<PAGE>
PAGE 1
- ---------------------------------------------
EVERGREEN FLORIDA TAX FREE FUND (FORMERLY KEYSTONE FLORIDA TAX FREE FUND)
SEEKS GENEROUS TAX-FREE INCOME FROM HIGH QUALITY MUNICIPAL BONDS
Dear Shareholders:
(Photo of
William M. Ennis)
WILLIAM M. ENNIS
MANAGING DIRECTOR
Healthy economic growth and low inflation paved the way for
lower interest rates over the six months ending September 30,
1997. The yield on the benchmark 30-year U.S. Treasury fell
from 7.10% on March 31, 1997 to 6.40% at the close of the six
month fiscal period on September 30, 1997. Though not without
short-term periods of investor concerns and price fluctuations,
the environment of the past six months stood in stark contrast
to that of the year's first quarter. As we closed the last
reporting period, the Federal Reserve Board had just raised
interest rates in a preemptive effort to thwart inflation.
The economy's lengthy expansion has continued, and through this
fiscal period ending September 30, 1997, has been accompanied
by only minimal price pressures on municipal bonds. However,
the market in general showed more volatility in late October
after the end of this reporting period. Despite this
volatility, we believe the underlying strength of the U.S.
economy remains intact.
Over the past six months of the reporting period, the more sanguine atmosphere
established a presence in the fixed income market. As investors required less of
an "inflation premium", interest rates fell. The benefit to municipal investors
was twofold. In addition to the price appreciation that resulted from declining
interest rates, the quality of municipal credits improved as stronger economic
growth generated higher tax revenues. Further, this increased cash flow gave
many state and local governments less of a need to issue bonds. For many states,
the dynamics of supply and demand changed. Demand remained strong as investors
sought improving credit opportunities; but supply was often reduced, which
pushed bond prices higher.
In addition to providing tax-advantaged income, municipal bonds offered an
attractive total return during this time. The average single-state municipal
bond fund generated a total return of 5.97% over the six-month period ending
September 30, 1997, according to Lipper Analytical Services, an independent
monitor of mutual fund performance. Currently paying approximately 88% of the
yield of taxable bonds, we continue to believe that municipal bonds hold a
valuable position in a well balanced portfolio.
As we head into the final months of 1997, we look for a continuation of many
of the trends we experienced over the past six months covered in this report. We
expect economic growth to remain moderate to strong; and while we are watchful
for signs of a resurgence of inflation, we believe price pressures will stay
contained. Many investors express confidence that improvements in technology and
productivity have created a new relationship between economic activity and
inflation, and that the development of new markets and efficiencies will enable
the economy to continue on this course for an extended period of time.
In the next few weeks and months, you will begin to see some changes which we
believe will enhance the investment experience of our shareholders. One change
which was effective in November 1997, was the renaming of the Evergreen Keystone
fund complex to Evergreen Funds. All of the Keystone America Funds were changed
to Evergreen Funds, which resulted in your fund being renamed to Evergreen
Florida Tax Free Fund.
-- CONTINUED--
<PAGE>
PAGE 2
- ---------------------------------------------
EVERGREEN FLORIDA TAX FREE FUND
In late October, we mailed a proxy statement explaining a number of proposed
changes. We have made these proposals after very serious consideration. We
encourage you to consider them carefully when you receive the proxy statement.
We appreciate your on-going support of Evergreen Funds and welcome any
suggestions or comments you may have. If you have any questions about these or
other issues affecting your investments, please consult your financial adviser
or call Evergreen Funds at 1-800-343-2898.
Sincerely,
/s/ William M. Ennis
William M. Ennis
MANAGING DIRECTOR
<PAGE>
PAGE 3
- ---------------------------------------------
A Discussion With
Your Fund Manager
(Photo of George J. Kimball)
YOUR FUND IS MANAGED BY GEORGE J. KIMBALL, A VICE PRESIDENT AND PORTFOLIO
MANAGER WITH KEYSTONE INVESTMENT MANAGEMENT COMPANY. AN INVESTMENT
PROFESSIONAL WITH 11 YEARS' EXPERIENCE, MR. 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.
Q HOW DID THE FUND PERFORM DURING THE PAST PERIOD?
A Class A shares returned 5.75% for the six month period, unadjusted for sales
charge.
Class B shares returned 5.29% for the six month period, unadjusted for sales
charge.
Class C shares returned 5.28% for the six month period, unadjusted for sales
charge.
The Lehman Brothers Municipal Bond Index, a widely recognized benchmark of
municipal bond performance returned 6.56% for the six month period and 9.02% for
the twelve month period, also ended September 30, 1997.
We were pleased with your Fund's performance during this period. In addition
to maintaining its orientation towards quality and income, we invested in bonds
with 20-25 year maturities. These bonds, because of their longer maturities,
generated attractive price appreciation when interest rates declined.
