-----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, Chf4dqYwSX2901SUjk0MTCEiSrFFTbiLRoMJOK+Eo91hMhyxhgQCYKcNE+cM6Nqb 8hY7lJFt8Sm870wtLodx8g== 0000836375-95-000020.txt : 199507050000836375-95-000020.hdr.sgml : 19950705 ACCESSION NUMBER: 0000836375-95-000020 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 19950703 EFFECTIVENESS DATE: 19950703 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: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-23180 FILM NUMBER: 95551822 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05579 FILM NUMBER: 95551823 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 485BPOS 1 POST EFFECTIVE AMENDMENT Registration No. 33-23180 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------- FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X Pre-Effective Amendment No. Post-Effective Amendment No. 18 X and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X Amendment No. 20 X (Check appropriate box or boxes) -------------------- THE EVERGREEN MUNICIPAL TRUST (Exact name of registrant as specified in charter) 2500 Westchester Avenue Purchase, N.Y. 10577 (Address of Principal Executive Offices) (Registrant's Telephone Number, Including Area Code (914) 694-2020) Joseph J. McBrien, Esq. Evergreen Asset Management Corp. 2500 Westchester Avenue, Purchase, N.Y. 10577 (Name and address of Agent for Service) It is proposed that this filing will become effective (check appropriate box) X Immediately upon filing pursuant to paragraph (b) or on (date) pursuant to paragraph (b) or 60 days after filing pursuant to paragraph (a)(i) or on (date) pursuant to paragraph (a)(i) or 75 days after filing pursuant to paragraph (a)(ii) or on (date) pursuant to paragraph (a)(ii) of Rule 485 If appropriate, check the following box: This post-effective amendment designates a new effective date for a previously filed post-effective amendment 60 days after filing pursuant to paragraph (a)(i) on (date) pursuant to paragraph (a)(i) Registrant has registered an indefinite number of shares under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940. Registrant's Rule 24f-2 notice for its fiscal year ended August 31, 1994, was filed on or about October 28, 1994. CROSS REFERENCE SHEET (as required by Rule 481(a)) N-1A Item No. Location in Prospectus(es) Part A Item 1. Cover Page Cover Page Item 2. Synopsis and Fee Table Overview of the Fund(s); Expense Information Item 3. Condensed Financial Information Financial Highlights Item 4. General Description of Registrant Cover Page; Description of the Fund(s); General Information Item 5. Management of the Fund Management of the Fund(s); General Information Item 5A. Management's Discussion Management's Discussion of Fund(s) Performance Item 6. Capital Stock and Other Securities Dividends, Distributions and Taxes; General Information Item 7. Purchase of Securities Being Offered Purchase and Redemption of Shares Item 8. Redemption or Repurchase Purchase and Redemption of Shares Item 9. Pending Legal Proceedings Not Applicable Location in Statement of Part B Additional Information Item 10. Cover Page Cover Page Item 11. Table of Contents Table of Contents Item 12. General Information and History Not Applicable Item 13. Investment Objectives and Policies Investment Objectives and Policies;Investment Restrictions; Other Restrictions and Operating Policies Item 14. Management of the Fund Management Item 15. Control Persons and Principal Management Holders of Securities Item 16. Investment Advisory and Other Services Investment Adviser; Purchase of Shares Item 17. Brokerage Allocation Allocation of Brokerage Item 18. Capital Stock and Other Securities Purchase of Shares Item 19. Purchase, Redemption and Pricing of Distribution Plans; Securities Being Offered Purchase of Shares; Net Asset Value Item 20. Tax Status Additional Tax Information Item 21. Underwriters Distribution Plans; Purchase of Shares Item 22. Calculation of Performance Data Performance Information Item 23. Financial Statements Financial Statements Part C Information required to be included in Part C is set forth under the appropriate item, so numbered, in Part C to this Registration Statement. -------------------------------------------------------------- PROSPECTUS , 1995 Evergreen Tax Exempt Funds -------------------------------------------------------- CLASS A SHARES CLASS B SHARES ------------------------- EVERGREEN NATIONAL TAX-FREE FUND EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA The Evergreen Tax Exempt Funds (the "Funds") are designed to provide investors with income exempt from Federal income taxes. This Prospectus provides information regarding the Class A and Class B shares offered by the Funds. Each Fund is, or is a series of, a diversified, open-end management investment company. This Prospectus sets forth concise information about the Funds that a prospective investor should know before investing. The address of the Funds is 2500 Westchester Avenue, Purchase, New York 10577. A "Statement of Additional Information" for the Funds and the other funds in the Evergreen Group of mutual funds (collectively, with the Funds the "Evergreen Funds") dated ---------, 1995 has been filed with the Securities and Exchange Commission and is incorporated by reference herein. The Statement of Additional Information provides information regarding certain matters discussed in this Prospectus and other matters which may be of interest to investors, and may be obtained without charge by calling the Funds at (800) 807-2940. There can be no assurance that the investment objective of any Fund will be achieved. Investors are advised to read this Prospectus carefully. The shares offered by this Prospectus are not deposits or obligations of First Union or any subsidiaries of First Union, are not endorsed or guaranteed by First Union or any subsidiaries of First Union, and are not insured or otherwise protected by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency and involve risk, including the possible loss of principal. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Keep This Prospectus for Future Reference TABLE OF CONTENTS OVERVIEW OF THE FUND EXPENSE INFORMATION FINANCIAL HIGHLIGHTS DESCRIPTION OF THE FUND Investment Objectives And Policies Other Investment Policies And Techniques MANAGEMENT OF THE FUND Investment Adviser Sub-Adviser PURCHASE AND REDEMPTION OF SHARES How To Buy Shares How To Redeem Shares Exchange Privilege Shareholder Services Effect Of Banking Laws OTHER INFORMATION Dividends, Distributions And Taxes Management's Discussion of Fund Performance General Information California Risk Considerations Florida Risk Considerations The following summary is qualified in its entirety by the more detailed information contained elsewhere in this Prospectus. See "Description of the Funds" and "Management of the Funds". The Investment Adviser to Evergreen National Tax-Free Fund, Evergreen Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal Fund-California is Evergreen Asset Management Corp. ("Evergreen Asset") which, with its predecessors, has served as investment adviser to the Evergreen Funds since 1971. Evergreen Asset is a wholly-owned subsidiary of First Union National Bank of North Carolina ("FUNB-NC"), which in turn is a subsidiary of First Union Corporation, one of the ten largest bank holding companies in the United States. The Capital Management Group of FUNB serves as investment adviser to Evergreen Florida High Income Municipal Bond Fund. Evergreen National Tax-Free Fund seeks a high level of current income exempt from Federal income tax. It invests substantially all of its assets in long-term municipal securities. Under normal market conditions, the Fund intends to invest at least 80% of its total assets in municipal securities which are insured. The Fund's dollar weighted average portfolio maturity is generally expected to exceed fifteen years. Evergreen Florida High Income Municipal Bond Fund seeks to provide a high level of current income exempt from federal income taxes. Under normal circumstances, the Fund will invest at least 65% of the value of its total assets in municipal securities consisting of high yield (i.e., high risk), medium, lower rated and unrated bonds. Such securities are commonly called junk bonds and are subject to greater market fluctuations and risk of loss of income and principal than higher rated securities. Lower quality securities involve a greater risk of default and, consequently, shares of Evergreen Florida High Income Municipal Bond Fund may be considered speculative securities. Evergreen Short-Intermediate Municipal Fund seeks as high a level of current income, exempt from Federal income tax other than the alternative minimum tax ("AMT"), as is consistent with preserving capital and providing liquidity. The Fund invests substantially all of its assets in short and intermediate-term municipal securities with a dollar weighted average portfolio maturity of two to five years. Evergreen Short-Intermediate Municipal Fund-California seeks as high a level of current income exempt from Federal and California income taxes as is consistent with preserving capital and providing liquidity. The Fund invests substantially all of its assets in short and intermediate-term municipal securities with a dollar weighted average portfolio maturity of two to five years. There is no assurance the investment objective of any Fund will be achieved. ------------------------------------------------------------------------------- EXPENSE INFORMATION ------------------------------------------------------------------------------- The table set forth below summarizes the shareholder transaction costs associated with an investment in Class A and Class B Shares of a Fund. For further information see "Purchase and Redemption of Fund Shares" and "Other Classes of Shares". SHAREHOLDER TRANSACTION EXPENSES Class A Shares Class B Shares Maximum Sales Charge Imposed on Purchases 4.75% None (as a % of offering price) Sales Charge on Dividend Reinvestments None None Contingent Deferred Sales Charge (as a % None 5% during the first year, 4% during the of original purchase price or redemption second year, 3% during the third and proceeds, whichever is lower) fourth year, 2% during the fifth year, 1% during the sixth and seventh years and 0% after the seventh year Redemption Fee None None Exchange Fee None None The following tables show for each Fund the annual operating expenses (as a percentage of average net assets) attributable to each Class of Shares, together with examples of the cumulative effect of such expenses on a hypothetical $1,000 investment in each Class for the periods specified assuming (i) a 5% annual return and (ii) redemption at the end of each period and, additionally for Class B shares, no redemption at the end of each period. In the following examples (i) the expenses for Class A Shares assume deduction of the maximum 4.75% sales charge at the time of purchase, (ii) the expenses for Class B Shares assume deduction at the time of redemption (if applicable) of the maximum contingent deferred sales charge applicable for that time period, and (iii) the expenses for Class B Shares reflect the conversion to Class A Shares eight years after purchase (years eight through ten, therefore, reflect Class A expenses). Evergreen National Tax-Free Fund
Examples Assuming Redemption Assuming no Annual Operating Expenses(1) at End of Period Redemption Class A Class B Class A Class B Class B ---- ---- ---- ---- ---- Advisory Fees .50% .50% After 1 Year $ 59 $ 69 $ 19 12b-1 Fees* .. .25% 1.00% After 3 Years $ 82 $ 89 $ 59 Other Expenses .39% .39% After 5 Years $ 107 $ 122 $ 102 ----- ----- Total ........ 1.14% 1.89% After 10 Years $ 180 $ 192 $ 192
Evergreen Florida High Income Municipal Fund
Examples Assuming Redemption Assuming no Annual Operating Expenses(1) at End of Period Redemption Class A Class B Class A Class B Class B ---- ---- ---- ---- ---- Advisory Fees After 1 Year 12b-1 Fees* After 3 Years Other Expenses After 5 Years Total After 10 Years
Evergreen Short-Intermediate Municipal Fund
Examples Assuming Redemption Assuming no Annual Operating Expenses(1) at End of Period Redemption Class A Class B Class A Class B Class B ---- ---- ---- ---- ---- Advisory Fees .50% .50% After 1 Year $ 57 $ 69 $ 19 12b-1 Fees* .. .10% 1.00% After 3 Years $ 76 $ 88 $ 58 Other Expenses .33% .33% After 5 Years $ 97 $ 119 $ 99 ----- Total ........ .93% 1.83% After 10 Years $ 156 $ 180 $ 180 -----
Evergreen Short-Intermediate Municipal Fund-California
Examples Assuming Redemption Assuming no Annual Operating Expenses(1) at End of Period Redemption Class A Class B Class A Class B Class B ---- ---- ---- ---- ---- Advisory Fees .55% .55% After 1 Year $ 58 $ 70 $ 20 12b-1 Fees* .. .10% 1.00% After 3 Years $ 79 $ 91 $ 61 Other Expenses .40% .40% After 5 Years $103 $125 $105 ---- Total ........ 1.05% 1.95% After 10 Years $170 $193 $193
*For Class B Shares, a portion of the 12b-1 Fees equivalent to .25 of 1% of average annual assets will be shareholder servicing-related. Distribution-related 12b-1 Fees will be limited to .75 of 1% of average annual assets as permitted under the rules of the National Association of Securities Dealers, Inc. Evergreen Asset has agreed to reimburse the Funds for which it serves as investment adviser to the extent that their aggregate operating expenses (including Evergreen Asset's fee, but excluding taxes, interest, brokerage commissions, Rule 12b-1 distribution fees and shareholder servicing fees and extraordinary expenses) exceed 1.00% of the average net assets for Evergreen Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal Fund-California and 1.25% of the average net assets for Evergreen National Tax-Free Fund. From time to time Evergreen Asset or FUNB-NC may, at its discretion, reduce or waive its fees or reimburse these Funds for certain of their other expenses in order to reduce their expense ratios. Evergreen Asset or FUNB-NC may cease these voluntary waivers and reimbursements at any time. (1)The estimated annual operating expenses for Evergreen National Tax-Free Fund does not reflect a voluntary advisory fee waiver by Evergreen Asset of .48 of 1% of average net assets and the voluntary reimbursement of a portion of the Fund's other expenses representing .12% of average net assets for the fiscal period ending August 31, 1994. (2)The estimated annual operating expenses for Evergreen Short-Intermediate Municipal Fund do not reflect a voluntary advisory fee waiver by Evergreen Asset of .25 of 1% of average net assets for the fiscal period ending August 31, 1994. (3)The estimated annual operating expenses for Evergreen Short-Intermediate Municipal Fund - California do not reflect a voluntary advisory fee waiver by Evergreen Asset of .43 of 1% of average net assets for the fiscal period ending August 31, 1994. The purpose of the foregoing table is to assist an investor in understanding the various costs and expenses that an investor in each Class of Shares of the Funds will bear directly or indirectly. The amounts set forth both in the tables and in the examples are estimated amounts based on the experience of each Fund's Class Y shares for the fiscal period ending August 31, 1994. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete description of the various costs and expenses borne by the Funds see "Management of the Funds". As a result of asset-based sales charges, long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted under the rules of the National Association of Securities Dealers, Inc. - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Evergreen National Tax-Free Fund The following selected per share data and ratios for the periods ended August 31, 1994 have been audited by Price Waterhouse LLP, independent auditors for Evergreen National Tax-Free Fund, whose report thereon was unqualified. This information should be read in conjunction with the financial statements and notes thereto which are incorporated in the Statement of Additional Information by reference. The per share data set forth below pertains to Class Y shares of the Fund, which are not offered through this prospectus. See "Other Classes of Shares". No per share data and ratios are shown for Class A or B shares, since these classes did not have any operations prior to the date of this Prospectus. Period from December 30, 1992* Year Ended through PER SHARE DATA August 31, 1994 August 31, 1993 --------------- --------------- Net asset value, beginning of year. . . . . . . $10.92 $10.00 ------ ------ Income (loss) from investment operations: Net investment income . . . . . . . . . . . . . .53 .40 Net realized and unrealized gain (loss) on (.77) .92 investments. . . Total from investment operations. . . . . . (.24) 1.32 Less distributions to shareholders: From net investment income. . . . . . . . . . . (.53) (.40) From net realized gains . . . . . . . . . . . . (.14) ---- In excess of net realized gains. . . . . . . . (.02) ---- --------- ----------- Total distributions . . . . . . . . . . . . . (.69) (.40) --------- --------- Net asset value, end of year. . . . . . . . . . $9.99 $10.92 ------- ------ TOTAL RETURN . . . . . . . . . . . . . . . . . (2.3)% 13.5%+ RATIOS & SUPPLEMENTAL DATA: Net assets, end of year (in millions). . . . . . . . . . . . . . . . $42 $33 Ratios to average net assets: Expenses . . . . . . . . . . . . . . . . . . .29% (a) 0% (b) Net investment income . . . . . . . . . . . 5.07% (a) 5.51%(b) Portfolio turnover rate . . . . . . . . . . . 135% 166% - ------------ * Commencement of operations. (a) Net of partial advisory fee waiver of .48 of 1.00% of daily net assets and the absorption of all other Fund expenses by the Adviser equal to .12% of average daily net assets. (b) Annualized and net of full advisory fee waiver of .50 of 1.00% of daily net assets and the absorption of all other Fund expenses by the Adviser equal to .42% of average daily net assets. + Total return calculated for the period December 30, 1992 through August 31, 1993 is not annualized. Evergreen Short Intermediate Municipal Fund The following selected per share data and ratios for the periods ended August 31, 1994 have been audited by Price Waterhouse LLP, independent auditors for Evergreen Short Intermediate Municipal Fund, whose report thereon was unqualified. This information should be read in conjunction with the financial statements and notes thereto which are incorporated in the Statement of Additional Information by reference. The per share data set forth below pertains to Class Y shares of the Fund, which are not offered through this prospectus. See "Other Classes of Shares". No per share data and ratios are shown for Class A or B shares, since these classes did not have any operations prior to the date of this Prospectus.
Period from July 17, 1991* Year Ended August 31, through PER SHARE DATA 1994 1993 1992+ August 31, 1991+ ---- ---- ----- ---------------- Net asset value, beginning of year. . . . . . . . . $10.58 $10.33 $10.00 $10.00 ------ ------ ------ ------ Income (loss) from investment operations: Net investment income . . . . . . . . . . . . . . . .47 .49 .51 .06 . . . . . . . . . . . . Net realized and unrealized gain (loss) on (.32) .25 .33 ---- investments. . . Total from investment operations. . . . . . . . .15 .74 .84 .06 . . . . . . . . . . Less distributions to shareholders from: From net investment income. . . . . . . . . . . . . (.47) (.49) (.51) (.06) . . . . . . . . . . From net realized gains . . . . . . . . . . . . . . (.03) ---- ---- ---- . . . . . . . . . . . . . In excess of net realized gains. . . . . . . . . . (.02) ---- ---- ---- . . . . . . . . . . . . Total distributions . . . . . . . . . . . . . . (.52) (.49) (.51) (.06) --------- --------- ---------- --------- Net asset value, end of year. . . . . . . . . . . . $10.21 $10.58 $10.33 $10.00 ------ ------ ------ ------ TOTAL RETURN . . . . . . . . . . . . . . . . . . . 1.4% 7.4% 8.6% .6%++ RATIOS & SUPPLEMENTAL DATA Net assets, end of year (in millions) . . . . . . . . . . . . . . . . . $53 $67 $54 $4 Ratios to average net assets: Expenses . . . . . . . . . . . . . . . . . . . .58% (a) .40% (b) .17% (c) .0% (d) Net investment income . . . . . . . . . . . . . 4.54% (a) 4.73% (b) 4.85% (c) 4.93% (d) Portfolio turnover rate . . . . . . . . . . . . . . 32% ----- 37% 57% - ------------ * Commencement of 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 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 calculated for the period July 17, 1991 through August 31,1991 is not annualized. (a) Net of partial advisory fee waiver of .25 of 1.00% of daily net assets. (b) Net of partial advisory fee waiver of .41 of 1.00% of daily net assets. (c) Net of partial advisory fee waiver of .46 of 1.00% of daily net assets and the absorption of a portion of all other Fund expenses by the Adviser equal to .23% of average daily net assets. (d) Annualized and net of full advisory fee waiver of .50 of 1.00% of daily net assets and the absorption of all other Fund expenses by the Adviser equal to .90% of average daily net assets.
Evergreen Short Intermediate Municipal Fund - California The following selected per share data and ratios for the periods ended August 31, 1994 have been audited by Price Waterhouse LLP, independent auditors for Evergreen Short Intermediate Municipal Fund - California, whose report thereon was unqualified. This information should be read in conjunction with the financial statements and notes thereto which are incorporated in the Statement of Additional Information by reference. The per share data set forth below pertains to Class Y shares of the Fund, which are not offered through this prospectus. See "Other Classes of Shares". No per share data and ratios are shown for Class A or B shares, since these classes did not have any operations prior to the date of this Prospectus.
Period from November 2, Year Ended August 31, 1988* through PER SHARE DATA 1994 1993+ 1992+ 1991+ 1990+ August 31, 1989+ ---- ----- ----- ----- ----- ---------------- Net asset value, beginning of year. . . . . . . . $10.34 $10.00 $10.00 $10.00 $10.00 $10.00 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income . . . . . . . . . . . . . . .43 .41 .33 .47 .55 .51 Net realized and unrealized gain (loss) on (.24) .34 ---- ---- ---- ---- investments Total from investment operations. . . . . . . .19 .75 .33 .47 .55 .51 Less distributions to shareholders from: From net investment income. . . . . . . . . . . . (.43) (.41) (.33) (.47) (.55) (.51) From net realized gains . . . . . . . . . . . . . (.01) ---- ---- ---- ---- ---- Total distributions . . . . . . . . . . . . . (.44) (.41) (.33) (.47) (.55) (.51) --------- --------- --------- - --------- --------- --------- Net asset value, end of year. . . . . . . . . . . $10.09 $10.34 $10.00 $10.00 $10.00 $10.00 ------ ------ ------ ------ ------ ------ TOTAL RETURN . . . . . . . . . . . . . . . . . . 1.8% 7.6% 3.4% 4.8% 5.7% 5.2%** RATIOS & SUPPLEMENTAL DATA: Net assets, end of year (in millions). . . . . . . . . . . . . . . . . $28 $42 $37 $28 $30 $34 Ratios to average net assets: Expenses . . . . . . . . . . . . . . . . . . . .52%(a) .30%(b) .40%(c) .37%(d) .29%(e) .24%(f) Net investment income . . . . . . . . . . . . 4.20%(a) 3.96%(b) 3.36%(c) 4.66%(d) 5.52%(e) 6.40%(f) . . . . . . . . . . . . . Portfolio turnover rate . . . . . . . . . . . . . 12% 37% ---- ---- ---- ---- - ------------ * Commencement of operations. + 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, 1990 through August 31, 1992 are restated to reflect both 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 calculated for the period November 2, 1988 through August 31, 1989 is not annualized. (a) Net of partial advisory fee waiver of .43 of 1.00% of daily net assets. (b) Net of partial advisory fee waiver of .52 of 1.00% of daily net assets and the absorption of a portion of all other Fund expenses by the Adviser equal to .16% of average daily net assets. (c) Net of partial advisory fee waiver of .44 of 1.00% of daily net assets. (d) Net of partial advisory fee waiver of .45 of 1.00% of daily net assets and the absorption of a portion of all other Fund expenses by the Adviser equal to .03% of average daily net assets. (e) Net of partial advisory fee waiver of .51 of 1.00% of daily net assets and the absorption of a portion of all other Fund expenses by the Adviser equal to .08% of average daily net assets. (f) Annualized and net of partial advisory fee waiver of .50 of 1.00% of daily net assets and the absorption of a portion of all other Fund expenses by the Adviser equal to .19% of average daily net assets.
- -------------------------------------------------------------------------------- DESCRIPTION OF THE FUNDS - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVES AND POLICIES Evergreen National Tax Free Fund The investment objective of Evergreen National Tax Free Fund is to achieve a high level of current income exempt from Federal income tax. The Fund will seek to achieve its objective by investing substantially all of its assets in a diversified portfolio of long-term debt obligations issued by states, possessions of the United States and by the District of Columbia, and their political subdivisions and duly constituted authorities, the interest from which is exempt from Federal income tax. Such securities are generally known as Municipal Securities (See "Municipal Securities" below). The Fund has no maturity restrictions. Its dollar weighted average portfolio maturity, however, is generally expected to exceed fifteen years. As a matter of policy, the Trustees will not change the Fund's investment objective without shareholder approval. Under normal market conditions, the Fund intends to invest at least 80% of its total assets in Municipal Securities that, at the time of purchase, are insured or prefunded. Such Municipal Securities include securities which are insured under a mutual fund insurance policy issued to the Trust for the benefit of the Fund by an insurer having a claims-paying ability rated AAA by Standard & Poor's Ratings Group ("S&P") or Aaa by Moody's Investors Service, Inc. ("Moody's") or insured by such an insurer under an insurance policy obtained by the issuer or underwriter of such Municipal Securities at the time of original issuance. The Fund may also purchase secondary market insurance on Municipal Securities which it holds or acquires. Although the fee for secondary market insurance will reduce the yield of the insured bond, such insurance would be reflected in the market value of the bond purchased. A bond is prefunded if marketable securities, typically U.S. Treasurys, are escrowed to maturity to assure payment of principal and interest. It should be noted that insurance is not a substitute for the basic credit of an issuer, but supplements the existing credit and provides additional security therefor. Moreover, while insurance coverage for the Municipal Securities held by the Fund reduces credit risk by insuring that the Fund will receive payment of principal and interest, it does not protect against market fluctuations caused by changes in interest rates and other factors. Obligations with longer maturities (e.g., 20 years or more) generally offer both higher yields and greater exposure to market fluctuation from changes in interest rates than do those with shorter maturities. Consequently, shares of the Fund may not be suitable for persons who cannot assume the somewhat greater risks of capital depreciation involved in seeking higher tax-exempt yields. It is anticipated that the annual portfolio turnover rate for the Fund may exceed 100%. For the period from December 30, 1992 (commencement of operations) to August 31, 1993, and the fiscal year ended August 31, 1994, the Fund's portfolio turnover rate was 166% and 135%, respectively. See "Investment Practices and Restrictions", below. Evergreen Florida High Income Municipal Bond Fund Evergreen Florida High Income Municipal Bond Fund seeks to provide a high level of current income which is exempt from federal income taxes. The term "high-level" indicates that the Fund seeks to achieve an income level that exceeds that which an investor would expect from an investment grade portfolio with similar maturity characteristics. Evergreen Florida High Income Municipal Bond Fund invests primarily in high yield, medium and lower rated (Baa through C by Moody's and BBB through D by S&P) and unrated municipal securities. To varying degrees, medium and lower rated municipal securities, as well as unrated municipal securities, are considered to have speculative characteristics and are subject to greater market fluctuations and risk of loss of income and principal than higher rated and securities. To the extent that an investor realizes a yield in excess of that which could be expected from a fund which invests primarily in investment grade securities, the investor should expect to bear increased risk due to the fact that the risk of principal and/or interest not being repaid with respect to the high yield securities described above is significantly greater than that which exists in connection with investment grade securities. In assessing the risk involved in purchasing medium and lower rated and unrated securities, the Fund's investment adviser will use nationally recognized statistical rating organizations such as Moody's and S&P, and will also rely heavily on credit analysis it develops internally. Under normal circumstances, the Fund's dollar-weighted average maturity generally will be 15 years or more. In pursuit of its investment objective, Evergreen Florida High Income Municipal Bond Fund will, under normal market conditions, invest at least 65% in such medium and lower rated municipal securities or unrated municipal securities of comparable quality to such rated municipal bonds.. Investors should note that such a policy is not a fundamental policy of the Fund and shareholder approval is not necessary to change such policy. There is no assurance that Evergreen Florida High Income Municipal Bond Fund can achieve its investment objective. The Fund will not invest in municipal securities which are in default, i.e., securities rated D by S&P. Investments may also be made by Evergreen Florida High Income Municipal Bond Fund in higher quality Municipal Obligations and, for temporary defensive purposes, the Fund may invest less than 65% of its total assets in the medium and lower quality municipal securities described above. The Fund may assume a defensive position if, for example, yield spreads between lower grade and investment grade municipal bonds are narrow and the yields available on lower quality municipal securities do not justify the increased risk associated with an investment in such securities or when there is a lack of medium and lower quality issues in which to invest. Evergreen Florida High Income Municipal Bond Fund may also invest primarily in higher quality Municipal Obligations until its net assets reach a level that would permit the Fund to begin investing in medium and lower rated municipal bonds and at the same time maintain adequate diversification and liquidity. Investing in this manner may result in yields lower than those normally associated with a fund that invests primarily in medium and lower quality municipal securities. Under normal circumstances, it is anticipated that the dollar-weighted average maturity of Evergreen Florida High Income Municipal Bond Fund will generally be 15 years or more, although it may invest in securities of any maturity. If the Fund's investment determines that market conditions warrant a shorter average maturity, the Fund's investments will be adjusted accordingly. During the most recent fiscal year completed by Evergreen Florida High Income Municipal Bond Fund's predecessor, ended April 30, 1995, its holdings had the following average credit quality characteristics: Percent of Rating Net Assets Aaa or AAA % Aa or AA A Baa or BBB Ba or BB Non-rated Total 100.00% The Funds may purchase industrial development bonds only if the interest on such bonds is, in the opinion of bond counsel, exempt from federal income taxes. It is anticipated that the annual portfolio turnover rate for the Fund may exceed 100%. The Fund may buy and sell Futures or Options on Futures (as hereinafter defined), which involve investment risks different from those of municipal securities. See "Investment Practices and Restrictions", below. Also, see the Statement of Additional Information for further information in regard to ratings. Evergreen Short Intermediate Municipal Fund The investment objective of Evergreen Short Intermediate Municipal Fund is to achieve as high a level of current income, exempt from Federal income tax other than the AMT, as is consistent with preserving capital and providing liquidity. Under normal circumstances, it is anticipated that the Fund will invest its assets so that at least 80% of its annual interest income is exempt from Federal income tax other than the AMT. The Fund will seek to achieve its objective by investing substantially all of its assets in a diversified portfolio of short and intermediate-term debt obligations issued by states, territories and possessions of the United States and by the District of Columbia, and their political subdivisions and duly constituted authorities, the interest from which is exempt from Federal income tax other than the AMT. Such securities are generally known as Municipal Securities (See "Municipal Securities" below). As a matter of policy, the Trustees will not change the Fund's investment objective without shareholder approval. The Fund intends to maintain a dollar-weighted average portfolio maturity of two to five years. The Fund may consider an obligation's maturity to be shorter than its stated maturity if the Fund has the right to sell the obligation at a price approximating par value before its stated maturity date. This is a liquidity put and is exercisable to the issuer or some third party. It is anticipated that the annual portfolio turnover rate for the Fund will generally not exceed 100%. For the fiscal years ended August 31, 1992, 1993 and 1994, the Fund's portfolio turnover rate was 57%, 37% and 32%, respectively. See "Investment Practices and Restrictions", below. Evergreen Short Intermediate Municipal Fund-California The investment objective of Evergreen Short Intermediate Municipal Fund-California 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. The Fund will seek to achieve its objective by investing at least 80% of the value of its assets in a diversified portfolio of short and intermediate-term debt obligations issued by the State of California, its political subdivisions and duly constituted authorities, the interest from which is exempt from Federal and California income taxes. Such securities are generally known as Municipal Securities (see "Municipal Securities" below). The Fund intends to maintain a dollar-weighted average portfolio maturity of two to five years. The Fund may consider an obligation's maturity to be shorter than its stated maturity if the Fund has the right to sell the obligation at a price approximating par value before its stated maturity date. This is a liquidity put and is exercisable to the issuer or some third party. It is anticipated that the annual portfolio turnover rate for the Fund will generally not exceed 100%. For the period from October 16, 1992 (commencement of operations as a short-intermediate municipal fund) through August 31, 1993 and for the fiscal year ended August 31, 1994, the Fund's portfolio turnover rate was 37% and 12%, respectively. See "Investment Practices and Restrictions", below. INVESTMENT PRACTICES AND RESTRICTIONS Except where noted, each Fund may engage in the investment practices described below. Each Fund is also subject to certain investment restrictions more fully described in the Statement of Additional Information. General. Evergreen Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal Fund-California will invest in Municipal Securities so long as they are determined to be of high or upper medium quality. Municipal Securities meeting this criteria include bonds rated A or higher by S&P, Moody's or another nationally recognized statistical rating organization ("SRO"); notes rated SP-1 or SP-2 by S&P or MIG-1 or MIG-2 by Moody's or rated VMIG-1 or VMIG-2 by Moody's in the case of variable rate demand notes or having comparable ratings from another SRO; and commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's or having comparable ratings from another SRO. Medium grade bonds are more susceptible to adverse economic conditions or changing circumstances than higher grade bonds. For a description of such ratings see Appendix C. The Funds may also purchase Municipal Securities which are unrated at the time of purchase, if such securities are determined by the Fund's investment adviser to be of comparable quality. Certain Municipal Securities (primarily variable rate demand notes) may be entitled to the benefit of standby letters of credit or similar commitments issued by banks and, in such instances, the Fund's investment adviser will take into account the obligation of the bank in assessing the quality of such security. Investments by Evergreen Short-Intermediate Municipal Fund-California in unrated securities are limited to 20% of total assets. As stated above, Evergreen Florida High Income Municipal Bond Fund invests primarily in high yield, medium and lower rated (Baa through C by Moody's and BBB through D by S&P) and unrated securities. The ability of the Funds to meet their investment objectives is necessarily subject to the ability of municipal issuers to meet their payment obligations. In addition, the portfolios of the Funds will be affected by general changes in interest rates which will result in increases or decreases in the value of the obligations held by the Funds. Investors should recognize that, in periods of declining interest rates, the yield of the Funds will tend to be somewhat higher than prevailing market rates, and in periods of rising interest rates, the yield of the Funds will tend to be somewhat lower. Also, when interest rates are falling, the inflow of net new money to the Funds from the continuous sale of its shares will likely be invested in portfolio instruments producing lower yields than the balance of each Fund's portfolio, thereby reducing the current yield of the Funds. In periods of rising interest rates, the opposite can be expected to occur. In addition since Evergreen Short Intermediate Municipal Fund-California will invest primarily in California Municipal Securities, there are certain specific factors and considerations concerning California which may affect the credit and market risk of the Municipal Securities that Evergreen Short Intermediate Municipal Fund-California purchases. Similarly, since Evergreen Florida High Income Municipal Bond Fund invests primarily in Florida Municipal Securities, it is subject to certain specific factors and considerations concerning Florida which may affect the credit and market risk of the Municipal Securities that it purchases. The factors relating to these Funds are described in Appendix A and B to this Prospectus. Additional risk factors relating to the investment by Evergreen Florida High Income Municipal Bond Fund in high yield, medium and lower rated (Baa through C by Moody's and BBB through D by S&P) and unrated securities is discussed below. Municipal Securities. As noted above, the Funds will invest substantially all of their assets in Municipal Securities. These include Municipal Securities, short-term municipal notes and tax exempt commercial paper. "Municipal Securities" are debt obligations issued to obtain funds for various public purposes that are exempt from Federal income tax in the opinion of issuer's counsel. The two principal classifications of Municipal Securities are "general obligation" and "revenue" bonds. General obligation bonds are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue bonds are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific source such as from the user of the facility being financed. The term "Municipal Securities" also includes "moral obligation" issues which are normally issued by special purpose authorities. Industrial development bonds ("IDBs") and private activity bonds ("PABs") are in most cases revenue bonds and are not payable from the unrestricted revenues of the issuer. The credit quality of IDBs and PABs is usually directly related to the credit standing of the corporate user of the facilities being financed. Participation interests are interests in Municipal Securities, including IDBs and PABs, and floating and variable rate obligations that are owned by banks. These interests carry a demand feature permitting the holder to tender them back to the bank, which demand feature is backed by an irrevocable letter of credit or guarantee of the bank. A put bond is a municipal bond which gives the holder the unconditional right to sell the bond back to the issuer at a specified price and exercise date, which is typically well in advance of the bond's maturity date. "Short-term municipal notes" and "tax exempt commercial paper" include tax anticipation notes, bond anticipation notes, revenue anticipation notes and other forms of short-term loans. Such notes are issued with a short-term maturity in anticipation of the receipt of tax funds, the proceeds of bond placements and other revenues. Floating Rate and Variable Rate Obligations. Municipal Securities also include certain variable rate and floating rate municipal obligations with or without demand features. These variable rate securities do not have fixed interest rates; rather, those rates fluctuate based upon changes in specified market rates, such as the prime rate, or are adjusted at predesignated periodic intervals. Certain of these obligations may carry a demand feature that gives the Funds the right to demand prepayment of the principal amount of the security prior to its maturity date. The demand obligation may or may not be backed by letters of credit or other guarantees of banks or other financial institutions. Such guarantees may enhance the quality of the security. The Funds will limit the value of their investments in any floating or variable rate securities which are not readily marketable to 10% or less of their total assets. When-Issued Securities. The Funds may purchase Municipal Securities on a "when-issued" basis (i.e., for delivery beyond the normal settlement date at a stated price and yield). The Funds generally would not pay for such securities or start earning interest on them until they are received. However, when the Funds purchase Municipal Securities on a when-issued basis, they assume the risks of ownership at the time of purchase, not at the time of receipt. Failure of the issuer to deliver a security purchased by a Fund on a when-issued basis may result in a Fund's incurring a loss or missing an opportunity to make an alternative investment. Commitments to purchase when-issued securities will not exceed 25% of each Fund's total assets. The Funds will maintain cash or liquid high grade debt obligations in a segregated account with their custodian in an amount equal to such commitments. The Funds do not intend to purchase when-issued securities for speculative purposes but only in furtherance of their investment objectives. Stand-by Commitments. The Funds may also acquire "stand-by commitments" with respect to Municipal Securities held in their portfolio. Under a stand-by commitment, a dealer agrees to purchase, at a Fund's option, specified Municipal Securities at a specified price. Failure of the dealer to purchase such Municipal Securities may result in a Fund incurring a loss or missing an opportunity to make an alternative investment. Each Fund expects that stand-by commitments generally will be available without the payment of direct or indirect consideration. However, if necessary and advisable, a Fund may pay for stand-by commitments either separately in cash or by paying a higher price for portfolio securities which are acquired subject to such a commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held in each Fund's portfolio will not exceed 10% of the value of the Fund's total assets calculated immediately after each stand-by commitment is acquired. The Funds will maintain cash or liquid high grade debt obligations in a segregated account with its custodian in an amount equal to such commitments. The Funds will enter into stand-by commitments only with banks and broker-dealers that, in the judgment of each Fund's investment adviser, present minimal credit risks. Taxable Investments. Evergreen National Tax Free Fund, Evergreen Short-Intermediate Municipal Fund-California and Evergreen Florida High Income Municipal Bond Fund may temporarily invest up to 20% of their assets in taxable securities, and Evergreen Short-Intermediate Municipal Fund may temporarily invest its assets so that not more than 20% of its annual interest income will be derived from taxable securities, under any one or more of the following circumstances: (a) pending investment of proceeds of sale of Fund shares or of portfolio securities, (b) pending settlement of purchases of portfolio securities, and (c) to maintain liquidity for the purpose of meeting anticipated redemptions. In addition, each such Fund may temporarily invest more than 20% of its total assets in taxable securities for defensive purposes. Each Fund may invest for defensive purposes during periods when each Fund's assets available for investment exceed the available Municipal Securities that meet each Fund's quality and other investment criteria. Taxable securities in which the Funds may invest on a short-term basis include obligations of the United States Government, its agencies or instrumentalities, including repurchase agreements with banks or securities dealers involving such securities; time deposits maturing in not more than seven days; other debt securities rated within the two highest ratings assigned by any major rating service; commercial paper rated in the highest grade by Moody's, S&P or any SRO; and certificates of deposit issued by United States branches of United States banks with assets of $1 billion or more. Alternative Minimum Tax. Under current tax law, a distinction is drawn between Municipal Securities issued to finance certain "private activities" and other Municipal Securities. Such private activity bonds include bonds issued to finance such projects as airports, housing projects, resource recovery programs, solid waste disposal facilities, student loan programs, and water and sewage projects. Interest income from such "private activity bonds" ("AMT- Subject Bonds") becomes an item of "tax preference" which is subject to the alternative minimum tax when received by a person in a tax year during which he is subject to that tax. Because interest income on AMT-Subject Bonds is taxable to certain investors, it is expected, although there can be no guarantee, that such Municipal Securities generally will provide somewhat higher yields than other Municipal Securities of comparable quality and maturity. Evergreen Short Intermediate Municipal Fund may invest up to 50% of its total assets, and Evergreen National Tax Free Fund, Evergreen Short-Intermediate Municipal Fund-California and Evergreen Florida High Income Municipal Bond Fund may invest up to 80% of their total assets, in AMT-Subject Bonds. Repurchase Agreements. The Funds may enter into repurchase agreements with member banks of the Federal Reserve System, including State Street Bank and Trust Company, the Fund's custodian ("State Street" or the "Custodian"), or "primary dealers" (as designated by the Federal Reserve Bank of New York) in United States Government securities. A repurchase agreement is an arrangement pursuant to which a buyer purchases a security and simultaneously agrees to resell it to the vendor at a price that results in an agreed-upon market rate of return which is effective for the period of time (which is normally one to seven days, but may be longer) the buyer's money is invested in the security. The arrangement results in a fixed rate of return that is not subject to market fluctuations during a Fund's holding period. Each Fund requires continued maintenance of collateral with its Custodian in an amount equal to, or in excess of, the market value of the securities, including accrued interest, which are the subject of a repurchase agreement. In the event a vendor defaults on its repurchase obligation, the Fund might suffer a loss to the extent that the proceeds from the sale of the collateral were less than the repurchase price. If the vendor becomes the subject of bankruptcy proceedings, a Fund might be delayed in selling the collateral. Each Fund's investment adviser will review and continually monitor the creditworthiness of each institution with which a Fund enters into a repurchase agreement to evaluate these risks. A Fund may not enter into repurchase agreements if, as a result, more than 10% of the Fund's net assets would be invested in repurchase agreements maturing in more than seven days. Illiquid Securities. The Funds may invest up to 15% of their net assets in illiquid securities and other securities which are not readily marketable, except that they may only invest up to 10% of their assets in repurchase agreements with maturities longer than seven days. Securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933, which have been determined to be liquid, will not be considered by the Fund's investment adviser to be illiquid or not readily marketable and, therefore, are not subject to the aforementioned 15% limit. The inability of a Fund to dispose of illiquid or not readily marketable investments readily or at a reasonable price could impair the Fund's ability to raise cash for redemptions or other purposes. The liquidity of securities purchased by a Fund which are eligible for resale pursuant to Rule 144A will be monitored by the Fund's investment adviser on an ongoing basis, subject to the oversight of the Trustees. In the event that such a security is deemed to be no longer liquid, a Fund's holdings will be reviewed to determine what action, if any, is required to ensure that the retention of such security does not result in a Fund having more than 15% of its assets invested in illiquid or not readily marketable securities. Other Investment Policies. The Funds may borrow funds and agree to sell portfolio securities to financial institutions such as banks and broker-dealers and to repurchase them at a mutually agreed upon date and price (a "reverse repurchase agreement") for temporary or emergency purposes in amounts not in excess of 10% of the value of each Fund's total assets at the time of such borrowing. At the time a Fund enters into a reverse repurchase agreement, it will place in a segregated custodial account cash, United States Government securities or liquid high grade debt obligations having a value equal to the repurchase price (including accrued interest) and will subsequently monitor the account to ensure that such equivalent value is maintained. Reverse repurchase agreements involve the risk that the market value of the securities sold by a Fund may decline below the repurchase price of those securities. Each Fund will not enter into reverse repurchase agreements exceeding 5% of the value of its total assets. Evergreen Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal Fund-California will not purchase any securities whenever any borrowings (including reverse repurchase agreements) are outstanding. In order to generate income and to offset expenses, the Funds may lend portfolio securities to brokers, dealers and other financial organizations. Each Fund's investment adviser will monitor the creditworthiness of such borrowers. Loans of securities by a Fund, if and when made, may not exceed 30 percent of each Fund's total assets and will be collateralized by cash, letters of credit or U.S. Government securities that are maintained at all times in an amount equal to at least 100 percent of the current market value of the loaned securities, including accrued interest. While such securities are on loan, the borrower will pay a Fund any income accruing thereon, and the Fund may invest the cash collateral, thereby increasing its return. A Fund will have the right to call any such loan and obtain the securities loaned at any time on five days' notice. Any gain or loss in the market price of the loaned securities which occurs during the term of the loan would affect a Fund and its investors. A Fund may pay reasonable fees in connection with such loans. Hedging Instruments Futures Contracts. For the purpose of protecting (hedging) the value of the Fund's assets, Evergreen Florida High Income Municipal Bond Fund may purchase and sell various kinds of futures contracts ("Futures"), and may enter into closing purchase and sale transactions with respect to such contracts. The Futures may be based on various debt securities (such as U.S. government securities), indices and other financial instruments and indices. In instances involving the purchase or sale of Futures by Evergreen Florida High Income Municipal Bond Fund, an amount of cash or cash equivalents equal to the market value of the Futures will be deposited in a segregated account with the Fund's Custodian to collateralize the position and thereby insure that the use of such Futures is unleveraged. The primary risks associated with the use of Futures are: (i) imperfect correlation between the change in the market value of the securities held in the Fund's portfolio and the prices of Futures purchased or sold by the Fund; (ii) incorrect forecasts by the Fund's investment adviser concerning interest rates which may result in the hedge being ineffective; (iii) possible lack of a liquid secondary market for Futures; and (iv) the risk of potentially unlimited losses. The resulting inability to close a Futures position could adversely affect the Fund's hedging ability. For a hedge to be completely effective, the price change of the hedging instrument should equal the price change of the security being hedged. The risk of imperfect correlation of these price changes is increased as the composition of a Fund's portfolio is divergent from the debt securities underlying the index. Options on Futures. Evergreen Florida High Income Municipal Bond Fund may purchase and write call and put options on Futures which are traded on an Exchange or Board of Trade and enter into closing transactions with respect to such options to terminate an existing position ("Futures Options"). A Futures Option gives the purchaser the right, and the writer the obligation, in return for the premium paid, to assume a position in a Future (a long position if the option is a call and short position if the option is a put) at a specified exercise price at any time during the period of the Futures Option. The purchase of put Futures Options is a means of hedging against the risk of rising interest rates. The purchase of call Futures Options is a means of hedging against a market advance when the Fund is not fully invested. Evergreen Florida High Income Municipal Bond Fund may use Futures Options only in connection with hedging strategies. While hedging can provide protection against an adverse movement in interest rates, it can also preclude a hedger's opportunity to benefit from a favorable interest rate movement. Thus, writing a call Futures Option results in receipt of an option premium which may offset a portion of any loss from a decline in the prices of Municipal Obligations held by the Fund; however if the prices of Municipal Obligations increase, all or part of any capital appreciation on portfolio securities would be offset by a loss incurred in closing out the call option. In addition, use of Futures and Futures Options causes the Fund to incur additional brokerage commissions, and may cause an increase in the Fund's portfolio turnover rate. Use of Futures Options would subject the Fund to risks similar to those described above relating to Futures, but any losses incurred in connection with the use of Futures Options would be limited to the amount of premiums paid. Evergreen Florida High Income Municipal Bond Fund will deposit in a segregated account with its custodian bank cash, U.S. government securities or other appropriate high grade and readily marketable debt obligations, in an amount equal to (i) the fluctuating market value of long positions it has purchased less any margin deposited on long positions, or (ii) the fluctuating market value of the options written less any margin deposited on such options. Limitations on Futures and Futures Options. Under regulations of the Commodity Futures Trading Commission ("CFTC"), the Futures and Futures Options trading activities described herein will not result in Evergreen Florida High Income Municipal Bond Fund being deemed to be a "commodity pool," as defined under such regulations, provided such Fund adheres to certain restrictions. In particular, a Fund may purchase and sell Futures and related Futures Options only for bona fide hedging purposes, as defined under CFTC regulations and may not purchase or sell any such Futures or related Futures Options if immediately thereafter, the sum of the amount of initial margin deposits on the Fund's existing futures and related Futures Options positions and the premiums paid for related Futures Options exceeds 5% of such Fund's total assets. Margin deposits may consist of cash or securities acceptable to the broker and the relevant contract market. As a matter of fundamental policy, Evergreen Florida High Income Municipal Bond Fund will not purchase a Future or Futures Option if immediately thereafter more than 10% of the Fund's total assets would be so invested. The Fund's ability to engage in transactions in futures and related Futures Options may also be limited by provisions of the Internal Revenue Code. See "Dividends, Distributions And Taxes" below and the Statement of Additional Information for further information concerning tax aspects of Futures and Futures Options. Risk Factors Associated with Medium and Lower Rated and Unrated Municipal Obligations Evergreen Florida High Income Municipal Bond Fund will invest in medium and lower rated or unrated municipal securities. The market for high yield, high risk debt securities rated in the medium and lower rating categories, or which are unrated, is relatively new and its growth has paralleled a long economic expansion. Past experience may not, therefore, provide an accurate indication of future performance of this market, particularly during periods of economic recession. An economic downturn or increase in interest rates is likely to have a greater negative effect on this market, the value of high yield debt securities in the Fund's portfolio, the Fund's net asset value and the ability of the bonds' issuers to repay principal and interest, meet projected business goals and obtain additional financing, than would be the case if investments by the Fund were limited to higher rated securities. These circumstances also may result in a higher incidence of defaults. Yields on medium or lower-rated Municipal Obligations may not fully reflect the higher risks of such bonds. Therefore, the risk of a decline in market value, should interest rates increase or credit quality concerns develop, may be higher than has historically been experienced with such investments. An investment in Evergreen Florida High Income Municipal Bond Fund may be considered more speculative than investment in shares of another fund which invests primarily in higher rated debt securities. Prices of high yield debt securities may be more sensitive to adverse economic changes or corporate developments than higher rated investments. Debt securities with longer maturities, which may have higher yields, may increase or decrease in value more than debt securities with shorter maturities. Market prices of high yield debt securities structured as zero coupon or pay-in-kind securities are affected to a greater extent by interest rate changes and may be more volatile than securities which pay interest periodically and in cash. Where Evergreen Florida High Income Municipal Bond Fund deems it appropriate and in the best interests of its shareholders, it may incur additional expenses to seek recovery on a debt security on which the issuer has defaulted and to pursue litigation to protect the interests of security holders of its portfolio entities. Because the market for medium or lower rated securities may be thinner and less active than the market for higher rated securities, there may be market price volatility for these securities and limited liquidity in the resale market. Unrated securities are usually not as attractive to as many buyers as are rated securities, a factor which may make unrated securities less marketable. These factors may have the effect of limiting the availability of the securities for purchase by Evergreen Florida High Income Municipal Bond Fund and may also limit the ability of a Fund to sell such securities at their fair value either to meet redemption requests or in response to changes in the economy or the financial markets. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of medium or lower rated debt securities, especially in a thinly traded market. To the extent a Fund owns or may acquire illiquid or restricted high yield securities, these securities may involve special registration responsibilities, liabilities and costs, and liquidity and valuation difficulties. Changes in values of debt securities which the Fund owns will affect the Fund's net asset value per share. If market quotations are not readily available for the Fund's lower rated or unrated securities, these securities will be valued by a method that the Trustees believes accurately reflects fair value. Valuation becomes more difficult and judgment plays a greater role in valuing high yield debt securities than with respect to securities for which more external sources of quotations and last sale information are available. Special tax considerations are associated with investing in high yield debt securities structured as zero coupon or pay-in-kind securities. A Fund investing in such securities accrues income on these securities prior to the receipt of cash payments. Evergreen Florida High Income Municipal Bond Fund must distribute substantially all of its income to shareholders to qualify for pass through treatment under the tax laws and may, therefore, have to dispose of portfolio securities to satisfy distribution requirements. While credit ratings are only one factor Evergreen Florida High Income Municipal Bond Fund's investment adviser relies on in evaluating high yield debt securities, certain risks are associated with using credit ratings. Credit ratings evaluate the safety of principal and interest payments, not market value risk. Credit rating agencies may fail to change in timely manner the credit ratings to reflect subsequent events; however, the Fund's investment adviser continuously monitors the issuers of high yield debt securities in a Fund's portfolio in an attempt to determine if the issuers will have sufficient cash flow and profits to meet required principal and interest payments. Achievement of Evergreen Florida High Income Municipal Bond Fund's investment objective may be more dependent upon the Fund's investment adviser and the credit analysis capability of the Fund's investment adviser, than is the case for higher quality debt securities. Credit ratings for individual securities may change from time to time and Evergreen Florida High Income Municipal Bond Fund may retain a portfolio security whose rating has been changed. See the Statement of Additional Information for a description of bond and note ratings. - ------------------------------------------------------------------------------ MANAGEMENT OF THE FUNDS - ------------------------------------------------------------------------------ INVESTMENT ADVISER The management of each Fund is supervised by its Trustees or Directors. Evergreen Asset Management Corp. ("Evergreen Asset") has been retained to serve as investment adviser to Evergreen National Tax Free Fund, Evergreen Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal Fund-California. Evergreen Asset, with its predecessors, has served as investment adviser to the Evergreen Group of Mutual Funds, which have assets in excess of $3 billion, since 1971. Evergreen Asset is a wholly-owned subsidiary of First Union National Bank of North Carolina ("FUNB"). The address of Evergreen Asset is 2500 Westchester Avenue, Purchase, New York 10577. FUNB is a subsidiary of First Union Corporation ("First Union"), one of the ten largest bank holding companies in the United States. Stephen A. Lieber and Nola Maddox Falcone serve as the chief investment officers of Evergreen Asset and, along with Theodore J. Israel, Jr., were the owners of Evergreen Asset's predecessor and the former general partners of Lieber & Company, which, as described below, provides certain subadvisory services to Evergreen Asset in connection with its duties as investment adviser to the aforementioned Funds. The Capital Management Group of FUNB ("CMG") serves as investment adviser to Evergreen Florida High Income Municipal Bond Fund. First Union is a bank holding company headquartered in Charlotte, North Carolina, which had $74.2 billion in consolidated assets as of September 30, 1994. First Union and its subsidiaries provide a broad range of financial services to individuals and businesses through offices in 36 states. The Capital Management Group of FUNB manages or otherwise oversees the investment of over $36 billion in assets belonging to a wide range of clients, including the First Union family of mutual funds. First Union Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered broker-dealer that is principally engaged in providing retail brokerage services consistent with its federal banking authorizations. First Union Capital Markets Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer principally engaged in providing, consistent with its federal banking authorizations, private placement, securities dealing, and underwriting services. Evergreen Asset manages investments, provides various administrative services and supervises the daily business affairs of Evergreen National Tax Free Fund, Evergreen Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal Fund-California, subject to the authority of the Trustees of each Fund. Under its investment advisory agreement with Evergreen Short-Intermediate Municipal Fund-California the Evergreen Asset is entitled to receive an annual fee equal to .55 of 1% of the Fund's average daily net assets. Under its investment advisory agreements with Evergreen Short-Intermediate Municipal Fund and Evergreen National Tax Free Fund Evergreen Asset is entitled to receive an annual fee equal to .50 of 1% of each Fund's average daily net assets. For the fiscal period ended August 31, 1994, total expense ratios of Evergreen National Tax Free Fund, Evergreen Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal Fund-California were .29%, .58%, and .52%, respectively. CMG manages investments and supervises the daily business affairs of Evergreen Florida High Income Municipal Bond Fund and, as compensation therefor, is entitled to receive an annual fee equal to .60 of 1% of average daily net assets of Florida High Income Municipal Bond Fund. For its most recent fiscal year ended _____________________, the total annualized operating expenses of ABT Florida High Income Municipal Bond Fund, predecessor to Florida High Income Municipal Bond Fund, were ___%. _________________ provides various administrative services to Florida High Income Municipal Bond Fund and is entitled to receive an annual fee equal to .[__] of 1% of average daily net assets of the Fund. The above-mentioned expense ratios are net of voluntary advisory fee waivers and expense reimbursements by each Fund's investment adviser which may, at its discretion, revise or cease such voluntary waivers at any time. The portfolio manager of Evergreen National Tax Free Fund is James T. Colby, III. Mr. Colby has been associated with Evergreen Asset and its predecessor since 1992 and has served as portfolio manager of the Fund since its inception. Prior to joining the Adviser, Mr. Colby served as Vice President-Investments at American Express Company from 1987 to 1992. The portfolio manager for Evergreen Short-Intermediate Municipal Fund- California and Evergreen Short-Intermediate Municipal Fund is Steven C. Shachat. Mr. Shachat has been associated with Evergreen Asset and its predecessor since prior to 1989 and has served as portfolio manager of these Funds since their inception. The portfolio manager for Evergreen Florida High Income Municipal Bond Fund is Stephen Eldridge, a Vice President of CMG who has been associated with CMG since July, 1995. Prior to that, Mr. Eldridge was a Vice President of Palm Beach Capital Management, Inc. and served as Portfolio manager of the Fund's predecessor, ABT Florida High Income Municipal Bond Fund, since prior to 1989. SUB-ADVISER Evergreen Asset has entered into sub-advisory agreements with Lieber & Company with respect to each Fund which provides that Lieber & Company's research department and staff will furnish Evergreen Asset with information, investment recommendations, advice and assistance, and will be generally available for consultation on each Fund's portfolio. Lieber & Company will be reimbursed by the Adviser in connection with the rendering of services on the basis of the direct and indirect costs of performing such services. There is no additional charge to the Funds for the services provided by Lieber & Company. The address of Lieber & Company is 2500 Westchester Avenue, Purchase, New York 10577. Lieber & Company is an indirect, wholly-owned, subsidiary of First Union. DISTRIBUTION PLANS AND AGREEMENTS Rule 12b-1 under the Investment Company Act of 1940 permits an investment company to pay expenses associated with the distribution of its shares in accordance with a duly adopted plan. Each Fund has adopted for each of its Class A and Class B shares a Rule 12b-1 plan (each, a "Plan" or collectively the "Plans"). Under the Plans, each Fund may incur distribution-related and shareholder servicing-related expenses which may not exceed an annual rate of .75 of 1% of the Fund's aggregate average daily net assets attributable to Class A shares and 1.00% of the Fund's aggregate average daily net assets attributable to the Class B. Payments with respect to Class A shares under the Plan are currently voluntarily limited to .10 of 1% of aggregate average daily net assets attributable to such shares in the case of Evergreen Short-Intermediate Municipal Fund-California and Evergreen Short-Intermediate Municipal Fund and .25 of 1% of aggregate average daily net assets attributable to such shares in the case of Evergreen Florida High Income Municipal Fund and Evergreen National Tax Free Fund. The Plans provide that a portion of the fee payable thereunder in an amount not to exceed .25% of the aggregate average daily net assets of each Fund attributable to each Class of shares may constitute a service fee to be used for providing ongoing personal service and/or the maintenance of shareholder accounts. Each Fund has also entered into a distribution agreement (each a "Distribution Agreement" or collectively the "Distribution Agreements") with, Evergreen Funds Distributor, Inc. ("EFD"). Pursuant to the Distribution Agreements, EFD will be compensated for its services as distributor at a rate which may not exceed an annual rate of .10 of 1% of aggregate average daily net assets attributable to Class A shares of Evergreen Short- Intermediate Municipal Fund-California and Evergreen Short-Intermediate Municipal Fund, .25 of 1% of aggregate average daily net assets attributable to Class A shares of Evergreen Florida High Income Municipal Fund and Evergreen National Tax Free Fund and .75 of 1% of each Fund's aggregate average daily net assets attributable to the Class B shares. The Distribution Agreements provide that EFD will use the distribution fee received from a Fund for payments (i) to compensate broker-dealers or other persons for distributing shares of the Funds, including interest and principal payments made in respect of amounts paid to broker-dealers or other persons that have been financed (EFD may assign its rights to receive compensation under the Plans to secure such financings), (ii) to otherwise promote the sale of shares of the Fund, and (iii) to compensate broker-dealers, depository institutions and other financial intermediaries for providing administrative, accounting and other services with respect to the Fund's shareholders. The financing of payments made by EFD to compensate broker-dealers or other persons for distributing shares of the Funds may be provided by First Union or its affiliates. The Funds may also make payments under the Plans, in amounts up to .25 of 1% of a Fund's aggregate average daily net assets on an annual basis attributable to Class B shares, to compensate organizations, which may include EFD and the Adviser or its affiliates, for personal services rendered to shareholders and/or the maintenance of shareholder accounts. The Funds may not pay any distribution or services fees during any fiscal period in excess of the amounts set forth above. Since EFD's compensation under the Distribution Agreements is not directly tied to the expenses incurred by EFD, the amount of compensation received by it under the Distribution Agreements during any year may be more or less than its actual expenses and may result in a profit to EFD. Distribution expenses incurred by EFD in one fiscal year that exceed the level of compensation paid to EFD for that year may be paid from distribution fees received from a Fund in subsequent fiscal years. The Plans are in compliance with rules of the National Association of Securities Dealers, Inc. which effectively limit the annual asset-based sales charges and service fees that a mutual fund may pay on a class of shares to .75 of 1% and .25 of 1%, respectively, of the average annual net assets attributable to that class. The rules also limit the aggregate of all front-end, deferred and asset-based sales charges imposed with respect to a class of shares by a mutual fund that also charges a service fee to 6.25% of cumulative gross sales of shares of that class, plus interest at the prime rate plus 1% per annum. - --------------------------------------------------------------------- PURCHASE AND REDEMPTION OF SHARES - ---------------------------------------------------------------------- HOW TO BUY SHARES You can purchase shares of any of the Funds through broker-dealers, banks or other financial intermediaries, or directly through EFD. The minimum initial investment is $1,000, which may be waived in certain situations. There is no minimum for subsequent investments. Investments of $25 or more are allowed under the systematic investment program. Share certificates are not issued for Class A and Class B shares. In states where EFD is not registered as a broker-dealer shares of a Fund will only be sold through other broker-dealers or other financial institutions that are registered. See the Share Purchase Application and Statement of Additional Information for more information. Only Class A and Class B shares are offered through this prospectus (see "Other Classes of Shares"). Class A Shares-Front-End Sales Charge Alternative. You can purchase Class A shares at net asset value plus an initial sales charge, as follows: Sales Charge as a Percentage Amount of Transaction of Public Offering Price $ 0-$ 99,999 4.75% $ 100,000-$ 249,999 3.75% $ 250,000-$ 499,999 3.00% $ 500,000-$ 999,999 2.00% $1,000,000-$2,499,999 1.00% $2,500,000 and above 0.25% When Class A shares are sold, EFD will normally retain a portion of the applicable sales charge and pay the balance to the broker-dealer or other financial intermediary through whom the sale was made. EFD may also pay fees to banks from sales charges for services performed on behalf of the bank's customers in connection with the purchase of shares of the Funds. In addition to compensation paid at the time of sale, entities whose clients have purchased Class A shares may receive a trailing commission equal to .10 of 1% of the aggregate average daily net assets attributable to Class A shares of Evergreen Short-Intermediate Municipal Fund-California and Evergreen Short-Intermediate Municipal Fund held by their clients, .__ of 1% of aggregate average daily net assets attributable to Class A shares in the case of Evergreen Florida High Income Municipal Fund, and .25 of 1% of aggregate average daily net assets attributable to Class A shares of Evergreen National Tax Free Fund held by their clients. Certain purchases of Class A shares may qualify for reduced sales charges in accordance with a Fund's Combined Purchase Privilege, Cumulative Quantity Discount, Statement of Intention, Privilege for Certain Retirement Plans and Reinstatement Privilege. Consult the Share Purchase Application and Statement of Additional Information for additional information concerning these reduced sales charges. Class B Shares-Deferred Sales Charge Alternative. You can purchase Class B shares at net asset value without an initial sales charge. However, you may pay a contingent deferred sales charge ("CDSC") if you redeem shares within seven years after purchase. Shares obtained from dividend or distribution reinvestment are not subject to the CDSC. The amount of the CDSC (expressed as a percentage of the lesser of the current net asset value or original cost) will vary according to the number of years from the purchase of Class B shares as set forth below. Year Since Purchase Contingent Deferred Sales Charge FIRST 5% SECOND 4% THIRD and FOURTH 3% FIFTH 2% SIXTH and SEVENTH 1% The CDSC is deducted from the amount of the redemption and is paid to EFD. The CDSC will be waived on redemptions of shares following the death or disability of a shareholder, to meet distribution requirements for certain qualified retirement plans or in the case of certain redemptions made under a Fund's Systematic Cash Withdrawal Plan. Class B shares are subject to higher distribution fees than Class A shares for a period of seven years (after which they convert to Class A shares) . The higher fees mean a higher expense ratio, so Class B shares pay correspondingly lower dividends and may have a lower net asset value than Class A shares. See the Statement of Additional Information for further details. How the Funds Value Their Shares. The net asset value of each Class of shares of a Fund is calculated by dividing the value of the amount of the Fund's net assets attributable to that Class by the outstanding shares of that Class. Shares are valued each day the New York Stock Exchange (the "Exchange") is open as of the close of regular trading (currently 4:00 p.m. Eastern time). The securities in a Fund are valued at their current market value determined on the basis of market quotations or, if such quotations are not readily available, such other methods as a Fund's Trustees believe would accurately reflect fair market value. General. The decision as to which Class of shares is more beneficial to you depends on the amount of your investment and the length of time you will hold it. If you are making a large investment, thus qualifying for a reduced sales charge, you might consider Class A shares. If you are making a smaller investment, you might consider Class B shares since 100% of your purchase is invested immediately and since such shares will convert to Class A shares, which incur lower ongoing distribution charges, after seven years. The compensation received by Dealers and agents may differ depending on whether they sell Class A or Class B shares. There is no size limit on purchases of Class A shares. In addition to the discount or commission paid to dealers, EFD will from time to time pay to dealers additional cash or other incentives that are conditioned upon the sale of a specified minimum dollar amount of shares of a Fund and/or other Evergreen Mutual Funds. Such incentives will take the form of payment for attendance at seminars, lunches, dinners, sporting events or theater performances, or payment for travel, lodging and entertainment incurred in connection with travel by persons associated with a dealer and their immediate family members to urban or resort locations within or outside the United States. Such a dealer may elect to receive cash incentives of equivalent amount in lieu of such payments. Additional Purchase Information. As a condition of this offering, if a purchase is canceled due to nonpayment or because an investor's check does not clear, the investor will be responsible for any loss a Fund or the Adviser incurs. If such investor is an existing shareholder, a Fund may redeem shares from an investor's account to reimburse the Fund or the Adviser for any loss. In addition, such investors may be prohibited or restricted from making further purchases in any of the Evergreen Funds. HOW TO REDEEM SHARES You may "redeem", i.e., sell your shares in a Fund to the Fund on any day the Exchange is open, either directly or through your financial intermediary. The price you will receive is the net asset value (less any applicable CDSC for Class B shares) next calculated after the Fund receives your request in proper form. Proceeds generally will be sent to you within seven days. However, for shares recently purchased by check, a Fund will not send proceeds until it is reasonably satisfied that the check has been collected (which may take up to 15 days). Once a redemption request has been telephoned or mailed, it is irrevocable and may not be modified or canceled. Redeeming Shares Through Your Financial Intermediary. A Fund must receive instructions from your financial intermediary before 4:00 p.m. Eastern time for you to receive that day's net asset value (less any applicable CDSC for Class B shares). Your financial intermediary is responsible for furnishing all necessary documentation to a Fund and may charge you for this service. Redeeming Shares Directly by Mail or Telephone. Send a signed letter of instruction or stock power form to State Street Bank and Trust Company ("State Street") which is the registrar, transfer agent and dividend-disbursing agent for each Fund. Stock power forms are available from your financial intermediary, State Street, and many commercial banks. Additional documentation is required for the sale of shares by corporations, financial intermediaries, fiduciaries and surviving joint owners. Signature guarantees are required for all redemption requests for shares with a value of more than $10,000 or where the redemption proceeds are to be mailed to an address other than that shown in the account registration. A signature guarantee must be provided by a bank or trust company (not a Notary Public), a member firm of a domestic stock exchange or by other financial institutions whose guarantees are acceptable to State Street. Shareholders may withdraw amounts of $1,000 or more from their accounts by calling State Street (800- 423-2615) between the hours of 9:00 a.m. and 4:00 p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on which the New York Stock Exchange or State Street's offices are closed). The New York Stock Exchange is closed on New Year's Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Redemption requests made after 4:00 p.m. (Eastern time) will be processed using the net asset value determined on the next business day. Such redemption requests must include the shareholder's account name, as registered with a Fund, and the account number. During periods of drastic economic or market changes, shareholders may experience difficulty in effecting telephone redemptions. Shareholders who are unable to reach a Fund or State Street by telephone should follow the procedures outlined above for redemption by mail. The telephone redemption service is not made available to shareholders automatically. Shareholders wishing to use the telephone redemption service must indicate this on the Share Purchase Application and choose how the redemption proceeds are to be paid. Redemption proceeds will either (i) be mailed by check to the shareholder at the address in which the account is registered or (ii) be wired to an account with the same registration as the shareholder's account in a Fund at a designated commercial bank. State Street currently deducts a $5 wire charge from all redemption proceeds wired. This charge is subject to change without notice. A shareholder who decides later to use this service, or to change instructions already given, should fill out a Shareholder Services Form and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank or trust company (not a Notary Public), a member firm of a domestic stock exchange or by other financial institutions whose guarantees are acceptable to State Street. Shareholders should allow approximately ten days for such form to be processed. The Funds will employ reasonable procedures to verify that telephone requests are genuine. These procedures include requiring some form of personal identification prior to acting upon instructions and tape recording of conversations. If the Fund fails to follow such procedures, it may be liable for any losses due to unauthorized or fraudulent instructions. The Fund shall not be liable for following telephone instructions reasonably believed to be genuine. Also, the Fund reserves the right to refuse a telephone redemption request, if it is believed advisable to do so. Financial intermediaries may charge a fee for handling telephonic requests. The telephone redemption option may be suspended or terminated at any time without notice. General. The sale of shares is a taxable transaction for Federal tax purposes. Under unusual circumstances, a Fund may suspend redemptions or postpone payment for up to seven days or longer, as permitted by Federal securities law. The Funds reserve the right to close an account that through redemption has remained below $1,000 for 30 days. Shareholders will receive 60 days' written notice to increase the account value before the account is closed. The Funds have elected to be governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant to which each Fund is obligated to redeem shares solely in cash, up to the lesser of $250,000 or 1% of a Fund's total net assets during any ninety day period for any one shareholder. See the Statement of Additional Information for further details. EXCHANGE PRIVILEGE How To Exchange Shares. You may exchange some or all of your shares for shares of the same Class in the other Evergreen Funds through your financial intermediary, or by telephone or mail as described below. An exchange which represents an initial investment in another Evergreen Fund must amount to at least $1,000. Once an exchange request has been telephoned or mailed, it is irrevocable and may not be modified or canceled. Exchanges will be made on the basis of the relative net asset values of the shares exchanged next determined after an exchange request is received. Exchanges are subject to minimum investment and suitability requirements. Each of the Evergreen Funds have different investment objectives and policies. For complete information, a prospectus of the fund into which an exchange will be made should be read prior to the exchange. An exchange is treated for Federal income tax purposes as a redemption and purchase of shares and may result in the realization of a capital gain or loss. Shareholders are limited to five exchanges per calendar year, with a maximum of three per calendar quarter. This exchange privilege may be modified or discontinued at any time by the Fund upon sixty days' notice to shareholders and is only available in states in which shares of the fund being acquired may lawfully be sold. No CDSC will be imposed in the event Class B shares are exchanged for Class B shares of other Evergreen Funds. If you redeem shares, the CDSC applicable to the Class B shares of the Evergreen Mutual Fund originally purchased for cash is applied. Also, Class B shares will continue to age following an exchange for purposes of conversion to Class A shares and determining the amount of the applicable CDSC. Exchanges Through Your Financial Intermediary. A Fund must receive exchange instructions from your financial intermediary before 4:00 p.m. Eastern time for you to receive that day's net asset value. Your financial intermediary is responsible for furnishing all necessary documentation to a Fund and may charge you for this service. Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000 or more by telephone by calling State Street (800-423-2615). Exchange requests made after 4:00 p.m. (Eastern time) will be processed using the net asset value determined on the next business day. During periods of drastic economic or market changes, shareholders may experience difficulty in effecting telephone exchanges. You should follow the procedures outlined below for exchanges by mail if you are unable to reach State Street by telephone. If you wish to use the telephone exchange service you should indicate this on the Share Purchase Application. As noted above, each Fund will employ reasonable procedures to confirm that instructions for the redemption or exchange of shares communicated by telephone are genuine. A telephone exchange may be refused by a Fund or State Street if it is believed advisable to do so. Procedures for exchanging Fund shares by telephone may be modified or terminated at any time. Written requests for exchanges should follow the same procedures outlined for written redemption requests in the section entitled "How to Redeem Shares", however, no signature guarantee is required. SHAREHOLDER SERVICES The Funds offer the following shareholder services. For more information about these services or your account, contact your financial intermediary, EFD or the toll-free number for the Funds, 800-807-2940. Some services are described in more detail in the Share Purchase Application. Systematic Investment Plan. You may make monthly or quarterly investments into an existing account automatically in amounts of not less than $25. Telephone Investment Plan. You may make investments into an existing account electronically in amounts of not less than $100 or more than $10,000 per investment. Telephone investment requests received by 3:00 p.m. (Eastern time) will be credited to a shareholder's account the day the request is received. Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or when an existing account reaches that size, you may participate in the Fund's Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share Purchase Application. Under this plan, you may receive (or designate a third party to receive) a monthly or quarterly check in a stated amount of not less than $100. Fund shares will be redeemed as necessary to meet withdrawal payments. All participants must elect to have their dividends and capital gain distributions reinvested automatically. Any applicable Class B CDSC will be waived with respect to redemptions occurring under a Systematic Cash Withdrawal Plan during a calendar year to the extent that such redemptions do not exceed 10% of (i) the initial value of the account plus (ii) the value, at the time of purchase, of any subsequent investments. Automatic Reinvestment Plan. For the convenience of investors, all dividends and distributions are automatically reinvested in full and fractional shares of a Fund at the net asset value per share on the last business day of each month, unless otherwise requested by a shareholder in writing. If the transfer agent does not receive a written request for subsequent dividends and/or distributions to be paid in cash at least three full business days prior to a given record date, the dividends and/or distributions to be paid to a shareholder will be reinvested. If you elect to receive dividends and distributions in cash and the U.S. Postal Service cannot deliver the checks, or if the checks remain uncashed for six months, the checks will be reinvested into your account at the then current net asset value. EFFECT OF BANKING LAWS The Glass-Steagall Act and other banking laws and regulations presently prohibit member banks of the Federal Reserve System ("Member Banks") or their non-bank affiliates from sponsoring, organizing, controlling, or distributing the shares of registered open-end investment companies such as the Funds. Such laws and regulations also prohibit banks from issuing, underwriting or distributing securities in general. However, under the Glass- Steagall Act and such other laws and regulations, a Member Bank or an affiliate thereof may act as investment adviser, transfer agent or custodian to a registered open-end investment company and may also act as agent in connection with the purchase of shares of such an investment company upon the order of their customer. FUNB and Evergreen Asset, since it is a subsidiary of FUNB, is subject to and in compliance with the aforementioned laws and regulations. Changes to applicable laws and regulations or future judicial or administrative decisions could result in FUNB and Evergreen Asset being prevented from continuing to perform the services required under the investment advisory contract or from acting as agent in connection with the purchase of shares of a Fund by its customers. If FUNB and Evergreen Asset were prevented from continuing to provide the services called for under the investment advisory agreement, it is expected that the Trustees would identify, and call upon each Fund's shareholders to approve, a new investment adviser. If this were to occur, it is not anticipated that the shareholders of any Fund would suffer any adverse financial consequences. ------------------------------------------------------------------------- OTHER INFORMATION ------------------------------------------------------------------------- DIVIDENDS, DISTRIBUTIONS AND TAXES Income dividends are declared daily and paid monthly. Distributions of any net realized gains of a Fund will be made at least annually. Shareholders will begin to earn dividends on the first business day after shares are purchased unless shares were not paid for, in which case dividends are not earned until the next business day after payment is received. Each Fund has qualified and intends to continue to qualify to be treated as a regulated investment company under the Internal Revenue Code (the "Code"). While so qualified, so long as each Fund distributes all of its investment company taxable income and any net realized gains to shareholders, it is expected that the Funds will not be required to pay any Federal income taxes. A 4% nondeductible excise tax will be imposed on a Fund if it does not meet certain distribution requirements by the end of each calendar year. Each Fund anticipates meeting such distribution requirements. The Funds will designate and pay exempt-interest dividends derived from interest earned on qualifying tax-exempt obligations. Such exempt-interest dividends may be excluded by shareholders of a Fund from their gross income for Federal income tax purposes, however (1) all or a portion of such exempt-interest dividends may be a specific preference item for purposes of the Federal individual and corporate alternative minimum taxes to the extent that they are derived from certain types of private activity bonds issued after August 7, 1986, and (2) all exempt- interest dividends will be a component of the "adjusted current earnings" for purposes of the Federal corporate alternative minimum tax. Dividends paid from taxable income, if any, and distributions of any net realized short-term capital gains (whether from tax exempt or taxable obligations) are taxable as ordinary income and long-term capital gain distributions are taxable as long-term capital gains, even though received in additional shares of the Fund, and regardless of the investors holding period relating to the shares with respect to which such gains are distributed. Market discount recognized on taxable and tax-exempt bonds is taxable as ordinary income, not as excludable income. Under current law, the highest Federal income tax rate applicable to net long-term gains realized by individuals is 28%. The rate applicable to corporations is 35%. Since each Fund's gross income is ordinarily expected to be tax exempt interest income, it is not expected that the 70% dividends-received deduction for corporations will be applicable. Specific questions should be addressed to the investor's own tax adviser. Each Fund is required by Federal law to withhold 31% of reportable payments (which may include dividends, capital gains distributions (if any) and redemptions) paid to certain shareholders. In order to avoid this backup withholding requirement, each investor must certify on the Share Purchase Application, or on a separate form supplied by State Street, that the investor's social security or taxpayer identification number is correct and that the investor is not currently subject to backup withholding or is exempt from backup withholding. For Evergreen Short Intermediate Municipal Fund-California, so long as the Fund remains qualified under Subchapter M of the Code for federal purposes and qualified as a diversified management investment company, then under current California law, the Fund is entitled to pass through to its shareholders the tax-exempt income it earns. To the extent that Fund dividends are derived from earnings on California Municipal Securities, such dividends will be exempt from California personal income taxes when received by the Fund's shareholders, provided the Fund has complied with the requirement that at least 50% of its assets be invested in California Municipal Securities. For California income tax purposes, long-term capital gains distributions are taxable as ordinary income. Statements describing the tax status of shareholders' dividends and distributions will be mailed annually by the Funds. These statements will set forth the amount of income exempt from Federal and, if applicable, state taxation (including California), and the amount, if any, subject to Federal and state taxation. Moreover, to the extent necessary, these statements will indicate the amount of exempt-interest dividends which are a specific preference item for purposes of the Federal individual and corporate alternative minimum taxes. The exemption of interest income for Federal income tax purposes does not necessarily result in exemption under the income or other tax law of any state or local taxing authority. Investors should consult their own tax advisers about the status of distributions from the Funds in their states and localities. Each Fund notifies shareholders annually as to the interest exempt from Federal taxes earned by the Fund. A shareholder who acquires Class A shares of a Fund and sells or otherwise disposes of such shares within 90 days of acquisition may not be allowed to include certain sales charges incurred in acquiring such shares for purposes of calculating gain and loss realized upon a sale or exchange of shares of the Fund. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE Evergreen National Tax Free Fund. The total return of Evergreen National Tax Free Fund for the fiscal year ending August 31, 1994 was -2.29%, outperforming the Lehman Brothers Long Insured Municipal Bond Index by .29% which stood at - -2.57% as of that date. Since inception, the Fund's cumulative total return is 1.84% greater than that of the index +10.86% versus +9.02%. The average annual return since inception was +6.33%. The Fund is a long-term bond fund with average maturities generally longer than fifteen years and seeks to extend or reduce those maturities as the market and interest rate outlook change. As the 1994 year evolved and the Federal Reserve initiated a series of moves to tighten credit (raise rates), the primary strategy employed by the Adviser was to reduce maturity and duration exposure, yet still provide a reasonable stream of tax-free income to shareholders. Protection of principal is an important goal for the Fund and though rising interest rates have caused returns to be negative for the fiscal year, the Fund's performance compares favorably with the relevant indices. [CHART] A particular security type which has exhibited poorer performance characteristics - deep market discount bonds - has been a specific candidate for sale from the Fund, to be replaced by higher coupon bonds. This strategy has generally enhanced the performance record of the Fund because more income is generated with the higher coupons. When possible, the Fund will continue to reduce its exposure to these securities to be consistent with the its goal of principal protection in an interest rate environment that has a decidedly upward bias. The Fund continues to invest at least 80% of its assets in Municipal Securities insured as to interest and principal and to maintain wide diversification in names of large national issuers. Evergreen Florida High Income Municipal Fund. The Fund's total return for the fiscal year ending August 31, 1994 was +1.42%, versus the Lehman Brothers 3-Year Municipal Bond Index, which rose + 2.38%, and the Lehman Brothers 5-Year Municipal Bond Index, which increased + 2.01%. As the economy picked up momentum and the Federal Reserve started tightening, interest rates in the fixed-income markets climbed in every maturity range. As a result, the Fund moved to a more defensive position during the last half of the fiscal year in order to moderate price volatility. We reduced the Fund's weighted average maturities and durations, and adjusted the holdings by selling securities most sensitive to price declines in a rising environment such as bonds trading at a discount. Proceeds were reinvested in premium-based, high quality bonds. The strategy of the Fund as of August 31, 1994 is to remain relatively short in the one to three-year range as we look to purchase investment grade, non-callable bonds. [CHART] Evergreen Short-Intermediate Municipal Fund. The Fund's total return for the fiscal year ending August 31, 1994 was +1.42%, versus the Lehman Brothers 3-Year Municipal Bond Index, which rose + 2.38%, and the Lehman Brothers 5-Year Municipal Bond Index, which increased + 2.01%. As the economy picked up momentum and the Federal Reserve started tightening, interest rates in the fixed-income markets climbed in every maturity range. As a result, the Fund moved to a more defensive position during the last half of the fiscal year in order to moderate price volatility. We reduced the Fund's weighted average maturities and durations, and adjusted the holdings by selling securities most sensitive to price declines in a rising environment such as bonds trading at a discount. Proceeds were reinvested in premium-based, high quality bonds. The strategy of the Fund as of August 31, 1994 is to remain relatively short in the one to three-year range as we look to purchase investment grade, non-callable bonds. [CHART] Evergreen Short-Intermediate Municipal Fund - California. The Fund's total return for the fiscal year ending August 31, 1994 was 1.84%, versus the Lehman Brothers 3-Year California Municipal Bond Index, which rose +2.38% and the Lehman Brothers California Municipal Bond Index, which increased + 2.21%. As the economy picked up momentum and the Federal Reserve started tightening, interest rates in the fixed-income markets climbed in every maturity range. As a result, the Fund moved to a more defensive position during the last half of the fiscal year in order to moderate price volatility. We reduced the Fund's weighted average maturities and durations, and adjusted the holdings by selling securities most sensitive to price declines in a rising environment such as bonds trading at a discount. Proceeds were reinvested in premium-based, high quality bonds. Our strategy as of August 31, 1994, is to remain relatively short in the one to three-year range as we look to purchase investment grade, non callable bonds. [CHART] GENERAL INFORMATION Portfolio Transactions. Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc., and subject to seeking best price and execution, a Fund may consider sales of its shares as a factor in the selection of dealers to enter into portfolio transactions with the Fund. Organization. The Funds are separate investment series of The Evergreen Municipal Trust, a Massachusetts business trust organized in 1988. The Funds do not intend to hold annual shareholder meetings; shareholder meetings will be held only when required by applicable law. Shareholders have available certain procedures for the removal of Trustees. A shareholder in each class of a Fund will be entitled to his or her share of all dividends and distributions from a Fund's assets, based upon the relative value of such shares to those of other Classes of the Fund, and, upon redeeming shares, will receive the then current net asset value of the Class of shares of the Fund represented by the redeemed shares less any applicable CDSC. The Funds are empowered to establish, without shareholder approval, additional investment series, which may have different investment objectives, and additional classes of shares for any existing or future series. If an additional series or class were established in a Fund, each share of the series or class would normally be entitled to one vote for all purposes. Generally, shares of each series and class would vote together as a single class on matters, such as the election of Directors, that affect each series and class in substantially the same manner. Class A, B and Y shares have identical voting, dividend, liquidation and other rights, except that each class bears, to the extent applicable, its own distribution and transfer agency expenses as well as any other expenses applicable only to a specific class. Each class of shares votes separately with respect to Rule 12b-1 distribution plans and other matters for which separate class voting is appropriate under applicable law. Shares are entitled to dividends as determined by the Trustees and, in liquidation of a Fund, are entitled to receive the net assets of the Fund. Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each Fund's registrar, transfer agent and dividend-disbursing agent for a fee based upon the number of shareholder accounts maintained for the Funds. The transfer agency fee with respect to the Class B shares will be higher than the transfer agency fee with respect to the Class A shares. Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz Incorporated, located at 237 Park Avenue, New York, New York 10017, is the principal underwriter of the Funds. EFD provides personnel to serve as officers of the Funds. The salaries and other expenses related to providing such personnel are borne by EFD. Other Classes of Shares. Each Fund currently offers three classes of shares, Class A, Class B and Class Y, and may in the future offer additional classes. Class Y shares are not offered by this Prospectus and are only available to (i) all shareholders of record in one or more of the Evergreen Funds as of December 30, 1994, (ii) certain institutional investors and (iii) investment advisory clients of the Adviser and its affiliates. The dividends payable with respect to Class A and Class B shares will be less than those payable with respect to Class Y shares due to the distribution and distribution related expenses borne by Class A and Class B shares and the fact that such expenses are not borne by Class Y shares. Performance Information. A Fund's performance may be quoted in advertising in terms of yield or total return. Both types of performance are based on SEC formulas and are not intended to indicate future performance. Yield is a way of showing the rate of income a Fund earns on its investments as a percentage of the Fund's share price. A Fund's yield is calculated according to accounting methods that are standardized by the SEC for all stock and bond funds. Because yield accounting methods differ from the method used for other accounting purposes, a Fund's yield may not equal its distribution rate, the income paid to your account or the income reported in a Fund's financial statements. To calculate yield, a Fund takes the interest income it earned from its portfolio of investments (as defined by the SEC formula) for a 30-day period (net of expenses), divides it by the average number of shares entitled to receive dividends, and expresses the result as an annualized percentage rate based on a Fund's share price at the end of the 30-day period. This yield does not reflect gains or losses from selling securities. A Fund may also quote tax-equivalent yields, which show the taxable yields an investor would have to earn before taxes to equal the Fund's tax-free yields. A tax-equivalent yield is calculated by dividing a Fund's tax-exempt yield by the result of one minus a stated Federal tax rate. If only a portion of a Fund's income was tax-exempt, only that portion is adjusted in the calculation. Total returns are based on the overall dollar or percentage change in the value of a hypothetical investment in a Fund. A Fund's total return shows its overall change in value including changes in share prices and assumes all a Fund's distributions are reinvested. A cumulative total return reflects a Fund's performance over a stated period of time. An average annual total return reflects the hypothetical annually compounded return that would have produced the same cumulative total return if a Fund's performance had been constant over the entire period. Because average annual total returns tend to smooth out variations in a Fund's return, you should recognize that they are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its cumulative and average annual total returns into income results and realized and unrealized gain or loss. Evergreen Short Intermediate Municipal Fund-California may also quote tax-equivalent yields, which show the taxable yields an investor would have to earn before taxes to equal the Fund's tax-free yields. A tax-equivalent yield is calculated by dividing a Fund's tax-exempt yield by the result of one minus a stated federal tax rate. If only a portion of a Fund's income was tax-exempt, only that portion is adjusted in the calculation. Comparative performance information may also be used from time to time in advertising or marketing a Fund's shares, including data from Lipper Analytical Services, Inc., Morningstar and other industry publications. The Fund may also advertise in items of sales literature an "actual distribution rate" which is computed by dividing the total ordinary income distributed (which may include the excess of short-term capital gains over losses) to shareholders for the latest twelve month period by the maximum public offering price per share on the last day of the period. Investors should be aware that past performance may not be reflective of future results. Liability Under Massachusetts Law. Under Massachusetts law, trustees and shareholders of a business trust may, in certain circumstances, be held personally liable for its obligations. The Declaration of Trust under which Funds operate provide that no trustee or shareholder will be personally liable for the obligations of the Trust and that every written contract made by the Trust contain a provision to that effect. If any trustee or shareholder were required to pay any liability of the Trust, that person would be entitled to reimbursement from the general assets of the Trust. Additional Information. This Prospectus and the Statement of Additional Information, which have been incorporated by reference herein, do not contain all the information set forth in the Registration Statements filed by the Funds with the Commission under the Securities Act. Copies of the Registration Statements may be obtained at a reasonable charge from the Commission or may be examined, without charge, at the offices of the Commission in Washington, D.C. APPENDIX A -- CALIFORNIA RISK CONSIDERATIONS The following information as to certain California risk factors is given to investors in view of the policy of Evergreen Short Intermediate Municipal Fund-California of investing primarily in California state and municipal issuers. The information is based primarily upon information derived from public documents relating to securities offerings of California state and municipal issuers, from independent municipal credit reports and historically reliable sources but has not been independently verified by the Fund. Changes in California constitutional and other laws during the last several years have raised questions about the ability of California state and municipal issuers to obtain sufficient revenue to pay their bond obligations. In 1978, California voters approved an amendment to the California Constitution known as Proposition 13. Proposition 13 limits ad valorem taxes on real property and restricts the ability of taxing entities to increase real property taxes. Legislation passed subsequent to Proposition 13, however, provided for the redistribution of California's General Fund surplus to local agencies, the reallocation of revenues to local agencies, and the assumption of certain local obligations by the state so as to help California municipal issuers to raise revenue to pay their bond obligations. It is unknown, however, whether additional revenue redistribution legislation will be enacted in the future and whether, if enacted, such legislation would provide sufficient revenue for such California issuers to pay their obligations. The state is also subject to another constitutional amendment, Article XIIIB, which may have an adverse impact on California state and municipal issuers. Article XIIIB restricts the state from spending certain appropriations in excess of an appropriations limit imposed for each state and local government entity. If revenues exceed such appropriations limit, such revenues must be returned either as revisions in the tax rates or fee schedules. Because of the uncertain impact of the aforementioned statutes and cases, the possible inconsistencies in the respective terms of the statutes and the impossibility of predicting the level of future appropriations and applicability of related statutes to such questions, it is not currently possible to assess the impact of such legislation, cases and policies on the long-term ability of California state and municipal issuers to pay interest or repay principal on their obligations. California's economy is larger than many sovereign nations. During the 1980s, California experienced growth rates well in excess of the rest of the nation. The state's major employment sectors are services, trade, and manufacturing. Industrial concentration is in electronics, aerospace, and non-electrical equipment. Also significant are agriculture and oil production. Key sectors of California's economy have been severely affected by the recession. Since May of 1990, job losses total over 850,000. Declines in the aerospace and high technology sectors have been especially severe. The continuing drive in population and labor force growth has produced higher unemployment rates in the state. Although total job loss has declined, weakness continues in key areas of California's economy, including government, real estate and aerospace. Wealth levels still remain high in the state, although the difference between state and national levels continues to narrow. In July of 1994, both S&P and Moody's lowered the general obligation bond ratings of the state of California. These revisions reflect the state's heavy reliance on the short-term note market to finance its cash imbalance and the likelihood that this exposure will persist for at least another two years. For more information on these ratings revisions and the state's current budget, please refer to the Statement of Additional Information. Orange County Bankruptcy. On December 6, 1994, Orange County, California, petitioned for bankruptcy based on losses in the Orange County Investment Fund which at the time were estimated to be approximately $2 billion. At the time of the petition, the Orange County Investment Fund held monies belonging to Orange County as well as other municipal issuers located in Orange County and other parts of California. Although the ultimate resolution of this matter is uncertain, one possible result is that the ability of municipal issuers investing in the Orange County Investment Fund to service some or all of their outstanding debt obligations may be severely impaired. As of December 6, 1994, Evergreen Short-Intermediate Municipal Fund - California did not hold debt obligations of Orange County or other issuers that the Fund is aware had invested in the Orange County Investment Fund. Although it has no current intention to do so, if it deems it advisable, the Fund reserves the right from time to time to make investments in municipal issuers who maintain assets in the Orange County Investment Fund. APPENDIX B -- FLORIDA RISK CONSIDERATIONS The following is a summary of economic factors which may affect the ability of the municipal issuers of Florida Obligations to repay general obligation and revenue bonds. Such information is derived from sources that are generally available to investors and is believed by the Funds to be accurate, but has not been independently verified and may not be complete. Under current law, the State of Florida is required to maintain a balanced budget such that current expenses are met from current revenues. Florida does not currently impose a tax on personal income but does impose taxes on corporate income derived from activities within the state. In addition, Florida imposes an ad valorem tax as well as sales and use taxes. These taxes are the principal sources of funds to meet state expenses, including repayment of, and interest on, obligations backed solely by the full faith and credit of the state, without recourse to any specific project or related revenue source. On November 3, 1992, Florida voters approved an amendment to the state constitution which limits the annual growth in the assessed valuation of residential property and which, over time, could constrain the growth in property taxes, a major revenue source for local governments. The amendment restricts annual increases in assessed valuation to the lesser of 3% or the Consumer Price Index. The amendment applies only to residential properties eligible for the homestead exemption and does not affect the valuation of rental, commercial, or industrial properties. When sold, residential property would be reassessed at market value. The amendment became effective January 1, 1993. While no immediate ratings implications are expected, the amendment could have a negative impact on the financial performance of local governments over time and lead to ratings revisions which may have a negative impact on the prices of affected bonds. Many of the bonds in which the Funds invest were issued by various units of local government in the State of Florida. In addition, most of these bonds are revenue bonds where the security interest of the bond holders typically is limited to the pledge of revenues or special assessments flowing from the project financed by the bonds. Projects include, but are not limited to, water and waste water utilities, drainage systems, roadways, and other development-related infrastructures. Therefore, the capacity of these issuers to repay their obligations may be affected by variations in the Florida economy. Since 1970, Florida has been one of the fastest growing states in the nation. Average annual population growth over the last 20 years was 320,000. During this period only California and Texas grew more rapidly. In terms of total population, Florida moved from the ninth most populous state in 1970 to fourth today. This rapid and sustained pace of population growth has given rise to sharp increases in construction activity and to the need for roads, drainage systems, and utilities to serve the burgeoning population. In turn this has driven the growth in the volume of revenue bond debt outstanding. The pace of growth, however, has not been steady. During economic expansions, Florida's population growth has exceeded 500,000 people per year, but in recessions growth has slowed to 120,000 per year. The variations in construction activity over the course of business cycles is also very large. Although the amplitude of the swings during business cycles is large, the duration of downturns in Florida's growth has been short. Historically, depressed levels of growth have lasted only a year or two at most. Furthermore, Florida's cycles have not been periods of growth or decline. Instead, what has occurred are periods of more growth or less growth. Florida's ability to meet increasing expenses will be dependent in part upon the state's ability to foster business and economic growth. During the past decade, Florida has experienced significant increases in the technology-based and other light industries and in the service sector. This growth has diversified the state's overall economy, which at one time was dominated by the citrus and tourism industries. The state's economic and business growth could be restricted, however, by the natural limitations of environmental resources and the state's ability to finance adequate public facilities such as roads and schools. -------------------------------------------------------------- PROSPECTUS , 1995 Evergreen Tax Exempt Funds -------------------------------------------------------- CLASS Y SHARES ------------------------- EVERGREEN NATIONAL TAX-FREE FUND EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA The Evergreen Tax Exempt Funds (the "Funds") are designed to provide investors with income exempt from Federal income taxes. This Prospectus provides information regarding the Class A and Class B shares offered by the Funds. Each Fund is, or is a series of, a diversified, open-end management investment company. This Prospectus sets forth concise information about the Funds that a prospective investor should know before investing. The address of the Funds is 2500 Westchester Avenue, Purchase, New York 10577. A "Statement of Additional Information" for the Funds and the other funds in the Evergreen Group of mutual funds (collectively, with the Funds the "Evergreen Funds") dated ---------, 1995 has been filed with the Securities and Exchange Commission and is incorporated by reference herein. The Statement of Additional Information provides information regarding certain matters discussed in this Prospectus and other matters which may be of interest to investors, and may be obtained without charge by calling the Funds at (800) 807-2940. There can be no assurance that the investment objective of any Fund will be achieved. Investors are advised to read this Prospectus carefully. The shares offered by this Prospectus are not deposits or obligations of First Union or any subsidiaries of First Union, are not endorsed or guaranteed by First Union or any subsidiaries of First Union, and are not insured or otherwise protected by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency and involve risk, including the possible loss of principal. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Keep This Prospectus for Future Reference TABLE OF CONTENTS OVERVIEW OF THE FUND EXPENSE INFORMATION FINANCIAL HIGHLIGHTS DESCRIPTION OF THE FUND Investment Objectives And Policies Other Investment Policies And Techniques MANAGEMENT OF THE FUND Investment Adviser Sub-Adviser PURCHASE AND REDEMPTION OF SHARES How To Buy Shares How To Redeem Shares Exchange Privilege Shareholder Services Effect Of Banking Laws OTHER INFORMATION Dividends, Distributions And Taxes Management's Discussion of Fund Performance General Information California Risk Considerations Florida Risk Considerations The following summary is qualified in its entirety by the more detailed information contained elsewhere in this Prospectus. See "Description of the Funds" and "Management of the Funds". The Investment Adviser to Evergreen National Tax-Free Fund, Evergreen Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal Fund-California is Evergreen Asset Management Corp. ("Evergreen Asset") which, with its predecessors, has served as investment adviser to the Evergreen Funds since 1971. Evergreen Asset is a wholly-owned subsidiary of First Union National Bank of North Carolina ("FUNB-NC"), which in turn is a subsidiary of First Union Corporation, one of the ten largest bank holding companies in the United States. The Capital Management Group of FUNB serves as investment adviser to Evergreen Florida High Income Municipal Bond Fund. Evergreen National Tax-Free Fund seeks a high level of current income exempt from Federal income tax. It invests substantially all of its assets in long-term municipal securities. Under normal market conditions, the Fund intends to invest at least 80% of its total assets in municipal securities which are insured. The Fund's dollar weighted average portfolio maturity is generally expected to exceed fifteen years. Evergreen Florida High Income Municipal Bond Fund seeks to provide a high level of current income exempt from federal income taxes. Under normal circumstances, the Fund will invest at least 65% of the value of its total assets in municipal securities consisting of high yield (i.e., high risk), medium, lower rated and unrated bonds. Such securities are commonly called junk bonds and are subject to greater market fluctuations and risk of loss of income and principal than higher rated securities. Lower quality securities involve a greater risk of default and, consequently, shares of Evergreen Florida High Income Municipal Bond Fund may be considered speculative securities. Evergreen Short-Intermediate Municipal Fund seeks as high a level of current income, exempt from Federal income tax other than the alternative minimum tax ("AMT"), as is consistent with preserving capital and providing liquidity. The Fund invests substantially all of its assets in short and intermediate-term municipal securities with a dollar weighted average portfolio maturity of two to five years. Evergreen Short-Intermediate Municipal Fund-California seeks as high a level of current income exempt from Federal and California income taxes as is consistent with preserving capital and providing liquidity. The Fund invests substantially all of its assets in short and intermediate-term municipal securities with a dollar weighted average portfolio maturity of two to five years. There is no assurance the investment objective of any Fund will be achieved. ------------------------------------------------------------------------------- EXPENSE INFORMATION ------------------------------------------------------------------------------- The table set forth below summarizes the shareholder transaction costs associated with an investment in Class A and Class B Shares of a Fund. For further information see "Purchase and Redemption of Fund Shares" and "Other Classes of Shares". The table set forth below summarizes the shareholder transaction costs associated with an investment in Class Y of Shares of a Fund. For further information see "Purchases and Redemption of Shares". SHAREHOLDER TRANSACTION EXPENSES Class Y Shares Maximum Sales Charge Imposed on Purchases None Sales Charge on Dividend Reinvestments None Contingent Deferred Sales Charge None Redemption Fee None Exchange Fee (only applies after 4 exchanges per calendar $5.00 year) The following tables show for each Fund the annual operating expenses attributable to Class Y Shares, together with examples of the cumulative effect of such expenses on a hypothetical $1,000 investment for the periods specified assuming (i) a 5% annual return and (ii) redemption at the end of each period. Evergreen National Tax-Free Fund Annual Operating Expenses1 Example Class Y Class Y Advisory Fees .50% After 1 Year $ 9 12b-1 Fees None After 3 Years $ 28 Other Expenses .39% After 5 Years $ 49 Total .89% After 10 Years $110 Evergreen Short-Intermediate Municipal Fund Annual Operating Expenses2 Example Class Y Class Y Advisory Fees .50% After 1 Year $ 8 12b-1 Fees None After 3 Years $ 26 Other Expenses .33% After 5 Years $ 46 Total .83% After 10 Years $103 Evergreen Short-Intermediate Municipal Fund-California Annual Operating Expenses3 Example Class Y Class Y Advisory Fees .55% After 1 Year $ 10 12b-1 Fees None After 3 Years $ 30 Other Expenses .40% After 5 Years $ 53 Total .95% After 10 Years $117 The Adviser has agreed to reimburse these Funds to the extent that these Fund's aggregate operating expenses (including the Adviser's fee, but excluding interest, taxes, brokerage commissions, Rule 12b-1 distribution fees and shareholder servicing fees, and extraordinary expenses) exceed 1.00% of the average net assets for Evergreen Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal FundCalifornia and 1.25% of the average net assets for Evergreen National Tax-Free Fund. From time to time the Adviser may, at its discretion, reduce or waive its fees or reimburse these Fund's for certain of their other expenses in order to reduce these Fund's expense ratios. The Adviser may cease these voluntary waivers and reimbursements at any time. 1The estimated annual operating expenses for Evergreen National Tax-Free Fund does not reflect a voluntary advisory fee waiver by the Adviser of .48 of 1% of average net assets and the voluntary reimbursement of a portion of the Fund's other expenses representing .12% of average net assets for the fiscal period ending August 31, 1994. 2The estimated annual operating expenses for Evergreen Short-Intermediate Municipal Fund do not reflect a voluntary advisory fee waiver by the Adviser of .25 of 1% of average net assets for the fiscal period ending August 31, 1994. 3The estimated annual operating expenses for Evergreen Short-Intermediate Municipal Fund - California do not reflect a voluntary advisory fee waiver by the Adviser of .43 of 1% of average net assets for the fiscal period ending August 31, 1994. The purpose of the foregoing table is to assist an investor in understanding the various costs and expenses that an investor in the Class Y Shares of the Funds will bear directly or indirectly. The amounts set forth under "Other Expenses" as well as the amounts set forth in the examples are estimated amounts based on historical experience for the fiscal period ending August 31, 1994. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete description of the various costs and expenses borne by the Funds see "Management of the Funds". - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Evergreen National Tax-Free Fund The following selected per share data and ratios for the periods ended August 31, 1994 have been audited by Price Waterhouse LLP, independent auditors for Evergreen National Tax-Free Fund, whose report thereon was unqualified. This information should be read in conjunction with the financial statements and notes thereto which are incorporated in the Statement of Additional Information by reference. The per share data set forth below pertains to Class Y shares of the Fund, which are not offered through this prospectus. See "Other Classes of Shares". No per share data and ratios are shown for Class A or B shares, since these classes did not have any operations prior to the date of this Prospectus. Period from December 30, 1992* Year Ended through PER SHARE DATA August 31, 1994 August 31, 1993 --------------- --------------- Net asset value, beginning of year. . . . . . . $10.92 $10.00 ------ ------ Income (loss) from investment operations: Net investment income . . . . . . . . . . . . . .53 .40 Net realized and unrealized gain (loss) on (.77) .92 investments. . . Total from investment operations. . . . . . (.24) 1.32 Less distributions to shareholders: From net investment income. . . . . . . . . . . (.53) (.40) From net realized gains . . . . . . . . . . . . (.14) ---- In excess of net realized gains. . . . . . . . (.02) ---- --------- ----------- Total distributions . . . . . . . . . . . . . (.69) (.40) --------- --------- Net asset value, end of year. . . . . . . . . . $9.99 $10.92 ------- ------ TOTAL RETURN . . . . . . . . . . . . . . . . . (2.3)% 13.5%+ RATIOS & SUPPLEMENTAL DATA: Net assets, end of year (in millions). . . . . . . . . . . . . . . . $42 $33 Ratios to average net assets: Expenses . . . . . . . . . . . . . . . . . . .29% (a) 0% (b) Net investment income . . . . . . . . . . . 5.07% (a) 5.51%(b) Portfolio turnover rate . . . . . . . . . . . 135% 166% - ------------ * Commencement of operations. (a) Net of partial advisory fee waiver of .48 of 1.00% of daily net assets and the absorption of all other Fund expenses by the Adviser equal to .12% of average daily net assets. (b) Annualized and net of full advisory fee waiver of .50 of 1.00% of daily net assets and the absorption of all other Fund expenses by the Adviser equal to .42% of average daily net assets. + Total return calculated for the period December 30, 1992 through August 31, 1993 is not annualized. Evergreen Short Intermediate Municipal Fund The following selected per share data and ratios for the periods ended August 31, 1994 have been audited by Price Waterhouse LLP, independent auditors for Evergreen Short Intermediate Municipal Fund, whose report thereon was unqualified. This information should be read in conjunction with the financial statements and notes thereto which are incorporated in the Statement of Additional Information by reference. The per share data set forth below pertains to Class Y shares of the Fund, which are not offered through this prospectus. See "Other Classes of Shares". No per share data and ratios are shown for Class A or B shares, since these classes did not have any operations prior to the date of this Prospectus.
