-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JSwcFg2MzCbXvB39M5UGhXws77VmYRrmUvqcNuDqEHFlpvAx1B2M6ry/35xKbwwu uwJy4EwQu4VNxn+zwX8/6g== 0000950168-98-000305.txt : 19980205 0000950168-98-000305.hdr.sgml : 19980205 ACCESSION NUMBER: 0000950168-98-000305 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971130 FILED AS OF DATE: 19980204 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EVERGREEN INVESTMENT TRUST CENTRAL INDEX KEY: 0000757440 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046599663 STATE OF INCORPORATION: NY FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04154 FILM NUMBER: 98521273 BUSINESS ADDRESS: STREET 1: 200 BERKELEY ST CITY: BOSTON E STATE: MA ZIP: 02116 BUSINESS PHONE: 9146412305 MAIL ADDRESS: STREET 1: 2500 WESTCHESTER AVE CITY: PURCHASE STATE: NY ZIP: 10577 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION FUNDS/ DATE OF NAME CHANGE: 19940628 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION HIGH GRADE TAX FREE PORT DATE OF NAME CHANGE: 19940519 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION FUNDS DATE OF NAME CHANGE: 19921230 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEYSTONE TAX FREE INCOME FUND CENTRAL INDEX KEY: 0000808334 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04951 FILM NUMBER: 98521274 BUSINESS ADDRESS: STREET 1: 200 BERKELEY ST CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6173383200 MAIL ADDRESS: STREET 1: 200 BERKELEY ST CITY: BOSTON STATE: MA ZIP: 02116 FORMER COMPANY: FORMER CONFORMED NAME: KEYSTONE AMERICA TAX FREE INCOME FUND DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EVERGREEN MUNICIPAL TRUST CENTRAL INDEX KEY: 0000836375 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: NY FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05579 FILM NUMBER: 98521275 BUSINESS ADDRESS: STREET 1: 200 BERKELEY ST CITY: BOSTON STATE: MA ZIP: 02116-5034 BUSINESS PHONE: 6172103533 MAIL ADDRESS: STREET 1: 2500 WESTCHESTER AVENUE CITY: PURCHASE STATE: NY ZIP: 10577 N-30D 1 EVERGREEN NATIONAL MUNICIPAL BOND FUNDS N-30/D EVERGREEN NATIONAL MUNICIPAL BOND FUNDS NOVEMBER 30, 1997 SEMIANNUAL REPORT (EVERGREEN LOGO APPEARS HERE) Table of Contents Letter to Shareholders .................... 1 Evergreen High Grade Tax Free Fund Fund at a Glance ......................... 2 Portfolio Manager Interview .............. 3 Evergreen Short-Intermediate Municipal Fund Fund at a Glance ......................... 5 Portfolio Manager Interview .............. 6 Evergreen Tax Free Income Fund Fund at a Glance ......................... 8 Portfolio Manager Interview .............. 9 Financial Highlights Evergreen High Grade Tax Free Fund ....... 11 Evergreen Short-Intermediate Municipal Fund .................................. 14 Evergreen Tax Free Income Fund ........... 16 Schedule of Investments Evergreen High Grade Tax Free Fund ....... 18 Evergreen Short-Intermediate Municipal Fund .................................. 21 Evergreen Tax Free Income Fund ........... 25 Statements of Assets and Liabilities ........ 29 Statements of Operations .................... 30 Statements of Changes in Net Assets - Six months ended November 30, 1997 ....... 31 Statements of Changes in Net Assets - Prior Periods ............................ 32 Combined Notes to Financial Statements .................................. 33 - -------------------------------------------------------------------------------- Evergreen Funds Evergreen Funds is one of the nation's fastest growing investment companies with more than $40 billion in assets under management. With 65 mutual funds to choose among and acclaimed service and operations capabilities, investors enjoy a broader range of quality investment products and services designed to meet their needs. The Evergreen Funds employ intensive, research-driven investment strategies executed by over 90 research analysts and portfolio managers. The fund company remains dedicated to meeting the needs of investors and their advisors in a global economy. Look to the Evergreen Funds to provide a distinctive level of service and excellence in investment management. This semiannual report must be preceded or accompanied by a prospectus of an Evergreen fund contained herein. The prospectus contains more complete information, including fees and expenses, and should be read carefully before investing or sending money. MUTUAL FUNDS: ARE NOT FDIC INSURED May lose value o Are not bank guaranteed
Evergreen Funds Distributor, Inc. Letter to Shareholders ---------------------- February 1998 Dear Shareholders: (PHOTO OF WILLIAM M. ENNIS) The past six months have been an excellent period for most investors in municipal bond WILLIAM M. ENNIS funds, and the shareholders of the Evergreen Managing Director National Municipal Bond Funds have been able to enjoy the benefits. The bond market enjoyed an extremely favorable environment, as moderate economic growth and an apparent absence of any serious inflation resulted in a period in which interest rates steadily declined. In fact, the 30-year Treasury Bond's yield fell nine-tenths of one percent, or 90 basis points, to finish the six month fiscal period on November 30, 1997 near the 6.00% level. While the yield, or income, of bond funds tended to go down, the prices of bonds tended to increase, giving investors strong positive real returns, even after allowing for inflation. The municipal bond market, which usually follows the same trends as the Treasury market, had strong performance, although not as impressive as the Treasury market. The result was that AAA-rated municipal bonds, at the end of the six month period, were paying investors as much as 85% of the yield of Treasury bonds. We believe that makes municipal bonds a very attractive investment. Municipal bond funds are designed to provide investors with tax-exempt income and greater potential protection of principal than an equity fund. Of course, they cannot be expected to provide the growth opportunities of an equity fund, which invests primarily in stocks. Municipal bond funds are successful when they produce steady income and relative stability of prices as they have during the past year. Advantages of Diversification At Evergreen Funds, we believe bond funds have a place in virtually every investor's portfolio, both because of their income and because they help diversify and reduce the risk of the total portfolio of investments. Municipal bond funds make sense for those investors attempting to limit their federal income taxes. During any short-term period, an undiversified portfolio of stock funds may give the appearance of a performance advantage over a diversified mix of stock, bond and international funds. Over the long term, however, proper diversification can help smooth out the bumps in the market and provide greater consistency. The right measure of diversification is different for each investor. This is why we encourage investors to consult with their financial advisors, who can help determine the right mix of investments for each person, given his or her objectives and risk tolerances. Upcoming Developments In the next few weeks and months, shareholders of Evergreen and Keystone funds will begin to notice some changes. The Evergreen Keystone Funds have become the Evergreen Funds. On October 31, 1997, Keystone America Funds adopted the name of Evergreen and in early 1998 the original Keystone Funds will also take the Evergreen name. We believe that by putting all the funds under the umbrella name of Evergreen Funds we will be creating a simpler and more cohesive image. Importantly, we expect to create substantial cost savings for shareholders as a result of consolidating prospectuses, annual reports, legal registrations and other materials. It also will be easier to find all the funds of the Evergreen Family, to which you have exchange privileges, under one heading in newspapers and electronic services. What will not change will be our commitment to provide you with the finest investment products and shareholder services possible. If you have any questions about these changes or other issues affecting your investments, we encourage you to consult your financial advisor or call Evergreen Funds at 1-800-343-2898. Sincerely, /s/ William M. Ennis - -------------------- William M. Ennis Managing Director 1 EVERGREEN High Grade Tax Free Fund Fund at a Glance as of November 30, 1997 We have a long-term strategy of trying to find the best value in the marketplace, and not trying to guess short-term swings in interest rates. Portfolio Management - ---------- [PHOTO OF JAMES T. COLBY III APPEARS HERE] James T. Colby III Vice President Evergreen Asset Management Corp. and Capital Management Group Tenure: July 1995 - -------------------------------------------------------------------------------- PERFORMANCE AND RETURNS
Class A Class B Class Y Inception Date 2/21/92 1/11/93 2/28/94 Average Annual Returns* 6 months with sales charge 0.19% -0.21% 5.31% 6 months w/o sales charge 5.18% 4.79% 5.31% One year with sales charge 0.48% -0.30% 5.74% One year w/o sales charge 5.49% 4.70% 5.74% 3 years 8.82% 8.94% 10.88% 5 years 5.78% - - Since Inception 6.39% 5.62% 5.86% Cumulative Total Return since inception 43.06% 30.61% 23.89% Maximum Sales Charge 4.75% 5.00% n/a Front End CDSC SEC Yield 4.09% 3.54% 4.54% 6 month dividends per share $ 0.24 $ 0.20 $ 0.25
*Adjusted for maximum applicable sales charge. - -------------------------------------------------------------------------------- LONG TERM GROWTH [GRAPH APPEARS BELOW WITH THE FOLLOWING PLOT POINTS:] Consumer Lehman Class A Price Brothers Insured Shares Index (CPI Bond Index (LBIB) ------ ---------- ----------------- 2/92 $ 9,520 $10,000 $10,000 11/93 11,540 10,560 12,050 11/95 12,990 11,120 13,590 11/97 14,310 11,680 15,240 Comparisons of a $10,000 investment in Evergreen High Grade Tax Free Fund, Class A shares, versus a similar investment in the Lehman Brothers Insured Bond Index and the Consumer Price Index. 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 shareholder investing in the different classes. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than original cost. The Lehman Brothers Insured Bond Index is an unmanaged, market index. The index does not include transaction costs associated with buying and selling securities, nor any management fees. The Consumer Price Index, a measure of inflation, is through November 30, 1997. - -------------------------------------------------------------------------------- CURRENT INVESTMENT STYLE Morningstar's Style Box is based on a portfolio date as of 12/31/97. [GRAPHIC OMITTED] The Fixed Income Style Box placement is based on a fund's average effective maturity or duration and the average credit rating of the bond portfolio. Source: 1997 Morningstar, Inc. 2 EVERGREEN High Grade Tax Free Fund Portfolio Manager Interview - -------------------------------------------------------------------------------- How did the Fund perform during the six-month period? The Fund performed well. For the six months that ended on November 30, 1997, the Fund's Class Y Shares had a total return of 5.31%, while Class A Shares had a total return of 5.18% and Class B Shares had a return of 4.79%. These returns are before deduction of any sales charge, if applicable. - -------------------------------------------------------------------------------- What was the investment environment like? It was a very favorable environment. The fixed income markets, including the municipal bond market, rallied as interest rates declined. To measure that environment, you only have to look at the long-term Treasury Bond. At the beginning of the fiscal period, its yield was in the 6.90% to 6.95% range. Shortly after November 30, it was touching the 6.00% level. In general, long-term municipal bonds improved in price as yields declined. It was a somewhat bumpy ride, however, as periods of uncertainty caused interest rates to spike up for short periods. The economic background continued to be favorable, with a strong economy and no real evidence that the prices of goods and services would cause inflation to increase. Municipal bonds, however, did not perform as well as Treasuries and other taxable bonds. We saw a great deal of new issuance of municipal bonds, particularly in September, as municipalities took advantage of the lower interest rates. In September, $30 billion in new municipal bond debt was issued. It is a measure of the health of the municipal bond industry that the marketplace was able to consume that new supply. However, this added supply - without any significant increase in demand - did limit the price appreciation of municipal bonds relative to the Treasury market. We believe it is a very good time to buy and own municipal bonds, partly as a consequence of this recent underperformance relative to Treasuries. We believe municipal bonds are attractive both on an absolute basis because of their value and on a relative basis because of their after-tax yield advantage over taxable bonds. At the close of the six month fiscal period, high-grade municipal bonds were trading with yields of about 84% to 85% of Treasury Bonds. Historically, it has been a "buy signal" when municipal bonds were trading at that level. -------------------------------------------------------------------- PORTFOLIO COMPOSITION [PIE CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:] (as a percentage of net assets) Industrial Development 13% Water and Sewer 13% Other 12% Hospitals 11% Port Authorities 11% General Obligations-Local 10% Utilities 10% Transportation 9% Airports 6% Housing 5% - -------------------------------------------------------------------------------- What strategies did you follow during the period? We have a long-term strategy of trying to find the best value in the marketplace, and not trying to guess short-term swings in interest rates. Our approach is to pay attention to economic fundamentals and supply fundamentals. During the period, we did take note of declining interest rates to increase the effective maturity and duration slightly. Average effective maturity of bonds in the portfolio increased from 12.3 years to 13.3 years, while the duration increased from 8.2 years to 8.4 years. When we purchased bonds, as we did in September, we extended maturity and duration somewhat, as bonds of longer maturity tend to perform better during periods of declining rates. 3 EVERGREEN High Grade Tax Free Fund Portfolio Manager Interview This Fund, by definition, focuses on insured municipal bonds, or bonds that are insured as to timely payment of principal and interest.1 At the close of the period, 94% of the Fund's assets were insured. The average credit quality was AAA. -------------------------------------------------------------------- PORTFOLIO QUALITY [PIE CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:] (as a percentage of net assets) AAA 85% AA 7% A 7% NR 1% - -------------------------------------------------------------------------------- Were there any external factors that influenced performance during the six months? Two factors stand out. First, as interest rates declined, some of the higher coupon bonds that we held were refunded. Municipalities took advantage of the lower rates to refinance their debt. When bonds are refunded, they typically increase in price significantly. The Fund was the beneficiary, as its return was enhanced. The second factor was not as positive. During recent years, insured bonds have become the "generic bond" of the municipal marketplace because of their great liquidity due to their AAA credit quality. They can be bought and sold very easily, and a high percentage of new issuance is insured. Because of these features, insured municipal bonds did not have the price appreciation of other bonds, particularly lower credit 1The Fund itself is not insured, nor is the value of its shares guaranteed. quality, high yield municipal bonds. High yield bonds benefited because their issuance was less and demand was substantially higher as more investors were willing to stretch for yield in an environment of lower rates. Thus, there was greater performance in lower quality, higher yielding bonds. Portfolio Characteristics --------------- Total Net Assets $103,404,112 Average Credit Quality AAA Average Maturity 13.3 years Average Duration 8.4 years - -------------------------------------------------------------------------------- What is your outlook? The economic trends point toward lower interest rates, which would be very good for municipal bonds and the Fund. At the same time, I would point out that municipal bonds - while they are unique to the United States -are still part of our global economic system. Like Treasury Bonds, municipal bonds can be affected by external events; from currency problems, volatility in the Asian markets to a crisis in the Middle East. Should nothing happen externally, I think there is a good opportunity for the interest rates of the 30-year Treasury Bond to decline to the 5.5% to 5.75% range. The economy is healthy, the federal Treasury may even show a surplus, and there is still no serious evidence of inflationary pressure. Given this outlook, I expect we will continue to maintain our relative position with respect to maturity and duration. If interest rates were to go lower, the Fund has the potential to benefit from refundings, which can add incremental returns. Municipal bonds, on a value basis, are extremely attractive. This is a good time to be a municipal bond investor or buyer. 4 EVERGREEN Short-Intermediate Municipal Fund Fund at a Glance as of November 30, 1997 Positively, we would say that the dramatic downward move in interest rates helped performance. Portfolio Management - ----------------- [PHOTO OF RICHARD K. MARRONE APPEARS HERE] Richard K. Marrone Vice President and Senior Fixed Income Portfolio Manager Capital Management Group Tenure: December 1, 1997 [PHOTO OF STEVEN SHACHAT APPEARS HERE] Steven Shachat Vice President Evergreen Asset Management Corp. Tenure: July 1991 - November 1997 - -------------------------------------------------------------------------------- PERFORMANCE AND RETURNS
Class A Class B Class Y Inception Date 1/5/95 1/5/95 7/17/91 Average Annual Returns* 6 months with sales charge -0.57% -2.69% 2.82 % 6 months w/o sales charge 2.77% 2.31% 2.82 % One year with sales charge 0.30% -2.04% 3.98 % One year w/o sales charge 3.67% 2.95% 3.98 % 3 years - - 5.00 % 5 years - - 4.22 % Since Inception 3.76% 3.09% 4.95 % Cumulative Total Return since inception 11.34% 9.25% 33.91%** Maximum Sales Charge 3.25% 5.00% n/a Front End CDSC SEC Yield 3.36% 2.57% 3.57 % 6 month dividends per share $ 0.20 $ 0.15 $ 0.20
