<PAGE>
EVERGREEN KEYSTONE
STATE TAX-FREE
FUNDS
(photo of mountain with silhouettes of states)
1997 Annual Report
(Evergreen Keystone Funds logo)
<PAGE>
EVERGREEN KEYSTONE
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders................................. 1
Keystone California Tax Free Fund
Fund at a Glance.................................. 2
Management Report................................. 3
Keystone Massachusetts Tax Free Fund
Fund at a Glance.................................. 4
Management Report................................. 5
Keystone Missouri Tax Free Fund
Fund at a Glance.................................. 6
Management Report................................. 7
Evergreen New Jersey Tax Free Income Fund
Fund at a Glance.................................. 8
Management Report................................. 9
Keystone New York Tax Free Fund
Fund at a Glance.................................. 10
Management Report................................. 11
Keystone Pennsylvania Tax Free Fund
Fund at a Glance.................................. 12
Management Report................................. 13
Growth of Investments.................................. 14
Financial Highlights
Keystone California Tax Free Fund................. 16
Keystone Massachusetts Tax Free Fund.............. 18
Keystone Missouri Tax Free Fund................... 20
Evergreen New Jersey Tax Free Income Fund......... 22
Keystone New York Tax Free Fund................... 24
Keystone Pennsylvania Tax Free Fund............... 26
Schedule of Investments
Keystone California Tax Free Fund................. 28
Keystone Massachusetts Tax Free Fund.............. 30
Keystone Missouri Tax Free Fund................... 32
Evergreen New Jersey Tax Free Income Fund......... 34
Keystone New York Tax Free Fund................... 37
Keystone Pennsylvania Tax Free Fund............... 39
Statements of Assets and Liabilities................... 42
Statements of Operations............................... 44
Statements of Changes in Net Assets.................... 48
Notes to Financial Statements.......................... 54
Independent Auditors' Report........................... 61
Additional Information................................. 62
</TABLE>
ABOUT EVERGREEN KEYSTONE
Since 1971, the Evergreen Funds have been providing investors with a proven,
value-driven approach to equity investment management. For over 60 years of
changing economic conditions, Keystone has taken pride in helping investors meet
their financial goals through a broad range of financial products and services.
Combined, Evergreen Keystone offers over 70 funds designed to meet a broad range
of objectives, including fixed-income, balanced, growth and income, and
aggressive growth. Assets under management total more than $29 billion.
<PAGE>
EVERGREEN KEYSTONE
LETTER TO SHAREHOLDERS
May 1997
(photo of William M. Ennis)
WILLIAM M. ENNIS
Dear Shareholders:
While not without its surprises, municipal bond investing during the past year
tended to be rewarding for investors. This was particularly true on an after-tax
basis, and especially so for those investors receiving the double-tax free
benefit of state-specific mutual funds. For the 12-month period ending March 31,
1997, the average single-state municipal bond fund had a total return of 5.03%.
In contrast, the average long-term government bond fund had a total return of
3.30% and the average corporate bond fund had a total return of 4.87%, according
to Lipper Analytical Services, an independent monitor of mutual fund
performance. When you consider the tax advantages of municipal bond funds, the
relative advantage increases.
As so often happens in the investment world, the road to the final performance
figures was somewhat bumpy and not always as comfortable as the eventual
destination. The initial period-- from April through August-- was very
difficult. Market fears of excessive growth and a possible reappearance of
higher inflation caused interest rates to spike up and bond prices to decline.
Municipal bonds also declined during this initial period, but not by as much as
taxable bonds. This initial period was followed by a rally in bonds-- in which
municipals did particularly well-- from September to January. This in turn was
followed by another correction in the market in late January, February and
March. As I write, the Federal Reserve has started to raise short-term interest
rates in an effort to contain inflation.
In this environment, we believe it continues to make sense for
investors-- particularly those in the higher tax brackets-- to maintain a
portion of their portfolios in municipal bond funds as part of an overall asset
allocation plan. As of the end of March, municipal bonds were paying about 85%
of the yield of taxable bonds of comparable maturity and credit quality, but
with significant tax advantages. For a married couple in the 36% federal income
tax bracket, a fund paying a 5% yield delivers the after-tax equivalent of a
taxable fund delivering 7.81%. When one adds in the advantages of a single-state
fund, the benefits increase.
I am delighted to inform you that Evergreen Keystone successfully integrated all
service functions of Evergreen and Keystone Funds in early May. This means you
now have full exchange privileges among all Evergreen and Keystone America
funds. In addition, you will be receiving the top-flight shareholder service
that earned Evergreen Keystone the 1996 Dalbar Quality Tested Service Seal, the
highest award for mutual fund service presented by Dalbar, an independent mutual
fund survey and rating firm.
In the following pages, Evergreen Keystone investment professionals will give
you more detailed information about the investment environment and the
strategies employed in managing your funds. You will notice that this annual
report is a departure from past reports in format. It represents the effort of
Evergreen Keystone Funds to provide honest, thoughtful reports and to present
them in a format that is attractive and makes information easily accessible. We
are very interested in hearing your thoughts on this new format, and we welcome
any suggestions you may have.
Sincerely,
WILLIAM M. ENNIS
MANAGING DIRECTOR
1
<PAGE>
KEYSTONE
CALIFORNIA TAX FREE FUND
(silhouette of California)
FUND AT A GLANCE
As of March 31, 1997
<TABLE>
<CAPTION>
ONE YEAR PERFORMANCE CLASS A CLASS B CLASS C
<S> <C> <C> <C>
One year with sales charge -0.55 % -1.31 % 2.55 %
One year w/o sales charge 4.41 % 3.64 % 3.53 %
Dividends per share $0.17 $0.14 $0.14
<CAPTION>
AVERAGE ANNUAL RETURNS CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Three Years 4.28 % 4.33 % 5.10 %
Since Inception 2.07 % 2.22 % 2.96 %
CLASSES A, B, AND C BEGAN 2/1/94
ALL RETURNS INCLUDE THE MAXIMUM SALES CHARGE.
<CAPTION>
CUMULATIVE RETURNS CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Four months w/o sales charge -1.29 % -1.54 % -1.64 %
Three Years 13.40 % 13.56 % 16.08 %
Since Inception 6.70 % 7.21 % 9.68 %
CLASSES A, B, AND C BEGAN 2/1/94
ALL RETURNS INCLUDE THE MAXIMUM SALES CHARGE.
<CAPTION>
PORTFOLIO CHARACTERISTICS
<S> <C> <C> <C>
Total Net Assets (all classes) $27,834,781
Average Credit Quality AAA
Average Maturity 17.0 years
</TABLE>
PORTFOLIO QUALITY (AS A PERCENTAGE OF PORTFOLIO ASSETS)
(pie chart appears here, plots follow:)
A 3.5%
AAA 96.5%
OBJECTIVE
Current income exempt from federal and California state income taxes and
preservation of capital.
STRATEGY
Keystone California Tax Free Fund seeks to meet its objectives by investing in
bonds issued by the State of California, municipalities and other qualifying
organizations in California. The Fund seeks to avoid unnecessary credit or
market risk. The Fund, as a matter of policy, invests at least 80% of its
portfolio in bonds insured for timely payment of principal and interest. The net
asset value of the fund, however, is not insured. Income may be subject to local
taxes and the federal alternative minimum tax (AMT) for some investors.
PORTFOLIO MANAGEMENT TEAM
George J. Kimball, a Keystone vice president and an investment
(photo of professional with 11 years experience in financial services,
George J. is Portfolio Manager of Keystone California Tax Free Fund. Mr.
Kimball) Kimball is a Chartered Financial Analyst, and holds a B.A.
from Hamilton College and an M.B.A. from Duke University. He
is supported by the Municipal Bond Team of Keystone Investment
Management Company. The team manages more than $2 billion in
municipal bond assets in a variety of portfolios.
2
<PAGE>
KEYSTONE
CALIFORNIA TAX FREE FUND (silhouette of California)
MANAGEMENT REPORT
May 1997
Dear Shareholders:
We are pleased to report on the Keystone California Tax Free Fund for the fiscal
period ended March 31, 1997. You may recall that you recently received an annual
report for the period ended November 30, 1996. We have changed your Fund's
fiscal year, however, to end on March 31, 1997. This is part of an effort by
Evergreen Keystone Funds to streamline and increase the efficiency of fund
administration. Funds with similar investment objectives, in this case state tax
free funds, are being placed on the same fiscal year cycle. The next report you
will receive will be a semi-annual report for the period ending September 30,
1997. You should expect to receive it in November.
While this is an annual report, we will focus our discussion primarily on the
four-month period since the last fiscal year ended.
PERFORMANCE
Your Fund's returns for the four-month period ended March 31, 1997 reflected
investors' uncertainty about the direction of interest rates. Virtually every
asset class experienced volatility, from blue-chip stocks to U.S. Treasury
bonds. Municipal bonds were also affected, although single-state municipal bond
funds withstood the turbulence better than long-term government funds.1 The
municipal bond market had experienced a high degree of price volatility earlier
in 1996. The situation changed by September, 1996, when interest rates started
to decline. The Fund took advantage of this outperformance of bonds with long
maturities and successfully sold them into the strong market. Early in January
of 1997, the Fund began increasing the weighting of bonds with shorter
maturities, which are generally not as sensitive to interest rate moves as bonds
with 20 and 30 year maturities. At the close of the fiscal year, the average
maturity of the bonds in the portfolio was 17 years.
ECONOMY ON THE MEND
California's recession lows gave way to a considerable improvement in economic
activity during the past year. The state's financial position and employment
conditions regained stability and the jobs lost during the prior two years were
regained. Not surprisingly, the value of California's bonds also improved. In
fact, the prices of California bonds were generally higher than the nation's
average.
PORTFOLIO COMPOSITION MARCH 31, 1997
(AS A PERCENTAGE OF NET ASSETS)
(pie chart appears here, plot points follow)
County-City/School District 42.8%
Water & Sewer 14.0%
Other Revenue Bonds 12.8%
Hospitals/Nursing
Homes Health 9.7%
Housing 9.0%
Public Facilities 3.7%
Education 3.0%
Indust. Dev/Pollution 1.9%
Utility 1.6%
Other 1.5%
While clearly beneficial for California, the economic improvement and the
accompanying rise in state bond values didn't have much impact on the Fund,
because the portfolio consisted primarily of insured bonds which are largely
immune to credit risk. The prospectus requires the Fund to keep at least 80% of
net assets in insured bonds. At the end of March, insured bonds represented 91%
of net assets. The overall credit quality of the portfolio at the close of the
fiscal year was AAA, the highest rating, according to Standard & Poor's, an
independent rating service.
OUTLOOK
Looking ahead, we think that the Federal Reserve may raise interest rates again
in the near future. Consumer confidence is high and the dollar is strong. This
combination may be interpreted as inflationary by the Fed. As a result, the Fund
is positioned defensively in expectation of higher interest rates.
Sincerely,
(sig of Albert H. Elfner, III)
ALBERT H. ELFNER, III
CHAIRMAN
Keystone Investment Management Company
GEORGE J. KIMBALL
VICE PRESIDENT AND
PORTFOLIO MANAGER
1Source: Wall Street Journal Quarterly Review, April 4, 1997, citing Mutual Fund
Performance Yardsticks compiled by Lipper Analytical Services Inc. Single-state
municipal bond funds' average total return for the first quarter of 1997 was
- -0.38% compared to -1.35% return of long-term government funds. Lipper
Analytical Services, Inc., is an independent organization that measures
performance of mutual funds.
3
<PAGE>
KEYSTONE
(silhouette of Mass.) MASSACHUSETTS TAX FREE FUND
FUND AT A GLANCE
As of March 31, 1997
<TABLE>
<CAPTION>
ONE YEAR PERFORMANCE CLASS A CLASS B CLASS C
<S> <C> <C> <C>
One year with sales charge -0.07 % -0.72 % 3.14 %
One year w/o sales charge 4.92 % 4.25 % 4.14 %
Dividends per share $0.50 $0.43 $0.43
<CAPTION>
AVERAGE ANNUAL RETURNS CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Three Years 4.23 % 4.23 % 5.07 %
Since Inception 1.51 % 1.59 % 2.36 %
CLASSES A, B AND C BEGAN 2/4/94
ALL RETURNS INCLUDE THE MAXIMUM SALES CHARGE.
<CAPTION>
CUMULATIVE RETURNS CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Three Years 13.23 % 13.23 % 16.01 %
Since Inception 4.85 % 5.11 % 7.64 %
CLASSES A, B AND C BEGAN 2/4/94
ALL RETURNS INCLUDE THE MAXIMUM SALES CHARGE.
<CAPTION>
PORTFOLIO CHARACTERISTICS
<S> <C> <C> <C>
Total Net Assets (all classes) $11,932,403
Average Credit Quality AA
Average Maturity 16.7 years
</TABLE>
PORTFOLIO QUALITY (AS A PERCENTAGE OF PORTFOLIO ASSETS)
(pie chart appears here, plot points follow:)
AAA 52.5%
AA 8.8%
A 20.9%
BAA 4.5%
Not Rated 13.3%
OBJECTIVE
Current income exempt from federal and Massachusetts state personal income taxes
and capital preservation.
STRATEGY
Keystone Massachusetts Tax Free Fund seeks to meet its objectives by investing
in bonds issued by the Commonwealth of Massachusetts, municipalities and other
issuers in the state. The Fund seeks to avoid unnecessary credit or market risk.
The Fund's portfolio will be structured to optimize the market risk/reward
tradeoffs, raising or lowering targeted duration in the process. Income may be
subject to local taxes and the federal alternative minimum tax (AMT) for some
investors.
PORTFOLIO MANAGEMENT TEAM
George J. Kimball, a Keystone vice president and an investment
professional with 11 years experience in financial services,
(photo of is Portfolio Manager of Keystone Massachusetts Tax Free Fund.
George J. Mr. Kimball is a Chartered Financial Analyst, and holds a B.A.
Kimball) from Hamilton College and an M.B.A. from Duke University. He
is supported by the Municipal Bond Team of Keystone Investment
Management Company. The team manages more than $2 billion in
municipal bond assets in a variety of portfolios.
4
<PAGE>
KEYSTONE
MASSACHUSETTS TAX FREE FUND (silhouette of Mass.)
MANAGEMENT REPORT
May 1997
Dear Shareholders:
The Keystone Massachusetts Tax Free Fund performed well for the 12-month period
ended March 31, 1997, consistent with the municipal bond market. The performance
was aided by the general health of the economy in Massachusetts and the Fund's
emphasis on quality bonds.
IMPROVED STATE ENVIRONMENT
State government in Massachusetts appears to have entered a period of stronger
budgetary health, due in part to a tighter fiscal discipline than has existed in
the past, combined with healthy state revenues produced by a very strong
economy. While the state government continues to have a heavy debt load, limits
on new capital spending and a succession of balanced budgets have helped restore
investor confidence in public bonds in the state. Moreover, the strong growth of
the state economy, led by the software and financial services industries, has
helped job creation.
DIFFICULT START TO YEAR
The 12-month fiscal year encompassed two contrasting periods: the first six
months, during which interest rates rose and Fund performance suffered; and the
final six months, when interest rates declined and the Fund did very well.
The year began with a high degree of volatility in April and May 1996. The
Fund's portfolio of longer-maturity municipal bonds was positioned for a
favorable municipal bond market. Unfortunately, market concerns about a
fast-growing economy and the possibility of rising inflation served to drive
interest rates up. This led to a period of underperformance, as the
longer-maturity bonds in the portfolio suffered some price erosion in the rising
interest rate environment.
IMPROVEMENT IN SECOND HALF
The situation changed in September, when interest rates started to decline.
While the Fund's portfolio maturities had been pulled in somewhat, the Fund
still was able to participate in a rallying bond market. As this rally
continued, we took advantage of market strength to de-emphasize bonds with
maturities of 20 to 30 years, which are more vulnerable than bonds with shorter
maturities to price loss when interest rates rise. We placed greater emphasis on
bonds with maturities from 15-to-20 years, which hold more of their price when
rates rise. This left the portfolio well positioned for a back-up in interest
rates in early 1997. At the close of the fiscal year, the average maturity was
16.7 years.
PORTFOLIO COMPOSITION MARCH 31, 1997
(AS A PERCENTAGE OF NET ASSETS)
(pie chart appears here, plot points follow:)
Water & Sewer 17.1%
Other General
Obligations 15.5%
Transportation 12.7%
Education 10.1%
County/City/
School District 9.8%
Utility 7.1%
Housing 5.2%
Indust. Dev/
Pollution Control 2.2%
Other 2.4%
Hospitals/Nursing
Homes Health 17.9%
BOND QUALITY UPGRADED
During the past year, spreads-- or the difference between yields-- narrowed
between higher-rated and lower-rated bonds. This meant that the lower-rated
bonds tended to outperform higher-rated bonds during the year. As a result, at
the end of the period there was very little yield premium to be gained by
holding lower-rated bonds.
Over the course of the year, we took advantage of the outperformance of the
lower-rated bonds and successfully sold them into the strong market, while
increasing the higher rated portion of the portfolio. This strategy, in addition
to capturing the profits from the sold securities, left the portfolio with a
relatively high credit quality at the end of the year. This strategy also should
benefit the Fund by giving the portfolio greater stability should economic
growth begin to slow in response to rising rates.
Sincerely,
(sig of Albert H. Elfner, III)
ALBERT H. ELFNER, III
CHAIRMAN
Keystone Investment Management Company
GEORGE J. KIMBALL
VICE PRESIDENT
PORTFOLIO MANAGER
5
<PAGE>
(silhouette of Missouri) KEYSTONE
MISSOURI TAX FREE FUND
FUND AT A GLANCE
As of March 31, 1997
<TABLE>
<CAPTION>
ONE YEAR PERFORMANCE CLASS A CLASS B CLASS C
<S> <C> <C> <C>
One year with sales charge 0.22 % -0.51 % 3.49 %
One year w/o sales charge 5.22 % 4.49 % 4.49 %
Dividends per share $0.16 $0.14 $0.14
<CAPTION>
AVERAGE ANNUAL RETURNS CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Three Years 4.50 % 4.45 % 5.33 %
Since Inception 2.66 % 2.57 % 3.39 %
CLASSES A, B AND C BEGAN 2/1/94
ALL RETURNS INCLUDE THE MAXIMUM SALES CHARGE.
<CAPTION>
CUMULATIVE RETURNS CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Four months w/o sales charge -0.57 % -0.83 % -0.73 %
Three Years 14.11 % 13.95 % 16.85 %
Since Inception 8.65 % 8.38 % 11.12 %
CLASSES A, B AND C BEGAN 2/1/94
ALL RETURNS INCLUDE THE MAXIMUM SALES CHARGE.
<CAPTION>
PORTFOLIO CHARACTERISTICS
<S> <C> <C> <C>
Total Net Assets (all classes) $24,060,440
Average Credit Quality AA
Average Maturity 18.8 years
</TABLE>
PORTFOLIO QUALITY (AS A PERCENTAGE OF PORTFOLIO ASSETS)
(pie chart appears here, plot points follow:)
AAA 62.4%
AA 15.7%
A 11.1%
BAA 6.4%
Not Rated 4.4%
OBJECTIVE
Current income exempt from federal and Missouri state personal income taxes and
capital preservation.
STRATEGY
Keystone Missouri Tax Free Fund seeks to meet its objectives by investing in
bonds issued by the State of Missouri, municipalities and other qualifying
organizations in Missouri. The Fund seeks to avoid unnecessary credit or market
risk. The Fund's portfolio will be structured to optimize the market risk/reward
tradeoffs, raising or lowering duration in the process. Income may be subject to
local taxes and the federal alternative minimum tax (AMT) for some investors.
PORTFOLIO MANAGEMENT TEAM
George J. Kimball, a Keystone vice president and an investment
professional with 11 years experience in financial services,
(photo of is Portfolio Manager of Keystone Missouri Tax Free Fund. Mr.
George J. Kimball is a Chartered Financial Analyst, and holds a B.A.
Kimball) from Hamilton College and an M.B.A. from Duke University. He
is supported by the Municipal Bond Team of Keystone Investment
Management Company. The team manages more than $2 billion in
municipal bond assets in a variety of portfolios.
6
<PAGE>
KEYSTONE (silhouette of Missouri)
MISSOURI TAX FREE FUND
MANAGEMENT REPORT
May 1997
Dear Shareholders:
We are pleased to report on the Keystone Missouri Tax Free Fund for the fiscal
period ended March 31, 1997. You may recall that you recently received an annual
report for the period ended November 30, 1996. We have changed your Fund's
fiscal year, however, to end on March 31, 1997. This is part of an effort by
Evergreen Keystone Funds to streamline and increase the efficiency of fund
administration. Funds with similar investment objectives, in this case state tax
free funds, are being placed on the same fiscal year cycle. The next report you
will receive will be a semi-annual report for the period ending September 30,
1997. You should expect to receive it in November.
While this is an annual report, we will focus our discussion primarily on the
four-month period since the last fiscal year ended.
PERFORMANCE
Your Fund's returns for the four-month period ended March 31, 1997 reflected
investors' uncertainty about the direction of interest rates. Virtually every
asset class experienced volatility, from blue-chip stocks to U.S. Treasury
bonds. Municipal bonds were also affected, although single-state municipal bond
funds withstood the turbulence better than long-term government funds.1 On the
positive side, the Fund was aided by the very strong climate for public finance
in Missouri. In addition, the Fund benefitted from its emphasis on higher rated
bonds and its management of maturities in the rally in late 1996.
STRONG STATE ENVIRONMENT
Missouri is one of the very few states with an AAA-rating for state government,
which has traditionally had a conservative fiscal policy and a long record of
balanced state budgets. In addition, the overall state economy was strong during
the fiscal period, as advances in the medical services and high technology
industries helped fuel economic growth and lower unemployment.
THE MARKET
The municipal bond market had experienced a high degree of price volatility
earlier in 1996. This situation had changed by September, 1996, when interest
rates started to decline. While the Fund's portfolio maturities had been pulled
in somewhat, the Fund still was able to participate in a rallying bond market.
As this rally continued, we took advantage of market strength to de-emphasize
bonds with maturities of 20 to 30 years, which are more vulnerable than
shorter-term securities to price loss when interest rates rise, and placed
greater emphasis on bonds with maturities of 15 to 20 years, which hold more of
their prices when rates rise. This left the portfolio well positioned for a
back-up in interest rates in early 1997. At the close of the fiscal year, the
average maturity was 18.8 years.
PORTFOLIO COMPOSITION MARCH 31, 1997
(AS A PERCENTAGE OF NET ASSETS)
(pie chart appears here, plot points follow:)
Hospitals/Nursing Home 15.4%
Education 14.6%
Water & Sewer 9.5%
Housing 8.5%
Utility 7.7%
County/City/
School 6.1%
Indust. Dev/
Pollution 5.7%
Transportation 4.4%
Other General
Obligations 3.6%
Other 1.2%
Revenue Bonds 23.3%
HIGH QUALITY EMPHASIZED
During the past year, the spreads-- or differences between yields-- tightened
between higher-rated and lower-rated bonds. This meant that the lower-rated
bonds tended to outperform higher-rated bonds during the year. As a result, at
the end of the period there was very little yield premium to be gained by
holding lower-rated bonds.
Over the course of the year, we took advantage of the outperformance of the
lower-rated bonds and successfully sold them into the strong market, while
increasing the higher-rated portion of the portfolio. This strategy, in addition
to capturing the profits from the sold securities, left the portfolio with
relatively high credit quality at the end of the year. This strategy also should
benefit the Fund by giving the portfolio greater potential stability should
economic growth begin to slow in response to rising rates.
Sincerely,
(sig of Albert H. Elfner, III)
ALBERT H. ELFNER, III
CHAIRMAN
Keystone Investment Management Company
GEORGE J. KIMBALL
VICE PRESIDENT
PORTFOLIO MANAGER
1Source: Wall Street Journal Quarterly Review, April 4, 1997, citing Mutual Fund
Performance Yardsticks compiled by Lipper Analytical Services Inc. Single-state
municipal bond funds' average total return for the first quarter of 1997 was
- -0.38% compared to -1.35% return of long-term government funds. Lipper
Analytical Services, Inc., is an independent organization that measures
performance of mutual funds.