Q WHAT WAS THE INVESTMENT ENVIRONMENT LIKE FOR FLORIDA MUNICIPAL BONDS OVER THE
PAST SIX MONTHS?
A The environment was favorable. At the national level, low inflation continued
to accompany moderate-to-strong economic growth. Historically, this type of
growth has caused investors to push interest rates higher in anticipation of
future inflation; however, investors have witnessed the economy's on-going
ability to expand with few inflationary pressures. The acknowledgment of this
potentially new relationship between economic growth and inflation has created a
positive atmosphere in the fixed income market. Interest rates closed the period
lower than where they stood on March 31, 1997. They moved within a clearly
defined trading range, despite some short-term fluctuations.
In Florida, a solid economy and sound fiscal situation benefited the state's
municipal bond investors. Now the fourth largest state in terms of population,
Florida's employment growth continues to outpace that of the nation; and its
economy has become increasingly diverse. Services, trade and financial services
have replaced tourism and agriculture as the dominant industries. From a fiscal
standpoint, tax revenues flowed in ahead of projections and the state has
maintained a moderate debt burden. Municipal bond issuance rose by over 20% to
finance the state's growing infrastructure, but was met with steady demand
because of the positive investment climate and favorable demographics.
Q WHAT STRATEGIES DID YOU USE IN MANAGING THE FUND?
A We continued to emphasize quality and income, believing that higher-rated
bonds offered better relative value. During the period, we upgraded the
portfolio as the yields of lower-rated bonds fell relative to those of
higher-rated bonds. We thought the lower yields did not compensate investors for
the additional credit risk of a lower-rated security. Specifically, we increased
the Fund's
<PAGE>
PAGE 4
- ---------------------------------------------
EVERGREEN FLORIDA TAX FREE FUND
AAA-rated holdings to 57.9% from 42.5% and decreased BBB-rated holdings to 7.4%
from 21.0%. To increase income, we invested in bonds with higher coupons and
selectively increased the Fund's positions in higher-yielding sectors, such as
health and hospitals. We eliminated one higher-yielding position, however, when
negative credit developments began to limit the bond's price performance.
We sought to improve total return by investing in bonds with 20-25 year
maturities. This strategy rewarded the portfolio when interest rates fell, since
bonds with longer maturities outperform those with shorter maturities in a
declining interest rate environment. Also, bonds in this maturity range
typically carried higher coupons, which generated more income for the portfolio.
As of September 30, 1997, the Fund's average maturity was approximately 17.5
years, modestly longer than its competitive group.
Q WHAT IS YOUR OUTLOOK OVER THE NEXT SIX MONTHS?
A We expect a continuation of many of the same trends that have existed over
the past six months. Nationally, economic growth remains moderate to strong, a
trend which we believe should have a positive influence on the fiscal soundness
of municipalities. In Florida, we anticipate another increase in supply to
finance the state's growth, but think it will be met with solid demand. We also
believe inflation should stay well contained; although we are cautious that
interest rates could experience short periods of fluctuations, due to
anticipated price pressures.
With this backdrop in mind, we intend to maintain your Fund's orientation
toward quality and income. The increased issuance of Florida municipal bonds has
given investors a better selection of securities and in our opinion, made their
yields more attractive relative to other bonds. From a structural standpoint, we
expect to reduce portfolio positions in bonds with 5-8 year maturities and
reinvest proceeds in the 10-12 year maturity range. We believe these strategies
will enhance total return and provide shareholders with a generous stream of
tax-exempt income.
Growth of an Investment
Growth of an investment in
Evergreen Florida Tax Free Fund--Class A
In Thousands
Average Annual Total Returns
1 Year 5 Year Life of Class Total Value: $15,554
Class A 2.45% 4.99% 6.75%
Class B 1.69% -- 4.65%
Class C 5.68% -- 4.99%
(A graph appears here with the following plot points.)
<TABLE>
<CAPTION>
12/90 3/91 3/92 3/93 3/94 3/95 3/96 3/97 9/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Investment 9,525 9,687 9,935 10,420 9,801 9,839 10,097 9,906 10,230
Dividend Reivestment 9,525 9,860 10,880 12,220 12,344 13,136 14,211 14,708 15,554
</TABLE>
A $10,000 investment in Evergreen Florida Tax Free Fund--Class A made at the
Fund's inception on December 28, 1990 with all distributions reinvested was
worth $15,554 on September 30, 1997. Past performance is no guarantee of
future results. The performance of each class may vary based on differences
in loads and fees paid by the shareholders investing in the different classes.