*Adjusted for maximum applicable sales charge. **Since inception return for Class Y shares reflects total return from 11/18/91 when the Fund changed to a fluctuating net asset value fund. - -------------------------------------------------------------------------------- LONG TERM GROWTH [GRAPH APPEARS BELOW WITH THE FOLLOWING PLOT POINTS:] Consumer Lehman Brothers Class A Price 3 Year Municipal Shares Index (CPI Bond Index (LB3YMBI) ------ ---------- -------------------- 1/95 $ 9,670 $10,000 $10,000 11/95 10,340 10,260 10,840 11/96 10,750 10,590 11,360 11/97 11,130 10,770 11,910 Comparisons of a $10,000 investment in Evergreen Short-Intermediate Municipal Fund, Class A shares, versus a similar investment in the Lehman Brothers 3 Year Municipal Bond Index and the Consumer Price Index. 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 shareholder investing in the different classes. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than original cost. The Lehman Brothers 3 Year Municipal Bond Index is an unmanaged, market index. The index does not include transaction costs associated with buying and selling securities, nor any management fees. The Consumer Price Index, a measure of inflation, is through November 30, 1997. - -------------------------------------------------------------------------------- CURRENT INVESTMENT STYLE [GRAPHIC OMITTED] Morningstar's Style Box is based on a portfolio date as of 12/31/97. The Fixed Income Style Box placement is based on a fund's average effective maturity or duration and the average credit rating of the bond portfolio. Source: 1997 Morningstar, Inc. 5 EVERGREEN Short-Intermediate Municipal Fund Portfolio Manager Interview Effective December 1, 1997, Richard K. Marrone is the portfolio manager for the Fund. Since joining First Union in 1993, Mr. Marrone has been a Vice President and Senior Fixed Income Portfolio Manager, with over 15 years of investment and market experience. - -------------------------------------------------------------------------------- How did the Fund perform during the six months? We have managed the Fund to give investors a higher return than a money fund, and still maintain relative stability in net asset value. The Fund did its job. For the six months that ended on November 30, 1997, the Fund's Class Y Shares had a total return of 2.82%. During the same period, the Fund's Class A Shares had a return of 2.77%, and the Class B Shares had a return of 2.31%. These returns are before deduction of any applicable sales charges. - -------------------------------------------------------------------------------- How would you describe the investment environment during the six-month period? It was a very attractive time for the municipal bond market. Inflation remained in check, the interest rate environment was very supportive, with rates declining, even though there were a few periodic blips when the market was concerned about the possibility of inflation increasing. Supply and demand of municipal bonds remained in relative balance, so it was an attractive time to be invested in the market. -------------------------------------------------------------------- PORTFOLIO COMPOSITION (as a percentage of net assets) [PIE CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:] General Obligations-State 23% General Obligations-Local 22% Escrow 17% Utilities 10% Other 7% Industrial Development 5% Transportation 5% Hospitals 4% Sales Tax 4% Education 3% - -------------------------------------------------------------------------------- What were your principal strategies during the period? We continued to maintain a laddered portfolio of securities by maturities. By that, we mean we sought to maintain as stable a price as possible by structuring a portfolio of maturities throughout the range in which the Fund invests, up to 7 years. At the same time, we tried to take advantage of the declining interest rate environment to increase our holdings in the longer end of the maturity curve and to sell off some at the shorter end. The Fund therefore had a somewhat higher weighting in the four-to-six year range, versus the two-to-three year range. Overall, we wanted to maintain a laddered structure because we have found that over the life of the Fund this structure has worked well. In terms of bond quality, we did take advantage of the higher yields in lower-rated investment grade bonds to diversify somewhat from just AAA- and AA-rated bonds, although the average credit quality remained at AA. We believe this diversification to some bonds rated BBB+ helped performance. 6 EVERGREEN Short-Intermediate Municipal Fund Portfolio Manager Interview In terms of sectors, we stayed away from housing bonds and student loan bonds, primarily because they did not offer significant opportunities for capital appreciation. At the same time, we did emphasize bonds from the healthcare sector. The consolidation among public health institutions has given stability to the credit ratings of these bonds. -------------------------------------------------------------------- PORTFOLIO QUALITY (as a percentage of net assets) [PIE CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:] AAA 68% AA 21% A 6% BBB 3% NR 2% - -------------------------------------------------------------------------------- What factors affected performance? Positively, we would say that the dramatic downward move in interest rates helped performance. During the six months, we took a conservative approach in the maturity structure. Although we did overweight bonds with maturities of four to six years, we didn't take too much risk. At the same time, we balanced the shorter maturities by investing in some lower-rated investment grade bonds. We helped reduce the risk of these bonds because of the shorter life of the securities. While we were conservative, we believe the approach was consistent with the purpose of the Fund, to provide federally-tax-exempt income with minimal fluctuations in share price. - -------------------------------------------------------------------------------- What is your outlook? We anticipate interest rates to remain relatively stable over the coming months, with the possibility of a slight decline. Within this environment, we will focus on structuring the portfolio to emphasize higher coupon income and increase the Fund's yield. In repositioning the portfolio to focus on yield, we will look for opportunities in two particular areas: healthcare and callable bonds. Bonds from the healthcare sector are not new to the portfolio, and will continue to be utilized to enhance returns. Because issuers of callable bonds need to compensate investors for their inherent features, this type of bond traditionally offers higher coupon income and yield. Going forward, we will look for opportunities to add callable bonds to the portfolio in order to increase the yield. As new securities are added to the portfolio, our municipal credit research group will continue to evaluate and monitor holdings to ensure our high credit standards. Portfolio Characteristics --------------- Total Net Assets $205,171,275 Average Credit Quality AA Average Maturity 6.2 years 7 EVERGREEN Tax Free Income Fund Fund at a Glance as of November 30, 1997 We continued to emphasize quality, by investing in higher-rated general obligation bonds and doubling the Fund's investment in water and sewer bonds to 9%. Portfolio Management - ---------------- [PHOTO OF BETSY A HUTCHINGS APPEARS HERE] Betsy A. Hutchings Senior Vice President, Head of Municipal Bond Group Keystone Investment Management Company Tenure: April 1997 - -------------------------------------------------------------------------------- PERFORMANCE AND RETURNS
Class A Class B Class C Inception Date 2/13/87 2/1/93 2/1/93 Average Annual Returns* 6 months with sales charge -0.25% -0.75% 3.35% 6 months w/o sales charge 4.72% 4.25% 4.35% One year with sales charge 1.09% 0.26% 4.37% One year w/o sales charge 6.13% 5.26% 5.37% 3 years 7.61% 7.65% 8.54% 5 years 4.67% - - 10 years 6.81% - - Since Inception 6.40% 4.34% 4.69% Cumulative Total Return since inception 93.59% 22.77% 24.82% Maximum Sales Charge 4.75% 5.00% 1.00% Front End CDSC CDSC SEC Yield 4.46% 3.92% 3.92% 6 month dividends per share $ 0.23 $ 0.19 $ 0.19
*Adjusted for maximum applicable sales charge. - -------------------------------------------------------------------------------- LONG TERM GROWTH [GRAPH APPEARS BELOW WITH THE FOLLOWING PLOT POINTS:] Consumer Lehman Brothers Class A Price Municipal Shares Index (CPI Bond Index (LMBI) ------ ---------- -------------------- 11/87 $ 9,520 $10,000 $10,000 11/89 11,580 10,910 12,280 11/91 13,400 11,940 14,580 11/93 16,030 12,630 17,820 11/95 17,540 13,300 20,080 11/97 19,360 13,970 22,520 Comparisons of a $10,000 investment in Evergreen Tax Free Income Fund, Class A shares, versus a similar investment in the Lehman Brothers Municipal Bond Index and the Consumer Price Index. 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 shareholder investing in the different classes. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than original cost. The Lehman Brothers Municipal Bond Index is an unmanaged, market index. The index does not include transaction costs associated with buying and selling securities, nor any management fees. The Consumer Price Index, a measure of inflation, is through November 30, 1997. - -------------------------------------------------------------------------------- CURRENT INVESTMENT STYLE Morningstar's Style Box is based on a portfolio date as of 12/31/97. [GRAPHIC OMITTED] The Fixed Income Style Box placement is based on a fund's average effective maturity or duration and the average credit rating of the bond portfolio. Source: 1997 Morningstar, Inc. 8 EVERGREEN Tax Free Income Fund Portfolio Manager Interview We are pleased to report that shareholders of the Evergreen Tax Free Income Fund and the Keystone Tax Free Fund approved a proposal to reorganize these funds into a new fund, the Evergreen Tax Free Fund. The new fund's investment objective is substantially the same as that of the former funds. The reorganization of these funds will take place on January 23, 1998. - -------------------------------------------------------------------------------- What was the environment like for municipal bonds over the last six months? The market was favorable. Interest rates declined, as the economy grew at a moderate pace and inflation remained low. In the tax-exempt market, the economy's strength generated high tax receipts, which strengthened municipal balance sheets and reduced the need to issue bonds. While investors continue to monitor signs of excessive economic strength in anticipation of future inflation, the fact that the economy has enjoyed such a lengthy expansion with minimal price pressures has created a very positive atmosphere in the fixed income market. Toward the end of the period, municipal bonds became very "cheap" to U.S. Treasuries. Heavier supply and lackluster demand put downward pressure on tax-exempt bond prices, and a flight to quality - stemming from the Asian currency crisis - drove U.S. Treasury prices higher. At that point, municipals provided very attractive relative value on an historical basis. Typically offering approximately 84% of the yield of U.S. Treasuries, the yields of AAA-rated municipal bonds climbed to as much as 88% of that of comparable U.S. Treasuries. - -------------------------------------------------------------------------------- How was the Fund's performance, during this time? We were satisfied with the Fund's performance. We attribute its attractive solid return to the successful implementation of our investment strategy, as well as the positive conditions that prevailed in the municipal bond market. -------------------------------------------------------------------- PORTFOLIO QUALITY (as a percentage of net assets) [PIE CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:] AAA 70% AA 9% A 7% BBB 10% NR 4% - -------------------------------------------------------------------------------- What strategies did you use in managing the Fund? We continued to manage the Fund with an emphasis on quality and income. We invested in AAA-rated and AA-rated general obligation bonds, increased portfolio holdings in water and sewer bonds and took advantage of supply/demand imbalances, which affected the relative value of certain issues. We also adjusted the Fund's duration. Duration is a mathematical formula that measures the portfolio's sensitivity to changes in interest rates. The longer a Fund's duration, the more sensitive it is to changes in interest rates. We continued to emphasize quality, by investing in higher-rated general obligation bonds and doubling the Fund's investment in water and sewer bonds to 8%. We believed the higher-rated bonds offered the most attractive relative value, since during the period the yields of lower-rated bonds were only marginally higher than those of their higher-rated counterparts. 9 EVERGREEN Tax Free Income Fund Portfolio Manager Interview -------------------------------------------------------------------- PORTFOLIO COMPOSITION (as a percentage of net ssets) [PIE CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:] Hospitals 15% Transportation 15% General Obligations 12% Industrial Development 10% Education 10% Water/Sewer 9% Electric/Power 8% Housing 8% Other 7% Pre-Refunded 6% Water and sewer bonds enhanced the Fund's quality, because of their stable revenue streams and liquidity. These bonds are known as "essential purpose" revenue bonds, in reflection of the necessity of the service they help provide. Water and sewer bonds are self-funding; because of this, their revenue streams tend to be more stable than many other kinds of bonds. These qualities typically enhance investor demand and increase liquidity. We scaled back on the Fund's New York holdings, a position we had increased when heavy supply had driven their prices lower and yields higher than alternative investments. We also made several adjustments to the Fund's duration. We lengthened duration when we anticipated a decline in interest rates and higher bond prices and shortened it when we believed interest rates would rise and bond prices would fall. Duration adjustments are made to correspond to larger interest rate trends, rather than the short-term fluctuations that often occur. We believe these changes to the Fund's duration coordinated well with the longer-term interest rate trends during the period particularly enhancing total return towards the end of the reporting period. Some of these gains were offset, however, by a short-term swing in interest rates. Portfolio Characteristics --------------- Total Net Assets $101,574,339 Average Credit Quality AA+ Average Maturity 17 years Average Duration 8.5 years - -------------------------------------------------------------------------------- What is your outlook for municipal bonds for the next six months? We have a positive outlook. Near term, we expect municipals to benefit from favorable seasonal patterns, as we head into the end of the calendar year and demand strengthens as investors begin thinking about reducing taxes. Longer term, we think the economy will remain healthy and inflation will stay low. This combination should continue to strengthen the financial conditions of many municipalities and provide a favorable backdrop for fixed income investing. 10 EVERGREEN High Grade Tax Free Fund Financial Highlights (For a share outstanding throughout each period)
Six Months Ended November 30, 1997 Nine Months Ended Year Ended (Unaudited) May 31, 1997 (a) August 31, 1996 CLASS A SHARES Net asset value beginning of period $ 10.89 $ 10.72 $ 10.69 =========== =========== ========= Income from investment operations Net investment income 0.24 0.37 0.52 Net realized and unrealized gain (loss) on investments 0.32 0.17 0.03 ----------- ----------- --------- Total from investment operations 0.56 0.54 0.55 ----------- ----------- --------- Less distributions from Net investment income ( 0.24) ( 0.37) ( 0.52) Net realized gains on investments 0 0 0 ----------- ----------- ---------- Total distributions ( 0.24) ( 0.37) ( 0.52) ----------- ----------- ---------- Net asset value end of period $ 11.21 $ 10.89 $ 10.72 =========== =========== ========== Total Return (c) 5.18% 5.13% 5.21% Ratios/Supplemental Data Ratios to average net assets Total expenses 1.10%(b) 1.03%(b) 0.89% Total expenses excluding indirectly paid expenses 1.10%(b) 1.03%(b) - Total expenses excluding waivers and reimbursements 1.10%(b) 1.11%(b) 1.09% Net investment income 4.35%(b) 4.60%(b) 4.78% Portfolio turnover rate 50% 114% 65% Net assets end of period (thousands) $ 45,999 $ 45,814 $ 50,569 February 21, 1992 (Commencement Eight Months Year Ended of Class Operations) Ended December 31, through August 31, 1995 (d) 1994 1993 December 31, 1992 CLASS A SHARES Net asset value beginning of period $ 9.79 $ 11.16 $ 10.42 $ 10.00 ========== ========= ======== =========== Income from investment operations Net investment income 0.34 0.52 0.54 0.51 Net realized and unrealized gain (loss) on investments 0.90 ( 1.37) 0.81 0.42 ---------- --------- -------- ----------- Total from investment operations 1.24 ( 0.85) 1.35 0.93 ---------- --------- -------- ----------- Less distributions from Net investment income ( 0.34) ( 0.52) ( 0.54) ( 0.51) Net realized gains on investments 0 0 ( 0.07) 0 ---------- --------- -------- ----------- Total distributions ( 0.34) ( 0.52) ( 0.61) ( 0.51) ---------- --------- -------- ----------- Net asset value end of period $ 10.69 $ 9.79 $ 11.16 $ 10.42 ========== ========= ======== =========== Total Return (c) 12.83% ( 7.71%) 13.25% 9.48% Ratios/Supplemental Data Ratios to average net assets Total expenses 1.06%(b) 1.01% 0.85% 0.49%(b) Total expenses excluding indirectly paid expenses - - - - Total expenses excluding waivers and reimbursements 1.09%(b) 1.02% 1.07% 1.11%(b) Net investment income 4.93%(b) 5.04% 4.99% 5.79%(b) Portfolio turnover rate 27% 53% 14% 7% Net assets end of period (thousands) $ 58,751 $ 57,676 $101,352 $ 90,738
(a) The Fund changed its fiscal year end from August 31 to May 31. (b) Annualized. (c) Excluding applicable sales charges. (d) The Fund changed its fiscal year end from December 31 to August 31. See Combined Notes to Financial Statements. 11 EVERGREEN High Grade Tax Free Fund Financial Highlights (For a share outstanding throughout each period)
Six Months Ended November 30, 1997 Nine Months Ended Year Ended (Unaudited) May 31, 1997 (a) August 31, 1996 CLASS B SHARES Net asset value beginning of period $ 10.89 $ 10.72 $ 10.69 =========== =========== ========= Income from investment operations Net investment income 0.20 0.31 0.44 Net realized and unrealized gain (loss) on investments 0.32 0.17 0.03 ----------- ----------- --------- Total from investment operations 0.52 0.48 0.47 ----------- ----------- --------- Less distributions from Net investment income ( 0.20) ( 0.31) ( 0.44) Net realized gain on investments 0 0 0 ----------- ----------- ---------- Total distributions ( 0.20) ( 0.31) ( 0.44) ----------- ----------- ---------- Net asset value end of period $ 11.21 $ 10.89 $ 10.72 =========== =========== ========== Total Return (c) 4.79% 4.55% 4.42% Ratios/Supplemental Data Ratios to average net assets Total expenses 1.85%(b) 1.78%(b) 1.64% Total expenses excluding indirectly paid expenses 1.85%(b) 1.78%(b) - Total expenses excluding waivers and reimbursements 1.85%(b) 1.86%(b) 1.84% Net investment income 3.60%(b) 3.85%(b) 4.03% Portfolio turnover rate 50% 114% 65% Net assets end of period (thousands) $ 32,329 $ 31,874 $ 32,221 January 11, 1993 (Commencement Eight Months of Class Operations) Ended Year Ended through August 31, 1995 (d) December 31, 1994 December 31, 1993 CLASS B SHARES Net asset value beginning of period $ 9.79 $ 11.16 $ 10.42 ========== ========== =========== Income from investment operations Net investment income 0.29 0.46 0.47 Net realized and unrealized gain (loss) on investments 0.90 ( 1.37) 0.81 ---------- ---------- ----------- Total from investment operations 1.19 ( 0.91) 1.28 ---------- ---------- ----------- Less distributions from Net investment income ( 0.29) ( 0.46) ( 0.47) Net realized gain on investments 0 0 ( 0.07) ---------- ---------- ----------- Total distributions ( 0.29) ( 0.46) ( 0.54) ---------- ---------- ----------- Net asset value end of period $ 10.69 $ 9.79 $ 11.16 ========== ========== =========== Total Return (c) 12.27% ( 8.24%) 12.52% Ratios/Supplemental Data Ratios to average net assets Total expenses 1.81%(b) 1.58% 1.35%(b) Total expenses excluding indirectly paid expenses - - - Total expenses excluding waivers and reimbursements 1.84%(b) 1.59% 1.57%(b) Net investment income 4.18%(b) 4.47% 4.44%(b) Portfolio turnover rate 27% 53% 14% Net assets end of period (thousands) $ 34,206 $ 32,435 $ 41,030
