-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, WgbBiOQlXE1lD6i2psT23L8ZPAQCaLkI6Oi38yXqBZYPoASXrrbsayIQlBlmw0MV KITDr0Ib7wDok707d9NmYA== 0000820636-95-000004.txt : 19950509 0000820636-95-000004.hdr.sgml : 19950509 ACCESSION NUMBER: 0000820636-95-000004 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950228 FILED AS OF DATE: 19950508 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: 95535249 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 N-30D 1 SEMI ANNUAL REPORT EVERGREEN NATIONAL TAX-FREE FUND Semi-Annual Report February 28, 1995 THE EVERGREEN FUNDS [LOGO] Dear Fellow Shareholder: Evergreen National Tax-Free Fund's total return (Class Y, no-load shares) for the six months ended February 28, 1995, was +3.17%*, slightly behind the Lehman Brothers Insured Municipal Bond Index** at +3.23%. For the calendar year-to-date, the Fund's total return was +7.06%, compared to the Index at +6.50%. Since its inception on December 30, 1992, the Fund has outperformed the Index by 1.0%. At this writing, the Fund's portfolio has net assets of $23.7 million, an average maturity of 15.3 years and a duration of 9.05 years. The Fund's historical performance as of February 28, 1995, is illustrated in the table below*. Class Y Class A Class B Shares Shares Shares ------- ------- ------- 6-Month Total Return 3.17% -0.55% -1.70% 1-Year Total Return 0.74% -3.95% -3.87% Average Annual Compound Return Since Inception 6.39% 4.08% 4.65% 30-Day SEC Yield+ 5.41% 5.09% 4.39% Tax-Equivalent Yield+ 8.45% 7.95% 6.86% (36% marginal Federal tax bracket) Since our last report in August, 1994, the fixed income markets -- in particular, the municipal bond market -- have experienced significant volatility. Yet, the markets are remarkably little changed in price or yield. To demonstrate, as of February 28, 1995, the yield on the Bond Buyers Index** of 25 revenue bonds stood at 6.31%, versus 6.43% at the end of August. The long Treasury bond stood at 7.48%, versus 7.45% in August. During this interval, however, Federal Reserve policies drove prices lower, and yields higher by nearly 75 basis points (3/4 percent). Since those lows, the markets have staged a turnaround such that the Fund's NAV (Class Y, no-load shares) which was $9.99 at the end of August stood at $10.04 on February 28. Thus, your patience during some very unsettled times of Federal Reserve tightening and inflationary fears were rewarded as the municipal marketplace rebounded in December, January and February. Although it is not clear that actions taken by the Federal Reserve have forestalled inflationary pressures or preclude further rate increases, it is clear that the municipal marketplace will be in a very strong technical position to perform well, as compared to the taxable marketplace. The strong showing year-to-date is evidence of the strong demand versus limited supply dynamic that is at work in this market for the foreseeable future. Even if interest rates were to rise again, we believe the current coupon structure of available bonds should generate sufficient income to help provide for positive returns in 1995. Having put behind us the worst bond market in decades, we are expectant of some very good opportunities for tax-free funds in the year to come. The Trustees of Evergreen National Tax-Free Fund have approved the sale of substantially all of the assets of the Fund to the First Union High Grade Tax Free Fund, whose investment objectives and policies are substantially simular to those of Evergreen National Tax-Free Fund. In the near future, shareholders will be receiving proxy material soliciting their votes in favor of the transaction. Assuming shareholder approval, it is anticipated that the transaction will be completed on or about July 1, 1995. We appreciate your interest in Evergreen National Tax- Free Fund and we look forward to an exciting and rewarding period to come in our association with First Union Corp. Sincerely, /s/ Stephen A. Lieber /s/ James T. Colby III Stephen A. Lieber James T. Colby, III Chairman Portfolio Manager Evergreen Asset Fixed Income Management Corp. February 28, 1995 - ------------------------------------------------------------------------------- FIGURES REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. * Performance figures include reinvestment of income dividend and capital gain distributions, if any. The Fund's return, net asset value and yield will fluctuate and there can be no guarantee that the Fund will achieve its objective or any particular tax exempt yield. Investors' shares, when redeemed, may be worth more or less than their original cost. Income may be subject to some state and local taxes and the Federal alternative minimum tax for certain investors. Fund's inception: 12/30/92 Since Class A shares, (subject to a maximum front-end sales charge of 4.75%) and Class B shares (subject to a maximum contingent deferred sales charge of 5.00%) were not in existence until 1/30/95 and 1/4/95, respectively, the performance for such classes until such dates has been calculated based upon the performance of the existing no-load (Class Y) shares as adjusted for any