Period from July 17, 1991* Year Ended August 31, through PER SHARE DATA 1994 1993 1992+ August 31, 1991+ ---- ---- ----- ---------------- Net asset value, beginning of year. . . . . . . . . $10.58 $10.33 $10.00 $10.00 ------ ------ ------ ------ Income (loss) from investment operations: Net investment income . . . . . . . . . . . . . . . .47 .49 .51 .06 . . . . . . . . . . . . Net realized and unrealized gain (loss) on (.32) .25 .33 ---- investments. . . Total from investment operations. . . . . . . . .15 .74 .84 .06 . . . . . . . . . . Less distributions to shareholders from: From net investment income. . . . . . . . . . . . . (.47) (.49) (.51) (.06) . . . . . . . . . . From net realized gains . . . . . . . . . . . . . . (.03) ---- ---- ---- . . . . . . . . . . . . . In excess of net realized gains. . . . . . . . . . (.02) ---- ---- ---- . . . . . . . . . . . . Total distributions . . . . . . . . . . . . . . (.52) (.49) (.51) (.06) --------- --------- ---------- --------- Net asset value, end of year. . . . . . . . . . . . $10.21 $10.58 $10.33 $10.00 ------ ------ ------ ------ TOTAL RETURN . . . . . . . . . . . . . . . . . . . 1.4% 7.4% 8.6% .6%++ RATIOS & SUPPLEMENTAL DATA Net assets, end of year (in millions) . . . . . . . . . . . . . . . . . $53 $67 $54 $4 Ratios to average net assets: Expenses . . . . . . . . . . . . . . . . . . . .58% (a) .40% (b) .17% (c) .0% (d) Net investment income . . . . . . . . . . . . . 4.54% (a) 4.73% (b) 4.85% (c) 4.93% (d) Portfolio turnover rate . . . . . . . . . . . . . . 32% ----- 37% 57% - ------------ * Commencement of 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 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 calculated for the period July 17, 1991 through August 31,1991 is not annualized. (a) Net of partial advisory fee waiver of .25 of 1.00% of daily net assets. (b) Net of partial advisory fee waiver of .41 of 1.00% of daily net assets. (c) Net of partial advisory fee waiver of .46 of 1.00% of daily net assets and the absorption of a portion of all other Fund expenses by the Adviser equal to .23% of average daily net assets. (d) Annualized and net of full advisory fee waiver of .50 of 1.00% of daily net assets and the absorption of all other Fund expenses by the Adviser equal to .90% of average daily net assets.
Evergreen Short Intermediate Municipal Fund - California The following selected per share data and ratios for the periods ended August 31, 1994 have been audited by Price Waterhouse LLP, independent auditors for Evergreen Short Intermediate Municipal Fund - California, whose report thereon was unqualified. This information should be read in conjunction with the financial statements and notes thereto which are incorporated in the Statement of Additional Information by reference. The per share data set forth below pertains to Class Y shares of the Fund, which are not offered through this prospectus. See "Other Classes of Shares". No per share data and ratios are shown for Class A or B shares, since these classes did not have any operations prior to the date of this Prospectus.
Period from November 2, Year Ended August 31, 1988* through PER SHARE DATA 1994 1993+ 1992+ 1991+ 1990+ August 31, 1989+ ---- ----- ----- ----- ----- ---------------- Net asset value, beginning of year. . . . . . . . $10.34 $10.00 $10.00 $10.00 $10.00 $10.00 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income . . . . . . . . . . . . . . .43 .41 .33 .47 .55 .51 Net realized and unrealized gain (loss) on (.24) .34 ---- ---- ---- ---- investments Total from investment operations. . . . . . . .19 .75 .33 .47 .55 .51 Less distributions to shareholders from: From net investment income. . . . . . . . . . . . (.43) (.41) (.33) (.47) (.55) (.51) From net realized gains . . . . . . . . . . . . . (.01) ---- ---- ---- ---- ---- Total distributions . . . . . . . . . . . . . (.44) (.41) (.33) (.47) (.55) (.51) --------- --------- --------- - --------- --------- --------- Net asset value, end of year. . . . . . . . . . . $10.09 $10.34 $10.00 $10.00 $10.00 $10.00 ------ ------ ------ ------ ------ ------ TOTAL RETURN . . . . . . . . . . . . . . . . . . 1.8% 7.6% 3.4% 4.8% 5.7% 5.2%** RATIOS & SUPPLEMENTAL DATA: Net assets, end of year (in millions). . . . . . . . . . . . . . . . . $28 $42 $37 $28 $30 $34 Ratios to average net assets: Expenses . . . . . . . . . . . . . . . . . . . .52%(a) .30%(b) .40%(c) .37%(d) .29%(e) .24%(f) Net investment income . . . . . . . . . . . . 4.20%(a) 3.96%(b) 3.36%(c) 4.66%(d) 5.52%(e) 6.40%(f) . . . . . . . . . . . . . Portfolio turnover rate . . . . . . . . . . . . . 12% 37% ---- ---- ---- ---- - ------------ * Commencement of operations. + 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, 1990 through August 31, 1992 are restated to reflect both 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 calculated for the period November 2, 1988 through August 31, 1989 is not annualized. (a) Net of partial advisory fee waiver of .43 of 1.00% of daily net assets. (b) Net of partial advisory fee waiver of .52 of 1.00% of daily net assets and the absorption of a portion of all other Fund expenses by the Adviser equal to .16% of average daily net assets. (c) Net of partial advisory fee waiver of .44 of 1.00% of daily net assets. (d) Net of partial advisory fee waiver of .45 of 1.00% of daily net assets and the absorption of a portion of all other Fund expenses by the Adviser equal to .03% of average daily net assets. (e) Net of partial advisory fee waiver of .51 of 1.00% of daily net assets and the absorption of a portion of all other Fund expenses by the Adviser equal to .08% of average daily net assets. (f) Annualized and net of partial advisory fee waiver of .50 of 1.00% of daily net assets and the absorption of a portion of all other Fund expenses by the Adviser equal to .19% of average daily net assets.
- -------------------------------------------------------------------------------- DESCRIPTION OF THE FUNDS - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVES AND POLICIES Evergreen National Tax Free Fund The investment objective of Evergreen National Tax Free Fund is to achieve a high level of current income exempt from Federal income tax. The Fund will seek to achieve its objective by investing substantially all of its assets in a diversified portfolio of long-term debt obligations issued by states, possessions of the United States and by the District of Columbia, and their political subdivisions and duly constituted authorities, the interest from which is exempt from Federal income tax. Such securities are generally known as Municipal Securities (See "Municipal Securities" below). The Fund has no maturity restrictions. Its dollar weighted average portfolio maturity, however, is generally expected to exceed fifteen years. As a matter of policy, the Trustees will not change the Fund's investment objective without shareholder approval. Under normal market conditions, the Fund intends to invest at least 80% of its total assets in Municipal Securities that, at the time of purchase, are insured or prefunded. Such Municipal Securities include securities which are insured under a mutual fund insurance policy issued to the Trust for the benefit of the Fund by an insurer having a claims-paying ability rated AAA by Standard & Poor's Ratings Group ("S&P") or Aaa by Moody's Investors Service, Inc. ("Moody's") or insured by such an insurer under an insurance policy obtained by the issuer or underwriter of such Municipal Securities at the time of original issuance. The Fund may also purchase secondary market insurance on Municipal Securities which it holds or acquires. Although the fee for secondary market insurance will reduce the yield of the insured bond, such insurance would be reflected in the market value of the bond purchased. A bond is prefunded if marketable securities, typically U.S. Treasurys, are escrowed to maturity to assure payment of principal and interest. It should be noted that insurance is not a substitute for the basic credit of an issuer, but supplements the existing credit and provides additional security therefor. Moreover, while insurance coverage for the Municipal Securities held by the Fund reduces credit risk by insuring that the Fund will receive payment of principal and interest, it does not protect against market fluctuations caused by changes in interest rates and other factors. Obligations with longer maturities (e.g., 20 years or more) generally offer both higher yields and greater exposure to market fluctuation from changes in interest rates than do those with shorter maturities. Consequently, shares of the Fund may not be suitable for persons who cannot assume the somewhat greater risks of capital depreciation involved in seeking higher tax-exempt yields. It is anticipated that the annual portfolio turnover rate for the Fund may exceed 100%. For the period from December 30, 1992 (commencement of operations) to August 31, 1993, and the fiscal year ended August 31, 1994, the Fund's portfolio turnover rate was 166% and 135%, respectively. See "Investment Practices and Restrictions", below. Evergreen Florida High Income Municipal Bond Fund Evergreen Florida High Income Municipal Bond Fund seeks to provide a high level of current income which is exempt from federal income taxes. The term "high-level" indicates that the Fund seeks to achieve an income level that exceeds that which an investor would expect from an investment grade portfolio with similar maturity characteristics. Evergreen Florida High Income Municipal Bond Fund invests primarily in high yield, medium and lower rated (Baa through C by Moody's and BBB through D by S&P) and unrated municipal securities. To varying degrees, medium and lower rated municipal securities, as well as unrated municipal securities, are considered to have speculative characteristics and are subject to greater market fluctuations and risk of loss of income and principal than higher rated and securities. To the extent that an investor realizes a yield in excess of that which could be expected from a fund which invests primarily in investment grade securities, the investor should expect to bear increased risk due to the fact that the risk of principal and/or interest not being repaid with respect to the high yield securities described above is significantly greater than that which exists in connection with investment grade securities. In assessing the risk involved in purchasing medium and lower rated and unrated securities, the Fund's investment adviser will use nationally recognized statistical rating organizations such as Moody's and S&P, and will also rely heavily on credit analysis it develops internally. Under normal circumstances, the Fund's dollar-weighted average maturity generally will be 15 years or more. In pursuit of its investment objective, Evergreen Florida High Income Municipal Bond Fund will, under normal market conditions, invest at least 65% in such medium and lower rated municipal securities or unrated municipal securities of comparable quality to such rated municipal bonds.. Investors should note that such a policy is not a fundamental policy of the Fund and shareholder approval is not necessary to change such policy. There is no assurance that Evergreen Florida High Income Municipal Bond Fund can achieve its investment objective. The Fund will not invest in municipal securities which are in default, i.e., securities rated D by S&P. Investments may also be made by Evergreen Florida High Income Municipal Bond Fund in higher quality Municipal Obligations and, for temporary defensive purposes, the Fund may invest less than 65% of its total assets in the medium and lower quality municipal securities described above. The Fund may assume a defensive position if, for example, yield spreads between lower grade and investment grade municipal bonds are narrow and the yields available on lower quality municipal securities do not justify the increased risk associated with an investment in such securities or when there is a lack of medium and lower quality issues in which to invest. Evergreen Florida High Income Municipal Bond Fund may also invest primarily in higher quality Municipal Obligations until its net assets reach a level that would permit the Fund to begin investing in medium and lower rated municipal bonds and at the same time maintain adequate diversification and liquidity. Investing in this manner may result in yields lower than those normally associated with a fund that invests primarily in medium and lower quality municipal securities. Under normal circumstances, it is anticipated that the dollar-weighted average maturity of Evergreen Florida High Income Municipal Bond Fund will generally be 15 years or more, although it may invest in securities of any maturity. If the Fund's investment determines that market conditions warrant a shorter average maturity, the Fund's investments will be adjusted accordingly. During the most recent fiscal year completed by Evergreen Florida High Income Municipal Bond Fund's predecessor, ended April 30, 1995, its holdings had the following average credit quality characteristics: Percent of Rating Net Assets Aaa or AAA % Aa or AA A Baa or BBB Ba or BB Non-rated Total 100.00% The Funds may purchase industrial development bonds only if the interest on such bonds is, in the opinion of bond counsel, exempt from federal income taxes. It is anticipated that the annual portfolio turnover rate for the Fund may exceed 100%. The Fund may buy and sell Futures or Options on Futures (as hereinafter defined), which involve investment risks different from those of municipal securities. See "Investment Practices and Restrictions", below. Also, see the Statement of Additional Information for further information in regard to ratings. Evergreen Short Intermediate Municipal Fund The investment objective of Evergreen Short Intermediate Municipal Fund is to achieve as high a level of current income, exempt from Federal income tax other than the AMT, as is consistent with preserving capital and providing liquidity. Under normal circumstances, it is anticipated that the Fund will invest its assets so that at least 80% of its annual interest income is exempt from Federal income tax other than the AMT. The Fund will seek to achieve its objective by investing substantially all of its assets in a diversified portfolio of short and intermediate-term debt obligations issued by states, territories and possessions of the United States and by the District of Columbia, and their political subdivisions and duly constituted authorities, the interest from which is exempt from Federal income tax other than the AMT. Such securities are generally known as Municipal Securities (See "Municipal Securities" below). As a matter of policy, the Trustees will not change the Fund's investment objective without shareholder approval. The Fund intends to maintain a dollar-weighted average portfolio maturity of two to five years. The Fund may consider an obligation's maturity to be shorter than its stated maturity if the Fund has the right to sell the obligation at a price approximating par value before its stated maturity date. This is a liquidity put and is exercisable to the issuer or some third party. It is anticipated that the annual portfolio turnover rate for the Fund will generally not exceed 100%. For the fiscal years ended August 31, 1992, 1993 and 1994, the Fund's portfolio turnover rate was 57%, 37% and 32%, respectively. See "Investment Practices and Restrictions", below. Evergreen Short Intermediate Municipal Fund-California The investment objective of Evergreen Short Intermediate Municipal Fund-California 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. The Fund will seek to achieve its objective by investing at least 80% of the value of its assets in a diversified portfolio of short and intermediate-term debt obligations issued by the State of California, its political subdivisions and duly constituted authorities, the interest from which is exempt from Federal and California income taxes. Such securities are generally known as Municipal Securities (see "Municipal Securities" below). The Fund intends to maintain a dollar-weighted average portfolio maturity of two to five years. The Fund may consider an obligation's maturity to be shorter than its stated maturity if the Fund has the right to sell the obligation at a price approximating par value before its stated maturity date. This is a liquidity put and is exercisable to the issuer or some third party. It is anticipated that the annual portfolio turnover rate for the Fund will generally not exceed 100%. For the period from October 16, 1992 (commencement of operations as a short-intermediate municipal fund) through August 31, 1993 and for the fiscal year ended August 31, 1994, the Fund's portfolio turnover rate was 37% and 12%, respectively. See "Investment Practices and Restrictions", below. INVESTMENT PRACTICES AND RESTRICTIONS Except where noted, each Fund may engage in the investment practices described below. Each Fund is also subject to certain investment restrictions more fully described in the Statement of Additional Information. General. Evergreen Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal Fund-California will invest in Municipal Securities so long as they are determined to be of high or upper medium quality. Municipal Securities meeting this criteria include bonds rated A or higher by S&P, Moody's or another nationally recognized statistical rating organization ("SRO"); notes rated SP-1 or SP-2 by S&P or MIG-1 or MIG-2 by Moody's or rated VMIG-1 or VMIG-2 by Moody's in the case of variable rate demand notes or having comparable ratings from another SRO; and commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's or having comparable ratings from another SRO. Medium grade bonds are more susceptible to adverse economic conditions or changing circumstances than higher grade bonds. For a description of such ratings see Appendix C. The Funds may also purchase Municipal Securities which are unrated at the time of purchase, if such securities are determined by the Fund's investment adviser to be of comparable quality. Certain Municipal Securities (primarily variable rate demand notes) may be entitled to the benefit of standby letters of credit or similar commitments issued by banks and, in such instances, the Fund's investment adviser will take into account the obligation of the bank in assessing the quality of such security. Investments by Evergreen Short-Intermediate Municipal Fund-California in unrated securities are limited to 20% of total assets. As stated above, Evergreen Florida High Income Municipal Bond Fund invests primarily in high yield, medium and lower rated (Baa through C by Moody's and BBB through D by S&P) and unrated securities. The ability of the Funds to meet their investment objectives is necessarily subject to the ability of municipal issuers to meet their payment obligations. In addition, the portfolios of the Funds will be affected by general changes in interest rates which will result in increases or decreases in the value of the obligations held by the Funds. Investors should recognize that, in periods of declining interest rates, the yield of the Funds will tend to be somewhat higher than prevailing market rates, and in periods of rising interest rates, the yield of the Funds will tend to be somewhat lower. Also, when interest rates are falling, the inflow of net new money to the Funds from the continuous sale of its shares will likely be invested in portfolio instruments producing lower yields than the balance of each Fund's portfolio, thereby reducing the current yield of the Funds. In periods of rising interest rates, the opposite can be expected to occur. In addition since Evergreen Short Intermediate Municipal Fund-California will invest primarily in California Municipal Securities, there are certain specific factors and considerations concerning California which may affect the credit and market risk of the Municipal Securities that Evergreen Short Intermediate Municipal Fund-California purchases. Similarly, since Evergreen Florida High Income Municipal Bond Fund invests primarily in Florida Municipal Securities, it is subject to certain specific factors and considerations concerning Florida which may affect the credit and market risk of the Municipal Securities that it purchases. The factors relating to these Funds are described in Appendix A and B to this Prospectus. Additional risk factors relating to the investment by Evergreen Florida High Income Municipal Bond Fund in high yield, medium and lower rated (Baa through C by Moody's and BBB through D by S&P) and unrated securities is discussed below. Municipal Securities. As noted above, the Funds will invest substantially all of their assets in Municipal Securities. These include Municipal Securities, short-term municipal notes and tax exempt commercial paper. "Municipal Securities" are debt obligations issued to obtain funds for various public purposes that are exempt from Federal income tax in the opinion of issuer's counsel. The two principal classifications of Municipal Securities are "general obligation" and "revenue" bonds. General obligation bonds are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue bonds are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific source such as from the user of the facility being financed. The term "Municipal Securities" also includes "moral obligation" issues which are normally issued by special purpose authorities. Industrial development bonds ("IDBs") and private activity bonds ("PABs") are in most cases revenue bonds and are not payable from the unrestricted revenues of the issuer. The credit quality of IDBs and PABs is usually directly related to the credit standing of the corporate user of the facilities being financed. Participation interests are interests in Municipal Securities, including IDBs and PABs, and floating and variable rate obligations that are owned by banks. These interests carry a demand feature permitting the holder to tender them back to the bank, which demand feature is backed by an irrevocable letter of credit or guarantee of the bank. A put bond is a municipal bond which gives the holder the unconditional right to sell the bond back to the issuer at a specified price and exercise date, which is typically well in advance of the bond's maturity date. "Short-term municipal notes" and "tax exempt commercial paper" include tax anticipation notes, bond anticipation notes, revenue anticipation notes and other forms of short-term loans. Such notes are issued with a short-term maturity in anticipation of the receipt of tax funds, the proceeds of bond placements and other revenues. Floating Rate and Variable Rate Obligations. Municipal Securities also include certain variable rate and floating rate municipal obligations with or without demand features. These variable rate securities do not have fixed interest rates; rather, those rates fluctuate based upon changes in specified market rates, such as the prime rate, or are adjusted at predesignated periodic intervals. Certain of these obligations may carry a demand feature that gives the Funds the right to demand prepayment of the principal amount of the security prior to its maturity date. The demand obligation may or may not be backed by letters of credit or other guarantees of banks or other financial institutions. Such guarantees may enhance the quality of the security. The Funds will limit the value of their investments in any floating or variable rate securities which are not readily marketable to 10% or less of their total assets. When-Issued Securities. The Funds may purchase Municipal Securities on a "when-issued" basis (i.e., for delivery beyond the normal settlement date at a stated price and yield). The Funds generally would not pay for such securities or start earning interest on them until they are received. However, when the Funds purchase Municipal Securities on a when-issued basis, they assume the risks of ownership at the time of purchase, not at the time of receipt. Failure of the issuer to deliver a security purchased by a Fund on a when-issued basis may result in a Fund's incurring a loss or missing an opportunity to make an alternative investment. Commitments to purchase when-issued securities will not exceed 25% of each Fund's total assets. The Funds will maintain cash or liquid high grade debt obligations in a segregated account with their custodian in an amount equal to such commitments. The Funds do not intend to purchase when-issued securities for speculative purposes but only in furtherance of their investment objectives. Stand-by Commitments. The Funds may also acquire "stand-by commitments" with respect to Municipal Securities held in their portfolio. Under a stand-by commitment, a dealer agrees to purchase, at a Fund's option, specified Municipal Securities at a specified price. Failure of the dealer to purchase such Municipal Securities may result in a Fund incurring a loss or missing an opportunity to make an alternative investment. Each Fund expects that stand-by commitments generally will be available without the payment of direct or indirect consideration. However, if necessary and advisable, a Fund may pay for stand-by commitments either separately in cash or by paying a higher price for portfolio securities which are acquired subject to such a commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held in each Fund's portfolio will not exceed 10% of the value of the Fund's total assets calculated immediately after each stand-by commitment is acquired. The Funds will maintain cash or liquid high grade debt obligations in a segregated account with its custodian in an amount equal to such commitments. The Funds will enter into stand-by commitments only with banks and broker-dealers that, in the judgment of each Fund's investment adviser, present minimal credit risks. Taxable Investments. Evergreen National Tax Free Fund, Evergreen Short-Intermediate Municipal Fund-California and Evergreen Florida High Income Municipal Bond Fund may temporarily invest up to 20% of their assets in taxable securities, and Evergreen Short-Intermediate Municipal Fund may temporarily invest its assets so that not more than 20% of its annual interest income will be derived from taxable securities, under any one or more of the following circumstances: (a) pending investment of proceeds of sale of Fund shares or of portfolio securities, (b) pending settlement of purchases of portfolio securities, and (c) to maintain liquidity for the purpose of meeting anticipated redemptions. In addition, each such Fund may temporarily invest more than 20% of its total assets in taxable securities for defensive purposes. Each Fund may invest for defensive purposes during periods when each Fund's assets available for investment exceed the available Municipal Securities that meet each Fund's quality and other investment criteria. Taxable securities in which the Funds may invest on a short-term basis include obligations of the United States Government, its agencies or instrumentalities, including repurchase agreements with banks or securities dealers involving such securities; time deposits maturing in not more than seven days; other debt securities rated within the two highest ratings assigned by any major rating service; commercial paper rated in the highest grade by Moody's, S&P or any SRO; and certificates of deposit issued by United States branches of United States banks with assets of $1 billion or more. Alternative Minimum Tax. Under current tax law, a distinction is drawn between Municipal Securities issued to finance certain "private activities" and other Municipal Securities. Such private activity bonds include bonds issued to finance such projects as airports, housing projects, resource recovery programs, solid waste disposal facilities, student loan programs, and water and sewage projects. Interest income from such "private activity bonds" ("AMT- Subject Bonds") becomes an item of "tax preference" which is subject to the alternative minimum tax when received by a person in a tax year during which he is subject to that tax. Because interest income on AMT-Subject Bonds is taxable to certain investors, it is expected, although there can be no guarantee, that such Municipal Securities generally will provide somewhat higher yields than other Municipal Securities of comparable quality and maturity. Evergreen Short Intermediate Municipal Fund may invest up to 50% of its total assets, and Evergreen National Tax Free Fund, Evergreen Short-Intermediate Municipal Fund-California and Evergreen Florida High Income Municipal Bond Fund may invest up to 80% of their total assets, in AMT-Subject Bonds. Repurchase Agreements. The Funds may enter into repurchase agreements with member banks of the Federal Reserve System, including State Street Bank and Trust Company, the Fund's custodian ("State Street" or the "Custodian"), or "primary dealers" (as designated by the Federal Reserve Bank of New York) in United States Government securities. A repurchase agreement is an arrangement pursuant to which a buyer purchases a security and simultaneously agrees to resell it to the vendor at a price that results in an agreed-upon market rate of return which is effective for the period of time (which is normally one to seven days, but may be longer) the buyer's money is invested in the security. The arrangement results in a fixed rate of return that is not subject to market fluctuations during a Fund's holding period. Each Fund requires continued maintenance of collateral with its Custodian in an amount equal to, or in excess of, the market value of the securities, including accrued interest, which are the subject of a repurchase agreement. In the event a vendor defaults on its repurchase obligation, the Fund might suffer a loss to the extent that the proceeds from the sale of the collateral were less than the repurchase price. If the vendor becomes the subject of bankruptcy proceedings, a Fund might be delayed in selling the collateral. Each Fund's investment adviser will review and continually monitor the creditworthiness of each institution with which a Fund enters into a repurchase agreement to evaluate these risks. A Fund may not enter into repurchase agreements if, as a result, more than 10% of the Fund's net assets would be invested in repurchase agreements maturing in more than seven days. Illiquid Securities. The Funds may invest up to 15% of their net assets in illiquid securities and other securities which are not readily marketable, except that they may only invest up to 10% of their assets in repurchase agreements with maturities longer than seven days. Securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933, which have been determined to be liquid, will not be considered by the Fund's investment adviser to be illiquid or not readily marketable and, therefore, are not subject to the aforementioned 15% limit. The inability of a Fund to dispose of illiquid or not readily marketable investments readily or at a reasonable price could impair the Fund's ability to raise cash for redemptions or other purposes. The liquidity of securities purchased by a Fund which are eligible for resale pursuant to Rule 144A will be monitored by the Fund's investment adviser on an ongoing basis, subject to the oversight of the Trustees. In the event that such a security is deemed to be no longer liquid, a Fund's holdings will be reviewed to determine what action, if any, is required to ensure that the retention of such security does not result in a Fund having more than 15% of its assets invested in illiquid or not readily marketable securities. Other Investment Policies. The Funds may borrow funds and agree to sell portfolio securities to financial institutions such as banks and broker-dealers and to repurchase them at a mutually agreed upon date and price (a "reverse repurchase agreement") for temporary or emergency purposes in amounts not in excess of 10% of the value of each Fund's total assets at the time of such borrowing. At the time a Fund enters into a reverse repurchase agreement, it will place in a segregated custodial account cash, United States Government securities or liquid high grade debt obligations having a value equal to the repurchase price (including accrued interest) and will subsequently monitor the account to ensure that such equivalent value is maintained. Reverse repurchase agreements involve the risk that the market value of the securities sold by a Fund may decline below the repurchase price of those securities. Each Fund will not enter into reverse repurchase agreements exceeding 5% of the value of its total assets. Evergreen Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal Fund-California will not purchase any securities whenever any borrowings (including reverse repurchase agreements) are outstanding. In order to generate income and to offset expenses, the Funds may lend portfolio securities to brokers, dealers and other financial organizations. Each Fund's investment adviser will monitor the creditworthiness of such borrowers. Loans of securities by a Fund, if and when made, may not exceed 30 percent of each Fund's total assets and will be collateralized by cash, letters of credit or U.S. Government securities that are maintained at all times in an amount equal to at least 100 percent of the current market value of the loaned securities, including accrued interest. While such securities are on loan, the borrower will pay a Fund any income accruing thereon, and the Fund may invest the cash collateral, thereby increasing its return. A Fund will have the right to call any such loan and obtain the securities loaned at any time on five days' notice. Any gain or loss in the market price of the loaned securities which occurs during the term of the loan would affect a Fund and its investors. A Fund may pay reasonable fees in connection with such loans. Hedging Instruments Futures Contracts. For the purpose of protecting (hedging) the value of the Fund's assets, Evergreen Florida High Income Municipal Bond Fund may purchase and sell various kinds of futures contracts ("Futures"), and may enter into closing purchase and sale transactions with respect to such contracts. The Futures may be based on various debt securities (such as U.S. government securities), indices and other financial instruments and indices. In instances involving the purchase or sale of Futures by Evergreen Florida High Income Municipal Bond Fund, an amount of cash or cash equivalents equal to the market value of the Futures will be deposited in a segregated account with the Fund's Custodian to collateralize the position and thereby insure that the use of such Futures is unleveraged. The primary risks associated with the use of Futures are: (i) imperfect correlation between the change in the market value of the securities held in the Fund's portfolio and the prices of Futures purchased or sold by the Fund; (ii) incorrect forecasts by the Fund's investment adviser concerning interest rates which may result in the hedge being ineffective; (iii) possible lack of a liquid secondary market for Futures; and (iv) the risk of potentially unlimited losses. The resulting inability to close a Futures position could adversely affect the Fund's hedging ability. For a hedge to be completely effective, the price change of the hedging instrument should equal the price change of the security being hedged. The risk of imperfect correlation of these price changes is increased as the composition of a Fund's portfolio is divergent from the debt securities underlying the index. Options on Futures. Evergreen Florida High Income Municipal Bond Fund may purchase and write call and put options on Futures which are traded on an Exchange or Board of Trade and enter into closing transactions with respect to such options to terminate an existing position ("Futures Options"). A Futures Option gives the purchaser the right, and the writer the obligation, in return for the premium paid, to assume a position in a Future (a long position if the option is a call and short position if the option is a put) at a specified exercise price at any time during the period of the Futures Option. The purchase of put Futures Options is a means of hedging against the risk of rising interest rates. The purchase of call Futures Options is a means of hedging against a market advance when the Fund is not fully invested. Evergreen Florida High Income Municipal Bond Fund may use Futures Options only in connection with hedging strategies. While hedging can provide protection against an adverse movement in interest rates, it can also preclude a hedger's opportunity to benefit from a favorable interest rate movement. Thus, writing a call Futures Option results in receipt of an option premium which may offset a portion of any loss from a decline in the prices of Municipal Obligations held by the Fund; however if the prices of Municipal Obligations increase, all or part of any capital appreciation on portfolio securities would be offset by a loss incurred in closing out the call option. In addition, use of Futures and Futures Options causes the Fund to incur additional brokerage commissions, and may cause an increase in the Fund's portfolio turnover rate. Use of Futures Options would subject the Fund to risks similar to those described above relating to Futures, but any losses incurred in connection with the use of Futures Options would be limited to the amount of premiums paid. Evergreen Florida High Income Municipal Bond Fund will deposit in a segregated account with its custodian bank cash, U.S. government securities or other appropriate high grade and readily marketable debt obligations, in an amount equal to (i) the fluctuating market value of long positions it has purchased less any margin deposited on long positions, or (ii) the fluctuating market value of the options written less any margin deposited on such options. Limitations on Futures and Futures Options. Under regulations of the Commodity Futures Trading Commission ("CFTC"), the Futures and Futures Options trading activities described herein will not result in Evergreen Florida High Income Municipal Bond Fund being deemed to be a "commodity pool," as defined under such regulations, provided such Fund adheres to certain restrictions. In particular, a Fund may purchase and sell Futures and related Futures Options only for bona fide hedging purposes, as defined under CFTC regulations and may not purchase or sell any such Futures or related Futures Options if immediately thereafter, the sum of the amount of initial margin deposits on the Fund's existing futures and related Futures Options positions and the premiums paid for related Futures Options exceeds 5% of such Fund's total assets. Margin deposits may consist of cash or securities acceptable to the broker and the relevant contract market. As a matter of fundamental policy, Evergreen Florida High Income Municipal Bond Fund will not purchase a Future or Futures Option if immediately thereafter more than 10% of the Fund's total assets would be so invested. The Fund's ability to engage in transactions in futures and related Futures Options may also be limited by provisions of the Internal Revenue Code. See "Dividends, Distributions And Taxes" below and the Statement of Additional Information for further information concerning tax aspects of Futures and Futures Options. Risk Factors Associated with Medium and Lower Rated and Unrated Municipal Obligations Evergreen Florida High Income Municipal Bond Fund will invest in medium and lower rated or unrated municipal securities. The market for high yield, high risk debt securities rated in the medium and lower rating categories, or which are unrated, is relatively new and its growth has paralleled a long economic expansion. Past experience may not, therefore, provide an accurate indication of future performance of this market, particularly during periods of economic recession. An economic downturn or increase in interest rates is likely to have a greater negative effect on this market, the value of high yield debt securities in the Fund's portfolio, the Fund's net asset value and the ability of the bonds' issuers to repay principal and interest, meet projected business goals and obtain additional financing, than would be the case if investments by the Fund were limited to higher rated securities. These circumstances also may result in a higher incidence of defaults. Yields on medium or lower-rated Municipal Obligations may not fully reflect the higher risks of such bonds. Therefore, the risk of a decline in market value, should interest rates increase or credit quality concerns develop, may be higher than has historically been experienced with such investments. An investment in Evergreen Florida High Income Municipal Bond Fund may be considered more speculative than investment in shares of another fund which invests primarily in higher rated debt securities. Prices of high yield debt securities may be more sensitive to adverse economic changes or corporate developments than higher rated investments. Debt securities with longer maturities, which may have higher yields, may increase or decrease in value more than debt securities with shorter maturities. Market prices of high yield debt securities structured as zero coupon or pay-in-kind securities are affected to a greater extent by interest rate changes and may be more volatile than securities which pay interest periodically and in cash. Where Evergreen Florida High Income Municipal Bond Fund deems it appropriate and in the best interests of its shareholders, it may incur additional expenses to seek recovery on a debt security on which the issuer has defaulted and to pursue litigation to protect the interests of security holders of its portfolio entities. Because the market for medium or lower rated securities may be thinner and less active than the market for higher rated securities, there may be market price volatility for these securities and limited liquidity in the resale market. Unrated securities are usually not as attractive to as many buyers as are rated securities, a factor which may make unrated securities less marketable. These factors may have the effect of limiting the availability of the securities for purchase by Evergreen Florida High Income Municipal Bond Fund and may also limit the ability of a Fund to sell such securities at their fair value either to meet redemption requests or in response to changes in the economy or the financial markets. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of medium or lower rated debt securities, especially in a thinly traded market. To the extent a Fund owns or may acquire illiquid or restricted high yield securities, these securities may involve special registration responsibilities, liabilities and costs, and liquidity and valuation difficulties. Changes in values of debt securities which the Fund owns will affect the Fund's net asset value per share. If market quotations are not readily available for the Fund's lower rated or unrated securities, these securities will be valued by a method that the Trustees believes accurately reflects fair value. Valuation becomes more difficult and judgment plays a greater role in valuing high yield debt securities than with respect to securities for which more external sources of quotations and last sale information are available. Special tax considerations are associated with investing in high yield debt securities structured as zero coupon or pay-in-kind securities. A Fund investing in such securities accrues income on these securities prior to the receipt of cash payments. Evergreen Florida High Income Municipal Bond Fund must distribute substantially all of its income to shareholders to qualify for pass through treatment under the tax laws and may, therefore, have to dispose of portfolio securities to satisfy distribution requirements. While credit ratings are only one factor Evergreen Florida High Income Municipal Bond Fund's investment adviser relies on in evaluating high yield debt securities, certain risks are associated with using credit ratings. Credit ratings evaluate the safety of principal and interest payments, not market value risk. Credit rating agencies may fail to change in timely manner the credit ratings to reflect subsequent events; however, the Fund's investment adviser continuously monitors the issuers of high yield debt securities in a Fund's portfolio in an attempt to determine if the issuers will have sufficient cash flow and profits to meet required principal and interest payments. Achievement of Evergreen Florida High Income Municipal Bond Fund's investment objective may be more dependent upon the Fund's investment adviser and the credit analysis capability of the Fund's investment adviser, than is the case for higher quality debt securities. Credit ratings for individual securities may change from time to time and Evergreen Florida High Income Municipal Bond Fund may retain a portfolio security whose rating has been changed. See the Statement of Additional Information for a description of bond and note ratings. - ------------------------------------------------------------------------------ MANAGEMENT OF THE FUNDS - ------------------------------------------------------------------------------ INVESTMENT ADVISER The management of each Fund is supervised by its Trustees or Directors. Evergreen Asset Management Corp. ("Evergreen Asset") has been retained to serve as investment adviser to Evergreen National Tax Free Fund, Evergreen Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal Fund-California. Evergreen Asset, with its predecessors, has served as investment adviser to the Evergreen Group of Mutual Funds, which have assets in excess of $3 billion, since 1971. Evergreen Asset is a wholly-owned subsidiary of First Union National Bank of North Carolina ("FUNB"). The address of Evergreen Asset is 2500 Westchester Avenue, Purchase, New York 10577. FUNB is a subsidiary of First Union Corporation ("First Union"), one of the ten largest bank holding companies in the United States. Stephen A. Lieber and Nola Maddox Falcone serve as the chief investment officers of Evergreen Asset and, along with Theodore J. Israel, Jr., were the owners of Evergreen Asset's predecessor and the former general partners of Lieber & Company, which, as described below, provides certain subadvisory services to Evergreen Asset in connection with its duties as investment adviser to the aforementioned Funds. The Capital Management Group of FUNB ("CMG") serves as investment adviser to Evergreen Florida High Income Municipal Bond Fund. First Union is a bank holding company headquartered in Charlotte, North Carolina, which had $74.2 billion in consolidated assets as of September 30, 1994. First Union and its subsidiaries provide a broad range of financial services to individuals and businesses through offices in 36 states. The Capital Management Group of FUNB manages or otherwise oversees the investment of over $36 billion in assets belonging to a wide range of clients, including the First Union family of mutual funds. First Union Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered broker-dealer that is principally engaged in providing retail brokerage services consistent with its federal banking authorizations. First Union Capital Markets Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer principally engaged in providing, consistent with its federal banking authorizations, private placement, securities dealing, and underwriting services. Evergreen Asset manages investments, provides various administrative services and supervises the daily business affairs of Evergreen National Tax Free Fund, Evergreen Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal Fund-California, subject to the authority of the Trustees of each Fund. Under its investment advisory agreement with Evergreen Short-Intermediate Municipal Fund-California the Evergreen Asset is entitled to receive an annual fee equal to .55 of 1% of the Fund's average daily net assets. Under its investment advisory agreements with Evergreen Short-Intermediate Municipal Fund and Evergreen National Tax Free Fund Evergreen Asset is entitled to receive an annual fee equal to .50 of 1% of each Fund's average daily net assets. For the fiscal period ended August 31, 1994, total expense ratios of Evergreen National Tax Free Fund, Evergreen Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal Fund-California were .29%, .58%, and .52%, respectively. CMG manages investments and supervises the daily business affairs of Evergreen Florida High Income Municipal Bond Fund and, as compensation therefor, is entitled to receive an annual fee equal to .60 of 1% of average daily net assets of Florida High Income Municipal Bond Fund. For its most recent fiscal year ended _____________________, the total annualized operating expenses of ABT Florida High Income Municipal Bond Fund, predecessor to Florida High Income Municipal Bond Fund, were ___%. _________________ provides various administrative services to Florida High Income Municipal Bond Fund and is entitled to receive an annual fee equal to .[__] of 1% of average daily net assets of the Fund. The above-mentioned expense ratios are net of voluntary advisory fee waivers and expense reimbursements by each Fund's investment adviser which may, at its discretion, revise or cease such voluntary waivers at any time. The portfolio manager of Evergreen National Tax Free Fund is James T. Colby, III. Mr. Colby has been associated with Evergreen Asset and its predecessor since 1992 and has served as portfolio manager of the Fund since its inception. Prior to joining the Adviser, Mr. Colby served as Vice President-Investments at American Express Company from 1987 to 1992. The portfolio manager for Evergreen Short-Intermediate Municipal Fund- California and Evergreen Short-Intermediate Municipal Fund is Steven C. Shachat. Mr. Shachat has been associated with Evergreen Asset and its predecessor since prior to 1989 and has served as portfolio manager of these Funds since their inception. The portfolio manager for Evergreen Florida High Income Municipal Bond Fund is Stephen Eldridge, a Vice President of CMG who has been associated with CMG since July, 1995. Prior to that, Mr. Eldridge was a Vice President of Palm Beach Capital Management, Inc. and served as Portfolio manager of the Fund's predecessor, ABT Florida High Income Municipal Bond Fund, since prior to 1989. SUB-ADVISER Evergreen Asset has entered into sub-advisory agreements with Lieber & Company with respect to each Fund which provides that Lieber & Company's research department and staff will furnish Evergreen Asset with information, investment recommendations, advice and assistance, and will be generally available for consultation on each Fund's portfolio. Lieber & Company will be reimbursed by the Adviser in connection with the rendering of services on the basis of the direct and indirect costs of performing such services. There is no additional charge to the Funds for the services provided by Lieber & Company. The address of Lieber & Company is 2500 Westchester Avenue, Purchase, New York 10577. Lieber & Company is an indirect, wholly-owned, subsidiary of First Union. - ------------------------------------------------------------------------------- PURCHASE AND REDEMPTION OF SHARES - ------------------------------------------------------------------------------- HOW TO BUY SHARES Eligible investors may purchase Fund shares at net asset value by mail or wire as described below. The Funds impose no sales charges on Class Y shares. Class Y shares are the only class of shares offered by this Prospectus and are only available to (i) all shareholders of record in one or more of the Evergreen Funds as of December 30, 1994, (ii) certain institutional investors and (iii) investment advisory clients of the Adviser and its affiliates. The minimum initial investment is $1,000, which may be waived in certain situations. There is no minimum for subsequent investments. Investors may make subsequent investments by establishing a Systematic Investment Plan or a Telephone Investment Plan. Purchases by Mail or Wire. Each investor must complete the enclosed Share Purchase Application and mail it together with a check made payable to the Fund whose shares are being purchased, to State Street Bank and Trust Company ("State Street") at P.O. Box 9021, Boston, Massachusetts 02205-9827. Checks not drawn on U.S. banks will be subject to foreign collection which will delay an investor's investment date and will be subject to processing fees. When making subsequent investments, an investor should either enclose the return remittance portion of the statement, or indicate on the face of the check, the name of the Fund in which an investment is to be made, the exact title of the account, the address, and the Fund account number. Purchase requests should not be sent to a Fund in New York. If they are, the Fund must forward them to State Street, and the request will not be effective until State Street receives them. Initial investments may also be made by wire by (i) calling State Street at 800-423-2615 for an account number and (ii) instructing your bank, which may charge a fee, to wire federal funds to State Street, as follows: State Street Bank and Trust Company, ABA No.0110-0002-8, Attn: Custodian and Shareholder Services. The wire must include references to the Fund in which an investment is being made, account registration, and the account number. A completed Application must also be sent to State Street indicating that the shares have been purchased by wire, giving the date the wire was sent and referencing the account number. Subsequent wire investments may be made by existing shareholders by following the instructions outlined above. It is not necessary, however, for existing shareholders to call for another account number. How the Funds Value Their Shares. The net asset value of each Class of shares of a Fund is calculated by dividing the value of the amount of the Fund's net assets attributable to that Class by the outstanding shares of that Class. Shares are valued each day the New York Stock Exchange (the "Exchange") is open as of the close of regular trading (currently 4:00 p.m. Eastern time). The securities in a Fund are valued at their current market value determined on the basis of market quotations or, if such quotations are not readily available, such other methods as a Fund's Trustees believe would accurately reflect fair market value. Additional Purchase Information. As a condition of this offering, if a purchase is canceled due to nonpayment or because an investor's check does not clear, the investor will be responsible for any loss a Fund or the Adviser incurs. If such investor is an existing shareholder, a Fund may redeem shares from an investor's account to reimburse the Fund or the Adviser for any loss. In addition, such investors may be prohibited or restricted from making further purchases in any of the Evergreen Funds. A Fund cannot accept investments specifying a certain price or date and reserves the right to reject any specific purchase order, including orders in connection with exchanges from the other Evergreen Funds. Although not currently anticipated, each Fund reserves the right to suspend the offer of shares for a period of time. Shares of each Fund are sold at the net asset value per share next determined after a shareholder's order is received. Investments by federal funds wire or by check will be effective upon receipt by State Street. Qualified institutions may telephone orders for the purchase of Fund shares. Investors may also purchase shares through a broker/dealer, which may charge a fee for the service. HOW TO REDEEM SHARES You may "redeem", i.e., sell your shares in a Fund to the Fund on any day the Exchange is open, either directly or through your financial intermediary. The price you will receive is the net asset value next calculated after the Fund receives your request in proper form. Proceeds generally will be sent to you within seven days. However, for shares recently purchased by check, a Fund will not send proceeds until it is reasonably satisfied that the check has been collected (which may take up to 15 days). Once a redemption request has been telephoned or mailed, it is irrevocable and may not be modified or canceled. Redeeming Shares Directly by Mail or Telephone. Send a signed letter of instruction or stock power form to State Street which is the registrar, transfer agent and dividend-disbursing agent for each Fund. Stock power forms are available from your financial intermediary, State Street, and many commercial banks. Additional documentation is required for the sale of shares by corporations, financial intermediaries, fiduciaries and surviving joint owners. Signature guarantees are required for all redemption requests for shares with a value of more than $10,000 or where the redemption proceeds are to be mailed to an address other than that shown in the account registration. A signature guarantee must be provided by a bank or trust company (not a Notary Public), a member firm of a domestic stock exchange or by other financial institutions whose guarantees are acceptable to State Street. Shareholders may withdraw amounts of $1,000 or more from their accounts by calling State Street (800- 423-2615) between the hours of 9:00 a.m. and 4:00 p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on which the New York Stock Exchange or State Street's offices are closed). The New York Stock Exchange is closed on New Year's Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Redemption requests made after 4:00 p.m. (Eastern time) will be processed using the net asset value determined on the next business day. Such redemption requests must include the shareholder's account name, as registered with a Fund, and the account number. During periods of drastic economic or market changes, shareholders may experience difficulty in effecting telephone redemptions. Shareholders who are unable to reach a Fund or State Street by telephone should follow the procedures outlined above for redemption by mail. The telephone redemption service is not made available to shareholders automatically. Shareholders wishing to use the telephone redemption service must indicate this on the Share Purchase Application and choose how the redemption proceeds are to be paid. Redemption proceeds will either (i) be mailed by check to the shareholder at the address in which the account is registered or (ii) be wired to an account with the same registration as the shareholder's account in a Fund at a designated commercial bank. State Street currently deducts a $5 wire charge from all redemption proceeds wired. This charge is subject to change without notice. A shareholder who decides later to use this service, or to change instructions already given, should fill out a Shareholder Services Form and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank or trust company (not a Notary Public), a member firm of a domestic stock exchange or by other financial institutions whose guarantees are acceptable to State Street. Shareholders should allow approximately ten days for such form to be processed. The Funds will employ reasonable procedures to verify that telephone requests are genuine. These procedures include requiring some form of personal identification prior to acting upon instructions and tape recording of conversations. If the Fund fails to follow such procedures, it may be liable for any losses due to unauthorized or fraudulent instructions. The Fund shall not be liable for following telephone instructions reasonably believed to be genuine. Also, the Fund reserves the right to refuse a telephone redemption request, if it is believed advisable to do so. Financial intermediaries may charge a fee for handling telephonic requests. The telephone redemption option may be suspended or terminated at any time without notice. General. The sale of shares is a taxable transaction for Federal tax purposes. Under unusual circumstances, a Fund may suspend redemptions or postpone payment for up to seven days or longer, as permitted by Federal securities law. The Funds reserve the right to close an account that through redemption has remained below $1,000 for 30 days. Shareholders will receive 60 days' written notice to increase the account value before the account is closed. The Funds have elected to be governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant to which each Fund is obligated to redeem shares solely in cash, up to the lesser of $250,000 or 1% of a Fund's total net assets during any ninety day period for any one shareholder. See the Statement of Additional Information for further details. EXCHANGE PRIVILEGE How To Exchange Shares. You may exchange some or all of your shares for shares of the same Class in the other Evergreen Funds by telephone or mail as described below. An exchange which represents an initial investment in another Evergreen Fund must amount to at least $1,000. Once an exchange request has been telephoned or mailed, it is irrevocable and may not be modified or canceled. Exchanges will be made on the basis of the relative net asset values of the shares exchanged next determined after an exchange request is received. Exchanges are subject to minimum investment and suitability requirements. Each of the Evergreen Funds have different investment objectives and policies. For complete information, a prospectus of the fund into which an exchange will be made should be read prior to the exchange. An exchange is treated for Federal income tax purposes as a redemption and purchase of shares and may result in the realization of a capital gain or loss. Each Fund imposes a fee of $5 per exchange on shareholders who exchange in excess of four times per calendar year. This exchange privilege may be modified or discontinued at any time by the Fund upon sixty days' notice to shareholders and is only available in states in which shares of the fund being acquired may lawfully be sold. Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000 or more by telephone by calling State Street (800-423-2615). Exchange requests made after 4:00 p.m. (Eastern time) will be processed using the net asset value determined on the next business day. During periods of drastic economic or market changes, shareholders may experience difficulty in effecting telephone exchanges. You should follow the procedures outlined below for exchanges by mail if you are unable to reach State Street by telephone. If you wish to use the telephone exchange service you should indicate this on the Share Purchase Application. As noted above, each Fund will employ reasonable procedures to confirm that instructions for the redemption or exchange of shares communicated by telephone are genuine. A telephone exchange may be refused by a Fund or State Street if it is believed advisable to do so. Procedures for exchanging Fund shares by telephone may be modified or terminated at any time. Written requests for exchanges should follow the same procedures outlined for written redemption requests in the section entitled "How to Redeem Shares", however, no signature guarantee is required. SHAREHOLDER SERVICES The Funds offer the following shareholder services. For more information about these services or your account, contact your financial intermediary, Evergreen Funds Distributor, Inc.("EFD"), the distributor of the Funds, or the toll-free number for the Funds, 800-807-2940. Some services are described in more detail in the Share Purchase Application. Systematic Investment Plan. You may make monthly or quarterly investments into an existing account automatically in amounts of not less than $25. Telephone Investment Plan. You may make investments into an existing account electronically in amounts of not less than $100 or more than $10,000 per investment. Telephone investment requests received by 3:00 p.m. (Eastern time) will be credited to a shareholder's account the day the request is received. Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or when an existing account reaches that size, you may participate in the Fund's Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share Purchase Application. Under this plan, you may receive (or designate a third party to receive) a monthly or quarterly check in a stated amount of not less than $100. Fund shares will be redeemed as necessary to meet withdrawal payments. All participants must elect to have their dividends and capital gain distributions reinvested automatically. Automatic Reinvestment Plan. For the convenience of investors, all dividends and distributions are automatically reinvested in full and fractional shares of a Fund at the net asset value per share on the last business day of each month, unless otherwise requested by a shareholder in writing. If the transfer agent does not receive a written request for subsequent dividends and/or distributions to be paid in cash at least three full business days prior to a given record date, the dividends and/or distributions to be paid to a shareholder will be reinvested. If you elect to receive dividends and distributions in cash and the U.S. Postal Service cannot deliver the checks, or if the checks remain uncashed for six months, the checks will be reinvested into your account at the then current net asset value. EFFECT OF BANKING LAWS The Glass-Steagall Act and other banking laws and regulations presently prohibit member banks of the Federal Reserve System ("Member Banks") or their non-bank affiliates from sponsoring, organizing, controlling, or distributing the shares of registered open-end investment companies such as the Funds. Such laws and regulations also prohibit banks from issuing, underwriting or distributing securities in general. However, under the Glass- Steagall Act and such other laws and regulations, a Member Bank or an affiliate thereof may act as investment adviser, transfer agent or custodian to a registered open-end investment company and may also act as agent in connection with the purchase of shares of such an investment company upon the order of their customer. FUNB and Evergreen Asset, since it is a subsidiary of FUNB, is subject to and in compliance with the aforementioned laws and regulations. Changes to applicable laws and regulations or future judicial or administrative decisions could result in FUNB and Evergreen Asset being prevented from continuing to perform the services required under the investment advisory contract or from acting as agent in connection with the purchase of shares of a Fund by its customers. If FUNB and Evergreen Asset were prevented from continuing to provide the services called for under the investment advisory agreement, it is expected that the Trustees would identify, and call upon each Fund's shareholders to approve, a new investment adviser. If this were to occur, it is not anticipated that the shareholders of any Fund would suffer any adverse financial consequences. ------------------------------------------------------------------------- OTHER INFORMATION ------------------------------------------------------------------------- DIVIDENDS, DISTRIBUTIONS AND TAXES Income dividends are declared daily and paid monthly. Distributions of any net realized gains of a Fund will be made at least annually. Shareholders will begin to earn dividends on the first business day after shares are purchased unless shares were not paid for, in which case dividends are not earned until the next business day after payment is received. Each Fund has qualified and intends to continue to qualify to be treated as a regulated investment company under the Internal Revenue Code (the "Code"). While so qualified, so long as each Fund distributes all of its investment company taxable income and any net realized gains to shareholders, it is expected that the Funds will not be required to pay any Federal income taxes. A 4% nondeductible excise tax will be imposed on a Fund if it does not meet certain distribution requirements by the end of each calendar year. Each Fund anticipates meeting such distribution requirements. The Funds will designate and pay exempt-interest dividends derived from interest earned on qualifying tax-exempt obligations. Such exempt-interest dividends may be excluded by shareholders of a Fund from their gross income for Federal income tax purposes, however (1) all or a portion of such exempt-interest dividends may be a specific preference item for purposes of the Federal individual and corporate alternative minimum taxes to the extent that they are derived from certain types of private activity bonds issued after August 7, 1986, and (2) all exempt- interest dividends will be a component of the "adjusted current earnings" for purposes of the Federal corporate alternative minimum tax. Dividends paid from taxable income, if any, and distributions of any net realized short-term capital gains (whether from tax exempt or taxable obligations) are taxable as ordinary income and long-term capital gain distributions are taxable as long-term capital gains, even though received in additional shares of the Fund, and regardless of the investors holding period relating to the shares with respect to which such gains are distributed. Market discount recognized on taxable and tax-exempt bonds is taxable as ordinary income, not as excludable income. Under current law, the highest Federal income tax rate applicable to net long-term gains realized by individuals is 28%. The rate applicable to corporations is 35%. Since each Fund's gross income is ordinarily expected to be tax exempt interest income, it is not expected that the 70% dividends-received deduction for corporations will be applicable. Specific questions should be addressed to the investor's own tax adviser. Each Fund is required by Federal law to withhold 31% of reportable payments (which may include dividends, capital gains distributions (if any) and redemptions) paid to certain shareholders. In order to avoid this backup withholding requirement, each investor must certify on the Share Purchase Application, or on a separate form supplied by State Street, that the investor's social security or taxpayer identification number is correct and that the investor is not currently subject to backup withholding or is exempt from backup withholding. For Evergreen Short Intermediate Municipal Fund-California, so long as the Fund remains qualified under Subchapter M of the Code for federal purposes and qualified as a diversified management investment company, then under current California law, the Fund is entitled to pass through to its shareholders the tax-exempt income it earns. To the extent that Fund dividends are derived from earnings on California Municipal Securities, such dividends will be exempt from California personal income taxes when received by the Fund's shareholders, provided the Fund has complied with the requirement that at least 50% of its assets be invested in California Municipal Securities. For California income tax purposes, long-term capital gains distributions are taxable as ordinary income. Statements describing the tax status of shareholders' dividends and distributions will be mailed annually by the Funds. These statements will set forth the amount of income exempt from Federal and, if applicable, state taxation (including California), and the amount, if any, subject to Federal and state taxation. Moreover, to the extent necessary, these statements will indicate the amount of exempt-interest dividends which are a specific preference item for purposes of the Federal individual and corporate alternative minimum taxes. The exemption of interest income for Federal income tax purposes does not necessarily result in exemption under the income or other tax law of any state or local taxing authority. Investors should consult their own tax advisers about the status of distributions from the Funds in their states and localities. Each Fund notifies shareholders annually as to the interest exempt from Federal taxes earned by the Fund. A shareholder who acquires Class A shares of a Fund and sells or otherwise disposes of such shares within 90 days of acquisition may not be allowed to include certain sales charges incurred in acquiring such shares for purposes of calculating gain and loss realized upon a sale or exchange of shares of the Fund. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE Evergreen National Tax Free Fund. The total return of Evergreen National Tax Free Fund for the fiscal year ending August 31, 1994 was -2.29%, outperforming the Lehman Brothers Long Insured Municipal Bond Index by .29% which stood at - -2.57% as of that date. Since inception, the Fund's cumulative total return is 1.84% greater than that of the index +10.86% versus +9.02%. The average annual return since inception was +6.33%. The Fund is a long-term bond fund with average maturities generally longer than fifteen years and seeks to extend or reduce those maturities as the market and interest rate outlook change. As the 1994 year evolved and the Federal Reserve initiated a series of moves to tighten credit (raise rates), the primary strategy employed by the Adviser was to reduce maturity and duration exposure, yet still provide a reasonable stream of tax-free income to shareholders. Protection of principal is an important goal for the Fund and though rising interest rates have caused returns to be negative for the fiscal year, the Fund's performance compares favorably with the relevant indices. [CHART] A particular security type which has exhibited poorer performance characteristics - deep market discount bonds - has been a specific candidate for sale from the Fund, to be replaced by higher coupon bonds. This strategy has generally enhanced the performance record of the Fund because more income is generated with the higher coupons. When possible, the Fund will continue to reduce its exposure to these securities to be consistent with the its goal of principal protection in an interest rate environment that has a decidedly upward bias. The Fund continues to invest at least 80% of its assets in Municipal Securities insured as to interest and principal and to maintain wide diversification in names of large national issuers. Evergreen Florida High Income Municipal Fund. The Fund's total return for the fiscal year ending August 31, 1994 was +1.42%, versus the Lehman Brothers 3-Year Municipal Bond Index, which rose + 2.38%, and the Lehman Brothers 5-Year Municipal Bond Index, which increased + 2.01%. As the economy picked up momentum and the Federal Reserve started tightening, interest rates in the fixed-income markets climbed in every maturity range. As a result, the Fund moved to a more defensive position during the last half of the fiscal year in order to moderate price volatility. We reduced the Fund's weighted average maturities and durations, and adjusted the holdings by selling securities most sensitive to price declines in a rising environment such as bonds trading at a discount. Proceeds were reinvested in premium-based, high quality bonds. The strategy of the Fund as of August 31, 1994 is to remain relatively short in the one to three-year range as we look to purchase investment grade, non-callable bonds. [CHART] Evergreen Short-Intermediate Municipal Fund. The Fund's total return for the fiscal year ending August 31, 1994 was +1.42%, versus the Lehman Brothers 3-Year Municipal Bond Index, which rose + 2.38%, and the Lehman Brothers 5-Year Municipal Bond Index, which increased + 2.01%. As the economy picked up momentum and the Federal Reserve started tightening, interest rates in the fixed-income markets climbed in every maturity range. As a result, the Fund moved to a more defensive position during the last half of the fiscal year in order to moderate price volatility. We reduced the Fund's weighted average maturities and durations, and adjusted the holdings by selling securities most sensitive to price declines in a rising environment such as bonds trading at a discount. Proceeds were reinvested in premium-based, high quality bonds. The strategy of the Fund as of August 31, 1994 is to remain relatively short in the one to three-year range as we look to purchase investment grade, non-callable bonds. [CHART] Evergreen Short-Intermediate Municipal Fund - California. The Fund's total return for the fiscal year ending August 31, 1994 was 1.84%, versus the Lehman Brothers 3-Year California Municipal Bond Index, which rose +2.38% and the Lehman Brothers California Municipal Bond Index, which increased + 2.21%. As the economy picked up momentum and the Federal Reserve started tightening, interest rates in the fixed-income markets climbed in every maturity range. As a result, the Fund moved to a more defensive position during the last half of the fiscal year in order to moderate price volatility. We reduced the Fund's weighted average maturities and durations, and adjusted the holdings by selling securities most sensitive to price declines in a rising environment such as bonds trading at a discount. Proceeds were reinvested in premium-based, high quality bonds. Our strategy as of August 31, 1994, is to remain relatively short in the one to three-year range as we look to purchase investment grade, non callable bonds. [CHART] GENERAL INFORMATION Portfolio Transactions. Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc., and subject to seeking best price and execution, a Fund may consider sales of its shares as a factor in the selection of dealers to enter into portfolio transactions with the Fund. Organization. The Funds are separate investment series of The Evergreen Municipal Trust, a Massachusetts business trust organized in 1988. The Funds do not intend to hold annual shareholder meetings; shareholder meetings will be held only when required by applicable law. Shareholders have available certain procedures for the removal of Trustees. A shareholder in each class of a Fund will be entitled to his or her share of all dividends and distributions from a Fund's assets, based upon the relative value of such shares to those of other Classes of the Fund, and, upon redeeming shares, will receive the then current net asset value of the Class of shares of the Fund represented by the redeemed shares less any applicable CDSC. The Funds are empowered to establish, without shareholder approval, additional investment series, which may have different investment objectives, and additional classes of shares for any existing or future series. If an additional series or class were established in a Fund, each share of the series or class would normally be entitled to one vote for all purposes. Generally, shares of each series and class would vote together as a single class on matters, such as the election of Directors, that affect each series and class in substantially the same manner. Class A, B and Y shares have identical voting, dividend, liquidation and other rights, except that each class bears, to the extent applicable, its own distribution and transfer agency expenses as well as any other expenses applicable only to a specific class. Each class of shares votes separately with respect to Rule 12b-1 distribution plans and other matters for which separate class voting is appropriate under applicable law. Shares are entitled to dividends as determined by the Trustees and, in liquidation of a Fund, are entitled to receive the net assets of the Fund. Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each Fund's registrar, transfer agent and dividend-disbursing agent for a fee based upon the number of shareholder accounts maintained for the Funds. The transfer agency fee with respect to the Class B shares will be higher than the transfer agency fee with respect to the Class A shares. Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz Incorporated, located at 237 Park Avenue, New York, New York 10017, is the principal underwriter of the Funds. EFD provides personnel to serve as officers of the Funds. The salaries and other expenses related to providing such personnel are borne by EFD. Other Classes of Shares. Each Fund currently offers three classes of shares, Class A, Class B and Class Y, and may in the future offer additional classes. Class Y shares are not offered by this Prospectus and are only available to (i) all shareholders of record in one or more of the Evergreen Funds as of December 30, 1994, (ii) certain institutional investors and (iii) investment advisory clients of the Adviser and its affiliates. The dividends payable with respect to Class A and Class B shares will be less than those payable with respect to Class Y shares due to the distribution and distribution related expenses borne by Class A and Class B shares and the fact that such expenses are not borne by Class Y shares. Performance Information. A Fund's performance may be quoted in advertising in terms of yield or total return. Both types of performance are based on SEC formulas and are not intended to indicate future performance. Yield is a way of showing the rate of income a Fund earns on its investments as a percentage of the Fund's share price. A Fund's yield is calculated according to accounting methods that are standardized by the SEC for all stock and bond funds. Because yield accounting methods differ from the method used for other accounting purposes, a Fund's yield may not equal its distribution rate, the income paid to your account or the income reported in a Fund's financial statements. To calculate yield, a Fund takes the interest income it earned from its portfolio of investments (as defined by the SEC formula) for a 30-day period (net of expenses), divides it by the average number of shares entitled to receive dividends, and expresses the result as an annualized percentage rate based on a Fund's share price at the end of the 30-day period. This yield does not reflect gains or losses from selling securities. A Fund may also quote tax-equivalent yields, which show the taxable yields an investor would have to earn before taxes to equal the Fund's tax-free yields. A tax-equivalent yield is calculated by dividing a Fund's tax-exempt yield by the result of one minus a stated Federal tax rate. If only a portion of a Fund's income was tax-exempt, only that portion is adjusted in the calculation. Total returns are based on the overall dollar or percentage change in the value of a hypothetical investment in a Fund. A Fund's total return shows its overall change in value including changes in share prices and assumes all a Fund's distributions are reinvested. A cumulative total return reflects a Fund's performance over a stated period of time. An average annual total return reflects the hypothetical annually compounded return that would have produced the same cumulative total return if a Fund's performance had been constant over the entire period. Because average annual total returns tend to smooth out variations in a Fund's return, you should recognize that they are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its cumulative and average annual total returns into income results and realized and unrealized gain or loss. Evergreen Short Intermediate Municipal Fund-California may also quote tax-equivalent yields, which show the taxable yields an investor would have to earn before taxes to equal the Fund's tax-free yields. A tax-equivalent yield is calculated by dividing a Fund's tax-exempt yield by the result of one minus a stated federal tax rate. If only a portion of a Fund's income was tax-exempt, only that portion is adjusted in the calculation. Comparative performance information may also be used from time to time in advertising or marketing a Fund's shares, including data from Lipper Analytical Services, Inc., Morningstar and other industry publications. The Fund may also advertise in items of sales literature an "actual distribution rate" which is computed by dividing the total ordinary income distributed (which may include the excess of short-term capital gains over losses) to shareholders for the latest twelve month period by the maximum public offering price per share on the last day of the period. Investors should be aware that past performance may not be reflective of future results. Liability Under Massachusetts Law. Under Massachusetts law, trustees and shareholders of a business trust may, in certain circumstances, be held personally liable for its obligations. The Declaration of Trust under which Funds operate provide that no trustee or shareholder will be personally liable for the obligations of the Trust and that every written contract made by the Trust contain a provision to that effect. If any trustee or shareholder were required to pay any liability of the Trust, that person would be entitled to reimbursement from the general assets of the Trust. Additional Information. This Prospectus and the Statement of Additional Information, which have been incorporated by reference herein, do not contain all the information set forth in the Registration Statements filed by the Funds with the Commission under the Securities Act. Copies of the Registration Statements may be obtained at a reasonable charge from the Commission or may be examined, without charge, at the offices of the Commission in Washington, D.C. APPENDIX A -- CALIFORNIA RISK CONSIDERATIONS The following information as to certain California risk factors is given to investors in view of the policy of Evergreen Short Intermediate Municipal Fund-California of investing primarily in California state and municipal issuers. The information is based primarily upon information derived from public documents relating to securities offerings of California state and municipal issuers, from independent municipal credit reports and historically reliable sources but has not been independently verified by the Fund. Changes in California constitutional and other laws during the last several years have raised questions about the ability of California state and municipal issuers to obtain sufficient revenue to pay their bond obligations. In 1978, California voters approved an amendment to the California Constitution known as Proposition 13. Proposition 13 limits ad valorem taxes on real property and restricts the ability of taxing entities to increase real property taxes. Legislation passed subsequent to Proposition 13, however, provided for the redistribution of California's General Fund surplus to local agencies, the reallocation of revenues to local agencies, and the assumption of certain local obligations by the state so as to help California municipal issuers to raise revenue to pay their bond obligations. It is unknown, however, whether additional revenue redistribution legislation will be enacted in the future and whether, if enacted, such legislation would provide sufficient revenue for such California issuers to pay their obligations. The state is also subject to another constitutional amendment, Article XIIIB, which may have an adverse impact on California state and municipal issuers. Article XIIIB restricts the state from spending certain appropriations in excess of an appropriations limit imposed for each state and local government entity. If revenues exceed such appropriations limit, such revenues must be returned either as revisions in the tax rates or fee schedules. Because of the uncertain impact of the aforementioned statutes and cases, the possible inconsistencies in the respective terms of the statutes and the impossibility of predicting the level of future appropriations and applicability of related statutes to such questions, it is not currently possible to assess the impact of such legislation, cases and policies on the long-term ability of California state and municipal issuers to pay interest or repay principal on their obligations. California's economy is larger than many sovereign nations. During the 1980s, California experienced growth rates well in excess of the rest of the nation. The state's major employment sectors are services, trade, and manufacturing. Industrial concentration is in electronics, aerospace, and non-electrical equipment. Also significant are agriculture and oil production. Key sectors of California's economy have been severely affected by the recession. Since May of 1990, job losses total over 850,000. Declines in the aerospace and high technology sectors have been especially severe. The continuing drive in population and labor force growth has produced higher unemployment rates in the state. Although total job loss has declined, weakness continues in key areas of California's economy, including government, real estate and aerospace. Wealth levels still remain high in the state, although the difference between state and national levels continues to narrow. In July of 1994, both S&P and Moody's lowered the general obligation bond ratings of the state of California. These revisions reflect the state's heavy reliance on the short-term note market to finance its cash imbalance and the likelihood that this exposure will persist for at least another two years. For more information on these ratings revisions and the state's current budget, please refer to the Statement of Additional Information. Orange County Bankruptcy. On December 6, 1994, Orange County, California, petitioned for bankruptcy based on losses in the Orange County Investment Fund which at the time were estimated to be approximately $2 billion. At the time of the petition, the Orange County Investment Fund held monies belonging to Orange County as well as other municipal issuers located in Orange County and other parts of California. Although the ultimate resolution of this matter is uncertain, one possible result is that the ability of municipal issuers investing in the Orange County Investment Fund to service some or all of their outstanding debt obligations may be severely impaired. As of December 6, 1994, Evergreen Short-Intermediate Municipal Fund - California did not hold debt obligations of Orange County or other issuers that the Fund is aware had invested in the Orange County Investment Fund. Although it has no current intention to do so, if it deems it advisable, the Fund reserves the right from time to time to make investments in municipal issuers who maintain assets in the Orange County Investment Fund. APPENDIX B -- FLORIDA RISK CONSIDERATIONS The following is a summary of economic factors which may affect the ability of the municipal issuers of Florida Obligations to repay general obligation and revenue bonds. Such information is derived from sources that are generally available to investors and is believed by the Funds to be accurate, but has not been independently verified and may not be complete. Under current law, the State of Florida is required to maintain a balanced budget such that current expenses are met from current revenues. Florida does not currently impose a tax on personal income but does impose taxes on corporate income derived from activities within the state. In addition, Florida imposes an ad valorem tax as well as sales and use taxes. These taxes are the principal sources of funds to meet state expenses, including repayment of, and interest on, obligations backed solely by the full faith and credit of the state, without recourse to any specific project or related revenue source. On November 3, 1992, Florida voters approved an amendment to the state constitution which limits the annual growth in the assessed valuation of residential property and which, over time, could constrain the growth in property taxes, a major revenue source for local governments. The amendment restricts annual increases in assessed valuation to the lesser of 3% or the Consumer Price Index. The amendment applies only to residential properties eligible for the homestead exemption and does not affect the valuation of rental, commercial, or industrial properties. When sold, residential property would be reassessed at market value. The amendment became effective January 1, 1993. While no immediate ratings implications are expected, the amendment could have a negative impact on the financial performance of local governments over time and lead to ratings revisions which may have a negative impact on the prices of affected bonds. Many of the bonds in which the Funds invest were issued by various units of local government in the State of Florida. In addition, most of these bonds are revenue bonds where the security interest of the bond holders typically is limited to the pledge of revenues or special assessments flowing from the project financed by the bonds. Projects include, but are not limited to, water and waste water utilities, drainage systems, roadways, and other development-related infrastructures. Therefore, the capacity of these issuers to repay their obligations may be affected by variations in the Florida economy. Since 1970, Florida has been one of the fastest growing states in the nation. Average annual population growth over the last 20 years was 320,000. During this period only California and Texas grew more rapidly. In terms of total population, Florida moved from the ninth most populous state in 1970 to fourth today. This rapid and sustained pace of population growth has given rise to sharp increases in construction activity and to the need for roads, drainage systems, and utilities to serve the burgeoning population. In turn this has driven the growth in the volume of revenue bond debt outstanding. The pace of growth, however, has not been steady. During economic expansions, Florida's population growth has exceeded 500,000 people per year, but in recessions growth has slowed to 120,000 per year. The variations in construction activity over the course of business cycles is also very large. Although the amplitude of the swings during business cycles is large, the duration of downturns in Florida's growth has been short. Historically, depressed levels of growth have lasted only a year or two at most. Furthermore, Florida's cycles have not been periods of growth or decline. Instead, what has occurred are periods of more growth or less growth. Florida's ability to meet increasing expenses will be dependent in part upon the state's ability to foster business and economic growth. During the past decade, Florida has experienced significant increases in the technology-based and other light industries and in the service sector. This growth has diversified the state's overall economy, which at one time was dominated by the citrus and tourism industries. The state's economic and business growth could be restricted, however, by the natural limitations of environmental resources and the state's ability to finance adequate public facilities such as roads and schools. -------------------------------------------------------------- PROSPECTUS January 3, 1995 Evergreen Money Market Funds -------------------------------------------------------- CLASS A SHARES CLASS B SHARES ------------------------- EVERGREEN MONEY MARKET TRUST EVERGREEN TAX EXEMPT MONEY MARKET FUND The Evergreen Money Market Funds (the "Funds") are designed to provide investors with a selection of investment alternatives which seek to provide current income, stability of principal and liquidity. This Prospectus provides information regarding the Class A shares offered by the Funds and the Class B shares offered by the Evergreen Money Market Trust. Each Fund is, or is a series of, an open-end, diversified, management investment company. This Prospectus sets forth concise information about the Funds that a prospective investor should know before investing. The address of the Funds is 2500 Westchester Avenue, Purchase, New York 10577. A "Statement of Additional Information" for the Funds and the other funds in the Evergreen Group of mutual funds (collectively, with the Funds the "Evergreen Funds") dated January 3, 1995 has been filed with the Securities and Exchange Commission and is incorporated by reference herein. The Statement of Additional Information provides information regarding certain matters discussed in this Prospectus and other matters which may be of interest to investors, and may be obtained without charge by calling the Funds at (800) 807-2940. There can be no assurance that the investment objective of any Fund will be achieved. Investors are advised to read this Prospectus carefully. The shares offered by this Prospectus are not deposits or obligations of First Union or any subsidiaries of First Union, are not endorsed or guaranteed by First Union or any subsidiaries of First Union, and are not insured or otherwise protected by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency and involve risk, including the possible loss of principal. An investment in the Funds is neither insured nor guaranteed by the U.S. Government, and there can be no assurance that the Funds will be able to maintain a stable net asset value of $1.00 per share. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Keep This Prospectus for Future Reference TABLE OF CONTENTS OVERVIEW OF THE FUNDS 2 PURCHASE AND REDEMPTION OF SHARES EXPENSE INFORMATION 2 How To Buy Shares 12 FINANCIAL HIGHLIGHTS 4 How To Redeem Shares 13 DESCRIPTION OF THE FUNDS Exchange Privilege 14 Investment Objectives And Policies 6 Shareholder Services 15 Investment Practices And Restrictions 9 Effect Of Banking Laws 16 MANAGEMENT OF THE FUNDS OTHER INFORMATION Investment Adviser 10 Dividends, Distributions And Taxes 16 Sub-Adviser 11 General Information 17 Distribution Plans And Agreements 11 - -------------------------------------------------------------------------------- OVERVIEW OF THE FUNDS - -------------------------------------------------------------------------------- The following summary is qualified in its entirety by the more detailed information contained elsewhere in this Prospectus. See "Description of the Funds" and "Management of the Funds". The Investment Adviser to the Funds is Evergreen Asset Management Corp. (the "Adviser") which, with its predecessors, has served as investment adviser to the Evergreen Funds since 1971. The Adviser is a wholly-owned subsidiary of First Union National Bank of North Carolina ("FUNB"), which in turn is a subsidiary of First Union Corporation, one of the ten largest bank holding companies in the United States. The Evergreen Money Market Trust seeks as high a level of current income as is consistent with preserving capital and providing liquidity. The Fund will invest only in high quality money market instruments. The Evergreen Tax Exempt Money Market Fund seeks as high a level of current income exempt from Federal income tax as is consistent with preserving capital and providing liquidity. The Fund invests substantially all of its assets in short-term municipal securities, the interest from which is exempt from Federal income tax. There is no assurance the investment objective of any Fund will be achieved. - -------------------------------------------------------------------------------- EXPENSE INFORMATION - -------------------------------------------------------------------------------- The table set forth below summarizes the shareholder transaction costs associated with an investment in Class A shares of each Fund, and in the case of Evergreen Money Market Trust, Class B Shares. For further information see "Purchase and Redemption of Fund Shares" and "Other Classes of Shares".