7
<PAGE>
EVERGREEN
(silhouette of New Jersey) NEW JERSEY TAX FREE INCOME FUND
FUND AT A GLANCE
As of March 31, 1997
<TABLE>
<CAPTION>
ONE YEAR PERFORMANCE CLASS A CLASS B CLASS Y
<S> <C> <C> <C>
One year with sales charge -0.29 % -1.25 % 4.74 %
One year w/o sales charge 4.68 % 3.73 % 4.74 %
Dividends per share $0.31 $0.26 $0.32
<CAPTION>
AVERAGE ANNUAL RETURNS CLASS A CLASS B CLASS Y
<S> <C> <C> <C>
Three Years 4.51 % -- --
Five Years 5.74 % -- --
Since Inception 6.03 % -1.72 % 2.01 %
CLASS A BEGAN 7/16/91; CLASS B BEGAN 1/30/96;
CLASS Y BEGAN 2/8/96.
ALL RETURNS INCLUDE THE MAXIMUM SALES CHARGE.
<CAPTION>
CUMULATIVE RETURNS CLASS A CLASS B CLASS Y
<S> <C> <C> <C>
Seven months w/o sales charge 2.83 % 2.29 % 2.88 %
Three Years 14.16 % -- --
Five Years 32.16 % -- --
Since Inception 39.76 % -2.01 % 2.31 %
CLASS A BEGAN 7/16/91; CLASS B BEGAN 1/30/96;
CLASS Y BEGAN 2/8/96.
ALL RETURNS INCLUDE THE MAXIMUM SALES CHARGE.
<CAPTION>
PORTFOLIO CHARACTERISTICS
<S> <C> <C> <C>
Total Net Assets (all classes) $48,717,109
Average Credit Quality AA
Average Maturity 15.07 years
</TABLE>
PORTFOLIO QUALITY (AS A PERCENTAGE OF PORTFOLIO ASSETS)
(pie chart appears here, plot points follow:)
AAA 63.8%
AA 16.6%
A 14.5%
BAA 2.8%
Not Rated 2.3%
OBJECTIVE
Evergreen New Jersey Tax Free Income Fund seeks a high level of income, exempt
from federal and New Jersey personal income taxes.
STRATEGY
Evergreen New Jersey Tax Free Income Fund seeks to meet its objectives by
investing in bonds issued by the State of New Jersey, municipalities and other
qualifying organizations in New Jersey. The Fund seeks to avoid unnecessary
credit or market risk. The Fund's portfolio will be structured to optimize the
market risk/reward tradeoffs, raising or lowering duration in the process.
Income may be subject to local taxes and the federal alternative minimum tax
(AMT) for some investors.
PORTFOLIO MANAGEMENT TEAM
Jocelyn Turner, an Evergreen vice president, is Portfolio
Manager of Evergreen New Jersey Tax Free Income Fund. Ms.
(photo of Turner, a professional with 22 years' experience in financial
Jocelyn services, holds an A.A. from Bryant College. She is supported
Turner) by the Municipal Bond Team of Evergreen Asset Management
Corporation. The team manages more than $800 million in
municipal bond assets in a variety of portfolios.
8
<PAGE>
EVERGREEN
NEW JERSEY TAX FREE INCOME FUND (silhouette of New Jersey)
MANAGEMENT REPORT
May 1997
Dear Shareholders:
We are pleased to report to you on the activities of the Evergreen New Jersey
Tax Free Income Fund for the fiscal period ended March 31, 1997.
You may recall you recently received a semi-annual report for the period ended
February 28, 1997. We have changed your Fund's fiscal year, however, to end on
March 31, 1997. This is part of an effort by Evergreen Keystone Funds to
streamline and increase the efficiency of fund administration. Funds with
similar investment objectives, in this case state tax free funds, are being
placed on the same fiscal year cycle. The next report you will receive will be a
semi-annual report for the period ending September 30, 1997. You should expect
to receive it in November.
While this is an annual report, we will focus our discussion primarily on the
seven-month period since the last fiscal year ended on August 30, 1996.
PERFORMANCE
The Evergreen New Jersey Tax Free Income Fund provided positive returns for the
period ended March 31, 1997. The Fund's results reflected the overall shortage
of New Jersey municipal issues, as well as the conservative emphasis of the Fund
on maintaining high current income and preservation of capital, rather than the
pursuit of price appreciation.
DEFENSIVE STRATEGY
The municipal bond market experienced periods of considerable price volatility
earlier in 1996. This led us to position the portfolio defensively. We bought
more premium bonds, favoring income protection and preservation of capital over
potential price appreciation. We replaced the 20-year revenue bonds in the
portfolio with five- and seven-year general obligation premium bonds, which, we
believed, would help to maintain a competitive level of current income while
reducing price fluctuations. We bought pre-refunded bonds backed by the U.S.
Government to add quality to the portfolio and boost income protection. We
reinforced the Fund's defense against early bond calls by selling bonds that
could be called in five years or less and replacing them with non-callable bonds
or higher-coupon bonds with longer calls.
PORTFOLIO COMPOSITION MARCH 31, 1997
(AS A PERCENTAGE OF NET ASSETS)
(pie chart appears here, plot points follow:)
County/City/School 19.8%
Utility 17.4%
Education 10.4%
Escrow 9.5%
Hospitals 6.2%
Leases 5.5%
Other 4.4%
G.O.-State 2.0%
Indust. Dev. 0.7%
Other 3.0%
Transportation 21.1%
Our strategy of income protection, which is consistent with the Fund's
objective, allowed the Fund to maintain a steady dividend payout, despite the
unsteady markets.
OUTLOOK
Looking ahead, we remain cautious. The Federal Reserve raised short-term rates
by a quarter of a percentage point in late March, and we think another hike is
likely. New Jersey bonds have an additional edge because of their scarcity. When
yields go up and prices move down, New Jersey bonds tend to hold their values
better than comparable bonds.
Sincerely,
RICHARD K. WAGONER
EXECUTIVE VICE PRESIDENT
CHIEF INVESTMENT OFFICER
First Union Capital Management Group
JOCELYN TURNER
VICE PRESIDENT
PORTFOLIO MANAGER
9
<PAGE>
(silhouette of New York) KEYSTONE
NEW YORK TAX FREE FUND
FUND AT A GLANCE
As of March 31, 1997
<TABLE>
<CAPTION>
ONE YEAR PERFORMANCE CLASS A CLASS B CLASS C
<S> <C> <C> <C>
One year with sales charge -0.11 % -0.95 % 3.14 %
One year w/o sales charge 4.87 % 4.03 % 4.14 %
Dividends per share $0.49 $0.42 $0.42
<CAPTION>
AVERAGE ANNUAL RETURNS CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Three Years 4.84 % 4.87 % 5.77 %
Since Inception 2.60 % 2.61 % 3.42 %
CLASSES A, B, AND C BEGAN 2/4/94
ALL RETURNS INCLUDE THE MAXIMUM SALES CHARGE.
<CAPTION>
CUMULATIVE RETURNS CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Three Years 15.24 % 15.32 % 18.34 %
Since Inception 8.44 % 8.47 % 11.22 %
CLASSES A, B, AND C BEGAN 2/4/94
ALL RETURNS INCLUDE THE MAXIMUM SALES CHARGE.
<CAPTION>
PORTFOLIO CHARACTERISTICS
<S> <C> <C> <C>
Total Net Assets (all classes) $24,628,120
Average Credit Quality AAA
Average Maturity 15.9 years
</TABLE>
PORTFOLIO QUALITY (AS A PERCENTAGE OF PORTFOLIO ASSETS)
(pie chart appears here, plot points follow:)
AAA 84.8%
AA 4.8%
BAA 6.2%
Not Rated 4.2%
OBJECTIVE
Current income exempt from federal, New York state and New York City personal
income taxes and preservation of capital.
STRATEGY
Keystone New York Tax Free Fund seeks to meet its objective by investing in
bonds issued by the State of New York, municipalities and other qualifying
organizations in New York. The Fund seeks to avoid unnecessary credit or market
risk. The Fund, as a matter of policy, invests at least 80% of its portfolio in
bonds insured for timely payment of principal and interest. The net asset value
of the fund, however, is not insured. Income may be subject to local taxes and
the federal alternative minimum tax (AMT) for some investors.
PORTFOLIO MANAGEMENT TEAM
George J. Kimball, a Keystone vice president and an investment
professional with 11 years experience in financial services,
(photo of is Portfolio Manager of Keystone New York Tax Free Fund. Mr.
George Kimball is a Chartered Financial Analyst, and hold a B.A. from
J. Kimball) Hamilton College and an M.B.A. from Duke University. He is
supported by the Municipal Bond Team of Keystone Investment
Management Company. The team manages more than $2 billion in
municipal bond assets in a variety of portfolios.
10
<PAGE>
KEYSTONE (silhouette of New York)
NEW YORK TAX FREE FUND
MANAGEMENT REPORT
May 1997
Dear Shareholders:
The Keystone New York Tax Free Fund provided positive returns for the 12-month
period ended March 31, 1997, although its performance was less than that of its
benchmark Lehman Municipal Bond Index. The Fund's results reflected the overall
underperformance of high-quality municipal bonds, as well as the bullish
positioning of the portfolio at the beginning of the fiscal year when interest
rates unexpectedly rose.
A YEAR OF CONTRASTS
The 12-month period encompassed two contrasting market environments: the first
six months, during which interest rates rose and Fund performance suffered; and
the final six months when interest rates declined and Fund performance improved.
The year began with a high degree of price volatility in April and May 1996. The
Fund's portfolio of longer-maturity bonds was positioned for a favorable
municipal bond market. Unfortunately, investors' concerns about a fast-growing
economy and the possibility of rising inflation served to drive interest rates
up. This led to a period of underperformance, as the longer-maturity bonds in
the portfolio experienced some price erosion in the rising rate environment.
IMPROVEMENT IN SECOND HALF OF THE YEAR
The situation changed in September, when interest rates started to decline. The
Fund took advantage of the outperformance of bonds with long maturities and
successfully sold them into the strong market. Early in January of 1997, the
Fund began increasing the weighting of bonds with shorter maturities, which are
generally not as sensitive to interest rate moves as bonds with 20 and 30-year
maturities.
STATE'S FISCAL CHALLENGES CONTINUED
New York state's economy was a sum of positive and negative developments in the
cities and towns across the state. In New York City, revenues were higher than
expected, helping the City to reduce the projected budget gap for the current
fiscal year. One source of concern was the continued financial problems of some
cities in New York state, notably Troy and Utica. Troy's and Utica's problems
did not have an adverse impact on the Fund, because we did not hold any of their
bonds.
Yet another challenge for New York state was a decline in state revenues
following Governor Pataki's tax cuts. Nonetheless, the state managed to balance
its budget.
PORTFOLIO COMPOSITION MARCH 31, 1997
(AS A PERCENTAGE OF NET ASSETS)
(pie chart appears here, plot points follow:)
Education 11.7%
Hospitals/Nursing Homes 10.9%
Transportation 9.9%
State General Obligations 7.6%
Other Revenue Bonds 7.4%
Water & Sewer 6.7%
Indust. Dev/Pollution 5.2%
Utility 4.2%
Housing 3.6%
Other 1.8%
County/City/School 31.0%
Going forward, we expect to continue emphasizing high quality bonds in New York.
The prospectus requires the Fund to keep at least 80% of net assets in insured
bonds. At the end of March, the insured-bond weighting represented 89%. The
remaining assets were invested in bonds rated AA and BBB, a strategy designed to
help boost the Fund's yield.
We are pleased to report that the Fund maintained its tax-free income dividend
during the fiscal year.
Looking ahead, we think that the Federal Reserve may raise interest rates again
in the near future. Consumer confidence is high and the dollar is strong. This
combination may be interpreted as inflationary by the Fed. As a result, the Fund
is positioned defensively in expectation of higher interest rates.
Sincerely,
(sig of Albert H. Elfner, III)
ALBERT H. ELFNER, III
CHAIRMAN
Keystone Investment Management Company
GEORGE J. KIMBALL
VICE PRESIDENT
PORTFOLIO MANAGER
11
<PAGE>
KEYSTONE
(silhouette of Penn.) PENNSYLVANIA TAX FREE FUND
FUND AT A GLANCE
As of March 31, 1997
<TABLE>
<CAPTION>
ONE YEAR PERFORMANCE CLASS A CLASS B CLASS C
<S> <C> <C> <C>
One year with sales charge 0.30 % -0.50 % 3.49 %
One year w/o sales charge 5.30 % 4.50 % 4.49 %
Dividends per share $0.59 $0.49 $0.49
<CAPTION>
AVERAGE ANNUAL RETURNS CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Three Years 4.25 % 4.24 % 5.15 %
Five Years 5.66 % -- --
Since Inception 7.14 % 4.40 % 4.82 %
CLASS A BEGAN 12/27/90; CLASSES B AND C BEGAN 2/1/93
ALL RETURNS INCLUDE THE MAXIMUM SALES CHARGE.
<CAPTION>
CUMULATIVE RETURNS CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Three Years 13.30 % 13.28 % 16.24 %
Five Years 31.68 % -- --
Since Inception 54.02 % 19.63 % 21.64 %
CLASS A BEGAN 12/27/90; CLASSES B AND C BEGAN 2/1/93
ALL RETURNS INCLUDE THE MAXIMUM SALES CHARGE.
<CAPTION>
PORTFOLIO CHARACTERISTICS
<S> <C> <C> <C>
Total Net Assets (all classes) $68,580,079
Average Credit Quality AA
Average Maturity 17.4 years
</TABLE>
PORTFOLIO QUALITY (AS A PERCENTAGE OF PORTFOLIO ASSETS)
(pie chart appears here, plot points follow:)
AAA 59.7%
AA 13.8%
A 5.4%
MIGI 15.7%
Not Rated 5.4%
OBJECTIVE
Current income exempt from federal, Pennsylvania state and city personal income
taxes, and preservation of capital. In addition, the Fund seeks to ensure that
its shares are exempt from Pennsylvania's personal property tax.
STRATEGY
Keystone Pennsylvania Tax Free Fund seeks to meet its objectives by investing in
bonds issued by the Commonwealth of Pennsylvania, municipalities and other
qualifying organizations in Pennsylvania. The Fund seeks to avoid unnecessary
credit or market risk. The Fund's portfolio will be structured to optimize the
market risk/reward tradeoffs, raising or lowering targeted durations in the
process. Income may be subjected to local taxes and the federal alternative
minimum tax (AMT) for some investors.
PORTFOLIO MANAGEMENT TEAM
Betsy A. Hutchings, a Keystone senior vice president and group
leader of Keystone's Municipal Bond Team, is Portfolio Manager
of Keystone Pennsylvania Tax Free Fund. Ms. Hutchings, a
(photo of professional with 15 years investment experience, received a
Betsy A. B.A. from Wheaton College, where she majored in economics and
Hutchings) sociology. She is supported by the Municipal Bond Team of
Keystone Investment Management Company. The team manages more
than $2 billion in municipal bond assets in a variety of
portfolios.
12
<PAGE>
KEYSTONE
PENNSYLVANIA TAX FREE FUND (silhouette of Penn.)
MANAGEMENT REPORT
May 1997
Dear Shareholders:
The Keystone Pennsylvania Tax Free Fund delivered strong performance for the
12-month period ended March 31, 1997. The Fund was aided by the general economic
health of the Commonwealth of Pennsylvania, the Fund's emphasis on quality bonds
and its careful monitoring of maturities, particularly in late 1996.
FISCALLY CONSERVATIVE STATE
Pennsylvania historically has been a fiscally conservative state, and the
continuation of this tradition provided a favorable backdrop for investing in
bonds issued by public agencies during the past year. In general, the state
economy was stable during the year. However, the retrenchment in the healthcare
industry, particularly as it has the potential to affect hospital revenues, has
important consequences in Pennsylvania. As a result, we have tended to
de-emphasize hospital bonds and emphasize general obligation bonds and bonds
from selected revenue sectors.
EARLY PROBLEMS
The 12-month fiscal year which ended on March 31, 1997, actually encompassed two
separate periods: the first six months, during which interest rates rose and
Fund performance suffered; and the final six months, when interest rates
declined and the Fund did very well.
The year began with a high degree of volatility in April and May 1996. The
Fund's portfolio of longer-maturity municipal bonds was positioned for a
favorable municipal bond market. Unfortunately, market concerns about a
fast-growing economy and the possibility of rising inflation served to drive
interest rates up. This led to a period of underperformance, as the
longer-maturity bonds in the portfolio suffered some price erosion in the rising
interest rate environment.
IMPROVEMENT IN SECOND HALF
The situation changed in September, when interest rates peaked and started to
decline. While the Fund's portfolio maturities had been pulled in somewhat, the
Fund still was able to participate in a rallying bond market. As this rally
continued, we took advantage of market strength to de-emphasize bonds with
maturities of 20 to 30 years, which are more vulnerable than shorter-term bonds
to price loss when interest rates rise, and to place greater emphasis on bonds
with maturities of 15 to 20 years, which hold more of their price when rates
rise. This left the portfolio well positioned for a back-up in interest rates in
early 1997.
PORTFOLIO COMPOSITION MARCH 31, 1997
(AS A PERCENTAGE OF NET ASSETS)
(pie chart appears here, plot points follow:)
IDR 15.3%
G.O. Local 10.1%
Water & Sewer 9.8%
Housing 9.7%
Education 9.4%
G.O. State 7.9%
Utility 5.3%
Transportation 4.1%
Other 11.7%
Health 16.7%
BOND QUALITY UPGRADED
During the past year, spreads-- or the difference between yields-- tightened
between higher-rated and lower-rated bonds. This meant that the lower-rated
bonds tended to outperform higher-rated bonds during the year. As a result, at
the end of the period there was very little yield premium to be gained by
holding lower-rated bonds. Over the course of the year, we took advantage of the
outperformance of the lower-rated bonds and successfully sold them into the
strong market, while increasing the higher rated portion of the portfolio. This
strategy, in addition to capturing the profits from the sold securities, left
the portfolio with higher overall credit quality at the end of the year.
Sincerely,
(sig of Albert H. Elfner, III)
ALBERT H. ELFNER, III
CHAIRMAN
Keystone Investment Management Company
BETSY HUTCHINGS
SENIOR VICE PRESIDENT
HEAD, MUNICIPAL BOND GROUP
13
<PAGE>
EVERGREEN KEYSTONE
GROWTH OF INVESTMENTS
(four charts appear on this page, copy is as follows:)
KEYSTONE CALIFORNIA TAX FREE FUND
Comparison of change in value of a $10,000 investment
in Keystone California Tax Free Fund Class A, the Lehman
Municipal Bond Index and the Consumer Price Index.
In thousands
Average Annual Total Returns
1 year Life of Class
Class A -0.55% 2.07%
Class B -1.31% 2.22%
Class C 2.55% 2.96%
LMBI $11,478
CPI $10,917
Class A $10,670
(plot points need to be filled in)
2/94 3/94 3/95 3/96 3/97
(Legend)
Lehman Municipal Bond Index (LMBI)
Class A
Consumer Price Index (CPI)
Past performance is no guarantee of future results. The performance
of Class B or Class C shares may be greater or less than the line
shown based on differences in loads and fees paid by the shareholder
investing in the different classes. The Consumer Price Index is through
February 28, 1997.
KEYSTONE MASSACHUSETTS TAX FREE FUND
Comparison of change in value of a $10,000 investment
in Keystone Massachusetts Tax Free Fund Class A, the Lehman
Municipal Bond Index and the Consumer Price Index.
In thousands
Average Annual Total Returns
1 year Life of Class
Class A -0.07% 1.51%
Class B -0.72% 1.59%
Class C 3.14% 2.36%
LMBI $11,478
CPI $10,917
Class A $10,485
(plot points need to be filled in)
2/94 3/94 3/95 3/96 3/97
(Legend)
Lehman Municipal Bond Index (LMBI)
Class A
Consumer Price Index (CPI)
Past performance is no guarantee of future results. The performance
of Class B or Class C shares may be greater or less than the line
shown based on differences in loads and fees paid by the shareholder
investing in the different classes. The Consumer Price Index is through
February 28, 1997.
KEYSTONE MISSOURI TAX FREE FUND
Comparison of change in value of a $10,000 investment
in Keystone Missouri Tax Free Fund Class A, the Lehman
Municipal Bond Index and the Consumer Price Index.
In thousands
Average Annual Total Returns
1 year Life of Class
Class A 0.22% 2.66%
Class B -0.51% 2.57%
Class C 3.49% 3.39%
LMBI $11,478
CPI $10,917
Class A $10,865
(plot points need to be filled in)
2/94 3/94 3/95 3/96 3/97
(Legend)
Lehman Municipal Bond Index (LMBI)
Class A
Consumer Price Index (CPI)
Past performance is no guarantee of future results. The performance
of Class B or Class C shares may be greater or less than the line
shown based on differences in loads and fees paid by the shareholder
investing in the different classes. The Consumer Price Index is through
February 28, 1997.
EVERGREEN NEW JERSEY TAX FREE INCOME FUND
Comparison of change in value of a $10,000 investment
in Keystone New Jersey Tax Free Fund Class A, the Lehman
Municipal Bond Index and the Consumer Price Index.
In thousands
Average Annual Total Returns
1 year Life of Class
Class A -0.29% 6.03%
Class B -1.25% -1.72%
Class C 4.74% 2.01%
LMBI $15,226
CPI $11,778
Class A $13,976
(plot points need to be filled in)
7/91 3/92 3/93 3/94 3/95 3/96 3/97
(Legend)
Lehman Municipal Bond Index (LMBI)
Class A
Consumer Price Index (CPI)
Past performance is no guarantee of future results. The performance
of Class B or Class Y shares may be greater or less than the line
shown based on differences in loads and fees paid by the shareholder
investing in the different classes. The Consumer Price Index is through
February 28, 1997.
14
<PAGE>
EVERGREEN KEYSTONE
GROWTH OF INVESTMENTS (CON'T)
(2 charts appear on this page, copy is as follows:)
KEYSTONE NEW YORK TAX FREE FUND
Comparison of change in value of a $10,000 investment
in Keystone Net York Tax Free Fund Class A, the Lehman
Municipal Bond Index and the Consumer Price Index.
In thousands
Average Annual Total Returns
1 year Life of Class
Class A -0.11% 2.60%
Class B -0.95% 2.61%
Class C 3.14% 3.42%
LMBI $11,478
CPI $10,917
Class A $10,844
(plot points need to be filled in)
2/94 3/94 3/95 3/96 3/97
(Legend)
Lehman Municipal Bond Index (LMBI)
Class A
Consumer Price Index (CPI)
Past performance is no guarantee of future results. The performance
of Class B or Class C shares may be greater or less than the line
shown based on differences in loads and fees paid by the shareholder
investing in the different classes. The Consumer Price Index is through
February 28, 1997.
KEYSTONE PENNSYLVANIA TAX FREE FUND
Comparison of change in value of a $10,000 investment
in Keystone Pennsylvania Tax Free Fund Class A, the Lehman
Municipal Bond Index and the Consumer Price Index.
In thousands
Average Annual Total Returns
1 year Life of Class
Class A 0.30% 7.14%
Class B -0.50% 4.40%
Class C 3.49% 4.82%
LMBI $15,905
CPI $11,928
Class A $15,402
(plot points need to be filled in)
12/90 3/93 3/95 3/97
(Legend)
Lehman Municipal Bond Index (LMBI)
Class A
Consumer Price Index (CPI)
Past performance is no guarantee of future results. The performance
of Class B or Class C shares may be greater or less than the line
shown based on differences in loads and fees paid by the shareholder
investing in the different classes. The Consumer Price Index is through
February 28, 1997.