(a) The Fund changed its fiscal year end from August 31 to May 31. (b) Annualized. (c) Excluding applicable sales charges. (d) The Fund changed its fiscal year end from December 31 to August 31. See Combined Notes to Financial Statements. 12 EVERGREEN High Grade Tax Free Fund Financial Highlights (For a share outstanding throughout each period)
Six Months Ended November 30, 1997 Nine Months Ended (Unaudited) May 31, 1997 (a) CLASS Y SHARES Net asset value beginning of period $ 10.89 $ 10.72 =========== =========== Income from investment operations Net investment income 0.25 0.39 Net realized and unrealized gain (loss) on investments 0.32 0.17 ----------- ----------- Total from investment operations 0.57 0.56 ----------- ----------- Less distributions from Net investment income ( 0.25) ( 0.39) ----------- ----------- Net asset value end of period $ 11.21 $ 10.89 =========== =========== Total Return 5.31% 5.32% Ratios/Supplemental Data Ratios to average net assets Total expenses 0.85%(b) 0.78%(b) Total expenses excluding indirectly paid expenses 0.85%(b) 0.78%(b) Total expenses excluding waivers and reimbursements 0.85%(b) 0.86%(b) Net investment income 4.60%(b) 4.85%(b) Portfolio turnover rate 50% 114% Net assets end of period (thousands) $ 25,076 $ 24,441 February 28, 1994 (Commencement Eight Months of Class Operations) Year Ended Ended through August 31, 1996 August 31, 1995 (c) December 31, 1994 CLASS Y SHARES Net asset value beginning of period $ 10.69 $ 9.79 $ 10.93 ========= ========== =========== Income from investment operations Net investment income 0.55 0.36 0.46 Net realized and unrealized gain (loss) on investments 0.03 0.90 ( 1.14) --------- ---------- ----------- Total from investment operations 0.58 1.26 ( 0.68) --------- ---------- ----------- Less distributions from Net investment income ( 0.55) ( 0.36) ( 0.46) ---------- ---------- ----------- Net asset value end of period $ 10.72 $ 10.69 $ 9.79 ========== ========== =========== Total Return 5.47% 13.02% ( 6.29%) Ratios/Supplemental Data Ratios to average net assets Total expenses 0.64% 0.81%(b) 0.76%(b) Total expenses excluding indirectly paid expenses - - - Total expenses excluding waivers and reimbursements 0.84% 0.84%(b) 0.77%(b) Net investment income 5.03% 5.18%(b) 5.46%(b) Portfolio turnover rate 65% 27% 53% Net assets end of period (thousands) $ 25,112 $ 25,079 $ 4,318
(a) The Fund changed its fiscal year end from August 31 to May 31. (b) Annualized. (c) The Fund changed its fiscal year end from December 31 to August 31. See Combined Notes to Financial Statements. 13 EVERGREEN Short-Intermediate Municipal Fund Financial Highlights (For a share outstanding throughout each period)
Six Months Ended November 30, 1997 (Unaudited) CLASS A SHARES Net asset value beginning of period $ 10.09 =========== Income from investment operations Net investment income 0.20 Net realized and unrealized gain (loss) on investments 0.08 ----------- Total from investment operations 0.28 ----------- Less distributions from Net investment income ( 0.20) ----------- Net asset value end of period $ 10.17 =========== Total Return (c) 2.77% Ratios/Supplemental Data Ratios to average net assets Total expenses 0.87%(b) Total expenses excluding indirectly paid expenses 0.87%(b) Total expenses excluding waivers and reimbursements 0.91%(b) Net investment income 3.92%(b) Portfolio turnover rate 37% Net assets end of period (thousands) $ 4,572 January 5, 1995 (Commencement of Class Operations) Nine Months Ended Year Ended through May 31, 1997 (a) August 31, 1996 August 31, 1995 CLASS A SHARES Net asset value beginning of period $ 10.08 $ 10.17 $ 9.97 =========== ========= ========== Income from investment operations Net investment income 0.30 0.43 0.30 Net realized and unrealized gain (loss) on investments 0.01 ( 0.09) 0.20 ----------- ---------- ---------- Total from investment operations 0.31 0.34 0.50 ----------- ---------- ---------- Less distributions from Net investment income ( 0.30) ( 0.43) ( 0.30) ----------- ---------- ---------- Net asset value end of period $ 10.09 $ 10.08 $ 10.17 =========== ========== ========== Total Return (c) 3.08% 3.37% 5.09% Ratios/Supplemental Data Ratios to average net assets Total expenses 0.84%(b) 0.80% 0.70%(b) Total expenses excluding indirectly paid expenses 0.83%(b) - - Total expenses excluding waivers and reimbursements 0.96%(b) 1.11% 1.14%(b) Net investment income 3.94%(b) 4.05% 4.32%(b) Portfolio turnover rate 34% 29% 80% Net assets end of period (thousands) $ 6,072 $ 27,722 $ 6,820
Six Months Ended November 30, 1997 (Unaudited) CLASS B SHARES Net asset value beginning of period $ 10.10 =========== Income from investment operations Net investment income 0.15 Net realized and unrealized gain (loss) on investments 0.08 ----------- Total from investment operations 0.23 ----------- Less distributions from Net investment income ( 0.15) ----------- Net asset value end of period $ 10.18 =========== Total Return (c) 2.31% Ratios/Supplemental Data Ratios to average net assets Total expenses 1.77%(b) Total expenses excluding indirectly paid expenses 1.77%(b) Total expenses excluding waivers and reimbursements 1.81%(b) Net investment income 3.00%(b) Portfolio turnover rate 37% Net assets end of period (thousands) $ 6,209 January 5, 1995 (Commencement of Class Operations) Nine Months Ended Year Ended through May 31, 1997 (a) August 31, 1996 August 31, 1995 CLASS B SHARES Net asset value beginning of period $ 10.08 $ 10.17 $ 9.97 =========== ========= ========== Income from investment operations Net investment income 0.23 0.34 0.24 Net realized and unrealized gain (loss) on investments 0.02 ( 0.09) 0.20 ----------- ---------- ---------- Total from investment operations 0.25 0.25 0.44 ----------- ---------- ---------- Less distributions from Net investment income ( 0.23) ( 0.34) ( 0.24) ----------- ---------- ---------- Net asset value end of period $ 10.10 $ 10.08 $ 10.17 =========== ========== ========== Total Return (c) 2.49% 2.44% 4.50% Ratios/Supplemental Data Ratios to average net assets Total expenses 1.73%(b) 1.67% 1.58%(b) Total expenses excluding indirectly paid expenses 1.73%(b) - - Total expenses excluding waivers and reimbursements 1.86%(b) 2.07% 2.26%(b) Net investment income 3.04%(b) 3.28% 3.50%(b) Portfolio turnover rate 34% 29% 80% Net assets end of period (thousands) $ 6,742 $ 7,413 $ 6,050
(a) The Fund changed its fiscal year end from August 31 to May 31. (b) Annualized. (c) Excluding applicable sales charges. See Combined Notes to Financial Statements. 14 EVERGREEN Short-Intermediate Municipal Fund Financial Highlights (For a share outstanding throughout each period)
Six Months Ended Nine Months November 30, 1997 Ended (Unaudited) May 31, 1997 (a) CLASS Y SHARES Net asset value beginning of period $ 10.10 $ 10.07 =========== =========== Income from investment operations Net investment income 0.20 0.30 Net realized and unrealized gain (loss) on investments 0.08 0.03 ----------- ----------- Total from investment operations 0.28 0.33 ----------- ----------- Less distributions from Net investment income ( 0.20) ( 0.30) In excess of net investment income 0 0 Net realized gain on investments 0 0 ----------- ----------- Total distributions ( 0.20) ( 0.30) ----------- ----------- Net asset value end of period $ 10.18 $ 10.10 =========== =========== Total Return 2.82% 3.36% Ratios/Supplemental Data Ratios to average net assets Total expenses 0.75%(b) 0.74%(b) Total expenses excluding indirectly paid expenses 0.75%(b) 0.73%(b) Total expenses excluding waivers and reimbursements 0.79%(b) 0.86%(b) Net investment income 4.04%(b) 4.04%(b) Portfolio turnover rate 37% 34% Net assets end of period (thousands) $ 194,390 $ 32,293 July 17, 1991 (Commencement of Class Operations) Year Ended August 31, through 1996 1995 1994 1993 1992 (c) August 31, 1991 (c) CLASS Y SHARES Net asset value beginning of period $ 10.17 $ 10.21 $ 10.58 $ 10.33 $ 10.00 $ 10.00 ======== ======== ======== ======== ======== ========== Income from investment operations Net investment income 0.43 0.46 0.47 0.49 0.51 0.06 Net realized and unrealized gain (loss) on investments ( 0.10) ( 0.04) ( 0.32) 0.25 0.33 0 --------- --------- --------- -------- -------- ----------- Total from investment operations 0.33 0.42 0.15 0.74 0.84 0.06 --------- --------- --------- -------- -------- ----------- Less distributions from Net investment income ( 0.43) ( 0.46) ( 0.47) ( 0.49) ( 0.51) ( 0.06) In excess of net investment income 0 0 ( 0.03) 0 0 0 Net realized gain on investments 0 0 ( 0.02) 0 0 0 --------- --------- --------- --------- --------- ----------- Total distributions ( 0.43) ( 0.46) ( 0.52) ( 0.49) ( 0.51) ( 0.06) --------- --------- --------- --------- --------- ----------- Net asset value end of period $ 10.07 $ 10.17 $ 10.21 $ 10.58 $ 10.33 $ 10.00 ========= ========= ========= ========= ========= =========== Total Return 3.30% 4.20% 1.40% 7.40% 8.56% 0.62% Ratios/Supplemental Data Ratios to average net assets Total expenses 0.70% 0.74% 0.58% 0.40% 0.17% 0.00%(b) Total expenses excluding indirectly paid expenses - - - - - - Total expenses excluding waivers and reimbursements 0.90% 0.86% 0.83% 0.81% 0.86% 1.40%(b) Net investment income 4.27% 4.52% 4.54% 4.73% 4.85% 4.93%(b) Portfolio turnover rate 29% 80% 32% 37% 57% - Net assets end of period (thousands) $ 34,893 $ 40,581 $ 53,417 $ 66,607 $ 54,470 $ 4,025
(a) The Fund changed its fiscal year end from August 31 to May 31. (b) Annualized (c) On November 18, 1991, the Fund was changed to a diversified municipal bond fund with a fluctuating net asset value per share from a non-diversified money market fund with a stable net asset value per share. The shares outstanding and the related per share data as of August 31, 1991 are restated to reflect both a 1 for 2 reverse share split on October 30, 1991 and a 1 for 5 reverse share split on August 19, 1992. Total return calculated after November 18, 1991 reflects the fluctuation in net asset value per share. See Combined Notes to Financial Statements. 15 EVERGREEN Tax Free Income Fund Financial Highlights (For a share outstanding throughout each period)
Six Months Ended Six Months November 30, 1997 Ended (Unaudited) May 31, 1997 (a) CLASS A SHARES Net asset value beginning of period $ 9.78 $ 9.90 ========== ========== Income from investment operations Net investment income 0.23 (f) 0.24 Net realized and unrealized gain (loss) on investments and futures contracts 0.23 ( 0.11) ---------- ---------- Total from investment operations 0.46 0.13 ---------- ---------- Less distributions from Net investment income ( 0.23) ( 0.24) In excess of net investment income 0 ( 0.01) Net realized gain on investments 0 0 Tax basis return of capital 0 0 ---------- ---------- Total distributions ( 0.23) ( 0.25) ---------- ---------- Net asset value end of period $ 10.01 $ 9.78 ========== ========== Total Return (c) 4.72% 1.34% Ratios/Supplemental Data Ratios to average net assets Total expenses 1.13%(b) 1.19%(b) Total expenses excluding indirectly paid expenses 1.12%(b) 1.18%(b) Net investment income 4.61%(b) 4.85%(b) Portfolio turnover rate 45% 54% Net assets end of period (thousands) $ 66,825 $ 72,629 Year Ended November 30, 1996 1995 1994 1993 CLASS A SHARES Net asset value beginning of period $ 10.05 $ 8.93 $ 10.25 $ 10.17 =========== ========= ========= ======== Income from investment operations Net investment income 0.51 (f) 0.51 (f) 0.51 0.57 Net realized and unrealized gain (loss) on investments and futures contracts ( 0.14) 1.13 ( 1.28) 0.36 ----------- --------- --------- -------- Total from investment operations 0.37 1.64 ( 0.77) 0.93 ----------- --------- --------- -------- Less distributions from Net investment income ( 0.52) ( 0.51) ( 0.52) ( 0.57) In excess of net investment income 0(e) ( 0.01) 0 ( 0.04) Net realized gain on investments 0 0 0 ( 0.24) Tax basis return of capital 0 0 ( 0.03) 0 ----------- --------- --------- -------- Total distributions ( 0.52) ( 0.52) ( 0.55) ( 0.85) ----------- --------- --------- -------- Net asset value end of period $ 9.90 $ 10.05 $ 8.93 $ 10.25 =========== ========= ========= ======== Total Return (c) 3.83% 18.71% ( 7.81%) 9.37% Ratios/Supplemental Data Ratios to average net assets Total expenses 1.13% 1.19% 1.13% 1.21% Total expenses excluding indirectly paid expenses 1.12% 1.18% - - Net investment income 5.21% 5.35% 5.27% 5.40% Portfolio turnover rate 128% 30% 98% 47% Net assets end of period (thousands) $ 82,425 $ 94,183 $ 95,691 $124,102
February 13, 1987 (Commencement Year Ended November 30, of Operations) to 1992 1991 1990 1989 1988 November 30, 1987 CLASS A SHARES Net asset value beginning of period $ 10.13 $ 9.94 $ 10.24 $ 9.96 $ 9.64 $ 10.00 ========= ======== ========= ======== ======== ========== Income from investment operations Net investment income 0.63 0.61 0.59 0.62 0.63 0.33 Net realized and unrealized gain (loss) on investments and futures contracts 0.30 0.31 ( 0.06) 0.34 0.37 ( 0.32) --------- -------- ---------- -------- -------- ---------- Total from investment operations 0.93 0.92 0.53 0.96 1.00 0.01 --------- -------- ---------- -------- -------- ---------- Less distributions from Net investment income ( 0.62) ( 0.61) ( 0.60) ( 0.63) ( 0.68) ( 0.37) In excess of net investment income 0 0 ( 0.03) 0 0 0 Net realized gain on investments ( 0.27) ( 0.12) ( 0.20) ( 0.05) 0 0 ---------- -------- ---------- -------- -------- ---------- Total distributions ( 0.89) ( 0.73) ( 0.83) ( 0.68) ( 0.68) ( 0.37) ---------- -------- ---------- -------- -------- ---------- Net asset value end of period $ 10.17 $ 10.13 $ 9.94 $ 10.24 $ 9.96 $ 9.64 ========== ======== ========== ======== ======== ========== Total Return (c) 9.35% 9.59% 5.55% 9.97% 10.60% 0.17% Ratios/Supplemental Data Ratios to average net assets Total expenses 1.25% 1.58% 1.66% 1.62% 1.57% 1.00%(d) Total expenses excluding indirectly paid expenses - - - - - - Net investment income 6.02% 5.95% 6.03% 6.15% 6.13% 6.85%(d) Portfolio turnover rate 32% 37% 42% 49% 109% 67% Net assets end of period (thousands) $ 120,660 $133,524 $ 146,335 $162,013 $179,191 $ 16,090
(a) The Fund changed its fiscal year end from November 30 to May 31. (b) Annualized. (c) Excluding applicable sales charges. (d) Annualized for the period April 14, 1987 (Commencement of Investment Operations) to November 30, 1987. (e) Amount represents less than $0.01 per share. (f) Calculation based on average shares outstanding. See Combined Notes to Financial Statements. 16 EVERGREEN Tax Free Income Fund Financial Highlights (For a share outstanding throughout each period)
Six Months Ended Six Months November 30, 1997 Ended (Unaudited) May 31, 1997 (a) CLASS B SHARES Net asset value beginning of period $ 9.69 $ 9.81 ========== ========== Income from investment operations Net investment income 0.19 (e) 0.19 Net realized and unrealized gain (loss) on investments and futures contracts 0.22 ( 0.10) ---------- ---------- Total from investment operations 0.41 0.09 ---------- ---------- Less distributions from Net investment income ( 0.19) ( 0.20) In excess of net investment income 0 ( 0.01) Net realized gain on investments 0 0 Tax basis return of capital 0 0 ---------- ---------- Total distributions ( 0.19) ( 0.21) ---------- ---------- Net asset value end of period $ 9.91 $ 9.69 ========== ========== Total Return (c) 4.25% 0.97% Ratios/Supplemental Data Ratios to average net assets Total expenses 1.88%(b) 1.95%(b) Total expenses excluding indirectly paid expenses 1.88%(b) 1.94%(b) Net investment income 3.85%(b) 4.09%(b) Portfolio turnover rate 45% 54% Net assets end of period (thousands) $ 26,216 $ 28,822 February 1, 1993 (Date of Initial Year Ended November 30, Public Offering) to 1996 1995 1994 November 30, 1993 CLASS B SHARES Net asset value beginning of period $ 9.97 $ 8.88 $ 10.25 $ 10.27 ========== ========== ========== =========== Income from investment operations Net investment income 0.44 (e) 0.44 (e) 0.45 0.37 Net realized and unrealized gain (loss) on investments and futures contracts ( 0.16) 1.11 ( 1.29) 0.30 ---------- ---------- ---------- ----------- Total from investment operations 0.28 1.55 ( 0.84) 0.67 ---------- ---------- ---------- ----------- Less distributions from Net investment income ( 0.44) ( 0.45) ( 0.50) ( 0.37) In excess of net investment income 0(d) ( 0.01) 0 ( 0.08) Net realized gain on investments 0 0 0 ( 0.24) Tax basis return of capital 0 0 ( 0.03) 0 ---------- ---------- ---------- ----------- Total distributions ( 0.44) ( 0.46) ( 0.53) ( 0.69) ---------- ---------- ---------- ----------- Net asset value end of period $ 9.81 $ 9.97 $ 8.88 $ 10.25 ========== ========== ========== =========== Total Return (c) 2.99% 17.84% ( 8.43%) 6.59% Ratios/Supplemental Data Ratios to average net assets Total expenses 1.90% 1.96% 1.88% 1.96%(b) Total expenses excluding indirectly paid expenses 1.89% 1.94% - - Net investment income 4.44% 4.59% 4.60% 4.42%(b) Portfolio turnover rate 128% 30% 98% 47% Net assets end of period (thousands) $ 33,063 $ 33,449 $ 28,860 $ 14,091
Six Months Ended Six Months November 30, 1997 Ended (Unaudited) May 31, 1997 (a) CLASS C SHARES Net asset value beginning of period $ 9.69 $ 9.81 ========== ========== Income from investment operations Net investment income 0.19 (e) 0.18 Net realized and unrealized gain (loss) on investments and futures contracts 0.23 ( 0.09) ---------- ---------- Total from investment operations 0.42 0.09 ---------- ---------- Less distributions from Net investment income ( 0.19) ( 0.20) In excess of net investment income 0 ( 0.01) Net realized gain on investments 0 0 Tax basis return of capital 0 0 ---------- ---------- Total distributions ( 0.19) ( 0.21) ---------- ---------- Net asset value end of period $ 9.92 $ 9.69 ========== ========== Total Return (c) 4.35% 0.97% Ratios/Supplemental Data Ratios to average net assets Total expenses 1.89%(b) 1.95%(b) Total expenses excluding indirectly paid expenses 1.89%(b) 1.94%(b) - Net investment income 3.85%(b) 4.09%(b) Portfolio turnover rate 45% 54% Net assets end of period (thousands) $ 8,533 $ 11,879 February 1, 1993 (Date of Initial Year Ended November 30, Public Offering) to 1996 1995 1994 November 30, 1993 CLASS C SHARES Net asset value beginning of period $ 9.97 $ 8.88 $ 10.26 $ 10.27 ========== ========== ========== =========== Income from investment operations Net investment income 0.41 (e) 0.44 (e) 0.43 0.37 Net realized and unrealized gain (loss) on investments and futures contracts ( 0.13) 1.11 ( 1.27) 0.31 ---------- ---------- ---------- ----------- Total from investment operations 0.28 1.55 ( 0.84) 0.68 ---------- ---------- ---------- ----------- Less distributions from Net investment income ( 0.44) ( 0.45) ( 0.51) ( 0.37) In excess of net investment income 0(d) ( 0.01) 0 ( 0.08) Net realized gain on investments 0 0 0 ( 0.24) Tax basis return of capital 0 0 ( 0.03) 0 ---------- ---------- ---------- ----------- Total distributions ( 0.44) ( 0.46) ( 0.54) ( 0.69) ---------- ---------- ---------- ----------- Net asset value end of period $ 9.81 $ 9.97 $ 8.88 $ 10.26 ========== ========== ========== =========== Total Return (c) 2.99% 17.84% ( 8.52%) 6.70% Ratios/Supplemental Data Ratios to average net assets Total expenses 1.90% 1.96% 1.89% 1.94%(b) Total expenses excluding indirectly paid expenses 1.89% 1.94% - - - Net investment income 4.44% 4.59% 4.52% 4.41%(b) Portfolio turnover rate 128% 30% 98% 47% Net assets end of period (thousands) $ 13,769 $ 20,386 $ 23,230 $ 27,261