front-end or back-end sales charges. That performance data for Class A and Class B shares does not reflect any 12b-1 fees through 1/30/95 and 1/4/95, respectively, and if reflected, the returns would be lower. The Fund may incur 12b-1 expenses up to an annual maximum of .75 of 1% of its aggregate average daily net assets attributable to Class A shares and 1.00% of its aggregate average daily net assets attributable to Class B shares. For the foreseeable future, however, management intends to limit such payments on the Class A shares to .25 of 1% of the Fund's aggregate average daily net assets. ** Unmanaged indices. + Currently, the Adviser is waiving a portion of its advisory fee, and for Class A and Class B shares, absorbing a portion of these classes other expenses. Had these fees not been waived or expenses absorbed, the Fund's 30-day annualized and tax-equivalent yields would have been 5.14% and 8.03% for Class Y shares, 4.23% and 6.61% for Class A shares, and 3.28% and 5.13% for Class B shares, respectively, and returns would have been lower. Voluntary fee waivers and expense absorption may be revised at any time. The tax-equivalent yield would be lower for investors in lower tax brackets. - ------------------------------------------------------------------------------- EVERGREEN NATIONAL TAX-FREE FUND STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1995 (UNAUDITED) - ------------------------------------------------------------------------------- PRINCIPAL AMOUNT (000) ISSUE VALUE - ------------------------------------------------------------------------------- ALASKA--2.1% - ------------------------------------------------------------------------------- $500 Municipality of Anchorage Senior Lien Electric $ 505,985 Series 1993 RRB (MBIA) 6.20% Due 12/01/13 - ------------------------------------------------------------------------------- ARIZONA--4.6% - ------------------------------------------------------------------------------- 1,000 Creighton Elementary School District No. 14 of 1,099,010 Maricopa County, School Improvement Bonds, Project of 1990 (Series C 1991) (FGIC) 6.50% Due 07/01/07 - ------------------------------------------------------------------------------- ARKANSAS--3.9% - ------------------------------------------------------------------------------- 900 Beaver Water District of Benton and Washington 926,226 Counties RRB Series 1994 (MBIA) 5.75% Due 11/15/07 - ------------------------------------------------------------------------------- CALIFORNIA--11.0% - ------------------------------------------------------------------------------- 1,000 City of Fresno Sewer System Series 1993A RB (AMBAC) 1,043,190 6.25% Due 09/01/14 - ------------------------------------------------------------------------------- 1,000 Redevelopment Agency of the City of San Jose Merged 1,027,810 Area Redevelopment Project Tax Allocation Bonds Series 1993 (MBIA) 6.00% Due 08/01/08 - ------------------------------------------------------------------------------- 500 San Mateo County Joint Powers Financing Authority 537,360 Lease (Capital Projects Program) Series 1993A RRB (MBIA) 6.50% Due 07/01/16 - ------------------------------------------------------------------------------- 2,608,360 - ------------------------------------------------------------------------------- DISTRICT OF COLUMBIA--4.4% - ------------------------------------------------------------------------------- 1,000 Washington Metropolitan Area Transit Authority Gross 1,034,290 Revenue Transit RRB Series 1993 (FGIC) 6.00% Due 07/01/08 - ------------------------------------------------------------------------------- GEORGIA--2.3% - ------------------------------------------------------------------------------- 500 City of Atlanta Airport Facilities Series 1994A RRB 534,980 (AMBAC) 6.50% Due 01/01/10 - ------------------------------------------------------------------------------- HAWAII--5.7% - ------------------------------------------------------------------------------- 1,250 Hawaii State Airport Systems Second Series 1990 RB 1,343,188 (FGIC) 7.50% Due 07/01/20 - ------------------------------------------------------------------------------- IDAHO--4.3% - ------------------------------------------------------------------------------- 1,000 Idaho Housing Agency Single Family Mortgage Bonds 1,015,270 Series 1994 C-1 Term Mezzanine Bonds 6.30% Due 07/01/11 - ------------------------------------------------------------------------------- ILLINOIS--5.6% - ------------------------------------------------------------------------------- 1,250 City of Chicago Water Series 1993 RRB (FGIC) 6.50% 1,337,212 Due 11/01/15 - ------------------------------------------------------------------------------- IOWA--2.1% - ------------------------------------------------------------------------------- 500 City of Iowa City, Johnson County Sewer Series 1993 503,635 RB (AMBAC) 6.00% Due 07/01/12 - ------------------------------------------------------------------------------- MAINE--4.8% - ------------------------------------------------------------------------------- 1,000 Maine Turnpike Authority Turnpike RB Series 1994 