15
<PAGE>
KEYSTONE
CALIFORNIA TAX FREE FUND
(silhouette of California)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FEBRUARY 1, 1994
FOUR MONTHS ENDED YEAR ENDED NOVEMBER (COMMENCEMENT
MARCH 31, 1997 30, OF OPERATIONS) TO
(D) 1996 1995 NOVEMBER 30, 1994
<S> <C> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE BEGINNING OF PERIOD......................... $ 9.73 $ 9.86 $ 8.70 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... 0.16 0.48 0.49 0.44
Net realized and unrealized gain (loss) on investments and
closed futures contracts.................................. (0.28) (0.11) 1.17 (1.30)
Total from investment operations............................ (0.12) 0.37 1.66 (0.86)
LESS DISTRIBUTIONS FROM:
Net investment income....................................... (0.16) (0.48) (0.47) (0.44)
In excess of net investment income.......................... (0.01) (0.02) (0.03) --
Total distributions......................................... (0.17) (0.50) (0.50) (0.44)
NET ASSET VALUE END OF PERIOD............................... $ 9.44 $ 9.73 $ 9.86 $ 8.70
Total return (c)............................................ (1.29%) 3.99% 19.63% (8.78%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses............................................ 0.77%(a)(b) 0.77%(b) 0.72%(b) 0.41%(a)
Total expenses excluding reimbursement and waivers........ 1.24%(a) 1.19% 1.31% 1.66%(a)
Net investment income..................................... 4.91%(a) 5.06% 5.37% 5.53%(a)
Portfolio turnover rate..................................... 39% 120% 119% 104%
NET ASSETS END OF PERIOD (THOUSANDS)........................ $ 4,192 $ 4,759 $ 4,555 $ 3,006
</TABLE>
(a) Annualized.
(b) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 0.75% (annualized), 0.75% and 0.69% for the four months ended March 31,
1997 and the years ended November 30, 1996 and 1995, respectively.
(c) Excluding applicable sales charges.
(d) The Fund changed its fiscal year end from November 30 to March 31 during the
current period.
<TABLE>
<CAPTION>
FEBRUARY 1, 1994
FOUR MONTHS ENDED YEAR ENDED NOVEMBER (COMMENCEMENT
MARCH 31, 1997 30, OF OPERATIONS) TO
(D) 1996 1995 NOVEMBER 30, 1994
<S> <C> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE BEGINNING OF PERIOD......................... $ 9.69 $ 9.82 $ 8.68 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... 0.13 0.41 0.44 0.40
Net realized and unrealized gain (loss) on investments and
closed futures contracts.................................. (0.28) (0.11) 1.17 (1.28)
Total from investment operations............................ (0.15) 0.30 1.61 (0.88)
LESS DISTRIBUTIONS FROM:
Net investment income....................................... (0.13) (0.41) (0.44) (0.40)
In excess of net investment income.......................... (0.01) (0.02) (0.03) (0.04)
Total distributions......................................... (0.14) (0.43) (0.47) (0.44)
NET ASSET VALUE END OF PERIOD............................... $ 9.40 $ 9.69 $ 9.82 $ 8.68
Total return (c)............................................ (1.54%) 3.23% 18.95% (9.00%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses............................................ 1.52%(a)(b) 1.52%(b) 1.48%(b) 1.16%(a)
Total expenses excluding reimbursement and waivers........ 1.99%(a) 1.94% 2.07% 2.36%(a)
Net investment income..................................... 4.16%(a) 4.31% 4.57% 4.83%(a)
Portfolio turnover rate..................................... 39% 120% 119% 104%
NET ASSETS END OF PERIOD (THOUSANDS)........................ $21,794 $22,719 $22,743 $11,415
</TABLE>
(a) Annualized.
(b) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 1.50% (annualized), 1.50% and 1.45% for the four months ended March 31,
1997 and the years ended November 30, 1996 and 1995, respectively.
(c) Excluding applicable sales charges.
(d) The Fund changed its fiscal year end from November 30 to March 31 during the
current period.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
KEYSTONE
CALIFORNIA TAX FREE FUND
(silhouette of California)
FINANCIAL HIGHLIGHTS, CONTINUED
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FEBRUARY 1, 1994
FOUR MONTHS ENDED YEAR ENDED NOVEMBER (COMMENCEMENT
MARCH 31, 1997 30, OF OPERATIONS) TO
(D) 1996 1995 NOVEMBER 30, 1994
<S> <C> <C> <C> <C>
CLASS C SHARES
NET ASSET VALUE BEGINNING OF PERIOD........................... $ 9.68 $ 9.80 $ 8.68 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income......................................... 0.14 0.41 0.43 0.39
Net realized and unrealized gain (loss) on investments and
closed futures contracts.................................... (0.30) (0.10) 1.15 (1.29)
Total from investment operations.............................. (0.16) 0.31 1.58 (0.90)
LESS DISTRIBUTIONS FROM:
Net investment income......................................... (0.13) (0.41) (0.43) (0.39)
In excess of net investment income............................ (0.01) (0.02) (0.03) (0.03)
Total distributions........................................... (0.14) (0.43) (0.46) (0.42)
NET ASSET VALUE END OF PERIOD................................. $ 9.38 $ 9.68 $ 9.80 $ 8.68
Total return (c).............................................. (1.64%) 3.34% 18.69% (9.08%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses.............................................. 1.52%(a)(b) 1.52%(b) 1.49%(b) 1.16%(a)
Total expenses excluding reimbursement and waivers.......... 1.99%(a) 1.94% 2.07% 2.38%(a)
Net investment income....................................... 4.16%(a) 4.31% 4.51% 4.96%(a)
Portfolio turnover rate....................................... 39% 120% 119% 104%
NET ASSETS END OF PERIOD (THOUSANDS).......................... $ 1,849 $1,521 $1,535 $ 624
</TABLE>
(a) Annualized.
(b) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 1.50% (annualized), 1.50% and 1.46% for the four months ended March 31,
1997 and the years ended November 30, 1996 and 1995, respectively.
(c) Excluding applicable sales charges.
(d) The Fund changed its fiscal year end from November 30 to March 31 during the
current period.
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
KEYSTONE
(silhouette of Mass.) MASSACHUSETTS TAX FREE FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
<TABLE>
<CAPTION>
FEBRUARY 4, 1994
(COMMENCEMENT
YEAR ENDED MARCH 31, OF OPERATIONS) TO
1997 1996 1995 MARCH 31, 1994
<S> <C> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE BEGINNING OF YEAR......................................... $ 9.29 $ 9.19 $ 9.17 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................................... 0.47 0.51 0.53 0.08
Net realized and unrealized gain (loss) on investments and closed futures
contracts............................................................... (0.03) 0.09 0.02 (0.82)
Total from investment operations.......................................... 0.44 0.60 0.55 (0.74)
LESS DISTRIBUTIONS FROM:
Net investment income..................................................... (0.47) (0.48) (0.53) (0.08)
In excess of net investment income........................................ (0.03) (0.02) -- (0.01)
Total distributions....................................................... (0.50) (0.50) (0.53) (0.09)
NET ASSET VALUE END OF YEAR............................................... $ 9.23 $ 9.29 $ 9.19 $ 9.17
Total return (c).......................................................... 4.92% 6.64% 6.23% (7.40%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses.......................................................... 0.76%(b) 0.75%(b) 0.46% 0.35%(a)
Total expenses excluding reimbursement and waivers...................... 1.58% 1.59% 1.93% 3.22%(a)
Net investment income................................................... 5.19% 5.36% 5.90% 5.07%(a)
Portfolio turnover rate................................................... 110% 165% 77% 7%
NET ASSETS END OF YEAR (THOUSANDS)........................................ $2,063 $1,786 $1,974 $ 1,472
</TABLE>
(a) Annualized.
(b) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 0.75% and 0.74% for the years ended March 31, 1997 and March 31, 1996,
respectively.
(c) Excluding applicable sales charges.
<TABLE>
<CAPTION>
FEBRUARY 4, 1994
(COMMENCEMENT
YEAR ENDED MARCH 31, OF OPERATIONS) TO
1997 1996 1995 MARCH 31, 1994
<S> <C> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE BEGINNING OF YEAR......................................... $ 9.22 $ 9.15 $ 9.19 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................................... 0.41 0.43 0.48 0.08
Net realized and unrealized gain (loss) on investments and closed futures
contracts............................................................... (0.03) 0.09 (0.01) (0.80)
Total from investment operations.......................................... 0.38 0.52 0.47 (0.72)
LESS DISTRIBUTIONS FROM:
Net investment income..................................................... (0.41) (0.43) (0.47) (0.07)
In excess of net investment income........................................ (0.02) (0.02) (0.04) (0.02)
Total distributions....................................................... (0.43) (0.45) (0.51) (0.09)
NET ASSET VALUE END OF YEAR............................................... $ 9.17 $ 9.22 $ 9.15 $ 9.19
Total return (c).......................................................... 4.25% 5.77% 5.41% (7.20%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses.......................................................... 1.51%(b) 1.49%(b) 1.24% 1.10%(a)
Total expenses excluding reimbursement and waivers...................... 2.35% 2.38% 2.68% 4.60%(a)
Net investment income................................................... 4.45% 4.60% 5.15% 3.23%(a)
Portfolio turnover rate................................................... 110% 165% 77% 7%
NET ASSETS END OF YEAR (THOUSANDS)........................................ $7,803 $7,274 $6,169 $ 1,817
</TABLE>
(a) Annualized.
(b) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 1.50% and 1.48% for the years ended March 31, 1997 and March 31, 1996,
respectively.
(c) Excluding applicable sales charges.
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
KEYSTONE
MASSACHUSETTS TAX FREE FUND
(silhouette of Mass.)
FINANCIAL HIGHLIGHTS, CONTINUED
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
<TABLE>
<CAPTION>
FEBRUARY 4, 1994
(COMMENCEMENT
YEAR ENDED MARCH 31, OF OPERATIONS) TO
1997 1996 1995 MARCH 31, 1994
<S> <C> <C> <C> <C>
CLASS C SHARES
NET ASSET VALUE BEGINNING OF YEAR......................................... $ 9.22 $ 9.14 $ 9.19 $ 10.00
Income from investment operations:
Net investment income..................................................... 0.41 0.43 0.48 0.08
Net realized and unrealized gain (loss) on investments and closed futures
contracts............................................................... (0.04) 0.10 (0.02) (0.80)
Total from investment operations.......................................... 0.37 0.53 0.46 (0.72)
LESS DISTRIBUTIONS FROM:
Net investment income..................................................... (0.41) (0.43) (0.47) (0.07)
In excess of net investment income........................................ (0.02) (0.02) (0.04) (0.02)
Total distributions....................................................... (0.43) (0.45) (0.51) (0.09)
NET ASSET VALUE END OF YEAR............................................... $ 9.16 $ 9.22 $ 9.14 $ 9.19
Total return (c).......................................................... 4.14% 5.89% 5.20% (7.21%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses.......................................................... 1.51%(b) 1.49%(b) 1.23% 1.10%(a)
Total expenses excluding reimbursement and waivers...................... 2.36% 2.39% 2.68% 4.91%(a)
Net investment income................................................... 4.46% 4.60% 5.11% 4.28%(a)
Portfolio turnover rate................................................... 110% 165% 77% 7%
NET ASSETS END OF YEAR (THOUSANDS)........................................ $2,066 $2,303 $1,971 $ 369
</TABLE>
(a) Annualized.
(b) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 1.50% and 1.48% for the years ended March 31, 1997 and March 31, 1996,
respectively.
(c) Excluding applicable sales charges.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
KEYSTONE
MISSOURI TAX FREE FUND
(silhouette of Missouri)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FEBRUARY 1, 1994
FOUR MONTHS ENDED YEAR ENDED (COMMENCEMENT OF
MARCH 31, 1997 NOVEMBER 30, OPERATIONS) TO
(E) 1996 1995 NOVEMBER 30, 1994
<S> <C> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE BEGINNING OF PERIOD......................... $ 9.86 $ 9.91 $ 8.72 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... 0.16 0.50 0.50 0.44
Net realized and unrealized gain (loss) on investments and
closed futures contracts.................................. (0.22) (0.06) 1.19 (1.28)
Total from investment operations............................ (0.06) 0.44 1.69 (0.84)
LESS DISTRIBUTIONS FROM:
Net investment income....................................... (0.16) (0.47) (0.47) (0.44)
In excess of net investment income.......................... 0(d) (0.02) (0.03) 0(d)
Total distributions......................................... (0.16) (0.49) (0.50) (0.44)
NET ASSET VALUE END OF PERIOD............................... $ 9.64 $ 9.86 $ 9.91 $ 8.72
Total return (c)............................................ (0.57%) 4.66% 19.86% (8.55%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses............................................ 0.76%(a)(b) 0.76%(b) 0.72%(b) 0.43%(a)
Total expenses excluding reimbursement and waivers........ 1.31%(a) 1.22% 1.32% 1.54%(a)
Net investment income..................................... 5.05%(a) 4.93% 5.26% 5.38%(a)
Portfolio turnover rate..................................... 12% 126% 74% 25%
NET ASSETS END OF PERIOD (THOUSANDS)........................ $ 2,627 $ 2,610 $ 4,848 $ 3,581
</TABLE>
(a) Annualized.
(b) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 0.75% (annualized), 0.75% and 0.69% for the four months ended March 31,
1997 and the years ended November 30, 1996 and 1995, respectively.
(c) Excluding applicable sales charges.
(d) Amount represents less than $0.01 per share.
(e) The Fund changed its fiscal year end from November 30 to March 31 during the
current period.
<TABLE>
<CAPTION>
FEBRUARY 1, 1994
FOUR MONTHS ENDED YEAR ENDED (COMMENCEMENT OF
MARCH 31, 1997 NOVEMBER 30, OPERATIONS) TO
(E) 1996 1995 NOVEMBER 30, 1994
<S> <C> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE BEGINNING OF PERIOD......................... $ 9.74 $ 9.80 $ 8.67 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income....................................... 0.13 0.40 0.44 0.40
Net realized and unrealized gain (loss) on investments and
closed futures contracts.................................. (0.21) (0.04) 1.15 (1.29)
Total from investment operations............................ (0.08) 0.36 1.59 (0.89)
LESS DISTRIBUTIONS FROM:
Net investment income....................................... (0.14) (0.40) (0.43) (0.40)
In excess of net investment income.......................... 0(d) (0.02) (0.03) (0.04)
Total distributions......................................... (0.14) (0.42) (0.46) (0.44)
NET ASSET VALUE END OF PERIOD............................... $ 9.52 $ 9.74 $ 9.80 $ 8.67
Total return (c)............................................ (0.83%) 3.83% 18.79% (9.06%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses............................................ 1.51%(a)(b) 1.52%(b) 1.47%(b) 1.16%(a)
Total expenses excluding reimbursement and waivers........ 2.06%(a) 2.00% 2.08% 2.49%(a)
Net investment income..................................... 4.31%(a) 4.20% 4.56% 4.70%(a)
Portfolio turnover rate..................................... 12% 126% 74% 25%
NET ASSETS END OF PERIOD (THOUSANDS)........................ $20,127 $21,925 $21,231 $12,906
</TABLE>
(a) Annualized.
(b) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 1.50% (annualized), 1.50% and 1.44% for the four months ended March 31,
1997 and the years ended November 30, 1996 and 1995, respectively.
(c) Excluding applicable sales charges.
(d) Amount represents less than $0.01 per share.
(e) The Fund changed its fiscal year end from November 30 to March 31 during the
current period.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
KEYSTONE
MISSOURI TAX FREE FUND
(silhouette of Missouri)
FINANCIAL HIGHLIGHTS, CONTINUED
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FEBRUARY 1, 1994
FOUR MONTHS ENDED YEAR ENDED (COMMENCEMENT OF
MARCH 31, 1997 NOVEMBER 30, OPERATIONS) TO
(E) 1996 1995 NOVEMBER 30, 1994
<S> <C> <C> <C> <C>
CLASS C SHARES
NET ASSET VALUE BEGINNING OF PERIOD........................... $ 9.73 $ 9.79 $ 8.66 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income......................................... 0.13 0.39 0.43 0.39
Net realized and unrealized gain (loss) on investments and
closed futures contracts.................................... (0.20) (0.03) 1.16 (1.29)
Total from investment operations.............................. (0.07) 0.36 1.59 (0.90)
LESS DISTRIBUTIONS FROM:
Net investment income......................................... (0.14) (0.40) (0.43) (0.39)
In excess of net investment income............................ 0(d) (0.02) (0.03) (0.05)
Total distributions........................................... (0.14) (0.42) (0.46) (0.44)
NET ASSET VALUE END OF PERIOD................................. $ 9.52 $ 9.73 $ 9.79 $ 8.66
Total return (c).............................................. (0.73%) 3.83% 18.78% (9.25%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses.............................................. 1.51%(a)(b) 1.52%(b) 1.46%(b) 1.15%(a)
Total expenses excluding reimbursement and waivers.......... 2.06%(a) 1.99% 2.07% 2.60%(a)
Net investment income....................................... 4.30%(a) 4.18% 4.56% 4.72%(a)
Portfolio turnover rate....................................... 12% 126% 74% 25%
NET ASSETS END OF PERIOD (THOUSANDS).......................... $ 1,306 $1,387 $1,788 $ 1,045
</TABLE>
(a) Annualized.
(b) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 1.50% (annualized), 1.50% and 1.44% for the four months ended March 31,
1997 and the years ended November 30, 1996 and 1995, respectively.
(c) Excluding applicable sales charges.
(d) Amount represents less than $0.01 per share.
(e) The Fund changed its fiscal year end from November 30 to March 31 during the
current period.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
EVERGREEN
NEW JERSEY TAX FREE INCOME FUND
(silhouette of New Jersey)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SEVEN MONTHS SIX MONTHS
ENDED ENDED YEAR ENDED
MARCH 31, AUGUST 31, FEBRUARY 29, YEAR ENDED FEBRUARY 28,
1997** 1996* 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE BEGINNING
OF PERIOD.............. $ 10.75 $ 11.01 $ 10.53 $ 10.99 $ 11.01 $ 10.22
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.... 0.31 0.28 0.56 0.57 0.60 0.63
Net realized and
unrealized gain (loss)
on investments and
closed futures
contracts.............. (0.01) (0.26) 0.48 (0.46) (0.02) 0.79
Total from investment
operations............. 0.30 0.02 1.04 0.11 0.58 1.42
LESS DISTRIBUTIONS FROM:
Net investment income.... (0.31) (0.28) (0.56) (0.57) (0.60) (0.63)
Total distributions...... (0.31) (0.28) (0.56) (0.57) (0.60) (0.63)
NET ASSET VALUE END OF
PERIOD................. $ 10.74 $ 10.75 $ 11.01 $ 10.53 $ 10.99 $ 11.01
Total return (b)......... 2.83% 0.19% 10.08% 1.41% 5.30% 14.39%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET
ASSETS:
Total expenses......... 0.44%(a)(c) 0.34%(a) 0.36% 0.25% 0.14% 0.00%
Total expenses
excluding
reimbursement and
waivers.............. 1.13%(a) 1.11%(a) 1.03% 1.04% 1.05% 1.16%
Net investment income 5.02%(a) 5.08%(a) 5.15% 5.52% 5.31% 5.97%
Portfolio turnover rate 15% 0% 4% 8% 2% 5%
NET ASSETS END OF PERIOD
(THOUSANDS) $ 31,434 $ 32,377 $41,762 $34,852 $42,783 $30,863
<CAPTION>
JULY 16, 1991
OF OPERATIONS)
THROUGH
FEBRUARY 29, 1992
<S> <C>
CLASS A SHARES
NET ASSET VALUE BEGINNING
OF PERIOD.............. $ 10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.... 0.38
Net realized and
unrealized gain (loss)
on investments and
closed futures
contracts.............. 0.22
Total from investment
operations............. 0.60
LESS DISTRIBUTIONS FROM:
Net investment income.... (0.38)
Total distributions...... (0.38)
NET ASSET VALUE END OF
PERIOD................. $ 10.22
Total return (b)......... 6.03%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET
ASSETS:
Total expenses......... 0.01%(a)
Total expenses
excluding
reimbursement and
waivers.............. 1.20%(a)
Net investment income 5.89%(a)
Portfolio turnover rate 5%
NET ASSETS END OF PERIOD
(THOUSANDS) $13,129
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 0.44% (annualized) for the seven months ended March 31, 1997.
* The Fund changed its fiscal year end from February 28 to August 31.
** During the current period, the Fund changed its fiscal year end from August
31 to March 31.
<TABLE>
<CAPTION>
JANUARY 30, 1996
SEVEN MONTHS SIX MONTHS (COMMENCEMENT
ENDED ENDED OF OPERATIONS)
MARCH 31, AUGUST 31, THROUGH
1997** 1996* FEBRUARY 29, 1996
<S> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE BEGINNING OF PERIOD....................................... $10.75 $11.01 $ 11.08
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................................... 0.25 0.24 0.05
Net realized and unrealized loss on investments........................... -- (0.26) (0.07)
Total from investment operations.......................................... 0.25 (0.02) (0.02)
LESS DISTRIBUTIONS FROM:
Net investment income..................................................... (0.26) (0.24) (0.05)
Total distributions....................................................... (0.26) (0.24) (0.05)
NET ASSET VALUE END OF PERIOD............................................. $10.74 $10.75 $ 11.01
Total return (b).......................................................... 2.29% (0.20%) (0.22%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses.......................................................... 1.36%(a)(c) 1.28%(a) 0.31%(a)
Total expenses excluding reimbursement and waivers...................... 1.88%(a) 1.85%(a) 1.66%(a)
Net investment income................................................... 4.07%(a) 4.14%(a) 5.23%(a)
Portfolio turnover rate................................................... 15% 0% 4%
NET ASSETS END OF PERIOD (THOUSANDS)...................................... $7,847 $2,709 $ 186
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 1.36% (annualized) for the seven months ended March 31, 1997.
* The Fund changed its fiscal year end from February 28 to August 31.
** During the current period, the Fund changed its fiscal year end from August
31 to March 31.
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
EVERGREEN
NEW JERSEY TAX FREE INCOME FUND
(silhouette of New Jersey)
FINANCIAL HIGHLIGHTS, CONTINUED
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
FEBRUARY 8, 1996
SEVEN MONTHS SIX MONTHS (COMMENCEMENT
ENDED ENDED OF OPERATIONS)
MARCH 31, AUGUST 31, THROUGH
1997** 1996* FEBRUARY 29, 1996
<S> <C> <C> <C>
CLASS Y SHARES
NET ASSET VALUE BEGINNING OF PERIOD....................................... $10.75 $11.01 $ 11.14
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................................... 0.32 0.28 0.03
Net realized and unrealized loss on investments........................... (0.01) (0.26) (0.13)
Total from investment operations.......................................... 0.31 0.02 (0.10)
LESS DISTRIBUTIONS FROM:
Net investment income..................................................... (0.32) (0.28) (0.03)
Total distributions....................................................... (0.32) (0.28) (0.03)
NET ASSET VALUE END OF PERIOD............................................. $10.74 $10.75 $ 11.01
Total return.............................................................. 2.88% 0.20% (0.87%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses.......................................................... 0.36%(a)(b) 0.31%(a) 0.31%(a)
Total expenses excluding reimbursement and waivers...................... 0.88%(a) 0.87%(a) 0.88%(a)
Net investment income................................................... 5.08%(a) 5.12%(a) 5.28%(a)
Portfolio turnover rate................................................... 15% 0% 4%
NET ASSETS END OF PERIOD (THOUSANDS)...................................... $9,436 $9,076 $ 18
</TABLE>
(a) Annualized.
(b) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 0.36% (annualized) for the seven months ended March 31, 1997.
* The Fund changed its fiscal year end from February 28 to August 31.
** During the current period, the Fund changed its fiscal year end from August
31 to March 31.