(a) The Fund changed its fiscal year end from November 30 to May 31. (b) Annualized. (c) Excluding applicable sales charges. (d) Amount represents less than $0.01 per share. (e) Calculation based on average shares oustanding. See Combined Notes to Financial Statements. 17 EVERGREEN High Grade Tax Free Fund Schedule of Investments November 30, 1997 (Unaudited)
Principal Amount Value MUNICIPAL OBLIGATIONS - 95.5% Arizona - 1.1% $ 1,000,000 Creighton, Arizona, Elem. School District No. 14 of Maricopa County, School Improvements Bonds (Project of 1990), Series C 1991 6.50%, 7/1/07, (FGIC) .................... $1,145,970 ---------- California - 3.5% 1,000,000 Orange County, California, Public Finance Authority 5.75%, 12/1/10, (AMBAC) .................. 1,067,040 1,000,000 San Joaquin Hills, California, Transportation Corridor Agency, Toll Revenue, Series A 5.25%, 1/15/30 ........................... 986,180 500,000 San Mateo County, California, Joint Powers Financing Authority, Lease Revenue (Capital Projects Program), Refunding Revenue, Series A 6.50%, 7/1/16, (MBIA) .................... 583,740 1,000,000 Southern California, Public Power Authority, Mead Adelanto Project, Series A 5.00%, 7/1/17, (AMBAC) ................... 973,160 ---------- 3,610,120 ---------- Colorado - 2.6% 1,000,000 Arapahoe County, Colorado, Public Highway Authority, Capital Improvements Trust Fund Revenue (E-470 Projects) 6.15%, 8/31/26, (MBIA) ................... 1,091,510 500,000 City & County of Denver, Colorado, School District No. 1, General Obligation Refunding Bonds, Series 1994A 6.50%, 6/1/10, (MBIA) .................... 575,675 1,000,000 Colorado State, Public Highway Authority, Senior Series A 5.75%, 9/1/14 ............................ 1,071,390 ---------- 2,738,575 ---------- Florida - 2.2% 1,000,000 Coral Springs, Florida, Improvements District, Refunding Revenue, Water and Sewer 6.00%, 6/1/10, (MBIA) .................... 1,111,870 1,000,000 Orange County, Florida, Health Facilities Authority Revenue, Orlando Regional Healthcare Systems, Series 1996C 6.25%, 10/1/16, (MBIA) ................... 1,135,220 ---------- 2,247,090 ---------- Georgia - 3.9% 500,000 City of Atlanta, Georgia, Airport Facilities Refunding Revenue, Series 1994A 6.50%, 1/1/10, (AMBAC) ................... 574,285 Georgia State, Municipal Electric Authority, Special Obligation, Fifth Crossover, Project One: 1,000,000 6.40%, 1/1/13, (AMBAC) .................. 1,139,050 2,000,000 6.50%, 1/1/17, (MBIA) ................... 2,324,220 ---------- 4,037,555 ----------
Principal Amount Value MUNICIPAL OBLIGATIONS - continued Hawaii - 2.7% $ 1,000,000 Hawaii State, Airport System Revenue, Second Series of 1990 7.50%, 7/1/20, (FGIC) .................... $1,085,240 1,500,000 Hawaii State, General Obligation, Series CM 6.00%, 12/1/10, (FGIC) ................... 1,666,515 ---------- 2,751,755 ---------- Idaho - 0.8% 800,000 Idaho State, Housing Agency, Single Family Mortgage, Mezzanine, Series C-1 6.30%, 7/1/11, (FHA) ..................... 837,728 ---------- Illinois - 16.9% 1,000,000 Chicago, Illinois, Board of Education, Chicago School Reform, Series A 5.25%, 12/1/18, (AMBAC) .................. 983,750 2,150,000 City of Chicago, Illinois, General Obligation, Series 1995 6.13%, 1/1/16, (AMBAC) ................... 2,318,796 4,725,000 City of Chicago, Illinois, Water Refunding Revenue, Series 1993 6.50%, 11/1/15, (FGIC) ................... 5,495,884 Illinois State, Development Finance Authority, Pollution Control Refunding Revenue (Commonwealth Edison Co. Project): Series 1991 2,000,000 7.25%, 6/1/11, (MBIA) ................... 2,197,160 Series 1994D 3,000,000 6.75%, 3/1/15, (AMBAC) .................. 3,348,180 1,750,000 Illinois State, Health Facilities Authority, Health Facilities Refunding Revenue, Series 1992AA 6.50%, 6/1/12, (MBIA) .................... 2,000,968 1,000,000 Illinois State, Regional Transportation Authority Revenue 6.00%, 6/1/15 ............................ 1,103,390 ---------- 17,448,128 ---------- Indiana - 3.9% 1,500,000 Indiana State, Middle School Building Corp., Lawrence Township of Marion County, First Mortgage Bond 6.88%, 7/5/11, (MBIA) .................... 1,788,225 1,000,000 Indiana State, Municipal Power Agency, Power Supply System, Refunding Revenue, 1993 Series B 6.00%, 1/1/13, (MBIA) .................... 1,102,790 1,000,000 Indiana State, Transportation Finance Authority, Highway Revenue, Series 1992A 6.80%, 12/1/16, (MBIA) ................... 1,187,940 ---------- 4,078,955 ---------- Maine - 1.2% 1,000,000 Maine State, Turnpike Authority, Turnpike Revenue, Series 1994 7.13%, 7/1/08, (MBIA) .................... 1,201,380 ---------- Massachusetts - 5.8% 1,000,000 Massachusetts State, General Obligation, Series A 6.50%, 11/1/14, (AMBAC) .................. 1,161,130
18 EVERGREEN High Grade Tax Free Fund Schedule of Investments (continued) November 30, 1997 (Unaudited)
Principal Amount Value MUNICIPAL OBLIGATIONS - continued Massachusetts - continued $ 500,000 Massachusetts State, Housing Finance Agency, Housing Project Revenue, 1993 Series A 6.15%, 10/1/15, (AMBAC) ............. $ 520,900 2,000,000 Massachusetts State, Port Authority Revenue, Series A 5.00%, 7/1/27 ....................... 1,910,780 1,000,000 Massachusetts State, Turnpike Authority Revenue, Metropolitan Highway System, Series B 5.13%, 1/1/23, (MBIA) ............... 974,460 1,500,000 Massachusetts State, Turnpike Authority Revenue, Senior Series A 5.13%, 1/1/23 ....................... 1,461,690 ---------- 6,028,960 ---------- Michigan - 4.9% Detroit, Michigan, Water Supply Systems Revenue: 1,250,000 Second Lien Series A 5.55%, 7/1/12, (MBIA) .............. 1,317,887 2,500,000 Senior Lien Series A 6.00%, 7/1/14 ...................... 2,746,775 1,000,000 Michigan State, Building Authority Revenue Facility Program, Series II 5.38%, 10/15/10 ..................... 1,031,420 ---------- 5,096,082 ---------- Minnesota - 0.5% 480,000 Minnesota State, Housing Finance Agency, Single Family Mortgage, 1994 Series H 6.70%, 1/1/18 ....................... 514,018 ---------- New Mexico - 1.0% City of Albuquerque, New Mexico, Airport Revenue: 500,000 Series 1995 A 6.35%, 7/1/07, (AMBAC) .............. 544,640 500,000 Series 1995 B 7.00%, 7/1/16, (AMBAC) .............. 501,090 ---------- 1,045,730 ---------- New York - 10.3% 2,000,000 New York City, New York, Transportation Finance Authority Revenue (Future Tax), Series A 5.00%, 8/15/27 ...................... 1,919,220 1,500,000 New York State, Housing Finance Agency Revenue, Series 1994 B 6.35%, 8/15/23, (AMBAC) ............. 1,587,180 1,000,000 New York State, Triborough Bridge and Tunnel Authority Revenue, Refunding Revenue, General Purpose, Series A 5.25%, 1/1/28 ....................... 982,140 500,000 Port Authority New York & New Jersey Consolidated Bonds, Fifth Installment, Ninety-Seventh Series 6.50%, 7/15/19, (FGIC) .............. 543,300 5,000,000 Port Authority New York & New Jersey Special Obligation (Special Project JFK Intl. Airport) 6.25%, 12/1/10, (MBIA) .............. 5,617,950 ---------- 10,649,790 ----------
Principal Amount Value MUNICIPAL OBLIGATIONS - continued North Dakota - 3.1% $3,000,000 Mercer County, North Dakota, Pollution Control Refunding Revenue (Basin Electric Power Cooperative-Antelope Valley), Second 1995 Series 6.05%, 1/1/19, (AMBAC) .............. $3,205,110 ---------- Ohio - 4.3% 1,500,000 City of Toledo, Ohio, Housing Improvements, Macy's Project, Series 1995A 6.35%, 12/1/25, (MBIA) .............. 1,637,340 1,000,000 Cleveland, Ohio, Airport System Revenue, Series A 5.13%, 1/1/17 ....................... 969,750 1,000,000 Ohio State, Board of Education, Kings Local School District, City of Warren School Improvements, Series 1995 7.50%, 12/1/16, (FGIC) .............. 1,283,440 475,000 Ohio State, Housing Finance Agency, Residential Mortgage Revenue, 1995 Series A-2 6.63%, 3/1/26, (GNMA) ............... 507,271 ---------- 4,397,801 ---------- Pennsylvania - 1.9% 2,000,000 Pittsburgh, Pennsylvania, General Obligation, Series B 5.00%, 9/1/10, (AMBAC) .............. 1,997,980 ---------- Puerto Rico - 2.1% Puerto Rico, Electric Power Authority, Refunding Revenue: 1,000,000 Series B 6.25%, 7/1/10, (MBIA) .............. 1,133,760 500,000 Series Y 6.50%, 7/1/06, (MBIA) .............. 570,580 495,000 Puerto Rico, Housing Bank & Finance Agency, Affordable Housing Mortgage Subsidy Program, Single Family Mortgage 6.10%, 10/1/15, (GNMA, FNMA & FHLMC) .............................. 512,043 ---------- 2,216,383 ---------- South Carolina - 2.1% 2,000,000 South Carolina State, Port Authority Revenue, Series 1991 6.63%, 7/1/11, (AMBAC) .............. 2,154,800 ---------- Tennessee - 3.2% 1,200,000 Bristol, Tennessee, Health & Educational Facility, Bristol Memorial Hospital, Series 1993 6.75%, 9/1/07, (FGIC) ............... 1,388,628 1,700,000 Knox County, Tennessee, Health, Educational & Housing Facility Board, Hospital Facility Revenue (Fort Sanders Alliance), Series 1993 6.25%, 1/1/13, (MBIA) ............... 1,921,272 ---------- 3,309,900 ---------- Texas - 2.8% 1,500,000 City of Austin, Texas, Airport System, Prior Lien Revenue, Series 1995A 6.13%, 11/15/25, (MBIA) ............. 1,590,030
19 EVERGREEN High Grade Tax Free Fund Schedule of Investments (continued) November 30, 1997 (Unaudited)
Principal Amount Value MUNICIPAL OBLIGATIONS - continued Texas - continued $ 1,000,000 City of Houston, Texas, Water Conveyance System Contract, COP, Series 1993 H 7.50%, 12/15/14, (AMBAC) ........... $ 1,276,450 ------------ 2,866,480 ------------ Utah - 1.0% 1,000,000 Salt Lake City, Utah, Salt Lake County Airport Revenue, Series 1993A 6.00%, 12/1/12, (FGIC) ............. 1,057,220 ------------ Virginia - 2.2% 2,000,000 Hanover County, Virginia, Industrial Development Authority, Memorial Regional Medical Center Project, Series 1995 6.38%, 8/15/18, (MBIA) ............. 2,300,120 ------------ Washington - 3.6% 2,500,000 City of Tacoma, Washington, Electric Systems Refunding Revenue, Series 1994 6.25%, 1/1/15, (FGIC) .............. 2,711,625 1,000,000 King County III, Washington, King Street Center Project 5.00%, 6/1/10 ...................... 999,070 ------------ 3,710,695 ------------ West Virginia - 0.5% 500,000 West Virginia State, Housing Development Fund, Series A 6.05%, 5/1/27 ...................... 520,250 ------------ Wisconsin - 7.4% 4,500,000 City of Superior, Wisconsin, Limited Obligation Refunding Revenue (Midwest Energy Resource Co. Project), Series E-1991 6.90%, 8/1/21, (FGIC) .............. 5,485,860
Principal Amount Value MUNICIPAL OBLIGATIONS - continued Wisconsin - continued $ 2,000,000 Wisconsin State, Health & Educational Facilities Authority Revenue (Wausau Hospitals, Inc. Project), Series 1991B 6.63%, 8/15/11, (AMBAC) ............ $ 2,147,880 ------------ 7,633,740 ------------ Total Municipal Obligations (cost $93,474,172) ................. 98,802,315 ------------
Shares MUTUAL FUND SHARES - 0.4% (cost $412,000) 412,000 Federated Tax Free Fund 412,000 ---------
Principal Amount SHORT-TERM MUNICIPAL SECURITIES - 7.2% New York - 5.8% New York City, New York, Municipal Water Finance Authority, Water and Sewer System Revenue, Series C: $ 4,000,000 3.85%, 6/15/23, (FGIC) (a) ....... 4,000,000 2,000,000 3.85%, 6/15/22, (FGIC) (a) ....... 2,000,000 --------- 6,000,000 --------- Wyoming - 1.4% 1,400,000 Lincoln County, Wyoming, Pollution Control Revenue, Dates Exxon Project, Series A 3.85%, 11/1/14 (a) ................ 1,400,000 --------- Total Short-Term Municipal Securities (cost $7,400,000) ................. 7,400,000 --------- Total Investments (cost $101,286,172)..... 103.1% 106,614,315 Other Assets and Liabilities - Net ...... ( 3.1) (3,210,203) ------ ------------- Net Assets .............. 100.0% $103,404,112 ====== =============
(a) Security is a variable rate demand note which is payable on demand at par on no more than seven calendar days' notice given by the Fund to the issuer or other parties not affiliated with the issuer. Interest rates are determined and reset by the issuer daily or weekly depending upon the terms of the security. The interest rates presented for these securities are those in effect at November 30, 1997. Summary of Abbreviations: AMBAC American Municipal Bond Assurance Corp. COP Certificate of Participation FGIC Financial Guaranty Insurance Corp. FHA Federal Housing Authority FHLMC Federal Home Loan Mortgage Association FNMA Federal National Mortgage Association GNMA Government National Mortgage Association MBIA Municipal Bond Investors Assurance Corp. See Combined Notes to Financial Statements. 20 EVERGREEN Short-Intermediate Municipal Fund Schedule of Investments November 30, 1997 (Unaudited)
Principal Amount Value MUNICIPAL OBLIGATIONS - 96.5% Arizona - 4.3% $ 2,000,000 Arizona State, Transportation Board, Excise Tax Revenue, Maricopa County Regional Area Road Fund, Subordinated Lien 6.80%, 7/1/98, (MBIA) ................. $2,034,860 5,000,000 Arizona State, Transportation Board, Highway Revenue 6.70%, 7/1/98 ......................... 5,082,650 1,600,000 Pima County, Arizona, General Obligation, Series 1992 6.55%, 7/1/01 ......................... 1,728,496 ---------- 8,846,006 ---------- California - 8.8% 5,000,000 California State, General Obligation 6.35%, 11/1/04, (FGIC) ................ 5,608,050 320,000 California State, Housing Finance Agency, Multi Unit Rental Housing Revenue, Series A 5.25%, 2/1/98 ......................... 320,704 1,090,000 City of Los Angeles, California, Judgement Obligation Bonds, Series A 5.00%, 8/1/00 ......................... 1,114,830 775,000 City of Santa Ana, California, Environment Finance Corp., Recycling Project, Series A 5.25%, 5/1/00, (AMBAC) ................ 794,987 900,000 County of Los Angeles, California, Municipal Improvements Corp., COP 4.50%, 12/1/99 ........................ 908,946 5,080,000 Sacramento, California, School Insurance Authority Revenue, Liability Program, Series D 5.70%, 6/1/03 ......................... 5,357,267 880,000 San Diego County, California, Regional Transportation Commission, Sales Tax Revenue, Second Sr., Series A 4.40%, 4/1/01, (FGIC) ................. 889,768 1,000,000 Stanislaus County, California Improvement Program, Series A 4.50%, 5/1/02, (MBIA) ................. 1,013,180 900,000 State of California, General Obligation 7.00%, 8/1/02, (FGIC) ................. 1,008,315 1,025,000 Stockton, California, Health Facilities Revenue, Series A 5.00%, 12/1/01 ........................ 1,041,349 ---------- 18,057,396 ---------- Colorado - 1.0% 520,000 Colorado State, Student Obligation Board Authority, Student Loan Revenue, Series B 6.13%, 12/1/98 ........................ 528,440 1,500,000 Denver, Colorado, City and County Airport Revenue, Series C 6.35%, 11/15/01 ....................... 1,595,775 ---------- 2,124,215 ---------- Connecticut - 1.2% 2,500,000 Connecticut State, Special Tax Obligation Revenue, Transportation Infrastructure, Series B 4.70%, 10/1/04, (FGIC) ................ 2,542,275 ----------
Principal Amount Value MUNICIPAL OBLIGATIONS - continued Delaware - 1.1% $ 2,200,000 Delaware State, Transportation Authority, Motor Fuel Tax Revenue 7.50%, 7/1/99 ......................... $2,317,480 ---------- District of Columbia - 3.1% 6,000,000 District of Columbia, General Obligation, Series A 5.75%, 6/1/03, (MBIA) ................. 6,362,280 ---------- Florida - 25.1% Broward County, Florida, School District: 1,000,000 6.75%, 2/15/98 ....................... 1,006,210 2,925,000 7.75%, 2/15/07 ....................... 3,007,397 2,000,000 Charlotte County, Florida, Utility Revenue 6.88%, 10/1/21, (FGIC) ................ 2,223,440 1,000,000 Dade County, Florida, School District 7.00%, 7/1/98 ......................... 1,018,540 Florida State, Board of Education, Capital Outlay: 3,000,000 6.75%, 6/1/00 ........................ 3,191,340 Public Education, Series B 4,000,000 5.30%, 6/1/98 ........................ 4,030,720 1,000,000 Florida State, Board of Regents, University Systems Improvements Revenue 5.90%, 7/1/98, (AMBAC) ................ 1,012,290 2,200,000 Florida State, Municipal Power Agency Revenue, All Requirements Power Supply Project 4.30%, 10/1/01, (AMBAC) ............... 2,215,400 Florida State, Turnpike Authority, Turnpike Revenue: 4,000,000 7.75%, 7/1/09 ........................ 4,305,920 3,000,000 Series A 9.50%, 7/1/98, (AMBAC) ............... 3,099,390 2,645,000 Fort Lauderdale, Florida, Water and Sewer Revenue, Series 78 6.10%, 9/1/98 ......................... 2,689,727 5,800,000 Jacksonville, Florida, Electric Authority Revenue, Series 10 4.40%, 10/1/99 ........................ 5,845,646 4,600,000 Jacksonville, Florida, Industrial Development Revenue, Refunding TTX Company Project 5.40%, 3/1/01 ......................... 4,754,836 3,675,000 Orange County, Florida, Health Facilities Authority Revenue, Series 3 5.20%, 10/1/04 ........................ 3,843,315 Palm Beach County, Florida, School District: 2,000,000 4.50%, 8/1/99, (FGIC) ................ 2,017,880 3,000,000 5.20%, 8/1/98, (AMBAC) ............... 3,027,750 3,000,000 Palm Beach County, Florida, Solid Waste Authority Revenue, Refunding and Improvements 5.50%, 12/1/02, (MBIA) ................ 3,174,480 1,000,000 Sarasota, Florida, General Obligation 6.85%, 8/1/00 ......................... 1,068,660 ---------- 51,532,941 ----------
21 EVERGREEN Short-Intermediate Municipal Fund Schedule of Investments (continued) November 30, 1997 (Unaudited)
Principal Amount Value MUNICIPAL OBLIGATIONS - continued Georgia - 3.6% $ 6,795,000 Georgia State, General Obligation, Series B 5.95%, 3/1/04 ...................... $7,380,661 ---------- Illinois - 3.7% 1,000,000 Central Lake County, Illinois, Joint Action Water Agency, Interim Water Revenue, Series A 7.00%, 5/1/00, (AMBAC) ............. 1,084,380 1,345,000 Chicago, Illinois, General Obligation 5.00%, 1/1/01 ...................... 1,376,231 1,000,000 Illinois State, Development Finance Authority Revenue, Refunding Community Rehab. Providers, Series A 5.35%, 7/1/00 ...................... 1,022,500 2,000,000 Illinois State, General Obligation 6.30%, 8/1/99 ...................... 2,072,360 2,000,000 Illinois State, Sales Tax Revenue, Series I 6.95%, 6/15/98 ..................... 2,033,480 ---------- 7,588,951 ---------- Maryland - 0.9% 635,000 Maryland State, Energy Financing Administration, Solid Waste Disposal Revenue (Wheelabrator Water Technologies Baltimore L.L.C. Projects), Series 1996 4.80%, 12/1/98 ..................... 639,108 1,140,000 Montgomery County, Maryland, General Obligation, Consolidated Public Improvement Revenue, Series 1992A 5.30%, 7/1/01 ...................... 1,185,988 ---------- 1,825,096 ---------- Massachusetts - 3.5% 2,000,000 Massachusetts State, General Obligation, Series A 5.00%, 8/1/01 ...................... 2,053,160 1,000,000 Massachusetts State, Health and Educational Facilities Revenue 4.55%, 1/1/21 ...................... 1,007,420 Massachusetts State, Industrial Development Revenue: 460,000 Series 1986G 5.30%, 12/1/06 .................... 474,794 565,000 Series 1986I 5.30%, 12/1/06 .................... 583,170 910,000 Series 1996A 5.35%, 11/1/07 .................... 944,607 1,085,000 Series 1996B 5.35%, 11/1/07 .................... 1,126,263 1,000,000 New England Education Loan Marketing Corp., Student Loan Revenue, Series 1993B 5.40%, 6/1/00 ...................... 1,017,320 ---------- 7,206,734 ----------
