1933 Act No. 333-36033
1940 Act No. 811-08367
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 7 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 8 [X]
EVERGREEN MUNICIPAL TRUST
(Exact Name of Registrant as Specified in Charter)
200 Berkeley Street, Boston, Massachusetts 02116-5034
(Address of Principal Executive Offices)
(617) 210-3200
(Registrant's Telephone Number)
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] 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)
<PAGE>
EVERGREEN MUNICIPAL TRUST
CONTENTS OF
POST-EFFECTIVE AMENDMENT NO. 7
to
REGISTRATION STATEMENT
This Post-Effective Amendment No. 7 to Registrant's Registration Statement
No. 333-36033/811-08367 consists of the following pages, items of information
and documents:
The Facing Sheet
The Contents Page
The Cross-Reference Sheet
PART A
------
Prospectuses for Evergreen Californa Tax Free Fund, Evergreen Connecticut
Municipal Bond Fund, Evergreen Massachusetts Tax Free Fund, Evergreen Missouri
Tax Free Fund, Evergreen New York Tax Free Fund, Evergreen Pennsylvania Tax Free
Fund, and Evergreen New Jersey Tax Free Income Fund is contained herein.
Prospectuses for Evergreen Florida High Income Municipal Bond Fund, Evergreen
Florida Municipal Bond Fund, Evergreen Georgia Municipal Bond Fund, Evergreen
North Carolina Municipal Bond Fund, Evergreen South Carolina Municipal Bond
Fund, and Evergreen Virginia Municipal Bond Fund contained in Post-Effective
Amendment No. 5 to Registration Statement No. 333-36033/811-08367 filed on
February 6, 1998 is incorporated by reference herein.
Prospectuses for Evergreen High Grade Tax Free Fund and Evergreen Short-
Intermediate Municipal Fund contained in Post-Effective Amendment No. 2 to
Registration Statement No. 333-36033/811-08367 filed on December 18, 1997 is
incorporated by reference herein.
Prospectuses for Evergreen Tax Free Fund contained in Pre-Effective Amendment
No. 2 to Registration Statement No. 333-36033/811-08367 filed on
November 10, 1997 is incorporated by reference herein.
PART B
------
Statement of Additional Information for Evergreen Californa Tax Free Fund,
Evergreen Connecticut Municipal Bond Fund, Evergreen Massachusetts Tax Free
Fund, Evergreen Missouri Tax Free Fund, Evergreen New York Tax Free Fund,
Evergreen Pennsylvania Tax Free Fund, and Evergreen New Jersey Tax Free Income
Fund is contained herein.
Statement of Additional Information for Evergreen Florida High Income Municipal
Bond Fund, Evergreen Florida Municipal Bond Fund, Evergreen Georgia Municipal
Bond Fund, Evergreen North Carolina Municipal Bond Fund, Evergreen South
Carolina Municipal Bond Fund, and Evergreen Virginia Municipal Bond Fund
contained in Post-Effective Amendment No. 5 to Registration Statement
No. 333-36033/811-08367 filed on February 6, 1998 is incorporated by reference
herein.
Statement of Additional Information for Evergreen High Grade Tax Free Fund and
Evergreen Short-Intermediate Municipal Fund contained in Post-Effective
Amendment No. 2 to Registration Statement No. 333-36033/811-08367 filed on
December 18, 1997 is incorporated by reference herein.
Statement of Additional Information for Evergreen Tax Free Fund contained in
Pre-Effective Amendment No. 2 to Registration Statement No. 333-36033/811-08367
filed on November 10, 1997 is incorporated by reference herein.
PART C
------
Financial Statements
Exhibits
Number of Holders of Securities
Indemnification
Business and Other Connections of Investment Adviser
Principal Underwriter
Location of Accounts and Records
Undertakings
Signatures
<PAGE>
EVERGREEN MUNICIPAL TRUST
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A Item No. Location in Prospectus(es)
<S> <C>
Part A
Item 1. Cover Page Cover Page
Item 2. Synopsis Expense Information
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Cover Page; Description of the Funds; Investment Objectives and Policies;
Investment Practices and Restrictions; Organization and Service Providers
Item 5. Management of the Fund Organization and Service Providers; Expense Information
Item 5A. Management's Discussion of Fund Not Applicable
Performance
Item 6. Capital Stock and Other Securities Description of the Funds; Organization; Purchase and Redemption of Shares;
Other Information
Item 7. Purchase of Securities Being Offered Organization and Service providers; 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 Policies; Appendix
Item 14. Management of the Fund Management of the Trust
Item 15. Control Persons and Principal Control Persons and Principal Holders of Securities
Holders of Securities
Item 16. Investment Advisory and Other Investment Advisory and Other Services
Services
Item 17. Brokerage Allocation and Other Brokerage Allocation and Other Services
Practices
Item 18. Capital Stock and Other Securities Organization
Item 19. Purchase, Redemption and Pricing of Purchase, Redemption and Pricing of Securities Being Offered
Securities Being Offered
Item 20. Tax Status Additional Tax Information
Item 21. Underwriters Principal Underwriter
Item 22. Calculation of Performance Data Calculation of Performance Data
Item 23. Financial Statements Financial Statements
</TABLE>
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.
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS August 1, 1998
- -------------------------------------------------------------------------------
EVERGREENSM STATE MUNICIPAL BOND FUNDS [LOGO OF EVERGREEN
FUNDS(SM) APPEARS HERE]
- -------------------------------------------------------------------------------
EVERGREEN CALIFORNIA TAX FREE FUND (CLASS A, B AND C SHARES)
EVERGREEN MASSACHUSETTS TAX FREE FUND (CLASS A, B AND C SHARES)
EVERGREEN MISSOURI TAX FREE FUND (CLASS A, B AND C SHARES)
EVERGREEN NEW YORK TAX FREE FUND (CLASS A, B AND C SHARES)
EVERGREEN PENNSYLVANIA TAX FREE FUND (CLASS A, B AND C SHARES)
EVERGREEN CONNECTICUT MUNICIPAL BOND FUND (CLASS A AND B SHARES)
EVERGREEN NEW JERSEY TAX FREE INCOME FUND (CLASS A AND B SHARES)
(EACH A "FUND", TOGETHER THE "FUNDS")
The Funds seek current income exempt from federal income taxes including
the alternative minimum tax, except in the case of EVERGREEN CONNECTICUT
MUNICIPAL BOND FUND, and personal income taxes of the state for which each
Fund is named. The Funds also seek to preserve capital. Each Fund looks to
achieve its objective by investing primarily in municipal obligations that are
issued by the state for which a Fund is named.
This prospectus provides information regarding the Class A, Class B and,
where applicable, Class C, shares offered by the Funds. The Funds are
nondiversified series of an 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 200
Berkeley Street, Boston, Massachusetts 02116.
A Statement of Additional Information ("SAI") for the Funds dated August
1, 1998, as supplemented from time to time, has been filed with the Securities
and Exchange Commission and is incorporated by reference herein. The SAI
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) 343-2898. There can be no
assurance that the investment objective of the Funds will be achieved.
Investors are advised to read this prospectus carefully.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OR AN OBLIGATION OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND SHARES ARE NOT INSURED OR OTHERWISE PROTECTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE FUNDS
INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE 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
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
EXPENSE INFORMATION................................................... 3
FINANCIAL HIGHLIGHTS.................................................. 6
DESCRIPTION OF THE FUNDS.............................................. 16
Investment Objectives and Policies................................. 16
Investment Practices and Restrictions.............................. 17
ORGANIZATION AND SERVICE PROVIDERS.................................... 21
Organization....................................................... 21
Service Providers.................................................. 21
Distribution Plans and Agreements.................................. 22
PURCHASE AND REDEMPTION OF SHARES...................................... 23
How to Buy Shares................................................... 23
How to Redeem Shares................................................ 26
Exchange Privilege.................................................. 27
Shareholder Services................................................ 28
Banking Laws........................................................ 29
OTHER INFORMATION...................................................... 29
Dividends, Distributions and Taxes.................................. 29
General Information................................................. 33
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
- --------------------------------------------------------------------------------
The table and examples below are designed to help you understand the
various expenses that you will bear, directly or indirectly, when you invest in
the Funds. Shareholder transaction expenses are fees paid directly from your
account when you buy or sell shares of a Fund.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A SHARES CLASS B SHARES CLASS C SHARES(3)
- -------------------------------- -------------- -------------- -----------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases (as a % of
offering price)............ 4.75%(1) None None
Maximum Contingent Deferred
Sales Charge (as a % of
original purchase price or
redemption proceeds,
whichever is lower)........ None 5.00%(2)(4) 1.00%(2)
</TABLE>
- -------
(1) Investments of $1 million or more are not subject to a front-end sales
charge, but may be subject to a contingent deferred sales charge upon
redemption within one year after the month of purchase.
(2) The deferred sales charge on Class B shares declines from 5.00% to 1.00% on
amounts redeemed within six years after the month of purchase. The deferred
sales charge on Class C shares is 1.00% on amounts redeemed within one year
after the month of purchase. No sales charge is imposed on redemptions made
thereafter. See "Purchase and Redemption of Shares" for more information.
(3) Class C shares are currently offered only by EVERGREEN CALIFORNIA TAX FREE
FUND, EVERGREEN MASSACHUSETTS TAX FREE FUND, EVERGREEN MISSOURI TAX FREE
FUND, EVERGREEN NEW YORK TAX FREE FUND and EVERGREEN PENNSYLVANIA TAX FREE
FUND and are available only through broker-dealers who have entered into
special distribution agreements with Evergreen Distributor, Inc., each
Fund's principal underwriter.
(4) Long-term shareholders may pay more than the economic equivalent front-end
sales charges permitted by the National Association of Securities Dealers,
Inc.
Annual operating expenses reflect the normal operating expenses of the
Funds, and include costs such as management, distribution and other fees. The
tables below show each Fund's estimated annual operating expenses for the fiscal
year ending March 31, 1999. The examples show what you would pay if you invested
$1,000 over the periods indicated, assuming that you reinvest all of your
dividends and that a Fund's average annual return will be 5%. THE EXAMPLES ARE
FOR ILLUSTRATION PURPOSES ONLY AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OR ANNUAL RETURN. EACH FUND'S ACTUAL EXPENSES AND
RETURNS WILL VARY. For a more complete description of the various costs and
expenses borne by a Fund see "Organization and Service Providers."
EVERGREEN CALIFORNIA TAX FREE FUND
EXAMPLES
<TABLE>
<CAPTION>
ASSUMING REDEMPTION AT
ANNUAL OPERATING EXPENSES (AFTER WAIVERS)(1) END OF PERIOD ASSUMING NO REDEMPTION
- -------------------------------------------- ----------------------- -----------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management
Fees........... 0.30% 0.30% 0.30% After 1 Year.... $ 55 $ 65 $ 25 $ 55 $ 15 $ 15
12b-1 Fees...... 0.25% 1.00% 1.00% After 3 Years... $ 71 $ 78 $ 48 $ 71 $ 48 $ 48
Other Expenses.. 0.30% 0.30% 0.30% After 5 Years... $ 89 $103 $ 83 $ 89 $ 83 $ 83
---- ---- ---- After 10 Years.. $140 $152 $181 $140 $152 $181
Total........... 0.85% 1.60% 1.60%
==== ==== ====
</TABLE>
EVERGREEN MASSACHUSETTS TAX FREE FUND
EXAMPLES
<TABLE>
<CAPTION>
ASSUMING REDEMPTION AT
ANNUAL OPERATING EXPENSES (AFTER WAIVERS)(1) END OF PERIOD ASSUMING NO REDEMPTION
- -------------------------------------------- ----------------------- -----------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management
Fees........... 0.60% 0.60% 0.60% After 1 Year.... $ 56 $ 66 $ 26 $ 56 $ 16 $ 16
12b-1 Fees...... 0.25% 1.00% 1.00% After 3 Years... $ 73 $ 80 $ 50 $ 73 $ 50 $ 50
Other Expenses.. 0.54% 0.54% 0.54% After 5 Years... $ 92 $107 $ 87 $ 92 $ 87 $ 87
---- ---- ---- After 10 Years.. $147 $160 $190 $147 $160 $160
Total........... 0.85% 1.60% 1.60%
==== ==== ====
</TABLE>
3
<PAGE>
EVERGREEN MISSOURI TAX FREE FUND
EXAMPLES
<TABLE>
<CAPTION>
ASSUMING REDEMPTION AT
ANNUAL OPERATING EXPENSES (AFTER WAIVERS)(1) END OF PERIOD ASSUMING NO REDEMPTION
- -------------------------------------------- ----------------------- -----------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management
Fees........... 0.19% 0.19% 0.19% After 1 Year.... $ 56 $ 66 $ 26 $ 56 $ 16 $ 16
12b-1 Fees...... 0.25% 1.00% 1.00% After 3 Years... $ 73 $ 80 $ 50 $ 73 $ 50 $ 50
Other Expenses.. 0.41% 0.41% 0.41% After 5 Years... $ 92 $107 $ 87 $ 92 $ 87 $ 87
---- ---- ---- After 10 Years.. $147 $160 $190 $147 $160 $160
Total........... 0.85% 1.60% 1.60%
==== ==== ====
</TABLE>
EVERGREEN NEW YORK TAX FREE FUND
EXAMPLES
<TABLE>
<CAPTION>
ASSUMING REDEMPTION AT
ANNUAL OPERATING EXPENSES (AFTER WAIVERS)(1) END OF PERIOD ASSUMING NO REDEMPTION
- -------------------------------------------- ----------------------- -----------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management
Fees........... 0.30% 0.30% 0.30% After 1 Year.... $ 56 $ 66 $ 26 $ 56 $ 16 $ 16
12b-1 Fees...... 0.25% 1.00% 1.00% After 3 Years... $ 73 $ 80 $ 50 $ 73 $ 50 $ 50
Other Expenses.. 0.30% 0.30% 0.30% After 5 Years... $ 92 $107 $ 87 $ 92 $ 87 $ 87
---- ---- ---- After 10 Years.. $147 $160 $190 $147 $160 $160
Total........... 0.85% 1.60% 1.60%
==== ==== ====
</TABLE>
EVERGREEN PENNSYLVANIA TAX FREE FUND
EXAMPLES
<TABLE>
<CAPTION>
ASSUMING REDEMPTION AT
ANNUAL OPERATING EXPENSES (AFTER WAIVERS)(1) END OF PERIOD ASSUMING NO REDEMPTION
- -------------------------------------------- ----------------------- -----------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management
Fees........... 0.34% 0.34% 0.34% After 1 Year.... $ 56 $ 66 $ 25 $ 56 $ 16 $ 16
12b-1 Fees...... 0.25% 1.00% 1.00% After 3 Years... $ 73 $ 80 $ 50 $ 73 $ 50 $ 50
Other Expenses.. 0.24% 0.24% 0.24% After 5 Years... $ 91 $106 $ 86 $ 91 $ 86 $ 86
---- ---- ---- After 10 Years.. $145 $158 $188 $145 $158 $188
Total........... 0.83% 1.58% 1.58%
==== ==== ====
</TABLE>
EVERGREEN CONNECTICUT MUNICIPAL BOND FUND
EXAMPLES
<TABLE>
<CAPTION>
ASSUMING
REDEMPTION ASSUMING NO
ANNUAL OPERATING EXPENSES (AFTER WAIVERS)(2) AT END OF PERIOD REDEMPTION
- -------------------------------------------- ----------------- ---------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------------------------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees..... 0.33% 0.33% After 1 Year....... $56 $66 $ 56 $ 16
12b-1 Fees.......... 0.25% 1.00% After 3 Years...... $73 $80 $ 73 $ 50
Other Expenses...... 0.27% 0.27% After 5 years...... $92 $107 $ 92 $ 87
-------- -------- After 10 years..... $147 $160 $147 $160
Total............... 0.85% 1.60%
======== ========
</TABLE>
EVERGREEN NEW JERSEY TAX FREE INCOME FUND
EXAMPLES
<TABLE>
<CAPTION>
ASSUMING
REDEMPTION AT ASSUMING NO
ANNUAL OPERATING EXPENSES (AFTER WAIVERS)(3) END OF PERIOD REDEMPTION
- -------------------------------------------- --------------- ---------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees..... 0.15% 0.15% After 1 Year......... $ 52 $ 64 $ 52 $ 14
12b-1 Fees.......... 0.09% 1.00% After 3 Years........ $ 63 $ 75 $ 63 $ 45
Other Expenses...... 0.26% 0.26% After 5 Years........ $ 74 $ 97 $ 74 $ 77
-------- -------- After 10 Years....... $107 $132 $107 $132
Total............... 0.50% 1.41%
======== ========
</TABLE>
4
<PAGE>
- -------
(1) Expense ratios for EVERGREEN CALIFORNIA TAX FREE FUND, EVERGREEN
MASSACHUSETTS TAX FREE FUND, EVERGREEN MISSOURI TAX FREE FUND, EVERGREEN
NEW YORK TAX FREE FUND and EVERGREEN PENNSYLVANIA TAX FREE FUND are
estimated for the fiscal year ending March 31, 1999, and reflect the waiver
by their investment adviser of fees in accordance with certain voluntary
expense limitations. Currently, the Investment Adviser to the Funds has
voluntarily limited annual expenses excluding indirectly paid expenses of
Class A, B and C shares to 0.85%, 1.60% and 1.60%, respectively, of
average daily net assets of each such class. Absent such waiver of fees,
expense ratios for the fiscal year ending March 31, 1999, are estimated to
be:
<TABLE>
<CAPTION>
TOTAL FUND OPERATING
EXPENSES (WITHOUT WAIVERS)
--------------------------------
CLASS A CLASS B CLASS C
-------- -------- --------
<S> <C> <C> <C>
California Fund...... 1.08% 1.85% 1.85%
Massachusetts Fund... 1.32% 2.09% 2.11%
Missouri Fund........ 1.22% 1.98% 1.99%
New York Fund........ 1.10% 1.85% 1.85%
Pennsylvania Fund.... 1.00% 1.75% 1.76%
</TABLE>
(2) Expense ratios for EVERGREEN CONNECTICUT MUNICIPAL BOND FUND are estimated
for the period ending March 31, 1999 and reflect the waiver of investment
advisory fees. Absent such waivers, the Fund's Total Operating Expenses are
estimated to be:
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING EXPENSES
(WITHOUT WAIVERS)
--------------------
CLASS A CLASS B
--------- ---------
<S> <C> <C>
Connecticut Fund............. 1.15% 1.87%
</TABLE>
(3) Expense ratios are estimated for the fiscal year ending March 31, 1999, and
reflect the reimbursement or waiver of certain expenses by the Fund's
investment adviser and distributor. Absent such reimbursements Total
Operating Expenses are estimated to be 1.04% and 1.77% of average daily net
assets of Class A and Class B shares, respectively.
5
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The following tables contain important financial information relating to
each of the Funds and have been audited by KPMG Peat Marwick LLP, the Funds'
independent auditor of the Funds. The information in the table for EVERGREEN
NEW JERSEY TAX FREE INCOME FUND for the year ended February 28, 1993, and the
period July 16, 1991 to February 29, 1992, was audited by other auditors. The
tables appear in the Funds' Annual Report and should be read in conjunction
with the Funds' financial statements and related notes, which also appear,
together with the independent auditors' report, in the Funds' Annual Report.
The Funds' financial statements, related notes, and independent auditors'
report thereon are incorporated by reference into the SAI. Additional
information about the Funds' performance is contained in the Funds' Annual
Report, which will be made available upon request and without charge.
(For a share outstanding throughout each year)
EVERGREEN CALIFORNIA TAX FREE FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
FEBRUARY 1, 1994
FOUR MONTHS YEAR ENDED (COMMENCEMENT OF
YEAR ENDED ENDED NOVEMBER 30, CLASS OPERATIONS) TO
MARCH 31, MARCH 31, -------------- NOVEMBER 30,
1998 1997* 1996 1995 1994
---------- ----------- ------ ------ --------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $9.44 $9.73 $9.86 $8.70 $10.00
------ ------ ------ ------ ------
Income from investment
operations
Net investment income.. 0.45 0.16 0.48 0.49 0.44
Net realized and
unrealized gain (loss)
on investments and
futures contracts..... 0.53 (0.28) (0.11) 1.17 (1.30)
------ ------ ------ ------ ------
Total from investment
operations............. 0.98 (0.12) 0.37 1.66 (0.86)
------ ------ ------ ------ ------
Less distributions from
Net investment income.. (0.44) (0.16) (0.48) (0.47) (0.44)
In excess of net
investment income..... 0 (0.01) (0.02) (0.03) 0
------ ------ ------ ------ ------
Total distributions..... (0.44) (0.17) (0.50) (0.50) (0.44)
------ ------ ------ ------ ------
Net asset value end of
year................... $9.98 $9.44 $9.73 $9.86 $8.70
====== ====== ====== ====== ======
TOTAL RETURN(B)......... 10.55% (1.29%) 3.99% 19.63% (8.78%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses............... 0.78% 0.77%(a) 0.77% 0.72% 0.41%(a)
Expenses excluding
indirectly paid
expenses.............. 0.78% 0.75%(a) 0.75% 0.69% --
Expenses excluding
waivers and/or
reimbursements........ 1.03% 1.24%(a) 1.19% 1.31% 1.66%(a)
Net investment income.. 4.60% 4.91%(a) 5.06% 5.37% 5.53%(a)
Portfolio turnover
rate................... 74% 39% 120% 119% 104%
NET ASSETS END OF YEAR
(THOUSANDS)............ $6,420 $4,192 $4,759 $4,555 $3,006
</TABLE>
EVERGREEN CALIFORNIA TAX FREE FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
FEBRUARY 1, 1994
FOUR MONTHS YEAR ENDED (COMMENCEMENT OF
YEAR ENDED ENDED NOVEMBER 30, CLASS OPERATIONS)
MARCH 31, MARCH 31, ---------------- TO NOVEMBER 30,
1998 1997* 1996 1995 1994
---------- ----------- ------- ------- ------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $9.40 $9.69 $9.82 $8.68 $10.00
------- ------- ------- ------- -------
Income from investment
operations
Net investment income.. 0.37 0.13 0.41 0.44 0.40
Net realized and
unrealized gain (loss)
on investments and
futures contracts..... 0.53 (0.28) (0.11) 1.17 (1.28)
------- ------- ------- ------- -------
Total from investment
operations............. 0.90 (0.15) 0.30 1.61 (0.88)
------- ------- ------- ------- -------
Less distributions from
Net investment income.. (0.36) (0.13) (0.41) (0.44) (0.40)
In excess of net
investment income..... 0 (0.01) (0.02) (0.03) (0.04)
------- ------- ------- ------- -------
Total distributions..... (0.36) (0.14) (0.43) (0.47) (0.44)
------- ------- ------- ------- -------
Net asset value end of
year................... $9.94 $9.40 $9.69 $9.82 $8.68
======= ======= ======= ======= =======
TOTAL RETURN(B)......... 9.75% (1.54%) 3.23% 18.95% (9.00%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses............... 1.52% 1.52%(a) 1.52% 1.48% 1.16%(a)
Expenses excluding
indirectly paid
expenses.............. 1.52% 1.50%(a) 1.50% 1.45% --
Expenses excluding
waivers and/or
reimbursements........ 1.77% 1.99%(a) 1.94% 2.07% 2.36%(a)
Net investment income.. 3.87% 4.16%(a) 4.31% 4.57% 4.83%(a)
Portfolio turnover
rate................... 74% 39% 120% 119% 104%
NET ASSETS END OF YEAR
(THOUSANDS)............ $18,967 $21,794 $22,719 $22,743 $11,415
</TABLE>
- -------
(a) Annualized.
(b) Excluding applicable sales charges.
* The Fund changed its fiscal year end from November 30 to March 31.
6
<PAGE>
(For a share outstanding throughout each year)
EVERGREEN CALIFORNIA TAX FREE FUND -- CLASS C SHARES
<TABLE>
<CAPTION>
FEBRUARY 1, 1994
FOUR MONTHS YEAR ENDED (COMMENCEMENT OF
YEAR ENDED ENDED NOVEMBER 30, CLASS OPERATIONS)
MARCH 31, MARCH 31, -------------- TO NOVEMBER 30,
1998 1997* 1996 1995 1994
---------- ----------- ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $9.38 $9.68 $9.80 $8.68 $10.00
------ ------ ------ ------ ------
Income from investment
operations
Net investment income.. 0.37 0.14 0.41 0.43 0.39
Net realized and
unrealized gain (loss)
on investments and
futures contracts..... 0.53 (0.30) (0.10) 1.15 (1.29)
------ ------ ------ ------ ------
Total from investment
operations............. 0.90 (0.16) 0.31 1.58 (0.90)
------ ------ ------ ------ ------
Less distributions from
Net investment income.. (0.36) (0.13) (0.41) (0.43) (0.39)
In excess of net
investment income..... 0 (0.01) (0.02) (0.03) (0.03)
------ ------ ------ ------ ------
Total distributions..... (0.36) (0.14) (0.43) (0.46) (0.42)
------ ------ ------ ------ ------
Net asset value end of
year................... $9.92 $9.38 $9.68 $9.80 $8.68
====== ====== ====== ====== ======
TOTAL RETURN(B)......... 9.77% (1.64%) 3.34% 18.69% (9.08%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses............... 1.52% 1.52%(a) 1.52% 1.49% 1.16%(a)
Expenses excluding
indirectly paid
expenses.............. 1.52% 1.50%(a) 1.50% 1.46% --
Expenses excluding
waivers and/or
reimbursements........ 1.77% 1.99%(a) 1.94% 2.07% 2.38%(a)
Net investment income.. 3.87% 4.16%(a) 4.31% 4.51% 4.96%(a)
Portfolio turnover
rate................... 74% 39% 120% 119% 104%
NET ASSETS END OF YEAR
(THOUSANDS)............ $1,735 $1,849 $1,521 $1,535 $624
</TABLE>
- -------
(a) Annualized.
(b) Excluding applicable sales charges.
* The Fund changed its fiscal year end from November 30 to March 31.
EVERGREEN MASSACHUSETTS TAX FREE FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
FEBRUARY 4, 1994
(COMMENCEMENT OF
YEAR ENDED MARCH 31, CLASS OPERATIONS)
------------------------------ TO MARCH 31,
1998 1997 1996 1995 1994
------ ------ ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING OF
YEAR........................ $9.23 $9.29 $9.19 $9.17 $10.00
------ ------ ------ ------ ------
Income from investment
operations
Net investment income....... 0.45 0.47 0.51 0.53 0.08
Net realized and unrealized
gain (loss) on investments
and futures contracts...... 0.50 (0.03) 0.09 0.02 (0.82)
------ ------ ------ ------ ------
Total from investment
operations.................. 0.95 0.44 0.60 0.55 (0.74)
------ ------ ------ ------ ------
Less distributions from
Net investment income....... (0.42) (0.47) (0.48) (0.53) (0.08)
In excess of net investment
income..................... 0 (0.03) (0.02) 0 (0.01)
------ ------ ------ ------ ------
Total distributions.......... (0.42) (0.50) (0.50) (0.53) (0.09)
Net asset value end of year.. $9.76 $9.23 $9.29 $9.19 $9.17
====== ====== ====== ====== ======
TOTAL RETURN(B).............. 10.50% 4.92% 6.64% 6.23% (7.40%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets
Expenses.................... 0.77% 0.76% 0.75% 0.46% 0.35%(a)
Expenses excluding
indirectly paid expenses... 0.77% 0.75% 0.74% -- --
Expenses excluding waivers
and/or reimbursements...... 1.26% 1.58% 1.59% 1.93% 3.22%(a)
Net investment income....... 4.64% 5.19% 5.36% 5.90% 5.07%(a)
Portfolio turnover rate...... 97% 110% 165% 77% 7%
NET ASSETS END OF YEAR
(THOUSANDS)................. $2,076 $2,063 $1,786 $1,974 $1,472
</TABLE>
- -------
(a) Annualized.
(b) Excluding applicable sales charges.
7
<PAGE>
(For a share outstanding throughout each year)
EVERGREEN MASSACHUSETTS TAX FREE FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
FEBRUARY 4, 1994
(COMMENCEMENT OF
YEAR ENDED MARCH 31, CLASS OPERATIONS) TO
------------------------------ MARCH 31,
1998 1997 1996 1995 1994
------ ------ ------ ------ --------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING
OF YEAR.................. $9.17 $9.22 $9.15 $9.19 $10.00
------ ------ ------ ------ ------
Income from investment
operations
Net investment income.... 0.36 0.41 0.43 0.48 0.08
Net realized and
unrealized gain (loss)
on investments and
futures contracts....... 0.51 (0.03) 0.09 (0.01) (0.80)
------ ------ ------ ------ ------
Total from investment
operations............... 0.87 0.38 0.52 0.47 (0.72)
------ ------ ------ ------ ------
Less distributions from
Net investment income.... (0.35) (0.41) (0.43) (0.47) (0.07)
In excess of net
investment income....... 0 (0.02) (0.02) (0.04) (0.02)
------ ------ ------ ------ ------
Total distributions....... (0.35) (0.43) (0.45) (0.51) (0.09)
------ ------ ------ ------ ------
Net asset value end of
year..................... $9.69 $9.17 $9.22 $9.15 $9.19
====== ====== ====== ====== ======
TOTAL RETURN(B)........... 9.60% 4.25% 5.77% 5.41% (7.20%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses................. 1.52% 1.51% 1.49% 1.24% 1.10%(a)
Expenses excluding
indirectly paid
expenses................ 1.52% 1.50% 1.48% -- --
Expenses excluding
waivers and/or
reimbursements.......... 2.01% 2.35% 2.38% 2.68% 4.60%(a)
Net investment income.... 3.89% 4.45% 4.60% 5.15% 3.23%(a)
Portfolio turnover rate... 97% 110% 165% 77% 7%
NET ASSETS END OF YEAR
(THOUSANDS).............. $6,384 $7,803 $7,274 $6,169 $1,817
</TABLE>
EVERGREEN MASSACHUSETTS TAX FREE FUND -- CLASS C SHARES
<TABLE>
<CAPTION>
FEBRUARY 4, 1994
(COMMENCEMENT OF
YEAR ENDED MARCH 31, CLASS OPERATIONS) TO
------------------------------ MARCH 31,
1998 1997 1996 1995 1994
------ ------ ------ ------ --------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING
OF YEAR.................. $9.16 $9.22 $9.14 $9.19 $10.00
------ ------ ------ ------ ------
Income from investment
operations
Net investment income.... 0.36 0.41 0.43 0.48 0.08
Net realized and
unrealized gain (loss)
on investments and
futures contracts....... 0.51 (0.04) 0.10 (0.02) (0.80)
------ ------ ------ ------ ------
Total from investment
operations............... 0.87 0.37 0.53 0.46 (0.72)
------ ------ ------ ------ ------
Less distributions from
Net investment income.... (0.35) (0.41) (0.43) (0.47) (0.07)
In excess of net
investment income....... 0 (0.02) (0.02) (0.04) (0.02)
------ ------ ------ ------ ------
Total distributions....... (0.35) (0.43) (0.45) (0.51) (0.09)
------ ------ ------ ------ ------
Net asset value end of
year..................... $9.68 $9.16 $9.22 $9.14 $9.19
====== ====== ====== ====== ======
TOTAL RETURN(B)........... 9.62% 4.14% 5.89% 5.20% (7.21%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses................. 1.54% 1.51% 1.49% 1.23% 1.10%(a)
Expenses excluding
indirectly paid
expenses................ 1.53% 1.50% 1.48% -- --
Expenses excluding
waivers and/or
reimbursements.......... 2.02% 2.36% 2.39% 2.68% 4.91%(a)
Net investment income.... 3.94% 4.46% 4.60% 5.11% 4.28%(a)
Portfolio turnover rate... 97% 110% 165% 77% 7%
NET ASSETS END OF YEAR
(THOUSANDS).............. $1,639 $2,066 $2,303 $1,971 $369
</TABLE>
- -------
(a) Annualized.
(b) Excluding applicable sales charges.
8
<PAGE>
(For a share outstanding throughout each year)
EVERGREEN MISSOURI TAX FREE FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
FEBRUARY 1, 1994
FOUR MONTHS YEAR ENDED (COMMENCEMENT OF
YEAR ENDED ENDED NOVEMBER 30, CLASS OPERATIONS) TO
MARCH 31, MARCH 31, -------------- NOVEMBER 30,
1998 1997* 1996 1995 1994
---------- ----------- ------ ------ --------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $9.64 $9.86 $9.91 $8.72 $10.00
------ ------ ------ ------ ------
Income from investment
operations
Net investment income.. 0.46 0.16 0.50 0.50 0.44
Net realized and
unrealized gain (loss)
on investments and
futures contracts..... 0.58 (0.22) (0.06) 1.19 (1.28)
------ ------ ------ ------ ------
Total from investment
operations............. 1.04 (0.06) 0.44 1.69 (0.84)
------ ------ ------ ------ ------
Less distributions from
Net investment income.. (0.47) (0.16) (0.47) (0.47) (0.44)
In excess of net
investment income..... 0 0(c) (0.02) (0.03) 0(c)
------ ------ ------ ------ ------
Total distributions..... (0.47) (0.16) (0.49) (0.50) (0.44)
------ ------ ------ ------ ------
Net asset value end of
year................... $10.21 $9.64 $9.86 $9.91 $8.72
====== ====== ====== ====== ======
TOTAL RETURN(B)......... 11.01% (0.57%) 4.66% 19.86% (8.55%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses............... 0.78% 0.76%(a) 0.76% 0.72% 0.43%(a)
Expenses excluding
indirectly paid
expenses.............. 0.78% 0.75%(a) 0.75% 0.69% --
Expenses excluding
waivers and/or
reimbursements........ 1.16% 1.31%(a) 1.22% 1.32% 1.54%(a)
Net investment income.. 4.83% 5.05%(a) 4.93% 5.26% 5.38%(a)
Portfolio turnover
rate................... 42% 12% 126% 74% 25%
NET ASSETS END OF YEAR
(THOUSANDS)............ $4,897 $2,627 $2,610 $4,848 $3,581
</TABLE>
EVERGREEN MISSOURI TAX FREE FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
FEBRUARY 1, 1994
FOUR MONTHS YEAR ENDED (COMMENCEMENT OF
YEAR ENDED ENDED NOVEMBER 30, CLASS OPERATIONS) TO
MARCH 31, MARCH 31, ---------------- NOVEMBER 30,
1998 1997* 1996 1995 1994
---------- ----------- ------- ------- --------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $9.52 $9.74 $9.80 $8.67 $10.00
------- ------- ------- ------- -------
Income from investment
operations
Net investment income.. 0.40 0.13 0.40 0.44 0.40
Net realized and
unrealized gain (loss)
on investments and
futures contracts..... 0.56 (0.21) (0.04) 1.15 (1.29)
------- ------- ------- ------- -------
Total from investment
operations............. 0.96 (0.08) 0.36 1.59 (0.89)
------- ------- ------- ------- -------
Less distributions from
Net investment income.. (0.39) (0.14) (0.40) (0.43) (0.40)
In excess of net
investment income..... 0 0(c) (0.02) (0.03) (0.04)
------- ------- ------- ------- -------
Total distributions..... (0.39) (0.14) (0.42) (0.46) (0.44)
------- ------- ------- ------- -------
Net asset value end of
year................... $10.09 $9.52 $9.74 $9.80 $8.67
======= ======= ======= ======= =======
TOTAL RETURN(B)......... 10.26% (0.83%) 3.83% 18.79% (9.06%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses............... 1.53% 1.51%(a) 1.52% 1.47% 1.16%(a)
Expenses excluding
indirectly paid
expenses.............. 1.52% 1.50%(a) 1.50% 1.44% --
Expenses excluding
waivers and/or
reimbursements........ 1.90% 2.06%(a) 2.00% 2.08% 2.49%(a)
Net investment income.. 4.12% 4.31%(a) 4.20% 4.56% 4.70%(a)
Portfolio turnover
rate................... 42% 12% 126% 74% 25%
NET ASSETS END OF YEAR
(THOUSANDS)............ $19,552 $20,127 $21,925 $21,231 $12,906
</TABLE>
- -------
(a) Annualized.
(b) Excluding applicable sales charges.
(c) Amount represents less than $0.01 per share.
* The Fund changed its fiscal year end from November 30 to March 31.
9
<PAGE>
(For a share outstanding throughout each year)
EVERGREEN MISSOURI TAX FREE FUND -- CLASS C SHARES
<TABLE>
<CAPTION>
FEBRUARY 1, 1994
FOUR MONTHS YEAR ENDED (COMMENCEMENT OF
YEAR ENDED ENDED NOVEMBER 30, CLASS OPERATIONS) TO
MARCH 31, MARCH 31, -------------- NOVEMBER 30,
1998 1997* 1996 1995 1994
---------- ----------- ------ ------ --------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $9.52 $9.73 $9.79 $8.66 $10.00
------ ------ ------ ------ ------
Income from investment
operations
Net investment income.. 0.38 0.13 0.39 0.43 0.39
Net realized and
unrealized gain (loss)
on investments and
futures contracts..... 0.57 (0.20) (0.03) 1.16 (1.29)
------ ------ ------ ------ ------
Total from investment
operations............. 0.95 (0.07) 0.36 1.59 (0.90)
------ ------ ------ ------ ------
Less distributions from
Net investment income.. (0.39) (0.14) (0.40) (0.43) (0.39)
In excess of net
investment income..... 0 0(c) (0.02) (0.03) (0.05)
------ ------ ------ ------ ------
Total distributions..... (0.39) (0.14) (0.42) (0.46) (0.44)
------ ------ ------ ------ ------
Net asset value end of
year................... $10.08 $9.52 $9.73 $9.79 $ 8.66
====== ====== ====== ====== ======
TOTAL RETURN(B)......... 10.15% (0.73%) 3.83% 18.78% (9.25%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses............... 1.52% 1.51%(a) 1.52% 1.46% 1.15%(a)
Expenses excluding
indirectly paid
expenses.............. 1.51% 1.50%(a) 1.50% 1.44% --
Expenses excluding
waivers and/or
reimbursements........ 1.90% 2.06%(a) 1.99% 2.07% 2.60%(a)
Net investment income.. 4.10% 4.30%(a) 4.18% 4.56% 4.72%(a)
Portfolio turnover
rate................... 42% 12% 126% 74% 25%
NET ASSETS END OF YEAR
(THOUSANDS)............ $990 $1,306 $1,387 $1,788 $1,045
</TABLE>
- -------
(a) Annualized.
(b) Excluding applicable sales charges.
(c) Amount represents less than $0.01 per share.
* The Fund changed its fiscal year end from November 30 to March 31.
EVERGREEN NEW YORK TAX FREE FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
FEBRUARY 4, 1994
(COMMENCEMENT OF
YEAR ENDED MARCH 31, CLASS OPERATIONS) TO
------------------------------ MARCH 31,
1998 1997 1996 1995 1994
------ ------ ------ ------ --------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING
OF YEAR.................. $9.64 $9.67 $9.44 $9.32 $10.00
------ ------ ------ ------ ------
Income from investment
operations
Net investment income.... 0.48 0.49 0.48 0.52 0.09
Net realized and
unrealized gain (loss)
on investments and
futures contracts....... 0.52 (0.03) 0.24 0.12 (0.68)
------ ------ ------ ------ ------
Total from investment
operations............... 1.00 0.46 0.72 0.64 (0.59)
------ ------ ------ ------ ------
Less distributions from
Net investment income.... (0.46) (0.48) (0.47) (0.52) (0.08)
In excess of net
investment income....... 0 (0.01) (0.02) 0 (0.01)
Net realized gain on
investments............. (0.06) 0 0 0 0
------ ------ ------ ------ ------
Total distributions....... (0.52) (0.49) (0.49) (0.52) (0.09)
------ ------ ------ ------ ------
Net asset value end of
year..................... $10.12 $9.64 $9.67 $9.44 $9.32
====== ====== ====== ====== ======
TOTAL RETURN(B)........... 10.56% 4.87% 7.73% 7.08% (5.91%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses................. 0.77% 0.76% 0.75% 0.50% 0.35%(a)
Expenses excluding
indirectly paid
expenses................ 0.77% 0.75% 0.74% -- --
Expenses excluding
waivers and/or
reimbursements.......... 1.01% 1.19% 1.31% 1.59% 4.44%(a)
Net investment income.... 4.78% 5.00% 4.95% 5.48% 3.85%(a)
Portfolio turnover rate... 41% 62% 53% 77% 14%
NET ASSETS END OF YEAR
(THOUSANDS).............. $3,559 $3,693 $3,947 $3,323 $680
</TABLE>
- -------
(a) Annualized.
(b) Excluding applicable sales charges.
10
<PAGE>
(For a share outstanding throughout each year)
EVERGREEN NEW YORK TAX FREE FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
FEBRUARY 4, 1994
(COMMENCEMENT OF
YEAR ENDED MARCH 31, CLASS OPERATIONS) TO
---------------------------------- MARCH 31,
1998 1997 1996 1995 1994
------- ------- ------- ------- --------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $9.55 $9.59 $9.38 $9.32 $10.00
------- ------- ------- ------- ------
Income from investment
operations
Net investment income.. 0.40 0.41 0.41 0.47 0.08
Net realized and
unrealized gain (loss)
on investments and
futures contracts..... 0.52 (0.03) 0.24 0.09 (0.67)
------- ------- ------- ------- ------
Total from investment
operations............. 0.92 0.38 0.65 0.56 (0.59)
------- ------- ------- ------- ------
Less distributions from
Net investment income.. (0.38) (0.41) (0.42) (0.45) (0.06)
In excess of net
investment income..... 0 (0.01) (0.02) (0.05) (0.03)
Net realized gain on
investments........... (0.06) 0 0 0 0
------- ------- ------- ------- ------
Total distributions..... (0.44) (0.42) (0.44) (0.50) (0.09)
------- ------- ------- ------- ------
Net asset value end of
year................... $10.03 $9.55 $9.59 $9.38 $9.32
======= ======= ======= ======= ======
TOTAL RETURN(B)......... 9.80% 4.03% 7.02% 6.28% (5.91%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses............... 1.52% 1.51% 1.50% 1.25% 1.10%(a)
Expenses excluding
indirectly paid
expenses.............. 1.52% 1.50% 1.49% -- --
Expenses excluding
waivers and/or
reimbursements........ 1.76% 1.94% 2.05% 2.35% 5.60%(a)
Net investment income.. 4.04% 4.25% 4.19% 4.78% 3.01%(a)
Portfolio turnover
rate................... 41% 62% 53% 77% 14%
NET ASSETS END OF YEAR
(THOUSANDS)............ $17,245 $19,064 $17,151 $11,907 $2,276
</TABLE>
EVERGREEN NEW YORK TAX FREE FUND -- CLASS C SHARES
<TABLE>
<CAPTION>
FEBRUARY 4, 1994
(COMMENCEMENT OF
YEAR ENDED MARCH 31, CLASS OPERATIONS) TO
------------------------------ MARCH 31,
1998 1997 1996 1995 1994
------ ------ ------ ------ --------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING
OF YEAR.................. $9.55 $9.58 $9.37 $9.31 $10.00
------ ------ ------ ------ ------
Income from investment
operations
Net investment income.... 0.39 0.40 0.41 0.48 0.07
Net realized and
unrealized gain (loss)
on investments and
futures contracts....... 0.52 (0.01) 0.24 0.07 (0.67)
------ ------ ------ ------ ------
Total from investment
operations............... 0.91 0.39 0.65 0.55 (0.60)
------ ------ ------ ------ ------
Less distributions from
Net investment income.... (0.38) (0.41) (0.42) (0.46) (0.07)
In excess of net
investment income....... 0 (0.01) (0.02) (0.03) (0.02)
Net realized gain on
investments............. (0.06) 0 0 0 0
------ ------ ------ ------ ------
Total distributions....... (0.44) (0.42) (0.44) (0.49) (0.09)
------ ------ ------ ------ ------
Net asset value end of
year..................... $10.02 $9.55 $9.58 $9.37 $9.31
====== ====== ====== ====== ======
TOTAL RETURN(B) 9.69% 4.14% 7.02% 6.18% (6.02%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses................. 1.52% 1.51% 1.50% 1.26% 1.10%(a)
Expenses excluding
indirectly paid
expenses................ 1.52% 1.50% 1.48% -- --
Expenses excluding
waivers and/or
reimbursements.......... 1.77% 1.93% 2.07% 2.32% 5.13%(a)
Net investment income.... 4.05% 4.25% 4.24% 4.88% 3.71%(a)
Portfolio turnover rate... 41% 62% 53% 77% 14%
NET ASSETS END OF YEAR
(THOUSANDS).............. $1,465 $1,871 $2,296 $2,890 $255
</TABLE>
- -------
(a) Annualized.
(b) Excluding applicable sales charges.
11
<PAGE>
(For a share outstanding throughout each year)
EVERGREEN PENNSYLVANIA TAX FREE FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
DECEMBER 27, 1990
(COMMENCEMENT OF
YEAR ENDED MARCH 31, CLASS OPERATIONS) TO
------------------------------------------------------------- MARCH 31,
1998 1997 1996 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- ------- ------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $11.14 $11.15 $10.91 $11.01 $11.42 $10.71 $10.25 $10.00
------- ------- ------- ------- ------- ------- ------- ------
Income from investment
operations
Net investment income.. 0.55 0.59 0.60 0.61 0.62 0.63 0.74 0.18
Net realized and
unrealized gain (loss)
on investments and
futures contracts..... 0.55 (0.01) 0.23 (0.09) (0.30) 0.75 0.46 0.25
------- ------- ------- ------- ------- ------- ------- ------
Total from investment
operations............. 1.10 0.58 0.83 0.52 0.32 1.38 1.20 0.43
------- ------- ------- ------- ------- ------- ------- ------
Less distributions from
Net investment income.. (0.54) (0.59) (0.57) (0.61) (0.62) (0.63) (0.74) (0.18)
In excess of net
investment income..... 0 0 (0.02) (0.01) (0.04) (0.02) 0 0
Net realized gain on
investments........... 0 0 0 0 (0.06) (0.02) 0 0
In excess of net
realized gain on
investments........... 0 0 0 0 (0.01) 0 0 0
------- ------- ------- ------- ------- ------- ------- ------
Total distributions..... (0.54) (0.59) (0.59) (0.62) (0.73) (0.67) (0.74) (0.18)
------- ------- ------- ------- ------- ------- ------- ------
Net asset value end of
year................... $11.70 $11.14 $11.15 $10.91 $11.01 $11.42 $10.71 $10.25
======= ======= ======= ======= ======= ======= ======= ======
TOTAL RETURN(B)......... 10.02% 5.30% 7.66% 4.91% 2.58% 13.30% 12.07% 4.37%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses............... 0.76% 0.76% 0.76% 0.75% 0.75% 0.68% 0.65% 0.65%(a)
Expenses excluding
indirectly paid
expenses.............. 0.76% 0.75% 0.75% -- -- -- -- --
Expenses excluding
waivers and/or
reimbursements........ 0.96% 0.99% 0.99% 1.05% 1.06% 1.16% 1.68% 3.19%(a)
Net investment income.. 4.79% 5.26% 5.29% 5.65% 5.27% 5.66% 6.92% 6.84%(a)
Portfolio turnover
rate................... 54% 84% 55% 97% 37% 20% 13% 8%
NET ASSETS END OF YEAR
(THOUSANDS)............ $24,119 $24,535 $28,710 $30,450 $30,560 $35,502 $12,914 $2,979
</TABLE>
EVERGREEN PENNSYLVANIA TAX FREE FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
FEBRUARY 1, 1993
(COMMENCEMENT OF
YEAR ENDED MARCH 31, CLASS OPERATIONS) TO
------------------------------------------- MARCH 31,
1998 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- --------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $10.99 $11.00 $10.81 $10.98 $11.42 $11.20
------- ------- ------- ------- ------- ------
Income from investment
operations
Net investment income.. 0.46 0.49 0.51 0.54 0.56 0.08
Net realized and
unrealized gain (loss)
on investments and
futures contracts..... 0.54 (0.01) 0.22 (0.10) (0.34) 0.24
------- ------- ------- ------- ------- ------
Total from investment
operations............. 1.00 0.48 0.73 0.44 0.22 0.32
------- ------- ------- ------- ------- ------
Less distributions from
Net investment income.. (0.44) (0.49) (0.52) (0.53) (0.52) (0.08)
In excess of net
investment income..... 0 0 (0.02) (0.08) (0.07) (0.02)
Net realized gain on
investments........... 0 0 0 0 (0.03) 0
In excess of net
realized gain on
investments........... 0 0 0 0 (0.04) 0
------- ------- ------- ------- ------- ------
Total distributions..... (0.44) (0.49) (0.54) (0.61) (0.66) (0.10)
------- ------- ------- ------- ------- ------
Net asset value end of
year................... $11.55 $10.99 $11.00 $10.81 $10.98 $11.42
======= ======= ======= ======= ======= ======
TOTAL RETURN(B)......... 9.27% 4.50% 6.84% 4.15% 1.70% 2.82%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses............... 1.52% 1.51% 1.48% 1.50% 1.50% 1.50%(a)
Expenses excluding
indirectly paid
expenses.............. 1.51% 1.50% 1.47% -- -- --
Expenses excluding
waivers and/or
reimbursements........ 1.71% 1.74% 1.74% 1.80% 1.81% 1.69%(a)
Net investment income.. 4.04% 4.50% 4.55% 4.89% 4.32% 3.44%(a)
Portfolio turnover
rate................... 54% 84% 55% 97% 37% 20%
NET ASSETS END OF YEAR
(THOUSANDS)............ $37,036 $37,215 $37,719 $30,657 $21,958 $2,543
</TABLE>
- -------
(a) Annualized.
(b) Excluding applicable sales charges.
12
<PAGE>
(For a share outstanding throughout each year)
EVERGREEN PENNSYLVANIA TAX FREE FUND -- CLASS C SHARES
<TABLE>
<CAPTION>
FEBRUARY 1, 1993
(COMMENCEMENT OF
YEAR ENDED MARCH 31, CLASS OPERATIONS) TO
-------------------------------------- MARCH 31,
1998 1997 1996 1995 1994 1993
------ ------ ------ ------ ------ --------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $11.02 $11.03 $10.83 $11.00 $11.42 $11.20
------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income.. 0.45 0.47 0.51 0.53 0.54 0.07
Net realized and
unrealized gain (loss)
on investments and
futures contracts..... 0.57 0.01 0.23 (0.10) (0.32) 0.24
------ ------ ------ ------ ------ ------
Total from investment
operations............. 1.02 0.48 0.74 0.43 0.22 0.31
------ ------ ------ ------ ------ ------
Less distributions from
Net investment income.. (0.45) (0.49) (0.52) (0.53) (0.52) (0.07)
In excess of net
investment income..... 0 0 (0.02) (0.07) (0.05) (0.02)
Net realized gain on
investments........... 0 0 0 0 (0.03) 0
In excess of net
realized gain on
investments........... 0 0 0 0 (0.04) 0
------ ------ ------ ------ ------ ------
Total distributions..... (0.45) (0.49) (0.54) (0.60) (0.64) (0.09)
------ ------ ------ ------ ------ ------
Net asset value end of
year................... $11.59 $11.02 $11.03 $10.83 $11.00 $11.42
====== ====== ====== ====== ====== ======
TOTAL RETURN(B)......... 9.34% 4.49% 6.92% 4.05% 1.78% 2.81%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses............... 1.52% 1.51% 1.48% 1.50% 1.50% 1.50%(a)
Expenses excluding
indirectly paid
expenses.............. 1.51% 1.50% 1.47% -- -- --
Expenses excluding
waivers and/or
reimbursements........ 1.71% 1.74% 1.74% 1.80% 1.90% 1.60%(a)
Net investment income.. 4.05% 4.52% 4.57% 4.90% 4.33% 2.50%(a)
Portfolio turnover
rate................... 54% 84% 55% 97% 37% 20%
NET ASSETS END OF YEAR
(THOUSANDS)............ $6,414 $6,830 $9,675 $9,559 $9,385 $952
</TABLE>
- -------
(a) Annualized.
(b) Excluding applicable sales charges.
EVERGREEN CONNECTICUT MUNICIPAL BOND FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
DECEMBER 30, 1997
(COMMENCEMENT OF
CLASS OPERATIONS)
THROUGH
MARCH 31, 1998
-----------------
<S> <C>
NET ASSET VALUE BEGINNING OF PERIOD........................... $6.40
-----
Income from investment operations
Net investment income........................................ 0.07
Net realized and unrealized loss on investments.............. (0.02)
-----
Total from investment operations.............................. 0.05
-----
Less distributions from
Net investment income........................................ (0.07)
-----
Net asset value end of period................................. $6.38
=====
TOTAL RETURN(B)............................................... 0.77%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets
Total expenses............................................... 0.86%(a)
Total expenses excluding indirectly paid expenses............ 0.85%(a)
Total expenses excluding waivers and/or reimbursement........ 1.13%(a)
Net investment income........................................ 4.38%(a)
Portfolio turnover rate....................................... 17%
NET ASSETS END OF PERIOD (THOUSANDS).......................... $146
</TABLE>
- -------
(a) Annualized.
(b) Excluding applicable sales charges.
13
<PAGE>
(For a share outstanding throughout the period)
EVERGREEN CONNECTICUT MUNICIPAL BOND FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
JANUARY 9, 1998
(COMMENCEMENT OF
CLASS OPERATIONS)
THROUGH
MARCH 31, 1998
-----------------
<S> <C>
NET ASSET VALUE BEGINNING OF PERIOD........................... $6.44
------
Income from investment operations
Net investment income........................................ 0.05
Net realized and unrealized loss on investments.............. (0.06)
------
Total from investment operations.............................. (0.01)
------
Less distributions from net investment income................. (0.05)
------
Net asset value end of period................................. $6.38
======
TOTAL RETURN(B)............................................... (0.21%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets
Total expenses............................................... 1.61%(a)
Total expenses excluding indirectly paid expenses............ 1.60%(a)
Total expenses excluding waivers and/or reimbursement........ 1.89%(a)
Net investment income........................................ 3.36%(a)
Portfolio turnover rate....................................... 17%
NET ASSETS END OF PERIOD (THOUSANDS).......................... $331
</TABLE>
- -------
(a) Annualized.
(b) Excluding applicable sales charges.