<PAGE>
PAGE 5
- ---------------------------------------------
SCHEDULE OF INVESTMENTS-- SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------------------------------------------------------
LONG-TERM INVESTMENTS-- 96.1%
FLORIDA-- 82.4%
$2,000,000 Brevard County, Florida,
Health Facilities Authority
Revenue, Refunding, Wuesthoff
Memorial Hospital
7.20%, 4/1/13, (MBIA)........... $ 2,274,820
190,000 Broward County, Florida,
Collateralized Home Mortgage,
Series B
7.13%, 3/1/17................... 201,349
1,405,000 Broward County, Florida,
Resource Recovery Revenue,
South Project
7.95%, 12/1/08.................. 1,531,506
1,000,000 Charlotte County, Florida,
Utility Revenue
6.75%, 10/1/13, (FGIC).......... 1,145,460
1,000,000 City of Tarpon Springs Health
Facilities Authority,
Florida, Hospital Refunding,
Helen Ellis Hospital
7.63%, 5/1/21................... 1,079,490
1,000,000 Dade County, Florida,
Aviation Revenue, Miami
International Airport, Series A
5.38%, 10/1/10.................. 1,017,790
2,000,000 Dade County, Florida,
Educational Facilities
Authority Revenue, St. Thomas
University
6.00%, 1/1/10................... 2,098,000
185,000 Dade County, Florida, Housing
Finance Agency, Single Family
Mortgage, Series E
7.00%, 3/1/24................... 195,756
40,000 Dade County, Florida, School
District, General Obligation
7.38%, 7/1/08................... 43,010
1,300,000 Dade County, Florida, Special
Obligation, Series B
5.00%, 10/1/35.................. 1,216,774
80,000 Duval County, Florida, Single
Family Mortgage, Refunding
7.30%, 7/1/11, (FGIC)........... 85,265
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------------------------------------------------------
LONG-TERM INVESTMENTS-- CONTINUED
FLORIDA-- CONTINUED
$ 140,000 Florida Housing Finance
Agency, Home Ownership
Mortgage
7.50%, 9/1/14................... $ 149,311
2,000,000 Florida Housing Finance
Agency, Multi-Family Housing,
Series C
6.20%, 8/1/16................... 2,106,220
1,000,000 Florida State Board of
Regents University, Systems
Improvement Revenue, Series A
5.00%, 7/1/14................... 977,690
1,000,000 Florida State Transportation,
Jacksonville Transportation
Authority
9.00%, 1/1/00................... 1,032,450
Gainesville, Florida,
Utilities System Revenue,
Series B:
3,000,000 7.50%, 10/1/08.................... 3,699,390
3,000,000 7.50%, 10/1/09.................... 3,715,920
1,000,000 Halifax Hospital Medical
Center, Florida, Hospital
Revenue, Series A
5.20%, 10/1/13, (MBIA).......... 1,001,830
2,000,000 Hillsborough County, Florida,
Hospital Authority, Hospital
Revenue, Tampa General
Hospital Project
6.38%, 10/1/13, (FSA)........... 2,173,060
1,000,000 Indian Trace Community
Development District,
Florida, Water Special
Benefit Assesment
5.00%, 5/1/17................... 963,250
3,000,000 Jacksonville, Florida, Health
Facilities Authority, St.
Luke's Hospital Association
7.13%, 11/15/20................. 3,330,540
1,200,000 Jacksonville, Florida, Health
Facilities Authority,
Hospital Revenue, Charity
Obligation Group, Series A
5.13%, 8/15/27.................. 1,147,824
</TABLE>
<PAGE>
PAGE 6
- ----------------------------------------------
EVERGREEN FLORIDA TAX FREE FUND
SCHEDULE OF INVESTMENTS-- SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------
LONG-TERM INVESTMENTS-- CONTINUED
FLORIDA-- CONTINUED
<C> <S> <C>
$2,000,000 Lakeland, Florida, Electric &
Water Revenue, Jr. Sub. Lien
6.50%, 10/1/07.................. $ 2,292,300
Lee County, Florida, Hospital
Board of Directors, Hospital
Revenue, Lee Memorial Health
Systems:
2,000,000 5.00%, 4/1/17..................... 1,918,060
2,000,000 5.00%, 4/1/20..................... 1,899,020
1,470,000 Miami Beach, Florida, Resort
Tax Revenue
6.25%, 10/1/22, (AMBAC)......... 1,667,024
1,000,000 Miramar, Florida, Wastewater
Improvement Assessment Revenue
6.75%, 10/1/16, (FGIC).......... 1,122,520
1,500,000 North Broward County,
Florida, Hospital District
Revenue
5.38%, 1/15/12, (MBIA).......... 1,512,525
1,335,000 North Springs Improvement
District, Florida, Water and
Sewer Revenue, Series B
6.50%, 12/1/16, (MBIA).......... 1,497,857
2,550,000 Okaloosa County, Florida, Gas
District, Refunding and
Improvement