Principal Amount Value MUNICIPAL OBLIGATIONS - continued Minnesota - 4.2% $ 1,015,000 City of Minneapolis, Minnesota, Housing and Redevelopment Authority of the City of St. Paul, Single Family Mortgage Refunding Revenue Bond, Series 1996A 5.13%, 6/1/32 ...................... $1,017,030 Minnesota State, General Obligation Various Purpose: 3,000,000 6.40%, 8/1/99 ..................... 3,116,790 1,300,000 6.60%, 8/1/99 ..................... 1,323,868 1,000,000 6.60%, 8/1/00 ..................... 1,041,650 2,000,000 State of Minnesota, General Obligation 6.60%, 8/1/99 ...................... 2,084,280 ---------- 8,583,618 ---------- Missouri - 0.4% 710,000 North Kansas City School District, General Obligation, Direct Deposit Program, Series 1996 6.70%, 3/1/00 ...................... 749,370 ---------- Nevada - 3.8% 5,000,000 Clark County, Nevada, School District, Series A 7.00%, 6/15/05, (MBIA) ............. 5,774,950 2,000,000 Nevada State, General Obligation, Series A 6.45%, 8/1/98 ...................... 2,034,700 ---------- 7,809,650 ---------- New Jersey - 1.1% 2,000,000 New Jersey State, General Obligation, Series 1991 5.90%, 8/1/02 ...................... 2,140,200 ---------- New York - 2.7% New York, New York, General Obligation: 1,000,000 Series 1997L 5.25%, 8/1/00 ..................... 1,023,700 1,450,000 Series L 5.00%, 8/1/01 ..................... 1,477,158 1,000,000 New York State, Dormitory Authority Revenue, State University Educational Facilities 5.00%, 5/15/03 ..................... 1,025,420 1,000,000 New York State, Environmental Facilities, Refunding State Water Subordinated Revolving Fund 5.50%, 6/15/03 ..................... 1,055,610 1,000,000 New York State, Power Authority, General Purpose Bonds, Series Z 5.85%, 1/1/00 ...................... 1,034,900 ---------- 5,616,788 ---------- Ohio - 0.7% 940,000 Cincinnati, Ohio, The Student Loan Funding Corp., Student Loan Revenue, Series 1993A 5.50%, 12/1/01 ..................... 961,667
22 EVERGREEN Short-Intermediate Municipal Fund Schedule of Investments (continued) November 30, 1997 (Unaudited)
Principal Amount Value MUNICIPAL OBLIGATIONS - continued Ohio - continued $ 500,000 Ohio State, Public Facilities Commission of Higher Education, Capital Facilities, Series II-C 4.70%, 12/1/97 ........................ $ 500,035 ---------- 1,461,702 ---------- Pennsylvania - 2.3% 1,000,000 Berks County, Pennsylvania, Municipal Authority, Reading Hospital Medical Center Project 5.00%, 10/1/02 ........................ 1,029,810 1,000,000 Lancaster County, Pennsylvania, Hospital Authority Revenue (The Lancaster General Hospital Project), Series 1992 5.60%, 7/1/00, (AMBAC) ................ 1,035,740 1,950,000 Philadelphia, Pennsylvania, Water and Sewer Revenue, 16th Series 7.50%, 8/1/10 ......................... 2,198,196 500,000 State of Pennsylvania, General Obligation, Series 1971 6.00%, 12/15/98 ....................... 502,080 ---------- 4,765,826 ---------- South Carolina - 1.4% 500,000 Charleston County, South Carolina, Airport System Refunding Revenue, Series 1993 8.25%, 7/1/00, (MBIA) ................. 549,465 2,200,000 South Carolina State, General Obligation, Series W 6.00%, 5/1/99 ......................... 2,263,360 ---------- 2,812,825 ---------- South Dakota - 0.5% 1,000,000 South Dakota State, Housing Development, Homeownership Mortgage, Series J 4.60%, 5/1/02, (FNMA) ................. 1,002,900 ---------- Texas - 4.0% 1,000,000 Austin, Texas, Utility Systems Revenue, Series A 9.50%, 5/15/15 ........................ 1,124,180 500,000 City of Dallas, Texas, General Obligation 5.90%, 2/15/01 ........................ 526,345 1,300,000 Dallas County, Texas, Tax-Permanent Improvements, Series 1992A 6.00%, 8/15/01 ........................ 1,382,810 1,000,000 Houston, Texas, General Obligation, Series 1992C 5.70%, 3/1/01 ......................... 1,045,470 1,315,000 North Texas, Health Facilities Development Corp., Limited Regional Health Care Systems Inc. Project 4.40%, 9/1/01 ......................... 1,323,521 505,000 San Antonio, Texas, Independent School District, Public Facilities Corp. Revenue, Series 1996 5.00%, 10/15/00, (AMBAC) .............. 516,383 1,215,000 Texas State, Department of Housing and Community Affairs, Single Family Mortgage Revenue, Series 1996E 4.45%, 3/1/99, (MBIA) ................. 1,220,419
Principal Amount Value MUNICIPAL OBLIGATIONS - continued Texas - continued $1,000,000 Victoria County, Texas, Hospital Revenue, Citizens Medical Center 5.50%, 1/1/01 ......................... $1,038,160 ---------- 8,177,288 ---------- Utah - 4.1% 245,000 Utah State, Housing Finance Agency, Single Family Mortgage Refunding Revenue, Series 1993A 5.20%, 1/1/01 ......................... 250,130 Utah State, Intermountain Power Agency: Power Supply Revenue, Series C 2,500,000 6.00%, 7/1/00, (MBIA) ................ 2,612,425 Special Obligation, Series B 5,000,000 6.50%, 7/1/04, (MBIA) ................ 5,576,750 ---------- 8,439,305 ---------- Vermont - 2.4% 4,385,000 Vermont State, General Obligation 6.00%, 12/1/06, (AMBAC) ............... 4,857,440 ---------- Virginia - 3.6% 5,000,000 Roanoke, Virginia, Industrial Development Authority, Roanoke Memorial Hospital 6.50%, 7/1/25, (MBIA) ................. 5,289,450 2,000,000 Virginia State, Public School Authority Revenue, Series B 6.75%, 1/1/00 ......................... 2,045,180 ---------- 7,334,630 ---------- Washington - 6.9% 5,000,000 Washington State, General Obligation, Series R93B 4.88%, 10/1/02 ........................ 5,135,200 2,950,000 Washington State, General Obligation Revenue, Motor Vehicle Fuel Tax, Series R-92D 5.60%, 9/1/01 ......................... 3,097,234 1,360,000 Washington State, Public Power Supply, Series B 5.00%, 7/1/01 ......................... 1,389,050 Washington State, Public Power Supply, Systems Nuclear Project No. 2 Revenue Bond: 675,000 Series 1992A 5.00%, 7/1/99 ........................ 683,930 3,500,000 Series C 7.63%, 7/1/10 ........................ 3,897,950 ---------- 14,203,364 ---------- Wisconsin - 2.1% 1,000,000 Milwaukee, Wisconsin, General Obligation Corp. Purpose Bonds, Public Improvements, Series BZ 6.30%, 6/15/01 ........................ 1,070,220
23 EVERGREEN Short-Intermediate Municipal Fund Schedule of Investments (continued) November 30, 1997 (Unaudited)
Principal Amount Value MUNICIPAL OBLIGATIONS - continued Wisconsin - continued Milwaukee, Wisconsin, Metropolitan Sewage District, General Obligation: $ 1,000,000 Series 1989A 7.00%, 9/1/01 .................... $ 1,097,420 2,000,000 Series A 6.50%, 10/1/98 .................. 2,042,980 ------------ 4,210,620 ------------ Total Municipal Obligations (cost $193,928,137)............... 197,949,561 ------------
Shares Value MUTUAL FUND SHARES - 1.8% (cost $3,728,000) 3,728,000 Federated Municipal Obligation Fund $ 3,728,000 ------------ Total Investments (cost $197,656,137)..... 98.3% 201,677,561 Other Assets and Liabilities - Net ...... 1.7 3,493,714 ----- ------------ Net Assets ............. 100.0% $205,171,275 ===== ============
Summary of Abbreviations: AMBAC American Municipal Bond Assurance Corp. COP Certificate of Participation FGIC Financial Guaranty Insurance Corp. FNMA Federal National Mortgage Association MBIA Municipal Bond Investors Assurance Corp. See Combined Notes to Financial Statements. 24 EVERGREEN Tax Free Income Fund Schedule of Investments November 30, 1997 (Unaudited)
Principal Amount Value MUNICIPAL OBLIGATIONS - 99.6% Alabama - 0.2% $ 240,000 Alabama Housing Finance Agency, Single Family Mortgage, 10.75%, 6/1/13 ....................... $ 259,123 ---------- Alaska - 0.3% 300,000 Alaska Housing Finance Corp., Collateralized Home Mortgage, 8.75%, 12/1/16 ....................... 308,175 ---------- Arizona - 0.5% 500,000 Salt River Project Arizona Agricultural Improvement, 5.00%, 1/1/20 ........................ 485,670 ---------- California - 8.3% 500,000 Anaheim, California, Public Financing Authority, Series C, 6.00%, 9/1/16 ........................ 551,310 1,000,000 California State Revenue Bond, 5.00%, 10/1/23 ....................... 963,540 1,020,000 California State, Department Water Resources, Central Valley Project Revenue, Water Systems, Series S, 5.00%, 12/1/16 ....................... 995,489 2,115,000 Central Coast, California, Water Authority Revenue, State Water Project, Regional Facilities, Series A, 5.00%, 10/1/16, (AMBAC) .............. 2,066,757 1,785,000 East Bay, California, Municipal Utility District, Water System Revenue, 5.00%, 6/1/16, (FGIC) ................ 1,734,467 500,000 Santa Clara County, California, Financing Authority, Lease Revenue, Refunding, Series A, 5.00%, 11/15/17, (AMBAC) ............. 485,220 1,295,000 Santa Maria, California, Water and Waste Revenue, COP, Capital Appreciation, Subordinated Debenture, Series A, (effective yield 5.42%) (a), 0.00%, 8/1/12, (AMBAC) ............... 597,254 2,450,000 Victor Valley, California, Joint Union High School District, Capital Appreciation, (effective yield 5.69%) (a), 0.00%, 9/1/13, (MBIA) ................ 1,070,479 ---------- 8,464,516 ---------- Colorado - 6.7% City and County of Denver, Colorado, Airport System, Series A: 200,000 7.25%, 11/15/25 ..................... 228,806 1,000,000 8.00%, 11/15/25 ..................... 1,109,405 750,000 8.75%, 11/15/23 ..................... 879,052 750,000 City and County of Denver, Colorado, Airport System, Series B, 7.25%, 11/15/12 ...................... 838,182 1,100,000 City and County of Denver, Colorado, Airport System, Series D, 7.75%, 11/15/13 ...................... 1,373,999
Principal Amount Value MUNICIPAL OBLIGATIONS - continued Colorado - continued Colorado Public Highway Authority, Senior, Series A: $ 1,000,000 5.00%, 9/1/15, (MBIA) ............... $ 982,500 1,500,000 5.00%, 9/1/21 ....................... 1,443,495 ---------- 6,855,439 ---------- District of Columbia - 2.2% 2,000,000 District of Columbia Hospital Revenue, Medlantic Healthcare, Refunding, Series A, 6.00%, 8/15/11, (MBIA) ............... 2,191,880 ---------- Florida - 10.0% 250,000 Florida State, Board of Education, Capital Outlay, Series A, 5.00%, 1/1/11 ........................ 251,053 500,000 Florida State, Department of Transportation, Right of Way, Series B, 5.00%, 7/1/27 ........................ 479,235 1,500,000 Indian Trace District, Florida, Community Development District, Water Management Special Benefit Assessment, 5.00%, 5/1/17, (MBIA) ................ 1,462,905 2,000,000 Orange County, Florida, Health Facilities Authority, Orlando Hospital Regional Healthcare, Series A, 6.25%, 10/1/18 ....................... 2,268,040 495,000 Orange County, Florida, Housing Finance Authority, GNMA and FNMA Mortgage-Backed Securities Program, 6.85%, 10/1/27 ....................... 535,209 1,000,000 Sarasota County, Florida, Utility Systems Revenue, 6.50%, 10/1/22, (FGIC) ............... 1,137,470 2,640,000 Tallahassee, Florida, Health Facilities, Tallahassee Memorial Regional Medical Project, 6.63%, 12/1/13, (MBIA) ............... 3,003,686 960,000 Tampa, Florida, Subordinated Guaranteed Entitlement Revenue, Series 1988B, 8.40%, 10/1/08 (b) ................... 995,558 ---------- 10,133,156 ---------- Illinois - 2.2% 910,000 Chicago, Illinois, Gas Supply Revenue, People's Gas, Light and Coke Co., Series A, 8.10%, 5/1/20 ........................ 999,034 1,000,000 Illinois Health Facilities Authority, United Medical Center, 8.38%, 7/1/12 ........................ 1,191,930 ---------- 2,190,964 ---------- Indiana - 3.3% 1,300,000 Indiana Municipal Power Supply Systems Revenue, 5.50%, 1/1/16 ........................ 1,348,308
25 EVERGREEN Tax Free Income Fund Schedule of Investments (continued) November 30, 1997 (Unaudited)
Principal Amount Value MUNICIPAL OBLIGATIONS - continued Indiana - continued $ 1,640,000 St. Joseph County, Indiana, Educational Facilities Revenue, University of Notre Dame, 6.50%, 3/1/26 ...................... $1,968,213 ---------- 3,316,521 ---------- Louisiana - 1.5% 1,415,000 Louisiana Public Facilities Authority, Health and Education, Prerefunded, 7.90%, 12/1/15 ..................... 1,491,325 ---------- Massachusetts - 7.9% Massachusetts Bay Transportation Authority, Series A: 600,000 5.00%, 3/1/16 ..................... 584,478 1,875,000 6.25%, 3/1/12 ..................... 2,103,113 1,000,000 7.00%, 3/1/11 ..................... 1,203,670 1,950,000 7.00%, 3/1/21 ..................... 2,432,995 1,490,000 Massachusetts State Housing Finance Agency, Residential Housing, Series A, 8.40%, 8/1/21 ...................... 1,543,759 500,000 Massachusetts State Industrial Finance Agency, Senior Lien, Massachusetts Recycling Association, 9.00%, 8/1/16 (d) .................. 187,500 ---------- 8,055,515 ---------- Michigan - 0.6% 500,000 Monroe County, Michigan, Economic Development Corp., Detroit Edison Co., 6.95%, 9/1/22, (FGIC) .............. 619,535 ---------- Minnesota - 0.6% 595,000 Minnesota Housing Finance Agency, Single Family Mortgage, Series A, 8.20%, 8/1/19 ...................... 612,017 ---------- Nevada - 1.0% 1,000,000 Clark County, Nevada, Passenger Facilities Charge Revenue, Las Vegas McCarran International Airport, 1992 Series A, 6.00%, 7/1/22, (AMBAC) ............. 1,051,310 ---------- New Jersey - 5.6% 1,000,000 New Jersey Economic Development Authority, Water Facilities Revenue, New Jersey American Water Co., Inc. Project, 6.50%, 4/1/22, (FGIC) .............. 1,077,000 4,325,000 Salem County, New Jersey, Pollution Control Financing Authority, Waste Disposal Revenue, 6.50%, 11/15/21 .................... 4,635,622 ---------- 5,712,622 ---------- New Mexico - 3.8% 1,950,000 Albuquerque, New Mexico, Joint Water and Sewer System Revenue, Capital Appreciation, Series A, (effective yield 5.42%) (a), 0.00%, 7/1/08, (FGIC) .............. 1,164,891
Principal Amount Value MUNICIPAL OBLIGATIONS - continued New Mexico - continued $ 1,560,000 New Mexico Mortgage Finance Authority, Single Family Mortgage, 8.63%, 7/1/17, (FGIC) .............. $1,607,658 1,000,000 University of New Mexico, University Revenue, Series A, 6.00%, 6/1/21 ...................... 1,106,530 ---------- 3,879,079 ---------- New York - 9.2% 2,500,000 New York City, New York, GO, Series G, 6.75%, 2/1/09 ...................... 2,833,000 New York State Dormitory Authority, State University Educational Facilities Revenue: 800,000 Series A, 5.25%, 5/15/15 .................... 822,080 1,300,000 Series C, 7.38%, 5/15/10 .................... 1,568,437 1,600,000 New York State Local Government Assistance Corp., Series A, 5.50%, 4/1/17 ...................... 1,636,272 1,000,000 New York State Thruway Authority, Highway and Bridge Trust Fund, Series B, 5.00%, 4/1/17, (FSA) ............... 965,010 805,000 New York State Urban Development Corp., Higher Education Technology Grants, 6.00%, 4/1/10, (MBIA) .............. 868,152 650,000 Triborough Bridge and Tunnel Authority, New York, General Purpose, Series A 5.13%, 1/1/17 ...................... 639,438 ---------- 9,332,389 ---------- Ohio - 2.3% 1,000,000 Montgomery County, Ohio, Hospital Revenue, Kettering Medical Center, 6.25%, 4/1/20 ...................... 1,132,100 1,250,000 North Olmsted, Ohio, GO, 5.00%, 12/1/16, (AMBAC) ............ 1,222,913 ---------- 2,355,013 ---------- Pennsylvania - 8.0% 1,000,000 Allegheny County, Pennsylvania, Airport Revenue, Series B, 5.00%, 1/1/17, (MBIA) .............. 972,330 1,000,000 North Wales, Pennsylvania, Water Authority, 5.00%, 11/1/22, (FGIC) ............. 968,230 1,500,000 Pennsylvania Convention Center Authority, Series A, (effective yield 5.39%) (a), 0.00%, 9/1/08, (FGIC) .............. 895,410 1,750,000 Pennsylvania State, Industrial Development Authority Revenue, Economic Development, 6.00%, 1/1/12, (AMBAC) ............. 1,873,935 1,000,000 Philadelphia, Pennsylvania, Hospital and Higher Education Facilities, Community College, Series B, 6.50%, 5/1/07, (MBIA) .............. 1,131,880
26 EVERGREEN Tax Free Income Fund Schedule of Investments (continued) November 30, 1997 (Unaudited)
Principal Amount Value MUNICIPAL OBLIGATIONS - continued Pennsylvania - continued $ 4,000,000 Pittsburgh, Pennsylvania, School District, Capital Appreciation, Series B, (effective yield 5.42%) (a), 0.00%, 8/1/09, (AMBAC) ........... $ 2,282,520 ------------ 8,124,305 ------------ South Carolina - 0.5% 500,000 Piedmont Municipal Power Agency, South Carolina, Electric Revenue, 5.38%, 1/1/25, (MBIA) ............ 506,874 ------------ Tennessee - 5.6% 2,000,000 Bristol, Tennessee, Health and Education Authority, Bristol Memorial Hospital, 6.75%, 9/1/10, (FGIC) ............ 2,342,860 Knox County, Tennessee, Health and Education Facilities, Fort Sanders Hospital Alliance: 1,000,000 Series B 7.25%, 1/1/10, (MBIA) ........... 1,204,900 1,000,000 Series C 5.25%, 1/1/15, (MBIA) ........... 1,015,670 1,000,000 Metropolitan Government of Nashville and Davidson County, Tennessee Water and Sewer, step bond, (effective yield 5.20%) (a), 0.00%, 1/1/12, (FGIC) ............ 1,173,380 ------------ 5,736,810 ------------ Texas - 11.4% 500,000 Austin, Texas, Utility Systems Revenue, Capital Appreciation Refunding, (effective yield 5.30%) (a), 0.00%, 11/15/11, (AMBAC) ......... 245,025 2,000,000 Bexar, Texas, Metropolitan Water District Waterworks, 5.88%, 5/1/22, (MBIA) ............ 2,087,760 3,000,000 Brazos River Authority, Texas, Revenue Refunding, Houston Light and Power Project 8.10%, 5/1/19, (MBIA) ............ 3,108,780 1,990,000 Harris County, Texas, Health Facilities Development Corp., Hospital Revenue, Memorial Hospital Systems Project, Series A, 6.00%, 6/1/12 .................... 2,177,995 1,000,000 Harris County, Texas, Toll Road, Senior Lien, Series A, 7.00%, 8/15/10 ................... 1,202,860
Principal Amount Value MUNICIPAL OBLIGATIONS - continued Texas - continued $ 3,000,000 Houston, Texas, Water and Sewer System Revenue, Jr. Lien, Series C, (effective yield 5.55%) (a), 0.00%, 12/1/11, (AMBAC) .......... $ 1,466,820 1,090,000 Montgomery County, Texas, Capital Appreciation Refunding, (effective yield 5.35%) (a), 0.00%, 3/1/10, (MBIA) ............ 578,605 1,125,000 Texas Municipal Power Agency Revenue, (effective yield 7.09%) (a), 0.00%, 9/1/08, (AMBAC) ........... 666,630 ------------ 11,534,475 ------------ Utah - 0.5% 750,000 Intermountain Power Agency, Utah, Power Supply Refunding, Series A, (effective yield 6.95%) (a), 0.00%, 7/1/07 .................... 472,560 ------------ Washington - 5.0% 3,000,000 Chelan County, Washington, Public Utilities District, Series A, (effective yield 5.53%) (a), 0.00%, 6/1/09 .................... 1,694,880 1,000,000 Tacoma, Washington, Electric System Revenue, Series 1994, 6.25%, 1/1/15, (FGIC) ............ 1,071,240 1,000,000 Washington State GO, Series A, 6.75%, 2/1/15 .................... 1,179,510 1,000,000 Washington State Public Power Supply System, Nuclear Project #2, Series C, 7.63%, 7/1/10 (b) ................ 1,113,930 ------------ 5,059,560 ------------ Puerto Rico - 2.4% 2,000,000 Commonwealth of Puerto Rico, GO, 7.00%, 7/1/10, (MBIA) ............ 2,421,580 ------------ Total Municipal Obligations (cost $96,026,749) ............... 101,170,413 ------------ SHORT-TERM MUNICIPAL SECURITIES - 0.3% Wyoming - 0.3% 270,000 Uinta County, Wyoming, Pollution Control Revenue, 3.85%, 12/1/22 (c) (cost $270,000) .................. 270,000 ------------ Total Investments (cost $96,296,749) ..... 99.9% 101,440,413 Other Assets and Liabilities - Net ....... 0.1 133,926 ----- ------------ Net Assets .............. 100.0% $101,574,339 ===== ============