EVERGREEN NEW JERSEY TAX FREE INCOME FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
JULY 16, 1991
SEVEN MONTHS SIX MONTHS (COMMENCEMENT OF
YEAR ENDED ENDED ENDED YEAR ENDED YEAR ENDED FEBRUARY 28, CLASS OPERATIONS)
MARCH 31, MARCH 31, AUGUST 31, FEBRUARY 29, ------------------------- TO FEBRUARY 29,
1998 1997** 1996* 1996 1995 1994 1993 1992
---------- ------------ ---------- ------------ ------- ------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $10.74 $10.75 $11.01 $10.53 $10.99 $11.01 $10.22 $10.00
------- ------- ------- ------- ------- ------- ------- -------
Income from investment
operations
Net investment income.. 0.53 0.31 0.28 0.56 0.57 0.60 0.63 0.38
Net realized and
unrealized gain (loss)
on investments........ 0.46 (0.01) (0.26) 0.48 (0.46) (0.02) 0.79 0.22
------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations............. 0.99 0.30 0.02 1.04 0.11 0.58 1.42 0.60
------- ------- ------- ------- ------- ------- ------- -------
Less distributions from
Net investment income.. (0.53) (0.31) (0.28) (0.56) (0.57) (0.60) (0.63) (0.38)
Net realized gain on
investments........... (0.09) 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- -------
Total distributions.... (0.62) (0.31) (0.28) (0.56) (0.57) (0.60) (0.63) (0.38)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value end of
year................... $11.11 $10.74 $10.75 $11.01 $10.53 $10.99 $11.01 $10.22
------- ------- ------- ------- ------- ------- ------- -------
TOTAL RETURN(B)......... 9.34% 2.83% 0.19% 10.08% 1.41% 5.30% 14.39% 6.03%
======= ======= ======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses............... 0.50% 0.44%(a) 0.34%(a) 0.36% 0.25% 0.14% 0.00% 0.01%(a)
Expenses excluding
indirectly
paid expenses......... 0.50% 0.44%(a) -- -- -- -- -- --
Expenses excluding
waivers and/or
reimbursements........ 1.01% 1.13%(a) 1.11%(a) 1.03% 1.04% 1.05% 1.16% 1.20%(a)
Net investment income.. 4.77% 5.02%(a) 5.08%(a) 5.15% 5.52% 5.31% 5.97% 5.89%(a)
Portfolio turnover
rate................... 37% 15% 0% 4% 8% 2% 5% 5%
NET ASSETS END OF YEAR
(THOUSANDS)............ $31,614 $31,434 $32,377 $41,762 $34,852 $42,783 $30,863 $13,129
</TABLE>
- -------
(a) Annualized.
(b) Excluding applicable sales charges.
* The Fund changed its fiscal year end from February 28 to August 31.
** The Fund changed its fiscal year end from August 31 to March 31.
14
<PAGE>
(For a share outstanding throughout each year)
EVERGREEN NEW JERSEY TAX FREE INCOME FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
JANUARY 30, 1996
SEVEN MONTHS SIX MONTHS (COMMENCEMENT OF
YEAR ENDED ENDED ENDED CLASS OPERATIONS)
MARCH 31, MARCH 31, AUGUST 31, TO FEBRUARY 29,
1998 1997** 1996* 1996
---------- ------------ ---------- -----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING
OF YEAR................. $ 10.74 $10.75 $11.01 $11.08
------- ------ ------ ------
Income from investment
operations
Net investment income... 0.43 0.25 0.24 0.05
Net realized and
unrealized gain (loss)
on investments......... 0.46 0 (0.26) (0.07)
------- ------ ------ ------
Total from investment
operations.............. 0.89 0.25 (0.02) (0.02)
------- ------ ------ ------
Less distributions from
Net investment income... (0.43) (0.26) (0.24) (0.05)
Net realized gain on
investments............ (0.09) 0 0 0
------- ------ ------ ------
Total distributions...... (0.52) (0.26) (0.24) (0.05)
------- ------ ------ ------
Net asset value end of
year.................... $ 11.11 $10.74 $10.75 $11.01
======= ====== ====== ======
TOTAL RETURN (B)......... 8.35% 2.29% (0.20%) (0.22%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses................ 1.41% 1.36%(a) 1.28%(a) 0.31%(a)
Expenses excluding
indirectly paid
expenses............... 1.41% 1.36%(a) -- --
Expenses excluding
waivers and/or
reimbursements......... 1.76% 1.88%(a) 1.85%(a) 1.66%(a)
Net investment income... 3.85% 4.07%(a) 4.14%(a) 5.23%(a)
Portfolio turnover rate.. 37% 15% 0% 4%
NET ASSETS END OF YEAR
(THOUSANDS)............. $13,645 $7,847 $2,709 $ 186
</TABLE>
- -------
(a) Annualized.
(b) Excluding applicable sales charges.
* The Fund changed its fiscal year end from February 28 to August 31.
** The Fund changed its fiscal year end from August 31 to March 31.
15
<PAGE>
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Each Fund's investment objective(s) is nonfundamental; as a result a Fund
may change its objective(s) without a shareholder vote. Each Fund has also
adopted certain fundamental investment policies which are mainly designed to
limit a Fund's exposure to risk. Each Fund's fundamental policies cannot be
changed without a shareholder vote. See the SAI for more information regarding
the Funds' fundamental investment policies or other related investment
policies. There can be no assurance that a Fund's investment objective(s) will
be achieved.
In addition to the investment policies detailed below each Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions" below.
Each Fund, other than EVERGREEN CONNECTICUT MUNICIPAL BOND FUND, seeks
the highest possible current income exempt from federal income taxes
(including the alternative minimum tax), while preserving capital. These Funds
normally invest their assets in accordance with applicable standards issued by
the Securities and Exchange Commission ("SEC") concerning investments in tax
free securities. The Funds cannot change this policy without shareholder
approval. The SEC currently requires the Funds to invest at least 80% of their
assets in federally tax exempt municipal securities. Each Fund also invests at
least 65% of its assets in municipal obligations that are exempt from income
taxes in the state for which the Fund is named. The Funds are permitted to
make taxable investments, and may from time to time generate income subject to
federal regular income tax.
In addition, EVERGREEN CALIFORNIA TAX FREE FUND and EVERGREEN NEW YORK
TAX FREE FUND will invest at least 80% of their assets in municipal securities
that at all times are fully insured as to timely payment of all principal and
interest when due ("Insured Securities"). Insurance does not cover against
market risk and therefore does not guarantee the market value of the
securities in either Fund's portfolio. Similarly, because the net asset value
of each Fund's portfolio is based upon the market value of the securities in
its portfolio, such insurance does not cover or guarantee the net asset value
of the Fund's shares.
Insured Securities will be covered by at least one of three policies. New
issue insurance is obtained by municipal securities issuers, who pay all
premiums for such policies in advance. Since new issue insurance remains in
effect as long as the securities are outstanding, the insurance may protect
the resale value of the Insured Securities. Portfolio insurance remains
effective only while a Fund and the issuer are still in business and the Fund
still holds the securities described in the policy. The premium on a portfolio
insurance policy is a Fund expense. The EVERGREEN CALIFORNIA TAX FREE FUND and
the EVERGREEN NEW YORK TAX FREE FUND may also purchase secondary insurance
when it believes the potential market value or net proceeds of the sale of a
security by a Fund exceeds the current uninsured value of the security plus
the cost of such insurance. Premiums for secondary insurance are added to the
cost basis of the security and are not Fund expense items.
EVERGREEN CONNECTICUT MUNICIPAL BOND FUND seeks current income exempt
from federal income taxes other than the alternative minimum tax and
Connecticut personal income taxes. In addition, the Fund seeks to preserve
capital. The Fund normally invests at least 80% of its assets in securities
that are exempt from federal income taxes (other than the alternative minimum
tax) and at least 65% of its assets in Connecticut municipal obligations. The
EVERGREEN CONNECTICUT MUNICIPAL BOND FUND may change either of these policies
without shareholder approval.
Each Fund will invest at least 80% of its assets in bonds that, at the
date of investment, are rated within the four highest categories by Standard
and Poor's Ratings Group ("S&P") (AAA, AA, A or BBB), by Moody's Investors
Service ("Moody's") (Aaa, Aa, A or Baa), by Fitch IBCA, Inc. ("Fitch") (AAA,
AA, A or BBB) or, if not rated or rated under a different system, are of
comparable quality to obligations so rated as determined by another nationally
recognized statistical ratings organization (an "SRO") or by a Fund's
investment adviser. The Funds may invest the remaining 20% of their assets in
lower rated bonds, but they will not invest in bonds rated below B.
16
<PAGE>
INVESTMENT PRACTICES AND RESTRICTIONS
Risk Factors. Bond yields are dependent on several factors including market
conditions, the size of an offering, the maturity of the bond, ratings of the
bond and the ability of issuers to meet their obligations. There is no limit
on the maturity of the bonds purchased by a Fund. Because bond prices
fluctuate inversely in relation to the direction of interest rates, the prices
of longer term bonds fluctuate more widely in response to market interest rate
changes. A Fund's concentration in securities issued by a particular state and
its political subdivisions provides a greater level of risk than a fund which
is diversified across numerous states and municipal entities.
A Fund is not required to dispose of securities that have been downgraded
subsequent to their purchase. If the municipal obligations held by a Fund are
downgraded (because of adverse economic conditions in the state for which it
is named, for example), a Fund's concentration in the state's securities may
cause a Fund to be subject to the risks inherent in holding material amounts
of low-rated debt securities in its portfolio.
Municipal Securities. The Funds invest in municipal bonds, notes and
commercial paper issued by or for states, territories and possessions of the
United States ("U.S.") including the District of Columbia and their political
subdivisions, agencies and instrumentalities. Municipal bonds include fixed,
variable or floating rate general obligation and revenue bonds. General
obligation bonds are used to support the government's general financial needs
and are supported by the full faith and credit of the municipality. General
obligation bonds are repaid from the issuer's general unrestricted revenues.
Payment, however, may be dependent upon legislative approval and may be
subject to limitations on the issuer's taxing power. Revenue bonds are used to
finance public works and certain private facilities. In contrast to general
obligation bonds, revenue bonds are repaid only with the revenue generated by
the project financed.
Municipal notes include tax anticipation notes, bond anticipation notes
and revenue anticipation notes. Municipal commercial paper obligations are
unsecured promissory notes issued by municipalities to meet short-term credit
needs.
Since the Funds invest primarily in municipal securities, you should be
aware of the risks associated with investing in such securities. The values of
municipal bonds tend to go up when interest rates go down and vice versa. An
issuer's failure to make such payment due to political development or fiscal
mismanagement could affect its ability to make prompt payments of interest and
principal. Those events could also affect the market value of the security.
Moreover, the market for municipal bonds is often thin and can be temporarily
affected by large purchases and sales, including those by a Fund.
Non-Diversification. The Funds are nondiversified portfolios of an investment
company and, as such, there is no limit on the percentage of assets which can
be invested in any single issuer. An investment in a Fund, therefore, will
entail greater risk than would exist in an investment in a diversified
investment company because the higher percentage of investments among fewer
issuers may result in greater fluctuation in the total market value of the
Fund's portfolio. Each of the Funds intends to comply with Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code") which requires that at
the end of each quarter of each taxable year, with regard to at least 50% of
each Fund's total assets, no more than 5% of the total assets may be invested
in the securities of a single issuer and that with respect to the remainder of
each Fund's total assets, no more than 25% of its total assets are invested in
the securities of a single issuer.
Defensive Investments. The Funds may invest up to 20% or, for temporary
defensive purposes, up to 100% of their assets in high quality short-term
obligations, such as notes, commercial paper, certificates of deposit,
bankers' acceptances, bank deposits or U.S. government securities.
Below Investment Grade Bonds. Below investment grade bonds are commonly known
as "junk bonds" because they are usually backed by issuers of less proven or
questionable financial strength. Such issuers are more vulnerable to financial
setbacks and less certain to pay interest and principal than issuers of bonds
offering lower yields and risk. Markets may overreact to unfavorable news
about issuers of below investment grade bonds, causing sudden and steep
declines in value.
Repurchase Agreements. The Funds may invest in repurchase agreements.
Repurchase agreements are agreements by which a Fund purchases a security
(usually U.S. government securities) for cash and obtains a simultaneous
commitment from the seller (usually a bank or broker/dealer) to repurchase the
security at an agreed-upon price and specified future date. The repurchase
price reflects an agreed-upon interest rate for the time period of the
agreement. The Funds' risk is the inability of the seller to pay the agreed-
upon price on the delivery date. However, this risk is tempered by the ability
of the Funds to sell the security in the open market in
17
<PAGE>
the case of a default. In such a case, the Funds may incur costs in disposing
of the security which would increase Fund expenses. Each Fund's investment
adviser will monitor the creditworthiness of the firms with which the Fund
enters into repurchase agreements.
Reverse Repurchase Agreements. Each Fund may enter into reverse repurchase
agreements. A reverse repurchase agreement is an agreement by a Fund to sell a
security and repurchase it at a specified time and price. A Fund could lose
money if the market values of the securities it sold decline below their
repurchase prices. Reverse repurchase agreements may be considered a form of
borrowing, and, therefore, a form of leverage. Leverage may magnify gains or
losses of the Fund.
When-Issued, Delayed-Delivery and Forward Commitment Transactions. Each Fund
may enter into transactions whereby it commits to buying a security, but does
not pay for or take delivery of the security until some specified date in the
future. The values of these securities are subject to market fluctuations
during this period and no income accrues to a Fund until settlement. At the
time of settlement, a when-issued security may be valued at less than its
purchase price. When entering into these transactions, a Fund relies on the
other party to consummate the transaction; if the other party fails to do so,
the Fund may be disadvantaged. Each Fund does not intend to purchase when-
issued securities for speculative purposes, but only in furtherance of its
investment objective.
Securities Lending. To generate income and offset expenses, the Funds may lend
securities to broker-dealers and other financial institutions. Loans of
securities by a Fund may not exceed 33 1/3% of the value of the Fund's total
assets. While securities are on loan, the borrower will pay the Fund any
income accruing on the security. Also, the Fund may invest any collateral it
receives in additional securities. Gains or losses in the market value of a
lent security will affect a Fund and its shareholders. When a Fund lends its
securities, it runs the risk that it could not retrieve the securities on a
timely basis, possibly losing the opportunity to sell the securities at a
desirable price. Also, if the borrower files for bankruptcy or becomes
insolvent, a Fund's ability to dispose of the securities may be delayed.
Investing In Securities Of Other Investment Companies. Each Fund may invest in
the securities of other investment companies. As a shareholder of another
investment company, a Fund would pay its portion of the other investment
company's expenses. These expenses would be in addition to the expenses that a
Fund currently bears concerning its own operations and may result in some
duplication of fees.
Borrowing. Each Fund may borrow from banks in an amount up to 33 1/3% of its
total assets, taken at market value. Each Fund may also borrow an additional
5% of its total assets from banks and others. A Fund may only borrow as a
temporary measure for extraordinary or emergency purposes such as the
redemption of Fund shares. A Fund will not purchase securities while
borrowings are outstanding except to exercise prior commitments and to
exercise subscription rights.
Zero Coupon Debt Securities. A Fund may purchase zero coupon debt securities.
These securities do not make regular interest payments. Instead, they are sold
at a deep discount from their face value. In calculating their daily
dividends, each day a Fund takes into account as income a portion of the
difference between these securities' purchase price and their face value.
Because they do not pay current income, the prices of zero coupon debt
securities can be very volatile when interest rates change. Values of zero
coupon 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.
Securities with Put or Demand Rights. The Funds have the ability to enter into
put transactions, sometimes referred to as stand-by commitments, with respect
to municipal obligations held in their portfolios or to purchase securities
which carry a demand feature or put option which permit a Fund, as holder, to
tender them back to the issuer or a third party prior to maturity and receive
payment within seven days. Segregated accounts will be maintained by each Fund
for all such transactions.
The amount payable to a Fund by the seller upon its exercise of a put
will normally be (i) a Fund's acquisition cost of the securities (excluding
any accrued interest which a Fund paid on their acquisition), less any
amortized market premium plus any amortized market or original issue discount
during the period the Fund owned the securities, plus (ii) all interest
accrued on the securities since the last interest payment date during the
period the securities were owned by the Fund. Accordingly, the amount payable
by a broker-dealer or bank during the time a put is exercisable will be
substantially the same as the value of the underlying securities.
18
<PAGE>
A Fund's right to exercise a put is unconditional and unqualified. A put
is not transferable by a Fund, although a Fund may sell the underlying
securities to a third party at any time. Each Fund expects that puts will
generally be available without any additional direct or indirect cost.
However, if necessary and advisable, a Fund may pay for certain puts either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to such a put (thus reducing the yield to maturity
otherwise available to the same securities). Thus, the aggregate price paid
for securities with put rights may be higher than the price that would
otherwise be paid.
The Funds may enter into put transactions only with broker-dealers (in
accordance with the rules of the SEC) and banks which, in the opinion of each
Fund's investment adviser, present minimal credit risks. A Fund's investment
adviser will monitor periodically the creditworthiness of issuers of such
obligations held by a Fund. A Fund's ability to exercise a put will depend on
the ability of the broker-dealer or bank to pay for the underlying securities
at the time the put is exercised. In the event that a broker-dealer should
default on its obligation to purchase an underlying security, a Fund might be
unable to recover all or a portion of any loss sustained from having to sell
the security elsewhere. Each Fund intends to enter into put transactions
solely to maintain portfolio liquidity and does not intend to exercise its
rights thereunder for trading purposes.
Options and Futures. The Funds may engage in options and futures transactions.
Options and futures transactions are intended to enable a Fund to manage
market or interest rate risk. The Funds do not use these transactions for
speculation or leverage.
The Funds may attempt to hedge all or a portion of their portfolios
through the purchase of both put and call options on their portfolio
securities and listed put options on financial futures contracts for portfolio
securities. The Funds may also write covered call options on their portfolio
securities to attempt to increase their current income. The Funds will
maintain their positions in securities, option rights, and segregated cash
subject to puts and calls until the options are exercised, closed, or have
expired. An option position may be closed out only on an exchange which
provides a secondary market for an option of the same series.
The Funds may write (i.e., sell) covered call and put options. By writing
a call option, a Fund becomes obligated during the term of the option to
deliver the securities underlying the option upon payment of the exercise
price. By writing a put option, a Fund becomes obligated during the term of
the option to purchase the securities underlying the option at the exercise
price if the option is exercised. The Funds also may write straddles
(combinations of covered puts and calls on the same underlying security). The
Funds may only write "covered" options. This means that so long as a Fund is
obligated as the writer of a call option, it will own the underlying
securities subject to the option or, in the case of call options on U.S.
Treasury bills, a Fund might own substantially similar U.S. Treasury bills. A
Fund will be considered "covered" with respect to a put option it writes if,
so long as it is obligated as the writer of the put option, it deposits and
maintains with its custodian in a segregated account liquid assets having a
value equal to or greater than the exercise price of the option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised.
By writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Funds might become obligated to purchase the underlying securities for more
than their current market price upon exercise.
A futures contract is a firm commitment by two parties: the seller, who
agrees to make delivery of the specific type of instrument called for in the
contract ("going short"), and the buyer, who agrees to take delivery of the
instrument ("going long") at a certain time in the future. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities
of the U.S. government. If a Fund enters into financial futures contracts
directly to hedge its holdings of fixed income securities, it would enter into
contracts to deliver securities at an undetermined price (i.e., "go short") to
protect itself against the possibility that the prices of its fixed income
securities may decline during a Fund's anticipated holding period. A Fund
would "go long" (agree to purchase securities in the future at a predetermined
price) to hedge against a decline in market interest rates.
The Funds may also enter into financial futures contracts and write
options on such contracts. The Funds intend to enter into such contracts and
related options for hedging purposes. The Funds will enter into futures on
securities or index-based futures contracts in order to hedge against changes
in interest rates or securities prices. A futures contract on securities is an
agreement to buy or sell securities during a designated month at whatever
price exists at that time. A futures contract on a securities index does not
involve the actual delivery of securities,
19
<PAGE>
but merely requires the payment of a cash settlement based on changes in the
securities index. The Funds do not make payment or deliver securities upon
entering into a futures contract. Instead, they put down a margin deposit,
which is adjusted to reflect changes in the value of the contract and which
remains in effect until the contract is terminated.
The Funds may sell or purchase other financial futures contracts. When a
futures contract is sold by a Fund, the profit on the contract will tend to
rise when the value of the underlying securities declines and to fall when the
value of such securities increases. Thus, the Funds sell futures contracts in
order to offset a possible decline in the profit on their securities. If a
futures contract is purchased by a Fund, the value of the contract will tend
to rise when the value of the underlying securities increases and to fall when
the value of such securities declines.
The Funds may enter into closing purchase and sale transactions in order
to terminate a futures contract and may buy or sell put and call options for
the purpose of closing out their options positions. If a Fund is not able to
enter into an offsetting transaction, the Fund will continue to be required to
maintain the margin deposits on the contract and to complete the contract
according to its terms, in which case it would continue to bear market risk on
the transaction.
Risk Characteristics of Options and Futures. Although options and futures
transactions are intended to enable the Funds to manage market or interest
rate risks, these investment devices can be highly volatile, and the Funds'
use of them can result in poorer performance (i.e., the Funds' return may be
reduced). The Funds' attempt to use such investment devices for hedging
purposes may not be successful. Successful futures strategies require the
ability to predict future movements in securities prices, interest rates and
other economic factors. When the Funds use financial futures contracts and
options on financial futures contracts as hedging devices, there is a risk
that the prices of the securities subject to the financial futures contracts
and options on financial futures contracts may not correlate perfectly with
the prices of the securities in the Funds' portfolios. This may cause the
financial futures contracts and any related options to react to market changes
differently than the portfolio securities. In addition, a Fund's investment
adviser could be incorrect in its expectations and forecasts about the
direction or extent of market factors, such as interest rates, securities
price movements, and other economic factors. Even if a Fund's investment
adviser correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of a Fund's futures position did not
correspond to changes in the value of its investments. In these events, a Fund
may lose money on the financial futures contracts or the options on financial
futures contracts. It is not certain that a secondary market for positions in
financial futures contracts or for options on financial futures contracts will
exist at all times. Although a Fund's investment adviser will consider
liquidity before entering into financial futures contracts or options on
financial futures contracts transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular financial
futures contract or option on a financial futures contract at any particular
time. A Fund's ability to establish and close out financial futures contracts
and options on financial futures contract positions depends on this secondary
market. If a Fund is unable to close out its position due to disruptions in
the market or lack of liquidity, the Fund may lose money on the futures
contract or option, and the losses to the Fund could be significant.
Derivatives. Derivatives are financial contracts whose value is based on an
underlying asset, such as a stock or a bond, or an underlying economic factor,
such as an index or an interest rate.
The Funds may invest in derivatives only if the expected risks and
rewards are consistent with their investment objectives and policies.
Losses from derivatives can sometimes be substantial. This is true partly
because small price movements in the underlying asset can result in immediate
and substantial gains or losses in the value of the derivative. Derivatives
can also cause a Fund to lose money if the Fund fails to correctly predict the
direction in which the underlying asset or economic factor will move.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the SAI.
20
<PAGE>
- -------------------------------------------------------------------------------
ORGANIZATION AND SERVICE PROVIDERS
- -------------------------------------------------------------------------------
ORGANIZATION
Fund Structure. Each Fund is an investment pool, which invests shareholders'
money towards a specified goal. In technical terms, each Fund is a non-
diversified series of an open-end, management investment company called
Evergreen Municipal Trust (the "Trust"). The Trust is a Delaware business
trust organized on September 18, 1997.
Board of Trustees. The Trust is supervised by a Board of Trustees that is
responsible for representing the interests of shareholders. The Trustees meet
periodically throughout the year to oversee the Funds' activities, reviewing,
among other things, each Fund's performance and its contractual arrangements
with various service providers.
Shareholder Rights. All shareholders have equal voting, liquidation and other
rights. Each share is entitled to one vote for each dollar of net asset value
applicable to such share. Shareholders may exchange shares as described under
"Exchanges," but will have no other preference, conversion, exchange or
preemptive rights. When issued and paid for, shares will be fully paid and
nonassessable. Shares of the Funds are redeemable, transferable and freely
assignable as collateral. The Trust may establish additional classes or series
of shares.
The Funds do not hold annual shareholder meetings; a Fund may, however,
hold special meetings for such purposes as electing or removing Trustees,
changing fundamental policies and approving investment advisory agreements or
12b-1 plans. In addition, a Fund is prepared to assist shareholders in
communicating with one another for the purpose of convening a meeting to elect
Trustees.
SERVICE PROVIDERS
Investment Advisers. The investment adviser to EVERGREEN CALIFORNIA TAX FREE
FUND, EVERGREEN MASSACHUSETTS TAX FREE FUND, EVERGREEN MISSOURI TAX FREE FUND,
EVERGREEN NEW YORK TAX FREE FUND and EVERGREEN PENNSYLVANIA TAX FREE FUND is
Keystone Investment Management Company ("Keystone"), a subsidiary of First
Union National Bank ("FUNB") which is a subsidiary of First Union Corporation
("First Union"). Keystone has provided investment advisory and management
services to investment companies and private accounts since 1932. Keystone is
located at 200 Berkeley Street, Boston, Massachusetts 02116-5034. FUNB is
located at 201 South College Street, and First Union is located at 301 South
College Street, Charlotte, North Carolina 28288-0630. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the U.S.
EVERGREEN CALIFORNIA TAX FREE FUND, EVERGREEN MASSACHUSETTS TAX FREE
FUND, EVERGREEN MISSOURI TAX FREE FUND, EVERGREEN NEW YORK TAX FREE FUND and
EVERGREEN PENNSYLVANIA TAX FREE FUND pay Keystone an annual fee for its
services as set forth below:
<TABLE>
<CAPTION>
AGGREGATE NET
ASSET VALUE
OF SHARES OF THE
MANAGEMENT FEE FUND
-------------- ------------------
<S> <C>
0.55% of the first $ 50,000,000, plus
0.50% of the next $ 50,000,000, plus
0.45% of the next $100,000,000, plus
0.40% of the next $100,000,000, plus
0.35% of the next $100,000,000, plus
0.30% of the next $100,000,000, plus
0.25% of amounts over $500,000,000
</TABLE>
computed as of the close of business on each business day.
The investment adviser to EVERGREEN CONNECTICUT MUNICIPAL BOND FUND and
EVERGREEN NEW JERSEY TAX FREE INCOME FUND is the Capital Management Group
("CMG") of FUNB.
EVERGREEN CONNECTICUT MUNICIPAL BOND FUND pays FUNB an annual fee for its
services equal to 0.60% of average daily net assets. FUNB has voluntarily
agreed to reduce or waive a portion of its fee equal to 0.10%, resulting in a
net advisory fee of 0.50%. FUNB may change or stop this waiver at any time.
21
<PAGE>
EVERGREEN NEW JERSEY TAX FREE INCOME FUND pays FUNB an annual fee for its
services as set forth below:
<TABLE>
<CAPTION>
AGGREGATE NET ASSET
VALUE OF SHARES
MANAGEMENT FEE OF THE FUND
-------------- --------------------
<S> <C>
0.50 of 1% of the first $ 500,000,000, plus
0.45 of 1% of the next $ 500,000,000, plus
0.40 of 1% of amounts over $1,000,000,000, plus
0.35 of 1% of amounts over $1,500,000,000
</TABLE>
computed as of the close of business on each business day.
The total expenses as a percentage of average daily net assets on an
annual basis of the Funds for the fiscal year or period ended March 31, 1998,
are set forth in the sections entitled "Expense Information" and "Financial
Highlights." Such expenses reflect all voluntary advisory fee waivers and
expense reimbursements, which may be revised or terminated at any time.
Portfolio Managers. George J. Kimball is responsible for the day-to-day
management of EVERGREEN CALIFORNIA TAX FREE FUND, EVERGREEN MASSACHUSETTS TAX
FREE FUND, EVERGREEN MISSOURI TAX FREE FUND and EVERGREEN NEW YORK TAX FREE
FUND. Mr. Kimball has been employed by Keystone or one of its affiliates since
1991, and was an Analyst prior to becoming a Vice President and Portfolio
Manager. He has more than 10 years of investment experience.
Jocelyn Turner is the Portfolio Manager for the EVERGREEN PENNSYLVANIA
TAX FREE FUND, EVERGREEN CONNECTICUT MUNICIPAL BOND FUND AND EVERGREEN NEW
JERSEY TAX FREE INCOME FUND. Since joining First Union in 1992, Ms. Turner has
been a Vice President and Municipal Bond Portfolio Manager for CMG. Ms. Turner
was previously employed as a Vice President and Municipal Bond Portfolio
Manager at One Federal Asset Management, Boston, Massachusetts from 1987-1991.
Transfer Agent and Dividend Disbursing Agent. Evergreen Service Company
("ESC"), 200 Berkeley Street, Boston, Massachusetts 02116-5034, acts as the
Funds' transfer agent and dividend disbursing agent. ESC is an indirect,
wholly-owned subsidiary of First Union.
Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, acts as the Funds' custodian.
Principal Underwriter. Evergreen Distributor, Inc. ("EDI"), a subsidiary of
The BISYS Group, Inc., located at 125 West 55th Street, New York, New York
10019, is the principal underwriter of the Funds. EDI is not affiliated with
First Union.
Administrator. Evergreen Investment Services, Inc. ("EIS"), 200 Berkeley
Street, Boston, Massachusetts 02116-5034, serves as administrator to EVERGREEN
CONNECTICUT MUNICIPAL BOND FUND and EVERGREEN NEW JERSEY TAX FREE INCOME FUND.
As administrator, and subject to the supervision and control of the Trust's
Board of Trustees, EIS provides the Funds with facilities, equipment and
personnel. For its services as administrator, EIS is entitled to receive a fee
based on the aggregate average daily net assets of the Funds at a rate based
on the total assets of all mutual funds advised by First Union subsidiaries
and administered by EIS. The administration fee is calculated in accordance
with the following schedule.
<TABLE>
<CAPTION>
ADMINISTRATION FEE
------------------
<S> <C>
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion, and
0.010% on assets in excess of $30 billion
</TABLE>
EIS also provides facilities, equipment and personnel to all of the Funds
on behalf of the investment advisers and is reimbursed by the Funds for its
services.
DISTRIBUTION PLANS AND AGREEMENTS
Distribution Plans. Each Fund's Class A, Class B and, where applicable, Class
C shares pay for the expenses associated with the distribution of such shares
according to distribution plans adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act") (each a "Plan" or collectively
the "Plans"). Under the Plans, each Fund may incur distribution-related and
shareholder servicing-related expenses which are based
22
<PAGE>
upon a maximum annual rate as a percentage of each Fund's average daily net
assets attributable to a class, as follows:
<TABLE>
<S> <C>
Class A shares 0.75% (currently limited to 0.25%)
Class B shares 1.00%
Class C shares 1.00%
Of the amount that each class may pay under its respective Plan, up to
0.25% may constitute a service fee to be used to compensate organizations,
which may include a Fund's investment 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 service fees during any
fiscal period in excess of the amounts set forth above. Amounts paid under the
Plans are used to compensate the Funds' distributor pursuant to the
Distribution Agreements entered into by each Fund.
Distribution Agreements. Each Fund has also entered into distribution
agreements (each a "Distribution Agreement" or collectively the "Distribution
Agreements") with EDI. Pursuant to the Distribution Agreements, each Fund will
compensate EDI for its services as distributor based upon the maximum annual
rate as a percentage of each Fund's average daily net assets attributable to
the class, as follows:
Class A shares 0.25%
Class B shares 1.00%
Class C shares 1.00%
</TABLE>
The Distribution Agreements provide that EDI will use the distribution
fee received from each Fund for payments (1) to compensate broker-dealers or
other persons for distributing shares of a Fund, including interest and
principal payments made in respect of amounts paid to broker-dealers or other
persons that have been financed (EDI may assign its rights to receive
compensation under the Plans to secure such financings), (2) to otherwise
promote the sale of shares of a Fund, and (3) to compensate broker-dealers,
depository institutions and other financial intermediaries for providing
administrative, accounting and other services with respect to a Fund's
shareholders. FUNB or its affiliates may finance the payments made by EDI to
compensate broker-dealers or other persons for distributing shares of a Fund.
In the event a Fund acquires the assets of other mutual funds,
compensation paid to EDI under the Distribution Agreements may be paid by EDI
to the distributors of the acquired funds or their predecessors.
Since EDI's compensation under the Distribution Agreements is not
directly tied to the expenses incurred by EDI, the amount of compensation
received by EDI under the Distribution Agreements during any year may be more
or less than its actual expenses and may result in a profit to EDI.
Distribution expenses incurred by EDI in one fiscal year that exceed the level
of compensation paid to EDI for that year may be paid from distribution fees
received from a Fund in subsequent fiscal years.
- -------------------------------------------------------------------------------
PURCHASE AND REDEMPTION OF SHARES
- -------------------------------------------------------------------------------
HOW TO BUY SHARES
You may purchase shares of the Funds through broker-dealers, banks or
other financial intermediaries, or directly through EDI. In addition, you may
purchase shares of a Fund by mailing to that Fund, c/o ESC, P.O. Box 2121,
Boston, Massachusetts 02106-2121, a completed application and a check payable
to the applicable Fund. You may also telephone 1-800-343-2898 to obtain the
number of an account to which you can wire or electronically transfer funds
and then send in a completed application. Subsequent investments in any amount
may be made by check, by wiring federal funds, by direct deposit or by an
electronic funds transfer.
The minimum initial investment is $1,000, which may be waived in certain
situations. There is no minimum amount for subsequent investments. Investments
of $25 or more are allowed under the Systematic Investment Plan. See the
application for more information.
23
<PAGE>
Class A Shares--Front-End Sales Charge Alternative. You may purchase Class A
shares at net asset value plus an initial sales charge on purchases under
$1,000,000. You may purchase $1,000,000 or more of Class A shares without a
front-end sales charge; however, a contingent deferred sales charge ("CDSC")
equal to the lesser of 1% of the purchase price or the redemption value will
be imposed on shares redeemed during the month of purchase and the 12-month
period following the month of purchase. The schedule of charges for Class A
shares is as follows:
INITIAL SALES CHARGE
<TABLE>
<CAPTION>
AS A % OF THE NET AS A % OF THE COMMISSION TO DEALER/AGENT
AMOUNT OF PURCHASE AMOUNT INVESTED OFFERING PRICE AS A % OF OFFERING PRICE
------------------ ----------------- -------------- --------------------------
<S> <C> <C> <C>
Less than
$50,000 4.99% 4.75% 4.25%
$ 50,000--
$ 99,999 4.71% 4.50% 4.25%
$100,000--
$249,999 3.90% 3.75% 3.25%
$250,000--
$499,999 2.56% 2.50% 2.00%
$500,000--
$999,999 2.04% 2.00% 1.75%
</TABLE>
No front-end sales charges are imposed on Class A shares purchased by (a)
institutional investors, which may include bank trust departments and
registered investment advisers; (b) investment advisers, consultants or
financial planners who place trades for their own accounts or the accounts of
their clients and who charge such clients a management, consulting, advisory
or other fee; (c) clients of investment advisers or financial planners who
place trades for their own accounts if the accounts are linked to the master
account of such investment advisers or financial planners on the books of the
broker-dealer through whom shares are purchased; (d) institutional clients of
broker-dealers, including retirement and deferred compensation plans and the
trusts used to fund these plans, which place trades through an omnibus account
maintained with a Fund by the broker-dealer; (e) shareholders of record on
October 12, 1990 in any series of Evergreen Investment Trust in existence on
that date, and the members of their immediate families; (f) current and
retired employees of FUNB and its affiliates, EDI and any broker-dealer with
whom EDI has entered into an agreement to sell shares of the Funds, and
members of the immediate families of such employees; (g) upon the initial
purchase of an Evergreen fund by investors reinvesting the proceeds from a
redemption within the preceding 30 days of shares of other mutual funds,
provided such shares were initially purchased with a front-end sales charge or
subject to a CDSC, and (h) all qualified plan customers holding Evergreen
Class Y shares in connection with a rollover into an individual retirement
account. Certain broker-dealers or other financial institutions may impose a
fee on transactions in shares of the Funds.
Class A shares may also be purchased at net asset value by corporate or
certain other qualified retirement plans or a non-qualified deferred
compensation, plan or a Title I tax sheltered annuity or TSA plan sponsored by
an organization having 100 or more eligible employees, or a TSA plan sponsored
by a public education entity having 5,000 or more eligible employees.
In connection with sales made to plans of the type described in the
preceding sentence, EDI will pay broker-dealers and others concessions at the
rate of 0.50% of the net asset value of the shares purchased. These payments
are subject to reclaim in the event the shares are redeemed within 12 months
after purchase.
When Class A shares are sold, EDI 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. EDI may also pay fees
to banks from sales charges for services performed on behalf of the customers
of such banks in connection with the purchase of shares of a Fund. In addition
to compensation paid at the time of sale, entities whose clients have
purchased Class A shares may receive a service fee equal to 0.25% of the
average daily net asset value on an annual basis of Class A shares held by
their clients. Certain purchases of Class A shares may qualify for reduced
sales charges in accordance with a Fund's Concurrent Purchases, Rights of
Accumulation, Letters of Intent, certain Retirement Plans and Reinstatement
Privilege. Consult the application for additional information concerning these
reduced sales charges.
Class B Shares--Deferred Sales Charge Alternative. You may purchase Class B
shares at net asset value without an initial sales charge. However, you may
pay a CDSC if you redeem shares within six years after the month of purchase.
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 month of purchase of Class B shares as set forth below.
24
<PAGE>
<TABLE>
<CAPTION>
CDSC
REDEMPTION TIMING IMPOSED
- ----------------- -------
<S> <C>
Month of purchase and the first twelve-month period following the
month of purchase. 5.00%
Second twelve-month period following the month of purchase. 4.00%
Third twelve-month period following the month of purchase. 3.00%
Fourth twelve-month period following the month of purchase. 3.00%
Fifth twelve-month period following the month of purchase. 2.00%
Sixth twelve-month period following the month of purchase. 1.00%
</TABLE>
No CDSC is imposed on amounts redeemed thereafter.
The CDSC is deducted from the amount of the redemption and is paid to
EDI. In the event a Fund acquires the assets of other mutual funds, the CDSC
may be paid by EDI to the distributors of the acquired funds. Class B shares
are subject to higher distribution and/or shareholder service fees than Class
A shares for a period of seven years after the month of purchase (after which
it is expected that they will convert to Class A shares without imposition of
a front-end sales charge). 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. The Funds will not normally accept any
purchase of Class B shares in the amount of $250,000 or more.
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
the 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 service fee
paid by holders of Class B shares that have been outstanding long enough for
EDI to have been compensated for the expenses associated with the sale of such
shares.
The CDSC on Class B shares is waived on redemptions of shares of certain
employer-sponsored retirement or savings plans, including eligible 401(k)
plans.
Class C Shares -- Level-Load Alternative. (EVERGREEN CALIFORNIA TAX FREE FUND,
EVERGREEN MASSACHUSETTS TAX FREE FUND, EVERGREEN MISSOURI TAX FREE FUND,
EVERGREEN NEW YORK TAX FREE FUND and EVERGREEN PENNSYLVANIA TAX FREE FUND
only). Class C shares are only offered through broker-dealers who have special
distribution agreements with EDI. You may purchase Class C shares at net asset
value without any initial sales charge and, therefore, the full amount of your
investment will be used to purchase Fund shares. However, you will pay a 1.00%
CDSC if you redeem shares during the month of purchase and the 12-month period
following the month of purchase. No CDSC is imposed on amounts redeemed
thereafter. Class C shares incur higher distribution and/or shareholder
service fees than Class A shares but, unlike Class B shares, do not convert to
any other class of shares of the Fund. The higher fees mean a higher expense
ratio, so Class C shares pay correspondingly lower dividends and may have a
lower net asset value than Class A shares. A Fund will not normally accept any
purchase of Class C shares in the amount of $500,000 or more. No CDSC will be
imposed on Class C shares purchased by institutional investors and through
employee benefit and savings plans eligible for the exemption from front-end
sales charges described under "Class A Shares -- Front-End Sales Charge
Alternative" above. Broker-dealers and other financial intermediaries whose
clients have purchased Class C shares may receive a trailing commission equal
to 0.75% of the average daily net asset value of such shares on an annual
basis held by their clients more than one year from the date of purchase.
Service fees will commence immediately with respect to shares eligible for
exemption from the CDSC normally applicable to Class C shares.
Contingent Deferred Sales Charge. Certain shares with respect to which a Fund
did not pay a commission on issuance, including shares obtained from dividend
or distribution reinvestment, are not subject to a CDSC. Any CDSC imposed upon
the redemption of Class A, Class B or Class C shares is a percentage of the
lesser of: (1) the net asset value of the shares redeemed or (2) the net asset
value at the time of purchase of such shares.
No CDSC is imposed on a redemption of shares of a Fund in the event of:
(1) death or disability of the shareholder; (2) a lump-sum distribution from a
401(k) plan or other benefit plan qualified under the Employee Retirement
Income Security Act of 1974 ("ERISA"); (3) automatic withdrawals from ERISA
plans if the shareholder is at least 59 1/2 years old; (4) involuntary
redemptions of accounts having an aggregate net asset value of less than
$1,000; (5) automatic withdrawals under the Systematic Withdrawal Plan of up
to 1.00% per month of the shareholder's initial account balance; (6)
withdrawals consisting of loan proceeds to a retirement plan participant; (7)
financial hardship withdrawals made by a retirement plan participant; or (8)
withdrawals consisting of returns of excess contributions or excess deferral
amounts made to a retirement plan participant.
25
<PAGE>
The Funds may also sell Class A, Class B or, where applicable, Class C
shares at net asset value without any initial sales charge or a CDSC to
certain Directors, Trustees, officers and employees of the Funds, Keystone,
FUNB, Evergreen Asset Management Corp. ("Evergreen Asset"), EDI and certain of
their affiliates, and to members of the immediate families of such persons, to
registered representatives of firms with dealer agreements with EDI, and to a
bank or trust company acting as a trustee for a single account.
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 Exchange is closed on New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The securities in a Fund are valued at
their current market values determined on the basis of market quotations or,
if such quotations are not readily available, such other methods as the
Trustees believe would accurately reflect fair 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 and/or shareholder service fees, after
seven years. If you are unsure of the time period of your investment, you
might consider Class C shares since there are no initial sales charges and,
although there is no conversion feature, the CDSC only applies to redemptions
made during the first year after the month of purchase. Consult your financial
intermediary for further information. The compensation received by broker-
dealers and agents may differ depending on whether they sell Class A, Class B
or Class C shares. There is no size limit on purchases of Class A shares.
In addition to the discount or commission paid to broker-dealers, EDI may
from time to time pay to broker-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 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 broker-dealer
and their immediate family members to urban or resort locations within or
outside the U.S. Such a dealer may elect to receive cash incentives of
equivalent amount in lieu of such payments. EDI may also limit the
availability of such incentives to certain specified dealers. EDI from time to
time sponsors promotions involving First Union Brokerage Services, Inc., an
affiliate of each Fund's investment adviser, and select broker-dealers,
pursuant to which incentives are paid, including gift certificates and
payments in amounts up to 1% of the dollar amount of shares of a Fund sold.
Awards may also be made based on the opening of a minimum number of accounts.
Such promotions are not being made available to all broker-dealers. Certain
broker-dealers may also receive payments from EDI or a Fund's investment
adviser over and above the usual trail commissions or shareholder servicing
payments applicable to a given class of shares.
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 its investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from an investor's account to reimburse the Fund or its investment
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
will not accept third party checks other than those payable directly to a
shareholder whose account has been in existence at least 30 days.
HOW TO REDEEM SHARES
You may redeem (i.e., sell) your shares in a Fund to the Fund for cash at
the net redemption value on any day the Exchange is open, either directly by
writing to the Fund, c/o ESC, or through your financial intermediary. The
amount you will receive is the net asset value adjusted for fractions of a
cent (less any applicable CDSC) 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, the 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
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CDSC). Your financial intermediary is responsible for furnishing all necessary
documentation to the Fund and may charge you for this service. Certain
financial intermediaries may require that you give instructions earlier than
4:00 p.m. (eastern time).
Redeeming Shares Directly by Mail or Telephone. You may redeem by mail by
sending a signed letter of instruction or stock power form to a Fund, c/o ESC
(the registrar, transfer agent and dividend-disbursing agent for the Funds.)
Stock power forms are available from your financial intermediary, ESC, 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 $50,000. Currently, the requirement for a
signature guarantee has been waived on redemptions of $50,000 or less when the
account address of record has been the same for a minimum period of 30 days.
The Funds and ESC reserve the right to withdraw this waiver at any time. 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 under the Securities Exchange Act
of 1934 and ESC's policies.
Shareholders may redeem amounts of $1,000 or more (up to $50,000) from
their accounts by calling the telephone number on the front page of this
prospectus between the hours of 8:00 a.m. and 6:00 p.m. (eastern time) each
business day (i.e., any weekday exclusive of days on which the Exchange or
ESC's offices are closed). Redemption requests received 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. If you cannot reach a Fund by
telephone, you should follow the procedures for redeeming by mail or through a
broker-dealer as set forth herein. The telephone redemption service is not
made available to shareholders automatically. Shareholders wishing to use the
telephone redemption service must complete the appropriate sections on the
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 the Fund at a designated
commercial bank.
In order to insure that instructions received by ESC are genuine when you
initiate a telephone transaction, you will be asked to verify certain criteria
specific to your account. At the conclusion of the transaction, you will be
given a transaction number confirming your request, and written confirmation
of your transaction will be mailed the next business day. Your telephone
instructions will be recorded. Redemptions by telephone are allowed only if
the address and bank account of record have been the same for a minimum period
of 30 days. A Fund reserves the right at any time to terminate, suspend, or
change the terms of any redemption method described in this prospectus, except
redemption by mail, and to impose fees.
Except as otherwise noted, the Funds, ESC, and EDI will not assume
responsibility for the authenticity of any instructions received by any of
them from a shareholder in writing, over the Evergreen Express Line (described
below), or by telephone. ESC will employ reasonable procedures to confirm that
instructions received over the Evergreen Express Line or by telephone are
genuine. The Funds, ESC, and EDI will not be liable when following
instructions received over the Evergreen Express Line or by telephone that ESC
reasonably believes are genuine.
Evergreen Express Line. The Evergreen Express Line offers you specific fund
account information and price and yield quotations as well as the ability to
do account transactions, including investments, exchanges and redemptions. You
may access the Evergreen Express Line by dialing toll free 1-800-346-3858 on
any touch-tone telephone, 24 hours a day, seven days a week.
General. The sale of shares is a taxable transaction for federal income tax
purposes. The Funds may temporarily suspend the right to redeem shares when
(1) the Exchange is closed, other than customary weekend and holiday closings;
(2) trading on the Exchange is restricted; (3) an emergency exists and the
Funds cannot dispose of their investments or fairly determine their value; or
(4) the SEC so orders. The Funds reserve the right to close an account that
through redemption has fallen below $1,000 and has remained so for 30 days.
Shareholders will receive 60 days' written notice to increase the account
value to at least $1,000 before the account is closed. The Funds have elected
to be governed by Rule 18f-1 under the 1940 Act 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 90-day period for any one
shareholder.
EXCHANGE PRIVILEGE
How to Exchange Shares. You may exchange some or all of your shares for shares
of the same class in other Evergreen funds through your financial
intermediary, by calling or writing to ESC, or by using the Evergreen Express
Line as described above. If the shares being tendered for exchange are still
subject to a CDSC or are
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eligible for conversion in a specified time, such remaining charge or
remaining time will carry over to the shares being acquired in the exchange
transaction. 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. An exchange which represents an initial
investment in another Evergreen fund is subject to the minimum investment and
suitability requirements of the Fund.
Each of the Evergreen funds has different investment objectives and
policies. For more complete information, a prospectus of the fund into which
an exchange will be made should be read prior to the exchange. An exchange
order must comply with the requirement for a redemption or repurchase order
and must specify the dollar value or number of shares to be exchanged. 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 a Fund upon 60 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 shares are exchanged for shares of
the same class of other Evergreen funds. If you redeem shares, the CDSC
applicable to the Class B shares of the Evergreen fund originally purchased
for cash is applied. Also, Class B shares will continue to age following an
exchange for the purpose of conversion to Class A shares and for the purpose
of 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. Exchange requests received by a Fund after
4:00 p.m. (eastern time) will be processed using the net asset value
determined at the close of 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 ESC by telephone. If you wish
to use the telephone exchange service you should indicate this on the
application. As noted above, the Funds 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 ESC if it is believed advisable to do so. Procedures for exchanging
Fund shares 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, ESC
or call the toll-free number on the front page of this prospectus. Some
services are described in more detail in the application.
Systematic Investment Plan. Under a Systematic Investment Plan, you may invest
as little as $25 per month to purchase shares of a Fund with no minimum
initial investment required.
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 4:00 p.m. (eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic 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
Systematic Withdrawal Plan (the "Withdrawal Plan") by filling out the
appropriate part of the application. Under this Withdrawal Plan, you may
receive (or designate a third party to receive) a monthly or quarterly fixed-
withdrawal payment in a stated amount of at least $75 and as much as 1.0% per
month or 3.0% per quarter of the total net asset value of the Fund shares in
your account when the Withdrawal Plan was opened. Fund shares will be redeemed
as necessary to meet withdrawal payments. All participants must elect to have
their dividends and capital gains distributions reinvested automatically.
Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified employee benefit and savings plans may make shares of the Funds
and other Evergreen funds available to their participants. Investments made by
such employee benefit plans may be exempt from front-end sales charges if
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they meet the criteria set forth under "Class A Shares--Front-End Sales Charge
Alternative." Keystone or FUNB may provide compensation to organizations
providing administrative and recordkeeping services to plans which make shares
of the Evergreen funds available to their participants.
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 at the close of business on the
record date, 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.
Dollar Cost Averaging. Through dollar cost averaging you can invest a fixed
dollar amount each month or each quarter in any Evergreen fund. This results
in more shares being purchased when the selected fund's net asset value is
relatively low and fewer shares being purchased when the fund's net asset
value is relatively high and may result in a lower average cost per share than
a less systematic investment approach.
Prior to participating in dollar cost averaging, you must establish an
account in an Evergreen fund. You should designate on the application (1) the
dollar amount of each monthly or quarterly investment you wish to make and (2)
the fund in which the investment is to be made. Thereafter, on the first day
of the designated month, an amount equal to the specified monthly or quarterly
investment will automatically be redeemed from your initial account and
invested in shares of the designated fund.
Two Dimensional Investing. You may elect to have income and capital gains
distributions from any class of Evergreen fund shares you may own
automatically invested to purchase the same class of shares of any other
Evergreen fund. You may select this service on your application and indicate
the Evergreen fund(s) into which distributions are to be invested.
Tax Sheltered Retirement Plans. The Funds have various retirement plans
available to eligible investors, including Individual Retirement Accounts
(IRAs); Rollover IRAs; Simplified Employee Pension Plans (SEPs); Salary
Incentive Match Plan for Employees (SIMPLEs); Tax Sheltered Annuity Plans;
403(b)(7) Plans; 401(k) Plans; Keogh Plans; Profit-Sharing Plans; Medical
Savings Accounts; Pension and Target Benefit and Money Purchase Plans. For
details, including fees and application forms, call toll free 1-800-247-4075
or write to ESC.
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 its customer. FUNB
and its affiliates are 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 its affiliates 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 the Funds by their customers. If FUNB and its affiliates
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 the Funds' shareholders to approve, a new investment
adviser. If this were to occur, it is not anticipated that the shareholders of
the Funds would suffer any adverse financial consequences.
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OTHER INFORMATION
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DIVIDENDS, DISTRIBUTIONS AND TAXES
Income dividends will be declared daily and paid monthly. Distributions
of any net realized gains of the Funds 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. The
Funds have qualified as regulated investment companies under the Code. While
so qualified, so long as a Fund distributes all of its investment company
taxable income and any net realized gains to shareholders, it is expected that
the Fund 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.
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Because Class A shares bear most of the costs of distribution of such
shares through payment of a front-end sales charge, while Class B and Class C
shares bear such expenses through a higher annual distribution fee, expenses
attributable to Class B shares and Class C shares will generally be higher
than those of Class A shares, and income distributions paid by a Fund with
respect to Class B and Class C shares, will be lower than those paid with
respect to Class A shares.
Account statements and/or checks, as appropriate, will be mailed within
seven days after a Fund pays a distribution. Unless a Fund receives
instructions to the contrary before the record or payable date, as the case
may be, it will assume that a shareholder wishes to receive that distribution
and future capital gains and income distributions in shares. Instructions
continue in effect until changed in writing.
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 dividend income and capital gain
dividends are taxable as net long-term capital gains, even though received in
additional shares of the Fund, and regardless of the investor's 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, net long-term
capital gains realized by an individual on assets held for more than 12 months
will generally be taxed at a maximum rate of 20%. 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 application, or on
a separate form supplied by the Funds' transfer agent, that the investor's
social security number or taxpayer identification number is correct and that
the investor is not currently subject to backup withholding or is exempt from
backup withholding.
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.
Set forth below are brief descriptions of the personal income tax status
of an investment in each of the Funds under California, Massachusetts,
Missouri, New York, Pennsylvania, Connecticut and New Jersey tax laws
currently in effect. Income from a Fund is not necessarily free from state
income taxes in states other than its designated state. State laws differ on
this issue, and shareholders are urged to consult their own tax advisers
regarding the status of their accounts under state and local laws.
EVERGREEN CALIFORNIA TAX FREE FUND. Dividends paid by the Fund that are
derived from interest on debt obligations that is exempt from California
personal income tax will not be subject to California personal income tax when
received by the Fund's shareholders assuming that the Fund qualifies as a
regulated investment Company ("RIC") for federal income tax purposes. The pass
through of exempt-interest dividends is allowed only if the Fund meets its
federal and California requirements that at least 50% of its total assets are
invested in such exempt obligations at the end of each quarter of its fiscal
year. Distributions to individual shareholders derived from interest on state
or municipal obligations issued by governmental authorities in states other
than California, short term capital gains and other taxable income will be
taxed as dividends for purposes of California personal income taxation. The
Fund's long term capital gains distributed to shareholders will be taxed as
long term capital gains to individual shareholders of the Fund for purposes of
California personal income taxation. Present California law taxes both long
term and short term capital gains at the rates applicable to ordinary income.
Generally, for corporate taxpayers subject to the California franchise tax,
all distributions will be fully taxable.
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EVERGREEN MASSACHUSETTS TAX FREE FUND. Under Massachusetts Law,
shareholders of the Fund who are subject to Massachusetts personal income tax
will not be subject to Massachusetts personal income tax on dividends paid by
the Fund to the extent such dividends are exempt from federal income tax and
are derived from interest payments on Massachusetts municipal securities. Long
term capital gains distributions are taxable as long term capital gains,
except that such distributions derived from the sale of certain Massachusetts
obligations are exempt from Massachusetts personal income tax. These
obligations, which are few in number, are those issued pursuant to legislation
that specifically exempts gain on their sale from Massachusetts income
taxation. Dividends and other distributions are not exempt from Massachusetts
corporate excise tax.
EVERGREEN MISSOURI TAX FREE FUND. Dividends paid by the Fund that qualify
as tax exempt dividends under Section 852(b)(5) of the Code will be exempt
from Missouri income tax to the extent that such dividends are derived from
interest on obligations issued by the State of Missouri or any of its
political subdivisions. Dividends paid by the Fund that are derived from
interest on obligations of the U.S. and its territories and possessions will
be exempt from Missouri income tax.