6.85%, 10/1/14, (MBIA).......... 2,942,011
2,000,000 Orange County, Florida,
Health Facilities Authority,
Hospital Revenue, Orlando
Regional Healthcare, Series C
6.25%, 10/1/21, (MBIA).......... 2,259,680
500,000 Orange County, Florida,
Housing Finance Authority,
Single Family Housing,
Mortgage-Backed Securities
Program
6.85%, 10/1/27, (GNMA/FNMA)..... 537,985
4,000,000 Orlando, Florida, Utilities
Commission, Water and
Electric Revenue
6.00%, 10/1/10.................. 4,426,440
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------
<C> <S> <C>
LONG-TERM INVESTMENTS-- CONTINUED
FLORIDA-- CONTINUED
$ 40,000 Orlando-Orange County, Florida,
Expressway Authority Revenue
8.25%, 7/1/15, (FGIC)........... $ 54,542
1,880,000 Palm Beach County, Florida,
General Obligation
6.50%, 7/1/10................... 2,169,783
500,000 Palm Beach County, Florida,
Solid Waste Authority
Revenue, Series B
5.38%, 10/1/11, (AMBAC)......... 510,820
Sunrise, Florida, Utility
Systems Revenue, Capital
Appreciation, Series A:
(effective yield 5.65%)(b)
1,000,000 0.00%, 10/1/09, (AMBAC)........... 549,830
(effective yield 5.75%)(b)
1,000,000 0.00%, 10/1/10, (AMBAC)........... 516,520
2,000,000 Tallahassee, Florida, Health
Facilities, Tallahassee
Memorial Regional Medical
Project
6.63%, 12/1/13, (MBIA).......... 2,267,000
1,250,000 Tampa, Florida, Capital
Improvement Program Revenue,
Series B
8.38%, 10/1/18.................. 1,295,600
45,000 Tampa, Florida, Subordinate
Guaranteed Entitlement
Revenue, Series B
8.50%, 10/1/18, (ETM)........... 47,067
1,000,000 West Melbourne, Florida,
Water and Sewer Revenue
6.75%, 10/1/14, (FGIC).......... 1,133,370
----------
61,806,659
----------
NEW YORK-- 5.3%
2,000,000 New York City, New York,
General Obligation, Series E
6.00%, 8/1/16................... 2,079,740
2,000,000 New York City, New York,
Municipal Water Finance
Authority, Water & Sewer
Systems Revenue, Series B
5.25%, 6/15/29.................. 1,916,900
---------
3,996,640
---------
</TABLE>
<PAGE>
PAGE 7
- ---------------------------------------------
SCHEDULE OF INVESTMENTS-- SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------
<C> <S> <C>
LONG-TERM INVESTMENTS-- CONTINUED
PENNSYLVANIA-- 1.2%
$ 875,000 McKeesport, Pennsylvania,
Hospital Authority Revenue,
McKeesport Hospital Project
6.50%, 7/1/08................... $ 909,423
-----------
PUERTO RICO-- 6.6%
1,000,000 Commonwealth of Puerto Rico,
Aqueduct and Sewer Authority
Revenue
6.25%, 7/1/12................... 1,125,710
500,000 Commonwealth of Puerto Rico,
General Obligation, Linked
Bond Payment Obligation
7.00%, 7/1/10 (c)............... 601,595
3,000,000 Puerto Rico Electric Power
Authority, Power Revenue,
Capital Appreciation, Series N,
(effective yield 7.05%)(b)
0.00%, 7/1/17, (MBIA)........... 1,064,220
2,000,000 Puerto Rico Industrial
Tourist, Educational, Medical
and Environmental Control
Facilities, Hospital Auxilio
Mutuo Group, Series A
6.25%, 7/1/24, (MBIA)........... 2,156,600
---------
4,948,125
---------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------
<C> <S> <C>
LONG-TERM INVESTMENTS-- CONTINUED
TEXAS-- 0.6%
$ 750,000 Texas Municipal Power Agency
Revenue, Capital
Appreciation,
(effective yield 7.30%)(b)
0.00%, 9/1/06................... $ 490,950
-----------
TOTAL LONG-TERM INVESTMENTS
(COST $67,983,156)............ 72,151,797
-----------
<CAPTION>
SHORT-TERM MUNICIPAL SECURITIES-- 0.6%
(COST $425,000)
<C> <S> <C>
FLORIDA-- 0.6%
425,000 Dade County, Florida, Water &
Sewer Systems Revenue
4.10%, 10/5/22 (a).............. 425,000
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS--
(COST $68,408,156).................... 96.7% 72,576,797
OTHER ASSETS AND
LIABILITIES-- NET..................... 3.3 2,462,345
------ -----------
NET ASSETS--............................ 100.0% $75,039,142
------ -----------
</TABLE>
(a) Security is a variable or floating rate instrument with periodic demand
features. The Fund is entitled to full payment of principal and accrued
interest upon surrendering the security to the issuing agent.
(b) Effective yield (calculated at date of purchase) is the annual yield at
which the bond accretes 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.