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
KEYSTONE
NEW YORK TAX FREE FUND
(silhouette of New York)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
<TABLE>
<CAPTION>
FEBRUARY 4, 1994
YEAR ENDED (COMMENCEMENT
MARCH 31, OF OPERATIONS) TO
1997 1996 1995 MARCH 31, 1994
<S> <C> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE BEGINNING OF YEAR...................................... $ 9.67 $ 9.44 $ 9.32 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................................................. 0.49 0.48 0.52 0.09
Net realized and unrealized gain (loss) on investments and closed
futures contracts.................................................... (0.03) 0.24 0.12 (0.68)
Total from investment operations....................................... 0.46 0.72 0.64 (0.59)
LESS DISTRIBUTIONS FROM:
Net investment income.................................................. (0.48) (0.47) (0.52) (0.08)
In excess of net investment income..................................... (0.01) (0.02) -- (0.01)
Total distributions.................................................... (0.49) (0.49) (0.52) (0.09)
NET ASSET VALUE END OF YEAR............................................ $ 9.64 $ 9.67 $ 9.44 $ 9.32
Total return (c)....................................................... 4.87% 7.73% 7.08% (5.91%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses....................................................... 0.76%(b) 0.75%(b) 0.50% 0.35%(a)
Total expenses excluding reimbursement and waivers................... 1.19% 1.31% 1.59% 4.44%(a)
Net investment income................................................ 5.00% 4.95% 5.48% 3.85%(a)
Portfolio turnover rate................................................ 62% 53% 77% 14%
NET ASSETS END OF YEAR (THOUSANDS)..................................... $ 3,693 $ 3,947 $ 3,323 $ 680
</TABLE>
(a) Annualized.
(b) The ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 0.75% and 0.74% for the years ended March 31, 1997 and 1996,
respectively.
(c) Excluding applicable sales charges.
<TABLE>
<CAPTION>
FEBRUARY 4, 1994
YEAR ENDED (COMMENCEMENT
MARCH 31, OF OPERATIONS) TO
1997 1996 1995 MARCH 31, 1994
<S> <C> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE BEGINNING OF YEAR...................................... $ 9.59 $ 9.38 $ 9.32 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................................................. 0.41 0.41 0.47 0.08
Net realized and unrealized gain (loss) on investments and closed
futures contracts.................................................... (0.03) 0.24 0.09 (0.67)
Total from investment operations....................................... 0.38 0.65 0.56 (0.59)
LESS DISTRIBUTIONS FROM:
Net investment income.................................................. (0.41) (0.42) (0.45) (0.06)
In excess of net investment income..................................... (0.01) (0.02) (0.05) (0.03)
Total distributions.................................................... (0.42) (0.44) (0.50) (0.09)
NET ASSET VALUE END OF YEAR............................................ $ 9.55 $ 9.59 $ 9.38 $ 9.32
Total return (c)....................................................... 4.03% 7.02% 6.28% (5.91%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses....................................................... 1.51%(b) 1.50%(b) 1.25% 1.10%(a)
Total expenses excluding reimbursement and waivers................... 1.94% 2.05% 2.35% 5.60%(a)
Net investment income................................................ 4.25% 4.19% 4.78% 3.01%(a)
Portfolio turnover rate................................................ 62% 53% 77% 14%
NET ASSETS END OF YEAR (THOUSANDS)..................................... $19,064 $17,151 $11,907 $ 2,276
</TABLE>
(a) Annualized.
(b) The ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 1.50% and 1.49% for the years ended March 31, 1997 and 1996,
respectively.
(c) Excluding applicable sales charges.
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
KEYSTONE
NEW YORK TAX FREE FUND
(silhouette of New York)
FINANCIAL HIGHLIGHTS, CONTINUED
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
<TABLE>
<CAPTION>
FEBRUARY 4, 1994
YEAR ENDED (COMMENCEMENT
MARCH 31, OF OPERATIONS) TO
1997 1996 1995 MARCH 31, 1994
<S> <C> <C> <C> <C>
CLASS C SHARES
NET ASSET VALUE BEGINNING OF YEAR...................................... $ 9.58 $ 9.37 $ 9.31 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................................................. 0.40 0.41 0.48 0.07
Net realized and unrealized gain (loss) on investments and closed
futures contracts.................................................... (0.01) 0.24 0.07 (0.67)
Total from investment operations....................................... 0.39 0.65 0.55 (0.60)
LESS DISTRIBUTIONS FROM:
Net investment income.................................................. (0.41) (0.42) (0.46) (0.07)
In excess of net investment income..................................... (0.01) (0.02) (0.03) (0.02)
Total distributions.................................................... (0.42) (0.44) (0.49) (0.09)
NET ASSET VALUE END OF YEAR............................................ $ 9.55 $ 9.58 $ 9.37 $ 9.31
Total return (c)....................................................... 4.14% 7.02% 6.18% (6.02%)
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses....................................................... 1.51%(b) 1.50%(b) 1.26% 1.10%(a)
Total expenses excluding reimbursement and waivers................... 1.93% 2.07% 2.32% 5.13%(a)
Net investment income................................................ 4.25% 4.24% 4.88% 3.71%(a)
Portfolio turnover rate................................................ 62% 53% 77% 14%
NET ASSETS END OF YEAR (THOUSANDS)..................................... $ 1,871 $ 2,296 $ 2,890 $ 255
</TABLE>
(a) Annualized.
(b) The ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 1.50% and 1.48% for the years ended March 31, 1997 and 1996,
respectively.
(c) Excluding applicable sales charges.
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
KEYSTONE
PENNSYLVANIA TAX FREE FUND
(silhouette of Penn.)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
<TABLE>
<CAPTION>
YEAR ENDED
1997 1996 1995 MARCH 31,1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
NET ASSET VALUE BEGINNING OF
YEAR.......................... $ 11.15 $ 10.91 $ 11.01 $ 11.42 $ 10.71 $ 10.25
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........... 0.59 0.60 0.61 0.62 0.63 0.74
Net realized and unrealized gain
(loss) on investments and
closed futures contracts...... (0.01) 0.23 (0.09) (0.30) 0.75 0.46
Total from investment
operations.................... 0.58 0.83 0.52 0.32 1.38 1.20
LESS DISTRIBUTIONS FROM:
Net investment income........... (0.59) (0.57) (0.61) (0.62) (0.63) (0.74)
In excess of net investment
income........................ -- (0.02) (0.01) (0.04) (0.02) --
Net realized gain on
investments................... -- -- -- (0.06) (0.02) --
In excess of net realized gain
on investments................ -- -- -- (0.01) -- --
Total distributions............. (0.59) (0.59) (0.62) (0.73) (0.67) (0.74)
NET ASSET VALUE END OF YEAR..... $ 11.14 $ 11.15 $ 10.91 $ 11.01 $ 11.42 $ 10.71
Total return (c)................ 5.30% 7.66% 4.91% 2.58% 13.30% 12.07%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses................ 0.76%(b) 0.76%(b) 0.75% 0.75% 0.68% 0.65%
Total expenses excluding
reimbursement and waivers... 0.99% 0.99% 1.05% 1.06% 1.16% 1.68%
Net investment income......... 5.26% 5.29% 5.65% 5.27% 5.66% 6.92%
Portfolio turnover rate......... 84% 55% 97% 37% 20% 13%
NET ASSETS END OF YEAR
(THOUSANDS) $24,535 $28,710 $30,450 $30,560 $35,502 $12,914
<CAPTION>
DECEMBER 27, 1990
OF OPERATIONS) TO
<S> <C>
CLASS A SHARES
NET ASSET VALUE BEGINNING OF
YEAR.......................... $ 10.00
INCOME FROM INVESTMENT OPERATION
Net investment income........... 0.18
Net realized and unrealized gain
(loss) on investments and
closed futures contracts...... 0.25
Total from investment
operations.................... 0.43
LESS DISTRIBUTIONS FROM:
Net investment income........... (0.18)
In excess of net investment
income........................ --
Net realized gain on
investments................... --
In excess of net realized gain
on investments................ --
Total distributions............. (0.18)
NET ASSET VALUE END OF YEAR..... $ 10.25
Total return (c)................ 4.37%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses................ 0.65%(a)
Total expenses excluding
reimbursement and waivers... 3.19%(a)
Net investment income......... 6.84%(a)
Portfolio turnover rate......... 8%
NET ASSETS END OF YEAR
(THOUSANDS) $ 2,979
</TABLE>
(a) Annualized.
(b) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 0.75% and 0.75% for the years ended March 31, 1997 and 1996,
respectively.
(c) Excluding applicable sales charges.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996 1995 1994
<S> <C> <C> <C> <C>
CLASS B SHARES
NET ASSET VALUE BEGINNING OF YEAR....................... $ 11.00 $ 10.81 $ 10.98 $ 11.42
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... 0.49 0.51 0.54 0.56
Net realized and unrealized gain (loss) on investments
and closed futures contracts.......................... (0.01) 0.22 (0.10) (0.34)
Total from investment operations........................ 0.48 0.73 0.44 0.22
LESS DISTRIBUTIONS FROM:
Net investment income................................... (0.49) (0.52) (0.53) (0.52)
In excess of net investment income...................... -- (0.02) (0.08) (0.07)
Net realized gain on investments........................ -- -- -- (0.03)
In excess of net realized gain on investments........... -- -- -- (0.04)
Total distributions..................................... (0.49) (0.54) (0.61) (0.66)
NET ASSET VALUE END OF YEAR............................. $ 10.99 $ 11.00 $ 10.81 $ 10.98
Total return (c)........................................ 4.50% 6.84% 4.15% 1.70%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses........................................ 1.51%(b) 1.48%(b) 1.50% 1.50%
Total expenses excluding reimbursement and waivers.... 1.74% 1.74% 1.80% 1.81%
Net investment income................................. 4.50% 4.55% 4.89% 4.32%
Portfolio turnover rate................................. 84% 55% 97% 37%
NET ASSETS END OF YEAR (THOUSANDS)...................... $37,215 $37,719 $30,657 $21,958
<CAPTION>
FEBRUARY 1, 1993
MARCH 31, 1993
<S> <C>
CLASS B SHARES
NET ASSET VALUE BEGINNING OF YEAR....................... $ 11.20
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... 0.08
Net realized and unrealized gain (loss) on investments
and closed futures contracts.......................... 0.24
Total from investment operations........................ 0.32
LESS DISTRIBUTIONS FROM:
Net investment income................................... (0.08)
In excess of net investment income...................... (0.02)
Net realized gain on investments........................ --
In excess of net realized gain on investments........... --
Total distributions..................................... (0.10)
NET ASSET VALUE END OF YEAR............................. $ 11.42
Total return (c)........................................ 2.82%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses........................................ 1.50%(a)
Total expenses excluding reimbursement and waivers.... 1.69%(a)
Net investment income................................. 3.44%(a)
Portfolio turnover rate................................. 20%
NET ASSETS END OF YEAR (THOUSANDS)...................... $ 2,543
</TABLE>
(a) Annualized.
(b) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 1.50% and 1.47% for the years ended March 31, 1997 and 1996,
respectively.
(c) Excluding applicable sales charges.
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
KEYSTONE
PENNSYLVANIA TAX FREE FUND
(silhouette of Penn.)
FINANCIAL HIGHLIGHTS, CONTINUED
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996 1995 1994
<S> <C> <C> <C> <C>
CLASS C SHARES
NET ASSET VALUE BEGINNING OF YEAR....................... $ 11.03 $ 10.83 $ 11.00 $ 11.42
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... 0.47 0.51 0.53 0.54
Net realized and unrealized gain (loss) on investments
and closed futures contracts.......................... 0.01 0.23 (0.10) (0.32)
Total from investment operations........................ 0.48 0.74 0.43 0.22
LESS DISTRIBUTIONS FROM:
Net investment income................................... (0.49) (0.52) (0.53) (0.52)
In excess of net investment income...................... -- (0.02) (0.07) (0.05)
Net realized gain on investments........................ -- -- -- (0.03)
In excess of net realized gain on investments........... -- -- -- (0.04)
Total distributions..................................... (0.49) (0.54) (0.60) (0.64)
NET ASSET VALUE END OF YEAR............................. $ 11.02 $ 11.03 $ 10.83 $ 11.00
Total return (c)........................................ 4.49% 6.92% 4.05% 1.78%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses........................................ 1.51%(b) 1.48%(b) 1.50% 1.50%
Total expenses excluding reimbursement and waivers.... 1.74% 1.74% 1.80% 1.90%
Net investment income................................. 4.52% 4.57% 4.90% 4.33%
Portfolio turnover rate................................. 84% 55% 97% 37%
NET ASSETS END OF YEAR (THOUSANDS)...................... $ 6,830 $ 9,675 $ 9,559 $ 9,385
<CAPTION>
FEBRUARY 1, 1993
(Date of Initial
Public Offering)
to
MARCH 31, 1993
<S> <C>
CLASS C SHARES
NET ASSET VALUE BEGINNING OF YEAR....................... $ 11.20
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... 0.07
Net realized and unrealized gain (loss) on investments
and closed futures contracts.......................... 0.24
Total from investment operations........................ 0.31
LESS DISTRIBUTIONS FROM:
Net investment income................................... (0.07)
In excess of net investment income...................... (0.02)
Net realized gain on investments........................ --
In excess of net realized gain on investments........... --
Total distributions..................................... (0.09)
NET ASSET VALUE END OF YEAR............................. $ 11.42
Total return (c)........................................ 2.81%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses........................................ 1.50%(a)
Total expenses excluding reimbursement and waivers.... 1.60%(a)
Net investment income................................. 2.50%(a)
Portfolio turnover rate................................. 20%
NET ASSETS END OF YEAR (THOUSANDS)...................... $ 952
</TABLE>
(a) Annualized.
(b) Ratio of total expenses to average net assets includes indirectly paid
expenses. Excluding indirectly paid expenses, the expense ratio would have
been 1.50% and 1.47% for the years ended March 31, 1997 and 1996,
respectively.
(c) Excluding applicable sales charges.
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
KEYSTONE
CALIFORNIA TAX FREE FUND
(silhouette of California)
SCHEDULE OF INVESTMENTS
March 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
<C> <S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
MUNICIPAL BONDS-- 98.6%
<C> <S> <C> <C> <C> <C>
CALIFORNIA-- 95.8% CALIFORNIA-- CONTINUED
</TABLE>
<TABLE>
<C> <S> <C>
$ 500,000 Anaheim, California, Public
Financing Authority, Lease
Revenue, Public Improvements
Project, Series C,
6.00%, 9/1/16, (FSA)............. $ 516,820
1,000,000 California Health Facilities
Finance Authority, Insured Health
Facilities-Catholic, Series A,
5.75%, 7/1/15, (AMBAC)........... 987,520
1,000,000 California Housing Finance Agency,
Multi-Family Housing, Series B,
6.05%, 8/1/16, (AMBAC)........... 999,830
1,000,000 California Housing Finance Agency,
Single Family Mortgage,
Series A-1, Class III,
5.70%, 8/1/11, (MBIA)............ 990,640
1,000,000 California Pollution Control
Financing Authority, Solid Waste
Disposal Revenue, Browning Ferris
Industries Inc., Series A,
5.80%, 12/1/16................... 961,090
500,000 California State Housing Finance
Agency, Home Mortgage Revenue,
Series L,
6.40%, 8/1/27, (MBIA)............ 507,965
500,000 Elk Grove, California Unified
School District, Special Tax,
Community Facilities, District
No. 1,
6.50%, 12/1/24, (AMBAC).......... 550,945
750,000 Los Angeles, California, Community
Redevelopment Agency Refunding,
Tax Allocation, Series H,
6.50%, 12/1/16, (FSA)............ 794,813
1,000,000 Los Angeles, California, Convention
and Exhibition Center Authority,
Lease Refunding, Series A,
6.00%, 8/15/10, (MBIA)........... 1,055,270
2,900,000 Los Angeles County, California,
Transportation Commission, Sales
Tax Revenue, Proposition C,
Second SR, Series A,
6.25%, 7/1/13, (MBIA)............ 3,015,797
400,000 MSR Public Power Agency,
California, San Juan Project,
Series B,
6.75%, 7/1/11, (MBIA)............ 431,620
250,000 Madera County, California,
Certificates of Participation,
Valley
Children's Hospital,
6.25%, 3/15/07, (MBIA)........... 269,867
$1,415,000 Oakland, California, Revenue
Refunding, Series A,
7.60%, 8/1/21, (FGIC)............ $ 1,499,362
500,000 Port Oakland, California, Port
Revenue, Series H,
5.50%, 11/1/11, (MBIA)........... 489,535
300,000 Rio Linda, California, Unified
School District,
5.25%, 8/1/17, (FSA)............. 278,358
1,000,000 Rio Linda, California, Unified
School District, Series A,
7.40%, 8/1/10, (AMBAC)........... 1,139,940
1,700,000 Riverside County, California, Asset
Leasing Corporation, Leasehold
Revenue, Riverside County
Hospital Project, (effective
yield 5.70%) (b),
0.00%, 6/1/13, (MBIA)............ 662,133
1,000,000 Riverside County, California,
Transmission Community Sales Tax
Revenue, Series A,
6.00%, 6/1/09, (FGIC)............ 1,060,820
1,000,000 Sacramento County, California,
Airport System Revenue, Series A,
6.00%, 7/1/11.................... 1,028,320
1,000,000 San Bernardino, California, Joint
Powers Financing Authority, Tax
Allocation Revenue, Series A,
5.75%, 10/1/15, (FSA)............ 987,530
400,000 San Diego, California, Public
Facilities Financing Authority,
Sewer Revenue, Series A,
5.38%, 5/15/15, (FGIC)........... 382,724
2,000,000 San Diego County, California, Water
Authority, Water Revenue
Certificates of Participation,
5.68%, 4/23/08, (FGIC)........... 2,060,560
500,000 San Francisco, California, State
Building Authority, Lease
Revenue, San Francisco Civic
Center
Complex A,
6.00%, 12/1/09, (AMBAC).......... 528,945
1,000,000 San Francisco, California, State
Building Authority, Lease
Revenue, San Francisco Civic
Center
Complex A,
5.25%, 12/1/16, (AMBAC).......... 934,650
1,230,000 San Jose, California, Redevelopment
Tax Allocation, Merged Area
Redevelopment Project,
6.00%, 8/1/15, (MBIA)............ 1,277,097
</TABLE>
(CONTINUED)
28
<PAGE>
KEYSTONE
CALIFORNIA TAX FREE FUND
(silhouette of California)
SCHEDULE OF INVESTMENTS, CONTINUED
March 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
<C> <S> <C> <C> <C> <C>
</TABLE>
CALIFORNIA-- CONTINUED
$ 100,000 San Mateo, Foster City, California,
School District Capital
Appreciation, Series C,
(effective yield 5.60%) (b),
0.00%, 9/1/03, (FGIC)............ $ 72,056
300,000 Santa Ana, California, Financing
Authority Lease Revenue, Police
Administration and Holding
Facility, Series A,
6.25%, 7/1/15, (MBIA)............ 319,920
1,000,000 South Orange County, California,
Public Financing Authority,
Special Tax Revenue, Sr. Lien,
Series A,
7.00%, 9/1/09, (MBIA)............ 1,151,850
1,000,000 Southern California Public Power
Authority, Transmission Project
Revenue, (effective yield
7.30%)(b),
0.00%, 7/1/14, (FSA)............. 368,720
625,000 Vista, California, Community
Development, Community Tax
Allocation Revenue, Vista
Redevelopment Project Area,
6.00%, 9/1/10, (MBIA)............ 659,637
190,000 Walnut Valley, California, Unified
School District, Series A,
6.00%, 8/1/14, (MBIA)............ 197,032
500,000 Watsonville, California, Solid
Waste Revenue,
5.50%, 5/15/16, (MBIA)........... 482,145
26,663,511
PUERTO RICO-- 2.8%
$ 750,000 Puerto Rico Industrial, Tourist,
Educational, Medical &
Environmental Control Facilities,
Hospital Auxilio Mutuo Obligation
Group, Series A,
6.25%, 7/1/24, (MBIA)............ $ 777,225
Total Municipal Bonds
(Cost $27,436,967)............... 27,440,736
<TABLE>
<CAPTION>
TEMPORARY TAX-EXEMPT
INVESTMENTS-- 4.3%
550,000 California Health
636,000 Facilities Financing
Authority Revenue, St.
Joseph Health System,
Series A,
3.65%, 7/1/13 (a)........550,000
Irvine, California,
Improvement Board Act
1915, Assessment District
95-12, Series A,
3.70%, 9/2/21 (a)........636,000
TOTAL TEMPORARY TAX-EXEMPT
INVESTMENTS
(COST $1,186,000)........1,186,000
TOTAL INVESTMENTS-- (COST
$28,622,967) (C).........102.9% 28,626,736
<C> <S> <C> <C>
OTHER ASSETS AND
LIABILITIES-- NET........ (2.9) (791,955)
NET ASSETS--............... 100.0% $27,834,781
</TABLE>
(a) Variable or floating rate instruments with periodic demand features. The
Fund is entitled to full payment of principal and accrued interest upon
surrendering the security to the issuing agent according to the terms of
the demand features.
(b) Effective yield (calculated at the date of purchase) is the annual yield at
which the bond accretes until its maturity date.
(c) The cost of investments for federal income tax purposes is identical. Gross
unrealized appreciation and depreciation of investments, based on
identified tax cost at March 31, 1997 are as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 291,409
Gross unrealized depreciation (287,640)
Net unrealized appreciation $ 3,769
</TABLE>
LEGEND OF PORTFOLIO ABBREVIATIONS:
AMBAC-- American Municipal Bond Assurance Corporation
FGIC-- Federal Guaranty Insurance Corporation
FSA-- Financial Security Assurance
MBIA-- Municipal Bond Insurance Association
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE>
KEYSTONE
MASSACHUSETTS TAX FREE FUND
(silhouette of Mass.)
SCHEDULE OF INVESTMENTS
March 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
<C> <S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
MUNICIPAL BONDS-- 97.8%
<C> <S> <C> <C> <C> <C>
MASSACHUSETTS-- 93.2% MASSACHUSETTS-- CONTINUED
</TABLE>
<TABLE>
<C> <S> <C>
$ 500,000 Franklin, Massachusetts, School
Improvements,
5.25%, 11/15/13, (MBIA).......... $ 473,210
525,000 Lawrence, Massachusetts, School
Improvements,
6.25%, 2/15/09, (AMBAC).......... 558,185
250,000 Lowell, Massachusetts, School
Improvements,
5.50%, 12/15/15, (AMBAC)......... 241,135
Massachusetts Bay Transportation
Authority,
General Transportation, Series A:
750,000 7.00%, 3/1/11...................... 861,210
525,000 6.25%, 3/1/12...................... 563,918
300,000 Massachusetts Educational Financing
Loan Authority, Issue E, Series
B,
6.00%, 1/1/12, (AMBAC)........... 298,344
Massachusetts Municipal Wholesale
Electric, Power Supply Systems,
Series B:
575,000 6.75%, 7/1/08...................... 608,241
250,000 4.95%, 7/1/09...................... 236,578
1,100,000 Massachusetts State Health and
Educational Facilities Authority,
Cape Islands Rehabilitation
Hospital, Series A,
7.88%, 8/15/24................... 1,178,837
550,000 Massachusetts State Health and
Educational Facilities Authority,
McLean Hospital, Series C,
6.50%, 7/1/10, (FGIC)............ 589,160
400,000 Massachusetts State Health and
Educational Facilities Authority,
New England Deaconess Hospital,
Series D,
6.88%, 4/1/22.................... 422,960
500,000 Massachusetts State Health and
Educational Facilities Authority,
North Adams Regional Hospital,
Series C,
6.75%, 7/1/09.................... 518,250
300,000 Massachusetts State Housing Finance
Agency, Series A,
6.60%, 7/1/14, (AMBAC)........... 313,359
300,000 Massachusetts State Housing Finance
Agency, Single Family Housing,
Series 52,
6.00%, 6/1/14, (MBIA)............ 301,404
$ 400,000 Massachusetts State Industrial
Finance Agency, College of the
Holy Cross, University and
College Improvements,
5.50%, 3/1/16, (MBIA)............ $ 385,304
250,000 Massachusetts State Industrial
Finance Agency, Solid Waste
Disposal, Molten Metal Technology
Project,
8.25%, 8/1/14.................... 265,025
525,000 Massachusetts State Water
Pollution, Series 2,
6.13%, 2/1/08.................... 566,375
900,000 Massachusetts State Water Pollution
Abatement Trust, New Bedford Loan
Program, Series A,
5.70%, 2/1/12.................... 904,176
125,000 Massachusetts State Water Pollution
Abatement Trust, South Essex
Sewerage District Loan Program,
Series A,
6.38%, 2/1/15.................... 130,024
575,000 Massachusetts State Water Resources
Authority, Series B,
4.00%, 12/1/18, (MBIA)........... 433,970
1,000,000 Methuen, Massachusetts, General
Obligation,
5.63%, 11/15/15, (FSA)........... 987,760
300,000 Worcester, Massachusetts, Municipal
Purpose Loan, Series A,
5.25%, 8/1/12, (AMBAC)........... 285,252
11,122,677
PUERTO RICO-- 4.6%
100,000 Commonwealth of Puerto Rico,
General Obligation
6.35%, 7/1/10.................... 105,145
100,000 Commonwealth of Puerto Rico,
Highway and Transportation
Authority, Series Y,
5.25%, 7/1/15, (FSA)............. 95,020
300,000 Commonwealth of Puerto Rico, Linked
Bond Payment Obligation,
7.00%, 7/1/10, (MBIA) (b)........ 344,388
544,553
TOTAL MUNICIPAL BONDS
(COST $11,466,778)............... 11,667,230
</TABLE>
(CONTINUED)
30
<PAGE>
KEYSTONE
MASSACHUSETTS TAX FREE FUND
(silhouette of Mass.)
