-----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, Bq1zaYYjl6bmBfvdbCGqaZfgWds/VUvz82ybF87fQJnwzpecVlsgbdiwSFhMGmYH C+1VZshmhIY/E2WG/5P9Iw== 0000082693-96-000049.txt : 19960509 0000082693-96-000049.hdr.sgml : 19960509 ACCESSION NUMBER: 0000082693-96-000049 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960508 SROS: NONE 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: 1940 Act SEC FILE NUMBER: 811-05579 FILM NUMBER: 96557733 BUSINESS ADDRESS: STREET 1: 2500 WESTCHESTER AVE CITY: PURCHASE STATE: NY ZIP: 10577 BUSINESS PHONE: 9146942020 MAIL ADDRESS: STREET 1: 2500 WESTCHESTER AVENUE CITY: PURCHASE STATE: NY ZIP: 10577 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: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04154 FILM NUMBER: 96557734 BUSINESS ADDRESS: STREET 1: 2500 WESTCHESTER AVE CITY: PURCHASE STATE: NY ZIP: 10577 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 N-30D 1 EVERGREEN SPECIALTY GROWTH AND INCOME FUNDS EVERGREEN(SM) TAX-FREE FUNDS (Photos of a building, money and power lines) SEMI-ANNUAL REPORT FEBRUARY 29, 1996 (Evergreen Tree Logo) Evergreen Funds EVERGREEN TAX-FREE FUNDS TABLE OF CONTENTS (Photo of building) Economic Overview......................................................... 1 HIGH GRADE A Report From Your Portfolio Manager...................................... 3 TAX FREE FUND Statement of Investments.................................................. 4 Statement of Assets and Liabilities....................................... 8 Statement of Operations................................................... 9 Statement of Changes in Net Assets........................................ 10 Financial Highlights...................................................... 11 (Photo of money) SHORT-INTERMEDIATE A Report From Your Portfolio Manager...................................... 13 MUNICIPAL FUND Statement of Investments.................................................. 14 Statement of Assets and Liabilities....................................... 16 Statement of Operations................................................... 17 Statement of Changes in Net Assets........................................ 18 Financial Highlights...................................................... 19 (Photo of power lines) SHORT-INTERMEDIATE A Report From Your Portfolio Manager...................................... 21 MUNICIPAL Statement of Investments.................................................. 22 FUND-CALIFORNIA Statement of Assets and Liabilities....................................... 24 Statement of Operations................................................... 25 Statement of Changes in Net Assets........................................ 26 Financial Highlights...................................................... 27 Combined Notes to Financial Statements.................................... 28 Trustees and Officers...................................... Inside Back Cover
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp. Copyright 1995, Evergreen Asset Management Corp. EVERGREEN TAX-FREE FUNDS ECONOMIC OVERVIEW BY EVERGREEN ASSET MANAGEMENT CHAIRMAN STEPHEN A. LIEBER The volatility of investment markets during the (Photo of Stephen A. first quarter of 1996 reflected a virtually constant Lieber) reappraisal of economic prospects. The prospects of sporadic commodity inflation, evidence of resurgent employment trends, failure of political negotiations to achieve a balanced budget agreement, declining demand in personal computer-based technological products, sizable consumer credit growth and greater credit card losses, the increase in imports without concomitant increases in exports, and the rise of the dollar, all drove the markets to mirror the fast changing trends of new statistics. The question of whether inflation might be reappearing was central to the investor reaction to these concerns. Fears of inflation increased through the first quarter, as evidenced by the sizable rise in bond market yields. By early April, long-term U.S. Treasury bond yields reached 7%, a level last seen in August 1995, and up more than one full percentage point from the beginning of the year. Clearly, investors were demanding more of an inflation premium in interest rates. The background with which this year has begun is inconclusive in its trends. We have previously held to the view that a wage-driven inflation is unlikely in the present economic environment due to the easy substitution of imported goods for many domestic goods, while competitive pressures for U.S. and world markets mount from the broadening dispersion of technology, capital, and capital goods. The strength of American industry, it is generally held, must come from its product innovation, its quality, and the rising productivity of its work force. These internal and external pressures have had a major impact in restraining wage-driven inflation. Monetary inflation has shown improving trends as the budget deficit, as a percentage of gross domestic product, continues to decline. Attention, however, must still be given to the longer term issues of potentially destabilized Federal budgeting due to entitlements. While no solution to this issue of government deficit control emerged from this year's political negotiations, it is at least better established on the political agenda than ever before. Investment markets demand a risk premium when faced with elements of uncertainty. The risk premium lately built into the fixed income markets not only reflects the arguable issue of whether there is a risk of wage inflation in the United States, but also the sharp recent increases in some key commodity prices. The combination of a dearth of rainfall and reduced acreage in key agricultural states has spiked up major food commodity prices. Similarly, the draining of oil inventories because of the heat requirements of the abnormally long and cold winter in northern states, together with the cautious inventory policies of the oil industry faced with the possibility that Iraqi supplies might return to the market, has caused prices of oil and refined products to rise. Many watchers for inflationary trends have jumped on these commodity rises, which have lead them to conclude that the inflation rate will rise and, therefore, that bond yields have to go up. The dissent is widespread, arguing that these are temporary interruptions, which will in the long run serve more to shrink profit margins than to raise prices and arguing that these are only interruptions to a fundamentally steady low inflation trend. They point to the 2.8% increase in the Consumer Price Index for the twelve months ended March 31. More important in the analysis of the potentials for bond yields, many economists argue, is the current trend toward the reduction of interest rates in Europe, led by the recent half percent discount rate cut by the German Bundesbank. The revival of economic growth in Europe, it is felt, requires lower interest rates which in turn will facilitate a decline in rates in the United States, merely from reduced competitive investment pressures. We conclude that negative trends which have dominated the bond market in the first months of the year, as marked by the sharp rise in yields, may well reflect shorter-term factors rather than long-term trends. Federal Reserve Bank Governors in numerous recent speeches and interviews have made the point that they are confident about the underlying trend of well-controlled inflation, suggesting that they are not aiming to increase the discount rates or to put any 1 EVERGREEN TAX-FREE FUNDS ECONOMIC OVERVIEW -- (CONTINUED) pressures to slow the economy. We conclude that the Federal Reserve is not aiming to stimulate the economy at this time, but will act to sustain a reasonable growth in the better than 2% range if there is any further evidence of broadly slowing economic activity. International competitive interest rate pressures are diminishing, the trade balance is improving and the economy has remained resilient in the recent period of inventory correction. These are all factors suggesting a period of comparative stability for the months ahead. The tax-exempt securities markets in late 1994 and 1995, and again in early 1996, were negatively affected by the flat tax proposals. The differential between the yields of taxable fixed income debt and tax-exempt debt shrank to record lows for recent years. For those who were convinced that a flat tax, or a substantially reduced income tax level, was not to be expected in the near-term, the tax-exempt fixed income market presented an outstanding comparative investment opportunity. The loss in the Presidential primaries of the one candidacy which featured a flat tax has already restored considerable confidence in the continuation of the present tax structure, and increased the spread between taxable and tax-exempt bonds. As the fall election campaign nears, the comparative strength of the tax-exempt market will reflect the positions of the candidates. Unless there is a major surprise in the conventions, tax-exempt obligations seem favorably situated. Credit issues in the tax-exempt market have not been paramount since the rare case of the Orange County, California default. The ripple effect of that default was shorter lived than many expected, and the resolution of Orange County's fiscal difficulties is well underway. Its positive impact was to develop pressure for many municipalities and agencies to tighten their controls on cash management policies and shift to a more prudent, credit worthy structure than had often been used. With our overall expectation of a gradual reduction in interest rates as the inflation premium recently built into the market is reduced, we anticipate an attractive total return for high-quality fixed income investments, and further relative gains for the tax-exempt securities market. 2 EVERGREEN HIGH GRADE TAX FREE FUND (Photo of building) A REPORT FROM YOUR PORTFOLIO MANAGER JAMES T. COLBY, III With the onset of winter's deep freeze, a similar chill (Photo of James settled into the fixed income markets during the first two T. Colby, III) months of calendar year 1996. Briefly recapping the activities of the past six months; in response to signals of a weakening economy, the Federal Reserve eased credit by lowering the Fed funds rate by 25-basis-points twice. These two rate cuts, which lowered the Fed funds rate from 5.75% to 5.25%, provided significant stimulus to the bond markets. The long treasury bond rallied from a 6.69% to 5.96%, while municipal bonds improved from 6.10% to 5.35%. There was also outstanding equity market performance which served to validate the dual expectations of continued Fed easing and a bipartisan compromise on a 7-year balanced budget program. But a December government shutdown served to mask some sound fundamental economic growth, and in February when Fed Chairman Alan Greenspan began to hedge his bets during Capital Hill testimony (precipitating treasury bond selling by hedge funds) the markets began to retreat from the January highs. And, of course, the enormous February growth in non-farm payrolls of 705,000 forced everyone to restate their near-term interest rate forecast. As we move into the second quarter of 1996, the future trend of the bond market seems less clear. We can now envision a scenario where there is no further easing by the Federal Reserve during 1996 as interest rates work their way back toward 7.00%. The municipal market, of course, will follow, although in a less precise path since individual and institutional demand continues to outpace the declining supply of new bonds. Therefore, technically, municipals should perform well, if not outperform, versus all other fixed income securities during the balance of the year. We remain optimistic as to the resilience of the market and that our positioning for performance in specific market sectors will help provide us with another fine year of returns. As stated in our 1995 Annual Report, our core holdings in noncallable bonds has enabled the Fund to perform well in all markets, as well as avoid any trend toward excessive turnover for repositioning purposes. As of February 29, 95% of the Fund's holdings were invested in insured bonds rated Aaa*. The Fund's average maturity was 14.4 years and its duration was 9.14 years. For the six months ended February 29, 1996, the total returns for the Fund's Class A shares at NAV, Class B shares at NAV, and Class Y shares (no-load), were 6.43%, 6.04%, and 6.56%, respectively**. The 12-month total returns ended February 29, for those classes of shares, were 11.4%, 10.6%, and 11.7%, respectively, which ranked them #5, #12, and #4, respectively, among the 46 Insured Municipal Debt Funds tracked by Lipper Analytical Services*** during that time. The 12-month total returns through December 31, 1995 for each of these classes of shares ranked within the top 5% of the 1,595 Insured Municipal Debt Funds tracked by Lipper during that time. (The Fund's Class A shares are subject to a maximum front end sales charge of 4.75% and Class B shares are subject to a maximum contingent deferred sales charge of 5%.) I look forward to communicating with you again at our fiscal year-end and we at Evergreen Asset Management are appreciative of your support and recognition that the High Grade Tax Free Fund is your investment vehicle of choice. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. * INSURED AS TO TIMELY PAYMENT OF PRINCIPAL AND INTEREST. THE FUND ITSELF IS NOT INURED, NOR IS THE VALUE OF ITS SHARES GUARANTEED. ** PERFORMANCE FIGURES INCLUDE REINVESTMENT OF INCOME DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE. INVESTORS' SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. *** LIPPER ANALYTICAL SERVICES, INC., IS AN INDEPENDENT MUTUAL FUNDS PERFORMANCE MONITOR. PERFORMANCE FIGURES AND LIPPER RANKINGS QUOTED DO NOT INCLUDE SALES CHARGES. IF INCLUDED, PERFORMANCE WOULD BE LOWER AND RANKINGS MAY BE DIFFERENT. 3 EVERGREEN HIGH GRADE TAX FREE FUND STATEMENT OF INVESTMENTS (Photo of building) FEBRUARY 29, 1996 (UNAUDITED)
