
Florida Risk Considerations 32
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Capital Management Group of First Union National Bank of North
Carolina ("CMG") serves as investment adviser to Evergreen State Specific
Tax-Free Funds which include: EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN
GEORGIA MUNICIPAL BOND FUND, EVERGREEN NEW JERSEY TAX-FREE INCOME FUND,
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL
BOND FUND, EVERGREEN VIRGINIA MUNICIPAL BOND FUND and EVERGREEN FLORIDA HIGH
INCOME MUNICIPAL BOND FUND. First Union National Bank of North Carolina ("FUNB")
is a subsidiary of First Union Corporation, the sixth largest bank holding
company in the United States.
EVERGREEN FLORIDA MUNICIPAL BOND FUND (formerly First Union Florida
Municipal Bond Portfolio, successor to ABT Florida Tax-Free Fund) seeks current
income exempt from federal income tax consistent with preservation of capital.
In addition, the Fund intends to qualify as an investment exempt from the
Florida state intangibles tax.
EVERGREEN GEORGIA MUNICIPAL BOND FUND (formerly First Union Georgia
Municipal Bond Portfolio) seeks current income exempt from federal income tax
and Georgia state income tax, consistent with preservation of capital.
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND (formerly FFB New Jersey
Tax-Free Income Fund) seeks a high level of income, exempt from federal and New
Jersey personal income taxes.
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND (formerly First Union North
Carolina Municipal Bond Portfolio) seeks current income exempt from federal
income tax and North Carolina state income tax, consistent with preservation of
capital. In addition, the Fund intends to qualify as an investment substantially
exempt from the North Carolina intangible personal property tax.
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND (formerly First Union South
Carolina Municipal Bond Portfolio seeks current income exempt from federal
income tax and South Carolina state income tax.
EVERGREEN VIRGINIA MUNICIPAL BOND FUND (formerly First Union Virginia
Municipal Bond Portfolio) seeks current income exempt from federal income tax
and Virginia state income tax, consistent with preservation of capital.
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND (successor to ABT
Florida High Income Municipal Bond Fund) seeks to provide a high level of
current income exempt from federal income tax. Under normal circumstances, the
Fund will invest at least 65% of the value of its total assets in municipal
securities consisting of high yield (i.e., high risk), medium, lower rated and
unrated bonds.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in Class A and Class B Shares of a Fund. For
further information see "Purchase and Redemption of Fund Shares" and "General
Information -- Other Classes of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares Class B Shares
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases 4.75% None
(as a % of offering price)
Sales Charge on Dividend Reinvestments None None
Contingent Deferred Sales Charge (as a % of original purchase None 5% during the first year, 4% during the
price or redemption proceeds, whichever is lower) second year, 3% during the third and fourth
years, 2% during the fifth year, 1% during
the sixth and seventh years and 0% after the
seventh year
Redemption Fee None None
Exchange Fee None None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to each Class of
Shares, together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment in each Class for the periods specified assuming
(i) a 5% annual return and (ii) redemption at the end of each period and,
additionally for Class B shares, no redemption at the end of each period.
In the following examples (i) the expenses for Class A Shares assume
deduction of the maximum 4.75% sales charge at the time of purchase, (ii) the
expenses for Class B Shares assume deduction at the time of redemption (if
applicable) of the maximum contingent deferred sales charge applicable for that
time period, and (iii) the expenses for Class B Shares reflect the conversion to
Class A Shares eight years after purchase (years eight through ten, therefore,
reflect Class A expenses).
<TABLE>
<CAPTION>
EVERGREEN FLORIDA MUNICIPAL BOND FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees(a) .30% .30%
After 1 Year $ 53 $ 66 $ 16
12b-1 Fees(b) .06% .75%
After 3 Years $ 66 $ 79 $ 49
Shareholder Service Fees -- .25%
After 5 Years $ 80 $ 104 $ 84
Other Expenses .25% .25%
After 10 Years $ 120 $ 147 $147
Total .61% 1.55%
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN GEORGIA MUNICIPAL BOND FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50%
After 1 Year $ 60 $ 70 $ 20
12b-1 Fees(b) .25% .75%
After 3 Years $ 85 $ 93 $ 63
Shareholder Service Fees -- .25%
After 5 Years $ 113 $ 128 $108
Other Expenses(c) .50% .50%
After 10 Years $ 191 $ 204 $204
Total 1.25% 2.00%
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50%
After 1 Year $ 53 $ 70 $ 20
12b-1 Fees (b) .25% .75%
After 3 Years $ 83 $ 91 $ 61
Shareholder Service Fees -- .25%
After 5 Years $ 110 $ 125 $105
Other Expenses .44% .44%
After 10 Years $ 185 $ 202 $202
Total 1.19% 1.99%
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees .50%
.50% After 1 Year $ 60 $ 70 $ 20
12b-1 Fees(b) .25% .75%
After 3 Years $ 85 $ 93 $ 63
Shareholder Service Fees -- .25%
After 5 Years $ 113 $ 128 $108
Other Expenses .50% .50%
After 10 Years $ 191 $ 204 $204
Total 1.25% 2.00%
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50%
After 1 Year $ 60 $ 70 $ 20
12b-1 Fees(b) .25% .75%
After 3 Years $ 85 $ 93 $ 63
Shareholder Service Fees -- .25%
After 5 Years $ 113 $ 128 $108
Other Expenses(c) .50% .50%
After 10 Years $ 191 $ 204 $204
Total 1.25% 2.00%
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50%
After 1 Year $ 60 $ 70 $ 20
12b-1 Fees(b) .25% .75%
After 3 Years $ 85 $ 93 $ 63
Shareholder Service Fees -- .25%
After 5 Years $ 113 $ 128 $108
Other Expenses(c) .50% .50%
After 10 Years $ 191 $ 204 $204
Total 1.25% 2.00%
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fees(a) .30% .30%
After 1 Year $ 58 $ 68 $ 18
12b-1 Fees(b) .25% 1.00%
After 3 Years $ 80 $ 87 $ 57
Other Expenses .52% .52%
After 5 Years $ 104 $ 119 $ 99
After 10 Years $ 172 $ 185 $185
Total 1.07% 1.82%
</TABLE>
(a) CMG has agreed to limit the Management Fee charged to EVERGREEN FLORIDA
MUNICIPAL BOND FUND and EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND to
.30 of 1% of average net assets until July 7, 1996.
From time to time each Fund's adviser may, at its discretion, reduce or waive
its fees or reimburse these Funds for certain of their other expenses in order
to reduce their expense ratios. Each Fund's adviser may cease these voluntary
waivers and reimbursements at any time.
(b) Class A Shares can pay up to .75 of 1% of average annual net assets as a
12b-1 Fee. For the forseeable future, the Class A Shares 12b-1 Fees will be
limited to .25 of 1% of average annual net assets. For Class B Shares of
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND, a portion of the 12b-1
Fees equivalent to .25 of 1% of average annual assets will be shareholder
servicing-related. Distribution-related 12b-1 Fees will be limited to .75 of
1% of average annual assets as permitted under the rules of the National
Association of Securities Dealers, Inc.
EVERGREEN FLORIDA MUNICIPAL BOND FUND will not pay 12b-1 Fees to the extent
that the effect of such payment would be to cause the Fund's ratio of
expenses to average net assets for Class A Shares to exceed .61 of 1%
through July 1, 1996.
4
<PAGE>
The estimated annual operating expenses and examples do not reflect fee
waivers and expense reimbursements for the most recent fiscal period. Actual
expenses for Class A and B Shares net of fee waivers and expense reimbursements
for the fiscal period ended August 31, 1995 or February 28, 1995, as applicable
were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
EVERGREEN FLORIDA MUNICIPAL BOND FUND .82% 1.44%
EVERGREEN GEORGIA MUNICIPAL BOND FUND .71% 1.46%
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND .38% N/A
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND .92% 1.67%
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND .53% 1.28%
EVERGREEN VIRGINIA MUNICIPAL BOND FUND .72% 1.47%
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND 1.07% N/A
</TABLE>
(c) Reflects agreements by CMG to limit aggregate operating expenses (including
the investment advisory fees, but excluding interest, taxes, brokerage
commissions, Rule 12b-1 Fees, shareholder servicing fees and extraordinary
expenses) of EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA
MUNICIPAL BOND FUND and EVERGREEN VIRGINIA MUNICIPAL BOND FUND to 1% of
average net assets for the foreseeable future. Absent such agreements, the
estimated annual operating expenses for the Funds would be as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
EVERGREEN GEORGIA MUNICIPAL BOND FUND 2.83% 3.58%
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND 6.50% 7.25%
EVERGREEN VIRGINIA MUNICIPAL BOND FUND 3.83% 4.58%
</TABLE>
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for its most recent fiscal period. Such expenses have been restated
to reflect current fee arrangements and in the case of Funds that did not offer
all of the above-referenced Classes of shares during such periods, the amounts
set forth in the tables are based on the expenses incurred by the Classes which
were offered. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN. For a more complete description of the various
costs and expenses borne by the Funds see "Management of the Funds." As a result
of asset-based sales charges, long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges permitted under the
rules of the National Association of Securities Dealers, Inc.
5
<PAGE>
FINANCIAL HIGHLIGHTS(stacked plus signs)
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter for EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN NORTH
CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND and
EVERGREEN VIRGINIA MUNICIPAL BOND FUND has been audited by KPMG Peat Marwick
LLP, each Fund's independent auditors. The information in the tables for
EVERGREEN FLORIDA MUNICIPAL BOND FUND for the fiscal period ended August 31,
1995 has been audited by KPMG Peat Marwick LLP, the Fund's current independent
auditors. The information in the tables for each of the years in the four-year
period ended April 30, 1995 was audited by Tait, Weller & Baker, the Fund's
prior independent auditors. The information in the tables for EVERGREEN NEW
JERSEY TAX-FREE INCOME FUND for each of the years in the two-year period ended
February 28, 1995 has been audited by KPMG Peat Marwick LLP, the Fund's current
independent auditors. The information in the tables for EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND for each of the periods from July 16, 1991 (commencement of
operations) through February 28, 1993 has been audited by Price Waterhouse LLP,
the Fund's prior independent auditors. The information in the tables for
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND for the fiscal period ended
August 31, 1995 has been audited by Price Waterhouse LLP, the Fund's current
independent auditors. The information in the tables for each of the years in the
two-year period ended April 30, 1995 and for the period June 17, 1992
(commencement of operations) through April 30, 1993 was audited by Tait, Weller
& Baker, the Fund's prior independent auditors. A report of KPMG Peat Marwick
LLP, Price Waterhouse LLP or Tait, Weller & Baker, as the case may be, on the
audited information with respect to each Fund is incorporated by reference in
the Fund's Statement of Additional Information. The following information for
each Fund should be read in conjunction with the financial statements and
related notes which are incorporated by reference in the Fund's Statement of
Additional Information.
Further information about each Fund's performance is contained in the
Fund's annual report to shareholders, which may be obtained without charge.
EVERGREEN FLORIDA MUNICIPAL BOND FUND(stacked plus signs)
<TABLE>
<CAPTION>
CLASS A SHARES
FOUR MAY 11,
MONTHS 1988*
ENDED THROUGH
AUGUST 31, YEAR ENDED APRIL 30, APRIL 30,
1995# 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period..... $9.61 $9.52 $9.95 $9.35 $9.21 $8.80 $9.09 $8.82
Income (loss) from investment operations:
Net investment income.................... .25 .54 .56 .56 .61 .66 .58 .47
Net realized and unrealized gain (loss)
on investments.......................... .22 .11 (.36) .67 .22 .43 (.24) .22
Total from investment operations........ .47 .65 .20 1.23 .83 1.09 .34 .69
Less distributions to shareholders from:
Net investment income.................... (.25) (.54) (.56) (.56) (.61) (.68) (.59) (.42)
Distributions in excess of net investment
income.................................. (.03) -- -- -- -- -- -- --
Net realized gains....................... (.06) (.02) (.07) (.07) (.04) -- (.04) --
Paid-in capital.......................... -- -- -- -- (.04) -- -- --
Total distributions..................... (.34) (.56) (.63) (.63) (.69) (.68) (.63) (.42)
Net asset value, end of period.......... $9.74 $9.61 $9.52 $9.95 $9.35 $9.21 $8.80 $9.09
TOTAL RETURN+............................ 4.2% 7.1% 1.9% 13.6% 9.3% 12.9% 3.7% 9.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)................................ $136,449 $168,542 $199,612 $198,286 $147,996 $75,791 $7,286 $717
Ratios to average net assets:
Expenses................................ .82%++** .61% .56% .58% .41%** .10%** .10%** .30%**++
Net investment income................... 4.89%++** 5.73% 5.37% 5.66% 6.12%** 6.55%** 6.15%** 5.30%**++
Portfolio turnover rate.................. 29% 53% 32% 24% 24% 66% 82% 2%
<CAPTION>
CLASS B CLASS Y
SHARES SHARES
JUNE 30, JUNE 30,
1995* 1995*
THROUGH THROUGH
AUGUST AUGUST
31, 31,
1995# 1995#
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period..... $9.67 $9.67
Income (loss) from investment operations:
Net investment income.................... .07 .09
Net realized and unrealized gain (loss)
on investments.......................... .10 .10
Total from investment operations........ .17 .19
Less distributions to shareholders from:
Net investment income.................... (.07) (.09)
Distributions in excess of net investment
income.................................. (.03) (.03)
Net realized gains....................... -- --
Paid-in capital.......................... -- --
Total distributions..................... (.10) (.12)
Net asset value, end of period.......... $9.74 $9.74
TOTAL RETURN+............................ 1.5% 1.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)................................ $27,351 $ 3,602
Ratios to average net assets:
Expenses................................ 1.44%++ .59%++
Net investment income................... 3.22%++ 4.93%++
Portfolio turnover rate.................. 29% 29%
</TABLE>
# The Fund changed its fiscal year-end from April 30 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES
MAY 11, 1988*
FOUR MONTHS THROUGH
ENDED YEAR ENDED APRIL 30, APRIL 30,
AUGUST 31, 1995# 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Expenses..................................................... 1.05% .68% .88% 5.14% 20.40%
Net investment income (loss)................................. 4.66% 5.85% 5.77% 1.01% (14.80%)
</TABLE>
(stacked plus signs) On June 30, 1995, ABT Florida Tax-Free Fund sold its net
assets to First Union Florida Municipal Bond Portfolio
which was subsequently renamed Evergreen Florida Municipal Bond Fund.
ABT Florida Tax-Free Fund was the
accounting survivor in the combination. Accordingly, the information stated
in the above table prior to the combination reflects the results of ABT
Florida Tax-Free Fund. The net asset values per share and related per share
data have been restated to reflect the conversion of shares.
6
<PAGE>
EVERGREEN GEORGIA MUNICIPAL BOND FUND -- CLASS A, B, AND Y SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
JULY 2, JULY 2, CLASS Y
1993* 1993* SHARES
EIGHT MONTHS YEAR ENDED THROUGH EIGHT MONTHS YEAR ENDED THROUGH EIGHT MONTHS
ENDED AUGUST DECEMBER 31, DECEMBER 31, ENDED AUGUST DECEMBER 31, DECEMBER 31, ENDED AUGUST
31, 1995# 1994 1993 31, 1995# 1994 1993 31, 1995#
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning
of period.................. $8.74 $10.19 $10.00 $ 8.74 $10.19 $10.00 $ 8.74
Income (loss) from
investment operations:
Net investment income....... .33 .48 .20 .28 .43 .18 .35
Net realized and unrealized
gain (loss) on
investments................ .73 (1.45) .19 .73 (1.45) .19 .73
Total from investment
operations............... 1.06 (.97) .39 1.01 (1.02) .37 1.08
Less distributions to
shareholders from:
Net investment income....... (.33) (.48) (.20) (.28) (.43) (.18) (.35)
Net asset value, end of
period..................... $9.47 $8.74 $10.19 $9.47 $8.74 $10.19 $ 9.47
TOTAL RETURN+............... 12.3% (9.6%) 4.0% 11.7% (10.2%) 3.7% 12.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted).......... $2,098 $1,387 $817 $7,538 $6,912 $3,692 $1,339
Ratios to average net
assets:
Expenses **................ .71%++ .53% .25%++ 1.46%++ 1.13% .75%++ 46%++
Net investment income **... 5.39%++ 5.26% 4.71%++ 4.64%++ 4.66% 4.15%++ 5.64%++
Portfolio turnover rate..... 91% 147% 15% 91% 147% 15% 91%
<CAPTION>
CLASS Y
SHARES
FEBRUARY 28,
1994* THROUGH
DECEMBER 31,
1994
<S> <C>
PER SHARE DATA:
Net asset value, beginning
of period.................. $9.83
Income (loss) from
investment operations:
Net investment income....... .42
Net realized and unrealized
gain (loss) on
investments................ (1.09)
Total from investment
operations............... (.67)
Less distributions to
shareholders from:
Net investment income....... (.42)
Net asset value, end of
period..................... $8.74
TOTAL RETURN+............... (6.9%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted).......... $284
Ratios to average net
assets:
Expenses **................ .31%++
Net investment income **... 5.68%++
Portfolio turnover rate..... 147%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
JULY 2, JULY 2, CLASS Y
1993* 1993* SHARES
EIGHT MONTHS YEAR ENDED THROUGH EIGHT MONTHS YEAR ENDED THROUGH EIGHT MONTHS
ENDED AUGUST DECEMBER 31, DECEMBER 31, ENDED AUGUST DECEMBER 31, DECEMBER 31, ENDED AUGUST
31, 1995# 1994 1993 31, 1995# 1994 1993 31, 1995#
<S> <C> <C> <C> <C> <C> <C> <C>
Expense.................... 2.83% 3.61% 6.82% 3.58% 4.21% 7.32% 2.58%
Net investment income
(loss).................... 3.27% 2.18% (1.86%) 2.52% 1.58% (2.42%) 3.52%
<CAPTION>
CLASS Y
SHARES
FEBRUARY 28,
1994*
THROUGH
DECEMBER 31,
1994
<S> <C>
Expense.................... 3.39%
Net investment income
(loss).................... 2.60%
</TABLE>
7
<PAGE>
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
CLASS A
SIX MONTHS
ENDED
AUGUST 31, 1995 YEAR ENDED FEBRUARY 28,
(UNAUDITED) 1995 1994 1993
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period............................... $10.53 $10.99 $11.01 $10.22
Income (loss) from investment operations:
Net investment income.............................................. .28 .57 .60 .63
Net realized and unrealized gain (loss) on investments............. .22 (.46) (.02) .79
Total from investment operations.................................. .50 .11 .58 1.42
Less distributions to shareholders from net investment income...... (.28) (.57) (.60) (.63)
Net asset value, end of period..................................... $10.75 $10.53 $10.99 $11.01
TOTAL RETURN+...................................................... 4.8% 1.4% 5.3% 14.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).......................... $35,469 $34,852 $42,783 $30,863
Ratios to average net assets:
Expenses **....................................................... .38%++ .25% .14% .00%
Net investment income **.......................................... 5.20%++ 5.52% 5.31% 5.97%
Portfolio turnover rate............................................ 0% 8% 2% 5%
<CAPTION>
CLASS A
JULY 16, 1991*
THROUGH
FEBRUARY 29,
1992
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period............................... $10.00
Income (loss) from investment operations:
Net investment income.............................................. .38
Net realized and unrealized gain (loss) on investments............. .22
Total from investment operations.................................. .60
Less distributions to shareholders from net investment income...... (.38)
Net asset value, end of period..................................... $10.22
TOTAL RETURN+...................................................... 9.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).......................... $13,129
Ratios to average net assets:
Expenses **....................................................... .01%++
Net investment income **.......................................... 5.89%++
Portfolio turnover rate............................................ 5%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
CLASS A
SIX MONTHS JULY 16, 1991*
ENDED THROUGH
AUGUST 31, 1995 YEAR ENDED FEBRUARY 28, FEBRUARY 29,
(UNAUDITED) 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Expenses................................................ 1.08%++ 1.04% 1.05% 1.16% 1.20%
Net investment income................................... 4.50%++ 4.73% 4.40% 4.81% 4.70%
</TABLE>
8
<PAGE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y
JANUARY 11, JANUARY 11, SHARES
EIGHT MONTHS YEAR ENDED 1993* THROUGH EIGHT MONTHS YEAR ENDED 1993* THROUGH EIGHT MONTHS
ENDED AUGUST DECEMBER 31, DECEMBER 31, ENDED AUGUST DECEMBER 31, DECEMBER 31, ENDED AUGUST
31, 1995# 1994 1993 31, 1995# 1994 1993 31, 1995#
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning
of period................. $9.16 $10.61 $10.00 $9.16 $10.61 $10.00 $9.16
Income (loss) from
investment operations:
Net investment income...... .33 .49 .46 .28 .44 .42 .35
Net realized and unrealized
gain (loss) on
investments............... .79 (1.45) .64 .79 (1.45) .64 .79
Total from investment
operations.............. 1.12 (.96) 1.10 1.07 (1.01) 1.06 1.14
Less distributions to
shareholders from:
Net investment income...... (.33) (.49) (.46) (.28) (.44) (.42) (.35)
Net realized gains......... -- -- (.03) -- -- (.03) --
Total distributions....... (.33) (.49) (.49) (.28) (.44) (.45) (.35)
Net asset value, end of
period.................... $9.95 $9.16 $10.61 $9.95 $9.16 $10.61 $9.95
TOTAL RETURN+.............. 12.3% (9.1%) 11.3% 11.8% (9.6%) 10.8% 12.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)........... $8,279 $7,979 $12,739 $49,040 $ 44,616 $45,168 $1,005
Ratios to average net
assets:
Expenses **............... 92%++ .79% .32%++ 1.67%++ 1.37% .79%++ .67%++
Net investment income **.. 5.09%++ 5.11% 4.91%++ 4.34%++ 4.53% 4.47%++ 5.34%++
Portfolio turnover rate.... 117% 126% 57% 117% 126% 57% 117%
<CAPTION>
CLASS Y
SHARES
FEBRUARY 28,
1994* THROUGH
DECEMBER 31,
1994
<S> <C>
PER SHARE DATA:
Net asset value, beginning
of period................. $10.31
Income (loss) from
investment operations:
Net investment income...... .43
Net realized and unrealized
gain (loss) on
investments............... (1.15)
Total from investment
operations.............. (.72)
Less distributions to
shareholders from:
Net investment income...... (.43)
Net realized gains......... --
Total distributions....... (.43)
Net asset value, end of
period.................... $9.16
TOTAL RETURN+.............. (7.0%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)........... $642
Ratios to average net
assets:
Expenses **............... .59%++
Net investment income **.. 5.58%++
Portfolio turnover rate.... 126%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y
JANUARY 11, JANUARY 11, SHARES
EIGHT MONTHS YEAR ENDED 1993* THROUGH EIGHT MONTHS YEAR ENDED 1993* THROUGH EIGHT MONTHS
ENDED AUGUST DECEMBER 31, DECEMBER 31, ENDED AUGUST DECEMBER 31, DECEMBER 31, ENDED AUGUST
31, 1995# 1994 1993 31, 1995# 1994 1993 31, 1995#
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses................. 1.27% 1.18% 1.25% 2.02% 1.76% 1.74% 1.02%
Net investment income.... 4.74% 4.72% 3.98% 3.99% 4.14% 3.52% 4.99%
<CAPTION>
CLASS Y
SHARES
FEBRUARY 28,
1994* THROUGH
DECEMBER 31,
1994
<S> <C>
Expenses................. .98%
Net investment income.... 5.19%
</TABLE>
9
<PAGE>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y
JANUARY 3, JANUARY 3, SHARES
EIGHT MONTHS 1994* THROUGH EIGHT MONTHS 1994* THROUGH EIGHT MONTHS
ENDED AUGUST DECEMBER 31, ENDED AUGUST DECEMBER 31, ENDED AUGUST
31, 1995# 1994 31, 1995# 1994 31, 1995#
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period... $8.62 $10.00 $8.62 $10.00 $8.62
Income (loss) from investment
operations:
Net investment income.................. .34 .46 .29 .41 .35
Net realized and unrealized gain (loss)
on investments........................ .97 (1.38) .97 (1.38) .97
Total from investment operations...... 1.31 (.92) 1.26 (.97) 1.32
Less distributions to shareholders
from:
Net investment income.................. (.34) (.46) (.29) (.41) (.35)
Net asset value, end of period......... $9.59 $8.62 $9.59 $8.62 $9.59
TOTAL RETURN+.......................... 15.4% (9.3%) 14.8% (9.8%) 15.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted).............................. $610 $312 $3,542 $2,456 $1,673
Ratios to average net assets:
Expenses **........................... .53%++ .25%++ 1.28%++ .87%++ .28%++
Net investment income **.............. 5.41%++ 5.57%++ 4.66%++ 4.88%++ 5.66%++
Portfolio turnover rate................ 66% 23% 66% 23% 66%
<CAPTION>
CLASS Y
SHARES
FEBRUARY 28,
1994* THROUGH
DECEMBER 31,
1994
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period... $9.74
Income (loss) from investment
operations:
Net investment income.................. .43
Net realized and unrealized gain (loss)
on investments........................ (1.12)
Total from investment operations...... (.69)
Less distributions to shareholders
from:
Net investment income.................. (.43)
Net asset value, end of period......... $8.62
TOTAL RETURN+.......................... (7.1%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted).............................. $92
Ratios to average net assets:
Expenses **........................... .00%++
Net investment income **.............. 5.92%++
Portfolio turnover rate................ 23%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y
JANUARY 3, JANUARY 3, SHARES
EIGHT MONTHS 1994* EIGHT MONTHS 1994* EIGHT MONTHS
ENDED THROUGH ENDED THROUGH ENDED
AUGUST 31, DECEMBER 31, AUGUST 31, DECEMBER 31, AUGUST 31,
1995# 1994 1995# 1994 1995#
<S> <C> <C> <C> <C> <C>
Expenses............................. 6.50% 10.71% 7.25% 11.33% 6.25%
Net investment loss.................. (.56%) (4.89%) (1.31%) (5.58%) (.31%)
<CAPTION>
CLASS Y SHARES
FEBRUARY 28,
1994*
THROUGH
DECEMBER 31,
1994
<S> <C>
Expenses............................. 10.46%
Net investment loss.................. (4.54%)
</TABLE>
10
<PAGE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y
JULY 2, JULY 2, SHARES
EIGHT MONTHS 1993* EIGHT MONTHS 1993* EIGHT MONTHS
ENDED YEAR ENDED THROUGH ENDED YEAR ENDED THROUGH ENDED
AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31,
1995# 1994 1993 1995# 1994 1993 1995#
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value,
beginning of period.... $8.85 $10.19 $10.00 $8.85 $10.19 $10.00 $8.85
Income (loss) from
investment operations:
Net investment income... .33 .47 .20 .28 .42 .17 .34
Net realized and
unrealized gain (loss)
on investments......... .82 (1.34) .19 .82 (1.34) .19 .82
Total from investment
operations........... 1.15 (.87) .39 1.10 (.92) .36 1.16
Less distributions to
shareholders from:
Net investment income... (.33) (.47) (.20) (.28) (.42) (.17) (.34)
Net asset value, end of
period................. $9.67 $8.85 $10.19 $9.67 $8.85 $10.19 $9.67
TOTAL RETURN+........... 13.1% (8.6%) 3.9% 12.5% (9.1%) 3.7% 13.3%
RATIOS & SUPPLEMENTAL
DATA
Net assets, end of
period (000's
omitted)............... $ 1,984 $1,606 $1,306 $ 5,803 $3,817 $2,235 $965
Ratios to average net
assets:
Expenses **............ .72%++ .53% .25%++ 1.47%++ 1.12% .75%++ .47%++
Net investment
income **............ 5.17%++ 5.11% 4.64%++ 4.42%++ 4.54% 4.25%++ 5.42%++
Portfolio turnover
rate................... 87% 59% 0% 87% 59% 0% 87%
<CAPTION>
CLASS Y SHARES
FEBRUARY 28, 1994*
THROUGH
DECEMBER 31, 1994
<S> <C>
PER SHARE DATA
Net asset value,
beginning of period.... $9.83
Income (loss) from
investment operations:
Net investment income... .41
Net realized and
unrealized gain (loss)
on investments........... (.98)
Total from investment
operations........... (.57)
Less distributions to
shareholders from:
Net investment income... (.41)
Net asset value, end of
period................. $8.85
TOTAL RETURN+........... (5.8%)
RATIOS & SUPPLEMENTAL
DATA
Net assets, end of
period (000's
omitted)............... $344
Ratios to average net
assets:
Expenses **............ .28%++
Net investment
income **............ 5.54%++
Portfolio turnover
rate................... 59%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y
JULY 2, JULY 2, SHARES
EIGHT MONTHS 1993* EIGHT MONTHS 1993* EIGHT MONTHS
ENDED YEAR ENDED THROUGH ENDED YEAR ENDED THROUGH ENDED
AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31,
1995# 1994 1993 1995# 1994 1993 1995#
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses................... 3.83% 5.14% 7.75% 4.58% 5.73% 8.25% 3.58%
Net investment income
(loss).................... 2.06% .50% (2.86%) 1.31% (.07%) (3.25%) 2.31%
<CAPTION>
CLASS Y
SHARES
FEBRUARY 28,
1994*
THROUGH
DECEMBER 31,
1994
<S> <C>
Expenses................... 4.89%
Net investment income
(loss).................... .93%
</TABLE>
11
<PAGE>
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND -- CLASS A AND Y SHARES
<TABLE>
<CAPTION>
CLASS A SHARES #
FOUR MONTHS
ENDED YEAR ENDED JUNE 17,
AUGUST 31, APRIL 30, 1992* THROUGH
1995 1995 1994 APRIL 30, 1993
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.......................... $10.16 $10.08 $10.36 $10.00
Income (loss) from investment operations:
Net investment income......................................... .21 .65 .68 .61
Net realized and unrealized gain (loss) on investments........ .24 .08 (.26) .39
Total from investment operations............................. .45 .73 .42 1.00
Less distributions to shareholders from:
Net investment income......................................... (.21) (.65) (.68) (.61)
Net realized gains............................................ -- -- (.02) (.03)
Total distributions.......................................... (.21) (.65) (.70) (.64)
Net asset value, end of period................................ $10.40 $10.16 $10.08 $10.36
TOTAL RETURN+................................................. 4.4% 7.6% 3.3% 10.3%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)..................... $59,551 $65,043 $72,683 $33,541
Ratios to average net assets:
Expenses..................................................... 1.07%++** .60%** .14%** .00++**
Net investment income........................................ 5.92%++** 6.52%** 6.16%** 5.92%++**
Portfolio turnover rate....................................... 14% 28% 31% 50%
<CAPTION>
CLASS B SHARES
JULY 10, 1995*
THROUGH
AUGUST 31,
1995
<S> <C>
PER SHARE DATA
Net asset value, beginning of period.......................... $10.41
Income (loss) from investment operations:
Net investment income......................................... .08
Net realized and unrealized gain (loss) on investments........ (.01)
Total from investment operations............................. .07
Less distributions to shareholders from:
Net investment income......................................... (.08)
Net realized gains............................................ --
Total distributions.......................................... (.08)
Net asset value, end of period................................ $10.40
TOTAL RETURN+................................................. .6%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)..................... $3,137
Ratios to average net assets:
Expenses..................................................... 1.09%++
Net investment income........................................ 3.40%++
Portfolio turnover rate....................................... 14%
</TABLE>
# Effective June 30, 1995, Evergreen Florida High Income Municipal Bond Fund, a
new series of the Evergreen Municipal Trust, acquired substantially all of
the net assets of ABT Florida High Income Municipal Bond Fund. ABT Florida
High Income Municipal Bond Fund, which had a fiscal year that ended on April
30, was the accounting survivor in the combination. Accordingly, the
information above includes the results of operations of ABT Florida High
Income Municipal Bond Fund prior to June 30, 1995.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales load and contingent deferred
sales is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets would have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES
FOUR MONTHS JUNE 17, 1992
ENDED YEAR ENDED THROUGH
AUGUST 31, APRIL 30, APRIL 30,
1995# 1995 1994 1993
<S> <C> <C> <C> <C>
Expenses.................................................. 1.42% 1.26% 1.12% 1.12%
Net investment income..................................... 5.72% 5.86% 5.18% 4.80%
</TABLE>
12
<PAGE>
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVES AND POLICIES
EVERGREEN FLORIDA MUNICIPAL BOND FUND
EVERGREEN GEORGIA MUNICIPAL BOND FUND
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
The Funds seek current income exempt from federal regular income tax and,
where applicable, state income taxes, consistent with preservation of capital.