1,135,800 (MBIA) 7.125% Due 07/01/08 - ------------------------------------------------------------------------------- MARYLAND--2.1% - ------------------------------------------------------------------------------- 500 Community Development Administration Department of 491,340 Housing and Community Single Family Program Bonds, First Series 1994 5.70% Due 04/01/17 - ------------------------------------------------------------------------------- MICHIGAN--4.5% - ------------------------------------------------------------------------------- 1,000 City of Detroit Water Supply System Series 1993 RRB 1,076,620 (FGIC) 6.50% Due 07/01/15 - ------------------------------------------------------------------------------- MINNESOTA--2.2% - ------------------------------------------------------------------------------- 500 Minnesota Housing Finance Agency Single Family 514,290 Mortgage Bonds Series 1994H 6.70% Due 01/01/18 - ------------------------------------------------------------------------------- NEW YORK--4.3% - ------------------------------------------------------------------------------- 500 New York State Thruway Authority General Revenue 495,145 Bonds Series C 6.00% Due 01/01/25 - ------------------------------------------------------------------------------- 500 The Port Authority of New York and New Jersey 514,130 Consolidated Bonds, Ninety Fifth Series Second Installment-Term Bonds 6.50% Due 07/15/19 - ------------------------------------------------------------------------------- 1,009,275 - ------------------------------------------------------------------------------- NEW MEXICO--4.3% - ------------------------------------------------------------------------------- City of Albuquerque, New Mexico Airport RB (AMT) (AMBAC) 500 Series 1995 A 519,530 6.35% Due 07/01/07 500 Series 1995 B 510,455 7.00% Due 07/01/16 - ------------------------------------------------------------------------------- 1,029,985 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PRINCIPAL AMOUNT (000) ISSUE VALUE - ------------------------------------------------------------------------------- OHIO--10.0% - ------------------------------------------------------------------------------- 500 Ohio Housing Finance Agency Residential Mortgage 504,735 Revenue Bonds (GNMA Mortgage-Backed Securities Program), 1995 Series A-2 (AMT) 6.625% Due 03/01/26 - ------------------------------------------------------------------------------- 1,100 Ohio Air Quality Development Authority (JMG Funding, 1,118,381 Limited Partnership Project) Series 1994 RRB (AMBAC) 6.375% Due 04/01/29 - ------------------------------------------------------------------------------- $750 Ohio Water Development Authority Water Development 753,757 RRB 1992 Clean Water Refunding Bonds (MBIA) 6.00% Due 12/01/16 - ------------------------------------------------------------------------------- 2,376,873 - ------------------------------------------------------------------------------- PENNSYLVANIA--2.4% - ------------------------------------------------------------------------------- 500 Pennsylvania Industrial Development Authority RB 563,190 Series 1994 (AMBAC) 7.00% Due 01/01/07 - ------------------------------------------------------------------------------- SOUTH CAROLINA--2.3% - ------------------------------------------------------------------------------- 500 Piedmont Municipal Power Agency (South Carolina) 548,525 Electric Revenue Bonds, 1991 Refunding Series (FGIC) 6.75% Due 01/01/19 - ------------------------------------------------------------------------------- TEXAS--5.0% - ------------------------------------------------------------------------------- 1,000 City of Houston Water Conveyance Systems Contract 1,194,490 Series 1993H COP (AMBAC) 7.50% Due 12/15/14 - ------------------------------------------------------------------------------- VIRGINIA--5.4% - ------------------------------------------------------------------------------- 1,250 Chesapeake Bay Bridge and Tunnel District General 1,272,075 Resolution Revenue Bonds, Refunding Series 1991(MBIA) 6.375% Due 07/01/22 - ------------------------------------------------------------------------------- WASHINGTON--2.2% - ------------------------------------------------------------------------------- 500 Tacoma, Washington Electric System Series 1992A RRB 512,730 (AMBAC) 6.25% Due 01/01/11 - ------------------------------------------------------------------------------- TOTAL LONG-TERM INVESTMENTS (COST $22,474,456) 95.5% 22,633,349 - ------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES-NET 4.5 1,071,054 - ------------------------------------------------------------------------------- TOTAL NET ASSETS 100.0% $23,704,403 - ------------------------------------------------------------------------------- COP--Certificates of Participation RB--Revenue Bonds RRB--Revenue Refunding Bonds ++At February 28, 1995, the percentage breakdown of total investments which are insured by municipal bond insurance companies are as follows: AMBAC--American Municipal Bond Assurance Corp. 29% FGIC--Financial Guaranty Insurance Corp. 28 MBIA--Municipal Bond Insurance Association 27 -- % of