PRINCIPAL AMOUNT (000) VALUE LONG-TERM INVESTMENTS -- 96.9% ALASKA -- .9% $ 500 Municipality of Anchorage GO School and GO Refunding School Bonds Series 1995, 6.00%, 10/1/14 (FGIC)................ $ 535,320 500 Municipality of Anchorage Senior Lien Electric RRB Series 1993, 6.20%, 12/1/13 (MBIA)....................... 528,415 1,063,735 ARIZONA -- 3.7% 1,940 City of Phoenix GO Refunding Bonds, Series 1995A, 6.25%, 7/1/17........................ 2,168,357 1,000 Creighton Elementary School District No. 14 of Maricopa County School Improvement Bonds (Project of 1990) Series C 1991, 6.50%, 7/1/07 (FGIC)................. 1,152,930 1,000 Navajo County Pollution Control Corp. RRB Series 1993A, 5.875%, 8/15/28 (MBIA)............... 1,022,170 4,343,457 CALIFORNIA -- 4.1% Redevelopment Agency of the City of San Jose Merged Area Redevelopment Project Tax Allocation Bonds Series 1993, 1,000 6.00%, 8/1/08 (MBIA)................. 1,106,320 3,000 6.00%, 8/1/15 (MBIA)................. 3,203,520 500 San Mateo County Joint Powers Financing Authority Lease RRB (Capital Projects Program) Series 1993A, 6.50%, 7/1/16 (MBIA)................. 568,015 4,877,855 COLORADO -- 1.4% 1,000 Arapahoe County Capital Improvement Trust Fund Highway RB (E-470 Project) Senior Current Interest Bonds, 7.00%, 8/31/26....................... 1,099,500 500 School District No. 1 in the City and County of Denver GO Refunding Bonds Series 1994A, 6.50%, 6/1/10 (MBIA)... 573,550 1,673,050 PRINCIPAL AMOUNT (000) VALUE CONNECTICUT -- 1.3% $ 1,400 Connecticut State Special Tax Obligation RB (Transportation Infrastructure) Series 1992B, 6.125%, 9/1/12 (MBIA)........................ $ 1,529,248 FLORIDA -- 1.0% 1,000 Hillsborough County Industrial Development Authority (University Community Hospital Project) Industrial Development RB Series 1994, 6.50%, 8/15/19 (MBIA)................ 1,145,320 GEORGIA -- 6.4% City of Atlanta Airport Facilities 500 RRB Series 1994A, 6.50%, 1/1/10 (AMBAC)................ 569,915 2,500 RB Series 1994B, 6.00%, 1/1/21 (AMBAC)................ 2,567,025 1,500 City of Brunswick Water and Sewage RRB and Improvement Bonds Series 1992, 6.10%, 10/1/19 (MBIA)................ 1,626,390 2,400 Municipal Electric Authority of Georgia Project One Special Obligation Bonds, Fifth Crossover Series, 6.50%, 1/1/17 (MBIA)................. 2,708,136 7,471,466 HAWAII -- 1.0% 1,000 Hawaii State Airport Systems RB Second Series 1990, 7.50%, 7/1/20 (FGIC)................. 1,114,560 IDAHO -- .9% 1,000 Idaho Housing Agency Single Family Mortgage Bonds Series 1994 C-1 Term Mezzanine, 6.30%, 7/1/11........................ 1,037,590 ILLINOIS -- 12.7% 2,150 City of Chicago GO Series 1995, 6.125%, 1/1/16 (AMBAC)............... 2,265,777 1,500 City of Chicago GO (Emergency Telephone System) Series 1993, 5.60%, 1/1/10 (FGIC)........................ 1,573,695 1,250 City of Chicago Water RRB Series 1993, 6.50%, 11/1/15 (FGIC)................ 1,411,975
4 EVERGREEN HIGH GRADE TAX FREE FUND STATEMENT OF INVESTMENTS -- (CONTINUED) (Photo of building) FEBRUARY 29, 1996 (UNAUDITED)
PRINCIPAL AMOUNT (000) VALUE LONG-TERM INVESTMENTS -- CONTINUED ILLINOIS -- (CONTINUED) Illinois Development Finance Authority Pollution Control RRB (Commonwealth Edison Company Project) $ 2,000 Series 1991, 7.25%, 6/1/11 (MBIA)................. $ 2,271,220 3,000 Series 1994D, 6.75%, 3/1/15 (AMBAC)................ 3,406,020 1,400 Illinois Health Facilities Authority RB (The Children's Memorial Hospital) Series 1993, 6.25%, 8/15/13 (MBIA)................ 1,513,554 1,750 Illinois Health Facilities Authority Health Facilities RRB (SSM Health Care) Series 1992AA, 6.50%, 6/1/12 (MBIA)................. 1,970,605 500 Regional Transportation Authority RB Series 1991A, 6.70%, 11/1/21 (FGIC)................ 580,420 14,993,266 INDIANA -- 6.4% Indiana Municipal Power Agency Power Supply System RRB 2,300 Series 1992A, 6.125%, 1/1/19 (MBIA)................ 2,376,590 Series 1993B, 1,390 6.00%, 1/1/12 (MBIA)................. 1,496,405 1,000 6.00%, 1/1/13 (MBIA)................. 1,073,780 1,500 Middle School Building Corporation of Lawrence Township of Marion County First Mortgage Bonds, 6.875%, 7/5/11 (MBIA)............................... 1,756,320 700 Indiana Transportation Finance Authority Highway RB Series 1992A, 6.80%, 12/1/16 (MBIA)................ 813,631 7,516,726 MAINE -- 1.0% 1,000 Maine Turnpike Authority Turnpike RB Series 1994, 7.125%, 7/1/08 (MBIA)................ 1,199,990 MASSACHUSETTS -- .4% 500 Massachusetts Housing Finance Agency RB (Housing Project) Series 1993, 6.15%, 10/1/15 (AMBAC)............... 511,485 PRINCIPAL AMOUNT (000) VALUE MICHIGAN -- .8% $ 1,000 City of Detroit Sewage Disposal System RB Series 1995A, 5.00%, 7/1/25 (MBIA)................. $ 920,710 MINNESOTA -- .5% 500 Minnesota Housing Finance Agency Single Family Mortgage Bonds Series 1994H, 6.70%, 1/1/18........................ 526,050 NEVADA -- 3.2% 1,575 Clark County Transportation GO Improvement Bonds (Limited Tax) Series 1992A, 6.50%, 6/1/17 (AMBAC)................ 1,783,656 2,000 Washoe County Multi-Purpose Bowling GO Facility Bonds (Reno-Sparks Convention & Visitors Authority) Series 1993A (Limited Tax), 5.70%, 7/1/17 (FGIC)................. 1,994,940 3,778,596 NEW MEXICO -- .9% City of Albuquerque, New Mexico Airport RB 500 Series 1995 A, 6.35%, 7/1/07 (AMBAC)................ 545,965 500 Series 1995 B, 7.00%, 7/1/16 (AMBAC)................ 510,595 1,056,560 NEW YORK -- .5% 500 The Port Authority of New York and New Jersey Consolidated Bonds, Ninety-Seventh Series Second Installment-Term Bonds, 6.50%, 7/15/19....................... 544,415 NORTH DAKOTA -- 1.3% 1,500 Mercer County Pollution Control RRB (Basin Electric Power Cooperative-Antelope Valley Unit 1 and Common Facilities) Second 1995 Series, 6.05%, 1/1/19 (AMBAC)................ 1,569,060 OHIO -- 5.0% 1,000 Board of Education Kings Local School District GO School Improvement Bonds (County of Warren) Series 1995 (Unlimited Tax), 7.50%, 12/1/16 (FGIC)................ 1,265,940
5 EVERGREEN HIGH GRADE TAX FREE FUND STATEMENT OF INVESTMENTS -- (CONTINUED) (Photo of building) FEBRUARY 29, 1996 (UNAUDITED)
PRINCIPAL AMOUNT (000) VALUE LONG-TERM INVESTMENTS -- CONTINUED OHIO -- (CONTINUED) $ 500 City of Cleveland Waterworks Improvement First Mortgage RRB Series 1993G, 5.50%, 1/1/13 (MBIA)................. $ 511,010 1,500 City of Toledo Housing GO Improvement Bonds (Macy's Project) Series 1995A (Limited Tax), 6.35%, 12/1/25 (MBIA)................ 1,615,725 1,100 Ohio Air Quality Development Authority RRB (JMG Funding, Limited Partnership Project) Series 1994, 6.375%, 4/1/29 (AMBAC)............... 1,168,244 500 Ohio Housing Finance Agency Residential Mortgage RB (GNMA Mortgage-Backed Securities Program) 1995 Series A-2, 6.625%, 3/1/26....................... 515,160 750 Ohio Water Development Authority Water Development 1992 Clean Water RRB, 6.00%, 12/1/16 (MBIA)................ 780,465 5,856,544 OKLAHOMA -- 1.4% 1,500 McGee Creek Authority RB Water Series 1992, 6.00%, 1/1/23 (MBIA)................. 1,622,175 PUERTO RICO -- 1.1% 250 Commonwealth of Puerto Rico GO Public Improvement Bonds Series 1995, 5.65%, 7/1/15 (MBIA)................. 260,178 500 Puerto Rico Electric Power Authority RRB Series 1995Y, 6.50%, 7/1/06 (MBIA)............................... 573,880 500 Puerto Rico Housing Bank and Finance Agency Affordable Housing Mortgage Subsidy Program Single Family Mortgage RB, Portfolio I, 6.10%, 10/1/15.............................. 510,470 1,344,528 SOUTH CAROLINA -- 4.4% 1,500 South Carolina Public Service Authority RRB 1993 Series C, 5.00%, 1/1/18 (FGIC)........................ 1,383,735 PRINCIPAL AMOUNT (000) VALUE SOUTH CAROLINA -- CONTINUED $ 3,500 South Carolina State Port Authority RB Series 1991, 6.625%, 7/1/11 (AMBAC)............... $ 3,808,490 5,192,225 SOUTH DAKOTA -- 6.4% 3,500 Heartland Consumers Power District Electric System RB Series 1992, 6.00%, 1/1/17 (FSA).................. 3,733,205 3,500 South Dakota Health and Educational Facilities Authority RRB (St. Luke's Midland Regional Medical Center Issue) Series 1991, 6.625%, 7/1/11 (MBIA)............................... 3,843,035 7,576,240 TENNESSEE -- 5.0% 500 Metropolitan Government Water & Sewer RRB (Counties of Nashville & Davidson) Series 1993, 6.50%, 1/1/10 (FGIC)................. 570,450 1,200 The Health and Educational Facilities Board of the City of Bristol Hospital RRB (Bristol Memorial Hospital) Series 1993, 6.75%, 9/1/07 (FGIC).... 1,401,552 The Health, Educational and Housing Facilities Board of the County of Knox Hospital RB (Fort Sanders Alliance Obligated Group) Series 1993, 1,700 6.25%, 1/1/13 (MBIA)................. 1,872,261 2,000 5.75%, 1/1/14 (MBIA)................. 2,084,020 5,928,283 TEXAS -- 6.9% 3,000 City of Austin Airport System Prior Lien RB Series 1995A, 6.125%, 11/15/25 (MBIA).............. 3,133,650 1,000 City of Houston Water Conveyance Systems Contract COP Series 1993H, 7.50%, 12/15/14 (AMBAC).............. 1,258,290 2,000 Harris County Toll Road Senior Lien RRB Series 1994, 5.30%, 8/15/13 (AMBAC)............... 1,971,300 4,000 Round Rock Independent School District Series 1991 Refunding GO, Zero Coupon, 8/15/10 (MBIA).......... 1,812,360 8,175,600
6 EVERGREEN HIGH GRADE TAX FREE FUND STATEMENT OF INVESTMENTS -- (CONTINUED) (Photo of building) FEBRUARY 29, 1996 (UNAUDITED)
PRINCIPAL AMOUNT (000) VALUE LONG-TERM INVESTMENTS -- CONTINUED UTAH -- 5.7% $ 2,500 Board of Education of Iron County GO School District School Building Bonds Series 1994, 6.40%, 1/15/12 (MBIA)................ $ 2,690,725 1,000 Salt Lake City, Salt Lake County Airport RB Series 1993A, 6.00%, 12/1/12 (FGIC)................ 1,030,410 3,000 Airport RRB Series 1993B, 5.875%, 12/1/18 (FGIC)....................... 3,021,810 6,742,945 VIRGINIA -- 2.2% 1,000 Chesapeake Bay Bridge & Tunnel Authority RRB (Highway Revenue Tolls) Series 1996, 5.25%, 7/1/19 (MBIA)................. 957,150 1,500 Industrial Development Authority of the County of Hanover RB (Memorial Regional Medical Center Project at Hanover Medical Park) Series 1995, 6.375%, 8/15/18 (MBIA)............... 1,670,115 2,627,265 WASHINGTON -- 4.0% 1,500 Seattle Municipal Light & Power Authority RB Series 1995A, 5.70%, 9/1/19 (MBIA)................. 1,514,370 City of Tacoma Electric System RRB Series 1992A, 500 6.25%, 1/1/11 (AMBAC)................ 528,790 Series 1994, 2,500 6.25%, 1/1/15 (FGIC)................. 2,648,575 4,691,735 WISCONSIN -- 6.4% 4,500 City of Superior Limited Obligation RRB (Midwest Energy Resources Company Project) Series 1991E, 6.90%, 8/1/21 (FGIC)............................... 5,384,790 2,000 Wisconsin Health and Educational Facilities Authority RB (Wausau Hospitals, Inc. Project) Series 1991B, 6.625%, 8/15/11 (AMBAC).............. 2,186,360 7,571,150 TOTAL LONG-TERM INVESTMENTS (COST $106,340,047).................. $114,201,829 SHARES VALUE MUTUAL FUND SHARES -- 1.0% 1,130,756 Lehman Tax-Free Money Market Fund (at net asset value) (cost $1,130,756)................... $ 1,130,756 TOTAL INVESTMENTS (COST $107,470,803)...... 97.9% 115,332,585 OTHER ASSETS AND LIABILITIES -- NET....... 2.1 2,416,862 TOTAL NET ASSETS............ 100.0% $117,749,447
Summary of Abbreviations: COP -- Certificates of Participation GO -- General Obligations RB -- Revenue Bonds RRB -- Revenue Refunding Bonds At February 29, 1996, the percentage breakdown of total investments which are insured by municipal bond insurance companies are as follows: AMBAC -- American Municipal Bond Assurance Corp..... 21% FGIC -- Financial Guaranty Insurance Corp........... 22% FSA -- Financial Security Assurance Inc............. 3% MBIA -- Municipal Bond Investors Assurance Corp..... 47% % of Total Investments Insured................. 93%
7 EVERGREEN HIGH GRADE TAX FREE FUND STATEMENT OF ASSETS AND LIABILITIES (Photo of building) FEBRUARY 29, 1996 (UNAUDITED)