In addition, the EVERGREEN FLORIDA MUNICIPAL BOND FUND intends to qualify as an
investment exempt from the Florida state intangibles tax. Florida does not
currently tax personal income.
Each Fund's investment objective is fundamental and cannot be changed
without shareholder approval. While there is no assurance that each objective
will be achieved, the Funds will endeavor to do so by following the investment
policies detailed below. Unless otherwise indicated, the investment policies of
a Fund may be changed by the Board of Trustees ("Trustees") without the approval
of shareholders. Shareholders will be notified before any material change in
these policies becomes effective.
As a matter of fundamental investment policy, which may not be changed
without shareholder approval, each Fund will normally invest its assets so that
at least 80% of its annual interest income is, or at least 80% of its net assets
are, invested in obligations which provide interest income which is exempt from
federal regular income taxes. The interest retains its tax-free status when
distributed to the Funds' shareholders. In addition, at least 65% of the value
of each Fund's total assets will be invested in municipal bonds of the
particular state after which the Fund is named. To qualify as an investment
exempt from the Florida state intangibles tax, the Evergreen Florida Municipal
Bond Fund's portfolio must consist entirely of investments exempt from the
Florida state intangibles tax on the last business day of the calendar year.
Each Fund seeks to achieve its investment objective by investing
principally in municipal bonds, including industrial development bonds, of its
designated state. In addition, the Funds may invest in obligations issued by or
on behalf of any state, territory, or possession of the United States, including
the District of Columbia, or their political subdivisions or agencies and
instrumentalities, the interest from which is exempt from federal (regular, if
applicable) income tax. It is likely that shareholders who are subject to the
alternative minimum tax will be required to include interest from a portion of
the municipal securities owned by a Fund in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
Municipal bonds are debt obligations issued by the state or local
entities to support a government's general financial needs or special projects,
such as housing projects or sewer works. Municipal bonds include industrial
development bonds issued by or on behalf of public authorities to provide
financing aid to acquire sites or construct or equip facilities for privately or
publicly owned corporations.
The two principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Revenue bonds are paid off only with the revenue
generated by the project financed by the bond or other specified sources of
revenue. For example, in the case of a bridge project, proceeds from the tolls
would go directly to retiring the bond issue. Thus, unlike general obligation
bonds, revenue bonds do not represent a pledge of credit or create any debt of
or charge against the general revenues of a municipality or public authority.
The municipal bonds in which the Funds will invest are subject to one or
more of the following quality standards: rated Baa or better by Moody's
Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's
Ratings Group ("S&P") or, if unrated, are determined by the Fund's investment
adviser to be of comparable quality to such ratings; insured by a municipal bond
insurance company which is rated Aa by Moody's or AA by S&P; guaranteed at the
time of purchase by the U.S. government as to the payment of principal and
interest; or fully collateralized by an escrow of U.S. government securities.
Bonds rated BBB by S&P or Baa by Moody's have speculative characteristics.
Changes in economic conditions or other circumstances are more likely to lead to
weakened capacity to make principal and interest payments than higher rated
bonds. However, like the higher
13
<PAGE>
rated bonds, these securities are considered to be investment grade. If any
security owned by a Fund loses its rating or has its rating reduced after the
Fund has purchased it, the Fund is not required to sell or otherwise dispose of
the security, but may consider doing so. If ratings made by Moody's or S&P
change because of changes in those organizations or their ratings systems, the
Funds will try to use comparable ratings as standards in accordance with the
Funds' investment objectives. A description of the rating categories is
contained in an Appendix to the Statement of Additional Information.
The Funds may also invest in:
participation interests in any of the above obligations.
(Participation interests may be purchased from financial institutions such
as commercial banks, savings and loan associations and insurance companies,
and give a Fund an undivided interest in particular municipal securities.);
variable rate municipal securities. (Variable rate securities
offer interest rates which are tied to a money market rate, usually a
published interest rate or interest rate index or the 91-day U.S. Treasury
bill rate. Many of these securities are subject to prepayment of principal
on demand by the Fund, usually in seven days or less.); and
municipal leases as described in "Investment Practices and
Restrictions", below.
During periods when, in the opinion of the Funds investment adviser, a
temporary defensive position in the market is appropriate, a Fund may
temporarily invest in short-term tax-exempt or taxable investments. These
temporary investments include: notes issued by or on behalf of municipal or
corporate issuers; obligations issued or guaranteed by the U.S. government, its
agencies, or instrumentalities; other debt securities; commercial paper; bank
certificates of deposit; shares of other investment companies; and repurchase
agreements. There are no rating requirements applicable to temporary
investments. However, the Funds investment adviser will limit temporary
investments to those it considers to be of comparable quality to the Funds'
primary investments.
Although the Funds are permitted to make taxable, temporary investments,
there is no current intention of generating income subject to federal regular
income tax, where applicable. However, certain temporary investments will
generate income which is subject to state taxes. The Funds may employ certain
additional investment strategies which are discussed in "Investment Practices
and Restrictions", below.
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
The objective of the EVERGREEN NEW JERSEY TAX-FREE INCOME FUND is to seek
a high level of income, exempt from federal and New Jersey personal income
taxes. The Fund is available only to investors who reside in New Jersey. There
is no assurance that the Fund will achieve its stated objective. The investment
objective of the Fund is fundamental and so may not be changed without the
approval of a majority of the Fund's shareholders.
To attain its objective, the EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
invests at least 80% of its net assets in municipal securities issued by the
State of New Jersey or its counties, municipalities, authorities or other
political subdivisions and municipal securities issued by territories or
possessions of the United States, such as Puerto Rico, the interests on which,
in the opinion of bond counsel, is exempt from federal and New Jersey personal
income taxes. The Fund normally invests in intermediate and long-term municipal
securities. Intermediate-term municipal securities generally mature in three to
ten years. Long-term municipal securities generally mature in ten to thirty
years. The Fund has no maximum or minimum maturity for any individual municipal
securities, however, it will maintain a dollar-weighted average portfolio
maturity of twenty years or less. If its investment adviser determines that
market conditions warrant a shorter average maturity, the Fund's investments
will be adjusted accordingly.
The Fund will only purchase securities rated within the three highest
rating categories by Moody's or by S&P and unrated securities of equivalent
quality as determined by the investment adviser pursuant to guidelines
established by the Trustees. See the Statement of Additional Information for
further information in regard to ratings.
The Fund will seek to invest substantially all of its assets in
intermediate and long-term municipal securities. However, under certain
circumstances, such as a temporary decline in the issuance of New Jersey
obligations, the Fund may invest up to 20% of its assets in the following:
short-term municipal securities issued outside of New Jersey (the income from
which may be subject to New Jersey income taxes) or certain taxable fixed income
securities (the income from which may be subject to federal and New Jersey
personal income taxes).
14
<PAGE>
In addition, under unusual circumstances the Fund reserves the right to
invest more than 20% of its assets in securities other than New Jersey municipal
securities such as taxable fixed income securities, the interest from which may
be subject to Federal and New Jersey personal income taxes. In most instances,
however, the Fund will seek to avoid holdings in an effort to provide income
that is fully exempt from federal and New Jersey personal income taxes.
The Fund may also invest in municipal securities issued to finance
private activities, whose interest is a preference item for purposes of the
Federal alternative minimum tax. Such "private activity bonds" might include
industrial development bonds and securities issued to finance project such as
solid waste disposal facilities, student loans or water and sewage projects. The
Fund currently intends to treat "private activity bonds" as not federally
tax-exempt and accordingly to limit income from "private activity bonds" to no
more than 20%. See "Other Information-Dividends, Distributions and Taxes" for
further information. The Fund may invest in other municipal securities and may
employ additional investment strategies which are discussed in "Investment
Practices and Restrictions" below.
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND seeks to provide a high
level of current income which is exempt from federal income taxes. This
objective is fundamental and may not be changed without shareholder approval.
The term "high-level" indicates that the Fund seeks to achieve an income level
that exceeds that which an investor would expect from an investment grade
portfolio with similar maturity characteristics. EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND invests primarily in high yield, medium and lower rated (Baa
through C by Moody's and BBB through C1 by S&P) and unrated municipal
securities. To varying degrees, medium and lower rated municipal securities, as
well as unrated municipal securities, are considered to have speculative
characteristics and are subject to greater market fluctuations and risk of loss
of income and principal than higher rated securities. To the extent that an
investor realizes a yield in excess of that which could be expected from a fund
which invests primarily in investment grade securities, the investor should
expect to bear increased risk due to the fact that the risk of principal and/or
interest not being repaid with respect to the high yield securities described
above is significantly greater than that which exists in connection with
investment grade securities. In assessing the risk involved in purchasing medium
and lower rated and unrated securities, the Fund's investment adviser will use
nationally recognized statistical rating organizations such as Moody's and S&P,
and will also rely heavily on credit analysis it develops internally. Under
normal circumstances, the Fund's dollar-weighted average maturity generally will
be fifteen years or more. However, the Fund may invest in securities of any
maturity, and if the Fund's investment adviser determines that market conditions
warrant a shorter average maturity, the Fund's investments will be adjusted
accordingly. In pursuit of its investment objective, EVERGREEN FLORIDA HIGH
INCOME MUNICIPAL BOND FUND will, under normal market conditions, invest at least
65% of its total assets in such medium and lower rated municipal securities or
unrated municipal securities of comparable quality to such rated municipal
bonds. Investors should note that such a policy is not a fundamental policy of
the Fund and shareholder approval is not necessary to change such policy. There
is no assurance that EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND can
achieve its investment objective.
The Fund will not invest in municipal securities which are in default,
i.e., securities rated D by S&P. Investments may also be made by EVERGREEN
FLORIDA HIGH INCOME MUNICIPAL BOND FUND in higher quality municipal bonds and,
for temporary defensive purposes, the Fund may invest less than 65% of its total
assets in the medium and lower quality municipal securities described above. The
Fund may assume a defensive position if, for example, yield spreads between
lower grade and investment grade municipal bonds are narrow and the yields
available on lower quality municipal securities do not justify the increased
risk associated with an investment in such securities or when there is a lack of
medium and lower quality issues in which to invest. EVERGREEN FLORIDA HIGH
INCOME MUNICIPAL BOND FUND may also invest primarily in higher quality municipal
obligations if its net assets are at a level that would not permit the Fund to
invest in medium and lower rated municipal bonds and at the same time maintain
adequate diversification and liquidity. Investing in this manner may result in
yields lower than those normally associated with a fund that invests primarily
in medium and lower quality municipal securities.
15
<PAGE>
During the fiscal year ended August 31, 1995 EVERGREEN FLORIDA HIGH
INCOME MUNICIPAL BOND FUND'S holdings had the following average credit quality
characteristics:
<TABLE>
<CAPTION>
Percent of
Rating Net Assets
<S> <C> <C>
Aaa or AAA 5.4%
Aa or AA --
A 1.9
Baa or BBB 18.3
Ba or BB 8.0
Non-rated 61.5
Total 95.1%
</TABLE>
The Fund may purchase industrial development bonds only if the interest
on such bonds is, in the opinion of bond counsel, exempt from federal income
taxes. It is anticipated that the annual portfolio turnover rate for the Fund
may exceed 100%. The Fund may invest in other municipal securities and may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions", below. Also, see the Statement of
Additional Information for further information in regard to ratings.
INVESTMENT PRACTICES AND RESTRICTIONS
Risk Factors. Bond yields are dependent on several factors including market
conditions, the size of an offering, the maturity of the bond, ratings of the
bond and the ability of issuers to meet their obligations. There is no limit on
the maturity of the bonds purchased by the Funds. Because the prices of bonds
fluctuate inversely in relation to the direction of interest rates, the prices
of longer term bonds fluctuate more widely in response to market interest rate
changes. A Fund's concentration in securities issued by its designated state and
that state's political subdivisions provides a greater level of risk than a fund
which is diversified across numerous states and municipal entities.
Although the Funds, other than EVERGREEN FLORIDA HIGH INCOME MUNICIPAL
BOND FUND, will not purchase securities rated below BBB by S&P or Baa by Moody's
(i.e., junk bonds), the Funds are not required to dispose of securities that
have been downgraded subsequent to their purchase. If the municipal obligations
held by a Fund (because of adverse economic conditions in a particular state,
for example) are downgraded, the Fund's concentration in securities of that
state may cause the Fund to be subject to the risks inherent in holding material
amounts of low-rated debt securities in its portfolio. As stated above,
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND invests primarily in high
yield, medium and lower rated (Baa through C by Moody's and BBB through C1 by
S&P) and unrated securities. Additional risk factors relating to the investment
by EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND in high yield, medium and
lower rated (Baa through C by Moody's and BBB through C1 by S&P) and unrated
securities are discussed below.
Portfolio Turnover. A portfolio turnover rate of 100% would occur if all of a
Fund's portfolio securities were replaced in one year. The portfolio turnover
rate experienced by a Fund directly affects the transaction costs relating to
the purchase and sale of securities which a Fund bears directly. A high rate of
portfolio turnover will increase such costs. See the Statement of Additional
Information for further information regarding the practices of the Funds
affecting portfolio turnover.
Non-Diversification. Each of EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN
GEORGIA MUNICIPAL BOND FUND, EVERGREEN NEW JERSEY TAX-FREE INCOME FUND,
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL
BOND FUND and EVERGREEN VIRGINIA MUNICIPAL BOND FUND is a non-diversified
portfolio of an investment company and, as such, there is no limit on the
percentage of assets which can be invested in any single issuer. An investment
in a Fund, therefore, will entail greater risk than would exist in a diversified
investment company because the higher percentage of investments among fewer
issuers may result in greater fluctuation in the total market value of the
Fund's portfolio. Each of the Funds intends to comply with Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code") which requires that at
the end of each quarter of each taxable year, with regard to at least 50% of the
Fund's total assets, no more than 5% of the total assets may be invested in the
securities of a single issuer and that with respect to the remainder of the
Fund's total assets, no more than 25% of its total assets are invested in the
securities of a single issuer.
16
<PAGE>
Repurchase Agreements. The Funds may invest in repurchase agreements. Repurchase
agreements are agreements by which a Fund purchases a security (usually U.S.
government securities) for cash and obtains a simultaneous commitment from the
seller (usually a bank or broker/dealer) to repurchase the security at an
agreed-upon price and specified future date. The repurchase price reflects an
agreed-upon interest rate for the time period of the agreement. The Funds' risk
is the inability of the seller to pay the agreed-upon price on the delivery
date. However, this risk is tempered by the ability of the Funds to sell the
security in the open market in the case of a default. In such a case, the Funds
may incur costs in disposing of the security which would increase Fund expenses.
The Funds Investment adviser will monitor the creditworthiness of the firms with
which the Funds enter into repurchase agreements.
When-Issued And Delayed Delivery Transactions. The Funds may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Funds purchase securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Funds to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Funds may pay more or less than the market value of the
securities on the settlement date. The Funds may dispose of a commitment prior
to settlement if the Funds investment adviser deems it appropriate to do so. In
addition, the Funds may enter into transactions to sell their purchase
commitments to third parties at current market values and simultaneously acquire
other commitments to purchase similar securities at later dates. The Funds may
realize short-term profits or losses upon the sale of such commitments.
Lending Of Portfolio Securities. In order to generate additional income, the
Funds may lend their portfolio securities on a short-term or long-term basis to
broker/dealers, banks, or other institutional borrowers of securities. The Funds
will only enter into loan arrangements with creditworthy borrowers and will
receive collateral in the form of cash or U.S. government securities equal to at
least 100% of the value of the securities loaned. As a matter of fundamental
investment policy, which cannot be changed without shareholder approval, the
Funds will not lend any of their assets except portfolio securities up to
one-third of the value of their total assets, except for EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND, which will only lend up to 5% of the value of its assets.
There is the risk that when lending portfolio securities, the securities may not
be available to a Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
Investing In Securities Of Other Investment Companies. Each Fund may invest in
the securities of other investment companies. This is a short-term measure to
invest cash which has not yet been invested in other portfolio instruments and
is subject to the following limitations: (1) no Fund will own more than 3% of
the total outstanding voting stock of any one investment company, (2) no Fund
may invest more than 5% of its total assets in any one investment company and
(3) no Fund may invest more than 10% of its total assets in investment companies
in general. The Funds investment adviser will waive its investment advisory fee
on assets invested in securities of other open end investment companies.
Borrowing. As a matter of fundamental policy, which may not be changed without
shareholder approval, the Funds may not borrow money except as a temporary
measure to facilitate redemption requests which might otherwise require the
untimely disposition of portfolio investments and for extraordinary or emergency
purposes, provided that the aggregate amount of such borrowings shall not exceed
one-third of the value of the total net assets at the time of such borrowing.
Illiquid Securities. The Funds may invest up to 15% of their net assets in
illiquid securities and other securities which are not readily marketable.
Repurchase agreements with maturities longer than seven days will be included
for the purpose of the foregoing 15% limit. Securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933, which have been
determined to be liquid, will not be considered by the Funds investment adviser
to be illiquid or not readily marketable and, therefore, are not subject to the
aforementioned 15% limit. The inability of a Fund to dispose of illiquid or not
readily marketable investments readily or at a reasonable price could impair a
Fund's ability to raise cash for redemptions or other purposes. The liquidity of
securities purchased by a Fund which are eligible for resale pursuant to Rule
144A will be monitored by the Funds investment adviser on an ongoing basis,
subject to the oversight of the Trustees. In the event that such a security is
deemed to be no longer liquid, a Fund's holdings will be reviewed to determine
what action, if any, is required to ensure that the retention of such security
does not result in a Fund having more than 15% of its assets invested in
illiquid or not readily marketable securities.
17
<PAGE>
Unseasoned Issuers. The Funds will not invest more than 5% of the value of their
total assets in securities of issuers (or guarantors, where applicable) which
have records of less than three years of continuous operations, including the
operation of any predecessor.
Risk Factors Associated with Medium and Lower Rated and Unrated Municipal
Obligations. EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND will invest in
medium and lower rated or unrated municipal securities. The market for high
yield, high risk debt securities rated in the medium and lower rating
categories, or which are unrated, is relatively new and its growth has
paralleled a long economic expansion. Past experience may not, therefore,
provide an accurate indication of future performance of this market,
particularly during periods of economic recession. An economic downturn or
increase in interest rates is likely to have a greater negative effect on this
market, the value of high yield debt securities in the Fund's portfolio, the
Fund's net asset value and the ability of the bonds' issuers to repay principal
and interest, meet projected business goals and obtain additional financing,
than would be the case if investments by the Fund were limited to higher rated
securities. These circumstances also may result in a higher incidence of
defaults. Yields on medium or lower-rated municipal bonds may not fully reflect
the higher risks of such bonds. Therefore, the risk of a decline in market
value, should interest rates increase or credit quality concerns develop, may be
higher than has historically been experienced with such investments. An
investment in EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND may be
considered more speculative than investment in shares of another fund which
invests primarily in higher rated debt securities.
Prices of high yield debt securities may be more sensitive to adverse
economic changes or corporate developments than higher rated investments. Debt
securities with longer maturities, which may have higher yields, may increase or
decrease in value more than debt securities with shorter maturities. Market
prices of high yield debt securities structured as zero coupon or pay-in-kind
securities are affected to a greater extent by interest rate changes and may be
more volatile than securities which pay interest periodically and in cash. Where
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND deems it appropriate and in
the best interests of its shareholders, it may incur additional expenses to seek
recovery on a debt security on which the issuer has defaulted and to pursue
litigation to protect the interests of security holders of its portfolio
entities.