Total Investments Insured 84% == - ------------------------------------------------------------------------------- EVERGREEN NATIONAL TAX-FREE FUND STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1995 (UNAUDITED) - ------------------------------------------------------------------------------- ASSETS: Investments at value (identified cost $22,474,456) $22,633,349 Cash 32,383 Receivable for investment securities sold 2,679,435 Receivable for Fund shares sold 353,660 Interest receivable 319,903 Unamortized organization expenses 26,655 Prepaid expenses 59,446 - ------------------------------------------------------------------------------- Total assets 26,104,831 - ------------------------------------------------------------------------------- LIABILITIES: Payable for investment securities purchased 2,320,046 Payable for Fund shares repurchased 2,059 Payable to Adviser 32,208 Accrued advisory fees 1,859 Accrued expenses 21,975 Dividend payable in cash 22,281 - ------------------------------------------------------------------------------- Total liabilities 2,400,428 - ------------------------------------------------------------------------------- NET ASSETS: Paid-in capital 26,561,142 Accumulated net realized loss on investment transactions (3,015,632) Net unrealized appreciation of investments 158,893 - ------------------------------------------------------------------------------- Net assets $23,704,403 =============================================================================== CALCULATION OF MAXIMUM OFFERING PRICE: CLASS A SHARES Net asset value per share ($192,222/19,136 shares of beneficial interest outstanding) $10.05 Sales charge--4.75% of public offering price .50 ----- Maximum offering price $10.55 ===== CLASS B SHARES Net asset value and offering price per share ($665,328/66,214 shares of beneficial interest outstanding) $10.05 ===== CLASS Y SHARES Net asset value and offering price per share ($22,846,853/2,274,991 shares of beneficial interest outstanding) $10.04 ===== - ------------------------------------------------------------------------------- See accompanying notes to financial statements. - ------------------------------------------------------------------------------- EVERGREEN NATIONAL TAX-FREE FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest and discount earned $ 974,631 EXPENSES: Advisory fee $82,554 Custodian fee 23,050 Registration and filing fees 14,518 Transfer agent expense 10,044 Reports and notices to shareholders 5,742 Professional fees 5,562 Trustees' fees and expenses 5,126 Amortization of organization expenses 4,661 Insurance expense 3,582 Distribution fee--Class A shares 21 Distribution and services fees--Class B shares 274 155,134 Less: Advisory fee waiver (44,577) Expense reimbursement (1,380) Total expenses 109,177 - --------------------------------------------------------------------------------------------------------------------- Net investment income 865,454 - --------------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss on investments (1,769,755) Net change in unrealized appreciation (depreciation) of investments 850,220 - --------------------------------------------------------------------------------------------------------------------- Net loss on investments (919,535) - --------------------------------------------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (54,081) =====================================================================================================================
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- EVERGREEN NATIONAL TAX-FREE FUND STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED FEBRUARY 28, 1995 YEAR ENDED (UNAUDITED) AUGUST 31, 1994 - ------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income $ 865,454 $ 1,995,694 Net realized loss on investments (1,769,755) (1,159,204) Net change in unrealized appreciation (depreciation) of investments 850,220 (1,935,794) - ----------------------------------------------------------------------------------------------------------------- Net decrease in net assets resulting from operations (54,081) (1,099,304) - ----------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS: From net investment income--Class A shares (317) -- From net investment income--Class B shares (903) -- From net investment income--Class Y shares (864,234) (1,995,694) From net realized gains on investments -- (494,382) In excess of net realized gains on investments -- (86,673) - ----------------------------------------------------------------------------------------------------------------- Total distributions to shareholders (865,454) (2,576,749) - ----------------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 8) Net increase (decrease) resulting from Fund share transactions (17,519,395) 12,734,280 - ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets (18,438,930) 9,058,227 NET ASSETS: Beginning of year 42,143,333 33,085,106 - ----------------------------------------------------------------------------------------------------------------- End of period $ 23,704,403 $ 42,143,333 =================================================================================================================