LEGEND OF PORTFOLIO ABBREVIATIONS:
<TABLE>
<S> <C>
AMBAC Insured by American Municipal Bond Assurance Corporation
ETM Escrowed to Maturity
FGIC Insured by Federal Guaranty Insurance Company
FNMA Insured by Federal National Mortgage Association
FSA Insured by Financial Security Assurance Corporation
GNMA Insured by Government National Mortgage Association
MBIA Insured by Municipal Bond Investors Assurance Corporation
</TABLE>
FUTURES CONTRACTS-- SHORT POSITIONS
<TABLE>
<CAPTION>
INITIAL
NUMBER CONTRACT VALUE AT UNREALIZED
EXPIRATION OF CONTRACTS AMOUNT SEPTEMBER 30, 1997 DEPRECIATION
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December '97 20 U.S. Treasury Bond Index $ 2,255,839 $2,206,054 ($49,785)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
PAGE 8
EVERGREEN FLORIDA TAX FREE FUND
- ---------------------------------------------
FINANCIAL HIGHLIGHTS-- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1997 YEAR ENDED MARCH 31,
(UNAUDITED) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING OF PERIOD $10.40 $10.60 $10.33 $10.29
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.26 0.55 0.56 0.56
Net realized and unrealized gain (loss) on investments and futures
contracts 0.33 (0.19) 0.27 0.07
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.59 0.36 0.83 0.63
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM
Net investment income (0.25) (0.55) (0.54) (0.56)
In excess of net investment income 0 (0.01) (0.02) (0.03)
Net realized gain on investments 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.25) (0.56) (0.56) (0.59)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE END OF PERIOD $10.74 $10.40 $10.60 $10.33
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 5.75% 3.50% 8.16% 6.42%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS
Total expenses 0.75%(a) 0.76% 0.76% 0.75%
Total expenses excluding indirectly paid expenses 0.74%(a) 0.75% 0.75% --
Total expenses excluding fee waiver 0.92%(a) 0.92% 0.92% 0.95%
Net investment income 4.98%(a) 5.26% 5.32% 5.60%
PORTFOLIO TURNOVER RATE 51% 104% 89% 129%
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS END OF PERIOD (THOUSANDS) $25,711 $29,305 $37,286 $42,239
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 28, 1990
(COMMENCEMENT OF
YEAR ENDED MARCH 31, OPERATIONS) TO
1994 1993 1992 MARCH 31, 1991
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING OF PERIOD $10.94 $10.43 $10.17 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.58 0.61 0.72 0.18
Net realized and unrealized gain (loss) on investments and futures
contracts (0.44) 0.64 0.30 0.17
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.14 1.25 1.02 0.35
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM
Net investment income (0.58) (0.61) (0.72) (0.18)
In excess of net investment income (0.05) (0.03) 0 0
Net realized gain on investments (0.16) (0.10) (0.04) 0
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.79) (0.74) (0.76) (0.18)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE END OF PERIOD $10.29 $10.94 $10.43 $10.17
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 1.01% 12.32% 10.34% 3.52%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS
Total expenses 0.75% 0.68% 0.65% 0.65%(a)
Total expenses excluding indirectly paid expenses -- -- -- --
Total expenses excluding fee waiver 1.00% 1.13% 1.21% 2.06%(a)
Net investment income 5.16% 5.60% 6.82% 6.33%(a)
PORTFOLIO TURNOVER RATE 113% 95% 63% 5%
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS END OF PERIOD (THOUSANDS) $45,150 $42,997 $29,258 $6,922
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
PAGE 9
- -----------------------------------------
FINANCIAL HIGHLIGHTS-- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 MARCH 31,
(UNAUDITED) 1997 1996
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE BEGINNING OF PERIOD $10.28 $10.48 $10.24
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.21 0.46 0.48
Net realized and unrealized gain (loss) on investments and futures contracts 0.34 (0.18) 0.28
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.55 0.28 0.76
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM
Net investment income (0.21) (0.47) (0.50)
In excess of net investment income 0 (0.01) (0.02)
Net realized gain on investments 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.21) (0.48) (0.52)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE END OF PERIOD $10.62 $10.28 $10.48
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 5.29% 2.75% 7.48%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS
Total expenses 1.50%(a) 1.51% 1.48%
Total expenses excluding indirectly paid expenses 1.50%(a) 1.50% 1.47%
Total expenses excluding fee waiver 1.68%(a) 1.68% 1.68%
Net investment income 4.22%(a) 4.51% 4.58%
PORTFOLIO TURNOVER RATE 51% 104% 89%
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS END OF PERIOD (THOUSANDS) $40,456 $46,918 $54,433
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 1, 1993
YEAR ENDED (DATE OF INITIAL
MARCH 31, PUBLIC OFFERING) TO
1995 1994 MARCH 31, 1993
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE BEGINNING OF PERIOD $10.27 $10.94 $10.81
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.53 0.52 0.08
Net realized and unrealized gain (loss) on investments and futures contracts 0.02 (0.47) 0.14
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.55 0.05 0.22
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM
Net investment income (0.49) (0.48) (0.08)
In excess of net investment income (0.09) (0.08) (0.01)
Net realized gain on investments 0 (0.16) 0