SCHEDULE OF INVESTMENTS
March 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE VALUE
<C> <S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
TEMPORARY TAX-EXEMPT INVESTMENTS-- 1.0%
(COST $120,000)
<C> <S> <C>
$ 120,000 Massachusetts State Health and
Educational Facilities Authority,
(Capital Assets Program), Series
D,
3.70%, 1/1/35, (MBIA) (a)........ $ 120,000
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS-- (COST
$11,586,778) (C)......... 98.8% $11,787,230
OTHER ASSETS AND
LIABILITIES-- NET........ 1.2 145,173
NET ASSETS--............... 100.0% $11,932,403
</TABLE>
(a) Variable or floating rate instruments with periodic demand features. The
Fund is entitled to full payment of principal and accrued interest upon
surrendering the security to the issuing agent according to the terms of
the demand features.
(b) At the discretion of the portfolio manager, these securities may be
separated into securities with interest or principal payments that are
linked to another rate or index and therefore would be considered derivative
securities.
(c) The cost of investments for federal income tax purposes amounted to
$11,589,255. Gross unrealized appreciation and depreciation of investments
based on identified tax cost, at March 31, 1997 are as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $242,953
Gross unrealized depreciation (44,978)
Net unrealized appreciation $197,975
</TABLE>
LEGEND OF PORTFOLIO ABBREVIATIONS:
AMBAC-- American Municipal Bond Assurance Corporation
FGIC-- Federal Guaranty Insurance Company
FSA-- Financial Security Assistance
MBIA-- Municipal Bond Investors Assurance
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
KEYSTONE
MISSOURI TAX FREE FUND
(silhouette of Missouri)
SCHEDULE OF INVESTMENTS
March 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
<C> <S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
MUNICIPAL BONDS-- 98.8%
<C> <S> <C> <C> <C> <C>
MISSOURI-- 87.3% MISSOURI-- CONTINUED
</TABLE>
<TABLE>
<C> <S> <C>
$1,105,000 Butler County, Missouri, Public
Facilities Authority, Butler
County Jail Project,
6.50%, 12/1/14, (FGIC)........... $ 1,167,587
1,500,000 Cape Girardeau County, Missouri,
Health Care Facilities, Southeast
Missouri Hospital Association,
5.25%, 6/1/16, (MBIA)............ 1,419,915
830,000 Chesterfield, Missouri, General
Obligation,
6.30%, 2/15/13................... 871,417
1,000,000 Clay County, Missouri, Public
Building Authority,
7.00%, 5/15/14, (FGIC)........... 1,102,730
1,000,000 Kansas City, Missouri, Municipal
Assistance, Capital Improvement,
Series B,
5.65%, 1/15/12, (AMBAC).......... 996,660
1,000,000 Missouri Higher Education, Loan
Authority, Student Loan, Series
F,
6.75%, 2/15/09................... 1,021,480
985,000 Missouri State Environmental
Improvement and Energy Resource
Authority, Water Pollution
Control, Capital Appreciation,
State Revolving Fund-Series D,
(effective yield 6.25%) (b),
0.00%, 1/1/16.................... 316,963
975,000 Missouri State Environmental
Improvement and Energy Resource
Authority, Water Pollution
Control, Capital Appreciation,
State Revolving Fund-Series D,
(effective yield 6.25%) (b),
0.00%, 1/1/17.................... 293,622
1,000,000 Missouri State Environmental
Improvement and Energy Resource
Authority, Water Pollution
Control, State Revolving Fund,
Kansas City, Series A,
5.75%, 1/1/16.................... 998,980
600,000 Missouri State Environmental
Improvement and Energy Resource
Authority, Water Pollution
Control, State Revolving Fund,
Series B,
7.20%, 7/1/16.................... 669,480
500,000 Missouri State Health and
Educational Facilities Authority,
BJC Health Systems, Series A,
6.50%, 5/15/20................... 539,550
$ 275,000 Missouri State Health and
Educational Facilities Authority,
Barnes Jewish, Inc., Series A,
5.15%, 5/15/10................... $ 266,978
1,000,000 Missouri State Health and
Educational Facilities Authority,
Bethesda Health Group, Project A,
7.50%, 8/15/12................... 1,061,670
250,000 Missouri State Health and
Educational Facilities Authority,
Jefferson Memorial Hospital
Association Project,
6.00%, 8/15/23................... 230,140
750,000 Missouri State Health and
Educational Facilities Authority,
Jefferson Memorial Hospital
Obligation Group,
6.80%, 5/15/25................... 757,890
500,000 Missouri State Health and
Educational Facilities Authority,
Lake of Ozark General Hospital,
6.50%, 2/15/21................... 500,240
1,500,000 Missouri State Health and
Educational Facilities Authority,
SSM Health Care, Series AA,
6.25%, 6/1/16, (MBIA)............ 1,550,385
260,000 Missouri State Housing Development
Commission, Single Family, GNMA,
Series A,
7.13%, 12/1/14................... 278,166
Missouri State Housing Development
Commission, Single Family, GNMA,
Series B:
500,000 6.25%, 9/1/15...................... 503,995
1,250,000 6.45%, 9/1/27...................... 1,263,900
500,000 St. Louis County, Missouri,
Industrial Development Authority,
Health Facilities Revenue, GNMA,
Mother of Perpetual Help,
6.40%, 8/1/35.................... 514,185
1,000,000 St. Louis, Missouri, Convention and
Sports Complex, Convention and
Sports Facilities, Series C,
5.30%, 8/15/17................... 935,970
1,200,000 St. Louis, Missouri, Municipal
Finance Corp. Leasehold Revenue
Improvement--City Justice Center,
Series A,
5.75%, 2/15/11, (AMBAC).......... 1,203,216
</TABLE>
(CONTINUED)
32
<PAGE>
KEYSTONE
MISSOURI TAX FREE FUND
(silhouette of Missouri)
SCHEDULE OF INVESTMENTS, CONTINUED
March 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
<C> <S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
MISSOURI-- CONTINUED PUERTO RICO-- CONTINUED
<C> <S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<C> <S> <C>
Sikeston, Missouri, Electric
Revenue:
$1,250,000 6.00%, 6/1/13, (MBIA).............. $ 1,309,200
500,000 6.00%, 6/1/15, (MBIA).............. 520,780
700,000 Wentzville, Missouri, School
District, Series A,
5.60%, 3/1/11, (FSA)............. 705,544
21,000,643
PUERTO RICO-- 11.5%
500,000 Commonwealth of Puerto Rico,
General Obligation,
6.45%, 7/1/17.................... 529,985
1,000,000 Commonwealth of Puerto Rico,
Highway and Transportation
Authority Revenue, Series Y,
6.25%, 7/1/14.................... 1,059,650
250,000 Commonwealth of Puerto Rico,
Industrial Tourist Educational
Authority, Group A,
6.25%, 7/1/24.................... 259,075
$ 800,000 Commonwealth of Puerto Rico, Linked
Bond Payment Obligation,
7.00%, 7/1/10, (MBIA) (c)........ $ 918,368
2,767,078
TOTAL MUNICIPAL BONDS
(COST $23,218,260)............... 23,767,721
TEMPORARY TAX-EXEMPT INVESTMENT-- 0.3%
(COST $70,000)
70,000 Missouri State Health and
Educational Facilities Authority,
Christian Health Services,
3.20%, 12/1/19 (a)............... 70,000
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS
(COST $23,288,260) (D)... 99.1% 23,837,721
OTHER ASSETS AND
LIABILITIES-- NET........ 0.9 222,719
NET ASSETS................. 100.0% $24,060,440
</TABLE>
(a) Variable or floating rate instruments with periodic demand features. The
Fund is entitled to full payment of principal and accrued interest upon
surrendering the security to the issuing agent according to the terms of
the demand features.
(b) Effective yield (calculated at the date of purchase) is the yield at which
the bond accretes on an annual basis until its maturity date.
(c) At the discretion of the portfolio manager, these securities may be
separated into securities with interest or principal payments that are
linked to another rate or index and therefore would be considered
derivative securities.
(d) The cost of investments for federal income tax purposes amounted to
$23,301,301. Gross unrealized appreciation and depreciation of investments,
based on identified tax cost at March 31, 1997 are as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 639,637
Gross unrealized depreciation (103,217)
Net unrealized appreciation $ 536,420
</TABLE>
LEGEND OF PORTFOLIO ABBREVIATIONS:
AMBAC-- American Municipal Bond Assurance Corporation
FGIC-- Federal Guaranty Insurance Corporation
FSA-- Financial Security Assistance
GNMA-- Government National Mortgage Association
MBIA-- Municipal Bond Investors Assurance
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE>
EVERGREEN
NEW JERSEY TAX FREE INCOME FUND
(silhouette of New Jersey)
SCHEDULE OF INVESTMENTS
March 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
<C> <S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
MUNICIPAL BONDS-- 96.7%
<C> <S> <C> <C> <C> <C>
NEW JERSEY-- 87.8% NEW JERSEY-- CONTINUED
</TABLE>
<TABLE>
<C> <S> <C>
$ 250,000 Bayshore Regional Swr. Auth. RB,
Subordinated Swr.,
5.50%, 4/1/12, (MBIA)............ $ 248,990
1,000,000 Bergen Cnty. Utils. PCR, (Ser. A),
5.50%, 12/15/06, (FGIC).......... 1,030,240
1,000,000 Bergen Cnty. GO,
5.25%, 10/1/10................... 991,420
500,000 Burlington Cnty. Bridge Commission
Sys. RB,
5.30%, 10/1/13................... 486,080
750,000 Burlington Cnty. GO, (Ser. A),
4.40%, 3/15/01................... 741,787
500,000 Burlington Cnty. GO,
4.88%, 11/15/09.................. 473,540
1,000,000 Burlington Cnty. GO,
6.95%, 9/15/97................... 1,014,210
500,000 Camden Cnty. Impt. Auth. Lease RB,
5.63%, 10/1/15, (MBIA)........... 493,500
500,000 Camden Cnty. Impt. Auth. Lease RB,
6.00%, 12/1/12................... 498,595
500,000 Camden Cnty. Muni Utils. Auth. Swr.
RB,
5.13%, 7/15/17, (FGIC)........... 463,380
500,000 Cape May Cnty. Muni Utils. Auth.
Swr. RB, (Ser. A),
5.75%, 1/1/16, (MBIA)............ 497,115
1,000,000 Delaware River & Bay Auth. RB,
5.00%, 1/1/17, (MBIA)............ 902,220
475,000 Delaware River Joint Toll Bridge
Commission RB,
6.25%, 7/1/12.................... 493,853
500,000 Delaware River Port Auth. of PA &
NJ RB,
5.40%, 1/1/15, (FGIC)............ 483,125
200,000 Edison Township, GO,
6.50%, 6/1/09.................... 219,980
250,000 Essex Cnty. Utils. Auth. Solid
Waste,
(Ser. A),
5.50%, 4/1/11, (FSA)............. 249,035
250,000 Essex Cnty. Utils. Auth. Solid
Waste,
(Ser. A),
5.60%, 4/1/16, (FSA)............. 242,888
1,000,000 Gloucester Cnty. Solid Waste RB,
(Ser. A),
6.20%, 9/1/07.................... 1,046,630
500,000 Gloucester Cnty. Utils. Auth. Swr.
RB,
6.50%, 1/1/21.................... 534,415
$1,000,000 Hamilton Township Atlantic County
New Jersey Municipal Utilities
Fitch Light Rtg,
6.00%, 8/15/17, (FGIC)........... $ 1,011,180
200,000 Hoboken, GO,
6.65%, 8/1/11.................... 215,216
250,000 Hudson Cnty. GO
5.13%, 8/1/08, (AMBAC)........... 247,338
400,000 Lakewood Township School District
GO,
6.25%, 2/15/12, (AMBAC).......... 432,292
500,000 Manalapan Regl. Brd. Ed. GO,
5.00%, 5/1/05.................... 499,320
305,000 Mercer Cnty. Imp. Auth. RB,
6.05%, 1/1/11.................... 304,402
150,000 Millburn Township, GO,
6.00%, 7/15/99................... 155,525
800,000 Monmouth Cnty. Impt. Auth. GO,
Correctional Facs. Monmouth
Proj.,
6.40%, 8/1/08.................... 847,312
500,000 New Jersey Bldg. Auth. RB,
5.00%, 6/15/13................... 462,255
500,000 New Jersey Bldg. Auth. RB,
5.00%, 6/15/18................... 446,465
300,000 New Jersey Bldg. Auth. RB,
6.25%, 6/15/13................... 316,581
300,000 New Jersey Eco. Dev. Auth. RB,
(Ser. A),
6.60%, 8/1/21.................... 315,618
500,000 New Jersey Eco. Dev. Auth. RB, NJ
Performing Arts Ctr. Proj.,
5.50%, 6/15/13, (AMBAC).......... 492,580
1,000,000 New Jersey Eco. Dev. Auth. RB,
Public Schs. Small Proj. Loan
Prog.,
5.40%, 8/15/13................... 976,160
400,000 New Jersey Edl. Facs. Auth. RB,
William Patterson College,
6.38%, 7/1/11, (MBIA)............ 417,320
325,000 New Jersey Edl. Facs. Auth. RB,
(Ser. A),
5.70%, 7/1/97.................... 326,570
250,000 New Jersey Edl. Facs. Auth. RB,
Kean College, (Ser. B),
6.50%, 7/1/11.................... 267,035
1,500,000 New Jersey Edl. Facs. Auth. RB,
Princeton, (Ser. C),
6.38%, 7/1/22.................... 1,582,950
</TABLE>
(CONTINUED)
34
<PAGE>
EVERGREEN
NEW JERSEY TAX FREE INCOME FUND
(silhouette of New Jersey)
SCHEDULE OF INVESTMENTS, CONTINUED
March 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
<C> <S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<C> <S> <C>
NEW JERSEY-- CONTINUED
$ 500,000 New Jersey Edl. Facs. Auth. RB,
(Ser. D),
6.20%, 7/1/17, (AMBAC)........... $ 515,220
500,000 New Jersey Edl. Facs. Auth. RB,
Seton Hall Univ. Proj., (Ser. E),
5.63%, 7/1/19, (MBIA)............ 485,445
185,000 New Jersey Health Care Facs.
Financing Auth. RB Robert Wood
Johnson Univ. Hosp., (Ser. B),
6.63%, 7/1/16.................... 196,870
750,000 New Jersey Health Care Facs.
Financing Auth. Atlantic City
Med. Center RB, (Ser. C),
6.80%, 7/1/05.................... 804,067
400,000 New Jersey Health Care Facs.
Financing Auth. RB,
Burdett Tomlin Mem. Hosp.,
(Ser. D),
6.50%, 7/1/12.................... 426,624
750,000 New Jersey Health Care Facs.
Financing Auth. RB Hackensack
Medical Center,
6.63%, 7/1/17, (FGIC)............ 798,120
300,000 New Jersey Health Care Facs.
Financing Auth. RB, Mercer
Medical Center, (Ser. E),
6.45%, 7/1/05, (MBIA)............ 320,256
500,000 New Jersey Health Care Facs.
Financing Auth. Shore Mem. Hosp.
Health Care Sys. RB,
5.00%, 7/1/12, (MBIA)............ 468,485
500,000 New Jersey Hwy. Auth. RB,
Garden State Pkwy.,
6.25%, 1/1/14.................... 525,165
1,000,000 New Jersey Sports & Exposition RB,
(Ser. A),
6.00%, 3/1/21.................... 1,016,500
190,000 New Jersey State Turnpike RB,
6.75%, 1/1/09.................... 207,970
200,000 New Jersey Trans. Trust Fund Auth.,
4.40%, 6/15/99................... 200,288
1,000,000 New Jersey Trans. Trust Fund Auth.,
(Ser. B),
6.50%, 6/15/10, (MBIA)........... 1,107,810
300,000 New Jersey Transit Corp. COP,
6.50%, 10/1/16, (FSA)............ 319,104
300,000 New Jersey Turnpike Auth. RB,
(Ser. A),
6.40%, 1/1/02.................... 316,758
2,000,000 New Jersey Turnpike Auth. RB,
(Ser. C),
6.50%, 1/1/16, (FSA)............. 2,192,360
NEW JERSEY-- CONTINUED
$ 200,000 New Jersey St. GO, (Ser. A),
6.80%, 9/15/10................... $ 218,466
500,000 New Jersey St. GO, (Ser. D),
5.25%, 2/15/01................... 510,670
400,000 New Jersey St. GO, (Ser. E),
6.00%, 7/15/07................... 427,516
350,000 North Jersey Dist. Wtr. Supply RB,
Wanaque North Proj., (Ser. B),
6.25%, 11/15/17, (MBIA).......... 362,610
500,000 North Jersey Dist. Wtr. Supply RB,
Wanque South Proj.,
6.00%, 7/1/12, (MBIA)............ 516,350
400,000 North Jersey Dist. Wtr. Supply RB,
Wanque South Proj.),
6.50%, 7/1/21, (MBIA)............ 435,944
500,000 Ocean Cnty. GO Utils. Auth.,
(Ser. A),
5.75%, 1/1/18.................... 493,985
200,000 Old Bridge Township GO,
6.55%, 7/15/09, (FGIC)........... 215,584
500,000 Old Bridge Township Muni. Utils.
Auth. RB,
6.25%, 11/1/16, (FGIC)........... 518,890
500,000 Passaic Valley Sewage Commisioners
RB, (Ser. D),
5.75%, 12/1/13, (AMBAC).......... 503,030
500,000 Pennsauken Township School Dist.
GO,
5.00%, 3/1/10.................... 474,860
500,000 Port Auth. NY & NJ RB,
5.00%, 7/15/11, (AMBAC).......... 473,545
500,000 Port Auth. NY & NJ RB, (Ser. 102),
5.63%, 10/15/13, (MBIA).......... 498,655
900,000 Port Auth. NY & NJ RB, (Ser. 102),
6.75%, 8/1/26.................... 960,624
500,000 Rutgers St University RB, (Ser. 1),
5.25%, 5/1/12.................... 483,790
1,100,000 Sparta Township GO
5.80%, 9/1/23, (MBIA)............ 1,094,049
500,000 Stafford Muni. Utils. Auth. Wtr. &
Swr. RB,
6.25%, 6/1/14, (MBIA)............ 518,920
500,000 Stony Brook Regional Sewage Auth.
RB, (Ser. B),
5.45%, 12/1/12................... 493,125
500,000 Trenton GO,
6.55%, 8/15/09, (MBIA)........... 537,860
400,000 University Medicine & Dentistry RB,
(Ser. E),
5.75%, 12/1/21................... 415,860
</TABLE>
(CONTINUED)
35
<PAGE>
EVERGREEN
NEW JERSEY TAX FREE INCOME FUND
(silhouette of New Jersey)
SCHEDULE OF INVESTMENTS, CONTINUED
March 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
<C> <S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<C> <S> <C>
NEW JERSEY-- CONTINUED
$ 500,000 University Medicine & Dentistry RB,
(Ser. E),
6.50%, 12/1/18................... $ 543,790
200,000 Washington Township Muni. Utils.
Auth. Sys. RB, (Ser. A),
6.70%, 2/1/11, (AMBAC)........... 217,302
1,000,000 West Windsor, GO,
Plainsboro School Dist.,
5.50%, 12/1/10, (FGIC)........... 1,002,320
500,000 Winslow Township GO,
6.50%, 10/1/18, (FGIC)........... 533,335
42,779,244
<CAPTION>
PENNSYLVANIA-- 2.0%
<C> <S> <C>
1,000,000 Delaware River Port Auth. PA & NJ,
RB, (Ser. 1995),
5.40%, 1/1/16, (FGIC)............ 961,170
<CAPTION>
PUERTO RICO-- 6.9%
<C> <S> <C>
500,000 Puerto Rico Commonwealth GO,
5.50%, 7/1/13.................... 478,225
300,000 Puerto Rico Commonwealth GO,
6.80%, 7/1/21.................... 332,802
500,000 Puerto Rico Commonwealth GO, (Ser.
A),
6.00%, 7/1/14.................... 501,690
500,000 Puerto Rico Commonwealth Hwy &
Trans. Auth., (Ser. Z),
6.00%, 7/1/18, (FSA)............. 523,980
275,000 Puerto Rico Elec. Pwr. Auth. RB,
(Ser. W),
6.50%, 7/1/05, (MBIA)............ 302,970
PUERTO RICO-- CONTINUED
$ 500,000 Puerto Rico Elec. Pwr. Auth. RB,
(Ser. P),
7.00%, 7/1/21.................... $ 553,835
400,000 Puerto Rico Pub. Bldgs. Auth. Gtd.
Hlth. Facs. RB, (Ser. J),
7.00%, 7/1/19.................... 420,820
250,000 Puerto Rico Pub. Bldgs. Auth. Gtd.