Dividends paid by the Fund, if any, that do not qualify as tax exempt
dividends under Section 852(b)(5) of the Code, will be exempt from Missouri
income tax only to the extent that such dividends are derived from interest on
certain U.S. obligations that the State of Missouri is expressly prohibited
from taxing under the laws of the U.S. The portion of such dividends that is
not subject to taxation by the State of Missouri may be reduced by interest,
or other expenses, in excess of $500 paid or incurred by a shareholder in any
taxable year to purchase or carry shares of the Fund or other investments
producing income that is includable in federal gross income, but exempt from
Missouri income tax.
Dividends and distributions derived from the Fund's other investment
income and its capital gains, to the extent includable in federal adjusted
gross income, will be subject to Missouri income tax. Dividends and
distributions paid by the Fund, including dividends that are exempt from
Missouri income tax as described above, may be subject to state taxes in
states other than Missouri or to local taxes. Shares in the Fund are not
subject to Missouri personal property taxes.
EVERGREEN NEW YORK TAX FREE FUND. Individual shareholders of the Fund who
are subject to New York State and New York City personal income tax will not
be subject to New York State and New York City personal income tax on
dividends paid by the Fund to the extent that they are derived from interest
on obligations of the State of New York and its political subdivisions that is
exempt from federal income tax, provided that the Fund continues to qualify as
a RIC under the Code and at the end of each quarter at least 50% of the value
of its total assets consists of obligations that are exempt from federal
income tax. In addition, dividends derived from interest on debt obligations
issued by certain other governmental entities (for example, U.S. territories)
will be similarly exempt.
For New York State and New York City personal income tax purposes, long-
term capital gain distributions are taxable as long-term capital gains
regardless of the length of time shareholders have owned their shares in the
Fund. Short-term capital gains and any other taxable distributions of income
are taxable as ordinary income. Shareholders of the Fund may not deduct
interest on indebtedness they incur or continue in order to purchase or carry
shares of the Fund for New York State or New York City personal income tax
purposes.
To the extent that investors are obligated to pay state or local taxes
outside the State of New York, dividends earned by an investment in the Fund
may represent taxable income. Distributions from investment income and capital
gains, including exempt-interest dividends, may be subject to New York State
corporate franchise taxes and to the New York City general corporation tax, if
received by a corporation subject to those taxes, to state taxes in states
other than New York and to local taxes in cities other than New York City. The
interest income that is distributed by the Fund will generally not be taxable
to the Fund for purposes of the New York State corporate franchise tax or the
New York City general corporation tax.
Evergreen Pennsylvania Tax Free Fund. Individual shareholders of the Fund
who are subject to the Pennsylvania personal income tax, as either residents
or non-residents of the Commonwealth of Pennsylvania, will not be subject to
Pennsylvania personal income tax on distributions of interest made by the Fund
that are attributable to (1) obligations issued by the Commonwealth of
Pennsylvania, any public authority, commission, board or agency created by the
Commonwealth of Pennsylvania, any political subdivision of the Commonwealth of
Pennsylvania or any public authority created by any such political subdivision
(collectively, "Pennsylvania
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Obligations"); and (2) obligations of the U.S. and certain qualifying
agencies, instrumentalities, territories and possessions of the U.S., the
interest from which are statutorily free from state taxation in the
Commonwealth of Pennsylvania under the laws of the Commonwealth or the U.S.
(collectively, "U.S. Obligations"). Distributions attributable to most other
sources will not be exempt from Pennsylvania personal income tax.
Distributions of gains attributable to Pennsylvania Obligations and U.S.
Obligations (collectively "Exempt Obligations") will be subject to the
Pennsylvania personal income tax.
Shares of the Fund that are held by individual shareholders who are
Pennsylvania residents subject to the Pennsylvania county personal property
tax will be exempt from such tax to the extent that the Fund's portfolio
consists of Exempt Obligations on the annual assessment date. Nonresidents of
the Commonwealth of Pennsylvania are not subject to the Pennsylvania county
personal property tax. Corporations are not subject to Pennsylvania personal
property taxes. For shareholders who are residents of the City of
Philadelphia, distributions of interest derived from Exempt Obligations are
not taxable for purposes of the Philadelphia School District investment income
tax provided that the Fund reports to its investors the percentage of Exempt
Obligations held by it for the year. The Fund will report such percentage to
its shareholders.
Distributions of interest, but not gains, realized on Exempt Obligations
are not subject to the Pennsylvania corporate net income tax. The Pennsylvania
Department of Revenue also takes the position that shares of funds similar to
the Fund are not considered exempt assets of a corporation for the purpose of
determining its capital stock value subject to the Commonwealth's capital
stock and franchise taxes.
EVERGREEN CONNECTICUT TAX FREE FUND. Exempt-interest dividends paid by
the Fund, to the extent such dividends are exempt from federal income tax and
are derived from interest payments on municipal securities of the State of
Connecticut and its political subdivisions, instrumentalities, state or local
authorities, districts or similar public entities created under Connecticut
law, are not subject to the Connecticut income tax on individuals, trusts and
estates. Long-term capital gain dividends are also not subject to the
Connecticut income tax to the extent derived from securities issued by such
entities. Ordinary income dividends are subject to the Connecticut income tax.
Distributions from the Fund to shareholders subject to the Connecticut
corporation business tax are included in gross income for purposes of the
corporation business tax, but a dividends received deduction may be available
for a portion thereof except to the extent such distributions constitute
exempt-interest dividends or capital gain dividends for federal income tax
purposes.
EVERGREEN NEW JERSEY TAX FREE INCOME FUND. For individual shareholders in
any year in which the Fund satisfies the requirements for treatment as a
"qualified investment fund" under New Jersey law, distributions from the Fund
will be exempt from the New Jersey Gross Income Tax to the extent such
distributions are attributable to interest or gains from (i) obligations
issued by or on behalf of the State of New Jersey or any county, municipality,
school or other district, agency, authority, commission, instrumentality,
public corporation, corporate body or political subdivision of New Jersey or
(ii) obligations that are otherwise statutorily exempt from state or local
taxation or under the laws of the United States. To be classified as a
qualified investment fund, at least 80% of the Fund's investments must consist
of such obligations. Distributions by a qualified investment fund that are
attributable to most other sources will be subject to the New Jersey gross
income tax. If the New Jersey Fund continues to qualify as a qualified
investment fund, any gain realized on the redemption or sale of its shares
will not be subject to the New Jersey gross income tax. Corporate shareholders
will be subject to a corporate franchise tax on distributions from and on
gains from sales of the shares in the Fund. The Fund shares are not subject to
property taxation by New Jersey or its political subdivisions.
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, 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.
The foregoing discussion of federal and certain state income tax
consequences is based on tax laws and regulations in effect on the date of
this prospectus and is subject to change by legislative or administrative
action. As the foregoing discussion is for general information only, you
should also review the discussion of "Additional Tax Information" contained in
the SAI.
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GENERAL INFORMATION
Portfolio Turnover. The portfolio turnover rates for each Fund are set forth
under "Financial Highlights."
Portfolio Transactions. Consistent with the Conduct Rules 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 broker-dealers to enter into portfolio transactions with the
Fund.
Other Classes of Shares. The Funds currently offer four classes of shares,
Class A and Class B, Class C and Class Y, where applicable, and may in the
future offer additional classes. Class Y shares are not offered by this
prospectus and are only available to (i) persons who at or prior to December
31, 1994, owned shares in a mutual fund advised by Evergreen Asset Management
Corporation, (ii) certain institutional investors, and (iii) investment
advisory clients of FUNB or their affiliates. The dividends payable with
respect to Class A, Class B and Class C shares will be less than those payable
with respect to Class Y shares due to the distribution and shareholder
servicing related expenses borne by Class A, Class B and Class C shares and
the fact that such expenses are not borne by Class Y shares. Investors should
telephone (800) 343-2898 to obtain more information on other classes of
shares.
Performance Information. From time to time, a Fund may quote its "total
return" or "yield" for specified periods in advertisements, reports, or other
communications to shareholders. Total return and yield are computed separately
for each class of shares. Performance data for one or more classes may be
included in any advertisement or sales literature using performance data of a
Fund. A Fund's total return for each such period is computed by finding,
through the use of a formula prescribed by the SEC, the average annual
compounded rate of return over the period that would equate an assumed initial
amount invested to the value of the investment at the end of the period. For
purposes of computing total return, dividends and capital gains distributions
paid on shares of a Fund are assumed to have been reinvested when paid and the
maximum sales charges applicable to purchases of the Fund's shares are assumed
to have been paid.
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
the 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 the Fund's share price at the end of the
30-day period. This yield does not reflect gains or losses from selling
securities.
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 of 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, the Fund may separate its cumulative and average annual
total returns into income results and realized and unrealized gain or loss.
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.
Performance data may be included in any advertisement or sales literature
of a Fund. These advertisements may quote performance rankings or ratings of a
Fund by financial publications or independent organizations such as Lipper
Analytical Services, Inc. and Morningstar, Inc. or may compare a Fund's
performance to various indices. A 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 12-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 indicative of
future results.
33
<PAGE>
In marketing the Funds' shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering
investment alternatives. The information provided to investors may also
include discussions of other Evergreen funds, products, and services, which
may include: retirement investing; brokerage products and services; the
effects of periodic investment plans and dollar cost averaging; saving for
college; and charitable giving. In addition, the information provided to
investors may quote financial or business publications and periodicals,
including model portfolios or allocations, as they relate to fund management,
investment philosophy, and investment techniques. EDI may also reprint, and
use as advertising and sales literature, articles from Evergreen Events, a
quarterly magazine provided to Evergreen fund shareholders.
Year 2000 Risks. Like other investment companies, financial and business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the Funds' investment advisers and
the Funds' other service providers do not properly process and calculate date-
related information and data from and after January 1, 2000. This is commonly
known as the "Year 2000 Problem." The Funds' investment advisers are taking
steps to address the Year 2000 Problem with respect to the computer systems
that they use and to obtain assurances that comparable steps are being taken
by the Funds' other major service providers. At this time, however, there can
be no assurance that these steps will be sufficient to avoid any adverse
impact on the Funds.
Additional Information. This prospectus and the SAI, which has been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statement filed by the Trust with the SEC under the
Securities Act of 1933, as amended. Copies of the Registration Statement may
be obtained at a reasonable charge from the SEC or may be examined, without
charge, at the offices of the SEC in Washington, D.C.
34
<PAGE>
INVESTMENT ADVISER
First Union National Bank, 201 South College Street, Charlotte, North Carolina
28288
Keystone Investment Management Company, 200 Berkeley Street, Boston,
Massachusetts 02116-5034
CUSTODIAN
State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827
TRANSFER AGENT
Evergreen Service Company, P.O. Box 2121, Boston, Massachusetts, 02116-5034
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110
DISTRIBUTOR
Evergreen Distributor, Inc., 125 West 55th Street, New York, New York 10019
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS August 1, 1998
- -------------------------------------------------------------------------------
EVERGREENSM STATE MUNICIPAL BOND FUNDS [LOGO OF EVERGREEN
FUNDS(SM) APPEARS HERE]
- -------------------------------------------------------------------------------
EVERGREEN NEW YORK TAX FREE FUND
EVERGREEN PENNSYLVANIA TAX FREE FUND
EVERGREEN CONNECTICUT MUNICIPAL BOND FUND
EVERGREEN NEW JERSEY TAX FREE INCOME FUND
(EACH A "FUND", TOGETHER THE "FUNDS")
CLASS Y SHARES
The Funds seek current income exempt from federal income taxes including
the alternative minimum tax, except in the case of EVERGREEN CONNECTICUT
MUNICIPAL BOND FUND, and personal income taxes of the state for which each
Fund is named. The Funds also seek to preserve capital. Each Fund looks to
achieve its objective by investing primarily in municipal obligations that are
issued by the state for which a Fund is named.
This prospectus provides information regarding the Class Y shares offered
by the Funds. The Funds are nondiversified series of an 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 200 Berkeley Street, Boston, Massachusetts 02116.
A Statement of Additional Information ("SAI") for the Funds dated August
1, 1998, as supplemented from time to time, has been filed with the Securities
and Exchange Commission and is incorporated by reference herein. The SAI
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) 343-2898. There can be no
assurance that the investment objective of the Funds will be achieved.
Investors are advised to read this prospectus carefully.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OR AN OBLIGATION OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND SHARES ARE NOT INSURED OR OTHERWISE PROTECTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE FUNDS
INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE 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
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
EXPENSE INFORMATION.................................................... 3
FINANCIAL HIGHLIGHTS................................................... 4
DESCRIPTION OF THE FUNDS............................................... 6
Investment Objectives and Policies.................................. 6
Investment Practices and Restrictions............................... 7
ORGANIZATION AND SERVICE PROVIDERS..................................... 11
Organization........................................................ 11
Service Providers................................................... 11
PURCHASE AND REDEMPTION OF SHARES...................................... 13
How to Buy Shares................................................... 13
How to Redeem Shares................................................ 13
Exchange Privilege.................................................. 14
Shareholder Services................................................ 15
Banking Laws........................................................ 16
OTHER INFORMATION...................................................... 16
Dividends, Distributions and Taxes.................................. 16
General Information................................................. 18
</TABLE>
2
<PAGE>
- -------------------------------------------------------------------------------
EXPENSE INFORMATION
- -------------------------------------------------------------------------------
The table and examples below are designed to help you understand the
various expenses that you will bear, directly or indirectly, when you invest
in the Funds. Shareholder transaction expenses are fees paid directly from
your account when you buy or sell shares of a Fund.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------
<S> <C>
Sales Charge Imposed on Purchases.......................................... None
Sales Charge on Dividend Reinvestments..................................... None
Contingent Deferred Sales Charge........................................... None
</TABLE>
Annual operating expenses reflect the normal operating expenses of the
Funds, and include costs such as management and other fees. For each Fund,
other than EVERGREEN NEW YORK TAX FREE FUND, the tables below show actual
annual operating expenses for the fiscal year or period ended March 31, 1998.
For EVERGREEN NEW YORK TAX FREE FUND, the tables reflect estimated annual
operating expenses for the fiscal year ending March 31, 1999. The examples
show what you would pay if you invested $1,000 over periods indicated,
assuming that you reinvest all of your dividends and that a Fund's average
annual return will be 5%. THE EXAMPLES ARE FOR ILLUSTRATION PURPOSES ONLY AND
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL
RETURN. EACH FUND'S ACTUAL EXPENSES AND RETURNS WILL VARY. For a more complete
description of the various costs and expenses borne by a Fund see
"Organization and Service Providers."
EVERGREEN NEW YORK TAX FREE FUND
<TABLE>
<CAPTION>
EXAMPLE
ANNUAL OPERATING -------
EXPENSES(4) CLASS Y
---------------- -------
<S> <C> <C> <C>
Management Fees..... 0.30% After 1 Year................................... $ 6
12b-1 Fees.......... None After 3 Years.................................. $19
Other Expenses...... 0.30% After 5 Years.................................. $33
---- After 10 Years................................. $75
Total............... 0.60%
====
</TABLE>
EVERGREEN CONNECTICUT MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
EXAMPLE
ANNUAL OPERATING -------
EXPENSES(1) CLASS Y
---------------- -------
<S> <C> <C> <C>
Management Fees..... 0.33% After 1 Year................................... $ 6
12b-1 Fees.......... None After 3 Years.................................. $20
Other Expenses...... 0.27% After 5 Years.................................. $34
---- After 10 Years................................. $76
Total............... 0.60%
====
</TABLE>
EVERGREEN NEW JERSEY TAX FREE INCOME FUND
<TABLE>
<CAPTION>
EXAMPLE
ANNUAL OPERATING -------
EXPENSES(2) CLASS Y
---------------- -------
<S> <C> <C> <C>
Management Fees..... 0.15% After 1 Year................................... $ 4
12b-1 Fees.......... None After 3 Years.................................. $13
Other Expenses...... 0.26% After 5 Years.................................. $23
---- After 10 Years................................. $52
Total............... 0.41%
====
</TABLE>
EVERGREEN PENNSYLVANIA TAX FREE FUND
<TABLE>
<CAPTION>
EXAMPLE
ANNUAL OPERATING -------
EXPENSES(3) CLASS Y
---------------- -------
<S> <C> <C> <C>
Management Fees..... 0.34% After 1 Year................................... $ 6
12b-1 Fees.......... None After 3 Years.................................. $19
Other Expenses...... 0.24% After 5 Years.................................. $33
---- After 10 Years................................. $74
Total............... 0.58%
====
</TABLE>
Amounts shown in the examples should not be considered a representation
of past or future expenses. Actual expenses may be greater or less than those
shown.
- -------
(1) The Fund's investment adviser has voluntarily agreed to waive 0.10% of the
Fund's investment advisory fee. The investment adviser currently intends
to continue this expense waiver through the fiscal period ending March 31,
1999; however, it may modify or cancel its expense waiver at any time.
Without such waiver, the Fund's management fee would be 0.60%. See
"Organization and Service Providers" for more information. Absent expense
waivers and/or reimbursements, the Total Operating Expenses for the Fund
would be 0.88%.
(2) The annual operating expenses and examples reflect fee waivers and
reimbursements for the most recent fiscal period. Actual expenses for
Class Y Shares of the Fund, absent fee waivers and expense reimbursements
for the period ended March 31, 1998 would have been 0.76%. Total Fund
Operating Expenses include indirectly paid expenses.
(3) The estimated annual operating expenses and examples reflect fee waivers
and reimbursements for the Fund's Class Y shares for the fiscal year
ended March 31, 1999. Actual expenses for Class Y shares of the Fund for
the same period are estimated to be 0.66%. Total Fund Operating Expenses
include indirectly paid expenses.
(4) The estimated annual operating expenses and examples reflect fee waivers
and reimbursements for the Fund's Class Y shares for the fiscal year
ending March 31, 1999. Actual expenses for the Class Y shares of the Fund
for the same period are estimated to be 0.76%.
3
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The following table contains important financial information relating to
the Funds and has been audited by KPMG Peat Marwick LLP, the independent
auditors of the Fund. (No financial highlights are currently available for the
Class Y shares of EVERGREEN NEW YORK TAX FREE FUND as such shares were not
offered until April 1, 1998.) The table appears in the Funds' Annual Report
and should be read in conjunction with the Funds' financial statements and
related notes, which also appear, together with the independent auditors'
report, in the Funds' Annual Report. The Funds' financial statements, related
notes, and independent auditors' report thereon are incorporated by reference
into the SAI. Additional information about the Funds' performance is contained
in the Funds' Annual Report, which will be made available upon request and
without charge.
(For a share outstanding throughout the period)
EVERGREEN PENNSYLVANIA TAX FREE FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
NOVEMBER 24, 1997
(COMMENCEMENT OF
CLASS OPERATIONS) TO
MARCH 31, 1998
--------------------
<S> <C>
NET ASSET VALUE BEGINNING OF PERIOD....................... $11.60
--------
Income from investment operations
Net investment income.................................... 0.19
Net realized and unrealized gain on investments and
futures contracts....................................... 0.10
--------
Total from investment operations.......................... 0.29
--------
Less distributions from net investment income............. (0.19)
--------
Net asset value end of period............................. $11.70
========
TOTAL RETURN.............................................. 2.54%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets
Expenses................................................. 0.59%(a)
Expenses excluding indirectly paid expenses.............. 0.58%(a)
Expenses excluding waivers and/or reimbursements......... 0.66%(a)
Net investment income.................................... 4.75%(a)
Portfolio turnover rate................................... 54%
NET ASSETS END OF PERIOD (THOUSANDS)...................... $152,960
</TABLE>
EVERGREEN CONNECTICUT MUNICIPAL BOND FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
NOVEMBER 24, 1997
(COMMENCEMENT OF
CLASS OPERATIONS)
THROUGH
MARCH 31, 1998
-----------------
<S> <C>
NET ASSET VALUE BEGINNING OF PERIOD........................... $6.32
-------
Income from investment operations
Net investment income........................................ 0.10
Net realized and unrealized gain on investments.............. 0.05
-------
Total from investment operations.............................. 0.15
-------
Less distributions from net investment income................. (0.10)
-------
Net asset value end of period................................. $6.37
=======
TOTAL RETURN.................................................. 2.39%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets
Total expenses............................................... 0.61%(a)
Total expenses excluding indirectly paid expenses............ 0.60%(a)
Total expenses excluding waivers and/or reimbursements....... 0.88%(a)
Net investment income........................................ 4.50%(a)
Portfolio turnover rate....................................... 17%
NET ASSETS END OF PERIOD (THOUSANDS).......................... $67,675
</TABLE>
- -------
(a) Annualized.
4
<PAGE>
(For a share outstanding throughout each year)
EVERGREEN NEW JERSEY TAX FREE INCOME FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
FEBRUARY 8, 1996
SEVEN MONTHS SIX MONTHS (COMMENCEMENT OF
YEAR ENDED ENDED ENDED CLASS OPERATIONS)
MARCH 31, MARCH 31, AUGUST 31, TO FEBRUARY 29,
1998 1997** 1996* 1996
---------- ------------ ---------- -----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE BEGINNING
OF YEAR................. $10.74 $10.75 $11.01 $11.14
-------- ------ ------ ------
Income from investment
operations
Net investment income... 0.54 0.32 0.28 0.03
Net realized and
unrealized gain (loss)
on investments......... 0.46 (0.01) (0.26) (0.13)
-------- ------ ------ ------
Total from investment
operations.............. 1.00 0.31 0.02 (0.10)
-------- ------ ------ ------
Less distributions from
Net investment income... (0.54) (0.32) (0.28) (0.03)
Net realized gain on
investments............ (0.09) 0 0 0
-------- ------ ------ ------
Total distributions...... (0.63) (0.32) (0.28) (0.03)
-------- ------ ------ ------
Net asset value end of
year.................... $11.11 $10.74 $10.75 $11.01
======== ====== ====== ======
TOTAL RETURN............. 9.44% 2.88% 0.20% (0.87%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses................ 0.41% 0.36%(a) 0.31%(a) 0.31%(a)
Expenses excluding
indirectly paid
expenses............... 0.41% 0.36%(a) -- --
Expenses excluding
waivers and/or
reimbursements......... 0.76% 0.88%(a) 0.87%(a) 0.88%(a)
Net investment income... 4.79% 5.08%(a) 5.12%(a) 5.28%(a)
Portfolio turnover rate.. 37% 15% 0% 4%
NET ASSETS END OF YEAR
(THOUSANDS)............. $105,331 $9,436 $9,076 $18
</TABLE>
- -------
(a) Annualized.
(b) Excluding applicable sales charges.
* The Fund changed its fiscal year end from February 28 to August 31.
** The Fund changed its fiscal year end from August 31 to March 31.
5
<PAGE>
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Each Fund's investment objective(s) is nonfundamental; as a result a Fund
may change its objective(s) without a shareholder vote. Each Fund has also
adopted certain fundamental investment policies which are mainly designed to
limit a Fund's exposure to risk. Each Fund's fundamental policies cannot be
changed without a shareholder vote. See the SAI for more information regarding
the Funds' fundamental investment policies or other related investment
policies. There can be no assurance that a Fund's investment objective(s) will
be achieved.
In addition to the investment policies detailed below each Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions" below.
Each Fund, other than EVERGREEN CONNECTICUT MUNICIPAL BOND FUND, seeks
the highest possible current income exempt from federal income taxes
(including the alternative minimum tax), while preserving capital. These Funds
normally invest their assets in accordance with applicable standards issued by
the Securities and Exchange Commission ("SEC") concerning investments in tax
free securities. The Funds cannot change this policy without shareholder
approval. The SEC currently requires the Funds to invest at least 80% of their
assets in federally tax exempt municipal securities. Each Fund also invests at
least 65% of its assets in municipal obligations that are exempt from income
taxes in the state for which the Fund is named. The Funds are permitted to
make taxable investments, and may from time to time generate income subject to
federal regular income tax.
In addition, EVERGREEN NEW YORK TAX FREE FUND will invest at least 80% of
their assets in municipal securities that at all times are fully insured as to
timely payment of all principal and interest when due ("Insured Securities").
Insurance does not cover against market risk and therefore does not guarantee
the market value of the securities in either Fund's portfolio. Similarly,
because the net asset value of each Fund's portfolio is based upon the market
value of the securities in its portfolio, such insurance does not cover or
guarantee the net asset value of the Fund's shares.
Insured Securities will be covered by at least one of three policies. New
issue insurance is obtained by municipal securities issuers, who pay all
premiums for such policies in advance. Since new issue insurance remains in
effect as long as the securities are outstanding, the insurance may protect
the resale value of the Insured Securities. Portfolio insurance remains
effective only while a Fund and the issuer are still in business and the Fund
still holds the securities described in the policy. The premium on a portfolio
insurance policy is a Fund expense. The EVERGREEN NEW YORK TAX FREE FUND may
also purchase secondary insurance when it believes the potential market value
or net proceeds of the sale of a security by a Fund exceeds the current
uninsured value of the security plus the cost of such insurance. Premiums for
secondary insurance are added to the cost basis of the security and are not
Fund expense items.
EVERGREEN CONNECTICUT MUNICIPAL BOND FUND seeks current income exempt
from federal income taxes other than the alternative minimum tax and
Connecticut personal income taxes. In addition, the Fund seeks to preserve
capital. The Fund normally invests at least 80% of its assets in securities
that are exempt from federal income taxes (other than the alternative minimum
tax) and at least 65% of its assets in Connecticut municipal obligations. The
EVERGREEN CONNECTICUT MUNICIPAL BOND FUND may change either of these policies
without shareholder approval.
Each Fund will invest at least 80% of its assets in bonds that, at the
date of investment, are rated within the four highest categories by Standard
and Poor's Ratings Group ("S&P") (AAA, AA, A or BBB), by Moody's Investors
Service ("Moody's") (Aaa, Aa, A or Baa), by Fitch IBCA, Inc. ("Fitch") (AAA,
AA, A or BBB) or, if not rated or rated under a different system, are of
comparable quality to obligations so rated as determined by another nationally
recognized statistical ratings organization (an "SRO") or by a Fund's
investment adviser. The Funds may invest the remaining 20% of their assets in
lower rated bonds, but they will not invest in bonds rated below B.
6
<PAGE>
INVESTMENT PRACTICES AND RESTRICTIONS
Risk Factors. Bond yields are dependent on several factors including market
conditions, the size of an offering, the maturity of the bond, ratings of the
bond and the ability of issuers to meet their obligations. There is no limit
on the maturity of the bonds purchased by a Fund. Because bond prices
fluctuate inversely in relation to the direction of interest rates, the prices
of longer term bonds fluctuate more widely in response to market interest rate
changes. A Fund's concentration in securities issued by a particular state and
its political subdivisions provides a greater level of risk than a fund which
is diversified across numerous states and municipal entities.
A Fund is not required to dispose of securities that have been downgraded
subsequent to their purchase. If the municipal obligations held by a Fund are
downgraded (because of adverse economic conditions in the state for which it
is named, for example), a Fund's concentration in the state's securities may
cause a Fund to be subject to the risks inherent in holding material amounts
of low-rated debt securities in its portfolio.
Municipal Securities. The Funds invest in municipal bonds, notes and
commercial paper issued by or for states, territories and possessions of the
United States ("U.S.") including the District of Columbia and their political
subdivisions, agencies and instrumentalities. Municipal bonds include fixed,
variable or floating rate general obligation and revenue bonds. General
obligation bonds are used to support the government's general financial needs
and are supported by the full faith and credit of the municipality. General
obligation bonds are repaid from the issuer's general unrestricted revenues.
Payment, however, may be dependent upon legislative approval and may be
subject to limitations on the issuer's taxing power. Revenue bonds are used to
finance public works and certain private facilities. In contrast to general
obligation bonds, revenue bonds are repaid only with the revenue generated by
the project financed.
Municipal notes include tax anticipation notes, bond anticipation notes
and revenue anticipation notes. Municipal commercial paper obligations are
unsecured promissory notes issued by municipalities to meet short-term credit
needs.
Since the Funds invest primarily in municipal securities, you should be
aware of the risks associated with investing in such securities. The values of
municipal bonds tend to go up when interest rates go down and vice versa. An
issuer's failure to make such payment due to political development or fiscal
mismanagement could affect its ability to make prompt payments of interest and
principal. Those events could also affect the market value of the security.
Moreover, the market for municipal bonds is often thin and can be temporarily
affected by large purchases and sales, including those by a Fund.
Non-Diversification. The Funds are nondiversified portfolios of an investment
company and, as such, there is no limit on the percentage of assets which can
be invested in any single issuer. An investment in a Fund, therefore, will
entail greater risk than would exist in an investment in a diversified
investment company because the higher percentage of investments among fewer
issuers may result in greater fluctuation in the total market value of the
Fund's portfolio. Each of the Funds intends to comply with Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code") which requires that at
the end of each quarter of each taxable year, with regard to at least 50% of
each Fund's total assets, no more than 5% of the total assets may be invested
in the securities of a single issuer and that with respect to the remainder of
each Fund's total assets, no more than 25% of its total assets are invested in
the securities of a single issuer.
Defensive Investments. The Funds may invest up to 20% or, for temporary
defensive purposes, up to 100% of their assets in high quality short-term
obligations, such as notes, commercial paper, certificates of deposit,
bankers' acceptances, bank deposits or U.S. government securities.
Below Investment Grade Bonds. Below investment grade bonds are commonly known
as "junk bonds" because they are usually backed by issuers of less proven or
questionable financial strength. Such issuers are more vulnerable to financial
setbacks and less certain to pay interest and principal than issuers of bonds
offering lower yields and risk. Markets may overreact to unfavorable news
about issuers of below investment grade bonds, causing sudden and steep
declines in value.
Repurchase Agreements. The Funds may invest in repurchase agreements.
Repurchase agreements are agreements by which a Fund purchases a security
(usually U.S. government securities) for cash and obtains a simultaneous
commitment from the seller (usually a bank or broker/dealer) to repurchase the
security at an agreed-upon price and specified future date. The repurchase
price reflects an agreed-upon interest rate for the time period of the
agreement. The Funds' risk is the inability of the seller to pay the agreed-
upon price on the delivery date. However, this risk is tempered by the ability
of the Funds to sell the security in the open market in
7
<PAGE>
the case of a default. In such a case, the Funds may incur costs in disposing
of the security which would increase Fund expenses. Each Funds' investment
adviser will monitor the creditworthiness of the firms with which the Fund
enters into repurchase agreements.
Reverse Repurchase Agreements. Each Fund may enter into reverse repurchase
agreements. A reverse repurchase agreement is an agreement by a Fund to sell a
security and repurchase it at a specified time and price. A Fund could lose
money if the market values of the securities it sold decline below their
repurchase prices. Reverse repurchase agreements may be considered a form of
borrowing, and, therefore, a form of leverage. Leverage may magnify gains or
losses of the Fund.
When-Issued, Delayed-Delivery and Forward Commitment Transactions. Each Fund
may enter into transactions whereby it commits to buying a security, but does
not pay for or take delivery of the security until some specified date in the
future. The values of these securities are subject to market fluctuations
during this period and no income accrues to a Fund until settlement. At the
time of settlement, a when-issued security may be valued at less than its
purchase price. When entering into these transactions, a Fund relies on the
other party to consummate the transaction; if the other party fails to do so,
the Fund may be disadvantaged. Each Fund does not intend to purchase when-
issued securities for speculative purposes, but only in furtherance of its
investment objective.
Securities Lending. To generate income and offset expenses, the Funds may lend
securities to broker-dealers and other financial institutions. Loans of
securities by a Fund may not exceed 33 1/3% of the value of the Fund's total
assets. While securities are on loan, the borrower will pay the Fund any
income accruing on the security. Also, the Fund may invest any collateral it
receives in additional securities. Gains or losses in the market value of a
lent security will affect a Fund and its shareholders. When a Fund lends its
securities, it runs the risk that it could not retrieve the securities on a
timely basis, possibly losing the opportunity to sell the securities at a
desirable price. Also, if the borrower files for bankruptcy or becomes
insolvent, a Fund's ability to dispose of the securities may be delayed.
Investing In Securities Of Other Investment Companies. Each Fund may invest in
the securities of other investment companies. As a shareholder of another
investment company, a Fund would pay its portion of the other investment
company's expenses. These expenses would be in addition to the expenses that a
Fund currently bears concerning its own operations and may result in some
duplication of fees.
Borrowing. Each Fund may borrow from banks in an amount up to 33 1/3% of its
total assets, taken at market value. Each Fund may also borrow an additional
5% of its total assets from banks and others. A Fund may only borrow as a
temporary measure for extraordinary or emergency purposes such as the
redemption of Fund shares. A Fund will not purchase securities while
borrowings are outstanding except to exercise prior commitments and to
exercise subscription rights.
Zero Coupon Debt Securities. A Fund may purchase zero coupon debt securities.
These securities do not make regular interest payments. Instead, they are sold
at a deep discount from their face value. In calculating their daily
dividends, each day a Fund takes into account as income a portion of the
difference between these securities' purchase price and their face value.
Because they do not pay current income, the prices of zero coupon debt
securities can be very volatile when interest rates change. Values of zero
coupon 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.
Securities with Put or Demand Rights. The Funds have the ability to enter into
put transactions, sometimes referred to as stand-by commitments, with respect
to municipal obligations held in their portfolios or to purchase securities
which carry a demand feature or put option which permit a Fund, as holder, to
tender them back to the issuer or a third party prior to maturity and receive
payment within seven days. Segregated accounts will be maintained by each Fund
for all such transactions.
The amount payable to a Fund by the seller upon its exercise of a put
will normally be (i) a Fund's acquisition cost of the securities (excluding
any accrued interest which a Fund paid on their acquisition), less any
amortized market premium plus any amortized market or original issue discount
during the period the Fund owned the securities, plus (ii) all interest
accrued on the securities since the last interest payment date during the
period the securities were owned by the Fund. Accordingly, the amount payable
by a broker-dealer or bank during the time a put is exercisable will be
substantially the same as the value of the underlying securities.
8
<PAGE>
A Fund's right to exercise a put is unconditional and unqualified. A put
is not transferable by a Fund, although a Fund may sell the underlying
securities to a third party at any time. Each Fund expects that puts will
generally be available without any additional direct or indirect cost.
However, if necessary and advisable, a Fund may pay for certain puts either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to such a put (thus reducing the yield to maturity
otherwise available to the same securities). Thus, the aggregate price paid
for securities with put rights may be higher than the price that would
otherwise be paid.
The Funds may enter into put transactions only with broker-dealers (in
accordance with the rules of the SEC) and banks which, in the opinion of each
Fund's investment adviser, present minimal credit risks. A Fund's investment
adviser will monitor periodically the creditworthiness of issuers of such
obligations held by a Fund. A Fund's ability to exercise a put will depend on
the ability of the broker-dealer or bank to pay for the underlying securities
at the time the put is exercised. In the event that a broker-dealer should
default on its obligation to purchase an underlying security, a Fund might be
unable to recover all or a portion of any loss sustained from having to sell
the security elsewhere. Each Fund intends to enter into put transactions
solely to maintain portfolio liquidity and does not intend to exercise its
rights thereunder for trading purposes.
Options and Futures. The Funds may engage in options and futures transactions.
Options and futures transactions are intended to enable a Fund to manage
market or interest rate risk. The Funds do not use these transactions for
speculation or leverage.
The Funds may attempt to hedge all or a portion of their portfolios
through the purchase of both put and call options on their portfolio
securities and listed put options on financial futures contracts for portfolio
securities. The Funds may also write covered call options on their portfolio
securities to attempt to increase their current income. The Funds will
maintain their positions in securities, option rights, and segregated cash
subject to puts and calls until the options are exercised, closed, or have
expired. An option position may be closed out only on an exchange which
provides a secondary market for an option of the same series.
The Funds may write (i.e., sell) covered call and put options. By writing
a call option, a Fund becomes obligated during the term of the option to
deliver the securities underlying the option upon payment of the exercise
price. By writing a put option, a Fund becomes obligated during the term of
the option to purchase the securities underlying the option at the exercise
price if the option is exercised. The Funds also may write straddles
(combinations of covered puts and calls on the same underlying security). The
Funds may only write "covered" options. This means that so long as a Fund is
obligated as the writer of a call option, it will own the underlying
securities subject to the option or, in the case of call options on U.S.
Treasury bills, a Fund might own substantially similar U.S. Treasury bills. A
Fund will be considered "covered" with respect to a put option it writes if,
so long as it is obligated as the writer of the put option, it deposits and
maintains with its custodian in a segregated account liquid assets having a
value equal to or greater than the exercise price of the option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised.
By writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Funds might become obligated to purchase the underlying securities for more
than their current market price upon exercise.
A futures contract is a firm commitment by two parties: the seller, who
agrees to make delivery of the specific type of instrument called for in the
contract ("going short"), and the buyer, who agrees to take delivery of the
instrument ("going long") at a certain time in the future. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities
of the U.S. government. If a Fund enters into financial futures contracts
directly to hedge its holdings of fixed income securities, it would enter into
contracts to deliver securities at an undetermined price (i.e., "go short") to
protect itself against the possibility that the prices of its fixed income
securities may decline during a Fund's anticipated holding period. A Fund
would "go long" (agree to purchase securities in the future at a predetermined
price) to hedge against a decline in market interest rates.
The Funds may also enter into financial futures contracts and write
options on such contracts. The Funds intend to enter into such contracts and
related options for hedging purposes. The Funds will enter into futures on
securities or index-based futures contracts in order to hedge against changes
in interest rates or securities prices. A futures contract on securities is an
agreement to buy or sell securities during a designated month at whatever
price exists at that time. A futures contract on a securities index does not
involve the actual delivery of securities,
9
<PAGE>
but merely requires the payment of a cash settlement based on changes in the
securities index. The Funds do not make payment or deliver securities upon
entering into a futures contract. Instead, they put down a margin deposit,
which is adjusted to reflect changes in the value of the contract and which
remains in effect until the contract is terminated.
The Funds may sell or purchase other financial futures contracts. When a
futures contract is sold by a Fund, the profit on the contract will tend to
rise when the value of the underlying securities declines and to fall when the
value of such securities increases. Thus, the Funds sell futures contracts in
order to offset a possible decline in the profit on their securities. If a
futures contract is purchased by a Fund, the value of the contract will tend
to rise when the value of the underlying securities increases and to fall when
the value of such securities declines.
The Funds may enter into closing purchase and sale transactions in order
to terminate a futures contract and may buy or sell put and call options for
the purpose of closing out their options positions. If a Fund is not able to
enter into an offsetting transaction, the Fund will continue to be required to
maintain the margin deposits on the contract and to complete the contract
according to its terms, in which case it would continue to bear market risk on
the transaction.
Risk Characteristics of Options and Futures. Although options and futures
transactions are intended to enable the Funds to manage market or interest
rate risks, these investment devices can be highly volatile, and the Funds'
use of them can result in poorer performance (i.e., the Funds' return may be
reduced). The Funds' attempt to use such investment devices for hedging
purposes may not be successful. Successful futures strategies require the
ability to predict future movements in securities prices, interest rates and
other economic factors. When the Funds use financial futures contracts and
options on financial futures contracts as hedging devices, there is a risk
that the prices of the securities subject to the financial futures contracts
and options on financial futures contracts may not correlate perfectly with
the prices of the securities in the Funds' portfolios. This may cause the
financial futures contracts and any related options to react to market changes
differently than the portfolio securities. In addition, a Fund's investment
adviser could be incorrect in its expectations and forecasts about the
direction or extent of market factors, such as interest rates, securities
price movements, and other economic factors. Even if a Fund's investment
adviser correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of a Fund's futures position did not
correspond to changes in the value of its investments. In these events, a Fund
may lose money on the financial futures contracts or the options on financial
futures contracts. It is not certain that a secondary market for positions in
financial futures contracts or for options on financial futures contracts will
exist at all times. Although a Fund's investment adviser will consider
liquidity before entering into financial futures contracts or options on
financial futures contracts transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular financial
futures contract or option on a financial futures contract at any particular
time. A Fund's ability to establish and close out financial futures contracts
and options on financial futures contract positions depends on this secondary
market. If a Fund is unable to close out its position due to disruptions in
the market or lack of liquidity, the Fund may lose money on the futures
contract or option, and the losses to the Fund could be significant.
Derivatives. Derivatives are financial contracts whose value is based on an
underlying asset, such as a stock or a bond, or an underlying economic factor,
such as an index or an interest rate.
The Funds may invest in derivatives only if the expected risks and
rewards are consistent with their investment objectives and policies.
Losses from derivatives can sometimes be substantial. This is true partly
because small price movements in the underlying asset can result in immediate
and substantial gains or losses in the value of the derivative. Derivatives
can also cause a Fund to lose money if the Fund fails to correctly predict the
direction in which the underlying asset or economic factor will move.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the SAI.
10
<PAGE>
- -------------------------------------------------------------------------------
ORGANIZATION AND SERVICE PROVIDERS
- -------------------------------------------------------------------------------
ORGANIZATION
Fund Structure. Each Fund is an investment pool, which invests shareholders'
money towards a specified goal. In technical terms, each Fund is a non-
diversified series of an open-end, management investment company called
Evergreen Municipal Trust (the "Trust"). The Trust is a Delaware business
trust organized on September 18, 1997.
Board of Trustees. The Trust is supervised by a Board of Trustees that is
responsible for representing the interests of shareholders. The Trustees meet
periodically throughout the year to oversee the Funds' activities, reviewing,
among other things, each Fund's performance and its contractual arrangements
with various service providers.
Shareholder Rights. All shareholders have equal voting, liquidation and other
rights. Each share is entitled to one vote for each dollar of net asset value
applicable to such share. Shareholders may exchange shares as described under
"Exchanges," but will have no other preference, conversion, exchange or
preemptive rights. When issued and paid for, shares will be fully paid and
nonassessable. Shares of the Funds are redeemable, transferable and freely
assignable as collateral. The Trust may establish additional classes or series
of shares.
The Funds do not hold annual shareholder meetings; a Fund may, however,
hold special meetings for such purposes as electing or removing Trustees,
changing fundamental policies and approving investment advisory agreements or
12b-1 plans. In addition, a Fund is prepared to assist shareholders in
communicating with one another for the purpose of convening a meeting to elect
Trustees.
SERVICE PROVIDERS
Investment Advisers. The investment adviser to EVERGREEN NEW YORK TAX FREE
FUND and EVERGREEN PENNSYLVANIA TAX FREE FUND is Keystone Investment
Management Company ("Keystone"), a subsidiary of First Union National Bank
("FUNB") which is a subsidiary of First Union Corporation ("First Union").
Keystone has provided investment advisory and management services to
investment companies and private accounts since 1932. Keystone is located at
200 Berkeley Street, Boston, Massachusetts 02116-5034. FUNB is located at 201
South College Street, and First Union is located at 301 South College Street,
Charlotte, North Carolina 28288-0630. First Union and its subsidiaries provide
a broad range of financial services to individuals and businesses throughout
the U.S.
EVERGREEN NEW YORK TAX FREE FUND and EVERGREEN PENNSYLVANIA TAX FREE FUND
pay Keystone an annual fee for its services as set forth below:
<TABLE>
<CAPTION>
AGGREGATE NET
ASSET VALUE
OF SHARES OF THE
MANAGEMENT FEE FUND
-------------- ------------------
<S> <C>
0.55% of the first $ 50,000,000, plus
0.50% of the next $ 50,000,000, plus
0.45% of the next $100,000,000, plus
0.40% of the next $100,000,000, plus
0.35% of the next $100,000,000, plus
0.30% of the next $100,000,000, plus
0.25% of amounts over $500,000,000
</TABLE>
computed as of the close of business on each business day.
The investment adviser to EVERGREEN CONNECTICUT MUNICIPAL BOND FUND and
EVERGREEN NEW JERSEY TAX FREE INCOME FUND is the Capital Management Group
("CMG") of FUNB.
EVERGREEN CONNECTICUT MUNICIPAL BOND FUND pays FUNB an annual fee for its
services equal to 0.60% of average daily net assets. FUNB has voluntarily
agreed to reduce or waive a portion of its fee equal to 0.10%, resulting in a
net advisory fee of 0.50%. FUNB may change or stop this waiver at any time.
11
<PAGE>
EVERGREEN NEW JERSEY TAX FREE INCOME FUND pays FUNB an annual fee for its
services as set forth below:
<TABLE>
<CAPTION>
AGGREGATE NET ASSET
VALUE OF SHARES
MANAGEMENT FEE OF THE FUND
-------------- --------------------
<S> <C>
0.50 of 1% of the first $ 500,000,000, plus
0.45 of 1% of the next $ 500,000,000, plus
0.40 of 1% of amounts over $1,000,000,000, plus
0.35 of 1% of amounts over $1,500,000,000
</TABLE>
computed as of the close of business on each business day.
The total expenses as a percentage of average daily net assets on an
annual basis of the Funds for the fiscal year or period ended March 31, 1998,
are set forth in the sections entitled "Expense Information" and "Financial
Highlights." Such expenses reflect all voluntary advisory fee waivers and
expense reimbursements, which may be revised or terminated at any time.
Portfolio Managers. George J. Kimball is responsible for the day-to-day
management of EVERGREEN NEW YORK TAX FREE FUND. Mr. Kimball has been employed
by Keystone or one of its affiliates since 1991, and was an Analyst prior to
becoming a Vice President and Portfolio Manager. He has more than 10 years of
investment experience.
Jocelyn Turner is the Portfolio Manager for the EVERGREEN PENNSYLVANIA
TAX FREE FUND, EVERGREEN CONNECTICUT MUNICIPAL BOND FUND and EVERGREEN NEW
JERSEY TAX FREE INCOME FUND. Since joining First Union in 1992, Ms. Turner has
been a Vice President and Municipal Bond Portfolio Manager for CMG. Ms. Turner
is currently responsible for the portfolio management of the EVERGREEN NEW
JERSEY TAX FREE INCOME FUND. Ms. Turner was previously employed as a Vice
President and Municipal Bond Portfolio Manager at One Federal Asset
Management, Boston, Massachusetts from 1987-1991.
Transfer Agent and Dividend Disbursing Agent. Evergreen Service Company
("ESC"), 200 Berkeley Street, Boston, Massachusetts 02116-5034, acts as the
Funds' transfer agent and dividend disbursing agent. ESC is an indirect,
wholly-owned subsidiary of First Union.
Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, acts as the Funds' custodian.
Principal Underwriter. Evergreen Distributor, Inc. ("EDI"), a subsidiary of
The BISYS Group, Inc., located at 125 West 55th Street, New York, New York
10019, is the principal underwriter of the Funds. EDI is not affiliated with
First Union.
Administrator. Evergreen Investment Services, Inc. ("EIS"), 200 Berkeley
Street, Boston, Massachusetts 02116-5034, serves as administrator to EVERGREEN
CONNECTICUT MUNICIPAL BOND FUND and EVERGREEN NEW JERSEY TAX FREE INCOME FUND.
As administrator, and subject to the supervision and control of the Trust's
Board of Trustees, EIS provides the Funds with facilities, equipment and
personnel. For its services as administrator, EIS is entitled to receive a fee
based on the aggregate average daily net assets of the Funds at a rate based
on the total assets of all mutual funds advised by First Union subsidiaries
and administered by EIS. The administration fee is calculated in accordance
with the following schedule.
<TABLE>
<CAPTION>
ADMINISTRATION FEE
------------------
<S> <C>
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion, and
0.010% on assets in excess of $30 billion
</TABLE>
EIS also provides facilities, equipment and personnel to all of the Funds
on behalf of the investment advisers and is reimbursed by the Funds for its
services.
12
<PAGE>
- -------------------------------------------------------------------------------
PURCHASE AND REDEMPTION OF SHARES
- -------------------------------------------------------------------------------
HOW TO BUY SHARES
Class Y shares are offered at net asset value without a front-end sales
charge or a contingent deferred sales load. Class Y shares are only offered to
(1) persons who at or prior to December 31, 1994 owned shares in a mutual fund
advised by Evergreen Asset Management Corp. ("Evergreen Asset"), (2) certain
institutional investors and (3) investment advisory clients of FUNB, Evergreen
Asset, Keystone or their affiliates.
Eligible investors may purchase Class Y shares of any Fund through
broker-dealers, banks or other financial intermediaries, or directly through
EDI. In addition, you may purchase Class Y shares of a Fund by mailing to the
Fund, c/o ESC, P.O. Box 2121, Boston, Massachusetts 02106-2121, a completed
application and a check payable to the Fund. You may also telephone 1-800-343-
2898 to obtain the number of an account to which you can wire or
electronically transfer funds and then send in a completed application.
Subsequent investments in any amount may be made by check, by wiring federal
funds, by direct deposit or by an electronic funds transfer.
There is no minimum amount for subsequent investments. Investments of $25
or more are allowed under the Systematic Investment Plan. See the application
for more information.
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 Exchange is closed on New Year's Day, Martin Luther King, Jr. Day,
Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The securities in a Fund are valued at
their current market values determined on the basis of market quotations or,
if such quotations are not readily available, such other methods as the
Trustees believe would accurately reflect fair 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 Fund's
investment adviser incurs. If such investor is an existing shareholder, a Fund
may redeem shares from an investor's account to reimburse the Fund or its
investment adviser for any loss. In addition such investors may be prohibited
or restricted from making further purchases in any of the Evergreen Funds. The
Funds will not accept third party checks other than those payable directly to
a shareholder whose account has been in existence at least 30 days.
HOW TO REDEEM SHARES
You may "redeem" (i.e., sell) your Class Y shares in a Fund to the Fund
for cash at their net redemption value on any day the Exchange is open, either
directly by writing to the Fund, c/o ESC, or through your financial
intermediary. The amount you will receive is the net asset value adjusted for
fractions of a cent 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, the 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. Your financial intermediary is
responsible for furnishing all necessary documentation to the Fund and may
charge you for this service. Certain financial intermediaries may require that
you give instructions earlier than 4:00 p.m. (eastern time).
Redeeming Shares Directly by Mail or Telephone. You may redeem by mail by
sending a signed letter of instruction or stock power form to a Fund, c/o ESC
(the registrar, transfer agent and dividend-disbursing agent for each Fund.)
Stock power forms are available from your financial intermediary, ESC, 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 $50,000. Currently, the requirement for a
signature guarantee has been waived on
13
<PAGE>
redemptions of $50,000 or less when the account address of record has been the
same or a minimum period of 30 days. The Funds and ESC reserve the right to
withdraw this wavier at any time. 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
under the Securities Exchange Act of 1934 and ESC's policies.
Shareholders may redeem amounts of $1,000 or more (up to $50,000) from
their accounts by calling the telephone number on the front page of this
prospectus between the hours of 8:00 a.m. and 6:00 p.m. (eastern time) each
business day (i.e., any weekday exclusive of days on which the Exchange or
ESC's offices are closed). Redemption requests received 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. If you cannot reach the Fund by
telephone, you should follow the procedures for redeeming by mail or through a
broker-dealer as set forth herein. The telephone redemption service is not
made available to shareholders automatically. Shareholders wishing to use the
telephone redemption service must complete the appropriate sections on the
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 the Fund at a designated
commercial bank.
In order to insure that instructions received by ESC are genuine when you
initiate a telephone transaction, you will be asked to verify certain criteria
specific to your account. At the conclusion of the transaction, you will be
given a transaction number confirming your request, and written confirmation
of your transaction will be mailed the next business day. Your telephone
instructions will be recorded. Redemptions by telephone are allowed only if
the address and bank account of record have been the same for a minimum period
of 30 days. A Fund reserves the right at any time to terminate, suspend, or
change the terms of any redemption method described in this prospectus, except
redemption by mail, and to impose fees.
Except as otherwise noted, the Funds, ESC, and EDI will not assume
responsibility for the authenticity of any instructions received by any of
them from a shareholder in writing, over the Evergreen Express Line (described
below), or by telephone. ESC will employ reasonable procedures to confirm that
instructions received over the Evergreen Express Line or by telephone are
genuine. The Funds, ESC, and EDI will not be liable when following
instructions received over the Evergreen Express Line or by telephone that ESC
reasonably believes are genuine.
Evergreen Express Line. Evergreen Express Line offers you specific fund
account information and price and yield quotations as well as the ability to
do account transactions, including investments, exchanges and redemptions. You
may access the Evergreen Express Line by dialing toll free 1-800-346-3858 on
any touch-tone telephone, 24 hours a day, seven days a week.
General. The sale of shares is a taxable transaction for federal income tax
purposes. The Funds may temporarily suspend the right to redeem their shares
when (1) the Exchange is closed, other than customary weekend and holiday
closings; (2) trading on the Exchange is restricted; (3) an emergency exists
and the Funds cannot dispose of their investments or fairly determine their
value; or (4) the SEC so orders. The Funds serve the right to close an account
that through redemption has fallen below $1,000 and has remained so for 30
days. Shareholders will receive 60 days' written notice to increase the
account value to at least $1,000 before the account is closed. The Funds have
elected to be governed by Rule 18f-1 under the 1940 Act 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 90-day period for any
one shareholder.
EXCHANGE PRIVILEGE
How to Exchange Shares. You may exchange some or all of your Class Y shares
for shares of the same class in other Evergreen funds through your financial
intermediary, by calling or writing to ESC or by using the Evergreen Express
Line as described above. 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. An exchange which
represents an initial investment in another Evergreen fund, is subject to the
minimum investment and suitability requirements of the Fund.
Each of the Evergreen funds has different investment objectives and
policies. For more complete information, a prospectus of the fund into which
an exchange will be made should be read prior to the exchange.
14
<PAGE>
An exchange order must comply with the requirement for a redemption or
repurchase order and must specify the dollar value or number of shares to be
exchanged. 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 a Fund upon 60 days' notice to
shareholders and is only available in states in which shares of the fund being
acquired may lawfully be sold.
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
harge you for this service.
Exchanges by Telephone and Mail. Exchange requests received by a Fund after
4:00 p.m. (eastern time) will be processed using the net asset value
determined at the close of 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 ESC by telephone. If you wish
to use the telephone exchange service you should indicate this on the
application. As noted above, a 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 ESC 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, ESC
or call the toll-free number on the front page of this prospectus. Some
services are described in more detail in the application.
Systematic Investment Plan. Under a Systematic Investment Plan, you may invest
as little as $25 per month to purchase shares of a Fund with no minimum
initial investment required.
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 4:00 p.m. (eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic 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
Systematic Withdrawal Plan (the "Withdrawal Plan") by filling out the
appropriate part of the application. Under this Withdrawal Plan, you may
receive (or designate a third party to receive) a monthly or quarterly fixed-
withdrawal payment in a stated amount of at least $75 and may be as much as
1.0% per month or 3.0% per quarter of the total net asset value of the Fund
shares in your account when the Withdrawal Plan was opened. Fund shares will
be redeemed as necessary to meet withdrawal payments. All participants must
elect to have their dividends and capital gains 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 at the close of business on the
record date, 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.