ASSETS: Investments at value (identified cost $107,470,803)........................................................... $115,332,585 Cash.......................................................................................................... 1,372 Receivable for investments sold............................................................................... 1,304,222 Interest receivable........................................................................................... 1,299,412 Receivable for Fund shares sold............................................................................... 88,694 Prepaid expenses.............................................................................................. 5,022 Total assets............................................................................................ 118,031,307 LIABILITIES: Dividends payable............................................................................................. 171,981 Payable for Fund shares repurchased........................................................................... 58,631 Distribution fee payable...................................................................................... 22,683 Accrued advisory fee.......................................................................................... 16,791 Accrued expenses.............................................................................................. 11,774 Total liabilities....................................................................................... 281,860 NET ASSETS....................................................................................................... $117,749,447 NET ASSETS CONSIST OF: Paid-in capital............................................................................................... $112,120,665 Undistributed net investment income........................................................................... 47,344 Accumulated net realized loss on investment transactions...................................................... (2,280,344) Net unrealized appreciation of investments.................................................................... 7,861,782 Net assets.............................................................................................. $117,749,447 CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE: Class A Shares ($56,772,378 5,108,167 shares of beneficial interest outstanding).............................. $ 11.11 Sales charge -- 4.75% of offering price....................................................................... .55 Maximum offering price..................................................................................... $ 11.66 Class B Shares ($36,052,138 3,243,560 shares of beneficial interest outstanding).............................. $ 11.11 Class Y Shares ($24,924,931 2,242,720 shares of beneficial interest outstanding).............................. $ 11.11
See accompanying notes to financial statements. 8 EVERGREEN HIGH GRADE TAX FREE FUND STATEMENT OF OPERATIONS (Photo of building) SIX MONTHS ENDED FEBRUARY 29, 1996 (UNAUDITED)
INVESTMENT INCOME: Interest........................................................................................... $3,384,935 EXPENSES: Advisory fee....................................................................................... $297,287 Administrative personnel and services fees......................................................... 31,893 Distribution fee -- Class A Shares................................................................. 72,859 Distribution fee -- Class B Shares................................................................. 132,272 Shareholder services fees -- Class B Shares........................................................ 44,090 Transfer agent fee................................................................................. 47,419 Custodian fee...................................................................................... 33,967 Reports and notices to shareholders................................................................ 24,042 Registration and filing fees....................................................................... 21,810 Professional fees.................................................................................. 14,722 Trustees' fees and expenses........................................................................ 2,527 Insurance.......................................................................................... 1,583 Miscellaneous...................................................................................... 11,337 735,808 Less: Advisory fee waiver.......................................................................... (118,917) Net expenses................................................................................. 616,891 Net investment income................................................................................. 2,768,044 NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investment transactions....................................................... 1,128,940 Net change in unrealized appreciation on investments............................................... 3,505,967 Net gain on investments............................................................................... 4,634,907 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................................. $7,402,951
See accompanying notes to financial statements. 9 EVERGREEN HIGH GRADE TAX FREE FUND (Photo of building) STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED EIGHT MONTHS FEBRUARY 29, 1996 ENDED (UNAUDITED) AUGUST 31, 1995 INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income.................................................................. $ 2,768,044 $ 3,187,579 Net realized gain on investment transactions........................................... 1,128,940 437,882 Net change in unrealized appreciation of investments................................... 3,505,967 7,804,353 Net increase resulting from operations.............................................. 7,402,951 11,429,814 DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME: Class A Shares......................................................................... (1,394,285) (1,935,789) Class B Shares......................................................................... (711,036) (936,437) Class Y Shares......................................................................... (637,947) (315,353) Total distributions to shareholders................................................. (2,743,268) (3,187,579) FUND SHARE TRANSACTIONS: Proceeds from shares sold.............................................................. 5,544,454 3,098,389 Proceeds from shares issued in acquisition of Evergreen National Tax Free Fund......... -- 28,779,194 Proceeds from reinvestment of distributions............................................ 1,602,889 1,826,205 Payment for shares redeemed............................................................ (12,093,790) (18,339,492) Net increase (decrease) resulting from Fund share transactions...................... (4,946,447) 15,364,296 Net increase (decrease) in net assets............................................... (286,764) 23,606,531 NET ASSETS: Beginning of period.................................................................... 118,036,211 94,429,680 End of period (includes undistributed net investment income of $47,344 and 22,568, respectively)........................................................................ $ 117,749,447 $ 118,036,211
See accompanying notes to financial statements. 10 EVERGREEN HIGH GRADE TAX FREE FUND (Photo of building) FINANCIAL HIGHLIGHTS CLASS A SHARES
SIX MONTHS ENDED EIGHT MONTHS YEAR ENDED FEBRUARY 29, 1996 ENDED DECEMBER 31, (UNAUDITED) AUGUST 31, 1995# 1994 1993 PER SHARE DATA: Net asset value, beginning of period................... $10.69 $9.79 $11.16 $10.42 Income (loss) from investment operations: Net investment income................................ .26 .34 .52 .54 Net realized and unrealized gain (loss) on investments........................................ .42 .90 (1.37) .81 Total from investment operations..................... .68 1.24 (.85) 1.35 Less distributions to shareholders from: Net investment income................................ (.26) (.34) (.52) (.54) Net realized gains................................... -- -- -- (.07) Total distributions.................................. (.26) (.34) (.52) (.61) Net asset value, end of period......................... $11.11 $10.69 $9.79 $11.16 TOTAL RETURN+.......................................... 6.4% 12.8% (7.7%) 13.3% RATIOS & SUPPLEMENTAL DATA: Net assets, end of period (000's omitted).............. $56,772 $58,751 $57,676 $101,352 Ratios to average net assets: Expenses **.......................................... .87%++ 1.06%++ 1.01% .85% Net investment income **............................. 4.78%++ 4.93%++ 5.04% 4.99% Portfolio turnover rate................................ 26% 27% 53% 14% FEBRUARY 21, 1992* THROUGH DECEMBER 31, 1992 PER SHARE DATA: Net asset value, beginning of period................... $10.00 Income (loss) from investment operations: Net investment income................................ .51 Net realized and unrealized gain (loss) on investments........................................ .42 Total from investment operations..................... .93 Less distributions to shareholders from: Net investment income................................ (.51) Net realized gains................................... -- Total distributions.................................. (.51) Net asset value, end of period......................... $10.42 TOTAL RETURN+.......................................... 9.4% RATIOS & SUPPLEMENTAL DATA: Net assets, end of period (000's omitted).............. $90,738 Ratios to average net assets: Expenses **.......................................... .49%++ Net investment income **............................. 5.79%++ Portfolio turnover rate................................ 7%
# The Fund changed its fiscal year end from December 31 to August 31. * Commencement of class operations. + Total return is calculated on net asset value per share for the periods indicated and is not annualized. Initial sales charge is not reflected. ++ Annualized. ** Net of expense waivers and reimbursements. If the Fund had borne all expenses that were reimbursed or waived by the investment adviser, the annualized ratios of expenses and net investment income to average net assets would have been the following:
SIX MONTHS EIGHT FEBRUARY 21, ENDED MONTHS 1992* FEBRUARY 29, ENDED YEAR ENDED THROUGH 1996 AUGUST 31, DECEMBER 31, DECEMBER 31, (UNAUDITED) 1995# 1994 1993 1992 Expenses................................................. 1.07% 1.09% 1.02% 1.07% 1.11% Net investment income.................................... 4.58% 4.90% 5.03% 4.77% 5.17%
See accompanying notes to financial statements. 11 EVERGREEN HIGH GRADE TAX FREE FUND (Photo of building) FINANCIAL HIGHLIGHTS CLASS B AND Y SHARES
CLASS B SHARES CLASS Y SHARES SIX MONTHS EIGHT JANUARY 11, SIX MONTHS EIGHT ENDED MONTHS 1993* ENDED MONTHS FEBRUARY 29, ENDED YEAR ENDED THROUGH FEBRUARY 29, ENDED 1996 AUGUST 31, DECEMBER 31, DECEMBER 31, 1996 AUGUST 31, (UNAUDITED) 1995# 1994 1993 (UNAUDITED) 1995# PER SHARE DATA: Net asset value, beginning of period.......... $10.69 $9.79 $11.16 $10.42 $10.69 $9.79 Income (loss) from investment operations: Net investment income....................... .22 .29 .46 .47 .28 .36 Net realized and unrealized gain (loss) on investments............................... .42 .90 (1.37) .81 .42 .90 Total from investment operations............ .64 1.19 (.91) 1.28 .70 1.26 Less distributions to shareholders from: Net investment income....................... (.22) (.29) (.46) (.47) (.28) (.36) Net realized gains.......................... -- -- -- (.07) -- -- Total distributions......................... (.22) (.29) (.46) (.54) (.28) (.36) Net asset value, end of period................ $11.11 $10.69 $9.79 $11.16 $11.11 $10.69 TOTAL RETURN+................................. 6.0% 12.3% (8.2%) 12.4% 6.6% 13.0% RATIOS & SUPPLEMENTAL DATA: Net assets, end of period (000's omitted)..... $36,052 $34,206 $32,435 $41,030 $24,925 $25,079 Ratios to average net assets: Expenses **................................. 1.62%++ 1.81%++ 1.58% 1.35%++ .62%++ .81%++ Net investment income **.................... 4.03%++ 4.18%++ 4.47% 4.44%++ 5.03%++ 5.18%++ Portfolio turnover rate....................... 26% 27% 53% 14% 26% 27% FEBRUARY 28, 1994* THROUGH DECEMBER 31, 1994 PER SHARE DATA: Net asset value, beginning of period.......... $10.93 Income (loss) from investment operations: Net investment income....................... .46 Net realized and unrealized gain (loss) on investments............................... (1.14) Total from investment operations............ (.68) Less distributions to shareholders from: Net investment income....................... (.46) Net realized gains.......................... -- Total distributions......................... (.46) Net asset value, end of period................ $9.79 TOTAL RETURN+................................. (6.3%) RATIOS & SUPPLEMENTAL DATA: Net assets, end of period (000's omitted)..... $4,318 Ratios to average net assets: Expenses **................................. .76%++ Net investment income **.................... 5.46%++ Portfolio turnover rate....................... 53%