RB, (Ser. A),
6.25%, 7/1/09, (AMBAC)........... 272,590
3,386,912
TOTAL MUNICIPAL BONDS
(COST $46,387,947)............... 47,127,326
<CAPTION>
MUTUAL FUND SHARES-- 4.0%
SHARES
<C> <S> <C>
437,106 Dreyfus New Jersey Municipal Money
Market Fund...................... 437,106
1,503,399 Federated New Jersey Municipal Cash
Trust............................ 1,503,399
TOTAL MUTUAL FUND SHARES
(COST $1,940,505)................ 1,940,505
TOTAL INVESTMENTS
-- (COST
$48,328,452)(A).......... 100.7% 49,067,831
OTHER ASSETS AND
LIABILITIES-- NET........ (0.7) (350,722)
NET ASSETS--............... 100.0% $48,717,109
</TABLE>
(a) The cost of investments for federal income tax purposes amounted to
$48,328,452. Gross unrealized appreciation and depreciation of investments,
based on identified tax cost, at March 31, 1997 are as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $1,203,853
Gross unrealized depreciation (464,474)
Net unrealized appreciation $ 739,379
</TABLE>
LEGEND OF PORTFOLIO ABBREVIATIONS:
AMBAC-- American Municipal Bond Assurance Corporation
COP-- Certificate of Participation
FGIC-- Federal Guaranty Insurance Company
FSA-- Federal Security Assistance
GO-- General Obligation
MBIA-- Municipal Bond Investors Assurance
PCR-- Pollution Control Revenue
RB-- Revenue Bond
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PAGE>
KEYSTONE
NEW YORK TAX FREE FUND
(silhouette of New York)
SCHEDULE OF INVESTMENTS
March 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
<C> <S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
MUNICIPAL BONDS-- 98.2%
<C> <S> <C> <C> <C> <C>
NEW YORK-- 90.4% NEW YORK-- CONTINUED
</TABLE>
<TABLE>
<C> <S> <C>
$ 400,000 Albany County, New York, Public
Improvements, Series B,
5.60%, 3/15/14, (FGIC)........... $ 392,968
465,000 Buffalo, New York, General
Obligation, Series E,
6.50%, 12/1/22, (AMBAC).......... 498,643
770,000 Erie County, New York, Water
Authority, Fourth Resolution,
(effective yield 7.30%) (b),
0.00%, 12/1/17, (AMBAC).......... 175,006
550,000 Hempstead Town, New York, General
Obligation, Series B,
5.63%, 2/1/15, (FGIC)............ 540,969
100,000 Islip, New York Resources Recovery
Agency, Electric Light and Power
Improvements, Series B,
7.25%, 7/1/11, (AMBAC)........... 118,400
1,400,000 Metropolitan Transportation
Authority, New York, Commuter
Facilities, Series A,
6.13%, 7/1/14, (MBIA)............ 1,440,390
600,000 Municipal Assistance Corporation,
Troy, New York, Series A,
5.00%, 1/15/12................... 556,296
695,000 Nassau County, New York, Combined
Sewer District, Series B,
6.00%, 5/1/14, (FGIC)............ 718,102
200,000 Nassau County, New York, General
Improvement, Series T,
5.20%, 9/1/15.................... 188,832
600,000 New Rochelle, New York, General
Obligation, Series B,
6.15%, 8/15/17, (MBIA)........... 617,832
250,000 New York City, New York, General
Obligation, Series A,
7.75%, 8/15/15................... 274,910
500,000 New York City, New York, General
Obligation, Series H,
5.75%, 3/15/10................... 481,245
100,000 New York City, New York, Industrial
Development Agency,
6.00%, 11/1/15................... 102,046
2,000,000 New York City, New York, Municipal
Water Finance Authority, Water
and Sewer System, Series A,
7.00%, 6/15/15, (FGIC)........... 2,177,102
1,200,000 New York State Dormitory Authority,
City University Systems, Series
D,
7.00%, 7/1/09, (FGIC)............ 1,381,260
$ 450,000 New York State Dormitory Authority,
City University, 3rd General
Resources, Series 2,
6.25%, 7/1/19, (MBIA)............ $ 462,029
250,000 New York State Dormitory Authority,
State University Educational
Facilities, Series A,
5.88%, 5/15/11, (AMBAC).......... 258,975
500,000 New York State Environmental
Facilities, Riverbank State Park,
5.50%, 4/1/16.................... 480,015
875,000 New York State Housing Finance
Agency, Multi-Family Mortgage
Series B,
6.25%, 8/15/14, (AMBAC).......... 893,900
250,000 New York State Medical Care
Facilities Finance Agency, Health
Center Projects,
6.38%, 11/15/19.................. 258,025
1,000,000 New York State Medical Care
Facilities Finance Agency, Mental
Health Services Facilities,
6.38%, 8/15/14, (FGIC)........... 1,050,090
New York State Medical Care
Facilities Finance Agency, New
York Hospital, Series A:
250,000 6.75%, 8/15/14..................... 269,657
300,000 6.80%, 8/15/24..................... 324,537
100,000 New York State Thruway Authority,
Service Contract, Local Highway
and Bridge,
5.75%, 4/1/09.................... 97,925
500,000 New York State Urban Development
Corp., Correctional Capital
Facilities,
(effective yield 5.63%) (b),
0.00%, 1/1/10, (AMBAC)........... 246,090
New York State Urban Development
Corp., Correctional Capital
Facilities, Series A:
600,000 6.50%, 1/1/09...................... 639,336
1,000,000 6.50%, 1/1/10, (FSA)............... 1,104,620
500,000 New York State Urban Development
Corp., Higher Education
Technology Grants,
6.00%, 4/1/10, (MBIA)............ 520,115
</TABLE>
(CONTINUED)
37
<PAGE>
KEYSTONE
NEW YORK TAX FREE FUND
(silhouette of New York)
SCHEDULE OF INVESTMENTS, CONTINUED
March 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
<C> <S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<C> <S> <C>
NEW YORK-- CONTINUED
Niagara Falls, New York, Public
Improvement, Series A:
$ 700,000 7.50%, 3/1/14, (MBIA).............. $ 841,498
750,000 7.50%, 3/1/16, (MBIA).............. 902,100
750,000 7.50%, 3/1/17, (MBIA).............. 906,540
100,000 Niagara, New York, Frontier
Transportation Authority, Greater
Buffalo International Airport,
6.13%, 4/1/14, (AMBAC)........... 102,268
1,000,000 Port Authority of New York and New
Jersey, Special Obligation,
Special Project KIAC-4,
6.75%, 10/1/11 (c)............... 1,037,640
250,000 St. Lawrence County, New York
Industrial Development Civic
Facilities, St. Lawrence
University Project-A,
5.63%, 7/1/13, (MBIA)............ 247,430
1,000,000 Suffolk County, New York,
Industrial Development Agency,
Southwest Sewer Systems,
6.00%, 2/1/08, (FGIC)............ 1,060,450
805,000 Triborough Bridge and Tunnel
Authority, New York, General
Purpose, Series X,
6.63%, 1/1/12.................... 893,711
22,260,952
PUERTO RICO-- 7.8%
$1,000,000 Commonwealth of Puerto Rico,
General Obligation,
7.00%, 7/1/10, (MBIA)............ $ 1,147,960
750,000 Commonwealth of Puerto Rico,
Industrial Tourist Educational
Authority, Group A,
6.25%, 7/17/24................... 777,225
1,925,185
TOTAL MUNICIPAL BONDS
(COST $23,458,346)............... 24,186,137
<CAPTION>
TEMPORARY TAX-EXEMPT INVESTMENTS-- 0.9%
(COST $215,000)
<C> <S> <C>
215,000 New York City, New York, Municipal
Water Finance Authority, Water
and Sewer System, Series C,
4.00%, 6/15/22, (FGIC) (a)....... 215,000
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS
-- (COST $23,673,346)
(D)...................... 99.1% 24,401,137
OTHER ASSETS AND
LIABILITIES-- NET........ 0.9 226,983
NET ASSETS................. 100.0% $24,628,120
</TABLE>
(a) Variable or floating rate instruments with periodic demand features. The
Fund is entitled to full payment of principal and accrued interest upon
surrendering the security to the issuing agent according to the terms of
the demand features.
(b) Effective yield (calculated at the date of purchase) is the yield at which
the bond accretes on an accrual basis until its maturity date.
(c) Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to Section 4(2) of the Securities
Act of 1933, as amended. These securities have been determined to be liquid
under guidelines established by the Board of Trustees.
(d) The cost of investments for federal income tax purposes amounted to
$23,693,095. Gross unrealized appreciation and depreciation of investments,
based on identified tax cost at March 31, 1997 are as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $805,799
Gross unrealized depreciation (97,757)
Net unrealized appreciation $708,042
</TABLE>
LEGEND OF PORTFOLIO ABBREVIATIONS:
AMBAC-- American Municipal Bond Assurance Corporation
FGIC-- Federal Guaranty Insurance Company
FSA-- Financial Security Assistance
MBIA-- Municipal Bond Investors Assurance
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PAGE>
KEYSTONE
PENNSYLVANIA TAX FREE FUND
(silhouette of Penn.)
SCHEDULE OF INVESTMENTS
March 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
<C> <S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
MUNICIPAL BONDS-- 97.8%
<C> <S> <C> <C> <C> <C>
PENNSYLVANIA-- 82.2% PENNSYLVANIA-- CONTINUED
</TABLE>
<TABLE>
<C> <S> <C>
$1,750,000 Allegheny County, Pennsylvania,
Airport Revenue, Greater
Pittsburgh International Airport,
Series B,
6.63%, 1/1/22.................... $ 1,842,208
975,000 Allegheny County, Pennsylvania,
Finance Authority, Single Family
Mortgage, Series Y,
6.60%, 11/1/14................... 1,013,922
1,500,000 Allegheny County, Pennsylvania,
Hospital Development Authority,
Ohio Valley General Hospital,
5.88%, 4/1/11.................... 1,433,490
2,000,000 Allegheny County, Pennsylvania,
Industrial Development Authority,
USX Corp., Series A,
6.70%, 12/1/20................... 2,063,860
1,750,000 Allentown, Pennsylvania Area
Hospital Authority, Sacred Heart
Hospital of Allentown, Series A,
6.75%, 11/15/14.................. 1,797,197
1,170,000 Beaver County, Pennsylvania,
Industrial Development Authority,
Pollution Control, Ohio Edison
Co. Project, Series A,
7.75%, 9/1/24.................... 1,218,649
4,485,000 Cambria County, Pennsylvania,
General Obligation, Series A,
6.63%, 8/15/12, (FGIC)........... 4,808,324
1,000,000 Central Bucks, Pennsylvania School
District, Series A,
6.90%, 11/15/13.................. 1,110,360
2,000,000 Chester County, Pennsylvania,
Health and Education, The Chester
County Hospital,
5.88%, 7/1/16, (MBIA)............ 1,991,560
850,000 Delaware County, Pennsylvania,
Industrial Development Authority,
Pollution Control, Philadelphia
Electric Co., Series A,
7.38%, 4/1/21.................... 913,172
500,000 Erie County, Pennsylvania,
Industrial Development Authority,
Environmental Improvement,
International Paper Co. Project,
Series A,
7.63%, 11/1/18................... 556,265
1,000,000 Hazleton, Pennsylvania, City
Authority, Water Revenue,
5.10%, 4/1/13, (FGIC)............ 939,320
$1,000,000 Lehigh County, Pennsylvania,
General Purpose Authority, Good
Shepherd Rehabilitation Hospital,
7.50%, 11/15/21.................. $ 1,071,910
1,250,000 Lehigh County, Pennsylvania,
General Purpose Authority, Lehigh
Valley Hospital, Series A,
7.00%, 7/1/16, (MBIA)............ 1,419,263
2,000,000 McKeesport, Pennsylvania, Area
School District Capital
Appreciation, Series B,
(effective yield 6.25%)(b),
0.00%, 10/1/15................... 659,300
1,000,000 McKeesport, Pennsylvania, Hospital
Authority Revenue, McKeesport
Hospital Project,
6.50%, 7/1/08.................... 1,012,710
1,305,000 Mon Valley, Pennsylvania, Sewage
Revenue,
6.55%, 11/1/19, (MBIA)........... 1,391,430
950,000 Montgomery County, Pennsylvania,
Industrial Development, Pollution
Control, Philadelphia Electric
Co.,
7.60%, 4/1/21.................... 1,009,916
7,200,000 Northumberland County,
Pennsylvania, Commonwealth Lease,
(effective yield 6.82%)(b),
0.00%, 10/15/12.................. 2,922,120
2,000,000 Pennsylvania Convention Center
Authority Revenue, Capital
Appreciation, Series A,
(effective yield 5.40%)(b),
0.00%, 9/1/08 (FGIC)............. 1,086,340
1,500,000 Pennsylvania Economic Development
Financing Authority, Northhampton
Generator Project, Series A,
6.60%, 1/1/19 (c)................ 1,470,570
2,200,000 Pennsylvania Economic Development
Financing Authority, Resources
Recovery, Northhampton University
Project, Series A,
6.50%, 1/1/13 (c)................ 2,162,292
860,000 Pennsylvania Housing Finance
Agency, Single Family Mortgage,
Series 33,
6.90%, 4/1/17.................... 893,076
2,000,000 Pennsylvania Housing Finance
Agency, Single Family Mortgage,
Series 34 A,
6.85%, 4/1/16 (FHA/FNMA)......... 2,071,300
</TABLE>
(CONTINUED)
39
<PAGE>
KEYSTONE
PENNSYLVANIA TAX FREE FUND
(silhouette of Penn.)
SCHEDULE OF INVESTMENTS, CONTINUED
March 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT VALUE AMOUNT VALUE
<C> <S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<C> <S> <C>
PENNSYLVANIA-- CONTINUED
$ 750,000 Pennsylvania Housing Finance
Agency, Single Family Mortgage,
Series 40 A,
6.80%, 10/1/15................... $ 783,525
1,840,000 Pennsylvania Housing Finance
Agency, Single Family Mortgage,
Series 50 A,
6.00%, 10/1/13................... 1,850,120
1,650,000 Pennsylvania Intragovernmental
Cooperation Authority, Special
Tax, Philadelphia Funding
Program,
6.75%, 6/15/21, (FGIC)........... 1,832,754
1,000,000 Pennsylvania State, General
Obligation, Second Series,
5.00%, 11/15/12, (AMBAC)......... 935,520
1,500,000 Pennsylvania State Industrial
Development Authority, Economic
Revenue Bonds,
7.00%, 1/1/06, (AMBAC)........... 1,690,230
1,000,000 Pennsylvania State Industrial
Development Authority, Economic
Revenue Bonds,
7.00%, 7/1/06, (AMBAC)........... 1,132,570
2,000,000 Pennsylvania State Higher
Educational Facilities Authority,
Health Services Revenue,
Allegheny Delaware Valley
Obligation, Series A,
5.60%, 11/15/10, (MBIA).......... 2,016,340
1,600,000 Pennsylvania State Higher
Educational Facilities Authority,
Thomas Jefferson University,
Series A,
6.63%, 8/15/09................... 1,726,528
1,150,000 Philadelphia, Pennsylvania,
Hospital & Higher Education
Facilities, Albert Einstein
Medical Center,
7.63%, 4/1/11.................... 1,211,513
1,000,000 Philadelphia, Pennsylvania,
Industrial Development Authority,
Industrial and Commercial
Revenue, Girard Estate Coal
Mining Project,
5.00%, 11/15/08.................. 962,410
4,000,000 Philadelphia, Pennsylvania, Water &
Waste Water,
6.25%, 8/1/12, (MBIA)............ 4,302,600
PENNSYLVANIA-- CONTINUED
$1,000,000 Pittsburgh, Pennsylvania, General
Obligation,
6.25%, 9/1/16, (MBIA)............ $ 1,041,330
56,343,994
PUERTO RICO-- 15.6%
325,000 Commonwealth of Puerto Rico,
Highway and Transportation
Authority, Series Q,
7.75%, 7/1/10.................... 361,832
1,000,000 Commonwealth of Puerto Rico,
Highway and Transportation
Authority, Series W,
5.50%, 7/1/13, (MBIA)............ 1,002,920
3,000,000 Commonwealth of Puerto Rico,
Industrial Tourist, Educational,
Medical and Environmental Control
Facilities, Hospital Auxilio
Mutuo Obligation Group, Series A,
6.25%, 7/1/24, (MBIA)............ 3,108,900
3,850,000 Commonwealth of Puerto Rico, Linked
Bond Payment Obligation,
7.00%, 7/1/10, (MBIA) (d)........ 4,419,646
1,800,000 Commonwealth of Puerto Rico, Public
Buildings Authority, Guaranteed
Public Education and Health
Facilities, Series M,
5.70%, 7/1/09.................... 1,834,164
10,727,462
TOTAL MUNICIPAL BONDS
(COST $65,165,797)............... 67,071,456
<CAPTION>
TEMPORARY TAX-EXEMPT INVESTMENT-- 0.7%
(COST $500,000)
<C> <S> <C>
500,000 Sayre County, Pennsylvania, Health
Care Facilities Authority
Revenue, Pennsylvania Capital
Financing Project, Series K,
3.20%, 12/1/20, (AMBAC) (a)...... 500,000
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS
-- (COST $65,665,797)
(E)...................... 98.5% 67,571,456
OTHER ASSETS AND
LIABILITIES-- NET........ 1.5 1,008,623
NET ASSETS--............... 100.0% $68,580,079
</TABLE>
(CONTINUED)
40
<PAGE>
KEYSTONE
PENNSYLVANIA TAX FREE FUND
(silhouette of Penn.)
SCHEDULE OF INVESTMENTS
March 31, 1997
(a) Variable or floating rate instruments with periodic demand features. The
Fund is entitled to full payment of principal and accrued interest upon
surrendering the security to the issuing agent according to the terms of
the demand features.
(b) Effective yield (calculated at date of purchase) is the yield at which the
bond accretes on an annual basis until its maturity date.
(c) Securities may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to Section 4(2) of the Securities Act
of 1933, as amended. These securities have been determined to be liquid
under guidelines established by the Board of Trustees.
(d) At the discretion of the portfolio manager, these securities may be
separated into securities with interest or principal payments that are
linked to another rate or index and therefore would be considered derivative
securities.
(e) The cost of investments for federal income tax purposes amounted to
$65,665,797. Gross unrealized appreciation and depreciation of investments,
based on identified tax cost, at March 31, 1997 are as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $2,077,255
Gross unrealized depreciation (171,596)
Net unrealized appreciation $1,905,659
</TABLE>
LEGEND OF PORTFOLIO ABBREVIATIONS:
AMBAC-- American Municipal Bond Assurance Corporation
FGIC-- Federal Guaranty Insurance Company
FHA-- Federal Housing Authority
FNMA-- Federal National Mortgage Association
MBIA-- Municipal Bond Investors Assurance
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PAGE>
EVERGREEN KEYSTONE
(silhouette of Penn.)
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments at market value (identified cost-- $28,622,967, $11,586,778, $23,288,260, $48,328,452, $23,673,346 and
$65,665,797, respectively)................................................................................................
Cash........................................................................................................................
Receivable for investments sold.............................................................................................
Receivable for Fund shares sold.............................................................................................
Interest receivable.........................................................................................................
Due from Investment Manager.................................................................................................
Prepaid expenses and other assets...........................................................................................
Total assets............................................................................................................
LIABILITIES
Payable for investments purchased...........................................................................................
Payable for Fund shares redeemed............................................................................................
Distributions to shareholders...............................................................................................
Distribution fee payable....................................................................................................
Due to related parties......................................................................................................
Other accrued expenses......................................................................................................
Total liabilities.......................................................................................................
NET ASSETS....................................................................................................................
Net assets represented by
Paid-in capital.............................................................................................................
Undistributed net investment income (accumulated distributions in excess of net investment income)..........................
Accumulated net realized loss on investments................................................................................
Net unrealized appreciation on investments..................................................................................
TOTAL NET ASSETS........................................................................................................
Net assets consists of
Class A.....................................................................................................................
Class B.....................................................................................................................
Class C.....................................................................................................................
Class Y.....................................................................................................................
Shares outstanding (Note 2)
Class A.....................................................................................................................
Class B.....................................................................................................................
Class C.....................................................................................................................
Class Y.....................................................................................................................
NET ASSET VALUE PER SHARE
Class A.....................................................................................................................
Class A-- Offering price (based on sales charge of 4.75%)...................................................................
Class B.....................................................................................................................
Class C.....................................................................................................................
Class Y.....................................................................................................................
</TABLE>
42
<PAGE>
EVERGREEN KEYSTONE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(graphic of CA) (graphic of Mass.) (graphic of Missouri) (graphic of NJ) (graphic of NY)
CALIFORNIA MASSACHUSETTS MISSOURI NEW JERSEY NEW YORK
FUND FUND FUND FUND FUND
<CAPTION>
<S> <C> <C> <C> <C>
28,626,736
$ $ 11,787,230 $ 23,837,721 $ 49,067,831 $ 24,401,137
2,112 4,845 3,183 -- 1,254
504,399 -- 8,391 -- --
23,506 45,100 -- 154,255 --
338,389 163,799 329,293 720,006 346,323
14,533 281 16,201 -- 431
4,056 4,961 3,315 8,767 2,289
29,513,731 12,006,216 24,198,104 49,950,859 24,751,434
1,487,372 -- -- 1,070,618 --
52,782 -- 8,855 10,866 --
104,425 47,298 91,946 88,988 92,024
6,781 3,646 8,445 15,024 6,897
3,561 2,250 3,500 -- 1,843
24,029 20,619 24,918 48,254 22,550
1,678,950 73,813 137,664 1,233,750 123,314
$27,834,781 $ 11,932,403 $ 24,060,440 $ 48,717,109 $ 24,628,120
$28,022,448 $ 12,077,878 $ 23,718,027 $ 48,182,809 $ 24,124,474
(104,425) (33,200) (87,930) 9,525 (64,926)
(87,011) (312,727) (119,118) (214,604) (159,219)
3,769 200,452 549,461 739,379 727,791
$27,834,781 $ 11,932,403 $ 24,060,440 $ 48,717,109 $ 24,628,120
$ 4,191,597 $ 2,063,325 $ 2,627,406 $ 31,434,060 $ 3,693,266
21,794,495 7,803,487 20,127,157 7,846,711 19,063,819
1,848,689 2,065,591 1,305,877 -- 1,871,035
-- -- -- 9,436,338 --
$27,834,781 $ 11,932,403 $ 24,060,440 $ 48,717,109 $ 24,628,120
444,050 223,575 272,424 2,926,484 383,164
2,319,559 851,347 2,113,361 730,515 1,996,424
197,043 225,545 137,158 -- 195,980
-- -- -- 878,516 --
$ 9.44 $ 9.23 $ 9.64 $ 10.74 $ 9.64
$ 9.91 $ 9.69 $ 10.12 $ 11.28 $ 10.12
$ 9.40 $ 9.17 $ 9.52 $ 10.74 $ 9.55
$ 9.38 $ 9.16 $ 9.52 -- $ 9.55
-- -- -- $ 10.74 --
<CAPTION>
(graphic of Penn.)
PENNSYLVANIA
FUND
<S>
$ 67,571,456
1,840
--
161,598
1,156,000
6,179
4,001
68,901,074
--
4,519
268,297
15,774
1,843
30,562
320,995
$ 68,580,079
$ 68,931,997
(218,513)
(2,039,064)
1,905,659
$ 68,580,079
$ 24,534,521
37,215,079
6,830,479
--
$ 68,580,079
2,202,803
3,385,350
619,545
--
$ 11.14
$ 11.70
$ 10.99
$ 11.02
--
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE>
EVERGREEN KEYSTONE
STATEMENTS OF OPERATIONS
Year Ended March 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest....................................................................................................................
EXPENSES (NOTES 4, 5 AND 6)
Management fee..............................................................................................................
Distribution Plan expenses..................................................................................................
Transfer agent fees.........................................................................................................
Custodian fees..............................................................................................................
Administrative and accounting expenses......................................................................................
Auditing....................................................................................................................
Legal.......................................................................................................................
Printing....................................................................................................................
Registration fees...........................................................................................................
Amortization of organization expenses.......................................................................................
Trustees fees...............................................................................................................
Other.......................................................................................................................
Fee waivers and/or reimbursement from Investment Manager....................................................................
Total expenses............................................................................................................
Less: Indirectly paid expenses..............................................................................................
Net expenses..............................................................................................................
NET INVESTMENT INCOME.......................................................................................................
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
CLOSED FUTURES CONTRACTS (NOTE 3)
Realized gain (loss) on:
Investments...............................................................................................................
Closed futures contracts..................................................................................................
Net realized gain (loss) on investments and closed futures contracts........................................................
Net change in unrealized appreciation (depreciation) on investments.........................................................
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND
CLOSED FUTURES CONTRACTS..................................................................................................
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.............................................................
</TABLE>
* Four months ended March 31, 1997. During this period, the California Fund and
the Missouri Fund changed their fiscal year end from November 30 to March 31.
** Seven months ended March 31, 1997. During this period, the New Jersey Fund
changed its fiscal year end from August 31 to March 31.
44
<PAGE>
EVERGREEN KEYSTONE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
(graphic of CA) (graphic of Mass.) (graphic of Missouri) (graphic of NJ) (graphic of NY) (graphic of Penn.)