(a) Effective yield (calculated at date of purchase) is the yield at which the bond accretes on an annual basis until its maturity date. (b) At November 30, 1997, these securities were pledged to cover margin requirements for open futures contracts. (c) Security is a variable rate demand note which is payable on demand at par on no more than seven calendar days' notice given by the Fund to the issuer or other parties not affiliated with the issuer. Interest rates are determined and reset by the issuer daily or weekly depending upon the terms of the security. The interest rates presented for these securities are those in effect at November 30, 1997. (d) Securities which have defaulted on payment of interest and/or principal. The Fund has stopped accruing income on those so identified. 27 EVERGREEN Tax Free Income Fund Schedule of Investments (continued) November 30, 1997 (Unaudited) Summary of Abbreviations: AMBAC American Municipal Bond Assurance Corp. COP Certificates of Participation FGIC Financial Guaranty Insurance Corp. FNMA Federal National Mortgage Association FSA Financial Security Assurance Corp. GNMA Government National Mortgage Association GO General Obligation MBIA Municipal Bond Investors Assurance Corp. FUTURES CONTRACTS - SHORT POSITIONS
Unrealized Number Initial Contract Value at Appreciation/ Expiration of Contracts Amount November 30, 1997 (Depreciation) - -------------- -------------- ------------------ ------------------- --------------- December '97 86 5 Year U.S. Treasury Note Index $9,295,412 $9,260,412 $ (35,000) December '97 24 Municipal Bond Index 2,899,750 2,904,475 4,725
See Combined Notes to Financial Statements. 28 EVERGREEN National Municipal Bond Funds Statements of Assets and Liabilities November 30, 1997 (Unaudited)
High Grade Fund ----------------- Assets Investments at market value (identified cost - $101,286,172, $197,656,137 and $96,296,749, respectively)........................................................ $ 106,614,315 Cash .............................................................................. 306 Interest receivable ............................................................... 1,955,001 Receivable for investments sold ................................................... 502,521 Receivable for Fund shares sold ................................................... 96,143 Receivable for daily variation margin on open futures contracts ................... 0 Prepaid expenses and other assets ................................................. 45,364 - ------------------------------------------------------------------------------------ ------------- Total assets .................................................................... 109,213,650 - ------------------------------------------------------------------------------------ ------------- Liabilities Payable for investments purchased ................................................. 5,476,505 Dividends payable ................................................................. 136,008 Distribution fees payable ......................................................... 80,025 Due to related parties ............................................................ 45,112 Accrued Trustees' fees and expenses ............................................... 5,387 Payable for Fund shares redeemed .................................................. 1,682 Due to custodian bank ............................................................. 0 Accrued expenses and other liabilities ............................................ 64,819 - ------------------------------------------------------------------------------------ ------------- Total liabilities ............................................................... 5,809,538 - ------------------------------------------------------------------------------------ ------------- Net assets ......................................................................... $ 103,404,112 ==================================================================================== ============= Net assets represented by Paid-in capital ................................................................... $ 97,305,043 Undistributed net investment income (accumulated distributions in excess of net investment income) ............................................................... 124,532 Accumulated net realized gain (loss) on investments and futures contracts ......... 646,394 Net unrealized appreciation on investments and futures contracts .................. 5,328,143 - ------------------------------------------------------------------------------------ ------------- Total net assets ................................................................ $ 103,404,112 ==================================================================================== ============= Net assets consist of Class A ........................................................................... $ 45,998,662 Class B ........................................................................... 32,328,925 Class C ........................................................................... - Class Y ........................................................................... 25,076,525 - ------------------------------------------------------------------------------------ ------------- Total net assets ................................................................ $ 103,404,112 ==================================================================================== ============= Shares outstanding Class A ........................................................................... 4,101,659 Class B ........................................................................... 2,882,720 Class C ........................................................................... - Class Y ........................................................................... 2,236,001 - ------------------------------------------------------------------------------------ ------------- Net asset value per share Class A ........................................................................... $ 11.21 ==================================================================================== ============= Class A - Offering price (based on sales charge of 4.75%, 3.25% and 4.75%, respectively) .................................................................... $ 11.77 ==================================================================================== ============= Class B ........................................................................... $ 11.21 ==================================================================================== ============= Class C ........................................................................... - ==================================================================================== ============= Class Y ........................................................................... $ 11.21 ==================================================================================== ============= Tax Free Short-Intermediate Income Fund Fund --------------------- --------------- Assets Investments at market value (identified cost - $101,286,172, $197,656,137 and $96,296,749, respectively)........................................................ $201,677,561 $101,440,413 Cash .............................................................................. 0 1,447 Interest receivable ............................................................... 3,817,843 1,481,827 Receivable for investments sold ................................................... 0 0 Receivable for Fund shares sold ................................................... 176,161 10,000 Receivable for daily variation margin on open futures contracts ................... 0 5,968 Prepaid expenses and other assets ................................................. 54,200 38,199 - ------------------------------------------------------------------------------------- ------------ ------------ Total assets .................................................................... 205,725,765 102,977,854 - ------------------------------------------------------------------------------------- ------------ ------------ Liabilities Payable for investments purchased ................................................. 0 0 Dividends payable ................................................................. 177,298 171,511 Distribution fees payable ......................................................... 11,431 42,190 Due to related parties ............................................................ 35,034 40,532 Accrued Trustees' fees and expenses ............................................... 6,859 3,136 Payable for Fund shares redeemed .................................................. 173,262 1,092,659 Due to custodian bank ............................................................. 128,325 0 Accrued expenses and other liabilities ............................................ 22,281 53,487 - ------------------------------------------------------------------------------------- ------------ ------------ Total liabilities ............................................................... 554,490 1,403,515 - ------------------------------------------------------------------------------------- ------------ ------------ Net assets ......................................................................... $205,171,275 $101,574,339 ===================================================================================== ============ ============ Net assets represented by Paid-in capital ................................................................... $201,688,998 $ 98,562,693 Undistributed net investment income (accumulated distributions in excess of net investment income) ............................................................... 0 (245,279) Accumulated net realized gain (loss) on investments and futures contracts ......... (539,147) (1,856,464) Net unrealized appreciation on investments and futures contracts .................. 4,021,424 5,113,389 - ------------------------------------------------------------------------------------- ------------ ------------ Total net assets ................................................................ $205,171,275 $101,574,339 ===================================================================================== ============ ============ Net assets consist of Class A ........................................................................... $ 4,572,263 $ 66,825,229 Class B ........................................................................... 6,209,437 26,216,479 Class C ........................................................................... - 8,532,631 Class Y ........................................................................... 194,389,575 - - ------------------------------------------------------------------------------------ ------------ ------------ $205,171,275 $101,574,339 ==================================================================================== ============ ============ Shares outstanding Class A ........................................................................... 449,778 6,676,928 Class B ........................................................................... 610,203 2,644,273 Class C ........................................................................... - 860,374 Class Y ........................................................................... 19,103,142 - - ------------------------------------------------------------------------------------- ------------ ------------ Net asset value per share Class A ........................................................................... $ 10.17 $ 10.01 ===================================================================================== ============ ============ Class A - Offering price (based on sales charge of 4.75%, 3.25% and 4.75%, respectively) .................................................................... $ 10.51 $ 10.51 ===================================================================================== ============ ============ Class B ........................................................................... $ 10.18 $ 9.91 ===================================================================================== ============ ============ Class C ........................................................................... - $ 9.92 ===================================================================================== ============ ============ Class Y ........................................................................... $ 10.18 - ===================================================================================== ============ ============
See Combined Notes to Financial Statements. 29 EVERGREEN National Municipal Bond Funds Statements of Operations Six Months Ended November 30, 1997 (Unaudited)
High Grade Fund ------------- Investment income Interest ................................................................................ $2,798,121 - ------------------------------------------------------------------------------------------ ---------- Expenses Management fee .......................................................................... 256,875 Distribution Plan expenses .............................................................. 219,355 Transfer agent fees ..................................................................... 60,753 Printing fees ........................................................................... 38,547 Custodian fees .......................................................................... 29,248 Administrative services fees ............................................................ 17,644 Professional fees ....................................................................... 13,646 Registration and filing fees ............................................................ 12,542 Trustees' fees and expenses ............................................................. 1,884 Other ................................................................................... 5,277 Fee waivers by investment manager ....................................................... 0 - ------------------------------------------------------------------------------------------ ---------- Total expenses ......................................................................... 655,771 Less: Indirectly paid expenses .......................................................... (41) - ------------------------------------------------------------------------------------------ ---------- Net expenses ........................................................................... 655,730 - ------------------------------------------------------------------------------------------ ---------- Net investment income ................................................................... 2,142,391 ========================================================================================== ========== Net realized and unrealized gain on investments and futures contracts Net realized gain (loss) on: Investments ............................................................................ 1,911,107 Futures contracts ...................................................................... 0 - ------------------------------------------------------------------------------------------ ---------- Net realized gain on investments and futures contracts .................................. 1,911,107 - ------------------------------------------------------------------------------------------ ---------- Net change in unrealized appreciation (depreciation) on: Investments ............................................................................ 1,125,429 Futures contracts ...................................................................... 0 - ------------------------------------------------------------------------------------------ ---------- Net change in unrealized appreciation (depreciation) on investments and futures 1,125,429 - ------------------------------------------------------------------------------------------ ---------- contracts - ------------------------------------------------------------------------------------------- Net realized and unrealized gain on investments and futures contracts ................... 3,036,536 - ------------------------------------------------------------------------------------------ ---------- Net increase in net assets resulting from operations .................................... $5,178,927 ========================================================================================== ========== Tax Free Short-Intermediate Income Fund Fund --------------------- ------------- Investment income Interest ................................................................................ $1,428,654 $3,122,606 - ------------------------------------------------------------------------------------------- ---------- ---------- Expenses Management fee .......................................................................... 149,134 332,778 Distribution Plan expenses .............................................................. 35,444 275,956 Transfer agent fees ..................................................................... 26,443 65,595 Printing fees ........................................................................... 15,945 13,566 Custodian fees .......................................................................... 12,816 12,805 Administrative services fees ............................................................ 0 2,024 Professional fees ....................................................................... 14,209 1,463 Registration and filing fees ............................................................ 16,520 42,226 Trustees' fees and expenses ............................................................. 989 6,676 Other ................................................................................... 2,051 4,454 Fee waivers by investment manager ....................................................... (11,968) 0 - ------------------------------------------------------------------------------------------- ---------- ---------- Total expenses ......................................................................... 261,583 757,543 Less: Indirectly paid expenses .......................................................... (400) (1,066) - ------------------------------------------------------------------------------------------- ---------- ---------- Net expenses ........................................................................... 261,183 756,477 - ------------------------------------------------------------------------------------------- ---------- ---------- Net investment income ................................................................... 1,167,471 2,366,129 =========================================================================================== ========== ========== Net realized and unrealized gain on investments and futures contracts Net realized gain (loss) on: Investments ............................................................................ 142,619 2,291,322 Futures contracts ...................................................................... 0 (614,857) - ------------------------------------------------------------------------------------------- ---------- ---------- Net realized gain on investments and futures contracts .................................. 142,619 1,676,465 - ------------------------------------------------------------------------------------------- ---------- ---------- Net change in unrealized appreciation (depreciation) on: Investments ............................................................................ 183,645 868,549 Futures contracts ...................................................................... 0 7,225 - ------------------------------------------------------------------------------------------- ---------- ---------- Net change in unrealized appreciation (depreciation) on investments and futures 183,645 875,774 - ------------------------------------------------------------------------------------------- ---------- ---------- contracts - ------------------------------------------------------------------------------------------- Net realized and unrealized gain on investments and futures contracts ................... 326,264 2,552,239 - ------------------------------------------------------------------------------------------- ---------- ---------- Net increase in net assets resulting from operations .................................... $1,493,735 $4,918,368 =========================================================================================== ========== ==========