Because the market for medium or lower rated securities may be thinner
and less active than the market for higher rated securities, there may be market
price volatility for these securities and limited liquidity in the resale
market. Unrated securities are usually not as attractive to as many buyers as
are rated securities, a factor which may make unrated securities less
marketable. These factors may have the effect of limiting the availability of
the securities for purchase by EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
and may also limit the ability of the Fund to sell such securities at their fair
value either to meet redemption requests or in response to changes in the
economy or the financial markets. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the values and
liquidity of medium or lower rated debt securities, especially in a thinly
traded market. To the extent the Fund owns or may acquire illiquid or restricted
high yield securities, these securities may involve special registration
responsibilities, liabilities and costs, and liquidity and valuation
difficulties. Changes in values of debt securities which the Fund owns will
affect the Fund's net asset value per share. If market quotations are not
readily available for the Fund's lower rated or unrated securities, these
securities will be valued by a method that the Trustees believes accurately
reflects fair value. Valuation becomes more difficult and judgment plays a
greater role in valuing high yield debt securities than with respect to
securities for which more external sources of quotations and last sale
information are available.
Special tax considerations are associated with investing in high yield
debt securities structured as zero coupon or pay-in-kind securities. A Fund
investing in such securities accrues income on these securities prior to the
receipt of cash payments. EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND must
distribute substantially all of its income to shareholders to qualify for pass
through treatment under the tax laws and may, therefore, have to dispose of
portfolio securities to satisfy distribution requirements.
While credit ratings are only one factor EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND'S investment adviser relies on in evaluating high yield debt
securities, certain risks are associated with using credit ratings. Credit
ratings evaluate the safety of principal and interest payments, not market value
risk. Credit rating agencies may fail to change in timely manner the credit
ratings to reflect subsequent events; however, the Fund's investment adviser
continuously monitors the issuers of high yield debt securities in the Fund's
portfolio in an attempt to determine if the issuers will have sufficient cash
flow and profits to meet required principal and interest payments. Achievement
of EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND'S investment objective may
be more dependent upon the Fund's investment adviser and the credit analysis
capability of the Fund's investment adviser, than is the case for higher quality
debt securities. Credit ratings for individual securities may change from
18
<PAGE>
time to time and EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND may retain a
portfolio security whose rating has been changed. See the Statement of
Additional Information for a description of bond and note ratings.
Transactions in Options and Futures. The Funds, other than EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND, may engage in options and futures transactions. Options
and futures transactions are intended to enable a Fund to manage market or
interest rate risk, and the Funds do not use these transactions for speculation
or leverage. The Funds, other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND,
may attempt to hedge all or a portion of their portfolios through the purchase
of both put and call options on their portfolio securities and listed put
options on financial futures contracts for portfolio securities. The Funds may
also write covered call options on their portfolio securities to attempt to
increase their current income. The Funds will maintain their positions in
securities, option rights, and segregated cash subject to puts and calls until
the options are exercised, closed, or have expired. An option position may be
closed out only on an exchange which provides a secondary market for an option
of the same series. The Funds may purchase listed put options on financial
futures contracts. These options will be used only to protect portfolio
securities against decreases in value resulting from market factors such as an
anticipated increase in interest rates.
The Funds, other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, may
write (i.e., sell) covered call and put options. By writing a call option, a
Fund becomes obligated during the term of the option to deliver the securities
underlying the option upon payment of the exercise price. By writing a put
option, a Fund becomes obligated during the term of the option to purchase the
securities underlying the option at the exercise price if the option is
exercised. The Funds also may write straddles (combinations of covered puts and
calls on the same underlying security). The Funds may only write "covered"
options. This means that so long as a Fund is obligated as the writer of a call
option, it will own the underlying securities subject to the option or, in the
case of call options on U.S. Treasury bills, the Fund might own substantially
similar U.S. Treasury bills. A Fund will be considered "covered" with respect to
a put option it writes if, so long as it is obligated as the writer of the put
option, it deposits and maintains with its custodian in a segregated account
liquid assets having a value equal to or greater than the exercise price of the
option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised. By
writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Funds might become obligated to purchase the underlying securities for more than
their current market price upon exercise.
A futures contract is a firm commitment by two parties: the seller, who
agrees to make delivery of the specific type of instrument called for in the
contract ("going short"), and the buyer, who agrees to take delivery of the
instrument ("going long") at a certain time in the future. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities of
the U.S. government. If a Fund would enter into financial futures contracts
directly to hedge its holdings of fixed income securities, it would enter into
contracts to deliver securities at an undetermined price (i.e., "go short") to
protect itself against the possibility that the prices of its fixed income
securities may decline during the Fund's anticipated holding period. A Fund
would "go long" (agree to purchase securities in the future at a predetermined
price) to hedge against a decline in market interest rates.
The Funds, other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, may also
enter into financial futures contracts and write options on such contracts. The
Funds intend to enter into such contracts and related options for hedging
purposes. The Funds will enter into futures on securities or index-based futures
contracts in order to hedge against changes in interest rates or securities
prices. A futures contract on securities is an agreement to buy or sell
securities during a designated month at whatever price exists at that time. A
futures contract on a securities index does not involve the actual delivery of
securities, but merely requires the payment of a cash settlement based on
changes in the securities index. The Funds do not make payment or deliver
securities upon entering into a futures contract. Instead, they put down a
margin deposit, which is adjusted to reflect changes in the value of the
contract and which remains in effect until the contract is terminated.
The Funds, other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, may sell
or purchase other financial futures contracts. When a futures contract is sold
by a Fund, the profit on the contract will tend to rise when the value of the
underlying securities declines and to fall when the value of such securities
increases. Thus, the Funds sell futures contracts in order to offset a possible
decline in the profit on their securities. If a futures contract is purchased by
a Fund, the value of the contract will tend to rise when the value of the
underlying
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<PAGE>
securities increases and to fall when the value of such securities declines. The
Funds may enter into closing purchase and sale transactions in order to
terminate a futures contract and may buy or sell put and call options for the
purpose of closing out their options positions. The Funds' ability to enter into
closing transactions depends on the development and maintenance of a liquid
secondary market. There is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. As a result, there
can be no assurance that the Funds will be able to enter into an offsetting
transaction with respect to a particular contract at a particular time. If the
Funds are not able to enter into an offsetting transaction, the Funds will
continue to be required to maintain the margin deposits on the contract and to
complete the contract according to its terms, in which case it would continue to
bear market risk on the transaction.
Risk Characteristics Of Options And Futures. Although options and futures
transactions are intended to enable the Funds to manage market or interest rate
risks, these investment devices can be highly volatile, and the Funds use of
them can result in poorer performance (i.e., the Funds return may be reduced).
The Funds attempt to use such investment devices for hedging purposes may not be
successful. Successful futures strategies require the ability to predict future
movements in securities prices, interest rates and other economic factors. When
the Funds use financial futures contracts and options on financial futures
contracts as hedging devices, there is a risk that the prices of the securities
subject to the financial futures contracts and options on financial futures
contracts may not correlate perfectly with the prices of the securities in the
Funds' portfolios. This may cause the financial futures contract and any related
options to react to market changes differently than the portfolio securities. In
addition, the Funds investment adviser could be incorrect in its expectations
and forecasts about the direction or extent of market factors, such as interest
rates, securities price movements, and other economic factors. Even if the Funds
investment adviser correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of a Fund's futures position did not
correspond to changes in the value of its investments. In these events, the
Funds may lose money on the financial futures contracts or the options on
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although the Funds investment adviser will
consider liquidity before entering into financial futures contracts or options
on financial futures contracts transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular financial futures
contract or option on a financial futures contract at any particular time. The
Funds' ability to establish and close out financial futures contracts and
options on financial futures contract positions depends on this secondary
market. If a Fund is unable to close out its position due to disruptions in the
market or lack of liquidity, the Fund may lose money on the futures contract or
option, and the losses to the Fund could be significant.
Municipal lease obligations. Each Fund may purchase municipal leases, which are
issued by state and local governments or authorities to finance the acquisition
of equipment and facilities. The Funds may purchase municipal securities in the
form of participation interests which represent undivided proportional interests
in lease payments by a governmental or non-profit entity. The lease payments and
other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal charter or the
nature of the appropriation for the lease. In particular, lease obligations may
be subject to periodic appropriation. If the entity does not appropriate funds
for future lease payments, the entity cannot be compelled to make such payments.
Furthermore, a lease may provide that the certificate trustee cannot accelerate
lease obligations upon default. The trustee would only be able to enforce lease
payments as they become due. In the event of a default or failure of
appropriation, it is unlikely that the trustee would be able to obtain an
acceptable substitute source of payment or that the substitute source of payment
would generate tax-exempt income.
Resource recovery bonds. Each Fund may purchase resource recovery bonds, which
may be general obligations of the issuing municipality or supported by corporate
or bank guarantees. The viability of the resource recovery project,
environmental protection regulations and project operator tax incentives may
affect the value and credit quality of resource recovery bonds.
Zero coupon debt securities. The Funds may purchase zero coupon debt securities.
These securities do not make regular interest payments. Instead, they are sold
at a deep discount from their face value. In calculating their daily dividends,
each day the Fund takes into account as income a portion of the difference
between these securities' purchase price and their face value. Because they do
not pay current income, the prices of zero coupon debt securities can be very
volatile when interest rates change.
Securities with Put or Demand Rights. The Funds have the ability to enter into
put transactions, sometimes referred to as stand-by commitments, with respect to
Municipal Obligations held in their portfolio or to purchase securities which
carry a demand feature or put option which permit a Fund, as holder, to tender
them back to the
20
<PAGE>
issuer or a third party prior to maturity and receive payment within seven days.
Segregated accounts will be maintained by each Fund for all such transactions.
For a detailed description of put transactions, see "Investment
Policies -- Securities with Put Rights" in the Statement of Additional
Information.
The amount payable to a Fund by the seller upon its exercise of a put
will normally be (i) the Funds' acquisition cost of the securities (excluding
any accrued interest which the Funds paid on their acquisition), less any
amortized market premium plus any amortized market or original issue discount
during the period a Fund owned the securities, plus (ii) all interest accrued on
the securities since the last interest payment date during the period the
securities were owned by a Fund. Accordingly, the amount payable by a
broker-dealer or bank during the time a put is exercisable will be substantially
the same as the value of the underlying securities.
A Fund's right to exercise a put is unconditional and unqualified. A put
is not transferable by a Fund, although each Fund may sell the underlying
securities to a third party at any time. The Funds expect that puts will
generally be available without any additional direct or indirect cost. However,
if necessary and advisable, a Fund may pay for certain puts either separately in
cash or by paying a higher price for portfolio securities which are acquired
subject to such a put (thus reducing the yield to maturity otherwise available
to the same securities). Thus, the aggravate price paid for securities with put
rights may be higher than the price that would otherwise be paid.
A Fund may enter into put transactions only with broker-dealers (in
accordance with the rules of the Securities and Exchange Commission) and banks
which, in the opinion of the Funds' Adviser, present minimal credit risks. Each
Fund's investment adviser will monitor periodically the creditworthiness of
issuers of such obligations held by each Fund. A Fund's ability to exercise a
put will depend on the ability of the broker-dealer or bank to pay for the
underlying securities at the time the put is exercised. In the event that a
broker-dealer should default on its obligation to purchase an underlying
security, a Fund might be unable to recover all or a portion of any loss
sustained from having to sell the security elsewhere. The Funds intend to enter
into put transactions solely to maintain portfolio liquidity and do not intend
to exercise their rights thereunder for trading purposes.
SPECIAL RISK FACTORS RELATED TO INVESTING IN MUNICIPAL SECURITIES
It should be noted that municipal securities may be adversely affected by
local political and economic conditions and developments within a state. For
example, adverse conditions in a significant industry within New Jersey may from
time to time have a correspondingly adverse effect on specific issuers within
New Jersey or on anticipated revenue to the State itself; conversely, an
improving economic outlook for a significant industry may have a positive effect
on such issuers or revenues.
The value of municipal securities may also be affected by general
conditions in the money markets or the municipal bond markets, the levels of
federal and state income tax rates, the supply of tax-exempt bonds, the size of
the particular offering, the maturity of the obligation, the credit quality and
rating of the issue, and perceptions with respect to the level of interest
rates. In general, the value of bonds tends to appreciate when interest rates
decline and depreciate when interest rates rise. An expanded discussion of the
risks associated with the purchase of securities issued in certain states is
contained in the Statement of Additional Information.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER
The management of each Fund is supervised by the Trustees of the Trust
under which each Fund has been established. The Capital Management Group of
First Union National Bank of North Carolina ("CMG") serves as investment adviser
to EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND,
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, EVERGREEN NORTH CAROLINA MUNICIPAL
BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN VIRGINIA
MUNICIPAL BOND FUND and EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND. First
Union National Bank of North Carolina ("FUNB") is a subsidiary of First Union
Corporation ("First Union"), the sixth largest bank holding company in the
United States. First Union is headquartered in Charlotte, North Carolina, and
had $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 through offices in 36 states. CMG manages or otherwise oversees
the investment of over $36 billion in assets belonging to a wide range of
clients, including all the series of Evergreen Investment Trust (formerly known
as First Union
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<PAGE>
Funds). First Union Brokerage Services, Inc., a wholly-owned subsidiary of FUNB,
is a registered broker-dealer that is principally engaged in providing retail
brokerage services consistent with its federal banking authorizations. First
Union Capital Markets Corp., a wholly-owned subsidiary of First Union, is a
registered broker-dealer principally engaged in providing, consistent with its
federal banking authorizations, private placement, securities dealing, and
underwriting services.
CMG manages investments and supervises the daily business affairs of
EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND,
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, EVERGREEN NORTH CAROLINA MUNICIPAL
BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN VIRGINIA
MUNICIPAL BOND FUND and EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND and,
as compensation therefor, is entitled to receive an annual fee equal to .50 of
1% of the average daily net assets of each Fund, other than EVERGREEN FLORIDA
HIGH INCOME MUNICIPAL BOND FUND, from which it is entitled to receive an annual
fee equal to .60 of 1% of average daily net assets and EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND, from which it is entitled to receive an annual fee based
on the average daily net assets of the Fund calculated as follows: up to $500
million -- .50 of 1%; in excess of $500 million up to $1 billion -- .45 of 1%;
in excess of $1 billion up to $1.5 billion -- .35 of 1%. The total annualized
operating expenses of EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA
MUNICIPAL BOND FUND, EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, EVERGREEN NORTH
CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND,
EVERGREEN VIRGINIA MUNICIPAL BOND FUND and EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND for the fiscal year ended August 31, 1995 are set forth in
the section entitled "Financial Highlights". Evergreen Asset Management Corp.
("Evergreen Asset"), a subsidiary of FUNB, serves as administrator to each Fund
and is entitled to receive a fee based on the average daily net assets of each
Fund at a rate based on the total assets of the mutual funds administered by
Evergreen Asset for which CMG or Evergreen Asset also serve as investment
adviser, calculated in accordance with the following schedule: .050% of the
first $7 billion; .035% on the next $3 billion; .030% on the next $5 billion;
.020% on the next $10 billion; .015% on the next $5 billion; and .010% on assets
in excess of $30 billion. Furman Selz LLC, an affiliate of Evergreen
Funds Distributor, Inc., distributor for the Evergreen group of mutual funds,
serves as sub-administrator for each Fund and is entitled to receive a fee from
each Fund calculated on the average daily net assets of each Fund at a rate
based on the total assets of the mutual funds administered by Evergreen Asset
for which CMG or Evergreen Asset also serve as investment adviser, calculated in
accordance with the following schedule: .0100% of the first $7 billion; .0075%
on the next $3 billion; .0050% on the next $15 billion; and .0040% on assets in
excess of $25 billion. The total assets of the mutual funds administered by
Evergreen Asset for which CMG or Evergreen Asset serve as investment adviser
were approximately $1 billion as of September 30, 1995. Prior to January 1,
1996, First Fidelity Bank, N.A. ("First Fidelity") served as investment adviser
to EVERGREEN NEW JERSEY TAX-FREE INCOME FUND. CMG succeeded to the mutual funds
advisory business of First Fidelity in connection with the acquisition of First
Fidelity Bancorporation by a subsidiary of First Union.
Robert S. Drye is a Vice President of FUNB, and has been with FUNB since
1968. Since 1989, Mr. Drye has served as a portfolio manager for several of the
series of Evergreen Investment Trust and for certain common trust funds. Prior
to 1989, Mr. Drye was a marketing specialist with First Union Brokerage
Services, Inc. Mr. Drye has managed the EVERGREEN SOUTH CAROLINA MUNICIPAL BOND
FUND since its inception in 1994 and the EVERGREEN FLORIDA MUNICIPAL BOND FUND
since its inception in 1993. Richard K. Marrone is a Vice President of FUNB. Mr.
Marrone joined FUNB in 1993 with eleven years experience managing fixed income
assets at Woodbridge Capital Management, a subsidiary of Comerica Bank, N.A. Mr.
Marrone is responsible for the portfolio management of several series of
Evergreen Investment Trust and certain common trust funds. Mr. Marrone has
served as portfolio manager of the EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
since 1993, the EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND since its
inception in 1995 and EVERGREEN GEORGIA MUNICIPAL BOND FUND since its inception
in 1993. Charles E. Jeanne joined FUNB in 1993. Prior to joining FUNB, Mr.
Jeanne served as a trader/portfolio manager for First American Bank where he was
responsible for individual accounts and common trust funds. Mr. Jeanne has been
the portfolio manager for the EVERGREEN VIRGINIA MUNICIPAL BOND FUND since its
inception in 1993. Jocelyn Turner is a Municipal Bond Portfolio Manager for CMG
and has managed the EVERGREEN NEW JERSEY TAX-FREE INCOME FUND since 1992. Ms.
Turner was previously employed at First Fidelity as a Vice President, Municipal
Bond Portfolio Manager at One Federal Asset Management, Boston, MA since 1987.
DISTRIBUTION PLANS AND AGREEMENTS
Rule 12b-1 under the Investment Company Act of 1940 permits an investment
company to pay expenses associated with the distribution of its shares in
accordance with a duly adopted plan. Each Fund has adopted for each of its Class
A and Class B shares a Rule 12b-1 plan (each, a "Plan" or collectively the
"Plans"). Under the
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<PAGE>
Plans, each Fund may incur distribution-related and shareholder
servicing-related expenses which may not exceed an annual rate of .75 of 1% of
the aggregate average daily net assets attributable to the Class A shares of
each Fund other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, .35 of 1% of the
aggregate average daily net assets attributable to the Class A shares of
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, 1.00% of the aggregate average daily
net assets attributable to the Class B shares of EVERGREEN NEW JERSEY TAX-FREE
INCOME FUND and EVERGREEN FLORIDA HIGH INCOME MUNICIPAL FUND, and .75 of 1% of
the aggregate average daily net assets attributable to the Class B shares of
EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND,
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL
BOND FUND and EVERGREEN VIRGINIA MUNICIPAL BOND FUND. Payments under the Plans
adopted with respect to Class A shares are currently voluntarily limited to .25
of 1% of each Fund's aggregate average daily net assets attributable to Class A
shares. The Plans provide that a portion of the fee payable thereunder may
constitute a service fee to be used for providing ongoing personal services
and/or the maintenance of shareholder accounts. EVERGREEN FLORIDA MUNICIPAL BOND
FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN NORTH CAROLINA MUNICIPAL
BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND and EVERGREEN VIRGINIA
MUNICIPAL BOND FUND have, in addition to the Plans adopted with respect to their
Class B shares, adopted a shareholder service plan ("Service Plans") relating to
the Class B shares which permit each Fund to incur a fee of up to .25 of 1% of
the aggregate average daily net assets attributable to the Class B shares for
ongoing personal services and/or the maintenance of shareholder accounts. Such
service fee payments to financial intermediaries for such purposes, whether
pursuant to a Plan or Service Plans, will not exceed .25% of the aggregate
average daily net assets attributable to each Class of shares of each Fund.
Each Fund has also entered into a distribution agreement (each a
"Distribution Agreement" or collectively the "Distribution Agreements") with
Evergreen Funds Distributor, Inc. ("EFD"). Pursuant to the Distribution
Agreements, each Fund will compensate EFD for its services as distributor at a
rate which may not exceed an annual rate of .25 of 1% of a Fund's aggregate
average daily net assets attributable to Class A shares, and .75 of 1% of a
Fund's aggregate average daily net assets attributable to the Class B shares.
The Distribution Agreements provide that EFD will use the distribution fee
received from a Fund for payments (i) to compensate broker-dealers or other
persons for distributing shares of the Funds, including interest and principal
payments made in respect of amounts paid to broker-dealers or other persons that
have been financed (EFD may assign its rights to receive compensation under the
Plans to secure such financings), (ii) to otherwise promote the sale of shares
of the Fund, and (iii) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative, accounting and
other services with respect to the Fund's shareholders. The financing of
payments made by EFD to compensate broker-dealers or other persons for
distributing shares of the Funds may be provided by FUNB or its affiliates. The
Funds may also make payments under the Plans (and in the case of EVERGREEN
FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN
NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
and EVERGREEN VIRGINIA MUNICIPAL BOND FUND, the Service Plans), in amounts up to
.25 of 1% of a Fund's aggregate average daily net assets on an annual basis
attributable to Class B shares, to compensate organizations, which may include
EFD and each Fund's investment adviser or their affiliates, for personal
services rendered to shareholders and/or the maintenance of shareholder
accounts.
The Funds may not pay any distribution or services fees during any fiscal
period in excess of the amounts set forth above. Since EFD's compensation under
the Distribution Agreements is not directly tied to the expenses incurred by
EFD, the amount of compensation received by it under the Distribution Agreements
during any year may be more or less than its actual expenses and may result in a
profit to EFD. Distribution expenses incurred by EFD in one fiscal year that
exceed the level of compensation paid to EFD for that year may be paid from
distribution fees received from a Fund in subsequent fiscal years.
The Plans and Service Plans are in compliance with rules of the National
Association of Securities Dealers, Inc. which effectively limit the annual
asset-based sales charges and service fees that a mutual fund may pay on a class
of shares to .75 of 1% and .25 of 1%, respectively, of the average annual net
assets attributable to that class. The rules also limit the aggregate of all
front-end, deferred and asset-based sales charges imposed with respect to a
class of shares by a mutual fund that also charges a service fee to 6.25% of
cumulative gross sales of shares of that class, plus interest at the prime rate
plus 1% per annum.
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PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
You can purchase shares of any of the Funds through broker-dealers, banks
or other financial intermediaries, or directly through EFD. The minimum initial
investment is $1,000, which may be waived in certain situations. There is no
minimum for subsequent investments. Investments of $25 or more are allowed under
the systematic investment program. Share certificates are not issued. In states
where EFD is not registered as a broker-dealer shares of a Fund will only be
sold through other broker-dealers or other financial institutions that are
registered. See the Share Purchase Application and Statement of Additional
Information for more information. Only Class A and Class B shares are offered
through this Prospectus (see "General Information" -- "Other Classes of
Shares").
Class A Shares-Front-End Sales Charge Alternative. You can purchase Class A
shares at net asset value plus an initial sales charge on purchases under
$1,000,000. On purchases of $1,000,000 or more, a contingent deferred sales
charge ("CDSC") equal to the lesser of 1% of the purchase price or redemption
value will be imposed on shares redeemed during the first year after purchase.
The schedule of charges for Class A Shares is as follows:
Initial Sales Charge
<TABLE>
<CAPTION>
as a % of the Net as a % of the Commission to Dealer/Agent
Amount of Purchase Amount Invested Offering Price as a % of Offering Price
<S> <C> <C> <C>
Less than $50,000 4.99% 4.75% 4.25%
$50,000 - $99,000 4.71% 4.50% 4.25%
$100,000 - $249,999 3.90% 3.75% 3.25%
$250,000 - $499,999 2.56% 2.50% 2.00%
$500,000 - $999,999 2.04% 2.00% 1.75%
$1,000,000 - $2,999,999 None None 1.00%
$3,000,000 - $4,999,999 None None .50%
Over $5,000,000 None None .25%
</TABLE>
No front-end sales charges are imposed on Class A shares purchased by:
institutional investors, which may include bank trust departments and registered
investment advisers; investment advisers, consultants or financial planners who
place trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee; clients of
investment advisers or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisers or financial planners on the books of the broker-dealer through whom
shares are purchased; institutional clients of broker-dealers, including
retirement and deferred compensation plans and the trusts used to fund these
plans, which place trades through an omnibus account maintained with a Fund by
the broker-dealer; shareholders of record on October 12, 1990 in any series of
Evergreen Investment Trust in existence on that date, and the members of their
immediate families; employees of FUNB and its affiliates, EFD and any
broker-dealer with whom EFD has entered into an agreement to sell shares of the
Funds, and members of the immediate families of such employees; and upon the
initial purchase of an Evergreen mutual fund by investors reinvesting the
proceeds from a redemption within the preceding thirty days of shares of other
mutual funds, provided such shares were initially purchased with a front-end
sales charge or subject to a contingent deferred sales charge. Certain
broker-dealers or other financial institutions may impose a fee on transactions
in shares of the Funds.
When Class A shares are sold, EFD will normally retain a portion of the
applicable sales charge and pay the balance to the broker-dealer or other
financial intermediary through whom the sale was made. EFD may also pay fees to
banks from sales charges for services performed on behalf of the bank's
customers in connection with the purchase of shares of the Funds. In addition to
compensation paid at the time of sale, entities whose clients have purchased
Class A shares may receive a trailing commission equal to .25 of 1% of the
aggregate average daily net assets attributable to Class A shares of each Fund
held by their clients. Certain purchases of Class A shares may qualify for
reduced sales charges in accordance with a Fund's Combined Purchase Privilege,
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<PAGE>
Cumulative Quantity Discount, Statement of Intention, Privilege for Certain
Retirement Plans and Reinstatement Privilege. Consult the Share Purchase
Application and Statement of Additional Information for additional information
concerning these reduced sales charges.
Class B Shares-Deferred Sales Charge Alternative. You can purchase Class B
shares at net asset value without an initial sales charge. However, you may pay
a contingent deferred sales charge ("CDSC") if you redeem shares within seven
years after purchase. Shares obtained from dividend or distribution reinvestment
are not subject to the CDSC. The amount of the CDSC (expressed as a percentage
of the lesser of the current net asset value or original cost) will vary
according to the number of years from the purchase of Class B shares as set
forth below.