# The Fund changed its fiscal year end from December 31 to August 31. * Commencement of class operations. + Total return is calculated on net asset value per share for the periods indicated and is not annualized. Contingent deferred sales charges are not reflected. ++ Annualized. ** Net of expense waivers and reimbursements. If the Fund had borne all expenses that were reimbursed or waived by the investment adviser, the annualized ratios of expenses and net investment income to average net assets would have been the following:
CLASS B SHARES CLASS Y SHARES SIX MONTHS EIGHT JANUARY 11, SIX MONTHS EIGHT ENDED MONTHS 1993* ENDED MONTHS FEBRUARY 29, ENDED YEAR ENDED THROUGH FEBRUARY 29, ENDED 1996 AUGUST 31, DECEMBER 31, DECEMBER 31, 1996 AUGUST 31, (UNAUDITED) 1995# 1994 1993 (UNAUDITED) 1995# Expenses.......................... 1.82% 1.84% 1.59% 1.57% .82% .84% Net investment income............. 3.83% 4.15% 4.46% 4.22% 4.83% 5.15% FEBRUARY 28, 1994* THROUGH DECEMBER 31, 1994 Expenses.......................... .77% Net investment income............. 5.45%
See accompanying notes to financial statements. 12 EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND (Photo of money) A REPORT FROM YOUR PORTFOLIO MANAGER STEVEN C. SHACHAT We are pleased to present the Semi-Annual Report for (Photo of Steven Evergreen Short-Intermediate Municipal Fund. The past six C. Shachat) months have proven to be an exhilarating but challenging ride for market participants. Evidence that economic activity remained sluggish and that inflation continued to be under control moved the Federal Reserve Board to further ease the Federal Funds rate (the rate at which the nation's banks borrow money from each other and on which all other short-term rates are based) in January. This was the third reduction for this important short-term rate in the past eight months, the first occurring in July. The latest 25-basis-point reduction in January put the rate at 5 1/4%. In addition, at its January meeting, the Fed also lowered its discount rate, the rate at which the Federal Reserve lends to member banks, to 5 1/4%, and, subsequently, commercial banks dropped the prime lending rate to 8 1/4%. More recently, however, economic strength has been reflected in some of the indicators released. In his semi-annual Humphrey-Hawkins testimony before Congress in February, Federal Reserve Board Chairman Alan Greenspan shocked the markets by making comments that indicated the Fed is probably not going to aggressively ease interest rates any time soon, barring more evidence that the economy is faltering badly. In addition, an unusual combination of circumstances had kept the true tempo of activity somewhat opaque as important economic statistics were first delayed by the government shutdown, and then skewed as a giant blizzard smothered the East Coast. Exceptionally weak data for January kept alive notions that the economy might be downsizing, but the unknown impact of the blizzard left a lot of doubt. Although everyone expected some rebound when the weather cleared, the avalanche of new jobs that appeared in February took the market by surprise. Since the February employment data, financial markets have adjusted to the possibility of quickened economic growth and the absence of an accommodative Fed. We do not expect any further pronounced trend movement in interest rates until more solid statistics and distortion-free data become available. For now, it looks as if the Fed is on hold until it can evaluate the true, underlying tempo of economic activity. Our long-term investment strategy remains the same as in the past. In conjunction with our primary goals of seeking to both maximize the Fund's yield and maintain as much price stability as possible, we continue to purchase high grade, noncallable, essential purchase and general obligation municipal bonds. Our philosophy amid the current uncertainty of the U.S. economy is to buy municipal bonds based on careful credit analysis and our estimation of a bond's relative value, rather than on the basis of interest rate forecasts. As such, we intend to maintain a neutral maturity stance in the 4 to 5-year range and hope to add value through a careful structuring of the portfolio, seeking individual bonds which we believe to be undervalued. Lastly, our portfolio quality remains high. At February 29, over 80% of the Fund's net assets were invested in securities rated Aaa, AA, or the equivalent by Moody's Investor Service and/or Standard & Poor's. As always, we remain dedicated to achieving superior investment results, and look forward to maintaining the Fund's commitment to solid performance and quality service. 13 EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND STATEMENT OF INVESTMENTS (Photo of money) FEBRUARY 29, 1996 (UNAUDITED)
PRINCIPAL AMOUNT (000) VALUE LONG-TERM MUNICIPAL SECURITIES -- 101.7% ALABAMA -- 2.7% $ 1,235 City of Mobile, GO Refunding Warrants Series 1996, 5.50%, 2/15/00........................ $ 1,293,008 ALASKA -- 6.5% 1,045 Municipality of Anchorage, Alaska 1993 GO School RFB Series 1993A, 5.00%, 2/1/98 (MBIA).................. 1,068,199 1,950 North Slope Borough, GO RFB Series 1988G, 7.50%, 6/30/97........................ 2,048,456 3,116,655 COLORADO -- 4.1% 1,000 Cherry Creek School District No. 5, Arapahoe County GO RB Series 1995A, 5.25%, 12/15/02....................... 1,053,590 865 Colorado Student Obligation Board Authority Student Loan RB Series 1985B, 6.125%, 12/1/98....................... 888,113 1,941,703 DISTRICT OF COLUMBIA -- 3.3% 1,500 District of Columbia GO RFB Series 1989 B, 6.625%, 6/1/98 (MBIA)................. 1,583,670 GEORGIA -- 2.2% 1,000 Municipal Electric Authority of Georgia Power RB Series 1986L, 7.50%, 1/1/98......................... 1,049,310 HAWAII -- 5.6% 2,500 State of Hawaii GO Series 1995 CJ, 5.70%, 1/1/03......................... 2,685,400 ILLINOIS -- 4.1% 1,000 Central Lake County Joint Action Water Agency Water RB Series 1990A, Prerefunded @102, 7.00%, 5/1/00 (AMBAC)................. 1,124,110 300 Illinois Health Facilities Authority RB (Edward Hospital Association Project) Series 1992, 6.00%, 2/15/97........................ 304,872 500 Illinois Student Assistance Commission Student Loan RB Series 1992M, 5.45%, 3/1/97......................... 509,100 1,938,082 PRINCIPAL AMOUNT (000) VALUE MAINE -- 2.1% $ 1,000 Maine Educational Loan Marketing Corp. Student Loan RB Series 1988A, 5.20%, 5/1/97......................... $ 1,017,690 MARYLAND -- 2.5% 1,140 Montgomery County GO Bonds Consolidated Public Improvement RB of 1992 Series A, 5.30%, 7/1/01......................... 1,203,259 MASSACHUSETTS -- 7.7% 1,500 City of Boston, GO Bonds Series 1995A, 5.25%, 10/1/02........................ 1,572,180 1,000 Mass. Water Pollution Abatement Trust RB (MWRA Loan Program) Series 1995A, 6.00%, 8/1/02......................... 1,086,880 1,000 New England Educational Loan Marketing Corp. Student Loan RB Series 1993B, 5.40%, 6/1/00......................... 1,028,970 3,688,030 MICHIGAN -- 3.2% 1,500 Detroit Sewage Disposal System RB Series 1993A, 4.85%, 7/1/01......................... 1,538,895 NEVADA -- 2.2% 1,000 Las Vegas Valley Water District GO (Limited Tax) Water RRB Series 1987, Prerefunded @102, 7.25%, 11/1/97 (AMBAC)................ 1,077,150 NEW JERSEY -- 6.8% 2,000 New Jersey State GO Series 1991, 5.90%, 8/1/02......................... 2,181,360 1,050 New Jersey State Waste Water Treatment Trust Series 1995A, 4.60%, 9/1/01......................... 1,074,076 3,255,436 NEW YORK -- 2.1% 1,000 New York State Dormitory Authority, Vassar College RB Series 1995, 4.375%, 7/1/02........................ 1,002,420 OHIO -- 2.1% 1,000 The Student Loan Funding Corporation (Cincinnati) Student Loan RB Series 1993A, 5.50%, 12/1/01........................ 1,020,650
14 EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND STATEMENT OF INVESTMENTS -- (CONTINUED) (Photo of money) FEBRUARY 29, 1996 (UNAUDITED)
PRINCIPAL AMOUNT (000) VALUE LONG-TERM MUNICIPAL SECURITIES -- CONTINUED OKLAHOMA -- 1.6% $ 750 Oklahoma Student Loan Authority RRB Series 1992A, 5.35%, 9/1/96......................... $ 756,878 OREGON -- 2.2% 1,050 Multnomah County, School District #1J GO Series 1995, 4.50%, 6/1/01......................... 1,065,645 PENNSYLVANIA -- 1.1% 500 State of Pennsylvania GO Series 1971, 6.00%, 12/15/98....................... 504,785 TEXAS -- 9.9% 695 Brazos Higher Education Authority, Inc. Student Loan RRB Series 1992-A, 6.00%, 3/1/96......................... 695,090 1,000 Series 1993A-1, 5.30%, 12/1/97........................ 1,023,130 500 City of Dallas, GO Bonds, 5.90%, 2/15/01........................ 537,235 1,300 Dallas County Improvement and Refunding Bonds (Limited Tax) Series 1992-A, 6.00%, 8/15/01........................ 1,414,439 1,000 Northside, Texas Independent School GO (District Unlimited Tax) Series 1986, 7.00%, 2/1/98......................... 1,059,690 4,729,584 UTAH -- .9% 405 Utah Housing Finance Agency Single Family Mortgage RRB Senior Bonds Series 1993A, 5.20%, 1/1/01......................... 411,334 VIRGINIA -- 13.2% 1,200 Chesapeake, Water & Sewer Series 1995A, 7.00%, 12/1/01........................ 1,369,440 1,205 City of Chesapeake Public School Authority Special Obligation School Financing Bonds Series 1995, 5.40%, 6/1/05......................... 1,275,974 1,000 City of Virginia Beach GO Public Improvement & RFB Series 1994, 5.70%, 11/1/07........................ 1,070,430 PRINCIPAL AMOUNT (000) VALUE VIRGINIA -- CONTINUED $ 1,000 Virginia Beach GO RFB Series 1992, 5.90%, 2/1/04......................... $ 1,085,770 1,500 Virginia Housing Development Authority Commonwealth Mortgage Bonds Series 1992B Subseries B-1, 6.00%, 1/1/98......................... 1,526,715 6,328,329 WASHINGTON -- 11.0% 2,950 State of Washington GO RB (Motor Vehicle Fuel Tax) Series R-92D, 5.60%, 9/1/01......................... 3,139,213 2,000 State of Washington, GO Series 93A, 5.50%, 10/1/03........................ 2,129,940 5,269,153 WISCONSIN -- 4.6% 1,000 City of Milwaukee GO Corporate Purpose Bonds, Public Improvements, Series BZ, 6.30%, 6/15/01........................ 1,094,710 1,000 Wisconsin State, GO RFB Series 1992, 6.00%, 5/1/02......................... 1,089,540 2,184,250
TOTAL LONG-TERM INVESTMENTS (COST $47,592,304)....... 101.7% 48,661,316 OTHER ASSETS AND LIABILITIES -- NET....... (1.7) (835,421) NET ASSETS.................. 100.0% $ 47,825,895
Summary of Abbreviations: AMBAC -- Insured by American Municipal Bond Assurance Corp. GO -- General Obligations MBIA -- Insured by Municipal Bond Investors Assurance MWRA -- Massachusetts Water Resources Authority RB -- Revenue Bonds RFB -- Refunding Bonds RRB -- Revenue Refunding Bonds See accompanying notes to financial statements. 15 EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND STATEMENT OF ASSETS AND LIABILITIES (Photo of money) FEBRUARY 29, 1996 (UNAUDITED) ASSETS: Investments at value (identified cost $47,592,304)............................................................. $48,661,316 Interest receivable............................................................................................ 657,948 Prepaid expenses............................................................................................... 33,446 Receivable for Fund shares sold................................................................................ 28,916 Unamortized organization expenses.............................................................................. 3,288 Total assets............................................................................................. 49,384,914 LIABILITIES: Due to custodian bank.......................................................................................... 178,821 Payable for investment securities purchased.................................................................... 1,284,740 Accrued expenses............................................................................................... 16,509 Distribution fee payable....................................................................................... 7,154 Payable for Fund shares repurchased............................................................................ 33,874 Dividend payable............................................................................................... 33,119 Accrued advisory fee........................................................................................... 4,802 Total liabilities........................................................................................ 1,559,019 NET ASSETS........................................................................................................ $47,825,895 NET ASSETS CONSISTS OF: Paid-in capital................................................................................................ $47,429,520 Accumulated net realized loss on investment transactions....................................................... (672,637) Net unrealized appreciation of investments..................................................................... 1,069,012 Net assets............................................................................................... $47,825,895 CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE: Class A Shares ($3,623,678 353,608 shares of beneficial interest outstanding).................................. $10.25 Sales charge -- 3.25% of offering price........................................................................ .34 Maximum offering price......................................................................................... $ 10.59 Class B Shares ($7,551,856 737,024 shares of beneficial interest outstanding).................................. $ 10.25 Class Y Shares ($36,650,361 3,578,681 shares of beneficial interest outstanding)............................... $ 10.24