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- EVERGREEN NATIONAL TAX-FREE FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 1--ORGANIZATION Evergreen National Tax-Free Fund (the "Fund") is a portfolio of The Evergreen Municipal Trust (the "Trust"). The Trust was organized in the Commonwealth of Massachusetts as a Massachusetts business trust on July 13, 1988. The Fund is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, diversified management investment company and commenced investment operations on December 30, 1992. NOTE 2--APPROVAL AND ISSUANCE OF MULTIPLE CLASSES OF SHARES On December 13, 1994, the Fund's shareholders, among other things, approved amendments to the Declaration of Trust to permit the issuance of additional classes of shares. On December 27, 1994, the Securities and Exchange Commission approved the application to issue additional classes of shares. In connection with the adoption of the multiple class distribution program, the Trustees have designated the existing shares of the Fund as Class Y (no load) shares and have created two new classes of shares designated Class A and Class B shares. Class A shares are offered with a front-end sales charge of 4.75% which will be reduced on purchases in excess of $100,000. 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. All three classes of shares have identical voting, dividend, liquidation and other rights, except that certain classes bear different distribution expenses (see Note 6) and have exclusive voting rights with respect to its distribution plan. NOTE 3--SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles. SECURITY VALUATION--Portfolio securities (other than short-term obligations purchased with a remaining maturity of 60 days or less) are valued on the basis of valuations provided by a pricing service when such prices are believed to reflect the fair value of such securities. Short-term obligations purchased with a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. SECURITIES TRANSACTIONS AND INVESTMENT INCOME--Securities transactions are recorded on the trade date (the date the order to buy or sell is executed). Interest income, including the amortization of discount and premium, is recognized on the accrual basis. DISTRIBUTIONS TO SHAREHOLDERS--The Fund declares substantially all of its net investment income as dividends each business day to shareholders of record. At the end of each month, such dividends are either reinvested in Fund shares and credited to the shareholder's account or, if elected by the shareholder, paid in cash. Distributions of net realized capital gains (if any) will be made at least annually. FEDERAL TAXES--It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its income and net capital gains to its shareholders. Therefore, no Federal income or excise tax provision is required. During the year ended August 31, 1994, the Fund distributed $86,673 in excess of net realized gains recognized for financial statement purposes. The Fund has elected for Federal income tax purposes to treat $1,245,717 of net capital losses that arose after October 31, 1993 ("post-October losses") within the prior fiscal year end as if arising on the first business day of the current fiscal year. UNAMORTIZED ORGANIZATION EXPENSES--The expenses of the Fund incurred in connection with its organization and initial registration are being deferred and amortized by the Fund over a period of benefit not to exceed 60 months from the date the Fund commenced investment operations. ALLOCATION OF EXPENSES--EXPENSES specifically identifiable to the Fund or to a class of shares are charged to the Fund or class. Other expenses common to the Fund or the Trust as a whole, including the compensation of all non-affiliated trustees of the Trust, are primarily allocated to the funds in the Trust or to the classes in the Fund in proportion to net assets. NOTE 4--ADVISORY FEE AND RELATED PARTY TRANSACTIONS Evergreen Asset Management Corp. (the "Adviser"), an affiliate of Lieber & Company, is the investment adviser to the Fund and also furnishes the Fund with administrative services. The Adviser, which is an indirect, wholly-owned subsidiary of First Union Corporation, succeeded on June 30, 1994 to the advisory business of the same name, but under different ownership. The Adviser is entitled to a fee, accrued daily and payable monthly, for the performance of its services at the annual rate of .50 of 1% of the daily net assets of the Fund. For the six months ended February 28, 1995, the Adviser voluntarily waived a portion of its advisory fee. In addition, the Adviser voluntarily reimbursed Class A and Class B shares for certain class specific expenses in the amount of $652 and $728, respectively. The Adviser may, at its discretion, revise or cease these voluntary expense waivers and reimbursements at any time. The Adviser has agreed to reimburse the Fund to the extent that the Fund's aggregate annual operating expenses (including the Adviser's fee and amortization of organization expenses, but excluding