SHAREHOLDER TRANSACTION EXPENSES Class A Shares B Shares Evergreen Money Market Trust only) -------------- -------- Maximum Sales Charge Imposed on Purchases None None Sales Charge on Dividend Reinvestments None None Contingent Deferred Sales Charge (as a % of original purchase price or redemption proceeds, whichever is lower) None 5% during the first year, 4% during the second year, 3% during the third and fourth year, 2% during the fifth year, 1% during the sixth and seventh years and 0% after the seventh year Redemption Fee None None Exchange Fee None None
The following tables show for each Fund the annual operating expenses (as a percentage of average net assets) attributable to each Class of Shares, together with examples of the cumulative effect of such expenses on a hypothetical $1,000 investment in each Class for the periods specified assuming (i) a 5% annual return, and (ii) redemption at the end of each period and, additionally for Class B shares, no redemption at the end of each period. In the following examples (i) the expenses for Class B Shares assume deduction at the time of redemption (if applicable) of the maximum contingent deferred sales charge applicable for that time period and (ii) the expenses for Class B Shares reflect the conversion to Class A Shares eight years after purchase (years eight through ten, therefore, reflect Class A expenses).
Evergreen Money Market Trust Examples -------- Assuming Redemption Assuming no Annual Operating Expenses* at End of Period Redemption -------------------------- -------------------- ------------ Class A Class B Class A Class B Class B ------- ------- ------- ------- ------- Advisory Fees .50% .50% After 1 Year $ 10 $ 67 $ 17 12b-1 Fees1 .30% 1.00% After 3 Years $ 32 $ 84 $ 54 Other Expenses .21% .21% After 5 Years $ 56 $113 $ 93 ---- ---- Total 1.01% 1.71% After 10 Years $124 $175 $175 ----- -----
Evergreen Tax Exempt Money Market Fund Examples ------------------- Annual Operating Assuming Redemption Expenses* at End of Period ---------------- ------------------- Class A Class A Advisory Fees .50% After 1 Year $ 10 12b-1 Fees .30% After 3 Years $ 30 Other Expenses .14% After 5 Years $ 52 ---- Total .94% After 10 years $115 ---- The Adviser has agreed to reimburse these Funds' to the extent that any Fund's aggregate annual operating expenses (including the Adviser's fee, but excluding taxes, interest, brokerage commissions, Rule 12b-1 distribution fees and shareholder service fees and extraordinary expenses) exceed 1.00% of the average net assets for any fiscal year. From time to time, the Adviser may, at its discretion, waive its fee or reimburse a Fund for certain of its expenses in order to reduce a Fund's expense ratio. *The annual operating expenses and examples do not reflect the voluntary Advisory fee waivers of .39 of 1% of average net assets for Evergreen Money Market Trust and .30 of 1% of average net assets for Evergreen Tax Exempt Money Market Fund for the fiscal period ending August 31, 1994. 1For Class B Shares, a portion of the 12b-1 Fees equivalent to .25 of 1% of average annual assets will be shareholder servicing related. Distribution related 12b-1 Fees will be limited to .75 of 1% of average annual assets as permitted under the rules of the National Association of Securities Dealers, Inc. The purpose of the foregoing table is to assist an investor in understanding the various costs and expenses that an investor in each Class of Shares of the Funds will bear directly or indirectly. The amounts set forth both in the tables and in the examples are estimated amounts based on the experience of each Fund's Class Y shares for the fiscal period ending August 31, 1994. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete description of the various costs and expenses borne by the Funds see "Management of the Funds". As a result of asset-based sales charges, long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted under the rules of the National Association of Securities Dealers, Inc. - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Evergreen Money Market Trust The following selected per share data and ratios for the ten months ended August 31, 1994 and the four annual periods ended October 31, 1993 have been audited by Price Waterhouse LLP, independent accountants for Evergreen Money Market Trust, whose report thereon was unqualified. This information should be read in conjunction with the financial statements and notes thereto which are incorporated in the Statement of Additional Information by reference. The per share data set forth below pertains to the Class Y shares of the Fund, which are not offered through this prospectus. See "Other Classes of Shares". No per share data and ratios are shown for Class A or B shares, since these classes did not have any operations prior to the date of this Prospectus.
Period Ten Months from Ended Year Ended October 31, 11/2/87** August 31, ----------------------------------------- to PER SHARE DATA 1994# 1993 1992 1991 1990 1989 10/31/88 ----- ---- ---- ---- ---- ---- -------- Net asset value, beginning of year. . . . $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ----- ----- ----- ----- ----- ----- ----- Income (loss) from investment operations: Net investment income. . . . . . . . . . .03 .03 .04 .07 .08 .09 .07 Net realized gain (loss) on investments. ---- ---- ---- ---- ---- ---- ---- ----- ----- ----- ----- ----- ----- ----- Total from investment operations. . . . . .03 .03 .04 .07 .08 .09 .07 Less distributions to shareholders from net investment income. . . . . . . . . (.03) (.03) (.04) (.07) (.08) (.09) (.07) ------- ------- ------- ------- ------- ------- ------- Net asset value, end of year. . . . . . . $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ----- ----- ----- ----- ----- ----- ----- TOTAL RETURN+. . . . . . . . . . . . . . 2.9% 3.2% 4.2% 6.7% 8.4% 9.4% 7.4% RATIOS & SUPPLEMENTAL DATA: Net assets, end of year (in millions) . . . . . . . . . . . . $273 $299 $358 $438 $458 $408 $161 Ratios to average net assets: Total expenses . . . . . . . . . . . . .36%* .35%* .38%* .32%++ .39%* .30%* .43%++ Net investment income . . . . . . . . 3.46%++ 3.19%* 4.18%* 6.53%* 8.08%* 9.42%* 7.26%++ - ------------ + Total return is calculated for the periods indicated and is not annualized. ++ Annualized and net of partial advisory fee waiver of .39% of daily net assets for the ten months ended August 31, 1994 and full advisory fee waiver of .50% of daily net assets for the period November 2, 1987 to October 31, 1988. * Net of partial advisory fee waivers of .325%, .36%, .40%, .34% and .37% of daily net assets for the years ended October 31, 1993, 1992, 1991, 1990 and 1989, respectively. ** Commencement of operations. # On September 21, 1994, the Fund's Trustees approved a change in the Fund's fiscal year end from October 31 to August 31.
Evergreen Tax Exempt Money Market Fund The following selected per share data and ratios for the five annual periods ended August 31, 1994 have been audited by Price Waterhouse LLP, independent accountants for Evergreen Tax-Exempt Money Market Fund, whose report thereon was unqualified. This information should be read in conjunction with the financial statements and notes thereto which are incorporated in the Statement of Additional Information by reference. The per share data set forth below pertains to the Class Y shares of the Fund, which are not offered through this prospectus. See "Other Classes of Shares". No per share data and ratios are shown for Class A shares, since this class did not have any operations prior to the date of this Prospectus.
Period from November 2, Year Ended August 31, 1988* through PER SHARE DATA 1994 1993 1992 1991 1990 August 31, 1989 ---- ---- ---- ---- ---- --------------- Net investment income declared as dividends to shareholders. . . . . $.0247 $.0258 $.0367 $.0533 $.0599 $.0538 ------ ------ ------ ------ ------ ------ Net asset value at beginning and end of year . . . . . . . . . . $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 ------- ------- ------- ------- ------- ------- TOTAL RETURN . . . . . . . . . . . 2.5% 2.6% 3.7% 5.5% 6.2% 5.5%+ RATIOS & SUPPLEMENTAL DATA: Net assets, end of year (in millions) . . . . . . . . . . . $402 $401 $417 $510 $311 $109 Ratios to average net assets: Total expenses . . . . . . . . .34%(a) .34%(a) .32%(a) .28%(a) .31%(a) .24%(b) Net investment income . . . . . . 2.47%(a) 2.58%(a) 3.72%(a) 5.23%(a) 5.94%(a) 6.77%(b) - ------------ * Commencement of operations. + Total return calculated for the period November 2, 1988 to August 31, 1989 is not annualized. (a) Net of partial advisory fee waivers of .30 of 1% of daily net assets for fiscal year ended August 31, 1994, .29 of 1% of daily net assets for fiscal year ended August 31, 1993, .31 of 1% of daily net assets for fiscal year ended August 31, 1992, .38 of 1% of daily net assets for fiscal year ended August 31, 1991 and .40 of 1% of daily net assets for fiscal year ended August 31, 1990. (b) Annualized and net of partial advisory fee waiver of .46 of 1% of daily net assets and the absorption of a portion of all other Fund expenses by the Adviser equal to .09% of average net assets.
- -------------------------------------------------------------------------------- DESCRIPTION OF THE FUNDS - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVES AND POLICIES Evergreen Money Market Trust The investment objective of Evergreen Money Market Trust is to achieve as high a level of current income as is consistent with preserving capital and providing liquidity. The Fund invests in high quality money market instruments, which are determined to be of eligible quality under Securities and Exchange Commission ("SEC") rules and to present minimal credit risk. Under SEC rules, eligible securities include First Tier Securities (i.e., securities rated in the highest short-term rating category) and Second Tier Securities (i.e., securities which are not in the First Tier). The rules prohibit the Fund from holding more than 5% of its value in Second Tier Securities. The Fund's permitted investments include: 1. Marketable obligations of, or guaranteed by, the United States Government, its agencies or instrumentalities, including issues of the United States Treasury, such as bills, certificates of indebtedness, notes and bonds, and issues of agencies and instrumentalities established under the authority of an act of Congress. Some of these securities are supported by the full faith and credit of the United States Government, others are supported by the right of the issuer to borrow from the Treasury, and still others are supported only by the credit of the agency or instrumentality. Agencies or instrumentalities whose securities are supported by the full faith and credit of the United States include, but are not limited to, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration and Government National Mortgage Association. Examples of agencies or instrumentalities whose securities are supported by the right of the issuer to borrow from the Treasury include, but are not limited to, the Federal Home Loan Bank, Federal Intermediate Credit Banks, Federal National Mortgage Association and Tennessee Valley Authority. Agencies or instrumentalities whose securities are supported only by the credit of the agency or instrumentality include the Interamerican Development Bank and the International Bank for Reconstruction and Development. These obligations are supported by appropriated but unpaid commitments of its member countries. There are no assurances that the commitments will be undertaken in the future. 2. Commercial paper, including variable amount master demand notes, that is rated in one of the two highest short-term rating categories by any two of Standard & Poor's Ratings Group ("S&P") or Moody's Investor Service, Inc. ("Moody's") or any other nationally recognized statistical rating organization ("SRO") (or by a single rating agency if only one of these agencies has assigned a rating). The Fund will not invest more than 10% of its total assets, at the time of the investment in question, in variable amount master demand notes. 3. Corporate debt securities and bank obligations that are rated in one of the two highest short-term rating categories by any two of S&P, Moody's and any other SRO (or by a single rating agency if only one of these agencies has assigned a rating). 4. Unrated corporate debt securities, commercial paper and bank obligations that are issued by an issuer that has outstanding a class of short-term debt instruments (i.e., instruments having a maturity of 366 days or less) that (A) is comparable in priority and security to the unrated securities and (B) meets the rating requirements of 2 or 3 above. 5. Unrated corporate debt securities, commercial paper and bank obligations issued by domestic and foreign companies which have an outstanding long-term debt issue rated in the top two rating categories by a SRO and determined by the Trustees to be of comparable quality. 6. Unrated corporate debt securities, commercial paper and bank obligations otherwise determined by the Trustees to be of comparable quality. 7. Repurchase agreements with respect to the securities described in paragraphs 1 through 6 above. The Fund may invest up to 30% of its total assets in bank certificates of deposit and bankers' acceptances payable in U.S. dollars and issued by foreign banks (including U.S. branches of foreign banks) or by foreign branches of U.S. banks. These investments involve risks that are different from investments in domestic securities. These risks may include future unfavorable political and economic developments, possible withholding taxes, seizure of foreign deposits, currency controls, interest limitations or other governmental restrictions which might affect the payment of principal or interest on the securities in the Fund's portfolio. Additionally, there may be less publicly available information about foreign issuers. The Fund may invest in commercial paper and other short-term corporate obligations which meet the rating criteria specified in paragraphs 3 and 4 above which are issued in private placements pursuant to Section 4(2) of the Securities Act of 1933 (the "Act"). Such securities are not registered for purchase and sale by the public under the Act. The Fund has been informed that the staff of the SEC does not consider such securities to be readily marketable. The Fund will not invest more than 10% of its total assets in securities which are not readily marketable (including private placement securities) and in repurchase agreements maturing in more than seven days. The Fund may borrow funds, issue senior securities and agree to sell portfolio securities to financial institutions such as banks and broker-dealers and to repurchase them at a mutually agreed upon date and price (a "reverse repurchase agreement") for temporary or emergency purposes in amounts not in excess of 10% of the value of the Fund's total assets at the time of such borrowing. See "Investment Practices and Restrictions", below. Evergreen Tax Exempt Money Market Fund The investment objective of Evergreen Tax Exempt Money Market Fund is to achieve as high a level of current income exempt from Federal income tax, as is consistent with preserving capital and providing liquidity. The Fund will seek to achieve its objective by investing substantially all of its assets in a diversified portfolio of short-term (i.e., with remaining maturities not exceeding 397 days) debt obligations issued by states, territories and possessions of the United States and by the District of Columbia, and their political subdivisions and duly constituted authorities, the interest from which is exempt from Federal income tax. Such securities are generally known as Municipal Securities (See "Municipal Securities" below.) The Fund will invest in Municipal Securities only if they are determined to be of eligible quality under SEC rules and to present minimum credit risk. Municipal Securities in which the Fund may invest include: (i) municipal securities that are rated in one of the top two short-term rating categories by any two of S&P, Moody's or any other nationally recognized SRO (or by a single rating agency if only one of these agencies has assigned a rating); (ii) municipal securities that are issued by an issuer that has outstanding a class of short-term debt instruments (i.e., having a maturity of 366 days or less) that (A) is comparable in priority and security to such instruments and (B) meets the rating requirements above; and (iii) bonds with a remaining maturity of 397 days or less that are rated no lower than one of the top two long-term rating categories by any SRO and determined by the Trustees to be of comparable quality. For a description of such ratings see the Statement of Additional Information. If a portfolio security is no longer of eligible quality, the Fund shall dispose of such security in an orderly fashion as soon as reasonably practicable, unless the Trustees determine, in light of market conditions or other factors, that disposal of the instrument would not be in the best interests of the Fund and its shareholders. The Fund may also purchase Municipal Securities which are unrated at the time of purchase up to a maximum of 20% of its total assets, if such securities are determined by the Fund's Trustees to be of comparable quality. Certain Municipal Securities (primarily variable rate demand notes) may be entitled to the benefit of standby letters of credit or similar commitments issued by banks or other financial institutions and, in such instances, the Trustees will take into account the obligation of the bank in assessing the quality of such security. Interest income on certain types of bonds issued after August 7, 1986 to finance nongovernmental activities is an item of "tax-preference" subject to the Federal alternative minimum tax for individuals and corporations. To the extent the Fund invests in these "private activity" bonds (some of which were formerly referred to as "industrial development" bonds), individual and corporate shareholders, depending on their status, may be subject to the alternative minimum tax on the part of the Fund's distributions derived from the bonds. As a matter of fundamental policy, the Fund will invest at least 80% of its net assets in Municipal Securities, the interest from which is not subject to the Federal alternative minimum tax. Municipal Securities. As noted above, the Fund will invest substantially all of its assets in Municipal Securities. These include municipal bonds, short-term municipal notes and tax exempt commercial paper. "Municipal bonds" are debt obligations issued to obtain funds for various public purposes that are exempt from Federal income tax in the opinion of issuer's counsel. The two principal classifications of municipal bonds are "general obligation" and "revenue" bonds. General obligation bonds are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue bonds are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific source such as from the user of the facility being financed. The term "municipal bonds" also includes "moral obligation" issues which are normally issued by special purpose authorities. Industrial development bonds ("IDBs") and private activity bonds ("PABs") are in most cases revenue bonds and are not payable from the unrestricted revenues of the issuer. The credit quality of IDBs and PABs is usually directly related to the credit standing of the corporate user of the facilities being financed. Participation interests are interests in municipal bonds, including IDBs and PABs, and floating and variable rate obligations that are owned by banks. These interests carry a demand feature permitting the holder to tender them back to the bank, which demand feature is backed by an irrevocable letter of credit or guarantee of the bank. A put bond is a municipal bond which gives the holder the unconditional right to sell the bond back to the issuer at a specified price and exercise date, which is typically well in advance of the bond's maturity date. "Short-term municipal notes" and "tax exempt commercial paper" include tax anticipation notes, bond anticipation notes, revenue anticipation notes and other forms of short-term loans. Such notes are issued with a short-term maturity in anticipation of the receipt of tax funds, the proceeds of bond placements and other revenues. Floating Rate and Variable Rate Obligations. Municipal Securities also include certain variable rate and floating rate municipal obligations with or without demand features. These variable rate securities do not have fixed interest rates; rather, those rates fluctuate based upon changes in specified market rates, such as the prime rate, or are adjusted at predesignated periodic intervals. Such securities must comply with conditions established by the SEC under which they may be considered to have remaining maturities of 397 days or less. Certain of these obligations may carry a demand feature that gives the Fund the right to demand prepayment of the principal amount of the security prior to its maturity date. The demand obligation may or may not be backed by letters of credit or other guarantees of banks or other financial institutions. Such guarantees may enhance the quality of the security. As a matter of fundamental policy, the Fund will limit the value of its investments in any floating or variable rate securities which are not readily marketable and in all other not readily marketable securities to 10% or less of its total assets. When-Issued Securities. The Fund may purchase Municipal Securities on a "when-issued" basis (i.e., for delivery beyond the normal settlement date at a stated price and yield). The Fund generally would not pay for such securities or start earning interest on them until they are received. However, when the Fund purchases Municipal Securities on a when-issued basis, it assumes the risks of ownership at the time of purchase, not at the time of receipt. Failure of the issuer to deliver a security purchased by the Fund on a when-issued basis may result in the Fund's incurring a loss or missing an opportunity to make an alternative investment. The Fund does not expect that commitments to purchase when-issued securities will normally exceed 25% of its total assets. The Fund does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective. Stand-by Commitments. The Fund may also acquire "stand-by commitments" with respect to Municipal Securities held in its portfolio. Under a stand-by commitment, a dealer agrees to purchase, at the Fund's option, specified Municipal Securities at a specified price. The Fund expects that stand-by commitments generally will be available without the payment of direct or indirect consideration. However, if necessary and advisable, the Fund may pay for stand-by commitments either separately in cash or by paying a higher price for portfolio securities which are acquired subject to such a commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held in the Fund's portfolio will not exceed 10% of the value of the Fund's total assets calculated immediately after each stand-by commitment is acquired. The Fund will enter into stand-by commitments only with banks and broker-dealers that, in the judgment of the Adviser, present minimal credit risks. Taxable Investments. The Fund may temporarily invest up to 20% of the Fund's net assets in taxable securities under any one or more of the following circumstances: (a) pending investment of proceeds of sale of Fund shares or of portfolio securities, (b) pending settlement of purchases of portfolio securities, and (c) to maintain liquidity for the purpose of meeting anticipated redemptions. In addition, the Fund may temporarily invest more than 20% of its total assets in taxable securities for defensive purposes. The Trust may invest for defensive purposes during periods when the Trust's assets available for investment exceed the available Municipal Securities that meet the Trust's quality and other investment criteria. Taxable securities in which the Fund may invest on a short-term basis include obligations of the United States Government, its agencies or instrumentalities, including repurchase agreements with banks or securities dealers involving such securities; time deposits maturing in not more than seven days; other debt securities rated within the two highest ratings assigned by any major rating service; commercial paper rated in the highest grade by Moody's or S&P; and certificates of deposit issued by United States branches of United States banks with assets of $1 billion or more. The ability of the Fund to meet its investment objective is necessarily subject to the ability of municipal issuers to meet their payment obligations. In addition, the portfolio of the Fund will be affected by general changes in interest rates which will result in increases or decreases in the value of the obligations held by the Fund. Investors should recognize that, in periods of declining interest rates, the yield of the Fund will tend to be somewhat higher than prevailing market rates, and in periods of rising interest rates, the yield of the Fund will tend to be somewhat lower. Also, when interest rates are falling, the inflow of net new money to the Fund from the continuous sale of its shares will likely be invested in portfolio instruments producing lower yields than the balance of the Fund's portfolio, thereby reducing the current yield of the Fund. In periods of rising interest rates, the opposite can be expected to occur. The Fund may borrow funds and agree to sell portfolio securities to financial institutions such as banks and broker-dealers and to repurchase them at a mutually agreed upon date and price (a "reverse repurchase agreement") for temporary or emergency purposes in amounts not in excess of 10% of the value of the Fund's total assets at the time of such borrowing. See "Investment Practices and Restrictions", below. INVESTMENT PRACTICES AND RESTRICTIONS General. The Funds invest only in securities that have remaining maturities of 397 days (thirteen months) or less at the date of purchase. For this purpose, floating rate or variable rate obligations (described above), which are payable on demand, but which may otherwise have a stated maturity in excess of this period, will be deemed to have remaining maturities of less than 397 days pursuant to conditions established by the SEC. The Funds maintain a dollar-weighted average portfolio maturity of ninety days or less. The Funds follow these policies to maintain a stable net asset value of $1.00 per share, although there is no assurance they can do so on a continuing basis. The market value of the obligations in a Fund's portfolio can be expected to vary inversely to changes in prevailing interest rates. Repurchase Agreements. A repurchase agreement is an arrangement pursuant to which a buyer purchases a security and simultaneously agrees to resell it to the vendor at a price that results in an agreed-upon market rate of return which is effective for the period of time (which is normally one to seven days, but may be longer) the buyer's money is invested in the security. The arrangement results in a fixed rate of return that is not subject to market fluctuations during a Fund's holding period. Repurchase agreements may be entered into with member banks of the Federal Reserve System, including, the Fund's custodian or "primary dealers" (as designated by the Federal Reserve Bank of New York) in United States Government securities. Each Fund will require continued maintenance of collateral with its Custodian in an amount equal to, or in excess of, the repurchase price (including accrued interest). In the event a vendor defaults on its repurchase obligation, a Fund might suffer a loss to the extent that the proceeds from the sale of the collateral were less than the repurchase price. If the vendor becomes the subject of bankruptcy proceedings, a Fund might be delayed in selling the collateral. The Adviser will review and continually monitor the creditworthiness of each institution with which the Fund enters into a repurchase agreement to evaluate these risks. A Fund may not enter into repurchase agreements if, as a result, more than 10% of a Fund's total assets would be invested in repurchase agreements maturing in more than seven days and in other securities that are not readily marketable. Securities Lending. In order to generate income and to offset expenses, the Fund may lend portfolio securities to brokers, dealers and other financial organizations. The Adviser will monitor the creditworthiness of such borrowers. Loans of securities by a Fund, if and when made, may not exceed 30% of the Fund's total assets and will be collateralized by cash, letters of credit or U.S. Government securities that are maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities, including accrued interest. While such securities are on loan, the borrower will pay a Fund any income accruing thereon, and the Fund may invest the cash collateral in portfolio securities, thereby increasing its return. A Fund will have the right to call any such loan and obtain the securities loaned at any time on five days' notice. Any gain or loss in the market price of the loaned securities which occurs during the term of the loan would affect the Fund and its investors. A Fund may pay reasonable fees in connection with such loans. Illiquid Securities. The Funds may invest up to 10% of their net assets in illiquid securities and other securities which are not readily marketable, including repurchase agreements with maturities longer than seven days. Securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933, which have been determined to be liquid, will not be considered by the Adviser to be illiquid or not readily marketable and, therefore, are not subject to the aforementioned 10% limit. The inability of a Fund to dispose of illiquid or not readily marketable investments readily or at a reasonable price could impair the Fund's ability to raise cash for redemptions or other purposes. The liquidity of securities purchased by a Fund which are eligible for resale pursuant to Rule 144A will be monitored by the Adviser on an ongoing basis, subject to the oversight of the Trustees. In the event that such a security is deemed to be no longer liquid, a Fund's holdings will be reviewed to determine what action, if any, is required to ensure that the retention of such security does not result in a Fund having more than 10% of its assets invested in illiquid or not readily marketable securities. Other Investment Policies. Each Fund may borrow funds and agree to sell portfolio securities to financial institutions such as banks and broker-dealers and to repurchase them at a mutually agreed upon date and price (a "reverse repurchase agreement") for temporary or emergency purposes in amounts not in excess of 10% of the value of a Fund's total assets at the time of such borrowing. At the time a Fund enters into a reverse repurchase agreement, it will place in a segregated custodial account cash, United States Government securities or liquid high grade debt obligations having a value equal to the repurchase price (including accrued interest) and will subsequently monitor the account to ensure that such equivalent value is maintained. Reverse repurchase agreements involve the risk that the market value of the securities sold by a Fund may decline below the repurchase price of those securities. A Fund will not enter into reverse repurchase agreements exceeding 5% of the value of its total assets. A Fund also will not purchase any securities whenever any borrowings (including reverse repurchase agreements) are outstanding. Other Investment Restrictions. Each Fund has adopted additional investment restrictions that are set forth in the Statement of Additional Information. - -------------------------------------------------------------------------------- MANAGEMENT OF THE FUNDS - -------------------------------------------------------------------------------- INVESTMENT ADVISER The management of each Fund is supervised by its Trustees. Evergreen Asset Management Corp. (the "Adviser") has been retained by each Fund as investment adviser. The Adviser succeeded on June 30, 1994 to the advisory business of the same name, but under different ownership, which was organized in 1971. The Adviser to the Funds, with its predecessors, has served as investment adviser to the Evergreen Funds since 1971. The Adviser is a wholly-owned subsidiary of First Union National Bank of North Carolina ("FUNB"). The address of the Adviser is 2500 Westchester Avenue, Purchase, New York 10577. FUNB is a subsidiary of First Union Corporation ("First Union"), one of the ten largest bank holding companies in the United States. Stephen A. Lieber and Nola Maddox Falcone serve as the chief investment officers of the Adviser and, along with Theodore J. Israel, Jr., were the owners of the Adviser's predecessor and the former general partners of Lieber & Company, which, as described below, provides certain subadvisory services to the Adviser in connection with its duties as investment adviser to the Fund. First Union is a bank holding company headquartered in Charlotte, North Carolina, which had $74.2 billion in consolidated assets as of September 30, 1994. First Union and its subsidiaries provide a broad range of financial services to individuals and businesses through offices in 36 states. The Capital Management Group of FUNB manages or otherwise oversees the investment of over $36 billion in assets belonging to a wide range of clients, including the First Union family of mutual funds. First Union Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered broker-dealer that is principally engaged in providing retail brokerage services consistent with its federal banking authorizations. First Union Capital Markets Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer principally engaged in providing, consistent with its federal banking authorizations, private placement, securities dealing, and underwriting services. The Adviser manages each Fund's investments, provides various administrative services and supervises each Fund's daily business affairs, subject to the authority of the Trustees of each Fund. The Adviser is entitled to receive from each Fund an annual fee equal to .50 of 1% of average daily net assets of each Fund. However, the Adviser has in the past, and may in the future, voluntarily waive all or a portion of its fee for the purpose of reducing each Fund's expense ratio. For the fiscal period ended August 31, 1994 the Adviser waived a portion of the advisory fee payable by the Evergreen Money Market Trust amounting to .39 of 1% of the Fund's average daily net assets on an annual basis, and received a net advisory fee amounting to .11 of 1% of the Fund's average daily net assets on an annual basis. With respect to the Evergreen Tax Exempt Money Market Fund the Adviser waived a portion of the advisory fee payable for the fiscal period ended August 31, 1994 amounting to .30 of 1% of the Fund's average daily net assets on an annual basis, and received a net advisory fee amounting to .20 of 1% of the Fund's average daily net assets on an annual basis. The total expenses as a percentage of average daily net assets on an annualized basis for Evergreen Money Market Trust and Evergreen Tax Exempt Money Market Fund for the fiscal period ended August 31, 1994 were .32% and .34%, respectively SUB-ADVISER The Adviser has entered into sub-advisory agreements with Lieber & Company with respect to each Fund which provides that Lieber & Company's research department and staff will furnish the Adviser with information, investment recommendations, advice and assistance, and will be generally available for consultation on each Fund's portfolio. Lieber & Company will be reimbursed by the Adviser in connection with the rendering of services on the basis of the direct and indirect costs of performing such services. There is no additional charge to the Funds for the services provided by Lieber & Company. The address of the Lieber & Company is 2500 Westchester Avenue, Purchase, New York 10577. Lieber & Company is an indirect, wholly-owned, subsidiary of First Union. DISTRIBUTION PLANS AND AGREEMENTS Rule 12b-1 under the Investment Company Act of 1940 permits an investment company to pay expenses associated with the distribution of its shares in accordance with a duly adopted plan. Each Fund has adopted for its Class A shares and Evergreen Money Market Trust for its Class B shares, a "Rule 12b-1 plan" (each, a "Plan" or collectively the "Plans"). Pursuant to each Plan, a Fund may incur distribution-related and shareholder servicing-related expenses which may not exceed an annual rate of .75 of 1% of the Fund's aggregate average daily net assets attributable to Class A shares and 1.00% of the Fund's aggregate average daily net assets attributable to the Class B shares. Payments with respect to Class A shares under the Plan are currently voluntarily limited to .30 of 1% of each Fund's aggregate average daily net assets attributable to Class A shares. The Plans provide that a portion of the fee payable thereunder in an amount not to exceed .25% of the aggregate average daily net assets of each Fund attributable to each Class of shares may constitute a service fee to be used for providing ongoing personal service and/or the maintenance of shareholder accounts. Payments may be made by the Funds under the Plans to financial intermediaries for services in amounts equal to .25 of 1% on an annualized basis of the assets maintained in a Fund by their customers. Each Fund has also entered into a distribution agreement (each a "Distribution Agreement" or collectively the "Distribution Agreements") with, Evergreen Funds Distributor, Inc. ("EFD"). Pursuant to the Distribution Agreements, each Fund will compensate EFD for its services as EFD at a rate which may not exceed an annual rate of .30 of 1% of a Fund's aggregate average daily net assets attributable to Class A shares and .75 of 1% of aggregate average daily net assets attributable to the Class B shares of the Evergreen Money Market Trust. The Distribution Agreements provide that EFD will use the distribution fee received from a Fund for payments (i) to compensate broker-dealers or other persons for distributing shares of the Funds, including interest and principal payments made in respect of amounts paid to broker-dealers or other persons that have been financed (EFD may assign its rights to receive compensation under the Plans to secure such financings), (ii) to otherwise promote the sale of shares of the Fund, and (iii) to compensate broker-dealers, depository institutions and other financial intermediaries for providing administrative, accounting and other services with respect to the Fund's shareholders. The financing of payments made by EFD to compensate broker-dealers or other persons for distributing shares of the Funds may be provided by First Union or its affiliates. The Evergreen Money Market Trust may also make payments under the Plans, in amounts up to .25 of 1% of a Fund's aggregate average daily net assets on an annual basis attributable to Class B shares, to compensate organizations, which may include EFD and the Adviser or its affiliates, for personal services rendered to shareholders and/or the maintenance of shareholder accounts. The Funds may not pay any distribution or services fees during any fiscal period in excess of the amounts set forth above. Since EFD's compensation under the Distribution Agreements is not directly tied to the expenses incurred by EFD, the amount of compensation received by it under the Distribution Agreements during any year may be more or less than its actual expenses and may result in a profit to EFD. Distribution expenses incurred by EFD in one fiscal year that exceed the level of compensation paid to EFD for that year may be paid from distribution fees received from a Fund in subsequent fiscal years. The Plans are in compliance with rules of the National Association of Securities Dealers, Inc. which effectively limit the annual asset-based sales charges and service fees that a mutual fund may pay on a class of shares to .75 of 1% and .25 of 1%, respectively, of the average annual net assets attributable to that class. The rules also limit the aggregate of all front-end, deferred and asset-based sales charges imposed with respect to a class of shares by a mutual fund that also charges a service fee to 6.25% of cumulative gross sales of shares of that class, plus interest at the prime rate plus 1% per annum. - -------------------------------------------------------------------------------- PURCHASE AND REDEMPTION OF SHARES - -------------------------------------------------------------------------------- HOW TO BUY SHARES You can purchase shares of any of the Funds through broker-dealers, banks or other financial intermediaries, or directly through EFD. The minimum initial investment is $1,000, which may be waived in certain situations. There is no minimum for subsequent investments. Share certificates are not issued for Class A, and in the case of Evergreen Money Market Trust, Class B shares. In states where EFD is not registered as a broker-dealer shares of a Fund will only be sold through other broker-dealers or other financial institutions that are registered. See the Share Purchase Application and Statement of Additional Information for more information. Only Class A shares of Evergreen Money Market Trust and Evergreen Tax-Exempt Money Market Fund, and Class B shares of Evergreen Money Market Trust are offered through this prospectus (See "Other Classes of Shares"). Class A Shares. Class A shares of the Evergreen Money Market Funds can be purchased at net asset value without an initial sales charge. Class B Shares-Deferred Sales Charge Alternative. You can purchase Class B shares of the Evergreen Money Market Trust at net asset value without an initial sales charge. However, you may pay a contingent deferred sales charge ("CDSC") if you redeem shares within seven years after purchase. Shares obtained from dividend or distribution reinvestment are not subject to the CDSC. The amount of the CDSC (expressed as a percentage of the lesser of the current net asset value or original cost) will vary according to the number of years from the purchase of Class B shares as set forth below. Year Since Purchase Contingent Deferred Sales Charge FIRST 5% SECOND 4% THIRD and FOURTH 3% FIFTH 2% SIXTH and SEVENTH 1% The CDSC is deducted from the amount of the redemption and is paid to EFD. The CDSC will be waived on redemptions of shares following the death or disability of a shareholder, to meet distribution requirements for certain qualified retirement plans or in the case of certain redemptions made under a Fund's Systematic Cash Withdrawal Plan, and may be waived in other situations. Class B shares are subject to higher distribution fees than Class A shares for a period of seven years (after which they convert to Class A shares) . The higher fees mean a higher expense ratio, so Class B shares pay correspondingly lower dividends and may have a lower net asset value than Class A shares. See the Statement of Additional Information for further details. How the Funds Value Their Shares. The net asset value of each Fund's shares for purposes of both purchases and redemptions is determined twice daily, at 12 noon (Eastern time) and promptly after the regular close of the New York Stock Exchange (usually 4 p.m. New York time) each business day (i.e., any weekday exclusive of days on which the New York Stock Exchange or State Street is closed). The New York Stock Exchange is closed on New Year's Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset value per share is calculated by taking the sum of the values of a Fund's investments and any cash and other assets, subtracting liabilities, and dividing by the total number of shares outstanding. All expenses, including the fees payable to the Adviser, are accrued daily. The securities in a Fund's portfolio are valued on an amortized cost basis. Under this method of valuation, a security is initially valued at its acquisition cost, and thereafter, a constant straight-line amortization of any discount or premium is assumed each day regardless of the impact of fluctuating interest rates on the market value of the security. The market value of the obligations in a Fund's portfolio can be expected to vary inversely to changes in prevailing interest rates. As a result, the market value of the obligations in a Fund's portfolio may vary from the value determined using the amortized cost method. Securities which are not rated are normally valued on the basis of valuations provided by a pricing service when such prices are believed to reflect the fair value of such securities. Other assets and securities for which no quotations are readily available are valued at the fair value as determined in good faith by the Trustees. Each Fund attempts to maintain its net asset value at $1.00 per share. Under most conditions, management believes this will be possible, although there can be no assurance that this will be achieved. Calculations are periodically made to compare the value of a Fund's portfolio valued at amortized cost with market values. If a deviation of 1/2 of 1% or more were to occur between the net asset value calculated by reference to market values and a Fund's $1.00 per share net asset value, or if there were other deviations which the Trustees believed would result in a material dilution to shareholders or purchasers, the Trustees would promptly consider what action, if any, should be initiated. Additional Purchase Information. As a condition of this offering, if a purchase is canceled due to nonpayment or because a investor's check does not clear, the investor will be responsible for any loss a Fund or the Adviser incurs. If such investor is an existing shareholder, a Fund may redeem shares from his or her account to reimburse a Fund or the Adviser for any loss. In addition, such investors may be prohibited or restricted from making further purchases in any of the Evergreen Funds. Shares of the Funds are sold at the net asset value per share next determined after a shareholder's investment has been received. Investments by federal funds wire will be effective upon receipt. Qualified institutions may telephone orders for the purchase of Fund shares. Shares purchased by institutions via telephone will receive the dividend declared on that day if the telephone order is placed by 12 noon (Eastern time), and federal funds are received the same day by 4 p.m. (Eastern time). Institutions should telephone the Fund (800-235-0064) for additional information on same day purchases by telephone. Investment checks received at State Street will be invested on the date of receipt. Shareholders will begin earning dividends the following business day. General. The decision as to which Class of shares of Evergreen Money Market Trust is more beneficial to you depends primarily on whether or not you wish to exchange all or part of any Class B shares you purchase for Class B shares of another Evergreen Fund at some future date. If you are not contemplating such an exchange, it would probably be in your best interest to purchase Class A shares. Consult your financial intermediary for further information. The compensation received by Dealers and agents may differ depending on whether they sell Class A or Class B shares. There is no size limit on purchases of Class A shares. In addition to any discount or commission paid to dealers, EFD will from time to time pay to dealers additional cash or other incentives that are conditioned upon the sale of a specified minimum dollar amount of shares of a Fund and/or other Evergreen Mutual Funds. Such incentives will take the form of payment for attendance at seminars, lunches, dinners, sporting events or theater performances, or payment for travel, lodging and entertainment incurred in connection with travel by persons associated with a dealer and their immediate family members to urban or resort locations within or outside the United States. Such a dealer may elect to receive cash incentives of equivalent amount in lieu of such payments. HOW TO REDEEM SHARES You may "redeem", i.e., sell your shares in a Fund to the Fund on any day the Exchange is open, either directly or through your financial intermediary. The price you will receive is the net asset value (less any applicable CDSC for Class B shares) next calculated after the Fund receives your request in proper form. Proceeds generally will be sent to you within seven days. However, for shares recently purchased by check, a Fund will not send proceeds until it is reasonably satisfied that the check has been collected (which may take up to 15 days). Redeeming Shares Through Your Financial Intermediary. A Fund must receive instructions from your financial intermediary before 4:00 p.m. Eastern time for you to receive that day's net asset value (less any applicable CDSC for Class B shares). Your financial intermediary is responsible for furnishing all necessary documentation to a Fund and may charge you for this service. Redeeming Shares Directly by Mail or Telephone. Send a signed letter of instruction or stock power form to State Street Bank and Trust Company ("State Street") which is the registrar, transfer agent and dividend-disbursing agent for each Fund. Stock power forms are available from your financial intermediary, State Street, and many commercial banks. Additional documentation is required for the sale of shares by corporations, financial intermediaries, fiduciaries and surviving joint owners. Signature guarantees are required for all redemption requests for shares with a value of more than $10,000 or where the redemption proceeds are to be mailed to an address other than that shown in the account registration. A signature guarantee must be provided by a bank or trust company (not a Notary Public), a member firm of a domestic stock exchange or by other financial institutions whose guarantees are acceptable to State Street. Shareholders may withdraw amounts of $1,000 or more from their accounts by calling State Street (800-423-2615) between the hours of 9:00 a.m. and 4:00 p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on which the New York Stock Exchange or State Street's offices are closed). The New York Stock Exchange is closed on New Year's Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Redemption requests made after 4:00 p.m. (Eastern time) will be processed using the net asset value determined on the next business day. Such redemption requests must include the shareholder's account name, as registered with a Fund, and the account number. During periods of drastic economic or market changes, shareholders may experience difficulty in effecting telephone redemptions. Shareholders who are unable to reach a Fund or State Street by telephone should follow the procedures outlined above for redemption by mail. The telephone redemption service is not made available to shareholders automatically. Shareholders wishing to use the telephone redemption service must indicate this on the enclosed Share Purchase Application and choose how the redemption proceeds are to be paid. Redemption proceeds will either (i) be mailed by check to the shareholder at the address in which the account is registered or (ii) be wired to an account with the same registration as the shareholder's account in a Fund at a designated commercial bank. State Street currently deducts a $5.00 wire charge from all redemption proceeds wired. This charge is subject to change without notice. Redemption proceeds will be wired on the same day if the request is made prior to 12 noon (Eastern time). Such shares, however, will not earn dividends for that day. Redemption requests received after 12 noon will earn dividends for that day, and the proceeds will be wired on the following business day. A shareholder who decides later to use this service, or to change instructions already given, should fill out a Shareholder Services Form and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank or trust company (not a Notary Public), a member firm of a domestic stock exchange or by other financial institutions whose guarantees are acceptable to State Street. Shareholders should allow approximately 10 days for such form to be processed. The Funds will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. These procedures include requiring some form of personal identification prior to acting upon instructions and tape recording of telephone instructions. If a Fund fails to follow such procedures, it may be liable for any losses due to unauthorized or fraudulent instructions. The Funds will not be liable for following telephone instructions reasonably believed to be genuine. The Funds reserve the right to refuse a telephone redemption if it is believed advisable to do so. Procedures for redeeming Fund shares by telephone may be modified or terminated without notice at any time. Redemptions by Check. Upon request, each Fund will provide holders of Class A shares, without charge, with checks drawn on the Fund that will clear through State Street. Class B shares cannot be redeemed by check. Shareholders will be subject to State Street's rules and regulations governing such checking accounts. Checks will be sent usually within ten business days following the date the account is established. Checks may be made payable to the order of any payee in an amount of $250 or more. The payee of the check may cash or deposit it like a check drawn on a bank. (Investors should be aware that, as in the case with regular bank checks, certain banks may not provide cash at the time of deposit, but will wait until they have received payment from State Street.) When such a check is presented to State Street for payment, State Street, as the shareholder's agent, causes the Fund to redeem a sufficient number of full and fractional shares in the shareholder's account to cover the amount of the check. Checks will be returned by State Street if there are insufficient or uncollectable shares to meet the withdrawal amount. The check writing procedure for withdrawal enables shareholders to continue earning income on the shares to be redeemed up to but not including the date the redemption check is presented to State Street for payment. Shareholders wishing to use this method of redemption, should fill out the appropriate part of the Share Purchase Application (including the Signature Card) and mail the completed form to State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827. Shareholders requesting this service after an account has been opened must contact State Street since additional documentation will be required. Currently, there is no charge either for checks or for the clearance of any checks. This service may be terminated or altered at any time. General. Under unusual circumstances, a Fund may suspend redemptions or postpone payment for up to seven days or longer, as permitted by Federal securities law. The Funds reserve the right to close an account that through redemption has remained below $1,000 for 30 days. Shareholders will receive 60 days' written notice to increase the account value before the account is closed. See the Statement of Additional Information for further details. EXCHANGE PRIVILEGE How To Exchange Shares. You may exchange some or all of your shares for shares of the other Evergreen Funds through your financial intermediary, or by telephone or mail as described below. An exchange which represents an initial investment in another Evergreen Fund must amount to at least $1,000. Once an exchange request has been telephoned or mailed, it is irrevocable and may not be modified or canceled. Exchanges will be made on the basis of the relative net asset values of the shares exchanged next determined after an exchange request is received. Exchanges are subject to minimum investment and suitability requirements. Each of the Evergreen Funds have different investment objectives and policies. For complete information, a prospectus of the fund into which an exchange will be made should be read prior to the exchange. An exchange is treated for Federal income tax purposes as a redemption and purchase of shares and may result in the realization of a capital gain or loss. Shareholders are limited to five exchanges per calendar year, with a maximum of three per calendar quarter. This exchange privilege may be materially modified or discontinued at any time by the Fund upon sixty days' notice to shareholders and is only available in states in which shares of the fund being acquired may lawfully be sold. No CDSC will be imposed in the event Class B shares of the Evergreen Money Market Trust are exchanged for Class B shares of other Evergreen Funds. If you redeem shares, the CDSC applicable to the Class B shares of the Evergreen Mutual Fund originally purchased for cash is applied. Also, Class B shares will continue to age following an exchange for purposes of conversion to Class A shares. An exchange of Class A shares of the Funds for Class A shares of other Evergreen Funds not offered in this prospectus would, to the extent a waiver or reduction were not available, require the payment of the applicable front-end sales charge. Exchanges Through Your Financial Intermediary. A Fund must receive exchange instructions from your financial intermediary before 4:00 p.m. Eastern time for you to receive that day's net asset value. Your financial intermediary is responsible for furnishing all necessary documentation to a Fund and may charge you for this service. Exchanges by Telephone and Mail. You may exchange shares by telephone by calling State Street (800-423-2615). Exchange requests made after 4:00 p.m. (Eastern time) will be processed using the net asset value determined on the next business day. During periods of drastic economic or market changes, shareholders may experience difficulty in effecting telephone exchanges. You should follow the procedures outlined below for exchanges by mail if you are unable to reach State Street by telephone. If you wish to use the telephone exchange service you should indicate this on the enclosed Share Purchase Application. As noted above, each Fund will employ reasonable procedures to confirm that instructions for the redemption or exchange of shares communicated by telephone are genuine. A telephone exchange may be refused by a Fund or State Street if it is believed advisable to do so. Procedures for exchanging Fund shares by telephone may be modified or terminated at any time. Written requests for exchanges should follow the same procedures outlined for written redemption requests in the section entitled "How to Redeem Shares", however, no signature guarantee is required.. SHAREHOLDER SERVICES The Funds offer the following shareholder services. For more information about these services or your account, contact EFD or the toll-free number for the Funds, 800 807-2940. Some services are described in more detail in the Share Purchase Application. Systematic Investment Plan. You may make monthly or quarterly investments into an existing account automatically in amounts of not less than $25. Telephone Investment Plan. You may make investments into an existing account electronically in amounts of not less than $100 or more than $25,000 per investment. Telephone investment requests received by 3:00 p.m. (Eastern time) will be credited to a shareholder's account two business days after the request is received. Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or when an existing account reaches that size, you may participate in the Fund's Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share Purchase Application. Under this plan, you may receive (or designate a third party to receive) a monthly or quarterly check in a stated amount of not less than $100. Fund shares will be redeemed as necessary to meet withdrawal payments. All participants must elect to have their dividends and capital gain distributions reinvested automatically. Any applicable Class B CDSC will be waived with respect to redemptions occurring under a Systematic Cash Withdrawal Plan during a calendar year to the extent that such redemptions do not exceed 10% of (i) the initial value of the account plus (ii) the value, at the time of purchase, of any subsequent investments. Investments Through Employee Benefit and Savings Plans. Certain qualified and non-qualified benefit and savings plans may make shares of the Funds and the other Evergreen Funds available to their participants. The Adviser may provide compensation to organizations providing administrative and recordkeeping services to plans which make shares of the Evergreen Funds available to their participants. Retirement Plans. Eligible investors may invest in Evergreen Money Market Trust under the following prototype retirement plans: (i) Individual Retirement Account (IRA); (ii) Simplified Employee Pension (SEP) for sole proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money Purchase Pension Plans for corporations and their employees. Automatic Reinvestment Plan. For the convenience of investors, all dividends and distributions are automatically reinvested in full and fractional shares of the Fund at the net asset value per share at the close of business on the last business day of each month, unless otherwise requested by a shareholder in writing. If the transfer agent does not receive a written request for subsequent dividends and/or distributions to be paid in cash at least three full business days prior to a given record date, the dividends and/or distributions to be paid to a shareholder will be reinvested. If you elect to receive dividends and distributions in cash and the U.S. Postal Service cannot deliver the checks, or if the checks remain uncashed for six months, the checks will be reinvested into your account at the then current net asset value. EFFECT OF BANKING LAWS The Glass-Steagall Act and other banking laws and regulations presently prohibit member banks of the Federal Reserve System ("Member Banks") or their non-bank affiliates from sponsoring, organizing, controlling, or distributing the shares of registered open-end investment companies such as the Funds. Such laws and regulations also prohibit banks from issuing, underwriting or distributing securities in general. However, under the Glass-Steagall Act and such other laws and regulations, a Member Bank or an affiliate thereof may act as investment adviser, transfer agent or custodian to a registered open-end investment company and may also act as agent in connection with the purchase of shares of such an investment company upon the order of their customer. The Adviser, since it is a subsidiary of First Union National Bank of North Carolina ("FUNB"), is subject to and in compliance with the aforementioned laws and regulations. Changes to applicable laws and regulations or future judicial or administrative decisions could result in the Adviser being prevented from continuing to perform the services required under the investment advisory contract or from acting as agent in connection with the purchase of shares of a Fund by its customers. If the Adviser were prevented from continuing to provide the services called for under the investment advisory agreement, it is expected that the Trustees would identify, and call upon each Fund's shareholders to approve, a new investment adviser. If this were to occur, it is not anticipated that the shareholders of any Fund would suffer any adverse financial consequences. - -------------------------------------------------------------------------------- OTHER INFORMATION - -------------------------------------------------------------------------------- DIVIDENDS, DISTRIBUTIONS AND TAXES The Funds declare substantially all of their net income as dividends on each business day. Such dividends are paid monthly. Net income, for dividend purposes, includes accrued interest and any market discount or premium that day, less the estimated expenses of a Fund. Gains or losses realized upon the sale of portfolio securities are not included in net income, but are reflected in the net asset value of a Fund's shares. Distributions of any net realized capital gains will be made annually or more frequently as required by the provisions of the Internal Revenue Code of 1986, as amended. The amount of dividends may fluctuate from day to day, and the dividend may be omitted on a day where Fund expenses exceed net investment income. Dividends and distributions generally are taxable in the year in which they are paid, except any dividends paid in January that were declared in the previous calendar quarter may be treated as paid in the immediately preceding December. Such dividends will be automatically reinvested in full and fractional shares of a Fund on the last business day of each month. However, shareholders who so inform the transfer agent in writing may have their dividends paid out in cash monthly. Shareholders who invest by check will be credited with a dividend on the business day following initial investment. Shareholders will receive dividends on investments made by federal funds bank wire the same day the wire is received provided that wire purchases are received by State Street by 12 noon (Eastern time). Shares purchased by qualified institutions via telephone as described in "How to Purchase Shares" will receive the dividend declared on that day if the telephone order is placed by 12 noon (Eastern time), and federal funds are received by 4 p.m. (Eastern time). All other wire purchases received after 12 noon (Eastern time) will earn dividends beginning the following business day. Dividends accruing on the day of redemption will be paid to redeeming shareholders except for redemptions by check and where proceeds are wired the same day. (See "How to Redeem Shares".) Each Fund has qualified and intends to continue to qualify to be treated as a regulated investment company under the Code. While so qualified, it is expected that each Fund will not be required to pay any Federal income taxes on that portion of its investment company taxable income and any net realized capital gains it distributes to shareholders. The Code imposes a 4% nondeductible excise tax on regulated investment companies, such as the Funds, to the extent they do not meet certain distribution requirements by the end of each calendar year. Each Fund anticipates meeting such distribution requirements. The excise tax generally does not apply to the tax exempt income of a regulated investment company (such as Evergreen Tax Exempt Money Market Fund) that pays exempt interest dividends. Except as noted below with respect to Evergreen Tax Exempt Money Market Fund, most shareholders of the Funds normally will have to pay Federal income taxes and any state or local taxes on the dividends and distributions they receive from a Fund. Evergreen Tax Exempt Money Market Fund will designate and pay exempt-interest dividends derived from interest earned on qualifying tax exempt obligations. Such exempt-interest dividends may be excluded by shareholders of the Fund from their gross income for Federal income tax purposes, however, (1) all or a portion of such exempt-interest dividends may be a specific preference item for purposes of the Federal individual and corporate alternative minimum taxes to the extent that they are derived from certain types of private activity bonds issued after August 7, 1986, and (2) all exempt-interest dividends will be a component of "adjusted current earnings" for purposes of the Federal corporate alternative minimum tax. Dividends paid from taxable income, if any, and distributions of any net realized short-term capital gains (whether from tax exempt or taxable obligations) are taxable as ordinary income, even though received in additional Fund shares. Market discount recognized on taxable and tax-free bonds is taxable as ordinary income, not as excludable income. Following the end of each calendar year, every shareholder of the Fund will be sent applicable tax information and information regarding the dividends and capital gain distributions made during the calendar year. Under current law, the highest Federal income tax rate applicable to net long-term capital gains realized by individuals is 28%. The rate applicable to corporations is 35%. Since the Funds' gross income is ordinarily expected to be interest income, it is not expected that the 70% dividends-received deduction for corporations will be applicable. Specific questions should be addressed to the investor's own tax adviser. Each Fund is required by Federal law to withhold 31% of reportable payments (which may include dividends, capital gain distributions and redemptions) paid to certain shareholders. In order to avoid this backup withholding requirement, you must certify on the Share Purchase Application, or on a separate form supplied by State Street, that the investor's social security or taxpayer identification number is correct and that the investor is not currently subject to backup withholding or is exempt from backup withholding. GENERAL INFORMATION Portfolio Transactions. Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc., and subject to seeking best price and execution, a Fund may consider sales of its shares as a factor in the selection of dealers to enter into portfolio transactions with the Fund. Organization. The Evergreen Money Market Trust is a Massachusetts business trust organized in 1987 and the Evergreen Tax Exempt Money Market Fund is a separate investment series of the Evergreen Municipal Trust, which is a Massachusetts business trust organized in 1988. The Funds do not intend to hold annual shareholder meetings; shareholder meetings will be held only when required by applicable law. Shareholders have available certain procedures for the removal of Trustees or Directors. A shareholder in each class of a Fund will be entitled to his or her share of all dividends and distributions from a Fund's assets, based upon the relative value of such shares to those of other Classes of the Fund, and, upon redeeming shares, will receive the then current net asset value of the Class of shares of the Fund represented by the redeemed shares less any applicable CDSC. The Trusts are empowered to establish, without shareholder approval, additional investment series, which may have different investment objectives, and additional classes of shares for any existing or future series. If an additional series or class were established in a Fund, each share of the series or class would normally be entitled to one vote for all purposes. Generally, shares of each series and class would vote together as a single class on matters, such as the election of Trustees, that affect each series and class in substantially the same manner. Class A, B and Y shares have identical voting, dividend, liquidation and other rights, except that each class bears, to the extent applicable, its own distribution and transfer agency expenses as well as any other expenses applicable only to a specific class. Each class of shares votes separately with respect to Rule 12b-1 distribution plans and other matters for which separate class voting is appropriate under applicable law. Shares are entitled to dividends as determined by the Trustees and, in liquidation of a Fund, are entitled to receive the net assets of the Fund. Registrar, Transfer Agent And Dividend-Disbursing Agent. State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each Fund's registrar, transfer agent and dividend-disbursing agent for a fee based upon the number of shareholder accounts maintained for the Funds. The transfer agency fee with respect to the Class B shares will be higher than the transfer agency fee with respect to the Class A shares. Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz Incorporated, located 237 Park Avenue, New York, New York 10017, is the principal underwriter of the Funds. EFD provides personnel to serve as officers of the Funds. The salaries and other expenses related to providing such personnel are borne by EFD. Other Classes of Shares. Evergreen Money Market Trust offers three classes of shares, Class A, Class B, and Class Y. Evergreen Tax-Exempt Money Market Fund offers two classes of shares, Class A and Class Y. Class Y shares are not offered by this Prospectus and are only available to (i) all shareholders of record in one or more of the Evergreen Funds as of December 30, 1994, (ii) certain institutional investors and (iii) investment advisory clients of the Adviser and its affiliates. The dividends payable with respect to Class A and Class B shares will be less than those payable with respect to Class Y shares due to the distribution and distribution-related expenses borne by Class A and Class B shares and the fact that such expenses are not borne by Class Y shares. Performance Information. From time to time, a Fund may quote its yield in advertisements or in reports to shareholders. Yield information may be useful in reviewing the performance of a Fund and for providing a basis for comparison with other investment alternatives. However, since net investment income of a Fund changes in response to fluctuations in interest rates and Fund expenses, any given yield quotation should not be considered representative of a Fund's yields for any future period. The method of calculating each Fund's yield is set forth in the Statement of Additional Information. Before investing in the Evergreen Tax Exempt Money Market Fund, the investor may want to determine which investment -- tax-free or taxable -- will result in a higher after-tax return. To do this, the yield on the tax-free investment should be divided by the decimal determined by subtracting from 1 the highest Federal tax rate to which the investor currently is subject. For example, if the tax-free yield is 6% and the investor's maximum tax bracket is 36%, the computation is: 6% Tax-Free Yield /(1 - .36 Tax Rate) = 6/.64 = 9.38% Taxable Yield. In this example, the investor's after-tax return will be higher from the 6% tax-free investment if available taxable yields are below 9.38%. Conversely, the taxable investment will provide a higher return when taxable yields exceed 9.38%. This is only an example and is not necessarily reflective of a Fund's yield. The tax equivalent yield will be lower for investors in the lower income brackets. Comparative performance information may also be used from time to time in advertising or marketing the Fund's shares, including data from Lipper Analytical Services, Inc., IBC/Donoghue's Money Fund Report, Bank Rate Monitor and other industry publications. Liability Under Massachusetts Law. Under Massachusetts law, trustees and shareholders of a business trust may, in certain circumstances, be held personally liable for its obligations. The Declarations of Trust under which Funds operate provide that no trustee or shareholder will be personally liable for the obligations of the trust and that every written contract made by the trust contain a provision to that effect. If any trustee or shareholder were required to pay any liability of the trust, that person would be entitled to reimbursement from the general assets of the trust. Additional Information. This Prospectus and the Statement of Additional Information, which have been incorporated by reference herein, do not contain all the information set forth in the Registration Statements filed by the Funds with the Commission under the Securities Act. Copies of the Registration Statements may be obtained at a reasonable charge from the Commission or may be examined, without charge, at the offices of the Commission in Washington, D.C. -------------------------------------------------------------- PROSPECTUS January 3, 1995 Evergreen Money Market Funds -------------------------------------------------------- CLASS Y SHARES ------------------------- EVERGREEN MONEY MARKET TRUST EVERGREEN TAX EXEMPT MONEY MARKET FUND The Evergreen Money Market Funds (the "Funds") are designed to provide investors with a selection of investment alternatives which seek to provide current income, stability of principal and liquidity. This Prospectus provides information regarding the Class Y shares offered by the Funds. Each Fund is, or is a series of, an open-end, diversified, management investment company. This Prospectus sets forth concise information about the Funds that a prospective investor should know before investing. The address of the Funds is 2500 Westchester Avenue, Purchase, New York 10577. A "Statement of Additional Information" for the Funds and the other funds in the Evergreen Group of mutual funds (collectively, with the Funds the "Evergreen Funds") dated January 3, 1995 has been filed with the Securities and Exchange Commission and is incorporated by reference herein. The Statement of Additional Information provides information regarding certain matters discussed in this Prospectus and other matters which may be of interest to investors, and may be obtained without charge by calling the Funds at (800) 807-2940. There can be no assurance that the investment objective of any Fund will be achieved. Investors are advised to read this Prospectus carefully. The shares offered by this Prospectus are not deposits or obligations of First Union or any subsidiaries of First Union, are not endorsed or guaranteed by First Union or any subsidiaries of First Union, and are not insured or otherwise protected by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency and involve risk, including the possible loss of principal. An investment in the Funds is neither insured nor guaranteed by the U.S. Government, and there can be no assurance that the Funds will be able to maintain a stable net asset value of $1.00 per share. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Keep This Prospectus for Future Reference TABLE OF CONTENTS OVERVIEW OF THE FUNDS 2 PURCHASE AND REDEMPTION OF SHARES EXPENSE INFORMATION 3 How To Buy Shares 11 FINANCIAL HIGHLIGHTS 4 How To Redeem Shares 12 DESCRIPTION OF THE FUNDS Exchange Privilege 13 Investment Objectives Shareholder Services 14 And Policies 6 Effect Of Banking Laws 14 Investment Practices OTHER INFORMATION And Restrictions 9 Dividends, Distributions And Taxes 15 MANAGEMENT OF THE FUNDS General Information 16 Investment Adviser 10 Sub-Adviser 11 - -------------------------------------------------------------------------------- OVERVIEW OF THE FUNDS - -------------------------------------------------------------------------------- The following summary is qualified in its entirety by the more detailed information contained elsewhere in this Prospectus. See "Description of the Funds" and "Management of the Funds". The Investment Adviser to the Funds is Evergreen Asset Management Corp. (the "Adviser") which, with its predecessors, has served as investment adviser to the Evergreen Funds since 1971. The Adviser is a wholly-owned subsidiary of First Union National Bank of North Carolina ("FUNB"), which in turn is a subsidiary of First Union Corporation, one of the ten largest bank holding companies in the United States. The Evergreen Money Market Trust seeks as high a level of current income as is consistent with preserving capital and providing liquidity. The Fund will invest only in high quality money market instruments. The Evergreen Tax Exempt Money Market Fund seeks as high a level of current income exempt from Federal income tax as is consistent with preserving capital and providing liquidity. The Fund invests substantially all of its assets in short-term municipal securities, the interest from which is exempt from Federal income tax. There is no assurance the investment objective of any Fund will be achieved. ------------------------------------------------------------------------------- EXPENSE INFORMATION ------------------------------------------------------------------------------- The table set forth below summarizes the shareholder transaction costs associated with an investment in each Class of Shares of a Fund. For further information see "Purchases and Redemption of Fund Shares". SHAREHOLDER TRANSACTION EXPENSES Class Y Shares Maximum Sales Charge Imposed on Purchases None Sales Charge on Dividend Reinvestments None Deferred Sales Charge None Redemption Fee None Exchange Fee (only applies after 4 exchanges per calendar year) $5 The following tables show for each Fund the annual operating expenses (as a percentage of average net assets) attributable to Class Y Shares, together with examples of the cumulative effect of such expenses on a hypothetical $1,000 investment the periods specified assuming (i) a 5% annual return and (ii) redemption at the end of each period. Evergreen Money Market Trust Annual Operating Expenses* Examples Class Y Class Y Advisory Fees .50% After 1 Year $ 7 12b-1 Fees None After 3 Years $ 23 Other Expenses .21% After 5 Years $ 40 ---- Total .71% After 10 Years $ 88 ---- Evergreen Tax Exempt Money Market Fund Annual Operating Expenses* Examples Class Y Class Y Advisory Fees .50% After 1 Year $ 7 12b-1 Fees None After 3 Years $ 20 Other Expenses .14% After 5 Years $ 36 ---- Total .64% After 10 Years $ 80 ---- The Adviser has agreed to reimburse these Funds' to the extent that any Fund's aggregate annual operating expenses (including the Adviser's fee, but excluding interest, taxes, brokerage commissions, Rule 12b-1 distribution fees and shareholder servicing fees, and extraordinary expenses) exceed 1.00% of the Fund's average net assets. From time to time, the Adviser may, at its discretion, waive its fee or reimburse a Fund for certain of its expenses in order to reduce a Fund's expense ratio. *The estimated annual operating expenses and examples do not reflect the voluntary Advisory fee waivers of .39 of 1% of average net assets for Evergreen Money Market Trust and .30 of 1% of average net assets for Evergreen Tax Exempt Money Market Fund for the fiscal period ending August 31, 1994. The purpose of the foregoing table is to assist an investor in understanding the various costs and expenses that an investor in Class Y Shares of the Funds will bear directly or indirectly. The amounts set forth under "Other Expenses" as well as the amounts set forth in the examples are estimated amounts based on historical experience for the fiscal period ending August 31, 1994. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete description of the various costs and expenses borne by the Funds see "Management of the Funds". - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Evergreen Money Market Trust The following selected per share data and ratios for the ten months ended August 31, 1994 and the four annual periods ended October 31, 1993 have been audited by Price Waterhouse LLP, independent accountants for Evergreen Money Market Trust, whose report thereon was unqualified. This information should be read in conjunction with the financial statements and notes thereto which are incorporated in the Statement of Additional Information by reference. The per share data set forth below pertains to the Class Y shares of the Fund, which are offered through this prospectus. See "Other Classes of Shares". No per share data and ratios are shown for Class A or B shares, since these classes did not have any operations prior to the date of this Prospectus.