See accompanying notes to financial statements. 16 EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND STATEMENT OF OPERATIONS (Photo of money) SIX MONTHS ENDED FEBRUARY 29, 1996 (UNAUDITED) INVESTMENT INCOME: Interest........................................................................................... $1,336,670 EXPENSES: Advisory fee....................................................................................... $130,676 Distribution fee -- Class A Shares................................................................. 3,462 Distribution fee -- Class B Shares................................................................. 24,951 Shareholder services fees -- Class B Shares........................................................ 8,317 Registration and filing fees....................................................................... 37,907 Transfer agent fee................................................................................. 31,949 Custodian fee...................................................................................... 27,505 Professional fees.................................................................................. 13,882 Reports and notices to shareholders................................................................ 7,589 Insurance.......................................................................................... 6,245 Amortization of organization expenses.............................................................. 4,399 Trustees' fees and expenses........................................................................ 4,041 Miscellaneous...................................................................................... 1,547 302,470 Less: Fee waivers and expense reimbursements....................................................... (90,129) Net expenses.............................................................................. 212,341 Net investment income................................................................................. 1,124,329 NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investments................................................................... 189,271 Net change in unrealized appreciation of investment transactions................................... 205,548 Net gain on investments............................................................................... 394,819 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................................. $1,519,148
See accompanying notes to financial statements. 17 EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND (Photo of money) STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED FEBRUARY 29, 1996 YEAR ENDED (UNAUDITED) AUGUST 31, 1995 INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income.................................................................. $ 1,124,329 $ 2,318,884 Net realized gain (loss) on investment transactions.................................... 189,271 (713,222) Net change in unrealized appreciation of investments................................... 205,548 529,821 Net increase resulting from operations.............................................. 1,519,148 2,135,483 DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME: Class A Shares......................................................................... (151,860) (178,721) Class B Shares......................................................................... (116,074) (96,022) Class Y Shares......................................................................... (856,395) (2,044,141) Total distributions to shareholders................................................. (1,124,329) (2,318,884) FUND SHARE TRANSACTIONS: Proceeds from shares sold.............................................................. 8,360,353 25,128,726 Proceeds from reinvestment of distributions............................................ 899,967 1,923,116 Payment for shares redeemed............................................................ (15,281,214) (26,833,640) Net increase (decrease) resulting from Fund share transactions...................... (6,020,894) 218,202 Net increase (decrease) in net assets............................................... (5,626,075) 34,801 NET ASSETS: Beginning of period.................................................................... 53,451,970 53,417,169 End of period.......................................................................... $ 47,825,895 $ 53,451,970
See accompanying notes to financial statements. 18 EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND (Photo of money) FINANCIAL HIGHLIGHTS CLASS A AND B SHARES
CLASS B CLASS A SHARES SHARES SIX MONTHS JANUARY 5, SIX MONTHS ENDED 1995* ENDED FEBRUARY 29, THROUGH FEBRUARY 29, 1996 AUGUST 31, 1996 (UNAUDITED) 1995 (UNAUDITED) PER SHARE DATA: Net asset value, beginning of period............................................ $10.17 $9.97 $10.17 Income from investment operations: Net investment income......................................................... .22 .30 .18 Net realized and unrealized gain on investments............................... .08 .20 .08 Total from investment operations............................................ .30 .50 .26 Less distributions to shareholders from net investment income................... (.22) (.30) (.18) Net asset value, end of period................................................ $10.25 $10.17 $10.25 TOTAL RETURN+................................................................... 3.0% 5.1% 2.6% RATIOS & SUPPLEMENTAL DATA: Net assets, end of period (000's omitted)............................................................... $3,624 $6,820 $7,552 Ratios to average net assets: Expenses**.................................................................... .72%++ .70%++ 1.62++ Net investment income**....................................................... 4.39%++ 4.32%++ 3.48++ Portfolio turnover rate......................................................... 27% 80% 27% JANUARY 5, 1995* THROUGH AUGUST 31, 1995 PER SHARE DATA: Net asset value, beginning of period............................................ $9.97 Income from investment operations: Net investment income......................................................... .24 Net realized and unrealized gain on investments............................... .20 Total from investment operations............................................ .44 Less distributions to shareholders from net investment income................... (.24) Net asset value, end of period................................................ $10.17 TOTAL RETURN+................................................................... 4.5% RATIOS & SUPPLEMENTAL DATA: Net assets, end of period (000's omitted)............................................................... $6,050 Ratios to average net assets: Expenses**.................................................................... 1.58%++ Net investment income**....................................................... 3.50%++ Portfolio turnover rate......................................................... 80%
* Commencement of class operations. + Total return is calculated for the periods indicated and is not annualized. Initial sales charge or contingent deferred sales charges are not reflected. ++ Annualized. ** Net of expense waivers and reimbursements. If the Fund had borne all expenses that were reimbursed or waived by the investment adviser, the annualized ratios of expenses and net investment income to average net assets would have been the following:
CLASS B CLASS A SHARES SHARES SIX MONTHS JANUARY 5, SIX MONTHS ENDED 1995* ENDED FEBRUARY 29, THROUGH FEBRUARY 29, 1996 AUGUST 31, 1996 (UNAUDITED) 1995 (UNAUDITED) Expenses........................................................................ 1.43% 1.14% 2.28% Net investment income........................................................... 3.68% 3.88% 2.82% JANUARY 5, 1995* THROUGH AUGUST 31, 1995 Expenses........................................................................ 2.26% Net investment income........................................................... 2.82%
See accompanying notes to financial statements. 19 EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND (Photo of money) FINANCIAL HIGHLIGHTS -- (CONTINUED) CLASS Y SHARES
CLASS Y SHARES SIX MONTHS ENDED FEBRUARY 29, 1996 YEAR ENDED AUGUST 31, (UNAUDITED) 1995 1994 1993 1992++ PER SHARE DATA: Net asset value, beginning of period............................. $10.17 $10.21 $10.58 $10.33 $10.00 Income from investment operations: Net investment income.......................................... .22 .46 .47 .49 .51 Net realized and unrealized gain (loss) on investments......... .08 (.04) (.32) .25 .33 Total from investment operations............................. .30 .42 .15 .74 .84 Less distributions to shareholders: From net investment income..................................... (.23) (.46) (.47) (.49) (.51) From net realized gains on investments......................... -- -- (.03) -- -- In excess of net realized gains on investments................. -- -- (.02) -- -- Total distributions.......................................... (.23) (.46) (.52) (.49) (.51) Net asset value, end of period................................. $10.24 $10.17 $10.21 $10.58 $10.33 TOTAL RETURN+.................................................... 2.9% 4.2% 1.4% 7.4% 8.6% RATIOS & SUPPLEMENTAL DATA: Net assets, end of period (000's omitted)........................ $36,650 $40,581 $53,417 $66,607 $54,470 Ratios to average net assets: Expenses**..................................................... .69%++ .74% .58% .40% .17% Net investment income**........................................ 4.43%++ 4.52% 4.54% 4.73% 4.85% Portfolio turnover rate.......................................... 27% 80% 32% 37% 57% JULY 17, 1991* THROUGH AUGUST 31, 1991++ PER SHARE DATA: Net asset value, beginning of period............................. $10.00 Income from investment operations: Net investment income.......................................... .06 Net realized and unrealized gain (loss) on investments......... -- Total from investment operations............................. .06 Less distributions to shareholders: From net investment income..................................... (.06) From net realized gains on investments......................... -- In excess of net realized gains on investments................. -- Total distributions.......................................... (.06) Net asset value, end of period................................. $10.00 TOTAL RETURN+.................................................... .6% RATIOS & SUPPLEMENTAL DATA: Net assets, end of period (000's omitted)........................ $4,025 Ratios to average net assets: Expenses**..................................................... 0%++ Net investment income**........................................ 4.93%++ Portfolio turnover rate.......................................... 0%
* Commencement of class operations. ++ 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 at August 31, 1991 and the related per share data are restated to reflect both for 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. + Total return is calculated for the periods indicated and is not annualized. ++ Annualized. ** Net of expense waivers and reimbursements. If the Fund had borne all expenses that were reimbursed or waived by the investment adviser, the annualized ratios of expenses and net investment income to average net assets would have been the following:
CLASS Y SHARES SIX MONTHS ENDED FEBRUARY 29, 1996 YEAR ENDED AUGUST 31, (UNAUDITED) 1995 1994 1993 1992 Expenses............................................................... .92% .86% .83% .81% .86% Net investment income.................................................. 4.20% 4.40% 4.29% 4.32% 4.16% JULY 17, 1991* THROUGH AUGUST 31, 1991 Expenses............................................................... 1.40% Net investment income.................................................. 3.53%