See Combined Notes to Financial Statements. 30 EVERGREEN National Municipal Bond Funds Statements of Changes in Net Assets Six Months Ended November 30, 1997 (Unaudited)
High Grade Fund --------------- Operations Net investment income ................................................................ $ 2,142,391 Net realized gain on investments and futures contracts ............................... 1,911,107 Net change in unrealized appreciation (depreciation) on investments and futures contracts ........................................................................... 1,125,429 - --------------------------------------------------------------------------------------- ------------ Net increase in net assets resulting from operations ................................ 5,178,927 - --------------------------------------------------------------------------------------- ------------ Distributions to shareholders from Net investment income Class A ............................................................................. (1,000,889) Class B ............................................................................. (581,803) Class C ............................................................................. 0 Class Y ............................................................................. (559,699) - --------------------------------------------------------------------------------------- ------------ Total distributions to shareholders ................................................. (2,142,391) - --------------------------------------------------------------------------------------- ------------ Capital share transactions Shares issued in connection with the acquisition of: Evergreen Short Intermediate Municipal Fund - California ............................ 0 Common Trust Fund - Intermediate Tax Exempt Bond Fund ............................... 0 Proceeds from shares sold ............................................................ 6,478,867 Proceeds from reinvestment of distributions .......................................... 1,204,270 Payment for shares redeemed .......................................................... (9,444,783) - --------------------------------------------------------------------------------------- ------------ Net increase (decrease) in net assets resulting from capital share transactions ..... (1,761,646) - --------------------------------------------------------------------------------------- ------------ Total increase (decrease) in net assets ............................................ 1,274,890 Net assets Beginning of period .................................................................. 102,129,222 - --------------------------------------------------------------------------------------- ------------ End of period ........................................................................ $103,404,112 ======================================================================================= ============ Undistributed net investment income (accumulated distributions in excess of net investment income) ................................................................... $ 124,532 ======================================================================================= ============ Short-Intermediate Tax Free Fund Income Fund --------------------- --------------- Operations Net investment income ................................................................ $ 1,167,471 $ 2,366,129 Net realized gain on investments and futures contracts ............................... 142,619 1,676,465 Net change in unrealized appreciation (depreciation) on investments and futures contracts ........................................................................... 183,645 875,774 - ---------------------------------------------------------------------------------------- ------------- ------------- Net increase in net assets resulting from operations ................................ 1,493,735 4,918,368 - ---------------------------------------------------------------------------------------- ------------- ------------- Distributions to shareholders from Net investment income Class A ............................................................................. (114,650) (1,633,540) Class B ............................................................................. (97,638) (534,576) Class C ............................................................................. 0 (199,125) Class Y ............................................................................. (955,183) 0 - ---------------------------------------------------------------------------------------- ------------- ------------- Total distributions to shareholders ................................................. (1,167,471) (2,367,241) - ---------------------------------------------------------------------------------------- ------------- ------------- Capital share transactions Shares issued in connection with the acquisition of: Evergreen Short Intermediate Municipal Fund - California ............................ 14,473,407 0 Common Trust Fund - Intermediate Tax Exempt Bond Fund ............................... 148,714,787 0 Proceeds from shares sold ............................................................ 6,406,648 1,003,980 Proceeds from reinvestment of distributions .......................................... 714,271 1,191,429 Payment for shares redeemed .......................................................... (10,570,703) (16,501,996) - ---------------------------------------------------------------------------------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions ..... 159,738,410 (14,306,587) - ---------------------------------------------------------------------------------------- ------------- ------------- Total increase (decrease) in net assets ............................................ 160,064,674 (11,755,460) Net assets Beginning of period .................................................................. 45,106,601 113,329,799 - ---------------------------------------------------------------------------------------- ------------- ------------- End of period ........................................................................ $ 205,171,275 $ 101,574,339 ======================================================================================== ============= ============= Undistributed net investment income (accumulated distributions in excess of net investment income) ................................................................... $ 0 $ (245,279) ======================================================================================== ============= =============
See Combined Notes to Financial Statements. 31 EVERGREEN National Municipal Bond Funds Statements of Changes in Net Assets Prior Periods
High Grade Fund Short-Intermediate Fund --------------------------------- ---------------------------------- Nine Months Nine Months Ended Year Ended Ended Year Ended May 31, 1997* August 31, 1996 May 31, 1997* August 31, 1996 --------------- ----------------- ---------------- ----------------- Operations Net investment income ....... $ 3,542,168 $ 5,304,418 $ 1,936,277 $ 2,353,029 Net realized gain on investments and futures contracts .................. 640,025 1,622,360 18,940 161,202 Net change in unrealized appreciation (depreciation) on investments and futures contracts .................. 982,691 (1,135,792) 139,624 (564,810) - ------------------------------ ------------- ------------- -------------- -------------- Net increase in net assets resulting from operations ................ 5,164,884 5,790,986 2,094,841 1,949,421 - ------------------------------ ------------- ------------- -------------- -------------- Distributions to shareholders from Net investment income Class A .................... (1,696,428) (2,655,984) (755,942) (541,615) Class B .................... (934,247) (1,385,989) (159,979) (229,080) Class C .................... 0 0 0 0 Class Y .................... (929,415) (1,262,445) (1,020,356) (1,582,334) In excess of net investment income Class A .................... 0 0 0 0 Class B .................... 0 0 0 0 Class C .................... 0 0 0 0 - ------------------------------ ------------- ------------- -------------- -------------- Total distributions to shareholders .............. (3,560,090) (5,304,418) (1,936,277) (2,353,029) - ------------------------------ ------------- ------------- -------------- -------------- Capital share transactions Proceeds from shares sold.... 9,286,983 16,695,647 9,393,392 37,737,994 Proceeds from shares issued in acquisition of Keystone Texas Tax Free Fund ....................... 0 0 0 0 Proceeds from reinvestment of distributions .............. 2,003,093 3,093,850 973,716 1,651,747 Payment for shares redeemed ................... (18,667,515) (30,410,409) (35,446,549) (22,410,625) - ------------------------------ ------------- ------------- -------------- -------------- Net increase (decrease) in net assets resulting from capital share transactions .............. (7,377,439) (10,620,912) (25,079,441) 16,979,116 - ------------------------------ ------------- ------------- -------------- -------------- Total increase (decrease) in net assets ................... (5,772,645) (10,134,344) (24,920,877) 16,575,508 Net assets Beginning of period ......... 107,901,867 118,036,211 70,027,478 53,451,970 - ------------------------------ ------------- ------------- -------------- -------------- End of period ............... $ 102,129,222 $ 107,901,867 $ 45,106,601 $ 70,027,478 ============================== ============= ============= ============== ============== Undistributed net investment income (accumulated distributions in excess of net investment income) ...... $ 124,532 $ 115,656 $ 0 $ 0 ============================== ============= ============= ============== ============== Tax Free Income Fund ----------------------------------- Six Months Ended Year Ended May 31, 1997** November 30, 1996 ---------------- ------------------ Operations Net investment income ....... $ 2,755,244 $ 6,794,938 Net realized gain on investments and futures contracts .................. 1,262,611 1,999,413 Net change in unrealized appreciation (depreciation) on investments and futures contracts .................. (2,704,951) (4,259,520) - ------------------------------- ------------- ------------- Net increase in net assets resulting from operations ................ 1,312,904 4,534,831 - ------------------------------- ------------- ------------- Distributions to shareholders from Net investment income Class A .................... (1,868,216) (4,538,414) Class B .................... (649,369) (1,498,516) Class C .................... (262,024) (758,007) Class Y .................... 0 0 In excess of net investment income Class A .................... (73,369) (31,491) Class B .................... (25,502) (10,398) Class C .................... (10,290) (5,260) - ------------------------------- ------------- ------------- Total distributions to shareholders .............. (2,888,770) (6,842,086) - ------------------------------- ------------- ------------- Capital share transactions Proceeds from shares sold.... 1,652,335 6,339,187 Proceeds from shares issued in acquisition of Keystone Texas Tax Free Fund ....................... 0 5,119,680 Proceeds from reinvestment of distributions .............. 1,527,184 3,629,202 Payment for shares redeemed ................... (17,530,768) (31,540,948) - ------------------------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions .............. (14,351,249) (16,452,879) - ------------------------------- ------------- ------------- Total increase (decrease) in net assets ................... (15,927,115) (18,760,134) Net assets Beginning of period ......... 129,256,914 148,017,048 - ------------------------------- ------------- ------------- End of period ............... $ 113,329,799 $ 129,256,914 =============================== ============= ============= Undistributed net investment income (accumulated distributions in excess of net investment income) ...... $ (244,167) $ (245,552) =============================== ============= =============
* During the period, the Fund changed its fiscal year end from August 31 to May 31. ** During the period, the Fund changed its fiscal year end from November 30 to May 31. See Combined Notes to Financial Statements. 32 Combined Notes to Financial Statements (Unaudited) 1. ORGANIZATION The Evergreen National Municipal Bond Funds consist of Evergreen High Grade Tax Free Fund ("High Grade Fund"), Evergreen Short-Intermediate Municipal Fund ("Short-Intermediate Fund") and Evergreen Tax Free Income Fund (formerly, Keystone Tax Free Income Fund) ("Tax Free Income Fund") which are registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as diversified, open-end management investment companies. The High Grade Fund, Short-Intermediate Fund and Tax Free Income Fund are collectively referred to herein as the "Funds". The Funds offer Class A, Class B, Class C or Class Y shares. Class A shares are sold with a maximum front-end sales charge of 4.75% for both the High Grade and Tax Free Income Funds and a maximum front-end sales charge of 3.25% for the Short-Intermediate Fund. Class B and Class C 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 of Tax Free Income Fund purchased after January 1, 1997 will automatically convert to Class A shares after seven years. Class B shares of Tax Free Income Fund 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. Class Y shares are sold at net asset value and are not subject to contingent deferred sales charges or distribution fees. Class Y shares are sold only to investment advisory clients of First Union Corporation ("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. 2. SIGNIFICANT ACCOUNTING POLICIES 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. Actual results could differ from these estimates. A. Valuation of Securities An independent pricing service values each 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, Tax Free Income 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 Taxes The Funds have qualified and intend to continue to qualify as regulated investment companies under the Internal Revenue Code of 1986, as amended (the "Code"). Thus, the Funds will not incur any federal income tax liability since they are expected to distribute all of their net investment company taxable income, net tax-exempt income and net capital gains, if any, to their shareholders. The Funds also intend to avoid any excise tax liability by making the required distributions under the Code. Accordingly, no provision for 33 Combined Notes to Financial Statements (Unaudited) (continued) federal taxes is required. To the extent that realized capital gains can be offset by capital loss carryforwards, it is each Fund's policy not to distribute such gains. E. Distributions Distributions from net investment income for the Funds 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 for 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. 3. CAPITAL SHARE TRANSACTIONS The High Grade and Short-Intermediate Funds have an unlimited number of shares of beneficial interest with a par value of $0.0001 authorized. The Tax Free Income Fund has an unlimited number of shares of beneficial interest with no par value 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: - -------------------------------------------------------------------------------- HIGH GRADE FUND
Six Months Ended Nine Months Ended November 30, 1997 May 31, 1997 ----------------------------- ----------------------------- Shares Amount Shares Amount ------------- --------------- ------------- --------------- Class A Shares sold ................................... 127,960 $ 1,426,027 138,267 $ 1,503,579 Shares issued in reinvestment of distributions 53,841 600,943 91,672 998,917 Shares redeemed ............................... (287,609) (3,194,718) (737,802) (8,010,676) - ----------------------------------------------- ----------- ------------- ----------- ------------- Net decrease .................................. (105,808) $ (1,167,748) (507,863) $ (5,508,180) - ----------------------------------------------- ----------- ------------- ----------- ------------- Class B Shares sold ................................... 209,560 $ 2,332,428 418,834 $ 4,553,869 Shares issued in reinvestment of distributions 30,756 343,297 50,410 549,306 Shares redeemed ............................... (284,791) (3,171,884) (546,605) (5,937,166) - ----------------------------------------------- ----------- ------------- ----------- ------------- Net decrease .................................. (44,475) $ (496,159) (77,361) $ (833,991) - ----------------------------------------------- ----------- ------------- ----------- ------------- Class Y Shares sold ................................... 244,116 $ 2,720,412 296,083 $ 3,229,535 Shares issued in reinvestment of distributions 23,295 260,030 41,755 454,870 Shares redeemed ............................... (275,999) (3,078,181) (434,833) (4,719,673) - ----------------------------------------------- ----------- ------------- ----------- ------------- Net decrease .................................. (8,588) $ (97,739) (96,996) $ (1,035,268) =============================================== =========== ============= =========== ============= Year Ended August 31, 1996 -------------------------------- Shares Amount --------------- ---------------- Class A Shares sold ................................... 728,801 $ 7,875,800 Shares issued in reinvestment of distributions 144,023 1,571,241 Shares redeemed ............................... (1,652,697) (17,891,048) - ------------------------------------------------------------- -------------- Net decrease .................................. (779,873) $ (8,444,007) - ------------------------------------------------------------- -------------- Class B Shares sold ................................... 420,508 $ 4,595,803 Shares issued in reinvestment of distributions 75,686 825,507 Shares redeemed ............................... (691,236) (7,495,373) - ------------------------------------------------------------- -------------- Net decrease .................................. (195,042) $ (2,074,063) - ------------------------------------------------------------- -------------- Class Y Shares sold ................................... 387,417 $ 4,224,044 Shares issued in reinvestment of distributions 63,909 697,102 Shares redeemed ............................... (455,583) (5,023,988) - ------------------------------------------------------------- -------------- Net decrease .................................. (4,257) $ (102,842) ============================================================= ==============
34 Combined Notes to Financial Statements (Unaudited) (continued) - -------------------------------------------------------------------------------- SHORT-INTERMEDIATE FUND