CALIFORNIA MASSACHUSETTS MISSOURI NEW JERSEY NEW YORK PENNSYLVANIA
FUND* FUND FUND* FUND** FUND FUND
<CAPTION>
<S> <C> <C> <C> <C> <C>
$ 530,927 $ 689,218 $ 491,314 $ 1,472,898 $ 1,418,910 $ 4,397,737
<CAPTION>
<S> <C> <C> <C> <C> <C>
51,555 63,584 46,447 135,196 135,473 390,366
73,147 89,334 69,477 73,129 192,105 454,998
10,465 14,962 11,842 25,207 31,226 100,426
11,380 25,849 9,726 33,707 33,033 58,687
3,338 17,384 3,277 11,307 14,776 14,831
9,152 9,570 8,945 14,592 9,664 10,542
3,639 8,078 4,956 863 9,721 11,256
6,233 10,561 6,122 4,108 10,771 14,867
5,518 11,566 5,807 3,545 8,405 8,710
30 1,596 16 -- 422 --
-- -- -- 2,148 -- --
775 4,824 1,232 7,829 4,398 7,119
(43,885) (97,150) (46,528) (173,444) (106,560) (169,740)
<CAPTION>
<S> <C> <C> <C> <C> <C>
131,347 160,158 121,319 138,187 343,434 902,062
(1,958) (1,087) (924) (23) (3,332) (7,594)
<CAPTION>
<S> <C> <C> <C> <C> <C>
129,389 159,071 120,395 138,164 340,102 894,468
<CAPTION>
<S> <C> <C> <C> <C> <C>
401,538 530,147 370,919 1,334,734 1,078,808 3,503,269
<CAPTION>
<S> <C> <C> <C> <C> <C>
58,316 (158,599) 160,739 186,579 20,521 694,925
27,709 (34,411) 18,150 -- (82,049) (402,065)
<CAPTION>
<S> <C> <C> <C> <C> <C>
86,025 (193,010) 178,889 186,579 (61,528) 292,860
(917,121) 153,528 (736,014) (302,716) 15,124 (321,053)
<CAPTION>
<S> <C> <C> <C> <C> <C>
(831,096) (39,482) (557,125) (116,137) (46,404) (28,193)
<CAPTION>
<S> <C> <C> <C> <C> <C>
$ (429,558) $ 490,665 $ (186,206) $ 1,218,597 $ 1,032,404 $ 3,475,076
<CAPTION>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
45
<PAGE>
EVERGREEN KEYSTONE
STATEMENTS OF OPERATIONS
Fiscal Year Ended 1996
[CAPTION]
<TABLE>
<CAPTION>
<S>
<S>
INVESTMENT INCOME
Interest....................................................................................................................
<CAPTION>
<S>
EXPENSES (NOTES 4, 5 AND 6)
Management fee..............................................................................................................
Distribution Plan expenses..................................................................................................
Transfer agent fees.........................................................................................................
Custodian fees..............................................................................................................
Administrative and accounting expenses......................................................................................
Professional fees...........................................................................................................
Printing....................................................................................................................
Registration fees...........................................................................................................
Amortization of organization expenses.......................................................................................
Trustees fees...............................................................................................................
Insurance expense...........................................................................................................
Other expenses..............................................................................................................
Fee waivers and/or reimbursement from Investment Manager....................................................................
<CAPTION>
<S>
Total expenses............................................................................................................
Less: Indirectly paid expenses..............................................................................................
<CAPTION>
<S>
Net expenses..............................................................................................................
<CAPTION>
<S>
NET INVESTMENT INCOME.......................................................................................................
<CAPTION>
<S>
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
CLOSED FUTURES CONTRACTS (NOTE 3)
Realized gain (loss) on:
Investments...............................................................................................................
Closed futures contracts..................................................................................................
<CAPTION>
<S>
Net realized gain on investments and closed futures contracts...............................................................
Net change in unrealized appreciation (depreciation) on investments.........................................................
<CAPTION>
<S>
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND CLOSED FUTURES CONTRACTS.........................................
<CAPTION>
<S>
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................................................................
<CAPTION>
</TABLE>
* Year ended November 30, 1996.
** Six months ended August 31, 1996. During this period, the New Jersey Fund
changed its fiscal year end from February 29 to August 31.
SEE NOTES TO FINANCIAL STATEMENTS.
46
<PAGE>
EVERGREEN KEYSTONE
<TABLE>
<CAPTION>
<S> <C> <C>
(graphic of CA) (graphic of Missouri) (graphic of NJ)
CALIFORNIA MISSOURI NEW JERSEY
FUND* FUND* FUND**
<CAPTION>
<S> <C> <C>
$ 1,721,469 $ 1,516,777 $ 1,158,964
<CAPTION>
<S> <C> <C>
163,334 146,922 107,212
231,970 212,358 50,113
30,208 35,133 12,666
37,531 36,477 28,357
24,104 24,104 9,468
19,457 19,644 6,238
14,451 14,361 9,453
12,092 8,178 --
1,360 750 --
-- -- 3,592
1,013 1,017 5,511
3,785 4,142 1,323
(124,138) (127,049) (154,885)
<CAPTION>
<S> <C> <C>
415,167 376,037 79,048
(4,860) (3,594) --
<CAPTION>
<S> <C> <C>
410,307 372,443 79,048
<CAPTION>
<S> <C> <C>
1,311,162 1,144,334 1,079,916
<CAPTION>
<S> <C> <C>
309,298 508,612 56
(58,763) (100,090) --
<CAPTION>
<S> <C> <C>
250,535 408,522 56
(615,669) (559,081) (955,855)
<CAPTION>
<S> <C> <C>
(365,134) (150,559) (955,799)
<CAPTION>
<S> <C> <C>
$ 946,028 $ 993,775 $ 124,117
<CAPTION>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<PAGE>
EVERGREEN KEYSTONE
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended March 31, 1997
<TABLE>
<S> <C>
OPERATIONS
Net investment income.......................................................................................................
Net realized gain (loss) on investments and closed futures contracts........................................................
Net change in unrealized appreciation (depreciation) on investments.........................................................
Net increase (decrease) in net assets resulting from operations...........................................................
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1)
Net investment income:
Class A...................................................................................................................
Class B...................................................................................................................
Class C...................................................................................................................
Class Y...................................................................................................................
In excess of net investment income:
Class A...................................................................................................................
Class B...................................................................................................................
Class C...................................................................................................................
Total distributions to shareholders.......................................................................................
CAPITAL SHARE TRANSACTIONS (NOTE 2)
Proceeds from shares sold:
Class A...................................................................................................................
Class B...................................................................................................................
Class C...................................................................................................................
Class Y...................................................................................................................
Payment for shares redeemed:
Class A...................................................................................................................
Class B...................................................................................................................
Class C...................................................................................................................
Class Y...................................................................................................................
Net asset value of shares issued in reinvestment of distributions:
Class A...................................................................................................................
Class B...................................................................................................................
Class C...................................................................................................................
Class Y...................................................................................................................
Net increase (decrease) in net assets resulting from capital share transactions.............................................
Total increase (decrease) in net assets...................................................................................
NET ASSETS
Beginning of period.........................................................................................................
END OF PERIOD...............................................................................................................
Undistributed net investment income (accumulated distributions in excess of net investment income)............................
</TABLE>
* Four months ended March 31, 1997. During this period, the California Fund and
the Missouri Fund changed their fiscal year end from November 30 to March 31.
** Seven months ended March 31, 1997. During this period, the New Jersey Fund
changed its fiscal year end from August 31 to March 31.
48
<PAGE>
EVERGREEN KEYSTONE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
(graphic of CA) (graphic of Mass.) (graphic of Missouri) (graphic of NJ) (graphic of NY) (graphic of Penn.)
CALIFORNIA MASSACHUSETTS MISSOURI NEW JERSEY NEW YORK PENNSYLVANIA
FUND* FUND FUND* FUND** FUND FUND
<CAPTION>
<S> <C> <C> <C> <C> <C>
$ 401,538 $ 530,147 $ 370,919 $ 1,334,734 $ 1,078,808 $ 3,503,269
86,025 (193,010) 178,889 186,579 (61,528) 292,860
(917,121) 153,528 (736,014) (302,716) 15,124 (321,053)
<CAPTION>
<S> <C> <C> <C> <C> <C>
(429,558) 490,665 (186,206) 1,218,597 1,032,404 3,475,076
<CAPTION>
<S> <C> <C> <C> <C> <C>
(72,534) (99,998) (43,242) (951,954) (194,146) (1,419,449)
(305,849) (333,403) (308,467) (106,102) (790,549) (1,723,506)
(22,898) (96,745) (18,770) -- (94,113) (359,246)
-- -- -- (282,668) -- --
(6,198) (5,743) (1,048) -- (5,112) --
(26,136) (19,147) (7,475) -- (20,815) --
(1,957) (5,556) (455) -- (2,478) --
<CAPTION>
<S> <C> <C> <C> <C> <C>
(435,572) (560,592) (379,457) (1,340,724) (1,107,213) (3,502,201)
<CAPTION>
<S> <C> <C> <C> <C> <C>
425,634 839,815 296,198 1,664,228 643,405 2,073,195
1,345,990 918,193 754,590 5,322,261 4,923,516 5,968,801
504,053 42,926 39,300 -- 195,183 823,705
-- -- -- 770,248 -- --
(882,895) (609,383) (240,124) (3,122,729) (998,464) (6,962,533)
(1,731,633) (556,450) (2,229,437) (190,302) (3,452,277) (7,472,808)
(141,139) (322,772) (103,404) -- (689,154) (3,919,941)
-- -- -- (434,606) -- --
26,973 53,822 20,672 545,271 111,722 730,217
140,579 214,508 153,879 79,993 500,919 1,006,535
12,654 58,350 13,082 -- 73,559 255,963
-- -- -- 42,501 -- --
<CAPTION>
<S> <C> <C> <C> <C> <C>
(299,784) 639,009 (1,295,244) 4,676,865 1,308,409 (7,496,866)
<CAPTION>
<S> <C> <C> <C> <C> <C>
(1,164,914) 569,082 (1,860,907) 4,554,738 1,233,600 (7,523,991)
28,999,695 11,363,321 25,921,347 44,162,371 23,394,520 76,104,070
<CAPTION>
<S> <C> <C> <C> <C> <C>
$ 27,834,781 $11,932,403 $ 24,060,440 $ 48,717,109 $24,628,120 $68,580,079
<CAPTION>
<S> <C> <C> <C> <C> <C>
$ (104,425) $ (33,200) $ (87,930) $ 9,525 $ (64,926) $ (218,513)
<CAPTION>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<PAGE>
EVERGREEN KEYSTONE
STATEMENTS OF CHANGES IN NET ASSETS
Year ended March 31, 1996
<TABLE>
<S> <C>
OPERATIONS
Net investment income.......................................................................................................
Net realized gain on investments and closed futures contracts...............................................................
Net change in unrealized appreciation (depreciation) on investments.........................................................
Net increase in net assets resulting from operations......................................................................
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1)
Net investment income:
Class A...................................................................................................................
Class B...................................................................................................................
Class C...................................................................................................................
Class Y...................................................................................................................
In excess of net investment income:
Class A...................................................................................................................
Class B...................................................................................................................
Class C...................................................................................................................
Total distributions to shareholders.......................................................................................
CAPITAL SHARE TRANSACTIONS (NOTE 2)
Proceeds from shares sold:
Class A...................................................................................................................
Class B...................................................................................................................
Class C...................................................................................................................
Class Y...................................................................................................................
Payment for shares redeemed:
Class A...................................................................................................................
Class B...................................................................................................................
Class C...................................................................................................................
Class Y...................................................................................................................
Net asset value of shares issued in reinvestment of distributions:
Class A...................................................................................................................
Class B...................................................................................................................
Class C...................................................................................................................
Class Y...................................................................................................................
Net increase (decrease) in net assets resulting from capital share transactions...........................................
Total increase (decrease) in net assets...................................................................................
NET ASSETS
Beginning of period.........................................................................................................
END OF PERIOD...............................................................................................................
Undistributed net investment income (accumulated distributions in excess of net investment income)............................
</TABLE>
* Year ended November 30, 1996.
** Six months ended August 31, 1996 (Year end changed to August 31 from February
29).
50
<PAGE>
EVERGREEN KEYSTONE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
(graphic of CA) (graphic of Mass.) (graphic of Missouri) (graphic of NJ) (graphic of NY) (graphic of Penn.)
CALIFORNIA MASSACHUSETTS MISSOURI NEW JERSEY NEW YORK PENNSYLVANIA
FUND* FUND FUND* FUND** FUND FUND
<CAPTION>
<S> <C> <C> <C> <C> <C>
$ 1,311,162 $ 543,218 $ 1,144,334 $ 1,079,916 $ 936,868 $ 3,676,278
250,535 255,425 408,522 56 325,487 1,291,054
(615,669) (134,154) (559,081) (955,855) 155,265 216,658
<CAPTION>
<S> <C> <C> <C> <C> <C>
946,028 664,489 993,775 124,117 1,417,620 5,183,990
<CAPTION>
<S> <C> <C> <C> <C> <C>
(235,059) (117,886) (180,167) (862,288) (181,786) (1,540,624)
(1,007,294) (342,321) (901,652) (32,289) (676,349) (1,676,905)
(68,809) (103,305) (62,515) -- (104,583) (458,750)
-- -- -- (185,339) -- --
(10,964) (435) (7,679) -- (7,630) (51,793)
(46,983) (1,262) (38,432) -- (28,387) (56,375)
(3,209) (380) (2,665) -- (4,389) (15,423)
<CAPTION>
<S> <C> <C> <C> <C> <C>
(1,372,318) (565,589) (1,193,110) (1,079,916) (1,003,124) (3,799,870)
<CAPTION>
<S> <C> <C> <C> <C> <C>
1,349,960 728,640 1,540,859 1,339,667 1,043,090 1,823,609
5,739,529 1,573,350 3,156,266 2,509,436 6,303,488 9,365,368
371,666 458,371 163,392 -- 749,393 1,526,571
-- -- -- 9,318,727 -- --
(1,165,388) (1,015,238) (3,827,386) (10,244,991) (613,550) (5,114,776)
(5,834,556) (727,777) (2,803,559) (13,260) (1,757,331) (3,838,463)
(394,952) (198,311) (586,879) -- (1,480,195) (1,930,722)
-- -- -- (280,780) -- --
83,004 65,247 119,315 457,685 111,251 862,452
406,441 206,616 448,603 24,017 423,530 1,004,041
37,702 59,663 42,351 -- 80,146 355,643
-- -- -- 41,210 -- --
<CAPTION>
<S> <C> <C> <C> <C> <C>
593,406 1,150,561 (1,747,038) 3,151,711 4,859,822 4,053,723
<CAPTION>
<S> <C> <C> <C> <C> <C>
167,116 1,249,461 (1,946,373) 2,195,912 5,274,318 5,437,843
28,832,579 10,113,860 27,867,720 41,966,459 18,120,202 70,666,227
<CAPTION>
<S> <C> <C> <C> <C> <C>
$ 28,999,695 $11,363,321 $ 25,921,347 $ 44,162,371 $23,394,520 $76,104,070
<CAPTION>
<S> <C> <C> <C> <C> <C>
$ (84,575) $ (2,872) $ (78,953) $ 15,515 $ (37,903) $ (227,211)
<CAPTION>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<PAGE>
EVERGREEN KEYSTONE
STATEMENTS OF CHANGES IN NET ASSETS
For the Periods Indicated
<TABLE>
<S> <C>
OPERATIONS
Net investment income.......................................................................................................
Net realized gain (loss) on investments and closed futures contracts........................................................
Net change in unrealized appreciation (depreciation) on investments.........................................................
Net increase in net assets resulting from operations......................................................................
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1)
Net investment income:
Class A...................................................................................................................
Class B...................................................................................................................
Class C...................................................................................................................
Class Y...................................................................................................................
In excess of net investment income:
Class A...................................................................................................................
Class B...................................................................................................................
Class C...................................................................................................................
Total distributions to shareholders.......................................................................................
CAPITAL SHARE TRANSACTIONS (NOTE 2)
Proceeds from shares sold:
Class A...................................................................................................................
Class B...................................................................................................................
Class C...................................................................................................................
Class Y...................................................................................................................
Payment for shares redeemed:
Class A...................................................................................................................
Class B...................................................................................................................
Class C...................................................................................................................
Class Y...................................................................................................................
Net asset value of shares issued in reinvestment of distributions:
Class A...................................................................................................................
Class B...................................................................................................................
Class C...................................................................................................................
Class Y...................................................................................................................
Net increase (decrease) in net assets resulting from capital share transactions.............................................
Total increase (decrease) in net assets...................................................................................
NET ASSETS
Beginning of period.........................................................................................................
END OF PERIOD...............................................................................................................
Undistributed net investment income (accumulated distributions in excess of net investment income)............................
</TABLE>
* Year ended November 30, 1995.
** Year ended February 29, 1996.
52
<PAGE>
EVERGREEN KEYSTONE
<TABLE>
<CAPTION>
<S> <C> <C>
(graphic of CA) (graphic of Missouri) (graphic of NJ)
CALIFORNIA MISSOURI NEW JERSEY
FUND* FUND* FUND**
<CAPTION>
<S> <C> <C>
$ 970,169 $ 1,018,144 $ 1,964,872
671,239 (405,181) 10,000
1,882,439 3,088,294 1,701,539
<CAPTION>
<S> <C> <C>
3,523,847 3,701,257 3,676,411
<CAPTION>
<S> <C> <C>
(180,675) (153,289) (1,964,372)
(746,674) (791,351) (451)
(47,288) (73,504) --
-- -- (56)
(12,433) (11,167) --
(51,381) (57,652) --
(3,254) (5,355) --
<CAPTION>
<S> <C> <C>
(1,041,705) (1,092,318) (1,964,879)
<CAPTION>
<S> <C> <C>
1,987,577 4,076,405 10,858,775
11,405,882 7,170,581 187,450
1,005,793 931,369 --
-- -- 18,542
(918,227) (3,330,599) (6,620,815)
(2,323,287) (1,245,399) --
(229,742) (414,529) --
-- -- --
45,806 103,984 958,593
307,457 392,566 364
24,916 42,017 --
-- -- 56
<CAPTION>
<S> <C> <C>
11,306,175 7,726,395 5,402,965
<CAPTION>
<S> <C> <C>
13,788,317 10,335,334 7,114,497
15,044,262 17,532,386 34,851,962
<CAPTION>
<S> <C> <C>
$28,832,579 $27,867,720 $41,966,459
<CAPTION>
<S> <C> <C>
$ (27,037) $ (39,999) $ 15,515
<CAPTION>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
53
<PAGE>
EVERGREEN KEYSTONE
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Evergreen Keystone State Tax Free Funds are separate series of Keystone
State Tax Free Fund, Keystone State Tax Free Fund-- Series II and Evergreen Tax
Free Trust all of which are registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as non-diversified, open-end investment companies.
Keystone Massachusetts Tax Free Fund ("Massachusetts Fund"), Keystone New York
Tax Free Fund ("New York Fund") and Keystone Pennsylvania Tax Free Fund
("Pennsylvania Fund") are separate series of Keystone State Tax Free Fund;
Keystone California Tax Free Fund ("California Fund") and Keystone Missouri Tax
Free Fund ("Missouri Fund") are separate series of Keystone State Tax Free
Fund-- Series II and Evergreen New Jersey Tax Free Income Fund ("New Jersey
Fund") is a separate series of Evergreen Tax Free Trust, collectively known as
the "Funds".
Keystone Investment Management Company ("Keystone") is the Investment Adviser
and Manager of each Fund except the New Jersey Fund. Keystone is a subsidiary of
First Union Keystone, Inc. First Union Keystone, Inc. is a wholly-owned
subsidiary of First Union National Bank of North Carolina which in turn is a
wholly-owned subsidiary of First Union Corporation ("First Union"). First Union
is the Investment Adviser for the New Jersey Fund. Each Fund offers several
classes of shares. The investment objective of each Fund is to seek the highest
current possible income exempt from federal income taxes and where applicable,
state income taxes, while preserving capital.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles, which
require management to make estimates and assumptions that affect amounts
reported herein. Although actual results could differ from these estimates, any
such differences are expected to be immaterial to the net assets of each Fund.
A. VALUATION OF SECURITIES
Securities held by each Fund are valued by an independent pricing service. In
determining value for normal institutional-size transactions, the pricing
service uses methods based on market transactions for comparable securities and
various relationships between securities which are generally recognized by
institutional traders. Securities for which valuations are not available from an
independent pricing service (including restricted securities) are valued at fair
value as determined in good faith according to procedures established by the
Boards of Trustees.
Short-term investments with remaining maturities of 60 days or less are carried
at amortized cost, which approximates market value. Short-term securities with
greater than 60 days to maturity are valued at market value.
B. FUTURES CONTRACTS
In order to gain exposure to or protect against changes in security values, each
Fund except the New Jersey Fund, may buy and sell futures contracts.
The initial margin deposited with a broker when entering into a futures
transaction is subsequently adjusted by daily payments or receipts as the value
of the contract changes. Such changes are recorded as unrealized gains or
losses. Realized gains or losses are recognized on closing the contract.
Risks of entering into futures contracts include (i) the possibility of an
illiquid market for the contract, (ii) the possibility that a change in the
value of the contract may not correlate with changes in the value of the
underlying instrument or index, and (iii) the credit risk that the other party
will not fulfill their obligations under the contract. Futures contracts also
involve elements of market risk in excess of the amount reflected in the
statement of assets and liabilities.
C. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes
amortization of discounts and premiums.
D. FEDERAL INCOME TAXES
The Funds have qualified and intend to qualify in the future as a regulated
investment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Funds are relieved of any federal income tax liability by
distributing all of their net taxable investment income and net taxable capital
gains, if any, to their shareholders. The Funds also intend to avoid excise tax
liability by making the required distributions under the Code. Accordingly, no
provision for federal income taxes is required.
E. DISTRIBUTIONS
For each Fund except the New Jersey Fund, distributions from net investment
income are declared and paid monthly. For the New Jersey Fund, distributions
from net investment income are declared daily and paid monthly. Distributions
from net realized capital gains, if any, are paid at least annually.
Distributions to shareholders are recorded at the close of business on the
ex-dividend date.
Income and capital gains distributions to shareholders are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. The significant differences between financial statement
amounts available for distributions and distributions made in accordance with
income tax regulations are primarily due to the differing treatment of market
discount on securities.
F. CLASS ALLOCATIONS
Class A shares are offered at a public offering price which includes a maximum
sales charge of 4.75% payable at the time of purchase.
54
<PAGE>
EVERGREEN KEYSTONE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Class B shares are sold subject to a contingent deferred sales charge that is
payable upon redemption and decreases depending on how long the shares have been
held. Class B shares purchased after January 1, 1997 will automatically convert
to Class A shares after seven years. Class B shares purchased prior to January
1, 1997 retain their existing conversion features.
Class C shares are sold subject to a contingent deferred sales charge payable on
shares redeemed within one year after the month of purchase.
Class Y shares for the New Jersey Fund are available without a front-end sales
charge or contingent deferred sales charge only to investment advisory clients
of First Union and its affiliates, certain institutional investors or Class Y
shareholders of record of certain other funds managed by First Union and its
affiliates as of December 30, 1994.
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the relative
net assets of each class. Currently, class specific expenses are limited to
expenses incurred under the Distribution Plans for each class.