Dollar Cost Averaging. Through dollar cost averaging you can invest a fixed
dollar amount each month or each quarter in any Evergreen fund. This results
in more shares being purchased when the selected fund's net asset value is
relatively low and fewer shares being purchased when the fund's net asset
value is relatively high and may result in a lower average cost per share than
a less systematic investment approach.
Prior to participating in dollar cost averaging, you must establish an
account in an Evergreen Fund. You should designate on the application (1) the
dollar amount of each monthly or quarterly investment you wish to make, and
(2) the fund in which the investment is to be made. Thereafter, on the first
day of the designated month, an amount equal to the specified monthly or
quarterly investment will automatically be redeemed from your initial account
and invested in shares of the designated fund.
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Two Dimensional Investing. You may elect to have income and capital gains
distributions from any Evergreen fund shares you own automatically invested to
purchase the same class of shares of any other Evergreen fund. You may select
this service on your application and indicate the Evergreen Fund(s) into which
distributions are to be invested.
Tax Sheltered Retirement Plans. The Funds have various retirement plans
available to eligible investors, including Individual Retirement Accounts
(IRAs); Rollover IRAs; Simplified Employee Pension Plans (SEPs); Salary
Incentive Match Plan for Employees (SIMPLEs); Tax Sheltered Annuity Plans;
403(b)(7) Plans; 401(k) Plans; Keogh Plans; Profit-Sharing Plans; Medical
Savings Accounts; Pension and Target Benefit and Money Purchase Plans. For
details, including fees and application forms, call toll free 1-800-247-4075
or write to ESC.
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 its customer. FUNB
and its affiliates are 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 its affiliates 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 the Funds by their customers. If FUNB and its affiliates
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 the Funds' shareholders to approve a new investment
adviser. If this were to occur, it is not anticipated that the shareholders of
the Funds would suffer any adverse financial consequences.
- -------------------------------------------------------------------------------
OTHER INFORMATION
- -------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
Income dividends will be declared daily and paid monthly. Distributions
of any net realized gains of the Funds 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. The
Funds have qualified as regulated investment companies under the Code. While
so qualified, so long as a Fund distributes all of its investment company
taxable income and any net realized gains to shareholders, it is expected that
the Fund 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.
Account statements and/or checks, as appropriate, will be mailed within
seven days after a Fund pays a distribution. Unless a Fund receives
instructions to the contrary before the record or payable date, as the case
may be, it will assume that a shareholder wishes to receive that distribution
and future capital gains and income distributions in shares. Instructions
continue in effect until changed in writing.
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.
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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 dividend income and capital gain
dividends are taxable as net long-term capital gains, even though received in
additional shares of the Fund, and regardless of the investor's 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, net long-term
capital gains realized by an individual on assets held for more than 12 months
will generally be taxed at a maximum rate of 20%. 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 application, or on
a separate form supplied by the Funds' transfer agent, that the investor's
social security number or taxpayer identification number is correct and that
the investor is not currently subject to backup withholding or is exempt from
backup withholding.
Set forth below are brief descriptions of the personal income tax status
of an investment in each of the Funds under New York, Pennsylvania,
Connecticut and New Jersey tax laws currently in effect. Income from a Fund is
not necessarily free from state income taxes in states other than its
designated state. State laws differ on this issue, and shareholders are urged
to consult their own tax advisers regarding the status of their accounts under
state and local laws.
EVERGREEN NEW YORK TAX FREE FUND. Individual shareholders of the Fund who
are subject to New York State and New York City personal income tax will not
be subject to New York State and New York City personal income tax on
dividends paid by the Fund to the extent that they are derived from interest
on obligations of the State of New York and its political subdivisions that is
exempt from federal income tax, provided that the Fund continues to qualify as
a regulated investment company ("RIC") under the Code and at the end of each
quarter at least 50% of the value of its total assets consists of obligations
that are exempt from federal income tax. In addition, dividends derived from
interest on debt obligations issued by certain other governmental entities
(for example, U.S. territories) will be similarly exempt.
For New York State and New York City personal income tax purposes, long-
term capital gain distributions are taxable as long-term capital gains
regardless of the length of time shareholders have owned their shares in the
Fund. Short-term capital gains and any other taxable distributions of income
are taxable as ordinary income. Shareholders of the Fund may not deduct
interest on indebtedness they incur or continue in order to purchase or carry
shares of the Fund for New York State or New York City personal income tax
purposes.
To the extent that investors are obligated to pay state or local taxes
outside the State of New York, dividends earned by an investment in the Fund
may represent taxable income. Distributions from investment income and capital
gains, including exempt-interest dividends, may be subject to New York State
corporate franchise taxes and to the New York City general corporation tax, if
received by a corporation subject to those taxes, to state taxes in states
other than New York and to local taxes in cities other than New York City. The
interest income that is distributed by the Fund will generally not be taxable
to the Fund for purposes of the New York State corporate franchise tax or the
New York City general corporation tax.
EVERGREEN PENNSYLVANIA TAX FREE FUND. Individual shareholders of the Fund
who are subject to the Pennsylvania personal income tax, as either residents
or non-residents of the Commonwealth of Pennsylvania, will not be subject to
Pennsylvania personal income tax on distributions of interest made by the Fund
that are attributable to (1) obligations issued by the Commonwealth of
Pennsylvania, any public authority, commission, board or agency created by the
Commonwealth of Pennsylvania, any political subdivision of the Commonwealth of
Pennsylvania or any public authority created by any such political subdivision
(collectively, "Pennsylvania Obligations"); and (2) obligations of the U.S.
and certain qualifying agencies, instrumentalities, territories and
possessions of the U.S., the interest from which are statutorily free from
state taxation in the Commonwealth of Pennsylvania under the laws of the
Commonwealth or the U.S. (collectively, "U.S. Obligations"). Distributions
attributable to most other sources will not be exempt from Pennsylvania
personal income tax. Distributions of gains attributable to Pennsylvania
Obligations and U.S. Obligations (collectively "Exempt Obligations") will be
subject to the Pennsylvania personal income tax.
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Shares of the Fund that are held by individual shareholders who are
Pennsylvania residents subject to the Pennsylvania county personal property
tax will be exempt from such tax to the extent that the Fund's portfolio
consists of Exempt Obligations on the annual assessment date. Nonresidents of
the Commonwealth of Pennsylvania are not subject to the Pennsylvania county
personal property tax. Corporations are not subject to Pennsylvania personal
property taxes. For shareholders who are residents of the City of
Philadelphia, distributions of interest derived from Exempt Obligations are
not taxable for purposes of the Philadelphia School District investment income
tax provided that the Fund reports to its investors the percentage of Exempt
Obligations held by it for the year. The Fund will report such percentage to
its shareholders.
Distributions of interest, but not gains, realized on Exempt Obligations
are not subject to the Pennsylvania corporate net income tax. The Pennsylvania
Department of Revenue also takes the position that shares of funds similar to
the Fund are not considered exempt assets of a corporation for the purpose of
determining its capital stock value subject to the Commonwealth's capital
stock and franchise taxes.
EVERGREEN CONNECTICUT TAX FREE FUND. Exempt-interest dividends paid by
the Fund, to the extent such dividends are exempt from federal income tax and
are derived from interest payments on municipal securities of the State of
Connecticut and its political subdivisions, instrumentalities, state or local
authorities, districts or similar public entities created under Connecticut
law, are not subject to the Connecticut income tax on individuals, trusts and
estates. Long-term capital gain dividends are also not subject to the
Connecticut income tax to the extent derived from securities issued by such
entities. Ordinary income dividends are subject to the Connecticut income tax.
Distributions from the Fund to shareholders subject to the Connecticut
corporation business tax are included in gross income for purposes of the
corporation business tax, but a dividends received deduction may be available
for a portion thereof except to the extent such distributions constitute
exempt-interest dividends or capital gain dividends for federal income tax
purposes.
EVERGREEN NEW JERSEY TAX FREE INCOME FUND. For individual shareholders in
any year in which the Fund satisfies the requirements for treatment as a
"qualified investment fund" under New Jersey law, distributions from the Fund
will be exempt from the New Jersey Gross Income Tax to the extent such
distributions are attributable to interest or gains from (i) obligations
issued by or on behalf of the State of New Jersey or any county, municipality,
school or other district, agency, authority, commission, instrumentality,
public corporation, corporate body or political subdivision of New Jersey or
(ii) obligations that are otherwise statutorily exempt from state or local
taxation or under the laws of the United States. To be classified as a
qualified investment fund, at least 80% of the Fund's investments must consist
of such obligations. Distributions by a qualified investment fund that are
attributable to most other sources will be subject to the New Jersey gross
income tax. If the Fund continues to qualify as a qualified investment fund,
any gain realized on the redemption or sale of its shares will not be subject
to the New Jersey gross income tax. Corporate shareholders will be subject to
a corporate franchise tax on distributions from and on gains from sales of the
shares in the Fund. The Fund shares are not subject to property taxation by
New Jersey or its political subdivisions.
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, 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.
The foregoing discussion of federal and certain state income tax
consequences is based on tax laws and regulations in effect on the date of
this prospectus and is subject to change by legislative or administrative
action. As the foregoing discussion is for general information only, you
should also review the discussion of "Additional Tax Information" contained in
the SAI.
GENERAL INFORMATION
Portfolio Turnover. The portfolio turnover rates for each Fund are set forth
under "Financial Highlights."
Portfolio Transactions. Consistent with the Conduct Rules 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 broker-dealers to enter into portfolio transactions with the
Fund.
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Other Classes of Shares. EVERGREEN CONNECTICUT MUNICIPAL BOND FUND and
EVERGREEN NEW JERSEY TAX FREE INCOME FUND each offer three classes of shares,
Class A, Class B and Class Y. EVERGREEN NEW YORK TAX FREE FUND and EVERGREEN
PENNSYLVANIA TAX FREE FUND each offer four classes of shares, Class A, Class
B, Class C and Class Y shares and may in the future offer additional classes.
Class Y shares are the only class of shares offered by this prospectus and are
only available to (i) persons who at or prior to December 31, 1994, owned
shares in a mutual fund advised by Evergreen Asset Management Corporation,
(ii) certain institutional investors and (iii) investment advisory clients of
FUNB or their affiliates. The dividends payable with respect to Class A, Class
B and Class C 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, Class B and Class C shares and the fact that such expenses are not
borne by Class Y shares. Investors should telephone (800) 343-2898 to obtain
more information on other classes of shares.
Performance Information. From time to time, a Fund may quote its "total
return" or "yield" for specified periods in advertisements, reports, or other
communications to shareholders. Total return and yield are computed separately
for each class of shares. Performance data for one or more classes may be
included in any advertisement or sales literature using performance data of a
Fund. A Fund's total return for each such period is computed by finding,
through the use of a formula prescribed by the SEC, the average annual
compounded rate of return over the period that would equate an assumed initial
amount invested to the value of the investment at the end of the period. For
purposes of computing total return, dividends and capital gains distributions
paid on shares of a Fund are assumed to have been reinvested when paid and the
maximum sales charges applicable to purchases of the Fund's shares are assumed
to have been paid.
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
the 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 the Fund's share price at the end of the
30-day period. This yield does not reflect gains or losses from selling
securities.
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 of 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, the Fund may separate its cumulative and average annual
total returns into income results and realized and unrealized gain or loss.
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.
Performance data may be included in any advertisement or sales literature
of a Fund. These advertisements may quote performance rankings or ratings of a
Fund by financial publications or independent organizations such as Lipper
Analytical Services, Inc. and Morningstar, Inc. or may compare a Fund's
performance to various indices. A 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 12-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 indicative of
future results.
In marketing the Funds' shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering
investment alternatives. The information provided to investors may also
include discussions of other Evergreen
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<PAGE>
funds, products, and services, which may include: retirement investing;
brokerage products and services; the effects of periodic investment plans and
dollar cost averaging; saving for college; and charitable giving. In addition,
the information provided to investors may quote financial or business
publications and periodicals, including model portfolios or allocations, as
they relate to fund management, investment philosophy, and investment
techniques. EDI may also reprint, and use as advertising and sales literature,
articles from Evergreen Events, a quarterly magazine provided to Evergreen
fund shareholders.
Year 2000 Risks. Like other investment companies, financial and business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the Funds' investment advisers and
the Funds' other service providers do not properly process and calculate date-
related information and data from and after January 1, 2000. This is commonly
known as the "Year 2000 Problem." The Funds' investment advisers are taking
steps to address the Year 2000 Problem with respect to the computer systems
that they use and to obtain assurances that comparable steps are being taken
by the Funds' other major service providers. At this time, however, there can
be no assurance that these steps will be sufficient to avoid any adverse
impact on the Funds.
Additional Information. This prospectus and the SAI, which has been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statement filed by the Trust with the SEC under the
Securities Act of 1933, as amended. Copies of the Registration Statement may
be obtained at a reasonable charge from the SEC or may be examined, without
charge, at the offices of the SEC in Washington, D.C.
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INVESTMENT ADVISER
First Union National Bank, 201 South College Street, Charlotte, North Carolina
28288
Keystone Investment Management Company, 200 Berkeley Street, Boston,
Massachusetts 02116-5034
CUSTODIAN
State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827
TRANSFER AGENT
Evergreen Service Company, P.O. Box 2121, Boston, Massachusetts, 02116-5034
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110
DISTRIBUTOR
Evergreen Distributor, Inc., 125 West 55th Street, New York, New York 10019
<PAGE>
EVERGREEN MUNICIPAL TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 633-2700
EVERGREEN STATE MUNICIPAL BOND FUNDS
STATEMENT OF ADDITIONAL INFORMATION
August 1, 1998
Evergreen California Tax Free Fund (the "California Fund")
Evergreen Massachusetts Tax Free Fund (the "Massachusetts Fund")
Evergreen Missouri Tax Free Fund (the "Missouri Fund")
Evergreen New York Tax Free Fund (the "New York Fund")
Evergreen Pennsylvania Tax Free Fund (the "Pennsylvania Fund")
Evergreen Connecticut Municipal Bond Fund (the "Connecticut Fund")
Evergreen New Jersey Tax Free Income Fund (the "New Jersey Fund")
(Each a "Fund"; together, the "Funds")
Each Fund is a series of an open-end management
investment company known as Evergreen
Municipal Trust (the "Trust").
This Statement of Additional Information ("SAI") pertains to all classes of
shares of the Funds listed above. It is not a prospectus and should be read in
conjunction with the prospectuses dated August 1, 1998 for the Fund in which you
are making or contemplating an investment. The Funds are offered through two
separate prospectuses: one offering Class A and Class B shares of each Fund and
Class C shares of each Fund except the Connecticut Fund and the New Jersey Fund,
and one offering Class Y shares of the New York Fund, the Pennsylvania Fund, the
Connecticut Fund and the New Jersey Fund. You may obtain either of these
prospectuses from Evergreen Distributor, Inc.
<PAGE>
TABLE OF CONTENTS
INVESTMENT POLICIES..........................................................3..
Fundamental Investment Policies.....................................3..
Additional Information on Securities and Investment Practices.......5
MANAGEMENT OF THE TRUST......................................................12
PRINCIPAL HOLDERS OF FUND SHARES.............................................15
INVESTMENT ADVISORY AND OTHER SERVICES.......................................21
Investment Advisers.................................................21.
Investment Advisory Agreements......................................22
Distributor.........................................................22.
Distribution Plans and Agreements...................................23
Additional Service Providers........................................24
BROKERAGE....................................................................25
Selection of Brokers..............................................25
Brokerage Commissions...............................................25.
General Brokerage Policies..........................................26.
TRUST ORGANIZATION...........................................................26.
Form of Organization................................................26.
Description of Shares...............................................26
Voting Rights.......................................................26.
Limitation of Trustees' Liability...................................27.
PURCHASE, REDEMPTION AND PRICING OF SHARES...................................27
How the Funds Offer Shares to the Public............................27
Contingent Deferred Sales Charge....................................28.
Sales Charge Waivers or Reductions..................................29.
Exchanges...........................................................31.
Calculation of Net Asset Value Per Share ("NAV") ...................31
Valuation of Portfolio Securities...................................31
Shareholder Services................................................31.
PRINCIPAL UNDERWRITER........................................................32.
ADDITIONAL TAX INFORMATION...................................................33
Requirements for Qualification as a Regulated Investment Company....33
Taxes on Distributions..............................................33.
Taxes on the Sale or Exchange of Fund Shares........................34
Other Tax Considerations............................................35.
FINANCIAL INFORMATION........................................................36.
ADDITIONAL INFORMATION.......................................................40.
APPENDIX A...................................................................A-1
APPENDIX B...................................................................B-1
APPENDIX C...................................................................C-1
APPENDIX D...................................................................D-1
APPENDIX E...................................................................E-1
APPENDIX F...................................................................F-1
APPENDIX G...................................................................G-5
APPENDIX H...................................................................H-1
APPENDIX I...................................................................I-1
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INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted the fundamental investment restrictions set forth
below which may not be changed without the vote of a majority of the Fund's
outstanding shares, as defined in the Investment Company Act of 1940 (the"1940
Act"). Where necessary, an explanation beneath a fundamental policy describes a
Fund's practices with respect to that policy, as allowed by current law. If the
law governing a policy change, the Fund's practices may change accordingly
without a shareholder vote. Unless otherwise stated, all references to the
assets of a Fund are in terms of current market value.
1. Diversification
Each Fund may not make any investment that is inconsistent with its
classification as a non-diversified investment company under the 1940 Act.
Further Explanation of Non-Diversified Funds:
All of the Funds are classified as "non-diversified". A non-diversified
management investment company may have no more than 25% of its total assets
invested in the securities (other than United States ("U.S.") government
securities or the shares of other regulated investment companies) of any one
issuer and must invest 50% of its total assets under the 5% of its assets and
10% of outstanding voting securities tests applicable to diversified Funds. The
test for diversified Funds requires that Fund cannot purchase securities of an
issuer if the purchase would cause more than 5% of the Fund's total assets taken
at market value to be invested in the securities of such issuer, except U.S.
government securities, or if the purchase would cause more than 10% of
outstanding voting securities of any one issuer to be held in the Fund's
portfolio. Most Funds apply this limitation to 75% of their total assets.
2. Concentration
Each Fund may not concentrate its investments in the securities of issuers
primarily engaged in any particular industry (other than securities that are
issued or guaranteed by the U.S. government or its agencies or
instrumentalities).
Further Explanation of Concentration Policy:
Each Fund may not invest more than 25% of its total assets, taken at market
value , in the securities of issuers primarily engaged in any particular
industry (other than securities issued or guaranteed by the U.S. government or
its agencies or instrumentalities).
3. Issuing Senior Securities
Except as permitted under the 1940 Act, each Fund may not issue senior
securities.
4. Borrowing
Each Fund may not borrow money, except to the extent permitted by
applicable law.
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Further Explanation of Borrowing Policy:
Each Fund may borrow from banks in an amount up to 33 1/3% of its total
assets, taken at market value. Each Fund may also borrow up to an additional 5%
of its total assets from banks or others. Each Fund may borrow only as a
temporary measure for extraordinary or emergency purposes such as the redemption
of Fund shares. A Fund will not purchase securities while borrowings are
outstanding except to exercise prior commitments and to exercise subscription
rights (as defined in the 1940 Act) or enter into reverse repurchase agreements,
in amounts up to 33 1/3% of its total assets (including the amount borrowed).
Each Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities. Each Fund may purchase
securities on margin and engage in short sales to the extent permitted by
applicable law.
5. Underwriting
Each Fund may not underwrite securities of other issuers, except insofar as
each Fund may be deemed to be an underwriter in connection with the disposition
of its portfolio securities.
6. Real Estate
Each Fund may not purchase or sell real estate, except that, to the extent
permitted by applicable law, each Fund may invest in (a) securities that are
directly or indirectly secured by real estate, or (b) securities issued by
issuers that invest in real estate.
7. Commodities
Each Fund may not purchase or sell commodities or contracts on commodities,
except to the extent that each Fund may engage in financial futures contracts
and related options and currency contracts and related options and may otherwise
do so in accordance with applicable law and without registering as a commodity
pool operator under the Commodity Exchange Act.
8. Lending
Each Fund may not make loans to other persons, except that each Fund may
lend its portfolio securities in accordance with applicable law. The acquisition
of investment securities or other investment instruments shall not be deemed to
be the making of a loan.
Further Explanation of Lending Policy:
To generate income and offset expenses, each Fund may lend portfolio
securities to broker-dealers and other financial institutions in an amount up to
33 1/3% of its total assets, taken at market value. While securities are on
loan, the borrower will pay each Fund any income accruing on the security. Each
Fund may invest any collateral it receives in additional portfolio securities,
such as U.S. Treasury notes, certificates of deposit, other high-grade,
short-term obligations or interest bearing cash equivalents. Gains or losses in
the market value of a security lent will affect each Fund and its shareholders.
When a Fund lends its securities, it will require the borrower to give the
Fund collateral in cash or government securities. Each Fund will require
collateral in an amount equal to at least 100% of the current market value of
the securities lent, including accrued interest. Each Fund has the right to call
a loan and obtain the securities lent any time on notice of not more than five
business days. Each Fund may pay reasonable fees in connection with such loans.
5
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9. Investment in Federally Tax Exempt Securities
Each Fund will, during periods of normal market conditions, invest its
assets in accordance with applicable guidelines issued by the Securities and
Exchange Commission or its staff concerning investment in tax-exempt securities
for funds with the words tax exempt, tax free or municipal in their names.
ADDITIONAL INFORMATION ON SECURITIES AND INVESTMENT PRACTICES
The investment objective of each Fund and a description of the securities
in which each Fund may invest is set forth in the Funds' prospectuses. The
following expands upon the discussion in the prospectuses regarding certain
investments of each Fund.
Municipal Bonds
The Funds may invest in municipal bonds of any state, territory or
possession of the U.S. including the District of Columbia. The Funds may also
invest in municipal bonds of any political subdivision, agency or
instrumentality (e.g., counties, cities, towns, villages, districts,
authorities) of the U.S. or its possessions. Municipal bonds are debt
instruments issued by or for a state or local government to support its general
financial needs or to pay for special projects such as airports, bridges,
highways, public transit, schools, hospitals, housing and water and sewer works.
Municipal bonds may also be issued to refinance public debt.
Municipal bonds are mainly divided between "general obligation" and
"revenue" bonds. General obligation bonds are backed by the full faith and
credit of governmental issuers with the power to tax. They are repaid from the
issuer's general revenues. Payment, however, may be dependent upon legislative
approval and may be subject to limitations on the issuer's taxing power.
Enforcement of payments due under general obligation bonds varies according to
the law applicable to the issuer. In contrast, revenue bonds are supported only
by the revenues generated by the project or facility.
The Funds may also invest in industrial development bonds. Such bonds are
usually revenue bonds issued to pay for facilities with a public purpose
operated by private corporations. The credit quality of industrial development
bonds is usually directly related to the credit standing of the owner or user of
the facilities. To qualify as a municipal bond, the interest paid on an
industrial development bond must qualify as fully exempt from federal income
tax. However, the interest paid on an industrial development bond may be subject
to the federal alternative minimum tax.
The yields on municipal bonds depend on such factors as market conditions,
the financial condition of the issuer and the issue's size, maturity date and
rating. Municipal bonds are rated by Standard & Poor's Ratings Group ("S&P"),
Moody's Investors Service ("Moody's") and Fitch IBCA, Inc. ("Fitch"). Such
ratings, however, are opinions, not absolute standards of quality. Municipal
bonds with the same maturity, interest rate and rating may have different
yields, while municipal bonds with the same maturity and interest rate, but
different ratings, may have the same yield. Once purchased by a Fund, a
municipal bond may cease to be rated or receive a new rating below the minimum
required for purchase by a Fund. Neither event would require a Fund to sell the
bond, but a Fund's Adviser (as defined later) would consider such events in
determining whether a Fund should continue to hold it.
6
<PAGE>
The ability of a Fund to achieve its investment objective depends upon the
continuing ability of issuers of municipal bonds to pay interest and principal
when due. Municipal bonds are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors. Such
laws extend the time for payment of principal and/or interest, and may otherwise
restrict a Fund's ability to enforce its rights in the event of default. Since
there is generally less information available on the financial condition of
municipal bond issuers compared to other domestic issuers of securities, a
Fund's investment adviser may lack sufficient knowledge of an issue's
weaknesses. Other influences, such as litigation, may also materially affect the
ability of an issuer to pay principal and interest when due. In addition, the
market for municipal bonds is often thin and can be temporarily affected by
large purchases and sales, including those by a Fund.
From time to time, Congress has considered restricting or eliminating the
federal income tax exemption for interest on municipal bonds. Such actions could
materially affect the availability of municipal bonds and the value of those
already owned by a Fund. If such legislation were passed, the Trust's Board of
Trustees may recommend changes in a Fund's investment objectives and policies or
dissolution of a Fund.
U.S. Government Securities
Each Fund may invest in securities issued or guaranteed by U.S. government
agencies or instrumentalities.
These securities are backed by (1) the discretionary authority of the U.S.
government to purchase certain obligations of agencies or instrumentalities or
(2) the credit of the agency or instrumentality issuing the obligations.
Some government agencies and instrumentalities may not receive financial
support from the U.S. government. Examples of such agencies are:
(i) Farm Credit System, including the National Bank for
Cooperatives, Farm Credit Banks and Banks for Cooperatives;
(ii) Farmers Home Administration;
(iii) Federal Home Loan Banks;
(iv) Federal Home Loan Mortgage Corporation;
(v) Federal National Mortgage Association; and
(vi) Student Loan Marketing Association.
Securities Issued by the Government National Mortgage Association ("GNMA")
The Funds may invest in securities issued by the GNMA, a corporation
wholly-owned by the U.S. government. GNMA securities or "certificates" represent
ownership in a pool of underlying mortgages. The timely payment of principal and
interest due on these securities is guaranteed.
7
<PAGE>
Unlike conventional bonds, the principal on GNMA certificates is not paid
at maturity but over the life of the security in scheduled monthly payments.
While mortgages pooled in a GNMA certificate may have maturities of up to 30
years, the certificate itself will have a shorter average maturity and less
principal volatility than a comparable 30-year bond.
The market value and interest yield of GNMA certificates can vary due not
only to market fluctuations, but also to early prepayments of mortgages within
the pool. Since prepayment rates vary widely, it is impossible to accurately
predict the average maturity of a GNMA pool. In addition to the guaranteed
principal payments, GNMA certificates may also make unscheduled principal
payments resulting from prepayments on the underlying mortgages.
Although GNMA certificates may offer yields higher than those available
from other types of U.S. government securities, they may be less effective as a
means of locking in attractive long-term rates because of the prepayment
feature. For instance, when interest rates decline, prepayments are likely to
increase as the holders of the underlying mortgages seek refinancing. As a
result, the value of a GNMA certificate is not likely to rise as much as the
value of a comparable debt security would in response to the same decline. In
addition, these prepayments can cause the price of a GNMA certificate originally
purchased at a premium to decline in price compared to its par value, which may
result in a loss.
Virgin Islands, Guam and Puerto Rico
Each Fund may invest in obligations of the governments of the Virgin
Islands, Guam and Puerto Rico to the extent such obligations are exempt from the
income or intangibles taxes, as applicable, of the state for which a Fund is
named. Each Fund does not presently intend to invest more than (a) 5% of its net
assets in the obligations of each of the Virgin Islands and Guam or (b) 25% of
its net assets in the obligations of Puerto Rico. Accordingly, a Fund may be
adversely affected by local political and economic conditions and developments
within the Virgin Islands, Guam and Puerto Rico affecting the issuers of such
obligations.
When-Issued, Delayed-Delivery and Forward Commitment Transactions
The Funds may purchase securities on a when-issued or delayed delivery
basis and may purchase or sell securities on a forward commitment basis.
Settlement of such transactions normally occurs within a month or more after the
purchase or sale commitment is made.
The Funds may purchase securities under such conditions only with the
intention of actually acquiring them, but may enter into a separate agreement to
sell the securities before the settlement date. Since the value of securities
purchased may fluctuate prior to settlement, a Fund may be required to pay more
at settlement than the security is worth. In addition, the purchaser is not
entitled to any of the interest earned prior to settlement.
Upon making a commitment to purchase a security on a when-issued, delayed
delivery or forward commitment basis, a Fund will hold liquid assets worth at
least the equivalent of the amount due. The liquid assets will be monitored on a
daily basis and adjusted as necessary to maintain the necessary value.
Purchases made under such conditions are a form of leveraging and may
involve the risk that yields secured at the time of commitment may be lower than
otherwise available by the time settlement takes place, causing an unrealized
loss to a Fund. In addition, when a Fund engages in such purchases, it relies on
the other party to consummate the sale. If the other party fails to
8
<PAGE>
perform its obligations, a Fund may miss the opportunity to obtain a security at
a favorable price or yield.
Repurchase Agreements
The Funds may enter into repurchase agreements with entities that are
registered as U.S. government securities dealers, including member banks of the
Federal Reserve System having at least $1 billion in assets, primary dealers in
U.S. government securities or other financial institutions believed by the
Adviser to be creditworthy. In a repurchase agreement, a Fund obtains a security
and simultaneously commits to return the security to the seller at a set price
(including principal and interest) within a period of time usually not exceeding
seven days. The resale price reflects the purchase price plus an agreed upon
market rate of interest which is unrelated to the coupon rate or maturity of the
underlying security. A repurchase agreement involves the obligation of the
seller to pay the agreed upon price, which obligation is in effect secured by
the value of the underlying security.
The Funds' custodian or a third party will take possession of the
securities subject to repurchase agreements, and these securities will be marked
to market daily. To the extent that the original seller does not repurchase the
securities from a Fund, a Fund could receive less than the repurchase price on
any sale of such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by a Fund
might be delayed pending court action. Each Fund's Adviser believes that under
the regular procedures normally in effect for custody of a Fund's portfolio
securities subject to repurchase agreements, a court of competent jurisdiction
would rule in favor of a Fund and allow retention or disposition of such
securities. The Funds will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker-dealers, which are
deemed by the Adviser to be creditworthy pursuant to guidelines established by
the Board of Trustees.
Reverse Repurchase Agreements
As described herein, the Funds may also enter into reverse repurchase
agreements. These transactions are similar to borrowing cash. In a reverse
repurchase agreement, a Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in return
for a percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable a Fund to avoid selling
portfolio instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not ensure that
the Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
Options
Each Fund may buy or sell (i.e., write) put and call options on securities
it holds or intends to acquire. The Funds may also buy and sell options on
financial futures contracts. Each Fund will use options as a hedge against
decreases or increases in the value of securities it holds or intends
9
<PAGE>
to acquire. The Funds may purchase put and call options for the purpose of
offsetting previously written put and call options of the same series.
The Funds may write only covered options. With regard to a call option,
this means that a Fund will own, for the life of the option, the securities
subject to the call option. Each Fund will cover put options by holding, in a
segregated account, liquid assets having a value equal to or greater than the
price of securities subject to the put option. If a Fund is unable to effect a
closing purchase transaction with respect to the covered options it has sold, it
will not be able to sell the underlying securities or dispose of assets held in
a segregated account until the options expire or are exercised.
Futures Transactions
Each Fund may enter into financial futures contracts and write options on
such contracts. Each Fund intends to enter into such contracts and related
options for hedging purposes. Each Fund will enter into futures contracts on
securities or index-based futures contracts in order to hedge against changes in
interest or exchange rates or securities prices. A futures contract on
securities is an agreement to buy or sell securities at a specified price during
a designated month. A futures contract on a securities index does not involve
the actual delivery of securities, but merely requires the payment of a cash
settlement based on changes in the securities index. A Fund does not make
payment or deliver securities upon entering into a futures contract. Instead, it
puts down a margin deposit, which is adjusted to reflect changes in the value of
the contract and which continues until the contract is terminated.
Each Fund may sell or purchase futures contracts. When a futures contract
is sold by a Fund, the value of the contract will tend to rise when the value of
the underlying securities declines and to fall when the value of such securities
increases. Thus, each Fund would sell futures contracts in order to offset a
possible decline in the value of its securities. If a futures contract is
purchased by a Fund, the value of the contract will tend to rise when the value
of the underlying securities increases and to fall when the value of such
securities declines. Each Fund intends to purchase futures contracts in order to
establish what is believed by the Adviser to be a favorable price and rate of
return for securities a Fund intends to purchase.
Each Fund also intends to purchase put and call options on futures
contracts for hedging purposes. A put option purchased by a Fund would give it
the right to assume a position as the seller of a futures contract. A call
option purchased by a Fund would give it the right to assume a position as the
purchaser of a futures contract. The purchase of an option on a futures contract
requires a Fund to pay a premium. In exchange for the premium, a Fund becomes
entitled to exercise the benefits, if any, provided by the futures contract, but
is not required to take any action under the contract. If the option cannot be
exercised profitably before it expires, a Fund's loss will be limited to the
amount of the premium and any transaction costs.
Each Fund may enter into closing purchase and sale transactions in order to
terminate a futures contract and may sell put and call options for the purpose
of closing out its options positions. A Fund's ability to enter into closing
transactions depends on the development and maintenance of a liquid secondary
market. There is no assurance that a liquid secondary market will exist for any
particular contract or at any particular time. As a result, there can be no
assurance that a Fund will be able to enter into an offsetting transaction with
respect to a particular contract at a particular time. If a Fund is not able to
enter into an offsetting transaction, the Fund will continue to be required to
maintain the margin deposits on the contract and to complete the contract
according to its terms, in which case it would continue to bear market risk on
the transaction.
10
<PAGE>
Although futures and options transactions are intended to enable a Fund to
manage market, interest rate or exchange rate risk, unanticipated changes in
interest rates or market prices could result in poorer performance than if it
had not entered into these transactions. Even if the Adviser correctly predicts
interest rate movements, a hedge could be unsuccessful if changes in the value
of a Fund's futures position did not correspond to changes in the value of its
investments. This lack of correlation between a Fund's futures and securities
positions may be caused by differences between the futures and securities
markets or by differences between the securities underlying a Fund's futures
position and the securities held by or to be purchased for a Fund. Each Fund's
Adviser will attempt to minimize these risks through careful selection and
monitoring of the Fund's futures and options positions.
The Funds do not intend to use futures transactions for speculation or
leverage. Each Fund has the ability to write options on futures, but currently
intends to write such options only to close out options purchased by the Fund.
Each Fund will not change these policies without supplementing the information
in the prospectuses and SAI.
Each Fund will not maintain open positions in futures contracts it has sold
or call options it has written on futures contracts if, in the aggregate, the
value of the open positions (marked to market) exceeds the current market value
of its securities portfolio plus or minus the unrealized gain or loss on those
open positions, adjusted for the correlation of volatility between the hedged
securities and the futures contracts. If this limitation is exceeded at any
time, each Fund will take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within this
limitation.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, the Funds do not pay or receive
money upon the purchase or sale of a futures contract. Rather, each Fund is
required to deposit an amount of "initial margin" in cash or U.S. Treasury bills
with its custodian (or the broker, if legally permitted). The nature of initial
margin in futures transactions is different from that of margin in securities
transactions in that futures contract initial margin does not involve the
borrowing of funds by a Fund to finance the transactions. Initial margin is in
the nature of a performance bond or good faith deposit on the contract which is
returned to a Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.
A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day, a Fund pays or
receives cash, called "variation margin," equal to the daily change in value of
the futures contract. This process is known as "marking to market". Variation
margin does not represent a borrowing or loan by a Fund but is instead a
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing its daily net asset value, a Fund
will mark-to-market its open futures positions. Each Fund is also required to
deposit and maintain margin when it writes call options on futures contracts.
Below Investment Grade Bonds
Each Fund may invest up to 20% of its assets in lower rated bonds but will
not invest in bonds rated below B. (For more information about bond ratings, see
Appendices H and I.) Bonds rated below BBB by S&P or Fitch or below Baa by
Moody's, commonly known as "junk bonds,"
11
<PAGE>
offer high yield, but also high risk. While investments in junk bonds provide
opportunities to maximize return over time, they are considered predominantly
speculative with respect to the ability of the issuer to meet principal and
interest payments. Investors should be aware of the following risks:
(1) The lower ratings of junk bonds reflect a greater possibility that
adverse changes in the financial condition of the issuer or in general economic
conditions, or both, or an unanticipated rise in interest rates may impair the
ability of the issuer to make payments of interest and principal, especially if
the issuer is highly leveraged. Such issuer's ability to meet its debt
obligations may also be adversely affected by the issuer's inability to meet
specific forecasts or the unavailability of additional financing. Also, an
economic downturn or an increase in interest rates may increase the potential
for default by the issuers of these securities.
(2) The value of junk bonds may be more susceptible to real or perceived
adverse economic or political events than is the case for higher quality
municipal bonds.
(3) The value of junk bonds, like that of other fixed income securities,
fluctuates in response to changes in interest rates, generally rising when
interest rates decline and falling when interest rates rise. For example, if
interest rates increase after a fixed income security is purchased, the
security, if sold prior to maturity, may return less than its cost. The prices
of junk bonds, however, are generally less sensitive to interest rate changes
than the prices of higher-rated bonds, but are more sensitive to news about an
issuer or the economy which is, or investors perceive as, negative.
(4) The secondary market for junk bonds may be less liquid at certain times
than the secondary market for higher quality bonds, which may adversely effect
(a) the bond's market price, (b) a Fund's ability to sell the bond, and (c) a
Fund's ability to obtain accurate market quotations for purposes of valuing its
assets.
Illiquid and Restricted Securities
Each Fund may not invest more than 15% of its net assets in securities that
are illiquid. A security is illiquid when a Fund cannot dispose of it in the
ordinary course of business within seven days at approximately the value at
which the Fund has the investment on its books.
Each Fund may invest in "restricted" securities, i.e., securities subject
to restrictions on resale under federal securities laws. Rule 144A under the
Securities Act of 1933 ("Rule 144A") allows certain restricted securities to be
traded freely among qualified institutional investors. Since Rule 144A
securities may have limited markets, the Board of Trustees will determine
whether such securities should be considered illiquid for the purpose of
determining a Fund's compliance with the limit on illiquid securities indicated
above. In determining the liquidity of Rule 144A securities, the Trustees will
consider: (1) the frequency of trades and quotes for the security; (2) the
number of dealers willing to purchase or sell the security and the number of
other potential buyers; (3) dealer undertakings to make a market in the
security; and (4) the nature of the security and the nature of the marketplace
trades.
12
<PAGE>
Investment in Other Investment Companies
Each Fund may purchase the shares of other investment companies to the
extent permitted under the 1940 Act. Currently, each Fund may not: (1) own more
than 3% of the outstanding voting stock of another investment company; (2)
invest more than 5% of its assets in any single investment company; and (3)
invest more than 10% of its assets in investment companies. However, each Fund
may invest all of its investable assets in securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and limitations as the Fund.
Short Sales
Each Fund may not make short sales of securities or maintain a short
position unless, at all times when a short position is open, it owns an equal
amount of such securities or of securities which, without payment of any further
consideration, are convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short. Each Fund may
effect a short sale in connection with an underwriting in which a Fund is the
participant.
MANAGEMENT OF THE TRUST
Set forth below are the Trustees and officers of the Trust and their
principal occupations and some of their affiliations over the last five years.
Unless otherwise indicated, the address for each Trustee and officer is 200
Berkeley Street, Boston, Massachusetts 02116. Each Trustee is also a Trustee of
each of the other Trusts in the Evergreen Fund complex.
<TABLE>
<CAPTION>
<S> <C> <C>
Name Position with Trust Principal Occupations for Last Five Years
- ------------------------------- -------------------------- -------------------------------------------------------------
Laurence B. Ashkin Trustee Real estate developer and construction consultant;
(DOB: 2/2/28) and President of Centrum Equities and Centrum
Properties, Inc.
Charles A. Austin III Trustee Investment Counselor to Appleton Partners, Inc.;
(DOB: 10/23/34) and former Managing Director, Seaward
Management
Company (investment advice).
K. Dun Gifford Trustee Trustee, Treasurer and Chairman of the Finance
(DOB: 10/12/38) Committee, Cambridge College; Chairman Emeritus
and Director, American Institute of Food and Wine; Chairman
and President, Oldways Preservation and Exchange Trust
(education); former Chairman of the Board, Director,and
Executive Vice President, The London Harness Company; former
Managing Partner, Roscommon Capital Corp.; former Chief
Executive Officer, Gifford Gifts of Fine Foods; and former
Chairman, Gifford, Drescher & Associates (environmental
consulting).
James S. Howell Chairman of the Former Chairman of the Distribution Foundation for
(DOB: 8/13/24) Board of Trustees the Carolinas; and former Vice President of Lance
Inc. (food manufacturing).
12
<PAGE>
Name Position with Trust Principal Occupations for Last Five Years
- ------------------------------- -------------------------- -------------------------------------------------------------
Leroy Keith, Jr. Trustee Chairman of the Board and Chief Executive Officer, Carson
Products Company; Director of Phoenix Total Return Fund and
Equifax, Inc.; Trustee of Phoenix Series Fund, Phoenix
Multi-Portfolio Fund, and The Phoenix Big Edge Series Fund; and
former President, Morehouse College.
Gerald M. McDonnell Trustee Sales Representative with Nucor-Yamoto, Inc.
(DOB: 7/14/39) (steel producer).
Thomas L. McVerry Trustee Former Vice President and Director of Rexham
(DOB: 8/2/39) Corporation; and former Director of Carolina
Cooperative Federal Credit Union.
William Walt Pettit Trustee Partner in the law firm of William Walt Pettit, P.A.
(DOB: 8/26/55)
David M. Richardson Trustee Vice Chair and former Executive Vice President,
(DOB: 9/14/41) DHR International, Inc. (executive recruitment);
former Senior Vice President, Boyden International
Inc. (executive recruitment); and Director,
Commerce and Industry Association of New
Jersey, 411 International, Inc., and J&M Cumming Paper Co.
Russell A. Salton, III MD Trustee Medical Director, U.S. Health Care/Aetna Health
(DOB: 6/2/47) Services; former Managed Health Care Consultant;
and former President, Primary Physician Care.
Michael S. Scofield Trustee Attorney, Law Offices of Michael S. Scofield.
(DOB: 2/20/43)
Richard J. Shima Trustee Former Chairman, Environmental Warranty, Inc.
(DOB: 8/11/39) (insurance agency); Executive Consultant, Drake
Beam Morin, Inc. (executive outplacement); Director of
Connecticut Natural Gas Corporation, Hartford Hospital, Old
State House Association, Middlesex Mutual Assurance Company,
and Enhance Financial Services, Inc.; Chairman, Board of
Trustees, Hartford Graduate Center; Trustee, Greater Hartford
YMCA; former Director, Vice Chairman and Chief Investment
Officer, The Travelers Corporation; former Trustee, Kingswood-0
Oxford School; and former Managing Director and Consultant,
Russell Miller, Inc.
William J. Tomko* President and Senior Vice President and Operations Executive,
(DOB:8/30/58) Treasurer BISYS Fund Services.
13
<PAGE>
Name Position with Trust Principal Occupations for Last Five Years
- ------------------------------- -------------------------- -------------------------------------------------------------
Nimish S. Bhatt* Vice President and Vice President, Tax, BISYS Fund Services; former
(DOB: 6/6/63) Assistant Treasurer Assistant Vice President, Evergreen Asset Management
Corp./First Union Bank; former Senior Tax Consulting/Acting
Manager, Investment Companies Group, Price Waterhouse LLP, NY.
Bryan Haft* Vice President Team Leader, Fund Administration, BISYS Fund
(DOB: 1/23/65) Services
D'Ray Moore* Secretary Vice President, Client Services, BISYS Fund
(DOB: 3/30/59) Services
*Address: BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219-8001
</TABLE>
Trustee Compensation
Listed below is the Trustee compensation for the fiscal year ended March
31, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Trustee Aggregate Total Compensation from Deferred
Compensation Trust and Fund Complex Paid Compensation of
from Trust to Trustees Trustees
Laurence B. Ashkin $719.99 $72,681.15 N/A
Charles A. Austin, III $515.24 $49,296.64 $7,394.50
K. Dun Gifford $470.40 $46,060.91 N/A
James S. Howell $819.17 $109,570.07 N/A
Leroy Keith Jr. $498.25 $46,461.22 N/A
Gerald M. McDonnell $767.65 $94,500.33 $94,500.33
Thomas L. McVerry $774.27 $96,804.62 $96,804.62
William Walt Pettit $712.41 $86,612.76 $86,612.76
David M. Richardson $509.42 $48,673.36 N/A
Russell A. Salton, III $738.01 $95,030.64 $95,030.64
Michael S. Scofield $760.29 $97,793.88 N/A
Richard J. Shima $525.80 $67,324.78 N/A
Robert J. Jeffries* $143.04 $18,222.42 N/A
Foster Bam* $435.65 $53,235.54 N/A
</TABLE>
*Former Trustee; retired as of December 31, 1997
14
<PAGE>
PRINCIPAL HOLDERS OF FUND SHARES
As of the date of this SAI, the officers and Trustees of the Trust owned as
a group less than 1% of the outstanding shares of any class of each Fund.
Set forth below is information with respect to each person who, to each
Fund's knowledge, owned beneficially or of record more than 5% of the
outstanding shares of any class of each fund as of June 30, 1998.
California Fund Class A
Peter Bodman and Frances 14.927%
Bodman Ttees
Bodman Family Trust
1325 Pinetree Drive
Frazier Park, CA 93225
MLPF&S for the Sole Benefit of 6.142%
its Customers
4800 Deer Lake Drive E 2nd Flr
Jacksonville, FL 32246
Billie Cheek and Irmgard Cheek 5.769%
Ttees
Cheek Family Trust
PO Box1041
Palm Desert, CA 92261
California Fund Class B
MLPF&S for the Sole Benefit of 17.533%
its Customers
4800 Deer Lake Drive E 2nd Flr
Jacksonville, FL 32246
California Fund Class C
MLPF&S for the Sole Benefit of 36.825%
its Customers
4800 Deer Lake Drive E 2nd Flr
Jacksonville, FL 32246
Victor Edward Rylander 10.525%
Lucille Rylander Co-ttees
Victor & Lucille Rylander Trust
4102 Caflur Ave
San Diego, CA 92117
15
<PAGE>
Prudential Securities FBO 6.961%
Rakesh C Gupta
Neelam Gupta Co-ttees
FBO Gupta Family Living Trust
Hemet, CA 92544
NFSC FEBO # OKS-714674 6.460%
Rozene L Kretz
776 Lawrence Drive
Gilroy, GA 95020
Smith Barney Inc 6.268%
388 Greenwich Street
New York, NY 10013
Richard B Smith 5.89%
Mary L Smith JT WROS
4853 MT Royal Court
San Diego, CA 92117
Massachusetts Fund Class A
Richard Nakashian 10.208%
PO Box 3150
Pocasset, MA 02559
Margaret Vogel 9.027%
Keystone Trust Company Trustee
c/o Youville Place
10 Pelham Road #306
Lexington, MA 02173
Ida R. Rodriguez 7.931%
Keystone Trust Company Trustee
58 Helen Road
Needham, MA 02192
Bertha M Beauchemin 6.924%
Keystone Trust Company Trustee
c/o Youville Place
10 Pelham Road #306
Lexington, MA 02173
Frank J. Pusateri and Helen C 6.016%
Pusateri Ttees
Pusateri Family Trust
1682 Dawes Road NE
Palm Bay, FL 32905
Ralph J Spuehler Jr and Sarah E 5.987%
Spuehler JT TEN
36 Bridle Path
Sudbury, MA 01776
Marion E Taylor Ttee 5.603%
Marion E Taylor Trust
10 Longwood Drive Apt 305
Westwood, MA 02090
16
<PAGE>
Massachusetts Fund Class C
Salvatore M Moscarello 8.65%
Irene A Moscarello JT TEN
24 Van Norden Road
Reading, MA 01867
Malcolm F Groves & Jean N 6.652%
Groves Ttees Malcolm F Groves
Rev Living Trust
80 Indian Hill Road
Cummaquid, MA 02367
William Ripley c/o Eastern 5.588%
Environmental Services Inc
45 Accord Park Drive
Norell, MA 02061
Jean J Shaughnessey & Paul F 5.371%
Shaughnessey JT TEN
76 Parkhurst Drive
Westford, MA 01886
John Pierce and Marie Pierce 5.357%
JT TEN
424 King's Town Way
Duxbury, MA 02332
Missouri Fund Class A
MLPF&S for the Sole Benefit of 47.973%
its Customers
4800 Deer Lake Drive E 2nd Flr
Jacksonville, FL 32246
Missouri Fund Class B
MLPF&S for the Sole Benefit of 29.178%
its Customers
4800 Deer Lake Drive E 2nd Flr
Jacksonville, FL 32246
Missouri Fund Class C
MLPF&S for the Sole Benefit of 23.222%
its Customers
4800 Deer Lake Drive E 2nd Flr
Jacksonville, FL 32246
Painewebber for the benefit of 20.266%
Dorothy K Pruett Trustee
Dorothy K Pruett Revocable
c/o Mid America Mortgage
8645 College Blvd
Overland Park, KS 66210
17
<PAGE>
Felicia L Bart 5.862%
Vern E Alexander JT WROS
6501 Twin Springs Road
Parkville, MO 64152
Robert L Beckmann 5.776%
Carol A Beckmann JT TEN
940 Sherman Lane
Florissant , MO 63031
Painewebber for the benefit of 5.031%
Joseph Henry Children Trust
Edwin C Hogueland Ttee
Donnelly Meiners Jordan Kline
4600 Madison Suite 1100
Kansas City, MO 64112
New York Fund Class A
MLPF&S for the Sole Benefit of 6.889%
its Customers
4800 Deer Lake Drive E 2nd Flr
Jacksonville, FL 32246
Prudential Securities Inc FBO 5.524%
Ms Sandra M Franck
c/o Ragtime #3
214 W 43rd ST
New York, NY 10036
New York Fund Class B
MLPF&S for the Sole Benefit of 13.138%
its Customers
4800 Deer Lake Drive E 2nd Flr
Jacksonville, FL 32246
New York Fund Class C
Bear Stearns Securities Corp 16.729%
FBO 626 60277 10
1 Metrotech Center North
Brooklyn, NY 11201
Carol T Whitman 13.250%
PO Box 43
Whippleville, NY 12995
Carol L Moore 9.903%
Rt 2 Box 1055
Chateaugay, NY 12920
MLPF&S for the Sole Benefit of 6.933%
its Customers
4800 Deer Lake Drive E 2nd Flr
Jacksonville, FL 32246
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<PAGE>
Henry W Demoy JT WROS 6.231%
Patricia K Demoy JT WROS
Rd 2 King Road
Cambridge, NY 12816
Pennsylvania Fund Class A
MLPF&S for the Sole Benefit of 5.061%
its Customers
4800 Deer Lake Drive E 2nd Flr
Jacksonville, FL 32246
Pennsylvania Fund Class B
MLPF&S for the Sole Benefit of 10.003%
its Customers
4800 Deer Lake Drive E 2nd Flr
Jacksonville, FL 32246
Pennsylvania Fund Class C
MLPF&S for the Sole Benefit of 23.082%
its Customers
4800 Deer Lake Drive E 2nd Flr
Jacksonville, FL 32246
Pennsylvania Fund Class Y
First Union Natl Bank 98.730%
BK/EB/INT Cash Acct
Attn Trust Oper Fd Grp
401 S Tryon Street 3rd flr
CMG 1151
Charlotte, NC 28202
Connecticut Fund Class A
First Union Brokerage Services 38.615%
Crown Realty LLC
PO Box 2-224 Devon Station
Milford, CT 06460
Rose Santoro 26.660%
Bruce A McEntee JTWROS
19 Mitchell Ave
Waterbury, CT 06460
First Union Brokerage Services 16.179%
FBO Catharina Vandestadt
201 S College 5th floor
Charlotte, NC 28202
Bertram M Metter 13.251%
41 Nutmeg Drive
Greenwich, CT 06831
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<PAGE>
Connecticut Fund Class B
First Union Brokerage Services 54.115%
Stewart Monroe Jr
92 Silver Spring Road
Wilton, CT 06897
First Union Brokerage Services 19.733%
Kathleen K Delaney
14 Smoke Hill Road
Stamford, CT 06903
First Union Brokerage Services 10.950%
FBO Henry F Goetz
201 S College 5th floor
Charlotte, NC 28202
First Union Brokerage Services 6.833%
William A Cotter
68 St Andrews Ave
East Haven, CT 06512
Connecticut Fund Class Y
First Union Natl Bank 99.834%
BK/EB/INT Cash Acct
Attn Trust Oper Fd Grp
401 S Tryon Street 3rd flr
CMG 1151
Charlotte, NC 28202
New Jersey Fund Class Y
First Union Natl Bank 96.536%
Trust Accounts
Attn Ginny Batten
401 S Tryon Street 3rd flr
CMG 1151
Charlotte, NC 28202
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISERS
The investment adviser (an "Adviser") to the California Fund, the
Massachusetts Fund, the Missouri Fund, the New York Fund, and the Pennsylvania
Fund is Keystone Investment Management Company ("Keystone"), 200 Berkeley
Street, Boston, Massachusetts, 02116-5034, a subsidiary of First Union National
Bank ("FUNB"), 201 South College Street, Charlotte, North Carolina 28288-0630.
FUNB is a subsidiary of First Union Corporation ("First Union"), a bank holding
company headquartered at 301 South College Street, Charlotte, North Carolina
28288- 0630. First Union and its subsidiaries provide a broad range of financial
services to individuals and businesses throughout the United States. Each Fund
pays Keystone a fee for its services at the
20
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annual rate set forth below:
Aggregate Net
Asset Value
of the Shares
Management Fee of the Fund
- ------------------------------- ------------------------------
0.55% of the first $ 50,000,000, plus
0.50% of the next $ 50,000,000, plus
0.45% of the next $100,000,000, plus
0.40% of the next $100,000,000, plus
0.35% of the next $100,000,000, plus
0.30% of the next $100,000,000, plus
0.25% of amounts over $500,000,000.
The Adviser's fee is computed as of the close of business each business day and
payable monthly.
The investment adviser (also an "Adviser") to the Connecticut Fund and
to the New Jersey Fund is the Capital Management Group ("CMG") of FUNB. The
Connecticut Fund pays CMG a fee for its services at the annual rate of 0.60% of
the average daily net assets. The New Jersey Fund pays CMG a fee for its
services at the annual rate set forth below:
Aggregate Net
Asset Value
of the Shares
Management Fee of the Fund
- ------------------------------- ------------------------------
0.50 of 1% the first $ 500,000,000, plus
0.45 of 1% the next $ 500,000,000, plus
0.40 of 1% of amounts over $1,000,000,000, plus
0.35 of 1% of amounts over $1,500,000,000
computed as of the close of business on each business day.