Six Months Ended Nine Months Ended November 30, 1997 May 31, 1997 ------------------------------ -------------------------------- Shares Amount Shares Amount -------------- --------------- --------------- ---------------- Class A Shares issued in acquisition of: Evergreen Short-Intermediate Municipal Fund-California .................................. 736 $ 7,495 0 $ 0 Shares sold ........................................ 56,252 570,605 182,673 1,860,992 Shares issued in reinvestment of distributions ..... 9,120 92,613 17,182 174,056 Shares redeemed .................................... (218,093) (2,213,937) (2,348,922) (23,711,903) - ---------------------------------------------------- ------------ ------------- ------------- -------------- Net increase (decrease) ............................ (151,985) $ (1,543,224) (2,149,067) $ (21,676,855) - ---------------------------------------------------- ------------ ------------- ------------- -------------- Class B Shares issued in acquisition of: Evergreen Short-Intermediate Municipal Fund-California .................................. 6,897 $ 70,307 0 $ 0 Shares sold ........................................ 40,383 410,143 144,261 1,461,443 Shares issued in reinvestment of distributions ..... 7,123 72,416 11,819 119,733 Shares redeemed .................................... (111,492) (1,132,788) (224,553) (2,272,638) - ---------------------------------------------------- ------------ ------------- ------------- -------------- Net increase (decrease) ............................ (57,089) $ (579,922) (68,473) $ (691,462) - ---------------------------------------------------- ------------ ------------- ------------- -------------- Class Y Shares issued in acquisition of: Evergreen Short-Intermediate Municipal Fund-California .................................. 1,412,138 $ 14,395,605 0 $ 0 Common Trust Fund - Intermediate Tax Exempt Bond Fund ........................................ 14,616,570 148,714,787 0 0 Shares sold ........................................ 533,840 5,425,900 600,756 6,070,957 Shares issued in reinvestment of distributions ..... 54,021 549,242 67,156 679,927 Shares redeemed .................................... (710,749) (7,223,978) (934,601) (9,462,008) - ---------------------------------------------------- ------------ ------------- ------------- -------------- Net increase (decrease) ............................ 15,905,820 $161,861,556 (266,689) $ (2,711,124) ==================================================== ============ ============= ============= ============== Year Ended August 31, 1996 ------------------------------- Shares Amount --------------- --------------- Class A Shares issued in acquisition of: Evergreen Short-Intermediate Municipal Fund-California .................................. 0 $ 0 Shares sold ........................................ 2,806,176 28,333,550 Shares issued in reinvestment of distributions ..... 24,978 253,579 Shares redeemed .................................... (750,660) (7,689,314) - ------------------------------------------------------------------ -------------- Net increase (decrease) ............................ 2,080,494 $ 20,897,815 - ------------------------------------------------------------------ -------------- Class B Shares issued in acquisition of: Evergreen Short-Intermediate Municipal Fund-California .................................. 0 $ 0 Shares sold ........................................ 291,382 2,967,713 Shares issued in reinvestment of distributions ..... 16,079 163,265 Shares redeemed .................................... (166,441) (1,686,967) - ------------------------------------------------------------------ -------------- Net increase (decrease) ............................ 141,020 $ 1,444,011 - ------------------------------------------------------------------ -------------- Class Y Shares issued in acquisition of: Evergreen Short-Intermediate Municipal Fund-California .................................. 0 $ 0 Common Trust Fund - Intermediate Tax Exempt Bond Fund ........................................ 0 0 Shares sold ........................................ 635,204 6,436,731 Shares issued in reinvestment of distributions ..... 121,645 1,234,903 Shares redeemed .................................... (1,283,965) (13,034,344) - ------------------------------------------------------------------ -------------- Net increase (decrease) ............................ (527,116) $ (5,362,710) ================================================================== ==============
- -------------------------------------------------------------------------------- TAX FREE INCOME FUND
Six Months Ended Six Months Ended November 30, 1997 May 31, 1997 ----------------------------- -------------------------------- Shares Amount Shares Amount ------------- --------------- --------------- ---------------- Class A Shares sold ........................................ 30,321 $ 301,912 32,393 $ 317,311 Shares issued in acquisition of Keystone Texas Tax Free Fund ..................................... 0 0 0 0 Shares issued in reinvestment of distributions ..... 82,837 825,745 105,269 1,024,777 Shares redeemed .................................... (861,176) (8,572,690) (1,038,464) (10,140,338) - ---------------------------------------------------- ----------- ------------- ------------- -------------- Net decrease ....................................... (748,018) $ (7,445,033) (900,802) $ (8,798,250) - ---------------------------------------------------- ----------- ------------- ------------- -------------- Class B Shares sold ........................................ 64,573 $ 634,871 136,707 $ 1,324,403 Shares issued in acquisition of Keystone Texas Tax Free Fund ..................................... 0 0 0 0 Shares issued in reinvestment of distributions ..... 25,413 250,985 35,437 341,830 Shares redeemed .................................... (420,079) (4,143,042) (568,355) (5,489,766) - ---------------------------------------------------- ----------- ------------- ------------- -------------- Net increase (decease) ............................. (330,093) $ (3,257,186) (396,211) $ (3,823,533) - ---------------------------------------------------- ----------- ------------- ------------- -------------- Class C Shares sold ........................................ 6,816 $ 67,197 1,101 $ 10,621 Shares issued in acquisition of Keystone Texas Tax Free Fund ..................................... 0 0 0 0 Shares issued in reinvestment of distributions ..... 11,614 114,699 16,648 160,577 Shares redeemed .................................... (383,615) (3,786,264) (195,509) (1,900,664) - ---------------------------------------------------- ----------- ------------- ------------- -------------- Net decrease ....................................... (365,185) $ (3,604,368) (177,760) $ (1,729,466) ==================================================== =========== ============= ============= ============== Year Ended November 30, 1996 -------------------------------- Shares Amount --------------- ---------------- Class A Shares sold ........................................ 181,417 $ 1,689,450 Shares issued in acquisition of Keystone Texas Tax Free Fund ..................................... 131,228 1,269,729 Shares issued in reinvestment of distributions ..... 243,221 2,380,811 Shares redeemed .................................... (1,600,793) (15,690,464) - ------------------------------------------------------------------ -------------- Net decrease ....................................... (1,044,927) $ (10,350,474) - ------------------------------------------------------------------ -------------- Class B Shares sold ........................................ 332,958 $ 3,194,770 Shares issued in acquisition of Keystone Texas Tax Free Fund ..................................... 374,545 3,592,334 Shares issued in reinvestment of distributions ..... 80,112 776,860 Shares redeemed .................................... (773,268) (7,498,073) - ------------------------------------------------------------------ -------------- Net increase (decease) ............................. 14,347 $ 65,891 - ------------------------------------------------------------------ -------------- Class C Shares sold ........................................ 140,724 $ 1,454,967 Shares issued in acquisition of Keystone Texas Tax Free Fund ..................................... 26,855 257,617 Shares issued in reinvestment of distributions ..... 48,553 471,531 Shares redeemed .................................... (857,965) (8,352,411) - ------------------------------------------------------------------ -------------- Net decrease ....................................... (641,833) $ (6,168,296) ================================================================== ==============
35 Combined Notes to Financial Statements (Unaudited) (continued) 4. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of investment securities (excluding short-term securities) were as follows for the six months ended November 30, 1997:
Cost of Proceeds Purchases from Sales -------------- -------------- High Grade Fund ................ $ 49,848,383 $53,564,973 Short-Intermediate Fund ........ 170,334,783 19,677,298 Tax Free Income Fund ........... 41,567,751 61,125,924
As of May 31, 1997, the Funds had capital loss carryovers for federal income tax purposes as follows:
Expiration ------------------------------------- 2002 2003 2004 ------------- ----------- ----------- High Grade Fund ........ $1,265,000 - - Short-Intermediate Fund - $249,000 $433,000 Tax Free Income Fund ... 2,704,000 867,000 -
5. DISTRIBUTION PLANS Evergreen Distributor, Inc. (formerly, Evergreen Keystone Distributor, Inc.) ("EDI"), a wholly-owned subsidiary of The BISYS Group Inc. ("BISYS"), serves as principal underwriter to the Funds. Each Fund has adopted Distribution Plans for each class of shares, except Class Y, as allowed by Rule 12b-1 of the 1940 Act. Distribution plans permit a 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 to broker-dealers who sell shares of the fund, are paid by the fund through expenses called "Distribution Plan expenses". Each class, except Class Y, currently pays a service fee equal to 0.25% of the average daily net assets of the class. The expenses are currently limited to 0.25% annually of the average daily net assets of the Class A shares of the High Grade and Tax Free Income Funds and limited to 0.10% annually of the average daily net assets of the Class A shares of the Short-Intermediate Fund. Class B and Class C shares also pay distribution fees equal to 0.75% of the average daily net assets of the class. Distribution Plan expenses are calculated daily and paid monthly. During the six months ended November 30, 1997, amounts paid to EDI pursuant to each Fund's Class A, Class B and Class C Distribution Plans were as follows:
Class A Class B Class C --------- ----------- ---------- High Grade Fund ................ $57,564 $161,791 - Short-Intermediate Fund ........ 2,924 32,520 - Tax Free Income Fund ........... 85,548 138,752 $51,656
With respect to Class B and Class C shares, the principal underwriter may pay distribution fees greater than the allowable annual amounts the Fund is permitted to pay under the Distribution Plans. Tax Free Income Fund may reimburse the principal underwriter for such excess amounts in later years with annual interest at prime plus 1.00%. EDI intends to seek full payment of such distribution costs from Tax Free Income 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. 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, for Tax Free Income Fund, after the termination of any Distribution Plan and subject to the discretion of the Independent Trustees, payments to EDI may continue as compensation for services which had been provided while the Distribution Plan was in effect. 6. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND OTHER AFFILIATED TRANSACTIONS Capital Management Group of First Union National Bank ("CMG"), a subsidiary of First Union, serves as the investment adviser to the High Grade Fund and is paid a management fee that is computed daily and paid monthly at an annual rate of 0.50% of the Fund's average daily net assets. Evergreen Investment Services, Inc. (formerly, Evergreen Keystone Investment Services, Inc.) ("EIS"), a wholly-owned subsidiary of Keystone Investment Management Company ("Keystone"), is the administrator and BISYS is sub-administrator to each Fund. As sub-administrator to the Funds, BISYS provides the officers of the Funds. The administrator and sub-administrator for each Fund are entitled 36 Combined Notes to Financial Statements (Unaudited) (continued) to an annual fee based on the average daily net assets of the funds administered by EIS for which First Union or its investment advisory subsidiaries are also the investment advisers. 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 assets of each Fund. The sub-administration fee is calculated by applying percentage rates, which start at 0.01% and decline to .004% per annum as net assets increase, to the average daily net assets of each Fund Evergreen Asset Management Corp. ("Evergreen Asset"), a wholly-owned subsidiary of First Union, is the investment adviser for the Short-Intermediate Fund and is paid a management fee that is computed daily and paid monthly at an annual rate of 0.50% of the Fund's average daily net assets. Out of its fee, Evergreen Asset pays EIS for its services as administrator, BISYS for its services as sub-administrator and Lieber & Company, an affiliate of First Union, for its services as sub-adviser. Keystone, a subsidiary of First Union, is the investment adviser for Tax Free Income Fund and is paid a management fee that is computed daily and paid monthly. The management fee is computed at an annual rate of 2.00% of Tax Free Income Fund's gross investment income plus an amount determined by applying percentage rates, starting at 0.50% and declining to 0.25% per annum as net assets increase, to the average daily net assets of the Fund. For the Tax Free Income Fund, the sub-administration fee is paid by Keystone and is not a fund expense. During the six months ended November 30, 1997, High Grade Fund and Tax Free Income Fund paid or accrued to EIS $14,497 and $2,024, respectively, for certain administrative services. During the six months ended November 30, 1997, the investment adviser for the Short-Intermediate Fund waived its management fees in the amount of $11,968. Evergreen Service Company (formerly, Evergreen Keystone Service Company) ("ESC"), a wholly-owned subsidiary of Keystone, serves as the transfer and dividend disbursing agent for the Funds. For certain accounts, First Union had been sub-contracted to maintain shareholder sub-account records, take fund purchase and redemption orders and answer inquiries. During the six months ended November 30, 1997, First Union earned no fee for each account of the High Grade and Short-Intermediate Funds. Officers of the Funds and affiliated Trustees receive no compensation directly from the Funds. At November 30, 1997, First Union National Bank of North Carolina, a wholly-owned subsidiary of First Union, owned directly or beneficially, 78% of the outstanding shares of Short-Intermediate Fund. 7. 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. 8. ACQUISITIONS On July 31, 1997, Short-Intermediate Fund acquired substantially all the assets and assumed certain liabilities of Evergreen Short-Intermediate Municipal Fund-California in exchange for Class A, Class B and Class Y shares of Short-Intermediate Fund. Also, on November 21, 1997, Short-Intermediate Fund acquired substantially all the assets and assumed certain liabilities of Common Trust Fund - Intermediate Tax Exempt Bond Fund in exchange for Class Y shares of Short-Intermediate Fund. On April 30, 1996, Tax Free Income Fund acquired substantially all the assets and assumed certain liabilities of Keystone Texas Tax Free Fund in exchange for Class A, Class B and Class C shares of Tax Free Income Fund. 37 Combined Notes to Financial Statements (Unaudited) (continued) These acquisitions were accomplished by a tax-free exchange of the respective shares of each fund. The value of net assets acquired, number of shares issued, unrealized appreciation acquired and the aggregate net assets of each fund immediately after the acquisition are as follows:
Value of Net Number of Unrealized Net Assets Acquiring Fund Acquired Fund Assets Acquired Shares Issued Appreciation After Acquisition - -------------------------- --------------------------------- ----------------- --------------- -------------- ------------------ Evergreen Short-Intermediate Short-Intermediate Fund .. Municipal Fund - California $ 14,473,407 1,419,771 $ 203,594 $ 59,045,106 Common Trust Fund - Intermediate Short-Intermediate Fund .. Tax Exempt Bond Fund 148,714,787 14,616,570 3,195,888 194,719,999 Keystone Tax Free Income Fund ..... Texas Tax Free Fund 5,119,680 532,628 81,550 140,303,798
9. DEFERRED TRUSTEES' FEES Each Independent Trustee of the High Grade and Short-Intermediate Funds may defer any or all compensation related to performance of their duties as trustees. The Trustees' deferred balances are allocated to deferral accounts, which are included in the accrued expenses for the Fund. The investment performance of the deferral accounts are based on the investment performance of certain Evergreen Funds. Any gains earned or losses incurred in the deferral accounts are reported in the Funds 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 November 30, 1997, the value of the Trustees' deferral account was $5,387 for the High Grade Fund and $6,463 for the Short-Intermediate Fund. 10. FINANCING AGREEMENT On October 31, 1996, a financing agreement among participating Evergreen Funds, State Street Bank & Trust ("State Street") and a group of banks (the "Banks") became effective. Under this agreement, the Banks provided an unsecured credit facility in the aggregate amount of $225 million ($112.5 million committed and $112.5 million uncommitted) allocated evenly among the Banks. Borrowings under this facility bore interest at 0.75% per annum above the Federal Funds rate. A commitment fee of 0.10% per annum was incurred on the unused portion of the committed facility, which was allocated to all participating funds. State Street served as agent for the Banks, and as agent was entitled to a fee of $15,000 which was allocated to participating Evergreen Funds. This agreement was terminated on October 31, 1997. On October 31, 1997, a temporary financing agreement between all of the Evergreen Funds and First Union became effective. Under this agreement, First Union provides a fully committed unsecured credit facility in the aggregate amount of $300 million. Borrowings under this facility bear interest at 1.00% per annum above the Federal Funds rate. State Street serves as administrative agent under this agreement, but receives no compensation for its services. During the six months ended November 30, 1997, the Funds had no borrowings under these agreements. 11. CONCENTRATION OF CREDIT RISK The Short-Intermediate Fund invested a substantial portion of its assets in issuers located in a single state, therefore, it may be affected by economic and political developments in that state or region. 38 (This Page Left Blank Intentionally) (This Page Left Blank Intentionally) 64756 541257 RV2 1/98 BULK RATE U.S. POSTAGE PAID CHARLOTTE, NC PERMIT NO. 136 [EVERGREEN FUNDS LOGO APPEARS HERE] SINCE 1932 201 S. College St. Charlotte, NC 28288 -----END PRIVACY-ENHANCED MESSAGE-----