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.58) (0.72) (0.09)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE END OF PERIOD $10.24 $10.27 $10.94
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 5.61% 0.19% 2.06%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS
Total expenses 1.50% 1.50% 1.50%(a)
Total expenses excluding indirectly paid expenses -- -- --
Total expenses excluding fee waiver 1.68% 1.74% 1.73%(a)
Net investment income 4.81% 4.21% 4.00%(a)
PORTFOLIO TURNOVER RATE 129% 113% 95%
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS END OF PERIOD (THOUSANDS) $51,083 $19,984 $1,704
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
PAGE 10
- -----------------------------------------
EVERGREEN FLORIDA TAX FREE FUND
FINANCIAL HIGHLIGHTS-- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 MARCH 31,
(UNAUDITED) 1997 1996
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE BEGINNING OF PERIOD $10.30 $10.50 $10.26
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.21 0.45 0.48
Net realized and unrealized gain (loss) on investments and futures contracts 0.33 (0.17) 0.28
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.54 0.28 0.76
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM
Net investment income (0.21) (0.47) (0.50)
In excess of net investment income 0 (0.01) (0.02)
Net realized gain on investments 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.21) (0.48) (0.52)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE END OF PERIOD $10.63 $10.30 $10.50
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 5.28% 2.74% 7.47%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS
Total expenses 1.50%(a) 1.51% 1.48%
Total expenses excluding indirectly paid expenses 1.50%(a) 1.50% 1.47%
Total expenses excluding fee waiver 1.68%(a) 1.68% 1.68%
Net investment income 4.22%(a) 4.51% 4.60%
PORTFOLIO TURNOVER RATE 51% 104% 89%
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS END OF PERIOD (THOUSANDS) $8,872 $9,650 $11,795
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 1, 1993
YEAR ENDED (DATE OF INITIAL
MARCH 31, PUBLIC OFFERING) TO
1995 1994 MARCH 31, 1993
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE BEGINNING OF PERIOD $10.28 $10.93 $10.81
- ------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.47 0.51 0.07
Net realized and unrealized gain (loss) on investments and futures contracts 0.08 (0.45) 0.14
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.55 0.06 0.21
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM
Net investment income (0.49) (0.49) (0.07)
In excess of net investment income (0.08) (0.06) (0.02)
Net realized gain on investments 0 (0.16) 0
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.57) (0.71) (0.09)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE END OF PERIOD $10.26 $10.28 $10.93
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (B) 5.61% 0.27% 1.95%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS
Total expenses 1.50% 1.50% 1.50%(a)
Total expenses excluding indirectly paid expenses -- -- --
Total expenses excluding fee waiver 1.70% 1.84% 1.63%(a)
Net investment income 4.86% 4.26% 2.95%(a)
PORTFOLIO TURNOVER RATE 129% 113% 95%
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS END OF PERIOD (THOUSANDS) $12,831 $13,096 $1,987
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
PAGE 11
- -----------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------
ASSETS
Investments at market value
(identified cost $68,408,156) $72,576,797
Cash 3,797
Receivable for investments sold 3,416,707
Interest receivable 1,588,941
Due from investment adviser 15,267
Receivable for daily variation margin on open
futures contracts 6,875
Receivable for Fund shares sold 5,000
Prepaid expenses and other assets 4,273
- ------------------------------------------------------------
Total assets 77,617,657
- ------------------------------------------------------------
LIABILITIES
Payable for investments purchased 2,114,741
Payable for Fund shares redeemed 199,667
Dividends payable 187,220
Due to related parties 34,686
Distribution fee payable 19,348
Accrued expenses and other liabilities 22,853
- ------------------------------------------------------------
Total liabilities 2,578,515
- ------------------------------------------------------------
NET ASSETS $75,039,142
- ------------------------------------------------------------
NET ASSETS REPRESENTED BY
Paid-in capital $74,059,734
Accumulated distributions in excess of net
investment income (264,708)
Accumulated net realized loss on investments (2,874,740)
Net unrealized appreciation on investments and
open futures contracts 4,118,856
- ------------------------------------------------------------
Total net assets $75,039,142
- ------------------------------------------------------------
NET ASSET VALUE PER SHARE
Class A Shares
Net assets of $25,710,990 2,393,535 shares
outstanding $ 10.74
Offering price per share $10.74 .9525 (based
on a sales charge of 4.75% of the offering
price at September 30, 1997) $ 11.28
Class B Shares
Net assets of $40,456,371 3,810,750 shares
outstanding $ 10.62
Class Y Shares
Net assets of $8,871,781 834,243 shares
outstanding $ 10.63
- ------------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
- ---------------------------------------------------------------
INVESTMENT INCOME
Interest $2,340,322
EXPENSES
Distribution Plan expenses $261,004
Management fee 217,080
Transfer agent fees 39,491
Custodian fees 19,423
Administrative services fees 6,475
Trustees' fees and expenses 3,112
Other 32,671
Fees waived by investment adviser (70,671)
- ---------------------------------------------------------------