<TABLE>
<CAPTION>
Year Since Purchase Contingent Deferred Sales Charge
<S> <C> <C>
FIRST 5%
SECOND 4%
THIRD and FOURTH 3%
FIFTH 2%
SIXTH and SEVENTH 1%
</TABLE>
The CDSC is deducted from the amount of the redemption and is paid to
EFD. The CDSC will be waived on redemptions of shares following the death or
disability of a shareholder, to meet distribution requirements for certain
qualified retirement plans or in the case of certain redemptions made under a
Fund's Systematic Cash Withdrawal Plan. Class B shares are subject to higher
distribution and/or shareholder service fees than Class A shares for a period of
seven years (after which they convert to Class A shares). The higher fees mean a
higher expense ratio, so Class B shares pay correspondingly lower dividends and
may have a lower net asset value than Class A shares. See the Statement of
Additional Information for further details.
With respect to Class B shares, no CDSC will be imposed on: (1) the
portion of redemption proceeds attributable to increases in the value of the
account due to increases in the net asset value per share, (2) shares acquired
through reinvestment of dividends and capital gains, (3) shares held for more
than seven years after the end of the calendar month of acquisition, (4)
accounts following the death or disability of a shareholder, or (5) minimum
required distributions to a shareholder over the age of 70 1/2 from an IRA or
other retirement plan.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the outstanding shares of that Class.
Shares are valued each day the New York Stock Exchange (the "Exchange") is open
as of the close of regular trading (currently 4:00 p.m. Eastern time). The
Exchange is closed on New Year's Day, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The securities
in a Fund are valued at their current market value determined on the basis of
market quotations or, if such quotations are not readily available, such other
methods as the Trustees believe would accurately reflect fair market value.
General. The decision as to which Class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A shares, which
incur lower ongoing distribution and/or shareholder service fees, after seven
years. The compensation received by dealers and agents may differ depending on
whether they sell Class A or Class B shares. There is no size limit on purchases
of Class A shares.
In addition to the discount or commission paid to dealers, EFD will from
time to time pay to dealers additional cash or other incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of a
Fund and/or other Evergreen Mutual Funds. Such incentives will take the form of
payment for attendance at seminars, lunches, dinners, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer and their immediate
family members to urban or resort locations within or outside the United States.
Such a dealer may elect to receive cash incentives of equivalent amount in lieu
of such payments. 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.
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Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from an investor's account to reimburse the Fund or its investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen mutual funds.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any day
the Exchange is open, either directly or through your financial intermediary.
The price you will receive is the net asset value (less any applicable CDSC for
Class B shares) next calculated after the Fund receives your request in proper
form. Proceeds generally will be sent to you within seven days. However, for
shares recently purchased by check, a Fund will not send proceeds until it is
reasonably satisfied that the check has been collected (which may take up to ten
days). Once a redemption request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value (less any applicable CDSC for
Class B shares). Your financial intermediary is responsible for furnishing all
necessary documentation to a Fund and may charge you for this service. Certain
financial intermediaries may require that you give instructions earlier than
4:00 p.m.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street Bank and Trust Company ("State
Street") which is the registrar, transfer agent and dividend-disbursing agent
for each Fund. Stock power forms are available from your financial intermediary,
State Street, and many commercial banks. Additional documentation is required
for the sale of shares by corporations, financial intermediaries, fiduciaries
and surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling the telephone number on the front page of this Prospectus between the
hours of 8:00 a.m. and 5:30 p.m. (Eastern time) each business day (i.e., any
weekday exclusive of days on which the Exchange or State Street's offices are
closed). The Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund or State Street by telephone should
follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Funds will employ reasonable procedures to verify that
telephone requests are genuine. These procedures include requiring some form of
personal identification prior to acting upon instructions and tape recording of
conversations. If the Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, the Fund reserves the right to refuse a telephone redemption request, if
it is believed advisable to do
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so. Financial intermediaries may charge a fee for handling telephonic requests.
The telephone redemption option may be suspended or terminated at any time
without notice.
General. The sale of shares is a taxable transaction for federal tax purposes.
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $1,000 for thirty days. Shareholders will receive sixty days' written
notice to increase the account value before the account is closed. The Funds
have elected to be governed by Rule 18f-1 under the Investment Company Act of
1940 pursuant to which each Fund is obligated to redeem shares solely in cash,
up to the lesser of $250,000 or 1% of a Fund's total net assets during any
ninety day period for any one shareholder. See the Statement of Additional
Information for further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen mutual funds through your financial
intermediary, or by telephone or mail as described below. An exchange which
represents an initial investment in another Evergreen mutual fund must amount to
at least $1,000. Once an exchange request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled. Exchanges will be made on the
basis of the relative net asset values of the shares exchanged next determined
after an exchange request is received. Exchanges are subject to minimum
investment and suitability requirements.
Each of the Evergreen mutual funds has different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
No CDSC will be imposed in the event Class B shares are exchanged for
Class B shares of other Evergreen mutual funds. If you redeem shares, the CDSC
applicable to the Class B shares of the Evergreen mutual fund originally
purchased for cash is applied. Also, Class B shares will continue to age
following an exchange for purposes of conversion to Class A shares and
determining the amount of the applicable CDSC.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Exchanges by Telephone and Mail. You may exchange shares by telephone by calling
the telephone number on the front page of this Prospectus. Exchange requests
made after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach State Street by telephone. If you wish to use the
telephone exchange service you should indicate this on the Share Purchase
Application. As noted above, each Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares communicated
by telephone are genuine. A telephone exchange may be refused by a Fund or State
Street if it is believed advisable to do so. Procedures for exchanging Fund
shares by telephone may be modified or terminated at any time. Written requests
for exchanges should follow the same procedures outlined for written redemption
requests in the section entitled "How to Redeem Shares", however, no signature
guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more information
about these services or your account, contact your financial intermediary, EFD
or the toll-free number on the front page of this Prospectus. Some services are
described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25 per month or
$75 per quarter. Each Fund reserves the right to close an account that through
liquidation or termination of the systematic investment plan has not reached a
minimum balance of $1,000 ($250 for retirement accounts) within 24 months of the
initial investment. You can open a
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systematic investment plan in the EVERGREEN FLORIDA MUNICIPAL BOND FUND for a
minimum of only $50 per month with no initial investment required.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Funds'
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $75. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gain
distributions reinvested automatically. Any applicable Class B CDSC will be
waived with respect to redemptions occurring under a Systematic Cash Withdrawal
Plan during a calendar year to the extent that such redemptions do not exceed
10% of (i) the initial value of the account plus (ii) the value, at the time of
purchase, of any subsequent investments.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of a
Fund at the net asset value per share on the last business day of each month,
unless otherwise requested by a shareholder in writing. If the transfer agent
does not receive a written request for subsequent dividends and/or distributions
to be paid in cash at least three full business days prior to a given record
date, the dividends and/or distributions to be paid to a shareholder will be
reinvested. If you elect to receive dividends and distributions in cash and the
U.S. Postal Service cannot deliver the checks, or if the checks remain uncashed
for six months, the checks will be reinvested into your account at the then
current net asset value.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG being prevented from continuing to
perform the services required under the investment advisory contract or from
acting as agent in connection with the purchase of shares of a Fund by its
customers. If CMG were prevented from continuing to provide the services called
for under the investment advisory agreement, it is expected that the Trustees
would identify, and call upon each Fund's shareholders to approve, a new
investment adviser. If this were to occur, it is not anticipated that the
shareholders of any Fund would suffer any adverse financial consequences.
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
Income dividends are declared daily and paid monthly. Distributions of
any net realized gains of a Fund will be made at least annually. Shareholders
will begin to earn dividends on the first business day after shares are
purchased unless shares were not paid for, in which case dividends are not
earned until the next business day after payment is received. Each Fund has
qualified and intends to continue to qualify to be treated as a regulated
investment company under the Code. While so qualified, so long as each Fund
distributes all of its investment company taxable income and any net realized
gains to shareholders, it is expected that the Funds will not be required to pay
any Federal income taxes. A 4% nondeductible excise tax will be imposed on a
Fund if it does not meet certain distribution requirements by the end of each
calendar year. Each Fund anticipates meeting such distribution requirements.
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The Funds will designate and pay exempt-interest dividends derived from
interest earned on qualifying tax-exempt obligations. Such exempt-interest
dividends may be excluded by shareholders of a Fund from their gross income for
federal income tax purposes, however (1) all or a portion of such
exempt-interest dividends may be a specific preference item for purposes of the
federal individual and corporate alternative minimum taxes to the extent that
they are derived from certain types of private activity bonds issued after
August 7, 1986, and (2) all exempt-interest dividends will be a component of the
"adjusted current earnings" for purposes of the federal corporate alternative
minimum tax.
Dividends paid from taxable income, if any, and distributions of any net
realized short-term capital gains (whether from tax exempt or taxable
obligations) are taxable as ordinary income and long-term capital gain
distributions are taxable as long-term capital gains, even though received in
additional shares of the Fund, and regardless of the investors holding period
relating to the shares with respect to which such gains are distributed. Market
discount recognized on taxable and tax-exempt bonds is taxable as ordinary
income, not as excludable income. Under current law, the highest federal income
tax rate applicable to net long-term gains realized by individuals is 28%. The
rate applicable to corporations is 35%.
Since each Fund's gross income is ordinarily expected to be tax exempt
interest income, it is not expected that the 70% dividends-received deduction
for corporations will be applicable. Specific questions should be addressed to
the investor's own tax adviser.
Each Fund is required by federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions (if any) and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, each investor must certify on the Share Purchase
Application, or on a separate form supplied by State Street, that the investor's
social security or taxpayer identification number is correct and that the
investor is not currently subject to backup withholding or is exempt from backup
withholding.
Set forth below are brief descriptions of the personal income tax status
of an investment in each of the Funds under Florida, Georgia, New Jersey, North
Carolina, South Carolina, and Virginia tax laws currently in effect. Income from
a Fund is not necessarily free from state income taxes in states other than its
designated state. State laws differ on this issue, and shareholders are urged to
consult their own tax advisers regarding the status of their accounts under
state and local laws.
EVERGREEN FLORIDA MUNICIPAL BOND FUND AND EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND. Florida does not currently impose an income tax on
individuals. Thus, individual shareholders of the Funds will not be subject to
any Florida state income tax on distributions received from the Funds. However,
certain distributions will be taxable to corporate shareholders which are
subject to Florida corporate income tax. Florida currently imposes an
intangibles tax at the annual rate of 0.20% on certain securities and other
intangible assets owned by Florida residents. Certain types of tax exempt
securities of Florida issuers, U.S. government securities and tax exempt
securities issued by certain U.S. territories and possessions are exempt from
this intangibles tax. Shares of the Funds will also be exempt from the Florida
intangibles tax if the portfolio consists exclusively of securities exempt from
the intangibles tax on the last business day of the calendar year. If the
portfolio consists of any assets which are not so exempt on the last business
day of the calendar year, however, only the portion of the shares of the Funds
which relate to securities issued by the United States and its possessions and
territories will be exempt from the Florida intangibles tax, and the remaining
portion of such shares will be fully subject to the intangibles tax, even if
they partly relate to Florida tax exempt securities.
EVERGREEN GEORGIA MUNICIPAL BOND FUND. Under existing Georgia law,
shareholders of the Fund will not be subject to individual or corporate Georgia
income taxes on distributions from the Fund to the extent that such
distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to (1) interest-bearing obligations issued by or
on behalf of the State of Georgia or its political subdivisions, or (2) interest
on obligations of the United States or of any other issuer whose obligations are
exempt from state income taxes under federal law. Distributions, if any, derived
from capital gains or other sources generally will be taxable for Georgia income
tax purposes to shareholders of the Fund who are subject to the Georgia income
tax. For purposes of the Georgia intangibles tax, shares of the Fund likely are
taxable (at the rate of 10 cents per $1,000 in value of the shares held on
January 1 of each year) to shareholders who are otherwise subject to such tax.
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND. In any year in which the Fund
satisfies the requirements for treatment as a "qualified investment fund" under
New Jersey law, distributions from the Fund will be exempt from the New Jersey
Gross Income Tax to the extent such distributions are attributable to interest
or gains from (i) obligations issued by or on behalf of the State of New Jersey
or any county, municipality, school or other district,
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agency, authority, commission, instrumentality, public corporation, body
corporate and politic or political subdivision of New Jersey or (ii) obligations
that are otherwise statutorily exempt from state or local taxation or under the
laws of the United States. Any gains realized on the sale or redemption of
shares held in a qualified investment fund are also exempt from the New Jersey
Gross Income Tax.
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND. Under existing North
Carolina law, shareholders of the Fund will not be subject to individual or
corporate North Carolina income taxes on distributions from the Fund to the
extent that such distributions represent exempt-interest dividends for federal
income tax purposes that are attributable to (1) interest on obligations issued
by North Carolina and political subdivisions thereof or (2) interest on
obligations of the United States or its territories or possessions.
Distributions, if any, derived from capital gains or other sources generally
will be taxable for North Carolina income tax purposes to shareholders of the
Fund who are subject to the North Carolina income tax.
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND. Under existing South
Carolina law, shareholders of the Fund will not be subject to individual or
corporate South Carolina income taxes on Fund distributions to the extent that
such distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to (1) interest on obligations of the State of
South Carolina, or any of its political subdivisions, (2) interest on
obligations of the United States, or (3) interest on obligations of any agency
or instrumentality of the United States that is prohibited by federal law from
being taxed by a state or any political subdivision of a state. Distributions,
if any, derived from capital gains or other sources, generally will be taxable
for South Carolina income tax purposes to shareholders of the Fund who are
subject to South Carolina income tax.
EVERGREEN VIRGINIA MUNICIPAL BOND FUND. Under existing Virginia law,
shareholders of the Fund will not be subject to individual or corporate Virginia
income taxes on distributions received from the Fund to the extent that such
distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to interest earned on (1) obligations issued by
or on behalf of the Commonwealth of Virginia or any political subdivision
thereof, or (2) obligations issued by a territory or possession of the United
States or any subdivision thereof which federal law exempts from state income
taxes. Distributions, if any, derived from capital gains or other sources
generally will be taxable for Virginia income tax purposes to shareholders of
the Fund who are subject to Virginia income tax.
Statements describing the tax status of shareholders' dividends and
distributions will be mailed annually by the Funds. These statements will set
forth the amount of income exempt from federal and if applicable, state
taxation, and the amount, if any, subject to federal and state taxation.
Moreover, to the extent necessary, these statements will indicate the amount of
exempt-interest dividends which are a specific preference item for purposes of
the federal individual and corporate alternative minimum taxes. The exemption of
interest income for federal income tax purposes does not necessarily result in
exemption under the income or other tax law of any state or local taxing
authority. Investors should consult their own tax advisers about the status of
distributions from the Funds in their states and localities. Each Fund notifies
shareholders annually as to the interest exempt from federal taxes earned by the
Fund.
A shareholder who acquires Class A shares of a Fund and sells or otherwise
disposes of such shares within ninety days of acquisition may not be allowed to
include certain sales charges incurred in acquiring such shares for purposes of
calculating gain and loss realized upon a sale or exchange of shares of the
Fund.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND is a separate
investment series of The Evergreen Municipal Trust, a Massachusetts business
trust organized in 1988. EVERGREEN NEW JERSEY TAX-FREE INCOME FUND is a separate
investment series of The Evergreen Tax Free Trust (formerly FFB Funds Trust), a
Massachusetts business trust organized in 1985. EVERGREEN FLORIDA MUNICIPAL BOND
FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN NORTH CAROLINA MUNICIPAL
BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND and EVERGREEN VIRGINIA
MUNICIPAL BOND FUND are each separate investment series of Evergreen Investment
Trust (formerly First Union Funds), a Massachusetts business trust organized in
1984. The Funds do not intend to hold annual shareholder meetings; shareholder
meetings will be held only when required by applicable law. Shareholders have
available certain procedures for the removal of Trustees.
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A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Trustees, that affect each series and class in
substantially the same manner. Class A, B and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific class. Each
class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Custodian, Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street
Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as
each Fund's custodian, registrar, transfer agent and dividend-disbursing agent
for a fee based upon the number of shareholder accounts maintained for the
Funds. The transfer agency fee with respect to the Class B shares will be higher
than the transfer agency fee with respect to the Class A shares.
Principal Underwriter. EFD, an affiliate of Furman Selz LLC located at 230 Park
Avenue, New York, New York 10169, is the principal underwriter of the Funds.
Furman Selz Incorporated also acts as sub-administrator to the Funds.
Other Classes of Shares. Each Fund currently offers three classes of shares,
Class A, Class B and Class Y, and may in the future offer additional classes.
Class Y shares are not offered by this Prospectus and are only available to (i)
persons who at or prior to December 31, 1994, owned shares in a mutual fund
advised by Evergreen Asset (ii) certain institutional investors and (iii)
investment advisory clients of CMG, Evergreen Asset or their affiliates. The
dividends payable with respect to Class A and Class B shares will be less than
those payable with respect to Class Y shares due to the distribution and
distribution related expenses borne by Class A and Class B shares and the fact
that such expenses are not borne by Class Y shares.
Performance Information. A Fund's performance may be quoted in advertising in
terms of yield or total return. Both types of performance are based on
Securities and Exchange Commission ("SEC") formulas and are not intended to
indicate future performance.
Yield is a way of showing the rate of income a Fund earns on its
investments as a percentage of the Fund's share price. A Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, a Fund's yield may not equal its
distribution rate, the income paid to your account or the income reported in a
Fund's financial statements. To calculate yield, a Fund takes the interest
income it earned from its portfolio of investments (as defined by the SEC
formula) for a 30-day period (net of expenses), divides it by the average number
of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on a Fund's share price at the end of the
30-day period. This yield does not reflect gains or losses from selling
securities.
Total returns are based on the overall dollar or percentage change in the
value of a hypothetical investment in a Fund. A Fund's total return shows its
overall change in value including changes in share prices and assumes all a
Fund's distributions are reinvested. A cumulative total return reflects a Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if a Fund's performance had been constant over
the entire period. Because average annual total returns tend to smooth out
variations in a Fund's return, you should recognize that they are not the same
as actual year-by-year results. To illustrate the components of overall
performance, a Fund may separate its cumulative and average annual total returns
into income results and realized and unrealized gain or loss.
Each Fund may also quote tax-equivalent yields, which show the taxable
yields an investor would have to earn before taxes to equal the Fund's tax-free
yields. A tax-equivalent yield is calculated by dividing a Fund's tax-
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exempt yield by the result of one minus a stated federal tax rate. If only a
portion of a Fund's income was tax-exempt, only that portion is adjusted in the
calculation.
Comparative performance information may also be used from time to time in
advertising or marketing a Fund's shares, including data from Lipper Analytical
Services, Inc., Morningstar and other industry publications. The Fund may also
advertise in items of sales literature an "actual distribution rate" which is
computed by dividing the total ordinary income distributed (which may include
the excess of short-term capital gains over losses) to shareholders for the
latest twelve month period by the maximum public offering price per share on the
last day of the period. Investors should be aware that past performance may not
be reflective of future results.
In marketing a Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering investment
alternatives. The information provided to investors may also include discussions
of other Evergreen mutual funds, products, and services, which may include:
retirement investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; and charitable
giving. In addition, the information provided to investors may quote financial
or business publications and periodicals, including model portfolios or
allocations, as they relate to fund management, investment philosophy, and
investment techniques. The 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.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which
each Fund operates provide that no Trustee or shareholder will be personally
liable for the obligations of the Trust and that every written contract made by
the Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the SEC under the Securities Act of 1933, as amended. Copies of the
Registration Statements may be obtained at a reasonable charge from the SEC or
may be examined, without charge, at the offices of the SEC in Washington, D.C.
APPENDIX A -- FLORIDA RISK CONSIDERATIONS
The following is a summary of economic factors which may affect the
ability of the municipal issuers of Florida obligations to repay general
obligation and revenue bonds. Such information is derived from sources that are
generally available to investors and is believed by the Funds to be accurate,
but has not been independently verified and may not be complete. Under current
law, the State of Florida is required to maintain a balanced budget such that
current expenses are met from current revenues. Florida does not currently
impose a tax on personal income but does impose taxes on corporate income
derived from activities within the state. In addition, Florida imposes an ad
valorem tax as well as sales and use taxes. These taxes are the principal
sources of funds to meet state expenses, including repayment of, and interest
on, obligations backed solely by the full faith and credit of the state, without
recourse to any specific project or related revenue source.
On November 3, 1992, Florida voters approved an amendment to the state
constitution which limits the annual growth in the assessed valuation of
residential property and which, over time, could constrain the growth in
property taxes, a major revenue source for local governments. The amendment
restricts annual increases in assessed valuation to the lesser of 3% or the
Consumer Price Index. The amendment applies only to residential properties
eligible for the homestead exemption and does not affect the valuation of
rental, commercial, or industrial properties. When sold, residential property
would be reassessed at market value. The amendment became effective January 1,
1993. While no immediate ratings implications are expected, the amendment could
have a negative impact on the financial performance of local governments over
time and lead to ratings revisions which may have a negative impact on the
prices of affected bonds.
Many of the bonds in which the Funds invest were issued by various units
of local government in the State of Florida. In addition, most of these bonds
are revenue bonds where the security interest of the bond holders typically is
limited to the pledge of revenues or special assessments flowing from the
project financed by the bonds. Projects include, but are not limited to, water
and waste water utilities, drainage systems, roadways, and other
development-related infrastructures. Therefore, the capacity of these issuers to
repay their obligations may be affected by variations in the Florida economy.
32
<PAGE>
Since 1970, Florida has been one of the fastest growing states in the
nation. Average annual population growth over the last 20 years was 320,000.
During this period only California and Texas grew more rapidly. In terms of
total population, Florida moved from the ninth most populous state in 1970 to
fourth today.
This rapid and sustained pace of population growth has given rise to
sharp increases in construction activity and to the need for roads, drainage
systems, and utilities to serve the burgeoning population. In turn this has
driven the growth in the volume of revenue bond debt outstanding.
The pace of growth, however, has not been steady. During economic
expansions, Florida's population growth has exceeded 500,000 people per year,
but in recessions growth has slowed to 120,000 per year. The variations in
construction activity over the course of business cycles is also very large.
Although the amplitude of the swings during business cycles is large, the
duration of downturns in Florida's growth has been short. Historically,
depressed levels of growth have lasted only a year or two at most. Furthermore,
Florida's cycles have not been periods of growth or decline. Instead, what has
occurred are periods of more growth or less growth.
Florida's ability to meet increasing expenses will be dependent in part
upon the state's ability to foster business and economic growth. During the past
decade, Florida has experienced significant increases in the technology-based
and other light industries and in the service sector. This growth has
diversified the state's overall economy, which at one time was dominated by the
citrus and tourism industries. The state's economic and business growth could be
restricted, however, by the natural limitations of environmental resources and
the state's ability to finance adequate public facilities such as roads and
schools.
33
<PAGE>
INVESTMENT ADVISER
Capital Management Group of First Union National Bank of North Carolina, 201
South College Street, Charlotte, North Carolina 28288
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL BOND
FUND, EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, EVERGREEN NORTH CAROLINA
MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND,
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 230 Park Avenue, New York, New York 10169
536118rev02 (10/pkg.) 1/96
******************************************************************************
EVERGREEN STATE SPECIFIC TAX-FREE FUNDS June 28, 1996
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
SUPPLEMENT TO PROSPECTUS DATED JANUARY 22, 1996
Class Y Shares. The Annual Operating Expenses table (and accompanying
notes) on page 3 of the EVERGREEN NEW JERSEY TAX-FREE INCOME FUND'S Class Y
Prospectus dated January 22, 1996, and the table giving examples of the annual
expenses to be borne by the Fund's Class Y shareholders, have been updated as of
the Fund's fiscal year ended February 29, 1996, as follows:
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES* CLASS Y
<S> <C> <C> <C>
Management Fees .50%
After 1 Year $ 9
12b-1 Fees --
After 3 Years $ 29
Other Expenses .41%
After 5 Years $ 50
After 10 Years $ 112
Total .91%
</TABLE>
* THE ESTIMATED ANNUAL OPERATING EXPENSES AND EXAMPLES DO NOT REFLECT FEE
WAIVERS AND EXPENSE REIMBURSEMENTS FOR THE MOST RECENT FISCAL YEAR. ACTUAL
EXPENSE FOR CLASS Y SHARES, NET OF FEE WAIVERS AND EXPENSE REIMBURSEMENTS FOR
THE FISCAL PERIOD ENDED FEBRUARY 29, 1996, WAS .31%.
From time to time, the Fund's investment adviser may, at its discretion,
reduce or waive its fees or reimburse the Fund for certain of its expenses in
order to reduce the Fund's expense ratio. The investment adviser may cease these
waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Fund will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of the Fund for its most recent fiscal period. Such expenses have been restated
to reflect current fee arrangements and in the case of Funds that did not offer
all of the above referenced Classes of shares during all or part of such
periods, the amounts set forth in the tables are based on the expenses incurred
by the Classes which were offered. THE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND
ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete
description of the various costs and expenses borne by the Fund see "Management
of the Funds".
The tables beginning on page 8 of the Prospectus dated January 22, 1996,
presenting financial highlights of the EVERGREEN NEW JERSEY TAX-FREE INCOME
FUND, have been amended as follows to include audited financial information for
each Class of the fiscal year ended February 29, 1996.
Class Y -- P. 1
<PAGE>
FINANCIAL HIGHLIGHTS
The information in the tables for EVERGREEN NEW JERSEY TAX-FREE INCOME
FUND for each of the years in the three-year period ended February 29, 1996, has
been audited by KPMG Peat Marwick LLP, the Fund's current independent auditors.
The information in the tables for the Fund for each of the periods from July 16,
1991 (commencement of operations) through February 28, 1993, has been audited by
Price Waterhouse LLP, the Fund's prior independent auditors. A report of KPMG
Peat Marwick LLP 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.
<TABLE>
<CAPTION>
CLASS A SHARES
JULY 16, 1991
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1996 1995 1994 1993 1992*
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........... $ 10.53 $ 10.99 $ 11.01 $ 10.22 $ 10.00
Income (loss) from investment operations:
Net investment income........................ .56 .57 .60 .63 .38
Net realized and unrealized gain (loss) on
investments................................ .48 (.46) (.02) .79 .22
Total from investment operations........... 1.04 .11 .58 1.42 .60
Less distributions to shareholders from net
investment income............................ (.56) (.57) (.60) (.63) (.38)
Net asset value, end of period................. $ 11.01 $ 10.53 $ 10.99 $ 11.01 $ 10.22
TOTAL RETURN+.................................. 10.1% 1.4% 5.3% 14.5% 9.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)...... $ 41,762 $ 34,852 $ 42,783 $ 30,863 $ 13,129
Ratios to average net assets:
Expenses..................................... .36%** .25%** .14%** .00%** .01%++**
Net investment income........................ 5.15%** 5.52%** 5.31%** 5.97%** 5.89%++**
Portfolio turnover rate........................ 4% 8% 2% 5% 5%
</TABLE>
* COMMENCEMENT OF CLASS OPERATIONS.