Period Ten Months from Ended 11/2/87** August 31, Year Ended October 31, to PER SHARE DATA 1994# 1993 1992 1991 1990 1989 10/31/88 ----- ---- ---- ---- ---- ---- -------- Net asset value, beginning of year. . . . $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ----- ----- ----- ----- ----- ----- ----- . . . . . . Income (loss) from investment operations: Net investment income. . . . . . . . . . .03 .03 .04 .07 .08 .09 .07 . . . . . . . . . Net realized gain (loss) on investments. ---- ---- ---- ---- ---- ---- ---- . . . . . . Total from investment operations. . . . . .03 .03 .04 .07 .08 .09 .07 . . . . . . Less distributions to shareholders from net investment income. . . . . . . . . (.03) (.03) (.04) (.07) (.08) (.09) (.07) ------- ------- ------- ------- ------- ------- ------- . . . . . . . Net asset value, end of year. . . . . . . $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ----- ----- ----- ----- ----- ----- ----- TOTAL RETURN+. . . . . . . . . . . . . . 2.9% 3.2% 4.2% 6.7% 8.4% 9.4% 7.4% RATIOS & SUPPLEMENTAL DATA: Net assets, end of year (in millions) . . . . . . . . . . . . $273 $299 $358 $438 $458 $408 $161 Ratios to average net assets: Total expenses . . . . . . . . . . . . .32%++ .39%* .36%* .30%* .35%* .38%* .43%++ Net investment income . . . . . . . . 3.46%++ 3.19%* 4.18%* 6.53%* 8.08%* 9.42%* 7.26%++ - ------------ + Total return is calculated for the periods indicated and is not annualized. ++ Annualized and net of partial advisory fee waiver of .39% of daily net assets for the ten months ended August 31, 1994 and full advisory fee waiver of .50% of daily net assets for the period November 2, 1987 to October 31, 1988. * Net of partial advisory fee waivers of .32%, .36%, .40%, .34% and .37% of daily net assets for the years ended October 31, 1993, 1992, 1991, 1990 and 1989, respectively. ** Commencement of operations. # On September 21, 1994, the Fund's Trustees approved a change in the Fund's fiscal year end from October 31 to August 31.
Evergreen Tax Exempt Money Market Fund The following selected per share data and ratios for the five annual periods ended August 31, 1994 have been audited by Price Waterhouse LLP, independent accountants for Evergreen Tax-Exempt Money Market Fund, whose report thereon was unqualified. This information should be read in conjunction with the financial statements and notes thereto which are incorporated in the Statement of Additional Information by reference. The per share data set forth below pertains to the Class Y shares of the Fund, which are offered through this prospectus. See "Other Classes of Shares". No per share data and ratios are shown for Class A shares, since this class did not have any operations prior to the date of this Prospectus.
Period from November 2, Year Ended August 31, 1988* through PER SHARE DATA 1994 1993 1992 1991 1990 August 31, 1989 ---- ---- ---- ---- ---- --------------- Net investment income declared as dividends to shareholders. . . . . $.0247 $.0258 $.0367 $.0533 $.0599 $.0538 ------ ------ ------ ------ ------ ------ Net asset value at beginning and end of year . . . . . . . . . . $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 ------- ------- ------- ------- ------- ------- TOTAL RETURN . . . . . . . . . . . 2.5% 2.6% 3.7% 5.5% 6.2% 5.5%+ RATIOS & SUPPLEMENTAL DATA: Net assets, end of year (in millions) . . . . . . . . . . . $402 $401 $417 $510 $311 $109 Ratios to average net assets: Total expenses . . . . . . . . . .34%(a) .34%(a) .32%(a) .28%(a) .31%(a) .24%(b) Net investment income . . . . . . 2.47%(a) 2.58%(a) 3.72%(a) 5.23%(a) 5.94%(a) 6.77%(b) ------------ * Commencement of operations. + Total return calculated for the period November 2, 1988 to August 31, 1989 is not annualized. (a) Net of partial advisory fee waivers of .30 of 1% of daily net assets for fiscal year ended August 31, 1994, .29 of 1% of daily net assets for fiscal year ended August 31, 1993, .31 of 1% of daily net assets for fiscal year ended August 31, 1992, .38 of 1% of daily net assets for fiscal year ended August 31, 1991 and .40 of 1% of daily net assets for fiscal year ended August 31, 1990. (b) Annualized and net of partial advisory fee waiver of .46 of 1% of daily net assets and the absorption of a portion of all other Fund expenses by the Adviser equal to .09% of average net assets.
- -------------------------------------------------------------------------------- DESCRIPTION OF THE FUNDS - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVES AND POLICIES Evergreen Money Market Trust The investment objective of Evergreen Money Market Trust is to achieve as high a level of current income as is consistent with preserving capital and providing liquidity. The Fund invests in high quality money market instruments, which are determined to be of eligible quality under Securities and Exchange Commission ("SEC") rules and to present minimal credit risk. Under SEC rules, eligible securities include First Tier Securities (i.e., securities rated in the highest short-term rating category) and Second Tier Securities (i.e., securities which are not in the First Tier). The rules prohibit the Fund from holding more than 5% of its value in Second Tier Securities. The Fund's permitted investments include: 1. Marketable obligations of, or guaranteed by, the United States Government, its agencies or instrumentalities, including issues of the United States Treasury, such as bills, certificates of indebtedness, notes and bonds, and issues of agencies and instrumentalities established under the authority of an act of Congress. Some of these securities are supported by the full faith and credit of the United States Government, others are supported by the right of the issuer to borrow from the Treasury, and still others are supported only by the credit of the agency or instrumentality. Agencies or instrumentalities whose securities are supported by the full faith and credit of the United States include, but are not limited to, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration and Government National Mortgage Association. Examples of agencies or instrumentalities whose securities are supported by the right of the issuer to borrow from the Treasury include, but are not limited to, the Federal Home Loan Bank, Federal Intermediate Credit Banks, Federal National Mortgage Association and Tennessee Valley Authority. Agencies or instrumentalities whose securities are supported only by the credit of the agency or instrumentality include the Interamerican Development Bank and the International Bank for Reconstruction and Development. These obligations are supported by appropriated but unpaid commitments of its member countries. There are no assurances that the commitments will be undertaken in the future. 2. Commercial paper, including variable amount master demand notes, that is rated in one of the two highest short-term rating categories by any two of Standard & Poor's Ratings Group ("S&P") or Moody's Investor Service, Inc. ("Moody's") or any other nationally recognized statistical rating organization ("SRO") (or by a single rating agency if only one of these agencies has assigned a rating). The Fund will not invest more than 10% of its total assets, at the time of the investment in question, in variable amount master demand notes. 3. Corporate debt securities and bank obligations that are rated in one of the two highest short-term rating categories by any two of S&P, Moody's and any other SRO (or by a single rating agency if only one of these agencies has assigned a rating). 4. Unrated corporate debt securities, commercial paper and bank obligations that are issued by an issuer that has outstanding a class of short-term debt instruments (i.e., instruments having a maturity of 366 days or less) that (A) is comparable in priority and security to the unrated securities and (B) meets the rating requirements of 2 or 3 above. 5. Unrated corporate debt securities, commercial paper and bank obligations issued by domestic and foreign companies which have an outstanding long-term debt issue rated in the top two rating categories by a SRO and determined by the Trustees to be of comparable quality. 6. Unrated corporate debt securities, commercial paper and bank obligations otherwise determined by the Trustees to be of comparable quality. 7. Repurchase agreements with respect to the securities described in paragraphs 1 through 6 above. The Fund may invest up to 30% of its total assets in bank certificates of deposit and bankers' acceptances payable in U.S. dollars and issued by foreign banks (including U.S. branches of foreign banks) or by foreign branches of U.S. banks. These investments involve risks that are different from investments in domestic securities. These risks may include future unfavorable political and economic developments, possible withholding taxes, seizure of foreign deposits, currency controls, interest limitations or other governmental restrictions which might affect the payment of principal or interest on the securities in the Fund's portfolio. Additionally, there may be less publicly available information about foreign issuers. The Fund may invest in commercial paper and other short-term corporate obligations which meet the rating criteria specified in paragraphs 3 and 4 above which are issued in private placements pursuant to Section 4(2) of the Securities Act of 1933 (the "Act"). Such securities are not registered for purchase and sale by the public under the Act. The Fund has been informed that the staff of the SEC does not consider such securities to be readily marketable. The Fund will not invest more than 10% of its total assets in securities which are not readily marketable (including private placement securities) and in repurchase agreements maturing in more than seven days. The Fund may borrow funds, issue senior securities and agree to sell portfolio securities to financial institutions such as banks and broker-dealers and to repurchase them at a mutually agreed upon date and price (a "reverse repurchase agreement") for temporary or emergency purposes in amounts not in excess of 10% of the value of the Fund's total assets at the time of such borrowing. See "Investment Practices and Restrictions", below. Evergreen Tax Exempt Money Market Fund The investment objective of Evergreen Tax Exempt Money Market Fund is to achieve as high a level of current income exempt from Federal income tax, as is consistent with preserving capital and providing liquidity. The Fund will seek to achieve its objective by investing substantially all of its assets in a diversified portfolio of short-term (i.e., with remaining maturities not exceeding 397 days) debt obligations issued by states, territories and possessions of the United States and by the District of Columbia, and their political subdivisions and duly constituted authorities, the interest from which is exempt from Federal income tax. Such securities are generally known as Municipal Securities (See "Municipal Securities" below.) The Fund will invest in Municipal Securities only if they are determined to be of eligible quality under SEC rules and to present minimum credit risk. Municipal Securities in which the Fund may invest include: (i) municipal securities that are rated in one of the top two short-term rating categories by any two of S&P, Moody's or any other nationally recognized SRO (or by a single rating agency if only one of these agencies has assigned a rating); (ii) municipal securities that are issued by an issuer that has outstanding a class of short-term debt instruments (i.e., having a maturity of 366 days or less) that (A) is comparable in priority and security to such instruments and (B) meets the rating requirements above; and (iii) bonds with a remaining maturity of 397 days or less that are rated no lower than one of the top two long-term rating categories by any SRO and determined by the Trustees to be of comparable quality. For a description of such ratings see the Statement of Additional Information. If a portfolio security is no longer of eligible quality, the Fund shall dispose of such security in an orderly fashion as soon as reasonably practicable, unless the Trustees determine, in light of market conditions or other factors, that disposal of the instrument would not be in the best interests of the Fund and its shareholders. The Fund may also purchase Municipal Securities which are unrated at the time of purchase up to a maximum of 20% of its total assets, if such securities are determined by the Fund's Trustees to be of comparable quality. Certain Municipal Securities (primarily variable rate demand notes) may be entitled to the benefit of standby letters of credit or similar commitments issued by banks or other financial institutions and, in such instances, the Trustees will take into account the obligation of the bank in assessing the quality of such security. Interest income on certain types of bonds issued after August 7, 1986 to finance nongovernmental activities is an item of "tax-preference" subject to the Federal alternative minimum tax for individuals and corporations. To the extent the Fund invests in these "private activity" bonds (some of which were formerly referred to as "industrial development" bonds), individual and corporate shareholders, depending on their status, may be subject to the alternative minimum tax on the part of the Fund's distributions derived from the bonds. As a matter of fundamental policy, the Fund will invest at least 80% of its net assets in Municipal Securities, the interest from which is not subject to the Federal alternative minimum tax. Municipal Securities. As noted above, the Fund will invest substantially all of its assets in Municipal Securities. These include municipal bonds, short-term municipal notes and tax exempt commercial paper. "Municipal bonds" are debt obligations issued to obtain funds for various public purposes that are exempt from Federal income tax in the opinion of issuer's counsel. The two principal classifications of municipal bonds are "general obligation" and "revenue" bonds. General obligation bonds are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue bonds are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific source such as from the user of the facility being financed. The term "municipal bonds" also includes "moral obligation" issues which are normally issued by special purpose authorities. Industrial development bonds ("IDBs") and private activity bonds ("PABs") are in most cases revenue bonds and are not payable from the unrestricted revenues of the issuer. The credit quality of IDBs and PABs is usually directly related to the credit standing of the corporate user of the facilities being financed. Participation interests are interests in municipal bonds, including IDBs and PABs, and floating and variable rate obligations that are owned by banks. These interests carry a demand feature permitting the holder to tender them back to the bank, which demand feature is backed by an irrevocable letter of credit or guarantee of the bank. A put bond is a municipal bond which gives the holder the unconditional right to sell the bond back to the issuer at a specified price and exercise date, which is typically well in advance of the bond's maturity date. "Short-term municipal notes" and "tax exempt commercial paper" include tax anticipation notes, bond anticipation notes, revenue anticipation notes and other forms of short-term loans. Such notes are issued with a short-term maturity in anticipation of the receipt of tax funds, the proceeds of bond placements and other revenues. Floating Rate and Variable Rate Obligations. Municipal Securities also include certain variable rate and floating rate municipal obligations with or without demand features. These variable rate securities do not have fixed interest rates; rather, those rates fluctuate based upon changes in specified market rates, such as the prime rate, or are adjusted at predesignated periodic intervals. Such securities must comply with conditions established by the SEC under which they may be considered to have remaining maturities of 397 days or less. Certain of these obligations may carry a demand feature that gives the Fund the right to demand prepayment of the principal amount of the security prior to its maturity date. The demand obligation may or may not be backed by letters of credit or other guarantees of banks or other financial institutions. Such guarantees may enhance the quality of the security. As a matter of fundamental policy, the Fund will limit the value of its investments in any floating or variable rate securities which are not readily marketable and in all other not readily marketable securities to 10% or less of its total assets. When-Issued Securities. The Fund may purchase Municipal Securities on a "when-issued" basis (i.e., for delivery beyond the normal settlement date at a stated price and yield). The Fund generally would not pay for such securities or start earning interest on them until they are received. However, when the Fund purchases Municipal Securities on a when-issued basis, it assumes the risks of ownership at the time of purchase, not at the time of receipt. Failure of the issuer to deliver a security purchased by the Fund on a when-issued basis may result in the Fund's incurring a loss or missing an opportunity to make an alternative investment. The Fund does not expect that commitments to purchase when-issued securities will normally exceed 25% of its total assets. The Fund does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective. Stand-by Commitments. The Fund may also acquire "stand-by commitments" with respect to Municipal Securities held in its portfolio. Under a stand-by commitment, a dealer agrees to purchase, at the Fund's option, specified Municipal Securities at a specified price. The Fund expects that stand-by commitments generally will be available without the payment of direct or indirect consideration. However, if necessary and advisable, the Fund may pay for stand-by commitments either separately in cash or by paying a higher price for portfolio securities which are acquired subject to such a commitment (thus reducing the yield to maturity otherwise available for the same securities). The total amount paid in either manner for outstanding stand-by commitments held in the Fund's portfolio will not exceed 10% of the value of the Fund's total assets calculated immediately after each stand-by commitment is acquired. The Fund will enter into stand-by commitments only with banks and broker-dealers that, in the judgment of the Adviser, present minimal credit risks. Taxable Investments. The Fund may temporarily invest up to 20% of the Fund's net assets in taxable securities under any one or more of the following circumstances: (a) pending investment of proceeds of sale of Fund shares or of portfolio securities, (b) pending settlement of purchases of portfolio securities, and (c) to maintain liquidity for the purpose of meeting anticipated redemptions. In addition, the Fund may temporarily invest more than 20% of its total assets in taxable securities for defensive purposes. The Trust may invest for defensive purposes during periods when the Trust's assets available for investment exceed the available Municipal Securities that meet the Trust's quality and other investment criteria. Taxable securities in which the Fund may invest on a short-term basis include obligations of the United States Government, its agencies or instrumentalities, including repurchase agreements with banks or securities dealers involving such securities; time deposits maturing in not more than seven days; other debt securities rated within the two highest ratings assigned by any major rating service; commercial paper rated in the highest grade by Moody's or S&P; and certificates of deposit issued by United States branches of United States banks with assets of $1 billion or more. The ability of the Fund to meet its investment objective is necessarily subject to the ability of municipal issuers to meet their payment obligations. In addition, the portfolio of the Fund will be affected by general changes in interest rates which will result in increases or decreases in the value of the obligations held by the Fund. Investors should recognize that, in periods of declining interest rates, the yield of the Fund will tend to be somewhat higher than prevailing market rates, and in periods of rising interest rates, the yield of the Fund will tend to be somewhat lower. Also, when interest rates are falling, the inflow of net new money to the Fund from the continuous sale of its shares will likely be invested in portfolio instruments producing lower yields than the balance of the Fund's portfolio, thereby reducing the current yield of the Fund. In periods of rising interest rates, the opposite can be expected to occur. The Fund may borrow funds and agree to sell portfolio securities to financial institutions such as banks and broker-dealers and to repurchase them at a mutually agreed upon date and price (a "reverse repurchase agreement") for temporary or emergency purposes in amounts not in excess of 10% of the value of the Fund's total assets at the time of such borrowing. See "Investment Practices and Restrictions", below. INVESTMENT PRACTICES AND RESTRICTIONS General. The Funds invest only in securities that have remaining maturities of 397 days (thirteen months) or less at the date of purchase. For this purpose, floating rate or variable rate obligations (described above), which are payable on demand, but which may otherwise have a stated maturity in excess of this period, will be deemed to have remaining maturities of less than 397 days pursuant to conditions established by the SEC. The Funds maintain a dollar-weighted average portfolio maturity of ninety days or less. The Funds follow these policies to maintain a stable net asset value of $1.00 per share, although there is no assurance they can do so on a continuing basis. The market value of the obligations in a Fund's portfolio can be expected to vary inversely to changes in prevailing interest rates. Repurchase Agreements. A repurchase agreement is an arrangement pursuant to which a buyer purchases a security and simultaneously agrees to resell it to the vendor at a price that results in an agreed-upon market rate of return which is effective for the period of time (which is normally one to seven days, but may be longer) the buyer's money is invested in the security. The arrangement results in a fixed rate of return that is not subject to market fluctuations during a Fund's holding period. Repurchase agreements may be entered into with member banks of the Federal Reserve System, including, the Fund's custodian or "primary dealers" (as designated by the Federal Reserve Bank of New York) in United States Government securities. Each Fund will require continued maintenance of collateral with its Custodian in an amount equal to, or in excess of, the repurchase price (including accrued interest). In the event a vendor defaults on its repurchase obligation, a Fund might suffer a loss to the extent that the proceeds from the sale of the collateral were less than the repurchase price. If the vendor becomes the subject of bankruptcy proceedings, a Fund might be delayed in selling the collateral. The Adviser will review and continually monitor the creditworthiness of each institution with which the Fund enters into a repurchase agreement to evaluate these risks. A Fund may not enter into repurchase agreements if, as a result, more than 10% of a Fund's total assets would be invested in repurchase agreements maturing in more than seven days and in other securities that are not readily marketable. Securities Lending. In order to generate income and to offset expenses, the Fund may lend portfolio securities to brokers, dealers and other financial organizations. The Adviser will monitor the creditworthiness of such borrowers. Loans of securities by a Fund, if and when made, may not exceed 30% of the Fund's total assets and will be collateralized by cash, letters of credit or U.S. Government securities that are maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities, including accrued interest. While such securities are on loan, the borrower will pay a Fund any income accruing thereon, and the Fund may invest the cash collateral in portfolio securities, thereby increasing its return. A Fund will have the right to call any such loan and obtain the securities loaned at any time on five days' notice. Any gain or loss in the market price of the loaned securities which occurs during the term of the loan would affect the Fund and its investors. A Fund may pay reasonable fees in connection with such loans. Illiquid Securities. The Funds may invest up to 10% of their net assets in illiquid securities and other securities which are not readily marketable, including repurchase agreements with maturities longer than seven days. Securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933, which have been determined to be liquid, will not be considered by the Adviser to be illiquid or not readily marketable and, therefore, are not subject to the aforementioned 10% limit. The inability of a Fund to dispose of illiquid or not readily marketable investments readily or at a reasonable price could impair the Fund's ability to raise cash for redemptions or other purposes. The liquidity of securities purchased by a Fund which are eligible for resale pursuant to Rule 144A will be monitored by the Adviser on an ongoing basis, subject to the oversight of the Trustees. In the event that such a security is deemed to be no longer liquid, a Fund's holdings will be reviewed to determine what action, if any, is required to ensure that the retention of such security does not result in a Fund having more than 10% of its assets invested in illiquid or not readily marketable securities. Other Investment Policies. Each Fund may borrow funds and agree to sell portfolio securities to financial institutions such as banks and broker-dealers and to repurchase them at a mutually agreed upon date and price (a "reverse repurchase agreement") for temporary or emergency purposes in amounts not in excess of 10% of the value of a Fund's total assets at the time of such borrowing. At the time a Fund enters into a reverse repurchase agreement, it will place in a segregated custodial account cash, United States Government securities or liquid high grade debt obligations having a value equal to the repurchase price (including accrued interest) and will subsequently monitor the account to ensure that such equivalent value is maintained. Reverse repurchase agreements involve the risk that the market value of the securities sold by a Fund may decline below the repurchase price of those securities. A Fund will not enter into reverse repurchase agreements exceeding 5% of the value of its total assets. A Fund also will not purchase any securities whenever any borrowings (including reverse repurchase agreements) are outstanding. Other Investment Restrictions. Each Fund has adopted additional investment restrictions that are set forth in the Statement of Additional Information. - -------------------------------------------------------------------------------- MANAGEMENT OF THE FUNDS - -------------------------------------------------------------------------------- INVESTMENT ADVISER The management of each Fund is supervised by its Trustees. Evergreen Asset Management Corp. (the "Adviser") has been retained by each Fund as investment adviser. The Adviser succeeded on June 30, 1994 to the advisory business of the same name, but under different ownership, which was organized in 1971. The Adviser to the Funds, with its predecessors, has served as investment adviser to the Evergreen Funds since 1971. The Adviser is a wholly-owned subsidiary of First Union National Bank of North Carolina ("FUNB"). The address of the Adviser is 2500 Westchester Avenue, Purchase, New York 10577. FUNB is a subsidiary of First Union Corporation ("First Union"), one of the ten largest bank holding companies in the United States. Stephen A. Lieber and Nola Maddox Falcone serve as the chief investment officers of the Adviser and, along with Theodore J. Israel, Jr., were the owners of the Adviser's predecessor and the former general partners of Lieber & Company, which, as described below, provides certain subadvisory services to the Adviser in connection with its duties as investment adviser to the Fund. First Union is a bank holding company headquartered in Charlotte, North Carolina, which had $74.2 billion in consolidated assets as of September 30, 1994. First Union and its subsidiaries provide a broad range of financial services to individuals and businesses through offices in 36 states. The Capital Management Group of FUNB manages or otherwise oversees the investment of over $36 billion in assets belonging to a wide range of clients, including the First Union family of mutual funds. First Union Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered broker-dealer that is principally engaged in providing retail brokerage services consistent with its federal banking authorizations. First Union Capital Markets Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer principally engaged in providing, consistent with its federal banking authorizations, private placement, securities dealing, and underwriting services. The Adviser manages each Fund's investments, provides various administrative services and supervises each Fund's daily business affairs, subject to the authority of the Trustees of each Fund. The Adviser is entitled to receive from each Fund an annual fee equal to .50 of 1% of average daily net assets of each Fund. However, the Adviser has in the past, and may in the future, voluntarily waive all or a portion of its fee for the purpose of reducing each Fund's expense ratio. For the fiscal period ended August 31, 1994 the Adviser waived a portion of the advisory fee payable by the Evergreen Money Market Trust amounting to .39 of 1% of the Fund's average daily net assets on an annual basis, and received a net advisory fee amounting to .11 of 1% of the Fund's average daily net assets on an annual basis. With respect to the Evergreen Tax Exempt Money Market Fund the Adviser waived a portion of the advisory fee payable for the fiscal period ended August 31, 1994 amounting to .30 of 1% of the Fund's average daily net assets on an annual basis, and received a net advisory fee amounting to .20 of 1% of the Fund's average daily net assets on an annual basis. The total expenses as a percentage of average daily net assets on an annualized basis for Evergreen Money Market Trust and Evergreen Tax Exempt Money Market Fund for the fiscal period ended August 31, 1994 were .32% and .34%, respectively SUB-ADVISER The Adviser has entered into sub-advisory agreements with Lieber & Company with respect to each Fund which provides that Lieber & Company's research department and staff will furnish the Adviser with information, investment recommendations, advice and assistance, and will be generally available for consultation on each Fund's portfolio. Lieber & Company will be reimbursed by the Adviser in connection with the rendering of services on the basis of the direct and indirect costs of performing such services. There is no additional charge to the Funds for the services provided by Lieber & Company. The address of the Lieber & Company is 2500 Westchester Avenue, Purchase, New York 10577. Lieber & Company is an indirect, wholly-owned, subsidiary of First Union. - -------------------------------------------------------------------------------- PURCHASE AND REDEMPTION OF SHARES - -------------------------------------------------------------------------------- HOW TO BUY SHARES Eligible investors may purchase Fund shares at net asset value by mail or wire as described below. The Funds impose no sales charges on Class Y shares. Class Y shares are the only class of shares offered by this Prospectus and are only available to (i) all shareholders of record in one or more of the Evergreen Funds as of December 30, 1994, (ii) certain institutional investors and (iii) investment advisory clients of the Adviser and its affiliates. The minimum initial investment is $1,000, which may be waived in certain situations. There is no minimum for subsequent investments. Investors may make subsequent investments by establishing a Systematic Investment Plan or a Telephone Investment Plan. Purchases by Mail or Wire. Each investor must complete the enclosed Share Purchase Application and mail it together with a check made payable to the Fund whose shares are being purchased, to State Street Bank and Trust Company ("State Street") at P.O. Box 9021, Boston, Massachusetts 02205-9827. Checks not drawn on U.S. banks will be subject to foreign collection which will delay an investor's investment date and will be subject to processing fees. When making subsequent investments, an investor should either enclose the return remittance portion of the statement, or indicate on the face of the check, the name of the Fund in which an investment is to be made, the exact title of the account, the address, and the Fund account number. Purchase requests should not be sent to a Fund in New York. If they are, the Fund must forward them to State Street, and the request will not be effective until State Street receives them. Initial investments may also be made by wire by (i) calling State Street at 800-423-2615 for an account number and (ii) instructing your bank, which may charge a fee, to wire federal funds to State Street, as follows: State Street Bank and Trust Company, ABA No.0110-0002-8, Attn: Custodian and Shareholder Services. The wire must include references to the Fund in which an investment is being made, account registration, and the account number. A completed Application must also be sent to State Street indicating that the shares have been purchased by wire, giving the date the wire was sent and referencing the account number. Subsequent wire investments may be made by existing shareholders by following the instructions outlined above. It is not necessary, however, for existing shareholders to call for another account number. How the Funds Value Their Shares. The net asset value of each Fund's shares for purposes of both purchases and redemptions is determined twice daily, at 12 noon (Eastern time) and promptly after the regular close of the New York Stock Exchange (usually 4 p.m. New York time) each business day (i.e., any weekday exclusive of days on which the New York Stock Exchange or State Street is closed). The New York Stock Exchange is closed on New Year's Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset value per share is calculated by taking the sum of the values of a Fund's investments and any cash and other assets, subtracting liabilities, and dividing by the total number of shares outstanding. All expenses, including the fees payable to the Adviser, are accrued daily. The securities in a Fund's portfolio are valued on an amortized cost basis. Under this method of valuation, a security is initially valued at its acquisition cost, and thereafter, a constant straight-line amortization of any discount or premium is assumed each day regardless of the impact of fluctuating interest rates on the market value of the security. The market value of the obligations in a Fund's portfolio can be expected to vary inversely to changes in prevailing interest rates. As a result, the market value of the obligations in a Fund's portfolio may vary from the value determined using the amortized cost method. Securities which are not rated are normally valued on the basis of valuations provided by a pricing service when such prices are believed to reflect the fair value of such securities. Other assets and securities for which no quotations are readily available are valued at the fair value as determined in good faith by the Trustees. Each Fund attempts to maintain its net asset value at $1.00 per share. Under most conditions, management believes this will be possible, although there can be no assurance that this will be achieved. Calculations are periodically made to compare the value of a Fund's portfolio valued at amortized cost with market values. If a deviation of 1/2 of 1% or more were to occur between the net asset value calculated by reference to market values and a Fund's $1.00 per share net asset value, or if there were other deviations which the Trustees believed would result in a material dilution to shareholders or purchasers, the Trustees would promptly consider what action, if any, should be initiated. Additional Purchase Information. As a condition of this offering, if a purchase is canceled due to nonpayment or because a investor's check does not clear, the investor will be responsible for any loss a Fund or the Adviser incurs. If such investor is an existing shareholder, a Fund may redeem shares from his or her account to reimburse a Fund or the Adviser for any loss. In addition, such investors may be prohibited or restricted from making further purchases in any of the Evergreen Funds. Shares of the Funds are sold at the net asset value per share next determined after a shareholder's investment has been converted to federal funds. Investments by federal funds wire will be effective upon receipt. Qualified institutions may telephone orders for the purchase of Fund shares. Shares purchased by institutions via telephone will receive the dividend declared on that day if the telephone order is placed by 12 noon (Eastern time), and federal funds are received the same day by 4 p.m. (Eastern time). Institutions should telephone the Fund (800-235-0064) for additional information on same day purchases by telephone. Investment checks received at State Street will be invested on the date of receipt. Shareholders will begin earning dividends the following business day. The Share Purchase Application may not be used to invest in any of the prototype retirement plans for which the Evergreen Money Market Trust is an available investment. For information about the requirements to make such investments, including copies of the necessary application forms, please call the telephone number set forth on the cover page of this Prospectus. A Fund cannot accept investments specifying a certain price or date and reserves the right to reject any specific purchase order, including orders in connection with exchanges from the other Evergreen Funds. Although not currently anticipated, each Fund reserves the right to suspend the offer of shares for a period of time. HOW TO REDEEM SHARES You may "redeem", i.e., sell your shares in a Fund to the Fund on any day the Exchange is open, either directly or through your financial intermediary. The price you will receive is the net asset value next calculated after the Fund receives your request in proper form. Proceeds generally will be sent to you within seven days. However, for shares recently purchased by check, a Fund will not send proceeds until it is reasonably satisfied that the check has been collected (which may take up to 15 days). Redeeming Shares Directly by Mail or Telephone. Send a signed letter of instruction or stock power form to State Street which is the registrar, transfer agent and dividend-disbursing agent for each Fund. Stock power forms are available from your financial intermediary, State Street, and many commercial banks. Additional documentation is required for the sale of shares by corporations, financial intermediaries, fiduciaries and surviving joint owners. Signature guarantees are required for all redemption requests for shares with a value of more than $10,000 or where the redemption proceeds are to be mailed to an address other than that shown in the account registration. A signature guarantee must be provided by a bank or trust company (not a Notary Public), a member firm of a domestic stock exchange or by other financial institutions whose guarantees are acceptable to State Street. Shareholders may withdraw amounts of $1,000 or more from their accounts by calling State Street (800-423-2615) between the hours of 9:00 a.m. and 4:00 p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on which the New York Stock Exchange or State Street's offices are closed). The New York Stock Exchange is closed on New Year's Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Redemption requests made after 4:00 p.m. (Eastern time) will be processed using the net asset value determined on the next business day. Such redemption requests must include the shareholder's account name, as registered with a Fund, and the account number. During periods of drastic economic or market changes, shareholders may experience difficulty in effecting telephone redemptions. Shareholders who are unable to reach a Fund or State Street by telephone should follow the procedures outlined above for redemption by mail. The telephone redemption service is not made available to shareholders automatically. Shareholders wishing to use the telephone redemption service must indicate this on the enclosed Share Purchase Application and choose how the redemption proceeds are to be paid. Redemption proceeds will either (i) be mailed by check to the shareholder at the address in which the account is registered or (ii) be wired to an account with the same registration as the shareholder's account in a Fund at a designated commercial bank. State Street currently deducts a $5.00 wire charge from all redemption proceeds wired. This charge is subject to change without notice. Redemption proceeds will be wired on the same day if the request is made prior to 12 noon (Eastern time). Such shares, however, will not earn dividends for that day. Redemption requests received after 12 noon will earn dividends for that day, and the proceeds will be wired on the following business day. A shareholder who decides later to use this service, or to change instructions already given, should fill out a Shareholder Services Form and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank or trust company (not a Notary Public), a member firm of a domestic stock exchange or by other financial institutions whose guarantees are acceptable to State Street. Shareholders should allow approximately 10 days for such form to be processed. The Funds will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. These procedures include requiring some form of personal identification prior to acting upon instructions and tape recording of telephone instructions. If a Fund fails to follow such procedures, it may be liable for any losses due to unauthorized or fraudulent instructions. The Funds will not be liable for following telephone instructions reasonably believed to be genuine. The Funds reserve the right to refuse a telephone redemption if it is believed advisable to do so. Procedures for redeeming Fund shares by telephone may be modified or terminated without notice at any time. Redemptions by Check. Upon request, each Fund will provide holders of Class Y shares, without charge, with checks drawn on the Fund that will clear through State Street. Shareholders will be subject to State Street's rules and regulations governing such checking accounts. Checks will be sent usually within ten business days following the date the account is established. Checks may be made payable to the order of any payee in an amount of $250 or more. The payee of the check may cash or deposit it like a check drawn on a bank. (Investors should be aware that, as in the case with regular bank checks, certain banks may not provide cash at the time of deposit, but will wait until they have received payment from State Street.) When such a check is presented to State Street for payment, State Street, as the shareholder's agent, causes the Fund to redeem a sufficient number of full and fractional shares in the shareholder's account to cover the amount of the check. Checks will be returned by State Street if there are insufficient or uncollectable shares to meet the withdrawal amount. The check writing procedure for withdrawal enables shareholders to continue earning income on the shares to be redeemed up to but not including the date the redemption check is presented to State Street for payment. Shareholders wishing to use this method of redemption, should fill out the appropriate part of the Share Purchase Application (including the Signature Card) and mail the completed form to State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827. Shareholders requesting this service after an account has been opened must contact State Street since additional documentation will be required. Currently, there is no charge either for checks or for the clearance of any checks. This service may be terminated or altered at any time. General. Under unusual circumstances, a Fund may suspend redemptions or postpone payment for up to seven days or longer, as permitted by Federal securities law. The Funds reserve the right to close an account that through redemption has remained below $1,000 for 30 days. Shareholders will receive 60 days' written notice to increase the account value before the account is closed. See the Statement of Additional Information for further details. EXCHANGE PRIVILEGE How To Exchange Shares. You may exchange some or all of your shares for shares of the other Evergreen Funds by telephone or mail as described below. An exchange which represents an initial investment in another Evergreen Fund must amount to at least $1,000. Once an exchange request has been telephoned or mailed, it is irrevocable and may not be modified or canceled. Exchanges will be made on the basis of the relative net asset values of the shares exchanged next determined after an exchange request is received. Exchanges are subject to minimum investment and suitability requirements. Each of the Evergreen Funds have different investment objectives and policies. For complete information, a prospectus of the fund into which an exchange will be made should be read prior to the exchange. An exchange is treated for Federal income tax purposes as a redemption and purchase of shares and may result in the realization of a capital gain or loss. Each Fund imposes a fee of $5 per exchange on shareholders who exchange in excess of four times per calendar year. This exchange privilege may be materially modified or discontinued at any time by the Fund upon sixty days' notice to shareholders and is only available in states in which shares of the fund being acquired may lawfully be sold. Exchanges by Telephone and Mail. You may exchange shares by telephone by calling State Street (800-423-2615). Exchange requests made after 4:00 p.m. (Eastern time) will be processed using the net asset value determined on the next business day. During periods of drastic economic or market changes, shareholders may experience difficulty in effecting telephone exchanges. You should follow the procedures outlined below for exchanges by mail if you are unable to reach State Street by telephone. If you wish to use the telephone exchange service you should indicate this on the enclosed Share Purchase Application. As noted above, each Fund will employ reasonable procedures to confirm that instructions for the redemption or exchange of shares communicated by telephone are genuine. A telephone exchange may be refused by a Fund or State Street if it is believed advisable to do so. Procedures for exchanging Fund shares by telephone may be modified or terminated at any time. Written requests for exchanges should follow the same procedures outlined for written redemption requests in the section entitled "How to Redeem Shares", however, no signature guarantee is required.. SHAREHOLDER SERVICES The Funds offer the following shareholder services. For more information about these services or your account, contact your financial intermediary, Evergreen Funds Distributor, Inc.("EFD"), the distributor of the Funds, or the toll-free number for the Funds, 800-807-2940. Some services are described in more detail in the Share Purchase Application. Systematic Investment Plan. You may make monthly or quarterly investments into an existing account automatically in amounts of not less than $25. Telephone Investment Plan. You may make investments into an existing account electronically in amounts of not less than $100 or more than $25,000 per investment. Telephone investment requests received by 3:00 p.m. (Eastern time) will be credited to a shareholder's account two business days after the request is received. Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or when an existing account reaches that size, you may participate in the Fund's Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share Purchase Application. Under this plan, you may receive (or designate a third party to receive) a monthly or quarterly check in a stated amount of not less than $100. Fund shares will be redeemed as necessary to meet withdrawal payments. All participants must elect to have their dividends and capital gain distributions reinvested automatically. Retirement Plans. Eligible investors may invest in Evergreen Money Market Trust under the following prototype retirement plans: (i) Individual Retirement Account (IRA); (ii) Simplified Employee Pension (SEP) for sole proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money Purchase Pension Plans for corporations and their employees. Automatic Reinvestment Plan. For the convenience of investors, all dividends and distributions are automatically reinvested in full and fractional shares of the Fund at the net asset value per share at the close of business on the last business day of each month, unless otherwise requested by a shareholder in writing. If the transfer agent does not receive a written request for subsequent dividends and/or distributions to be paid in cash at least three full business days prior to a given record date, the dividends and/or distributions to be paid to a shareholder will be reinvested. If you elect to receive dividends and distributions in cash and the U.S. Postal Service cannot deliver the checks, or if the checks remain uncashed for six months, the checks will be reinvested into your account at the then current net asset value. EFFECT OF BANKING LAWS The Glass-Steagall Act and other banking laws and regulations presently prohibit member banks of the Federal Reserve System ("Member Banks") or their non-bank affiliates from sponsoring, organizing, controlling, or distributing the shares of registered open-end investment companies such as the Funds. Such laws and regulations also prohibit banks from issuing, underwriting or distributing securities in general. However, under the Glass-Steagall Act and such other laws and regulations, a Member Bank or an affiliate thereof may act as investment adviser, transfer agent or custodian to a registered open-end investment company and may also act as agent in connection with the purchase of shares of such an investment company upon the order of their customer. The Adviser, since it is a subsidiary of First Union National Bank of North Carolina ("FUNB"), is subject to and in compliance with the aforementioned laws and regulations. Changes to applicable laws and regulations or future judicial or administrative decisions could result in the Adviser being prevented from continuing to perform the services required under the investment advisory contract or from acting as agent in connection with the purchase of shares of a Fund by its customers. If the Adviser were prevented from continuing to provide the services called for under the investment advisory agreement, it is expected that the Trustees would identify, and call upon each Fund's shareholders to approve, a new investment adviser. If this were to occur, it is not anticipated that the shareholders of any Fund would suffer any adverse financial consequences. - -------------------------------------------------------------------------------- OTHER INFORMATION - -------------------------------------------------------------------------------- DIVIDENDS, DISTRIBUTIONS AND TAXES The Funds declare substantially all of their net income as dividends on each business day. Such dividends are paid monthly. Net income, for dividend purposes, includes accrued interest and any market discount or premium that day, less the estimated expenses of a Fund. Gains or losses realized upon the sale of portfolio securities are not included in net income, but are reflected in the net asset value of a Fund's shares. Distributions of any net realized capital gains will be made annually or more frequently as required by the provisions of the Internal Revenue Code of 1986, as amended. The amount of dividends may fluctuate from day to day, and the dividend may be omitted on a day where Fund expenses exceed net investment income. Dividends and distributions generally are taxable in the year in which they are paid, except any dividends paid in January that were declared in the previous calendar quarter may be treated as paid in the immediately preceding December. Such dividends will be automatically reinvested in full and fractional shares of a Fund on the last business day of each month. However, shareholders who so inform the transfer agent in writing may have their dividends paid out in cash monthly. Shareholders who invest by check will be credited with a dividend on the business day following initial investment. Shareholders will receive dividends on investments made by federal funds bank wire the same day the wire is received provided that wire purchases are received by State Street by 12 noon (Eastern time). Shares purchased by qualified institutions via telephone as described in "How to Purchase Shares" will receive the dividend declared on that day if the telephone order is placed by 12 noon (Eastern time), and federal funds are received by 4 p.m. (Eastern time). All other wire purchases received after 12 noon (Eastern time) will earn dividends beginning the following business day. Dividends accruing on the day of redemption will be paid to redeeming shareholders except for redemptions by check and where proceeds are wired the same day. (See "How to Redeem Shares".) Each Fund has qualified and intends to continue to qualify to be treated as a regulated investment company under the Code. While so qualified, it is expected that each Fund will not be required to pay any Federal income taxes on that portion of its investment company taxable income and any net realized capital gains it distributes to shareholders. The Code imposes a 4% nondeductible excise tax on regulated investment companies, such as the Funds, to the extent they do not meet certain distribution requirements by the end of each calendar year. Each Fund anticipates meeting such distribution requirements. The excise tax generally does not apply to the tax exempt income of a regulated investment company (such as Evergreen Tax Exempt Money Market Fund) that pays exempt interest dividends. Except as noted below with respect to Evergreen Tax Exempt Money Market Fund, most shareholders of the Funds normally will have to pay Federal income taxes and any state or local taxes on the dividends and distributions they receive from a Fund. Evergreen Tax Exempt Money Market Fund will designate and pay exempt-interest dividends derived from interest earned on qualifying tax exempt obligations. Such exempt-interest dividends may be excluded by shareholders of the Fund from their gross income for Federal income tax purposes, however, (1) all or a portion of such exempt-interest dividends may be a specific preference item for purposes of the Federal individual and corporate alternative minimum taxes to the extent that they are derived from certain types of private activity bonds issued after August 7, 1986, and (2) all exempt-interest dividends will be a component of "adjusted current earnings" for purposes of the Federal corporate alternative minimum tax. Dividends paid from taxable income, if any, and distributions of any net realized short-term capital gains (whether from tax exempt or taxable obligations) are taxable as ordinary income, even though received in additional Fund shares. Market discount recognized on taxable and tax-free bonds is taxable as ordinary income, not as excludable income. Following the end of each calendar year, every shareholder of the Fund will be sent applicable tax information and information regarding the dividends and capital gain distributions made during the calendar year. Under current law, the highest Federal income tax rate applicable to net long-term capital gains realized by individuals is 28%. The rate applicable to corporations is 35%. Since the Funds' gross income is ordinarily expected to be interest income, it is not expected that the 70% dividends-received deduction for corporations will be applicable. Specific questions should be addressed to the investor's own tax adviser. Each Fund is required by Federal law to withhold 31% of reportable payments (which may include dividends, capital gain distributions and redemptions) paid to certain shareholders. In order to avoid this backup withholding requirement, you must certify on the Share Purchase Application, or on a separate form supplied by State Street, that the investor's social security or taxpayer identification number is correct and that the investor is not currently subject to backup withholding or is exempt from backup withholding. GENERAL INFORMATION Portfolio Transactions. Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc., and subject to seeking best price and execution, a Fund may consider sales of its shares as a factor in the selection of dealers to enter into portfolio transactions with the Fund. Other Classes of Shares. Evergreen Money Market Trust offers three classes of shares, Class A, Class B, and Class Y. Evergreen Tax-Exempt Money Market Fund offers two classes of shares, Class A and Class Y. Class Y shares are the only class offered by this Prospectus and are only available to (i) all shareholders of record in one or more of the Evergreen Funds as of December 30, 1994, (ii) certain institutional investors and (iii) investment advisory clients of the Adviser and its affiliates. The dividends payable with respect to Class A and Class B shares will be less than those payable with respect to Class Y shares due to the distribution and distribution-related expenses borne by Class A and Class B shares and the fact that such expenses are not borne by Class Y shares. Organization. The Evergreen Money Market Trust is a Massachusetts business trust organized in 1987 and the Evergreen Tax Exempt Money Market Fund is a separate investment series of the Evergreen Municipal Trust, which is a Massachusetts business trust organized in 1988. The Funds do not intend to hold annual shareholder meetings; shareholder meetings will be held only when required by applicable law. Shareholders have available certain procedures for the removal of Trustees or Directors. A shareholder in each class of a Fund will be entitled to his or her share of all dividends and distributions from a Fund's assets, based upon the relative value of such shares to those of other Classes of the Fund, and, upon redeeming shares, will receive the then current net asset value of the Class of shares of the Fund represented by the redeemed shares less any applicable contingent deferred sales charge ("CDSC"). There is no CDSC imposed on redemptions of Class Y shares. The Trusts are empowered to establish, without shareholder approval, additional investment series, which may have different investment objectives, and additional classes of shares for any existing or future series. If an additional series or class were established in a Fund, each share of the series or class would normally be entitled to one vote for all purposes. Generally, shares of each series and class would vote together as a single class on matters, such as the election of Trustees, that affect each series and class in substantially the same manner. Class A, B and Y shares have identical voting, dividend, liquidation and other rights, except that each class bears, to the extent applicable, its own distribution and transfer agency expenses as well as any other expenses applicable only to a specific class. Each class of shares votes separately with respect to Rule 12b-1 distribution plans and other matters for which separate class voting is appropriate under applicable law. Shares are entitled to dividends as determined by the Trustees and, in liquidation of a Fund, are entitled to receive the net assets of the Fund. Registrar, Transfer Agent And Dividend-Disbursing Agent. State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each Fund's registrar, transfer agent and dividend-disbursing agent for a fee based upon the number of shareholder accounts maintained for the Funds. The transfer agency fee with respect to the Class B shares will be higher than the transfer agency fee with respect to the Class A shares. Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz Incorporated, located at 237 Park Avenue, New York, New York 10017, is the principal underwriter of the Funds. EFD provides personnel to serve as officers of the Funds. The salaries and other expenses related to providing such personnel are borne by EFD. For its services, EFD is paid an annual fee by the Adviser. No portion of this fee is borne by Class Y shareholders. Performance Information. From time to time, a Fund may quote its yield in advertisements or in reports to shareholders. Yield information may be useful in reviewing the performance of a Fund and for providing a basis for comparison with other investment alternatives. However, since net investment income of a Fund changes in response to fluctuations in interest rates and Fund expenses, any given yield quotation should not be considered representative of a Fund's yields for any future period. The method of calculating each Fund's yield is set forth in the Statement of Additional Information. Before investing in the Evergreen Tax Exempt Money Market Fund, the investor may want to determine which investment -- tax-free or taxable -- will result in a higher after-tax return. To do this, the yield on the tax-free investment should be divided by the decimal determined by subtracting from 1 the highest Federal tax rate to which the investor currently is subject. For example, if the tax-free yield is 6% and the investor's maximum tax bracket is 36%, the computation is: 6% Tax-Free Yield /(1 - .36 Tax Rate) = 6/.64 = 9.38% Taxable Yield. In this example, the investor's after-tax return will be higher from the 6% tax-free investment if available taxable yields are below 9.38%. Conversely, the taxable investment will provide a higher return when taxable yields exceed 9.38%. This is only an example and is not necessarily reflective of a Fund's yield. The tax equivalent yield will be lower for investors in the lower income brackets. Comparative performance information may also be used from time to time in advertising or marketing the Fund's shares, including data from Lipper Analytical Services, Inc., IBC/Donoghue's Money Fund Report, Bank Rate Monitor and other industry publications. Liability Under Massachusetts Law. Under Massachusetts law, trustees and shareholders of a business trust may, in certain circumstances, be held personally liable for its obligations. The Declarations of Trust under which Funds operate provide that no trustee or shareholder will be personally liable for the obligations of the trust and that every written contract made by the trust contain a provision to that effect. If any trustee or shareholder were required to pay any liability of the trust, that person would be entitled to reimbursement from the general assets of the trust. Additional Information. This Prospectus and the Statement of Additional Information, which have been incorporated by reference herein, do not contain all the information set forth in the Registration Statements filed by the Funds with the Commission under the Securities Act. Copies of the Registration Statements may be obtained at a reasonable charge from the Commission or may be examined, without charge, at the offices of the Commission in Washington, D.C. STATEMENT OF ADDITIONAL INFORMATION ___________, 1995 THE EVERGREEN MUTUAL FUNDS 2500 Westchester Avenue, Purchase, New York 10577 800-807-2940 This Statement of Additional Information pertains to all classes of shares of the Funds listed below. It is not a prospectus and should be read in conjunction with the current Prospectus of the Fund in which you are making or contemplating an investment. The Evergreen Mutual Funds are offered through 6 separate prospectuses representing different investment categories, including growth, growth and income, fixed-income, money market and tax exempt funds. Copies of the Prospectuses for each Fund listed below may be obtained without charge by calling the number listed above. The Evergreen Fund ("Evergreen") The Evergreen Aggressive Growth Fund ("Aggressive") Evergreen Global Real Estate Equity Fund ("Global") Evergreen U.S. Real Estate Equity Fund ("U.S. Real Estate") The Evergreen Limited Market Fund, Inc. ("Limited Market") Evergreen Growth and Income Fund ("Growth and Income") The Evergreen Total Return Fund ("Total Return") The Evergreen American Retirement Fund ("American Retirement") Evergreen Small Cap Equity Income Fund ("Small Cap") Evergreen Foundation Fund ("Foundation") Evergreen Tax Strategic Foundation Fund ("Tax Strategic") Evergreen Short-Intermediate Municipal Fund ("Short-Intermediate") Evergreen Short-Intermediate Municipal Fund-CA("Short-Intermediate-CA") Evergreen National Tax-Free Fund ("National") Evergreen Florida High Income Fund ("Florida High Income") Evergreen Tax Exempt Money Market Fund ("Tax Exempt") The Evergreen Money Market Trust ("Money Market") Evergreen U.S. Government Securities Fund ("U.S. Government") TABLE OF CONTENTS . Page Investment Objectives and Policies.................................... Investment Restrictions............................................... Non-Fundamental Operating Policies.................................... Certain Risk Considerations........................................... Management............................................................ Investment Advisers................................................... Distribution Plans.................................................... Allocation of Brokerage............................................... Additional Tax Information............................................ Net Asset Value....................................................... Purchase of Shares.................................................... Performance Information............................................... Financial Statements.................................................. Appendix A - Note, Bond And Commercial Paper Ratings i Appendix B - Additional Information Concerning California ii Appendix B - Additional Information Concerning Florida iii INVESTMENT OBJECTIVES AND POLICIES (See also "Investment Objective and Policies" in each Fund's Prospectus) .........The investment objective of each Fund and a description of the securities in which they may invest is set forth under "Investment Objective and Policies" in each Fund's Prospectus. .........Each of the Funds, with the exception of Global and U.S. Real Estate may not invest more than 25% of its net assets in any one industry. Under normal circumstances, Global and U.S. Real Estate will invest not less than 65% of their total assets in equity securities of companies principally engaged in the real estate industry. Also, Florida High Income, National, Tax Strategic, Short-Intermediate and Short-Intermediate-CA may, subject to the Investment Restrictions set forth below, invest 25% or more of their total assets in municipal securities that are related in such a way that an economic, business, or political development or change affecting one such security could also affect the other securities (for example, securities whose issuers are located in the same state). .........As a matter of non-fundamental investment policy, each Fund may invest up to 15% of its net assets in illiquid securities and other securities which are not readily marketable (10% for Money Market and Tax Exempt). Repurchase agreements with maturities longer than seven days will be included for the purpose of the foregoing 15% (or 10%) limit but, with respect to Global, U.S. Real Estate, Small Cap, Tax Strategic, National, Short-Intermediate, Short-Intermediate-CA, Tax Exempt, Money Market and U.S. Government,, investments in such repurchase agreements are limited to 10% of a Fund's assets. American Retirement and Foundation may not invest in repurchase agreements. Securities eligible for resale pursuant to Rule 144A under the Securities Act of 1933, which the Trustees/Directors of a Fund have determined to be liquid, will not be considered by the Fund to be illiquid or not readily marketable and, therefore, are not subject to the aforementioned 15% limit. The inability of a Fund to dispose of illiquid or not readily marketable investments readily or at a reasonable price could impair the Fund's ability to raise cash for redemptions or other purposes. The liquidity of securities purchased by a Fund which are eligible for resale pursuant to Rule 144A will be monitored by its investment adviser on an ongoing basis, subject to the oversight of the Trustees/Directors. Notwithstanding the fact that a favorable liquidity determination was made at the time of purchase of such a security, subsequent developments affecting the market for such securities held by a Fund could have a negative effect on their liquidity. In the event that such a security is deemed to be no longer liquid, a Fund's holdings will be reviewed to determine what action, if any, is required to ensure that the retention of such security does not result in the Fund exceeding the applicable limit on assets invested in illiquid or not readily marketable securities. .........A portion of the assets of Florida High Income, National, Short-Intermediate, Short-Intermediate-CA or Tax-Strategic may be invested in health care bonds issued for public and non-profit hospitals. Since 1983, the U.S. hospital industry has been under significant pressure from third party payors to reduce expenses and limit length of stay, a phenomenon which has negatively affected the financial health of many hospitals. National or Tax-Strategic may also from time to time invest in electric revenue issues which have exposure to or participate in nuclear projects. There may be substantial construction or operating risks associated with such nuclear plants which could affect the issuer's financial performance. Such risks include delay in construction and operation due to increased regulation, unexpected outages or plant shutdowns, increased Nuclear Regulatory Commission surveillance or inadequate rate relief. .........Evergreen, Florida High Income, Total Return and Growth and Income may write covered call options to a limited extent on their portfolio securities ("covered options") in an attempt to earn additional income. A call option gives the purchaser of the option the right to buy a security from the writer at the exercise price at any time during the option period. The premium paid to the writer is the consideration for undertaking the obligations under the option contract. The writer foregoes the opportunity to profit from an increase in the market price of the underlying security above the exercise price except insofar as the premium represents such a profit. The Fund retains the risk of loss should the price of the underlying security decline. The Fund will write only covered call option contracts and will receive premium income from the writing of such contracts. Evergreen, Total Return and Growth and Income may purchase call options to close out a previously written call option. In order to do so, the Fund will make a "closing purchase transaction" -- the purchase of a call option on the same security with the same exercise price and expiration date as the call option which it has previously written. A Fund will realize a profit or loss from a closing purchase transaction if the cost of the transaction is less or more than the premium received from the writing of the option. If an option is exercised, a Fund realizes a long-term or short-term gain or loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. .........Consistent with its strategy of investing in "undervalued" securities, Growth and Income may invest in lower medium and low-quality bonds and may also purchase bonds in default if, in the opinion of the Fund's investment adviser, there is significant potential for capital appreciation. Growth and Income, however, will not invest more than 5% of its total assets in debt securities which are rated below investment grade. These bonds are regarded as speculative with respect to the issuer's continuing ability to meet principal and interest payments. High yield bonds may be more susceptible to real or perceived adverse economic and competitive industry conditions than investment grade bonds. A projection of an economic downturn, or higher interest rates, for example, could cause a decline in high yield bond prices because such events could lessen the ability of highly leveraged companies to make principal and interest payments on their debt securities. In addition, the secondary trading market for high yield bonds may be less liquid than the market for higher grade bonds, which can adversely affect the ability to dispose of such securities. .........Subject to the limits described in the Prospectus and this Statement of Additional Information, Florida High Income, National, Small Cap, U.S. Government, and U.S. Real Estate may, to a limited extent, enter into financial futures contracts including futures contracts based on securities indices, purchase and write put and call options on such futures contracts, and engage in related closing transactions. .........Florida High Income, Foundation, National, Short-Intermediate and Short-Intermediate-CA may invest in variable and floating rate securities. The terms of variable and floating rate instruments provide for the interest rate to be adjusted according to a formula on certain predetermined dates. Variable and floating rate instruments that are repayable on demand at a future date are deemed to have a maturity equal to the time remaining until the principal will be received on the assumption that the demand feature is exercised on the earliest possible date. For the purposes of evaluating the interest-rate sensitivity of the Fund, variable and floating rate instruments are deemed to have a maturity equal to the period remaining until the next interest-rate readjustment. For the purposes of evaluating the credit risks of variable and floating rate instruments, these instruments are deemed to have a maturity equal to the time remaining until the earliest date the Fund is entitled to demand repayment of principal. Foundation may invest no more than 5% of its total assets, at the time of the investment in question, in variable and floating rate securities. Florida High Income, National, Short-Intermediate and Short-Intermediate-CA may invest no more than 10% of their total assets, at the time of the investment in question, in variable and floating rate securities which are not readily marketable. Fixed Income Ratings. The ratings assigned by nationally recognized statistical rating organizations ("NRSROs") such as Moody's Investors Service, Inc. (Moody's") or Standard & Poor's Ratings Group ("S&P") represent their respective opinions of the quality of the municipal bonds and notes and Taxable Short Term Obligations which they undertake to rate. It should be emphasized, however, that ratings are general and not absolute standards of quality. Consequently, obligations with the same maturity, stated interest rate and rating may have different yields, while obligations of the same maturity and stated interest rate with different ratings may have the same yield. While the each Fund's investment adviser intends to use NRSROs such as Moody's or S&P to evaluate the risk involved in purchasing medium and lower rated and unrated instruments, they will also rely heavily on their internal credit analysis. See Appendix A for further information about the ratings of Moody's and S&P as to the various rated Municipal Obligations which the Funds may purchase. When-Issued and Delayed Delivery Obligations. Each Fund may purchase Obligations on a when-issued or delayed delivery basis. The purchase price and the interest rate payable on the Obligations are fixed on the transaction date. At the time a Fund makes the commitment to purchase Obligations on a when-issued or delayed delivery basis, it will record the transaction and thereafter reflect the value each day of such Obligations in determining its net asset value. A Fund will make commitments for such when-issued transactions only when it has the intention of actually acquiring the Obligations. To facilitate such acquisitions, such Fund will maintain with the Custodian a separate account with portfolio Obligations in an amount at least equal to such commitments. On delivery dates for such transactions, a Fund will meet its commitments by selling the Obligations held in the separate account and/or from cash flow. At the time of settlement, the market values of the securities purchased may vary from the purchase prices. Although a Fund will only purchase Obligations on a when-issued basis with the intention of actually acquiring the Obligations, such Fund may sell these securities before the settlement date if it is deemed advisable. There may be risks of delay in receiving additional collateral, or risks of delay in recovery of the securities or even loss of rights in the collateral if the borrower of the securities becomes insolvent. MUNICIPAL BONDS. The two principal classifications of municipal bonds are "general obligation" bonds and "revenue" bonds. General obligation bonds are secured by the issuer's pledge of its full faith, credit and unlimited taxing power for the payment of principal and interest. Revenue or special tax bonds are payable only from the revenues derived from a particular facility or class of facilities or projects or, in a few cases, from the proceeds of a special excise or other tax, but are not supported by the issuer's power to levy general taxes. There are, of course, variations in the security of municipal bonds, both within a particular classification and between classifications, depending on numerous factors. The yields of municipal bonds depend on, among other things, general money market conditions, general conditions of the municipal bond market, size of a particular offering, the maturity of the obligations and rating of the issue. Since the Funds may invest in industrial development bonds, the Funds may not be an appropriate investment for entities which are "substantial users" of facilities financed by industrial development bonds or for investors who are "related persons". Generally, an individual will not be a "related person" under the Code unless such investor or his immediate family (spouse, brothers, sisters and lineal descendants) own directly or indirectly in the aggregate more than 50 percent of the value of the equity of a corporation or partnership which is a "substantial user" of a facility financed from proceeds of "industrial development bonds". A "substantial user" of such facilities is defined generally as a "non-exempt person who regularly uses a part of a facility" financed from the proceeds of industrial development bonds. As set forth in the Prospectus, the Code establishes new unified volume caps for most "private purpose" municipal bonds (such as industrial development bonds and obligations to finance low-interest mortgages on owner-occupied housing and student loans). The unified volume cap is not expected to affect adversely the availability of Municipal Obligations for investment by the Funds; however, it is possible that proposals will be introduced before Congress to further restrict or eliminate the federal income tax exemption for interest on Municipal Obligations. Any such proposals, if enacted, could adversely affect the availability of municipal bonds for investment by the Funds and the value of each Fund's portfolio might be affected. In that event, each Fund might reevaluate its investment policies and restrictions and consider recommending to its shareholders changes in both. CURRENCY HEDGING - Global Forward Contracts .........As noted in its Prospectus, Global may enter into forward foreign currency exchange contracts in order to protect against uncertainty in the level of future foreign exchange rates. A forward foreign currency exchange contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days (usually less than one year) from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has a deposit requirement, and no commissions are charged at any stage for trades. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (the spread) between the price at which they are buying and selling various currencies. .........Except for cross-hedges, the Fund will not enter into such forward contracts or maintain a net exposure to such contracts where the consummation of the contracts would obligate the Fund to deliver an amount of foreign currency in excess of the value of the Fund's portfolio securities or other assets denominated in that currency. At the consummation of such a forward contract, the Fund may either make delivery of the foreign currency or terminate its contractual obligation to deliver the foreign currency by purchasing an offsetting contract obligating it to purchase, at the same maturity date, the same amount of such foreign currency. If the Fund chooses to make delivery of the foreign currency, it may be required to obtain such currency through the sale of portfolio securities denominated in such currency or through conversion of other assets of the Fund into such currency. If the Fund engages in an offsetting transaction, the Fund will incur a gain or loss to the extent that there has been a change in forward contract prices. .........The Fund's investment adviser believes that it is important to have the flexibility to enter into such forward contracts when it determines that the best interest of the Fund will be served. The Fund will place cash or high grade debt securities in a separate account of the Fund at its custodian bank in an amount equal to the value of the Fund's total assets committed to forward foreign currency exchange contracts entered into as a hedge against a substantial decline in the value of a particular foreign currency. If the value of the securities placed in the separate account declines, additional cash or securities will be placed in the account on a daily basis so that the value of the account will equal the amount of the Fund's commitments with respect to such contracts. .........It should be realized that this method of protecting the value of the Fund's portfolio securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange which can be achieved at some future point in time. Additionally, although such contracts tend to minimize the risk of loss due to a decline in the value of the hedged currency, at the same time they tend to limit any potential gain which might result should the value of such currency increase. .........Inasmuch as it is not clear whether the gross income from certain foreign currency transactions will be excluded by the Internal Revenue Service from "qualifying income" for the purpose of qualification of the Fund as a regulated investment company under U.S. Federal income tax law, the Fund intends to operate so that the gross income from such transactions, together with other nonqualifying income, will be less than 10% of the gross income of the Fund in any taxable year. Futures Contracts on Currencies .........Global may also invest in currency futures contracts and related options thereon. The Fund may sell a currency futures contract or a call option thereon or purchase a put option on such futures contract, if Evergreen Asset anticipates that exchange rates for a particular currency will fall, as a hedge (or in the case of a sale of a call option, a partial hedge) against a decrease in the value of the Fund's securities denominated in such currency. If Evergreen Asset anticipates that exchange rates will rise, the Fund may purchase a currency futures contract or a call option thereon to protect against an increase in the price of securities denominated in a particular currency the Fund intends to purchase. These futures contracts and related options will be used only as a hedge against anticipated currency rate changes. .........A currency futures contract sale creates an obligation by the Fund, as seller, to deliver the amount of currency called for in the contract at a specified future time for a specified price. A currency futures contract purchase creates an obligation by the Fund, as purchaser, to take delivery of an amount of currency at a specified future time at a specified price. Although the terms of currency futures contracts specify actual delivery or receipt, in most instances the contracts are closed out before the settlement date without the making or taking of delivery of the currency. Closing out of a currency futures contract is effected by entering into an offsetting purchase or sale transaction. An offsetting transaction for a currency futures contract sale is effected by the Fund entering into a currency futures contract purchase for the same aggregate amount of currency and same delivery date. If the price of the sale exceeds the price of the offsetting purchase, the Fund is immediately paid the difference and realizes a loss. Similarly, the closing out of a currency futures contract purchase is effected by the Fund entering into a currency futures contract sale. If the offsetting sale price exceeds the purchase price, the Fund realizes a gain, and if the offsetting sale price is less than the purchase price, the Fund realizes a loss. .........Unlike a currency futures contract, which requires the parties to buy and sell currency on a set date, an option on a futures contract entitles its holder to decide on or before a future date whether to enter into such a contract. If the holder decides not to enter into the contract, the premium paid for the option is lost. .........The Fund is required to maintain margin deposits with brokerage firms through which it effects currency futures contracts and options thereon. In addition, due to current industry practice, daily variations in gains and losses on open contracts are required to be reflected in cash in the form of variation margin payments. The Fund may be required to make additional margin payments during the term of the contract. .........A risk in employing currency futures contracts to protect against the price volatility of portfolio securities denominated in a particular currency is that the prices of such securities subject to currency futures contracts may correlate imperfectly with the behavior of the cash prices of the Fund's securities. The correlation may be distorted by the fact that the currency futures market may be dominated by short-term traders seeking to profit from changes in exchange rates. This would reduce their value for hedging purposes over a short-term period. Such distortions are generally minor and would diminish as the contract approached maturity. Another risk is that the Fund's investment adviser could be incorrect in its expectations as to the direction or extent of various exchange rate movements or the time span within which the movements take place. .........Put and call options on currency futures have characteristics similar to those of other options. In addition to the risks associated with investing in options on securities, there are particular risks associated with investing in options on currency futures. In particular, the ability to establish and close out positions on such options will be subject to the development and maintenance of a liquid secondary market. It is not certain that this market will develop. .........The Fund may not enter into currency futures contracts or related options thereon if immediately thereafter the amount committed to margin plus the amount paid for premiums for unexpired options on currency futures exceeds 5% of the market value of the Fund's total assets. The Fund may not purchase or sell currency futures contracts or related options if immediately thereafter more than 30% of its net assets would be hedged. In instances involving the purchase of currency futures contracts by the Fund, an amount equal to the market value of the currency futures contract will be deposited in a segregated account of cash and cash equivalents to collateralize the position and thereby ensure that the use of such futures contract is unleveraged. FUTURES CONTRACTS - Florida High Income, Small Cap, U.S. Government and U.S. Real Estate. Florida High Income, Small Cap, U.S. Government and U.S. Real Estate are permitted to use futures contracts ("Futures") as a possible means of hedging each Fund's exposure to the equity or fixed income markets. The following discussion is intended to explain briefly the workings of Futures. Unlike when a Fund purchases or sells a portfolio security, no money is paid or received by theFund upon the purchase or sale of a Future. Initially, however, when such transactions are entered into, a Fund will be required to deposit with the futures commission merchant ("broker") an amount of cash or portfolio securities equal to a varying specified percentage of the contract amount. This amount is known as initial margin. Subsequent payments, called variation margin, to and from the broker, will be made on a daily basis as the price of the underlying securities fluctuate making the Future more or less valuable, a process known as mark to market. Insolvency of the broker may make it more difficult to recover initial or variation margin. Changes in variation margin are recorded by each Fund as unrealized gains or losses. Margin deposits do not involve borrowing by a Fund and may not be used to support any other transactions. At any time prior to the expiration of the Future, a Fund may elect to close the position by taking an opposite position which will operate to terminate such Fund's position in the Future. A final determination of variation margin is then made. Additional cash is required to be paid or released to such Fund and it realizes a gain or a loss. Although Futures by their terms call for the actual delivery or acceptance of cash or securities, in most cases the contractual obligation is fulfilled without having to make or take delivery. All transactions in the futures markets are subject to commissions payable and are offset or fulfilled through a clearing house associated with the exchange on which the contracts are traded. Although the Funds intend to buy and sell Futures only on an exchange where there appears to be an active secondary market, there is no assurance that a liquid secondary market will exist for any particular Future at any particular time. In such event, or in the event of an equipment failure at a clearing house, it may not be possible to close a Futures position. The "sale" of a Future means the acquisition by a Fund of an obligations to deliver an amount of cash equal to a specified dollar amount times the difference between the index value at the close of the last trading day of the Future and the price at which the Future is originally struck (which a Fund anticipates will be lower because of a subsequent rise in interest rates and a corresponding decline in the index value). This is referred to as having a "short" Futures position. The "purchase" of a Future means the acquisition by a Fund of an obligation to take delivery of such an amount of cash. In this case, a Fund anticipates that the closing index value will be higher than the price at which the Future is originally struck. This is referred to as having a "long" Futures position. No physical delivery of the securities making up the index is made as to either a long or a short Futures position. Risks Relating to Futures Contracts. One risk in employing Futures to attempt to protect against the price volatility of a Fund's portfolio securities is that the Fund's investment adviser could be incorrect in its expectations as to the extent of various interest rate movements or the time span within which the movements take place. For example, if a Fund sold a Future in anticipation of an increase in interest rates, and then interest rates went down instead, such Fund would lose money on the sale. Another risk as to Futures arises because of the imperfect correlation between movement in the price of the Future and movements in the prices of the portfolio securities which are the subject of the hedge. The risk of imperfect correlation increases as the composition of a Fund's portfolio diverges from the securities underlying the Futures. The price of the Future may move more than or less than the price of the portfolio securities being hedged. If the price of the Future moves less than the price of the portfolio securities which are the subject of the hedge, the hedge will not be fully effective but, if the price of the portfolio securities being hedged has moved in an unfavorable direction, a Fund would be in a better position than if it had not hedged at all. If the price of the Fportfolio securities being hedged has moved in a favorable direction, this advantage will be partially offset by the Future. If the price of the Future moved more than the price of the portfolio securities, a Fund will experience either a loss or gain on the Future which will not be completely offset by movements in the price of the Fportfolio securities which are the subject of the hedge. To compensate for the imperfect correlation of movements in the price of the portfolio securities being hedged and movements in the price of the Futures, a Fund may buy or sell Futures in a greater dollar amount than the dollar amount of the Obligations being hedged if the historical volatility of the prices of the Obligations being hedged is less than the historical volatility of the debt securities underlying the Futures. It is also possible that, where a Fund has sold Futures to hedge its portfolio against decline in the market, the market may advance and the value of the Fportfolio securities held in such Fund's portfolio may decline. If this occurred, such Fund would lose money on the Future and also experience a decline in value of its portfolio securities. Where Futures are purchased to hedge against a possible increase in the price of portfolio securities before a Fund is able to invest in them in an orderly fashion, it is possible that the market may decline instead; if such Fund then concludes not to invest in them at that time because of concern as to possible further market decline or for other reasons, such Fund will realize a loss on the Futures that is not offset by a reduction in the price of the portfolio securities which it had anticipated purchasing. There are daily price fluctuation limits established by contract markets which limit the amount of fluctuation in a futures contract price during a single trading day. Once the daily limit has been reached on a contract, no trades may be entered into at prices beyond the limit, thus preventing the liquidation of open Futures positions. Risks Relating to Futures Options. In addition to the risks which apply to Futures, there are several special risks relating to Futures Options. The ability to establish and close out a position on Futures Options is subject to the development and maintenance of a liquid secondary market. Compared to the purchase or sale of Futures, the purchase of call or put Futures Options involves less potential risk to a Fund because the maximum amount at risk is the premium paid for the Futures Options (plus transaction costs). There may be circumstances, however, when the purchase of a call or put Futures Option would result in a loss, and the purchase or sale of a Future would not result in a loss, such as when there is no movement in the prices of the underlying securities. The writing of a put or call Futures Option involves risks similar to those relating to transactions in Futures as described above. During the option period, a Fund as a call writer, in return for the premium on the Futures Option, has given up the opportunity for capital appreciation above the exercise price should the market price of the Future increase, but has retained the risk of depreciation should the price of the Future decline. As a secured put writer, a Fund also retains the risk of loss should the market value of the Future decline below the exercise price of the Futures Option. In both cases, a Fund has no control over the time when it may be required to fulfill its obligation as a writer of the Futures Option. If a Fund as a call Future Option writer is unable to effect a closing purchase transaction, it would continue to bear the risk of an increase in the market price of the Future until the Futures Option expires or is exercised. If a Fund as a secured put Futures Option writer is unable to effect a closing purchase transaction, it would continue to bear the risk of decline in the market price of the Future until the Futures Option expires or is exercised. In purchasing a put Futures Option, a Fund would realize a loss if the price of the Future subject to the Futures Option increased or remained the same or did not decrease during the option period by more than the amount of the premium. In purchasing a call Futures Option, a Fund would realize a loss if the price of the Future subject to the Futures Option decreased or remained the same or did not increase during the option period by more than the amount of the premium. In purchasing Futures Options, a Fund relies on a clearing corporation to purchase or deliver the Future if the Futures Option is exercised. Failure of a clearing corporation to do so may cause a Fund to lose the opportunity to effect a profitable transaction. Regulatory Aspects of Futures Contracts. Each Fund, due to requirements under the Investment Company Act of 1940 (the "1940 Act"), will deposit in a segregated account with its custodian bank portfolio maturing in one year or less or cash, in an amount equal to the fluctuating market value of long Futures it has purchased, less any margin deposited on long positions. Each Fund must operate within certain restrictions as to its long and short positions in Futures under a rule (the "CFTC Rule" ) adopted by the Commodity Futures Trading Commission ( "CFTC" ) under the Commodity Exchange Act (the "CEA" ) to be eligible for the exclusion provided by the CFTC Rule as a "commodity pool operator" (as defined under the CEA), and must represent to the CFTC that it will operate within such restrictions. Under these restrictions a Fund will not, as to any positions, whether long, short or a combination thereof, enter into Futures for which the aggregate initial margins exceed 5% of the fair market value of its assets. Under the restrictions, a Fund also must, as to its short positions, use Futures solely for bona- fide hedging purposes within the meaning and intent of the applicable provisions under the CEA. As to a Fund's long positions which are used as part of its portfolio strategy and are incidental to its activities in the underlying cash market, the "underlying commodity value" (see below) of its Futures must not exceed the sum of (i) cash set aside in an identifiable manner, or short-term U.S. debt obligations or other U.S. dollar-denominated high quality short-term money market instruments so set aside, plus any funds deposited as margin; (ii) cash proceeds from existing investments due in 30 days and (iii) accrued profits held at the futures commission merchant. (There is described above the segregated account which a Fund must maintain with its Custodian bank as to its Futures activities due to requirements other than those of the CFTC Rule; a Fund will, as to long positions, be required to abide by the more restrictive of this other requirement or the above requirements of the CFTC Rule. ) The "underlying commodity value" of a Future is computed by multiplying the size of the Future by the daily settlement price of the Future. INVESTMENT RESTRICTIONS .........Except as noted, the investment restrictions set forth below are fundamental and may not be changed with respect to each Fund without the affirmative vote of a majority of the outstanding voting securities of the Fund. Where an asterisk (*) appears after a Fund's name, the relevant policy is non-fundamental with respect to that Fund and may be changed by the Fund's investment adviser without shareholder approval, subject to review and approval by the Trustees. As used in this Statement of Additional Information and in the Prospectus, "a majority of the outstanding voting securities of the Fund" means the lesser of (1) the holders of more than 50% of the outstanding shares of beneficial interest of the Fund or (2) 67% of the shares present if more than 50% of the shares are present at a meeting in person or by proxy. 1........Concentration of Assets in Any One Issuer .........None of Growth and Income, Limited Market and Total Return may invest more than 5% of its total net assets, at the time of the investment in question, in the securities of any one issuer other than the United States Government and its instrumentalities. .........Evergreen may not invest more than 5% of its total net assets in the securities of any one issuer other than the United States Government and its instrumentalities. .........American Retirement may not invest more than 5% of its total assets, at the time of the investment in question, in the securities of any one issuer other than the United States Government and its agencies or instrumentalities. ........None of Aggressive, Foundation, Global, Small Cap and U.S. Real Estate may invest more than 5% of its total assets, at the time of the investment in question, in the securities of any one issuer other than the United States Government and its agencies or instrumentalities, except that up to 25% of the value of the Fund's total assets may be invested without regard to such 5% limitation. .........None of Florida High Income, National, Short Intermediate, Short Intermediate-CA, Tax Exempt, and Tax Strategic may invest more than 5% of its total assets, at the time of the investment in question, in the securities of any one issuer other than the United States Government and its agencies or instrumentalities, except that up to 25% of the value of each Fund's total assets may be invested without regard to such 5% limitation. For this purpose each political subdivision, agency, or instrumentality and each multi-state agency of which a state is a member, and each public authority which issues industrial development bonds on behalf of a private entity, will be regarded as a separate issuer for determining the diversification of each Fund's portfolio. .........Money Market may not invest more than 5% of its total assets, at the time of the investment in question, in the securities of any one issuer other than the United States Government and its agencies or instrumentalities, except that up to 25% of the value of the Fund's total assets may be invested without regard to such 5% limitation. (In order to comply with amendments to the applicable portfolio diversification requirements, the Fund as a matter of operating policy, prohibits the investment of more than 5% of the Fund's total assets in securities issued by any one issuer, except that the Fund may invest more than 5% of its total assets in First Tier Securities of a single issuer for a period of up to three business days after the purchase thereof. The Fund may not make more than one such investment at any time.) 2........10% Limit on Securities of Any One Issuer .........None of Aggressive*, American Retirement, Foundation, Global, Money Market, Short Intermediate-CA, Small Cap*, Tax Exempt and U.S. Real Estate* may purchase more than 10% of any class of securities of any one issuer other than the United States Government and its agencies or instrumentalities. .........None of Evergreen, Growth and Income, Limited Market and Total Return may purchase more than 10% of any class of securities of any one issuer other than the United States Government and its instrumentalities. .........None of Florida High Income*, National*, Short-Intermediate* and Tax Strategic* may invest more than 10% of the voting securities of any one issuer other than the United States Government and its agencies or instrumentalities. 3........Investment for Purposes of Control or Management .........No Fund(2) may invest in companies for the purpose of exercising control or management. - -------- (2) Not fundamental for Small Cap, Tax Strategic, U.S. Real Estate, National and U.S. Government. 4........Purchase of Securities on Margin .........None of Agressive*, American Retirement, Evergreen, Foundation, Global, Growth and Income, Limited Market, Money Market, National,* Short-Intermediate, Short Intermediate-CA, Tax-Exempt, Tax Strategic* and Total Return may purchase securities on margin, except that each Fund may obtain such short-term credits as may be necessary for the clearance of transactions. .........None of Florida High Income*, Small Cap,* U.S. Government* and U.S. Real Estate* may purchase securities on margin, except that each Fund may obtain such short-term credits as may be necessary for clearance of transactions, and provided that margin payments in connection with futures contracts and options on futures contracts shall not constitute purchasing securities on margin. 5........Unseasoned Issuers .........Neither American Retirement nor Foundation may invest in the securities of unseasoned issuers that have been in continuous operation for less than three years, including operating periods of their predecessors. .........None of Evergreen, Money Market and Total Return may invest more than 5% of its total assets (5% of total net assets for Evergreen) in securities of unseasoned issuers that have been in continuous operation for less than three years, including operating periods of their predecessors. .........None of Florida High Income*, National, Short-Intermediate, Short-Intermediate-CA and Tax Exempt may invest more than 5% of its total assets in securities of unseasoned issuers (taxable securities of unseasoned issuers for Short Intermediate, Short-Intermediate-CA and Tax Exempt) that have been in continuous operation for less than three years, including operating periods of their predecessors, except that no such limitation shall apply to the extent that (i) each Fund may invest in obligations issued or guaranteed by the United States Government and its agencies or instrumentalities, (ii) Short-Intermediate, Short-Intermediate-CA and Tax Exempt may invest in Municipal Securities, and (iii) Florida High Income*, National* may invest in Municipal Bonds. .........None of Growth and Income, Small Cap* and Tax Strategic* may invest more than 15% of its total assets (10% of total net assets for Growth and Income) in securities of unseasoned issuers that have been in continuous operation for less than three years, including operating periods of their predecessors. .........Aggressive* and U.S. Real Estate* may not invest more than 15% of its total assets in securities of unseasoned issuers that have been in continuous operation for less than three years, including operating periods of their predecessors, except obligations issued or guaranteed by the United States Government and its agencies or instrumentalities (this limitation does not apply to real estate investment trusts). .........Global may not invest more than 5% of its total assets in securities of unseasoned issuers that have been in continuous operation for less than three years, including operating periods of their predecessors, except obligations issued or guaranteed by the United States Government and its agencies or instrumentalities (this limitation does not apply to real estate investment trusts). 6........Underwriting .........None of Aggressive*, American Retirement, Evergreen, Foundation, Global, Growth and Income, Limited Market, Money Market, Small Cap,* Tax Strategic,* Total Return, U.S. Government and U.S. Real Estate* may engage in the business of underwriting the securities of other issuers. .........None of Florida High Income*, National,* Short-Intermediate, Short-Intermediate - CA and Tax-Exempt may engage in the business of underwriting the securities of other issuers, provided that the purchase of Municipal Securities (Municipal Bonds for National), or other permitted investments, directly from the issuer thereof (or from an underwriter for an issuer) and the later disposition of such securities in accordance with a Fund's investment program shall not be deemed to be an underwriting. 7........Interests in Oil, Gas or Other Mineral Exploration or Development Programs ......... No Fund may purchase, sell or invest in interests in oil, gas or other mineral exploration or development programs. 