Total expenses 508,585
Less: Indirectly paid expenses (1,406)
- ---------------------------------------------------------------
Net expenses 507,179
- ---------------------------------------------------------------
Net investment income 1,833,143
- ---------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FUTURES CONTRACTS
Net realized gain (loss) on:
Investments 437,542
Closed futures contracts (119,779)
- ---------------------------------------------------------------
Net realized gain on investments and
closed futures contracts 317,763
- ---------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) on investments
and futures contracts 2,208,055
- ---------------------------------------------------------------
Net realized and unrealized gain on
investments and futures contracts 2,525,818
- ---------------------------------------------------------------
Net increase in net assets resulting
from operations $4,358,961
- ---------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
PAGE 12
EVERGREEN FLORIDA TAX FREE FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MARCH 31, 1997
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 1,833,143 $ 4,613,672
Net realized gain (loss) on investments and closed futures contracts 317,763 (954,246)
Net change in unrealized appreciation (depreciation) on investments
and futures contracts 2,208,055 (593,956)
- --------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 4,358,961 3,065,470
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income:
Class A (669,200) (1,760,650)
Class B (883,432) (2,363,748)
Class C (192,350) (489,274)
In excess of net investment income:
Class A 0 (46,750)
Class B 0 (62,764)
Class C 0 (12,992)
- --------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (1,744,982) (4,736,178)
- --------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold:
Class A 542,149 1,516,596
Class B 413,325 3,171,407
Class C 197,186 362,937
Payment for shares redeemed:
Class A (5,271,271) (9,405,525)
Class B (8,683,927) (10,685,777)
Class C (1,352,599) (2,508,025)
Net asset value of shares issued in reinvestment of distributions:
Class A 234,723 497,684
Class B 400,747 896,419
Class C 72,949 182,889
- --------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from capital share transactions (13,446,718) (15,971,395)
- --------------------------------------------------------------------------------------------------------------------------
Total decrease in net assets (10,832,739) (17,642,103)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 85,871,881 103,513,984
- --------------------------------------------------------------------------------------------------------------------------
End of period [Including accumulated distributions in excess of
net investment income as follows: September 1997-- ($264,708) and
March 1997-- ($352,869)] $ 75,039,142 $ 85,871,881
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
PAGE 13
- -----------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Evergreen Florida Tax Free Fund (formerly Keystone Florida Tax Free Fund) (the
"Fund") is a separate series of the Keystone State Tax Free Fund. The Fund is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as a non-diversified, open-end investment company.
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a maximum front-end sales charge of 4.75%. Class B shares are sold without
a front-end sales charge, but pay a higher ongoing distribution fee than Class
A. 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 rights. Class C shares are sold subject
to a contingent deferred sales charge payable on shares redeemed within one year
after the month of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its 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. Actual results could differ from these estimates.
A. VALUATION OF SECURITIES
An independent pricing service values the Fund's municipal bonds at fair value
using a variety of factors which may include yield, liquidity, interest rate
risk, credit quality, coupon, maturity and type of issue. 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 Board of Trustees. Short-term
investments with remaining maturities of 60 days or less are carried at
amortized cost, which approximates market value.
B. FUTURES CONTRACTS
In order to gain exposure to or protect against changes in security values, the
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 accretion
of discounts and amortization of premiums.
D. FEDERAL INCOME TAXES
The Fund has qualified and intends to continue to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Fund will not incur any federal income tax liability since it
is expected to distribute all of its net investment company taxable income, net
tax-exempt income and net capital gains, if any, to its shareholders. The Fund
also intends to avoid any excise tax liability by making the required
distributions under the Code. Accordingly, no provision for federal income taxes
is required. To the extent that realized capital gains can be offset by capital
loss carryforwards, it is the Fund's policy not to distribute such gains.
<PAGE>
PAGE 14
- -----------------------------------------
EVERGREEN FLORIDA TAX FREE FUND
E. DISTRIBUTIONS
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 differing treatment of market
discount on securities.
F. CLASS ALLOCATIONS
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
The Fund's Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest with no par value. Shares of beneficial
interest of the Fund are currently divided into Class A, Class B and Class C.