+ TOTAL RETURN IS CALCULATED ON NET ASSET VALUE PER SHARE FOR THE PERIODS
INDICATED AND IS NOT ANNUALIZED. INITIAL SALES CHARGE IS NOT REFLECTED.
++ ANNUALIZED.
** NET OF EXPENSE WAIVERS AND REIMBURSEMENTS. IF THE FUND HAD BORNE ALL
EXPENSES THAT WERE REIMBURSED OR WAIVED BY THE INVESTMENT ADVISER, THE
ANNUALIZED RATIOS OF EXPENSES AND NET INVESTMENT INCOME TO AVERAGE NET
ASSETS WOULD HAVE BEEN THE FOLLOWING:
<TABLE>
<CAPTION>
CLASS A SHARES
JULY 16, 1991
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1996 1995 1994 1993 1992*
<S> <C> <C> <C> <C> <C>
Expenses....................................... 1.03% 1.04% 1.05% 1.16% 1.20%
Net investment income.......................... 4.48% 4.73% 4.40% 4.81% 4.70%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
Class Y -- P. 2
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
JANUARY 30, 1996* FEBRUARY 8, 1996*
THROUGH THROUGH
FEBRUARY 29, 1996 FEBRUARY 29, 1996
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................................................. $11.08 $11.14
Income (loss) from investment operations:
Net investment income.............................................................. .05 .03
Net realized and unrealized gain (loss) on investments............................. (.07) (.13)
Total loss from investment operations............................................ (.02) (.10)
Less distributions to shareholders from net investment income........................ (.05) (.03)
Net asset value, end of period....................................................... $11.01 $11.01
TOTAL RETURN+........................................................................ (.2%) (.9%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............................................ $186 $18
Ratios to average net assets:
Expenses**......................................................................... .31%++ .31%++
Net investment income**............................................................ 5.23%++ 5.28%++
Portfolio turnover rate.............................................................. 4% 4%
</TABLE>
* COMMENCEMENT OF CLASS OPERATIONS.
+ TOTAL RETURN IS CALCULATED ON NET ASSET VALUE PER SHARE FOR THE PERIODS
INDICATED AND IS NOT ANNUALIZED. CONTINGENT DEFERRED SALES CHARGES ARE NOT
REFLECTED.
++ ANNUALIZED.
** NET OF EXPENSE WAIVERS AND REIMBURSEMENTS. IF THE FUND HAD BORNE ALL
EXPENSES THAT WERE REIMBURSED OR WAIVED BY THE INVESTMENT ADVISER, THE
ANNUALIZED RATIOS OF EXPENSES AND NET INVESTMENT INCOME TO AVERAGE NET
ASSETS WOULD HAVE BEEN THE FOLLOWING:
<TABLE>
<CAPTION>
CLASS B SHARES CLASS Y SHARES
JANUARY 30, 1996* FEBRUARY 8, 1996*
THROUGH THROUGH
FEBRUARY 29, 1996 FEBRUARY 29, 1996
<S> <C> <C>
Expenses............................................................................. 1.66% .88%
Net investment income................................................................ 3.88% 4.71%
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
******************************************************************************
<PAGE>
PROSPECTUS January 22, 1996
EVERGREEN(SM) STATE SPECIFIC TAX FREE FUNDS (Evergreen Tree Logo)
EVERGREEN FLORIDA MUNICIPAL BOND FUND
EVERGREEN GEORGIA MUNICIPAL BOND FUND
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
CLASS Y SHARES
The Evergreen State Specific Tax-Free Funds (the "Funds") are
designed to provide investors with current income exempt from Federal
income tax and certain state income tax. This Prospectus provides
information regarding the Class Y shares offered by the Funds. Each Fund
is, or is a series of, an open-end, non-diversified, management investment
company except for EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND which
is diversified. This Prospectus sets forth concise information about the
Funds that a prospective investor should know before investing. The address
of the Funds is 2500 Westchester Avenue, Purchase, New York 10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen group of mutual funds dated January 22, 1996
has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus
and other matters which may be of interest to investors, and may be
obtained without charge by calling the Funds at (800) 235-0064. There can
be no assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, ARE NOT INSURED OR
OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE INVESTMENT RISKS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND WILL INVEST AT LEAST 65%
OF THE VALUE OF ITS TOTAL ASSETS IN MUNICIPAL SECURITIES CONSISTING OF HIGH
YIELD (I.E., HIGH RISK), MEDIUM, LOWER RATED AND UNRATED BONDS. SUCH
SECURITIES ARE COMMONLY CALLED JUNK BONDS AND ARE SUBJECT TO GREATER MARKET
FLUCTUATIONS AND RISK OF LOSS OF INCOME AND PRINCIPAL THAN HIGHER RATED
SECURITIES. LOWER QUALITY SECURITIES INVOLVE A GREATER RISK OF DEFAULT AND,
CONSEQUENTLY, SHARES OF THE EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND
FUND ARE SPECULATIVE SECURITIES.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 12
Investment Practices and Restrictions 14
MANAGEMENT OF THE FUNDS
Investment Adviser 18
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 20
How to Redeem Shares 21
Exchange Privilege 21
Shareholder Services 22
Effect of Banking Laws 22
OTHER INFORMATION
Dividends, Distributions and Taxes 23
Management's Discussion of Fund Performance 25
General Information 25
APPENDIX
Florida Risk Considerations 27
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Capital Management Group of First Union National Bank of North
Carolina ("CMG") serves as investment adviser to Evergreen State Specific Tax
Free Funds which include: EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN
GEORGIA MUNICIPAL BOND FUND, EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND,
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN VIRGINIA MUNICIPAL BOND
FUND AND EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND. First Union National
Bank of North Carolina ("FUNB") is a subsidiary of First Union Corporation, the
sixth largest bank holding company in the United States.
EVERGREEN FLORIDA MUNICIPAL BOND FUND (formerly First Union Florida
Municipal Bond Portfolio, successor to ABT Florida Tax-Free Fund) seeks current
income exempt from federal income tax consistent with preservation of capital.
In addition, the Fund intends to qualify as an investment exempt from the
Florida state intangibles tax.
EVERGREEN GEORGIA MUNICIPAL BOND FUND (formerly First Union Georgia
Municipal Bond Portfolio) seeks current income exempt from federal income tax
and Georgia state income tax, consistent with preservation of capital.
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND (formerly FFB New Jersey
Tax-Free Income Fund) seeks a high level of income, exempt from federal and New
Jersey personal income taxes.
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND (formerly First Union North
Carolina Municipal Bond Portfolio) seeks current income exempt from federal
income tax and North Carolina state income tax, consistent with preservation of
capital. In addition, the Fund intends to qualify as an investment substantially
exempt from the North Carolina intangible personal property tax.
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND (formerly First Union South
Carolina Municipal Bond Portfolio) seeks current income exempt from federal
income tax and South Carolina state income tax.
EVERGREEN VIRGINIA MUNICIPAL BOND FUND (formerly First Union Virginia
Municipal Bond Fund) seeks current income exempt from federal income tax and
Virginia state income tax, consistent with preservation of capital.
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND (successor to ABT
Florida High Income Municipal Bond Fund) seeks to provide a high level of
current income exempt from federal income taxes. Under normal circumstances, the
Fund will invest at least 65% of the value of its total assets in municipal
securities consisting of high yield (i.e., high risk), medium, lower rated and
unrated bonds.
THERE IS NO ASSURANCE THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in the Class Y Shares of the Fund. For further
information see "Purchase and Redemption of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Redemption Fee None
Exchange Fee (only applies after 4 exchanges per
year) $ 5.00
</TABLE>
The following table shows for the Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to Class Y Shares,
together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment for the periods specified assuming (i) a 5%
annual return and (ii) redemption at the end of each period.
EVERGREEN FLORIDA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES Class Y
<S> <C> <C> <C>
Management Fees* .30%
After 1 Year $ 6
12b-1 Fees --
After 3 Years $ 18
Other Expenses .25%
After 5 Years $ 31
After 10 Years $ 69
Total .55%
</TABLE>
EVERGREEN GEORGIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES+ Class Y
<S> <C> <C> <C>
Management Fees .50%
After 1 Year $ 10
12b-1 Fees --
After 3 Years $ 32
Other Expenses** .50%
After 5 Years $ 55
After 10 Years $ 122
Total 1.00%
</TABLE>
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES Class Y
<S> <C> <C> <C>
Management Fees .50%
After 1 Year $ 10
12b-1 Fees --
After 3 Years $ 30
Other Expenses** .44%
After 5 Years $ 52
After 10 Years $ 115
Total .94%
</TABLE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES+ Class Y
<S> <C> <C> <C>
Management Fees .50%
After 1 Year $ 10
12b-1 Fees --
After 3 Years $ 32
Other Expenses .50%
After 5 Years $ 55
After 10 Years $ 122
Total 1.00%
</TABLE>
3
<PAGE>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES+ Class Y
<S> <C> <C> <C>
Management Fees .50%
After 1 Year $ 10
12b-1 Fees --
After 3 Years $ 32
Other Expenses** .50%
After 5 Years $ 55
After 10 Years $ 122
Total 1.00%
</TABLE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES+ Class Y
<S> <C> <C> <C>
Management Fees .50%
After 1 Year $ 10
12b-1 Fees --
After 3 Years $ 32
Other Expenses** .50%
After 5 Years $ 55
After 10 Years $ 122
Total 1.00%
</TABLE>
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES Class Y
<S> <C> <C> <C>
Management Fees* .30%
After 1 Year $ 8
12b-1 Fees --
After 3 Years $ 26
Other Expenses .52%
After 5 Years $ 46
After 10 Years $ 101
Total .82%
</TABLE>
+ The estimated annual operating expenses and examples do not reflect fee
waivers and reimbursements for the most recent fiscal year. Actual expenses
for Class Y Shares, net of fee waivers and expense reimbursements for the
period ended August 31, 1995 were as follows:
<TABLE>
<S> <C>
EVERGREEN GEORGIA MUNICIPAL BOND FUND .46%
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND .67%
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND .28%
EVERGREEN VIRGINIA MUNICIPAL BOND FUND .47%
</TABLE>
* CMG has agreed to limit the Management fee charged to EVERGREEN FLORIDA
MUNICIPAL BOND FUND and EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND to
.30 of 1% of average net assets until July 7, 1996.
** Reflects agreements by CMG to limit aggregate operating expenses (including
the management fees, but excluding interest, taxes, brokerage commissions,
Rule 12b-1 Fees, shareholder servicing fees and extraordinary expenses) of
EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL
BOND FUND and EVERGREEN VIRGINIA MUNICIPAL BOND FUND to 1% of average net
assets for the foreseeable future. Absent such agreements, the estimated
annual operating expenses for the Funds would be as follows:
<TABLE>
<S> <C>
EVERGREEN GEORGIA MUNICIPAL BOND FUND 2.58%
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND 6.25%
EVERGREEN VIRGINIA MUNICIPAL BOND FUND 3.58%
</TABLE>
From time to time, each Fund's investment adviser may, at its discretion,
reduce or waive its fees or reimburse the Funds for certain of their expenses in
order to reduce their expense ratios. Each Fund's investment adviser may cease
these waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for the most recent fiscal period. Such amounts have been restated
to reflect current fee arrangements and in the case of funds that did not offer
all of the above-referenced Classes of shares during such periods, the amounts
set forth in the tables are based on the expenses incurred by the Classes which
were offered. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN. For a more complete description of the various
costs and expenses borne by the Funds see "Management of the Funds".
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter for EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN NORTH
CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND and
EVERGREEN VIRGINIA MUNICIPAL BOND FUND has been audited by KPMG Peat Marwick
LLP, each Fund's independent auditors. The information in the tables for
EVERGREEN FLORIDA MUNICIPAL BOND FUND for the fiscal period ended August 31,
1995 has been audited by KPMG Peat Marwick LLP, the Fund's current independent
auditors. The information in the tables for each of the years in the four-year
period ended April 30, 1995 was audited by Tait, Weller & Baker, the Fund's
prior independent auditors. The information in the tables for EVERGREEN NEW
JERSEY TAX-FREE INCOME FUND for each of the years in the two-year period ended
February 28, 1995 has been audited by KPMG Peat Marwick LLP, the Fund's current
independent auditors. The information in the tables for each of the periods from
July 16, 1991 (commencement of operations) through February 28, 1993 has been
audited by Price Waterhouse LLP, the Fund's prior independent auditors. The
information in the tables for EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
for the fiscal period ended August 31, 1995 has been audited by Price Waterhouse
LLP, the Fund's current independent auditors. The information in the tables for
each of the years in the two-year period ended April 30, 1995 and for the period
June 17, 1992 (commencement of operations) through April 30, 1993 was audited by
Tait, Weller & Baker, the Fund's prior independent auditors. A report of KPMG
Peat Marwick LLP, Price Waterhouse LLP or Tait, Weller & Baker, as the case may
be on the audited information with respect to each Fund is incorporated by
reference in the Fund's Statement of Additional Information. The following
information for each Fund should be read in conjunction with the financial
statements and related notes which are incorporated by reference in the Fund's
Statement of Additional Information.
Further information about each Fund's performance is contained in the
Fund's annual report to shareholders, which may be obtained without charge.
EVERGREEN FLORIDA MUNICIPAL BOND FUND++
<TABLE>
<CAPTION>
CLASS A SHARES
FOUR MAY 11,
MONTHS 1988*
ENDED THROUGH
AUGUST 31, YEAR ENDED APRIL 30, APRIL 30,
1995# 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period..... $9.61 $9.52 $9.95 $9.35 $9.21 $8.80 $9.09 $8.82
Income (loss) from investment operations:
Net investment income.................... .25 .54 .56 .56 .61 .66 .58 .47
Net realized and unrealized gain (loss)
on investments.......................... .22 .11 (.36) .67 .22 .43 (.24) .22
Total from investment operations........ .47 .65 .20 1.23 .83 1.09 .34 .69
Less distributions to shareholders from:
Net investment income.................... (.25) (.54) (.56) (.56) (.61) (.68) (.59) (.42)
Distributions in excess of net investment
income.................................. (.03) -- -- -- -- -- -- --
Net realized gains....................... (.06) (.02) (.07) (.07) (.04) -- (.04) --
Paid-in capital.......................... -- -- -- -- (.04) -- -- --
Total distributions..................... (.34) (.56) (.63) (.63) (.69) (.68) (.63) (.42)
Net asset value, end of period.......... $9.74 $9.61 $9.52 $9.95 $9.35 $9.21 $8.80 $9.09
TOTAL RETURN+............................ 4.2% 7.1% 1.9% 13.6% 9.3% 12.9% 3.7% 9.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)................................ $136,449 $168,542 $199,612 $198,286 $147,996 $75,791 $7,286 $717
Ratios to average net assets:
Expenses................................ .82%++** .61% .56% .58% .41%** .10%** .10%** .30%**++
Net investment income................... 4.89%++** 5.73% 5.37% 5.66% 6.12%** 6.55%** 6.15%** 5.30%**++
Portfolio turnover rate.................. 29% 53% 32% 24% 24% 66% 82% 2%
<CAPTION>
CLASS B CLASS Y
SHARES SHARES
JUNE 30, JUNE 30,
1995* 1995*
THROUGH THROUGH
AUGUST AUGUST
31, 31,
1995# 1995#
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period..... $9.67 $9.67
Income (loss) from investment operations:
Net investment income.................... .07 .09
Net realized and unrealized gain (loss)
on investments.......................... .10 .10
Total from investment operations........ .17 .19
Less distributions to shareholders from:
Net investment income.................... (.07) (.09)
Distributions in excess of net investment
income.................................. (.03) (.03)
Net realized gains....................... -- --
Paid-in capital.......................... -- --
Total distributions..................... (.10) (.12)
Net asset value, end of period.......... $9.74 $9.74
TOTAL RETURN+............................ 1.5% 1.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)................................ $27,351 $ 3,602
Ratios to average net assets:
Expenses................................ 1.44%++ .59%++
Net investment income................... 3.22%++ 4.93%++
Portfolio turnover rate.................. 29% 29%
</TABLE>
# The Fund changed its fiscal year-end from April 30 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES
MAY 11, 1988*
FOUR MONTHS THROUGH
ENDED YEAR ENDED APRIL 30, APRIL 30,
AUGUST 31, 1995# 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Expenses..................................................... 1.05% .68% .88% 5.14% 20.40%
Net investment income (loss)................................. 4.66% 5.85% 5.77% 1.01% (14.80%)
</TABLE>
++ On June 30, 1995, ABT Florida Tax-Free Fund sold its net assets to First
Union Florida Municipal Bond Portfolio which was subsequently renamed
Evergreen Florida Municipal Bond Fund. ABT Florida Tax-Free Fund was the
accounting survivor in the combination. Accordingly, the information stated
in the above table prior to the combination reflects the results of ABT
Florida Tax-Free Fund. The net asset values per share and related per share
data have been restated to reflect the conversion of shares.
5
<PAGE>
EVERGREEN GEORGIA MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y
JULY 2, JULY 2, SHARES
EIGHT MONTHS 1993* EIGHT MONTHS 1993* EIGHT MONTHS
ENDED YEAR ENDED THROUGH ENDED YEAR ENDED THROUGH ENDED
AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31,
1995# 1994 1993 1995# 1994 1993 1995#
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning
of period.................. $8.74 $10.19 $10.00 $8.74 $10.19 $10.00 $8.74
Income (loss) from
investment operations......
Net investment income....... .33 .48 .20 .28 .43 .18 .35
Net realized and unrealized
gain (loss) on
investments................ .73 (1.45) .19 .73 (1.45) .19 .73
Total from investment
operations............... 1.06 (.97) .39 1.01 (1.02) .37 1.08
Less distributions to
shareholders from:
Net investment income....... (.33) (.48) (.20) (.28) (.43) (.18) (.35)
Net asset value, end of
period..................... $9.47 $8.74 $10.19 $9.47 $8.74 $10.19 $9.47
TOTAL RETURN+............... 12.3% (9.6%) 4.0% 11.7% (10.2%) 3.7% 12.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)............ $2,098 $1,387 $817 $7,538 $6,912 $3,692 $1,339
Ratios to average net
assets:
Expenses **................ .71%++ .53% .25%++ 1.46%++ 1.13% .75%++ .46%++
Net investment income **... 5.39%++ 5.26% 4.71%++ 4.64%++ 4.66% 4.15%++ 5.64%++
Portfolio turnover rate..... 91% 147% 15% 91% 147% 15% 91%
<CAPTION>
FEBRUARY 28,
1994*
THROUGH
DECEMBER 31,
1994
<S> <C>
PER SHARE DATA:
Net asset value, beginning
of period.................. $9.83
Income (loss) from
investment operations......