See accompanying notes to financial statements. 20 EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA (Photo of power lines) A REPORT FROM YOUR PORTFOLIO MANAGER STEVEN C. SHACHAT We are pleased to present the Semi-Annual Report for (Photo of Steven Evergreen Short-Intermediate Municipal Fund-California. The C. Shachat) past six months have proven to be an exhilarating but challenging ride for market participants. Evidence that economic activity remained sluggish and that inflation continued to be under control moved the Federal Reserve Board to further ease the Federal Funds rate (the rate at which the nation's banks borrow money from each other and on which all other short-term rates are based) in January. This was the third reduction for this important short-term rate in the past eight months, the first occurring in July. The latest 25-basis-point reduction in January put the rate at 5 1/4%. In addition, at its January meeting, the Fed also lowered its discount rate, the rate at which the Federal Reserve lends to member banks, to 5 1/4%, and, subsequently, commercial banks dropped the prime lending rate to 8 1/4%. More recently, however, economic strength has been reflected in some of the indicators released. In his semi-annual Humphrey-Hawkins testimony before Congress in February, Federal Reserve Board Chairman Alan Greenspan shocked the markets by making comments that indicated the Fed is probably not going to aggressively ease interest rates any time soon, barring more evidence that the economy is faltering badly. In addition, an unusual combination of circumstances had kept the true tempo of activity somewhat opaque as important economic statistics were first delayed by the government shutdown, and then skewed as a giant blizzard smothered the East Coast. Exceptionally weak data for January kept alive notions that the economy might be downsizing, but the unknown impact of the blizzard left a lot of doubt. Although everyone expected some rebound when the weather cleared, the avalanche of new jobs that appeared in February took the market by surprise. Since the February employment data, the financial markets have adjusted to the possibility of quickened economic growth and the absence of an accommodative Fed. We do not expect any further pronounced trend movement in interest rates until more solid statistics and distortion-free data become available. For now, it looks as if the Fed is on hold until it can evaluate the true, underlying tempo of economic activity. Our long-term investment strategy remains the same as in the past. In conjunction with our primary goals of seeking to both maximize the Fund's yield and maintain as much price stability as possible, we continue to purchase high grade, noncallable, essential purchase and general obligation municipal bonds. Our philosophy amid the current uncertainty of the U.S. economy is to buy municipal bonds based on careful credit analysis and our estimation of a bond's relative value, rather than on the basis of interest rate forecasts. As such, we intend to maintain a neutral maturity stance in the 4 to 5-year range and hope to add value through a careful structuring of the portfolio, seeking individual bonds which we believe to be undervalued. Lastly, our portfolio quality remains high. At February 29, over 80% of th Fund's net assets were invested in securities rated Aaa, AA, or the equivalent by Moody's Investor Service and/or Standard & Poor's. The California economy continues to grow and the unemployment rate declined to 7.7% by year-end 1995, as compared with the unemployment rate average of 8.6% throughout 1994. The improving economy bolstered state cash balances beyond required liquidity levels and thus avoided any mandated cuts in state spending. Short-term borrowing is anticipated after the outstanding Revenue Anticipation Warrants are paid in April, but the borrowing would be only for $2 billion and will not extend over year-end. As always, we remain dedicated to achieving superior investment results, and look forward to continuing to serve your investment needs. 21 EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA STATEMENT OF INVESTMENTS (Photo of power lines) FEBRUARY 29, 1996 (UNAUDITED)
PRINCIPAL AMOUNT (000) VALUE LONG-TERM INVESTMENTS -- 94.7% $1,000 Burbank-Glendale-Pasadena Airport Authority Airport RRB Series 1992, 5.00%, 6/1/98 (AMBAC).......... $ 1,025,390 California Housing Finance Agency Multi-Unit Rental Housing RB 1992 Series A, 325 5.00%, 2/1/97.................. 327,347 320 5.25%, 2/1/98.................. 324,006 900 California State GO, 7.00%, 8/1/02 (FGIC)........... 1,030,725 500 California Statewide Communities Development Authority COP (Sutter Obligated Group), 5.00%, 8/15/98 (AMBAC)......... 513,135 320 Chino Unified School District San Bernardino County GO 1975 Series 3, 5.25%, 2/1/97.................. 323,779 1,090 City of Los Angeles Judgement Obligation Bonds Series 1992-A, 5.00%, 8/1/00.................. 1,121,719 565 City of Santa Rosa (Sonoma County) Wastewater Service Facilities District 1992 Refunding Improvement Bonds, 5.10%, 7/2/98 (AMBAC).......... 581,024 650 City of Santa Rosa (Sonoma County) Wastewater RRB 1992 Series B, 5.10%, 9/1/98 (FGIC)........... 669,702 1,000 City of Torrance Refunding COP Series 1995, 5.00%, 4/1/05 (AMBAC).......... 1,014,550 1,100 City of Vallejo (Water Improvement Project) RB 1992 Series B, 6.00%, 11/1/98 (FGIC).......... 1,160,302 685 County of San Bernardino (West Valley Detention Center Project) COP, Prerefunded @102, 7.70%, 11/1/98................. 765,919 PRINCIPAL AMOUNT (000) VALUE $1,000 County of Stanislaus (Capital Improvement Program) Series A of 1996 Refunding COP, 4.50%, 5/1/02 (MBIA).................. $ 1,003,150 900 East Bay Municipal Utility District Water System RRB Series 1996, 6.00%, 6/1/01 (FGIC)........... 972,099 1,000 Los Angeles County Metropolitan Transportation Authority Proposition C Sales Tax Second Senior RB Series 1995 A, 5.90%, 7/1/05 (AMBAC).......... 1,100,910 585 Northern California Power Agency Geothermal Project No. 3 RRB 1987 Series A, 6.20%, 7/1/96......................... 590,382 450 Pico Rivera Public Financing Authority 1992 (Water Enterprise Project) RRB Series A, 5.70%, 12/1/98 (MBIA).......... 471,897 1,000 Public Facilities Financing Authority of the City of San Diego Sewer RB Series 1995, 4.30%, 5/15/02 (FGIC).......... 994,340 Rim of the World Unified School District 1992 (Measure V Capital Project) COP, 500 5.10%, 9/1/97 (AMBAC).......... 511,115 500 5.25%, 9/1/98 (AMBAC).......... 516,930 1,000 Sacramento Municipal Utility District Electric RRB 1993 Series D, 5.25%, 11/15/04 (MBIA)......... 1,047,610 880 San Diego County Regional Transportation Commission Second Senior Sales Tax RB (Limited Tax Bonds) 1992 Series A, 4.40%, 4/1/01 (FGIC)........... 884,752 575 San Diego Unified School District COP Series B, 5.90%, 7/1/97......................... 590,887 785 San Francisco City & County Sewer RB Series B, Prerefunded @101.50, 7.60%, 10/1/97 (AMBAC)......... 844,542
22 EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA STATEMENT OF INVESTMENTS -- (CONTINUED) (Photo of power lines) FEBRUARY 29, 1996 (UNAUDITED)
PRINCIPAL AMOUNT (000) VALUE LONG-TERM INVESTMENTS -- CONTINUED $500 San Jose-Santa Clara Clean Water Financing Authority Sewer RRB Series 1995C, 4.50%, 11/15/02 (FGIC)................ $ 503,425 300 Sunnyvale Financing Authority Utility Revenue RB (Solid Waste Materials Recovery and Transfer Station) 1992 Series B, 5.10%, 10/1/98 (MBIA).......... 309,369 TOTAL LONG-TERM INVESTMENTS (COST $18,850,356)........ 19,199,006 SHORT-TERM INVESTMENTS -- 4.0% 300 Irvine Ranch Water District (Orange County) Series 1985B Consolidated Refunding Bonds, (LOC: The Sumitomo Bank, Ltd.), 3.75% -- VRDN.................. 300,000 400 County of Orange Irvine Coast Assessment District, No. 88-1 Limited Obligation Improvement Bonds, (LOC: The Industrial Bank of Japan, Ltd., The Fuji Bank Ltd. & The Mitsubishi Bank, Ltd. 1/3 each), 3.75% -- VRDN.................. 400,000 PRINCIPAL AMOUNT (000) VALUE SHORT-TERM INVESTMENTS -- CONTINUED $100 County Sanitation Districts Nos. 1,2,3,5,6,7,11,13 & 14 of Orange County (Capital Improvement Program) Series 1990-92A COP, (LOC: National Westminster Bank PLC), 3.20% -- VRDN.................. $ 100,000 TOTAL SHORT-TERM INVESTMENTS (COST $800,000)........... 800,000 TOTAL INVESTMENTS (COST $19,650,356)........ 98.7% 19,999,006 OTHER ASSETS AND LIABILITIES -- NET........ 1.3 267,485 NET ASSETS................... 100.0% $20,266,491
Summary of Abbreviations AMBAC -- Insured by American Municipal Bond Assurance Corp. COP -- Certificates of Participation FGIC -- Insured by Financial Guaranty Insurance Co. GO -- General Obligations LOC -- Letter of Credit MBIA -- Insured by Municipal Bond Investors Assurance RB -- Revenue Bonds RRB -- Refunding Revenue Bonds VRDN -- Variable Rate Demand Notes are 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 February 29, 1996. See accompanying notes to financial statements. 23 EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA STATEMENT OF ASSETS AND LIABILITIES (Photo of power lines) FEBRUARY 29, 1996 (UNAUDITED)
ASSETS: Investments at value (identified cost $19,650,356)............................................................. $19,999,006 Cash........................................................................................................... 53,805 Interest receivable............................................................................................ 250,501 Receivable for Fund shares sold................................................................................ 6,739 Prepaid expenses............................................................................................... 1,485 Total assets............................................................................................. 20,311,536 LIABILITIES: Payable for Fund shares repurchased............................................................................ 22,701 Accrued expenses............................................................................................... 11,553 Dividend payable............................................................................................... 5,978 Accrued advisory fee........................................................................................... 4,813 Total liabilities........................................................................................ 45,045 NET ASSETS........................................................................................................ $20,266,491 NET ASSETS CONSIST OF: Paid-in capital................................................................................................ $20,236,757 Accumulated net realized loss on investment transactions....................................................... (318,916) Net unrealized appreciation of investments..................................................................... 348,650 Net assets............................................................................................... $20,266,491 CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE: Class A Shares ($10.11 1 share of beneficial interest issued and outstanding).................................. $10.11 Sales charge -- 3.25% of public offering price................................................................. .34 Maximum offering price................................................................................... $ 10.45 Class B Shares ($10.11 1 share of beneficial interest issued and outstanding).................................. $ 10.11 Class Y Shares ($20,266,471 2,003,940 shares of beneficial interest issued and outstanding)................................................................................................ $ 10.11
See accompanying notes to financial statements. 24 EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA STATEMENT OF OPERATIONS (Photo of power lines) SIX MONTHS ENDED FEBRUARY 29, 1996 (UNAUDITED)
INVESTMENT INCOME: Interest............................................................................................. $497,173 EXPENSES: Advisory fee......................................................................................... $ 55,822 Custodian fee........................................................................................ 17,672 Transfer agent fee................................................................................... 12,011 Professional fees.................................................................................... 11,936 Insurance............................................................................................ 5,068 Reports and notices to shareholders.................................................................. 4,116 Trustees' fees and expenses.......................................................................... 1,991 Registration and filing fees......................................................................... 615 Miscellaneous........................................................................................ 1,402 110,633 Less: Advisory fee waiver............................................................................ (25,373) Net expenses................................................................................... 85,260 Net investment income................................................................................... 411,913 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investment transactions......................................................... 113,262 Net decrease in unrealized appreciation of investments............................................... (11,867) Net gain on investments................................................................................. 101,395 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................................... $513,308