Transactions in shares of the Fund were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 MARCH 31, 1997
- ----------------------------------------------------------
<S> <C> <C>
CLASS A
Shares sold 51,231 143,758
Shares redeemed (496,075) (892,684)
Shares issued in
reinvestment of
distributions 21,974 47,237
- ----------------------------------------------------------
Net decrease (422,870) (701,689)
- ----------------------------------------------------------
CLASS B
Shares sold 39,600 306,536
Shares redeemed (829,265) (1,025,655)
Shares issued in
reinvestment of
distributions 38,314 86,179
- ----------------------------------------------------------
Net decrease (751,351) (632,940)
- ----------------------------------------------------------
CLASS C
Shares sold 18,770 35,183
Shares redeemed (128,233) (239,822)
Shares issued in
reinvestment of
distributions 7,109 17,534
- ----------------------------------------------------------
Net decrease (102,354) (187,105)
- ----------------------------------------------------------
</TABLE>
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) for the six months ended September 30, 1997 were
$41,050,786 and $55,554,472, respectively.
As of March 31, 1997, the Fund had a capital loss carryover for federal income
tax purposes of approximately $2,934,000 which expires as follows:
$1,845,000-- 2002 and $1,089,000-- 2005.
4. DISTRIBUTION PLANS
Evergreen Keystone Distributor, Inc. ("EKD"), a wholly-owned subsidiary of The
BISYS Group Inc. ("BISYS"), serves as principal underwriter to the Fund.
The Fund has adopted Distribution Plans for each class of shares as allowed by
Rule 12b-1 of the 1940 Act. Distribution plans permit the Fund to reimburse its
principal underwriter for costs related to selling shares of the Fund and for
various other services. These costs, which consist primarily of commissions and
service fees
<PAGE>
PAGE 15
- -----------------------------------------
to broker-dealers who sell shares of the Fund, are paid by shareholders through
expenses called "Distribution Plan expenses". Each class currently pays a
service fee equal to 0.25% of the average daily net asset of the class. Class B
and Class C also presently pay distribution fees equal to 0.75% of the average
daily net assets of the respective class. Distribution Plan expenses are
calculated daily and paid monthly.
With respect to Class B and Class C shares, the principal underwriter may pay
12b-1 fees greater than the allowable annual amounts the Fund is permitted to
pay. The Fund may reimburse the principal underwriter for such excess amounts in
later years with annual interest at the prime rate plus 1.00%.
During the six months ended September 30, 1997, amounts paid to EKD pursuant
to each Fund's Class A, Class B and Class C Distribution Plans were $19,285,
$198,417 and $43,302 respectively.
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 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.
5. INVESTMENT MANAGEMENT AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
Keystone Investment Management Company ("Keystone"), a subsidiary of First Union
Corporation ("First Union"), is the investment adviser for the Fund. In return
for providing investment management and administrative services, the Fund pays
Keystone a management fee that is calculated 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 the Fund.
Effective, January 1, 1997, BISYS became sub-administrator to the Fund. This
service is paid by Keystone and is not a Fund expense. As sub-administrator to
the Fund, BISYS provides the officers of the Fund.
Keystone has voluntarily limited the expenses of Class A shares, excluding
service fees, to 0.60% of average daily net assets and has limited the expenses
of Class B and C, excluding service fees, to 1.35% of the average daily net
assets of each respective class. For the six months ended September 30, 1997,
Keystone waived $70,671 in management fees.
During the six months ended Septmber 30, 1997, the Fund paid or accrued $6,475
to Evergreen Keystone Investment Services, Inc. ("EKIS"), a subsidairy of First
Union, for certain administrative services. Evergreen Keystone Service Company,
a wholly-owned subsidiary of Keystone, serves as the Fund's transfer and
dividend disbursing agent.
Officers of the Fund and affiliated Trustees receive no compensation directly
from the Fund.
6. EXPENSE OFFSET ARRANGEMENT
The Fund has entered into an expense offset arrangement with its custodian. The
assets deposited with the custodian under this expense offset arrangement could
have been invested in income-producing assets.
7. CONCENTRATION OF CREDIT RISK
The Fund invests a substantial portion of its assets in issuers located in the
state of Florida and therefore, it may be more affected by economic and
political developments in Florida than would be a comparable general tax-exempt
mutual fund.
<PAGE>
This report was prepared primarily for the information of the Fund's
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 Funds, contact your
financial adviser or call Evergreen Funds.
- -----------------------------------------
NOT
FDIC MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- -----------------------------------------
EVERGREEN KEYSTONE DISTRIBUTOR, INC.
Evergreen KeystoneSM is a Service Mark of
Evergreen
Keystone Investment Services, Inc.
Copyright 1997.
(Recyclable logo)
542101 REV01 11/97
----------------------------
EVERGREEN
(Photo of building and flag)
FLORIDA TAX FREE
FUND
(FORMERLY KEYSTONE
FLORIDA TAX FREE FUND)
----------------------------
(Evergreen tree logo)
Evergreen Funds(SM)
SINCE 1932
SEMIANNUAL REPORT
SEPTEMBER 30, 1997