Net investment income....... .42
Net realized and unrealized
gain (loss) on
investments................ (1.09)
Total from investment
operations............... (.67)
Less distributions to
shareholders from:
Net investment income....... (.42)
Net asset value, end of
period..................... $8.74
TOTAL RETURN+............... (6.9%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)............ $284
Ratios to average net
assets:
Expenses **................ .31%++
Net investment income **... 5.68%++
Portfolio turnover rate..... 147%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y
JULY 2, JULY 2, SHARES
EIGHT MONTHS 1993* EIGHT MONTHS 1993* EIGHT MONTHS
ENDED YEAR ENDED THROUGH ENDED YEAR ENDED THROUGH ENDED
AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31,
1995# 1994 1993 1995# 1994 1993 1995#
<S> <C> <C> <C> <C> <C> <C> <C>
Expense..................... 2.83% 3.61% 6.82% 3.58% 4.21% 7.32% 2.58%
Net investment income
(loss)..................... 3.27% 2.18% (1.86%) 2.52% 1.58% (2.42%) 3.52%
<CAPTION>
FEBRUARY 28,
1994* THROUGH
DECEMBER 31,
1994
<S> <C>
Expense..................... 3.39%
Net investment income
(loss)..................... 2.60%
</TABLE>
6
<PAGE>
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
CLASS A
SIX MONTHS
ENDED
AUGUST 31, 1995 YEAR ENDED FEBRUARY 28,
(UNAUDITED) 1995 1994 1993
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period............................... $10.53 $10.99 $11.01 $10.22
Income (loss) from investment operations:
Net investment income.............................................. .28 .57 .60 .63
Net realized and unrealized gain (loss) on investments............. .22 (.46) (.02) .79
Total from investment operations.................................. .50 .11 .58 1.42
Less distributions to shareholders from net investment income...... (.28) (.57) (.60) (.63)
Net asset value, end of period..................................... $10.75 $10.53 $10.99 $11.01
TOTAL RETURN+...................................................... 4.8% 1.4% 5.3% 14.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).......................... $35,469 $34,852 $42,783 $30,863
Ratios to average net assets:
Expenses**........................................................ .38%++ .25% .14% .00%
Net investment income**........................................... 5.20%++ 5.52% 5.31% 5.97%
Portfolio turnover rate............................................ 0% 8% 2% 5%
<CAPTION>
JULY 16, 1991*
THROUGH
FEBRUARY 29,
1992
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period............................... $10.00
Income (loss) from investment operations:
Net investment income.............................................. .38
Net realized and unrealized gain (loss) on investments............. .22
Total from investment operations.................................. .60
Less distributions to shareholders from net investment income...... (.38)
Net asset value, end of period..................................... $10.22
TOTAL RETURN+...................................................... 9.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).......................... $ 13,129
Ratios to average net assets:
Expenses**........................................................ .01%++
Net investment income**........................................... 5.89%++
Portfolio turnover rate............................................ 5%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment advisor, the
annualized ratios of expenses and net investment income to average net
assets would have been the following:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, 1995 YEAR ENDED FEBRUARY 28,
(UNAUDITED) 1995 1994 1993
<S> <C> <C> <C> <C>
Expenses.............................................................. 1.08% 1.04% 1.05% 1.16%
Net investment income................................................. 4.50% 4.73% 4.40% 4.81%
<CAPTION>
JULY 16, 1991*
THROUGH
FEBRUARY 29,
1992
<S> <C>
Expenses.............................................................. 1.20%
Net investment income................................................. 4.70%
</TABLE>
7
<PAGE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES
<TABLE>
<CAPTION>
CLASS Y
CLASS A SHARES CLASS B SHARES SHARES
EIGHT MONTHS JANUARY 11, EIGHT MONTHS JANUARY 11, EIGHT MONTHS
ENDED YEAR ENDED 1993* THROUGH ENDED YEAR ENDED 1993* THROUGH ENDED
AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31,
1995# 1994 1993 1995# 1994 1993 1995#
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning
of period................. $9.16 $10.61 $10.00 $9.16 $10.61 $10.00 $9.16
Income (loss) from
investment operations:
Net investment income...... .33 .49 .46 .28 .44 .42 .35
Net realized and unrealized
(loss) on investments..... .79 (1.45) .64 .79 (1.45) .64 .79
Total from investment
operations.............. 1.12 (.96) 1.10 1.07 (1.01) 1.06 1.14
Less distributions to
shareholders from:
Net investment income...... (.33) (.49) (.46) (.28) (.44) (.42) (.35)
Net realized gains......... -- -- (.03) -- -- (.03) --
Total distributions........ (.33) (.49) (.49) (.28) (.44) (.45) (.35)
Net asset value, end of
period.................... $9.95 $9.16 $10.61 $9.95 $9.16 $10.61 $9.95
TOTAL RETURN+.............. 12.3% (9.1%) 11.3% 11.8% (9.6%) 10.8% 12.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)........... $8,279 $7,979 $12,739 $49,040 $ 44,616 $45,168 $1,005
Ratios to average net
assets:
Expenses **............... .92%++ .79% .32%++ 1.67%++ 1.37% .79%++ .67%++
Net investment income
**...................... 5.09%++ 5.11% 4.91%++ 4.34%++ 4.53% 4.47%++ 5.34%++
Portfolio turnover rate.... 117% 126% 57% 117% 126% 57% 117%
<CAPTION>
FEBRUARY 28,
1994* THROUGH
DECEMBER 31,
1994
<S> <C>
PER SHARE DATA:
Net asset value, beginning
of period................. $10.31
Income (loss) from
investment operations:
Net investment income...... .43
Net realized and unrealized
(loss) on investments..... (1.15)
Total from investment
operations.............. (.72)
Less distributions to
shareholders from:
Net investment income...... (.43)
Net realized gains......... --
Total distributions........ (.43)
Net asset value, end of
period.................... $9.16
TOTAL RETURN+.............. (7.0%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)........... $642
Ratios to average net
assets:
Expenses **............... .59%++
Net investment income
**...................... 5.58%++
Portfolio turnover rate.... 126%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were reimbursed or waived by the investment adviser, the annualized
ratios of expenses and net investment income (loss) to average net assets
would have been the following:
<TABLE>
<CAPTION>
CLASS Y
CLASS A SHARES CLASS B SHARES SHARES
EIGHT MONTHS EIGHT MONTHS EIGHT MONTHS
ENDED YEAR ENDED JANUARY 11, 1993* ENDED YEAR ENDED JANUARY 11, 1993* ENDED
AUGUST 31, DECEMBER 31, THROUGH DECEMBER AUGUST 31, DECEMBER 31, THROUGH DECEMBER AUGUST 31,
1995# 1994 31, 1993 1995# 1994 31, 1993 1995#
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses........ 1.27% 1.18% 1.25% 2.02% 1.76% 1.74% 1.02%
Net investment
income......... 4.74% 4.72% 3.98% 3.99% 4.14% 3.52% 4.99%
<CAPTION>
FEBRUARY 28, 1994*
THROUGH DECEMBER
31, 1994
<S> <C>
Expenses........ .98%
Net investment
income......... 5.19%
</TABLE>
8
<PAGE>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y SHARES
EIGHT MONTHS JANUARY 3, EIGHT MONTHS JANUARY 3, EIGHT MONTHS FEBRUARY 28,
ENDED 1994* THROUGH ENDED 1994* THROUGH ENDED 1994* THROUGH
AUGUST 31, DECEMBER 31, AUGUST 31, DECEMBER 31, AUGUST 31, DECEMBER 31,
1995# 1994 1995# 1994 1995# 1994
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period... $8.62 $10.00 $ 8.62 $10.00 $ 8.62 $9.74
Income (loss) from investment
operations:
Net investment income.................. .34 .46 .29 .41 .35 .43
Net realized and unrealized gain (loss)
on investments....................... .97 (1.38) .97 (1.38) .97 (1.12)
Total from investment operations..... 1.31 (.92) 1.26 (.97) 1.32 (.69)
Less distributions to shareholders
from:
Net investment income.................. (.34) (.46) (.29) (.41) (.35) (.43)
Net asset value, end of period......... $9.59 $8.62 $9.59 $8.62 $9.59 $8.62
TOTAL RETURN+.......................... 15.4% (9.3%) 14.8% (9.8%) 15.5% (7.1%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)............................. $610 $312 $3,542 $2,456 $1,673 $92
Ratios to average net assets:
Expenses **.......................... .53%++ .25%++ 1.28%++ .87%++ .28%++ .00%++
Net investment income **............. 5.41%++ 5.57%++ 4.66%++ 4.88%++ 5.66%++ 5.92%++
Portfolio turnover rate................ 66% 23% 66% 23% 66% 23%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y SHARES
EIGHT MONTHS JANUARY 3, EIGHT MONTHS JANUARY 3, EIGHT MONTHS FEBRUARY 28,
ENDED 1994* THROUGH ENDED 1994* THROUGH ENDED 1994* THROUGH
AUGUST 31, DECEMBER 31, AUGUST 31, DECEMBER 31, AUGUST 31, DECEMBER 31,
1995# 1994 1995# 1994 1995# 1994
<S> <C> <C> <C> <C> <C> <C>
Expenses............................... 6.50% 10.71% 7.25% 11.33% 6.25% 10.46%
Net investment loss.................... (.56%) (4.89%) (1.31%) (5.58%) (.31%) (4.54%)
</TABLE>
9
<PAGE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES*
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y
JULY 2, JULY 2, SHARES
EIGHT MONTHS 1993* EIGHT MONTHS 1993* EIGHT MONTHS
ENDED YEAR ENDED THROUGH ENDED YEAR ENDED THROUGH ENDED
AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31,
1995# 1994 1993 1995# 1994 1993 1995#
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period.... $ 8.85 $10.19 $10.00 $8.85 $10.19 $10.00 $8.85
Income (loss) from
investment operations:
Net investment income... .33 .47 .20 .28 .42 .17 .34
Net realized and
unrealized gain (loss)
on investments......... .82 (1.34) .19 .82 (1.34) .19 .82
Total from investment
operations........... 1.15 (.87) .39 1.10 (.92) .36 1.16
Less distributions to
shareholders from:
Net investment income... (.33) (.47) (.20) (.28) (.42) (.17) (.34)
Net asset value, end of
period................. $9.67 $8.85 $10.19 $9.67 $8.85 $10.19 $9.67
TOTAL RETURN+........... 13.1% (8.6%) 3.9% 12.5% (9.1%) 3.7% 13.3%
RATIOS & SUPPLEMENTAL
DATA:
Net assets, end of
period (000's
omitted)............... $1,984 $1,606 $1,306 $ 5,803 $3,817 $2,235 $965
Ratios to average net
assets:
Expenses **............ .72%++ .53% .25%++ 1.47%++ 1.12% .75%++ .47%++
Net investment income
**................... 5.17%++ 5.11% 4.64%++ 4.42%++ 4.54% 4.25%++ 5.42%++
Portfolio turnover
rate................... 87% 59% 0% 87% 59% 0% 87%
<CAPTION>
FEBRUARY 28, 1994*
THROUGH
DECEMBER 31, 1994
<S> <C>
PER SHARE DATA:
Net asset value,
beginning of period.... $9.83
Income (loss) from
investment operations:
Net investment income... .41
Net realized and
unrealized gain (loss)
on investments......... (.98)
Total from investment
operations........... (.57)
Less distributions to
shareholders from:
Net investment income... (.41)
Net asset value, end of
period................. $8.85
TOTAL RETURN+........... (5.8%)
RATIOS & SUPPLEMENTAL
DATA:
Net assets, end of
period (000's
omitted)............... $344
Ratios to average net
assets:
Expenses **............ .28%++
Net investment income
**................... 5.54%++
Portfolio turnover
rate................... 59%
</TABLE>
# The Fund changed its fiscal year-end from December 31 to August 31.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y
JULY 2, JULY 2, SHARES
EIGHT MONTHS 1993* EIGHT MONTHS 1993* EIGHT MONTHS
ENDED YEAR ENDED THROUGH ENDED YEAR ENDED THROUGH ENDED
AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31, DECEMBER 31, DECEMBER 31, AUGUST 31,
1995# 1994 1993 1995# 1994 1993 1995#
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses................ 3.83% 5.14% 7.75% 4.58% 5.73% 8.25% 3.58%
Net investment income
(loss)................. 2.06% .50% (2.86%) 1.31% (.07%) (3.25%) 2.31%
<CAPTION>
FEBRUARY 28,
1994* THROUGH
DECEMBER 31, 1994
<S> <C>
Expenses................ 4.89%
Net investment income
(loss)................. .93%
</TABLE>
10
<PAGE>
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND -- CLASS A AND Y SHARES
<TABLE>
<CAPTION>
CLASS A SHARES#
JUNE 17,
FOUR MONTHS 1992*
ENDED YEAR ENDED THROUGH
AUGUST 31, APRIL 30, APRIL
1995 1995 1994 30, 1993
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................................. $10.16 $10.08 $10.36 $10.00
Income (loss) from investment operations:
Net investment income................................................ .21 .65 .68 .61
Net realized and unrealized gain (loss) on investments............... .24 .08 (.26) .39
Total from investment operations.................................... .45 .73 .42 1.00
Less distributions to shareholders from:
Net investment income................................................ (.21) (.65) (.68) (.61)
Net realized gains................................................... -- -- (.02) (.03)
Total distributions................................................. (.21) (.65) (.70) (.64)
Net asset value at end of period..................................... $10.40 $10.16 $10.08 $10.36
TOTAL RETURN+........................................................ 4.4% 7.6% 3.3% 10.3%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............................ $59,551 $65,043 $72,683 $33,541
Ratios to average net assets:
Expenses............................................................ 1.07%++** .60%** .14%** .00%++**
Net investment income............................................... 5.92%++** 6.52%** 6.16%** 5.92%**++
Portfolio turnover rate.............................................. 14% 28% 31% 50%
<CAPTION>
CLASS B SHARES
JULY 10, 1995*
THROUGH
AUGUST 31,
1995
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period................................. $10.41
Income (loss) from investment operations:
Net investment income................................................ .08
Net realized and unrealized gain (loss) on investments............... (.01)
Total from investment operations.................................... .07
Less distributions to shareholders from:
Net investment income................................................ (.08)
Net realized gains................................................... --
Total distributions................................................. (.08)
Net asset value at end of period..................................... $10.40
TOTAL RETURN+........................................................ .6%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............................ $3,137
Ratios to average net assets:
Expenses............................................................ 1.09%++
Net investment income............................................... 3.40%++
Portfolio turnover rate.............................................. 14%
</TABLE>
# Effective June 30, 1995, Evergreen Florida High Income Municipal Bond Fund, a
new series of the Evergreen Municipal Trust, acquired substantially all of
the net assets of ABT Florida High Income Municipal Bond Fund. ABT Florida
High Income Municipal Bond Fund, which had a fiscal year that ended on April
30, was the accounting survivor in the combination. Accordingly, the
information above includes the results of operations of ABT Florida High
Income Municipal Bond Fund prior to June 30, 1995.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge and contingent deferred
sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were reimbursed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets would have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES
FOUR MONTHS
ENDED YEAR ENDED
AUGUST 31, APRIL 30,
1995# 1995 1994
<S> <C> <C> <C>
Expenses....................................................................... 1.42% 1.26% 1.12%
Net investment income.......................................................... 5.57% 5.86% 5.18%
<CAPTION>
JUNE 17, 1992*
THROUGH
APRIL 30, 1993
<S> <C>
Expenses....................................................................... 1.12%
Net investment income.......................................................... 4.80%
</TABLE>
11
<PAGE>
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVES AND POLICIES
EVERGREEN FLORIDA MUNICIPAL BOND FUND
EVERGREEN GEORGIA MUNICIPAL BOND FUND
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
The Funds seek current income exempt from federal regular income tax and,
where applicable, state income taxes, consistent with preservation of capital.
In addition, the EVERGREEN FLORIDA MUNICIPAL BOND FUND intends to qualify as an
investment exempt from the Florida state intangibles tax. Florida does not
currently tax personal income.
Each Fund's investment objective is fundamental cannot be changed without
shareholder approval. While there is no assurance that each objective will be
achieved, the Funds will endeavor to do so by following the investment policies
detailed below. Unless otherwise indicated, the investment policies of a Fund
may be changed by the Board of Trustees ("Trustees") without the approval of
shareholders. Shareholders will be notified before any material change in these
policies becomes effective.
As a matter of fundamental investment policy, which may not be changed
without shareholder approval, each Fund will normally invest its assets so that
at least 80% of its annual interest income is, or at least 80% of its net assets
are, invested in obligations which provide interest income which is exempt from
federal regular income taxes. The interest retains its tax-free status when
distributed to the Funds' shareholders. In addition, at least 65% of the value
of each Fund's total assets will be invested in municipal bonds of the
particular state after which the Fund is named. To qualify as an investment
exempt from the Florida state intangibles tax, the EVERGREEN FLORIDA MUNICIPAL
BOND FUND'S portfolio must consist entirely of investments exempt from the
Florida state intangibles tax on the last business day of the calendar year.
Each Fund seeks to achieve its investment objective by investing
principally in municipal bonds, including industrial development bonds, of its
designated state. In addition, the Funds may invest in obligations issued by or
on behalf of any state, territory, or possession of the United States, including
the District of Columbia, or their political subdivisions or agencies and
instrumentalities, the interest from which is exempt from federal (regular, if
applicable) income tax. It is likely that shareholders who are subject to the
alternative minimum tax will be required to include interest from a portion of
the municipal securities owned by a Fund in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
Municipal bonds are debt obligations issued by the state or local
entities to support a government's general financial needs or special projects,
such as housing projects or sewer works. Municipal bonds include industrial
development bonds issued by or on behalf of public authorities to provide
financing aid to acquire sites or construct or equip facilities for privately or
publicly owned corporations.
The two principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Revenue bonds are paid off only with the revenue
generated by the project financed by the bond or other specified sources of
revenue. For example, in the case of a bridge project, proceeds from the tolls
would go directly to retiring the bond issue. Thus, unlike general obligation
bonds, revenue bonds do not represent a pledge of credit or create any debt of
or charge against the general revenues of a municipality or public authority.
The municipal bonds in which the Funds will invest are subject to one or
more of the following quality standards: rated Baa or better by Moody's
Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's
Ratings Group ("S&P") or, if unrated, are determined by the Fund's investment
adviser to be of comparable quality to such ratings; insured by a municipal bond
insurance company which is rated Aa by Moody's or AA by S&P; guaranteed at the
time of purchase by the U.S. government as to the payment of principal and
interest; or fully collateralized by an escrow of U.S. government securities.
Bonds rated BBB by S&P or Baa by Moody's have speculative characteristics.
Changes in economic conditions or other circumstances are more likely to lead to
weakened capacity to make principal and interest payments than higher rated
bonds. However, like the higher
12
<PAGE>
rated bonds, these securities are considered to be investment grade. If any
security owned by a Fund loses its rating or has its rating reduced after the
Fund has purchased it, the Fund is not required to sell or otherwise dispose of
the security, but may consider doing so. If ratings made by Moody's or S&P
change because of changes in those organizations or their ratings systems, the
Funds will try to use comparable ratings as standards in accordance with the
Funds' investment objectives. A description of the rating categories is
contained in an Appendix to the Statement of Additional Information.
The Funds may also invest in:
participation interests in any of the above obligations.
(Participation interests may be purchased from financial institutions
such as commercial banks, savings and loan associations and insurance
companies, and give a Fund an undivided interest in particular municipal
securities.);
variable rate municipal securities. (Variable rate securities
offer interest rates which are tied to a money market rate, usually a
published interest rate or interest rate index or the 91-day U.S.
Treasury bill rate. Many of these securities are subject to prepayment of
principal on demand by the Fund, usually in seven days or less.); and
municipal leases as described in "Investment Practices and
Restrictions", below issued by state and local governments or authorities
to finance the acquisition of equipment and facilities.
During periods when, in the opinion of the Funds investment adviser, a
temporary defensive position in the market is appropriate, a Fund may
temporarily invest in short-term tax-exempt or taxable investments. These
temporary investments include: notes issued by or on behalf of municipal or
corporate issuers; obligations issued or guaranteed by the U.S. government, its
agencies, or instrumentalities; other debt securities; commercial paper; bank
certificates of deposit; shares of other investment companies; and repurchase
agreements. There are no rating requirements applicable to temporary
investments. However, the Funds investment adviser will limit temporary
investments to those it considers to be of comparable quality to the Funds'
primary investments.
Although the Funds are permitted to make taxable, temporary investments,
there is no current intention of generating income subject to federal regular
income tax, where applicable. However, certain temporary investments will
generate income which is subject to state taxes. The Funds may employ certain
additional investment strategies which are discussed in "Investment Practices
and Restrictions", below.
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
The objective of the EVERGREEN NEW JERSEY TAX FREE INCOME FUND is to seek
a high level of income, exempt from Federal and New Jersey personal income
taxes. The Fund is available only to investors who reside in New Jersey. There
is no assurance that the Fund will achieve its stated objective. The investment
objective of the Fund is fundamental and so may not be changed without the
approval of a majority of the Fund's shareholders.
To attain its objective, the EVERGREEN NEW JERSEY TAX-FREE INCOME FUND
invests at least 80% of its net assets in municipal securities issued by the
State of New Jersey or its counties, municipalities, authorities or other
political subdivisions and municipal obligations issued by territories or
possessions of the United States, such as Puerto Rico, the interests on which,
in the opinion of bond counsel, is exempt from federal and New Jersey personal
income taxes. The Fund normally invests in intermediate and long-term municipal
securities. Intermediate-term municipal securities generally mature in three to
ten years. Long-term municipal securities generally mature in ten to thirty
years. The Fund has no maximum or minimum maturity for any individual municipal
securities, however, it will maintain a dollar-weighted average portfolio
maturity of twenty years or less. If its investment adviser determines that
market conditions warrant a shorter average maturity, the Fund's investments
will be adjusted accordingly.
The Fund will only purchase securities rated within the three highest
rating categories by Moody's or by S&P and unrated securities of equivalent
quality as determined by the investment adviser pursuant to guidelines
established by the Trustees. See the Statement of Additional Information for
further information in regard to ratings.
The Fund will seek to invest substantially all of its assets in
intermediate and long-term Municipal Obligations. However, under certain
circumstances, such as a temporary decline in the issuance of New Jersey
obligations, the Fund may invest up to 20% of its assets in the following:
short-term municipal securities issued
13
<PAGE>
outside of New Jersey (the income from which may be subject to New Jersey income
taxes) or certain taxable fixed income securities (the income from which may be
subject to federal and New Jersey personal income taxes).
In addition, under unusual circumstances the Fund reserves the right to
invest more than 20% of its assets in securities other than New Jersey Municipal
Obligations such as taxable fixed income securities, the interest from which may
be subject to Federal and New Jersey personal income taxes. In most instances,
however, the Fund will seek to avoid holdings in an effort to provide income
that is fully exempt from federal and New Jersey personal income taxes.
The Fund may also invest in municipal securities issued to finance
private activities, whose interest is a preference item for purposes of the
Federal alternative minimum tax. Such "private activity bonds" might include
industrial development bonds and securities issued to finance project such as
solid waste disposal facilities, student loans or water and sewage projects. The
Fund currently intends to treat "private activity bonds" as not Federally
tax-exempt and accordingly to limit income from "private activity bonds" to no
more than 20%. See "Other Information-Dividends, Distributions and Taxes" for
further information. The Fund may invest in other municipal securities and may
employ additional investment strategies which are discussed in "Investment
Practices and Restrictions" below.
Municipal lease obligations. The Funds may purchase municipal securities in the
form of participation interests which represent undivided proportional interests
in lease payments by a governmental or non-profit entity. The lease payments and
other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal charter or the
nature of the appropriation for the lease. In particular, lease obligations may
be subject to periodic appropriation. If the entity does not appropriate funds
for future lease payments, the entity cannot be compelled to make such payments.
Furthermore, a lease may provide that the certificate trustee cannot accelerate
lease obligations upon default. The trustee would only be able to enforce lease
payments as they become due. In the event of a default or failure of
appropriation, it is unlikely that the trustee would be able to obtain an
acceptable substitute source of payment or that the substitute source of payment
would generate tax-exempt income.
Resource recovery bonds. Each Fund may purchase resource recovery bonds, which
may be general obligations of the issuing municipality or supported by corporate
or bank guarantees. The viability of the resource recovery project,
environmental protection regulations and project operator tax incentives may
affect the value and credit quality of resource recovery bonds.
Zero coupon debt securities. The Funds may ??? zero coupon debt securities do
not make regular interest payments. Instead, they are sold at a deep discount
from their face value. In calculating their daily dividends, each day the Fund
takes into account as income a portion of the difference between these
securities' purchase price and their face value. Because they do not pay current
income, the prices of zero coupon debt securities can be very volatile when
interest rates change.
Securities with Put or Demand Rights. The Funds have the ability to enter into
put transactions, sometimes referred to as stand-by commitments, with respect to
Municipal Obligations held in their portfolio or to purchase securities which
carry a demand feature or put option which permit a Fund, as holder, to tender
them back to the issuer or a third party prior to maturity and receive payment
within seven days. Segregated accounts will be maintained by each Fund for all
such transactions. For a detailed description of put transactions, see
"Investment Policies -- Securities with Put Rights" in the Statement of
Additional Information.
The amount payable to a Fund by the seller upon its exercise of a put
will normally be (i) the Funds' acquisition cost of the securities (excluding
any accrued interest which the Funds paid on their acquisition), less any
amortized market premium plus any amortized market or original issue discount
during the period a Fund owned the securities, plus (ii) all interest accrued on
the securities since the last interest payment date during the period the
securities were owned by a Fund. Accordingly, the amount payable by a
broker-dealer or bank during the time a put is exercisable will be substantially
the same as the value of the underlying securities.
A Fund's right to exercise a put is unconditional and unqualified. A put
is not transferable by a Fund, although each Fund may sell the underlying
securities to a third party at any time. The Funds expect that puts will
generally be available without any additional direct or indirect cost. However,
if necessary and advisable, a Fund may pay for certain puts either separately in
cash or by paying a higher price for portfolio securities which are acquired
subject to such a put (thus reducing the yield to maturity otherwise available
to the same securities).
14
<PAGE>
Thus, the aggravate price paid for securities with put rights may be higher than
the price that would otherwise be paid.
A Fund may enter into put transactions only with broker-dealers (in
accordance with the rules of the Securities and Exchange Commission) and banks
which, in the opinion of the Funds' Adviser, present minimal credit risks. The
Funds' Adviser will monitor periodically the creditworthiness of issuers of such
obligations held by the Fund. A Funds' ability to exercise a put will depend on
the ability of the broker-dealer or bank to pay for the underlying securities at
the time the put is exercised. In the event that a broker-dealer should default
on its obligation to purchase an underlying security, a Fund might be unable to
recover all or a portion of any loss sustained from having to sell the security
elsewhere. The Funds intend to enter into put transactions solely to maintain
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes.
SPECIAL RISK FACTORS RELATED TO INVESTING IN MUNICIPAL OBLIGATIONS
It should be noted that municipal securities may be adversely affected by
local political and economic conditions and developments within a state. For
example, adverse conditions in a significant industry within New Jersey may from
time to time have a correspondingly adverse effect on specific issuers within
New Jersey or on anticipated revenue to the State itself; conversely, an
improving economic outlook for a significant industry may have a positive effect
on such issuers or revenues.
The value of municipal securities may also be affected by general
conditions in the money markets or the municipal bond markets, the levels of
federal and state income tax rates, the supply of tax-exempt bonds, the size of
the particular offering, the maturity of the obligation, the credit quality and
rating of the issue, and perceptions with respect to the level of interest
rates. In general, the value of bonds tends to appreciate when interest rates
decline and depreciate when interest rates rise. An expanded discussion of the
risks associated with the purchase of securities issued is contained in the
Statement of Additional Information.
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND seeks to provide a high
level of current income which is exempt from federal income taxes. The term
"high-level" indicates that the Fund seeks to achieve an income level that
exceeds that which an investor would expect from an investment grade portfolio
with similar maturity characteristics. EVERGREEN FLORIDA HIGH INCOME MUNICIPAL
BOND FUND invests primarily in high yield, medium and lower rated (Baa through C
by Moody's and BBB through C1 by S&P) and unrated municipal securities. To
varying degrees, medium and lower rated municipal securities, as well as unrated
municipal securities, are considered to have speculative characteristics and are
subject to greater market fluctuations and risk of loss of income and principal
than higher rated securities. To the extent that an investor realizes a yield in
excess of that which could be expected from a fund which invests primarily in
investment grade securities, the investor should expect to bear increased risk
due to the fact that the risk of principal and/or interest not being repaid with
respect to the high yield securities described above is significantly greater
than that which exists in connection with investment grade securities. In
assessing the risk involved in purchasing medium and lower rated and unrated
securities, the Fund's investment adviser will use nationally recognized
statistical rating organizations such as Moody's and S&P, and will also rely
heavily on credit analysis it develops internally. Under normal circumstances,
the Fund's dollar-weighted average maturity generally will be fifteen years or
more. However, the Fund may invest in securities of any maturity, and if the
Fund's investment adviser determines that market conditions warrant a shorter
average maturity, the Fund's investments will be adjusted accordingly. In
pursuit of its investment objective, EVERGREEN FLORIDA HIGH INCOME MUNICIPAL
BOND FUND will, under normal market conditions, invest at least 65% of its total
assets in such medium and lower rated municipal securities or unrated municipal
securities of comparable quality to such rated municipal bonds. Investors should
note that such a policy is not a fundamental policy of the Fund and shareholder
approval is not necessary to change such policy. There is no assurance that
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND can achieve its investment
objective.
The Fund will not invest in municipal securities which are in default,
i.e., securities rated D by S&P. Investments may also be made by EVERGREEN
FLORIDA HIGH INCOME MUNICIPAL BOND FUND in higher quality municipal bonds and,
for temporary defensive purposes, the Fund may invest less than 65% of its total
assets in the medium and lower quality municipal securities described above. The
Fund may assume a defensive position if, for example, yield spreads between
lower grade and investment grade municipal bonds are narrow and the yields
available on lower quality municipal securities do not justify the increased
risk associated with an investment in such securities or when there is a lack of
medium and lower quality issues in which to invest. EVERGREEN FLORIDA HIGH
INCOME MUNICIPAL BOND FUND may also invest primarily in higher quality municipal
obligations until its net
15
<PAGE>
assets reach a level that would permit the Fund to begin investing in medium and
lower rated municipal bonds and at the same time maintain adequate
diversification and liquidity. Investing in this manner may result in yields
lower than those normally associated with a fund that invests primarily in
medium and lower quality municipal securities.
During the fiscal year ended August 31, 1995 EVERGREEN FLORIDA HIGH
INCOME MUNICIPAL BOND FUND'S holdings had the following average credit quality
characteristics:
<TABLE>
<CAPTION>
Percent of
Rating Net Assets
<S> <C>
Aaa or AAA 5.4%
Aa or AA --
A 1.9
Baa or BBB 18.3
Ba or BB 8.0
Non-rated 61.5
Total 95.1%
</TABLE>
The Fund may purchase industrial development bonds only if the interest
on such bonds is, in the opinion of bond counsel, exempt from federal income
taxes. It is anticipated that the annual portfolio turnover rate for the Fund
may exceed 100%. The Fund may employ certain additional investment strategies
which are discussed in "Investment Practices and Restrictions", below. Also, see
the Statement of Additional Information for further information in regard to
ratings.
INVESTMENT PRACTICES AND RESTRICTIONS
Risk Factors. Bond yields are dependent on several factors including market
conditions, the size of an offering, the maturity of the bond, ratings of the
bond and the ability of issuers to meet their obligations. There is no limit on
the maturity of the bonds purchased by the Funds. Because the prices of bonds
fluctuate inversely in relation to the direction of interest rates, the prices
of longer term bonds fluctuate more widely in response to market interest rate
changes. A Fund's concentration in securities issued by its designated state and
that state's political subdivisions provides a greater level of risk than a fund
which is diversified across numerous states and municipal entities. An expanded
discussion of the risks associated with the purchase of the designated state's
municipal bonds is contained in the Statements of Additional Information.
Although the Funds, other than EVERGREEN FLORIDA HIGH INCOME MUNICIPAL
BOND FUND, will not purchase securities rated below BBB by S&P or Baa by Moody's
(i.e., junk bonds), the Funds are not required to dispose of securities that
have been downgraded subsequent to their purchase. If the municipal obligations
held by a Fund (because of adverse economic conditions in a particular state,
for example) are downgraded, the Fund's concentration in securities of that
state may cause the Fund to be subject to the risks inherent in holding material
amounts of low-rated debt securities in its portfolio. As stated above,
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND invests primarily in high
yield, medium and lower rated (Baa through C by Moody's and BBB through C1 by
S&P) and unrated securities. Additional risk factors relating to the investment
by EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND in high yield, medium and
lower rated (Baa through C by Moody's and BBB through C1 by S&P) and unrated
securities are discussed below.
Portfolio Turnover. A portfolio turnover rate of 100% would occur if all of a
Fund's portfolio securities were replaced in one year. The portfolio turnover
rate experienced by a Fund directly affects the transaction costs relating to
the purchase and sale of securities which a Fund bears directly. A high rate of
portfolio turnover will increase such costs. See the Statement of Additional
Information for further information regarding the practices of the Funds
affecting portfolio turnover.