INVESTMENT ADVISORY AGREEMENTS
On behalf of each of its Funds, the Trust has entered into an investment
advisory agreement with each Adviser (the "Advisory Agreements"). Under the
Advisory Agreements, and subject to the supervision of the Trust's Board of
Trustees, each Adviser furnishes to the appropriate Fund investment advisory,
management and administrative services, office facilities, and equipment in
connection with its services for managing the investment and reinvestment of the
Fund's assets. The Adviser pays for all of the expenses incurred in connection
with the provision of its services. Each Fund pays for all charges and expenses,
other than those specifically referred to as being borne by the Adviser,
including, but not limited to: (1) custodian charges and expenses; (2)
bookkeeping and auditors' charges and expenses; (3) transfer agent charges and
expenses; (4) fees and expenses of Independent Trustees (Trustees who are not
interested persons of a Fund as defined in the 1940 Act); (5) brokerage
commissions, brokers' fees and expenses; (6) issue and transfer taxes; (7) costs
and expenses under the Distribution Plan (as applicable); (8) taxes and trust
fees payable to governmental agencies; (9) the cost of share certificates; (10)
fees and expenses of the registration and qualification of such Fund and its
shares with the Securities and
21
<PAGE>
Exchange Commission ("SEC") or under state or other securities laws; (11)
expenses of preparing, printing and mailing prospectuses, SAIs, notices, reports
and proxy materials to shareholders of such Fund; (12) expenses of shareholders'
and Trustees' meetings; (13) charges and expenses of legal counsel for such Fund
and for the Independent Trustees of the Trust on matters relating to such Fund;
(14) charges and expenses of filing annual and other reports with the SEC and
other authorities; and (15) all extraordinary charges and expenses of such Fund.
(See also the section entitled "Financial Information.")
Each Advisory Agreement continues in effect for two years from its
effective date and, thereafter, from year to year only if approved at least
annually by the Board of Trustees of the Trust or by a vote of a majority of
each Fund's outstanding shares. In either case, the terms of the Advisory
Agreement and continuance thereof must be approved by the vote of a majority of
the Independent Trustees cast in person at a meeting called for the purpose of
voting on such approval. The Advisory Agreements may be terminated, without
penalty, on 60 days' written notice by the Trust's Board of Trustees or by a
vote of a majority of outstanding shares. Each Advisory Agreement will terminate
automatically upon its "assignment" as that term is defined in the 1940 Act.
Transactions Among Advisory Affiliates
The Trust has adopted procedures pursuant to Rule 17a-7 under the 1940 Act
("Rule 17a-7 Procedures"). The Rule 17a-7 Procedures permit a Fund to buy or
sell securities from another investment company for which a subsidiary of First
Union is an investment adviser. The Rule 17a-7 Procedures also allow the Funds
to buy or sell securities from other advisory clients for whom a subsidiary of
First Union is an investment adviser. The Funds may engage in such transactions
if they are equitable to each participant and consistent with each participant's
investment objective.
DISTRIBUTOR
Evergreen Distributor, Inc. (the "Distributor") markets the Funds through
broker-dealers and other financial representatives. Its address is 125 W. 55th
Street, New York, NY 10019.
DISTRIBUTION PLANS AND AGREEMENTS
Distribution fees are accrued daily and paid monthly on Class A, Class B
and Class C shares and are charged as class expenses, as accrued. The
distribution fees attributable to the Class B and Class C shares are designed to
permit an investor to purchase such shares through broker-dealers without the
assessment of a front-end sales charge, 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 are
the same as those of the front-end 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.
The National Association of Securities Dealers, Inc. ("NASD") limits the
amount that a mutual fund may pay annually in distribution costs for sale of its
shares and shareholder service fees. The NASD limits annual expenditures to
1.00% of the aggregate average daily net asset value of its shares, of which
0.75% may be used to pay such distribution costs and 0.25% may be used to pay
shareholder services fees. The NASD also limits the aggregate amount that a Fund
may pay for such distribution costs to 6.25% of gross share sales since the
inception of the
22
<PAGE>
distribution plan, plus interest at the prime rate plus 1.00% on such amounts
remaining unpaid from time to time.
Under the Rule 12b-1 Distribution Plans that have been adopted by each Fund
with respect to each of its Class A and Class B shares, as well as Class C
shares (except in the case of the Connecticut Fund and the New Jersey Fund,
(each a "Plan" and collectively, the "Plans"), the Treasurer of each Fund
reports the amounts expended under the Plans and the purposes for which such
expenditures were made to the Trustees of the Trust for their review on a
quarterly basis. Also, each Plan provides that the selection and nomination of
the Independent Trustees are committed to the discretion of such Independent
Trustees then in office.
Each Adviser may from time to time from its own funds or such other
resources as may be permitted by rules of the SEC 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.
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 of the Trust or by vote of the
holders of a majority of the outstanding voting securities of that class and, in
either case, by a majority of the Independent Trustees of the Trust who have no
direct or indirect financial interest in the operation of the Plan or any
agreement related thereto.
The Plans permit the payment of fees to brokers and others for distribution
and shareholder-related administrative service and to broker-dealers, depository
institutions, financial intermediaries and administrators for administrative
services as to Class A, Class B and Class C shares (as applicable). The Plans
are designed to (i) stimulate brokers to provide distribution and administrative
support services to each Fund and holders of such Class A, Class B and Class C
shares and (ii) stimulate administrators to render administrative support
services to a Fund and holders of such Class A, Class B and Class C shares. The
administrative services are provided by a representative who has knowledge of
the shareholder's particular circumstances and goals, and include, but are not
limited to, providing office space, equipment, telephone facilities, and various
personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding such
Class A, Class B and Class C shares; assisting clients in changing dividend
options, account designations, and addresses; and providing such other services
as a Fund reasonably requests for its Class A, Class B and Class C shares, as
applicable.
FUNB or its affiliates may finance the payments made by the Distributor to
compensate broker/dealers or other persons for distributing shares of a Fund. 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 a Fund to the
Distributor with respect to that Class or Classes, and (ii) a 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 service
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 of the Trust or the holders of a Fund's
outstanding voting securities, voting separately by Class, and in either case,
by a majority of the Independent Trustees, cast in person at a meeting called
for the purpose of voting on such approval; and any Plan or Distribution
23
<PAGE>
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 (i) 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 Independent Trustees, or
(ii) by the Distributor. To terminate any Distribution Agreement, any party must
give the other parties 60 days' written notice; to terminate a Plan only, a Fund
need give no notice to the Distributor. Any Distribution Agreement will
terminate automatically in the event of its assignment. (See also the section
entitled "Financial Information.")
ADDITIONAL SERVICE PROVIDERS
Administrator
Evergreen Investment Services, Inc. ("EIS"), 200 Berkeley Street, Boston,
Massachusetts 02116-5034, serves as administrator to the Connecticut Fund and
the New Jersey Fund, subject to the supervision and control of the Trust's Board
of Trustees. EIS provides the Funds with facilities, equipment and personnel and
is entitled to receive a fee based on the aggregate average daily net assets of
the Funds at a rate based on the total assets of all mutual funds advised by
First Union subsidiaries and administered by EIS. The fee paid to EIS is
calculated in accordance with the following schedule:
Administration Fee
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion, and
0.010% on assets in excess of $30 billion.
Transfer Agent
Evergreen Service Company ("ESC") a subsidiary of First Union, is the
Funds' transfer agent. The transfer agent issues and redeems shares, pays
dividends and performs other duties in connection with the maintenance of
shareholder accounts. The transfer agent's address is 200 Berkeley Street,
Boston, Massachusetts 02116-5034.
Independent Auditors
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110, audits
the financial statements of each Fund.
Custodian
State Street Bank and Trust Company is the Funds' custodian. The bank keeps
custody of each Fund's securities and cash and performs other related duties.
The custodian's address is P.O. Box 9021, Boston, Massachusetts 02205-9827.
24
<PAGE>
Legal Counsel
Sullivan & Worcester LLP provides legal advice to the Funds. Its address is
1025 Connecticut Avenue, N.W., Washington, D.C. 20036.
BROKERAGE
SELECTION OF BROKERS
In effecting transactions in portfolio securities for a Fund, each Adviser
seeks the best execution of orders at the most favorable prices. Each Adviser
determines whether a broker has provided a Fund with best execution and price in
the execution of a securities transaction by evaluating, among other things, the
broker's ability to execute large or potentially difficult transactions, and the
financial strength and stability of the broker.
BROKERAGE COMMISSIONS
Each Fund expects to buy and sell its fixed-income securities through
principal transactions, that is, directly from the issuer or from an underwriter
or market maker for the securities. Generally, a Fund will not pay brokerage
commissions for such purchases. Usually, when a Fund buys a security from an
underwriter, the purchase price will include an underwriting commission or
concession. The purchase price for securities bought from dealers serving as
market makers will similarly include the dealer's mark up or reflect a dealer's
mark down. When a Fund executes transactions in the over-the-counter market, it
will deal with primary market makers unless more favorable prices are otherwise
obtainable.
GENERAL BROKERAGE POLICIES
Each Adviser makes investment decisions for a Fund independently from those
of its other clients. It may frequently develop, however, that an Adviser will
make the same investment decision for more than one client. Simultaneous
transactions are inevitable when the same security is suitable for the
investment objective of more than one account. When two or more of its clients
are engaged in the purchase or sale of the same security, an Adviser will
allocate the transactions according to a formula that is equitable to each of
its clients. Although, in some cases, this system could have a detrimental
effect on the price or volume of a Fund's securities, each Fund believes that in
other cases its ability to participate in volume transactions will produce
better executions. In order to take advantage of the availability of lower
purchase prices, the Funds may occasionally participate in group bidding for the
direct purchase from an issuer of certain securities.
The Board of Trustees periodically reviews each Fund's brokerage policy.
Because of the possibility of further regulatory developments affecting the
securities exchanges and brokerage practices generally, the Board of Trustees
may change, modify or eliminate any of the foregoing practices.
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<PAGE>
TRUST ORGANIZATION
FORM OF ORGANIZATION
Each Fund is a series of an open-end management investment company known as
"Evergreen Municipal Trust" (the "Trust"). The Trust was formed as a Delaware
business trust on September 18, 1997 (the "Declaration of Trust"). A copy of the
Declaration of Trust is on file at the SEC as an exhibit to the Trust's
Registration Statement, of which this SAI is a part. This summary is qualified
in its entirety by reference to the Declaration of Trust.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of beneficial interest of series and classes of shares. Each share of
each Fund represents an equal proportionate interest with each other share of
that series and/or class. Upon liquidation, shares are entitled to a pro rata
share of the Trust based on the relative net assets of each series and/or class.
Shareholders have no preemptive or conversion rights. Shares are redeemable and
transferable.
VOTING RIGHTS
Under the terms of the Declaration of Trust, the Trust is not required to
hold annual meetings. At meetings called for the initial election of Trustees or
to consider other matters, each share is entitled to one vote for each dollar of
net asset value applicable to such share. Shares generally vote together as one
class on all matters. Classes of shares of each Fund have equal voting rights.
No amendment may be made to the Declaration of Trust that adversely affects any
class of shares without the approval of a majority of the votes applicable to
the shares of that class. Shares have non-cumulative voting rights, which means
that the holders of more than 50% of the votes applicable to shares voting for
the election of Trustees can elect 100% of the Trustees to be elected at a
meeting and, in such event, the holders of the remaining shares voting will not
be able to elect any Trustees.
After the initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law, unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time, the Trustees
then in office will call a shareholders' meeting for the election of Trustees.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.
26
<PAGE>
PURCHASE, REDEMPTION AND PRICING OF SHARES
HOW THE FUNDS OFFER SHARES TO THE PUBLIC
You may buy shares of a Fund through the Distributor, broker-dealers that
have entered into special agreements with the Distributor or certain other
financial institutions. Each Fund offers three or four classes of shares that
differ primarily with respect to sales charges and distribution fees. Depending
upon the class of shares, you will pay an initial sales charge when you buy a
Fund's shares, a contingent deferred sales charge (a "CDSC") when you redeem a
Fund's shares or no sales charges at all.
Class A Shares
With certain exceptions, when you purchase Class A shares you will pay a
maximum sales charge of 4.75%. (The prospectus contains a complete table of
applicable sales charges and a discussion of sales charge reductions or waivers
that may apply to purchases. See also the section in this SAI entitled
"Financial Information" for an example of the method of computing the offering
price of Class A shares.) If you purchase Class A shares in the amount of $1
million or more, without an initial sales charge, the Funds will charge a CDSC
of 1.00% if you redeem during the month of your purchase and the 12-month period
following the month of your purchase (see "Contingent Deferred Sales Charge,"
below).
Class B Shares
The Funds offer Class B shares at net asset value without an initial sales
charge. With certain exceptions, however, the Funds will charge a CDSC on shares
you redeem within 72 months after the month of your purchase, in accordance with
the following schedule:
REDEMPTION TIMING CDSC RATE
Month of purchase and the first twelve-month
period following the month of purchase............................5.00%
Second twelve-month period following the month of purchase........4.00%
Third twelve-month period following the month of purchase.........3.00%
Fourth twelve-month period following the month of purchase........3.00%
Fifth twelve-month period following the month of purchase.........2.00%
Sixth twelve-month period following the month of purchase.........1.00%
Thereafter........................................................0.00%
Class B shares that have been outstanding for seven years after the month
of purchase will automatically convert to Class A shares without imposition of a
front-end sales charge or exchange fee. (Conversion of Class B shares
represented by stock certificates will require the return of the stock
certificate to ESC).
Class C Shares (excluding the Connecticut and New Jersey Funds)
Class C shares are available only through broker-dealers who have entered
into special distribution agreements with the Distributor. The Funds offer Class
C shares at net asset value without an initial sales charge. With certain
exceptions, however, the Fund will charge a CDSC of
27
<PAGE>
1.00% on shares you redeem within 12-months after the month of your purchase.
(See "Contingent Deferred Sales Charge" below).
Class Y Shares (excluding the California, Massachusetts and Missouri Funds)
No CDSC is imposed on the redemption of Class Y shares. Class Y shares are
not offered to the general public and are available only to (1) persons who at
or prior to December 31, 1994 owned shares in a mutual fund advised by Evergreen
Asset Management Corp. ("Evergreen Asset"), (2) certain institutional investors
and (3) investment advisory clients of CMG, Evergreen Asset, Keystone, or their
affiliates. Class Y shares are offered at net asset value without a front-end or
back-end sales charge and do not bear any Rule 12b-1 distribution expenses.
CONTINGENT DEFERRED SALES CHARGE
The Funds charge a CDSC as reimbursement for certain expenses, such as
commissions or shareholder servicing fees, that it has incurred in connection
with the sale of its shares (see "Distribution Plans and Agreements," above). If
imposed, the Funds deduct the CDSC from the redemption proceeds you would
otherwise receive. The CDSC is a percentage of the lesser of (1) the net asset
value of the shares at the time of redemption or (2) the shareholder's original
net cost for such shares. If a shareholder requests a redemption, the Fund will
seek to minimize the CDSC the shareholder is required to pay by first redeeming
shares not subject to a CDSC and, thereafter, redeeming shares held the longest.
The CDSC on any redemption is, to the extent permitted by the NASD, paid to the
Distributor or its predecessor.
SALES CHARGE WAIVERS OR REDUCTIONS
Reducing Class A Front-end Loads
With a larger purchase, there are several ways that you can combine
multiple purchases of Class A shares in Evergreen funds and take advantage of
lower sales charges.
Combined Purchases
You can reduce your sales charge by combining purchases of Class A shares
of multiple Evergreen funds. For example, if you invested $75,000 in each of two
different Evergreen funds, you would pay a sales charge based on a $150,000
purchase (i.e., 3.75% of the offering price, rather than 4.75%).
Rights of Accumulation
You can reduce your sales charge by adding the value of Class A shares of
Evergreen funds you already own to the amount of your next Class A investment.
For example, if you hold Class A shares valued at $99,999 and purchase an
additional $5,000, the sales charge for the $5,000 purchase would be at the next
lower sales charge of 3.75%, rather than 4.75%.
Letter of Intent
You can, by completing the "Letter of Intent" section of the application,
purchase Class A shares over a 13-month period and receive the same sales charge
as if you had invested all the money at once. All purchases of Class A shares of
an Evergreen fund during the period will qualify
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<PAGE>
as Letter of Intent purchases.
Waiver of Initial Sales Charges
The Funds may sell their shares at net asset value without an initial sales
charge to:
1. purchasers of shares in the amount of $1 million or more;
2. a corporate or certain other qualified retirement plan or a
non-qualified deferred compensation plan or a Title 1 tax
sheltered annuity or TSA plan sponsored by an organization
having 100 or more eligible employees (a "Qualifying Plan") or
a TSA plan sponsored by a public educational entity having
5,000 or more eligible employees (an "Educational TSA Plan");
3. institutional investors, which may include bank trust
departments and registered investment advisers;
4. investment advisers, consultants or financial planners who
place trades for their own accounts or the accounts of their
clients and who charge such clients a management, consulting,
advisory or other fee;
5. clients of investment advisers or financial planners who place
trades for their own accounts if the accounts are linked to a
master account of such investment advisers or financial
planners on the books of the broker-dealer through whom shares
are purchased;
6. institutional clients of broker-dealers, including retirement
and deferred compensation plans and the trusts used to fund
these plans, which place trades through an omnibus account
maintained with a Fund by the broker-dealer;
7. employees of FUNB, its affiliates, the Distributor, any
broker-dealer with whom the Distributor, has entered into an
agreement to sell shares of the Funds, and members of the
immediate families of such employees;
8. certain Directors, Trustees, officers and employees of the
Evergreen funds, the Distributor or their affiliates and the
immediate families of such persons; or
9. a bank or trust company in a single account in the name of
such bank or trust company as trustee if the initial
investment in or any Evergreen fund made pursuant to this
waiver is at least $500,000 and any commission paid at the
time of such purchase is not more than 1% of the amount
invested.
With respect to items 8 and 9 above, each Fund will only sell shares to
these parties upon the purchasers' written assurance that the purchase is for
their personal investment purposes only. Such purchasers may not resell the
securities except through redemption by a Fund. The Funds will not charge any
CDSC on redemptions by such purchasers.
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<PAGE>
Waiver of CDSC
The Funds do not impose a CDSC when the shares you are redeeming represent:
1. an increase in the share value above the net cost of such shares;
2. certain shares for which a Fund did not pay a commission on
issuance, including shares acquired through reinvestment of
dividend income and capital gains distributions;
3. shares that are in the accounts of a shareholder who has died or
become disabled;
4. a lump-sum distribution from a 401(k) plan or other benefit
plan qualified under the Employee Retirement Income Security
Act of 1974 ("ERISA");
5. an automatic withdrawal from the ERISA plan of a shareholder
who is a least 59 1/2 years old;
6. shares in an account that a Fund has closed because the
account has an aggregate net asset value of less than $1,000;
7. an automatic withdrawal under a Systematic Withdrawal Plan of
up to 1.0% per month of your initial account balance;
8. a withdrawal consisting of loan proceeds to a retirement plan
participant;
9. a financial hardship withdrawal made by a retirement plan
participant;
10. a withdrawal consisting of returns of excess contributions or
excess deferral amounts made to a retirement plan; or
11. a redemption by an individual participant in a Qualifying Plan
that purchased Class C shares (this waiver is not available in
the event a Qualifying Plan, as a whole, redeems substantially
all of its assets).
EXCHANGES
Investors may exchange shares of a Fund for shares of the same class of any
other Evergreen fund, as described under the section entitled "Exchanges" in a
Fund's prospectus. Before you make an exchange, you should read the prospectus
of the Evergreen fund into which you want to exchange. The Trust's Board of
Trustees reserves the right to discontinue, alter or limit the exchange
privilege at any time.
CALCULATION OF NET ASSET VALUE PER SHARE ("NAV")
Each Fund computes its NAV once daily on Monday through Friday, as
described in the prospectuses. A Fund will not compute its NAV on the day the
following legal holidays are observed: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
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<PAGE>
The NAV of each Fund is calculated by dividing the value of a Fund's net
assets attributable to that class by all of the shares issued for that class.
VALUATION OF PORTFOLIO SECURITIES
Current values for a Fund's portfolio securities are determined as follows:
(1) An independent pricing service values each Fund's municipal bonds
at fair value using a variety of factors which may include yield, liquidity,
interest rate risk, credit quality, coupon, maturity and type of issue.
(2) Short-term investments with remaining maturities of sixty days or
less are carried at amortized cost, which approximates market value.
(3) Securities for which valuations are not available from an
independent pricing service, including restricted securities, are valued at fair
value according to procedures established by the Trust's Board of Trustees.
SHAREHOLDER SERVICES
As described in the prospectuses, a shareholder may elect to receive
dividends and capital gains distributions in cash instead of shares. However,
ESC will automatically convert a shareholder's distribution option so that the
shareholder reinvests all dividends and distributions in additional shares when
it learns that the postal or other delivery service is unable to deliver checks
or transaction confirmations to the shareholder's address of record. The Funds
will hold the returned distribution or redemption proceeds in a non-interest
bearing account in the shareholder's name until the shareholder updates his or
her address. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
PRINCIPAL UNDERWRITER
The Distributor is the principal underwriter for the Trust and with respect
to each class of each Fund. The Trust has entered into a Principal Underwriting
Agreement ("Underwriting Agreement") with the Distributor with respect to each
class of each Fund. The Distributor is a subsidiary of The BISYS Group, Inc.
The Distributor, as agent, has agreed to use its best efforts to find
purchasers for the shares. The Distributor may retain and employ representatives
to promote distribution of the shares and may obtain orders from broker-dealers,
and others, acting as principals, for sales of shares to them. The Underwriting
Agreement provides that the Distributor will bear the expense of preparing,
printing, and distributing advertising and sales literature and prospectuses
used by it.
All subscriptions and sales of shares by the Distributor are at the public
offering price of the shares, which is determined in accordance with the
provisions of the Trust's Declaration of Trust, By-Laws, current prospectuses
and SAI. All orders are subject to acceptance by the Trust and the Trust
reserves the right, in its sole discretion, to reject any order received. Under
the Underwriting Agreement, the Trust is not liable to anyone for failure to
accept any order.
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<PAGE>
The Distributor has agreed that it will, in all respects, duly comply with
all state and federal laws applicable to the sale of the shares. The Distributor
has also agreed that it will indemnify and hold harmless the Trust and each
person who has been, is, or may be a Trustee or officer of the Trust against
expenses reasonably incurred by any of them in connection with any claim,
action, suit, or proceeding to which any of them may be a party that arises out
of or is alleged to arise out of any misrepresentation or omission to state a
material fact on the part of the Distributor or any other person for whose acts
the Distributor is responsible or is alleged to be responsible, unless such
misrepresentation or omission was made in reliance upon written information
furnished by the Trust.
The Underwriting Agreement provides that it will remain in effect as long
as its terms and continuance are approved annually (i) by a vote of a majority
of the Trust's Independent Trustees, and (ii) by vote of a majority of the
Trust's Trustees, in each case, cast in person at a meeting called for that
purpose.
The Underwriting Agreement may be terminated, without penalty, on 60 days'
written notice by the Board of Trustees or by a vote of a majority of
outstanding shares subject to such agreement. The Underwriting Agreement will
terminate automatically upon its "assignment," as that term is defined in the
1940 Act.
From time to time, if, in the Distributor's judgment, it could benefit the
sales of shares, the Distributor may provide to selected broker-dealers
promotional materials and selling aids, including, but not limited to, personal
computers, related software, and data files.
ADDITIONAL TAX INFORMATION
REQUIREMENTS FOR QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Fund has qualified and intends to continue to qualify for and elect
the tax treatment applicable to a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code ("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 RIC, a Fund must, among
other things, (i) 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 or foreign currencies and other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in such securities; (ii) diversify its
holdings so that, at the end of each quarter of its taxable year, (a) 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 (b) 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 and securities of other regulated investment
companies). 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.
TAXES ON DISTRIBUTIONS
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<PAGE>
Distributions out of taxable income or capital gains will be taxable to
shareholders 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.
To calculate ordinary income for federal income tax purposes, shareholders
must generally include dividends paid by a Fund from its investment company
taxable income (net investment income plus net realized short-term capital
gains, if any).
From time to time, a Fund will distribute the excess of its net long-term
capital gains over its short-term capital losses to shareholders. For federal
tax purposes, shareholders must include such distributions when calculating
their long-term capital gains. Each Fund will inform its shareholders of the
portion, if any, of a long-term capital gain distribution which is subject to
tax at the maximum 28% rate and the portion, if any, of a long term capital gain
distribution which is subject to tax at the maximum 20% rate. Distributions of
long-term capital gains are taxable as such to a shareholder, no matter how long
the shareholder has held the shares.
Distributions by a Fund reduce its NAV. A distribution that reduces a
Fund's NAV below a shareholder's cost basis is taxable as described above,
although from an investment standpoint, it is a return of capital. In
particular, if a shareholder buys Fund shares just before a Fund makes a
distribution, when the Fund makes the distribution the shareholder will receive
what is in effect a return of capital. Nevertheless, the shareholder must pay
taxes on the distribution. Therefore, shareholders should carefully consider the
tax consequences of buying Fund shares just before a distribution.
Each Fund expects that substantially all of its dividends will be
"exempt-interest dividends," which should be treated as excludable from federal
gross income. In order to pay exempt-interest dividends, at least 50% of the
value of a Fund's assets must consist of federally tax-exempt obligations at the
close of each quarter. An exempt-interest respect to its net federally
excludable municipal obligation interest and designated as an exempt-interest
dividend in a written notice mailed to each shareholder not later than 60 days
after the close of its taxable year. The percentage of the total dividends paid
by a Fund with respect to any taxable year that qualifies as exempt-interest
dividends will be the same for all shareholders of the Fund receiving dividends
with respect to such year. If a shareholder receives an exempt-interest dividend
with respect to any share and such share has been held for six months or less,
any loss on the sale or exchange of such share will be disallowed to the extent
of the exempt-interest dividend amount.
Any shareholder of a Fund who may be a "substantial user" of a facility
financed with an issue of tax-exempt obligations or a "related person" to such a
user should consult his tax adviser concerning his qualification to receive
exempt-interest dividends should the Fund hold obligations financing such
facility.
Under regulations to be promulgated, to the extent attributable to interest
paid on certain private activity bonds, a Fund's exempt-interest dividends,
while otherwise tax-exempt, will be treated as a tax preference item for
alternative minimum tax purposes. Corporate shareholders should also be aware
that the receipt of exempt-interest dividends could subject them to alternative
minimum tax under the provisions of Section 56(g) of the Code (relating to
"adjusted current earnings").
Under particularly unusual circumstances, such as when a Fund is in a
prolonged defensive
33
<PAGE>
investment position, it is possible that no portion of a Fund's distributions of
income to its shareholders for a fiscal year would be exempt from federal income
tax. The Funds do not presently anticipate, however, that such unusual
circumstances will occur.
Each Fund intends to distribute its net capital gains as capital gains
dividends. Shareholders should treat such dividends as long-term capital gains.
Each Fund will designate capital gains distributions as such by a written notice
mailed to each shareholder no later than 60 days after the close of the Fund's
taxable year. If a shareholder receives a capital gain dividend and holds his
shares for six months or less, then any allowable loss on disposition of such
shares will be treated as a long-term capital loss to the extent of such capital
gain dividend.
Interest on indebtedness incurred or continued by shareholders to purchase
or carry shares of a Fund will not be deductible for federal income tax purposes
to the extent of the portion of the interest expense relating to exempt-interest
dividends. Such portion is determined by multiplying the total amount of
interest paid or accrued on the indebtedness by a fraction, the numerator of
which is the exempt-interest dividends received by a shareholder in his taxable
year and the denominator of which is the sum of the exempt-interest dividends
and the taxable distributions out of the Fund's investment income and long-term
capital gains received by the shareholder.
TAXES ON THE SALE OR EXCHANGE OF FUND SHARES
Upon a sale or exchange of Fund shares, a shareholder will realize a
taxable gain or loss depending on his or her basis in the shares. A shareholder
must treat such gains or losses as a capital gain or loss if the shareholder
held the shares as capital assets. Capital gain on assets held for more than
twelve months is generally subject to a maximum federal income tax rate of 20%
for an individual. Generally, the Code will not allow a shareholder to realize a
loss on shares he or she has sold or exchanged and replaced within a
sixty-one-day period beginning thirty days before and ending thirty days after
he or she sold or exchanged the shares. The Code will not allow a shareholder to
realize a loss on the sale of Fund shares held by the shareholder for six months
or less to the extent the shareholder received exempt-interest dividends on such
shares. Moreover, the Code will treat a shareholder's loss on shares held for
six months or less as a long-term capital loss to the extent the shareholder
received distributions of net capital gains on such shares.
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.
OTHER TAX CONSIDERATIONS
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 tax 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
34
<PAGE>
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.
35
<PAGE>
FINANCIAL INFORMATION
Expenses
The table below shows the total dollar amounts paid by each Fund for
services rendered during the fiscal periods specified. For more information on
specific expenses, see "Investment Advisory and Other Services," "Distribution
Plans and Agreements," "Principal Underwriter" and "Purchase, Redemption and
Pricing of Shares."
<TABLE>
<CAPTION>
Total Underwriting
Advisory Class A Class B Class C Underwriting Commissions
Fees 12b-1 Fees 12b-1 Fees 12b-1 Fees Commissions Retained
============================ =========== ============= ============ =========== ============== ===================
1998 Fund Expenses
<S> <C> <C> <C> <C> <C> <C>
California $150,177. $8,075 $191,945 $16,932 $46,632 $3,029
Massachusetts $62,171 $3,513 $67,467 $16,883 $22,859 $1,771
Missouri $138,262 $7,025 $183,796 $11,123 $138,428 $8,737
New York $132,245 $6,072 $173,914 $14,416 $62,317 $4,131
Pennsylvania $610,824 $41,755 $351,011 $61,038 $65,672 $6,605
Connecticut (a) $141,059 $51 $415 N/A $3,194 $476
New Jersey $429,995 $79,247* $108,770 N/A $44,432 $4,471
1997 Fund Expenses
California (b) $51,555 $2,121 $66,054 $4,972 $133,966 $60,931
Massachusetts $63,584 $2,689 $67,185 $19,460 $97,579 $29,745
Missouri (b) $46,447 $1,259 $64,269 $3,949 $96,918 $55,982
New York $135,473 $5,586 $166,682 $19,837 $236,114 $20,175
Pennsylvania $390,366 $39,570 $343,818 $71,610 $504,459 $106,694
Connecticut (a) N/A N/A N/A N/A N/A N/A
New Jersey (c) $135,196 $47,320 $25,809 N/A N/A N/A
1996 Fund Expenses
California (d) $163,334 $6,390 $178,969 $12,179 $341,589 $67,534
Massachusetts $62,760 $2,268 $64,033 $19,322 $108,131 $18,234
Missouri (d) $146,922 $12,309 $175,942 $15,518 $230,925 $94,279
New York $118,589 $5,471 $139,881 $21,378 $201,162 $201,162
Pennsylvania $402,467 $44,555 $321,061 $202,901 $482,423 $482,423
Connecticut (a) N/A N/A N/A N/A N/A N/A
New Jersey (e) $107,212 $42,750 $22,310 N/A N/A N/A
</TABLE>
*Of this amount, $50,718 was waived by the Distributor.
(a) The Fund commenced operations on November 24, 1997.
(b) Four months ended March 31, 1997. During the period, the California Fund
and the Missouri Fund changed their fiscal year end from November 30 to
March 31.
(c) Seven months ended March 31, 1997. During the period, the New Jersey Fund
changed its fiscal year end from August 31 to March 31.
(d) Year ended November 30, 1996.
(e) Six months ended August 31, 1996. The Fund changed its fiscal year end from
February 29 to August 31.
36
<PAGE>
Advisory Fee Waivers
In accordance with voluntary expense limitations in effect during the
fiscal year ended March 31, 1998, each Fund's Adviser voluntarily reimbursed or
waived advisory fees, as follows:
California $67,381
Massachusetts $54,590
Missouri $94,233
New York $58,744
Pennsylvania $174,928
Connecticut $64,322
New Jersey $296,793
Brokerage Commissions
The Funds paid no brokerage commissions during 1998, 1997 and 1996.
Total Return
Total return quotations for a class of shares of a Fund as they may appear
from time to time in advertisements are calculated by finding the average annual
compounded rates of return over one, five and ten year periods, or the time
periods for which such class of shares has been effective, whichever is
relevant, on a hypothetical $1,000 investment that would equate the initial
amount invested in the class to the ending redeemable value. All dividends and
distributions are added to the initial investment, and all recurring fees
charged to all shareholder accounts are deducted. The ending redeemable value
assumes a complete redemption at the end of the relevant periods.
37
<PAGE>
The annual total returns for each class of shares of the Funds (including
applicable sales charges) as of March 31, 1998 are as follows:
Since Inception
One Year Five Years Inception Date
California
Class A 5.30% -- 4.05% 2/1/94
Class B 4.75% -- 4.22% 2/1/94
Class C 8.77% -- 4.56% 2/1/94
Massachusetts
Class A 5.25% -- 3.60% 2/4/94
Class B 4.60% -- 3.69% 2/4/94
Class C 8.62% -- 4.06% 2/4/94
Missouri
Class A 5.73% -- 4.60% 2/1/94
Class B 5.26% -- 4.61% 2/1/94
Class C 9.15% -- 4.97% 2/1/94
New York
Class A 5.31% -- 4.46% 2/4/94
Class B 4.80% -- 4.53% 2/4/94
Class C 8.69% -- 4.90% 2/4/94
Class Y -- -- -- --
Pennsylvania
Class A 4.80% 5.04% 7.53% 12/27/90
Class B 4.27% 4.93% 5.50% 2/1/93
Class C 8.34% 5.28% 5.68% 2/1/93
Class Y -- -- 2.54% 11/24/97
Connecticut
Class A -- -- 0.77% 12/30/97
Class B -- -- (0.21%) 1/9/98
Class Y -- -- 2.39% 11/24/97
- ------------------------------------------- ------------------- ----------------
New Jersey
Class A 4.15% 4.98% 6.52% 7/16/91
- ------------------------------------------- ------------------- ----------------
Class B 3.35% -- 3.34% 1/30/96
- ------------------------------------------- ------------------- ----------------
Class Y 9.44% -- 5.36% 2/8/96
=========================================== =================== ================
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<PAGE>
Current and Tax Equivalent Yields
Current yield quotations as they may appear from time to time in
advertisements will consist of a quotation based on a 30-day period ended on the
date of the most recent balance sheet of a Fund, computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the base period. Such yield will include
income from sources other than municipal obligations, if any. Tax equivalent
yield is, in general, the current yield divided by a factor equal to one minus a
stated income tax rate and reflects the yield a taxable investment would have to
achieve in order to equal on an after-tax basis a tax-exempt yield. For the
30-day period ended March 31, 1998, the current and tax-equivalent yields of the
Funds are shown below. Any given yield or total return quotation should not be
considered representative of the Fund's yield or total return for any future
period.
<TABLE>
<CAPTION>
30-Day Yield Tax-Equivalent Yield
================================== ===============================================
Fund Combined Class A Class B Class C Class Y Class A Class B Class C Class Y
Federal &
State Tax
Rate (1)
===================== ========== ======== ======== ===================== ============ ============ ============ ============
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California 39.6% 4.11% 3.56% 3.56% -- 6.80% 5.89% 5.89% --
Massachusetts 39.6% 3.85% 3.31% 3.31% -- 6.37% 5.48% 5.48% --
Missouri 39.6% 4.33% 3.80% 3.79% -- 7.17% 6.29% 6.27% --
New York 39.6% 4.20% 3.66% 3.66% -- 6.95% 6.06% 6.06% --
Pennsylvania 39.6% 4.07% 3.52% 3.52% 4.52% 6.74% 5.83% 5.83% 7.48%
Connecticut 39.6% -- -- -- 4.11% -- -- -- 6.80%
New Jersey 39.6% 4.27% 3.57% -- 4.58% 7.07% 5.91% -- 7.58%
</TABLE>
(1) Assumed for purposes of this chart. Your tax may vary.
39
<PAGE>
Method of Computing Offering Price for Class A Shares
Class A shares are sold at the NAV plus a sales charge. 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 aggregating less than $50,000 based upon
the NAV of each Fund's Class A shares as of March 31, 1998.
Fund Net Asset Value Maximum Per Offering Price
Share Sales Per Share
Charge
California $9.98 4.75% $10.48
Massachusetts $9.76 4.75% $10.25
Missouri $10.21 4.75% $10.72
New York $10.12 4.75% $10.62
Pennsylvania $11.70 4.75% $12.28
Connecticu $6.38 4.75% $6.70
New Jersey $11.11 4.75% $11.66
Financial Statements
The audited financial statements and the independent auditors' report
thereon are hereby incorporated by reference to each Fund's Annual Report, a
copy of which may be obtained without charge by writing to ESC, P.O. Box 2121,
Boston, Massachusetts 02106-2121, or by calling ESC toll-free at 1-800-343-2898.
ADDITIONAL INFORMATION
Except as otherwise stated in its prospectuses or required by law, each
Fund reserves the right to change the terms of the offer stated in its
prospectuses without shareholder approval, including the right to impose or
change fees for services provided.
No dealer, salesman or other person is authorized to give any information
or to make any representation not contained in a Fund's prospectuses, SAI or in
supplemental sales literature issued by such Fund or the Distributor, and no
person is entitled to rely on any information or representation not contained
therein.
Each Fund's prospectuses and SAI omit certain information contained in the
Trust's registration statement, which you may obtain for a fee from the SEC in
Washington, D.C.
40
<PAGE>
APPENDIX A
EVERGREEN CALIFORNIA TAX FREE FUND
General
California's economy is the largest among the 50 states and one of the
largest in the world. The State's population of almost 33 million represents
over 12% of the total U.S. population and grew by 27% in the 1980's. Population
growth slowed to less than 1% annually in 1994 and 1995, but rose to 1.9% in
1996. During the early 1990's, net population growth in the State was due to
births and foreign immigration, but more recently net in-migration from the
other states has resumed. Total personal income in the State, at an estimated
$867 billion in 1997 accounts for more than 12% of all personal income in the
nation. Total civilian employment is over 14 million, the majority of which is
in the service, trade and manufacturing sectors.
From mid-1990 to late 1993, the State suffered a recession with the worst
economic, fiscal and budget conditions since the 1930's. Construction,
manufacturing (especially aerospace), and financial services, among others, were
all severely affected, particularly in Southern California. Job losses were the
worst of any post-war recession. Employment levels stabilized by late 1993 and
steady growth has occurred since the start of 1994; pre-recession job levels
were reached in 1996. Unemployment, while higher than the national average, has
come down significantly from the January, 1994 peak of 10% and is now at the
pre-recession level. Economic indicators show a steady recovery underway in
California since the start of 1994, with greatest strength in manufacturing,
high technology, exports, services, entertainment, tourism, and construction.
The Asian economic crisis starting in mid-1997 is expected to have a moderate
dampening effect on the State's economy. Any delay or reversal of the economic
recovery may cause a recurrence of revenue shortfalls for the State.
Constitutional Limitations on Taxes, Other Charges and Appropriations
Limitation on Property Taxes. Certain California municipal obligations may
be obligations of issuers that rely in whole or in part, directly or indirectly,
on ad valorem property taxes as a source of revenue. The taxing powers of
California local governments and districts are limited by Article XIIIA of the
California Constitution, enacted by the voters in 1978 and commonly known as
"Proposition 13." Briefly, Article XIIIA limits to 1% of full cash value the
rate of ad valorem property taxes on real property and generally restricts the
reassessment of property to 2% per year, except upon new construction or change
of ownership (subject to a number of exemptions). Taxing entities may, however,
raise ad valorem taxes above the 1% limit to pay debt service on voter-approved
bonded indebtedness.
Under Article XIIIA, the basic 1% ad valorem tax levy is applied against
the assessed value of property as of the owner's date of acquisition (or as of
March 1, 1975, if acquired earlier), subject to certain adjustments. This system
has resulted in widely varying amounts of tax on similarly situated properties.
Several lawsuits have been filed challenging the acquisition-based assessment
system of Proposition 13, and on June 18, 1992 the U.S. Supreme Court announced
a decision upholding Proposition 13.
Article XIIIA prohibits local governments from raising revenues through ad
valorem property taxes above the 1% limit; it also requires voters of any
governmental unit to give two-thirds approval to levy any "special tax." Court
decisions, however, allowed non-voter-approved levy of
A-1
<PAGE>
"general taxes" that were not dedicated to a specific use.
Limitations on Other Taxes, Fees and Charges. On November 5, 1996, the
voters of the State approved Proposition 218, called the "Right to Vote on Taxes
Act." Proposition 218 added Articles XIIIC and XIIID to the State Constitution,
which contain a number of provisions affecting the ability of local agencies to
levy and collect both existing and future taxes, assessments, fees and charges.
Article XIIIC requires that all new or increased local taxes be submitted
to the electorate before they become effective. Taxes for general governmental
purposes require a majority vote and taxes for specific purposes require a
two-thirds vote. Further, any general purpose tax which was imposed, extended or
increased without voter approval after December 31, 1994 must be approved by a
majority vote within two years.
Article XIIID contains several new provisions making it generally more
difficult for local agencies to levy and maintain "assessments" for municipal
services and programs. Article XIIID also contains several new provisions
affecting "fees" and "charges", defined for purposes of Article XIIID to mean
"any levy other than an ad valorem tax, a special tax, or an assessment, imposed
by a [local government] upon a parcel or upon a person as an incident of
property ownership, including a user fee or charge for a property related
service." All new and existing property related fees and charges must conform to
requirements prohibiting, among other things, fees and charges which generate
revenues exceeding the funds required to provide the property related service or
are used for unrelated purposes. There are new notice, hearing and protest
procedures for levying or increasing property related fees and charges, and,
except for fees or charges for sewer, water and refuse collection services (or
fees for electrical and gas service, which are not treated as "property related"
for purposes of Article XIIID), no property related fee or charge may be imposed
or increased without majority approval by the property owners subject to the fee
or charge or, at the option of the local agency, two-thirds voter approval by
the electorate residing in the affected area.
In addition to the provisions described above, Article XIIIC removes
limitations on the initiative power in matters of local taxes, assessments, fees
and charges. Consequently, local voters could, by future initiative, repeal,
reduce or prohibit the future imposition or increase of any local tax,
assessment, fee or charge. It is unclear how this right of local initiative may
be used in cases where taxes or charges have been or will be specifically
pledged to secure debt issues.
The interpretation and application of Proposition 218 will ultimately be
determined by the courts with respect to a number of matters, and it is not
possible at this time to predict with certainty the outcome of such
determinations. Proposition 218 is generally viewed as restricting the fiscal
flexibility of local governments, and for this reason, some ratings of
California cities and counties have been, and others may be, reduced.
Appropriation Limits. The State and its local governments are subject to an
annual "appropriations limit" imposed by Article XIIIB of the California
Constitution, enacted by the voters in 1979 and significantly amended by
Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB prohibits
the State or any covered local government from spending "appropriations subject
to limitation" in excess of the appropriations limit imposed. "Appropriations
subject to limitation" are authorizations to spend "proceeds of taxes," which
consist of tax revenues and certain other funds, including proceeds from
regulatory licenses, user charges or other fees, to the extent that such
proceeds exceed the cost of providing the product or service, but "proceeds of
taxes" excludes most State subventions to local governments. No limit is imposed
on
A-2
<PAGE>
appropriations of funds that are not "proceeds of taxes," such as reasonable
user charges or fees, and certain other non-tax funds, including bond proceeds.
Among the expenditures not included in the Article XIIIB appropriations
limit are (1) the debt service cost of bonds issued or authorized prior to
January 1, 1979, or subsequently authorized by the voters, (2) appropriations
arising from certain emergencies declared by the Governor, (3) appropriations
for certain capital outlay projects, (4) appropriations by the State of post
1989 increases in gasoline taxes and vehicle weight fees, and (5) appropriations
made in certain cases of emergency.
The appropriations limit for each year is adjusted annually to reflect
changes in cost of living and population and any transfers of service
responsibilities between governmental units. The definitions for such
adjustments were liberalized in 1990 to follow more closely growth in the
State's economy.
"Excess" revenues are measured over a two-year cycle. Local governments
must return any excess to taxpayers by rate reductions. The State must refund
50% paid to schools and community colleges. With more liberal annual adjustment
factors since 1988, and depressed revenues for several years after 1990 because
of the recession, few governments, including the State, are currently operating
near their spending limits, but this condition may change over time. The State's
1997-98 Budget Act provides for State appropriations of more than $6.3 billion
under the Article XIIIB limit. Local governments may by voter approval exceed
their spending limits for up to four years.
Because of the complex nature of Articles XIIIA, XIIIB, XIIIC and XIIID, of
the California Constitution, the ambiguities and possible inconsistencies of
their terms, and the impossibility of predicting future appropriations or
changes in population and cost of living, and the probability of continuing
legal challenges, it is not currently possible to determine fully the impact of
these articles on California municipal obligations. It is not presently possible
to predict the outcome of any pending litigation with respect to the ultimate
scope, impact or constitutionality of these articles, or the impact of any such
determinations upon State agencies or local governments, or upon their ability
to pay debt service on their obligations. Future initiatives or legislative
changes in laws or the California Constitution may also affect the ability of
the State or local issuers to repay their obligations.
Obligations of the State of California
As of April 1, 1998, the State had approximately $18.4 billion of long-term
general obligation bonds outstanding, plus $1.3 billion of general obligation
commercial paper which is planned to be refunded by long-term bonds in the
future ($600 million was so converted on April 30, 1998) and $6.5 billion of
lease-purchase debt supported by the General Fund. The State also had about $8.2
billion of authorized but unissued long-term general obligation bonds and
lease-purchase debt. In fiscal year 1996-1997, debt service on general
obligation bonds and lease-purchase debt was approximately 5.0% of General Fund
revenues. The State has paid the principal of and interest on its general
obligation bonds, lease-purchase debt and short-term obligations when due.
Recent Financial Results
The principal sources of General Fund revenues in 1996-1997 were the
California personal income tax (47% of total revenues), the sales tax (34%),
bank and corporation taxes (12%), and
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the gross premium tax on insurance (2%). The State maintains a Special Fund for
Economic Uncertainties (SFEU), derived from General Fund revenues, as a reserve
to meet cash needs of the General Fund. Because of the recession and an
accumulated budget deficit, no reserve was budgeted in the SFEU from 1992-93 to
1995-96.
General. Throughout the 1980's, State spending increased rapidly as the
State population and economy also grew rapidly, including increased spending for
many assistance programs to local governments, which were constrained by
Proposition 13 and other laws. The largest State program is assistance to local
public school districts. In 1988, an initiative (Proposition 98) was enacted
which (subject to suspension by a two-thirds vote of the Legislature and the
Governor) guarantees local school districts and community college districts a
minimum share of State General Fund revenues (currently 35%).
Since the start of 1990-91 Fiscal Year, the State has faced adverse
economic, fiscal, and budget conditions. The economic recession seriously
affected State tax revenues. It also caused increased expenditures for health
and welfare programs.
Recent Budgets. As a result of the recession and other factors, the State
experienced substantial revenue shortfalls and greater than anticipated social
service costs in the early 1990's. The State accumulated and sustained a budget
deficit in the SFEU approaching $2.8 billion at its peak at June 30, 1993. The
Legislature and Governor agreed on a number of different steps to respond to
these adverse financial conditions produce Budget Acts in the Years 1991-92 to
1994- 95 (although not all these actions occurred in each year), including:
* significant cuts in health and welfare program expenditures;
* transfers of program responsibilities and some funding sources
from the state to local governments, coupled with some
reduction in mandates on local government;
* transfer of about $3.6 billion in annual local property tax
revenues from cities, counties, redevelopment agencies and
some other districts to local school districts, thereby
reducing state funding for schools;
* reduction in growth of support for higher education programs,
coupled with increases in student fees;
* revenue increases (particularly in the 1991-92 Fiscal Year
budget), most of which were for a short duration;
* increased reliance on aid from the federal government to
offset the costs of incarcerating, educating and providing
health and welfare services to undocumented aliens (although
these efforts have produced much less federal aid than the
State Administration had requested); and
* various one-time adjustment and accounting changes.
The combination of stringent budget actions cutting State expenditures, and
the turnaround of the economy by late 1993, finally led to the restoration of
positive financial results, with revenues equaling or exceeding expenditures
starting in FY 1992-93. As a result, the accumulated budget deficit of about
$2.8 billion was eliminated by June 30, 1997, when the State showed a positive
balance of about $408 million, on a budgetary basis, in the SFEU.
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A consequence of the accumulated budget deficits in the early 1990's,
together with other factors such as disbursement of funds to local school
districts borrowed from future fiscal years and hence not shown in the annual
budget, was to significantly reduce the State's cash resources available to pay
its ongoing obligations. The State's cash condition became so serious that from
late spring 1992 until 1995, the State had to rely on issuance of short term
notes which matured in a subsequent fiscal year to finance its ongoing deficit,
and pay current obligations. The last of these deficit notes was repaid in
April, 1996.
The 1995-96 and 1996-97 Budget Acts reflected significantly improved
financial conditions, as the State's economy recovered and tax revenues soared
above projections. Over the two years, revenues averaged about $2 billion higher
than initially estimated. Most of the additional revenues were allocated to
school funding, as required by Proposition 98, and to make up shortfalls in
federal aid for health and welfare costs and costs of illegal aliens. The
budgets for both these years showed strong increases in funding for K-14 public
education, including implementation of initiatives to reduce class sizes for
lower elementary grades to not more than 20 pupils. Higher education funding
also increased. Spending for health and welfare programs was kept in check, as
previously implemented cuts in benefit levels were retained.
Fiscal Year 1997-98 Budget. With continued strong economic recovery and
surging tax receipts, the State entered the 1997-98 Fiscal Year in the strongest
financial position in the decade. However, in May 1997, the California Supreme
Court ruled that the State had acted illegally in 1993 and 1994 by using a
deferral of payments to the Public Employees Retirement Fund to help balance
earlier budgets. In response to this court decision, the Governor ordered an
immediate repayment to the Retirement Fund of about $1.235 billion, which was
made in late July, 1997, and substantially used up the expected additional
revenues for the fiscal year. The Budget Act as signed provided for about $52.8
billion of General Fund expenditures, and assumed about $52.5 billion of
revenues.
The 1997-98 Budget Act provided another year of rapidly increasing funding
for K-14 public education. Total General Fund support was targeted to reach
$5,150 per pupil, more than 20% higher than the recession-period levels which
were in effect as late as FY 1993-94. The $1.75 billion in new funding was
budgeted to be spent on class size reduction and other initiatives, as well as
fully funding growth and cost of living increases. Support for higher education
units in the State also increased by about 6 percent. Because of the pension
payment, most other State programs were funded at levels consistent with prior
years, and several initiatives had to be dropped. These included additional
assistance to local governments, state employee raises, and funding of a bond
bank.
Part of the 1997-98 Budget Act was completion of State welfare reform
legislation to implement the new federal law passed in 1996. The new State
program, called CalWORKs, became effective January 1, 1998, and emphasizes
programs to bring aid recipients into the workforce. As required by federal law,
new time limits were placed on receipt of welfare aid. Grant levels for 1997-98
remained at the reduced, prior years' levels.
The Department of Finance released updated budget estimates in May, 1998,
which showed that revenues for the 1997-98 Fiscal Year would be $54.6 billion,
almost $2 billion higher than initial budget estimates, as a result of the
strong economy. Expenditures were expected to increase to about $53.0 billion,
resulting in a significant balance in the SFEU at June 30, 1998.
Proposed 1998-99 Fiscal Year Budget. The Governor released his proposed FY
1998-99 Budget on January 9, 1998, and updated his revenue projections and
budgetary proposals on May 13, 1998 (the May Revision). The May Revision
projected General Fund revenues and transfers of
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$57.8 billion. Revenue losses due to tax cuts enacted in late 1997 were expected
to be offset by higher capital gains realizations. These revenue estimates were
$2.5 billion higher than the Governor had projected with the January Budget
proposal. The Governor proposed expenditures of $58.3 billion. The Governor
proposed significant additional funding for K-12 schools under Proposition 98,
as well as additional funding for higher education, with a proposed reduction of
college student fees. State and federal funds will be used in the new CalWORKS
welfare program, with projections of a fourth consecutive year of caseload
decline. The Governor proposed a large capital expenditure program, focusing on
schools and universities, but also including corrections, environmental and
general government projects. These proposals would require approval of almost $
10 billion of new general obligation bonds over the next six years. No agreement
was reached with the Legislature to place any bond measures on the June, 1998
ballot, but negotiations will continue for bonds at the November, 1998 election.
With the significantly increased revenue projection for both 1997-98 and
1998-99, the Governor proposed in the May Revision that the State reduce its
Vehicle License Fee (a personal property tax on the value of automobiles, the
VLF) by 75% over four years. Under current law, the VLF is entirely dedicated to
city and county government, and the Governor proposed to use the State's
burgeoning General Fund to offset the loss of VLF funds to local government. All
of the Governor's proposals must be negotiated with the Legislature as part of
the annual budget process.
Although the State's strong economy is producing record revenues to the
State government, the State's budget continues to be under stress from mandated
spending on education, a rising prison population, and social needs of a growing
population with many immigrants. These factors which limit State spending growth
also put pressure on local governments. There can be no assurances that, if
economic conditions weaken, or other factors intercede, the State will not
experience budget gaps in the future.
Bond Ratings
The ratings on California's long-term general obligation bonds were reduced
in the early 1990's from "AAA" levels which had existed prior to the recession.
In 1996 and 1997, the ratings of California's general obligation bonds were
raised by the three major rating agencies, which as of June 1997 assigned
ratings of A+ from Standard & Poor's, Al from Moody's and AA- from Fitch. There
can be no assurance that such ratings will be maintained in the future. It
should be noted that the creditworthiness of obligations issued by local
California issuers may be unrelated to creditworthiness of obligations issued by
the State of California, and that there is no obligation on the part of the
State to make payment on such local obligations in the event of default.
Legal Proceedings
The State is involved in certain legal proceedings (described in the
State's recent financial statements) that, if decided against the State, may
require the State to make significant future expenditures or may substantially
impair revenues. Trial courts have recently entered tentative decisions or
injunctions which would overturn several parts of the State's recent budget
compromises. The matters covered by these lawsuits include reductions in welfare
payments and the use of certain cigarette tax funds for health costs. All of
these cases are subject to further proceedings and appeals, and if California
eventually loses, the final remedies may not have to be implemented in one year.
Obligations of Other Issuers
Other Issuers of California Municipal Obligations. There are a number of
state agencies,
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instrumentalities and political subdivisions of the State that issue municipal
obligations, some of which may be conduit revenue obligations payable from
payments from private borrowers. These entities are subject to various economic
risks and uncertainties, and the credit quality of the securities issued by them
may vary considerably from the credit quality of obligations backed by the full
faith and credit of the State.