8........Concentration in Any One Industry .........Neither Global nor U.S. Real Estate may concentrate its investments in any one industry, except that each Fund will invest at least 65% of its total assets in securities of companies engaged principally in the real estate industry. .........None of Evergreen, Growth and Income, Limited Market and Total Return may concentrate its investments in any one industry, except that each Fund may invest up to 25% of its total net assets in any one industry. .........None of Aggressive, American Retirement, Foundation, Money Market, Small Cap and Tax Strategic may invest 25% or more of its total assets in the securities of issuers conducting their principal business activities in any one industry; provided, that this limitation shall not apply (i) with respect to each Fund, to obligations issued or guaranteed by the United States Government or its agencies or instrumentalities, (ii) with respect to Tax Strategic, to Municipal Securities, or (iii) with respect to Money Market, to certificates of deposit, bankers' acceptances and interest bearing savings deposits. For purposes of this restriction, utility companies, gas, electric, water and telephone companies will be considered separate industries. .........U.S. Government may not purchase the securities of any issuer (other than obligations issued or guaranteed by the government of the United States or its agencies or instrumentalities) if, as a result, 25% or more of the Fund's total assets would be invested in the securities of issuers having their principal business activities in the same industry. .........None of Short-Intermediate, Short-Intermediate-CA and Tax Exempt may invest 25% or more of its total assets in the securities of issuers conducting their principal business activities in any one industry; provided, that this limitation shall not apply (i) with respect to each Fund, to obligations issued or guaranteed by the United States Government or its agencies or instrumentalities and Municipal Securities, or (ii) with respect to Short-Intermediate-CA and Tax-Exempt, to certificates of deposit and bankers' acceptances issued by domestic branches of United States banks). .........Florida High Income and National may not invest more than 25% of their total assets in the securities of issuers conducting their principal business activities in any one industry; provided, that this limitation shall not apply to obligations issued or guaranteed by the United States Government or its agencies or instrumentalities or Municipal Bonds. 9........Warrants .........None of Aggressive*, American Retirement, Evergreen, Florida High Income*, lobal, Growth and Income, Limited Market, National,* Short-Intermediate, Short-Intermediate - CA, Small Cap,* Tax-Exempt, Total Return and U.S. Real Estate* may invest more than 5% of its total net assets in warrants, and, of this amount, no more than 2% of each Fund's total net assets may be invested in warrants that are listed on neither the New York nor the American Stock Exchange. .........Neither Foundation nor Tax Strategic* may invest more than 5% of its net assets in warrants, and of this amount, no more than 2% of each Fund's net assets may be invested in warrants that are listed on neither the New York nor the American Stock Exchanges. .........U.S. Government* may not invest more than 5% of its total net assets in warrants, and of this amount, no more than 2% of the Fund's total net assets may be invested in warrants that are not traded on principal domestic or foreign exchanges. 10.......Ownership by Directors/Trustees .........None of Agressive*, American Retirement, Evergreen, Foundation, Florida High Income*, Global, Growth and Income, Limited Market, Money Market, National, Short-Intermediate, Short-Intermediate-CA, Tax-Exempt, Total Return and U.S. Government* may purchase or retain the securities of any issuer if (i) one or more officers or trustees/directors of the Fund or its investment adviser individually owns or would own, directly or beneficially, more than 1/2% of the securities of such issuer, and (ii) in the aggregate, such persons own or would own, directly or beneficially, more than 5% of such securities. .........None of Small Cap,* Tax Strategic* and U.S. Real Estate* may purchase or retain the securities of any issuer if, to the Fund's knowledge, (i) one or more officers or trustees/directors of the Fund or its investment adviser individually owns or would own, directly or beneficially, more than 1/2% of the securities of such issuer, and (ii) in the aggregate, such persons own or would own, directly or beneficially, more than 5% of such securities. 11.......Short Sales .........None of Aggressive*, National,* Money Market, Short-Intermediate, Short-Intermediate-CA and Tax Exempt may make short sales of securities or maintain a short position. .........Neither American Retirement nor Foundation may make short sales of securities unless, at the time of each such sale and thereafter while a short position exists, each Fund owns the securities sold or securities convertible into or carrying rights to acquire such securities. .........None of Evergreen, Growth and Income, Global, Limited Market, Tax Strategic* and Total Return may make short sales of securities unless, at the time of each such sale and thereafter while a short position exists, each Fund owns an equal amount of securities of the same issue or owns securities which, without payment by the Fund of any consideration, are convertible into, or are exchangeable for, an equal amount of securities of the same issue. .........None of Florida High Income*, Small Cap,* U.S. Real Estate* and U.S. Government* may make short sales of securities unless, at the time of each such sale and thereafter while a short position exists, each Fund owns an equal amount of securities of the same issue or owns securities which, without payment by the Fund of any consideration, are convertible into, or are exchangeable for, an equal amount of securities of the same issue (and provided that transactions in futures contracts and options are not deemed to constitute selling securities short). 12.......Lending of Funds .........None of Global, Small Cap, U.S. Government, U.S. Real Estate and Tax Strategic may lend its funds to other persons, except through the purchase of a portion of an issue of publicly distributed debt securities or the entering into of repurchase agreements. .........None of American Retirement, Evergreen, Foundation, Growth and Income, Limited Market and Total Return may lend its funds to other persons, except through the purchase of a portion of an issue of publicly distributed debt securities. .........None of Aggressive, Florida High Incoem, National, Short-Intermediate, Short-Intermediate-CA and Tax Exempt may lend its funds to other persons, provided that each Fund may purchase issues of debt securities, acquire privately negotiated loans made to municipal borrowers and enter into repurchase agreements. .........Money Market may not lend its funds to other persons, provided that it may purchase money market securities or enter into repurchase agreements. 13.......Lending of Securities .........None of Foundation, Aggressive*, Florida High Income*, Global, National, Short-Intermediate, Small Cap, Tax Strategic, U.S. Government and U.S. Real Estate may lend its portfolio securities, unless the borrower is a broker, dealer or financial institution that pledges and maintains collateral with the Fund consisting of cash or securities issued or guaranteed by the United States Government having a value at all times not less than 100% of the current market value of the loaned securities, including accrued interest, provided that the aggregate amount of such loans shall not exceed 30% of the Fund's total assets (30% of the Fund's total net assets for Global, U.S. Government and U.S. Real Estate). .........None of American Retirement, Evergreen, Growth and Income and Limited Market may lend its portfolio securities, unless the borrower is a broker, dealer or financial institution that pledges and maintains collateral with the Fund consisting of cash or securities issued or guaranteed by the United States Government having a value at all times not less than 100% of the value of the loaned securities (100% of the current market value for American Retirement), provided that the aggregate amount of such loans shall not exceed 30% of the Fund's total net assets. .........None of Money Market, Short-Intermediate-CA, Tax Exempt and Total Return may lend its portfolio securities, unless the borrower is a broker, dealer or financial institution that pledges and maintains collateral with the Fund consisting of cash, letters of credit or securities issued or guaranteed by the United States Government having a value at all times not less than 100% of the current market value of the loaned securities (100% of the value of the loaned securities for Total Return), including accrued interest, provided that the aggregate amount of such loans shall not exceed 30% of the Fund's total assets (30% of the Fund's total net assets for Total Return). 14.......Commodities .........None of National,* Short-Intermediate, Short-Intermediate-CA, Tax Exempt and Tax Strategic* may purchase, sell or invest in commodities, commodity contracts or financial futures contracts. .........None of Aggressive*, Florida High Income*, Small Cap, U.S. Government and U.S. Real Estate may purchase, sell or invest in physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Fund from purchasing or selling options and futures contracts or from investing in securities or other instruments backed by physical commodities). .........None of American Retirement, Evergreen, Foundation, Growth and Income, Limited Market, Money Market and Total Return may purchase, sell or invest in commodities or commodity contracts. .........Global may not purchase, sell or invest in commodities or commodity contracts; provided, however, that this policy does not prevent the Fund from purchasing and selling currency futures contracts and entering into forward foreign currency contracts. 15.......Real Estate .........Neither Small Cap nor U.S. Government may purchase or invest in real estate or interests in real estate (but this shall not prevent either Fund from investing in marketable securities issued by companies such as real estate investment trusts which deal in real estate or interests therein, and shall not prevent U.S. Government from investing in participation interests in pools of real estate mortgage loans). .........Global may not purchase or invest in real estate or interests in real estate (although it may purchase securities secured by real estate or interests therein, or issued by companies or investment trusts which invest in real estate or interests therein). .........U.S. Real Estate* may not purchase, sell or invest in real estate or interests in real estate (although it may purchase securities secured by real estate or interests therein, or issued by companies or investment trusts which invest in real estate or interests therein). .........None of Aggressive*, American Retirement, Evergreen, Foundation, Florida High Income*, Growth and Income, Limited Market, Money Market, Tax Strategic and Total Return may purchase, sell or invest in real estate or interests in real estate, except that (i) each Fund may purchase, sell or invest in marketable securities of companies holding real estate or interests in real estate, including real estate investment trusts, and (ii) Tax Strategic may purchase, sell or invest in Municipal Securities or other debt securities secured by real estate or interests therein. None of National, Short-Intermediate, Short-Intermediate-CA and Tax Exempt may purchase, sell or invest in real estate or interests in real estate, except that each Fund may purchase Municipal Securities (Municipal Bonds for National) and other debt securities secured by real estate or interests therein. 16.......Borrowing, Senior Securities, Reverse Repurchase Agreements .........(Certain Funds have additional fundamental policies relating to senior securities, repurchase agreements and reverse repurchase agreements. (See Items 17 and 20 below)). .........None of American Retirement, Foundation, Limited Market and Total Return may borrow money except from banks as a temporary measure to facilitate redemption requests which might otherwise require the untimely disposition of portfolio investments and for extraordinary or emergency purposes (and, with respect to American Retirement only, for leverage), provided that the aggregate amount of such borrowings shall not exceed 5% of the value of the Fund's total net assets (5% of total assets for American Retirement and Foundation) at the time of any such borrowing, or mortgage, pledge or hypothecate its assets, except in an amount sufficient to secure any such borrowing. .........Evergreen may not borrow money except from banks as a temporary measure for extraordinary or emergency purposes (i) on an unsecured basis, subject to the requirements that the value of the Fund's assets, including the proceeds of borrowings, does not at any time become less than 300% of the Fund's indebtedness; provided, however, that if the value of the Fund's assets becomes less than such amount, the Fund will reduce its borrowings within three business days so that the value of the Fund's assets will be at least 300% of its indebtedness, or (ii) may make such borrowings on a secured basis, provided that the aggregate amount of such borrowings shall not exceed 5% of the value of its total net assets at the time of any such borrowing, or mortgage, pledge or hypothecate its assets, except in an amount not exceeding 15% of its total net assets taken at cost to secure such borrowing. .........Aggressive may not borrow money except on an unsecured basis up to 25% of its net assets, subject to the requirements that the value of the Fund's assets, including the proceeds of borrowings, does not at any time become less than 300% of the Fund's indebtedness; provided, however, that if the value of the Fund's assets becomes less than such amount, the Fund will reduce its borrowings within three business days so that the value of the Fund's assets will be at least 300% of its indebtedness. .........None of Global, Short-Intermediate, Short-Intermediate-CA, Small-Cap, Tax-Exempt, Tax Strategic, U.S. Government and U.S. Real Estate may borrow money, issue senior securities or enter into reverse repurchase agreements, except for temporary or emergency purposes, and not for leveraging, and then in amounts not in excess of 10% of the value of each Fund's total assets at the time of such borrowing; or mortgage, pledge or hypothecate any assets except in connection with any such borrowing and in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of each Fund's total assets at the time of such borrowing, provided that each of Small Cap, Tax Strategic, U.S. Government and U.S. Real Estate will not purchase any securities at any time when borrowings, including reverse repurchase agreements, exceed 5% of the value of its total assets, and provided further that each of Global, Tax Exempt, Short-Intermediate and Short-Intermediate-CA will not purchase any securities at times when any borrowings (including reverse repurchase agreements) are outstanding. No Fund will enter into reverse repurchase agreements exceeding 5% of the value of its total assets. .........Money Market may not borrow money, issue senior securities or enter into reverse repurchase agreements except for temporary or emergency purposes, and not for leveraging, and then in amounts not in excess of 10% of the value of the Fund's assets at the time of such borrowing; or mortgage, pledge or hypothecate any assets except in connection with any such borrowing and in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of the Fund's assets at the time of such borrowing. The Fund will not enter into reverse repurchase agreements exceeding 5% of the value of its total assets. The Fund also will not purchase any additional securities whenever any borrowings are outstanding. .........Florida High Income and National may not borrow money or enter into reverse repurchase agreements except for temporary or emergency purposes, and not for leveraging, and then in amounts not in excess of 10% of the value of the Fund's total assets at the time of such borrowing; or mortgage, pledge or hypothecate any assets except in connection with any such borrowing and in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of the Fund's total assets at the time of such borrowing. The Fund will not enter into reverse repurchase agreements exceeding 5% of the value of its total assets. .........Growth and Income may not borrow money except from banks as a temporary measure for extraordinary or emergency purposes, provided that the aggregate amount of such borrowings shall not exceed 5% of the value of the Fund's total assets at the time of such borrowing; or mortgage, pledge or hypothecate its assets, except in an amount not exceeding 15% of its assets taken at cost to secure such borrowing. 17.......Senior Securities .........(The policies of certain Funds concerning senior securities are set forth in Item 16 above.) .........National* may not issue senior securities. .........Neither American Retirement nor Foundation may issue senior securities, except as permitted by the Investment Company Act of 1940, as amended. .........Growth and Income may not issue senior securities, as defined in the Investment Company Act of 1940, as amended, except that this restriction shall not be deemed to prohibit the Fund from (i) making any permitted borrowings, mortgages or pledges, (ii) lending its portfolio securities, or (iii) entering into permitted repurchase transactions. .........Limited Market may not issue senior securities as defined in the Investment Company Act of 1940, as amended, except insofar as the Fund may be deemed to have issued a senior security by reason of borrowing money in accordance with the restrictions described above. 18.......Joint Trading .........None of Aggressive, American Retirement, Evergreen, Florida High Income, Foundation, Global, Growth and Income, Limited Market and Total Return, Small Cap,* Tax Strategic,* U.S. Government* and U.S. Real Estate* may participate on a joint or joint and several basis in any trading account in any securities. (The "bunching of orders for the purchase or sale of portfolio securities with the Fund's investment adviser or accounts under its management to reduce brokerage commissions, to average prices among them or to facilitate such transactions is not considered a trading account in securities for purposes of this restriction). 19.......Options .........None of Foundation, Global, Limited Market, Money Market, Tax Strategic* and U.S. Real Estate* may write, purchase or sell put or call options, or combinations thereof, except that Global and U.S. Real Estate may do so as permitted under "Investment Objective" in each such Fund's Prospectus. .........None of National,* Short-Intermediate, Short-Intermediate-CA and Tax Exempt may write, purchase or sell put or call options, or combinations thereof; except each Fund may purchase securities with rights to put securities to the seller in accordance with its investment program. .........None of Evergreen, Growth and Income and Total Return may write, purchase or sell put or call options, or combinations thereof, except that each Fund is authorized to write covered call options on portfolio securities and to purchase call options in closing purchase transactions, provided that (i) such options are listed on a national securities exchange, (ii) the aggregate market value of the underlying securities does not exceed 25% of the Fund's total net assets, taken at current market value on the date of any such writing, and (iii) the Fund retains the underlying securities for so long as call options written against them make the shares subject to transfer upon the exercise of any options. .........American Retirement may not write, purchase or sell put or call options, or combinations thereof, except that the Fund is authorized (i) to write call options traded on a national securities exchange against no more than 15% of the value of the equity securities (including securities convertible into equity securities) held in its portfolio, provided that the Fund owns the optioned securities or securities convertible into or carrying rights to acquire the optioned securities and (ii) to purchase call options in closing purchase transactions. 20.......Repurchase Agreements; Reverse Repurchase Agreements. .........(The policies of certain Funds concerning repurchase agreements and/or reverse repurchase agreements are set forth in Item 16 above). .........Money Market may not invest more than 10% of its total assets in repurchase agreements maturing in more than seven days. .........Neither American Retirement nor Foundation may enter into repurchase agreements or reverse repurchase agreements. 21.......Investment in Equity Securities .........American Retirement may not invest more than 75% of the value of its total assets in equity securities (including securities convertible into equity securities). 22. ....Investment in Municipal Securities .........National may not invest more than 20% of its total assets in securities other than Municipal Bonds (as described under "Investment Objective" in the Fund's Prospectus), unless extraordinary circumstances dictate a more defensive posture. .........Neither Short-Intermediate nor Tax Exempt may invest more than 20% of its total assets in securities other than Municipal Securities (as described under "Investment Objective" in each Fund's Prospectus), unless extraordinary circumstances dictate a more defensive posture. .........Short-Intermediate-CA may not invest more than 20% of its total assets in securities other than California Municipal Securities (as described under "Investment Objective" in the Fund's Prospectus), unless extraordinary circumstances dictate a more defensive posture. ........Florida High Income* will invest, under normal market conditions, at least 80% of its net assets in municipal securities and at least 90% of such assets will be invested in Florida obligations. 23.......Investment in Money Market Securities .........Money Market may not purchase any securities other than money market instruments (as described under "Investment Objective" in the Fund's Prospectus). NON FUNDAMENTAL OPERATING POLICIES .........Certain Funds have adopted additional non-fundamental operating policies. Operating policies may be changed by the Board of Trustees without a shareholder vote. 1........Securities Issued by Government Units; Industrial Development Bonds. Each of Short-Intermediate and Tax-Exempt have determined not to invest more than 25% of its total assets (i) in securities issued by governmental units located in any one state, territory or possession of the United States (but this limitation does not apply to project notes backed by the full faith and credit of the United States Government) or (ii) industrial development bonds not backed by bank letters of credit. In addition, Short-Intermediate-CA has determined not to invest more than 25% of its total assets in industrial development bonds not backed by bank letters of credit. 2........Futures and Options Transactions. Each of Small Cap, U.S. Real Estate and U.S. Government has adopted the following limitations on futures and options transactions: Each Fund has filed a notice of eligibility for exclusion from the definition of the term "commodity pool operator" with the Commodity Futures Trading Commission (CFTC) and the National Futures Association, which regulate trading in the futures markets. Pursuant to Section 4.5 of the regulations under the Commodity Exchange Act, the notice of eligibility included the following representations: .........The Fund will use commodity futures or commodity options contracts solely for bona fide hedging purposes within the meaning and intent of Section 1.3(z)(1) of the General Regulations under the Act (the "Regulations"); provided, however, that in addition, with respect to positions in commodity futures or commodity option contracts which do not come within the meaning and intent of Section 1.3(z)(i) of the Regulations, the Fund represents that the aggregate initial margin and premiums required to establish such positions will not exceed five percent (5%) of the fair market value of the Fund's portfolio, after taking into account unrealized profits and unrealized losses on any such contracts it has entered into; and, provided, further, that in the case of an option that is in-the-money at the time of purchase, the in-the-money amount as defined in Section 190.01(x) may be excluded in computing such five percent; .........The Fund will not be, and has not been, marketing participations to the public as or in a commodity pool or otherwise as or in a vehicle for trading in the commodity future or commodity options market; .........The Fund will disclose in writing to each prospective participant the purpose of and the limitations on the scope of the commodity future and commodity options trading in which it intends to engage; and .........The Fund will submit to such special calls as the CFTC may make to require the qualifying entity to demonstrate compliance with the provision of Reg. 4.5(c). .........In addition to the above limitations, the Fund will not: (i) sell futures contracts, purchase put options or write call options if, as a result, more than 30% of the Fund's total assets (25% of total assets for U.S. Government) would be hedged with futures and options under normal conditions; (ii) purchase futures contracts or write put options if, as a result, the Fund's total obligations upon settlement or exercise of purchased futures contracts and written put options would exceed 30% of its total assets (25% of total assets for U.S. Government); or (iii) purchase call options if, as a result, the current value of option premiums for options purchased by the Fund would exceed 5% of the Fund's total assets. These limitations do not apply to options attached to, or acquired or traded together with their underlying securities, and do not apply to securities that incorporate features similar to options. 3........Illiquid Securities. .........None of Evergreen, Global, Growth and Income, Limited Market, Money Market, National, Short-Intermediate, Short-Intermediate-CA, Small Cap, Tax-Exempt, Tax Strategic, Total Return, U.S. Government and U.S. Real Estate may invest more than 15% (10% for Money Market and Tax-Exempt) of its net assets in illiquid securities and other securities which are not readily marketable, including repurchase agreements which have a maturity of longer than seven days, but excluding securities eligible for resale under Rule 144A of the Securities Act of 1933, as amended, which the Directors/Trustees have determined to be liquid. .........Neither American Retirement nor Foundation may invest more than 15% of its net assets in illiquid securities and other securities (other than repurchase agreements) which are not readily marketable, excluding securities eligible for resale under Rule 144A of the Securities Act of 1933, as amended, which the Trustees have determined to be liquid. 4........Other Investment Companies. Each Fund may purchase the securities of other investment companies, except to the extent such purchases are not permitted by applicable law. 5........Other. In order to comply with certain state blue sky limitations: ----- .........Each of American Retirement, Evergreen, Foundation, Global, Growth and Income, National, Money Market, Short-Intermediate, Short-Intermediate-CA, Small Cap, Tax-Exempt, Tax Strategic, Total Return, U.S. Government and U.S. Real Estate interprets fundamental investment restriction 7 to prohibit investments in oil, gas and mineral leases. .........Each of American Retirement, Evergreen, Foundation, Global, Growth and Income, National, Money Market, Short-Intermediate, Short-Intermediate-CA, Small Cap, Tax-Exempt, Tax Strategic, Total Return, U.S. Government and U.S. Real Estate interprets fundamental investment restriction 15 to prohibit investment in real estate limited partnerships which are not readily marketable. .........Foundation interprets fundamental investment restriction 11 to permit short sales only where the Fund owns the securities sold or securities convertible into or carrying rights to acquire such securities without payment of any additional consideration therefor. CERTAIN ADDITIONAL RISK CONSIDERATIONS .........There can be no assurance that a Fund will achieve its investment objective and an investment in the Fund involves certain risks which are described under "Description of the Funds" in the Prospectus. .........In addition, the ability of Florida High Income, National, Short-Intermediate, Short-Intermediate-CA, Tax-Exempt, and Tax Strategic to achieve their respective investment objectives is dependent on the continuing ability of the issuers of Municipal Bonds in which the Funds' invest -- and of banks issuing letters of credit backing such securities -- to meet their obligations with respect to the payment of interest and principal when due. The ratings of Moody's, S&P and other nationally recognized rating organizations represent their opinions as to the quality of Municipal Bonds which they undertake to rate. Ratings are not absolute standards of quality; consequently, Municipal Bonds with the same maturity, coupon, and rating may have different yields. There are variations in Municipal Bonds, both within a particular classification and between classifications, resulting from numerous factors. ......... Unlike other types of investments, Municipal Bonds have traditionally not been subject to regulation by, or registration with, the Securities and Exchange Commission, although there have been proposals which would provide for regulation in the future. ......... The federal bankruptcy statutes relating to the debts of political subdivisions and authorities of states of the United States provide that, in certain circumstances, such subdivisions or authorities may be authorized to initiate bankruptcy proceedings without prior notice to or consent of creditors, which proceedings could result in material and adverse changes in the rights of holders of their obligations. In addition, there have been lawsuits challenging the issuance of pollution control revenue bonds or the validity of their issuance under state or Federal law which could ultimately affect the validity of those Municipal Bonds or the tax-free nature of the interest thereon. ......... While not anticipated, it is conceivable that substantial redemptions could result in the realization by Florida High Income, National, Short-Intermediate, Tax-Exempt, and Short-Intermediate-CA of gains. Short-term gains would be taxable as ordinary income when distributed to the Fund's shareholders. Long-term gains would be treated as capital gains. ......... While Global and U.S. Real Estate are technically diversified within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"), because the investment alternatives of each Fund are restricted by a policy of concentrating at least 65% of its total assets in companies in the real estate industry, investors should understand that investment in these Funds may be subject to greater risk and market fluctuation than an investment in a portfolio of securities representing a broader range of industry investment alternatives. Borrowing. .........The table set forth below describes the extent to which Evergreen and Global entered into borrowing transactions during the fiscal years ended September 30, 1993 and 1994. Evergreen Amount of Debt Average Amount of Average Number of Average Amount of Outstanding Debt Outstanding Shares Outstanding Debt Per-Share Year Ended During the Year During the Year During the Year During the Year September 30, 1993 $0 $ 1,369,863 50,301,298 $0.03 September 30, 1994 $0 $11,164,110 39,709,107 $0.28 Global September 30, 1993 $0 $ 1,369,863 50,301,298 $0.03
MANAGEMENT .........The following is a list of the Trustees or Directors and executive officers of each Fund: Laurence B. Ashkin, 180 East Pearson Street, Chicago, IL Trustee/Director. Real estate developer and construction consultant since 1980; President of Centrum Equities since 1987 and Centrum Properties, Inc. since 1980. Foster Bam, Greenwich Plaza, Greenwich, CT Trustee/Director. Partner in the law firm of Cummings and Lockwood since 1968.(3)(2) James S. Howell, 4124 Crossgate Road, Charlotte, NC Trustee/Director. Retired Vice President of Lance Inc.; Chairman of the Distribution Comm. Foundation for the Carolinas from 1989 to 1993; Chairman of the First Union Funds since 1984. Robert J. Jeffries, 2118 New Bedford Drive, Sun City Center, FL Trustee/Director. Corporate consultant since 1967. Gerald M. McDonnell, 821 Regency Drive, Charlotte, NC Trustee/Director. Sales Representative with Nucor-Yamoto Inc. since 1988; Trustee of the First Union Funds since 1988. Thomas L. McVerry, 4419 Parkview Drive, Charlotte, NC Trustee/Director. Senior executive and advisor to the Board of Directors of Rexham Corporation from 1973 to 1980; Director of Carolina Cooperative Federal Credit Union since 1990 and Rexham Corporation from 1988 to 1990; Vice President of Rexham Industries, Inc. from 1989 to 1990; Vice President-Finance and Resources, Rexham Corporation from 1979 to 1990; Trustee of the First Union Funds since October 1993. William Walt Pettit, Holcomb and Pettit, P.A., 207 West Trade St., Charlotte, NC Trustee/Director. Partner in the law firm Holcomb and Pettit, P.A. since 1990; Attorney, Clontz and Clontz from 1980 to 1990; Trustee of the First Union Funds since 1988.(4) Russell A. Salton, III, M.D., Primary Physician Care, 1515 Mockingbird Lane, Charlotte, NC Trustee/Director. President, Primary Physician Care since 1990; President, Metrolina Family Practice Group, P.A. from 1982 to 1989; Trustee of the First Union Funds since 1984. Michael S. Scofield, 212 S. Tryon Street Suite 980, Charlotte, NC Trustee/Director. Attorney, Law Offices of Michael S. Scofield since prior to 1989; Trustee of the First Union Funds since 1984. John J. Pileggi, 237 Park Avenue, Suite 910, New York, NY President and Treasurer. Senior Managing Director, Furman Selz Incorporated since 1992, Managing Director from 1984 to 1992. Joan V. Fiore, 237 Park Avenue, Suite 910, New York, NY Secretary. Managing Director and Counsel, Furman Selz Incorporated since 1991; Staff Attorney, Securities and Exchange Commission from 1986 to 1991. Donald E. Brostrom, 237 Park Avenue, Suite 910, New York, NY Assistant Treasurer. Director of Fund Services, Furman Selz Incorporated since 1992, Associate Director from 1986 to 1992. Sheryl A. Hirschfeld, 237 Park Avenue, Suite 910, New York, NY Assistant Secretary. Director, Corporate Secretary Services, Furman Selz Incorporated since 1994; Assistant to the Corporate Secretary, The Dreyfus Corporation since prior to 1989. Stephen W. St. Clair, 237 Park Avenue, Suite 910, New York, NY Assistant Treasurer. Associate Director of Fund Services, Furman Selz Incorporated since 1994, Administrator from 1992 to 1994; Assistant Treasurer of J. W. Seligman Co., Inc. from 1989 to 1992. The officers of the Funds are all officers and/or employees of Furman Selz Incorporated. Furman Selz Incorporated is the parent of Evergreen Funds Distributor, Inc., the distributor of each Class of shares of each Fund. - ------------ (3) Mr. Bam may be deemed to be an "interested person" within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act") due to the fact that his son is employed by the Adviser. (4) Mr. Pettit may be deemed to be an "interested person" within the meaning of the 1940 Act as a result of the legal services rendered to a subsidiary of First Union by the law firm of Holcomb and Pettit, P.A. The Funds do not pay any direct remuneration to any officer or Trustee/ Director who is an "affiliated person" of the Evergreen Asset, First Union National Bank of North Carolina ("FUNB") or their affiliates. Currently, none of the Funds' Trustees/Directors is an "affiliated person". One of the Trustees/Directors, Mr. Pettit, is considered an "interested person" of the Funds by virtue of the fact that he and his firm provide legal services to FUNB. Another Trustee/Director, Mr. Bam, is considered an "interested person" of the Fund by virtue of the fact that his son is employed by Evergreen Asset. However, Mr. Bam and Mr. Pettit are not considered "affiliated persons" of Evergreen Asset or FUNB as defined in the 1940 Act. The Trusts or Funds pay each Trustee/Director who is not an "affiliated person" an annual retainer and a fee per meeting attended, plus expenses (and $50 for each telephone conference meeting) as follows: Name of Trust/Fund Annual Retainer Meeting Fee Evergreen Trust $ 4,500 Evergreen $ 300 Aggressive 100 Total Return 5,500 300 Limited Market 500 100 Growth and Income 500 100 The Evergreen American Retirement Trust 1,000 American Retirement 100 Small Cap 100 The Evergreen Money Market Trust 300 Evergreen Municipal Trust and Fixed Income Trust 4,000 Tax Exempt 100 Short-Intermediate 100 Short-Intermediate-CA 100 National 100 Florida High Income 100 U.S. Government 100 Evergreen Real Estate Equity Trust 1,000 Global 100 U.S. Real Estate 100 Evergreen Foundation Trust 500 Foundation 100 Tax Strategic 100 The Trustees/Directors who were not affiliated with the Adviser during each Fund's last fiscal year received total Trustees/Directors' fees and expenses as follows: Fees No. of Name of Fund Fiscal Year Ended* Expenses Meetings Evergreen September 30, 1994 $34,175 4 Global September 30, 1994 8,080 4 U.S. Real Estate September 30, 1994 2,847 4 Limited Market September 30, 1994 3,223 4 Total Return January 31, 1994 Growth and Income December 31, 1994 American Retirement December 31, 1994 Small Cap December 31, 1994 Foundation December 31, 1994 Tax Strategic December 31, 1994 Short-Intermediate August 31, 1994 4,377 4 Short-Intermediate-CA August 31, 1994 3,129 4 National August 31, 1994 3,620 4 Tax Exempt August 31, 1994 12,390 4 Money Market August 31, 1994 11,478 4 U.S. Government March 31, 1994 1,772 3 - ---------- * The following Funds changed their fiscal year ends during the periods covered by the foregoing table: Global and U.S. Real Estate from December 31, to September 30; and Limited Market, from May 31 to September 30. Accordingly, the Trustees/Directors fees and expenses reported in the foregoing table reflect, for Global and U.S. Real Estate, the period from January 1, 1994 to September 30, 1994 and, for Limited Market, the period from June 1, 1994 to September 30, 1994. Also Small Cap and Tax Strategic commenced operations on October 1, 1993, November 2, 1993 and September 1, 1993, respectively, and therefore the figures set forth in the table above reflect expenses incurred for the period from commencement of operations through December 31, 1993. No officer or Trustee/Director of the Funds owned Class A, B or C shares of any Fund as of the date hereof. The number and percent of outstanding shares Class Y shares of each Fund in the Evergreen Group of Funds owned by officers and Trustees/Directors as a group on April 15, 1995, is as follows: Ownership by Officers and Trustees/Directors No. of Shares Owned No. of Shares Owned By Officers Trustees/Directors as a % of Fund Name of Fund as a as a Group Shares Outstanding Evergreen - Y Total Return - Y Limited Market - Y Growth and Income - Y Money Market - Y American Retirement - Y Small Cap - Y Tax Exempt - Y Short-Intermediate - Y Short-Intermediate-CA - Y National - Y Global - Y U.S. Real Estate - Y Foundation - Y Tax Strategic - Y U.S. Government- Y Of the Funds set forth above where the Directors/Trustees or Officers collectively own more than 1%, but less than 5%, of the outstanding shares, the percentage owned by each Director/Trustee or Officer owning shares of such Funds is as follows:
Name and Address Name of Fund Number of Shares Percentage of Class - ---------------- ------------ ---------------- ------------------- Foster Bam Limited Market - Y 2 Greenwich Plaza Growth and Income - Y Greenwich, CT 06830 American Retirement - Y Short-Intermediate - Y Robert J. Jeffries Limited Market - Y 2118 New Bedford Drive Growth and Income - Y Sun City, FL 33573 American Retirement - Y Short-Intermediate - Y Joan V. Fiore American Retirement - Y 237 Park Avenue New York, NY 10017
The table below sets forth information with respect to each person, including Directors or Trustees of the Funds who, to each Funds knowledge, owned beneficially or of record more than 5% of each Fund's total outstanding shares as of April 15, 1995:
Name and Address Name of Fund Number of Shares % of Class - ---------------- ------------ ---------------- ---------- Stephen A. Lieber 2500 Westchester Ave. Purchase, NY 10577 Foster Bam 2 Greenwich Plaza Greenwich, CT 06830 Nola Maddox Falcone 2500 Westchester Ave. Purchase, NY 10577 Pax Beale DBA Bush & Octavia Realty Co. 163 Alpine San Francisco, CA 94117
*As a result of his ownership of .......... and......... , of the shares of National, Small Cap, U.S. Real Estate, Tax Strategic and U.S. Government, respectively, on April 15, 1995, Mr. Lieber may be deemed to "control" the Fund, as that term is defined in Section 2(a)(9) of the Investment Company Act of 1940, as amended (the "1940 Act"). If any matter was submitted for a shareholder vote while Mr. Lieber owned more than 50% of any Fund's shares, the presence of Mr. Lieber or his proxy would be required for, and constitute, a quorum and the vote of Mr. Lieber or his proxy would be dispositive. INVESTMENT ADVISERS (See also "Management of the Fund" in each Fund's Prospectus) EVERGREEN ASSET MANAGEMENT CORP. The investment adviser of each Fund in the Evergreen Group of Funds, except Aggressive and Florida High Income, is Evergreen Asset Management Corp., a New York corporation, with offices at 2500 Westchester Avenue, Purchase, New York (the "Adviser"). Evergreen Asset is owned by First Union National Bank of North Carolina (previously defined as "FUNB") which, in turn, is a subsidiary of First Union Corporation. The Directors of Evergreen Asset are Richard K. Wagoner and Barbara I. Colvin. The executive officers of Evergreen Asset are Stephen A. Lieber, Chairman and Co-Chief Executive Officer, Nola Maddox Falcone, President and Co-Chief Executive Officer, Theodore J. Israel, Jr., Executive Vice President, Joseph J. McBrien, Senior Vice President and General Counsel, and George R. Gaspari, Senior Vice President and Chief Financial Officer. On June 30, 1994, Evergreen and Lieber and Company ("Lieber") were acquired by First Union Corporation ("First Union") through certain of its subsidiaries. Evergreen was acquired by FUNB, a wholly-owned subsidiary (except for directors' qualifying shares) of First Union, by merger into EAMC Corporation ("EAMC") a wholly-owned subsidiary of FUNB. EAMC then assumed the name "Evergreen Asset Management Corp." and succeeded to the business of Evergreen. Contemporaneously with the succession of EAMC to the business of Evergreen and its assumption of the name "Evergreen Asset Management Corp.", each Fund entered into a new investment advisory agreement the ("Investment Advisory Agreement") with EAMC and into a distribution agreement with Evergreen Funds Distributor, Inc., a subsidiary of Furman Selz Incorporated. At that time, EAMC also entered into a new sub-advisory agreement with Lieber pursuant to which Lieber provides certain services to Evergreen Asset in connection with its duties as investment adviser to each Fund. The partnership interests in Lieber, a New York general partnership, were acquired by Lieber I Corp. and Lieber II Corp., which are both wholly-owned subsidiaries of FUNB. The business of Lieber is being continued. The new advisory and sub-advisory agreements were approved by the Funds' shareholders at their meeting held on June 23, 1994, and became effective on June 30, 1994. Under its Investment Advisory Agreement with each Fund for which it serves as investment adviser, Evergreen Asset has agreed to furnish reports, statistical and research services and recommendations with respect to each Funds portfolio of investments. In addition, Evergreen Asset provides office facilities to the Funds and performs a variety of administrative services. Each Fund pays the cost of all of its other expenses and liabilities, including expenses and liabilities incurred in connection with maintaining theirregistration under the Securities Act of 1933, as amended, and the 1940 Act, printing prospectuses (for existing shareholders) as they are updated, state qualifications, share certificates, mailings, brokerage, custodian and stock transfer charges, printing, legal and auditing expenses, expenses of shareholder meetings and reports to shareholders. Notwithstanding the foregoing, Evergreen Asset will pay the costs of printing and distributing prospectuses used for prospective shareholders. For the performance of its services Evergreen Asset is entitled to receive a fee at the following annual rate of each Fund's daily net assets. These fees are computed daily and paid monthly, and are accrued daily for purposes of determining the redemption and offering price of each Fund's shares (exclusive of Money Market and Tax Exempt, which seek to maintain a stable net asset value of $1.00 per share): Advisory Advisory Name of Fund Fee Name of Fund Fee Evergreen 1% Short-Intermediate .50% Total Return 1% Short-Intermediate-CA .55% Limited Market 1% National .50% Growth and Income 1% Global 1% American Retirement .75% U.S. Real Estate 1% Small Cap 1% Foundation .875% Money Market .50% Tax Strategic .875% Tax Exempt .50% U.S. Government .50% The rates of the advisory fees paid by Evergreen, Total Return, Limited Market, Growth and Income, Small Cap, Global and U.S. Real Estate are higher than those paid by most management investment companies. However the fee paid by Global is not higher than that paid by other funds, which like Global, that invest a substantial part of their assets in foreign securities. The advisory fees paid by each Fund for the three most recent fiscal periods reflected in its registration statement are set forth below: EVERGREEN Year Ended Year Ended Year Ended GLOBAL Period Ended Year Ended Year Ended 9/30/94 9/30/93 9/30/92 9/30/94 12/31/93 12/31/92 Advisory Fee $5,738,633 $7,217,230 $7,588,372 Advisory Fee $1,133,380 $523, 294 $75,696 ========== ========== ========== ========== ========= ========= Expense Reimbursement $0 $ 41,226 $130,246 -------- --------- Reimbursement as a % of Average Daily Net Assets 0.08% 1.72% ----- ----- U.S. REAL ESTATE Year Ended Year Ended LIMITED MARKET Year Ended Year Ended Year Ended 9/30/94 12/31/93 9/30/94 5/31/94 5/31/93 Advisory Fee $57,506 $8,624 Advisory Fee $314,648 $964,383 $658,014 -------- ------- ======== ======== ======== Waiver ($57,506) ($8,624) Net Advisory Fee $ 0 $ 0 ============ ========== Expense Reimbursement $9,102 $18,480 TOTAL RETURN Year Ended Year Ended Year Ended GROWTH AND INCOME Year Ended Year Ended Year Ended 3/31/94 3/31/93 3/31/92 12/31/93 12/31/92 12/31/91 Advisory Fee $11,613,964 $10,671,425 $11,065,156 Advisory Fee $722,166 $528,190 $427,498 =========== =========== =========== ======== ======== ======== FOUNDATION Year Ended Year Ended Year Ended AMERICAN Year Ended Year Ended Year Ended 12/31/93 12/31/92 12/31/91 RETIREMENT 12/31/93 12/31/92 12/31/91 Advisory Fee $1,290,748 $257,141 $42,202 Advisory Fee $226,080 $152,055 $102,456 ========== ======== ======= ======== ======== ======== Expense Expense Reimbursement $ 7,926 $66,546 Reimbursement $ 16,093 $44,189 ---------- ------- --------- - --------- SMALL CAP Year Ended TAX STRATEGIC Year Ended 12/31/93 12/31/93 Advisory Fee $ 4,929 Advisory Fee $ 4,989 -------- ------- Waiver ($ 4,929) Waiver ($4,989) Net Advisory Fee 0 Net Advisory Fee $ 0 ============ ========== Expense Expense Reimbursement $16,800 Reimbursement $12,700 ------- ------- NATIONAL Year Ended Year Ended SHORT-INTERMEDIATE Year Ended Year Ended Year Ended 8/31/94 8/31/93 8/31/94 8/31/93 8/31/92 Advisory Fee $ 196,089 $72,564 Advisory Fee $301,565 $313,180 $135,976 --------- -------- -------- -------- --------- Waiver ($190,396) ($72,564) Waiver ($150,194) ($256,324) ($124,013) Net Advisory Fee $ 6, 413 $ 0 Net Advisory Fee $151,371 $56,856 $11,963 =========== ============ ======== ========== ========== Expense Expense Reimbursement $ 45,680 $61,146 Reimbursement $63,773 ---------- -------- - --------- SHORT-INTERMEDIATE-C Year Ended Year Ended Year Ended TAX EXEMPT Year Ended Year Ended Year Ended 8/31/94 8/31/93 8/31/92 8/31/94 8/31/93 8/31/92 Advisory Fee $164,447 $158,025 $213,131 Advisory Fee $2,126,246 $ 2,028,966 $2,272,890 --------- --------- --------- ---------- ----------- ------------ Waiver ($129,952) ($150,551) ($170,867) Waiver ($1,256,653) ($1,168,131) ($1,411,094) Net Advisory Fee $34,495 $7,474 $42,264 Net Advisory Fee $869,593 $ 860,835 $861,796 ========= =========== ========= ============ ============ ============ Expense Reimbursement $44,957 MONEY MARKET Year Ended Year Ended Year Ended U.S. GOVERNMENT Year Ended 8/31/94 10/31/93 10/31/92 3/31/94 Advisory Fee $1,245,513 $1,637,123 $2,089,939 Advisory Fee $20,607 ---------- ---------- ---------- --------- Waiver ($974,438) (1,047,935) ($1,507,506) Waiver ($20,607) Net Advisory Fee $271,075 $589,188 $582,433 Net Advisory Fee $ 0 ========== ========== ============ Expense Reimbursement $48,772
The following Funds changed their fiscal year ends during the periods covered by the foregoing table: Global and U.S. Real Estate from December 31, to September 30; and Limited Market, from May 31 to September 30. Accordingly, the investment advisory fees reported in the foregoing table reflect, for Global and U.S. Real Estate, the period from January 1, 1994 to September 30, 1994 and, for Limited Market, the period from June 1, 1994 to September 30, 1994. Also Small Cap, Tax Strategic and U.S. Real Estate commenced operations on October 1, 1993, November 2, 1993 and September 1, 1993, respectively, and therefore the figures set forth in the table above reflect investment advisory fees paid for the period from commencement of operations through December 31, 1993. Expense Limitations Evergreen Asset's fee will be reduced by, or Evergreen Asset will reimburse the Funds (except Money Market, National, Tax Exempt, Short-Intermediate, Short-Intermediate CA and U.S. Government, which have specific percentage limitations described below) for any amount necessary to prevent such expenses (exclusive of taxes, interest, brokerage commissions and extraordinary expenses, but inclusive of Evergreen Asset's fee) from exceeding the most restrictive of the expense limitations imposed by state securities commissions of the states in which the Fund's shares are then registered or qualified for sale. Reimbursement, when necessary, will be made monthly in the same manner in which the advisory fee is paid. Currently the most restrictive state expense limitation is 2.5% of the first $30,000,000 of the Fund's average daily net assets, 2% of the next $70,000,000 of such assets and 1.5% of such assets in excess of $100,000,000. With respect to Money Market, Tax Exempt, Short-Intermediate and Short-Intermediate CA the Adviser has agreed to reimburse each Fund to the extent that the Fund's aggregate operating expenses (including Evergreen Asset's fee but excluding interest, taxes, brokerage commissions and extraordinary expenses, and, for Class A, Class B and Class C shares Rule 12b-1 distribution fees and shareholder servicing fees payable) exceed 1% of its average daily net assets for any fiscal year. With respect to U.S. Government and National, Evergreen Asset has agreed to reimburse each Fund to the extent that its aggregate operating expenses (including Evergreen Asset's fee, but excluding interest, taxes, brokerage commissions and extraordinary expenses, and, for Class A, Class B and Class C shares, Rule 12b-1 distribution fees and shareholder servicing fees) exceed 1.25% of its average net assets for any fiscal year. In addition, Evergreen Asset has in some instances voluntarily limited (and may in the future limit) expenses of certain of the Funds. For the years ended December 31, 1991 and 1992, and for the three month period ended March 31, 1993, the Adviser limited the expenses of Global to 2% of the Fund's average net assets on an annual basis. For the four month period January 1, 1992 to April 30, 1992, the Adviser voluntarily limited the expenses of American Retirement to 1.50% of average net assets. For U.S. Government, during the period from June 14, 1993 (commencement of investment operations) through March 31, 1994, Evergreen Asset voluntarily waived its entire management fee of .50 of 1% of daily net assets which amounted to $20,607, and reimbursed the Fund for all other expenses incurred by the Fund representing 1.18% of average net assets Evergreen Asset has voluntarily agreed to reimburse Small Cap to the extent that the Fund's aggregate operating expenses (including Evergreen Asset's fee but excluding interest, taxes, brokerage commissions and extraordinary expenses) exceed 1.50% of its average net assets until such time as the Fund's net assets reach $15 million. During the fiscal years ended December 31, 1991 and December 31, 1992, the Adviser voluntarily absorbed a portion of Foundation's expenses and reimbursed the Fund for expenses in excess of the voluntary expense limitation in an amount equal to 1.38% of its average daily net assets for fiscal 1991 and in an amount equal to .03% of its average daily net assets for fiscal 1992; the voluntary expense limitation and the absorption of Fund expenses ceased on May 1, 1992. Evergreen Asset has agreed to voluntarily reimburse Tax Strategic until the Fund reaches $15 million in net assets, to the extent that the Fund's aggregate operating expenses (including the Advisory Fees, but excluding interest, taxes, brokerage commissions, Rule 12b-1 distribution fees and shareholder servicing fees and extraordinary expenses) exceed 1.50% of its average net assets for any fiscal year. During the period from November 2, 1993 (commencement of investment operations) to December 31, 1993, Evergreen Asset voluntarily waived its advisory fee with respect to Tax Strategic, which amounted to $4,989, and reimbursed the Fund for all of the Fund's other expenses which aggregated $12,700 (2.23% of average net assets). Until U.S. Real Estate reaches $15 million in net assets, Evergreen Asset has voluntarily agreed to reimburse the Fund to the extent that the Fund's aggregate operating expenses (including Evergreen Asset's fee but excluding taxes, interest, brokerage commissions and extraordinary expenses) exceed 1.50% of its average net assets for any fiscal year. During the period from December 30, 1992 (commencement of investment operations) to August 31, 1993, Evergreen Asset voluntarily waived National's entire management fee of .50 of 1% of daily net assets and reimbursed the Fund for all other expenses incurred by the Fund representing .42% of the daily net assets. During the fiscal year ended August 31, 1994, Evergreen Asset voluntarily waived .78 of 1% of its advisory fee and absorbed a portion of the Fund's other expenses equal to .12 % of average net assets. Evergreen Asset may, at its discretion, revise or cease the voluntary absorption of Fund expenses at any time. The Investment Advisory Agreements are terminable, without the payment of any penalty, on sixty days' written notice, by a vote of the holders of a majority of each Fund's outstanding shares, or by a vote of a majority of each Fund's Trustees/Directors or by Evergreen Asset. The Investment Advisory Agreements will automatically terminate in the event of their assignment. Each Investment Advisory Agreement provides in substance that Evergreen Asset shall not be liable for any action or failure to act in accordance with its duties thereunder in the absence of willful misfeasance, bad faith or gross negligence on the part of the Adviser or of reckless disregard of its obligations thereunder. The Investment Advisory Agreements were approved by each Fund's shareholders on June 23, 1994, became effective on June 30, 1994, and will continue in effect until June 30, 1996, and thereafter from year to year provided that their continuance is approved annually by a vote of a majority of the Trustees/Directors of each Fund who are not parties thereto or interested persons (as defined in the 1940 Act) of any such party, cast in person at a meeting duly called for the purpose of voting on such approval, and by a vote of the Trustees/Directors of each Fund or a majority of the outstanding voting shares of each Fund. With respect to Money Market, National, Short-Intermediate, Short-Intermediate-California, Tax Exempt and U.S. Government, the Investment Advisory Agreements were amended on December 13, 1994 by shareholder vote to clarify that distribution fees and shareholder servicing fees applicable only to a particular class of shares of any such Funds will not be included for the purpose of calculating the expense limitations contained in such Investment Advisory Agreements. Certain other clients of Evergreen Asset may have investment objectives and policies similar to those of the Funds. The Adviser (including the sub-adviser)may, from time to time, make recommendations which result in the purchase or sale of a particular security by its other clients simultaneously with a Fund. If transactions on behalf of more than one client during the same period increase the demand for securities being purchased or the supply of securities being sold, there may be an adverse effect on price or quantity. It is the policy of the Adviser to allocate advisory recommendations and the placing of orders in a manner which is deemed equitable by Evergreen Asset to the accounts involved, including the Funds. When two or more of the clients of the Adviser (including one or more of the Funds) are purchasing or selling the same security on a given day from the same broker-dealer, such transactions may be averaged as to price. Although the investment objectives of the Funds are not the same, and their investment decisions are made independently of each other, they rely upon the same resources for investment advice and recommendations. Therefore, on occasion, when a particular security meets the different investment objectives of the various Funds, they may simultaneously purchase or sell the same security. This could have a detrimental effect on the price and quantity of the security available to each Fund. If simultaneous transactions occur, Evergreen Asset attempts to allocate the securities, both as to price and quantity, in accordance with a method deemed equitable to each Fund and consistent with their different investment objectives. In some cases, simultaneous purchases or sales could have a beneficial effect, in that the ability of one Fund to participate in volume transactions may produce better executions for that Fund. Each Fund has adopted procedures under Rule 17a-7 of the 1940 Act to permit purchase and sales transactions to be effected between each Fund and the other registered investment companies for which Evergreen Asset acts as investment adviser or between the Fund and any advisory clients of Evergreen Asset or Lieber & Company. Each Fund may from time to time engage in such transactions but only in accordance with these procedures and if they are equitable to each participant and consistent with each participant's investment objectives. FIRST UNION NATIONAL BANK OF NORTH CAROLINA - CAPITAL MANAGEMENT GROUP Aggressive and Florida High Income The investment adviser to Aggressive and Florida High Income is FUNB. It provides investment advisory services through its Capital Management Group. First Union is a subsidiary of First Union Corporation, a bank holding company headquartered in Charlotte, North Carolina. FUNB's Capital Management Group employs an experienced staff of professional investment analysts, portfolio managers, and traders, and uses several proprietary computer-based systems in conjunction with fundamental analysis to identify investment opportunities. The Capital Management Group has been managing trust assets for over 50 years and currently oversees assets of more than $51.2 billion. In addition, the Capital Management Group has advised the Trust since its inception in 1984. As part of its regular banking operations, FUNB may make loans to public companies. Thus, it may be possible, from time to time, for the Funds to hold or acquire the securities of issuers which are also lending clients of FUNB. The lending relationship will not be a factor in the selection of securities. FUNB shall not be liable to any Fund or any shareholder thereof for any losses that may be sustained in the purchase, holding, or sale of any security, or for anything done or omitted by it, except acts or omissions involving wilful misfeasance, bad faith, gross negligence, or reckless disregard of the duties imposed upon it by its contract with the Trust. Because of the internal controls maintained by FUNB to restrict the flow of non-public information, each Fund's investments are typically made without any knowledge of FUNB's or its affiliates' lending relationships with an issuer. The Investment Advisory Agreements are terminable, without the payment of any penalty, on sixty days' written notice, by a vote of the holders of a majority of each Fund's outstanding shares, or by a vote of a majority of each Fund's Trustees or by FUNB. The Investment Advisory Agreements will automatically terminate in the event of their assignment. Each Investment Advisory Agreement provides in substance that FUNB shall not be liable for any action or failure to act in accordance with its duties thereunder in the absence of willful misfeasance, bad faith or gross negligence on the part of FUNB or of reckless disregard of its obligations thereunder. The Investment Advisory Agreements were approved by each Fund's shareholders on April 20, 1995, became effective on July 1, 1995, and will continue in effect until June 30, 1996, and thereafter from year to year provided that their continuance is approved annually by a vote of a majority of the Trustees of each Fund who are not parties thereto or interested persons (as defined in the 1940 Act) of any such party, cast in person at a meeting duly called for the purpose of voting on such approval, and by a vote of the Trustees of each Fund or a majority of the outstanding voting shares of each Fund. ADVISORY FEES For its advisory services, FUNB receives an annual investment advisory fee as described in the respective prospectus of Aggressive and Florida High Income. ADMINISTRATIVE SERVICES ---------------------------------------------------------------------- provides administrative personnel and services to Aggressive and Florida High Income and manages the business affairs of each Fund for a fee as described in the respective prospectus of Aggressive and Florida High Income. DISTRIBUTION PLANS Reference is made to "Management of the Fund - Distribution Plans and Agreements" in the Prospectus of each Fund for additional disclosure regarding the Funds' distribution arrangements. Distribution fees are accrued daily and paid monthly on the Class A, B and C shares and are charged as class expenses, as accrued. The distribution fees attributable to the Class B shares and Class C shares are designed to permit an investor to purchase such shares through broker-dealers without the assessment of an initial sales charge, and, in the case of Class C shares, without the assessment of a contingent deferred sales charge after the first year following purchase, while at the same time permitting the Distributor to compensate broker-dealers in connection with the sale of such shares. In this regard the purpose and function of the combined contingent deferred sales charge and distribution services fee on the Class B shares and the Class C shares, are the same as those of the initial sales charge and distribution fee with respect to the Class A shares in that in each case the sales charge and/or distribution fee provide for the financing of the distribution of the Fund's shares. Under the Rule 12b-1 Distribution Plans that have been adopted by each Fund with respect to each of its Class A, Class B and Class C shares (to the extent that each Fund offers such classes) (each a "Plan" and collectively, the "Plans"), the Treasurer of each Fund reports the amounts expended under the Plan and the purposes for which such expenditures were made to the Trustees or Directors of each Fund for their review on a quarterly basis. Also, each Plan provides that the selection and nomination of Trustees or Directors who are not interested persons of each Fund (as defined in the 1940 Act) are committed to the discretion of such disinterested Trustees or Directors then in office. The Adviser may from time to time and from its own funds or such other resources as may be permitted by rules of the Securities and Exchange Commission make payments for distribution services to the Distributor; the latter may in turn pay part or all of such compensation to brokers or other persons for their distribution assistance. As of the date of this Statement of Additional Information, no Fund has offered Class A, B or C shares. Each Plan, except those pertaining to Aggressive and Florida High Income, became effective on December 30, 1994 and were initially approved by the sole shareholder of each Class of shares of each Fund with respect to which a Plan was adopted on that date and by the unanimous vote of the Trustees or Directors of each Fund, including the disinterested Trustees or Directors voting separately, at a meeting called for that purpose and held on December 13, 1994. The Plans of Aggressive and Florida High Income became effective on ---------, 1995 and were initially approved by the sole shareholder of each Class of shares of those Funds with respect to which a Plan was adopted on that date and by the unanimous vote of the Trustees or Directors of each Fund, including the disinterested Trustees or Directors voting separately, at a meeting called for that purpose and held on April 20, 1995. The Distribution Agreements between each Fund and Evergreen Funds Distributor, Inc., pursuant to which distribution fees are paid under the Plans by each Fund with respect to its Class A, and where applicable Class B and Class C shares, were, in the case of all Funds except Aggressive and Florida High Income, also approved at the December 13, 1994 meeting by the unanimous vote of the Trustees or Directors of each Fund, including the disinterested Trustees or Directors voting separately. The Distribution Agreements between Aggressive and Florida High Income and Evergreen Funds Distributor, Inc., were approved at the April 20, 1995 meeting by the unanimous vote of the Trustees or Directors of each Fund, including the disinterested Trustees or Directors voting separately. Each Plan and Distribution Agreement will continue in effect for successive twelve-month periods provided, however, that such continuance is specifically approved at least annually by the Trustees or Directors of each Fund or by vote of the holders of a majority of the outstanding voting securities (as defined in the 1940 Act) of that Class, and, in either case, by a majority of the Directors of the Fund who are not parties to the Agreement or interested persons, as defined in the 1940 Act, of any such party (other than as trustees or directors of the Fund) and who have no direct or indirect financial interest in the operation of the Plan or any agreement related thereto. In the event that a Plan or Distribution Agreement is terminated or not continued with respect to one or more Classes of a Fund, (i) no distribution fees (other than current amounts accrued but not yet paid) would be owed by the Fund to the Distributor with respect to that Class or Classes, and (ii) the Fund would not be obligated to pay the Distributor for any amounts expended under the Distribution Agreement not previously recovered by the Distributor from distribution services fees in respect of shares of such Class or Classes through deferred sales charges. All material amendments to any Plan or Distribution Agreement must be approved by a vote of the Trustees or Directors of a Fund or the holders of the Fund's outstanding voting securities, voting separately by Class, and in either case, by a majority of the disinterested Trustees or Directors, cast in person at a meeting called for the purpose of voting on such approval; and any Plan or Distribution Agreement may not be amended in order to increase materially the costs that a particular Class of shares of a Fund may bear pursuant to the Plan or Distribution Agreement without the approval of a majority of the holders of the outstanding voting shares of the Class affected. Any Plan or Distribution Agreement may be terminated (a) by a Fund without penalty at any time by a majority vote of the holders of the outstanding voting securities of the Fund, voting separately by Class or by a majority vote of the Trustees or Directors who are not "interested persons" as defined in the 1940 Act, or (b) by the Distributor. To terminate any Distribution Agreement, any party must give the other parties 60 days' written notice; to terminate a Plan only, the Fund need give no notice to the Distributor. Any Distribution Agreement will terminate automatically in the event of its assignment. ALLOCATION OF BROKERAGE Decisions regarding the portfolio of each Fund other than Aggressive and Florida High Income are made by Evergreen Asset, subject to the supervision and control of the Trustees/Directors. Orders for the purchase and sale of securities and other investments are placed by employees of Evergreen Asset, all of whom are associated with Lieber. In general, the same individuals perform the same functions for the other funds managed by Evergreen Asset. A Fund will not effect any brokerage transactions with any broker or dealer affiliated directly or indirectly with Evergreen Asset or FUNB unless such transactions are fair and reasonable, under the circumstances, to the Fund's shareholders. Circumstances that may indicate that such transactions are fair or reasonable include the frequency of such transactions, the selection process and the commissions payable in connection with such transactions. Most of the transactions in equity securities for each Fund will occur on domestic and, in the case of Global foreign, stock exchanges. Transactions on stock exchanges involve the payment of brokerage commissions. In transactions on stock exchanges in the United States, these commissions are negotiated, whereas on many foreign stock exchanges these commissions are fixed. In the case of securities traded in the foreign and domestic over-the-counter markets, there is generally no stated commission, but the price usually includes an undisclosed commission or markup. Over-the-counter transactions will generally be placed directly with a principal market maker, although the Fund may place an over-the-counter order with a broker-dealer if a better price (including commission) and execution are available. It is anticipated that most purchase and sale transactions involving Money Market, National, Short Intermediate, Short Intermediate-Ca, Tax Exempt and U.S. Government (and the other Funds to the extent they purchase fixed income securities) will be with the issuer or an underwriter or with major dealers in such securities acting as principals. Such transactions are normally on a net basis and generally do not involve payment of brokerage commissions. However, the cost of securities purchased from an underwriter usually includes a commission paid by the issuer to the underwriter. Purchases or sales from dealers will normally reflect the spread between bid and ask prices. In selecting firms to effect securities transactions, the primary consideration of each Fund shall be prompt execution at the most favorable price. A Fund will also consider such factors as the price of the securities and the size and difficulty of execution of the order. If these objectives may be met with more than one firm, the Fund will also consider the availability of statistical and investment data and economic facts and opinions helpful to the Fund. Any such research and analysis is not expected to reduce the costs of the Adviser. No Fund, other than Global, allocated brokerage commissions to firms in exchange for research during the most recent fiscal year. Of the total brokerage commissions paid by Global for its fiscal year ended September 30, 1994, $738,237 or 80% were allocated in exchange for best execution and research. Under Section 11(a) of the Securities Exchange Act of 1934, as amended, and the rules adopted thereunder by the Securities and Exchange Commission, Lieber & Company may be compensated for effecting transactions in portfolio securities for a Fund on a national securities exchange provided the conditions of the rules are met. Each Fund, other than Aggressiv and Florida High Income, has entered into an agreement with Lieber authorizing Lieber to retain compensation for brokerage services. In accordance with such agreement, it is contemplated that Lieber a member of the New York and American Stock Exchanges, will, to the extent practicable, provide brokerage services to the Fund with respect to substantially all securities transactions effected on the New York and American Stock Exchanges. In such transactions, a Fund will seek the best execution at the most favorable price while paying a commission rate no higher than that offered to other clients of Lieber & Company or that which can be reasonably expected to be offered by an unaffiliated broker-dealer having comparable execution capability in a similar transaction. However, no Fund will engage in transactions in which Lieber would be a principal. While no Fund contemplates any ongoing arrangements with other brokerage firms, brokerage business may be given from time to time to other firms. In addition, the Trustees or Directors have adopted procedures pursuant to Rule 17e-1 under the 1940 Act to ensure that all brokerage transactions with Lieber & Company, as an affiliated broker-dealer, are fair and reasonable. Any profits from brokerage commissions accruing to Lieber & Company as a result of portfolio transactions for the Fund will accrue to FUNB and to its ultimate parent, First Union Corporation. The Investment Advisory Agreements do not provide for a reduction of Evergreen Asset's fee with respect to any fund by the amount of any profits earned by Lieber & Company from brokerage commissions generated by portfolio transactions of any Fund. The following chart shows: (1) the brokerage commissions paid by the Funds during their last three fiscal years; (2) the amount and percentage thereof, if any, paid to Lieber & Company; ; and (3) the percentage of the total dollar amount of all portfolio transactions with respect to which commission have been paid which were effected by Lieber & Company: EVERGREEN Year Ended Year Ended Year Ended GLOBAL Period Ended Year Ended Year Ended 9/30/94 9/30/93 9/30/92 9/30/94 12/31/93 12/31/92 Total Brokerage $535,816 $534,533 $595,552 Total Brokerage $917,989 $868,367 $196,719 Commissions Commissions Dollar Amount and % $478,391 89% $477,691 89% $548,346 92% Dollar Amount and % $174,137 19% $154,666 18% $51,684 26% paid to Lieber paid to Lieber % of Transactions % of Transactions Effected by Lieber 90% 90% 91% Effected by Lieber 33% 29% 35% U.S. REAL ESTATE Period Ended Year Ended Year Ended LIMITED MARKET Period Ended Year Ended Year Ended 9/30/94 12/31/93 9/30/94 5/31/94 5/31/93 Total Brokerage $49,723 $14,287 Total Brokerage $94,996 $183,282 $43,664 Commissions Commissions Dollar Amount and % $48,400 97% $13,657 96% Dollar Amount and % $51,736 54% $82,104 45% $25,221 58% paid to Lieber paid to Lieber % of Transactions % of Transactions Effected by Lieber 98% 97% Effected by Lieber 50% 40% 57% TOTAL RETURN Year Ended Year Ended Year Ended GROWTH AND INCOME Year Ended Year Ended Year Ended 3/31/94 3/31/93 3/31/92 12/31/93 12/31/92 12/31/91 Total Brokerage $3,234,684 4,873,169 $4,105,695 Total Brokerage $76,427 $66,266 $41,514 Commissions Commissions Dollar Amount and % $3,199,114 $4,842,437 $4,047,326 Dollar Amount and % $66,670 87% $57,686 87% $38,829 94% paid to Lieber 99% 99% 99% paid to Lieber % of Transactions % of Transactions Effected by Lieber 99% 99% 99% Effected by Lieber 84% 86% 92% FOUNDATION Year Ended Year Ended Year Ended AMERICAN RETIREMENT Year Ended Year Ended Year Ended 12/31/93 12/31/92 12/31/91 12/31/93 12/31/92 12/31/91 Total Brokerage $291,259 $128,811 $36,180 Total Brokerage $99,435 $99,293 $46,018 Commissions Commissions Dollar Amount and % $284,864 98% $124,801 97% $35,655 99% Dollar Amount and % $96,950 98% $98,793 99.5% $45,868 paid to Lieber paid to Lieber 99.7% % of Transactions % of Transactions Effected by Lieber 98% 96% 98% Effected by Lieber 98% 99.6% 99.5% SMALL CAP Period Ended TAX STRATEGIC Period Ended 12/31/93 12/31/93 Total Brokerage $2,091 Total Brokerage $3,260 Commissions Commissions Dollar Amount and % $1,729 Dollar Amount and % $3,210 paid to Lieber 83% paid to Lieber 98% % of Transactions % of Transactions Effected by Lieber 73% Effected by Lieber 98%
The following Funds changed their fiscal year ends during the periods covered by the foregoing table: Global and U.S. Real Estate from December 31 to September 30; and Limited Market, from May 31 to September 30. Accordingly, the commissions reported in the foregoing table reflect, for Global and U.S. Real Estate, the period from January 1, 1994 to September 30, 1994 and, for Limited Market, the period from June 1, 1994 to September 30, 1994. Also Small Cap, Tax Strategic and U.S. Real Estate commenced operations on October 1, 1993, November 2, 1993 and September 1, 1993, respectively, and therefore the figures set forth in the table above reflect commissions paid for the period from commencement of operations through December 31, 1993. The transactions in which National, U.S. Government, Money Market, Short-Intermediate, Tax Exempt, and Short-Intermediate-CA engage do not involve the payment of brokerage commissions and are executed with brokers other than Lieber & Company. ADDITIONAL TAX INFORMATION (See also "Taxes" in the Prospectus) Each Fund has qualified and intends to continue to qualify for and elect the tax treatment applicable to regulated investment companies ("RIC") under Subchapter M of the Code. (Such qualification does not involve supervision of management or investment practices or policies by the Internal Revenue Service.) In order to qualify as a regulated investment company, a Fund must, among other things, (a) derive at least 90% of its gross income from dividends, interest, payments with respect to proceeds from securities loans, gains from the sale or other disposition of securities and other income (including gains from options) derived with respect to its business of investing in such securities; (b) derive less than 30% of its gross income from the sale or other disposition of securities of any of the following: options, futures or forward contracts (other than those on foreign currencies), or foreign currencies (or options, futures or forward contracts thereon) that are not directly related to the RIC's principal business of investing in securities (or options and futures with respect thereto) held less than three months; and (c) diversify its holdings so that, at the end of each quarter of its taxable year, (i) at least 50% of the market value of the Fund's total assets is represented by cash, U.S. Government securities and other securities limited in respect of any one issuer, to an amount not greater than 5% of the Fund's total assets and 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its total assets is invested in the securities of any one issuer (other than U.S. Government securities). By so qualifying, a Fund is not subject to Federal income tax if it timely distributes its investment company taxable income and any net realized capital gains. A 4% nondeductible excise tax will be imposed on a Fund to the extent it does not meet certain distribution requirements by the end of each calendar year. Each Fund anticipates meeting such distribution requirements. Dividends paid by a Fund from investment company taxable income generally will be taxed to the shareholders as ordinary income. Investment company taxable income includes net investment income and net realized short-term gains (if any). Any dividends received by a Fund from domestic corporations will constitute a portion of the Fund's gross investment income. It is anticipated that this portion of the dividends paid by a Fund (other than distributions of securities profits) will qualify for the 70% dividends-received deduction for corporations. Shareholders will be informed of the amounts of dividends which so qualify. Distributions of the excess of net long-term capital gain over net short-term capital loss are taxable to shareholders (who are not exempt from tax) as long-term capital gain, regardless of the length of time the shares of a Fund have been held by such shareholders. Short-term capital gains are taxable to shareholders who are not exempt from tax as ordinary income. Such distributions are not eligible for the dividends-received deduction. Any loss recognized upon the sale of shares of a Fund held by a shareholder for six months or less will be treated as a long-term capital loss to the extent that the shareholder received a long-term capital gain distribution with respect to such shares. Distributions of investment company taxable income and any net long-term capital gains will be taxable as ordinary income as described above to shareholders (who are not exempt from tax), whether made in shares or in cash. Shareholders electing to receive distributions in the form of additional shares will have a cost basis for Federal income tax purposes in each share so received equal to the net asset value of a share of a Fund on the reinvestment date. Distributions by each Fund result in a reduction in the net asset value of the Fund's shares. Should a distribution reduce the net asset value below a shareholder's cost basis, such distribution nevertheless would be taxable as ordinary income or capital gain as described above to shareholders (who are not exempt from tax), even though, from an investment standpoint, it may constitute a return of capital. In particular, investors should be careful to consider the tax implications of buying shares just prior to a distribution. The price of shares purchased at that time includes the amount of the forthcoming distribution. Those purchasing just prior to a distribution will then receive, what in effect is, a return of capital upon the distribution which will nevertheless be taxable to shareholders subject to taxes. Upon a sale or exchange of its shares, a shareholder will realize a taxable gain or loss depending on its basis in the shares. Such gains or loss will be treated as a capital gain or loss if the shares are capital assets in the investor's hands and will be a long-term capital gain or loss if the shares have been held for more than one year. Generally, any loss realized on a sale or exchange will be disallowed to the extent shares disposed of are replaced within a period of sixty-one days beginning thirty days before and ending thirty days after the shares are disposed of. Any loss realized by a shareholder on the sale of shares of the Fund held by the shareholder for six months or less will be disallowed to the extent of any exempt interest dividends received by the shareholder with respect to such shares, and will be treated for tax purposes as a long-term capital loss to the extent of any distributions of net capital gains received by the shareholder with respect to such shares. All distributions, whether received in shares or cash, must be reported by each shareholder on his or her Federal income tax return. Each shareholder should consult his or her own tax adviser to determine the state and local tax implications of Fund distributions. Shareholders who fail to furnish their taxpayer identification numbers to a Fund and to certify as to its correctness and certain other shareholders may be subject to a 31% Federal income tax backup withholding requirement on dividends, distributions of capital gains and redemption proceeds paid to them by the Fund. If the withholding provisions are applicable, any such dividends or capital gain distributions to these shareholders, whether taken in cash or reinvested in additional shares, and any redemption proceeds will be reduced by the amounts required to be withheld. Investors may wish to consult their own tax advisers about the applicability of the backup withholding provisions. The foregoing discussion relates solely to U.S. Federal income tax law as applicable to U.S. persons (i.e., U.S.citizens and residents and U.S.domestic corporations, partnerships, trusts and estates). It does not reflect the special tax consequences to certain taxpayers (e.g., banks, insurance companies, tax exempt organizations and foreign persons). Shareholders are encouraged to consult their own tax advisers regarding specific questions relating to Federal, state and local consequences of investing in shares of a Fund. Each shareholder who is not a U.S. person should consult his or her tax adviser regarding the U.S. and foreign tax consequences of ownership of shares of a Fund, including the possibility that such a shareholder may be subject to a U.S. withholding tax at a rate of 30% (or at a lower rate under a tax treaty)on amounts treated as income from U.S. sources under the Code. Special Tax Consideration for Florida High Income, National, Tax Exempt, Short Intermediate, Short Intermediate-CA, and Tax Strategic With respect to Florida High Income, National, Tax Exempt, Short Intermediate, Short Intermediate-CA, and Tax Strategic, to the extent that the Fund distributes exempt interest dividends to a shareholder, interest on indebtedness incurred or continued by such shareholder to purchase or carry shares of the Fund is not deductible. Furthermore, entities or persons who are "substantial users" (or related persons) of facilities financed by "private activity" bonds (some of which were formerly referred to as "industrial development" bonds) should consult their tax advisers before purchasing shares of the Fund. "Substantial user" is defined generally as including a "non-exempt person" who regularly uses in its trade or business a part of a facility financed from the proceeds of industrial development bonds. Special Tax Considerations for Global Global maintains accounts and calculates income in U.S. dollars. In general, gains or losses on the disposition of debt securities denominated in a foreign currency that are attributable to fluctuations in exchange rates between the date the debt security is acquired and the date of disposition, gains and losses attributable to fluctuations in exchange rates that occur between the time the Fund accrues interest or other receivable or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivable or pays such liabilities, and gains and losses from the disposition of foreign currencies and foreign currency forward contracts will be treated as ordinary income or loss. These gains or losses increase or decrease, respectively, the amount of the Fund's investment company taxable income available to be distributed to its shareholders as ordinary income. The Fund's transactions in foreign currencies, forward contracts, options and futures contracts (including options and futures contracts on foreign currencies) are subject to special provisions of the Code that, among other things, may affect the character of gains and losses by the Fund (i.e., may affect whether gains or losses are ordinary or capital), accelerate recognition of income to the Fund and defer Fund losses. These rules could therefore affect the character, amount and timing of distributions to shareholders. These provisions also (a) require the Fund to mark-to-market certain types of positions in its portfolio (i.e., treat them as if they were closed out) and (b) may cause the Fund to recognize income without receiving cash with which to pay dividends or make distributions in amounts necessary to satisfy the distribution requirements for avoiding U.S. Federal income and excise taxes. The Fund will monitor its transactions, make appropriate tax elections and make appropriate entries in its books and records when it acquires any foreign currency, forward contract, option, futures contract or hedged investment in order to mitigate the effect of these rules. The Fund anticipates that its hedging activities will not adversely affect its regulated investment company status. Income received by the Fund from sources within various foreign countries may be subject to foreign income tax. If more than 50% of the value of the Fund's total assets at the close of its taxable year consists of the stock or securities of foreign corporations, the Fund may elect to "pass through" to the Fund's shareholders the amount of foreign income taxes paid by the Fund. Pursuant to such election, shareholders would be required: (i) to treat a proportionate share of dividends paid by the Fund which represent foreign source income received by the Fund plus the foreign taxes paid by the Fund as foreign source income; and (ii) either to deduct their pro-rata share of foreign taxes in computing their taxable income, or to use it as a foreign tax credit against Federal income taxes (but not both). No deduction for foreign taxes could be claimed by a shareholder who does not itemize deductions. The Fund intends to meet for each taxable year the requirements of the Code to "pass through" to its shareholders foreign income taxes paid if it is determined by the Adviser to be beneficial to do so. There can be no assurance that the Fund will be able to pass through foreign income taxes paid. Each shareholder will be notified within 60 days after the close of each taxable year of the Fund whether the foreign taxes paid by the Fund will "pass through" for that year, and, if so, the amount of each shareholder's pro-rata share (by country) of (i) the foreign taxes paid and (ii) the Fund's gross income from foreign sources. Of course, shareholders who are not liable for Federal income taxes, such as retirement plans qualified under Section 401 of the Code, will not be affected by any such "pass through" of foreign tax credits. The Fund may invest in certain entities that may qualify as "passive foreign investment companies." Generally, the income of such companies may become taxable to the Fund prior to the receipt of distributions, or, alternatively, income taxes and interest charges may be imposed on the Fund on "excess distributions" received by the Fund or on gain from the disposition of such investments by the Fund. In addition, gains from the sale of such investments held for less than three months will count toward the 30% of gross income test described above. The Fund will take steps to minimize income taxes and interest charges arising from such investments, and will monitor such investments to ensure that the Fund complies with the 30% of gross income test. Proposed tax regulations, if they become effective, will allow the Fund to mark to market and recognize gains on such investments at the Fund's taxable year end. The Fund would not be subject to income tax on these gains if they are distributed subject to these proposed rules. NET ASSET VALUE The following information supplements that set forth in each Prospectus under the subheading "How to Buy Shares - How the Funds Value Their Shares" in the Section entitled "Purchase and Redemption of Shares". The public offering price of shares of a Fund is its net asset value, plus, in the case of Class A shares, a sales charge which will vary depending on the purchase alternative chosen by the investor, as more fully described in the Prospectus. See "Purchase of Shares - Initial Sales Charge Alternative -- Class A Shares." On each Fund business day on which a purchase or redemption order is received by a Fund and trading in the types of securities in which a Fund invests might materially affect the value of Fund shares, the per share net asset value of each such Fund is computed in accordance with each Fund's Declaration of Trust or Articles of Incorporation, as applicable, and By-Laws as of the next close of regular trading on the New York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern time) by dividing the value of the Fund's total assets, less its liabilities, by the total number of its shares then outstanding. A Fund business day is any weekday, exclusive of national holidays on which the Exchange is closed and Good Friday. For Tax Exempt and Money Market, securities are valued at amortized cost. Under this method of valuation, a security is initially valued at its acquisition cost and, thereafter, a constant straight line amortization of any discount or premium is assumed each day regardless of the impact of fluctuating interest rates on the market value of the security. For each other Fund, Exchange-listed securities and over-the-counter securities admitted to trading on the NASDAQ National List are valued at the last quoted sale or, if no sale, at the mean of closing bid and asked prices and portfolio bonds are presently valued by a recognized pricing service when such prices are believed to reflect the fair value of the security. Unlisted securities for which market quotations are readily available are valued at a price quoted by one or more brokers. If accurate quotations are not available, securities will be valued at fair value determined in good faith by the Board of Trustees or Directors. The respective per share net asset values of the Class A, Class B, Class C (if Class C shares are offered by a Fund) and Class Y shares are expected to be substantially the same. Under certain circumstances, however, the per share net asset values of the Class B and Class C shares may be lower than the per share net asset value of the Class A shares (and, in turn, that of Class A shares may be lower than Class Y shares) as a result of the greater daily expense accruals, relative to Class A and Class Y shares, of Class B and Class C shares relating to distribution and, to the extent applicable, transfer agency fees and the fact that Class Y shares bear no additional distribution or transfer agency related fees. While it is expected that, in the event each Class of shares of a Fund realizes net investment income or does not realize a net operating loss for a period, the per share net asset values of the four classes will tend to converge immediately after the payment of dividends, which dividends will differ by approximately the amount of the expense accrual differential among the classes, there is no assurance that this will be the case. In the event one or more Classes of a Fund experiences a net operating loss for any fiscal period, the net asset value per share of such Class or Classes will remain lower than that of Classes that incurred lower expenses for the period. To the extent that any Fund invests in non-U.S. dollar denominated securities, the value of all assets and liabilities will be translated into United States dollars at the mean between the buying and selling rates of the currency in which such a security is denominated against United States dollars last quoted by any major bank. If such quotations are not available, the rate of exchange will be determined in accordance with policies established by the Fund. The Trustees or Directors will monitor, on an ongoing basis, a Fund's method of valuation. Trading in securities on European and Far Eastern securities exchanges and over-the-counter markets is normally completed well before the close of business on each business day in New York. In addition, European or Far Eastern securities trading generally or in a particular country or countries may not take place on all business days in New York. Furthermore, trading takes place in various foreign markets on days which are not business days in New York and on which the Fund's net asset value is not calculated. Such calculation does not take place contemporaneously with the determination of the prices of the majority of the portfolio securities used in such calculation. Events affecting the values of portfolio securities that occur between the time their prices are determined and the close of the New York Stock Exchange will not be reflected in a Fund's calculation of net asset value unless the Trustees or Directors deem that the particular event would materially affect net asset value, in which case an adjustment will be made. Securities transactions are accounted for on the trade date, the date the order to buy or sell is executed. Dividend income and other distributions are recorded on the ex-dividend date, except certain dividends and distributions from foreign securities which are recorded as soon as the Fund is informed after the ex-dividend date. PURCHASE OF SHARES The following information supplements that set forth in each Prospectus under the heading "Purchase and Redemption of Shares - How To Buy Shares." General Shares of each Fund will be offered on a continuous basis at a price equal to their net asset value plus an initial sales charge at the time of purchase (the "initial sales charge alternative"), with a contingent deferred sales charge (the deferred sales charge alternative"), or without any initial sales charge, but with a contingent deferred sales charge imposed only during the first year after purchase (the "level-load alternative"), as described below. Class Y shares which, as described below, are not offered to the general public, are offered without any initial or contingent sales charges. Shares of each Fund are offered on a continuous basis through (i) investment dealers that are members of the National Association of Securities Dealers, Inc. and have entered into selected dealer agreements with the Distributor ("selected dealers"), (ii) depository institutions and other financial intermediaries or their affiliates, that have entered into selected agent agreements with the Distributor ("selected agents"), or (iii) the Distributor. The minimum for initial investments is $1,000; there is no minimum for subsequent investments. The subscriber may use the Share Purchase Application available from the Distributor for his or her initial investment. Sales personnel of selected dealers and agents distributing a Fund's shares may receive differing compensation for selling Class A, Class B or Class C shares. Investors may purchase shares of a Fund in the United States either through selected dealers or agents or directly through the Distributor. A Fund reserves the right to suspend the sale of its shares to the public in response to conditions in the securities markets or for other reasons. Each Fund will accept unconditional orders for its shares to be executed at the public offering price equal to the net asset value next determined (plus for Class A shares, the applicable sales charges), as described below. Orders received by the Distributor prior to the close of regular trading on the Exchange on each day the Exchange is open for trading are priced at the net asset value computed as of the close of regular trading on the Exchange on that day (plus for Class A shares the sales charges). In the case of orders for purchase of shares placed through selected dealers or agents, the applicable public offering price will be the net asset value as so determined, but only if the selected dealer or agent receives the order prior to the close of regular trading on the Exchange and transmits it to the Distributor prior to its close of business that same day (normally 5:00 p.m. Eastern time). The selected dealer or agent is responsible for transmitting such orders by 5:00 p.m. If the selected dealer or agent fails to do so, the investor's right to that day's closing price must be settled between the investor and the selected dealer or agent. If the selected dealer or agent receives the order after the close of regular trading on the Exchange, the price will be based on the net asset value determined as of the close of regular trading on the Exchange on the next day it is open for trading. Following the initial purchase of shares of a Fund, a shareholder may place orders to purchase additional shares by telephone if the shareholder has completed the appropriate portion of the Share Purchase Application. Payment for shares purchased by telephone can be made only by Electronic Funds Transfer from a bank account maintained by the shareholder at a bank that is a member of the National Automated Clearing House Association ("ACH"). If a shareholder's telephone purchase request is received before 4:00 p.m. New York time on a Fund business day, the order to purchase shares is automatically placed the same Fund business day for non-money market funds, and two days following the day the order is received for money market funds, and the applicable public offering price will be the public offering price determined as of the close of business on such business day. Full and fractional shares are credited to a subscriber's account in the amount of his or her subscription. As a convenience to the subscriber, and to avoid unnecessary expense to a Fund, stock certificates representing Class Y shares of a Fund are not issued except upon written request to the Fund by the shareholder or his or her authorized selected dealer or agent. This facilitates later redemption and relieves the shareholder of the responsibility for and inconvenience of lost or stolen certificates. No certificates are issued for fractional shares, although such shares remain in the shareholder's account on the records of a Fund, or for Class A, B or C shares of any Fund. In addition to the discount or commission amount paid to selected dealers or agents, the Distributor may from time to time pay additional cash bonuses or other incentives to selected dealers in connection with the sale of shares, other than Class Y shares, of a Fund. On some occasions, such bonuses or incentives may be conditioned upon the sale of a specified minimum dollar amount of the shares of the Fund and/or other Evergreen Mutual Funds, as defined below, during a specific period of time. At the option of the dealer such bonuses or other incentives may take the form of payment for travel expenses, including lodging incurred in connection with trips taken by persons associated with the dealer and members of their families to places within or outside of the United States. Alternative Purchase Arrangements Except as noted, each Fund issues four classes of shares: (i) Class A shares, which are sold to investors choosing the initial sales charge alternative; (ii) Class B shares, which are sold to investors choosing the deferred sales charge alternative and which are not currently offered by Tax Exempt; (iii) Class C shares, which are sold to investors choosing the level-load sales charge alternative and which are not currently offered by National, Short-Intermediate, Short-Intermediate-CA, Tax Exempt and Money Market; and (iv) Class Y shares, which are offered only to (a) shareholders in one or more of the Evergreen Mutual Funds prior to December 30, 1994., (b) certain investment advisory clients of the Adviser and its affiliates, and (c) institutional investors. The four classes of shares each represent an interest in the same portfolio of investments of the Fund, have the same rights and are identical in all respects, except that (I) only Class A, Class B and Class C shares are subject to a Rule 12b-1 distribution fee, (II) Class A shares bear the expense of the initial sales charge and Class B and Class C shares bear the expense of the deferred sales charge, (III) Class B shares and Class C shares each bear the expense of a higher Rule 12b-1 distribution fee than Class A shares and, in the case of Class B shares, higher transfer agency costs, (IV) with the exception of Class Y Shares, each Class of each Fund has exclusive voting rights with respect to provisions of the Rule 12b-1 Plan pursuant to which its distribution services fee is paid which relates to a specific Class and other matters for which separate Class voting is appropriate under applicable law, provided that, if the Fund submits to a simultaneous vote of Class A, Class B and Class C shareholders an amendment to the Rule 12b-1 Plan that would materially increase the amount to be paid thereunder with respect to the Class A shares, the Class A shareholders and the Class B and Class C shareholders will vote separately by Class, and (V) only the Class B shares are subject to a conversion feature. Each Class has different exchange privileges and certain different shareholder service options available. The alternative purchase arrangements permit an investor to choose the method of purchasing shares that is most beneficial given the amount of the purchase, the length of time the investor expects to hold the shares, and other circumstances. Investors should consider whether, during the anticipated life of their investment in the Fund, the accumulated distribution services fee and contingent deferred sales charges on Class B shares prior to conversion, or the accumulated distribution services fee on Class C shares, would be less than the initial sales charge and accumulated distribution services fee on Class A shares purchased at the same time, and to what extent such differential would be offset by the higher return of Class A shares. Class B and Class C shares will normally not be suitable for the investor who qualifies to purchase Class A shares at the lowest applicable sales charge. For this reason, the Distributor will reject any order (except orders for Class B shares from certain retirement plans) for more than $2,500,000 for Class B or Class C shares. Class A shares are subject to a lower distribution services fee and, accordingly, pay correspondingly higher dividends per share than Class B shares or Class C shares. However, because initial sales charges are deducted at the time of purchase, investors purchasing Class A shares would not have all their funds invested initially and, therefore, would initially own fewer shares. Investors not qualifying for reduced initial sales charges who expect to maintain their investment for an extended period of time might consider purchasing Class A shares because the accumulated continuing distribution charges on Class B shares or Class C shares may exceed the initial sales charge on Class A shares during the life of the investment. Again, however, such investors must weigh this consideration against the fact that, because of such initial sales charges, not all their funds will be invested initially. Other investors might determine, however, that it would be more advantageous to purchase Class B shares or Class C shares in order to have all their funds invested initially, although remaining subject to higher continuing distribution charges and, in the case of Class B shares, being subject to a contingent deferred sales charge for a seven-year period. For example, based on current fees and expenses, an investor subject to the 4.75% initial sales charge would have to hold his or her investment approximately seven years for the B and Class C distribution services fee, to exceed the initial sales charge plus the accumulated distribution services fee of Class A shares. In this example, an investor intending to maintain his or her investment for a longer period might consider purchasing Class A shares. This example does not take into account the time value of money, which further reduces the impact of the Class C distribution services fees on the investment, fluctuations in net asset value or the effect of different performance assumptions. Those investors who prefer to have all of their funds invested initially but may not wish to retain Fund shares for the seven year period during which Class B shares are subject to a contingent deferred sales charge may find it more advantageous to purchase Class C shares. The Trustees or Directors of each Fund have determined that currently no conflict of interest exists between or among the Class A, Class B, Class C and Class Y shares. On an ongoing basis, the Trustees and Directors of each Fund, pursuant to their fiduciary duties under the 1940 Act and state laws, will seek to ensure that no such conflict arises. Initial Sales Charge Alternative--Class A Shares The public offering price of Class A shares for purchasers choosing the initial sales charge alternative is the net asset value plus a sales charge (except for Money Market and Tax Exempt), as set forth in the Prospectus for each Fund. Shares issued pursuant to the automatic reinvestment of income dividends or capital gains distributions are not subject to any sales charges. The Fund receives the entire net asset value of its Class A shares sold to investors. The Distributor's commission is the sales charge set forth in the Prospectus for each Fund, less any applicable discount or commission "reallowed" to selected dealers and agents. The Distributor will reallow discounts to selected dealers and agents in the amounts indicated in the table in the Prospectus. In this regard, the Distributor may elect to reallow the entire sales charge to selected dealers and agents for all sales with respect to which orders are placed with the Distributor. A selected dealer who receives reallowance in excess of 90% of such a sales charge may be deemed to be an "underwriter" under the Securities Act of 1933, as amended. Set forth below is an example of the method of computing the offering price of the Class A shares of each Fund. The example assumes a purchase of Class A shares of a Fund aggregating less than $100,000 subject to the schedule of sales charges set forth above at a price based upon the net asset value of Class A shares of each Fund at the end of each Fund's latest fiscal year.