Non-Diversification. Each of EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN
GEORGIA MUNICIPAL BOND FUND, EVERGREEN NEW JERSEY TAX-FREE INCOME FUND,
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL
BOND FUND AND EVERGREEN VIRGINIA MUNICIPAL BOND FUND is a non-diversified
portfolio of an investment company and, as such, there is no limit on the
percentage of assets which can be invested in any single issuer. An investment
in a Fund, therefore, will entail greater risk than would exist in a diversified
investment company because the higher percentage of investments among fewer
issuers may result in greater fluctuation in the total market value of the
Fund's portfolio. Each of the Funds intends to comply with Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code") which requires that at
the end of
16
<PAGE>
each quarter of each taxable year, with regard to at least 50% of the Fund's
total assets, no more than 5% of the total assets may be invested in the
securities of a single issuer and that with respect to the remainder of the
Fund's total assets, no more than 25% of its total assets are invested in the
securities of a single issuer.
Repurchase Agreements. The Funds may invest in repurchase agreements. Repurchase
agreements are agreements by which a Fund purchases a security (usually U.S.
government securities) for cash and obtains a simultaneous commitment from the
seller (usually a bank or broker/dealer) to repurchase the security at an
agreed-upon price and specified future date. The repurchase price reflects an
agreed-upon interest rate for the time period of the agreement. The Funds' risk
is the inability of the seller to pay the agreed-upon price on the delivery
date. However, this risk is tempered by the ability of the Funds to sell the
security in the open market in the case of a default. In such a case, the Funds
may incur costs in disposing of the security which would increase Fund expenses.
The Funds Investment adviser will monitor the creditworthiness of the firms with
which the Funds enter into repurchase agreements.
When-Issued And Delayed Delivery Transactions. The Funds may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Funds purchase securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Funds to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Funds may pay more or less than the market value of the
securities on the settlement date. The Funds may dispose of a commitment prior
to settlement if the Funds investment adviser deems it appropriate to do so. In
addition, the Funds may enter into transactions to sell their purchase
commitments to third parties at current market values and simultaneously acquire
other commitments to purchase similar securities at later dates. The Funds may
realize short-term profits or losses upon the sale of such commitments.
Lending Of Portfolio Securities. In order to generate additional income, the
Funds may lend their portfolio securities on a short-term or long-term basis to
broker/dealers, banks, or other institutional borrowers of securities. The Funds
will only enter into loan arrangements with creditworthy borrowers and will
receive collateral in the form of cash or U.S. government securities equal to at
least 100% of the value of the securities loaned. As a matter of fundamental
investment policy, which cannot be changed without shareholder approval, the
Funds will not lend any of their assets except portfolio securities up to
one-third of the value of their total assets, except for EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND, which will only lend up to 5% of the value of its assets.
There is the risk that when lending portfolio securities, the securities may not
be available to a Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
Investing In Securities Of Other Investment Companies. Each Fund may invest in
the securities of other investment companies. This is a short-term measure to
invest cash which has not yet been invested in other portfolio instruments and
is subject to the following limitations: (1) no Fund will own more than 3% of
the total outstanding voting stock of any one investment company, (2) no Fund
may invest more than 5% of its total assets in any one investment company and
(3) no Fund may invest more than 10% of its total assets in investment companies
in general. The Funds investment adviser will waive its investment advisory fee
on assets invested in securities of other open end investment companies.
Borrowing. As a matter of fundamental policy, which may not be changed without
shareholder approval, the Funds may not borrow money except as a temporary
measure to facilitate redemption requests which might otherwise require the
untimely disposition of portfolio investments and for extraordinary or emergency
purposes, provided that the aggregate amount of such borrowings shall not exceed
one-third of the value of the total net assets at the time of such borrowing.
Illiquid Securities. The Funds may invest up to 15% of their net assets in
illiquid securities and other securities which are not readily marketable.
Repurchase agreements with maturities longer than seven days will be included
for the purpose of the foregoing 15% limit. Securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933, which have been
determined to be liquid, will not be considered by the Funds investment adviser
to be illiquid or not readily marketable and, therefore, are not subject to the
aforementioned 15% limit. The inability of a Fund to dispose of illiquid or not
readily marketable investments readily or at a reasonable price could impair a
Fund's ability to raise cash for redemptions or other purposes. The liquidity of
securities purchased by a Fund which are eligible for resale pursuant to Rule
144A will be monitored by the Funds investment adviser on an ongoing basis,
subject to the oversight of the Trustees. In the event that such a security is
deemed to be no longer
17
<PAGE>
liquid, a Fund's holdings will be reviewed to determine what action, if any, is
required to ensure that the retention of such security does not result in a Fund
having more than 15% of its assets invested in illiquid or not readily
marketable securities.
Unseasoned Issuers. The Funds will not invest more than 5% of the value of their
total assets in securities of issuers (or guarantors, where applicable) which
have records of less than three years of continuous operations, including the
operation of any predecessor.
Risk Factors Associated with Medium and Lower Rated and Unrated Municipal
Obligations. EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND will invest in
medium and lower rated or unrated municipal securities. The market for high
yield, high risk debt securities rated in the medium and lower rating
categories, or which are unrated, is relatively new and its growth has
paralleled a long economic expansion. Past experience may not, therefore,
provide an accurate indication of future performance of this market,
particularly during periods of economic recession. An economic downturn or
increase in interest rates is likely to have a greater negative effect on this
market, the value of high yield debt securities in the Fund's portfolio, the
Fund's net asset value and the ability of the bonds' issuers to repay principal
and interest, meet projected business goals and obtain additional financing,
than would be the case if investments by the Fund were limited to higher rated
securities. These circumstances also may result in a higher incidence of
defaults. Yields on medium or lower-rated municipal bonds may not fully reflect
the higher risks of such bonds. Therefore, the risk of a decline in market
value, should interest rates increase or credit quality concerns develop, may be
higher than has historically been experienced with such investments. An
investment in EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND may be
considered more speculative than investment in shares of another fund which
invests primarily in higher rated debt securities.
Prices of high yield debt securities may be more sensitive to adverse
economic changes or corporate developments than higher rated investments. Debt
securities with longer maturities, which may have higher yields, may increase or
decrease in value more than debt securities with shorter maturities. Market
prices of high yield debt securities structured as zero coupon or pay-in-kind
securities are affected to a greater extent by interest rate changes and may be
more volatile than securities which pay interest periodically and in cash. Where
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND deems it appropriate and in
the best interests of its shareholders, it may incur additional expenses to seek
recovery on a debt security on which the issuer has defaulted and to pursue
litigation to protect the interests of security holders of its portfolio
entities.
Because the market for medium or lower rated securities may be thinner
and less active than the market for higher rated securities, there may be market
price volatility for these securities and limited liquidity in the resale
market. Unrated securities are usually not as attractive to as many buyers as
are rated securities, a factor which may make unrated securities less
marketable. These factors may have the effect of limiting the availability of
the securities for purchase by EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
and may also limit the ability of the Fund to sell such securities at their fair
value either to meet redemption requests or in response to changes in the
economy or the financial markets. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the values and
liquidity of medium or lower rated debt securities, especially in a thinly
traded market. To the extent the Fund owns or may acquire illiquid or restricted
high yield securities, these securities may involve special registration
responsibilities, liabilities and costs, and liquidity and valuation
difficulties. Changes in values of debt securities which the Fund owns will
affect the Fund's net asset value per share. If market quotations are not
readily available for the Fund's lower rated or unrated securities, these
securities will be valued by a method that the Trustees believes accurately
reflects fair value. Valuation becomes more difficult and judgment plays a
greater role in valuing high yield debt securities than with respect to
securities for which more external sources of quotations and last sale
information are available.
Special tax considerations are associated with investing in high yield
debt securities structured as zero coupon or pay-in-kind securities. A Fund
investing in such securities accrues income on these securities prior to the
receipt of cash payments. EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND must
distribute substantially all of its income to shareholders to qualify for pass
through treatment under the tax laws and may, therefore, have to dispose of
portfolio securities to satisfy distribution requirements.
While credit ratings are only one factor EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND'S investment adviser relies on in evaluating high yield debt
securities, certain risks are associated with using credit ratings. Credit
ratings evaluate the safety of principal and interest payments, not market value
risk. Credit rating agencies may fail to change in timely manner the credit
ratings to reflect subsequent events; however, the Fund's investment adviser
continuously monitors the issuers of high yield debt securities in the Fund's
portfolio in an attempt to determine if the issuers will have sufficient cash
flow and profits to meet required principal and interest
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payments. Achievement of EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND'S
investment objective may be more dependent upon the Fund's investment adviser
and the credit analysis capability of the Fund's investment adviser, than is the
case for higher quality debt securities. Credit ratings for individual
securities may change from time to time and EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND may retain a portfolio security whose rating has been
changed. See the Statement of Additional Information for a description of bond
and note ratings.
Transactions in Options and Futures. The Funds, other than EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND, may engage in options and futures transactions. Options
and futures transactions are intended to enable a Fund to manage market or
interest rate risk, and the Funds do not use these transactions for speculation
or leverage. The Funds, other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND,
may attempt to hedge all or a portion of their portfolios through the purchase
of both put and call options on their portfolio securities and listed put
options on financial futures contracts for portfolio securities. The Funds may
also write covered call options on their portfolio securities to attempt to
increase their current income. The Funds will maintain their positions in
securities, option rights, and segregated cash subject to puts and calls until
the options are exercised, closed, or have expired. An option position may be
closed out only on an exchange which provides a secondary market for an option
of the same series. The Funds may purchase listed put options on financial
futures contracts. These options will be used only to protect portfolio
securities against decreases in value resulting from market factors such as an
anticipated increase in interest rates.
The Funds, other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, may
write (i.e., sell) covered call and put options. By writing a call option, a
Fund becomes obligated during the term of the option to deliver the securities
underlying the option upon payment of the exercise price. By writing a put
option, a Fund becomes obligated during the term of the option to purchase the
securities underlying the option at the exercise price if the option is
exercised. The Funds also may write straddles (combinations of covered puts and
calls on the same underlying security). The Funds may only write
"covered"options. This means that so long as a Fund is obligated as the writer
of a call option, it will own the underlying securities subject to the option
or, in the case of call options on U.S. Treasury bills, the Fund might own
substantially similar U.S. Treasury bills. A Fund will be considered
"covered"with respect to a put option it writes if, so long as it is obligated
as the writer of the put option, it deposits and maintains with its custodian in
a segregated account liquid assets having a value equal to or greater than the
exercise price of the option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised. By
writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Funds might become obligated to purchase the underlying securities for more than
their current market price upon exercise.
A futures contract is a firm commitment by two parties: the seller, who
agrees to make delivery of the specific type of instrument called for in the
contract ("going short"), and the buyer, who agrees to take delivery of the
instrument ("going long") at a certain time in the future. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities of
the U.S. government. If a Fund would enter into financial futures contracts
directly to hedge its holdings of fixed income securities, it would enter into
contracts to deliver securities at an undetermined price (i.e., "go short") to
protect itself against the possibility that the prices of its fixed income
securities may decline during the Fund's anticipated holding period. A Fund
would "go long" (agree to purchase securities in the future at a predetermined
price) to hedge against a decline in market interest rates.
The Funds, other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, may also
enter into financial futures contracts and write options on such contracts. The
Funds intend to enter into such contracts and related options for hedging
purposes. The Funds will enter into futures on securities or index-based futures
contracts in order to hedge against changes in interest rates or securities
prices. A futures contract on securities is an agreement to buy or sell
securities during a designated month at whatever price exists at that time. A
futures contract on a securities index does not involve the actual delivery of
securities, but merely requires the payment of a cash settlement based on
changes in the securities index. The Funds do not make payment or deliver
securities upon entering into a futures contract. Instead, they put down a
margin deposit, which is adjusted to reflect changes in the value of the
contract and which remains in effect until the contract is terminated.
The Funds, other than EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, may sell
or purchase other financial futures contracts. When a futures contract is sold
by a Fund, the profit on the contract will tend to rise
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when the value of the underlying securities declines and to fall when the value
of such securities increases. Thus, the Funds sell futures contracts in order to
offset a possible decline in the profit on their securities. If a futures
contract is purchased by a Fund, the value of the contract will tend to rise
when the value of the underlying securities increases and to fall when the value
of such securities declines. The Funds may enter into closing purchase and sale
transactions in order to terminate a futures contract and may buy or sell put
and call options for the purpose of closing out their options positions. The
Funds' ability to enter into closing transactions depends on the development and
maintenance of a liquid secondary market. There is no assurance that a liquid
secondary market will exist for any particular contract or at any particular
time. As a result, there can be no assurance that the Funds will be able to
enter into an offsetting transaction with respect to a particular contract at a
particular time. If the Funds are not able to enter into an offsetting
transaction, the Funds will continue to be required to maintain the margin
deposits on the contract and to complete the contract according to its terms, in
which case it would continue to bear market risk on the transaction.
Risk Characteristics Of Options And Futures. Although options and futures
transactions are intended to enable the Funds to manage market or interest rate
risks, these investment devices can be highly volatile, and the Funds use of
them can result in poorer performance (i.e., the Funds return may be reduced).
The Funds attempt to use such investment devices for hedging purposes may not be
successful. Successful futures strategies require the ability to predict future
movements in securities prices, interest rates and other economic factors. When
the Funds use financial futures contracts and options on financial futures
contracts as hedging devices, there is a risk that the prices of the securities
subject to the financial futures contracts and options on financial futures
contracts may not correlate perfectly with the prices of the securities in the
Funds' portfolios. This may cause the financial futures contract and any related
options to react to market changes differently than the portfolio securities. In
addition, the Funds investment adviser could be incorrect in its expectations
and forecasts about the direction or extent of market factors, such as interest
rates, securities price movements, and other economic factors. Even if the Funds
investment adviser correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of a Fund's futures position did not
correspond to changes in the value of its investments. In these events, the
Funds may lose money on the financial futures contracts or the options on
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although the Funds investment adviser will
consider liquidity before entering into financial futures contracts or options
on financial futures contracts transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular financial futures
contract or option on a financial futures contract at any particular time. The
Funds' ability to establish and close out financial futures contracts and
options on financial futures contract positions depends on this secondary
market. If a Fund is unable to close out its position due to disruptions in the
market or lack of liquidity, the Fund may lose money on the futures contract or
option, and the losses to the Fund could be significant.
A Fund's right to exercise a put is unconditional and unqualified. A put
is not transferable by a Fund, although each Fund may sell the underlying
securities to a third party at any time. The Funds expect that puts will
generally be available without any additional direct or indirect cost. However,
if necessary and advisable, a Fund may pay for certain puts either separately in
cash or by paying a higher price for portfolio securities which are acquired
subject to such a put (thus reducing the yield to maturity otherwise available
to the same securities). Thus, the aggravate price paid for securities with put
rights may be higher than the price that would otherwise be paid.
A Fund may enter into put transactions only with broker-dealers (in
accordance with the rules of the Securities and Exchange Commission) and banks
which, in the opinion of the Funds' Adviser, present minimal credit risks. The
Funds' Adviser will monitor periodically the creditworthiness of issuers of such
obligations held by the Fund. A Funds' ability to exercise a put will depend on
the ability of the broker-dealer or bank to pay for the underlying securities at
the time the put is exercised. In the event that a broker-dealer should default
on its obligation to purchase an underlying security, a Fund might be unable to
recover all or a portion of any loss sustained from having to sell the security
elsewhere. The Funds intend to enter into put transactions solely to maintain
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes.
SPECIAL RISK FACTORS RELATED TO INVESTING IN MUNICIPAL OBLIGATIONS
It should be noted that municipal securities may be adversely affected by
local political and economic conditions and developments within a state. For
example, adverse conditions in a significant industry within New Jersey may from
time to time have a correspondingly adverse effect on specific issuers within
New Jersey or on
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anticipated revenue to the State itself; conversely, an improving economic
outlook for a significant industry may have a positive effect on such issuers or
revenues.
The value of municipal securities may also be affected by general
conditions in the money markets or the municipal bond markets, the levels of
federal and state income tax rates, the supply of tax-exempt bonds, the size of
the particular offering, the maturity of the obligation, the credit quality and
rating of the issue, and perceptions with respect to the level of interest
rates. In general, the value of bonds tends to appreciate when interest rates
decline and depreciate when interest rates rise. An expanded discussion of the
risks associated with the purchase of securities issued is contained in the
Statement of Additional Information.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER
The management of each Fund is supervised by the Trustees of the Trust
under which each Fund has been established ("Trustees"). The Capital Management
Group of First Union National Bank of North Carolina ("CMG") serves as
investment adviser to EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA
MUNICIPAL BOND FUND, EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, EVERGREEN NORTH
CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND,
EVERGREEN VIRGINIA MUNICIPAL BOND FUND AND EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND. First Union National Bank of North Carolina ("FUNB") is a
subsidiary of First Union Corporation ("First Union"), the sixth largest bank
holding company in the United States. First Union is headquartered in Charlotte,
North Carolina, and had $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 through offices in 36 states. CMG manages
or otherwise oversees the investment of over $36 billion in assets belonging to
a wide range of clients, including all the series of Evergreen Investment Trust
(formerly known as First Union Funds). First Union Brokerage Services, Inc., a
wholly-owned subsidiary of FUNB, is a registered broker-dealer that is
principally engaged in providing retail brokerage services consistent with its
federal banking authorizations. First Union Capital Markets Corp., a
wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
CMG manages investments and supervises the daily business affairs of
EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND,
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, EVERGREEN NORTH CAROLINA MUNICIPAL
BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN VIRGINIA
MUNICIPAL BOND FUND AND EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND and,
as compensation therefor, is entitled to receive an annual fee equal to .50 of
1% of the average daily net assets of each Fund, other than EVERGREEN FLORIDA
HIGH INCOME MUNICIPAL BOND FUND, from which it is entitled to receive an annual
fee equal to .60 of 1% of average daily net assets and EVERGREEN NEW JERSEY
TAX-FREE INCOME FUND, from which it is entitled to receive an annual fee based
on the average daily net assets of the Fund calculated as follows: up to $500
million -- .50 of 1%; in excess of $500 million up to $1 million -- .45 of 1%;
in excess of $1 billion up to $ 1.5 billion -- .35 of 1%. The total annualized
operating expenses of EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA
MUNICIPAL BOND FUND, EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, EVERGREEN NORTH
CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND,
EVERGREEN VIRGINIA MUNICIPAL BOND FUND AND EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND for the fiscal year ended August 31, 1995 are set forth in
the section entitled "Financial Highlights". Evergreen Asset Management Corp.
("Evergreen Asset"), a subsidiary of FUNB, serves as administrator to each Fund
and is entitled to receive a fee based on the average daily net assets of each
Fund at a rate based on the total assets of the mutual funds administered by
Evergreen Asset for which CMG or Evergreen Asset also serve as investment
adviser, calculated in accordance with the following schedule: .050% of the
first $7 billion; .035% on the next $3 billion; .030% on the next $5 billion;
.020% on the next $10 billion; .015% on the next $5 billion; and .010% on assets
in excess of $30 billion. Furman Selz Incorporated, an affiliate of Evergreen
Funds Distributor, Inc., distributor for the Evergreen group of mutual funds,
serves as sub-administrator for each Fund and is entitled to receive a fee from
each Fund calculated on the average daily net assets of each Fund at a rate
based on the total assets of the mutual funds administered by Evergreen Asset
for which CMG or Evergreen Asset also serve as investment adviser, calculated in
accordance with the following schedule: .0100% of the first $7 billion; .0075%
on the next $3 billion; .0050% on the next $15 billion; and .0040% on assets in
excess of $25 billion. The total assets of the mutual funds administered by
Evergreen Asset for which CMG or Evergreen Asset serve as investment
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adviser were approximately $1 billion as of September 30, 1995. Prior to January
1, 1996, First Fidelity Bank, N.A. ("First Fidelity") served as investment
adviser to EVERGREEN NEW JERSEY TAX-FREE INCOME FUND. CMG succeeded to the
mutual funds advisory business of First Fidelity in connection with the
acquisition of First Fidelity by a subsidiary of First Union.
Robert S. Drye is a Vice President of FUNB, and has been with FUNB since
1968. Since 1989, Mr. Drye has served as a portfolio manager for several of the
series of Evergreen Investment Trust and for certain common trust funds. Prior
to 1989, Mr. Drye was a marketing specialist with First Union Brokerage
Services, Inc. Mr. Drye has managed the EVERGREEN SOUTH CAROLINA MUNICIPAL BOND
FUND since its inception in 1994 and the EVERGREEN FLORIDA MUNICIPAL BOND FUND
since its inception in 1993. Richard K. Marrone is a Vice President of FUNB. Mr.
Marrone joined FUNB in 1993 with eleven years experience managing fixed income
assets at Woodbridge Capital Management, a subsidiary of Comerica Bank, N.A. Mr.
Marrone is responsible for the portfolio management of several series of
Evergreen Investment Trust and certain common trust funds. Mr. Marrone has
served as portfolio manager of the EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
since 1993, the EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND since its
inception in 1995 and EVERGREEN GEORGIA MUNICIPAL BOND FUND since its inception
in 1993. Charles E. Jeanne joined FUNB in 1993. Prior to joining FUNB, Mr.
Jeanne served as a trader/portfolio manager for First American Bank where he was
responsible for individual accounts and common trust funds. Mr. Jeanne has been
the portfolio manager for the EVERGREEN VIRGINIA MUNICIPAL BOND FUND since its
inception in 1993. Jocelyn Turner is a Municipal Bond Portfolio Manager for CMG
and has managed the EVERGREEN NEW JERSEY TAX-FREE INCOME FUND since 1992. Ms.
Turner was previously employed as a Vice President, Municipal Bond Portfolio
Manager at One Federal Asset Management, Boston, MA since 1987.
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
Eligible investors may purchase Fund shares at net asset value by mail or
wire as described below. The Funds impose no sales charges on Class Y shares.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) persons who at or prior to December 31, 1994 owned shares
in a mutual fund advised by Evergreen Asset, (ii) certain institutional
investors and (iii) investment advisory clients of CMG Evergreen Asset or their
affiliates. The minimum initial investment is $1,000, which may be waived in
certain situations. There is no minimum for subsequent investments. Investors
may make subsequent investments by establishing a Systematic Investment Plan or
a Telephone Investment Plan.
Purchases by Mail or Wire. Each investor must complete the Share Purchase
Application and mail it, together with a check made payable to the Fund whose
shares are being purchased, to State Street Bank and Trust Company ("State
Street") at P.O. Box 9021, Boston, Massachusetts 02205-9827. Checks not drawn on
U.S. banks will be subject to foreign collection which will delay an investor's
investment date and will be subject to processing fees.
When making subsequent investments, an investor should either enclose the
return remittance portion of the statement, or indicate on the face of the
check, the name of the Fund in which an investment is to be made, the exact
title of the account, the address, and the Fund account number. Purchase
requests should not be sent to a Fund in New York. If they are, the Fund must
forward them to State Street, and the request will not be effective until State
Street receives them.
Initial investments may also be made by wire by (i) calling State Street
at 800-423-2615 for an account number and (ii) instructing your bank, which may
charge a fee, to wire federal funds to State Street, as follows: State Street
Bank and Trust Company, ABA No.0110-0002-8, Attn: Custodian and Shareholder
Services. The wire must include references to the Fund in which an investment is
being made, account registration, and the account number. A completed
Application must also be sent to State Street indicating that the shares have
been purchased by wire, giving the date the wire was sent and referencing the
account number. Subsequent wire investments may be made by existing shareholders
by following the instructions outlined above. It is not necessary, however, for
existing shareholders to call for another account number.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the outstanding shares of that Class.
Shares are valued each day the New York Stock Exchange (the "Exchange") is open
as of the close of regular trading (currently 4:00 p.m. Eastern time). The
Exchange is closed on New Year's Day, Presidents Day, Good
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Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The securities in a Fund are valued at their current market value
determined on the basis of market quotations or, if such quotations are not
readily available, such other methods as the Trustees believe would accurately
reflect fair market value.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from an investor's account to reimburse the Fund or the Fund's investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen mutual funds.
A Fund cannot accept investments specifying a certain price or date and
reserves the right to reject any specific purchase order, including orders in
connection with exchanges from the other Evergreen mutual funds. Although not
currently anticipated, each Fund reserves the right to suspend the offer of
shares for a period of time.
Shares of each Fund are sold at the net asset value per share next
determined after a shareholder's order is received. Investments by federal funds
wire or by check will be effective upon receipt by State Street. Qualified
institutions may telephone orders for the purchase of Fund shares. Investors may
also purchase shares through a broker/dealer, which may charge a fee for the
service.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any day
the Exchange is open, either directly or through your financial intermediary.
The price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, a Fund will
not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to ten days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street which is the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, State Street, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, financial intermediaries, fiduciaries and surviving joint owners.
Signature guarantees are required for all redemption requests for shares with a
value of more than $10,000 or where the redemption proceeds are to be mailed to
an address other than that shown in the account registration. A signature
guarantee must be provided by a bank or trust company (not a Notary Public), a
member firm of a domestic stock exchange or by other financial institutions
whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling State Street (800-423-2615) between the hours of 8:00 a.m. and 5:30
p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on
which the Exchange or State Street's offices are closed). The Exchange is closed
on New Year's Day, Presidents Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Redemption requests made after
4:00 p.m. (Eastern time) will be processed using the net asset value determined
on the next business day. Such redemption requests must include the
shareholder's account name, as registered with a Fund, and the account number.
During periods of drastic economic or market changes, shareholders may
experience difficulty in effecting telephone redemptions. Shareholders who are
unable to reach a Fund or State Street by telephone should follow the procedures
outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Funds will employ reasonable procedures to verify that
telephone requests are genuine. These procedures include requiring some form of
personal identification prior to acting upon instructions and tape recording of
conversations. If a Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or
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fraudulent instructions. The Funds shall not be liable for following telephone
instructions reasonably believed to be genuine. Also, the Funds reserve the
right to refuse a telephone redemption request, if it is believed advisable to
do so. Financial intermediaries may charge a fee for handling telephonic
requests. The telephone redemption option may be suspended or terminated at any
time without notice.
General. The sale of shares is a taxable transaction for Federal tax purposes.