See accompanying notes to financial statements. 25 EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA (Photo of power lines) STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED FEBRUARY YEAR 29, ENDED 1996 AUGUST 31, (UNAUDITED) 1995 INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income........................................................................ $ 411,913 $ 1,004,141 Net realized gain (loss) on investments...................................................... 113,262 (432,178) Net change in unrealized appreciation of investments......................................... (11,867) 279,942 Net increase resulting from operations................................................. 513,308 851,905 DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income -- Class Y Shares...................................................... (411,913) (1,004,141) Net realized gains on investments -- Class Y Shares.......................................... -- (77,128) Total distributions to shareholders.................................................... (411,913) (1,081,269) FUND SHARE TRANSACTIONS: Proceeds from shares sold.................................................................... 3,257,543 8,632,605 Proceeds from reinvestment of distributions.................................................. 360,518 954,278 Payments for shares redeemed................................................................. (4,814,989) (16,428,530) Net decrease resulting from Fund share transactions.................................... (1,196,928) (6,841,647) Net decrease in net assets............................................................. (1,095,533) (7,071,011) NET ASSETS: Beginning of period.......................................................................... 21,362,024 28,433,035 End of period................................................................................ $20,266,491 $ 21,362,024
See accompanying notes to financial statements. 26 EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA (Photo of power lines) FINANCIAL HIGHLIGHTS CLASS Y SHARES
SIX MONTHS ENDED FEBRUARY 29, 1996 YEAR ENDED AUGUST 31, (UNAUDITED) 1995 1994 1993++ 1992++ PER SHARE DATA: Net asset value, beginning of period............................... $ 10.06 $ 10.09 $ 10.34 $ 10.00 $ 10.00 Income from investment operations: Net investment income............................................ .20 .41 .43 .41 .33 Net realized and unrealized gain (loss) on investments........... .05 -- (.24) .34 -- Total income from investment operations.......................... .25 .41 .19 .75 .33 Less distributions to shareholders from: Net investment income............................................ (.20) (.41) (.43) (.41) (.33) Net realized gains............................................... -- (.03) (.01) -- -- Total distributions.............................................. (.20) (.44) (.44) (.41) (.33) Net asset value, end of period..................................... $ 10.11 $ 10.06 $ 10.09 $ 10.34 $ 10.00 TOTAL RETURN+...................................................... 2.5% 4.2% 1.8% 7.6% 3.4% RATIOS & SUPPLEMENTAL DATA: Net assets, end of period (000's omitted).......................... $ 20,266 $21,362 $28,433 $30,136 $34,452 Ratios to average net assets: Expenses*........................................................ .84%++ .79% .52% .30% .40% Net investment income*........................................... 4.06%++ 4.10% 4.20% 3.96% 3.36% Portfolio turnover rate............................................ 38% 29% 12% 37% -- 1991++ PER SHARE DATA: Net asset value, beginning of period............................... $ 10.00 Income from investment operations: Net investment income............................................ .47 Net realized and unrealized gain (loss) on investments........... -- Total income from investment operations.......................... .47 Less distributions to shareholders from: Net investment income............................................ (.47) Net realized gains............................................... -- Total distributions.............................................. (.47) Net asset value, end of period..................................... $ 10.00 TOTAL RETURN+...................................................... 4.8% RATIOS & SUPPLEMENTAL DATA: Net assets, end of period (000's omitted).......................... $42,022 Ratios to average net assets: Expenses*........................................................ .37% Net investment income*........................................... 4.66% Portfolio turnover rate............................................ --
++ On October 16, 1992, the Fund was converted to a short-intermediate municipal fund with a fluctuating net asset value per share from a money market fund with a stable net asset value per share. The shares outstanding and the related per share data for the fiscal years ended August 31, 1991 and August 31, 1992 are restated to reflect the 1 for 10 reverse share split on October 21, 1992. Total return calculated after October 16, 1992 reflects the fluctuation in net asset value per share. + Total return is calculated on net asset value per share for the periods indicated and is not annualized. ++ Annualized. * Net of expense waivers and reimbursements. If the Fund had borne all expenses that were assumed or waived by the investment adviser, the annualized ratios of expenses and net investment income to average net asset would have been the following:
SIX MONTHS ENDED FEBRUARY 29, 1996 YEAR ENDED AUGUST 31, (UNAUDITED) 1995 1994 1993 1992 Expenses........................................................... 1.09% .99% .95% .98% .84% Net investment income.............................................. 3.81% 3.90% 3.77% 3.28% 2.92% 1991 Expenses........................................................... .85% Net investment income.............................................. 4.18%
See accompanying notes to financial statements. 27 COMBINED NOTES TO FINANCIAL STATEMENTS NOTE 1 -- ORGANIZATION AND NATURE OF OPERATIONS The Evergreen Tax-Free Funds (the "Funds") are separate series of open-end management companies registered under the Investment Company Act of 1940, as amended (the "Act"). The Evergreen Tax-Free Funds consist of Evergreen High Grade Tax Free Fund ("High Grade"), Evergreen Short-Intermediate Municipal Fund ("Short-Intermediate") and Evergreen Short-Intermediate Municipal Fund -- California ("California"), known collectively as the Funds. High Grade is a series of the Evergreen Investment Trust. Short Intermediate and California are each series of the Evergreen Municipal Trust. High Grade's objective is to seek a high level of Federally tax free income that is consistent with preservation of capital, Short Intermediate's investment objective is to achieve as high a level of current income, exempt from Federal income tax other than the Federal alternative minimum tax as is consistent with preserving capital and providing liquidity. California's investment objective is to achieve as high a level of current income exempt from Federal and California income taxes as is consistent with preserving capital and providing liquidity. Effective July 7, 1995, High Grade acquired substantially all of Evergreen National Tax-Free Fund's net assets, valued at $28,779,194 through a non-taxable exchange for 2,679,627 shares of High Grade. The net assets of Evergreen National Tax-Free Fund acquired included unrealized appreciation of $528,003. The aggregate net assets of High Grade immediately after the acquisition were $128,792,690. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. These policies are in conformity with generally accepted accounting principles. SECURITY VALUATIONS -- Municipal bonds are valued by an independent pricing service taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue and any other factors or market data it deems relevant in determining valuations for normal institutional size trading units of debt securities which it believes to reflect the fair value of securities. The independent pricing service does not rely exclusively on quoted prices. Short term securities purchased with remaining maturities of sixty days or less are stated at amortized cost which approximates market value. SECURITY TRANSACTIONS -- Security transactions are accounted for on the date purchased or sold. Net realized gains or losses are determined on the identified cost basis. INVESTMENT INCOME AND EXPENSES -- Interest income and expenses are accrued daily. Premiums and discounts paid on securities are amortized or accreted into interest income. WHEN ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Funds record when-issued or delayed delivery transactions on the trade date and maintain security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. DIVIDENDS TO SHAREHOLDERS -- Dividends from net investment income are declared daily and paid monthly. Dividends from net realized capital gains on investments, if any, will be distributed at least annually. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from the amounts available for distribution under generally accepted accounting principles. To the extent these differences are permanent in nature, such amounts are reclassified within the components of net assets. INCOME TAXES -- It is each Fund's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable and other net income to its shareholders. Accordingly, no provisions for Federal income or excise taxes are necessary. 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. 28 COMBINED NOTES TO FINANCIAL STATEMENTS NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- continued At August 31, 1995, each Fund's most recent fiscal year-end, High Grade and Short-Intermediate had capital loss carryforwards of $3,409,284 and $267,515, respectively. Pursuant to the Code, such capital loss carryforwards will expire in the year 2002 and 2003, respectively. Capital losses incurred after October 31, within a Fund's fiscal year are deemed to arise on the first business day of the following fiscal year for tax purposes. Short-Intermediate and California have incurred and have elected to defer $594,394 and $432,178, respectively, of capital losses to the fiscal year ended August 31, 1996. DEFERRED EXPENSES -- The costs incurred by High Grade with respect to registration of its shares in its first fiscal year, excluding the initial expense of registering the shares, have been deferred and are being amortized using the straight-line method not to exceed a period of five years from the Fund's commencement. ALLOCATION OF EXPENSES -- Expenses specifically identifiable to a class of shares or to a specific Fund in a Trust are charged to that class or Fund. Expenses common to a Trust as a whole are allocated to the Funds in that Trust. Investment income, net of expenses (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets of each class. UNAMORTIZED ORGANIZATION EXPENSES -- The expenses of Short-Intermediate incurred in connection with its organization are being deferred and amortized over a period of benefit not to exceed 60 months from the date the Fund commenced operations. USE OF ESTIMATES -- The preparation of financial statements is in accordance with generally accepted accounting principles which requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. NOTE 3 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY AGREEMENTS -- First Union National Bank of North Carolina ("First Union") is entitled to an annual fee of .50 of 1% of High Grade's average daily net assets pursuant to an investment advisory agreement. For the six-month period ended February 29, 1996, First Union voluntarily waived $118,912 of its advisory fee. First Union can modify or terminate this voluntary waiver at any time. Pursuant to an agreement with Short-Intermediate's and California's investment adviser, Evergreen Asset Management Corp. ("Evergreen Asset"), a wholly owned subsidiary of First Union, Evergreen Asset is entitled to an annual fee based on Short-Intermediate's and California's average daily net assets, respectively, in accordance with the following schedule:
SHORT-INTERMEDIATE CALIFORNIA First $1 billion 0.50% 0.55 % Over $1 billion 0.45% 0.50 %