State Assistance. Property tax revenues received by local governments
declined more than 50% following passage of Proposition 13. Subsequently, the
California Legislature enacted measures to provide for the redistribution of the
State's General Fund surplus to local agencies, the reallocation of certain
State revenues to local agencies and the assumption of certain governmental
functions by the State to assist municipal issuers to raise revenues. Local
assistance (including public schools) has historically accounted for around 75%
of General Fund spending. To reduce State General Fund support for school
districts, the 1992-93 and 1993-94 Budget Acts caused local governments to
transfer a total of $3.9 billion of property tax revenues to school districts,
representing loss of all the post-Proposition 13 "bailout" aid. The largest
share of these transfers came from counties, and the balance from cities,
special districts and redevelopment agencies. Local governments have in return
received greater revenues and greater flexibility to operate health and welfare
programs.
To the extent the State should be constrained by its Article XIIIB
appropriations limit, or its obligation to conform to Proposition 98, or other
fiscal considerations, the absolute level, or the rate of growth, of State
assistance to local governments may continue to be reduced. Any such reductions
in State aid could compound the serious fiscal constraints already experienced
by many local governments, particularly counties. A number of other counties
have indicated that their budgetary condition is extremely serious. In the
1995-96 and 1996-97 fiscal years, Los Angeles County, the largest in the State,
had to make significant cuts in services and personnel, particularly in the
health care system, in order to balance its budget. The County's debt was
downgraded by Moody's and S&P in the summer of 1995. Orange County, which
recently emerged from federal bankruptcy protection, has substantially reduced
services and personnel in order to live within much reduced means.
Counties and cities may face further budgetary pressures as a result of
changes in welfare and public assistance programs, which were enacted in August,
1997 in order to comply with the federal welfare reform law. Generally, counties
play a large role in the new system, and are given substantial flexibility to
develop and administer programs to bring aid recipients into the workforce.
Counties are also given financial incentives if either at the county or
statewide level, the welfare-to- work programs exceed minimum targets; counties
are also responsible to provide general assistance for able-bodied indigents who
are ineligible for other welfare programs. The long-term financial impact of the
new CalWORKS system on local governments is still unknown.
Legislation enacted in late 1997 provides for the State to take over
financial responsibility for funding trial courts throughout the State. This is
estimated to save counties and cities a total of over $350 million annually.
Assessment Bonds. California municipal obligations that are assessment
bonds may be adversely affected by a general decline in real estate values or a
slowdown in real estate sales activity. In many cases, such bonds are secured by
land that is undeveloped at the time of issuance, but anticipated to be
developed within a few years after issuance. In the event of such reduction or
slowdown, such development may not occur or may be delayed, thereby increasing
the risk of default on the bonds. Because the special assessments or taxes
securing these bonds are not the personal liability of the owners of the
property assessed, the lien on the property is the
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only security for the bonds. Moreover, in most cases the issuer of these bonds
is not required to make payments on the bonds in the event of delinquency in the
payment of assessments or taxes, except from amounts, if any, in a reserve fund
established for the bonds.
California Long-Term Lease Obligations. Based on a series of court
decisions, certain California long-term lease obligations, though payable from
the general fund of the municipality, are not considered indebtedness requiring
voter approval. Such leases are, however, subject to "abatement" in the event
the facility being leased is unavailable for beneficial use and occupancy by the
municipality during the term of the lease. Abatement is not a default, and there
may be no remedies available to the holders of the certificates evidencing the
lease obligation in the event abatement occurs. The most common cases of
abatement are failure to complete construction of the facility before the end of
the period during which lease payments have been capitalized and uninsured
casualty losses to the facility (e.g. due to earthquake). In the event abatement
occurs with respect to a lease obligation, lease payments may be interrupted (if
all available insurance proceeds and reserves are exhausted) and the
certificates may not be paid when due. Litigation is brought from time to time
which challenges the constitutionality of such lease arrangements.
Other Considerations
The repayment of industrial development securities secured by real property
may be affected by California laws limiting foreclosure rights of creditors.
Securities backed by health care and hospital revenues may be affected by
changes in State regulations governing cost reimbursements to health care
providers under Medi-Cal (the State's Medicaid program), including risks related
to the policy of awarding exclusive contracts to certain hospitals.
Limitations on ad valorem property taxes may particularly affect "tax
allocation" bonds issued by California redevelopment agencies. Such bonds are
secured solely by the increase in assessed valuation of a redevelopment project
area after the start of redevelopment activity. In the event that assessed
values in the redevelopment project decline (e.g. because of major natural
disaster such as an earthquake), the tax increment revenue may be insufficient
to make principal and interest payments on these bonds. Both Moody's and S&P
suspended ratings on California tax allocation bonds after the enactment of
Articles XIIIA and XIIIB, and only resumed such ratings on a selective basis.
Proposition 87, approved by California voters in 1988, requires that all
revenues produced by a tax rate increase go directly to the taxing entity that
increased such tax rate to repay that entity's general obligation indebtedness.
As a result, redevelopment agencies (which typically are the issuers of tax
allocation securities) no longer receive an increase in tax increment when taxes
on property in the project area are increased to repay voter-approved bonded
indebtedness.
The effect of these various constitutional and statutory changes upon the
ability of California municipal securities issuers to pay interest and principal
on their obligations remains unclear. Furthermore, other measures affecting the
taxing or spending authority of California or its political subdivisions may be
approved or enacted in the future. Legislation has been or may be introduced
that would modify existing taxes or other revenue raising measures or that
either would further limit or, alternatively, would increase the abilities of
state and local governments to impose new taxes or increase existing taxes. It
is not presently possible to predict the extent to which any such legislation
will be enacted. Nor is it presently possible to determine the impact of any
such legislation on California municipal obligations in which the Fund may
invest, future allocations of state revenues to local governments or the
abilities of state or local governments to pay the interest on, or repay the
principal of, such California municipal obligations.
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Substantially all of California is within an active geologic region subject
to major seismic activity. Northern California in 1989 and Southern California
in 1994 experienced major earthquakes causing billions of dollars in damages.
The federal government provided more than $13 billion in aid for both
earthquakes, and neither event is expected to have any long-term negative
economic impact. Any security in the California Fund could be affected by an
interruption of revenues because of damaged facilities, or, consequently, income
tax deductions for casualty losses or property tax assessment reductions.
Compensatory financial assistance could be constrained by the inability of (I)
an issuer to have obtained earthquake insurance coverage at reasonable rates;
(ii) an insurer to perform on its contracts of insurance in the event of
widespread losses; or (iii) the federal or State governments to appropriate
sufficient funds within their respective budget limitations.
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APPENDIX B
EVERGREEN MASSACHUSETTS TAX FREE FUND
The Commonwealth of Massachusetts and certain of its cities and towns and
public bodies have experienced in the past, and may experience in the future,
financial difficulties that may adversely affect their credit standing. The
prolonged effects of such financial difficulties could adversely affect the
market value of the municipal securities held by the Massachusetts Fund. The
information summarized below describes some of the more significant factors that
could affect the Massachusetts Fund or the ability of the obligors to pay debt
service on certain of the securities. The sources of such information are the
official statement of issuers located in the Commonwealth of Massachusetts as
well as other publicly available documents, and statements of public officials.
The Massachusetts Fund has not independently verified any of the information
contained in such statements and documents but the Massachusetts Fund is not
aware of facts which would render such information inaccurate.
General
The Commonwealth's constitution requires, in effect, that its budget,
though not necessarily its operating expenditures and revenue, be balanced each
year. In addition, the Commonwealth has certain budgetary procedures and fiscal
controls in place that are designed to ensure that sufficient cash is available
to meet the Commonwealth's obligations, that state expenditures are consistent
with periodic allotments of annual appropriations and that funds are expended
consistent with statutory and public purposes. The condition of the three
principal operating funds (the General Fund, the Local Aid Fund and the Highway
Fund), viewed on a consolidated basis, is generally regarded as the principal
indicator of whether the Commonwealth's operating revenues and expenses are in
balance.
1998 FISCAL YEAR
The budget for fiscal 1998 was enacted by the Legislature on June 30, 1997
and approved by Governor Weld on July 10, 1997. (Appropriations covering the
first two weeks of the fiscal year were enacted and approved on June 30, 1997.)
The budget was based on a consensus tax revenue forecast of $12.85 billion, as
agreed by both houses of the Legislature in March. The Executive Office for
Administration and Finance revised the fiscal 1998 tax forecast to $13.06
billion on July 30, 1997 and, after a review of first quarter fiscal 1998 tax
receipts, to $13.20 billion on October 15, 1997. The fiscal 1998 tax revenue
estimates were revised again on January 16, 1998 to reflect an increase of $100
million in tax revenues. Tax law changes effective in fiscal 1998 have (I)
increased anticipated revenues by $19.0 million from miscellaneous fees to be
collected as a result of the convention center legislation approved on November
17, 1997, (ii) reduced tax revenues by an estimated $25.0 million as a result of
the exemption of military pensions from state income tax, effective January 1,
1998, which was approved by Acting Governor Cellucci on November 6, 1997, and
(iii) reduced tax revenues by an estimated $140 million as a result of a change
in the sales tax payment schedule. After taking into account such tax law
changes, the January 16, 1998 estimate was $13.154 billion. On May 5, 1998, the
tax revenue estimate was further revised upward to $13.3 billion. On June 1,
1998, Revenue Commissioner Mitchell Adams announced that year-to-date revenue
collections totaled $12.364 billion, which he found to be in line with revenue
estimates.
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The fiscal 1998 budget provides for total appropriations of approximately
$18.4 billion, a 2.8% increase over fiscal 1997 expenditures. The budget
incorporates tax cuts valued by the Department of Revenue at $61 million and
provides for an accelerated pension funding schedule. Supplemental
appropriations have been approved for fiscal 1998 in the amount of approximately
$210.4 million, including the transfer of approximately $34.8 million to the
Massachusetts Water Pollution Abatement Trust for state revolving fund programs.
In addition, on November 26, 1997, Acting Governor Cellucci approved legislation
transferring off-budget the $206.3 million Department of Medical Assistance
reserve to indemnify certain medical facilities against losses that might result
from providing uncompensated care. On January 30, 1998, Acting Governor Cellucci
filed two bills recommending supplemental appropriations for fiscal 1998
totaling $211.8 million. The bills incorporated most of the supplemental
appropriations recommended in bills filed by the Administration on October 6,
1997 and October 17, 1997 which were not enacted by the Legislature. The first
bill totaled $44.6 million in proposed spending to provide to certain
unanticipated obligations of the Commonwealth. The second bill recommended
$167.1 million in proposed spending to provide for one-time expenditures,
matching grants and capital initiatives, including $50 million for the
construction and repair of local roads and bridges, $20 million for the
development of a new human resource compensation management system and $10
million in additional funding for the upgrade of the Commonwealth's information
technology systems in preparation for the year 2000 conversion. On April 29,
1998, Acting Governor Cellucci approved a supplemental appropriations bill for
$116.4 million, of which $56.3 million is for expenditures contained in the
bills filed by the Acting Governor on January 30, 1998. The bill includes $21.1
million for snow and ice costs at the Massachusetts Highway Department, $15.4
million for child care services relating to welfare reform and $11 million at
the Department of Social Services for residential group care and adoption.
Projected Total fiscal 1998 expenditures are approximately $18.930 billion.
Cash Flow
The most recent cash flow projections for fiscal 1998 and fiscal 1999 were
released by the State Treasurer and the Secretary of Administration and Finance
on March 25, 1998. The forecast for fiscal 1998 is based on the fiscal 1998
budget signed by Governor Weld on July 10, 1997, and includes the value of all
fiscal 1998 supplemental budgets enacted by the Legislature. The fiscal 1999
forecast is based on the proposed fiscal 1999 budget submitted by the Acting
Governor on January 27, 1998. Both projections are based on revenue and spending
estimates prepared by the Executive Office for Administration and Finance and
incorporate actual results through January, 1998 and monthly projections through
June, 1999.
Fiscal 1998 is projected to end with a cash balance of $477.9 million,
without regard to any fiscal 1998 activity that may occur after June 30, 1998.
Such balance does not include the balance in the Stabilization Fund ($799.0
million at June 30, 1997) or interest earnings thereon expected during fiscal
1998; it does reflect the required Stabilization Fund transfer related to fiscal
1997 of $234.0 million during fiscal 1998. The cash flow statement notes that
general obligation bonds were issued for capital projects in August, 1997 in the
amount of $250 million and in January, 1998 in the amount of $250 million and
projects that an additional $428 million of general obligation bonds will be
issued for such purposes during the remainder of the fiscal year. The statement
also notes that $105 million of special obligation bonds were issued in October,
1997.
The cash flow statement notes that the Massachusetts Turnpike Authority and
the Massachusetts Port Authority are required to make payments to the
Commonwealth in connection with the Central Artery/Ted Williams Tunnel project
and forecasts that the Commonwealth will receive $430 million in the aggregate
during fiscal 1998 from such authorities or from the issuance
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of Commonwealth notes in anticipation of payments from such authorities. (The
statement also notes that the Commonwealth has the statutory authority to issue
bonds to pay any such notes.) The statement further forecasts, in connection
with the Central Artery/Ted Williams Tunnel project, that the Commonwealth will
issue $350 million of notes in anticipation of future federal highway grants,
noting that federal funding for such purposes has been extended on an interim
basis through March 31, 1998, and that successor federal funding legislation is
expected to be enacted by late 1998.
1999 FISCAL YEAR
On January 27, 1998, Acting Governor Cellucci filed his fiscal 1999 budget
recommendations with the House of Representatives. The proposal calls for
budgeted expenditures of approximately $19.06 billion, or total fiscal 1999
spending of $19.49 billion after adjusting for shifts to and from off-budget
accounts. The proposed fiscal 1999 spending level represents a $559 million, or
3.0%, increase over projected total fiscal 1998 expenditures of $18.930 billion.
Budgeted revenues for fiscal 1999 are projected to be $18.961 billion, or
$19.291 billion after adjusting for shifts to and from off-budget accounts. This
represents a $53.0 million, or 0.3%, increase over the $18.908 billion forecast
for fiscal 1998. (The $18.908 billion revenue estimate for fiscal 1998 reflects
the addition of $100 million in tax revenue incorporated into the forecast by
the Secretary of Administration and Finance on January 16, 1998 and the addition
of $146 million in tax revenue incorporated into the forecast by the Secretary
of Administration and Finance on May 5, 1998.) The Governor's proposal projects
a fiscal 1999 ending balance in the budgeted funds of $906.3 million, including
a Stabilization Fund balance of $878.1 million.
The Governor's budget recommendation is based on a tax revenue estimate of
$13.665 billion, a $365.0 million, or 2.7%, increase over fiscal 1998 projected
tax revenues of $13.300 billion. The projection incorporates $244.8 million in
income tax cuts proposed by the Governor, including a reduction of the Part B
("earned income') tax rate from 5.95% to 5% over three years ($205.8 million), a
reduction of the Part A ("unearned income"; i.e., interest from non-
Massachusetts banks, dividends, and short-term capital gains) tax rate from 12%
to 5% over five years ($30 million), credits and exemptions to encourage saving
for children's higher education ($3 million), an exemption from capital gains
taxes on the sale of a house ($2 million) and an exemption for providing care to
an elderly relative ($4 million). The recommendation also proposes moving $92.5
million in tax revenue in the Children's and Seniors Health Protection Fund off-
budget.
The proposed budget assumes non-tax revenues of $5.297 billion, or $5.624
billion when adjusted for the shifts to and from off-budget accounts, and
represents an increase of $15.4 million from fiscal 1998. Of the three classes
of non-tax revenue, federal reimbursements, including those for Medicaid, and
block grants for Temporary Assistance to Needy Families and Child Care programs
most affect the Commonwealth's budgetary considerations. These payments are
projected to total $3.216 billion in fiscal 1999, or $3.426 billion after the
impact of shifts to and from off-budget accounts is removed. This level of
federal payments represents an increase of $41.0 million, or 1.2%, from fiscal
1998, the result primarily of changes in federal reimbursement for Medicaid
programs. Fiscal 1999 departmental revenues of $1.130 billion, or $1.158 billion
after adjusting for shifts to and from off-budget accounts, represent a decrease
of approximately $127 million from fiscal 1998 projections, due primarily to the
implementation of free, lifetime driver licensing and vehicle registration and a
decrease of $29.3 million from fiscal 1998 in the revenue generated by the
revenue optimization program. Consolidated transfers, the third category of
non-tax revenue, consists primarily of state lottery profits which are
distributed to cities and towns. Consolidated transfers are projected to
increase by $1.8 million from fiscal 1998 levels.
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Lottery profits are expected to remain constant in fiscal 1999.
The Governor's budget proposal generally provides for maintaining current
levels of service for most state programs but recommends increased spending for
certain priority areas, including a $357 million increase in funding for the
Department of Education, $309.7 million in additional local aid to cities and
towns, $69 million for Medicaid program medical inflation and $34 million in
additional local aid funded by the State Lottery.
The Governor's fiscal 1999 budget recommendations call for appropriations
of $945.3 million for pension funding, $85.2 million less than the amount
appropriated for fiscal 1998 and $113.9 million less than the amount called for
in the most recent adopted funding schedule. The recommended amount reflects the
elimination in 1997 of the Commonwealth's responsibility for funding
cost-of-living adjustments incurred by local pension systems and assumes the
adoption of a revised funding schedule in the spring of 1998. The proposed
budget also includes a $20 million reserve to meet the Commonwealth's obligation
to reduce the unfunded pension liabilities attributable to former employees of
Franklin, Hampden, Middlesex and Worcester counties and certain incremental
benefit costs associated with legislation enacted in 1996; any expenditures from
the reserve are contingent upon the adoption of a new funding schedule.
On April 27, 1998, the House Committee on Ways and Means released its
proposed budget for fiscal 1999. Debate in the full House of Representatives
began on May 4, 1998. The House Committee's budget provides for total spending
of $19.592 billion and assumes total revenues of $19.446 billion. The House
Committee's budget is based on the consensus tax revenue estimate of $14.4
billion, less approximately $534 million from tax cuts proposed in such budget.
The Committee's budget includes the income tax provisions approved by the House
of Representatives on March 12, 1998. It would raise the statutory ceiling on
amounts in the Stabilization Fund from 5% to 7.5% of budgeted revenues and other
financial resources pertaining to the budgeted funds. The committee's budget
would add $18 million in appropriations for building maintenance and $21 million
in appropriations for debt service related to the "forward funding" of the
Massachusetts Bay Transportation Authority. The committee's budget would also
appropriate approximately $965.3 million for the Commonwealth's pension
liabilities.
On November 28, 1995 the Governor approved a modified version of the
legislation he had filed in September to establish a "single sales factor"
apportionment formula for the business corporations tax. As finally enacted, the
legislation applies the new formula, effective January 1, 1996, to certain
federal defense contractors and phases the new formula in over five years to
manufacturing firms generally. The Department of Revenue estimates that the new
law reduced revenues by $44 million in fiscal 1996 and will reduce revenues by
$90 million in fiscal 1997. If the new formula were fully effective for all
covered businesses, the Department estimates that the annual revenue reduction
would be $100 million to $150 million. On August 8, 1996, the Governor approved
legislation changing the apportionment formula for the business corporations tax
payable by certain mutual fund service corporations. The legislation changes the
computation of the sales factor effective January 1, 1997 and adopts the "single
sales factor" formula effective July 1, 1997 with respect to these companies. It
also requires the affected corporations to increase their numbers of employees
by 5% per year for five years, subject to certain exceptions. The Department of
Revenue estimates that the changes will reduce revenues by $10 million in fiscal
1997 and by approximately $39 million to $53 million per year beginning in
fiscal 1998.
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Limitations on Tax Revenues
In Massachusetts, efforts to limit and reduce levels of taxation have been
underway for several years. Limits were established on state tax revenues by
legislation enacted on October 25, 1986 and by an initiative petition approved
by the voters on November 4, 1986. The two measures are inconsistent in several
respects.
Chapter 62F, which was added to the General Laws by initiative petition in
November 1986, establishes a state tax revenue growth limit for each fiscal year
equal to the average positive rate of growth in total wages and salaries in the
Commonwealth, as reported by the federal government, during the three calendar
years immediately preceding the end of such fiscal year. Chapter 62F also
requires that allowable state tax revenues be reduced by the aggregate amount
received by local governmental units from any newly authorized or increased
local option taxes or excises. Any excess in state tax revenue collections for a
given fiscal year over the prescribed limit, as determined by the State Auditor,
is to be applied as a credit against the then current personal income tax
liability of all taxpayers in the Commonwealth in proportion to the personal
income tax liability of all taxpayers in the Commonwealth for the immediately
preceding tax year.
Unlike Chapter 29B, as described below, the initiative petition did not
exclude principal and interest payments on Commonwealth debt obligations from
the scope of its tax limit. However, the preamble contained in Chapter 62F
provides that "although not specifically required by anything contained in this
chapter, it is assumed that from allowable state tax revenues as defined herein
the Commonwealth will give priority attention to the funding of state financial
assistance to local governmental units, obligations under the state governmental
pension systems, and payment of principal and interest on debt and other
obligations of the Commonwealth".
The legislation enacted in October 1986, which added Chapter 29B to the
General Laws, also establishes an allowable state revenue growth factor by
reference to total wages and salaries in the Commonwealth. However, rather than
utilizing a three-year average wage and salary growth rate, as used by Chapter
62F, Chapter 29B utilizes an allowable state revenue growth factor equal to 1/3
of the positive percentage gain in Massachusetts wages and salaries, as reported
by the federal government during the three calendar years immediately preceding
the end of a given fiscal year. Additionally, unlike Chapter 62F, Chapter 29B
allows for an increase in maximum state tax revenues to fund the increase in
local aid and excludes from its definition of state tax revenues (I) income
derived from local option taxes and excises, and (ii) revenues needed to fund
debt service costs.
Proposition 2 1/2
In November 1980, voters in the Commonwealth approved a statewide tax
limitation initiative petition, commonly known as Proposition 2 1/2, to
constrain levels of property taxation and to limit the charges and fees imposed
on cities and towns by certain governmental entities, including county
governments. Proposition 2 1/2 is not a provision of the state constitution and
accordingly is subject to amendment or repeal by the legislature. Proposition 2
1/2, as amended to date, limits the property taxes that may be levied by any
city or town in any fiscal year to the lesser of (I) 2.5% of the full and fair
cash valuation of the real estate and personal property therein, and (ii) 2.5%
over the previous year's levy limit plus any growth in the tax base from certain
new construction and parcel subdivisions. Proposition 2 1/2 also limits any
increase in the charges and fees assessed by certain governmental entities,
including county governments, on cities and towns to the sum of (I) 2.5% of the
total charges and fees imposed in the preceding fiscal year, and (ii) any
increase in charges for services customarily provided locally or services
obtained by the city or
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town at its option. The law contains certain override provisions and, in
addition, permits debt service on specific bonds and notes and expenditures for
identified capital projects to be excluded from the limits by a majority vote at
a general or special election.
Many communities have responded to the limitations imposed by Proposition 2
1/2 through statutorily permitted overrides and exclusions. Override activity
peaked in fiscal 1991 and decreased thereafter. In fiscal 1992, 65 communities
approved one of the three types of referenda questions (override of levy limit,
exclusion of debt service, or exclusion of capital expenditures), adding $31.0
million to their levy limits.
In fiscal 1993, 59 communities added $16.3 million through override votes
and in fiscal 1994, only 48 communities had successful override referenda which
added $8.4 million to their levy limits. In fiscal 1995, 32 communities added
$8.8 million, and in fiscal 1996, 30 communities added $5.8 million to their
levy limits. Although Proposition 2 1/2 will continue to constrain local
property tax revenues, significant capacity exists for overrides in nearly all
cities and towns.
In addition to overrides, Proposition 2 1/2 allows a community, through
voter approval, to assess taxes in excess of its levy limit for the payment of
certain capital projects (capital outlay expenditure exclusions) and for the
payment of specified debt service costs (debt exclusions). Capital exclusions
were passed by 19 communities in fiscal 1996 and totaled $1.5 million. In fiscal
1996, the impact of successful debt exclusion votes going back as far as fiscal
1983, was to raise the levy limits of 229 communities by $125.8 million.
Litigation
There are pending in state and federal courts within the Commonwealth and
in the U.S. Supreme Court various suits in which the Commonwealth is a party. In
the opinion of the Attorney General, no litigation is pending or, to his
knowledge, threatened which is likely to result, either individually or in the
aggregate, in final judgments against the Commonwealth that would affect
materially its financial condition.
Other Factors
Many factors affect the financial condition of the Commonwealth, including
many social, environmental, and economic conditions, which are beyond the
control of the Commonwealth. As with most urban states, the continuation of many
of the Commonwealth's programs, particularly its human service programs, is, in
significant part, dependent upon continuing federal reimbursements, which are
expected to decline in fiscal 1997.
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APPENDIX C
EVERGREEN MISSOURI TAX FREE FUND
General
Missouri's economy includes manufacturing, commerce, trade, services,
agriculture, tourism and mining. The State's economy is diversified and closely
resembles that of the nation's although growth prospects are less favorable than
in the past. It is the nation's fifteenth largest state. The State employment
sectors, services, trade and manufacturing, also account for the primary sources
of national employment. Recent growth in the manufacturing sector has outpaced
the nation as a whole. Labor force growth has remained steady, totaling 2.65
million in 1993, up from 2.3 million in 1980. Through the 1980's and early
1990's the State's unemployment rate essentially mirrored that of the nation;
however, adverse changes in military appropriations, which play an important
role in the State's economy, could contribute to a significant increase in
unemployment. In 1996, according to the Bureau of Labor Statistics, the State
ranked seventeenth among the states in unadjusted nonagricultural employment. In
November 1996, the State's unemployment rate was estimated to be 4.0% as against
the national rate of 5.3%. In recent years, Missouri's wealth indicators have
grown at a slower rate than national levels and in 1995 the State's per capita
personal income was approximately 94.0% of the average for the nation as a
whole.
Missouri displayed strong fiscal performance during most of the 1980's.
However, Missouri has recently experienced difficulties in balancing its budget
as a result of increased expenses and declining sources of revenues. Other
factors contributing to Missouri's weak fiscal position relate to the reduction
of large manufacturing companies, including those in aerospace and the auto
industry. The Missouri portions of the St. Louis and Kansas City metropolitan
areas together contain over 50% of Missouri's population. Economic reversals in
either of these two areas would have a major impact on the overall economic
condition of the State of Missouri. Additionally, the State of Missouri has a
significant agricultural sector, which may experience problems comparable to
those which are occurring in other states. To the extent that any such problems
intensify, there could possibly be an adverse impact on the overall economic
condition of the State.
Currently, general obligations of Missouri are rated "AAA," "Aaa" and
"AAA," by S&P, Moody's and Fitch, respectively. There can be no assurance that
the economic conditions on which these ratings are based will continue or that
particular bond issues may not be adversely affected by changes in economic,
political or other conditions.
Revenue and Limitations Thereon
Article X, Section 16-24 of the Constitution of Missouri (the "Hancock
Amendment"), imposes limitations on the amount of State taxes which may be
imposed by the General Assembly of Missouri (the "General Assembly") as well as
on the amount of local taxes, licenses and fees (including taxes, licenses and
fees used to meet debt service commitments on debt obligations) which may be
imposed by local governmental units (such as cities, counties, school districts,
fire protection districts and other similar bodies) in the State of Missouri in
any fiscal year.
The State limit on taxes is tied to total State revenues for fiscal year
1980-81, as defined in the Hancock Amendment, adjusted annually in accordance
with the formula set forth in the amendment, which adjusts the limit based on
increases in the average personal income of Missouri
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for certain designated periods. The details of the Amendment are complex and
clarification from subsequent legislation and further judicial decisions may be
necessary. Generally, if the total State revenues exceed the State revenue limit
imposed by Section 18 of Article X by more than one percent, the State is
required to refund the excess. The State revenue limitation imposed by the
Hancock Amendment does not apply to taxes imposed for the payment of principal
and interest on bonds, approved by the voters and authorized by the Missouri
constitution. The revenue limit also can be exceeded by a constitutional
amendment authorizing new or increased taxes or revenue adopted by the voters of
the State of Missouri.
The Hancock Amendment also limits new taxes, licenses and fees and
increases in taxes, licenses and fees by local governmental units in Missouri.
It prohibits counties and other political subdivisions (essentially all local
governmental units) from levying new taxes, licenses and fees or increasing the
current levy of an existing tax, license or fee without the approval of the
required majority of the qualified voters of that county or other political
subdivision voting thereon.
When a local government unit's tax base with respect to certain fees or
taxes is broadened, the Hancock Amendment requires the tax levy or fees to be
reduced to yield the same estimated gross revenue as on the prior base. It also
effectively limits any percentage increase in property tax revenues to the
percentage increase in the general price level (plus the value of new
construction and improvements), even if the assessed valuation of property in
the local governmental unit, excluding the value of new construction and
improvements, increases at a rate exceeding the increase in the general price
level.
Industry and Employment
While Missouri has a diverse economy with a distribution of earnings and
employment among manufacturing, trade and service sectors closely approximating
the average national distribution, the national economic recession of the early
1980's had a disproportionately adverse impact on the economy of Missouri.
During the 1970's, Missouri characteristically had a pattern of unemployment
levels well below the national averages. However, since the 1980 to 1983
recession periods Missouri unemployment levels generally approximated or
slightly exceeded the national average. A return to a pattern of high
unemployment could adversely affect the Missouri debt obligations acquired by
the Missouri Fund and, consequently, the value of the shares of the Fund.
The Missouri portions of the St. Louis and Kansas City metropolitan areas
contain approximately 1,949,956 and 1,039,241 residents, respectively,
constituting over fifty percent of Missouri's 1997 population census of
approximately 5,387,753. St. Louis is an important site for banking and
manufacturing activity, as well as a distribution and transportation center,
with nine Fortune 500 industrial companies (as well as other major educational,
financial, insurance, retail, wholesale and transportation companies and
institutions) headquartered there. Kansas City is a major agribusiness center
and an important center for finance and industry. Economic reversals in either
of these two areas would have a major impact on the overall economic condition
of the State of Missouri. Additionally, the State of Missouri has a significant
agricultural sector which is experiencing farm-related problems comparable to
those which are occurring in other states. To the extent that these problems
were to intensify, there could possibly be an adverse impact on the overall
economic condition of the State of Missouri.
Defense related business plays an important role in Missouri's economy.
There are a large number of civilians employed at the various military
installations and training bases in the state and recent action of the Defense
Base Closure and Realignment Commission will result in the loss of a
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substantial number of civilian jobs in the St. Louis Metropolitan area. Further,
aircraft and related businesses in Missouri are the recipients of substantial
annual dollar volumes of defense contract awards. The contractor receiving the
second largest dollar volume of defense contracts in the United States in 1995
was McDonnell Douglas Corporation which lost the number one position it held in
1994 by reason of the merger of the Lockheed and Martin Companies. McDonnell
Douglas Corporation, which was acquired by The Boeing Company on August 1, 1997,
is the State's largest employer, currently employing approximately 22,900
employees in Missouri. Recent changes in the levels of military appropriations
and the cancellation of the A-12 program has affected McDonnell Douglas
Corporation in Missouri and over the last four years it has reduced its Missouri
work force by such company approximately 30%. There can be no assurances that
there will be further changes in the levels of military appropriations, and, to
the extent that further changes in military appropriations are enacted by the
United States Congress, Missouri could be disproportionately affected. It is
impossible to determine what effect, if any, completion of the acquisition of
all McDonnell Douglas Corporation by The Boeing Company will have on the
operations conducted in Missouri by the former McDonnel Douglas Corporation.
However, any shift or loss of production now conducted in Missouri would have a
negative impact on the economy of the state and particularly the economy of the
St. Louis metropolitan area.
Other Factors
Desegregation lawsuits in St. Louis and Kansas City continue to require
significant levels of state funding and are sources of uncertainty. Litigation
continues on many issues, notwithstanding a 1995 U.S. Supreme Court favorable to
the State in the Kansas City desegregation litigation; court orders are
unpredictable, and school district spending patterns have proven difficult to
predict. The State paid $282 million for desegregation costs in fiscal 1994,
$315 million for fiscal 1995 and $274 million for fiscal 1996. This expense
accounted for close to 7% of total state General Revenue Fund spending in fiscal
1994 and 1995, and close to 5% in fiscal 1996.
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APPENDIX D
EVERGREEN NEW YORK TAX FREE FUND
Special Considerations Relating to New York Municipal Securities
The financial condition of the State of New York ("New York State" or the
"State"), its public authorities and public benefit corporations (the
"Authorities") and its local governments, particularly the City of New York (the
"City"), could affect the market values and marketability of, and therefore the
net asset value per share and the interest income of a Fund, or result in the
default of existing obligations, including obligations which may be held by the
Fund. The following section provides only a brief summary of the complex factors
affecting the financial situation in New York and is based on information
obtained from New York State, certain of its Authorities, the City and certain
other localities as publicly available on the date of this Annual Information
Statement. The information contained in such publicly available documents has
not been independently verified. It should be noted that the creditworthiness of
obligations issued by local issuers may be unrelated to the creditworthiness of
New York State, and that there is no obligation on the part of New York State to
make payment on such local obligations in the event of default in the absence of
a specific guarantee or pledge provided by New York State.
Economic Factors. New York is the third most populous state in the nation
and has a relatively high level of personal wealth. The State's economy is
diverse, with a comparatively large share of the nation's finance, insurance,
transportation, communications and services employment, and a very small share
of the nation's farming and mining activity. The State's location and its
excellent air transport facilities and natural harbors have made it an important
link in international commerce. Travel and tourism constitute an important part
of the economy. Like the rest of the nation, New York has a declining proportion
of its workforce engaged in manufacturing, and an increasing proportion engaged
in service industries.
Both the State and the City experienced substantial revenue increases in
the mid-1980s attributable directly (corporate income and financial corporations
taxes) and, indirectly (personal income and a variety of other taxes) to growth
in new jobs, rising profits and capital appreciation derived from the finance
sector of the City's economy. Economic activity in the City has experienced
periods of growth and recession and can be expected to experience periods of
growth and recession in the future. In recent years, the City has experienced
increases in employment. Real per capita personal income (i.e., per capita
personal income adjusted for the effects of inflation and the differential in
living costs) has generally experienced fewer fluctuations than employment in
the City. Although the City periodically experienced declines in real per capita
personal income between 1969 and 1981, real per capita personal income in the
City has generally increased from the mid-1980s until the present. In nearly all
of the years between 1969 and 1988 the City experienced strong increases in
retail sales. However, from 1989 to 1993, the City experienced a weak period of
retail sales. Since 1994, the City has returned to a period of growth in retail
sales. Overall, the City's economic improvement accelerated significantly, in
fiscal year 1997. Much of the increase can be traced to the performance of the
securities industry, but the City's economy also produced gains in the retail
trade sector, the hotel and tourism industry, and business services, with
private sector employment higher than previously forecasted. The City's current
Financial Plan assumes that, after strong growth in 1997- 1998, moderate
economic growth will exist through calendar year 2002, with moderating job
growth and wage increases. However, there can be no assurance that the economic
projections assumed in the Financial Plan will occur or that the tax revenues
projected in the Financial Plan to be received will be received in the amounts
anticipated.
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During the calendar years 1984 through 1991, the State's rate of economic
expansion was somewhat slower than that of the nation as a whole. In the
1990-1991 national recession, the economy of the Northeast region in general and
the State in particular was more heavily damaged than that of the rest of the
nation and has been slower to recover.
Although the national economy began to expand in 1991, the State economy
remained in recession until 1993, when employment growth resumed. Currently the
State economy continues to expand, but growth remains somewhat slower than in
the nation. Although the State has added over 400,000 jobs since late 1992,
employment growth has been hindered during recent years by significant cutbacks
in the computer and instrument manufacturing, utility, defense and banking
industries. Government downsizing has also moderated these job gains. Personal
income increased substantially in 1992 and 1993. The State's economy entered
into the fourth year of a slow recovery in 1996. Most of the growth occurred in
the trade, construction and service industries, with business, social services
and health sectors accounting for most of the service industry growth.
The State has released information regarding the national and state
economic activity in its Annual Information Statement of the State of New York
dated June 26, 1998 ("Annual Information Statement"). At the State level, the
Annual Information Statement projects continued expansion during the 1998
calendar year, with employment growth gradually slowing as the year progresses.
The financial and business service sectors are expected to continue to do well,
while employment in the manufacturing and government sectors will post only
small, if any, declines. On an average annual basis, the employment growth rate
in the State is expected to be higher than in 1997 and the unemployment rate is
expected to drop further to 6.1 percent. Personal income is expected to record
moderate gains in 1998. Wage growth in 1998 is expected to be slower than in the
previous year as the recent robust growth in bonus payments moderates.
Personal income tax collections for 1998-99 are projected to reach $21.24
billion, or $3.5 billion above the reported 1997-98 collection total. Total
business tax collections in 1998-99 are now projected to be $4.96 billion, $91
million less than received in the prior fiscal year. Receipts from user taxes
and fees are projected to total $7.14 billion, an increase of $107 million from
reported collections in the prior year. Other tax receipts are projected to
total $1.02 billion-$75 million below last year's amount. Total miscellaneous
receipts are projected to reach $1.40 billion, down almost $200 million from the
prior year. Transfers from other funds are expected to total $1.8 billion, or
$222 million less than total receipts from this category during 1997-98.
General Fund disbursements in 1998-99, including transfers to support
capital projects, debt service and other funds are estimated at $36.78 billion.
This represents an increase of $2.43 billion or 7.1 percent from 1997-98. Nearly
one-half of the growth is for educational purposes, reflecting increased support
for public schools, special education programs and the State and City university
systems. The remaining increase is primarily for Medicaid, mental hygiene, and
other health and social welfare programs, including children and family
services. The 1998-99 Financial Plan also includes funds for the current
negotiated salary increases for State employees, as well as increased transfers
for debt service. Grants to local governments is the largest category of General
Fund disbursements and includes financial assistance to local governments and
not-for-profit corporations, as well as entitlement benefits to individuals. The
1998-99 Financial Plan projects spending of $25.14 billion in this category, an
increase of $1.88 billion or 8.1 percent over the prior year. The largest annual
increases are for educational programs, Medicaid, other health and social
welfare programs, and community projects grants. The 1998-99 budget provides
$9.65 billion in support of public schools. The year-to-year increase of $769
million is comprised of partial funding for a 1998-99 school year increase of
$847 million as well as the remainder of the 1997-98 school year increase that
occurs in State fiscal year 1998-99. Spending for all other educational
programs, which includes the State and City university systems, the Tuition
Assistance Program, and handicapped programs, is estimated at
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$3.00 billion, an increase of $270 million over 1997-98 levels. Medicaid costs
are estimated at $5.60 billion, an increase of $144 million from the prior year.
The 1998-99 Financial Plan projects a closing fund balance in the General
Fund of $1.42 billion. This fund balance is composed of a reserve of $761
million available for future needs, a $400 million balance in the TSRF, a $158
million in the CPF, and a balance of $100 million in the CRF, after a projected
deposit of $32 million in 1998-99.
The economic and financial condition of the State may be affected by
various financial, social, economic and political factors. These factors can be
very complex, may vary from fiscal year to fiscal year, and are frequently the
result of actions taken not only by the State and its agencies and
instrumentalities, but also by entities, such as the federal government, that
are not under the control of the State. Because of the uncertainty and
unpredictability of these factors, their impact cannot, as a practical matter,
be included in the assumptions underlying the State's projections at this time.
As a result, there can be no assurance that the State economy will not
experience results in the current fiscal year that are worse than predicted,
with corresponding material and adverse effects on the State's projections of
receipts and disbursements.
The State Financial Plan is based upon forecasts of national and State
economic activity developed through both internal analysis and review of State
and national economic forecasts prepared by commercial forecasting services and
other public and private forecasters. Economic forecasts have frequently failed
to predict accurately the timing and magnitude of changes in the national and
the State economies, including consumer attitudes toward spending, the extent of
corporate and governmental restructuring, the condition of the financial sector,
federal fiscal and monetary policies, the level of interest rates, and the
condition of the world economy, which could have an adverse effect on the
State's projections of receipts and disbursements.
The State. Owing to the factors mentioned above and other factors, the
State may, in future years, face substantial potential budget gaps resulting
from a significant disparity between tax revenues projected from a lower
recurring receipts base and the future costs of maintaining State programs at
current levels.
Total General Fund receipts in 1998-99 are projected to be $37.56 billion,
an increase of over $3 billion from the $34.55 billion recorded in 1997-98. This
total included $34.36 billion in tax receipts, $1.40 billion in miscellaneous
receipts, and $1.80 billion in transfers from other funds. However, many complex
political, social and economic forces influence the State's economy and
finances, which may in turn affect the State's Financial Plan. These forces may
affect the State unpredictably from fiscal year to fiscal year and are
influenced by governments, institutions, and organizations that are not subject
to the State's control. The State Financial Plan is also necessarily based upon
forecasts of national and State economic activity. Economic forecasts have
frequently failed to predict accurately the timing and magnitude of changes in
the national and the State economies. Because of the uncertainty and
unpredictability of changes in these factors, their impact cannot be fully
included in the assumptions underlying the State's projections.
An additional risk to the State Financial Plan arises from the potential
impact of certain litigation and of federal disallowances now pending against
the State, which could adversely affect the States projections of receipts and
disbursements. The State Financial Plan assumes no significant litigation or
federal disallowance or other federal actions that could affect State finances,
but has significant reserves in the event of such an action.
Revenue Base. The State's principal revenue sources are economically
sensitive, and include the personal income tax, user taxes and fees and business
taxes. The 1998-99 Financial
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Plan projects General Fund receipts (including transfers from other funds) of
$37.56 billion, an increase of over 3 billion from the $34.55 billion recorded
in 1997-98. This total includes $34.36 billion in tax receipts, $1.40 billion in
miscellaneous receipts, and $1.80 billion in transfers from other funds.
The transfer of a portion of the surplus recorded in 1997-98 to 1998-99
exaggerates the "real" growth in State receipts from year to year by depressing
reported 1997-98 figures and inflating 1998-99 projections. Conversely, the
incremental cost of tax reductions newly effective in 1998-99 and the impact of
statutes earmarking certain tax receipts to other funds work to depress apparent
growth below the underlying growth in receipts attributable to expansion of the
State's economy. On an adjusted basis, State tax revenues in the 1998-99 fiscal
year are projected to grow at approximately 7.5 percent, following an adjusted
growth of roughly nine percent in the 1997-98 fiscal year. On an adjusted basis,
State tax revenues in the 1998-99 fiscal year are projected to grow at
approximately 7.5 percent, following an adjusted growth of roughly nine percent
in the 1997-98 fiscal year.
The Personal Income Tax is imposed on the income of individuals, estates
and trusts and is based on federal definitions of income and deductions with
certain modifications. This tax continues to account for over half of the
State's General Fund receipts base. Net personal income tax collections are
projected to reach $21.24 billion, nearly $3.5 billion above the reported
1997-98 collection total. Since 1997 represented the completion of the 20
percent income tax reduction program enacted in 1995, growth from 1997 to 1998
will be unaffected by major income tax reductions. Adding to the projected
annual growth is the net impact of the transfer of the surplus from 1997-98 to
the current year which affects reported collections by over $2.4 billion on a
year- over-year basis, as partially offset by the diversion of slightly over
$700 million in income tax receipts to the STAR fund to finance the initial year
of the school tax reduction program. The STAR program was enacted in 1997 to
increase the State share of school funding and reduce residential school taxes.
Adjusted for these transactions, the growth in net income tax receipts is
roughly $1.7 billion, an increase of over 9 percent. This growth is largely a
function of over 8 percent growth in income tax liability projected for 1998 as
well as the impact of the 1997 tax year settlement on 1998-99 net collections.
User taxes and fees comprised of three quarters of the State four percent
sales and use tax (the balance, one percent, flows to support Government
Assistance Corporation ("LGAC") debt service requirements), cigarette, alcoholic
beverage container, and auto rental taxes, and a portion of the motor fuel
excise levies. Also included in this category are receipts from the motor
vehicle registration fees and alcoholic beverage license fees. A portion of the
motor fuel tax and motor vehicle registration fees and all of the highway use
tax are earmarked for dedicated transportation funds.
Receipts from user taxes and fees receipts are projected to total $7.14
billion, an increase of $107 million from reported collections in the prior
year. The sales tax component of this category accounts for all of the 1998-99
growth, as receipts from all other sources decline $100 million. The growth in
yield of the sales tax in 1998-99, after adjusting for tax law and other
changes, is projected at 4.7 percent. The yields of most of the excise taxes in
this category show a long-term declining trend, particularly cigarette and
alcoholic beverage taxes. These General Fund declines are exacerbated in 1998-99
by revenue losses from scheduled and newly enacted tax reductions, and by an
increase in earmarking of motor vehicle registration fees to the Dedicated
Highway and Bridge Trust Fund.
Business taxes include franchise taxes based generally on net income of
general business, bank and insurance corporations, as well as gross receipt
taxes on utilities and galling-based
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petroleum business taxes. Beginning in 1994, a 15 percent surcharge on these
levies began to be phased out and, for most taxpayers, there is no surcharge
liability for taxable periods ending in 1997 and thereafter.
Total business tax collections in 1998-99 are now projected to be $4.96
billion, $91 million less than received in the prior fiscal year. The category
includes receipts from the largely income- based levies on general business
corporations, banks and insurance companies, gross receipts taxes on energy and
telecommunication service providers and a per-gallon imposition on petroleum
business. The year-over-year decline in projected receipts in this category is
largely attributable to statutory changes between the two years. These include
the first year of utility-tax rate cuts and the Power for Jobs tax reduction
program for energy providers, and the scheduled additional diversion of General
Fund petroleum business and utility tax receipts to other funds. In addition,
profit growth is also expected to slow in 1998.
Other taxes include estate, gift and real estate transfer taxes, a tax on
gains from the sale or transfer of certain real estate (this tax was repealed in
1996), a pari-mutuel tax and other minor levies. They are now projected to total
$1.02 billion-$75 million below last year's amount. Two factors account for a
significant part of the expected decline in collections from this category.
First, the effects of the elimination of the real property gains tax
collections; second, a decline in estate tax receipts, following the explosive
growth recorded in 1997-98, when receipts expanded by over 16 percent.
Miscellaneous receipts include investment income, abandoned property
receipts, medical provider assessments, minor federal grants, receipts from
public authorities, and certain other license and fee revenues. Total
miscellaneous receipts are projected to reach $1.40 billion, down almost $200
million from the prior year, reflecting the loss of non-recurring receipts in
1997-98 and the growing effects of the phase-out of the medical provider
assessments.
Transfers from other funds to the General Fund consist primarily of tax
revenues in excess of debt service requirements, particularly the one percent
sales tax used to support payments to LGAC. Transfers from other funds are
expected to total $1.8 billion, or $222 million less than total receipts from
this category during 1997-98. Total transfers of sales taxes in excess of LGAC
debt service requirements are expected to increase by approximately $51 million,
while transfers from all other funds are expected to fall by $273 million,
primarily reflecting the absence, in 1998-99, of a one-time transfer of nearly
$200 million for retroactive reimbursement of certain social services claims
from the federal government.
State Debt. General Fund disbursements in 1998-99, including transfers to
support capital projects, debt service and other funds are estimated at $36.78
billion. This represents an increase of $2.43 billion or 7.1 percent from
1997-98. Nearly one-half of the growth is for educational purposes, reflecting
increased support for public schools, special education programs and the State
and City university systems. The remaining increase is primarily for Medicaid,
mental hygiene and other health and social welfare programs, including children
and family services. The 1998-99 Financial Plan also includes funds for the
current negotiated salary increase for State employees, as well as increased
transfers for debt service.
Nonrecurring Sources. The Division of the Budget estimates that the 1998-99
State Financial Plan contains actions that provide nonrecurring resources or
savings totaling approximately $64 million, the largest of which is a
retroactive reimbursement of federal welfare claims.
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Outyear Projections of Receipts and Disbursements
State law requires the Governor to propose a balanced budget each year. In
recent years, the State has closed projected budget gaps of $5.0 billion
(1995-96), $3.9 billion (1996-97), $2.3 billion (1997-98), and less than $1
billion (1998-99). The State, as a part of the 1998-99 Executive Budget
projections submitted to the Legislature in February 1998, projected a 1999-00
General Fund budget gap of approximately $1.7 billion and a 2000-01 gap of $3.7
billion. As a result of changes made in the 1998-99 enacted budget, the 1999-00
gap is now expected to be roughly $1.3 billion, or about $400 million less than
previously projected, after application of reserves created as part of the
1998-99 budget process. Such reserves would not be available against subsequent
year imbalances.
Sustained growth in the State's economy could contribute to closing
projected budget gaps over the next several years, both in terms of
higher-than-projected tax receipts and in lower-than- expected entitlement
spending. However, the States projections in 1999-00 currently assume actions to
achieve $600 million in lower disbursements and $250 million in additional
receipts from the settlement of State claims against the tobacco industry.
Consistent with past practice, the projections do not include any costs
associated with new collective bargaining agreements after the expiration of the
current round of contracts at the end of the 1998-99 fiscal year. The State
expects that the 1999- 00 Financial Plan will achieve savings from initiatives
by State agencies to deliver services more efficiently, workforce management
efforts, maximization of federal and non-General Fund spending offsets, and
other actions necessary to bring projected disbursements and receipts into
balance.
The State will formally update its outyear projections of receipts and
disbursements for the 2000-01 and 2001-02 fiscal years as a part of the 1999-00
Executive Budget process, as required by law. The revised expectations for years
2000-01 and 2001-02 will reflect the cumulative impact of tax reductions and
spending commitments enacted over the last several years as well as new 1999-00
Executive Budget recommendations. The STAR program, which dedicates a portion of
person income tax receipts to fund school tax reductions, has a significant
impact on General Fund receipts. STAR is projected to reduce personal income tax
revenues available to the General Fund by an estimated $1.3 billion in 2000-01.
Measured from the 1998-99 base, scheduled reductions to estate and gift, sales
and other taxes, reflecting tax cuts enacted in 1997-98 and 1998-99, will lower
General Fund taxes and fees by an estimated $1.8 billion in 2000-01.
Disbursement projections for the outyears currently assume additional outlays
for school aid, Medicaid, welfare reform, mental health community reinvestment,
and other multi-year spending commitments in law.
Labor Costs. The State government workforce is mostly unionized, subject to
the Taylor- Law which authorizes collective bargaining and prohibits (but has
not, historically, prevented) strikes and work slowdowns. Costs for employee
health benefits have increased substantially, and can be expected to further
increase. The State has a substantial unfunded liability for future pension
benefits, and has utilized changes in its pension fund investment return
assumptions to reduce current contribution requirements. If such investment
earnings assumptions are not sustained by actual results, additional State
contributions will be required in future years to meet the State's contractual
obligations. The State's change in actuarial method from the aggregate cost
method to a modified projected unit credit in FY1990-91 created a substantial
surplus that was amortized and applied to offset the State's contribution
through FY1993-94. This change in actuarial method was ruled unconstitutional by
the State's highest court and the State returned to the aggregate cost method in
FY1994-95 using a four year phase in. Employer contributions, including the
State's, are expected to increase over the next five to ten years. Since January
1995, the State's workforce has been reduced by about 10 percent, and is
projected to remain at its current level of approximately 191,000 persons in
1998-99 year. The State is currently preparing for negotiations with various
unions to establish new agreements since most of the
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existing contracts will expire on March 31, 1999.
On August 22, 1996, the President signed into law the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996. This federal
legislation fundamentally changed the programmatic and fiscal responsibilities
for administration of welfare programs at the federal, state and local levels.
The new law abolishes the federal Aid to Families with Dependent Children
program (AFDC), and creates a new Temporary Assistance to Needy Families with
Dependent Children program (AFDC), and creates a new Temporary Assistance to
Needy Families program (TANF) funded with a fixed federal block grant to states.
The new law also imposes (with certain exceptions) a five era durational limit
on TANF recipients, requires that virtually all recipients be engaged in work or
community service activities within two years of receipt benefits, and limits
assistance provided to certain immigrants and other classes of individuals.
States are required to meet work activity participation targets for their TANF
caseload; these requirements are phased in over time. States that fail to meet
these federally mandated job participation rates, or that fail to conform with
certain other federal standards, face potential sanctions in the form of a
reduced federal block grant.
Proposed legislation that includes both provisions necessary to implement
the State's TANF plan to conform with federal law and implement the Governor's
welfare reform proposal is still pending before the Legislature. There can be no
assurances of timely enactment of certain conforming provisions required under
the federal law. Further delay increases the risk that the State could incur
fiscal penalties for failure to comply with federal law.
Medicaid. New York participates in the federal Medicaid program under a
state plan approved by the Health Care Financing Administration. The federal
government provides a substantial portion of eligible program costs, with the
remainder shared by the State and its counties (including the City). Basic
program eligibility and benefits are determined by federal guidelines, but the
State provides a number of optional benefits and expanded eligibility. Program
costs have increased substantially in recent years, and account for a rising
share of the State budget. Federal law requires that the State adopt
reimbursement rates for hospitals and nursing homes that are reasonable and
adequate to meet the costs that must be incurred by efficiently and economically
operated facilities in providing patient care, a standard that has led to past
litigation by hospitals and nursing homes seeking higher reimbursement from the
State. General Fund payments for Medicaid are projected to be $5.60 billion, an
increase of $144 million from the prior year. After adjusting 1997-98 for the
$116 million prepayment of an additional Medicaid cycle, Medicaid spending is
projected to increase $260 million or 4.9 percent. Disbursements for all other
health and social welfare programs are projected to total $3.63 billion, an
increase of $131 million from 1997-98. This includes an increase in support for
children and families and local public health programs, offset by a decline in
welfare spending of $75 million that reflects continuing State and local efforts
to reduce welfare fraud, declining caseloads, and the impact of State and
federal welfare reform legislation.
The State Authorities. The fiscal stability of the State is related in part
to the fiscal stability of its public authorities. Public authorities are not
subject to the constitutional restrictions on the incurrence of debt which apply
to the State itself and may issue bonds and notes within the amounts and
restrictions set forth in legislative authorization. The State's access to the
public credit markets could be impaired and the market price of its outstanding
debt may be materially and adversely affected if any of its public authorities
were to default on their respective obligations, particularly those using the
financing techniques referred to as State-supported or State-related debt.
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The State has numerous public authorities with various responsibilities,
including those which finance, construct and/or operate revenue producing public
facilities. Public authority operating expenses and debt service costs are
generally paid by revenues generated by the projects financed or operated, such
as tolls charged for the use of highways, bridges or tunnels, charges for public
power, electric and gas utility services, rentals charged for housing units, and
charges for occupancy at medical care facilities. In addition, State legislation
authorizes several financing techniques for public authorities. Also there are
statutory arrangements providing for State local assistance payments otherwise
payable to localities to be made under certain circumstances to public
authorities. Although the State has no obligation to provide additional
assistance to localities whose local assistance payments have been paid to
public authorities under these arrangements, the affected localities may seek
additional State assistance if local assistance payments are diverted. Some
authorities also receive moneys from State appropriations to pay for the
operating costs of certain of their programs. The MTA receives the bulk of this
money in order to provide transit and commuter services.