interest, taxes, brokerage commissions, 12b-1 distribution and shareholder service fees, and extraordinary expenses) exceed 1.25% of its average daily net assets for any fiscal year. Lieber & Company is the investment sub-adviser to the Fund. Lieber & Company is reimbursed by the Adviser, at no additional expense to the Fund, for its cost of providing investment advisory services. NOTE 5--PORTFOLIO TRANSACTIONS Cost of purchases and proceeds from sales of investments, other than short-term obligations, aggregated $15,876,951 and $28,965,631 respectively, for the six months ended February 28, 1995. The aggregate cost of investments owned at February 28, 1995, is the same for financial statement and Federal income tax purposes. Gross unrealized appreciation and depreciation of securities at February 28, 1995, was $428,632 and $269,739, respectively, resulting in net unrealized appreciation for Federal income tax purposes of $158,893. NOTE 6--DISTRIBUTION AND SHAREHOLDER SERVICES FEE The Fund has adopted for each of its Class A and Class B shares, a Distribution Plan (the "Plans") pursuant to Rule 12b-1 under the Act. Under the terms of the Plans, the Fund may incur distribution-related and shareholder servicing-related expenses which may not exceed, as a percentage of average daily net assets on an annual basis, .75 of 1% for Class A shares and 1% for Class B shares. The payments under the Class A Plan will be voluntarily limited to .25 of 1%. In connection with the Plans, the Fund has entered into a distribution agreement with Evergreen Funds Distributor, Inc. ("EFD"), a subsidiary of Furman Selz Incorporated, whereby the Fund will compensate EFD for its services at a rate which may not exceed, as a percentage of average daily net assets on an annual basis, .25 of 1% for Class A shares and .75 of 1% for Class B shares. Such fees are accrued daily and paid monthly. The Agreement provides that EFD will use such fees to finance activities that promote the sale of Class A and Class B shares. A portion of the payments under the Class B Plan up to .25 of 1% of average daily net assets may constitute a shareholder service fee. The Fund has entered into a Shareholder Services Agreement with First Union Brokerage Services ("FUBS"), an affiliate of the Adviser, whereby the Fund will compensate FUBS for certain services provided to shareholders and/or for the maintenance of shareholder accounts relating to the Funds Class B shares. Such fees are accrued daily and paid monthly. NOTE 7--CONCENTRATION OF CREDIT RISK The Fund invests 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. The Fund intends to invest at least 80% of its total assets in obligations that, at the time of purchase, are insured as to the payment of interest and principal. Certain debt obligations held in the Fund's portfolio may be entitled to the benefit of standby letters of credit or other guarantees of banks or other financial institutions. NOTE 8--SHARES OF BENEFICIAL INTEREST There is an unlimited number of $.0001 par value shares of beneficial interest authorized, divided into three classes, designated Class A, Class B, and Class Y. Transactions in shares of beneficial interest were as follows: SIX MONTHS ENDED FEBRUARY 28, 1995 - ------------------------------------------------------------------------------- SHARES DOLLARS - ------------------------------------------------------------------------------- CLASS A* Shares sold 19,104 $188,951 Shares issued on reinvest- ment of distributions 32 317 Shares redeemed -- -- - ------------------------------------------------------------------------------- Net increase 19,136 $189,268 =============================================================================== CLASS B* Shares sold 66,158 $653,334 Shares issued on reinvest- ment of distributions 56 562 Shares redeemed -- -- - ------------------------------------------------------------------------------- Net increase 66,214 $653,896 =============================================================================== CLASS Y Shares sold 735,388 $ 6,940,537 Shares issued on reinvest- ment of distributions 79,704 763,823 Shares redeemed (2,756,560) (26,066,919) - ------------------------------------------------------------------------------- Net decrease (1,941,468) $(18,362,559) =============================================================================== Total net decrease resulting from Fund share transactions (1,856,118) $(17,519,395) =============================================================================== YEAR ENDED AUGUST 31, 1994 - ------------------------------------------------------------------------------- SHARES DOLLARS - ------------------------------------------------------------------------------- CLASS Y Shares sold 2,815,233 $29,696,495 Shares issued on reinvestment of distributions 231,806 2,424,612 Shares redeemed (1,860,323) (19,386,827) - ------------------------------------------------------------------------------- Net increase resulting from Fund share transactions 1,186,716 $12,734,280 =============================================================================== * For Class A and B