2. CAPITAL SHARE TRANSACTIONS
Each Fund, except the New Jersey Fund, has an unlimited number of shares of
beneficial interest with no par value authorized. The New Jersey Fund has an
unlimited number of shares of beneficial interest with a par value of $0.0001
authorized. Shares of beneficial interest of the Funds are currently divided
into Class A, Class B, Class C or Class Y. Transactions in shares of the Funds
were as follows:
<TABLE>
<CAPTION>
CALIFORNIA FUND MASSACHUSETTS FUND
<S> <C> <C> <C> <C> <C>
FOUR MONTHS
ENDED YEAR ENDED YEAR ENDED
MARCH 31, NOVEMBER 30, MARCH 31,
1997 1996 1995 1997 1996
CLASS A
Shares sold............................................... 44,393 140,002 210,863 90,822 77,233
Shares redeemed........................................... (92,045) (121,799) (99,402) (65,408) (106,698)
Shares issued in reinvestment of dividends and
distributions........................................... 2,798 8,643 4,943 5,823 6,900
Net increase (decrease)................................... (44,854) 26,846 116,404 31,237 (22,565)
CLASS B
Shares sold............................................... 141,390 597,313 1,223,780 100,024 170,546
Shares redeemed........................................... (181,037) (612,458) (254,280) (60,790) (78,313)
Shares issued in reinvestment of dividends and
distributions........................................... 14,653 42,516 33,291 23,389 22,195
Net increase (decrease)................................... (24,994) 27,371 1,002,791 62,623 114,428
CLASS C
Shares sold............................................... 53,270 38,530 107,136 4,630 48,902
Shares redeemed........................................... (14,740) (41,822) (25,172) (35,362) (21,034)
Shares issued in reinvestment of dividends and
distributions........................................... 1,321 3,949 2,687 6,372 6,401
Net increase (decrease)................................... 39,851 657 84,651 (24,360) 34,269
</TABLE>
55
<PAGE>
EVERGREEN KEYSTONE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
MISSOURI FUND
FOUR MONTHS
ENDED YEAR ENDED
MARCH 31, NOVEMBER 30,
1997 1996 1995
<S> <C> <C> <C>
CLASS A
Shares sold.................................................................. 30,205 156,363 429,776
Shares redeemed.............................................................. (24,613) (392,880) (362,420)
Shares issued in reinvestment of dividends and distributions................. 2,110 12,216 11,139
Net increase (decrease)...................................................... 7,702 (224,301) 78,495
CLASS B
Shares sold.................................................................. 78,288 330,193 769,123
Shares redeemed.............................................................. (231,593) (292,558) (134,192)
Shares issued in reinvestment of dividends and distributions................. 15,900 46,792 42,162
Net increase (decrease)...................................................... (137,405) 84,427 677,093
CLASS C
Shares sold.................................................................. 4,028 17,038 101,419
Shares redeemed.............................................................. (10,736) (61,550) (44,088)
Shares issued in reinvestment of dividends and distributions................. 1,352 4,411 4,503
Net increase (decrease)...................................................... (5,356) (40,101) 61,834
</TABLE>
NEW JERSEY FUND
<TABLE>
<CAPTION>
SEVEN MONTHS SIX MONTHS
ENDED ENDED YEAR ENDED
MARCH 31, AUGUST 31, FEBRUARY 29,
1997 1996 1996*
<S> <C> <C> <C>
CLASS A
Shares sold.................................................................. 152,942 124,249 10,858,775
Shares redeemed.............................................................. (287,177) (949,514) (6,620,815)
Shares issued in reinvestment of dividends and distributions................. 50,115 42,586 958,593
Net increase (decrease)...................................................... (84,120) (782,679) 5,196,553
CLASS B
Shares sold.................................................................. 488,639 234,035 187,450
Shares redeemed.............................................................. (17,415) (1,239) --
Shares issued in reinvestment of dividends and distributions................. 7,360 2,234 364
Net increase................................................................. 478,584 235,030 187,814
CLASS Y
Shares sold.................................................................. 70,718 864,470 18,542
Shares redeemed.............................................................. (40,043) (26,045) --
Shares issued in reinvestment of dividends and distributions................. 3,909 3,838 56
Net increase................................................................. 34,584 842,263 18,598
</TABLE>
* For Class B shares, the Fund share transaction is for the period January 30,
1996 (commencement of operations) through February 29, 1996. For Class Y
shares, the Fund share transaction is for the period February 8, 1996
(commencement of operations) through February 29, 1996.
56
<PAGE>
EVERGREEN KEYSTONE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
NEW YORK FUND PENNSYLVANIA FUND
<S> <C> <C> <C> <C> <C>
YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31,
<CAPTION>
1997 1996 1997 1996
<S> <C> <C> <C> <C> <C>
CLASS A
Shares sold....................................................... 66,697 107,459 185,067 162,995
Shares redeemed................................................... (103,151) (63,070) (622,861) (455,676)
Shares issued in reinvestment of dividends and distributions...... 11,528 11,515 65,422 76,584
Net increase (decrease)........................................... (24,926) 55,904 (372,372) (216,097)
CLASS B
Shares sold....................................................... 514,292 658,066 542,771 844,393
Shares redeemed................................................... (359,121) (182,936) (677,087) (343,491)
Shares issued in reinvestment of dividends and distributions...... 52,129 44,023 91,329 90,532
Net increase (decrease)........................................... 207,300 519,153 (42,987) 591,434
CLASS C
Shares sold....................................................... 20,357 77,987 75,398 136,525
Shares redeemed................................................... (71,587) (155,157) (356,046) (173,811)
Shares issued in reinvestment of dividends and distributions...... 7,661 8,359 23,192 31,980
Net decrease...................................................... (43,569) (68,811) (257,456) (5,306)
</TABLE>
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the year ended March 31, 1997:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
<S> <C> <C>
California Fund*.......................................................... $10,880,950 $28,020,782
Massachusetts Fund........................................................ 13,094,901 12,452,429
Missouri Fund*............................................................ 3,117,436 4,050,362
New Jersey Fund**......................................................... 12,549,187 6,464,045
New York Fund............................................................. 16,479,230 14,940,310
Pennsylvania Fund......................................................... 60,521,692 68,596,654
</TABLE>
* For the four months ended March 31, 1997.
** For the seven months ended March 31, 1997.
As of March 31, 1997, the Funds had capital loss carryovers for federal income
tax purposes as follows:
<TABLE>
<CAPTION>
CAPITAL
LOSS
CARRYOVER EXPIRES 2002 EXPIRES 2003 EXPIRES 2004 EXPIRES 2005
<S> <C> <C> <C> <C> <C>
California Fund..................................... $ 87,000 $ 87,000 $ -- $ -- $ --
Massachusetts Fund.................................. 310,000 117,000 -- -- 193,000
Missouri Fund....................................... 106,000 -- 106,000 -- --
New Jersey Fund..................................... 215,000 -- 80,000 135,000 --
New York Fund....................................... 139,000 1,000 70,000 -- 68,000
Pennsylvania Fund................................... 2,039,000 1,248,000 791,000 -- --
</TABLE>
4. DISTRIBUTION PLANS
Each Fund bears some of the costs of selling its shares under Distribution Plans
adopted for its Class A, B and C shares pursuant to Rule 12b-1 under the 1940
Act. Under the Distribution Plans, each Fund pays its principal underwriter
amounts which are calculated and paid monthly.
On December 11, 1996, the California Fund, the Massachusetts Fund, the Missouri
Fund, the New York Fund and the Pennsylvania Fund entered into a principal
underwriting agreement with Evergreen Keystone Distributor, Inc. (formerly,
Evergreen Funds Distributor, Inc.) ("EKD"), a wholly-owned subsidiary of The
BISYS Group Inc. ("BISYS"). Prior to December 11, 1996, Evergreen Keystone
Investment Services, Inc. (formerly, Keystone Investment Distributors Company)
("EKIS"), a wholly-owned subsidiary of Keystone, served as the Funds' principal
underwriter. EKD also serves as the principal underwriter for the New Jersey
Fund
57
<PAGE>
EVERGREEN KEYSTONE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the California Fund, the Massachusetts Fund, the Missouri Fund, the New York
Fund and the Pennsylvania Fund, the Class A Distribution Plan provides for
expenditures, which are currently limited to 0.15% annually of the average daily
net assets of the Class A shares, to pay expenses related to the distribution of
Class A shares. For the New Jersey Fund Class A Distribution Plan, expenditures
are limited to 0.25% annually of the average daily net assets of Class A shares.
Pursuant to the California Fund, the Massachusetts Fund, the Missouri Fund, the
New York Fund and the Pennsylvania Fund Class B and Class C Distribution Plans,
each Fund pays a distribution fee which may not exceed 0.90% annually of the
average daily net assets of Class B and Class C shares, respectively. Of that
amount, 0.75% is used to pay distribution expenses and 0.15% is used to pay
service fees. The New Jersey Fund Class B shares pay a fee at an annual rate of
0.75% of Class B average daily net assets.
During the period or year ended March 31, 1997, amounts paid to EKD and/or EKIS
pursuant to each Fund's Class A, Class B and Class C Distribution Plans were as
follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
California Fund............................... $ 2,121 $ 66,054 $ 4,972
Massachusetts Fund............................ 2,689 67,185 19,460
Missouri Fund................................. 1,259 64,269 3,949
New Jersey Fund............................... 47,320 25,809 N/A
New York Fund................................. 5,586 166,682 19,837
Pennsylvania Fund............................. 39,570 343,818 71,610
</TABLE>
Of the amounts paid to EKD for the New Jersey Fund, $32,121 was waived for the
period ended March 31, 1997.
Each of the Distribution Plans may be terminated at any time by vote of the
Independent Trustees or by vote of a majority of the outstanding voting shares
of the respective class. However, after the termination of any Distribution
Plan, and subject to the discretion of the Independent Trustees, payments to
EKIS and/or EKD may continue as compensation for services which had been earned
while the Distribution Plan was in effect.
EKD intends, but is not obligated, to continue to pay distribution costs that
exceed the current annual payments from the Fund. EKD intends to seek full
payment of such distribution costs from the Fund at such time in the future as,
and to the extent that, payment thereof by the Class B or Class C shares would
be within permitted limits.
At March 31, 1997, total unpaid distribution costs were as follows:
<TABLE>
<CAPTION>
CLASS B CLASS C
<S> <C> <C>
California Fund....................................... $1,556,143 $130,741
Massachusetts Fund.................................... 446,206 140,981
Missouri Fund......................................... 1,287,330 137,003
New York Fund......................................... 1,184,099 228,676
Pennsylvania Fund..................................... 2,464,474 831,646
</TABLE>
EKD has advised the Funds that it has retained the following amounts from
front-end sales charges resulting from the sales of Class A shares during the
period or year ended March 31, 1997;
<TABLE>
<S> <C>
California Fund...................................................... $1,760
Massachusetts Fund................................................... 2,309
Missouri Fund........................................................ 1,481
New Jersey Fund...................................................... 5,646
New York Fund........................................................ 1,816
Pennsylvania Fund.................................................... 2,496
</TABLE>
Contingent deferred sales charges paid by redeeming shareholders are paid to EKD
or its predecessor.
5. INVESTMENT MANAGEMENT AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
Under the terms of an Investment Advisory and Management Agreement between
Keystone and the California Fund, the Massachusetts Fund, the Missouri Fund, the
New York Fund and the Pennsylvania Fund, Keystone provides investment management
and administrative services to each Fund. In return, Keystone is paid a
management fee that is computed daily and paid monthly. The management fee is
calculated by applying percentage rates, which start at 0.55% and decline to
0.25% per annum as net assets increase, to the average daily net asset value of
each Fund. First Union serves as the Investment Adviser to the New Jersey Fund
and is paid a management fee that is computed daily and paid monthly. The fee is
calculated by applying percentage rates, which start at 0.50% and decline to
0.35% per annum as net assets increase, to the average daily net asset value of
the New Jersey Fund.
For the California Fund, the Massachusetts Fund, the Missouri Fund, the New York
Fund and the Pennsylvania Fund, Keystone has voluntarily limited the expenses,
excluding indirectly paid expenses, of Class A shares to 0.75% of their average
daily net assets and has limited the expenses,
58
<PAGE>
EVERGREEN KEYSTONE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
excluding indirectly paid expenses, of Class B and C to 1.50% of the average
daily net assets of each respective class. For the period or year ended March
31, 1997, Keystone or First Union waived its fee and/or reimbursed the Funds as
follows:
<TABLE>
<CAPTION>
FEES EXPENSES
WAIVED REIMBURSED
<S> <C> <C>
California Fund.............................................................. $ 43,885 --
Massachusetts Fund........................................................... 63,584 $ 33,566
Missouri Fund................................................................ 46,447 81
New Jersey Fund.............................................................. 135,196 --
New York Fund................................................................ 106,560 --
Pennsylvania Fund............................................................ 169,740 --
</TABLE>
Evergreen Asset Management Corp. ("Evergreen Asset"), a wholly-owned subsidiary
of First Union, was the administrator for the New Jersey Fund. Effective March
11, 1997, Evergreen Keystone Investment Services, a subsidiary of First Union,
began providing the administrative services to the New Jersey Fund that were
formerly provided by Evergreen Asset. Furman Selz LLC ("Furman Selz") was the
New Jersey Fund's sub-administrator through December 31, 1996. Effective January
1, 1997, BISYS acquired Furman Selz mutual fund and accordingly BISYS became
sub-administrator. The administrator and sub-administrator for New Jersey is
entitled to an annual fee based on the average daily net assets of the funds
administered by Evergreen Asset or Evergreen Keystone Investment Services for
which First Union or its investment advisory subsidiaries is also the investment
advisors. The administration fee is calculated by applying percentage rates,
which start at 0.05% and decline to 0.01% per annum as net assets increase, to
the average daily net asset value of the Fund. The sub-administration fee is
calculated by applying percentage rates, which start at 0.01% and decline to
0.004% per annum as net assets increase, to the average daily net asset value of
the Fund. Evergreen Asset waived $6,127 of its administration fee for the period
ended March 31, 1997.
During the period or year ended March 31, 1997, the following Funds paid or
accrued to Keystone for certain accounting services as follows:
<TABLE>
<S> <C>
California Fund............................................................................. $ 3,338
Massachusetts Fund.......................................................................... 17,384
Missouri Fund............................................................................... 3,277
New Jersey Fund............................................................................. 11,307
New York Fund............................................................................... 14,776
Pennsylvania Fund........................................................................... 14,831
</TABLE>
Evergreen Keystone Service Company ("EKSC") (formerly, Keystone Investor
Resource Center, Inc.), a wholly-owned subsidiary of Keystone, serves as the
transfer and dividend disbursing agent for the California Fund, the
Massachusetts Fund, the Missouri Fund, the New York Fund and the Pennsylvania
Fund.
State Street Bank and Trust Company ("State Street") serves as the transfer
agent, dividend disbursing agent and shareholder servicing agent for the New
Jersey Fund. For certain accounts in the New Jersey Fund, First Union has been
sub-contracted by State Street to maintain shareholder sub-account records, take
fund purchase and redemption orders and answer inquiries. For each account,
First Union is entitled to a monthly fee which totaled $213 for the period ended
March 31, 1997.
Officers of the Funds and affiliated Trustees receive no compensation directly
from the Funds. Currently the Independent Trustees of the Funds, except New
Jersey Fund, receive no compensation for their services.
6. EXPENSE OFFSET ARRANGEMENT
The Funds have entered into an expense offset arrangement with their custodian.
The assets deposited with the custodian under this expense offset arrangement
could have been invested in income-producing assets. The custody fees incurred,
credits received and net custody expenses for the Funds are as follows for the
year ended March 31, 1997:
<TABLE>
<CAPTION>
CUSTODY CREDIT NET
FEES RECEIVED FEE
<S> <C> <C> <C>
California Fund*...................................................... $11,380 $1,958 $ 9,422
Massachusetts Fund.................................................... 25,849 1,087 24,762
Missouri Fund*........................................................ 9,726 924 8,802
New Jersey Fund**..................................................... 33,707 23 33,684
New York Fund......................................................... 33,033 3,332 29,701
Pennsylvania Fund..................................................... 58,687 7,594 51,093
</TABLE>
* For the four months ended March 31, 1997.
** For the seven months ended March 31, 1997.
59
<PAGE>
EVERGREEN KEYSTONE
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. DEFERRED TRUSTEE'S FEES
Each Trustee of the New Jersey Fund may defer any or all compensation related to
performance of duties as a Trustee of the Fund. Each Trustees' deferred balances
are allocated to deferral accounts which are included in the Fund's accrued
expenses. Any gains or losses incurred in the deferral accounts are reported in
the Trustees' fees and expenses. Trustees will be paid either in one lump sum or
in quarterly installments for up to ten years at their election, not earlier
than either the year in which the Trustee ceases to be a member of the Board of
Trustees or January 1, 2000. As of March 31, 1997, Trustees of the New Jersey
Fund had deferred $3,450 of their fees.
8. FINANCING AGREEMENT
A financing agreement was in place with all of the Evergreen Funds ("Evergreen")
and State Street. Under this agreement, State Street provided an unsecured line
of credit facility, in the aggregate amount of $100 million ($50 million
committed and $50 million uncommitted), to be accessed by Evergreen for
temporary or emergency purposes only and is subject to each participating Fund's
borrowing restrictions. Effective October 31, 1996, a new financing agreement
was put in place with Evergreen and State Street, Societe Generale and ABN AMRO
Bank N.V. (collectively, the "Banks"). Under this agreement, the Banks provide
an unsecured credit facility in the aggregate amount of $225 million ($112.5
million committed and $112.5 million uncommitted) allocated evenly between the
Banks. Borrowings under the facilities bore interest at .75% per annum above the
Federal Funds rate. A commitment fee of .10% per annum was incurred on the
unused portion of the committed facility which was allocated to all
participating funds. State Street acts as agent for the Banks, and as agent is
entitled to a fee of $15,000 which is allocated to all of the Evergreen Funds.
During the period ended March 31, 1997, the New Jersey Fund had no borrowings
outstanding.
9. CONCENTRATION OF CREDIT RISK
The Funds invest a substantial portion of their assets in issuers located in a
single state, therefore, they may be more affected by economic and political
developments in a specific state or region than would be a comparable general
tax-exempt mutual fund.
10. SUBSEQUENT EVENT
Effective May 5, 1997, EKSC became the transfer and dividend disbursing agent
for the New Jersey Fund.
60
<PAGE>
EVERGREEN KEYSTONE
INDEPENDENT AUDITORS' REPORT
The Trustees and Shareholders
Keystone State Tax Free Fund-- Series II
Keystone State Tax Free Fund
Evergreen Tax Free Trust
We have audited the accompanying statements of assets and liabilities, including
the statements of investments of the Evergreen Keystone State Tax Free Funds
listed below as of March 31, 1997, and the related statements of operations,
statements of changes in net assets, and financial highlights for each of the
years or periods presented below:
KEYSTONE CALIFORNIA TAX FREE FUND AND KEYSTONE MISSOURI TAX FREE FUND (BOTH
PORTFOLIOS CONSTITUTE KEYSTONE STATE TAX FREE FUND-- SERIES II)-- statements
of operations for the four months ended March 31, 1997 and for the year
ended November 30, 1996, statements of changes in net assets for the four
months ended March 31, 1997 and for each of the years in the two-year period
ended November 30, 1996, and financial highlights for the four months ended
March 31, 1997, each of the years in the two-year period ended November 30,
1996 and the period from February 1, 1994 (commencement of operations) to
November 30, 1994.
KEYSTONE MASSACHUSETTS TAX FREE FUND, KEYSTONE NEW YORK TAX FREE FUND AND
KEYSTONE PENNSYLVANIA TAX FREE FUND (EACH ONE OF THE PORTFOLIOS CONSTITUTING
KEYSTONE STATE TAX FREE FUND)-- statements of operations for the year ended
March 31, 1997, statements of changes in net assets for each of the years in
the two-year period ended March 31, 1997, and financial highlights for each
of the years in the three-year period ended March 31, 1997 and the period
from February 4, 1994 (commencement of operations) to March 31, 1994 for
Keystone Massachusetts Tax Free Fund and Keystone New York Tax Free Fund and
financial highlights for each of the years in the six-year period ended
March 31, 1997 and the period from December 27, 1990 (commencement of
operations) to March 31, 1991 for Keystone Pennsylvania Tax Free Fund.
EVERGREEN NEW JERSEY TAX FREE INCOME FUND (ONE OF THE PORTFOLIOS
CONSTITUTING EVERGREEN TAX FREE TRUST)-- statement of operations for the
seven months ended March 31, 1997 and the six months ended August 31, 1996,
statements of changes in net assets for the seven months ended March 31,
1997, the six months ended August 31, 1996 and the year ended February 29,
1996, and the financial highlights for the seven months ended March 31,
1997, the six months ended August 31, 1996 and each of the years in the
three-year period ended February 29, 1996. The financial highlights for the
year ended February 28, 1993 and the period from July 16, 1991 (commencement
of operations) to February 29, 1992 were audited by other auditors whose
report expressed an unqualified opinion thereon.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Keystone California Tax Free Fund, Keystone Massachusetts Tax Free Fund,
Keystone Missouri Tax Free Fund, Evergreen New Jersey Tax Free Income Fund,
Keystone New York Tax Free Fund and Keystone Pennsylvania Tax Free Fund as of
March 31, 1997, the results of their operations for years or periods then ended,
the changes in their net assets for each of the years or periods in the two-year
period then ended, and the financial highlights for each of the years or periods
specified in the first paragraph above in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
May 2, 1997
61
<PAGE>
EVERGREEN KEYSTONE
ADDITIONAL INFORMATION (Unaudited)
Shareholders of each Fund considered and acted upon the proposals listed below
at a special meeting of shareholders held Monday December 9, 1996. In addition,
below each proposal are the results of that vote.
1. To elect the following Trustees:
<TABLE>
<CAPTION>
PENNSYLVANIA
CALIFORNIA MASSACHUSETTS MISSOURI NEW YORK TAX FREE
TAX FREE FUND TAX FREE FUND TAX FREE FUND TAX FREE FUND FUND
AFFIRMATIVE WITHHELD AFFIRMATIVE WITHHELD AFFIRMATIVE WITHHELD AFFIRMATIVE WITHHELD AFFIRMATIVE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Laurence B. Ashkin........ 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,835,024
Frederick Amling.......... 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,836,707
Charles A. Austin III..... 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,837,735
Foster Bam................ 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,835,024
George S. Bissell......... 2,557,375 37,562 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,836,707
Edwin D. Campbell......... 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,836,707
Charles F. Chapin......... 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,835,827
K. Dun Gifford............ 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,837,735
James S. Howell........... 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,836,707
Leroy Keith, Jr........... 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,837,735
F. Ray Keyser............. 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,836,707
Gerald M. McDonnell....... 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,837,735
Thomas L. McVerry......... 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,837,735
William Walt Pettit....... 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,833,956
David M. Richardson....... 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,837,735
Russell A. Salton, III
M.D..................... 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,837,735
Michael S. Scofield....... 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,837,735
Richard J. Shima.......... 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,837,735
Andrew J. Simons.......... 2,557,445 37,492 825,045 1,273 2,220,726 75,222 1,848,907 44,308 4,837,735
<CAPTION>
WITHHELD
<S> <C>
Laurence B. Ashkin........ 93,189
Frederick Amling.......... 91,507
Charles A. Austin III..... 90,478
Foster Bam................ 93,189
George S. Bissell......... 91,507
Edwin D. Campbell......... 91,507
Charles F. Chapin......... 92,387
K. Dun Gifford............ 90,478
James S. Howell........... 91,507
Leroy Keith, Jr........... 90,478
F. Ray Keyser............. 91,507
Gerald M. McDonnell....... 90,478
Thomas L. McVerry......... 90,478
William Walt Pettit....... 94,257
David M. Richardson....... 90,478
Russell A. Salton, III
M.D..................... 90,478
Michael S. Scofield....... 90,478
Richard J. Shima.......... 90,478
Andrew J. Simons.......... 90,478
</TABLE>
2. To approve an Investment Advisory and Management Agreement between the Funds
and Keystone Investment Management Company:
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
<S> <C> <C> <C>
California Tax Free Fund.................................................. 2,511,012 20,293 63,621
Massachusetts Tax Free Fund............................................... 810,222 2,323 13,773
Missouri Tax Free Fund.................................................... 2,170,461 67,959 57,527
New York Tax Free Fund.................................................... 1,769,644 11,388 112,183
Pennsylvania Tax Free Fund................................................ 4,772,296 51,463 104,453
</TABLE>
FEDERAL INCOME TAX STATUS OF DIVIDENDS (UNAUDITED)
100% of the dividends distributed by the California, Massachusetts, Missouri,
New Jersey, New York and Pennsylvania Fund for the fiscal year ended March 31,
1997 are exempt from federal income tax, other than alternative minimum tax.
62
<PAGE>
Evergreen Keystone
(This Page Left Blank Intentionally)
<PAGE>
Evergreen Keystone
(This Page Left Blank Intentionally)
<PAGE>
This report was prepared primarily for the information of fund shareholders.
It is authorized for distribution if preceded or accompanied by the
fund's current prospectus. The prospectus contains important information
about the fund, including fees and expenses. Read it carefully before
you invest or send money. For a free prospectus on other Evergreen Keystone
Funds, contact your financial adviser or call Evergreen Keystone.
NOT May lose value
FDIC No bank guarantee
INSURED
Evergreen Keystone Distributor, Inc.
Evergreen Keystone(SM) is a Service Mark of Evergreen Keystone Investment
Services, Inc. Copyright 1997
XXXXXX
49564 5/97