Net Per Share Offering Net Per Share Offering Asset Sales Price Asset Sales Price Per Value Charge Date Per Share Value Charge Date Share Aggressive Evergreen $14.62 $.73 9/30/94 $15.35% Florida High Income Foundation $12.12 $.65 12/31/93 $13.77 Global $13.81 $.69 9/30/94 $14.50 Tax Strategic $10.31 $.51 12/31/93 $10.82 U.S. Real Short-Inter- Estate $10.07 $.50 9/30/94 $10.57 mediate $10.21 $.51 8/31/94 $10.72 Short-Inter- Limited Market $21.74 $1.08 9/30/94 $22.82 mediate-CA $10.09 $.50 8/31/94 $10.59 Growth and Income $15.41 $.77 12/31/93 $16.18 National $9.99 $.47 8/31/94 $10.46 Total Return $18.29 $.91 3/31/94 $19.20 Tax Exempt $1.00 N/A 8/31/94 $1.00 American Retirement $11.60 $.58 12/31/93 $12.18 U.S. Government $9.34 $.47 3/31/94 $9.81 Small Cap $10.15 $.51 12/31/93 $10.66 Money Market $1.00 N/A 8/31/94 $1.00
Prior to the date of this Statement of Additional Information, shares of the Funds were offered exclusively on a no-load basis and, accordingly, no underwriting commissions have been paid in respect of sales of shares of the Funds or retained by the Distributor. In addition, since Class B and Class C shares were not offered prior to the date hereof, no contingent deferred sales charges have been paid to the distributor with respect to Class B or Class C shares. Investors choosing the initial sales charge alternative may under certain circumstances be entitled to pay reduced sales charges. The circumstances under which such investors may pay reduced sales charges are described below. Combined Purchase Privilege. Certain persons may qualify for the sales charge reductions by combining purchases of shares of one or more Funds into a single "purchase," if the resulting "purchase" totals at least $100,000. The term "purchase" refers to: (i) a single purchase by an individual, or to concurrent purchases, which in the aggregate are at least equal to the prescribed amounts, by an individual, his or her spouse and their children under the age of 21 years purchasing shares for his, her or their own account(s); (ii) a single purchase by a trustee or other fiduciary purchasing shares for a single trust, estate or single fiduciary account although more than one beneficiary is involved; or (iii) a single purchase for the employee benefit plans of a single employer. The term "purchase" also includes purchases by any "company," as the term is defined in the 1940 Act, but does not include purchases by any such company which has not been in existence for at least six months or which has no purpose other than the purchase of shares of a Fund or shares of other registered investment companies at a discount. The term "purchase" does not include purchases by any group of individuals whose sole organizational nexus is that the participants therein are credit card holders of a company, policy holders of an insurance company, customers of either a bank or broker-dealer or clients of an investment adviser. A "purchase" may also include shares, purchased at the same time through a single selected dealer or agent, of any Evergreen Mutual Fund. Currently, the Evergreen Mutual Funds include: The Evergreen Fund Evergreen Aggressive Growth Fund Evergreen Global Real Estate Equity Fund Evergreen U.S. Real Estate Equity Fund The Evergreen Limited Market Fund, Inc. Evergreen Growth and Income Fund The Evergreen Total Return Fund The Evergreen American Retirement Fund Evergreen Small Cap Equity Income Fund Evergreen Tax Strategic Foundation Fund Evergreen Short-Intermediate Municipal Fund Evergreen Short-Intermediate Municipal Fund-CA Evergreen National Tax-Free Fund Evergreen Florida High Income Municipal Fund Evergreen Tax Exempt Money Market Fund The Evergreen Money Market Trust Evergreen U.S. Government Securities Fund Evergreen Foundation Fund Prospectuses for the Evergreen Mutual Funds may be obtained without charge by contacting the Distributor, Evergreen Asset or FUNB at the address or telephone number shown on the front cover of this Statement of Additional Information. Cumulative Quantity Discount (Right of Accumulation). An investor's purchase of additional Class A shares of a Fund may qualify for a Cumulative Quantity Discount. The applicable sales charge will be based on the total of: (i) the investor's current purchase; (ii) the net asset value (at the close of business on the previous day) of (a) all Class A, Class B and Class C shares of the Fund held by the investor and (b) all such shares of any other Evergreen Mutual Fund held by the investor; and (iii) the net asset value of all shares described in paragraph (ii) owned by another shareholder eligible to combine his or her purchase with that of the investor into a single "purchase" (see above). For example, if an investor owned Class A, B or C shares of an Evergreen Mutual Fund worth $200,000 at their then current net asset value and, subsequently, purchased Class A shares of a Fund worth an additional $100,000, the sales charge for the $100,000 purchase would be at the 3.00% rate applicable to a single $300,000 purchase of shares of the Fund, rather than the 3.75% rate. To qualify for the Combined Purchase Privilege or to obtain the Cumulative Quantity Discount on a purchase through a selected dealer or agent, the investor or selected dealer or agent must provide the Distributor with sufficient information to verify that each purchase qualifies for the privilege or discount. Statement of Intention. Class A investors may also obtain the reduced sales charges shown in the table above by means of a written Statement of Intention, which expresses the investor's intention to invest not less than $100,000 within a period of 13 months in Class A shares (or Class A, Class B and/or Class C shares) of the Fund or any other Evergreen Mutual Fund. Each purchase of shares under a Statement of Intention will be made at the public offering price or prices applicable at the time of such purchase to a single transaction of the dollar amount indicated in the Statement of Intention. At the investor's option, a Statement of Intention may include purchases of Class A, B or C shares of the Fund or any other Evergreen Mutual Fund made not more than 90 days prior to the date that the investor signs a Statement of Intention; however, the 13-month period during which the Statement of Intention is in effect will begin on the date of the earliest purchase to be included. Investors qualifying for the Combined Purchase Privilege described above may purchase shares of the Evergreen Mutual Funds under a single Statement of Intention. For example, if at the time an investor signs a Statement of Intention to invest at least $100,000 in Class A shares of the Fund, the investor and the investor's spouse each purchase shares of the Fund worth $20,000 (for a total of $40,000), it will only be necessary to invest a total of $60,000 during the following 13 months in shares of the Fund or any other Evergreen Mutual Fund, to qualify for the 3.75% sales charge on the total amount being invested (the sales charge applicable to an investment of $100,000). The Statement of Intention is not a binding obligation upon the investor to purchase the full amount indicated. The minimum initial investment under a Statement of Intention is 5% of such amount. Shares purchased with the first 5% of such amount will be held in escrow (while remaining registered in the name of the investor) to secure payment of the higher sales charge applicable to the shares actually purchased if the full amount indicated is not purchased, and such escrowed shares will be involuntarily redeemed to pay the additional sales charge, if necessary. Dividends on escrowed shares, whether paid in cash or reinvested in additional Fund shares, are not subject to escrow. When the full amount indicated has been purchased, the escrow will be released. To the extent that an investor purchases more than the dollar amount indicated on the Statement of Intention and qualifies for a further reduced sales charge, the sales charge will be adjusted for the entire amount purchased at the end of the 13-month period. The difference in sales charge will be used to purchase additional shares of the Fund subject to the rate of sales charge applicable to the actual amount of the aggregate purchases. Investors wishing to enter into a Statement of Intention in conjunction with their initial investment in Class A shares of the Fund should complete the appropriate portion of the Subscription Application found in the Prospectus while current Class A shareholders desiring to do so can obtain a form of Statement of Intention by contacting a Fund at the address or telephone numbers shown on the cover of this Statement of Additional Information. Investments Through Employee Benefit and Savings Plans. Certain qualified and non-qualified benefit and savings plans may make shares of the Evergreen Funds available to their participants. Investments made by such employee benefit plans may be exempt from any applicable front-end sales charges if they meet the criteria set forth in the Prospectus under "Class A Shares-Front End Sales Charge Alternative". The Adviser may provide compensation to organizations providing administrative and recordkeeping services to plans which make shares of the Evergreen Funds available to their participants. Reinstatement Privilege. A Class A shareholder who has caused any or all of his or her shares of the Fund to be redeemed or repurchased may reinvest all or any portion of the redemption or repurchase proceeds in Class A shares of the Fund at net asset value without any sales charge, provided that such reinvestment is made within 30 calendar days after the redemption or repurchase date. Shares are sold to a reinvesting shareholder at the net asset value next determined as described above. A reinstatement pursuant to this privilege will not cancel the redemption or repurchase transaction; therefore, any gain or loss so realized will be recognized for Federal tax purposes except that no loss will be recognized to the extent that the proceeds are reinvested in shares of the Fund. The reinstatement privilege may be used by the shareholder only once, irrespective of the number of shares redeemed or repurchased, except that the privilege may be used without limit in connection with transactions whose sole purpose is to transfer a shareholder's interest in the Fund to his or her individual retirement account or other qualified retirement plan account. Investors may exercise the reinstatement privilege by written request sent to the Fund at the address shown on the cover of this Statement of Additional Information. Sales at Net Asset Value. The Fund may sell its Class A shares at net asset value, i.e., without any sales charge, to certain categories of investors including: (i) certain investment advisory clients of the Adviser or its affiliates; (ii) officers and present or former Trustees or Directors of the Fund; present or former directors and trustees of other investment companies managed by the Adviser; present or retired full-time employees of the Adviser; officers, directors and present or retired full-time employees of the Adviser, the Distributor, and their affiliates; officers, directors and present and full-time employees of selected dealers or agents; or the spouse, sibling, direct ancestor or direct descendant (collectively "relatives") of any such person; or any trust, individual retirement account or retirement plan account for the benefit of any such person or relative; or the estate of any such person or relative, if such shares are purchased for investment purposes (such shares may not be resold except to the Fund); (iii) certain employee benefit plans for employees of the Adviser, the Distributor. and their affiliates; and (iv) persons participating in a fee-based program, sponsored and maintained by a registered broker-dealer and approved by the Distributor, pursuant to which such persons pay an asset-based fee to such broker-dealer, or its affiliate or agent, for service in the nature of investment advisory or administrative services. These provisions are intended to provide additional job-related incentives to persons who serve the Funds or work for companies associated with the Funds and selected dealers and agents of the Funds. Since these persons are in a position to have a basic understanding of the nature of an investment company as well as a general familiarity with the Fund, sales to these persons, as compared to sales in the normal channels of distribution, require substantially less sales effort. Similarly, these provisions extend the privilege of purchasing shares at net asset value to certain classes of institutional investors who, because of their investment sophistication, can be expected to require significantly less than normal sales effort on the part of the Funds and the Distributor. Deferred Sales Charge Alternative--Class B Shares Investors choosing the deferred sales charge alternative purchase Class B shares at the public offering price equal to the net asset value per share of the Class B shares on the date of purchase without the imposition of a sales charge at the time of purchase. The Class B shares are sold without an initial sales charge so that the full amount of the investor's purchase payment is invested in the Fund initially. Proceeds from the contingent deferred sales charge are paid to the Distributor and are used by the Distributor to defray the expenses of the Distributor related to providing distribution-related services to the Fund in connection with the sale of the Class B shares, such as the payment of compensation to selected dealers and agents for selling Class B shares. The combination of the contingent deferred sales charge and the distribution services fee enables the Fund to sell the Class B shares without a sales charge being deducted at the time of purchase. The higher distribution services fee incurred by Class B shares will cause such shares to have a higher expense ratio and to pay lower dividends than those related to Class A shares. Contingent Deferred Sales Charge. Class B shares which are redeemed within seven years of purchase will be subject to a contingent deferred sales charge at the rates set forth in the Prospectus charged as a percentage of the dollar amount subject thereto. The charge will be assessed on an amount equal to the lesser of the cost of the shares being redeemed or their net asset value at the time of redemption. Accordingly, no sales charge will be imposed on increases in net asset value above the initial purchase price. In addition, no CDSC charge will be assessed on shares derived from reinvestment of dividends or capital gains distributions. The amount of the contingent deferred sales charge, if any, will vary depending on the number of years from the time of payment for the purchase of Class B shares until the time of redemption of such shares. In determining the contingent deferred sales charge applicable to a redemption, it will be assumed, that the redemption is first of any Class A shares or Class C shares in the shareholder's Fund account, second of Class B shares held for over eight years or Class B shares acquired pursuant to reinvestment of dividends or distributions and third of Class B shares held longest during the eight-year period. To illustrate, assume that an investor purchased 100 Class B shares at $10 per share (at a cost of $1,000) and in the second year after purchase, the net asset value per share is $12 and, during such time, the investor has acquired 10 additional Class B shares upon dividend reinvestment. If at such time the investor makes his or her first redemption of 50 Class B shares, 10 Class B shares will not be subject to charge because of dividend reinvestment. With respect to the remaining 40 Class B shares, the charge is applied only to the original cost of $10 per share and not to the increase in net asset value of $2 per share. Therefore, of the $600 of the shares redeemed $400 of the redemption proceeds (40 shares x $10 original purchase price) will be charged at a rate of 4.0% (the applicable rate in the second year after purchase for a CDSC of $16). The contingent deferred sales charge is waived on redemptions of shares (i) following the death or disability, as defined in the Internal Revenue Code of 1986, as amended (the "Code"), of a shareholder, or (ii) to the extent that the redemption represents a minimum required distribution from an individual retirement account or other retirement plan to a shareholder who has attained the age of 70-1/2. Conversion Feature. At the end of the period ending seven years after the end of the calendar month in which the shareholder's purchase order was accepted, Class B shares will automatically convert to Class A shares and will no longer be subject to a higher distribution services fee imposed on Class B shares. Such conversion will be on the basis of the relative net asset values of the two classes, without the imposition of any sales load, fee or other charge. The purpose of the conversion feature is to reduce the distribution services fee paid by holders of Class B shares that have been outstanding long enough for the Distributor to have been compensated for the expenses associated with the sale of such shares. For purposes of conversion to Class A, Class B shares purchased through the reinvestment of dividends and distributions paid in respect of Class B shares in a shareholder's account will be considered to be held in a separate sub-account. Each time any Class B shares in the shareholder's account (other than those in the sub-account) convert to Class A, an equal pro-rata portion of the Class B shares in the sub-account will also convert to Class A. The conversion of Class B shares to Class A shares is subject to the continuing availability of an opinion of counsel to the effect that (i) the assessment of the higher distribution services fee and transfer agency costs with respect to Class B shares does not result in the dividends or distributions payable with respect to other Classes of a Fund's shares being deemed "preferential dividends" under the Code, and (ii) the conversion of Class B shares to Class A shares does not constitute a taxable event under Federal income tax law. The conversion of Class B shares to Class A shares may be suspended if such an opinion is no longer available at the time such conversion is to occur. In that event, no further conversions of Class B shares would occur, and shares might continue to be subject to the higher distribution services fee for an indefinite period which may extend beyond the period ending eight years after the end of the calendar month in which the shareholder's purchase order was accepted, subject to the Rules of Fair Practice of the National Association of Securities Dealers, Inc. Level-Load Alternative--Class C Shares Class C shares are offered by all Funds except Short-Intermediate, Short-Intermediate-CA, Money Market and Tax Exempt. Investors choosing the level load sales charge alternative purchase Class C shares at the public offering price equal to the net asset value per share of the Class C shares on the date of purchase without the imposition of a sales charge. However, you will pay a 1.0% CDSC if you redeem shares during the first year after purchase. No charge is imposed in connection with redemptions made more than one year from the date of purchase . Class C shares are sold without an initial sales charge so that the Fund will receive the full amount of the investor's purchase payment and after the first year without a contingent deferred sales charge so that the investor will receive as proceeds upon redemption the entire net asset value of his or her Class C shares. The Class C distribution services fee enables the Fund to sell Class C shares without either an initial or contingent deferred sales charge. However, unlike Class B shares, Class C shares do not convert to any other class of shares of the Fund. Class C shares incur higher distribution services fees than Class A shares, and will thus have a higher expense ratio and pay correspondingly lower dividends than Class A shares. Class Y Shares Class Y shares are not offered to the general public and are available only to (i) investors that held shares in one or more of the Evergreen Mutual Funds prior to December 30, 1994., (ii) certain investment advisory clients of the Adviser and its affiliates, and (iii) institutional investors. Class Y shares do not bear any Rule 12b-1 distribution expenses and are not subject to any front-end or contingent deferred sales charges. GENERAL INFORMATION Capitalization and Organization. All of the Funds, except Limited Market, are series of Massachusetts business trusts (the "Trusts"). Evergreen and Aggressive are the two series of the Evergreen Trust, which was originally organized in 1971 as a Delaware corporation under the name "The Evergreen Fund, Inc." and reincorporated as a Maryland corporation in 1981. On January 30, 1987, Evergreen was reorganized from a Maryland corporation into a Massachusetts business trust. Total Return is the only series of the Evergreen Total Return Fund and was originally organized in 1978 as a Maryland corporation under the name "The Evergreen Total Return Fund, Inc." On August 1, 1986, the Total Return was reorganized from a Maryland corporation into a Massachusetts business trust. American Retirement and Small Cap are series of The Evergreen American Retirement Trust, which was organized as a Massachusetts business trust in 1987. Florida High Income, National, Short-Intermediate, Short-Intermediate-CA and Tax Exempt, are series of the Evergreen Municipal Trust, which was organized as a Massachusetts business trust in 1988. Money Market is the only series of the Evergreen Money Market Trust, which was organized as a Massachusetts business trust in 1987. Global and U.S. Real Estate are the two series of Evergreen Real Estate Equity Trust, which was organized as a Massachusetts business trust in 1988. Growth and Income, is the only series of a Massachusetts business trust organized in 1986. U.S. Government is the only series of Evergreen Fixed Income Trust, which was organized as a Massachusetts business trust in 1992. Foundation and Tax Strategic are the two series of Evergreen Foundation Trust which was organized as a Massachusetts business trust in 1989. Limited Market is a Maryland corporation initially organized in 1983. Liability Under Massachusetts Law Under Massachusetts law, trustees and shareholders of a business trust may, in certain circumstances, be held personally liable for its obligations. The Declaration of Trust under which the Fund operates provides that no trustee or shareholder will be personally liable for the obligations of the Trust and that every written contract made by the Trust contain a provision to that effect. If any Trustee or shareholder were required to pay any liability of the Trust, that person would be entitled to reimbursement from the general assets of the Trust. Aggressive, Total Return, Evergreen and Growth and Income may issue an unlimited number of shares of beneficial interest with a $0.001 par value. American Retirement, Florida High Income, Small Cap, Global, U.S. Real Estate, Foundation, Tax Strategic, U.S. Government, Money Market, Tax Exempt, Short-Intermediate, Short-Intermediate-CA and National may issue an unlimited number of shares of beneficial interest with a $0.0001 par value. All shares of these Funds have equal rights and privileges. Each share is entitled to one vote, to participate equally in dividends and distributions declared by the Funds and on liquidation to their proportionate share of the assets remaining after satisfaction of outstanding liabilities. Shares of these Funds are fully paid, nonassessable and fully transferable when issued and have no pre-emptive, conversion or exchange rights. Fractional shares have proportionally the same rights, including voting rights, as are provided for a full share. The authorized capital stock of Limited Market consists of 25,000,000 shares of Common Stock having a par value of $0.10 per share. Each share of Limited Market is entitled to one vote and to participate equally in dividends and distributions declared by Limited Market and, on liquidation, to its proportionate share of the net assets remaining after satisfaction of outstanding liabilities (including fractional shares on a proportional basis). All shares of Limited Market when issued will be fully paid and non-assessable and have no preemptive, conversion or exchange rights. Fractional shares have proportionally the same rights, including voting rights, as are provided for a full share. The rights of the holders of shares of Common Stock may not be modified except by vote of the holders of a majority of the outstanding shares. The Trustees of the Funds (with the exception of Limited Market) were elected by the shareholders of each Fund at a Joint Special Meeting of Shareholders held on June 23, 1994. Under each Funds Declaration of Trust, each Trustee will continue in office until the termination of the Fund or his or her earlier death, incapacity, resignation or removal. Shareholders can remove a Trustee upon a vote of two-thirds of the outstanding shares of beneficial interest of the Trust. Vacancies will be filled by a majority of the remaining Trustees, subject to the 1940 Act. As a result, normally no annual or regular meetings of shareholders will be held, unless otherwise required by the Declaration of Trust of each Fund or the 1940 Act. The Directors of Limited Market were elected by the shareholders of the Fund at their meeting held June 23, 1994. Under the Fund's Bylaws, each Director will continue in office until such time as less than a majority of the Directors then holding office have been elected by the shareholders or upon the occurrence of any of the conditions described under Section 16 of the 1940 Act. As a result, normally no annual or regular meetings of shareholders will be held, unless otherwise required by the Bylaws or the 1940 Act. Shares have noncumulative voting rights, which means that the holders of more than 50% of the shares voting for the election of Trustees or Directors can elect 100% of the Trustees or Directors if they choose to do so and in such event the holders of the remaining shares so voting will not be able to elect any Trustees or Directors. The Trustees or Directors of each Fund are authorized to reclassify and issue any unissued shares to any number of additional series without shareholder approval. Accordingly, in the future, for reasons such as the desire to establish one or more additional portfolios of a Trust or Limited market with different investment objectives, policies or restrictions, additional series of shares may be created by one or more Funds. Any issuance of shares of another series or class would be governed by the 1940 Act and the law of either the State of Massachusetts or the State of Maryland. If shares of another series of a Trust or Limited Market were issued in connection with the creation of additional investment portfolios, each share of the newly created portfolio would normally be entitled to one vote for all purposes. Generally, shares of all portfolios would vote as a single series on matters, such as the election of Trustees or Directors, that affected all portfolios in substantially the same manner. As to matters affecting each portfolio differently, such as approval of the Investment Advisory Contract and changes in investment policy, shares of each portfolio would vote separately. In addition any Fund may, in the future, create additional classes of shares which represent an interest in the same investment portfolio. Except for the different distribution related an other specific costs borne by such additional classes, they will have the same voting and other rights described for the existing classes of each Fund. Procedures for calling a shareholders' meeting for the removal of the Trustees or Directors of each Fund, similar to those set forth in Section 16(c) of the 1940 Act will be available to shareholders of each Fund. The rights of the holders of shares of a series of a Fund may not be modified except by the vote of a majority of the outstanding shares of such series. An order has been received from the Securities and Exchange Commission permitting the issuance and sale of multiple classes of shares representing interests in each Fund. In the event a Fund were to issue additional Classes of shares other than those described herein, no further relief from the Securities and Exchange Commission would be required. As of April 15, 1995 each Fund had outstanding the following number of shares of each Class:
Total Shares Class A Class B Class C Class Y Evergreen Total Return Limited Market Growth and Income Money Market American Retirement Small Cap Tax Exempt Short-Intermediate Short-Intermediate-CA National Global U.S. Real Estate Foundation Tax Strategic U.S. Government
Custodian and Transfer Agent State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, acts as custodian for the securities and cash of each Fund but plays no part in deciding the purchase or sale of portfolio securities. State Street has entered into sub-custodian agreements with a number of major financial institutions, pursuant to which cash and Global's portfolio securities which are purchased outside the United States will be maintained in the custody of such institutions. All sub-custodian arrangements will be approved by Global's Trustees in accordance with Rule 17f-5 of the 1940 Act. Distributor Evergreen Funds Distributor, Inc. (the "Distributor"), 230 Park Avenue, New York, New York 10169, serves as each Fund's principal underwriter, and as such may solicit orders from the public to purchase shares of any Fund. Evergreen Funds Distributor, Inc. is not obligated to sell any specific amount of shares and will purchase shares for resale only against orders for shares. Under the Agreement between the Fund and the Distributor, the Fund has agreed to indemnify the Distributor, in the absence of its willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations thereunder, against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended. Counsel Shereff, Friedman, Hoffman & Goodman, LLP, 919 Third Avenue, New York, New York 10022 serves as counsel to the Funds. Independent Auditors Ernst & Young LLP has been selected to be the independent auditors of Total Return, Limited Market, Growth and Income and the two series funds of The Evergreen American Retirement Trust. Price Waterhouse LLP has been selected to be the independent auditors of the two series funds of Evergreen Trust, Money Market, the five series funds of The Evergreen Municipal Trust, the two series funds of Evergreen Real Estate Equity Trust, the two series funds of Evergreen Foundation Trust and the sole series of Evergreen Fixed-Income Trust. PERFORMANCE INFORMATION Total Return From time to time a Fund may advertise its "total return" . Computed separately for each class, the Fund's "total return" is its average annual compounded total return for recent one, five, and ten-year periods (or the period since the Fund's inception). The Fund's total return for such a period is computed by finding, through the use of a formula prescribed by the Securities and Exchange Commission, the average annual compounded rate of return over the period that would equate an assumed initial amount invested to the value of such investment at the end of the period. For purposes of computing total return, income dividends and capital gains distributions paid on shares of the Fund are assumed to have been reinvested when paid and the maximum sales charge applicable to purchases of Fund shares is assumed to have been paid. The Fund will include performance data for Class A, Class B and Class C shares in any advertisement or information including performance data of the Fund. The shares of each Fund outstanding prior to January 3, 1995 have been reclassified as Class Y shares. The average annual compounded total return, or where applicable yield, for each Class of shares offered by the Funds for the most recently completed one, five and ten year fiscal periods is set forth in the table below. EVERGREEN 1 Year 5 Years 10 Years AGGRESSIVE 1 Year 5 Years 10 Years ------- Ended Ended Ended Ended Ended Ended ------ 9/30/94 9/30/94 9/30/94 Class A 1.12% 5.73% 11.57% Class A Class B 1.16% 6.46% 12.11% Class B Class C 5.16% 6.77% 12.11% Class C Class Y 6.16% 6.77% 12.11% Class Y FLORIDA HIGH INCOME 1 Year 5 Years 10 Years TOTAL RETURN 1 Year 5 Years 10 Years ------- Ended Ended Ended Ended Ended Ended ------ 9/30/94 9/30/94 9/30/94 3/31/94 3/31/94 3/31/94 Class A 1.12% 5.73% 11.57% Class A -6.78% 7.11% 11.25% Class B 1.16% 6.46% 12.11% Class B -6.51% 7.87% 11.79% Class C 5.16% 6.77% 12.11% Class C -3.01% 8.16% 11.79% Class Y 6.16% 6.77% 12.11% Class Y -2.13% 8.16% 11.79% LIMITED MARKET 1 Year 5 Years 10 Years GROWTH AND INCOME 1 Year 5 Years From Ended Ended Ended Ended Ended 10/15/86 9/30/94 9/30/94 9/30/94 12/31/93 12/31/93 (inception) Class A -2.74% 8.58% 15.32% Class A 9.00% 13.34% 11.81% Class B -2.71% 9.37% 15.89% Class B 9.44% 14.22% 12.50% Class C 1.15% 9.64% 15.89% Class C 13.44% 14.45% 12.57% Class Y 2.11% 9.64% 15.89% Class Y 14.44% 14.45% 12.57% MONEY MARKET 1 Year 5 Years From AMERICAN RETIREMENT 1 Year 5 Years From Ended Ended 11/2/87 Ended Ended 3/14/88 8/31/94 8/31/94 (inception) 12/31/93 12/31/93 (inception) Class A 3.60% 5.31% 6.16% Class A 8.64% 10.25% 9.82% Class B -1.40% 4.98% 6.06% Class B 9.06% 11.07% 10.64% Class Y 3.60% 5.31% 6.16% Class C 13.06% 11.33% 10.75% Class Y 14.06% 11.33% 10.75% SMALL CAP From TAX EXEMPT 1 Year 5 Years From 10/1/93 Ended Ended 11/2/88 (inception) 8/31/94 8/31/94 (inception) Class A -2.41% Class A 2.50% 4.08% 4.44% Class B -2.54% Class Y 2.50% 4.08% 4.44% Class C 1.46% Class Y 2.46% SHORT INTERMEDIATE 1 Year From SHORT-INTERMEDIATE-CA 1 Year From Ended 11/18/91 Ended 10/16/92 8/31/94 (inception) 8/31/94 (inception) Class A -3.40% 3.96% -3.00% 2.12% Class B -3.41% 4.81% -3.04% 2.74% Class Y 1.42% 5.79% 1.84% 4.79% NATIONAL 1 Year From GLOBAL 1 Year 5 Years From 2/1/89 Ended 10/1/93 Ended Ended (inception) ----------- 8/31/94 (inception) 9/30/94 9/30/94 Class A -6.93% 3.30% -1.74% 6.28% 5.92% Class B -6.86% 4.04% -1.84% 7.01% 5.70% Class C -2.29% 6.33% 2.16% 7.32% 6.83% Class Y 3.16% 7.32% 6.83% U.S. REAL ESTATE 1 Year From 9/1/93 FOUNDATION 1 Year From 1/2/90 Ended (inception) Ended (inception) ----------- ----------- 9/30/94 12/31/93 Class A -6.89% -3.37% 10.21% 17.76% Class B -7.11% -2.62% 10.71% 18.76% Class C -3.22% 1.08% 14.71% 19.20% Class Y -2.25% 1.08% 15.71% 19.20% TAX STRATEGIC From 11/02/93 U.S. GOVERNMENT From 6/14/93 (inception) (inception) to 12/31/93 to 3/31/94 Class A -1.37% -5.38% Class B -1.45% -5.33% Class C -2.55% -1.56% Class Y 3.55% -0.66%
The performance numbers for the Class A, B and C shares are hypothetical numbers based on the performance for Class Y shares as adjusted for any applicable front-end sales charge or CDSC. The performance data does not reflect any Rule 12b-1 fees. If such fees were reflected the returns would be lower. A Fund's total return is not fixed and will fluctuate in response to prevailing market conditions or as a function of the type and quality of the securities in a Fund's portfolio and its expenses. Total return information is useful in reviewing a Fund's performance but such information may not provide a basis for comparison with bank deposits or other investments which pay a fixed yield for a stated period of time. An investor's principal invested in a Fund is not fixed and will fluctuate in response to prevailing market conditions. YIELD CALCULATIONS - NON-MONEY MARKET FUNDS The yields used by U.S. Government, National, Short-Intermediate and Short-Intermediate-CA in advertising are computed by dividing the Fund's interest income (as defined in the SEC yield formula) for a given 30-day or one month period, net of expenses, by the average number of shares entitled to receive distributions during the period, dividing this figure by the Fund's net asset value per share at the end of the period and annualizing the result (assuming compounding of income) in order to arrive at an annual percentage rate. The formula for calculating yield is as follows: YIELD = 2[(a-b+1)6-1] cd Where a = Interest earned during the period b = Expenses accrued for the period (net of reimbursements) c = The average daily number of shares outstanding during the period that were entitled to receive dividends d = The maximum offering price per share on the last day of the period Income is calculated for purposes of yield quotations in accordance with standardized methods applicable to all stock and bond funds. Gains and losses generally are excluded from the calculation. Income calculated for purposes of determining a Fund's yield differs from income as determined for other accounting purposes. Because of the different accounting methods used, and because of the compounding assumed in yield calculations, the yields quoted for a Fund may differ from the rate of distributions a Fund paid over the same period, or the net investment income reported in a Fund's financial statements. Yield examples for National, Short-Intermediate and Short-Intermediate-CA are shown under "Tax Equivalent Yield', below. An example of the 30-day yield for U.S. Government is set forth below: Year Ended: Yield U.S. Government 3/31/94 6.95% Tax Equivalent Yield National, Short-Intermediate and Short-Intermediate-CA invest principally in obligations the interest from which is exempt from federal income tax other than the AMT. In addition, the securities in which Short-Intermediate-CA invests will also, to the extent practicable, be exempt from California income taxes. However from time to time the Funds may make investments which generate taxable income. A Fund's tax-equivalent yield is the rate an investor would have to earn from a fully taxable investment in order to equal the Fund's yield after taxes. Tax-equivalent yields are calculated by dividing a Fund's yield by the result of one minus a stated federal or combined federal and state tax rate. (If only a portion of the Fund's yield is tax-exempt, only that portion is adjusted in the calculation.) Of course, no assurance can be given that a Fund will achieve any specific tax-exempt yield. If only a portion of the Fund's yield is tax-exempt, only that portion is adjusted in the calculation. Of course, no assurance can be given that the Fund will achieve any specific tax-exempt yield. The following formula is used to calculate Tax Equivalent Yield without taking into account state tax: Fund's Yield 1 - Fed Tax Rate The following formula is used to calculate Tax Equivalent Yield taking into account state tax: Fund's Yield 1 - Fed Tax Rate + (State Tax Rate - [State Tax Rate x Fed Tax Rate]) Examples of the 30-day tax exempt and tax equivalent yields, assuming the 36% federal income tax bracket and, for Short-Intermediate-CA only, the 11% California income tax bracket, are set forth below: Year Ended: Yield Tax Equivalent Yield National 8/31/94 5.20% 8.12% Short-Intermediate 8/31/94 4.23% 6.61% Short-Intermediate-CA 8/31/94 4.10% 7.20% CURRENT YIELD - MONEY MARKET FUNDS Money Market and Tax Exempt may quote a "Current Yield" or "Effective Yield" from time to time. The Current Yield is an annualized yield based on the actual total return for a seven-day period. The Effective Yield is an annualized yield based on a compounding of the Current Yield. These yields are each computed by first determining the "Net Change in Account Value" for a hypothetical account having a share balance of one share at the beginning of a seven-day period ("Beginning Account Value"), excluding capital changes. The Net Change in Account Value will generally equal the total dividends declared with respect to the account. The yields are then computed as follows: Current Yield = Net Change in Account Value Beginning Account Value x 365/7 Effective Yield = (1 + Total Dividend for 7 days)365/7- 1 Yield fluctuations may reflect changes in a Fund's net investment income, and portfolio changes resulting from net purchases or net redemptions of the Fund's shares may affect the yield. Accordingly, a Fund's yield may vary from day to day, and the yield stated for a particular past period is not necessarily representative of its future yield. Since the Funds use the amortized cost method of net asset value computation, it does not anticipate any change in yield resulting from any unrealized gains or losses or unrealized appreciation or depreciation not reflected in the yield computation, or change in net asset value during the period used for computing yield. If any of these conditions should occur, yield quotations would be suspended. A Fund's yield is not guaranteed, and the principal is not insured. However, a Fund will use its best efforts to maintain its net asset value at $1.00 per share. Examples of seven day current and effective yields for Money Market and Tax-Exempt are set forth below: 7-Day Period Ended Current Yield Effective Yield Money Market 8/31/94 4.21% 4.30% Tax Exempt 8/31/94 2.87% 2.91% GENERAL From time to time, a Fund may quote its performance in advertising and other types of literature as compared to the performance of the S & P Index, the Dow Jones Industrial Average, Russell 2000 Index, or any other commonly quoted index of common stock prices. The S & P Index, the Dow Jones Industrial Average and the Russell 2000 Index are unmanaged indices of selected common stock prices. A Fund's performance may also be compared to those of other mutual funds having similar objectives. This comparative performance would be expressed as a ranking prepared by Lipper Analytical Services, Inc., an independent service which monitors the performance of mutual funds. A Fund's performance will be calculated by assuming, to the extent applicable, reinvestment of all capital gains distributions and income dividends paid. Any such comparisons may be useful to investors who wish to compare a Fund's past performance with that of its competitors. Of course, past performance cannot be a guarantee of future results. Additional Information Any shareholder inquiries may be directed to the shareholder's broker or to the Adviser. at the address or telephone numbers shown on the front cover of this Statement of Additional Information. This Statement of Additional Information does not contain all the information set forth in the Registration Statement filed by the Fund with the Securities and Exchange Commission under the Securities Act of 1933. Copies of the Registration Statement may be obtained at a reasonable charge from the Securities and Exchange Commission or may be examined, without charge, at the offices of the Securities and Exchange Commission in Washington, D.C. FINANCIAL STATEMENTS Each Fund's financial statements appearing in their most current fiscal year Annual Report to shareholders and the report thereon of the independent auditors appearing therein, namely Ernst & Young, LLP (in the case of Total Return, Limited Market, Growth and Income and the two series funds of The Evergreen American Retirement Trust) or Price Waterhouse, (in the case of Evergreen, Money Market, the four series funds of The Evergreen Municipal Trust, the two series funds of Evergreen Real Estate Equity Trust, the two series funds of Evergreen Foundation Trust and the sole series fund of Evergreen Fixed-Income Trust) , and for Total Return, Growth and Income, American Retirement, Small Cap, Foundation, Tax Strategic and U.S. Government the Semi-Annual Report for the most recently completed semi-annual period, along with the reports of each Fund for the aforementioned periods filed with the Securities and Exchange Commission on form NSAR are incorporated by reference in this Statement of Additional Information. The Annual and Semi-Annual Reports to Shareholders for each Fund, which contain the referenced statements, are available upon request and without charge. APPENDIX A - NOTE, BOND AND COMMERCIAL PAPER RATINGS APPENDIX A - DESCRIPTION OF BOND RATINGS AND NOTE RATINGS Bond Ratings Standard & Poor's Corporation. A Standard & Poor's corporate or municipal bond rating is a current assessment of the credit worthiness of an obligor with respect to a specific obligation. This assessment of credit worthiness may take into consideration obligors such as guarantors, insurers or lessees. The debt rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished to Standard & Poor's by the issuer or obtained by Standard & Poor's from other sources it considers reliable. Standard & Poor's does not perform any audit in connection with the ratings and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended or withdrawn as a result of changes in, unavailability of such information, or for other circumstances. The ratings are based, in varying degrees, on the following considerations: 1. Likelihood of default-capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation. 2. Nature of and provisions of the obligation. 3. Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization or their arrangement under the laws of bankruptcy and other laws affecting creditors' rights. AAA - This is the highest rating assigned by Standard & Poor's to a debt obligation and indicates an extremely strong capacity to pay interest and repay any principal. AA - Debt rated AA also qualifies as high quality debt obligations. Capacity to pay interest and repay principal is very strong and in the majority of instances they differ from AAA issues only in small degree. A - Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas they normally exhibit protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than is higher rated categories. BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on a balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. BB indicates the lowest degree of speculation and C the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. BB - Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BBB - rating. B - Debt rated B has greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating. CCC - Debt rated CCC has a currently indefinable vulnerability to default, and is dependent upon favorable business, financial and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC rating category is also used for debt subordinated to senior debt that is assigned an actual or implied B or B- rating. CC - The rating CC is typically applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. C - The rating C is typically applied to debt subordinated to senior debt which is assigned an actual or implied CCC- debt rating. The C rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued. C1 - The rating C1 is reserved for income bonds on which no interest is being paid. D - Debt rated D is in payment default. It is used when interest payments or principal payments are not made on a due date even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace periods; it will also be used upon a filing of a bankruptcy petition if debt service payments are jeopardized. Plus (+) or Minus (-) - To provide more detailed indications of credit quality, the ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. NR - indicates that no public rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poor's does not rate a particular type of obligation as a matter of policy. Debt obligations of issuers outside the United States and its territories are rated on the same basis as domestic corporate and municipal issues. The ratings measure the credit worthiness of the obligor but do not take into account currency exchange and related uncertainties. Bond Investment Quality Standards: Under present commercial bank regulations issued by the Comptroller of the Currency, bonds rated in the top four categories (AAA, AA, A, BBB, commonly known as "Investment Grade" ratings) are generally regarded as eligible for bank investment. In addition, the Legal Investment Laws of various states may impose certain rating or other standards for obligations eligible for investment by savings banks, trust companies, insurance companies and fiduciaries generally. Moody's Investors Service. A brief description of the applicable Moody's Investors Service rating symbols and their meanings follows: Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge". Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa - Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuations of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A - Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa - Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Some bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. NOTE: Bonds within the above categories which possess the strongest investment attributes are designated by the symbol "1" following the rating. Ba - Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during good and bad times over the future. Uncertainty of position characterizes bonds in this class. B - Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa - Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca - bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C - bonds which are rated C are the lowest rated class of bonds and issue so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. NOTE RATINGS Moody's Investors Service: MIG-1 -- the best quality. MIG-2 -- high quality, with margins of protection ample though not so large as in the preceding group. MIG-3 -- favorable quality, with all security elements accounted for, but lacking the undeniable strength of the preceding grades. Market access for refinancing, in particular, is likely to be less well established. Standard & Poor's Ratings Group: SP-1 - Very strong or strong capacity to pay principal and interest. SP-2 -- Satisfactory capacity to pay principal and interest. Municipal Note Ratings. A Standard & Poor's note rating reflects the liquidity concerns and market access risks unique to notes. Notes due in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment. o Amortization schedule (the larger the final maturity relative to other maturities the more likely it will be treated as a note). o Source of Payment (the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note.) Note rating symbols are as follows: o SP-1 Very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. o SP-2 Satisfactory capacity to pay principal and interest. o SP-3 Speculative capacity to pay principal and interest. Moody's Short-Term Loan Ratings - Moody's ratings for state and municipal short-term obligations will be designated Moody's Investment Grade (MIG). This distinction is in recognition of the differences between short-term credit risk and long-term risk. Factors affecting the liquidity of the borrower are uppermost in importance in short-term borrowing, while various factors of major importance in bond risk are of lesser importance over the short run. Rating symbols and their meanings follow: o MIG 1 - This designation denotes best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. o MIG 2 - This designation denotes high quality. Margins of protection are ample although not so large as in the preceding group. o MIG 3 - This designation denotes favorable quality. All security elements are accounted for but this is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established. o MIG 4 - This designation denotes adequate quality. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk. APPENDIX B - ADDITIONAL INFORMATION CONCERNING CALIFORNIA The following information as to certain California risk factors is given to investors in view of Short-Intermediate-CA's policy of investing primarily in California state and municipal issuers. The information is based primarily upon information derived from public documents relating to securities offerings of California state and municipal issuers, from independent municipal credit reports and historically reliable sources, but has not been independently verified by the Fund. On June 6, 1978, California voters approved Proposition 13, which added Article XIIIA to the California Constitution. The principal thrust of Article XIIIA is to limit the amount of ad valorem taxes on real property to one percent of the full cash value as determined by the county assessor. The assessed valuation of all real property may be increased, but not in excess of two percent per year, or decreased to reflect the rate of inflation or deflation as shown by the consumer price index. Article XIIIA requires a vote of two thirds of the qualified electorate to impose special taxes, and completely prohibits the imposition of any additional ad valorem, sales or transaction tax on real property (other than ad valorem taxes to repay general obligation bonds issued to acquire or improve real property), and requires the approval of two-thirds of all members of the State Legislature to change any state tax laws resulting in increased tax revenues. On November 6, 1979, California voters approved the initiative seeking to amend the California Constitution entitled "Limitation of Government Appropriations" which added Article XIIIB to the California Constitution. Under Article XIIIB state and local governmental entities have an annual appropriations limit and may not spend certain monies which are called appropriations subject to limitations (consisting of tax revenues, state subventions and certain other funds) in an amount higher than the appropriations limit. Generally, the appropriations limit is to be based on certain 1978-79 expenditures, and is to be adjusted annually to reflect changes in consumer prices, population and services provided by these entities. Decreased in state and local revenues in future fiscal years as a consequence of these initiatives may continue to result in reductions in allocations of state revenues to California municipal issuers or reduce the ability of such California issuers to pay their obligations. With the apparent onset of recovery in California's economy, revenue growth over the next few years could recommence at levels that would enable California to restore fiscal stability. The political environment, however, combined with pressures on the state's financial flexibility, may frustrate its ability to reach this goal. Strong interests in long-established state programs ranging from low-cost public higher education access to welfare and health benefits join with the more recently emerging pressure for expanded prison construction and a heightened awareness and concern over the state's business climate. Adopted on July 8, 1994, the fiscal 1994 budget is designed to address California's accumulated deficit over a 22-month period. In order to balance the budget and generate sufficient cash to retire the $4 billion deficit Revenue Anticipation Warrant and a $3 billion Revenue Anticipation Note to be issued in July 1995, the state's fiscal plan relies upon aggressive assumptions of federal aid, projected at about $760 million in fiscal year 1995 and $2.8 billion in fiscal year 1995, to compensate the state for its costs of providing service to illegal immigrants. These assumptions, combined with fiscal year 1996 constitutionally mandated increases in spending for K-14 education, and continued growth in social services and corrections expenditures, are risky. To offset this risk, the state has enacted a Budget Adjustment Law, known as the "trigger" legislation, which established a set of backup budget adjustment mechanisms to address potential shortfalls in cash. The trigger mechanism will be in effect for both fiscal years 1995 and 1996. In July of 1994, S& P and Moody's lowered the general obligation bond rating of the state of California. The rating agencies explained their actions by citing the state's continuing deferral of substantial portions of its estimated $3.8 billion accumulated deficit; continuing structural budgetary constraints including a funding guarantee for K-14 education; overly optimistic expectation of federal aid to balance fiscal year 1995's budget and fiscal year 1996's cash flow projections; and reliance upon a trigger mechanism to reduce spending if the plan's federal aid assumptions prove to be inflated. EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND STATEMENT OF ASSETS AND LIABILITIES June 23, 1995 Assets: Cash $ 300 Deferred organizational expenses 17,650 ------ Total assets 17,950 Liabilities: Organizational expenses payable 17,650 Net assets: Paid-in Capital 300 Net assets $ 300 ========= Net asset value per share: Class A Shares ($100/9.65 shares of beneficial interest outstanding) $10.36 ====== Sales charge - 4.75% of offering price Maximum offering price (100/95.25 * $10.36) $10.88 ====== Class B Shares ($100/9.65 shares of beneficial interest outstanding) $10.36 Class Y Shares ($100/9.65 shares of beneficial interest outstanding) $10.36 See accompanying notes to financial statements. EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND NOTES TO FINANCIAL STATEMENTS June 23, 1995 Note 1 - Organization Evergreen Florida High Income Municipal Bond Fund (the "Fund") is a newly organized, separate investment series of Evergreen Municipal Trust (the "Trust"), a Massachusetts business trust. The Fund is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end, diversified management company. The Fund has had no operations other than the sale of 9.65 shares of each of Class A, Class B and Class Y shares of beneficial interest to Stephen A. Lieber, Chairman of Evergreen Asset Management Corp. ("Evergreen Asset"). Evergreen Asset is a related party to Capital Management Group of First Union Bank of North Carolina (the "Adviser"). The Adviser has agreed to advance all of the costs incurred and to be incurred in connection with the organization and initial registration of the Fund and the Fund has agreed to reimburse the Adviser for such costs. These costs have been deferred and will be amortized by the Fund over a period of benefit not to exceed 60 months from the date the Fund commences operations. Note 2 - Description of Multiple Classes of Shares The Fund is authorized to issue an unlimited number of shares in three classes. Class A shares are offered with a front-end sales charge of 4.75%. 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 it is expected that they will convert to Class A shares). Class Y shares are available only to investment advisory clients of the Adviser and its affiliates, certain institutional investors and shareholders of other funds managed by Evergreen Asset as of December 30, 1994. Class Y shares are sold without a sales charge. All classes have identical voting, dividend, liquidation and other rights, except that certain classes bear different distribution expenses (see note 4) and have exclusive voting rights with respect to their distribution plan. Note 3 - Investment Advisory and Administration Agreements The Fund has agreed to enter into an investment advisory agreement with the Adviser pursuant to which the Adviser will manage the Fund's investments, subject to the authority of the Fund's Trustees. In consideration of the Adviser performing its obligations, the Fund will pay to the Adviser an advisory fee accrued daily and payable monthly, at an annual rate of .60 of 1% of the Fund's daily net assets. For a period of at least one year, the Adviser has reduced its advisory fee to an annual rate of .30 of 1% of the Fund's daily net assets. EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND NOTES TO FINANCIAL STATEMENTS Note 3 (continued) - Evergreen Asset has agreeed to furnish the Fund with administrative services and will supervise the Fund's daily business affairs. The Fund will pay Evergreen Asset an administration fee accrued daily and payable monthly, at a rate based on the average daily net assets of all of the Funds administered by Evergreen Asset for which either Evergreen Asset or the Adviser serves as investment adviser. The fee is calculated daily and payable monthly at the following annual rates: .050% on the first $7 billion, .035% on the next $3 billion, .030% on the next $5 billion, .020% on the next $10 billion, .015% on the next $5 billion, .010% on assets in excess of $30 billion. Furman Selz Incorporated, the parent of Evergreen Funds Distributor, Inc. ("EFD"), distributor of the Evergreen group of mutual funds, will serve as sub-administrator and will pay the cost of compensation of the officers of the Fund. Furman Selz is entitled to receive a fee based on the average daily net assets of all of the Funds administered by Evergreen Asset for which either Evergreen Asset or the Adviser serves as investment adviser. The fee is calculated daily and payable monthly at the following annual rates: .010% on the first $7 billion, .0075% on the next $3 billion, .005% on the next $15 billion, .004% on assets in excess of $25 billion. Note 4 - Distribution Plans In connection with distribution plans pursuant to Rule 12b-1 of the Act, the Fund has agreed to enter into a distribution agreement (the "Agreement") with EFD 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 shares. Such fees are accrued daily and paid monthly. The Agreement provides that EFD will use these fees to finance activities that promote the sale of Class A and Class B shares. A portion of the payments under Class B plan of 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 shareholder accounts relating to the Fund's Class B shares. Such fees are accrued daily and paid monthly. Note 5 - Plan of Reorganization In accordance with a Plan of Reorganization dated March 15, 1995 between the Trust and ABT Southern Master Trust with respect to its ABT Florida High Income Municipal Bond Fund series ("ABT Fund"), as of the close of business on June 30, 1995, the ABT Fund will transfer substantially all of its assets, and certain stated liabilities, in exchange for shares of the Fund. Report of Independent Accountants To the Shareholder and Trustees of Evergreen Florida High Income Municipal Bond Fund In our opinion, the accompanying statement of assets and liabilities presents fairly, in all material respects, the financial position of Evergreen Florida High Income Municipal Bond Fund (the "Fund"), a series of The Evergreen Municipal Trust, at June 23, 1995, in conformity with generally accepted accounting principles. This financial statement is the responsibility of the Fund's management; our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit of this financial statement in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. Price Waterhouse LLP 1177 Avenue of the Americas New York, N.Y. 10036 June 30, 1995 THE EVERGREEN MUNICIPAL TRUST PART C. OTHER INFORMATION Item 24. Financial Statements and Exhibits a. Financial Statements Included in Part A of this Registration Statement: Financial Highlights for Evergreen Short-Intermediate Municipal Fund for the fiscal period from July 17, 1991 (commencement of operations) through August 31, 1991 and for the fiscal years ended August 31, 1992 through August 31, 1994. Financial Highlights for Evergreen Short-Intermediate Municipal Fund - California for the fiscal period from November 2, 1988 (commencement of operations) through August 31, 1989 and for the fiscal years ended August 31, 1990 through August 31, 1994. Financial Highlights for Evergreen National Tax-Free Fund for the fiscal period from December 30, 1992 (commencement of operations) through August 31, 1993 and for the fiscal year ended August 31, 1994. Financial Highlights for Evergreen Tax Exempt Money Market Fund for the fiscal period from November 2, 1988 (commencement of operations) through August 31, 1989 and for the fiscal years ended August 31, 1990 through August 31, 1994. Included in Part B of this Registration Statement:* and ** Statements of Investments of Evergreen Short-Intermediate Municipal Fund, Evergreen Short-Intermediate Municipal Fund - California, Evergreen National Tax-Free Fund and Evergreen Tax Exempt Money Market Fund as of August 31, 1994 and February 28, 1995. Statements of Assets and Liabilities of Evergreen Short-Intermediate Municipal Fund, Evergreen Short-Intermediate Municipal Fund - California, Evergreen National Tax-Free Fund and Evergreen Tax Exempt Money Market Fund as of August 31, 1994 and February 28, 1995 and of Evergreen Florida High Income Municipal Bond Fund as of June 23, 1995. Statements of Operations of Evergreen Short-Intermediate Municipal Fund, Evergreen Short-Intermediate Municipal Fund - California, Evergreen National Tax-Free Fund and Evergreen Tax Exempt Money Market Fund for the year ended August 31, 1994 and the semi-annual period ended February 28, 1995 Statements of Changes in Net Assets of Evergreen Short-Intermediate Municipal Fund, Evergreen Short-Intermediate Municipal Fund - California, Evergreen National Tax-Free Fund and Evergreen Tax Exempt Money Market Fund for the fiscal years ended August 31, 1993 and 1994 and the semi-annual period ended February 28, 1995 Financial Highlights of Evergreen Short-Intermediate Municipal Fund, Evergreen Short-Intermediate Municipal Fund - California, Evergreen National Tax-Free Fund and Evergreen Tax Exempt Money Market Fund Notes to Financial Statements of Evergreen Short-Intermediate Municipal Fund, Evergreen Short-Intermediate Municipal Fund - California, Evergreen National Tax-Free Fund and Evergreen Tax Exempt Money Market Fund Reports of Independent Auditors relating to each of the aforementioned financial statements Statements, schedules and historical information other than those listed above have been omitted since they are either not applicable or are not required or the required information is shown in the financial statements or notes thereto. - -------------------- * Incorporated by reference to the Annual Report to Shareholders for the fiscal year ended August 31, 1994 which has been previously filed with the Commission and which is attached as an Exhibit to this Post-Effective Amendment and by reference to the Annual Report of Registrant on form NSAR for the aforementioned period and by reference to Semi Annual Report to Shareholders for the period ended February 28, 1995. b. Exhibits No. Description 1(A) Amended and Restated Declaration of Trust*** 1(B) Form of Instrument providing for the Establishment and Designation of Classes*** 2 By-Laws** 3 None 4 Instruments Defining Rights of Shareholders** 5(A) Evergreen Fund Investment Advisory Agreement*** 5(B) Evergreen Fund Investment Subadvisory Agreement*** 5(C) Evergreen Florida High Income Fund Investment Advisory Agreement 6 Distribution Agreement*** 7 Form of Administration Agreement 8 Custodian Agreement** 9 None 10 None 11 Consent of Price Waterhouse, independent accountants 12 None 13 None 14 None 15 Rule 12b-1 Distribution Plans*** 16 None 17 Other Exhibits Annual Reports of Evergreen Short-Intermediate Municipal Fund, Evergreen Short-Intermediate Municipal Fund - California, Evergreen National Tax-Free Fund and Evergreen Tax Exempt Money Market Fund for the fiscal years ended August 31, 1994 - -------------------------- * Incorporated all or in part by reference to the Annual Report to Shareholders of each series for the fiscal year ended August 31, 1994 which has been previously filed with the Commission and which is attached as an Exhibit to this Post-Effective Amendment and by reference to the Annual Report of Registrant on form NSAR for the aforementioned period. ** Incorporated all or in part by reference to Registrant's initial Registration on Form N-1A filed on September 15, 1988. *** Incorporated all or in part by reference to Post-Effective Amendment No. 16 to Registrant's initial Registration on Form N-1A filed on January 3, 1995. Item 25. Persons Controlled by or Under Common Control with Registrant Stephen A. Lieber, Chairman and Co-Chief Executive Officer of Evergreen Asset Management Corp., the investment adviser to all four of Registrant's separate investment series, owns, as of the date of this Post Effective Amendment to the Registration Statement % of the outstanding shares of one such series, namely Evergreen National Tax Free Fund, and therefore, with respect to matters on which only shareholders of that investment series may vote, Mr. Lieber may be presumed to "control" that series. Item 26. Number of Holders of Securities (as of March 28, 1995) (1) (2) Number of Title of Class Record Shareholders Evergreen Short Intermediate Municipal Fund: Class Y Shares of Beneficial Interest ($0.0001 par value) 1,280 Class A Shares of Beneficial Interest ($0.0001 par value) 27 Class B Shares of Beneficial Interest ($0.0001 par value) 64 Evergreen Short Intermediate Municipal Fund-California: Class Y Shares of Beneficial Interest ($0.0001 par value) 843 Class A Shares of Beneficial Interest ($0.0001 par value) 1 Class B Shares of Beneficial Interest ($0.0001 par value) 1 - --------------------- **Incorporated by reference to Registrant's previous filings on Form N-1A. Evergreen National Tax Free Fund: Class Y Shares of Beneficial Interest ($0.0001 par value) 783 Class A Shares of Beneficial Interest ($0.0001 par value) 18 Class B Shares of Beneficial Interest ($0.0001 par value) 33 Evergreen Florida High Income Municipal Fund: Class Y Shares of Beneficial Interest ($0.0001 par value) 1 Class A Shares of Beneficial Interest ($0.0001 par value) 1 Class B Shares of Beneficial Interest ($0.0001 par value) 1 Evergreen Tax Exempt Money Market Fund: Class Y Shares of Beneficial Interest ($0.0001 par value) 9,482 Class A Shares of Beneficial Interest ($0.0001 par value) 19 Item 27. Indemnification Article XI of the Registrant's By-laws contains the following provisions regarding indemnification of Trustees and officers: SECTION 11.1 Actions Against Trustee or Officer. The Trust shall indemnify any individual who is a present or former Trustee or officer of the Trust and who, by reason of his position as such, was, is, or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than any action or suit by or in the right of the Trust) against expenses, including attorneys' fees, judgments, fines, and amounts paid in settlement, actually and reasonably incurred by him in connection with the claim, action, suit, or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon the plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. SECTION 11.2 Derivative Actions Against Trustees or Officers. The Trust shall indemnify any individual who is a present or former Trustee or officer of the Trust and who, by reason of his position as such, was, is, or is threatened to be made a party to any threatened, pending or completed action or suit by or on behalf of the Trust to obtain a judgment or decree in its favor, against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense or settlement of the action or suit, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, except that no indemnification shall be made in respect of any claim, issue or matter as to which the individual has been adjudged to be liable for negligence or misconduct in the performance of his duty to the Trust, except to the extent that the court in which the action or suit was brought determines upon application that, despite the adjudication of liability but in view of all circumstances of the case, the person is fairly and reasonably entitled to indemnity for those expenses which the court shall deem proper, provided such Trustee or officer is not adjudged to be liable by reason of his willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. SECTION 11.3 Expenses of Successful Defense. To the extent that a Trustee or officer of the Trust has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 11.1 or 11.2 or in defense of any claim, issue, or matter therein, he shall be indemnified against expenses, including attorneys' fees, actually and reasonably incurred by him in connection therewith. SECTION 11.4 Required Standard of Conduct. (a) Unless a court orders otherwise, any indemnification under Section 11.1 or 11.2 may be made by the Trust only as authorized in the specific case after a determination that indemnification of the Trustee or officer is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 11.1 or 11.2. The determination shall be made by: (i) the Trustees, by a majority vote of a quorum consisting of Trustees who were not parties to the action, suit or proceeding; or if the required quorum is not obtainable, or if a quorum of disinterested Trustees so directs, (ii) an independent legal counsel in a written opinion. (b) Nothing contained in this Article XI shall be construed to protect any Trustee or officer of the Trust against any liability to the Trust or its Shareholders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office (any such conduct being hereinafter called "Disabling Conduct"). No indemnification shall be made pursuant to this Article XI unless: (i) There is a final determination on the merits by a court or other body before whom the action, suit or proceeding was brought that the individual to be indemnified was not liable by reason of Disabling Conduct; or (ii) In the absence of such a judicial determination, there is a reasonable determination, based upon a review of the facts, that such individual was not liable by reason of Disabling Conduct, which determination shall be made by: (A) A majority of a quorum of Trustees who are neither "interested persons" of the Trust, as defined in section 2(a) (19) of the 1940 Act, nor parties to the action, suit or proceeding; or (B) An independent legal counsel in a written opinion. SECTION 11.5 Advance Payments. Notwithstanding any provision of this Article XI, any advance payment of expenses by the Trust to any Trustee or officer of the Trust shall be made only upon the undertaking by or on behalf of such Trustee or officer to repay the advance unless it is ultimately determined that he is entitled to indemnification as above provided, and only if one of the following conditions is met: (a) the Trustee or officer to be indemnified provides a security for his undertaking; or (b) The Trust is insured against losses arising by reason of any lawful advances; or (c) There is a determination, based on a review of readily available facts, that there is reason to believe that the Trustee or officer to be indemnified ultimately will be entitled to indemnification, which determination shall be made by: (i) A majority of a quorum of Trustees who are neither "interested persons" of the Trust, as defined in Section 2(a) (19) of the 1940 Act, nor parties to the action, suit or proceeding; or (ii) An independent legal counsel in a written opinion. SECTION 11.6 Former Trustees and Officers. The indemnification provided by this Article XI shall continue as to an individual who has ceased to be a Trustee or officer of the Trust and inure to the benefit of the legal representatives of such individual and shall not be deemed exclusive of any other rights to which any Trustee, officer, employee or agent of the Trust may be entitled under any agreement, vote of Trustees or otherwise, both as to action in his official capacity and as to action in another capacity while holding office as such; provided, that no Person may satisfy any right of indemnity granted herein or to which he may be otherwise entitled, except out of the Trust Property, and no Shareholder shall be personally liable with respect to any claim for indemnity. SECTION 11.7 Insurance. The Trust may purchase and maintain insurance on behalf of any person who is or was a Trustee, officer, employee, or agent of the Trust, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such. However, the Trust shall not purchase insurance to indemnify any Trustee or officer against liability for any conduct in respect of which the 1940 Act prohibits the Trust itself from indemnifying him. SECTION 11.8 Other Rights to Indemnification. The indemnification provided for herein shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any By-Law, agreement, vote of Shareholders or disinterested Trustees or otherwise. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to Trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a Trustee, officer, or controlling person of the Registrant in connection with the successful defense of any action, suit or proceeding) is asserted by such Trustee, officer or controlling person in connection with the shares being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 28. Business or Other Connections of Investment Adviser Evergreen Asset Management Corp. ("Evergreen Asset"), the investment adviser to each of Registrant's series other than the Evergreen Florida High Income Municipal Bond Fund series, and Lieber and Company, the sub-adviser thereto also acts as such to one or more of the separate investment series offered by The Evergreen Total Return Fund, The Evergreen Limited Market Fund, Inc., The Evergreen Value Timing Fund, The Evergreen Money Market Trust, The Evergreen American Retirement Trust, The Evergreen Municipal Trust, Evergreen Global Real Estate Equity Trust and Evergreen Foundation Fund, all registered investment companies. Stephen A. Lieber, Chairman and Co-CEO, Theodore J. Israel, Jr., Executive Vice President, Nola Maddox Falcone, President and Co-CEO, George R. Gaspari, Senior Vice President and CFO and Joseph J. McBrien, Senior Vice President and General Counsel, are the principal executive officers of Evergreen Asset and Lieber and Company, were, prior to June 30, 1994 officers and/or directors or trustees of the Registrant and the other funds for which the Adviser acts as investment adviser. For a description of the other business of the First Union National Bank of North Carolina ("FUNB-NC"), which will serves as investment adviser to Registrant's Evergreen Florida High Income Municipal Bond Fund series, see the section entitled "Investment Advisers" in Part A. The Directors and principal executive officers of FUNB, are set forth in the following table: FIRST UNION NATIONAL BANK OF NORTH CAROLINA BOARD OF DIRECTORS Ben Mayo Boddie Raymond A. Bryan, Jr. Chairman & CEO Chairman & CEO Boddie-Noell Enterprises, Inc. T.A. Loving Company P.O. Box 1908 P.O. Drawer 919 Rocky Mount, NC 27802 Goldsboro, NC 27530 John F.A.V. Cecil John W. Copeland President President Biltmore Dairy Farms, Inc. Ruddick Corporation P.O. Box 5355 2000 Two First Union Center Asheville, NC 28813 Charlotte, NC 28282 John Crosland, Jr. J. William Disher Chairman of the Board Chairman & President The Crosland Group, Inc. Lance Incorporated 135 Scaleybark Road P.O. Box 32368 Charlotte, NC 28209 Charlotte, NC 28232 Frank H. Dunn Malcolm E. Everett, III Chairman and CEO President First Union National Bank First Union National Bank of North Carolina of North Carolina One First Union Center 310 S. Tryon Street Charlotte, NC 28288-0006 Charlotte, NC 28288-0156 James F. Goodmon Shelton Gorelick President & Chief President Executive Officer SGIC, Inc. Capitol Broadcasting 741 Kenilworth Ave., Suite 200 Company, Inc. Charlotte, NC 28204 2619 Western Blvd. Raleigh, NC 27605 Charles L. Grace James E. S. Hynes President Chairman Cummins Atlantic, Inc. Hynes Sales Company, Inc. P.O. Box 240729 P.O. Box 220948 Charlotte, NC 28224-0729 Charlotte, NC 28222 Daniel W. Mathis Earl N. Phillips, Jr. Vice Chairman President First Union National Bank First Factors Corporation of North Carolina P.O. Box 2730 One First Union Center High Point, NC 27261 Charlotte, NC 28288-0009 J. Gregory Poole, Jr. John P. Rostan, III Chairman & President Senior Vice President Gregory Poole Equipment Company Waldensian Bakeries, Inc. P.O. Box 469 P.O. Box 220 Raleigh, NC 27602 Valdese, NC 28690 Nelson Schwab, III Charles M. Shelton, Sr. Chairman & CEO Chairman & CEO Paramount Parks The Shelton Companies, Inc 8720 Red Oak Boulevard, Suite 315 3600 One First Union Center Charlotte, NC 28217 Charlotte, NC 28202 George Shinn Harley F. Shuford, Jr. Owner and Chairman President and CEO Shinn Enterprises, Inc. Shuford Industries One Hive Drive P.O. Box 608 Charlotte, NC 28217 Hickory, NC 28603 FIRST UNION NATIONAL BANK OF NORTH CAROLINA EXECUTIVE OFFICERS James Maynor, President, First Union Mortgage Corporation; Austin A. Adams, Executive Vice President; Howard L. Arthur, Senior Vice President; Robert T. Atwood, Executive Vice President and Chief Financial Officer; Marion A. Cowell, Jr., Executive Vice President, Secretary and General Counsel; Edward E. Crutchfield, Jr., Chairman, CEO, First Union Corporation; Frank H. Dunn, Jr., Chairman and CEO; Malcolm E. Everett, III, President; John R. Georgius, President, First Union Corporation; James Hatch, Senior Vice President and Corporate Controller; Don R. Johnson, Executive Vice President; Mark Mahoney, Senior Vice President; Barbara K. Massa, Senior Vice President; Daniel W. Mathis, Vice Chairman; H. Burt Melton, Executive Vice President; Malcolm T. Murray, Jr., Executive Vice President; Alvin T. Sale, Executive Vice President; Louis A. Schmitt, Jr., Executive Vice President; Ken Stancliff, Senior Vice President and Corporate Treasurer; Richard K. Wagoner, Executive Vice President and General Fund Officer. All of the Executive Officers are located at the following address: First Union National Bank of North Carolina, One First Union Center, Charlotte, NC 28288. Item 29. Principal Underwriters Evergreen Funds Distributor, Inc. The Director and principal executive officers are: Director Michael C. Petrycki Officers Robert A. Hering President Michael C. Petrycki Vice President Gordon Forrester Vice President Lawrence Wagner VP, Chief Financial Officer Steven D. Blecher VP, Treasurer, Secretary Elizabeth Q. Solazzo Assistant Secretary Thalia M. Cody Assistant Secretary Item 30. Location of Accounts and Records Accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder are maintained at the offices of the Registrant's Custodian, State Street Bank and Trust Company, 2 Heritage Drive, North Quincy, Massachusetts 02171 or the offices of Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York 10577. Item 31. Management Services Not Applicable. Item 32. Undertakings Not Applicable. SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant hereby certifies that it meets all of the requirements for effectiveness of this registration statement pursuant to Rule 485(b) under the Securities has caused this Post-Effective Amendment to Registrant's Registration Statement has been signed on behalf of the Registrant, in the City of New York and State of New York, on the 30th day of June, 1995. Registrant: The Evergreen Municipal Trust By: /s/ John J. Pileggi ---------------------- Name: John J. Pileggi Title: President As required by the Securities Act of 1933, this Post-Effective Amendment to Registrant's Registration Statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date /s/ John J. Pileggi President (Principal June 30, 1995 - ------------------- John J. Pileggi Executive Officer) and Treasurer (Principal Financial and Accounting Officer) /s/ Laurence B. Ashkin* Trustee June 30, 1995 - ---------------------- Laurence B. Ashkin /s/ Foster Bam* Trustee June 30, 1995 - ----------------------- Foster Bam /s/ Robert J. Jefferies* Trustee June 30, 1995 - ----------------------- Robert J. Jefferies /s/ James Howell* Trustee June 30, 1995 - ----------------------- James Howell /s/ Gerald McDonnell* Trustee June 30, 1995 - ----------------------- Gerald McDonnell /s/ Thomas L. McVerry* Trustee June 30, 1995 - ----------------------- Thomas L. McVerry /s/ William W. Pettit* Trustee June 30, 1995 - ----------------------- William W. Pettit /s/ Russell A. Salton, III* Trustee June 30, 1995 - -------------------------- Russell A. Salton, III /s/ Michael S. Scofield* Trustee June 30, 1995 - ----------------------- Michael S. Scofield - ------------------------------ * by Joseph J. McBrien, Attorney in Fact INDEX TO EXHIBITS INDEX TO EXHIBITS N-1A Item 24 EXHIBIT No. PAGE 1(B) Form of Instrument providing for the Establishment and Designation of Classes 5(C) Evergreen Florida High Income Fund Form of Investment Advisory Agreement 7 Form of Administration Agreement 14 Consent of Price Waterhouse LLP 15 Form of Rule 12b-1 Distribution Plan 27 Financial Data Schedules OTHER EXHIBITS Annual Report of Evergreen National Tax Free Fund for the fiscal year ended August 31, 1994. Annual Report of Evergreen Short Intermediate Municipal Fund CA for the fiscal year ended August 31, 1994. Annual Report of Evergreen Short Intermediate Municipal Fund for the fiscal year ended August 31, 1994. Annual Report of Evergreen Tax Exempt Money Market Fund for the fiscal year ended August 31, 1994. - -------------------------- EX-99.1B 2 AMENDMENT TO DECLARATION OF TRUST THE EVERGREEN MUNICIPAL TRUST Establishment and Designation of Series and Establishment and Designation of Classes The undersigned, being a majority of the Trustees of The Evergreen Municipal Trust, a Massachusetts business trust (the "Trust"), acting pursuant to Sections 6.1 and 6.6(j) of the Declaration of Trust dated July 13, 1988 as amended (the "Declaration") of the Trust, do hereby establish and designate a new series of the Trust to be known as the "Evergreen Florida High Income Municipal Fund" (the "New Series"). The undersigned, being a majority of the Trustees of the Trust, acting pursuant to Sections 6.1 and 6.6(j) of the Declaration, do hereby divide the shares of beneficial interest of the New Series to create three classes of shares, within the meaning of said Sections, as follows: 1. The three classes of shares of the New Series are designated "Class A Shares," "Class B Shares," and "Class Y Shares." 2. Such Class A Shares, Class B Shares, and Class Y Shares shall be entitled to all of the rights and preferences accorded to shares of beneficial interest of the Trust under the Declaration. 3. The purchase price, the method of determination of net asset value, the price, terms and manner of redemption, and the relative dividend rights of holders of such Class A Shares, Class B Shares, and Class Y Shares shall be as established by the Trustees of the Trust in accordance with the provisions of the Declaration and set forth in the currently effective prospectus and statement of additional information of the Trust relating to the New Series, as amended from time to time, contained in the Trust's registration statement under the Securities Act of 1933, as amended. 4. Such Class A Shares, Class B Shares, and Class Y Shares shall vote together as a single class except that shares of a class may vote separately on matters affecting only that class and shares of a class not affected by a matter will not vote on that matter. 