shares, the Fund share transaction activity reflects the period from commencement of class operations January 30, 1995 and January 4, 1995, respectively, through February 28, 1995. NOTE 9--SUBSEQUENT EVENT At a special Board meeting held on Tuesday, March 7, 1995, the Trustees, on behalf of the Fund, approved an Agreement and Plan of Reorganization, pursuant to which First Union High Grade Tax Free Fund ("High Grade"), which is a series of First Union Funds, would purchase substantially all of the net assets of the Fund, subject to a vote by the shareholders of the Fund to approve the transaction (the "Acquisition"). High Grade is advised by the Capital Management Group of First Union National Bank of North Carolina ("FUNB"), an affiliate of the Adviser, and has investment objectives and investment policies which are substantially similar to those of the Fund. A meeting of the Fund's shareholders is tentatively scheduled for June 15, 1995, for the purpose of voting on the Acquisition of High Grade. Notice regarding this meeting and details of the proposed acquisition will be sent to shareholders shortly. If the Fund's shareholders approve the Acquisition, it is presently contemplated that the acquisition will be completed on July 1, 1995. As part of the transaction, the Fund will cease to exist, and shareholders of the Fund will receive shares of High Grade. - ------------------------------------------------------------------------------- EVERGREEN NATIONAL TAX FREE FUND FINANCIAL HIGHLIGHTS CLASS Y SHARES
SIX MONTHS ENDED DECEMBER 30, 1992* FEBRUARY 28, 1995 YEAR ENDED THROUGH PER SHARE DATA (UNAUDITED) AUGUST 31, 1994 AUGUST 31, 1993 - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year $ 9.99 $10.92 $10.00 - ------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .25 .53 .40 Net realized and unrealized gain (loss) on investments .05 (.77) .92 - ------------------------------------------------------------------------------------------------------------------- Total income from investment operations .30 (.24) 1.32 - ------------------------------------------------------------------------------------------------------------------- Distributions to shareholders: From net investment income (.25) (.53) (.40) From net realized gains on investments -- (.14) -- In excess of net realized gains on investments -- (.02) -- - ------------------------------------------------------------------------------------------------------------------- Total distributions (.25) (.69) (.40) - ------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.04 $ 9.99 $10.92 =================================================================================================================== TOTAL RETURN++ 3.2% (2.3)% 13.5% RATIOS & SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $22,847 $42,143 $33,085 Ratios to average net assets: Expenses .66%** .29% .0%** Net investment income 5.25%** 5.07% 5.51%** Voluntary advisory fee waiver++ .27%** .48% .50%** Voluntary expense reimbursement++ -- .12% .42%** Portfolio turnover rate 53% 135% 166% ===================================================================================================================
*Commencement of operations. **Annualized. +Total return is calculated for the periods indicated is not annualized. ++This voluntary expense decrease is reflected in both the expense and net investment income ratios shown above. See accompanying notes to financial statements. - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (UNAUDITED)
CLASS A SHARES CLASS B SHARES JANUARY 30, 1994* JANUARY 4, 1995* THROUGH THROUGH PER SHARE DATA February 28, 1995 February 28, 1995 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.70 $ 9.47 - -------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income .05 .07 Net realized and unrealized gain on investments .35 .58 - -------------------------------------------------------------------------------------------------------------------- Total income from investment operations .40 .65 - -------------------------------------------------------------------------------------------------------------------- Less distributions to shareholders from net investment income (.05) (.07) - -------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.05 $10.05 ==================================================================================================================== TOTAL RETURN+ 4.1% 6.9% RATIOS & SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $192 $665 Ratios to average net assets:# Expenses .64% 1.11% Net investment income 3.84% 3.12% Voluntary advisory fee waiver++ .27% .27% Voluntary expense reimbursement++ .59% .87% Portfiolio turnover rate** 53% 53% ====================================================================================================================