Beginning in 1998, the Long Island Power Authority (LIPA) assumed
responsibility for the provision of electric utility services previously
provided by Long Island Lighting Company for Nassau, Suffolk and a portion of
Queen Counties, as part of an estimated $7 billion financing plan.
Metropolitan Transportation Authority
Since 1980, the State has enacted several taxes including a surcharge on
the profits of banks, insurance corporations and general business corporations
doing business in the 12 county Metropolitan Transportation Region served by the
MTA and a special one quarter of 1 percent regional sales and use tax that
provide revenues for mass transit purposes, including assistance to the MTA.
Since 1987 State law has required that the proceeds of a one quarter of 1
percent mortgage recording tax paid on certain mortgages in the Metropolitan
Transportation Region be deposited in a special MTA fund for operating or
capital expenses. In 1993, the State dedicated a portion of certain additional
State petroleum business tax receipts to fund operating or capital assistance to
the MTA. For the 1998-99 fiscal year, State assistance to the MTA is projected
to total approximately $1.3 billion, an increase of $133 million over the
1997-98 fiscal year.
State legislation accompanying the 1996-97 adopted State budget authorized
the MTA, Triborough Bridge and Tunnel Authority and Transit Authority to issue
an aggregate of $6.5 billion in bonds to finance a portion of the $12.17 billion
MTA capital plan for the 1995 through 1999 calendar years (the "1995-99 Capital
Program"). In July 1997, the Capital Program Review Board (CPRB) approved the
1995-99 Capital Program (subsequently amended in August 1997), which supersedes
the overlapping portion of the MTA's 1992-96 Capital Program. The 1995-99
Capital Program is the fourth capital plan since the Legislature authorized
procedures for the adoption, approval and amendment of MTA capital programs and
is designed to upgrade the performance of the MTA's transportation systems by
investing in new rolling stock, maintaining replacement schedules for existing
assets and bringing the MTA system into a state of good repair. The 1995- 99
Capital Program assumes the issuance of an estimated $5.2 billion in bonds under
this $6.5 billion aggregate bonding authority. The remainder of the plan is
projected to be financed through assistance from the State, the federal
government, and the City of New York, and from various other revenues generated
from actions taken the MTA.
There can be no assurance that all the necessary governmental actions for
the 1995-99 Capital Program or future capital programs will be taken, that
funding sources currently identified will not be decreased or eliminated, or
that the 1995-99 Capital Program, or parts thereof, will not be delayed or
reduced. Should funding levels fall below current projections, the MTA would
have to revise its 1995-99 Capital Program accordingly. If the 1995-99 Capital
Program is delayed or
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reduced, ridership and Fare revenues may decline, which could, among other
things, impair the MTA's ability to meet its operating expenses without
additional assistance.
The City
The fiscal health of the State may also be affected by the fiscal health of
New York City (City), which continues to receive significant financial
assistance from the State. State aid contributes to the City's ability to
balance its budget and meet its cash requirements. The State may also be
affected by the ability of the City and certain entities issuing debt for the
benefit of the City to market their securities successfully in the public credit
markets.
The City has achieved balanced operating results for each of its fiscal
years since 1981 as measured by the GAAP standards in force at that time.
However, in the early 1970s, the City incurred substantial operating deficits,
and its financial controls, accounting practices and disclosure policies were
widely criticized. In response to the City's fiscal crisis in 1975, the State
took action to assist the City in returning to fiscal stability. Among these
actions, the State established the Municipal Assistance Corporation For The City
of New York ("MAC") to provide financing assistance for the City; the New York
State Financial Control Board (the Control Board) to oversee the City's
financial affairs; and the Office of the State Deputy Comptroller for the City
of New York (OSDC) to assist the Control Board in exercising its powers and
responsibilities. A "control period" existed from 1975 to 1986, during which the
City was subject to certain statutorily conditions were met. State law requires
the Control Board to reimpose a control period upon the occurrence, or
"substantial likelihood and imminence" of the occurrence, of certain events,
including (but not limited to) a City operating budget deficit of more than $100
million or impaired access to the public credit markets.
The City provides services usually undertaken by counties, school districts
or special districts in other large urban areas, including the provision of
social services such as day care, foster care, health care, family planning,
services for the elderly and special employment services for needy individuals
and families who qualify for such assistance. State law requires the City to
allocate a large portion of its total budget to Board of Education operations,
and mandates that the City assume the local share of public assistance and
Medicaid costs. For each of the 1981 through 1996 fiscal years, the City
achieved balanced operating results as reported in accordance with then
applicable generally accepted accounting principles ("GAAP"). The City was
required to close substantial budget gaps in recent years in order to maintain
balanced operating results. There can be no assurance that the City will
continue to maintain a balanced budget as required by State law without
additional tax or other revenue increases or additional reductions in. City
services or entitlement programs, which could adversely affect the City's
economic base.
Pursuant to the New York State Financial Emergency Act for The City of New
York (the "Financial Emergency Act" or the "Act"), the City prepares a four year
annual financial plan, which is reviewed and revised on a quarterly basis and
which includes the City's capital, revenue and expense projections and outlines
proposed gap closing programs for years with projected budget gaps. The City's
projections set forth in the 1999-2002 Financial Plan are based on various
assumptions and contingencies which are uncertain and which may not materialize.
Changes in major assumptions could significantly effect the City's ability to
balance its budget and to meet its annual cash flow and financing requirements.
Such assumptions and contingencies include the timing and pace of a regional and
local economic recovery, increases in tax revenues, employment growth, the
ability to implement proposed reductions in City personnel and other cost
reduction initiatives which may require in certain cases the cooperation of the
City's municipal unions, the ability of New York City Health and Hospitals
Corporation and the Board of Education to take actions to offset reduced
revenues, the ability to complete revenue generating transactions,
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provision of State and federal aid and mandate relief, and the impact on City
revenues of proposals for federal and State welfare reform. No assurance can be
given that the assumptions used by the City in the 1999-2002 Financial Plan will
be realized. Due to the uncertainty existing on the federal and state levels,
the ultimate adoption of the State budget for FY 1997-98 may result in
substantial reductions in projected expenditures for social spending programs.
Cost containment assumptions contained in the 1997-2000 Financial Plan and the
City FY 1997-98 Budget may therefore be significantly adversely affected upon
the final adoption of the State budget for FY 1997-98. Furthermore, actions
taken in recent fiscal years to avert deficits may have reduced the City's
flexibility in responding to future budgetary imbalances, and have deferred
certain expenditures to later fiscal year.
The 1999-2002 Financial Plan projects revenues and expenditures for the
1999 fiscal year balanced in accordance with GAAP, and projects gaps of $1.5
billion, $2.1 billion and $1.6 billion for the 2000, 2001 and 2002 fiscal years,
respectively.
On April 24, 1998, the City released the Financial Plan for the 1999
through 2002 fiscal years, which relates to the City and certain entities which
receive funds from the City, and which is based on the Executive Budget and
Budget Message for the City's 1999 fiscal year (the "Executive Budget"). The
Executive Budget and Financial Plan project revenues and expenditures for the
1999 fiscal year balanced in accordance with GAAP, and project gaps of $1.5
billion, $2.1 billion and $1.6 billion for the 2000, 2001 and 2002 fiscal years,
respectively.
Changes since the June Financial Plan include: (I) an increase in projected
tax revenues of $1.3 billion, $1.1 billion, $955 million, $897 million and $1.7
billion in the 1998 through 2002 fiscal years, respectively; (ii) a reduction in
assumed State aid of $283 million in the 1998 fiscal year and of between $134
million and $142 million in each of the 1999 through 2002 fiscal years,
reflecting the adopted budget for the State's 1998 fiscal year; (iii) a delay in
the assumed collection of $350 million of projected rent payments for the City's
airports in the 1999 fiscal year to fiscal years 2000 through 2002; (iv) a
reduction in projected debt service expenditures totaling $197 million, $361
million, $204 million and $226 million in the 1998 through 2001 fiscal years,
respectively; (v) an increase in the Board of Education (the "BOE") spending of
$266 million, $26 million, $58 million and $193 million in the 1999 through 2002
fiscal years, respectively; (vi) an increase in expenditures for the City's
proposed drug initiatives totaling $68 million in the 1998 fiscal year and of
between $167 million and $193 million in each of the 1999 through 2002 fiscal
years; (vii) other agency net spending initiatives totaling $112 million, $443
million, $281 million, $273 million and $677 million in fiscal years 1998
through 2002, respectively; and (viii) reduced pension costs of $116 million,
$168 million and $404 million in fiscal years 2000 through 2002, respectively.
The Financial Plan also sets forth gap closing actions for the 1998 through 2002
fiscal years, which include: (I) additional agency actions totaling $176
million, $595 million, $516 million, $494 million and $552 million in fiscal
years 1998 through 2002, respectively, and (ii) assumed additional Federal and
State aid of $100 million in each of fiscal years 1999 through 2002.
The 1998 Modification and the 1999-2002 Financial Plan include a proposed
discretionary transfer in the 1998 fiscal year of approximately $2.0 billion to
pay debt service due in the 1999 fiscal year, and a proposed discretionary
transfer in the 1999 fiscal year of $416 million to pay debt service due in
fiscal year 2000, included in the Budget Stabilization Plan for the 1998 and
1999 fiscal years, respectively. In addition, the Financial Plan reflects
proposed tax reduction programs totaling $237 million, $537 million, $657
million and $666 million in fiscal years 1999 through 2002, respectively,
including the elimination of the City
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sales tax on all clothing as of December 1, 1999, a City funded acceleration of
the State funded personal income tax reduction for the 1999 through 2001 fiscal
years, the extension of current tax reductions for owners of cooperative and
condominium apartments starting in fiscal year 2000 and a personal income tax
credit for child care and for residential holders of Subchapter S corporations,
which are subject to State legislative approval, and reduction of the commercial
rent tax commencing in fiscal year 2000.
Although the City has maintained balanced budgets in each of its last
sixteen fiscal years and is projected to achieve balanced operating results for
the 1998 fiscal year, there can be no assurance that the gap closing actions
proposed in the Financial Plan can be successfully implemented or that the City
will maintain a balanced budget in future years without additional State aid,
revenue increases or expenditure reductions. Additional tax increases and
reductions in essential City services could adversely affect the City's economic
base.
The City derives its revenues from a variety of local taxes, user charges
and miscellaneous revenues, as well as from Federal and State unrestricted and
categorical grants. State aid as a percentage of the City's revenues has
remained relatively constant over the period from 1980 to 1997, while
unrestricted Federal aid has been sharply reduced. The City projects that local
revenues will provide approximately 66.9% of total revenues in the 1998 fiscal
year while Federal aid, including categorical grants, will provide 13.2%, and
State aid, including unrestricted aid and categorical grants, will provide
19.7%.
The City since 1981 has fully satisfied its seasonal financing needs in the
public credit markets, repaying all short term obligations within their fiscal
year of issuance. The City has issued $1.075 billion of short term obligations
in fiscal year 1998 to finance the City's projected cash flow needs for the 1998
fiscal year. The City issued $2.4 billion of short term obligations in fiscal
year 1997. Seasonal financing requirements for the 1996 fiscal year increased to
$2.4 billion from $2.2 billion and $1.75 billion in the 1995 and 1994 fiscal
years, respectively. The delay in the adoption of the State's budget in certain
past fiscal years has required the city to issue short term notes in amounts
exceeding those expected early in such fiscal years.
The City makes substantial capital expenditures to reconstruct and
rehabilitate the city's infrastructure and physical assets, including City mass
transit facilities, sewers, streets, bridges and tunnels, and to make capital
investments that will improve productivity in City operations.
The City utilizes a three tiered capital planning process consisting of the
Ten Year Capital Strategy, the Four Year Capital Plan and the current year
Capital Budget. The Ten Year Capital Strategy is a long term planning tool
designed to reflect fundamental allocation choices and basic policy objectives.
The Four Year Capital Program translates mid-range policy goals into specific
projects. The Capital Budget defines specific projects and the timing of their
initiation, design, construction and completion.
This City's projection of its capital financing need pursuant to the
Mayor's Declaration of Need and Proposed Transitional Capital Plan of June 30,
1997 indicates additional projected debt and contract liabilities of
approximately $3 billion for fiscal year 1998. To provide for the City's capital
program, State legislation was enacted which created the Finance Authority, the
debt of which is not subject to the general debt limit. Without the Finance
Authority or other legislative relief, new contractual commitments for the
City's general obligation financed capital program would have been virtually
brought to a halt during
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the Financial Plan period beginning early in the 1998 fiscal year. By
utilizing projected Finance Authority borrowing and including the Finance
Authority's projected borrowing as part of the total debt incurring power set
forth in the following table, the City's total debt incurring power has been
increased. Even with the increase, the City may reach the limit of its capacity
to enter into new contractual commitments in fiscal year 2000.
Other Localities. Certain localities outside New York City have experienced
financial problems and have requested and received additional State assistance
during the last several State fiscal years. The cities of Yonkers and Troy
continue to operate under State-ordered control agencies. The potential impact
on the State of any future requests by localities for additional oversight or
financial assistance is not included in the projections of the State's receipts
and disbursements for the State's 1998-99 fiscal year.
Eighteen municipalities received extraordinary assistance during the 1996
legislative session through $50 million in special appropriations targeted for
distressed cities, and twenty-eight municipalities received more than $32
million in targeted unrestricted aid in the 1997-98 budget. Both of these
emergency aid packages were largely continued through the 1998-99 budget. The
State also dispersed an additional $21 million among all cities, towns and
villages after enacting a 3.9 percent increase in General Purpose State Aid in
1997-98 and continued this increase in 1998- 99.
The 1998-99 budget includes an additional $29.4 million in unrestricted aid
targeted to 57 municipalities across the State. Other assistance for
municipalities with special needs totals more than $25.6 million. Twelve upstate
cities will receive $24.2 million in one-time assistance from a cash flow
acceleration of State aid.
Municipalities and school districts have engaged in substantial short term
and long term borrowings. In 1996, the total indebtedness of all localities in
the State other than New York City was approximately $20.0 billion. A small
portion (approximately $77.2 million) of that indebtedness represented borrowing
to finance budgetary deficits and was issued pursuant to State enabling
legislation. State law requires the Comptroller to review and make
recommendations concerning the budgets of those local government units other
than New York City authorized by State law to issue debt to finance deficits
during the period that such deficit financing is outstanding. Twenty-one
localities had outstanding indebtedness for deficit financing at the close of
their fiscal year ending in 1996.
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APPENDIX E
EVERGREEN PENNSYLVANIA TAX FREE FUND
General
The Commonwealth of Pennsylvania, the fifth most populous state,
historically has been identified as a heavy industry state, although that
reputation has changed with the decline of the coal, steel and railroad
industries and the resulting diversification of the Commonwealth's industrial
composition. The major new sources of growth are in the service sector,
including trade, medical and health services, educational and financial
institutions. Manufacturing has fallen behind in both the service sector and the
trade sector as a source of employment in Pennsylvania. The Commonwealth is the
headquarters for 58 major corporations. Pennsylvania's average annual
unemployment rate for the year 1990 has generally not been more than one percent
greater or lesser than the nation's annual average unemployment rate. The
seasonally adjusted unemployment rate for Pennsylvania for May, 1998 was 4.3%
and for the United States for May, 1998 was 4.3%. The population of
Pennsylvania,12.02 million people in 1997 according to the U.S. Bureau of the
Census, represents an increase from the 1988 estimate of 11.846 million. Per
capita income in Pennsylvania for 1996 of $24, 803 was higher than the per
capita income of the United States of $24,426. The Commonwealth's General Fund,
which receives all tax receipts and most other revenues and through which debt
service on all general obligations of the Commonwealth are made, closed fiscal
years ended June 30, 1995, June 30, 1996 and June 30, 1997 with positive fund
balances of $688.304 million, $635.182 million and $1,364.9 million
respectively.
Debt
The Commonwealth may incur debt to rehabilitate areas affected by disaster,
debt approved by the electorate, debt for certain capital projects (for projects
such as highways, public improvements, transportation assistance, flood control,
redevelopment assistance, site development and industrial development) and tax
anticipation debt payable in the fiscal year of issuance. The Commonwealth had
outstanding general obligation debt of $4.795 million at June 30, 1997. The
Commonwealth is not permitted to fund deficits between fiscal years with any
form of debt. All year-end deficit balances must be funded within the succeeding
fiscal year's budget. At March 11, 1997, all outstanding general obligation
bonds of the Commonwealth were rated AA- by Standard & Poor's Corporation and
Aa3 by Moody's Investors Service, Inc. (see Appendix H). There can be no
assurance that these ratings will remain in effect in the future. Over the
five-year period ending June 30, 2003, the Commonwealth has projected that it
will issue notes and bonds totaling $2,984.5 million and retire bonded debt in
the principal amount of $2,350.9 million.
Certain agencies created by the Commonwealth have statutory authorization
to incur debt for which Commonwealth appropriations to pay debt service thereon
are not required. As of June 30, 1997, one of these agencies, the Pennsylvania
Turnpike Commission, had total outstanding indebtedness of $1,177.6 million. The
Combined total debt outstanding for all other above mentioned agencies as of
December 31, 1997 was $7,047.4. The debt of these agencies is supported by
assets of, or revenues derived from, the various projects financed and is not an
obligation of the Commonwealth. Some of these agencies, however, are indirectly
dependent on Commonwealth appropriations. The only obligations of agencies in
the Commonwealth that bear a moral obligation of the Commonwealth are those
issued by the Pennsylvania Housing Finance Agency ("PHFA"), a state-created
agency which provides housing for lower and moderate income families, and The
Hospitals and Higher Education Facilities Authority of Philadelphia (the
"Hospital Authority"), an agency created by the City of Philadelphia to acquire
and prepare various sites for
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use as intermediate care facilities for the mentally retarded.
Local Government Debt
Numerous local government units in Pennsylvania issue general obligation
(i.e., backed by taxing power) debt, including counties, cities, boroughs,
townships and school districts. School district obligations are supported
indirectly by the Commonwealth. The issuance of non-electoral general obligation
debt is limited by constitutional and statutory provisions. Electoral debt,
i.e., that approved by the voters, is unlimited. In addition, local government
units and municipal and other authorities may issue revenue obligations that are
supported by the revenues generated from particular projects or enterprises.
Examples include municipal authorities (frequently operating water and sewer
systems), municipal authorities formed to issue obligations benefitting
hospitals and educational institutions, and industrial development authorities,
whose obligations benefit industrial or commercial occupants. In some cases,
sewer or water revenue obligations are guaranteed by taxing bodies and have the
credit characteristics of general obligations debt.
Litigation
Pennsylvania is currently involved in certain litigation where adverse
decisions could have an adverse impact on its ability to pay debt service. For
example, in Baby Neal v. Commonwealth, the American Civil Liberties Union filed
a lawsuit against the Commonwealth seeking an order that would require the
Commonwealth to provide additional funding for child welfare services. County of
Allegheny v. Commonwealth of Pennsylvania involves litigation regarding the
state constitutionality of the statutory scheme for county funding of the
judicial system. In Pennsylvania Association of Rural and Small Schools v.
Casey, the constitutionality of Pennsylvania's system for funding local school
districts has been challenged. No estimates for the amount of these claims are
available.
Other Factors
The performance of the obligations held by the Fund issued by the
Commonwealth, its agencies, subdivisions and instrumentalities are in part tied
to state-wide, regional and local conditions within the Commonwealth and to the
creditworthiness of certain non-Commonwealth related obligers, depending upon
the Pennsylvania Fund's portfolio mix at any given time. Adverse changes to the
state-wide, regional or local economies or changes in government may adversely
affect the creditworthiness of the Commonwealth, its agencies and
municipalities, and certain other non-government related obligers of
Pennsylvania tax-free obligations (e.g., a university, a hospital or a corporate
obligor). The City of Philadelphia, for example, experienced severe financial
problems which impaired its ability to borrow money and adversely affected the
ratings of its obligations and their marketability. Conversely, some obligations
held by the Fund will be almost exclusively dependent on the creditworthiness of
one underlying obligor, such as a project occupant or provider of credit or
liquidity support.
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APPENDIX F
EVERGREEN CONNECTICUT MUNICIPAL BOND FUND
As described in the prospectus, the Fund will generally invest in
Connecticut municipal obligations. The performance of the Fund is therefore
susceptible to political, economical and regulatory factors affecting the State
of Connecticut and governmental bodies within the State of Connecticut. The
information summarized below briefly describes some of the more significant
factors that could affect the performance of the Fund or the ability of the
obligors to pay debt service on certain of the securities. Such information is
derived from sources that are generally available to investors and is believed
to be accurate. It is based on information from official statements of issuers
located in the State of Connecticut as well as other publicly available
documents. The Fund has not independently verified any of the information
contained in such statements and documents.
State Economy
General. Connecticut, the southernmost of the New England States, is
located on the northeast coast and is bordered by Long Island Sound, New York,
Massachusetts and Rhode Island. Connecticut is situated directly between the
financial centers of Boston and New York and is a highly developed and urbanized
state. More than one-quarter of the total population of the United States and
approximately 60% of the Canadian population live within 500 miles of the State.
The State's population grew at a rate which exceeded the United States' rate of
population growth during the period 1940 to 1970, slowed substantially during
the 1970s and 1980s, and declined in the years 1992 through 1995.
Connecticut's economic performance is measured by personal income which has
been and is expected to remain among the highest in the nation; gross state
product (the current market value of all final goods and services produced by
labor and property located within the State) which demonstrated stronger output
growth than the nation in general during the 1980s and a lower growth in the
1990s; and employment which, although rising, still remains below the levels
achieved in the late 1980s as manufacturing employment has declined and
non-manufacturing employment has recovered most of its losses.
Defense Industry. One important component of the manufacturing sector in
Connecticut is defense related business. Approximately one-quarter of
manufacturing establishments and total manufacturing employees in Connecticut
are involved in defense related businesses. Nonetheless, its significance in the
state economy has declined considerably due to the scaling back of the national
defense budget in the past decade, spending on defense procurement as well as
outlays for personnel, research and development and construction has been
dramatically reduced. In fiscal year 1996, Connecticut received $2,638 million
of prime contact awards. This accounted for 2.4% of national total awards and
ranked thirteenth in total defense dollars awarded and fifth in per capita
dollars awarded among the 50 states. As measured by defense contract awards as a
percent of Gross State Product (GSP), awards to Connecticut based firms has
fallen to 2.1% of GSP in fiscal year 1996, down from over 12% of GSP as recently
as fiscal year 1982.
Similar to other states with a dependence on the defense budget, these cuts
not only negatively affect Connecticut's defense employment but also other
sectors that provide "support" activities to defense related businesses. These
budget cuts ultimately impact other industries in the manufacturing sector and
further extend to the nonmanufacturing sector such as grocery stores,
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gas stations, and real estate, etc.
State Budgetary Process
Balanced Budget Requirement. In November 1992, State electors approved an
amendment to the State Constitution providing that the amount of general budget
expenditures authorized for any fiscal year shall not exceed the estimated
amount of revenue for such fiscal year. This amendment also provides for a cap
on budget expenditures. The General Assembly is precluded from authorizing an
increase in general budget expenditures for any fiscal year above the amount of
general budget expenditures authorized for the previous fiscal year by a
percentage which exceeds the greater of the percentage increase in personal
income or the percentage increase in inflation, unless the Governor declares an
emergency or the existence of extraordinary circumstances and at least
three-fifths of the members of each house of the General Assembly vote to exceed
such limit for the purposes of such emergency or extraordinary circumstances.
The limitation on general budget expenditures does not include expenditures for
the payment of bonds, notes or other evidences of indebtedness. There is no
statutory or constitutional prohibition against bonding for general budget
expenditures.
Biennium Budget. The State's fiscal year begins on July 1 and ends June 30.
The Connecticut General Statutes require that the budgetary process be on a
biennium basis. The Governor is required to transmit a budget document in
February of each odd-numbered year setting forth the financial program for the
ensuing biennium with a separate budget for each of the two fiscal years and a
report which sets forth estimated revenues and expenditures for the three fiscal
years after the biennium to which the budget document relates. In each
even-numbered year, the Governor must prepare a report on the status of the
budget enacted in the previous year with any recommendations for adjustments and
revisions, and a report, with revisions, if any, which sets forth estimated
revenues and expenditures for the three fiscal years after the biennium in
progress.
Adoption of the Budget. The Governor or a representative appeals before the
appropriate committee of the General Assembly to explain and address questions
concerning the budget document. Prior to June 30 of each odd-numbered year, the
General Assembly generally enacts one bill making all appropriations for the
next two fiscal years and setting forth revenue estimates for those years.
Subsequent appropriations of revenue bills are occasionally passed.
Line Item Veto. Under the State Constitution, the Governor has the power to
veto any line of any itemized appropriations bill while at the same time
approving the remainder of the bill. A statement identifying the items so
disapproved and explaining the reasons therefore must be transmitted with the
bill to the Secretary of the State and, when in session, the General Assembly.
The General Assembly may separately reconsider and re-pass such disapproved
appropriation items by a two-thirds vote of each house.
State General Fund
The State finances most of its operations through the General Fund.
However, certain State functions are financed through other State funds.
1996-97 Operations. The Comptroller's August 29, 1997 annual report
indicated a 1996-97 General Fund surplus of $262.6 million. This surplus was
primarily the result of higher than anticipated revenue collections, the most
significant of which was an increase in personal income tax collections. The
improved revenue results are offset somewhat by Medicaid expenditures higher
than appropriations, and the prepayment of expenditures for the 1997-98 fiscal
year.
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1997-98 Operations. The adopted budget for fiscal 1997-98 anticipated
General Fund revenues of $9,342.4 million and General Fund expenditures of
$9,342.2 million resulting in a projected surplus of $0.3 million.
The Comptroller's monthly report for the period ending April 30, 1998,
indicated a projected General Fund surplus of $191.9 million. This surplus is
primarily the result of revenue collections which exceeded the original
estimates adopted by the General Assembly by $691.2 million. Expenditures for
the fiscal year were also increased, including $115.0 million for a one time tax
rebate program and $79.5 million for Year 200 conversions.
No assurance can be given that the final year-end report of the Comptroller
will not indicate changes in the anticipated General Fund result. Any
unappropriated surplus will be deposited into the Budget Reserve Fund, pursuant
to the limits set forth in the Connecticut General Statutes, and the balance
will be used to reduce bonded indebtedness. The Budget Reserve Fund contains a
balance of $336.9 million prior to any transfer for fiscal year 1997-98.
Adopted Budget 1998-99. On February 4, 1998, the Governor submitted to the
legislature a status report including proposed Midterm Budget Adjustments for
the 1998-99 fiscal year. After consideration of the Governor's proposal, the
legislature adopted budget adjustments for fiscal year 1998-99 in Special Act
No. 98-6. The adopted Midterm Budget Adjustments for fiscal year 1998- 99
anticipate General Fund expenditures of $9,972.4 million, General Fund revenues
of $9,992.0 million and an estimated General Fund surplus of $19.6 million.
The enacted Midterm Budget Adjustments for fiscal year 1998-99 are within
the limits imposed by the expenditure cap. For fiscal year 1998-99, permitted
growth in capped expenditures is estimated at 4.86%. The enacted Midterm Budget
Adjustments would result in a fiscal 1998-99 budget that is $82.3 million below
the expenditure cap.
State Debt
Constitutional Provisions. The State has no constitutional limit on its
power to issue obligations or incur debt other than it may borrow only for
public purposes. There are no reported court decisions relating to State bonded
debt other than two cases validating the legislative determination of the public
purpose for improving employment opportunities and related activities. The State
Constitution has never required a public referendum on the question of incurring
debt. Therefore, the authorization and issuance of State debt, including the
purpose, amount and nature thereof, the method and manner of the incidence of
such debt, the maturity and terms of repayment thereof, and other related
matters are statutory.
Types of State Debt. Pursuant to various public and special acts the State
has authorized a variety of types of debt. These types fall generally into the
following categories: direct general obligation debt, which is payable from the
State's General Fund; special tax obligation debt, which is payable from
specified taxes and other funds which are maintained outside the State's General
Fund; and special obligation and revenue debt, which is payable from specified
revenues or other funds which are maintained outside the State's General Fund.
In addition, the State has a number of programs under which the State is
contingently liable on the debt of certain State quasi-public agencies and
political subdivisions.
Statutory Authorization and Security Provisions for State General
Obligation Debt. In general the State issues general obligation bonds pursuant
to specific statutory bond acts and Section 3-20 of the Connecticut General
Statues, the State general obligation bond procedure act. That act provides that
such bonds shall be general obligations of the State and that the full faith
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and credit of the State of Connecticut are pledged for the payment of the
principal of an interest on such bonds as the same become due. Such act further
provides that, as a part of the contract of the State with the owners of such
bonds, appropriation of all amounts necessary for the punctual payment of such
principal and interest is made, and the Treasurer shall pay such principal and
interest as the same become due. As of December 1, 1997, there was legislatively
authorized general obligation bond indebtedness in the aggregate amount of
$11,460,239,000, of which $10,159,950,000 had been approved for issuance and
$9,181,272,000 had been issued. As of December 1, 1997, $6,877,330,000 was
outstanding.
There are no State Constitutional provisions precluding the exercise of
State power by statute to impose any taxes, including taxes on taxable property
in the State or on income, in order to pay debt service on bonded debt now or
thereafter incurred. The constitutional limit on increases in general fund
expenditures for any fiscal year does not include expenditures for the payment
of bonds, notes or other evidences of indebtedness. There are also no
constitutional or statutory provisions requiring or precluding the enactment of
liens on or pledges of State general fund revenues or taxes, or the
establishment of priorities for payment of debt service on the State's general
obligation bonds. There are no express statutory provisions establishing any
priorities in favor of general obligation bondholders over other valid claims
against the State.
Statutory Debt Limit. Section 3-21 of the Connecticut General Statutes
provides that no bonds, notes or other evidences of indebtedness for borrowed
money payable from General Fund tax receipts of the State shall be authorized by
the General Assembly except to the extent such authorization shall cause the
aggregate amount of (1) the total amount of bonds, notes or other evidences of
indebtedness payable from General Fund tax receipts authorized by the General
Assembly but which have not been issued and (2) the total amount of such
indebtedness which has been issued and remains outstanding, to exceed 1.6 times
the total estimated General Fund tax receipts of the State for the fiscal year
in which any such authorization will become effective, as estimated for such
fiscal year by the joint standing committee of the General Assembly having
cognizance of finance, revenue and bonding. However, in computing the aggregate
amount of indebtedness at any time, there shall be excluded or deducted revenue
anticipation notes having a maturity of one year or less, refunded indebtedness,
bond anticipation notes, borrowings payable solely from the revenues of a
particular project, the balances of debt retirement funds associated with
indebtedness subject to the debt limit as certified by the Treasurer, the amount
of federal grants certified by the Secretary of the Office of Policy and
Management as receivable to meet the principal of certain indebtedness, all
authorized and issued indebtedness to fund any budget deficits of the State for
any fiscal year ending on or before June 30, 1991, and all authorized debt to
fund the Connecticut Development Authority's tax increment bond program under
Section 32-285 of the Connecticut General Statutes. For purpose of the debt
limit statute, all bonds and notes issued or guaranteed by the State and payable
from General Fund tax receipts are counted against the limit, except for the
exclusions or deductions described above.
In accordance with Section 2-27b of the Connecticut General Statutes, the
Treasurer shall compute the aggregate amount of indebtedness as of January 1 and
July 1 of each year and shall certify the results of such computation to the
Governor and the General Assembly. If the aggregate amount of indebtedness
reaches 90% of the statutory debt limit, the Governor shall review each bond act
for which no bonds, notes or other evidences of indebtedness have been issued,
and recommend to the General Assembly priorities for repealing authorizations
for remaining projects.
Ratings. As of March 18, 1998, all outstanding general obligation bonds of
the State were rated AA3 by Moody's Investors Service, Inc., AA- by Standard &
Poor's Rating Service, a division of the McGraw-Hill Companies, Inc., and AA by
Fitch IBCA, Inc. There can be no assurance that
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these ratings will remain in effect in the future.
Obligations of Other State Issuers. The State conducts certain of its
operations through State funds other than the General Fund and pursuant to
legislation may issue debt secured by special taxes or revenues pledged to such
funds. In addition, there are a number of state agencies and instrumentalities
of the State that issue conduit revenue obligations payable from payments by
private borrowers. These entities are subject to various economic risks
uncertainties, and the credit quality of the securities issued by them may vary
considerably from the credit quality of obligations backed by the full faith and
credit of the State.
Litigation
The State, its officers and employees are defendants in numerous lawsuits.
The ultimate disposition and fiscal consequences of these lawsuits are not
presently determinable. In the cases described below the fiscal impact of an
adverse decision might be significant but is not determinable at this time. The
cases described in this section generally do not include any individual case
where the fiscal impact of an adverse judgment is expected to be less than $15
million, but adverse judgments in a number of such cases could, in the aggregate
and in certain circumstances, have a significant impact.
Connecticut Criminal Defense Lawyers Association v. Forst is an action
brought in 1989 in Federal Court alleging a pervasive campaign by the State and
various State Police officials of illegal electronic surveillance, wiretapping
and bugging for a number of years at Connecticut State Police facilities. The
plaintiffs seek compensatory damages, punitive damages, as well as other damages
and costs and attorneys fees, as well as temporary and permanent injunctive
relief. In November 1991, the court issued an order which will allow the
plaintiffs to represent a class of all persons who participated in wire or oral
communications to, from, or within State Police facilities between January 1,
1974 and November 9, 1989 and whose communications were intercepted, recorded
and/or used by the defendants in violation of the law. This class includes a
sub-class of the Connecticut State Police Union, current and former Connecticut
State Police officers who are not defendants in this or any consolidated case,
and other persons acting on behalf of the State Police who participated in oral
or wire communications to, from or within State Police facilities between such
dates.
Sheff v. O'Neill is a Superior Court action brought in 1989 on behalf of
black and Hispanic school children in the Hartford school district. The
plaintiffs sought a declaratory judgment that the public schools in the greater
Hartford metropolitan area are segregated de facto by race and ethnicity and are
inherently unequal to their detriment. They also sought injunctive relief
against state officials to provide them with an "integrated education." On April
12, 1995, the Superior Court entered judgment for the State. On July 9, 1996,
the State Supreme Court reversed the Superior Court judgment and remanded the
case with direction to render a declaratory judgment in favor of the plaintiffs.
The Court directed the legislature to develop appropriate measures to remedy the
racial and ethnic segregation in the Hartford public schools. The Supreme Court
also directed the Superior Court to retain jurisdiction of this matter. In
response to the Supreme Court decision, the 1997 General Assembly enacted P.A.
97-290, an Act Enhancing Educational Choices and Opportunities. Plaintiffs, the
Supreme Court recently ordered the State to show cause as to whether there has
been compliance with the Supreme Court's ruling.
The Connecticut Traumatic Brain Injury Association, Inc. v. Hogan is a
Federal District Court civil rights action brought in 1990 on behalf of all
persons with retardation or traumatic brain injury who have been, or may be,
placed in Norwich, Fairfield Hills or Connecticut Valley Hospitals. The
plaintiffs claim that the treatment and training they need is unavailable in
state hospitals for the
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mentally ill and that placement in those hospitals violates their constitutional
rights. The plaintiffs seek relief which would require that the plaintiff class
members be transferred to community residential settings with appropriate
support services. This case has been settled as to all persons with mental
retardation by their eventual discharge from Norwich and Fairfield Hills
Hospital. The case is still proceeding as to those persons with traumatic brain
injury. The Court recently expanded the class of plaintiffs to include persons
who are in the custody of the Department of Mental Health and Addiction Services
at any time during the pendency of the case for treatment or benefits in any
program which is provided by or is the responsibility of the State, by reason of
being diagnosed with acquired brain injury (which includes traumatic and other
brain injuries).
Johnson v. Rowland is a Superior Court action brought in 1998 in the name
of several public school students and the Connecticut municipalities in which
the students reside, seeking a declaratory judgement that the State's current
system of financing public education through local property taxes and State
payments to municipalities determined under a statutory Education Cost Sharing
("ECS") formula violates the Connecticut Constitution. Additionally, the suit
seeks various injunctive orders requiring the State to, among other things cease
implementation of the present system, modify the ECS formula, and fund the ECS
formula at the level contemplated in the original 1988 public act which
established the ECS.
Several suits have been filed since 1977 in the Federal District Court and
the Connecticut Superior Court on behalf of alleged Indian Tribes in various
parts of the State, claiming monetary recovery as well as ownership to land in
issue. Some of these suits have been settled or dismissed. The plaintiff group
in the remaining suits is the alleged Golden Hill Paugussett Tribe and the lands
involved are generally located in Bridgeport, Trumbull, Orange, Shelton and
Seymour.
Local Government Debt
General. Numerous governmental units, cities, school districts and special
taxing districts, issue general obligation bonds backed by their taxing power.
Under Connecticut statutes, such entities have the power to levy ad valorem
taxes on all taxable property without limit as to rate or amount, except as to
certain classified property such as certified forest land taxable at a limited
rate and dwelling houses of qualified elderly persons of low income or qualified
disabled persons taxable at limited amounts. Under existing statutes, the State
is obligated to pay to such entities the amount of tax revenue which it would
have received except for the limitation on its power to tax such dwelling
houses.
Payment of principal and interest on such general obligations is not
limited to property tax revenues or any other revenue source, but certain
revenues may be restricted as to use and therefore may not be available to pay
debt service on such general obligations.
Local government units may also issue revenue obligations, which are
supported by the revenues generated from particular projects or enterprises.
Debt Limit. Pursuant to the Connecticut General Statutes, local
governmental units are prohibited from incurring indebtedness in any of the
following categories if such indebtedness would cause the aggregate indebtedness
in that category to exceed, excluding sinking fund contributions, the multiple
for such category times the aggregate annual tax receipts of such local
governmental unit for the most recent fiscal year ending prior to the date of
issue:
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DEBT CATEGORY MULTIPLE
(I) all debt other than urban renewal projects,
water pollution control projects and school
building projects............................................2 1/4
(ii) urban renewal projects.......................................3 1/4
(iii) water pollution control projects.............................3 3/4
(iv) school building projects.....................................4 1/2
(v) total debt, including (I), (ii), (iii) and (iv)
above........................................................7
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APPENDIX G
EVERGREEN NEW JERSEY TAX FREE INCOME FUND
New Jersey Municipal Securities
The financial condition of the State of New Jersey, its public authorities
(the "Authorities") and its local governments, could affect the market values
and marketability of, and therefore the net asset value per share and the
interest income of New Jersey Tax Free Income Fund, or result in the default of
existing obligations, including obligations which may be held by the Fund. The
following section provides only a brief summary of the complex factors affecting
the financial situation in New Jersey and is based on information obtained from
New Jersey, certain of its Authorities and certain other localities, as publicly
available on the date of this Statement of Additional Information. The
information contained in such publicly available documents has not been
independently verified. It should be noted that the creditworthiness of
obligations issued by local issuers may be unrelated to the creditworthiness of
New Jersey, and that there is no obligation on the part of New Jersey to make
payment on such local obligations in the event of default in the absence of a
specific guarantee or pledge provided by New Jersey.
Economic Factors
New Jersey is the ninth largest state in population and the fifth smallest
in land area. With an average of 1,077 people per square mile, it is the most
densely populated of all the states. The State's economic base is diversified,
consisting of a variety of manufacturing, construction and service industries,
supplemented by rural areas with selective commercial agriculture. The extensive
facilities of the Port Authority of New York and New Jersey, the Delaware River
Port Authority and the South Jersey Port Corporation across the Delaware River
from Philadelphia augment the air, land and water transportation complex which
has influenced much of the State's economy. The State's central location in the
northeastern corridor, the transportation and port facilities and proximity to
New York City make the State an attractive location for corporate headquarters
and international business offices. According to the United States Bureau of the
Census, the population of New Jersey was 7,170,000 in 1970, 7,365,000 in 1980,
7,730,000 in 1990 and 7,988,000 in 1996. Historically, New Jersey's average per
capita income has been well above the national average, and in 1996 the State
ranked second among the states in per capita personal income ($31,053).
While New Jersey's economy continued to expand during the late 1980s, the
level of growth slowed considerably after 1987. By the beginning of the national
recession in July 1990 (according to the National Bureau of Economic Research),
construction activity had already been declining in New Jersey for nearly two
years, growth had tapered off markedly in the service sectors and the long-term
downward trend of factory employment had accelerated, partly because of a
leveling off of industrial demand nationally. The onset of recession caused an
acceleration of New Jersey's job losses in construction and manufacturing, as
well as an employment downturn in such previously growing sectors as wholesale
trade, retail trade, finance, utilities and trucking and warehousing. The net
effect was a decline in the State's total nonfarm wage and salary employment
from a peak of 3,689,800 in 1989 to a low of 3,457,900 in 1992. This loss has
been followed by an employment gain of 255,600 from May 1992 to June 1997, a
recovery of 97.5% of the jobs lost during the recession. In July 1991, S&P
lowered the State's general obligation bond rating from AAA to AA+.
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Reflecting the downturn, the rate of unemployment in the State rose from a
low of 3.6% during the first quarter of 1989 to a recessionary peak of 8.5%
during 1992. Since then, the unemployment rate fell to 6.2% during 1996 and 5.5%
for the six month period from January 1997 through June 1997.
For the recovery period as a whole, May 1992 to June 1997,
service-producing employment in New Jersey has expanded by 283,500 jobs. Hiring
has been reported by food stores, wholesale distributors, trucking and
warehousing firms, security and commodity brokers, business and
engineering/management service firms, hotels/hotel-casinos, social service
agencies and health care providers other than hospitals. Employment growth was
particularly strong in business services and its personnel supply component with
increases of 17,300 and 7,500, respectively, in the 12-month period ending June
1997.
In the manufacturing sector, employment losses slowed between 1992 and
1994. After an average annual job loss of 33,500 from 1989 through 1992, New
Jersey's factory job losses fell to 13,300 during 1993 and 7,300 during 1994.
During 1995 and 1996, however, manufacturing job losses increased slightly to
10,100 and 13,900 respectively, reflecting a slowdown in national manufacturing
production activity. While experiencing growth in the number of production
workers in 1994, the number declined in 1995 at the same time that managerial
and office staff were also reduced as part of nationwide downsizing. Through
August 1996, layoffs of white collar workers and corporate downsizing appear to
be abating.
Conditions have slowly improved in the construction industry, where
employment has risen by 18,600 since its low in May 1992. Between 1992 and 1996,
this sector's hiring rebound was driven primarily by increased homebuilding and
nonresidential projects. During 1996 and the first five months of 1997, public
works projects and homebuilding became the growth segments while nonresidential
construction lessened but remained positive.
State Finances
The State operates on a fiscal year beginning July 1 and ending June 30.
For example, "Fiscal Year 1999" refers to the State's fiscal year beginning July
1, 1998 and ending June 30, 1999.
The General Fund is the fund into which all State revenues not otherwise
restricted by statute are deposited and from which appropriations are made. The
largest part of the total financial operations of the State is accounted for in
the General Fund. Revenues received from taxes and unrestricted by statute, most
federal revenue and certain miscellaneous revenue items are recorded in the
General Fund. The appropriations act provides the basic framework for the
operation of the General Fund. Undesignated Fund Balances are available for
appropriation in succeeding fiscal years. There have been positive Undesignated
Fund Balances in the General Fund at the end of each year since the State
Constitution was adopted in 1947. The estimates for Fiscal Year 1998 and Fiscal
Year 1999 reflect the amounts contained in the Governor's Fiscal Year 1999
Budget Message delivered on February 10, 1998.
In Fiscal Years 1996 and 1997, the actual General Fund balances were $442.0
million and $280.5 million, respectively, and total Undesignated Fund Balances
were $882.2 million and $1,106.4 million. For Fiscal Years 1998 and 1999 General
Fund balances are estimated to be $268.7 million and $144.0 million,
respectively, and total Undesignated Fund Balances are estimated to be $1,021.3
million and $6750.0 million.
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Fiscal Years 1998 and 1999 State Revenue Estimates
Sales and Use Tax. The revised estimate forecasts Sales and Use tax
collections for Fiscal Year 1998 as $4,720.0 million, a 6.9% increase from the
Fiscal Year 1997 revenue. The Fiscal Year 1999 estimate of $4,928.0 million, is
a 4.4% increase from the Fiscal Year 1998 estimate.
Gross Income Tax. The revised estimate forecasts Gross Income Tax
collections for Fiscal Year 1998 of $5,340.0 million, a 10.7% increase from
Fiscal Year 1997 revenue. The Fiscal Year 1999 estimate of $5,860.0 million, is
a 9.7% increase from the Fiscal Year 1998 estimate. Included in the Fiscal Year
1998 estimate and the Fiscal Year 1999 estimate is the enactment of a property
tax deduction, to be phased in over a three-year period, permitting a deduction
by resident taxpayers against gross income tax of a percentage of their property
taxes.
Corporation Business Tax. The revised estimate forecasts Corporation
Business Tax collection for Fiscal Year 1998 as $1,315.1 million, a 2.2%
decrease from Fiscal Year 1997 revenue. The Fiscal Year 1999 estimate of
$1,431.0 million, is an 8.8% increase from the Fiscal Year 1998 estimate.
General Considerations. Estimated receipts from State taxes and revenues,
including the three principal taxes set forth above, are forecasts based on the
best information available at the time of such forecasts. Changes in economic
activity in the State and the nation, consumption of durable goods, corporate
financial performance and other factors that are difficult to predict may result
in actual collections being more or less than forecasted.
Should revenues be less than the amount anticipated in the budget for a
fiscal year, the Governor may, pursuant to statutory authority, prevent any
expenditure under any appropriation. There are additional means by which the
Governor may ensure that the State is operated efficiently and does not incur a
deficit. No supplemental appropriation may be enacted after adoption of an
appropriations act except where there are sufficient revenues on hand or
anticipated, as certified by the Governor, to meet such appropriation. In the
past when actual revenues have been less than the amount anticipated in the
budget, the Governor has exercised her plenary powers leading to, among other
actions, implementation of a hiring freeze for all State departments and the
discontinuation of programs for which appropriations were budgeted but not yet
spent. Under the State Constitution, no general appropriations law or other law
appropriating money for any State purpose may be enacted if the amount of money
appropriated therein, together with all other prior appropriations made for the
same fiscal year, exceeds the total amount of revenue on hand and anticipated to
be available for such fiscal year, as certified by the Governor.
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APPENDIX H
S&P AND MOODY'S BOND RATINGS
S&P Corporate and Municipal Bond Ratings
A. Municipal Notes
An S&P 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 are used in making that assessment:
a. Amortization schedule (the larger the final maturity relative to
other maturities the more likely it will be treated as a note),
and
b. 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 ratings are as follows:
1. 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.
2. SP-2 - Satisfactory capacity to pay principal and interest.
3. SP-3 - Speculative capacity to pay principal and interest.
B. Tax Exempt Demand Bonds
S&P assigns "dual" ratings to all long-term debt issues that have as
part of their provisions a demand or double feature.
The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols are used to denote the put
option (for example, "AAA/A-1+"). For the newer "demand notes", S&P note rating
symbols, combined with the commercial paper symbols, are used (for example,
"SP-1+/A-1+").
C. Corporate and Municipal Bond Ratings
An S&P corporate or municipal bond rating is a current assessment of
the creditworthiness of an obligor, including obligors outside the U.S., with
respect to a specific obligation. This assessment may take into consideration
obligors such as guarantors, insurers or lessees. Ratings of foreign obligors do
not take into account currency exchange and related uncertainties. The ratings
are based on current information furnished by the issuer or obtained by S&P from
other sources it considers reliable.
H-1
<PAGE>
The ratings are based, in varying degrees, on the following considerations:
a. Likelihood of default and 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;
b. Nature of and provisions of the obligation; and
c. Protection afforded by and relative position of the obligation in
the event of bankruptcy reorganization or other arrangement under
the laws of bankruptcy and other laws affecting creditors' rights.
Plus (+) or Minus (-): To provide more detailed indications of credit
quality, ratings from "AA" to "BBB" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
A provisional rating is sometimes used by S&P. It assumes the
successful completion of the project being financed by the debt being rated and
indicates that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default upon
failure of, such completion.
C. Bond ratings are as follows:
1. AAA - Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
2. AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in
small degree.
3. 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.
4. BBB - Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate 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 in higher rated categories.
5. BB, B, CCC, CC and C - Debt rated BB, B, CCC, CC and C is
regarded, on 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.
D. Moody's Corporate and Municipal Bond Ratings
Moody's ratings are as follows:
1. 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.
2. 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 fluctuation 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.
3. 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.
4. 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. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
5. 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 both good and bad
times over the future. Uncertainty of position characterizes bonds
in this class.
6. 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.
7. 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.
8. Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other market shortcomings.
9. C - Bonds which are rated as C are the lowest rated class of bonds
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through Baa in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
H-2
<PAGE>
10. Con. (...) - Municipal bonds for which the security depends
upon the completion of some act or the fulfillment of some
condition are rated conditionally. These are bonds secured
by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operation experience, (c) rentals
which begin when facilities are completed, or (d) payments to
which some other limiting condition attaches. Parenthetical
rating denotes probable credit stature upon completion of
construction or elimination of basis of condition.
Those municipal bonds in the Aa, A, and Baa groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa 1, A 1, and Baa 1.
MONEY MARKET INSTRUMENTS
Money market securities are instruments with remaining maturities of
one year or less such as bank certificates of deposit, bankers' acceptances,
commercial paper (including variable rate master demand notes), and obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities,
some of which may be subject to repurchase agreements.
Commercial Paper
Commercial paper will consist of issues rated at the time of purchase
A-1, by S&P, or Prime-1 by Moody's or F-1 by Fitch; or, if not rated, will be
issued by companies which have an outstanding debt issue rated at the time of
purchase Aaa, Aa or A by Moody's, or AAA, AA or A by S&P or Fitch, or will be
determined by a Fund's investment adviser to be of comparable quality.
A. S&P Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. Ratings are graded into four categories, ranging from "A" for the
highest quality obligations to "D" for the lowest. The top category is as
follows:
1. A: Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1, 2 and 3 to indicate the relative
degree of safety.
2. A-1: This designation indicates that the degree of safety
regarding timely payment is either overwhelming or very strong.
Those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign designation.
B. Moody's Ratings
The term "commercial paper" as used by Moody's means promissory
obligations not having an original maturity in excess of nine months. Moody's
commercial paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's employs the following designation, judged to be investment
grade, to indicate the relative repayment capacity of rated issuers.
1. The rating Prime-1 is the highest commercial paper rating assigned
by Moody's. Issuers rated Prime-1 (or related supporting
institutions) are deemed to have a superior capacity for repayment
of short term promissory obligations. Repayment capacity of
Prime-1 issuers is normally evidenced by the following
characteristics:
1) leading market positions in well-established industries;
2) high rates of return on funds employed;
3) conservative capitalization structures with moderate reliance on debt
and ample asset protection;
4) broad margins in earnings coverage of fixed financial charges and high
internal cash generation; and
5) well established access to a range of financial markets and assured
sources of alternate liquidity.
In assigning ratings to issuers whose commercial paper obligations are
supported by the credit of another entity or entities, Moody's evaluates the
financial strength of the affiliated corporations, commercial banks, insurance
companies, foreign governments or other entities, but only as one factor in the
total rating assessment.
H-3
<PAGE>
APPENDIX I
FITCH BOND RATINGS
Investment Grade Bond Ratings
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA: Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA". Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated "F-1+".
A: Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than debt securities with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these securities and,
therefore, impair timely payment. The likelihood that the ratings of these bonds
will fall below investment grade is higher than for securities with higher
ratings.
Plus (+) Minus (-): Plus and minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the "AAA" category.
NR: Indicates that Fitch does not rate the specific issue.
Conditional: A conditional rating is premised on the successful
completion of a project or the occurrence of a specific event.
Suspended: A rating is suspended when Fitch deems the amount of
information available from the issuer to be inadequate for rating purposes.
Withdrawn: A rating will be withdrawn when an issue matures or is
called or refinanced, and, at Fitch's discretion, when an issuer fails to
furnish proper and timely information.
FitchAlert: Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and the likely direction
of such change. These are designated as "Positive," indicating a potential
upgrade, "Negative," for potential downgrade, or "Evolving," where ratings may
be raise or lowered. FitchAlert is relatively short-term and should be resolved
within 12 months.
Rating Outlook: An outlook is used to describe the most likely
direction of any rating change over the intermediate term. It is described as
"Positive" or "Negative." The absence of a designation indicates a stable
outlook.
Speculative Grade Bond Ratings BB: Bonds are considered speculative.
The obligor's ability to pay interest and repay principal may be affected over
time by adverse economic changes.
I-1
<PAGE>
However, business and financial alternatives can be identified, which could
assist the obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While securities in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC: Bonds have certain identifiable characteristics that, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D: Bonds are in default on interest and/or principal
payments. Such securities are extremely speculative and should be valued on the
basis of their ultimate recovery value in liquidation or reorganization of the
obligor. "DDD" represents the highest potential for recovery on these
securities, and "D" represents the lowest potential for recovery.
Plus (+) Minus (-): Plus and minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category. Plus
and minus signs, however, are not used in the "DDD", "DD", or "D" categories.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
The short-term rating places greater emphasis than a long-term rating
on the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of assurance for timely
payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect
an assurance of timely payment only slightly less in degree than issues rated
"F-1+."
F-2: Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the margin of safety is
not as great as for issues assigned "F-1+" and "F-1" ratings.
F-3: Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for timely payment is
adequate; however, near-term adverse changes could cause these securities to be
rated below investment grade.
F-5: Weak Credit Quality. Issues assigned this rating have
characteristics suggesting a minimal degree of assurance for timely payment and
are vulnerable to near-term adverse changes in financial and economic
conditions.
I-2
<PAGE>
D: Default. Issues assigned this rating are in actual or imminent
payment default.
LOC: The symbol LOC indicates that the rating is based on a letter of
credit issued by a commercial bank.