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by Federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $1,000 for thirty days. Shareholders will receive sixty days' written
notice to increase the account value before the account is closed. The Funds
have elected to be governed by Rule 18f-1 under the Investment Company Act of
1940 pursuant to which each Fund is obligated to redeem shares solely in cash,
up to the lesser of $250,000 or 1% of a Fund's total net assets during any
ninety day period for any one shareholder. See the Statement of Additional
Information for further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen mutual funds by telephone or mail as
described below. An exchange which represents an initial investment in another
Evergreen mutual fund must amount to at least $1,000. Once an exchange request
has been telephoned or mailed, it is irrevocable and may not be modified or
canceled. Exchanges will be made on the basis of the relative net asset values
of the shares exchanged next determined after an exchange request is received.
Exchanges are subject to minimum investment and suitability requirements.
Each of the Evergreen mutual funds has different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Each Fund imposes a
fee of $5 per exchange on shareholders who exchange in excess of four times per
calendar year. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling State Street (800-423-2615). Exchange requests
made after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach State Street by telephone. If you wish to use the
telephone exchange service you should indicate this on the Share Purchase
Application. As noted above, each Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares communicated
by telephone are genuine. A telephone exchange may be refused by a Fund or State
Street if it is believed advisable to do so. Procedures for exchanging Fund
shares by telephone may be modified or terminated at any time. Written requests
for exchanges should follow the same procedures outlined for written redemption
requests in the section entitled "How to Redeem Shares", however, no signature
guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more information
about these services or your account, contact your financial intermediary,
Evergreen Funds Distributor, Inc. ("EFD"), the distributor of the Funds, or the
toll-free number on the front page of this Prospectus. Some services are
described in more detail in the Share Purchase Application. Systematic
Investment Plan. You may make monthly or quarterly investments into an existing
account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Funds'
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically.
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<PAGE>
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of a
Fund at the net asset value per share on the last business day of each month,
unless otherwise requested by a shareholder in writing. If the transfer agent
does not receive a written request for subsequent dividends and/or distributions
to be paid in cash at least three full business days prior to a given record
date, the dividends and/or distributions to be paid to a shareholder will be
reinvested. If you elect to receive dividends and distributions in cash and the
U.S. Postal Service cannot deliver the checks, or if the checks remain uncashed
for six months, the checks will be reinvested into your account at the then
current net asset value.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG being prevented from continuing to
perform the services required under the investment advisory contract or from
acting as agent in connection with the purchase of shares of a Fund by its
customers. If CMG were prevented from continuing to provide the services called
for under the investment advisory agreement, it is expected that the Trustees
would identify, and call upon each Fund's shareholders to approve, a new
investment adviser. If this were to occur, it is not anticipated that the
shareholders of any Fund would suffer any adverse financial consequences.
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
Income dividends are declared daily and paid monthly. Distributions of
any net realized gains of a Fund will be made at least annually. Shareholders
will begin to earn dividends on the first business day after shares are
purchased unless shares were not paid for, in which case dividends are not
earned until the next business day after payment is received. Each Fund has
qualified and intends to continue to qualify to be treated as a regulated
investment company under the Internal Revenue Code (the "Code"). While so
qualified, so long as each Fund distributes all of its investment company
taxable income and any net realized gains to shareholders, it is expected that
the Funds will not be required to pay any Federal income taxes. A 4%
nondeductible excise tax will be imposed on a Fund if it does not meet certain
distribution requirements by the end of each calendar year. Each Fund
anticipates meeting such distribution requirements.
The Funds will designate and pay exempt-interest dividends derived from
interest earned on qualifying tax-exempt obligations. Such exempt-interest
dividends may be excluded by shareholders of a Fund from their gross income for
Federal income tax purposes, however (1) all or a portion of such
exempt-interest dividends may be a specific preference item for purposes of the
Federal individual and corporate alternative minimum taxes to the extent that
they are derived from certain types of private activity bonds issued after
August 7, 1986, and (2) all exempt-interest dividends will be a component of the
"adjusted current earnings" for purposes of the Federal corporate alternative
minimum tax.
Dividends paid from taxable income, if any, and distributions of any net
realized short-term capital gains (whether from tax exempt or taxable
obligations) are taxable as ordinary income and long-term capital gain
distributions are taxable as long-term capital gains, even though received in
additional shares of the Fund, and regardless of the investors holding period
relating to the shares with respect to which such gains are distributed. Market
discount recognized on taxable and tax-exempt bonds is taxable as ordinary
income, not as excludable income. Under current law, the highest Federal income
tax rate applicable to net long-term gains realized by individuals is 28%. The
rate applicable to corporations is 35%.
25
<PAGE>
Since each Fund's gross income is ordinarily expected to be tax exempt
interest income, it is not expected that the 70% dividends-received deduction
for corporations will be applicable. Specific questions should be addressed to
the investor's own tax adviser.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions (if any) and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, each investor must certify on the Share Purchase
Application, or on a separate form supplied by State Street, that the investor's
social security or taxpayer identification number is correct and that the
investor is not currently subject to backup withholding or is exempt from backup
withholding.
EVERGREEN FLORIDA MUNICIPAL BOND FUND AND EVERGREEN FLORIDA HIGH INCOME
MUNICIPAL BOND FUND. Florida does not currently impose tax on individuals. Thus,
individual shareholders of the Funds will not be subject to any Florida state
income tax on distributions received from the Funds. However, certain
distributions will be taxable to corporate shareholders which are subject to
Florida corporate income tax. Florida currently imposes an intangible tax at the
annual rate of 0.20% on certain securities and other intangible assets owned by
Florida residents. Certain types of tax exempt securities of Florida issuers,
U.S. government securities and tax exempt securities issued by certain U.S.
territories and possessions are exempt from this intangible tax. Shares of the
Funds will also be exempt from the Florida intangible tax if the portfolio
consists exclusively of securities which are not so exempt on the last business
day of the calendar year, however, only the portion of the shares of the Funds
which relate to securities issued by the United States and its possessions and
territories will be exempt from the Florida intangible tax, and the remaining
portion of such shares will be fully subject to the intangible tax, even if they
partly relate to Florida tax exempt securities.
EVERGREEN GEORGIA MUNICIPAL BOND FUND. Under existing Georgia law,
shareholders of the Fund will not be subject to individual or corporate Georgia
income taxes on distributions from the Fund to the extent that such
distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to (1) interest-bearing obligations issued by or
on behalf of the State of Georgia or its political subdivisions, or (2) interest
on obligations of the United States or of any other issuer whose obligations are
exempt from state income taxes under federal tax. Distributions, if any, derived
from capital gains or other sources generally will be taxable for Georgia income
tax purposes to shareholders of the Fund who are subject to the Georgia income
tax. For purposes of the Georgia intangible tax, shares of the Fund likely are
taxable (at the rate of 10 cents per $1,000 in value of the shares held on
January 1 of each year) to shareholders who are otherwise subject to such tax.
EVERGREEN NEW JERSEY TAX-FREE INCOME FUND. In any year in which the Fund
satisfies the requirements for treatment as a "qualified investment fund" under
New Jersey law, distribution from the Fund will be exempt from the New Jersey
Gross Income Tax to the extent such distributions are attributable to interest
or gains from (i) obligations issued by or on behalf of the State of New Jersey
or any country, municipality, school or other district, agency, authority,
commission, instrumentality, public corporation, body corporate and politic or
political subdivision of New Jersey or (ii) obligations that are otherwise
statutorily exempt from state or local taxation or under the laws of the United
States. Any gains realized on the sale or redemption of shares held in a
qualified investment fund are also exempt from the New Jersey Gross Income Tax.
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND. Under existing North
Carolina law, shareholders of the Fund will not be subject to individual or
corporate North Carolina income taxes on distributions from the Fund to the
extend that such distributions represent exempt-interest dividends for federal
income tax purposes that are attributable to (1) interest on obligations issued
by North Carolina and political subdivisions thereof or (2) interest on
obligations of the United States or its territories or possessions.
Distributions, if any, derived from capital gains or other sources generally
will be taxable for North Carolina income tax purposes to shareholders of the
Fund who are subject to the North Carolina income tax.
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND. Under existing South
Carolina law, shareholders of the Fund will not be subject to individual or
corporate South Carolina income taxes on Fund distributions to the extent that
such distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to (1) interest on obligations of the State of
South Carolina, or any of its political subdivisions, (2) interest on
obligations of the United States, or (3) interest on obligations of any agency
or instrumentality of the United States that is prohibited by federal law from
being taxed by a state or any political subdivision of a state. Distributions,
if any, derived from capital gains or other sources, generally will be taxable
for South Carolina income tax purposes to shareholders of the Fund who are
subject to South Carolina income tax.
26
<PAGE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND. Under existing Virginia law,
shareholders of the Fund will not be subject to individual or corporate Virginia
income taxes on distributions received from the Fund to the extent that such
distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to interest earned on (1) obligations issued by a
territory or possession of the United States or any subdivision thereof which
federal law exempts from state income taxes. Distributions, if any, derived from
capital gains or other sources generally will be taxable for Virginia income tax
purposes to shareholders of the Fund who are subject to Virginia income tax.
Statements describing the tax status of shareholders' dividends and
distributions will be mailed annually by the Funds. These statements will set
forth the amount of income exempt from federal and if applicable, state
taxation, and the amount, if any, subject to federal and state taxation.
Moreover, to the extent necessary, these statements will indicate the amount of
exempt-interest dividends which are a specific preference item for purposes of
the federal individual and corporate alternative minimum taxes. The exemption of
interest income for federal income tax purposes does not necessarily result in
exemption under the income or other tax law of any state or local taxing
authority. Investors should consult their own tax advisers about the status of
distributions from the Funds in their states and localities. Each Fund notifies
shareholders annually as to the interest exempt from federal taxes earned by the
Fund.
A shareholder who acquires Class A shares of a Fund and sells or
otherwise disposes of such shares within ninety days of acquisition may not be
allowed to include certain sales charges incurred in acquiring such shares for
purposes of calculating gain and loss realized upon a sale or exchange of shares
of the Fund.
OTHER INFORMATION
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND is a separate
investment series of The Evergreen Municipal Trust, a Massachusetts business
trust organized in 1988. EVERGREEN NEW JERSEY TAX-FREE INCOME FUND is a separate
investment series of The Evergreen Tax Free Trust (formerly FFB Funds Trust), a
Massachusetts business trust organized in 1985. EVERGREEN FLORIDA MUNICIPAL BOND
FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN NORTH CAROLINA MUNICIPAL
BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND AND EVERGREEN VIRGINIA
MUNICIPAL BOND FUND are each separate investment series of Evergreen Investment
Trust (formerly First Union Funds), a Massachusetts business trust organized in
1984. The Funds do not intend to hold annual shareholder meetings; shareholder
meetings will be held only when required by applicable law. Shareholders have
available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Trustees, that affect each series and class in
substantially the same manner. Class A, B and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific class. Each
class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Custodian, Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street
Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as
each Fund's registrar, transfer agent and dividend-disbursing agent for a fee
based upon the number of shareholder accounts maintained for the Funds. The
transfer
27
<PAGE>
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares.
Principal Underwriter. EFD, an affiliate of Furman Seiz LLC, located 230 Park
Avenue, New York, New York 10169, is the principal underwriter of the Funds.
Furman Selz LLC also acts as sub-administrator to the Funds.
Other Classes of Shares. Each Fund currently offers three classes of shares,
Class A, Class B and Class Y, and may in the future offer additional classes.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) persons who at or prior to December 31, 1994, owned shares
in a mutual fund advised by Evergreen Asset, (ii) certain institutional
investors and (iii) investment advisory clients of CMG, Evergreen Asset or their
affiliates. The dividends payable with respect to Class A and Class B shares
will be less than those payable with respect to Class Y shares due to the
distribution and distribution related expenses borne by Class A and Class B
shares and the fact that such expenses are not borne by Class Y shares.
Performance Information. A Fund's performance may be quoted in advertising in
terms of yield or total return. Both types of performance are based on
Securities and Exchange Commission ("SEC") formulas and are not intended to
indicate future performance.
Yield is a way of showing the rate of income a Fund earns on its
investments as a percentage of the Fund's share price. A Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, a Fund's yield may not equal its
distribution rate, the income paid to your account or the income reported in a
Fund's financial statements. To calculate yield, a Fund takes the interest
income it earned from its portfolio of investments (as defined by the SEC
formula) for a 30-day period (net of expenses), divides it by the average number
of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on a Fund's share price at the end of the
30-day period. This yield does not reflect gains or losses from selling
securities.
Total returns are based on the overall dollar or percentage change in the
value of a hypothetical investment in a Fund. A Fund's total return shows its
overall change in value including changes in share prices and assumes all a
Fund's distributions are reinvested. A cumulative total return reflects a Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if a Fund's performance had been constant over
the entire period. Because average annual total returns tend to smooth out
variations in a Fund's return, you should recognize that they are not the same
as actual year-by-year results. To illustrate the components of overall
performance, a Fund may separate its cumulative and average annual total returns
into income results and realized and unrealized gain or loss.
A Fund may also quote tax-equivalent yields, which show the taxable
yields an investor would have to earn before taxes to equal the Fund's tax-free
yields. A tax-equivalent yield is calculated by dividing a Fund's tax-exempt
yield by the result of one minus a stated federal tax rate. If only a portion of
a Fund's income was tax-exempt, only that portion is adjusted in the
calculation.
Comparative performance information may also be used from time to time in
advertising or marketing a Fund's shares, including data from Lipper Analytical
Services, Inc., Morningstar and other industry publications. The Fund may also
advertise in items of sales literature an "actual distribution rate" which is
computed by dividing the total ordinary income distributed (which may include
the excess of short-term capital gains over losses) to shareholders for the
latest twelve month period by the maximum public offering price per share on the
last day of the period. Investors should be aware that past performance may not
be reflective of future results.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which
each Fund operates provide that no Trustee or shareholder will be personally
liable for the obligations of the Trust and that every written contract made by
the Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the 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.
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APPENDIX A -- FLORIDA RISK CONSIDERATIONS
The following is a summary of economic factors which may affect the
ability of the municipal issuers of Florida obligations to repay general
obligation and revenue bonds. Such information is derived from sources that are
generally available to investors and is believed by the Funds to be accurate,
but has not been independently verified and may not be complete. Under current
law, the State of Florida is required to maintain a balanced budget such that
current expenses are met from current revenues. Florida does not currently
impose a tax on personal income but does impose taxes on corporate income
derived from activities within the state. In addition, Florida imposes an ad
valorem tax as well as sales and use taxes. These taxes are the principal
sources of funds to meet state expenses, including repayment of, and interest
on, obligations backed solely by the full faith and credit of the state, without
recourse to any specific project or related revenue source.
On November 3, 1992, Florida voters approved an amendment to the state
constitution which limits the annual growth in the assessed valuation of
residential property and which, over time, could constrain the growth in
property taxes, a major revenue source for local governments. The amendment
restricts annual increases in assessed valuation to the lesser of 3% or the
Consumer Price Index. The amendment applies only to residential properties
eligible for the homestead exemption and does not affect the valuation of
rental, commercial, or industrial properties. When sold, residential property
would be reassessed at market value. The amendment became effective January 1,
1993. While no immediate ratings implications are expected, the amendment could
have a negative impact on the financial performance of local governments over
time and lead to ratings revisions which may have a negative impact on the
prices of affected bonds.
Many of the bonds in which the Funds invest were issued by various units
of local government in the State of Florida. In addition, most of these bonds
are revenue bonds where the security interest of the bond holders typically is
limited to the pledge of revenues or special assessments flowing from the
project financed by the bonds. Projects include, but are not limited to, water
and waste water utilities, drainage systems, roadways, and other
development-related infrastructures. Therefore, the capacity of these issuers to
repay their obligations may be affected by variations in the Florida economy.
Since 1970, Florida has been one of the fastest growing states in the
nation. Average annual population growth over the last 20 years was 320,000.
During this period only California and Texas grew more rapidly. In terms of
total population, Florida moved from the ninth most populous state in 1970 to
fourth today.
This rapid and sustained pace of population growth has given rise to
sharp increases in construction activity and to the need for roads, drainage
systems, and utilities to serve the burgeoning population. In turn this has
driven the growth in the volume of revenue bond debt outstanding.
The pace of growth, however, has not been steady. During economic
expansions, Florida's population growth has exceeded 500,000 people per year,
but in recessions growth has slowed to 120,000 per year. The variations in
construction activity over the course of business cycles is also very large.
Although the amplitude of the swings during business cycles is large, the
duration of downturns in Florida's growth has been short. Historically,
depressed levels of growth have lasted only a year or two at most. Furthermore,
Florida's cycles have not been periods of growth or decline. Instead, what has
occurred are periods of more growth or less growth.
Florida's ability to meet increasing expenses will be dependent in part
upon the state's ability to foster business and economic growth. During the past
decade, Florida has experienced significant increases in the technology-based
and other light industries and in the service sector. This growth has
diversified the state's overall economy, which at one time was dominated by the
citrus and tourism industries. The state's economic and business growth could be
restricted, however, by the natural limitations of environmental resources and
the state's ability to finance adequate public facilities such as roads and
schools.
29
<PAGE>
INVESTMENT ADVISER
Capital Management Group of First Union National Bank of North Carolina, 201
South College Street, Charlotte, North Carolina 28288
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL BOND
FUND, EVERGREEN NEW JERSEY TAX-FREE INCOME FUND, EVERGREEN NORTH CAROLINA
MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND,
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 230 Park Avenue, New York, New York 10169
536126rev02
******************************************************************************
EVERGREEN PENNSYLVANIA TAX-FREE MONEY MARKET FUND June 28, 1996
SUPPLEMENT TO PROSPECTUS DATED JANUARY 22, 1996
Class A Shares. The Annual Operating Expenses table (and accompanying notes) on
page 3 of the EVERGREEN PENNSYLVANIA TAX-FREE MONEY MARKET FUND'S Class A
Prospectus dated January 22, 1996, and the table giving examples of the annual
expenses to be borne by the Fund's Class A shareholders, have been updated as of
the Fund's fiscal year ended February 29, 1996, as follows:
<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 $ 11
12b-1 Fees** .30%
After 3 Years $ 33
Other Expenses .33%
After 5 Years $ 57
After 10 Years $126
Total 1.03%
</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 29, 1996, FOR CLASS A SHARES WERE .47%.
FROM TIME TO TIME, THE FUND'S INVESTMENT ADVISER MAY, AT ITS DISCRETION,
REDUCE OR 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 AND 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 example are estimated amounts
based on historical experience for the most recent fiscal period. Such expenses
have been restated to reflect current fee arrangements and since the above
referenced class was not offered during part of the most recent fiscal period,
such amounts are based on the expenses incurred by the classes which were
offered. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN. For a more complete description of the various
costs and expenses borne by the Fund see "Management of the Funds".
The table on page 4 of the Prospectus dated January 22, 1996, presenting
financial highlights of the Class Y shares of the EVERGREEN PENNSYLVANIA
TAX-FREE MONEY MARKET FUND has been amended as follows to include audited
financial information of such shares for the fiscal year ended February 29,
1996.
A Share -- P. 1
<PAGE>
This section has been further amended to include audited financial
highlights of the Class A and Class Y shares of the EVERGREEN PENNSYLVANIA
TAX-FREE MONEY MARKET FUND, as follows:
FINANCIAL HIGHLIGHTS
The information in the tables for each of the years in the three-year
period ended February 29, 1996, has 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 has been audited by Price Waterhouse LPP, 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's incorporated by reference in the Fund's Statement of Additional
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.
<TABLE>
<CAPTION>
CLASS A CLASS Y SHARES
SHARES
AUGUST 22,
1995*
THROUGH YEAR ENDED
FEBRUARY 29, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
1996 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period......... $1.00 $1.00 $1.00 $1.00 $1.00
Net investment income........................ .02 .03 .03 .02 .03
Less distributions to shareholders from net
investment income.......................... (.02) (.03) (.03) (.02) (.03)
Net asset value, end of period............... $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+................................ 1.7% 3.5% 2.8% 2.1% 2.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).... $4,333 $83,398 $43,539 $14,383 $15,999
Ratios to average net assets:
Expenses**................................. .47%++ .37% .33% .47% .35%
Net investment income**.................... 3.14%++ 3.42% 3.09% 2.10% 2.62%
<CAPTION>
AUGUST 15,
1991*
THROUGH
FEBRUARY 29,
1992
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period......... $1.00
Net investment income........................ .02
Less distributions to shareholders from net
investment income.......................... (.02)
Net asset value, end of period............... $1.00
TOTAL RETURN+................................ 4.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).... $20,699
Ratios to average net assets:
Expenses**................................. .19%++
Net investment income**.................... 3.90%++
</TABLE>
+ TOTAL RETURN IS CALCULATED FOR THE PERIODS INDICATED AND IS NOT ANNUALIZED.
++ ANNUALIZED.
* COMMENCEMENT OF CLASS OPERATIONS
** NET OF EXPENSE WAIVERS AND REIMBURSEMENTS. IF THE FUND HAD BORNE ALL
EXPENSES THAT WERE REIMBURSED OR WAIVED BY THE ADVISER, THE ANNUALIZED
RATIOS OF EXPENSES AND NET INVESTMENT INCOME TO AVERAGE NET ASSETS WOULD
HAVE BEEN THE FOLLOWING:
<TABLE>
<CAPTION>
CLASS A CLASS Y SHARES
SHARES
AUGUST 22,
1995*
THROUGH YEAR ENDED
FEBRUARY 29, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
1996 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Expenses.................................. 1.08%++ .73% 1.05% 1.26% 1.07%
Net investment income..................... 2.53%++ 3.06% 2.37% 1.31% 1.90%
<CAPTION>
AUGUST 15,
1991*
THROUGH
FEBRUARY 29,
1992
<S> <C>
Expenses.................................. .77%++
Net investment income..................... 3.32%++
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
******************************************************************************
<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.
<PAGE>
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
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in Class A shares of the Fund. For further
information see "Purchase and Redemption of Shares" and "General
Information -- Other Classes of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares
<S> <C> <C> <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
<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 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
<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 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
<PAGE>
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
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.
14
<PAGE>
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
******************************************************************************
EVERGREEN PENNSYLVANIA TAX-FREE MONEY MARKET FUND June 28, 1996
SUPPLEMENT TO PROSPECTUS DATED JANUARY 22, 1996
Class Y Shares. The Annual Operating Expenses table (and accompanying notes) on
pages 3 of the EVERGREEN PENNSYLVANIA TAX-FREE MONEY MARKET FUND'S Class Y
Prospectus dated January 22, 1996, and the table giving examples of the annual
expenses to be borne by the Fund's Class Y shareholders, have been updated as of
the Fund's fiscal year ended February 29, 1996, as follows:
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES* EXAMPLE
CLASS Y CLASS Y
<S> <C> <C> <C>
Management Fees .40%
After 1 year $ 7
12b-1 Fees --
After 3 Years $23
Other Expenses .33%
After 5 Years $41
After 10 years $91
Total .73%
</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
29, 1996, FOR CLASS Y SHARES WERE .37%.
From time to time, the Fund's investment adviser may, at its discretion,
reduce or 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 and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in Class Y Shares
of the Fund will bear directly or indirectly. The amounts set forth under "Other
Expenses" as well as the amounts set forth in the example 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 Funds".
The table on page 4 of the Prospectus dated January 22, 1996, presenting
financial highlights of the Class Y shares of the EVERGREEN PENNSYLVANIA
TAX-FREE MONEY MARKET FUND has been amended as follows to include audited
financial information of such shares for the fiscal year ended February 29,
1996.
Class Y -- P. 1
<PAGE>
This section has been further amended to include audited financial
highlights of the Class A and Class Y shares of the EVERGREEN PENNSYLVANIA
TAX-FREE MONEY MARKET FUND, as follows:
FINANCIAL HIGHLIGHTS
The information in the tables for each of the years in the three-year
period ended February 29, 1996, has 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 has been audited by Price Waterhouse LPP, 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.
<TABLE>
<CAPTION>
CLASS A CLASS Y SHARES
SHARES
AUGUST 22,
1995*
THROUGH YEAR ENDED
FEBRUARY 29, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
1996 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period......... $1.00 $1.00 $1.00 $1.00 $1.00
Net investment income........................ .02 .03 .03 .02 .03
Less distributions to shareholders from net
investment income.......................... (.02) (.03) (.03) (.02) (.03)
Net asset value, end of period............... $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+................................ 1.7% 3.5% 2.8% 2.1% 2.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).... $4,333 $83,398 $43,539 $14,383 $15,999
Ratios to average net assets:
Expenses**................................. .47%++ .37% .33% .47% .35%
Net investment income**.................... 3.14%++ 3.42% 3.09% 2.10% 2.62%
<CAPTION>
AUGUST 15,
1991*
THROUGH
FEBRUARY 29,
1992
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period......... $1.00
Net investment income........................ .02
Less distributions to shareholders from net
investment income.......................... (.02)
Net asset value, end of period............... $1.00
TOTAL RETURN+................................ 4.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).... $20,699
Ratios to average net assets:
Expenses**................................. .19%++
Net investment income**.................... 3.90%++
</TABLE>
+ TOTAL RETURN IS CALCULATED FOR THE PERIODS INDICATED AND IS NOT ANNUALIZED.
++ ANNUALIZED.
* COMMENCEMENT OF CLASS OPERATIONS
** NET OF EXPENSE WAIVERS AND REIMBURSEMENTS. IF THE FUND HAD BORNE ALL
EXPENSES THAT WERE REIMBURSED OR WAIVED BY THE ADVISER, THE ANNUALIZED
RATIOS OF EXPENSES AND NET INVESTMENT INCOME TO AVERAGE NET ASSETS WOULD
HAVE BEEN THE FOLLOWING:
<TABLE>
<CAPTION>
CLASS A CLASS Y SHARES
SHARES
AUGUST 22,
1995*
THROUGH YEAR ENDED
FEBRUARY 29, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
1996 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Expenses.................................. 1.08%++ .73% 1.05% 1.26% 1.07%
Net investment income..................... 2.53%++ 3.06% 2.37% 1.31% 1.90%
<CAPTION>
AUGUST 15,
1991*
THROUGH
FEBRUARY 29,
1992
<S> <C>
Expenses.................................. .77%++
Net investment income..................... 3.32%++
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
******************************************************************************
<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
7
<PAGE>
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
<PAGE>
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;
9
<PAGE>
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
10
<PAGE>
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