5. A class of shares of the New Series may be terminated by the Trustees by written notice to the Shareholders of the class. The Declaration provides that the name of "The Evergreen Municipal Trust" refers to the Trustees under the Declaration collectively as Trustees, but not as individuals or personally; and no Trustee, shareholder, officer, employee or agent of The Evergreen Municipal Trust shall be held to any personal liability, nor shall resort be had to their private property for the satisfaction of any obligation or claim or otherwise in connection with the affairs of said Trust but the Trust Property only shall be liable. IN WITNESS WHEREOF, the undersigned have signed this instrument in duplicate original counterparts and have caused a duplicate original to be lodged among the records of the Trust this 13 day of March, 1995. /s/ /s/ Laurence B. Ashkin Thomas L. McVerry Trustee Trustee /s/ /s/ Foster Bam William Walt Pettit Trustee Trustee /s/ /s/ James S. Howell Russell A. Salton, III Trustee Trustee /s/ /s/ Robert J. Jeffries Michael S. Scofield Trustee Trustee /s/ Gerald M. McDonnell Trustee EX-99.5B 3 FORM OF INVESTMENT ADVISORY AGREEMENT First Union National Bank of North Carolina Dear Sirs: The undersigned, the Evergreen ......... Trust (the "Fund"), is an investment company organized as a series company, which means that it may offer separate classes (or series) of shares comprising different investment portfolios. Presently, the Fund offers five investment funds: ..................................................................... The Fund desires to employ its capital by investing and reinvesting the same in securities in accordance with the limitations specified in its Declaration of Trust and in its Prospectus as from time to time in effect, copies of which have been, or will be, submitted to you, and in such manner and to such extent as may from time to time be approved by the Fund's Trustees. Subject to the terms and conditions of this Agreement, the Fund desires to employ your corporation (the "Adviser") and the Adviser desires to be so employed, to supervise and assist in the management of the business of its ....................... series(the "Portfolio"). Accordingly, this will confirm our agreement as follows: 1. The Adviser shall, on a continuous basis, furnish reports, statistical and research services, and advice and recommendations with respect to each Portfolio of investments. The Adviser shall use its best judgment in rendering these services to the Fund, and the Fund agrees as an inducement to the Adviser undertaking such services that the Adviser shall not be liable for any mistake of judgment or in any other event whatsoever, except for lack of good faith, provided that nothing herein shall be deemed to protect the Adviser against any liability to the Fund or to the shareholders of the Fund (or any Portfolio) to which it would otherwise be subject by reason of wilful misfeasance, bad faith or gross negligence in the performance of the Adviser's duties hereunder or by reason of the Adviser's reckless disregard of its obligations and duties hereunder. 2. The Adviser agrees that in any case where an officer or director of the Adviser is also an officer or director of another corporation, and the purchase or sale of securities issued by such other corporation is under consideration, such officer or director shall abstain from participation in any decision made on behalf of the Fund (or any Portfolio) to purchase or sell any securities issued by such other corporation. 3. In consideration of the Adviser performing its obligations hereunder, the Fund will pay to the Adviser an advisory fee, payable monthly, at an annual rate of .-- of 1% of the daily net assets of the Portfolio. 4. The Fund understands that the Adviser acts as investment adviser to other investment companies, and that the Adviser's parent acts as investment adviser to individuals, partnerships, corporations, and pension funds, and the Fund confirms that it has no objection to the Adviser or its parent so acting. 5. This Agreement shall be in effect until ............. This Agreement shall continue in effect from year to year thereafter, provided it is approved, at least annually, in the manner required by the Act. The Act requires that this Agreement and any renewal thereof be approved by a vote of a majority of Trustees of the Fund who are not parties thereto or interested persons (as defined in the Act) of any such party, cast in person at a meeting duly called for the purpose of voting on such approval, and by a vote of the Trustees of the Fund or a majority of the outstanding voting securities of the Fund. A vote of a majority of the outstanding voting securities of the Fund is defined in the Act to mean a vote of the lesser of (i) more than 50% of the outstanding voting securities of the Fund or (ii) 67% or more of the voting securities present at the meeting if more than 50% of the outstanding voting securities are present or represented by proxy. This Agreement may be terminated at any time, without payment of any penalty, on sixty (60) days' prior written notice by a vote of a majority of the Fund's outstanding voting securities, by a vote of a majority of the Fund's Trustees, or by the Adviser. This Agreement shall be automatically terminated in the event of its assignment (as such term is defined in the Act). 7. This Agreement is made by the Fund pursuant to authority granted by the Trustees, and the obligations created hereby are not binding on any of the Trustees or shareholders of the Fund individually, but bind only the property of the Fund. If the foregoing is in accordance with your understanding, please so indicate by signing and returning to the undersigned the enclosed copy hereof. Very truly yours, EVERGREEN .......... TRUST By: ACCEPTED: By: EX-99.7 4 FORM OF ADMINISTRATION AGREEMENT MASTER ADMINISTRATIVE SERVICES CONTRACT __________________ 1995 Dear Sirs: This will confirm the agreement between the undersigned (the "Trust") and you (the "Administrator") as follows: 1. The Trust is an open-end investment company organized as a Massachusetts business trust and consists of one or more separate investment portfolios as may be established and designated by the Trustees from time to time (the "Funds"). This contract shall pertain to such Funds as shall be designated in supplements to this contract, as further agreed by the Trust and the Administrator. A separate series of shares of beneficial interest in the Trust is offered to investors with respect to each Fund. The Trust engages in the business of investing and reinvesting the assets of each Fund in the manner and in accordance with the investment objective and restrictions specified in the currently effective prospectus (the "prospectus") relating to the Trust and the Fund included in the Trust's Registration statement, as amended from time to time (the "Registration statement"), filed by the Trust under the investment Company Act of 1940 (the "1940 Act") and the securities Act of 1933 (the "1933 Act"). Copies of the documents referred to in the preceding sentence have been furnished to the Administrator. Any amendments to those documents shall be furnished to the Administrator promptly. The Trust has entered into an investment advisory contract or contracts (the "Advisory contract") with respect to the Funds with such advisors as are designated therein (each such advisor is hereinafter referred to as an "Advisor") , and a Distribution Contract or Contracts relating to the distribution of its shares (together, the "Distribution contract") with such distributor as are designated therein (each such distributor is hereinafter referred to as a "distributor") . The Trust also has adopted a Distribution Plan or Plans (the "Plan") pursuant to Rule 12b-l under the 1940 Act with respect to certain of the Funds. 2. (a) The Administrator shall provide all management and administrative services reasonably necessary for the operation of the Trust and each Fund, other than those investment management and administrative services which are to be provided with respect to a Fund by an Advisor pursuant to an Advisory contract. The Administrator may retain Service organizations (as defined in the Prospectus) to provide these services to the Trust. The Administrator shall make periodic reports to the Trust's Board of Trustees on the performance of its obligations under this contract, other than servtces provided to the Trust by service organizations retained in accordance with the previous sentence. (b) The Administrator shall, at its expense, (i) provide the Trust with office space and office facilities reasonably necessary for the operation of the Trust and the Funds, (ii)employ or associate with itself such persons as it believes appropriate to assist it in performing its obligations under this contract and (iii) provide the Trust with persons satisfactory to the Trust's Board of Trustees to serve as officers and employees of the Trust, including a president, one or more vice presidents, a secretary and a treasurer. The Administrator shall pay the entire compensation of all of the Trust's officers and employees and the entire compensation of the trustees cf the Trust who are affiliated persons of the Administrator and the compensation shall not be deemed to be expenses of the Trust for purposes of paragraph 5 hereof. (c) Except as provided in subparagraph (b) and, with respect to a Fund, in an Advisory contract, the Trust shall be responsible for all of its expenses and liabilities, including compensation of its Trustees who are not affiliated with the Administratoror the Advisor or any of their affiliates; taxes and governmental fees; interest charges; fees and expenses of the Trust's independent accountants and legal counsel; trade association membership dues; fees and expenses of any custodian (including maintenance cf books and accounts and calculation of the net asset value of shares of the Fund) , transfer agent, registrar and dividend disbursing agent of the Trust; expenses of issuing, redeeming, registering and gualifying for sale shares of beneficial interest in the Trust; expenses of preparing and printing share certificates, prospectuses and reports to shareholders, notices, proxy statements and reports to regulatory agencies; the cost of office supplies, including stationery; travel expenses of all officers, trustees and employees; insurance premiums; brokerage and other expenses of executing portfolio transactions; expenses of shareholders' meetings; organizational expenses; extraordinary expenses; and reimbursements to the Administrator in accordance with the Plan. 3. The Administrator shall give the Trust the benefit of the Administrator's best judgment and efforts in rendering services under this Contract. As an inducement to the Administrator's undertaking to render these services, the Trust agrees that the Administrator shall not be liable under this contract for any mistake in judgment or in any other event whatsoever except for lack of good faith, provided that nothing in this Contract shall be deemed to protect or purport to protect the Administrator against any liability to the Trust or its shareholders to which the Administrator would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of the Administrator's duties under this contract or by reason of the Administrator's reckless disregard of its obligations and duties hereunder. 4. in consideration of the services to be rendered by the Administrator under this contract, the Trust shall pay the Administrator a monthly fee with respect to each Fund on the first business day of each month, based upon the average daily value of the net assets of that Fund during the preceding month at annual rates set forth in a supplement to this contract with respect to that Fund. If the fees payable to the Administrator pursuant to this paragraph 4 begin to accrue before the end of any month or if this contract terminates before the end of any month, the fees for the period from that date to the end of that month or from the beginning of that month to the date of termination, as the case may be, shall be prorated according to the proportion that the period bears to the full month in which the effectiveness or termination occurs. For purposes of calculating the monthly fees, the value of the net assets of each Fund shall be computed in the manner specified in its Prospectus for the computation of net asset value. For purposes of this contract, a "business day" is any day the New York stock Exchange is open for trading. 5. If the aggregate expenses of every character incurred by, or allocated to, a Fund in any fiscal year, other than interest, taxes, brokerage commissions and other portfolio transaction expenses, other expenditures which are capitalized in accordance with generally accepted accounting principles and any extraordinary expense (including, without limitation, litigation and indemnification expense), but including the fees provided for in paragraph 4 and under an Advisory contract with respect to a Fund ("includable expenses") , shall exceed the expense limitations applicable to that Fund imposed by state securities law or regulations thereunder, as these limitations may be raised or lowered from time to time, the Administrator shall pay that Fund an amount egual to a percentage of that excess (the "Administrator's reimbursement"), such Administrator's reimbursement to be in an amount set forth with respect to the Fund in a supplement to this contract. With respect to portions of a fiscal year in which this contract shall be in effect, the foregoing limitations shall be prorated according to the proportion which that portion of the fiscal year bear to the full fiscal year. At the end of each month of the Trust's fiscal year, the Administrator will review the includable expenses accrued during that fiscal year to the end of the period and shall estimate the contemplated includable expenses for the balance cf that fiscal year. if, as a result of that review and estimation, it appears likely that the includable expenses will exceed the limitations referred to in this paragraph 5 for a fiscal year, the monthly fees payable to the Administrator under this Contract for such month shall be reduced, subject to a later reimbursement to reflect actual expenses, by an amount egual to a percentage (which shall be egual to the Administrator's reimbursement) of a pro rata portion (prorated on the basis of the remaining months of the fiscal year, including the month just ended) of the amount by which the includable expenses for the fiscal year (less an amount egual to the aggregate of actual reductions made pursuant to this provision with respect to prior months of the fiscal year) are expected to exceed the limitations provided in this paragraph 5 For purposes of the foregoing, the value of the net assets of each Fund shall be computed in the manner specified in paragraph 4, and any payments required to be made by the Administrator shall be made once a year promptly after the end of the Trust's fiscal year. 6. This contract, and any supplement, shall become effective with respect to a Fund only when approved by vote of a majority of (i) the Board of Trustees of the Trust, and (ii) the trustees who are not "interested persons" (as defined in the 1940 Act) cf the Trust and who have no direct or indirect financial interest in this contract, cast in person at a meeting called for the purpose of voting on such approval. This contract and any supplement, shall continue in effect with respect to a Fund until the last day of the calendar year next following the date of effectiveness specified in a supplement to the contract, and thereafter shall continue automatically for successive annual periods ending on the last day of each calendar year, provided such continuance is specifically approved at least annually by a vote of a majority of (i) the Trust's Board of Trustees and (ji) the trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust and who have no direct or indirect financial interest in the contract, by vote cast in person at a meeting called for the purpose of voting on such approval. This contract may be terminated at any time, without payment of any penalty, by a vote of a majority of the outstanding voting securities of each Fund (as defined in the 1940 Act) or by a vote of a majority of the trustees of the Trust who are not "interested persons" (as defined in the 1940 Act) and who have no direct or indirect financial interest in this contract on 60 days written notice to the Administrator or by the Administrator on 60 days written notice to the Trust. This contract shall terminate automatically in the event of its assignment (as defined in the 1940 Act) 7. Except to the extent necessary to perform the Administrator's obligations under this contract, nothing herein shall be deemed to limit or restrict the right of the Administrator, or any affiliate of the Administrator, or any employee of the Administrator, to engage in any other business or to devote time and attention to the management or other aspects of any other business, whether of a similar or -dissimilar nature, or to render services of any kind to any other corporation, firm, individual or association. 8. The Declaration of Trust establishing the Trust, filed on ............., a copy of which, together with all amendments thereto (the "Declaration"), is on file in the office of the Secretary of the Commonwealth of Massachusetts, provides that the name "..........." refers to the trustees under the Declaration collectively as trustees and not as individuals or personally, and that no shareholder, trustee, officer, employee or agent of the Trust shall be subject to claims against or obligations of the Trust to any extent whatsoever, but that the Trust estate only shall be liable. 9. This contract shall be construed and its provisions interpreted in accordance with the laws of the State of New York. If the foregoing correctly sets forth the agreement between the Trust and the Administrator, please so indicate by signing and returning to the Trust the enclosed copy hereof. Very truly yours, ACCEPTED: EX-99.14 5 AUDITOR'S CONSENT CONSENT OF INDEPENDENT ACCOUNTANTS Consent of Independent Accountants We hereby consent to the use in the Statement of Additional Information constituting part of this Post-Effective Amendment No. 18 to the registration statement on Form N-1A (the "Registration Statement") of our report dated June 30, 1995, relating to the statement of assets and liabilities at June 23, 1995 of Evergreen Florida High Income Municipal Bond Fund, which appears in such Statement of Additional Information, and to the incorporation by reference of our report into the Prospectuses which constitute parts of this Registration Statement. We also consent to the incorporation by reference in the Prospectus and Statement of Additional Information constituting parts of this Post Effective Amendment No. 17 to the Registration Statement registration statement on Form N-1A (the "Registration Statement") of our reports dated October 17, 1994, relating to the financial statements and financial highlights appearing in the August 31, 1994 Annual Reporst to Shareholders of the Evergreen Tax Exempt Money Market Fund, The Evergreen Short Intermediate Municipal Fund-California, The Evergreen Short Intermediate Municipal Fund and the Evergreen National Tax-Free Fund, which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the heading "Financial Highlights" in the Prospectus and under the headings "Independent Auditors" and "Financial Statements" in the Statement of Additional Information. /s/Price Waterhouse LLP Price Waterhouse LLP New York, NY March 30, 1995 EX-99.15 6 FORM OF DISTRIBUTION PLAN 1 DISTRIBUTION PLAN OF CLASS -- SHARES THE EVERGREEN FUND EVERGREEN FUND Section 1. The (the "Trust") may act as the distributor of securities which are issued in respect of one or more of its separate investment series, pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act") according to the terms of this Distribution Plan ("Plan"). Section 2. The Trust may expend daily amounts at an annual rate of 0.-- of 1% of the average daily net asset value of the Class A Shares ("Shares") of its Evergreen Fund Series ("Fund") to finance any activity which is principally intended to result in the sale of Shares including, without limitation, expenditures consisting of payments to a principal underwriter of the Fund (Principal Underwriter) or others in order: (i) to enable payments to be made by the Principal Underwriter or others for any activity primarily intended to result in the sale of Shares, including, without limitation, (a) compensation to public relations consultants or other persons assisting in, or providing services in connection with, the distribution of Shares, (b) advertising, (c) printing and mailing of prospectuses and reports for distribution to persons other than existing shareholders, (d) preparation and distribution of advertising material and sales literature, (e) commission payments, and principal and interest expenses associated with the financing of commission payments, made by the Principal Underwriter in connection with the sale of Shares and (f) conducting public relations efforts such as seminars; (ii) to enable the Principal Underwriter or others to receive, pay or to have paid to others who have sold Shares, or who provide services to holders of Shares, a maintenance or other fee in respect of services provided to holders of Shares, at such intervals as the Principal Underwriter may determine, in respect of Shares previously sold and remaining outstanding during the period in respect of which such fee is or has been paid; and/or (iii) to compensate the Principal Underwriter for its efforts in respect of sales of Shares since inception of the Plan. Appropriate adjustments shall be made to the payments made pursuant to this Section 2 to the extent necessary to ensure that no payment is made by the Fund with respect to any Class in excess of the applicable limit imposed on asset based, front end and deferred sales charges under subsection (d) of Section 26 of Article III of the Rules of Fair Practice of the National Association of Securities Dealers, Inc. (the "NASD"). In addition, to the extent any amounts paid hereunder fall within the definition of an "asset based sales charge" under said NASD Rule such payments shall be limited to .75 of 1% of the aggregate net asset value of the Shares on an annual basis and, to the extent that any such payments are made in respect of "shareholder services" as that term is defined in the NASD Rule, such payments shall be limited to .25 of 1% of the aggregate net asset value of the Shares on an annual basis and shall only be made in respect of shareholder services rendered during the period in which such amounts are accrued. Section 3. This Plan shall not take effect with respect to any Fund until it has been approved by votes of a majority of (a) the outstanding Shares of such Series, (b) the Trustees of the Trust, and (c) those Trustees of the Trust who are not "interested persons" of the Fund (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of this Plan or any agreements of the Trust related hereto or any other person related to this Plan ("Disinterested Trustees"), cast in person at a meeting called for the purpose of voting on this Plan. In addition, any agreement related to this Plan and entered into by the Fund in connection therewith shall not take effect until it has been approved by votes of a majority of (a) the Board of Trustees of the Trust, and (c) the Disinterested Trustees of the Trust. Section 4. Unless sooner terminated pursuant to Section 6, this Plan shall continue in effect for a period of one year from the date it takes effect and thereafter shall continue in effect for additional periods that shall not exceed one year so long as such continuance is specifically approved by votes of a majority of both (a) the Board of Trustees of the Trust and (b) the Disinterested Trustees of the Trust, cast in person at a meeting called for the purpose of voting on this Plan. Section 5. Any person authorized to direct the disposition of monies paid or payable pursuant to this Plan or any related agreement shall provide to the Trust's Board and the Board shall review at least quarterly a written report of the amounts so expended and the purposes for which such expenditures were made. Section 6. This Plan may be terminated at any time with respect to any Fund by vote of a majority of the Disinterested Trustees, or by vote of a majority of the Shares of the Fund. Section 7. Any agreement of the Trust, with respect to any Fund, related to this Plan shall be in writing and shall provide: A. That such agreement may be terminated with respect to a Fund at any time without payment of any penalty, by vote of a majority of the Disinterested Trustees or by a vote of a majority of the outstanding Shares of such Fund on not more than sixty days written notice to any other party to the agreement; and B. That such agreement shall terminate automatically in the event of its assignment. Section 8. This Plan may not be amended to increase materially the amount of distribution expenses provided for in Section 2 with respect to a Fund unless such amendment is approved by a vote of at least a majority (as defined in the 1940 Act) of the outstanding Shares of such Fund, and no material amendment to this Plan shall be made unless approved by votes of a majority of (a) the Board of Trustees of the Trust, and (c) the Disinterested Trustees of the Trust, cast in person at a meeting called for the purpose of voting on such amendment. DATED: EX-27.FINANDATASCHED 7
6 1 EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND 12-Mos Aug-31-1994 Aug-31-1994 52,488,411 52,822,054 737,818 110,392 0 53,670,264 0 0 253,095 253,095 0 52,232,212 5,230,083 6,295,897 0 0 (148,686) 0 333,643 53,417,169 0 3,082,775 0 347,990 2,734,785 (53,108) (1,837,704) 843,973 0 2,734,785 277,003 0 1,211,704 2,526,223 248,705 (13,190,015) 0 180,991 0 0 301,565 0 498,184 60,312,957 10.58 0.47 (0.32) 0.47 0.05 0 10.21 0.58 0 0
EX-27.FINANDATASCHED 8
6 2 EVERGREEN TAX-EXEMPT MONEY MARKET FUND PORTFOLIO 12-Mos Aug-31-1994 Aug-31-1994 412,615,353 412,615,353 2,809,528 1,158,272 0 416,583,173 12,905,836 0 1,258,156 14,163,992 0 402,419,181 402,419,181 401,375,823 0 0 0 0 0 402,419,181 0 11,930,196 0 1,438,093 10,492,103 0 0 10,492,103 0 10,492,103 0 0 438,032,706 447,132,393 10,143,045 1,043,358 0 0 0 0 2,126,246 0 2,694,746 425,249,277 1.00 0.025 0 0 0.025 0 1.00 0.34 0 0
EX-27.FINANDATASCHED 9
6 3 EVERGREEN NATIONAL TAX-FREE FUND 12-Mos Aug-31-1994 Aug-31-1994 41,977,070 41,285,743 1,583,788 115,447 0 42,984,978 773,449 0 68,196 841,645 0 44,080,537 4,216,459 3,029,743 0 0 (1,245,877) 0 (691,327) 42,143,333 0 2,109,228 0 113,534 1,995,694 (1,159,204) (1,935,794) (1,099,304) 0 1,995,694 581,055 0 2,815,233 1,860,323 231,806 9,058,227 0 494,382 0 0 196,809 0 349,610 39,361,721 10.92 0.53 (0.77) 0.53 0.16 0 9.99 0.29 0 0
EX-27.FINANDATASCHED 10
6 4 EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA 12-Mos Aug-31-1994 Aug-31-1994 28,041,963 28,122,538 387,383 24,902 0 28,534,823 0 0 101,788 101,788 0 28,275,386 2,816,554 2,915,063 0 0 77,074 0 80,575 28,433,035 0 1,410,461 0 154,461 1,256,000 97,167 (823,736) 529,431 0 1,256,000 97,167 0 1,453,754 1,666,477 114,214 (1,702,468) 0 2,656 0 0 164,447 0 284,413 29,899,508 10.34 0.43 (0.24) 0.43 0.01 0 10.09 0.52 0 0
EX-99.SCHEDULE 11 FUND PERFORMANCE COMPUTATION
Schedule for Computation Initial of Fund Performance Data Invest of: $10,000 EVERGREEN SHORT- Offering INTERMEDIATE MUNICIPAL Price/ FUND Share= $10.00 Return Since Inception ending 8/31/94 NAV= $10.00 FYE:August31 Total DECLARED: DAILY Begin Capital Ending Ending PAID: MONTHLY Reinvest Period Dividend Gain Reinvest Period Investment Dates Shares /Share /Share Price Shares Price Value 11/18/91 10.00 1,000.000 10.00 10,000.00 11/29/91 1,000.000 0.020412380 10.05 1,002.031 10.05 10,070.41 12/31/91 1,002.031 0.046542875 10.15 1,006.626 10.15 10,217.25 1/31/92 1,006.626 0.046163465 10.15 1,011.204 10.15 10,253.72 2/28/92 1,011.204 0.038782210 10.15 1,015.068 10.15 10,302.94 3/31/92 1,015.068 0.039923440 10.10 1,019.080 10.10 10,292.71 4/30/92 1,019.080 0.042291330 10.15 1,023.326 10.15 10,386.76 5/29/92 1,023.326 0.042073525 10.20 1,027.547 10.20 10,480.98 6/30/92 1,027.547 0.041153470 10.25 1,031.673 10.25 10,574.65 7/31/92 1,031.673 0.043695340 10.40 1,036.008 10.40 10,774.48 8/28/92 1,036.008 0.038586243 10.33 1,039.877 10.33 10,741.93 9/30/92 1,039.877 0.040443334 10.35 1,043.941 10.35 10,804.79 10/30/92 1,043.941 0.040914259 10.29 1,048.092 10.29 10,784.86 11/30/92 1,048.092 0.040320616 10.35 1,052.175 10.35 10,890.01 12/31/92 1,052.175 0.041814222 0.0028 10.38 1,056.697 10.38 10,968.52 1/31/93 1,056.697 0.041936250 10.35 1,060.979 10.35 10,981.13 2/28/93 1,060.979 0.042258365 10.57 1,065.220 10.57 11,259.38 3/31/93 1,065.220 0.041026176 10.48 1,069.390 10.48 11,207.21 4/30/93 1,069.390 0.044483758 10.51 1,073.917 10.51 11,286.86 5/28/93 1,073.917 0.038887838 10.50 1,077.894 10.50 11,317.89 6/30/93 1,077.894 0.041713991 10.56 1,082.152 10.55 11,427.52 7/30/93 1,082.152 0.041676964 10.50 1,086.447 10.50 11,407.70 8/31/93 1,086.447 0.038940768 10.58 1,090.446 10.58 11,536.92 9/30/93 1,090.446 0.040634696 10.62 1,094.618 10.62 11,624.85 10/29/93 1,094.618 0.039932979 10.60 1,098.742 10.60 11,646.65 11/30/93 1,098.742 0.040390788 10.52 1,102.961 10.52 11,603.14 12/27/93 1,102.961 0.0465 10.58 1,107.808 10.58 11,720.61 12/30/93 1,107.808 0.040086126 10.58 1,112.005 10.58 11,765.02 1/28/94 1,112.005 0.039516775 10.60 1,116.151 10.60 11,831.20 2/28/94 1,116.151 0.040321489 10.42 1,120.470 lO.42 11,575.30 3/31/94 1,120.470 0.043325051 10.23 1,125.215 10.23 11,510.95 4/29/94 1,125.215 0.036276659 10.23 1,129.205 10.23 11,551.77 5/31/94 1,129.206 0.037693748 10.23 1,133.366 10.23 11,594.34 6/30/94 1,133.366 0.038536980 10.18 1,137.557 10.18 11,581.35 7/29/94 1,137.657 0.037601661 10.23 1,141.638 10.23 11,681.01 8/31/94 1,141.838 0.037586731 10.21 1,146.042 10.21 11,701.09 $10,000 (1+T) = End Value T = 17.01%
EX-99.SCHEDULE 12
Schedule for Computation Initial of Fund Performance Data Invest of: $10,000 EVERGREEN NATIONAL Offering TAX-FREE FUND Price/ Share $10.00 Return Since Inception ending 8/31/94 NAV= $10.00 FYE:August 31 Total DECLARED: DAILY Begin Capital Ending Ending PAID: MONTHLY Reinvest Period Dividend Gain Reinvest Period Investment Dates Shares /Share /Share Price Shares Price Value 12/30/92 1,000.000 10.00 1,000.000 10.00 10,000.00 12/31/92 1,000.000 0.002334854 10.00 1,000.233 10.00 10,002.33 1/31/93 1,000.233 0.052335088 10.14 1,005.396 10.14 10,194.71 2/28/93 1,005.396 0.051233194 10.60 1,010.255 10.60 10,708.71 3/31/93 1,010.255 0.050103854 10.36 1,015.141 10.36 10,516.86 4/30/93 1,015.141 0.053677093 10.49 1,020.336 10.49 10,703.32 5/28/93 1,020.336 0.046312610 10.50 1,024.836 10.50 10,760.78 6/30/93 1,024.836 0.049549711 10.69 1,029.586 10.69 11,006.28 7/30/93 1,029.586 0.050705855 10.60 1,034.511 10.60 10,965.82 8/31/93 1,034.511 0.046953579 10.92 1,038.960 10.92 11,345.44 9/30/93 1,038.980 0.048637666 11.05 1,043.533 11.05 11,531.04 10/29/93 1,043.533 0.047129300 11.01 1,048.000 11.01 11,538.48 11/30/93 1,048.000 0.043580358 10.79 1,052.232 10.79 11,353.59 12/27/93 1,052.232 0.1639 10.83 1,068.157 10.83 11,568.14 12/30/93 1,068.157 0.043710663 10.82 1,072.472 10.82 11,604.15 1/28/94 1,072.472 0.043684840 10.92 1,076.762 10.92 11,758.24 2/28/94 1,076.762 0.044187051 10.50 1,081.294 10.50 11,353.58 3/31/94 1,081.294 0.047629268 9.90 1,086.496 9.90 10,756.31 4/29/94 1,086.496 0.040624889 9.89 1,090.959 9.89 10,789.58 5/31/94 1,090.959 0.042846789 9.99 1,095.638 9.99 10,945.42 6/30/94 1,095.636 0.042687555 9.83 1,100.396 9.83 10,816.89 7/29/94 1,100.396 0.043288540 10.04 1,105.140 10.04 11,095.61 8/31/94 1,105.140 0.040962675 9.99 1,109.672 9.99 11,085.62 $10,000 (1+T) = End Value T = 10.86%
EX-99.SCHEDULE 13
Schedule for Computation Initial of Fund Performance Data Invest of: $10,000 EVERGREEN SHORT- Offering INTERMEDIATE MUNICIPAL Price/ FUND-CALIFORNIA Share $10.00 Return Since Inception ending 8/31/94 NAV= $10.00 FYE:August31 Total DECLARED: DAILY Begin Capital Ending Ending PAID: MONTHLY Reinvest Period Dividend Gain Reinvest Period Investment Dates Shares /Share /Share Price Shares Price Value 10/16/92 1,000.000 10.00 1,000.000 lO.00 10,000.00 10/31/92 1,000.000 0.011352560 10.01 1,001.134 10.01 10,021.35 11/30/92 1,001.134 0.030496480 10.07 1,004.166 lO.07 10,111.95 12/31/92 1,004.166 0.035425973 10.09 1,007.692 lO.09 10,167.61 1/31/93 1,007.692 0.036719856 10.16 1,011.334 lO.16 10,275.15 2/28/93 1,011.334 0.037867708 10.36 1,015.030 lO.36 10,515.71 3/31/93 1,015.030 0.037508623 10.21 1,018.759 10.21 10,401.53 4/30/93 1,018.759 0.040266299 10.23 1,022.759 10.23 10,462.93 5/28/93 1,022.769 0.034503687 10.23 1,026.219 10.23 10,498.22 6/30/93 1,026.219 0.035905727 10.30 1,029.796 10.30 10,606.90 7/30/93 1,029.796 0.037146090 10.23 1,033.535 10.23 10,573.07 8/31/93 1,033.535 0.034849341 10.34 1,037.019 10.34 10,722.77 9/30/93 1,037.019 0.036544685 10.40 1,040.663 lO.40 10,822.89 10/29/93 1,040.663 0.036405859 10.38 1,044.313 10.38 10,839.96 11/30/93 1,044.313 0.036559432 10.32 1,048.012 10.32 10,815.49 12/27/93 1,048.012 0.0077 10.41 1,048.787 10.41 10,917.88 12/30/93 1,048.787 0.036360419 10.41 1,052.451 10.41 10,958.01 1128194 1,052.451 0.036265026 10.46 1,056.099 10.48 11,046.80 2128194 1,056.099 0.036419346 10.27 1,059.845 10.27 10,884.60 3131194 1,059.845 0.039166155 10.08 1,063.963 10.08 10,724.74 4129194 1,063.963 0.033635410 10.09 1,087.509 10.09 10,771.17 5131194 1,067.509 0.034943816 10.09 1,071.206 10.09 10,808.47 6130194 1,071.206 0.035699222 10.04 1,075.015 10.04 10,793.15 7129194 1,075.015 0.034658697 10.11 1,078.701 10.11 10,905.66 8131194 1,078.701 0.033356154 10.09 1,082.267 10.09 10,920.07 $10,000 (1+T) = End Value T = 9.20%
EX-99 14 EVERGREEN SHORT-INTERMEDIATE--CA ANNUAL REPORT EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND - --CALIFORNIA ANNUAL REPORT AUGUST 31, 1994 THE EVERGREEN FUNDS - ------------------------------------------------------------------------------- September 19, 1994 Dear Fellow Shareholder: We are pleased to bring you the second annual report for Evergreen Short-Intermediate Municipal Fund -California. During the fiscal year which ended August 31, 1994, the Fund produced a total return for investors of +1.84%*. The Fund's average annual compounded rate of return from inception on October 16, 1992, through August 31, 1994, was +4.80%. The Fund's 30-day annualized yield as of this writing is 4.15%, with a taxable equivalent yield of 7.29% for investors in the 47% combined California state and marginal Federal tax bracket. We are happy to report that all of the Fund's net investment income was 100% free of California state and Federal income taxes*. The bond market turmoil that began in early February continued and was dominated by the strength of the domestic economy and the accompanying credit tightening measures taken by the Federal Reserve. In response to accelerating growth, the Federal Reserve raised interest rates four more times after the first action in early February. The latest move, which occurred this past August, raised the Fed Funds rate (the overnight lending rate among banks) to 4.75% and the discount rate (the rate charged by the Federal Reserve for loans to banks) to 4.00%. As the economy picked up momentum and the Fed started tightening, interest rates in the fixed-income markets climbed in every maturity range. In the taxable sector, the yield on the one-year treasury bill ended the fiscal year at 5.54%, while the yield on the 30-year treasury bond ended at 7.45%. Yields in the tax exempt sector moved up similarly, though not quite as sharply. Very short-term yields (i.e. overnight and 7-day rates) initially held firm due to supply and demand factors. By August 31, however, yields on securities from one-day to one-year increased dramatically from the lows of the previous month. Moving out on the yield curve, intermediate and long-term yields averaged 60 to 80 basis points higher for the six-month period. The Fund moved to a more defensive position during the past six months in order to moderate price volatility. We reduced the Fund's weighted average maturities and durations by selling securities most sensitive to price declines in a rising interest rate environment, such as bonds trading at a discount. Proceeds were reinvested in short-term, high-quality bonds. Our current strategy is to remain relatively short in the one-to-three-year range as we look to purchase high quality, non-callable bonds. We expect tax exempts to outperform treasuries as new municipal issuance declines. While we think that the municipal market is attractive relative to other fixed-income investments and that supply looks manageable, the overall direction of this market will be determined by the movement of rates in the taxable (specifically the U.S. Treasury) sector. Over the next several months we will take our cue from the economic indicators that typically shape the prospects for Gross Domestic Product (GDP) and inflation. We thank you for investing in Evergreen Short-Intermediate Fund-California and look forward to continuing to serve your investment needs. Sincerely, /s/ Stephen A. Lieber /s/ Steven C. Shachat Stephen A. Lieber Steven C. Shachat Chairman Portfolio Manager Evergreen Asset Management Corp. - ---------------------------------- 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 vary 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. Currently, the Adviser is voluntarily waiving a portion of its advisory fee. Had this fee not been waived, the Fund's 30-day annualized and tax-equivalent yields as of September 19, 1994, would have been 3.95% and 6.93%, respectively, and returns would have been lower. Voluntary fee waivers may be revised at any time. Tax-equivalent yield would be lower for investors in lower marginal income tax brackets. The Fund may invest in securities the income from which may be subject to the Federal alternative minimum tax for certain investors. - ------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND--CALIFORNIA STATEMENT OF INVESTMENTS AUGUST 31, 1994 - ---------------------------------------------------------- PAR INTEREST MATURITY ISSUE (000) RATE DATE VALUE - ---------------------------------------------------------- LONG-TERM INVESTMENTS--92.2% - ---------------------------------------------------------- Alameda County $1,200 5.00% 05/01/98 $ 1,212,312 Transportation Authority Sales Tax (Limited Tax) Series 1992-RB (FGIC Insured) - ---------------------------------------------------------- Burbank-Glendale- 1,000 5.00 06/01/98 1,013,870 Pasedena Airport Authority Airport Series 1992-RRB (AMBAC Insured) - ---------------------------------------------------------- California Housing 310 4.70 02/01/96 309,860 Finance Agency 325 5.00 02/01/97 325,423 Multi-Unit Rental 345 5.25 02/01/98 345,197 Housing 1992 Series A-RB - ---------------------------------------------------------- California Statewide 500 5.00 08/15/98 505,525 Communities Development Authority (Sutter Obligated Group)-COP (AMBAC Insured) - ---------------------------------------------------------- California Various 490 5.00 09/01/97 496,390 Purpose Bonds-GO - ---------------------------------------------------------- Chino Unified School 320 5.25 02/01/97 322,400 District San Bernadino County 1975 Series 3-GO - ---------------------------------------------------------- City of Beverly Hills 250 4.70 06/01/97 249,855 (1992 Refunding 300 4.90 06/01/98 299,976 Project)-COP - ---------------------------------------------------------- City of Burbank Public 980 6.10 06/01/97 1,019,278 Service Department of Electric and Water 1992 Series A-RB (AMBAC Insured) - ---------------------------------------------------------- City of Long Beach, 1,500 4.50 05/15/00 1,452,195 California Harbor Series 1993-RB - ---------------------------------------------------------- City of Los Angeles 200 5.10 12/15/95 202,872 Department of Water and Power Electric Plant, Issue of 1977-RRB - ---------------------------------------------------------- City of Los Angeles 1,200 4.50 08/15/00 1,158,012 Department of Water and Power Electric Plant, Issue of 1994-RRB - ---------------------------------------------------------- - ------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND--CALIFORNIA STATEMENT OF INVESTMENTS (continued) AUGUST 31, 1994 - ---------------------------------------------------------- PAR INTEREST MATURITY ISSUE (000) RATE DATE VALUE - ---------------------------------------------------------- City of Los Angeles $1,090 5.00% 08/01/00 $ 1,086,643 Judgement Obligation Bonds Series 1992-A - ---------------------------------------------------------- City of Santa Rosa 565 5.10 07/02/98 573,006 (Sonoma County) Wastewater Service Facilities District 1992 Refunding Improvement Bonds (AMBAC Insured) - ---------------------------------------------------------- City of Santa Rosa 650 5.10 09/01/98 659,613 (Sonoma County) Wastewater 1992 Series B-RRB (FGIC Insured) - ---------------------------------------------------------- City of Vallejo (Water 1,100 6.00 11/01/98 1,153,031 Improvement Project) 1992 Series B-RB (FGIC Insured) - ---------------------------------------------------------- County of Los Angeles 475 5.25 03/01/98 477,256 (1993 Disney Parking Project)-COP - ---------------------------------------------------------- County of San 685 7.70 11/01/98 773,714 Bernardino (West Valley Detention Center Project)- COP Prerefunded @ $102 - ---------------------------------------------------------- Los Angeles Building 1,000 6.25 03/01/96 1,023,070 Authority Lease (State of California Department of General Services Lease)1988 Series A-RB - ---------------------------------------------------------- Los Angeles County 1,250 4.75 07/01/96 1,259,300 Transportation Commission Proposition C Sales Tax Senior Series 1992 A-RB (MBIA Insured) - ---------------------------------------------------------- Northern California 585 6.20 07/01/96 601,439 Power Agency Geothermal Project Number 3 1987 Series A-RRB - ---------------------------------------------------------- - ------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND--CALIFORNIA STATEMENT OF INVESTMENTS (continued) AUGUST 31, 1994 - ---------------------------------------------------------- PAR INTEREST MATURITY ISSUE (000) RATE DATE VALUE - ---------------------------------------------------------- Pasadena Community $1,200 5.00% 12/01/96 $ 1,210,212 Development Commission Multifamily Housing(Civic Center West Project) Series B-RB (FSA Insured) - ---------------------------------------------------------- Pico Rivera Public 450 5.70 12/01/98 467,113 Financing Authority 1992 (Water Enterprise Project) Series A-RRB (MBIA Insured) - ---------------------------------------------------------- Port of Oakland 1992 475 6.10 11/01/03 504,749 Series E-RB (MBIA Insured) - ---------------------------------------------------------- Rim of the World 500 5.10 09/01/97 508,050 Unified School 500 5.25 09/01/98 510,100 District 1992 (Measure V Capital Project)-COP (AMBAC Insured) - ---------------------------------------------------------- Sacramento Municipal 1,000 7.50 08/15/98 1,101,100 Utility District Electric Series V -RB Prerefunded @ $100 - ---------------------------------------------------------- Sacramento Municipal 1,410 5.10 05/15/01 1,406,715 Utility District Electric 1993 Series E-RB - ---------------------------------------------------------- San Diego County 760 5.00 09/01/01 758,222 (1993 Vista Detention Facility Refunding Project)-COP (AMBAC Insured) - ---------------------------------------------------------- San Diego County 1,200 4.75 05/01/98 1,201,524 Water Authority Water Revenue Refunding Series 1993 A-COP (FGIC Insured) - ---------------------------------------------------------- San Diego Unified 575 5.90 07/01/97 593,831 School District Series B-COP - ---------------------------------------------------------- San Francisco Bay Area 250 6.50 07/01/98 264,698 Rapid Transit District Sales Tax Revenue Notes Series 1993 - ---------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND--CALIFORNIA STATEMENT OF INVESTMENTS (continued) AUGUST 31, 1994 - ---------------------------------------------------------- PAR INTEREST MATURITY ISSUE (000) RATE DATE VALUE - ---------------------------------------------------------- San Francisco City $ 785 7.60% 10/01/97 $ 865,031 & County Sewer Series B-RB Prerefunded @ $101.50 (AMBAC Insured) - ---------------------------------------------------------- Sunnyvale Financing 300 5.10 10/01/98 304,509 Authority Utility Revenue (Solid Waste Materials Recovery and Transfer Station) 1992 Series B-RB (MBIA Insured) - ---------------------------------------------------------- TOTAL LONG-TERM INVESTMENTS (COST $26,135,516) 26,216,091 - ---------------------------------------------------------- SHORT-TERM INVESTMENTS--6.7% - ---------------------------------------------------------- California RANS 1,000 5.00 06/28/95 1,006,447 - ---------------------------------------------------------- California Statewide 600 3.20 V 600,000 Community Development Authority (DV Industries) (LOC: Bank of Tokyo) - ---------------------------------------------------------- City of Irvine Apartment 300 2.90 V 300,000 Development (San Rafael Apartments Project) Issue A of 1992-RB - ---------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (COST $1,906,447) 1,906,447 - ---------------------------------------------------------- TOTAL INVESTMENTS (COST $28,041,963) 98.9% 28,122,538 OTHER ASSETS AND LIABILITIES-NET 1.1 310,497 - ---------------------------------------------------------- NET ASSETS 100.0% $28,433,035 ========================================================== AMBAC--American Municipal Bond Assurance Corp. COP--Certificates of Participation FGIC--Financial Guaranty Insurance Co. FSA--Financial Security Assurance Inc. GO--General Obligations MBIA--Municipal Bond Investors Assurance RANS--Revenue Anticipation Notes RB--Revenue Bonds RRB--Refunding Revenue Bonds V--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 August 31, 1994. See accompanying notes to financial statements. - ------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1994 - ------------------------------------------------------------------------------- ASSETS: Investments at value (cost $28,041,963) $28,122,538 Cash 20,496 Interest receivable 387,308 Receivable for Fund shares sold 75 Prepaid expenses 4,406 - ------------------------------------------------------------------------------- Total assets 28,534,823 - ------------------------------------------------------------------------------- LIABILITIES: Payable for Fund shares repurchased 43,500 Accrued expenses 42,091 Accrued advisory fee 9,491 Dividend payable in cash 6,706 - ------------------------------------------------------------------------------- Total liabilities 101,788 - ------------------------------------------------------------------------------- NET ASSETS: Paid-in capital 28,275,386 Undistributed net realized gain on investment transactions 77,074 Net unrealized appreciation of investments 80,575 - ------------------------------------------------------------------------------- Net assets $28,433,035 =============================================================================== NET ASSET VALUE PER SHARE, based on 2,816,554 shares of beneficial interest outstanding (unlimited shares authorized of $.0001 par value) $10.09 =============================================================================== See accompanying notes to financial statements. - ------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 1994 - ------------------------------------------------------------------------------- INVESTMENT INCOME: Interest $1,410,461 EXPENSES: Custodian fee $45,688 Advisory fee--net of $129,952 fee waiver 34,495 Transfer agent fee 25,417 Professional fees 20,551 Reports and notices to shareholders 12,886 Insurance 6,386 Trustees' fees and expenses 3,129 Registration and filing fees 1,056 Amortization of organization expenses 844 Other 4,009 ----- Total expenses 154,461 - ------------------------------------------------------------------------------- Net investment income 1,256,000 - ------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 97,167 Net decrease in unrealized appreciation of investments (823,736) - ------------------------------------------------------------------------------- Net loss on investments (726,569) - ------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 529,431 =============================================================================== See accompanying notes to financial statements. - ------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA STATEMENT OF CHANGES IN NET ASSETS YEAR ENDED AUGUST 31, ------------------------------- 1994 1993 - ------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income $1,256,000 $1,137,284 Net realized gain on investments 97,167 2,656 Net change in unrealized appreciation of investments (823,736) 904,311 - ------------------------------------------------------------------------------- Net increase resulting from operations 529,431 2,044,251 - ------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (1,256,000) (1,137,284) Net realized gains on investment transactions (22,749) -- - ------------------------------------------------------------------------------- Total distributions to shareholders (1,278,749) (1,137,284) - ------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS: Proceeds from sale of shares 14,927,525 20,570,340 Net asset value of shares issued on reinvestment of distributions 1,169,051 1,060,522 - ------------------------------------------------------------------------------- 16,096,576 21,630,862 Cost of shares repurchased (17,049,726) (26,854,680) - ------------------------------------------------------------------------------- Net decrease resulting from Fund share transactions (953,150) (5,223,818) - ------------------------------------------------------------------------------- Net decrease in net assets (1,702,468) (4,316,851) NET ASSETS: Beginning of year 30,135,503 34,452,354 - ------------------------------------------------------------------------------- End of year $28,433,035 $30,135,503 =============================================================================== NUMBER OF FUND SHARES: Sold 1,453,754 4,887,860 Issued on reinvestment of distributions 114,214 170,281 Reverse share split -- (24,896,601) Repurchased (1,666,477) (11,698,831) - ------------------------------------------------------------------------------- Net decrease (98,509) (31,537,291) Outstanding at beginning of year 2,915,063 34,452,354 - ------------------------------------------------------------------------------- Outstanding at end of year 2,816,554 2,915,063 =============================================================================== See accompanying notes to financial statements. - ------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND--CALIFORNIA FINANCIAL HIGHLIGHTS YEAR ENDED AUGUST 31, ------------------------------------------ PER SHARE DATA 1994 1993+ 1992+ 1991+ 1990+ - ------------------------------------------------------------------------------- Net asset value, beginning of year $10.34 $10.00 $10.00 $10.00 $10.00 - ------------------------------------------------------------------------------- Income from investment operations: Net investment income .43 .41 .33 .47 .55 Net realized and unrealized gain (loss)on investments (.24) .34 -- -- -- - ------------------------------------------------------------------------------- Total from investment operations .19 .75 .33 .47 .55 - ------------------------------------------------------------------------------- Less distributions to shareholders from: Net investment income (.43) (.41) (.33) (.47) (.55) Net realized gains (.01) -- -- -- -- - ------------------------------------------------------------------------------- Total distributions (.44) (.41) (.33) (.47) (.55) - ------------------------------------------------------------------------------- Net asset value, end of year $10.09 $10.34 $10.00 $10.00 $10.00 =============================================================================== TOTAL RETURN 1.8% 7.6% 3.4% 4.8% 5.7% RATIOS & SUPPLEMENTAL DATA Net assets, end of year (000's omitted) $28,433 $30,136 $34,452 $42,022 $37,291 Ratios to average net assets: Expenses .52%(a) .30%(b) .40%(c) .37%(d) .29%(e) Net investment income 4.20%(a) 3.96%(b) 3.36%(c) 4.66%(d) 5.52%(e) Portfolio turnover rate 12% 37% -- -- -- =============================================================================== + 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, 1990 through 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. (a) Net of partial advisory fee waiver of .43 of 1% of daily net assets. (b) Net of partial advisory fee waiver of .52 of 1% of daily net assets and the absorption of a portion of all other Fund expenses by the Adviser equal to .16% of average daily net assets. (c) Net of partial advisory fee waiver of .44 of 1% of daily net assets. (d) Net of partial advisory fee waiver of .45 of 1% of daily net assets and the absorption of a portion of all other Fund expenses by the Adviser equal to .03% of average daily net assets. (e) Net of partial advisory fee waiver of .51 of 1% of daily net assets and the absorption of a portion of all other Fund expenses by the Adviser equal to .08% of average daily net assets. See accompanying notes to financial statements. - ------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND--CALIFORNIA NOTES TO FINANCIAL STATEMENTS NOTE 1--ORGANIZATION The Evergreen Short-Intermediate Municipal Fund-California (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. The Fund commenced investment operations on November 2, 1988, as a diversified tax exempt money market fund which maintained a stable $1.00 net asset value per share and a dollar weighted average maturity of 90 days or less. On October 16, 1992, an amendment to the registration statement filed by the Trust with the Securities and Exchange Commission on August 13, 1992 became effective which allowed the Fund to invest in long-term tax exempt securities and maintain a dollar weighted average portfolio of between two and five years. Subsequent to this change, the Fund has a fluctuating net asset value per share. On October 8, 1992 the Fund's Trustees declared a 1 for 10 reverse share split effective for shareholders of record on October 21, 1992. This reverse split decreased shares outstanding on October 21, 1992 by 24,896,601 and changed the net asset value per share from $1.00 to $10.00. NOTE 2--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, when 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 accretion or 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 INCOME 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 taxable and other income to its shareholders. Therefore, no Federal income tax provision is required. OTHER--Expenses incurred directly by the Fund in connection with its operations are charged to the Fund. Expenses common to 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 in proportion to net assets. NOTE 3--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 .55 of 1% of the daily net assets. For the year ended August 31, 1994, the total advisory fee amounted to $164,447 of which the Adviser voluntarily waived $129,952, resulting in a net fee incurred by the Fund of $34,495. The Adviser may, at its discretion, revise or cease this voluntary fee waiver at any time. - ------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND--CALIFORNIA NOTES TO FINANCIAL STATEMENTS (continued) The Adviser has agreed to reimburse the Fund to the extent that the Fund's aggregate annual operating expenses (including the Adviser's fee but excluding interest, taxes, brokerage commissions and extraordinary expenses) exceed 1.00% of its average daily net assets for any fiscal year. The expenses of the Fund for the year ended August 31, 1994, did not exceed this limit. 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 to the Adviser. Evergreen Funds Distributor, Inc. (the "Distributor"), a subsidiary of Furman Selz Incorporated, is the distributor of the Fund's shares and provides personnel to serve as officers of the Trust. For its services, the Distributor is paid an annual fee by the Adviser. No portion of this fee is borne by the Fund. Cost of purchases and proceeds from sales of investments, other than short-term obligations, aggregated $3,306,919 and $5,223,728 respectively, for the year ended August 31, 1994. NOTE 4--PORTFOLIO TRANSACTIONS The aggregate cost of investments owned at August 31, 1994 is the same for financial statement and Federal income tax purposes. Gross unrealized appreciation and depreciation of securities at August 31, 1994, was $234,760 and $154,185, respectively. NOTE 5--CONCENTRATION OF CREDIT RISK The Fund 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 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. - ------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees and Shareholders of Evergreen Short-Intermediate Municipal Fund-California In our opinion, the accompanying Statement of Assets and Liabilities, including the Statement of Investments, and the related Statements of Operations and of Changes in Net Assets and the Financial Highlights present fairly, in all material respects, the financial position of Evergreen Short-Intermediate Municipal Fund-California (the "Fund"), constituting one of The Evergreen Municipal Trust portfolios, at August 31, 1994, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 1994 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, New York October 17, 1994 - ------------------------------------------------------------------------------- FEDERAL INCOME TAX STATUS OF DISTRIBUTIONS (UNAUDITED) During the year ended August 31, 1994, the Evergreen Short-Intermediate Municipal Fund paid distributions from net investment income aggregating $.43 per share. For Federal income tax purposes these distributions represents tax-exempt interest which is 100% exempt from all Federal income taxes other than the alternative minimum tax. On December 31, 1993, the Fund paid a short-term gain distribution of $.0077 per share which, for Federal income tax purposes, is taxable as ordinary income. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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. GROWTH & INCOME FUNDS (continued) 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. - -------------------------------------------------------------------------------- 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 Ben Weberman 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 SHORT-INTERMEDIATE MUNICIPAL FUND--CALIFORNIA 2500 Westchester Avenue Purchase, New York 10577 EX-99 15 EVERGREEN SHORT-INTERMEDIATE ANNUAL REPORT EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND ANNUAL REPORT AUGUST 31, 1994 THE EVERGREEN FUNDS - -------------------------------------------------------------------------------- September 19, 1994 Dear Fellow Shareholder: We are pleased to bring you Evergreen Short-Intermediate Municipal Fund's annual report for the fiscal year ended August 31, 1994. During this period, the Fund produced a total return for investors of +1.42%*. The Fund's average annual compounded rate of return from inception on November 18, 1991, through August 31, 1994, was +5.79%. The Fund's 30-day annualized yield as of this writing is 4.27%, which is equivalent to a taxable yield of 6.67% for investors in the 36% marginal Federal tax bracket*. The bond market turmoil that began in early February continued and was dominated by the strength of the domestic economy and the accompanying credit tightening measures taken by the Federal Reserve. In response to accelerating growth, the Federal Reserve raised interest rates four more times after their first action in early February. The latest move, which occurred this past August, increased the Fed Funds rate (the overnight lending rate among banks) to 4.75% and the discount rate (the rate charged by the Federal Reserve for loans to banks) to 4.00%. As the economy picked up momentum and the Fed started tightening, interest rates in the fixed-income markets climbed in every maturity range. In the taxable sector, the yield on the one-year treasury bill ended the fiscal year at 5.54% while the yield on the 30-year treasury bond ended at 7.45%. Yields in the tax exempt sector moved up similarly, though not quite as sharply. Very short-term yields (i.e. overnight and 7-day rates) initially held firm due to supply and demand factors. By August 31, however, yields on securities from one-day to one-year increased dramatically from the lows of the previous month. Moving out on the yield curve, intermediate and long-term yields averaged 60 to 80 basis points higher for the six-month period. The Fund moved to a more defensive position during the past six months in order to moderate price volatility. We reduced the Fund's weighted average maturities and durations by selling securities most sensitive to price declines in a rising interest rate environment, such as bonds trading at a discount. Proceeds were reinvested in premium-priced, high-quality bonds. Our current strategy is to remain relatively short in the one-to-three-year range as we look to purchase high quality, non-callable bonds. We expect tax exempts to outperform treasuries as new municipal issuance declines. While we think that the municipal market is attractive relative to other fixed-income investments and that supply looks manageable, the overall direction of our market will be determined by the movement of rates in the taxable (specifically the U.S. Treasury) sector. Over the next several months we will take our cue from the economic indicators that typically shape the prospects for Gross Domestic Product (GDP) and inflation. Thank you for investing in Evergreen Short-Intermediate Municipal Fund. We look forward to serving your continued investment needs. Sincerely, /s/Stephen A. Lieber /s/Steven C. Shachat Stephen A. Lieber Steven C. Shachat Chairman Portfolio Manager Evergreen Asset Management Corp. - ---------------------------------- 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. Currently, the Adviser is voluntarily waiving a portion of its advisory fee. Had this fee not been waived, the Fund's 30-day annualized and tax-equivalent yields as of September 19, 1994, would have been 4.15% and 6.48%, respectively, and returns would have been lower. Voluntary fee waivers may be revised at any time. Tax-equivalent yield would be lower for investors in lower tax brackets. Income may be subject to some state and local taxes, and the Federal alternative minimum tax for certain investors. - -------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND STATEMENT OF INVESTMENTS AUGUST 31, 1994 - ---------------------------------------------------------- PAR INTEREST MATURITY ISSUE (000) RATE DATE VALUE - ---------------------------------------------------------- LONG-TERM INVESTMENTS--96.8% - ---------------------------------------------------------- ALASKA--6.7% - ---------------------------------------------------------- Alaska Student Loan Corp. $ 400 6.20% 07/01/96 $ 410,388 State Assisted Student Loan RB Series 1991A - ---------------------------------------------------------- Municipality of Anchorage, 1,045 5.00 02/01/98 1,051,468 Alaska 1993 GO School RFB Series 1993A - ---------------------------------------------------------- North Slope Borough, GO 1,950 7.50 06/30/97 2,091,999 RFB Series 1988G - ---------------------------------------------------------- 3,553,855 - ---------------------------------------------------------- ARIZONA--2.2% - ---------------------------------------------------------- City of Tuscon, Arizona 1,100 7.70 07/01/15 1,184,480 Water System RRB Series 1993, Prerefunded @ $102 - ---------------------------------------------------------- COLORADO--2.5% - ---------------------------------------------------------- Colorado Student Obligation 1,315 6.125 12/01/98 1,351,872 Board Authority Student Loan RB Series 1985B - ---------------------------------------------------------- DELAWARE--1.7% - ---------------------------------------------------------- City of Wilmington, GO Series 1986 200 6.80 03/01/96 207,218 Series 1987 685 7.50 08/15/97 719,490 - ---------------------------------------------------------- 926,708 - ---------------------------------------------------------- DISTRICT OF COLUMBIA--3.0% - ---------------------------------------------------------- District of Columbia GO 1,500 6.625 06/01/98 1,579,635 RFB Series 1989B - ---------------------------------------------------------- FLORIDA--7.2% - ---------------------------------------------------------- City of Sunrise Special Tax 375 5.10 11/01/96 378,720 District No. 1 Ad Valorem Tax RFB Series 1991 (LOC; Hypo Bank) - ---------------------------------------------------------- Florida Board of Education 1,500 4.55 06/01/00 1,468,710 Public Education Capital Outlay Bonds Series 1992E - ---------------------------------------------------------- Florida Housing Finance 2,000 5.50 11/01/07 2,020,860 Agency Multi-Family Housing RB 1985 Series QQ (Lantana- Oxford Project) - ---------------------------------------------------------- 3,868,290 - ---------------------------------------------------------- GEORGIA--2.0% - ---------------------------------------------------------- Municipal Electric Authority 1,000 7.50 01/01/98 1,074,890 of Georgia Power RB Series 1986L - ---------------------------------------------------------- - -------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND STATEMENT OF INVESTMENTS (continued) AUGUST 31, 1994 - ---------------------------------------------------------- PAR INTEREST MATURITY ISSUE (000) RATE DATE VALUE - ---------------------------------------------------------- ILLINOIS--10.5% - ---------------------------------------------------------- City of Evanston, Cook $ 440 5.70% 07/01/05 $ 448,914 County Residential Mortgage RRB Series 1992 - ---------------------------------------------------------- City of Joliet, Will County 180 9.75 01/01/96 192,245 Waterworks and Sewer- age RB Series 1989 - ---------------------------------------------------------- Du Page Water Commission 1,000 5.90 05/01/96 1,022,320 RB (Du Page, Cook and Will Counties) Series 1987 - ---------------------------------------------------------- Forest Preserve District of 1,900 7.40 11/01/98 2,073,698 Du Page County GO Series 1987 - ---------------------------------------------------------- Illinois Health Facilities 300 6.00 02/15/97 305,937 Authority RB (Edward Hospital Association Project) Series 1992 - ---------------------------------------------------------- Illinois Student Assistance 500 5.45 03/01/97 504,875 Commission Student RB Loan Series 1992M - ---------------------------------------------------------- Metropolitan Sanitary 1,000 8.50 01/01/95 1,036,870 District of Greater Chicago GO Capital Improvement Bonds Series 1985, Prerefunded @ $102 - ---------------------------------------------------------- 5,584,859 - ---------------------------------------------------------- KENTUCKY--0.3% - ---------------------------------------------------------- Kentucky State University 155 6.25 05/01/96 159,673 Consolidated Educational Buildings RB Series 1991G - ---------------------------------------------------------- MAINE--2.1% - ---------------------------------------------------------- Maine Educational Loan 1,000 5.20 05/01/97 1,005,590 Marketing Corp. Student Loan RB Series 1988A - ---------------------------------------------------------- Maine Housing Authority RB 110 6.30 11/15/95 112,549 Mortgage Purchase Series 1988D-4 - ---------------------------------------------------------- 1,118,139 - ---------------------------------------------------------- MARYLAND--2.7% - ---------------------------------------------------------- Board of Education of 325 5.75 12/01/96 332,667 Baltimore County, (Seven Oaks Elementary School Facility) COP Series 1990A - ---------------------------------------------------------- Montgomery County GO 1,105 5.20 10/01/99 1,131,177 Series 1992A Consolidated Public Improvement Bonds - ---------------------------------------------------------- 1,463,844 - ---------------------------------------------------------- - -------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND STATEMENT OF INVESTMENTS (continued) AUGUST 31, 1994 - ---------------------------------------------------------- PAR INTEREST MATURITY ISSUE (000) RATE DATE VALUE - ---------------------------------------------------------- MASSACHUSETTS--6.1% - ---------------------------------------------------------- Massachusetts Bay $2,160 7.00% 03/01/97 $2,281,630 Transportation Authority General Transportation System Bond Series 1990A - ---------------------------------------------------------- New England Educational 1,000 5.40 06/01/00 988,730 Loan Marketing Corp. Student Loan RB Series 1993B - ---------------------------------------------------------- 3,270,360 - ---------------------------------------------------------- MISSOURI--1.0% - ---------------------------------------------------------- Missouri Environmental 530 5.40 07/01/97 538,994 Improvement & Energy Resources Authority Water Pollution Control RB (State Revolving Fund Program-Multiple Participant Series) Series 1992A - ---------------------------------------------------------- NEVADA--2.1% - ---------------------------------------------------------- Las Vegas Valley Water 1,000 7.25 11/01/97 1,094,800 District GO (Limited Tax) Water RRB Series 1987, Prerefunded @ $102 - ---------------------------------------------------------- NEW JERSEY--2.8% - ---------------------------------------------------------- City of Passaic GO Fiscal 200 6.40 11/15/96 207,876 Year Adjustment Bonds Series 1991 - ---------------------------------------------------------- New Jersey Health Care 1,125 4.25 07/01/99 1,060,020 Facilities Financing Authority RB (Chilton Memorial Hospital Issue) Series 1993D - ---------------------------------------------------------- New Jersey Health Care 200 6.00 07/01/96 204,854 Facilities Financing Authority RB (Pascack Valley Hospital Association Issue) Series 1991 - ---------------------------------------------------------- 1,472,750 - ---------------------------------------------------------- NEW YORK--3.2% - ---------------------------------------------------------- City of New York Series GO 1,000 5.20 08/15/01 980,000 1993B - ---------------------------------------------------------- New York Local Government Assistance Corporation (A Public Benefit Corporation of the State of New York) Series 1991B 500 6.25 04/01/96 513,200 Series 1991D 200 5.70 04/01/96 203,588 - ---------------------------------------------------------- 1,696,788 - ---------------------------------------------------------- - -------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND STATEMENT OF INVESTMENTS (continued) AUGUST 31, 1994 - ---------------------------------------------------------- PAR INTEREST MATURITY ISSUE (000) RATE DATE VALUE - ---------------------------------------------------------- NORTH CAROLINA--5.7% - ---------------------------------------------------------- North Carolina Municipal $1,000 5.10% 01/01/98 $1,006,010 Power Agency RB 2,000 5.20 01/01/00 2,016,480 Number 1 Catawba Electric Series 1992 - ---------------------------------------------------------- 3,022,490 - ---------------------------------------------------------- OHIO--2.2% - ---------------------------------------------------------- Gateway Economic 200 6.40 09/01/94 200,000 Development Corporation of Greater Cleveland RB (Senior Lien Excise Tax) Series 1990 - ---------------------------------------------------------- The Student Loan Funding 1,000 5.50 12/01/01 993,410 Corporation (Cincinnati) Student Loan RB Series 1993A - ---------------------------------------------------------- 1,193,410 - ---------------------------------------------------------- OKLAHOMA--1.4% - ---------------------------------------------------------- Oklahoma Student Loan 750 5.35 09/01/96 746,918 Authority RRB Series 1992A ---------------------------------------------------------- PENNSYLVANIA--1.0% - ---------------------------------------------------------- State of Pennsylvania 500 6.00 12/15/98 506,250 GO Series 1971 ---------------------------------------------------------- RHODE ISLAND--1.9% - ---------------------------------------------------------- Rhode Island GO 1,000 6.00 05/15/96 1,026,590 Construction Capital Development Loan Series 1991B - ---------------------------------------------------------- SOUTH CAROLINA--4.0% - ---------------------------------------------------------- Rock Hill School District 1,000 7.75 02/01/97 1,070,970 No. 3 of York County RFB Series 1992B - ---------------------------------------------------------- School District of Chester 1,000 7.70 02/01/97 1,063,490 County GO School Building Bonds Series 1992 - ---------------------------------------------------------- 2,134,460 - ---------------------------------------------------------- TENNESSEE--0.4% - ---------------------------------------------------------- Metropolitan Government of 200 8.20 01/01/95 207,192 Nashville & Davidson County Water & Sewer RRB Series 1985A, Prerefunded @ $102 ---------------------------------------------------------- TEXAS--7.9% - ---------------------------------------------------------- Brazos Higher Education Authority, Inc. Student Loan RRB Series 1992-A 790 6.00 03/01/96 802,522 Series 1993A-1 1,000 5.30 12/01/97 1,009,400 - ---------------------------------------------------------- - -------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND STATEMENT OF INVESTMENTS (continued) AUGUST 31, 1994 - ---------------------------------------------------------- PAR INTEREST MATURITY ISSUE (000) RATE DATE VALUE - ---------------------------------------------------------- TEXAS--CONTINUED - ---------------------------------------------------------- City of Austin (Travis & $ 250 8.875%09/01/98 $ 286,775 Williamson Counties) Improvement Bonds Series 1991-A - ---------------------------------------------------------- Houston Water 1,000 6.375 12/15/00 1,068,320 Conveyance System Contract COP Series 1993D - ---------------------------------------------------------- Northside, Texas 1,000 7.00 02/01/98 1,069,480 Independent School GO (District Unlimited Tax) Series 1986 - ---------------------------------------------------------- 4,236,497 - ---------------------------------------------------------- UTAH--1.4% - ---------------------------------------------------------- Intermountain Power 180 8.40 07/01/95 189,695 Agency Power Supply RRB Series 1985G, Prerefunded @ $102 - ---------------------------------------------------------- Utah Housing Finance 560 5.20 01/01/01 554,898 Agency Single Family Mortgage RRB Senior Bonds Series 1993A - ---------------------------------------------------------- 744,593 - ---------------------------------------------------------- VIRGINIA--3.6% - ---------------------------------------------------------- Medical College Of 410 5.60 11/15/96 417,442 Hampton Roads RRB Series 1991A - ---------------------------------------------------------- Virginia Housing 1,500 6.00 01/01/98 1,524,240 Development Authority Commonwealth Mortgage Bonds Series 1992B-AMT Subseries B-1 - ---------------------------------------------------------- 1,941,682 - ---------------------------------------------------------- WASHINGTON--6.5% - ---------------------------------------------------------- Public Utility District No. 2 1,000 5.00 01/01/99 1,006,110 of Grant County Electric System RRB Series 1993-E - ---------------------------------------------------------- Seattle Metropolitan Sewer 1,500 5.00 01/01/01 1,488,660 RRB Series 1993Y - ---------------------------------------------------------- Washington Public Power 1,000 5.10 07/01/98 1,001,650 Supply System RRB (Nuclear Project #2) Series 1992A - ---------------------------------------------------------- 3,496,420 - ---------------------------------------------------------- - -------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND STATEMENT OF INVESTMENTS (continued) AUGUST 31, 1994 - ---------------------------------------------------------- PAR INTEREST MATURITY ISSUE (000) RATE DATE VALUE - ---------------------------------------------------------- WISCONSIN--4.7% - ---------------------------------------------------------- State of Wisconsin GO $1,000 5.75% 05/01/97 $ 1,031,510 Series 1992A - ---------------------------------------------------------- Wisconsin Health & 1,500 5.00 08/15/98 1,494,105 Educational Facilities Authority (Sisters of the Sorrowful Mother-Ministry Corp.) Series 1993B - ---------------------------------------------------------- 2,525,615 - ---------------------------------------------------------- TOTAL LONG-TERM INVESTMENTS (COST $51,388,411) 51,722,054 - ---------------------------------------------------------- SHORT-TERM INVESTMENTS--2.1% - ---------------------------------------------------------- DISTRICT OF COLUMBIA--0.2% - ---------------------------------------------------------- Washington, DC GO Series 100 3.10 VR 100,000 1992A-4 (LOC; Industrial Bank of Japan, Ltd., NY) - ---------------------------------------------------------- MICHIGAN--1.5% - ---------------------------------------------------------- Michigan State Strategic 800 4.15 VR 800,000 Fund Ltd Series 1989 (Coil Center Corp. Project) (LOC; Tokai Bank, Ltd., NY) - ---------------------------------------------------------- OHIO--0.4% - ---------------------------------------------------------- Ohio Housing Finance 200 3.40 VR 200,000 Agency RB Single Family Mortgage (LOC; Dai-Ichi Kangyo Bank, Ltd.) - ---------------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (COST $1,100,000) 1,100,000 - ---------------------------------------------------------- TOTAL INVESTMENTS (COST $52,488,411) 98.9% 52,822,054 OTHER ASSETS AND LIABILITIES-NET 1.1 595,115 - ---------------------------------------------------------- NET ASSETS 100.0% $53,417,169 ========================================================== COP--Certificates of Participation GO--General Obligations LOC--Letter of Credit RB--Revenue Bonds RFB--Refunding Bonds RRB--Revenue Refunding Bonds VR--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. The interest rates are determined and reset by the issuer daily or weekly. The interest rates presented for these securities are those in effect as of August 31, 1994. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1994 - -------------------------------------------------------------------------------- ASSETS: Investments at value (identified cost $52,488,411) $52,822,054 Cash 73,942 Interest receivable 736,718 Receivable for Fund shares sold 1,100 Unamortized organization expenses 16,510 Prepaid expenses 19,940 - -------------------------------------------------------------------------------- Total assets 53,670,264 - -------------------------------------------------------------------------------- LIABILITIES: Payable for Fund shares repurchased 170,749 Accrued expenses 38,446 Accrued advisory fees 13,455 Dividend payable in cash 30,445 - -------------------------------------------------------------------------------- Total liabilities 253,095 - -------------------------------------------------------------------------------- NET ASSETS: Paid-in capital 53,232,212 Accumulated net realized loss on investment transactions (148,686) Net unrealized appreciation of investments 333,643 - -------------------------------------------------------------------------------- Net assets $53,417,169 ================================================================================ NET ASSET VALUE PER SHARE, based on 5,230,083 shares of beneficial interest outstanding (unlimited shares authorized of $.0001 par value) $10.21 ================================================================================ STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 1994 - -------------------------------------------------------------------------------- INVESTMENT INCOME: Interest $3,082,775 EXPENSES: Advisory fee--net of $150,194 fee waiver $151,371 Custodian fee 52,047 Registration and filing fees 38,105 Transfer agent expense 33,433 Professional fees 27,267 Reports and notices to shareholders 15,926 Insurance expense 12,383 Amortization of organization expenses 8,823 Trustees' fees and expenses 4,377 Other 4,258 ------- Total expenses 347,990 - -------------------------------------------------------------------------------- Net investment income 2,734,785 - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS: Net realized loss on investments (53,108) Net decrease in unrealized appreciation of investments (1,837,704) - -------------------------------------------------------------------------------- Net loss on investments (1,890,812) - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 843,973 ================================================================================ See accompanying notes to financial statements. - -------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, ------------------------------------- 1994 1993 - ---------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income $ 2,734,785 $ 2,961,980 Net realized gain (loss) on investments (53,108) 180,991 Net change in unrealized appreciation of investments (1,837,704) 1,305,169 - ----------------------------------------------------------------------------------------------------------------- Net increase resulting from operations 843,973 4,448,140 - ----------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (2,734,785) (2,961,980) From net realized gains on investment transactions (180,991) (15,779) In excess of net realized gains on investment transactions (96,012) -- - ----------------------------------------------------------------------------------------------------------------- Total distributions to shareholders (3,011,788) (2,977,759) - ----------------------------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS: Proceeds from sale of shares 12,683,649 33,919,896 Net asset value of shares issued on reinvestment of distributions 2,590,791 2,618,234 - ----------------------------------------------------------------------------------------------------------------- 15,274,440 36,538,130 Cost of shares repurchased (26,296,640) (25,870,993) - ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) resulting from Fund share transactions (11,022,200) 10,667,137 - ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets (13,190,015) 12,137,518 NET ASSETS: Beginning of year 66,607,184 54,469,666 - ----------------------------------------------------------------------------------------------------------------- End of year $ 53,417,169 $ 66,607,184 ================================================================================================================= NUMBER OF FUND SHARES: Sold 1,211,704 3,251,318 Issued on reinvestment of distributions 248,705 250,345 Repurchased (2,526,223) (2,479,120) - ----------------------------------------------------------------------------------------------------------------- Net increase (decrease) (1,065,814) 1,022,543 Outstanding at beginning of year 6,295,897 5,273,354 - ----------------------------------------------------------------------------------------------------------------- Outstanding at end of year 5,230,083 6,295,897 =================================================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND NOTES TO FINANCIAL STATEMENTS NOTE 1--ORGANIZATION Evergreen Short-Intermediate Municipal 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. The Fund commenced investment operations July 17, 1991 as a non-diversified tax exempt money market fund. On November 18, 1991, the Fund was changed to a diversified municipal bond fund with a fluctuating net asset value per share. The Fund invests substantially all of its assets in short and intermediate-term municipal securities with a dollar weighted average portfolio maturity of two to five years. NOTE 2--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 accretion or 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 INCOME 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 taxable and other income to its shareholders. Therefore, no Federal income tax provision is required. During the year ended August 31, 1994, the Fund distributed net realized gains for Federal income tax purposes of $277,003 resulting in a distribution of $96,012 in excess of net realized gains recognized for financial statement purposes. This excess distribution is due to net realized losses on securities sold after October 31, 1993, in the amount of $148,686, which are deferred for Federal income tax purposes. 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. OTHER--Expenses incurred directly by the Fund in connection with its operations are charged to the Fund. Expenses common to 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 in proportion to net assets. NOTE 3--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 - -------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND NOTES TO FINANCIAL STATEMENTS (continued) Fund. For the year ended August 31, 1994, the total advisory fee amounted to $301,565 of which the Adviser voluntarily waived $150,194, resulting in a net fee incurred by the Fund of $151,371. The Adviser may, at its discretion, revise or cease this voluntary advisory fee waiver 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 and extraordinary expenses) exceed 1.00% 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 to the adviser. Evergreen Funds Distributor, Inc. (the "Distributor"), a subsidiary of Furman Selz Incorporated, is the distributor of the Fund's shares and provides personnel to serve as officers of the Trust. For its services, the Distributor is paid an annual fee by the Adviser. No portion of this fee is borne by the Fund. NOTE 4--PORTFOLIO TRANSACTIONS Cost of purchases and proceeds from sales of investments, other than short-term obligations, aggregated $18,808,313 and $30,553,077 respectively, for the year ended August 31, 1994. The aggregate cost of investments owned at August 31, 1994, is the same for financial statement and Federal income tax purposes. Gross unrealized appreciation and depreciation of securities at August 31, 1994, was $585,242 and $251,599, respectively. NOTE 5--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. 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. - -------------------------------------------------------------------------------- EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND FINANCIAL HIGHLIGHTS
JULY 17, 1991* YEAR ENDED AUGUST 31, THROUGH -------------------------------------------- PER SHARE DATA 1994 1993 1992+ AUGUST 31, 1991+ - -------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year $10.58 $10.33 $10.00 $10.00 - -------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income .47 .49 .51 .06 Net realized and unrealized gain (loss) on investments (.32) .25 .33 -- - -------------------------------------------------------------------------------------------------------------------- Total from investment operations .15 .74 .84 .06 - -------------------------------------------------------------------------------------------------------------------- Less distributions to shareholders: From net investment income (.47) (.49) (.51) (.06) From net realized gains (.03) -- -- -- In excess of net realized gains (.02) -- -- -- - -------------------------------------------------------------------------------------------------------------------- Total distributions (.52) (.49) (.51) (.06) - -------------------------------------------------------------------------------------------------------------------- Net asset value, end of year $10.21 $10.58 $10.33 $10.00 ==================================================================================================================== TOTAL RETURN 1.4% 7.4% 8.6% .6%++ RATIOS & SUPPLEMENTAL DATA Net assets, end of year (000's omitted) $53,417 $66,607 $54,470 $4,025 Ratios to average net assets: Expenses .58%(a) .40%(b) .17%(c) 0%(d) Net investment income 4.54%(a) 4.73%(b) 4.85%(c) 4.93%(d) Portfolio turnover rate 32% 37% 57% -- ====================================================================================================================