Evergreen Asset has agreed to reimburse Short-Intermediate and California to the extent that the Funds' operating expenses (including the investment advisory fee and amortization of organizational expenses but excluding interest, taxes, brokerage commissions, 12b-1 distribution and shareholder services fees and extraordinary expenses) exceed 1.00% of its average daily net assets for any fiscal year. The expenses of Short-Intermediate and California did not exceed this limit. However, for the six-month period ended February 29, 1996, Evergreen Asset voluntarily waived $59,167 and $25,373 of its advisory fee for Short-Intermediate and California, respectively, and reimbursed expenses amounting to $30,962 for Short-Intermediate. Evergreen Asset can modify or terminate these voluntary waivers at any time. Lieber & Company, an affiliate of First Union, is the investment sub-adviser to Short-Intermediate and California. Lieber & Company is reimbursed by the Adviser at no additional expense to the Funds. 29 COMBINED NOTES TO FINANCIAL STATEMENTS NOTE 3 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES -- continued Evergreen Asset furnishes Short Intermediate and California with administrative services as part of their advisory agreements and accordingly, these Funds do not pay a separate administration fee. Furman Selz LLC ("Furman Selz") is each Fund's sub-administrator. As sub-administrator, Furman Selz provides the officers of the Funds. For Short Intermediate and California, Furman Selz' fee is paid by Evergreen Asset and is not a Fund expense. Evergreen Asset is High Grade's administrator and Furman Selz is the sub-administrator. Evergreen Asset's and Furman Selz' fees for High Grade are based on the average daily net assets of all of the Funds administered by Evergreen Asset for which First Union or Evergreen Asset is also the investment adviser. These fees are calculated at the following annual rates:
ADMINISTRATION FEE AVERAGE DAILY NET ASSETS 0.050% on the first $7 billion 0.035% on the next $3 billion 0.030% on the next $5 billion 0.020% on the next $10 billion 0.015% on the next $5 billion 0.010% in excess of $30 billion SUB-ADMINISTRATION FEE AVERAGE DAILY NET ASSETS 0.0100% on the first $7 billion 0.0075% on the next $3 billion 0.0050% on the next $15 billion 0.0040% in excess of $25 billion
At February 29, 1996, assets for which Evergreen Asset was the administrator for which either Evergreen Asset or First Union was investment adviser totaled approximately $14.4 billion. PLANS OF DISTRIBUTION -- The Funds have adopted for their Class A and Class B shares, Distribution Plans (the "Plans") pursuant to Rule 12b-1 under the Act (see Note 4). Under the terms of the Plans, Short-Intermediate and California may incur distribution-related and shareholder servicing expenses which may not exceed an annual fee of .75 of 1% for Class A shares and 1% for Class B shares. The payments for Short-Intermediate for Class A Shares were voluntarily limited to .10 of 1% of average daily net assets for the six-month period ended February 29, 1996. Such fees are accrued daily and paid monthly. No fee was charged to California's Class A and Class B shares. In connection with their Plans, Short-Intermediate and California have entered into distribution agreements with Evergreen Funds Distributor, Inc. ("EFD"), a subsidiary of Furman Selz whereby Short-Intermediate and California will compensate EFD for its services at a rate which may not exceed an annual fee of .10 of 1% of Class A Share's average daily net assets and an annual fee of 1% of Class B Share's average daily net assets. A portion of the payments under Short-Intermediate's and California's Class B Plans, up to .25 of 1% of average daily net assets may constitute a shareholder service fee. EFD has entered into a Shareholder Services Agreement with First Union Brokerage Services ("FUBS"), an affiliate of First Union, whereby they will compensate FUBS for certain services provided to shareholders and/or maintenance of shareholder accounts relating to each of the Funds' Class B Shares. In connection with its Plan, High Grade entered into a distribution agreement with EFD whereby High Grade will compensate EFD for its services at a rate which may not exceed an annual fee of .25 of 1% of Class A average daily net assets and an annual fee of .75 of 1% of Class B average daily net assets. Pursuant to a Shareholder Services Agreement, High Grade compensated FUBS an annual fee of .25 of 1% of Class B average daily net assets for certain services provided to Class B shareholders. 30 COMBINED NOTES TO FINANCIAL STATEMENTS NOTE 3 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES -- continued EFD has advised the Funds that it has retained $4,112 and 4,029 from front-end sales charges resulting from sales of Class A shares of High Grade and Short-Intermediate, respectively, during the six months ended February 29, 1996. ORGANIZATIONAL EXPENSES -- Organizational expenses of High Grade were initially borne by the Fund's former administrator. High Grade had agreed to reimburse such expenses during the five-year period following February 21, 1992, the date High Grade commenced operations. As a result of a change in the administration agreement, First Union purchased the remaining unreimbursed organizational expenses from the former administrator. At February 29, 1996, $10,019 remains to be reimbursed to First Union. NOTE 4 -- SHARES OF BENEFICIAL INTEREST The Funds have an unlimited number of $0.0001 par value shares of beneficial interest authorized, which are divided into classes, designated Class A, Class B and Class Y Shares. High Grade's Class A shares are offered with a front-end sales charge of 4.75%. Short-Intermediate's and California's Class A shares are offered with a front-end sales charge of 3.25%. The Funds' Class B shares are offered with a contingent deferred sales charge payable when shares are redeemed which would decline from 5% to zero over a seven-year period (after which they will convert to Class A shares). The Fund's Class Y shares are sold without a sales charge and are available only to investment advisory clients of First Union and its affiliates, certain institutional investors or Class Y shareholders of record of certain other funds managed by First Union and its affiliates as of December 30, 1994. All classes have identical voting, dividend, liquidation and other rights, except that Class A and Class B shares bear distribution expenses (see Note 3) and have exclusive voting rights with respect to their distribution plans. Transactions in shares of beneficial interest were as follows:
SIX MONTHS ENDED FEBRUARY 29, 1996 EIGHT MONTHS ENDED (UNAUDITED) AUGUST 31, 1995 HIGH GRADE SHARES AMOUNT SHARES AMOUNT CLASS A Shares sold............................................................. 90,521 $ 1,006,582 95,059 $ 1,003,763 Shares issued in acquisition of Evergreen National Tax-Free Fund........ -- -- 369,661 3,970,157 Shares issued on reinvestment of distributions.......................... 74,649 826,700 109,500 1,150,986 Shares redeemed......................................................... (552,206) (6,114,381) (967,409) (10,152,313) Net decrease............................................................ (387,036) (4,281,099) (393,189) (4,027,407) CLASS B Shares sold............................................................. 215,836 2,392,720 112,511 1,186,133 Shares issued in acquisition of Evergreen National Tax-Free Fund........ -- -- 243,174 2,611,688 Shares issued on reinvestment of distributions.......................... 37,804 418,958 52,945 556,311 Shares redeemed......................................................... (209,678) (2,315,849) (520,448) (5,459,057) Net increase (decrease)................................................. 43,962 495,829 (111,818) (1,104,925) CLASS Y Shares sold............................................................. 193,410 2,145,152 85,773 908,492 Shares issued in acquisition of Evergreen National Tax-Free Fund........ -- -- 2,066,792 22,197,350 Shares issued on reinvestment of distributions.......................... 32,238 357,231 11,174 118,908 Shares redeemed......................................................... (328,769) (3,663,560) (258,812) (2,728,122) Net increase (decrease)................................................. (103,121) (1,161,177) 1,904,927 20,496,628 Total net increase (decrease) resulting from Fund share transactions.... (446,195) $(4,946,447) 1,399,920 $15,364,296
31 COMBINED NOTES TO FINANCIAL STATEMENTS NOTE 4 -- SHARES OF BENEFICIAL INTEREST -- continued
SIX MONTHS ENDED FEBRUARY 29, 1996 YEAR ENDED (UNAUDITED) AUGUST 31, 1995* SHARES AMOUNT SHARES AMOUNT SHORT-INTERMEDIATE CLASS A Shares sold............................................................. 331,089 $ 3,384,420 1,438,502 $14,469,110 Shares issued on reinvestment of distributions.......................... 12,962 132,435 16,308 164,891 Shares redeemed......................................................... (660,779) (6,782,717) (784,474) (7,943,982) Net decrease.......................................................... (316,728) (3,265,862) 670,336 6,690,019 CLASS B Shares sold............................................................. 199,391 2,041,611 673,520 6,777,013 Shares issued on reinvestment of distributions.......................... 8,296 84,799 7,150 72,369 Shares redeemed......................................................... (65,408) (668,584) (85,925) (870,798) Net increase.......................................................... 142,279 1,457,826 594,745 5,978,584 CLASS Y Shares sold............................................................. 287,767 2,934,322 385,625 3,882,603 Shares issued on reinvestment of distributions.......................... 66,851 682,733 167,271 1,685,856 Shares redeemed......................................................... (767,064) (7,829,913) (1,791,852) (18,018,860) Net decrease.......................................................... (412,446) (4,212,858) (1,238,956) (12,450,401) Total net increase (decrease) resulting from Fund share transactions.... (586,895) $(6,020,894) 26,125 $ 218,202
* For Class A and Class B shares, the Fund share transaction activity reflects the period January 5, 1995 (commencement of class operations) to August 31, 1995.
SIX MONTHS ENDED FEBRUARY 29, 1996 YEAR ENDED (UNAUDITED) AUGUST 31, 1995* SHARES AMOUNT SHARES AMOUNT CALIFORNIA CLASS A Shares sold............................................................ -- $ -- 1 $ 10 CLASS B Shares sold............................................................ -- -- 1 10 CLASS Y Shares sold............................................................ 322,516 3,257,543 866,764 8,632,585 Shares issued on reinvestment of distributions......................... 35,724 360,518 96,132 954,278 Shares redeemed........................................................ (477,540) (4,814,989) (1,656,210) (16,428,530) Net decrease......................................................... (119,300) (1,196,928) (693,314) (6,841,667) Total net decrease resulting from Fund share transactions.............. (119,300) $(1,196,928) (693,312) $ (6,841,647)
* For Class A and Class B shares, the Fund share transaction activity reflects the initial purchase of one share in each class on December 30, 1994. Through February 29, 1996 there were no further transactions. 32 COMBINED NOTES TO FINANCIAL STATEMENTS NOTE 5 -- INVESTMENT TRANSACTIONS The cost of purchases and proceeds from sales of investments, excluding short-term securities for the six-month period ended February 29, 1996 were as follows:
PURCHASES SALES High Grade............ $30,484,259 $34,291,888 Short-Intermediate.... 16,184,584 13,086,575 California............ 7,393,023 7,845,282
On February 29, 1996, the aggregate cost of investments for federal tax purposes is the same as for financial reporting purposes. The composition of unrealized appreciation and depreciation of investment securities was as follows:
APPRECIATION DEPRECIATION NET High Grade............ $ 7,950,042 $ 88,260 $7,861,782 Short-Intermediate.... 1,075,761 6,749 1,069,012 California............ 354,592 5,942 348,650
NOTE 6 -- CONCENTRATION OF CREDIT RISK High Grade and Short-Intermediate invest in obligations issued by states, territories and possessions of the United States and by the District of Columbia, and by their political subdivisions and duly constituted authorities. The issuers' abilities to meet their obligations may be affected by economic and political developments in a specific state or region. California invests in obligations issued by the State of California and by its political subdivisions and duly constituted authorities. The issuers' abilities to meet their obligations may be affected by economic and political developments in the State of California. Certain debt obligations held by each of the Funds are entitled to the benefit of insurance, standby letters of credit or other guarantees of banks or other financial institutions. 33 (This Page Left Blank Intentionally) 34 (This Page Left Blank Intentionally) 35 (This Page Left Blank Intentionally) 36 TRUSTEES AND OFFICERS TRUSTEES: Laurence B. Ashkin* Foster Bam* James S. Howell, Chairman Robert J. Jeffries* Gerald M. McDonnell Thomas L. McVerry William W. Pettit Russell A. Salton, III M.D. Michael S. Scofield OFFICERS: John J. Pileggi President and Treasurer Joan V. Fiore Secretary Sheryl Hirschfeld Assistant Secretary Donald E. Brostrom Assistant Treasurer Stephen W. St. Clair Assistant Treasurer * These individuals are not Trustees for Evergreen High Grade Tax Free Fund. NOT May lose value FDIC No bank guarantee INSURED Evergreen Funds Distributor, Inc. 538358 42607 4/96 -----END PRIVACY-ENHANCED MESSAGE-----