*Commencement of class operations. **Portfolio turnover rate is calculated for the six months period ended February 28, 1995. +Total return is calculated on net asset value per share for the periods indicated and is not annualized. Initial sales charges or contingent deferred sales charges are not reflected. ++This voluntary expense decrease is reflected in both the expense and net investment income ratios shown above. #Annualized. Due to the recent commencement of their offering, the ratios for Class A and Class B shares are not necessarily comparable to that of the Class Y shares, and are not necessarily indicative of future ratios. See accompanying notes to financial statements. EVERGREEN FAMILY OF FUNDS GROWTH FUNDS ____________________________________ EVERGREEN FUND seeks capital appreciation by investing in securities of little known or relatively small companies and companies with entrepreneurial management. GLOBAL REAL ESTATE EQUITY FUND seeks capital appreciation by investing in securities of companies involved in various aspects of the real estate industry throughout the world. LIMITED MARKET FUND seeks capital appreciation by investing in securities of little-known, small or special situation companies. U.S. REAL ESTATE EQUITY FUND seeks long-term capital growth by investing in equity securities of U.S. companies which are principally engaged in the real estate industry or which own significant real estate assets. GROWTH & INCOME FUNDS _________________________ AMERICAN RETIREMENT FUND seeks conservation of capital, reasonable income and capital growth by investing in a diversified and balanced portfolio of equity and fixed income securities. EVERGREEN FOUNDATION FUND seeks reasonable income, conservation of capital and growth by investing in common and preferred stocks, convertibles and fixed income securities. GROWTH & INCOME FUND seeks capital appreciation and current income by investing in securities of companies undervalued in the marketplace due to temporary adverse circumstances or misperceptions of underlying values. SMALL CAP EQUITY INCOME FUND seeks a return consisting of current income and capital appreciation by investing primarily in companies with market capitalizations of less than $500 million. TAX STRATEGIC FOUNDATION FUND seeks to maximize the after tax total return on its portfolio investments by investing in common and preferred stocks and securities convertible into or exchangeable for common stocks, and municipal securities. TOTAL RETURN FUND seeks a total return consisting of current income and capital appreciation by investing in common and preferred stocks, securities convertible or exchangeable for common stocks and fixed income securities. INCOME FUND _____________________________________ U.S. GOVERNMENT SECURITIES FUND seeks a high level of return from a combination of current income and capital appreciation through investment in obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities. TAX-FREE FUNDS___________________________________ NATIONAL TAX-FREE FUND seeks a high level of current income, exempt from Federal income tax, by investing at least 80% of its portfolio in insured long-term municipal securities. SHORT-INTERMEDIATE MUNICIPAL FUND seeks as high a level of current income, exempt from Federal income tax (other than the alternative minimum tax), as is consistent with preserving capital and providing liquidity by investing in short and intermediate-term municipal securities. SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA seeks as high a level of current income, exempt from Federal and California state income taxes, as is consistent with preserving capital and providing liquidity by investing in short and intermediate-term municipal securities. MONEY MARKET FUNDS _________________________ MONEY MARKET TRUST seeks as high a level of current income as is consistent with preserving capital and providing liquidity. TAX EXEMPT MONEY MARKET FUND seeks as high a level of current income exempt from Federal income taxes as is consistent with preserving capital and providing liquidity. THE PROSPECTUS(ES) CONTAIN MORE COMPLETE INFORMATION AND SHOULD BE READ CAREFULLY PRIOR TO INVESTING. [This page left blank intentionally] [This page left blank intentionally] TRUSTEES Laurence B. Ashkin Foster Bam James S. Howell Robert J. Jeffries Gerald M. McDonnell Thomas L. McVerry William Walt Pettit Russell A. Salton, III, M.D. Michael S. Scofield INVESTMENT ADVISER Evergreen Asset Management Corp. 2500 Westchester Avenue Purchase, New York 10577 CUSTODIAN & TRANSFER AGENT State Street Bank and Trust Company LEGAL COUNSEL Shereff, Friedman, Hoffman & Goodman INDEPENDENT ACCOUNTANTS Price Waterhouse LLP DISTRIBUTOR Evergreen Funds Distributor, Inc. The investment adviser to the Evergreen Funds is Evergreen Asset Management Corp., which is wholly- owned by First Union National Bank of North Carolina. Investments in the Evergreen Funds are not endorsed or guaranteed by First Union, are not deposits or other obligations of First Union, are not insured or otherwise protected by the U.S. Government, the FDIC or any other government agency, and involve investment risks, including possible loss of principal. The Evergreen Funds are sponsored and distributed by Evergreen Funds Distributor, Inc., which is independent of Evergreen and First Union. Evergreen National Tax-Free Fund 2500 Westchester Avenue Purchase, New York 10577 -----END PRIVACY-ENHANCED MESSAGE-----