* Commencement of 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 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 period July 17, 1991 through August 31, 1991 is not annualized. (a) Net of partial advisory fee waiver of .25 of 1.00% of daily net assets. (b) Net of partial advisory fee waiver of .41 of 1.00% of daily net assets. (c) Net of partial advisory fee waiver of .46 of 1.00% of daily net assets and the absorption of a portion of all other Fund expenses by the Adviser equal to .23% of average daily net assets. (d) Annualized and net of full advisory fee waiver of .50 of 1.00% of daily net assets and the absorption of all other Fund expenses by the Adviser equal to .90% of average daily net assets. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees and Shareholders of Evergreen Short-Intermediate Municipal Fund In our opinion, the accompanying Statement of Assets and Liabilities, including the Statement of Investments, and the related Statements of Operations and of Changes in Net Assets and the Financial Highlights present fairly, in all material respects, the financial position of Evergreen Short-Intermediate Municipal Fund (the "Fund"), constituting one of The Evergreen Municipal Trust portfolios, at August 31, 1994, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the three years in the period then ended and for the period July 17, 1991 (commencement of operations) through August 31, 1991, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 1994 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, New York October 17, 1994 - -------------------------------------------------------------------------------- FEDERAL INCOME TAX STATUS OF DISTRIBUTIONS (UNAUDITED) During the year ended August 31, 1994, the Evergreen Short-Intermediate Municipal Fund paid distributions from net investment income aggregating $.4719 per share. For Federal income tax purposes these distributions represent tax-exempt interest which is 100% exempt from all Federal income taxes other than the alternative minimum tax. On December 31, 1993, the Fund paid a distribution from net realized gains of $.0465 per share comprised of $.0251 short-term gains which, is considered ordinary income for Federal income tax purposes and $.0214 long-term capital gains. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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. GROWTH & INCOME FUNDS (continued) 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. - -------------------------------------------------------------------------------- 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 Ben Weberman 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 SHORT-INTERMEDIATE MUNICIPAL FUND 2500 Westchester Avenue Purchase, New York 10577 EX-99 16 EVERGREEN NATIONAL ANNUAL REPORT Evergreen National Tax-Free Fund - ------------------------ Annual Report August 31, 1994 The Evergreen Funds [LOGO] Dear Fellow Shareholder: August 31, 1994 In this, our second annual report for Evergreen National Tax-Free Fund, we stand in stark contrast to our report of one year ago when we reported on a weakened economy and declining interest rates. As evidenced by the Federal Reserve's five increases in short-term interest rates year-to-date, the national economy appears to have rebounded during 1994 with gains in employment, industrial production and housing that have set the fixed-income markets on their heels. In September of 1993, long-term U.S. Treasuries were yielding 6.00%, as compared to current long-term U.S. Treasuries at 7.70%. Similarly, 30-year insured municipals yielding 5.25% in September 1993, are currently yielding 6.30% or higher. Although insured municipals performed better than long-term treasuries during this period, the resulting impact upon the performance of the Fund was still, of course, to the negative. The details are as follows: As of the date of this writing, the Fund's 30-day annualized yield is 5.20% producing a taxable-equivalent yield of 8.12%* for investors in the 36% Federal marginal tax bracket. The Fund's cumulative total return for the calendar year-to-date is -4.47%**, with the 12-month total return at -2.29%. Since its inception on December 30, 1992, the Fund's average annual compounded rate of return through August 31, 1994, is +6.33%. As of August 31, 85% of the Fund's investments were in securities that are insured as to payment of principal and interest, which produced an Aaa weighted average credit quality rating for the Fund's securities. While insurance on the Fund's securities does not remove market risks, it does reduce the risk of default on the Fund's investments. Our weighted average maturity of 14.2 years and duration of 8.4 years are significantly below levels of one year ago, reflecting our concern about rising rates and our desire to preserve principal during this period of market volatility. Since there is a decided bias toward higher interest rates going forward, the strategy employed these past eight months, to reduce exposure to interest rate risk, remains in place. So that the Fund may continue to seek to protect principal, we will sacrifice some yield until such time as the economy shows signs of weakening or the Federal Reserve signals an end to inflation fears. Further, it is important to note that great value remains in the tax-free market place relative to taxable investments. After tax, you would still have to assume more rate risk (longer maturities) and credit risk (lower quality) to equal or better your returns versus that of long-term tax-free funds. Finally, municipal issuance is down 40% from 1993, which has meant stronger price performance relative to most fixed-income securities, despite the rise in rates. We will continue to be vigilant in our attempt to not only maximize the Fund's returns but also guard against any further erosion due to volatile market activities. We thank you for investing in Evergreen National Tax-Free Fund and look forward to serving your continued investment needs. Sincerely, /s/ Stephen A. Lieber /s/ James T. Colby, III Stephen A. Lieber James T. Colby, III Chairman Portfolio Manager Evergreen Asset Management Corp. - ----------------------------------- Figures represent past performance which does not guarantee future results. * Currently, the Adviser is waiving a portion of its advisory fee. Had this fee not been waived, the Fund's 30-day annualized and tax-equivalent yields would have been 4.81% and 7.52%, respectively, and returns would have been lower. Fee waivers may be revised at any time. The tax-equivalent yield would be lower for investors in lower tax brackets. ** 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. 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. Evergreen National Tax-Free Fund Statement of Investments August 31, 1994 - -------------------------------------------------------------------------------- Par Interest Maturity Issue (000) Rate Date Value - -------------------------------------------------------------------------------- LONG-TERM INVESTMENTS--87.1% - -------------------------------------------------------------------------------- ALASKA--1.2% - -------------------------------------------------------------------------------- Municipality of $ 500 6.20% 12/01/13 $ 502,275 Anchorage Senior Lien Electric Series 1993 RRB (MBIA) - -------------------------------------------------------------------------------- ARKANSAS--2.4% - -------------------------------------------------------------------------------- Beaver Water District 1,000 5.75 11/15/07 1,010,670 of Benton and Washington Counties RRB Series 1994 (MBIA) - -------------------------------------------------------------------------------- CALIFORNIA--11.6% - -------------------------------------------------------------------------------- City and County of 1,000 6.75 05/01/13 1,052,700 San Francisco Airports Commission, San Francisco International Airport RRB Second Series Issue 2 Bonds (MBIA) - -------------------------------------------------------------------------------- City of Fresno Sewer 1,500 6.25 09/01/14 1,539,780 System Series 1993A RB (AMBAC) - -------------------------------------------------------------------------------- Redevelopment 750 6.00 08/01/15 741,150 Agency of the City 1,000 6.00 08/01/08 1,018,860 of San Jose Merged Area Redevelopment Project Tax Allocation Bonds Series 1993 (MBIA) - -------------------------------------------------------------------------------- San Mateo County 500 6.50 07/01/16 523,895 Joint Powers Financing Authority Lease (Capital Projects Program) Series 1993A RRB (MBIA) - -------------------------------------------------------------------------------- 4,876,385 - -------------------------------------------------------------------------------- DISTRICT OF COLUMBIA--1.1% - -------------------------------------------------------------------------------- Metropolitan 500 5.75 10/01/20 462,570 Washington Airports Authority Airports System RB Series 1994A (MBIA) - -------------------------------------------------------------------------------- FLORIDA--1.1% - -------------------------------------------------------------------------------- Orlando-Orange 500 5.50 07/01/18 457,245 County Expressway Authority Senior Lien Series 1993 RRB (FGIC) - -------------------------------------------------------------------------------- Par Interest Maturity Issue (000) Rate Date Value - -------------------------------------------------------------------------------- GEORGIA--2.5% - -------------------------------------------------------------------------------- City of Atlanta Airport $ 500 6.50% 01/01/10 $ 529,420 Facilities Series 1994A RRB (AMBAC) - -------------------------------------------------------------------------------- Municipal Electric 500 6.40 01/01/13 522,570 Authority of Georgia Project One Special Obligation Bonds, Fifth Crossover Series (AMBAC) - -------------------------------------------------------------------------------- 1,051,990 - -------------------------------------------------------------------------------- HAWAII--3.2% - -------------------------------------------------------------------------------- Hawaii State Airport 1,250 7.50 07/01/20 1,362,563 Systems Second Series 1990 RB (FGIC) - -------------------------------------------------------------------------------- IDAHO--2.4% - -------------------------------------------------------------------------------- Idaho Housing Agency 1,000 6.30 07/01/11 1,003,200 Single Family Mortgage Bonds Series 1994C-1 Term Mezzanine Bonds - -------------------------------------------------------------------------------- ILLINOIS--4.2% - -------------------------------------------------------------------------------- City of Chicago Water 1,250 6.50 11/01/15 1,302,775 Series 1993 RRB (FGIC) - -------------------------------------------------------------------------------- Illinois State University 500 5.75 04/01/14 470,875 Board of Regents (Auxiliary Facilities System) Series 1993 RRB (MBIA) - -------------------------------------------------------------------------------- 1,773,650 - -------------------------------------------------------------------------------- INDIANA--2.8% - -------------------------------------------------------------------------------- Indiana Health 500 5.875 08/01/13 479,865 Facilities Finance Authority Hospital (Lafayette Home Hospital) Series 1993 RRB (MBIA) - -------------------------------------------------------------------------------- Indianapolis Airport 750 5.875 01/01/13 713,197 Authority Series 1993 RB (MBIA) - -------------------------------------------------------------------------------- 1,193,062 - -------------------------------------------------------------------------------- IOWA--1.2% - -------------------------------------------------------------------------------- City of Iowa City, 500 6.00 07/01/12 499,950 Johnson County Sewer Series 1993 RB (AMBAC) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Par Interest Maturity Issue (000) Rate Date Value - -------------------------------------------------------------------------------- MAINE--2.7% - -------------------------------------------------------------------------------- Maine Turnpike $1,000 7.125% 07/01/08 $1,129,850 Authority Turnpike RB Series 1994 (MBIA) - -------------------------------------------------------------------------------- MARYLAND--1.2% - -------------------------------------------------------------------------------- Community 500 5.70 04/01/17 498,710 Development Administration Department of Housing and Community Single Family Program Bonds, First Series 1994 - -------------------------------------------------------------------------------- MASSACHUSETTS--8.0% - -------------------------------------------------------------------------------- Massachusetts 1,000 6.00 07/01/11 1,001,360 Municipal Wholesale Electric Company Series 1992E RB (MBIA) - -------------------------------------------------------------------------------- Massachusetts 1,100 6.15 10/01/15 1,092,212 Housing Finance Agency Housing Project Series 1993A RB (AMBAC) - -------------------------------------------------------------------------------- Massachusetts 250 6.60 07/01/14 253,245 Housing Finance Agency Insured Rental Housing Bonds, Series 1994A (AMBAC) - -------------------------------------------------------------------------------- Massachusetts 500 6.30 07/01/13 507,720 Industrial Finance Agency (Mt. Holyoke College) RRB (MBIA) - -------------------------------------------------------------------------------- Massachusetts State 500 6.25 07/01/20 500,725 Health & Educational Facilities Authority Series 1992F (Massachusetts General Hospital Project) RB (AMBAC) - -------------------------------------------------------------------------------- 3,355,262 - -------------------------------------------------------------------------------- MICHIGAN--3.6% - -------------------------------------------------------------------------------- City of Detroit Water 1,000 6.50 07/01/15 1,051,560 Supply System Series 1993 RRB (FGIC) - -------------------------------------------------------------------------------- Par Interest Maturity Issue (000) Rate Date Value - -------------------------------------------------------------------------------- MICHIGAN--continued - -------------------------------------------------------------------------------- City of Grand Haven $ 510 5.25% 07/01/13 $ 460,214 Electric System Series 1993 RRB (MBIA) - -------------------------------------------------------------------------------- 1,511,774 - -------------------------------------------------------------------------------- MINNESOTA--2.4% - -------------------------------------------------------------------------------- Minnesota Housing 1,000 6.70 01/01/18 1,030,290 Finance Agency Single Family Mortgage Bonds Series 1994H - -------------------------------------------------------------------------------- NEVADA--4.1% - -------------------------------------------------------------------------------- City of Henderson 500 5.60 05/01/13 467,040 Series 1993A GO (FGIC) - -------------------------------------------------------------------------------- City of Henderson 500 6.375 12/01/14 508,020 Water Bonds Series 1993A GO (AMBAC) - -------------------------------------------------------------------------------- Washoe County, 750 6.30 12/01/14 751,800 Nevada Gas & Water Facilities (Sierra Pacific) Series 1987 RRB (AMBAC) - -------------------------------------------------------------------------------- 1,726,860 - -------------------------------------------------------------------------------- NEW HAMPSHIRE--0.6% - -------------------------------------------------------------------------------- New Hampshire State 250 5.95 07/01/13 236,455 Housing Finance Authority Single Family Mortgage Series 1993B RRB - -------------------------------------------------------------------------------- NEW JERSEY--3.0% - -------------------------------------------------------------------------------- New Jersey Health 300 5.75 07/01/14 286,656 Care Facilities Finance Authority (St. Clares- Riverside Medical Center Obligated Group Issue) Series 1994 RB (MBIA) - -------------------------------------------------------------------------------- New Jersey Housing 1,000 6.30 04/01/25 999,920 & Mortgage Finance Agency Home Buyer Series 1990F-2 RB (MBIA) - -------------------------------------------------------------------------------- 1,286,576 - -------------------------------------------------------------------------------- Evergreen National Tax-Free Fund Statement of Investments (continued) August 31, 1994 - -------------------------------------------------------------------------------- Par Interest Maturity Issue (000) Rate Date Value - -------------------------------------------------------------------------------- NEW MEXICO--1.2% - -------------------------------------------------------------------------------- City of Farmington $ 500 6.375% 12/15/22 $ 503,495 Pollution Control (Public Service Co. of New Mexico) Series 1992A RRB (AMBAC) - -------------------------------------------------------------------------------- NEW YORK--5.4% - -------------------------------------------------------------------------------- New York State 1,000 7.75 01/01/24 1,072,180 Energy Reserve & Development Authority Electric Facilities Series 1989A RB (Consolidated Edison Company of New York, Inc. Project) - -------------------------------------------------------------------------------- Westchester County, 1,225 5.75 07/01/09 1,216,425 Industrial Development Agency Resource Recovery Bonds (Westchester Resco Company Project) Series 1994A RRB (AMBAC) - -------------------------------------------------------------------------------- 2,288,605 - -------------------------------------------------------------------------------- OHIO--2.4% - -------------------------------------------------------------------------------- Ohio Housing Finance 270 6.10 09/01/14 266,620 Agency Residential Mortgage (GNMA Mortgage-Backed Securities Program) Series 1994A-1 RB - -------------------------------------------------------------------------------- Ohio Water Development 750 6.00 12/01/16 749,910 Authority Water Development RRB 1992 Clean Water Refunding Bonds (MBIA) - -------------------------------------------------------------------------------- 1,016,530 - -------------------------------------------------------------------------------- OKLAHOMA--1.5% - -------------------------------------------------------------------------------- Tulsa Industrial 645 5.75 02/15/05 650,521 Authority Hospital (St. John's Medical Center Project) RB Series 1994 - -------------------------------------------------------------------------------- PENNSYLVANIA--3.7% - -------------------------------------------------------------------------------- Pennsylvania Industrial 500 7.00 01/01/07 554,150 Development Authority RB Series 1994 (AMBAC) - -------------------------------------------------------------------------------- Pennsylvania Turnpike 1,000 5.80 12/01/07 1,009,900 Commission Series 1992P RB (MBIA) - -------------------------------------------------------------------------------- 1,564,050 - -------------------------------------------------------------------------------- Par Interest Maturity Issue (000) Rate Date Value - -------------------------------------------------------------------------------- TEXAS--2.8% - -------------------------------------------------------------------------------- City of Houston Water $1,000 7.50% 12/15/14 $ 1,168,000 Conveyance Systems Contract Series 1993H COP (AMBAC) - -------------------------------------------------------------------------------- VIRGINIA--1.6% - -------------------------------------------------------------------------------- Fairfax County, Public 250 5.50 10/01/03 256,067 Improvement Series 1992C RB - -------------------------------------------------------------------------------- County of Roanoke 500 5.00 07/01/21 418,000 Water System Series 1993 RRB (FGIC) - -------------------------------------------------------------------------------- 674,067 - -------------------------------------------------------------------------------- WASHINGTON--7.4% - -------------------------------------------------------------------------------- Tacoma, Washington Electric System Series 1992A RRB 500 6.25 01/01/11 504,865 (AMBAC) Series 1992B RRB 500 6.15 01/01/08 508,460 (AMBAC) - -------------------------------------------------------------------------------- Washington Health 1,000 6.25 10/01/18 976,820 Care Facilities Authority Series 1992 RB (The Children's Hospital and Medical Center, Seattle) (FGIC) - -------------------------------------------------------------------------------- Washington State 1,000 7.125 07/01/16 1,121,360 Public Power Supply System Series 1989B (Nuclear Project No. 3) RRB (MBIA) - -------------------------------------------------------------------------------- 3,111,505 - -------------------------------------------------------------------------------- WISCONSIN--1.8% - -------------------------------------------------------------------------------- Wisconsin Housing & 500 6.875 09/01/24 502,945 Economic Development Authority Home Ownership Series 1992 RRB - -------------------------------------------------------------------------------- Wisconsin Health & 250 5.875 10/01/13 236,688 Education Facilities Authority Series 1994A RB (Froedtert Memorial Lutheran Hospital, Inc.) (MBIA) - -------------------------------------------------------------------------------- 739,633 - -------------------------------------------------------------------------------- Total Long-Term Investments (Cost $37,377,070) 36,685,743 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Par Interest Maturity Issue (000) Rate Date Value - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS--10.9% - -------------------------------------------------------------------------------- CALIFORNIA--0.7% - -------------------------------------------------------------------------------- California Pollution $ 300 3.25% VR $ 300,000 Control Financing Authority Series 1987 Adjustable Tender Resource Recovery RB (OMS Equity of Stanislaus, Inc. Project) (LOC; Swiss Bank Corp., NY) - -------------------------------------------------------------------------------- INDIANA--1.0% - -------------------------------------------------------------------------------- City of Indianapolis 400 3.35 VR 400,000 Series 1987 Adjustable Tender Resource Recovery RB (Ogden Martin Systems of Indianapolis, Inc. Project) (LOC; Swiss Bank Corp., NY) - -------------------------------------------------------------------------------- NEW YORK--9.0% - -------------------------------------------------------------------------------- New York City 300 3.15 VR 300,000 Municipal Water Finance Authority Series 1992-C Water and Sewer Systems RB (FGIC) - -------------------------------------------------------------------------------- New York State 3,500 3.00 VR 3,500,000 Energy Research and Development Authority Pollution Control Series 1994A RRB (Orange and Rockland Utilities, Inc. Projects) (FGIC) (LOC; Bank of NY) - -------------------------------------------------------------------------------- 3,800,000 - -------------------------------------------------------------------------------- Par Interest Maturity Issue (000) Rate Date Value - -------------------------------------------------------------------------------- WYOMING--0.2% - -------------------------------------------------------------------------------- Lincoln County, WY $100 3.15% VR $ 100,000 Pollution Control (Exxon Corporation) Series 1984B RB - -------------------------------------------------------------------------------- Total Short-Term Investments (Cost $4,600,000) 4,600,000 - -------------------------------------------------------------------------------- Total Investments (Cost $41,977,070)++ 98.0% $41,285,743 Other Assets and Liabilities-Net 2.0 857,590 - -------------------------------------------------------------------------------- Total Net Assets 100.0% $42,143,333 - -------------------------------------------------------------------------------- COP--Certificates of Participation GO--General Obligations LOC--Letter of Credit RB--Revenue Bonds RRB--Revenue Refunding Bonds VR--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. Interest rates presented for these securities are those in effect at August 31, 1994. ++ At August 31, 1994, the percentage breakdown of total investments which are insured by municipal bond insurance companies are as follows: AMBAC--American Municipal Bond Assurance Corp. 26% FGIC--Financial Guaranty Insurance Corp. 24 MBIA--Municipal Bond Insurance Association 35 -- % of Total Investments Insured 85% == Evergreen National Tax-Free Fund Statement of Assets and Liabilities August 31, 1994 - --------------------------------------------------------------------------------------------------------------------- Assets: Investments at value (identified cost $41,977,070) $41,285,743 Cash 70,422 Receivable for investment securities sold 1,017,308 Receivable for Fund shares sold 12,000 Interest receivable 554,480 Unamortized organization expenses 31,316 Prepaid expenses 13,709 - --------------------------------------------------------------------------------------------------------------------- Total assets 42,984,978 - --------------------------------------------------------------------------------------------------------------------- Liabilities: Payable for investment securities purchased 773,449 Payable for Fund shares repurchased 5,054 Accrued advisory fees 4,805 Accrued expenses 37,127 Dividend payable in cash 21,210 - --------------------------------------------------------------------------------------------------------------------- Total liabilities 841,645 - --------------------------------------------------------------------------------------------------------------------- Net assets: Paid-in capital 44,080,537 Accumulated net realized loss on investment transactions (1,245,877) Net unrealized depreciation of investments (691,327) - --------------------------------------------------------------------------------------------------------------------- Net assets $42,143,333 ===================================================================================================================== Net asset value per share, based on 4,216,459 shares of beneficial interest outstanding (unlimited shares authorized of $.0001 par value) $9.99 =====================================================================================================================
Statement of Operations For the Year Ended August 31, 1994 - --------------------------------------------------------------------------------------------------------------------- Investment income: Interest $ 2,109,228 Expenses: Custodian fee $ 44,432 Registration and filing fees 25,523 Professional fees 24,619 Transfer agent expense 21,795 Reports and notices to shareholders 14,583 Amortization of organization expenses 9,400 Insurance expense 6,486 Advisory fee--net of $190,396 fee waiver 6,413 Trustees' fees and expenses 3,620 Other 2,343 ------- 159,214 Less-expense reimbursement (45,680) ------- Total expenses 113,534 - --------------------------------------------------------------------------------------------------------------------- Net investment income 1,995,694 - --------------------------------------------------------------------------------------------------------------------- Net realized and unrealized loss on investments: Net realized loss on investments (1,159,204) Net change in unrealized appreciation (depreciation) of investments (1,935,794) - --------------------------------------------------------------------------------------------------------------------- Net loss on investments (3,094,998) - --------------------------------------------------------------------------------------------------------------------- Net decrease in net assets resulting from operations $(1,099,304) =====================================================================================================================
See accompanying notes to financial statements. Evergreen National Tax-Free Fund Statement of Changes in Net Assets
For the Period December 30, 1992* Year Ended through August 31, 1994 August 31, 1993 - ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets: Operations: Net investment income $ 1,995,694 $ 799,883 Net realized gain (loss) on investments (1,159,204) 494,382 Net change in unrealized appreciation (depreciation) of investments (1,935,794) 1,244,467 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) resulting from operations (1,099,304) 2,538,732 - ------------------------------------------------------------------------------------------------------------------------------------ Distributions to shareholders: From net investment income (1,995,694) (799,883) From net realized gains on investment transactions (494,382) -- In excess of net realized gains on investment transactions (86,673) -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions to shareholders (2,576,749) (799,883) - ------------------------------------------------------------------------------------------------------------------------------------ Fund share transactions: Proceeds from sale of shares 29,696,495 33,316,196 Net asset value of shares issued on reinvestment of distributions 2,424,612 780,126 - ------------------------------------------------------------------------------------------------------------------------------------ 32,121,107 34,096,322 Cost of shares repurchased (19,386,827) (2,750,075) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase resulting from Fund share transactions 12,734,280 31,346,247 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets 9,058,227 33,085,096 Net assets: Beginning of year 33,085,106 10 - ------------------------------------------------------------------------------------------------------------------------------------ End of year $ 42,143,333 $ 33,085,106 ==================================================================================================================================== Number of Fund shares: Sold 2,815,233 3,212,540 Issued on reinvestment of distributions 231,806 73,620 Repurchased (1,860,323) (256,418) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase 1,186,716 3,029,742 Outstanding at beginning of year 3,029,743 1 - ------------------------------------------------------------------------------------------------------------------------------------ Outstanding at end of year 4,216,459 3,029,743 ====================================================================================================================================
* Commencement of operations. See accompanying notes to financial statements. Evergreen National Tax-Free Fund Notes to Financial Statements Note 1--Organization Evergreen National Tax-Free Fund (formerly Evergreen Insured 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--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 accretion or 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 Income 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 taxable and other income to its shareholders. Therefore, no Federal income tax provision is required. During the year ended August 31, 1994, the Fund distributed net realized gains for Federal income tax purposes of $581,055 resulting in a distribution of $86,673 in excess of net realized gains recognized for financial statement purposes. This excess distribution is due to net realized losses on securities sold after October 31, 1993, in the amount of $1,246,378, which are deferred for Federal income tax purposes. 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. Other--Expenses incurred directly by the Fund in connection with its operations are charged to the Fund. Expenses common to 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 in proportion to net assets. Note 3--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. 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 and extraordinary expenses) exceed 1.25% of its average daily net assets for any fiscal year. For the year ended August 31, 1994, the Adviser waived a portion of its advisory fee totalling $190,396. Additionally, the Adviser voluntarily reimbursed the Fund for certain of its expenses in the amount of $45,680 representing .12% of average net assets. The Adviser ceased this voluntary expense reimbursement on May 23, 1994. The Adviser may, at its discretion, revise or cease voluntary Advisory fee waivers and expense reimbursements at any time. 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 to the Adviser. Evergreen Funds Distributor, Inc. (the "Distributor"), a subsidiary of Furman Selz Incorporated, is the distributor of the Fund's shares and provides personnel to serve as officers of the Trust. For its services, the Distributor is paid an annual fee by the Adviser. No portion of this fee is borne by the Fund. Note 4--Portfolio Transactions Cost of purchases and proceeds from sales of investments, other than short-term obligations, aggregated $56,185,153 and $49,328,814 respectively, for the year ended August 31, 1994. The aggregate cost of investments owned at August 31, 1994, is the same for financial statement and Federal income tax purposes. Gross unrealized appreciation and depreciation of securities at August 31, 1994, was $152,543 and $843,870 respectively. Note 5--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. - -------------------------------------------------------------------------------- Financial Highlights
December 30, 1992* Year Ended through Per Share Data August 31, 1994 August 31, 1993 - --------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year $10.92 $10.00 - --------------------------------------------------------------------------------------------------------------------- Income from investment operations: Net investment income .53 .40 Net realized and unrealized gain (loss) on investments (.77) .92 - --------------------------------------------------------------------------------------------------------------------- Total from investment operations (.24) 1.32 - --------------------------------------------------------------------------------------------------------------------- Distributions to shareholders: From net investment income (.53) (.40) From net realized gains (.14) -- In excess of net realized gains (.02) -- - --------------------------------------------------------------------------------------------------------------------- Total distributions (.69) (.40) - --------------------------------------------------------------------------------------------------------------------- Net asset value, end of year $ 9.99 $10.92 ===================================================================================================================== Total return (2.3)% 13.5%+ Ratios & Supplemental Data Net assets, end of year (000's omitted) $42,143 $33,085 Ratios to average net assets: Expenses .29%(a) 0%(b) Net investment income 5.07%(a) 5.51%(b) Portfolio turnover rate 135% 166% =====================================================================================================================
* Commencement of operations. (a) Net of partial advisory fee waiver of .48 of 1.00% of daily net assets and the absorption of a portion of all other Fund expenses by the Adviser equal to .12% of average daily net assets. (b) Annualized and net of full advisory fee waiver of .50 of 1.00% of daily net assets and the absorption of all other Fund expenses by the Adviser equal to .42% of average daily net assets. + Total return is calculated for the period December 30, 1992 through August 31, 1993 is not annualized. See accompanying notes to financial statements. See accompanying notes to financial statements. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees and Shareholders of Evergreen National Tax-Free Fund In our opinion, the accompanying Statement of Assets and Liabilities, including the Statement of Investments, and the related Statements of Operations and of Changes in Net Assets and the Financial Highlights present fairly, in all material respects, the financial position of Evergreen National Tax-Free Fund (the "Fund"), formerly Evergreen Insured National Tax-Free Fund, constituting one of The Evergreen Municipal Trust portfolios, at August 31, 1994, the results of its operations for the year then ended and the changes in its net assets and the financial highlights for the year then ended and for the period December 30, 1992 (commencement of operations) through August 31, 1993, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 1994 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, New York October 17, 1994 - -------------------------------------------------------------------------------- FEDERAL INCOME TAX STATUS OF DISTRIBUTIONS (UNAUDITED) During the year ended August 31, 1994, the Evergreen National Tax-Free Fund paid distributions from net investment income aggregating $.5290 per share. For Federal income tax purposes these distributions represent tax-exempt interest which is 100% exempt from all Federal income taxes other than the alternative minimum tax. On December 31, 1993, the Fund paid a net short-term gain distribution of $.1639 per share, which, for Federal income tax purposes is taxable as ordinary income. - -------------------------------------------------------------------------------- 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 Ben Weberman 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 EX-99 17 EVERGREEN TAX EXEMPT ANNUAL REPORT - -------------------------------------------------------------------------------- Evergreen Tax Exempt Money Market Fund --------------------------------------------------- Annual Report August 31, 1994 The Evergreen Funds [Logo] - -------------------------------------------------------------------------------- Dear Fellow Shareholder: September 19, 1994 We are pleased to bring you the sixth annual report for Evergreen Tax Exempt Money Market Fund. The Fund's annual yield for the fiscal year ended August 31, 1994, was 2.49%*. The taxable-equivalent yield for investors in the 36% marginal Federal tax bracket was 3.89%. The Fund's average annual compounded rates of return for the one and five-year periods and the period since the Fund's inception on November 2, 1988, through August 31, 1994, were +2.50%, +4.08% and +4.44%, respectively. As of August 31, the Fund's 7-day current and effective (compound) yields were 2.87% and 2.91%, respectively*. Evergreen Tax Exempt Money Market Fund continues to strive to meet its objective of providing investors with as high a level of tax-free income as is consistent with capital preservation and the maintenance of daily liquidity. The chart below compares the Fund's monthly yields for the past six months to Donoghue's average for all stockbroker and general purpose tax-free money market funds. Average Monthly Yields Evergreen Donoghue's Tax Exempt Tax-Free Money Market Money Market Month Fund** Average+ - -------------------------------------------------------------------------------- March .............................. 2.33% 1.80% April .............................. 2.52% 1.95% May ................................ 2.68% 2.27% June ............................... 2.48% 2.10% July ............................... 2.30% 2.08% August ............................. 2.68% 2.38% During the period under review, Evergreen Tax Exempt Money Market Fund continued to receive national recognition for its consistently superior performance. The Fund was ranked #4 among all 120 tax exempt money market funds tracked by Lipper Analytical Services++ based on its twelve-month total return through August 31, 1994. In addition, Lipper ranked the Fund #2 among 84 tax exempt money market funds for its five-year average annual compounded rate of return through August 31. It is the Fund's intent to purchase securities the income from which is free from all forms of Federal income taxation for individuals. To this end, the Fund will attempt to continue to purchase securities the income from which is not subject to the Federal alternative minimum tax. We continue to search for the highest yield possible while maintaining standards of high credit quality. We research individual securities extensively, searching for value relative to comparable securities available in the market. The creditworthiness of issuers and diversification of the portfolio are of primary importance in our analysis. The bond market turmoil that began in early February continued and was dominated by the strength of the domestic economy and the accompanying credit tightening measures taken by the Federal Reserve. In response to accelerating growth, the Federal Reserve raised interest rates four more times after their first action in early February. The latest move, which occurred this past August, increased the Federal funds rate (the overnight lending rate among banks) to 4.75% and the discount rate (the rate charged by the Federal Reserve for loans to banks) to 4.00%. As the economy picked up momentum and the Fed started tightening, interest rates in the fixed-income markets climbed in every maturity range. In the taxable sector, yields on one-year treasury bills closed the fiscal year at 5.54% while yields on 30-year treasury bonds closed at 7.45%. Yields in the tax exempt sector moved up similarly, though not quite as sharply. Very short-term yields (i.e. overnight and 7-day rates) initially held firm due to supply and demand factors. By August 31, however, yields on securities from one-day to one-year increased dramatically from the lows of the previous month. Moving out on the yield curve, intermediate and long-term yields averaged 60 to 80 basis points higher for the six-month period. During the past six months, we initially reduced the Fund's weighted average maturity to assure a more defensive posture as the Fed moved rates higher. The light supply of new issues in the money market sector coupled with persistent demand for safe short-term securities, depressed the rise in tax exempt rates relative to taxable alternatives. However, a reverse of this relationship occurred in July and August as the seasonal summer borrowings put upward pressure on yields. The shorter maturities in the Fund gave us more flexibility for good buying opportunities over the past two months. We expect tax exempts to outperform treasuries as new municipal issuance declines. While we think that the municipal market is attractive relative to other fixed-income investments and that supply looks manageable, the overall direction of this market will be determined by the movement of rates in the taxable (specifically the U.S. Treasury) sector. Over the next several months we will take our cue from the coming economic indicators that typically shape the prospects for Gross Domestic Product (GDP) and inflation. We thank you for investing in Evergreen Tax Exempt Money Market Fund and look forward to continuing to serve your investment needs. Sincerely, /s/Stephen A. Lieber /s/Steven C. Shachat Stephen A. Lieber Steven C. Shachat Chairman Portfolio Manager Evergreen Asset Management Corp. - -------------------------------------------------------------------------------- Figures represent past performance which is no guarantee of future results. * The Fund's yield may vary, and there can be no guarantee that the Fund will achieve its objective or any particular tax exempt yield. The tax-equivalent yield would be lower for investors in lower marginal income tax brackets. Income may be subject to some state or local taxes, and the Federal alternative minimum tax for certain investors. An investment in the Fund is neither insured nor guaranteed by the U.S. Government and there can be no assurance that the Fund will be able to maintain a stable net asset value of $1.00 per share. During the period under review, the Adviser voluntarily waived a portion of its advisory fee. Had fees not been waived, the 7-day current and effective yields as of August 31, 1994, would have been 2.72% and 2.76%, respectively. Fee waivers may be revised at any time. **Calculated as total per share dividends declared for the month divided by the number of days for which dividends were declared for the month and multiplied by 365. + IBC/Donoghue's Money Fund Average(TM) for all stockbroker and general purpose tax-free funds listed in its monthly publication. As of August 31, 1994, there were 133 funds in this category. ++ Source: Lipper Analytical Services, Inc., an independent mutual funds performance monitor. - -------------------------------------------------------------------------------- Evergreen Tax Exempt Money Market Fund Statement of Investments August 31, 1994 - -------------------------------------------------------------------------------- Par (000) Issue Value - -------------------------------------------------------------------------------- ALABAMA--3.3% - -------------------------------------------------------------------------------- $2,850 City of Arab Industrial Development $ 2,850,000 Board RRB Series 1989 (SCI Manufacturing, Inc.), 3.35%-VRDN (LOC: Bank of Tokyo) - -------------------------------------------------------------------------------- 1,340 City of Birmingham Commercial 1,340,000 Authority RB Series 1991 (Avondale Development Commerce Park, Phase II Project), 3.50%-VRDN (LOC: Amsouth Bank) - -------------------------------------------------------------------------------- 750 City of Birmingham Commercial 750,000 Development Authority RB Series 1991 (Southside Business Center Project)-ARB, 3.85% Due 12/01/94 (LOC: Amsouth Bank) - -------------------------------------------------------------------------------- 5,935 City of Northport Multifamily Housing 5,935,000 Refunding Revenue Warrants (Northbrook I Project) 1993 Series A, 3.55%-VRDN (LOC: Southtrust Bank of Alabama, N.A.) - -------------------------------------------------------------------------------- 1,200 City of Parrish Industrial Development 1,200,000 Board Pollution Control RB (Alabama Power Co. Project), 3.15%-VRDN - -------------------------------------------------------------------------------- 1,000 City of Tuscaloosa, Industrial 1,000,000 Development Board RRB Series 1992 (Field Container Corp.), 3.25%-VRDN (LOC: American National Bank and Trust Co. of Chicago) - -------------------------------------------------------------------------------- 13,075,000 - -------------------------------------------------------------------------------- ARKANSAS--0.3% - -------------------------------------------------------------------------------- 1,025 City of Texarkana Public Facilities 1,050,890 Board SCH Health Care System RB (Sisters of Charity of the Incarnate World) Prerefunded @ $100, 10.50% Due 01/01/95 - -------------------------------------------------------------------------------- ARIZONA--2.1% - -------------------------------------------------------------------------------- 8,500 Maricopa County Tax Anticipation Notes 8,548,074 Series 1994, 5.00% Due 07/28/95 - -------------------------------------------------------------------------------- CALIFORNIA--17.8% - -------------------------------------------------------------------------------- 9,295 California Housing Finance Agency 9,295,000 Mortgage RB, 3.15%-VRDN (LIQ: Banque Nationale de Paris) - -------------------------------------------------------------------------------- 10,000 California Public Capital Improvements 10,000,000 Financing Authority RB (Pooled Projects) Series 1988C, 3.15% Due 09/15/94 (LOC: National Westminster Bank) - -------------------------------------------------------------------------------- 3,000 California State GO, 3,000,000 3.35% Due 11/01/94 (FGIC Insured) - -------------------------------------------------------------------------------- 16,000 California State Revenue 16,099,957 Anticipation Notes Series A, 5.00% Due 06/28/95 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Par (000) Issue Value - -------------------------------------------------------------------------------- CALIFORNIA (continued) - -------------------------------------------------------------------------------- $ 350 City of Barstow Central $ 350,000 Redevelopment Project Tax Allocation Bonds 1994 Series A, 3.45% Due 09/01/94 (MBIA Insured) - -------------------------------------------------------------------------------- 4,500 City of Corona Multifamily Housing RB 4,500,000 (Household Bank Project) 1985 Series B, 3.775%-VRDN (LOC: Household Bank-Guaranteed by Household Finance Corp.) - -------------------------------------------------------------------------------- 10,000 County of Orange 1994-95 10,000,000 Series B TRANS, 3.19375% Due 08/10/95-VRDN - -------------------------------------------------------------------------------- 8,500 Lancaster Redevelopment 8,500,000 Agency Multifamily Housing RRB (Far West Savings and Loan Association/20th Street Apartments Project) Issue of 1988, 3.65%-VRDN (LOC: Far West Savings and Loan Association, Collateralized: U.S. Treasury Bills) - -------------------------------------------------------------------------------- 6,000 Los Angeles Unified School 6,044,523 District 1994-95 TRANS, 4.50% Due 07/10/95 - -------------------------------------------------------------------------------- 4,000 San Francisco Unified School District 4,021,381 (City and County of San Francisco) 1994 TRANS, 4.75% Due 08/24/95 - -------------------------------------------------------------------------------- 71,810,861 - -------------------------------------------------------------------------------- COLORADO--4.3% - -------------------------------------------------------------------------------- 8,000 Arapahoe County Capital Improvement 8,000,000 Trust Fund Highway RB (E-470 Project) Series 1986E-ARB, 3.90% Due 02/28/95 - -------------------------------------------------------------------------------- 605 Boulder County Development RB 605,000 (The Geological Society of America, Inc. Project) Series 1992-ARB, 3.25% Due 12/01/94 (LOC: Banc One Corp.) - -------------------------------------------------------------------------------- 5,000 Colorado Housing Finance Authority 5,000,000 Multifamily Housing RB (Grant Plaza Project) 1984 Series A, 3.275%-VRDN (LOC: Bankers Trust Co.) - -------------------------------------------------------------------------------- 3,555 Jefferson County School District No. R-1, 3,525,482 GO Bond Series 1992, 2.95% Due 12/15/94 (AMBAC Insured) - -------------------------------------------------------------------------------- 17,130,482 - -------------------------------------------------------------------------------- CONNECTICUT--0.1% - -------------------------------------------------------------------------------- 205 Connecticut Housing Finance Authority 205,586 Housing Mortgage Finance Program Bonds 1985 Series B, 7.80% Due 11/15/94 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Evergreen Tax Exempt Money Market Fund Statement of Investments (continued) August 31, 1994 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Par (000) Issue Value - -------------------------------------------------------------------------------- DELAWARE--3.0% - -------------------------------------------------------------------------------- $12,000 Delaware Economic Development $12,000,000 Authority Gas Facilities RRB (Delmarva Power & Light Co. Project) Series 1993C, 3.05%-VRDN - -------------------------------------------------------------------------------- DISTRICT OF COLUMBIA--0.5% - -------------------------------------------------------------------------------- 2,000 District of Columbia GO Bonds 2,125,094 Series 1985B Prerefunded @ $102, 9.75% Due 06/01/95 - -------------------------------------------------------------------------------- FLORIDA--1.8% - -------------------------------------------------------------------------------- 500 City of St. Petersburg Public 520,146 Improvement RRB Series 1988A, Prerefunded @ $102, 7.80% Due 02/01/95 (MBIA Insured) - -------------------------------------------------------------------------------- 400 City of Sarasota Infrastructure 400,000 Sales Surtax Bonds, Series 1989, 6.30% Due 09/01/94 (AMBAC Insured) - -------------------------------------------------------------------------------- 645 City of Tampa Allegany Health 645,000 System RB (St. Joseph's Hospital) Series 1993, 2.65% Due 12/01/94 (MBIA Insured) - -------------------------------------------------------------------------------- 5,000 Lee County Industrial Development 5,000,000 Authority Industrial Development RB (The Christian and Missionary Alliance Foundation Shell Point Village Project) Series 1985, 3.275%-VRDN (LOC: Banque Paribas) - -------------------------------------------------------------------------------- 500 Palm Beach County Criminal Justice 498,872 Facilities RB Series 1994, 3.60% Due 06/01/95 (FGIC Insured) - -------------------------------------------------------------------------------- 7,064,018 - -------------------------------------------------------------------------------- GEORGIA--4.2% - -------------------------------------------------------------------------------- 6,555 Clayton County Multifamily Housing 6,555,000 RRB (Summerwind Project) Series 1989, 3.35%-VRDN (LOC: Amsouth Bank N.A.) - -------------------------------------------------------------------------------- 2,200 Columbus Housing Authority Multifamily 2,200,000 Housing RRB (Quail Ridge Project) Series 1988, 3.55%-VRDN (LOC: Columbus Bank & Trust Co.) - -------------------------------------------------------------------------------- 7,470 County of Dekalb Housing Authority 7,470,000 Multifamily Housing RRB (Terrace Club Project) Series 1993A, 3.40%-VRDN (LOC: Amsouth Bank N.A.) - -------------------------------------------------------------------------------- 565 Georgia Residential Finance Authority 565,000 Home Ownership Mortgage Bonds, 1984 Series A-ARB, 3.375% Due 12/01/94 (TOP: The Citizens and Southern National Bank) - -------------------------------------------------------------------------------- 16,790,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Par (000) Issue Value - -------------------------------------------------------------------------------- HAWAII--0.1% - -------------------------------------------------------------------------------- $ 525 City & County of Honolulu GO $ 529,287 Bonds 1990 Series D, Escrowed to Maturity, 6.30% Due 12/01/94 - -------------------------------------------------------------------------------- ILLINOIS--1.6% - -------------------------------------------------------------------------------- 1,550 Illinois Development Finance Authority 1,550,000 Industrial Development Revenue and RRB Series 1992 (Saint Xavier University), 3.25%-VRDN (LOC: American National Bank and Trust Co. of Chicago) - -------------------------------------------------------------------------------- 500 Illinois Development Finance Authority 506,220 School District Program RB Series 1993 (Wheaton-Warrenville Community Unit School District #200 Project), 8.00% Due 12/01/94 (MBIA Insured) - -------------------------------------------------------------------------------- 3,000 Illinois Development Finance Authority 3,000,000 RB Series 1994 (St. Ignatius College Prep), 3.20%-VRDN (LOC: Northern Trust Co.) - -------------------------------------------------------------------------------- 500 State of Illinois GO Bonds 515,008 Prerefunded $101, 7.10% Due 05/01/95 - -------------------------------------------------------------------------------- 1,000 Village of Skokie Economic 1,000,000 Development RB (Skokie Fashion Square Associates Project) Series 1984, 3.30%-VRDN (LOC: Bankers Trust Co.) - -------------------------------------------------------------------------------- 6,571,228 - -------------------------------------------------------------------------------- INDIANA--1.3% - -------------------------------------------------------------------------------- 4,000 Indiana Bond Bank Advanced Funding 4,004,110 Program Series 1994A-2-GMN, 3.03% Due 01/17/95 - -------------------------------------------------------------------------------- 750 Indiana Transportation Finance 750,000 Authority Highway RB Series A, 3.75% Due 06/01/95 (AMBAC Insured) - -------------------------------------------------------------------------------- 315 Valparaiso Multi-Schools Building Corp. 315,000 (Porter County) First Mortgage RFB Series 1994, 2.75% Due 01/01/95 (AMBAC Insured) - -------------------------------------------------------------------------------- 5,069,110 - -------------------------------------------------------------------------------- KANSAS--0.6% - -------------------------------------------------------------------------------- City of Salina, Salina Central Mall L.P.- 3.175%-VRDN (LOC: Boatmen's Bancshares Inc.) 1,200 Dillard's Project 1,200,000 1,105 Penney's Project 1,105,000 - -------------------------------------------------------------------------------- 2,305,000 - -------------------------------------------------------------------------------- KENTUCKY--2.5% - -------------------------------------------------------------------------------- 9,900 County of Ohio, Kentucky Pollution 9,900,000 Control RFB Series 1985 (Big Rivers Electric Corp. Project), 3.60%-VRDN (LOC: Chemical Bank) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Par (000) Issue Value - -------------------------------------------------------------------------------- LOUISIANA--0.1% - -------------------------------------------------------------------------------- $ 500 Jefferson Parish Hospital District No. 1 $ 500,000 Hospital RB Series 1993, 3.60% Due 01/01/95 (FGIC Insured) - -------------------------------------------------------------------------------- MAINE--0.3% - -------------------------------------------------------------------------------- 1,250 Maine Health and Higher Educational 1,250,000 Facilities Authority RB Bowdoin College Issue Series 1985-ARB, 3.00% Due 10/01/94 (SPBA: The Sanwa Bank Ltd.) - -------------------------------------------------------------------------------- MARYLAND--4.0% - -------------------------------------------------------------------------------- 8,875 Custodial Receipts, Municipal Series 8,875,000 1991 A1-27, 3.40%-VRDN (LIQ: Sakura Bank Ltd.) - -------------------------------------------------------------------------------- 1,200 Mayor and City Council of Baltimore 1,200,000 Economic Development RRB Series 1992 (Field Container Corp.), 3.25%-VRDN (LOC: American National Bank and Trust Co. of Chicago) - -------------------------------------------------------------------------------- 6,200 State of Maryland Single Family Program 6,200,000 Bonds Department of Housing and Community Development 1987 Fourth Series, 3.20% Due 10/01/94 (TOP: First National Bank of Chicago) - -------------------------------------------------------------------------------- 16,275,000 - -------------------------------------------------------------------------------- MASSACHUSETTS--2.1% - -------------------------------------------------------------------------------- 1,010 City of Cambridge GO Bond Municipal 1,013,095 Purpose Loan 1994, 3.75% Due 02/01/95 - -------------------------------------------------------------------------------- 7,600 Massachusetts Bay Transportation 7,599,772 Authority GO 1993 Series C, 3.25% Due 09/30/94 - -------------------------------------------------------------------------------- 8,612,867 - -------------------------------------------------------------------------------- MICHIGAN--1.8% - -------------------------------------------------------------------------------- 2,909 City of Battle Creek Limited Obligation 2,909,000 Economic Development Corp. RRB Series 1992 (Michigan Carton & Paperboard Co.), 3.25%-VRDN (LOC: American National Bank and Trust Co. of Chicago) - -------------------------------------------------------------------------------- 4,000 Michigan Job Development Authority RB 4,000,000 (Gordon Foods Service, Inc. Project) Series 1985, 3.275%-VRDN (LOC: Rabobank Nederland) - -------------------------------------------------------------------------------- 435 St. Josephs Hospital Finance Authority 435,000 RRB (Mercy Memorial Medical Center Obligated Group), 2.90% Due 01/01/95 (AMBAC Insured) - -------------------------------------------------------------------------------- 7,344,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Par (000) Issue Value - -------------------------------------------------------------------------------- MINNESOTA--0.4% - -------------------------------------------------------------------------------- $ 500 City of Minneapolis Health Care $ 500,000 System RB Series 1993A (Fairview Hospital and Healthcare Services), 3.00% Due 11/15/94 (MBIA Insured) - -------------------------------------------------------------------------------- 1,000 Regents of the University of 1,046,305 Minnesota GO-RFB Series 1985A Prerefunded @ $102, 9.50% Due 02/15/95 - -------------------------------------------------------------------------------- 1,546,305 - -------------------------------------------------------------------------------- MISSOURI--0.6% - -------------------------------------------------------------------------------- 2,365 City of Springfield Industrial 2,365,000 Development Authority (Springfield Retirement Center Ltd. Project) Series 1985, 3.525%-VRDN (LOC: Kreditbank N.A.) - -------------------------------------------------------------------------------- NEVADA--0.1% - -------------------------------------------------------------------------------- 530 Nevada State Municipal Bond Bank Project 531,233 #R-5 Series A, 4.10% Due 11/01/94 - -------------------------------------------------------------------------------- NEW JERSEY--3.2% - -------------------------------------------------------------------------------- 670 City of Bayonne School Bonds (New 679,953 Jersey School Bond Reserve Act, 5.80% Due 05/01/95 (FGIC Insured) - -------------------------------------------------------------------------------- 2,815 New Jersey Economic Development 2,815,000 Authority Economic Development Bonds (Atlantic States Cast Iron Pipe Co. Project), 3.35%-VRDN (LOC: Amsouth Bank N.A.) - -------------------------------------------------------------------------------- 5,400 New Jersey GO Bonds, RB 5,400,000 Series D-ARB, 3.75% Due 02/15/95 (LIQ: Banque Nationale de Paris) - -------------------------------------------------------------------------------- 400 Passaic County General Improvement 403,137 Bonds, 5.125% Due 03/01/95 (FGIC Insured) - -------------------------------------------------------------------------------- 3,400 Passaic County Utilities Authority 3,400,000 Solid Waste System Project Notes Series 1993B-GMN, 3.00% Due 11/10/94 - -------------------------------------------------------------------------------- 12,698,090 - -------------------------------------------------------------------------------- NEW MEXICO--1.4% - -------------------------------------------------------------------------------- 5,750 City of Albuquerque Gross Receipts 5,784,169 Lodgers' Tax RRB Series 1991A, 4.70% Due 01/02/95 (LOC: Canadian Imperial Bank of Commerce) - -------------------------------------------------------------------------------- NEW YORK--5.5% - -------------------------------------------------------------------------------- 4,200 City of New York GO Fiscal 1994 Series I, 4,200,000 3.15%-VRDN (FSA Insured) - -------------------------------------------------------------------------------- 18,000 City of New York GO, Floating Rate 18,000,000 Series B-RANS, 3.23438%-VRDN - -------------------------------------------------------------------------------- 22,200,000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Evergreen Tax Exempt Money Market Fund Statement of Investments (continued) August 31, 1994 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Par (000) Issue Value - -------------------------------------------------------------------------------- NORTH CAROLINA--1.5% - -------------------------------------------------------------------------------- $ 4,000 Beaufort County Industrial Facilities and $ 4,000,000 Pollution Control Financing Authority Pollution Control RB (Texasgulf Inc. Project) Series 1985, 3.05%-VRDN (LOC: Societe Generale) - -------------------------------------------------------------------------------- 2,100 NCNB Pooled Tax-Exempt Trust 2,100,000 (North Carolina) COP Series 1990A, 3.875%-VRDN (LOC: NationsBank of North Carolina) - -------------------------------------------------------------------------------- 6,100,000 - -------------------------------------------------------------------------------- OHIO--3.4% - -------------------------------------------------------------------------------- 2,500 Cleveland-Cuyahoga County Port 2,500,000 Authority RB (Rock and Roll Hall of Fame and Museum Project), 3.20%-VRDN (LOC: Credit Local de France) - -------------------------------------------------------------------------------- 10,300 Ohio Housing Finance Agency Single 10,300,000 Family Mortgage RRB (GNMA Mortgage Backed Securities Program) Series 1992 2B, 3.40%-VRDN (LOC: Dai-Ichi Kangyo Bank) - -------------------------------------------------------------------------------- 1,000 Toledo-Lucas County Port Authority 1,000,000 Industrial Development RRB, Series 1994 (Countrymark Cooperative, Inc. Project) 3.15%-VRDN (LOC: Fifth Third Bank) - -------------------------------------------------------------------------------- 13,800,000 - -------------------------------------------------------------------------------- OKLAHOMA--0.8% - -------------------------------------------------------------------------------- 2,800 Bartlesville Development Authority RB 2,800,000 (Heritage Village Nursing Center Project) Series 1985, 3.65%-VRDN (LOC: Kreditbank) - -------------------------------------------------------------------------------- 500 Independent School District No.1 509,805 Tulsa County (Tulsa Board of Education) Building Bonds of 1993, 7.90% Due 03/01/95 - -------------------------------------------------------------------------------- 3,309,805 - -------------------------------------------------------------------------------- PENNSYLVANIA--6.5% - -------------------------------------------------------------------------------- 12,390 BSTE Funding III Inc. Municipal 12,389,612 Securities Trust Receipts Series 1993 BFIII 5, 3.40%-VRDN - -------------------------------------------------------------------------------- 650 Lawrence County Industrial Development 650,000 Authority Pollution Control RB (Calgon Carbon Project) 1983 Series A, 3.65%-VRDN - -------------------------------------------------------------------------------- 13,000 School District of Philadelphia TRANS 13,056,887 Series 1994-1995, 4.75% Due 06/30/95 - -------------------------------------------------------------------------------- 26,096,499 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Par (000) Issue Value - -------------------------------------------------------------------------------- SOUTH CAROLINA--0.9% - -------------------------------------------------------------------------------- $ 690 Charleston County Public Facilities Corp. $ 690,000 Refunding COP, Series 1994, 3.00% Due 12/01/94 (MBIA Insured) - -------------------------------------------------------------------------------- 800 School District of Oconee County 814,286 GO Bonds of 1994, 8.50% Due 01/01/95 (MBIA Insured) - -------------------------------------------------------------------------------- 2,000 South Carolina Educational Facilities 2,000,000 Authority for Private Nonprofit Institutions of Higher Learning Educational Facilities RB (Presbyterian College Project) Series 1993, 3.15%-VRDN (LOC: The South Carolina National Bank) - -------------------------------------------------------------------------------- 3,504,286 - -------------------------------------------------------------------------------- TENNESSEE--5.7% - -------------------------------------------------------------------------------- 5,000 City of Clarksville Public Building 5,000,000 Authority Adjustable Rate Pooled Financing RB Series 1994 (Tennessee Municipal Bond Fund), 3.15%-VRDN (LOC: NationsBank of Tennessee) - -------------------------------------------------------------------------------- 5,000 City of Morristown Industrial Development 5,000,000 Board Industrial RB, Series 1983 (Camvac International, Inc. Project), 3.175%-VRDN (LOC: ABN Amro Bank) - -------------------------------------------------------------------------------- 1,100 Health, Educational and Housing 1,100,000 Facility Board of the County of Shelby Educational Facilities RB (Rhodes College) Series 1985, 3.00%-VRDN (LOC: National Westminster Bank) - -------------------------------------------------------------------------------- 2,000 Health and Educational Facilities Board 2,000,000 of the Metropolitan Government of Nashville and Davidson County RRB (West Meade Place Project) Series 1992, 3.15%-VRDN (LOC: NationsBank of Georgia) - -------------------------------------------------------------------------------- 4,000 Metropolitan Government of Nashville 4,000,000 & Davidson County Industrial Development Board RB Multifamily Housing Apartments (Arbor Crest Project) Series 1985, 3.15%-VRDN (LOC: Chemical Bank) - -------------------------------------------------------------------------------- 2,850 Metropolitan Government of Nashville 2,850,000 & Davidson County Industrial Development Board RB Multifamily Housing Apartments, 4.25% Due 09/01/95 (LOC: Union Bank of Switzerland) - -------------------------------------------------------------------------------- 3,000 Metropolitan Government of Nashville 3,132,006 & Davidson County Unlimited Tax GO Prerefunded @ $102, 7.45% Due 05/01/95 - -------------------------------------------------------------------------------- 23,082,006 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Par (000) Issue Value - -------------------------------------------------------------------------------- TEXAS--12.6% - -------------------------------------------------------------------------------- $ 6,310 Bexar County Health Facilities $ 6,310,000 Development Corp. Retirement Community RB (The Army Retirement Residence Foundation-San Antonio Project) Series 1985B, 3.275%-VRDN (LOC: Banque Paribas) - -------------------------------------------------------------------------------- 300 City of Fort Worth (Tarrant County) 308,710 General Purpose RB Series 1985 A, Prerefunded @ $100, 8.70% Due 03/01/95 - -------------------------------------------------------------------------------- 6,800 Galveston Housing Finance Corp. 6,800,000 Multifamily Housing RRB (Village by the Sea Apartments Project) Series 1993, 3.30%-VRDN (LOC: Sumitomo Bank, Ltd.) - -------------------------------------------------------------------------------- 2,000 Harris County Toll Road Unlimited 2,117,669 Tax RB, Prerefunded @ $103, 9.875% Due 02/01/95 - -------------------------------------------------------------------------------- 2,000 Harris County Toll Road Unlimited Tax 2,111,195 and Sub Lien RB Series 1985F, Prerefunded @ $103, 9.25% Due 02/01/95 - -------------------------------------------------------------------------------- 5,000 Harris County Toll Road Unlimited Tax 5,000,000 and Sub Lien RB Series 1994A, 3.32%-VRDN (LIQ: Citibank) - -------------------------------------------------------------------------------- 10,000 Irving Texas Independent School District 10,055,500 TRANS 4.75% Due 08/31/95 - -------------------------------------------------------------------------------- 7,425 NCNB Pooled Tax Exempt Trust (Texas) 7,425,000 COP Series 1990B, 3.875%-VRDN (LOC: NationsBank of Texas) - -------------------------------------------------------------------------------- 1,200 San Antonio Electric & Gas Revenue 1,250,393 Series A, Prerefunded @ $101.50, 9.60% Due 02/01/95 - -------------------------------------------------------------------------------- 7,350 San Antonio Electric & Gas Systems 7,570,850 Revenue Improvement Bonds Series 1985A Prerefunded @ $101.50, 7.00% Due 02/01/95 - -------------------------------------------------------------------------------- 1,500 Tarrant County Health Facilities 1,500,000 Development Corp. Multimodal Retirement - Cumberland RB, 3.35%-VRDN (LOC: Banque Paribas) - -------------------------------------------------------------------------------- 250 Texas Public Finance Authority GO RFB 250,000 Series 1992A, 3.50% Due 10/01/94 (MBIA Insured) - -------------------------------------------------------------------------------- 50,699,317 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Par (000) Issue Value - -------------------------------------------------------------------------------- UTAH--2.3% - -------------------------------------------------------------------------------- Intermountain Power Agency Power Supply RRB 1985,3.00% Due 09/15/94 (SBPA: Bank of America) $2,000 Series E $ 2,000,000 4,000 Series F 4,000,000 - -------------------------------------------------------------------------------- 3,100 Summit County Industrial Development 3,100,000 RB (Hornes' Kimball Junction L.P. Project) Series 1985, 3.65%-VRDN (LOC: West One Trust) - -------------------------------------------------------------------------------- 9,100,000 - -------------------------------------------------------------------------------- VIRGINIA--0.2% - -------------------------------------------------------------------------------- 1,000 Industrial Development Authority of 1,000,000 Rockingham County Pollution Control RB 1982 Series A (Merck & Co. Project), 3.65%-VRDN - -------------------------------------------------------------------------------- WASHINGTON--2.2% - -------------------------------------------------------------------------------- Washington Public Power Supply System RRB Series 1993B, 3.35%-VRDN (LIQ: Bankers Trust Co.) 6,165 Nuclear Project #1 6,165,000 2,750 Nuclear Project #3 2,750,000 - -------------------------------------------------------------------------------- 8,915,000 - -------------------------------------------------------------------------------- WISCONSIN--2.3% - -------------------------------------------------------------------------------- 3,400 City of Alma Pollution Control RRB 3,400,000 Series 1984 (Dairyland Power Cooperative Project), 3.00%-VRDN (LOC: Rabobank Nederland) - -------------------------------------------------------------------------------- 6,000 Lac du Flambeau Band of Lake Superior 6,000,000 Chippewa Indians Special Obligation Bonds (Simpson Electric Co. Project) Series 1985, 3.30%-VRDN (LOC: Barclay's Bank) - -------------------------------------------------------------------------------- 9,400,000 - -------------------------------------------------------------------------------- OTHER--1.1% - -------------------------------------------------------------------------------- 4,327 LaSalle National Bank BusTOPS Trust, 4,327,146 BusTOPS Certificates Series 1993A, 3.50%-VRDN (LIQ: LaSalle National Bank) - -------------------------------------------------------------------------------- Total Investments (Cost $412,615,353) 102.5% 412,615,353 Other Assets and Liabilities-Net (2.5) (10,196,172) - -------------------------------------------------------------------------------- Net Assets 100.0% $402,419,181 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Evergreen Tax Exempt Money Market Fund Statement of Investments (continued) August 31, 1994 - -------------------------------------------------------------------------------- SUMMARY OF ABBREVIATIONS AMBAC--American Municipal Bond Assurance Corp. ARB--Adjustable Rate Bonds COP--Certificates of Participation FGIC--Financial Guaranty Insurance Co. FSA--Financial Security Assurance Inc. GMN--General Market Notes GO--General Obligations LIQ--Liquidity Guaranty LOC--Letter of Credit MBIA--Municipal Bond Investors Assurance RB--Revenue Bonds RFB--Refunding Bonds RRB--Refunding Revenue Bonds SBPA--Standby Bond Purchase Agreement TRANS--Tax Revenue Anticipation Notes TOP--Tender Option Purchase VRDN--Variable Rate Demand Notes Adjustable Rate Bonds are putable back to the issuer or other parties not affiliated with the issuer at par on the interest reset dates. Interest rates are determined and set by the issuer quarterly, semi-annually or annually depending upon the terms of the security. Interest rates presented for these securities are those in effect at August 31, 1994. These securities represent 4% of total investments at August 31, 1994. Variable Rate Demand Notes are payable on demand 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, weekly or monthly depending upon the terms of the security. Interest rates presented for these securities are those in effect at August 31, 1994. These securities represent 61% of total investments at August 31, 1994. Certain obligations held in the portfolio have credit enhancements or liquidity features that may, under certain circumstances, provide for repayment of principal and interest on the obligation upon demand date, interest rate reset date or final maturity. These enhancements include: letters of credit; liquidity guarantees; standby bond purchase agreements; tender option purchase agreements; and third party insurance (i.e. FGIC, FSA and MBIA). Adjustable rate bonds and variable rate demand notes held in the portfolio may be considered derivative securities. Management has determined that these securities comply with the standards imposed by the Securities and Exchange Commission under Rule 2a-7 which were designed to minimize both credit risk and market risk. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- Evergreen Tax Exempt Money Market Fund Statement of Assets and Liabilities August 31, 1994 - -------------------------------------------------------------------------------- Assets: Investments at value (amortized cost $412,615,353) $412,615,353 Cash 1,129,809 Interest receivable 2,210,192 Receivable for Fund shares sold 599,336 Prepaid expenses 28,483 - -------------------------------------------------------------------------------- Total assets 416,583,173 - -------------------------------------------------------------------------------- Liabilities: Payable for investment securities purchased 12,905,836 Payable for Fund shares repurchased 958,004 Accrued advisory fee 145,772 Accrued expenses 131,058 Dividend payable in cash 23,322 - -------------------------------------------------------------------------------- Total liabilities 14,163,992 - -------------------------------------------------------------------------------- Net assets: Paid-in capital $402,419,181 ================================================================================ Net asset value per share, based on 402,419,181 shares of beneficial interest outstanding (unlimited shares authorized of $.0001 par value) $ 1.00 ================================================================================ See accompanying notes to financial statements - -------------------------------------------------------------------------------- Evergreen Tax Exempt Money Market Fund Statement of Operations For the Year Ended August 31, 1994 - -------------------------------------------------------------------------------- Investment income: Interest $11,930,196 Expenses: Advisory fee-net of $1,256,653 fee waiver $869,593 Transfer agent fee 268,204 Custodian fee 84,097 Professional fees 76,673 Registration and filing fees 51,678 Reports and notices to shareholders 38,011 Insurance 14,476 Trustees' fees and expenses 12,390 Amortization of organization expenses 2,176 Other 20,795 -------- Total expenses 1,438,093 - -------------------------------------------------------------------------------- Net investment income and net increase in net assets resulting from operations $10,492,103 ================================================================================ See accompanying notes to financial statements. - -------------------------------------------------------------------------------- Evergreen Tax Exempt Money Market Fund Statement of Changes in Net Assets
Year Ended August 31, ----------------------------------------- 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets: Operations: Net investment income and net increase in net assets resulting from operations $ 10,492,103 $ 10,458,428 - ------------------------------------------------------------------------------------------------------------------------------------ Dividends to shareholders from net investment income (10,492,103) (10,458,428) - ------------------------------------------------------------------------------------------------------------------------------------ Fund share transactions (valued at $1.00 per share): Proceeds from sale of shares 438,032,706 426,705,680 Net asset value of shares issued on reinvestment of dividends 10,143,045 10,084,157 - ------------------------------------------------------------------------------------------------------------------------------------ 448,175,751 436,789,837 Cost of shares repurchased (447,132,393) (452,338,345) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) resulting from Fund share transactions 1,043,358 (15,548,508) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets 1,043,358 (15,548,508) - ------------------------------------------------------------------------------------------------------------------------------------ Net assets: Beginning of year 401,375,823 416,924,331 - ------------------------------------------------------------------------------------------------------------------------------------ End of year $ 402,419,181 $ 401,375,823 ====================================================================================================================================
Financial Highlights
Year Ended August 31, -------------------------------------------------------------------------- Per Share Data 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income declared as dividends to shareholders $ .0247 $ .0258 $ .0367 $ .0533 $ .0599 ==================================================================================================================================== Net asset value at beginning and end of year $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 ==================================================================================================================================== Total Return 2.5% 2.6% 3.7% 5.5% 6.2% Ratios & Supplemental Data Net assets, end of year (000's omitted) $402,419 $401,376 $416,924 $510,160 $310,667 Ratios to average net assets: Expenses .34%+ .34%+ .32%+ .28%+ .31%+ Net investment income 2.47%+ 2.58%+ 3.72%+ 5.23%+ 5.94%+ ====================================================================================================================================
+ Net of partial advisory fee waivers of .30 of 1% of daily net assets for fiscal year ended August 31, 1994, .29 of 1% of daily net assets for fiscal year ended August 31, 1993, .31 of 1% of daily net assets for fiscal year ended August 31, 1992, .38 of 1% of daily net assets for fiscal year ended August 31, 1991 and .40 of 1% of daily net assets for fiscal year ended August 31, 1990. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- Evergreen Tax Exempt Money Market Fund Notes to Financial Statements Note 1--Significant Accounting Policies The Evergreen Tax Exempt Money Market 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. 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 are valued at amortized cost, which approximates market value. The amortized cost method involves valuing a security at cost on the date of purchase and thereafter assuming a straight-line accretion or amortization to maturity of any discount or premium. 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 accretion or amortization of discount and premium, is recognized on the accrual basis. Dividends to Shareholders--The Fund declares substantially all of its net investment income which includes realized gains or losses, if any, 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. Federal Income 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 taxable and other income to its shareholders. Therefore, no Federal income tax provision is required. The cost of portfolio securities for Federal income tax purposes is the same as for financial reporting purposes. Other--Expenses incurred directly by the Fund in connection with its operations are charged to the Fund. Expenses common to 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 in proportion to net assets. Note 2--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 year ended August 31, 1994, the total advisory fee amounted to $2,126,246 of which the Adviser voluntarily waived $1,256,653, resulting in a net fee incurred by the Fund of $869,593. The Adviser may, at its discretion, revise or cease this voluntary fee waiver 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 but excluding interest, taxes, brokerage commissions and extraordinary expenses) exceed 1.00% of its average daily net assets for any fiscal year. The expenses of the Fund for the year ended August 31, 1994, did not exceed this limit. 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 advisory services to the the Adviser. Evergreen Funds Distributor, Inc. (the "Distributor"), a subsidiary of Furman Selz Incorporated, is the distributor of the Fund's shares and provides personnel to serve as officers of the Trust. For its services, the Distributor is paid an annual fee by the Adviser. No portion of this fee is borne by the Fund. - -------------------------------------------------------------------------------- Evergreen Tax Exempt Money Market Fund Notes to Financial Statements (continued) Note 3--Concentration of Credit Risk The Fund maintains a portfolio of short-term debt obligations maturing in 397 days or less whose ratings are determined to be of eligible quality under Securities and Exchange Commission rules. The Fund invests in short-term debt 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. Certain short-term 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 4--Subsequent Event On September 21, 1994, the Trustees approved a change in the Fund's dividend policy whereby daily net investment income dividends will be calculated excluding the effect of net realized gains or losses. Distributions of net realized gains (if any) will be made annually. This change became effective September 22, 1994. - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees and Shareholders of Evergreen Tax Exempt Money Market Fund In our opinion, the accompanying Statement of Assets and Liabilities, including the Statement of Investments, and the related Statements of Operations and of Changes in Net Assets and the Financial Highlights present fairly, in all material respects, the financial position of Evergreen Tax Exempt Money Market Fund, (the "Fund"), constituting one of The Evergreen Municipal Trust portfolios, at August 31, 1994, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 1994 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, New York October 17, 1994 - -------------------------------------------------------------------------------- FEDERAL INCOME TAX STATUS OF DISTRIBUTIONS (UNAUDITED) Consistent with its investment objective, 100% of the dividends paid by Evergreen Tax Exempt Money Market Fund for the year ended August 31, 1994 are exempt from regular Federal income taxes. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 Ben Weberman 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 governement agency, and involve investment risks, including the 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 Tax Exempt Money Market Fund 2500 Westchester Avenue Purchase, New York 10577 -----END PRIVACY-ENHANCED MESSAGE-----