I-3
<PAGE>
EVERGREEN MUNICIPAL TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
Item 24(a). Financial Statements
The financial statements listed below are included in Part A of this
Amendment to the Registration Statement:
<TABLE>
<CAPTION>
<S> <C>
EVERGREEN CALIFORNIA TAX FREE FUND
Class A Financial Highlights For the year ended March 31, 1998; for the four-month period ended March 31, 1997;
for each of the years in two-year period ended November 30, 1996; and for the
period from February 1, 1994 (Commencement of Operations) to November 30, 1994
Class B Financial Highlights For the year ended March 31, 1998; for the four-month period ended March 31, 1997;
for each of the years in two-year period ended November 30, 1996; and for the
period from February 1, 1994 (Commencement of Operations) to November 30, 1994
Class C Financial Highlights For the year ended March 31, 1998; for the four-month period ended March 31, 1997;
for each of the years in two-year period ended November 30, 1996; and for the
period from February 1, 1994 (Commencement of Operations) to November 30, 1994
EVERGREEN MASSACHUSETTS TAX FREE FUND
Class A Financial Highlights For each of the years in the four-year period ended March 31, 1998; and for the
period from February 4, 1994 (Commencement of Operations) to March 31, 1994
Class B Financial Highlights For each of the years in the four-year period ended March 31, 1998; and for the
period from February 4, 1994 (Commencement of Operations) to March 31, 1994
Class C Financial Highlights For each of the years in the four-year period ended March 31, 1998; and for the
period from February 4, 1994 (Commencement of Operations) to March 31, 1994
EVERGREEN MISSOURI TAX FREE FUND
Class A Financial Highlights For the year ended March 31, 1998; for the four-month period ended March 31, 1997;
for each of the years in two-year period ended November 30, 1996; and for the
period from February 1, 1994 (Commencement of Operations) to November 30, 1994
Class B Financial Highlights For the year ended March 31, 1998; for the four-month period ended March 31, 1997;
for each of the years in two-year period ended November 30, 1996; and for the
period from February 1, 1994 (Commencement of Operations) to November 30, 1994
Class C Financial Highlights For the year ended March 31, 1998; for the four-month period ended March 31, 1997;
for each of the years in two-year period ended November 30, 1996; and for the
period from February 1, 1994 (Commencement of Operations) to November 30, 1994
EVERGREEN NEW YORK TAX FREE FUND
Class A Financial Highlights For each of the years in the four-year period ended March 31, 1998; and for the
period from February 4, 1994 (Commencement of Operations) to March 31, 1994
Class B Financial Highlights For each of the years in the four-year period ended March 31, 1998; and for the
period from February 4, 1994 (Commencement of Operations) to March 31, 1994
Class C Financial Highlights For each of the years in the four-year period ended March 31, 1998; and for the
period from February 4, 1994 (Commencement of Operations) to March 31, 1994
EVERGREEN PENNSYLVANIA TAX FREE FUND
Class A Financial Highlights For each of the years in the seven-year period ended March 31, 1998; and for the
period from December 27, 1990 (Commencement of Operations) to March 31, 1991
Class B Financial Highlights For each of the years in the five-year period ended March 31, 1998; and for the
period from February 1, 1993 (Commencement of Operations) to March 31, 1993
Class C Financial Highlights For each of the years in the five-year period ended March 31, 1998; and for the
period from February 1, 1993 (Commencement of Operations) to March 31, 1993
Class Y Financial Highlights For the period from November 24, 1997 (Commencement of Operations) to
March 31, 1998.
EVERGREEN CONNECTICUT MUNICIPAL BOND FUND
Class A Financial Highlights For the period from December 30, 1997 (Commencement of Operations) to
March 31, 1998.
Class B Financial Highlights For the period from January 9, 1998 (Commencement of Operations) to
March 31, 1998.
Class Y Financial Highlights For the period from November 24, 1997 (Commencement of Operations) to
March 31, 1998.
EVERGREEN NEW JERSEY TAX FREE FUND
Class A Financial Highlights For the year ended March 31, 1998; for the seven-month period ended
March 31, 1997; for the six-month period ended August 31, 1996; for the year ended
February 29, 1996; for each of the years in three-year period ended
February 28, 1995; and for the period from July 16, 1991 (Commencement of
Operations) to February 29, 1992
Class B Financial Highlights For the year ended March 31, 1998; for the seven-month period ended
March 31, 1997; for the six-month period ended August 31, 1996; and for the period
from January 30, 1996 (Commencement of Operations) to February 29, 1996
Class Y Financial Highlights For the year ended March 31, 1998; for the seven-month period ended
March 31, 1997; for the six-month period ended August 31, 1996; and for the period
from February 8, 1996 (Commencement of Operations) to February 29, 1996
</TABLE>
The financial statements listed below are included in Part B of this
Amendment to the Registration Statement:
Schedule of Investments March 31, 1998
Statements of Assets and Liabilities March 31, 1998
Statements of Operations Year or period ended
March 31, 1998
Statements of Changes in Net Assets For each of the years or
periods in the two-year period
ended March 31, 1998
Notes to Financial Statements
Independent Auditors' Report May 1, 1998
The information required by this item for Evergreen Florida High Income
Municipal Bond Fund, Evergreen Florida Municipal Bond Fund, Evergreen Georgia
Municipal Bond Fund, Evergreen Maryland Municipal Bond Fund, Evergreen North
Carolina Municipal Bond Fund, Evergreen South Carolina Municipal Bond Fund, and
Evergreen Virginia Municipal Bond Fund contained in Post-Effective Amendment No.
5 to Registration Statement No. 333-36033/811-08367 filed on February 6, 1998 is
incorporated by reference herein.
The information required by this item for Evergreen High Grade Tax Free
Fund, and Evergreen Short-Intermediate Municipal Fund contained in
Post-Effective No. 2 to Registration Statement No. 333-36033/811-08367 filed on
December 18, 1997 is incorporated by reference herein.
Item 24(b). Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description Location
- ------- ----------- -----------
<S> <C> <C>
1 Declaration of Trust Incorporated by reference to
Registrant's Pre-Effective Amendment No. 1
Filed on October 8, 1997
2 By-laws Incorporated by reference to
Registrant's Pre-Effective Amendment No. 1
Filed on October 8, 1997
3 Not applicable
4 Provisions of instruments defining the rights
of holders of the securities being registered
are contained in the Declaration of Trust
Articles II, III.(6)(c), VI.(3), IV.(8), V, VI,
VII, VIII and By-laws Articles II, III and VIII
included as part of Exhibits 1 and 2 of this
Registration Statement
5(a) Investment Advisory and Management
Agreement between the Registrant and First
Union National Bank
5(b) Investment Advisory and Management
Agreement between the Registrant and Evergreen
Asset Management Corp.
5(c) Investment Advisory and Management
Agreement between the Registrant and Keystone
Investment Management Company
6(a) Class A and Class C Principal Underwriting
Agreement between the Registrant and Evergreen
Distributor, Inc.
6(b) Class B Principal Underwriting Agreement
between the Registrant and Evergreen Investment
Services, Inc. (B-1)
6(c) Class B Principal Underwriting Agreement
between the Registrant and Evergreen Distributor,
Inc. (B-2)
6(d) Class B Principal Underwriting Agreement
between the Registrant and Evergreen Distributor,
Inc. (Evergreen/KCF)
6(e) Class Y Principal Underwriting Agreement
between the Registrant and Evergreen Distributor,
Inc.
6(f) Specimen copy of Dealer Agreement used by Incorporated by reference to
Evergreen Distributor, Inc. Registrant's Pre-Effective Amendment No. 1
filed November 12, 1997
7 Form of Deferred Compensation Plan Incorporated by reference to
Registrant's Pre-Effective Amendemnt No. 2
Filed on November 10, 1997
8 Custodian Agreement between the Registrant
and State Street Bank and Trust Company
9(a) Administration Agreement between Evergreen
Investment Services, Inc. and the Registrant
9(b) Transfer Agent Agreement between the
Registrant and Evergreen Service Company
10 Opinion and Consent of Sullivan & Worcester LLP Incorporated by reference to
Registrant's Post-Effective Amendment No. 2
Filed on December 12, 1997
11(a) Consent of PricewaterhouseCoopers LLP Not applicable to this filing
11(b) Consent of KPMG Peat Marwick LLP
11(c) Consent of Deloitte and Touche LLP Not applicable to this filing
12 Not applicable
13 Not applicable
15(a) 12b-1 Distribution Plan for Class A
15(b) 12b-1 Distribution Plan for Class B
(KAF B-1)
15(c) 12b-1 Distribution Plan for Class B
(KAF B-2)
15(d) 12b-1 Distribution Plan for Class B
(KCF/Evergreen)
15(e) 12b-1 Distribution Plan for Class C
16 Performance Calculations
17 Financial Data Schedule
18 Multiple Class Plan Incorporated by reference to
Registrant's Pre-Effective Amendment No. 2
Filed on November 10, 1997
19 Powers of Attorney
</TABLE>
Item 25. Persons Controlled by or Under Common Control with Registrant.
None
Item 26. Number of Holders of Securities (as of June 30, 1998)
Evergreen California Tax Free Fund
Class A 107
Class B 306
Class C 19
Evergreen Connecticut Municipal Bond Fund
Class A 17
Class B 0
Class Y 0
Evergreen Massachusetts Tax Free Fund
Class A 37
Class B 171
Class C 44
Evergreen Missouri Tax Free Fund
Class A 75
Class B 432
Class C 27
Evergreen New Jersey Tax Free Income Fund
Class A 640
Class B 338
Class Y 17
Evergreen New York Tax Free Fund
Class A 95
Class B 400
Class C 37
Class Y 0
Evergreen Pennsylvania Tax Free Fund
Class A 597
Class B 1124
Class C 184
Class Y 4
Item 27. Indemnification.
Provisions for the indemnification of the Registrant's Trustees and
officers are contained the Registrant's Declaration of Trust.
Provisions for the indemnification of Registrant's Investment Advisors are
contained in their Investment Advisory and Management Agreements.
Provisions for the indemnification of Evergreen Distributor, Inc., the
Registrant's principal underwriter, are contained in each Principal Underwriting
Agreement between Evergreen Distributor, Inc. and the Registrant.
Item 28. Business or Other Connections of Investment Adviser.
The Directors and principal executive officers of First Union National Bank
are:
Edward E. Crutchfield, Jr. Chairman and Chief Executive Officer,
First Union Corporation; Chief Executive
Officer and Chairman, First Union National
Bank
John R. Georgius President, First Union Corporation; Vice
Chairman and President, First Union National
Bank
Marion A. Cowell, Jr. Executive Vice President, Secretary &
General Counsel, First Union Corporation;
Secretary and Executive Vice President,
First Union National Bank
Robert T. Atwood Executive Vice President and Chief Financial
Officer, First Union Corporation; Chief
Financial Officer and Executive Vice
President
All of the above persons are located at the following address: First Union
National Bank, One First Union Center, Charlotte, NC 28288.
The information required by this item with respect to Evergreen Asset
Management Corp. is incorporated by reference to the Form ADV (File No.
801-46522) of Evergreen Asset Management Corp.
The information required by this item with respect to Keystone Investment
Management Company is incorporated by reference to the Form ADV (File No.
801-8327) of Keystone Investment Management Company.
Item 29. Principal Underwriters.
The Directors and principal executive officers of Evergreen Distributor,
Inc. are:
Lynn C. Mangum Director, Chairman and Chief Executive
Officer
Robert J. McMullan Director, Executive Vice President and
Treasurer
J. David Huber President
Kevin J. Dell Vice President, General Counsel and Secretary
All of the above persons are located at the following address: Evergreen
Distributor, Inc., 125 West 55th Street, New York, New York 10019.
Evergreen Distributor, Inc. acts as principal underwriter for each
registered investment company or series thereof that is a part of the Evergreen
Keystone "fund complex" as such term is defined in Item 22(a) of Schedule 14A
under the Securities Exchange Act of 1934.
Item 30. Location of Accounts and Records.
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Evergreen Investment Services, Inc., Evergreen Service Company and Keystone
Investment Management Company, all located at 200 Berkeley Street, Boston,
Massachusetts 02110
First Union National Bank, One First Union Center, 301 S. College Street,
Charlotte, North Carolina 28288
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase,
New York 10577
Iron Mountain, 3431 Sharp Slot Road, Swansea, Massachusetts 02777
State Street Bank and Trust Company, 2 Heritage Drive, North Quincy,
Massachusetts 02171
Item 31. Management Services.
Not Applicable
Item 32. Undertakings.
The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Columbus, and State of Ohio, on the 31st day of
July, 1998.
EVERGREEN MUNICIPAL TRUST
By: /s/ William J. Tomko
-----------------------------
Name: William J. Tomko
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 31st day of July, 1998.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/William J. Tomko /s/ Laurence B. Ashkin /s/ Charles A. Austin, III
- ------------------------- ----------------------------- --------------------------------
William J. Tomko Laurence B. Ashkin* Charles A. Austin III*
President and Treasurer (Principal Trustee Trustee
Financial and Accounting Officer)
/s/ K. Dun Gifford /s/ James S. Howell /s/ William Walt Pettit
- ---------------------------- ---------------------------- --------------------------------
K. Dun Gifford* James S. Howell* William Walt Pettit*
Trustee Trustee Trustee
/s/Gerald M. McDonnell /s/ Thomas L. McVerry /s/ Michael S. Scofield
- ------------------------------- ----------------------------- --------------------------------
Gerald M. McDonell* Thomas L. McVerry* Michael S. Scofield*
Trustee Trustee Trustee
/s/ David M. Richardson /s/ Russell A. Salton, III MD
- ------------------------------ -------------------------------
David M. Richardson* Russell A. Salton, III MD*
Trustee Trustee
/s/ Richard J. Shima
- ------------------------------
Richard J. Shima*
Trustee
</TABLE>
*By: /s/ Maureen E. Towle
- -------------------------------
Maureen E. Towle
Attorney-in-Fact
*Maureen E. Towle, by signing his name hereto, does hereby sign this
document on behalf of each of the above-named individuals pursuant to powers of
attorney duly executed by such persons.
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Exhibit
- -------------- -------
5(a) Investment Advisory and Management
Agreement between the Registrant and First
Union National Bank
5(b) Investment Advisory and Management
Agreement between the Registrant and Evergreen
Asset Management Corp.
5(c) Investment Advisory and Management
Agreement between the Registrant and Keystone
Investment Management Company
6(a) Class A and Class C Principal Underwriting
Agreement between the Registrant and Evergreen
Distributor, Inc.
6(b) Class B Principal Underwriting Agreement
between the Registrant and Evergreen Investment
Services, Inc. (B-1)
6(c) Class B Principal Underwriting Agreement
between the Registrant and Evergreen Distributor,
Inc. (B-2)
6(d) Class B Principal Underwriting Agreement
between the Registrant and Evergreen Distributor,
Inc. (Evergreen/KCF)
6(e) Class Y Principal Underwriting Agreement
between the Registrant and Evergreen Distributor,
Inc.
8 Custodian Agreement between the Registrant
and State Street Bank and Trust Company
9(a) Administration Agreement between Evergreen
Investment Services, Inc. and the Registrant
9(b) Transfer Agent Agreement between the
Registrant and Evergreen Service Company
11(b) Consent of KPMG Peat Marwick LLP
15(a) 12b-1 Distribution Plan for Class A
15(b) 12b-1 Distribution Plan for Class B
(KAF B-1)
15(c) 12b-1 Distribution Plan for Class B
(KAF B-2)
15(d) 12b-1 Distribution Plan for Class B
(KCF/Evergreen)
15(e) 12b-1 Distribution Plan for Class C
16 Performance Calculations
17 Financial Data Schedule
19 Powers of Attorney
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
AGREEMENT made the 18th day of September 1997, by and between EVERGREEN
MUNICIPAL TRUST, a Delaware business trust (the "Trust") and THE FIRST UNION
NATIONAL BANK, a national banking association (the "Adviser").
WHEREAS, the Trust and the Adviser wish to enter into an Agreement
setting forth the terms on which the Adviser will perform certain services for
the Trust, its series of shares as listed on Schedule 1 to this Agreement and
each series of shares subsequently issued by the Trust (each singly a "Fund" or
collectively the "Funds").
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Trust and the Adviser agree as follows:
1. (a) The Trust hereby employs the Adviser to manage and administer
the operation of the Trust and each of its Funds, to supervise the provision of
the services to the Trust and each of its Funds by others, and to manage the
investment and reinvestment of the assets of each Fund of the Trust in
conformity with such Fund's investment objectives and restrictions as may be set
forth from time to time in the Fund's then current prospectus and statement of
additional information, if any, and other governing documents, all subject to
the supervision of the Board of Trustees of the Trust, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations set forth herein, for the compensation provided herein.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
(b) In the event that the Trust establishes one or more Funds, in
addition to the Funds listed on Schedule 1, for which it wishes the Adviser to
perform services hereunder, it shall notify the Adviser in writing. If the
Adviser is willing to render such services, it shall notify the Trust in writing
and such Fund shall become a Fund hereunder and the compensation payable to the
Adviser by the new Fund will be as agreed in writing at the time.
2. The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of each Fund with broker-dealers selected
by the Adviser. In executing portfolio transactions and selecting
broker-dealers, the Adviser will use its best efforts to seek best execution on
behalf of each Fund. In assessing the best execution available for any
transaction, the Adviser shall consider all factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any (all for the specific transaction and
on a continuing basis). In evaluating the best execution available, and in
selecting the broker-dealer to execute a particular transaction, the Adviser may
also consider
23959
1
<PAGE>
the brokerage and research services (as those terms are used in Section 28(e) of
the Securities Exchange Act of 1934 (the "1934 Act")) provided to a Fund and/or
other accounts over which the Adviser or an affiliate of the Adviser exercises
investment discretion. The Adviser is authorized to pay a broker-dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for a Fund which is in excess of the amount of commission
another broker-dealer would have charged for effecting that transaction if, but
only if, the Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer viewed in terms of that particular transaction or
in terms of all of the accounts over which investment discretion is so
exercised.
3. The Adviser, at its own expense, shall furnish to the Trust office
space in the offices of the Adviser or in such other place as may be agreed upon
by the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Trust, for members of the Adviser's organization to serve without
salaries from the Trust as officers or, as may be agreed from time to time, as
agents of the Trust. The Adviser assumes and shall pay or reimburse the Trust
for:
(a) the compensation (if any) of the Trustees of the Trust who are
affiliated with the Adviser or with its affiliates, or with any adviser retained
by the Adviser, and of all officers of the Trust as such; and
(b) all expenses of the Adviser incurred in connection with its
services hereunder.
The Trust assumes and shall pay all other expenses of the Trust and its
Funds, including, without limitation:
(a) all charges and expenses of any custodian or depository appointed
by the Trust for the safekeeping of the cash, securities and other property of
any of its Funds;
(b) all charges and expenses for bookkeeping and auditors;
(c) all charges and expenses of any transfer agents and registrars
appointed by the Trust;
(d) all fees of all Trustees of the Trust who are not affiliated with
the Adviser or any of its affiliates, or with any adviser retained by the
Adviser;
(e) all brokers' fees, expenses, and commissions and issue and transfer
taxes chargeable to a Fund in connection with transactions involving securities
and other property to which the Fund is a party;
(f) all costs and expenses of distribution of shares of its Funds
incurred pursuant to Plans of Distribution adopted under Rule 12b-1 under the
Investment Company Act of 1940 ("1940 Act");
(g) all taxes and trust fees payable by the Trust or its Funds to
Federal, state, or other governmental agencies;
(h) all costs of certificates representing shares of the Trust or its
Funds;
23959
2
<PAGE>
(i) all fees and expenses involved in registering and maintaining
registrations of the Trust, its Funds and of their shares with the Securities
and Exchange Commission (the "Commission") and registering or qualifying the
Funds' shares under state or other securities laws, including, without
limitation, the preparation and printing of registration statements,
prospectuses, and statements of additional information for filing with the
Commission and other authorities;
(j) expenses of preparing, printing, and mailing prospectuses and
statements of additional information to shareholders of each Fund of the Trust;
(k) all expenses of shareholders' and Trustees' meetings and of
preparing, printing, and mailing notices, reports, and proxy materials to
shareholders of the Funds;
(l) all charges and expenses of legal counsel for the Trust and its
Funds and for Trustees of the Trust in connection with legal matters relating to
the Trust and its Funds, including, without limitation, legal services rendered
in connection with the Trust and its Funds' existence, trust, and financial
structure and relations with its shareholders, registrations and qualifications
of securities under Federal, state, and other laws, issues of securities,
expenses which the Trust and its Funds have herein assumed, whether customary or
not, and extraordinary matters, including, without limitation, any litigation
involving the Trust and its Funds, its Trustees, officers, employees, or agents;
(m) all charges and expenses of filing annual and other reports with
the Commission and other authorities; and
(n) all extraordinary expenses and charges of the Trust and its Funds.
In the event that the Adviser provides any of these services or pays
any of these expenses, the Trust and any affected Fund will promptly reimburse
the Adviser therefor.
The services of the Adviser to the Trust and its Funds hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others.
4. As compensation for the Adviser's services to the Trust with respect
to each Fund during the period of this Agreement, the Trust will pay to the
Adviser a fee at the annual rate set forth on Schedule 2 for such Fund.
The Adviser's fee is computed as of the close of business on each
business day.
A pro rata portion of the Trust's fee with respect to a Fund shall be
payable in arrears at the end of each day or calendar month as the Adviser may
from time to time specify to the Trust. If and when this Agreement terminates,
any compensation payable hereunder for the period ending with the date of such
termination shall be payable upon such termination.
Amounts payable hereunder shall be promptly paid when due.
5. The Adviser may enter into an agreement to retain, at its own
expense, a firm or firms ("SubAdviser") to provide the Trust with respect to all
or any of its Funds all of the services to be provided by the Adviser hereunder,
if such agreement is approved as required
23959
3
<PAGE>
by law. Such agreement may delegate to such SubAdviser all of Adviser's rights,
obligations, and duties hereunder.
6. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust or any of its Funds in connection
with the performance of this Agreement, except a loss resulting from the
Adviser's willful misfeasance, bad faith, gross negligence, or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also an officer, Director, partner, employee, or agent of the
Adviser, who may be or become an officer, Trustee, employee, or agent of the
Trust, shall be deemed, when rendering services to the Trust or any of its Funds
or acting on any business of the Trust or any of its Funds (other than services
or business in connection with the Adviser's duties hereunder), to be rendering
such services to or acting solely for the Trust or any of its Funds and not as
an officer, Director, partner, employee, or agent or one under the control or
direction of the Adviser even though paid by it.
7. The Trust shall cause the books and accounts of each of its Funds to
be audited at least once each year by a reputable independent public accountant
or organization of public accountant or organization of public accountants who
shall render a report to the Trust.
8. Subject to and in accordance with the Declaration of Trust of the
Trust, the governing documents of the Adviser and the governing documents of any
SubAdviser, it is understood that Trustees, Directors, officers, agents and
shareholders of the Trust or any Adviser are or may be interested in the Adviser
(or any successor thereof) as Directors and officers of the Adviser or its
affiliates, as stockholders of First Union Corporation or otherwise; that
Directors, officers and agents of the Adviser and its affiliates or stockholders
of First Union Corporation are or may be interested in the Trust or any Adviser
as Trustees, Directors, officers, shareholders or otherwise; that the Adviser
(or any such successor) is or may be interested in the Trust or any SubAdviser
as shareholder, or otherwise; and that the effect of any such adverse interests
shall be governed by the Declaration of Trust of the Trust, governing documents
of the Adviser and governing documents of any SubAdviser.
9. This Agreement shall continue in effect for two years from the date
set forth above and after such date (a) such continuance is specifically
approved at least annually by the Board of Trustees of the Trust or by a vote of
a majority of the outstanding voting securities of the Trust, and (b) such
renewal has been approved by the vote of the majority of Trustees of the Trust
who are not interested persons, as that term is defined in the 1940 Act, of the
Adviser or of the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
10. On sixty days' written notice to the Adviser, this Agreement may be
terminated at any time without the payment of any penalty by the Board of
Trustees of the Trust or by vote of the holders of a majority of the outstanding
voting securities of any Fund with respect to that Fund; and on sixty days'
written notice to the Trust, this Agreement may be terminated at any time
without the payment of any penalty by the Adviser with respect to a Fund. This
23959
4
<PAGE>
Agreement shall automatically terminate upon its assignment (as that term is
defined in the 1940 Act). Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postage prepaid, to the other party
at the main office of such party.
11. This Agreement may be amended at any time by an instrument in
writing executed by both parties hereto or their respective successors, provided
that with regard to amendments of substance such execution by the Trust shall
have been first approved by the vote of the holders of a majority of the
outstanding voting securities of the affected Funds and by the vote of a
majority of Trustees of the Trust who are not interested persons (as that term
is defined in the 1940 Act) of the Adviser, any predecessor of the Adviser, or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval. A "majority of the outstanding voting securities" of the Trust or
the affected Funds shall have, for all purposes of this Agreement, the meaning
provided therefor in the 1940 Act.
12. Any compensation payable to the Adviser hereunder for any period
other than a full year shall be proportionately adjusted.
13. The provisions of this Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EVERGREEN MONEY MARKET TRUST
By: /s/ John J. Pileggi
-------------------------
Name: John J. Pileggi
Title: President
FIRST UNION NATIONAL BANK
By: /s/ T. Hal Clarke
-------------------------
Name: T. Hal Clarke
Title: President
23959
5
<PAGE>
Schedule 1
----------
(Amended February 28, 1998)
Evergreen Florida High Income Municipal Bond Fund
Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund
Evergreen Maryland Municipal Bond Fund
Evergreen New Jersey Tax Free Income Fund
Evergreen North Carolina Municipal Bond Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
Evergreen Connecticut Municipal Bond Fund
Evergreen High Grade Tax Free Fund
<PAGE>
Schedule 2
----------
(Amended February 28, 1998)
As compensation for the Adviser's services to each Fund during the
period of this Agreement, each Fund will pay to the Adviser a fee at the annual
rate of :
I. Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund
Evergreen Maryland Municipal Bond Fund
Evergreen North Carolina Municipal Bond Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
Evergreen High Grade Tax Free Fund
0.50 of 1% of the Average Daily Net Assets of the Fund
II. Evergreen Florida High Income Municipal Bond Fund
-------------------------------------------------
0.60 of 1% of the Average Daily Net Assets of the Fund
III. Evergreen New Jersey Tax-Free Income Fund
-----------------------------------------
Aggregate Net Asset Value
Management Fee Of Shares of the Fund
--------------------------------------------------------------
0.50 of 1% the first $ 500,000,000, plus
0.45 of 1% the next $ 500,000,000, plus
0.40 of 1% of amounts over $1,000,000,000, plus
0.35 of 1% of amounts over $1,500,000,000.
--------------------------------------------------------------
computed as of the close of business on each business day.
IV. Evergreen Connecticut Municipal Bond Fund
-----------------------------------------
0.60% of Average Daily Net Assets of the Fund
23062
7
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
AGREEMENT made the 18th day of September 1997, by and between EVERGREEN
MUNICIPAL TRUST, a Delaware business trust (the "Trust") and EVERGREEN ASSET
MANAGEMENT CORP., a New York corporation (the "Adviser").
WHEREAS, the Trust and the Adviser wish to enter into an Agreement
setting forth the terms on which the Adviser will perform certain services for
the Trust, its series of shares as listed on Schedule 1 to this Agreement and
each series of shares subsequently issued by the Trust (each singly a "Fund" or
collectively the "Funds").
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Trust and the Adviser agree as follows:
1. (a) The Trust hereby employs the Adviser to manage and administer
the operation of the Trust and each of its Funds, to supervise the provision of
the services to the Trust and each of its Funds by others, and to manage the
investment and reinvestment of the assets of each Fund of the Trust in
conformity with such Fund's investment objectives and restrictions as may be set
forth from time to time in the Fund's then current prospectus and statement of
additional information, if any, and other governing documents, all subject to
the supervision of the Board of Trustees of the Trust, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations set forth herein, for the compensation provided herein.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
(b) In the event that the Trust establishes one or more Funds, in
addition to the Funds listed on Schedule 1, for which it wishes the Adviser to
perform services hereunder, it shall notify the Adviser in writing. If the
Adviser is willing to render such services, it shall notify the Trust in writing
and such Fund shall become a Fund hereunder and the compensation payable to the
Adviser by the new Fund will be as agreed in writing at the time.
2. The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of each Fund with broker-dealers selected
by the Adviser. In executing portfolio transactions and selecting
broker-dealers, the Adviser will use its best efforts to seek best execution on
behalf of each Fund. In assessing the best execution available for any
transaction, the Adviser shall consider all factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any (all for the specific transaction and
on a continuing basis). In evaluating the best execution available, and in
selecting the broker-dealer to execute a particular transaction, the Adviser may
also consider
23842
1
<PAGE>
the brokerage and research services (as those terms are used in Section 28(e) of
the Securities Exchange Act of 1934 (the "1934 Act")) provided to a Fund and/or
other accounts over which the Adviser or an affiliate of the Adviser exercises
investment discretion. The Adviser is authorized to pay a broker-dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for a Fund which is in excess of the amount of commission
another broker-dealer would have charged for effecting that transaction if, but
only if, the Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer viewed in terms of that particular transaction or
in terms of all of the accounts over which investment discretion is so
exercised.
3. The Adviser, at its own expense, shall furnish to the Trust office
space in the offices of the Adviser or in such other place as may be agreed upon
by the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Trust, for members of the Adviser's organization to serve without
salaries from the Trust as officers or, as may be agreed from time to time, as
agents of the Trust. The Adviser assumes and shall pay or reimburse the Trust
for:
(a) the compensation (if any) of the Trustees of the Trust who are
affiliated with the Adviser or with its affiliates, or with any adviser retained
by the Adviser, and of all officers of the Trust as such; and
(b) all expenses of the Adviser incurred in connection with its
services hereunder.
The Trust assumes and shall pay all other expenses of the Trust and its
Funds, including, without limitation:
(a) all charges and expenses of any custodian or depository appointed
by the Trust for the safekeeping of the cash, securities and other property of
any of its Funds;
(b) all charges and expenses for bookkeeping and auditors;
(c) all charges and expenses of any transfer agents and registrars
appointed by the Trust;
(d) all fees of all Trustees of the Trust who are not affiliated with
the Adviser or any of its affiliates, or with any adviser retained by the
Adviser;
(e) all brokers' fees, expenses, and commissions and issue and transfer
taxes chargeable to a Fund in connection with transactions involving securities
and other property to which the Fund is a party;
(f) all costs and expenses of distribution of shares of its Funds
incurred pursuant to Plans of Distribution adopted under Rule 12b-1 under the
Investment Company Act of 1940 ("1940 Act");
(g) all taxes and trust fees payable by the Trust or its Funds to
Federal, state, or other governmental agencies;
(h) all costs of certificates representing shares of the Trust or its
Funds;
23842
2
<PAGE>
(i) all fees and expenses involved in registering and maintaining
registrations of the Trust, its Funds and of their shares with the Securities
and Exchange Commission (the "Commission") and registering or qualifying the
Funds' shares under state or other securities laws, including, without
limitation, the preparation and printing of registration statements,
prospectuses, and statements of additional information for filing with the
Commission and other authorities;
(j) expenses of preparing, printing, and mailing prospectuses and
statements of additional information to shareholders of each Fund of the Trust;
(k) all expenses of shareholders' and Trustees' meetings and of
preparing, printing, and mailing notices, reports, and proxy materials to
shareholders of the Funds;
(l) all charges and expenses of legal counsel for the Trust and its
Funds and for Trustees of the Trust in connection with legal matters relating to
the Trust and its Funds, including, without limitation, legal services rendered
in connection with the Trust and its Funds' existence, trust, and financial
structure and relations with its shareholders, registrations and qualifications
of securities under Federal, state, and other laws, issues of securities,
expenses which the Trust and its Funds have herein assumed, whether customary or
not, and extraordinary matters, including, without limitation, any litigation
involving the Trust and its Funds, its Trustees, officers, employees, or agents;
(m) all charges and expenses of filing annual and other reports with
the Commission and other authorities; and
(n) all extraordinary expenses and charges of the Trust and its Funds.
In the event that the Adviser provides any of these services or pays
any of these expenses, the Trust and any affected Fund will promptly reimburse
the Adviser therefor.
The services of the Adviser to the Trust and its Funds hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others.
4. As compensation for the Adviser's services to the Trust with respect
to each Fund during the period of this Agreement, the Trust will pay to the
Adviser a fee at the annual rate set forth on Schedule 2 for such Fund.
The Adviser's fee is computed as of the close of business on each
business day.
A pro rata portion of the Trust's fee with respect to a Fund shall be
payable in arrears at the end of each day or calendar month as the Adviser may
from time to time specify to the Trust. If and when this Agreement terminates,
any compensation payable hereunder for the period ending with the date of such
termination shall be payable upon such termination.
Amounts payable hereunder shall be promptly paid when due.
5. The Adviser may enter into an agreement to retain, at its own
expense, a firm or firms ("SubAdviser") to provide the Trust with respect to all
or any of its Funds all of the services to be provided by the Adviser hereunder,
if such agreement is approved as required
23842
3
<PAGE>
by law. Such agreement may delegate to such SubAdviser all of Adviser's rights,
obligations, and duties hereunder.
6. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust or any of its Funds in connection
with the performance of this Agreement, except a loss resulting from the
Adviser's willful misfeasance, bad faith, gross negligence, or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also an officer, Director, partner, employee, or agent of the
Adviser, who may be or become an officer, Trustee, employee, or agent of the
Trust, shall be deemed, when rendering services to the Trust or any of its Funds
or acting on any business of the Trust or any of its Funds (other than services
or business in connection with the Adviser's duties hereunder), to be rendering
such services to or acting solely for the Trust or any of its Funds and not as
an officer, Director, partner, employee, or agent or one under the control or
direction of the Adviser even though paid by it.
7. The Trust shall cause the books and accounts of each of its Funds to
be audited at least once each year by a reputable independent public accountant
or organization of public accountant or organization of public accountants who
shall render a report to the Trust.
8. Subject to and in accordance with the Declaration of Trust of the
Trust, the governing documents of the Adviser and the governing documents of any
SubAdviser, it is understood that Trustees, Directors, officers, agents and
shareholders of the Trust or any Adviser are or may be interested in the Adviser
(or any successor thereof) as Directors and officers of the Adviser or its
affiliates, as stockholders of First Union Corporation or otherwise; that
Directors, officers and agents of the Adviser and its affiliates or stockholders
of First Union Corporation are or may be interested in the Trust or any Adviser
as Trustees, Directors, officers, shareholders or otherwise; that the Adviser
(or any such successor) is or may be interested in the Trust or any SubAdviser
as shareholder, or otherwise; and that the effect of any such adverse interests
shall be governed by the Declaration of Trust of the Trust, governing documents
of the Adviser and governing documents of any SubAdviser.
9. This Agreement shall continue in effect for two years from the date
set forth above and after such date (a) such continuance is specifically
approved at least annually by the Board of Trustees of the Trust or by a vote of
a majority of the outstanding voting securities of the Trust, and (b) such
renewal has been approved by the vote of the majority of Trustees of the Trust
who are not interested persons, as that term is defined in the 1940 Act, of the
Adviser or of the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
10. On sixty days' written notice to the Adviser, this Agreement may be
terminated at any time without the payment of any penalty by the Board of
Trustees of the Trust or by vote of the holders of a majority of the outstanding
voting securities of any Fund with respect to that Fund; and on sixty days'
written notice to the Trust, this Agreement may be terminated at any time
without the payment of any penalty by the Adviser with respect to a Fund. This
23842
4
<PAGE>
Agreement shall automatically terminate upon its assignment (as that term is
defined in the 1940 Act). Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postage prepaid, to the other party
at the main office of such party.
11. This Agreement may be amended at any time by an instrument in
writing executed by both parties hereto or their respective successors, provided
that with regard to amendments of substance such execution by the Trust shall
have been first approved by the vote of the holders of a majority of the
outstanding voting securities of the affected Funds and by the vote of a
majority of Trustees of the Trust who are not interested persons (as that term
is defined in the 1940 Act) of the Adviser, any predecessor of the Adviser, or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval. A "majority of the outstanding voting securities" of the Trust or
the affected Funds shall have, for all purposes of this Agreement, the meaning
provided therefor in the 1940 Act.
12. Any compensation payable to the Adviser hereunder for any period
other than a full year shall be proportionately adjusted.
13. The provisions of this Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EVERGREEN MUNICIPAL TRUST
By: /s/ John J. Pileggi
-------------------------
Name: John J. Pileggi
Title: President
EVERGREEN ASSET MANAGEMENT CORP.
By: /s/ Stephen A. Lieber
-------------------------
Name: Stephen A. Lieber
Title: Chairman & Co-Chief Executive
Officer
23842
5
<PAGE>
Schedule 1
----------
Evergreen Short-Intermediate Municipal Fund
<PAGE>
Schedule 2
----------
As compensation for the Adviser's services to the Fund during the
period of this Agreement, the Fund will pay the Adviser a fee at the annual rate
of:
I. Evergreen Short-Intermediate Municipal Fund
-------------------------------------------
0.50% of 1% of Daily Net Asset Value of the Fund
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
AGREEMENT made the 18th day of September 1997, by and between EVERGREEN
MUNICIPAL TRUST, a Delaware business trust (the "Trust") and KEYSTONE INVESTMENT
MANAGEMENT COMPANY, a Delaware corporation (the "Adviser").
WHEREAS, the Trust and the Adviser wish to enter into an Agreement
setting forth the terms on which the Adviser will perform certain services for
the Trust, its series of shares as listed on Schedule 1 to this Agreement and
each series of shares subsequently issued by the Trust (each singly a "Fund" or
collectively the "Funds").
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Trust and the Adviser agree as follows:
1. (a) The Trust hereby employs the Adviser to manage and administer
the operation of the Trust and each of its Funds, to supervise the provision of
the services to the Trust and each of its Funds by others, and to manage the
investment and reinvestment of the assets of each Fund of the Trust in
conformity with such Fund's investment objectives and restrictions as may be set
forth from time to time in the Fund's then current prospectus and statement of
additional information, if any, and other governing documents, all subject to
the supervision of the Board of Trustees of the Trust, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations set forth herein, for the compensation provided herein.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
(b) In the event that the Trust establishes one or more Funds, in
addition to the Funds listed on Schedule 1, for which it wishes the Adviser to
perform services hereunder, it shall notify the Adviser in writing. If the
Adviser is willing to render such services, it shall notify the Trust in writing
and such Fund shall become a Fund hereunder and the compensation payable to the
Adviser by the new Fund will be as agreed in writing at the time.
2. The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of each Fund with broker-dealers selected
by the Adviser. In executing portfolio transactions and selecting
broker-dealers, the Adviser will use its best efforts to seek best execution on
behalf of each Fund. In assessing the best execution available for any
transaction, the Adviser shall consider all factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any (all for the specific transaction and
on a continuing basis). In evaluating the best execution available, and in
selecting the broker-dealer to execute a particular transaction, the Adviser may
also consider
1
<PAGE>
the brokerage and research services (as those terms are used in Section 28(e) of
the Securities Exchange Act of 1934 (the "1934 Act")) provided to a Fund and/or
other accounts over which the Adviser or an affiliate of the Adviser exercises
investment discretion. The Adviser is authorized to pay a broker-dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for a Fund which is in excess of the amount of commission
another broker-dealer would have charged for effecting that transaction if, but
only if, the Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer viewed in terms of that particular transaction or
in terms of all of the accounts over which investment discretion is so
exercised.
3. The Adviser, at its own expense, shall furnish to the Trust office
space in the offices of the Adviser or in such other place as may be agreed upon
by the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Trust, for members of the Adviser's organization to serve without
salaries from the Trust as officers or, as may be agreed from time to time, as
agents of the Trust. The Adviser assumes and shall pay or reimburse the Trust
for:
(a) the compensation (if any) of the Trustees of the Trust who are
affiliated with the Adviser or with its affiliates, or with any adviser retained
by the Adviser, and of all officers of the Trust as such; and
(b) all expenses of the Adviser incurred in connection with its
services hereunder.
The Trust assumes and shall pay all other expenses of the Trust and its
Funds, including, without limitation:
(a) all charges and expenses of any custodian or depository appointed
by the Trust for the safekeeping of the cash, securities and other property of
any of its Funds;
(b) all charges and expenses for bookkeeping and auditors;
(c) all charges and expenses of any transfer agents and registrars
appointed by the Trust;
(d) all fees of all Trustees of the Trust who are not affiliated with
the Adviser or any of its affiliates, or with any adviser retained by the
Adviser;
(e) all brokers' fees, expenses, and commissions and issue and transfer
taxes chargeable to a Fund in connection with transactions involving securities
and other property to which the Fund is a party;
(f) all costs and expenses of distribution of shares of its Funds
incurred pursuant to Plans of Distribution adopted under Rule 12b-1 under the
Investment Company Act of 1940 ("1940 Act");
(g) all taxes and trust fees payable by the Trust or its Funds to
Federal, state, or other governmental agencies;
(h) all costs of certificates representing shares of the Trust or its
Funds;
(i) all fees and expenses involved in registering and maintaining
registrations of the Trust, its Funds and of their shares with the Securities
and Exchange Commission (the
2
<PAGE>
"Commission") and registering or qualifying the Funds' shares under state or
other securities laws, including, without limitation, the preparation and
printing of registration statements, prospectuses, and statements of additional
information for filing with the Commission and other authorities;
(j) expenses of preparing, printing, and mailing prospectuses and
statements of additional information to shareholders of each Fund of the Trust;
(k) all expenses of shareholders' and Trustees' meetings and of
preparing, printing, and mailing notices, reports, and proxy materials to
shareholders of the Funds;
(l) all charges and expenses of legal counsel for the Trust and its
Funds and for Trustees of the Trust in connection with legal matters relating to
the Trust and its Funds, including, without limitation, legal services rendered
in connection with the Trust and its Funds' existence, trust, and financial
structure and relations with its shareholders, registrations and qualifications
of securities under Federal, state, and other laws, issues of securities,
expenses which the Trust and its Funds have herein assumed, whether customary or
not, and extraordinary matters, including, without limitation, any litigation
involving the Trust and its Funds, its Trustees, officers, employees, or agents;
(m) all charges and expenses of filing annual and other reports with
the Commission and other authorities; and
(n) all extraordinary expenses and charges of the Trust and its Funds.
In the event that the Adviser provides any of these services or pays
any of these expenses, the Trust and any affected Fund will promptly reimburse
the Adviser therefor.
The services of the Adviser to the Trust and its Funds hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others.
4. As compensation for the Adviser's services to the Trust with respect
to each Fund during the period of this Agreement, the Trust will pay to the
Adviser a fee at the annual rate set forth on Schedule 2 for such Fund.
The Adviser's fee is computed as of the close of business on each
business day.
A pro rata portion of the Trust's fee with respect to a Fund shall be
payable in arrears at the end of each day or calendar month as the Adviser may
from time to time specify to the Trust. If and when this Agreement terminates,
any compensation payable hereunder for the period ending with the date of such
termination shall be payable upon such termination.
Amounts payable hereunder shall be promptly paid when due.
5. The Adviser may enter into an agreement to retain, at its own
expense, a firm or firms ("SubAdviser") to provide the Trust with respect to all
or any of its Funds all of the services to be provided by the Adviser hereunder,
if such agreement is approved as required by law. Such agreement may delegate to
such SubAdviser all of Adviser's rights, obligations, and duties hereunder.
3
<PAGE>
6. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust or any of its Funds in connection
with the performance of this Agreement, except a loss resulting from the
Adviser's willful misfeasance, bad faith, gross negligence, or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also an officer, Director, partner, employee, or agent of the
Adviser, who may be or become an officer, Trustee, employee, or agent of the
Trust, shall be deemed, when rendering services to the Trust or any of its Funds
or acting on any business of the Trust or any of its Funds (other than services
or business in connection with the Adviser's duties hereunder), to be rendering
such services to or acting solely for the Trust or any of its Funds and not as
an officer, Director, partner, employee, or agent or one under the control or
direction of the Adviser even though paid by it.
7. The Trust shall cause the books and accounts of each of its Funds to
be audited at least once each year by a reputable independent public accountant
or organization of public accountant or organization of public accountants who
shall render a report to the Trust.
8. Subject to and in accordance with the Declaration of Trust of the
Trust, the governing documents of the Adviser and the governing documents of any
SubAdviser, it is understood that Trustees, Directors, officers, agents and
shareholders of the Trust or any Adviser are or may be interested in the Adviser
(or any successor thereof) as Directors and officers of the Adviser or its
affiliates, as stockholders of First Union Corporation or otherwise; that
Directors, officers and agents of the Adviser and its affiliates or stockholders
of First Union Corporation are or may be interested in the Trust or any Adviser
as Trustees, Directors, officers, shareholders or otherwise; that the Adviser
(or any such successor) is or may be interested in the Trust or any SubAdviser
as shareholder, or otherwise; and that the effect of any such adverse interests
shall be governed by the Declaration of Trust of the Trust, governing documents
of the Adviser and governing documents of any SubAdviser.
9. This Agreement shall continue in effect for two years from the date
set forth above and after such date (a) such continuance is specifically
approved at least annually by the Board of Trustees of the Trust or by a vote of
a majority of the outstanding voting securities of the Trust, and (b) such
renewal has been approved by the vote of the majority of Trustees of the Trust
who are not interested persons, as that term is defined in the 1940 Act, of the
Adviser or of the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
10. On sixty days' written notice to the Adviser, this Agreement may be
terminated at any time without the payment of any penalty by the Board of
Trustees of the Trust or by vote of the holders of a majority of the outstanding
voting securities of any Fund with respect to that Fund; and on sixty days'
written notice to the Trust, this Agreement may be terminated at any time
without the payment of any penalty by the Adviser with respect to a Fund. This
Agreement shall automatically terminate upon its assignment (as that term is
4
<PAGE>
defined in the 1940 Act). Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postage prepaid, to the other party
at the main office of such party.
11. This Agreement may be amended at any time by an instrument in
writing executed by both parties hereto or their respective successors, provided
that with regard to amendments of substance such execution by the Trust shall
have been first approved by the vote of the holders of a majority of the
outstanding voting securities of the affected Funds and by the vote of a
majority of Trustees of the Trust who are not interested persons (as that term
is defined in the 1940 Act) of the Adviser, any predecessor of the Adviser, or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval. A "majority of the outstanding voting securities" of the Trust or
the affected Funds shall have, for all purposes of this Agreement, the meaning
provided therefor in the 1940 Act.
12. Any compensation payable to the Adviser hereunder for any period
other than a full year shall be proportionately adjusted.
13. The provisions of this Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EVERGREEN MUNICIPAL EQUITY TRUST
By: /s/ John J. Pileggi
-----------------------------
Name: John J. Pileggi
Title: President
KEYSTONE INVESTMENT MANAGEMENT COMPANY
By: /s/ Albert H. Elfner, III
------------------------------
Name: Albert H. Elfner, III
Title: Chief Executive Officer
5
<PAGE>
SCHEDULE 1
Evergreen California Tax Free Fund
Evergreen Massachusetts Tax Free Fund
Evergreen Missouri Tax Free Fund
Evergreen New York Tax Free Fund
Evergreen Pennsylvania Tax Free Fund
Evergreen Tax Free Fund
6
<PAGE>
Schedule 2
As compensation for the Adviser's services to each Fund during the
period of this Agreement, each Fund will pay to the Adviser a fee at the annual
rate of:
I. Evergreen California Tax Free Fund, Evergreen Massachusetts Tax Free Fund,
Evergreen Missouri Tax Free Fund, Evergreen New York Tax Free Fund and
Evergreen Pennsylvania Tax Free Fund
- --------------------------------------------------------------------------------
Aggregate Net Asset Value
Management Fee of Shares of the Fund
0.55% of the first $50,000,000, plus
0.50% of the next $50,000,000, plus
0.45% of the next $100,000,000, plus
0.40% of the next $100,000,000, plus
0.35% of the next $100,000,000, plus
0.30% of the next $100,000,000, plus
0.25% of amounts over $500,000,000.
computed as of the close of business on each business day.
II. Evergreen Tax Free Fund
- --------------------------------------------------------------------------------
Annual Aggregate Net Asset Value
Management Fee Income of Shares of the Fund
2.0% of Gross Dividend
and Interest Income Plus
0.50% of the first $100,000,000, plus
0.45% of the next $100,000,000, plus
0.40% of the next $100,000,000, plus
0.35% of the next $100,000,000, plus
0.30% of the next $100,000,000, plus
0.25% of amounts over $500,000,000.
23065
7
PRINCIPAL UNDERWRITING AGREEMENT
EVERGREEN MUNICIPAL TRUST
CLASS A AND C SHARES
AGREEMENT made this 18th day of September, 1997 by and between
Evergreen Municipal Trust on behalf of its series listed on Exhibit A attached
hereto and made a part hereof (such Trust and series referred to herein as
"Fund" individually or "Funds" collectively) and Evergreen Distributor, Inc., a
Delaware corporation ("Principal Underwriter").
It is hereby mutually agreed as follows:
1. The Fund hereby appoints Principal Underwriter a principal
underwriter of the Class A and Class C shares of beneficial interest of the Fund
("Shares") as an independent contractor upon the terms and conditions
hereinafter set forth. Except as the Fund may from time to time agree, Principal
Underwriter will act as agent for the Fund and not as principal.
2. Principal Underwriter will use its best efforts to find purchasers
for the Shares, to promote distribution of the Shares and may obtain orders from
brokers, dealers or other persons for sales of Shares to them. No such broker,
dealer or other person shall have any authority to act as agent for the Fund;
such dealer, broker or other person shall act only as principal in the sale of
Shares.
3. Sales of Shares by Principal Underwriter shall be at the applicable
public offering price determined in the manner set forth in the prospectus
and/or statement of additional information of the Fund current at the time of
the Fund's acceptance of the order for Shares; provided that Principal
Underwriter also shall have the right to sell Shares at net asset value, if such
sale is permissible under and consistent with applicable statutes, rules,
regulations and orders. All orders shall be subject to acceptance by the Fund,
and the Fund reserves the right in its sole discretion to reject any order
received. The Fund shall not be liable to anyone for failure to accept any
order.
4. On all sales of Shares, the Fund shall receive the current net asset
value, and Principal Underwriter shall be entitled to receive fees for sales of
Class A and C Shares as set forth on Exhibit B attached hereto and made a part
hereof.
5. The payment provisions of this Agreement shall be applicable to the
extent necessary to enable the Fund to comply with the obligation of the Fund to
pay Principal Underwriter in accordance with this Agreement in respect of Class
C Shares and shall remain in effect so long as any payments are required to be
made by the Fund pursuant to the irrevocable payment instruction under the
Master Sale Agreement between Principal Underwriter and Mutual Fund Funding
1994-1 dated as of December 6, 1996 (the "Master Sale Agreement").
24156
1
<PAGE>
6. Payment to the Fund for Shares shall be in New York or Boston
Clearing House
24156
2
<PAGE>
funds received by Principal Underwriter within (3) business days after notice of
acceptance of the purchase order and the amount of the applicable public
offering price has been given to the purchaser. If such payment is not received
within such 3-day period, the Fund reserves the right, without further notice,
forthwith to cancel its acceptance of any such order. The Fund shall pay such
issue taxes as may be required by law in connection with the issue of the
Shares.
7. Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the Shares any representations concerning the Shares
except those contained in the then current prospectus and/or statement of
additional information covering the Shares and in printed information approved
by the Fund as information supplemental to such prospectus and statement of
additional information. Copies of the then current prospectus and statement of
additional information will be supplied by the Fund to Principal Underwriter in
reasonable quantities upon request.
8. Principal Underwriter agrees to comply with the Business Conduct
Rules of the National Association of Securities Dealers, Inc.
9. The Fund appoints Principal Underwriter as its agent to accept
orders for redemptions and repurchases of Shares at values and in the manner
determined in accordance with the then current prospectus and/or statement of
additional information of the Fund.
10. The Fund agrees to indemnify and hold harmless the Principal
Underwriter, its officers and Directors and each person, if any, who controls
the Principal Underwriter within the meaning of Section 15 of the Securities Act
of 1933 ("1933 Act"), against any losses, claims, damages, liabilities and
expenses (including the cost of any legal fees incurred in connection therewith)
which the Principal Underwriter, its officers, Directors or any such controlling
person may incur under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon
a) any untrue statement or alleged untrue statement of a
material fact contained in the Fund's registration statement,
prospectus or statement of additional information (including amendments
and supplements thereto), or
b) any omission or alleged omission to state a material fact
required to be stated in the Fund's registration statement, prospectus
or statement of additional information necessary to make the statements
therein not misleading, provided, however, that insofar as losses,
claims, damages, liabilities or expenses arise out of or are based upon
any such untrue statement or omission or alleged untrue statement or
omission made in reliance and in conformity with information furnished
to the Fund by the Principal Underwriter for use in the Fund's
registration statement, prospectus or statement of additional
information, such indemnification is not applicable. In no case shall
the Fund indemnify the Principal Underwriter or its controlling person
as to any amounts incurred for any liability arising out of or based
upon any action for which the Principal
24156
3
<PAGE>
Underwriter, its officers and Directors or any controlling person would
otherwise be subject to liability by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason
of the reckless disregard of its obligations and duties under this
Agreement.
11. The Principal Underwriter agrees to indemnify and hold harmless the
Fund, its officers, Trustees and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act against any loss, claims,
damages, liabilities and expenses (including the cost of any legal fees incurred
in connection therewith) which the Fund, its officers, Trustees or any such
controlling person may incur under the 1933 Act, under any other statute, at
common law or otherwise arising out of the acquisition of any Shares by any
person which
a) may be based upon any wrongful act by the Principal
Underwriter or any of its employees or representatives, or
b) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in the Fund's registration
statement, prospectus or statement of additional information (including
amendments and supplements thereto), or any omission or alleged
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
or confirmed in writing to the Fund by the Principal Underwriter.
12. The Fund agrees to execute such papers and to do such acts and
things as shall from time to time be reasonably requested by Principal
Underwriter for the purpose of qualifying the Shares for sale under the
so-called "blue sky" laws of any state or for registering Shares under the 1933
Act or the Fund under the Investment Company Act of 1940 ("1940 Act"). Principal
Underwriter shall bear the expense of preparing, printing and distributing
advertising, sales literature, prospectuses and statements of additional
information. The Fund shall bear the expense of registering Shares under the
1933 Act and the Fund under the 1940 Act, qualifying Shares for sale under the
so-called "blue sky" laws of any state, the preparation and printing of
prospectuses, statements of additional information and reports required to be
filed with the Securities and Exchange Commission and other authorities, the
preparation, printing and mailing of prospectuses and statements of additional
information to shareholders of the Fund and the direct expenses of the issue of
Shares.
13. To the extent required by the Fund's 12b-1 Plans, Principal
Underwriter shall provide to the Board of Trustees of the Fund in connection
with such 12b-1 Plans, not less than quarterly, a written report of the amounts
expended pursuant to such 12b-1 Plans and the purposes for which such
expenditures were made.
14. This Agreement shall become effective as of the date of the
commencement of
24156
4
<PAGE>
operations of the Fund and shall remain in force for two years unless sooner
terminated or continued as provided below. This Agreement shall continue in
effect after such term if its continuance is specifically approved by a majority
of the Trustees of the Fund and a majority of the 12b-1 Trustees referred to in
the 12b-1 Plans of the Fund ("Rule 12b-1 Trustees") at least annually in
accordance with the 1940 Act and the rules and regulations thereunder.
This Agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of any Rule 12b-1 Trustees or by a vote of a
majority of the Fund's outstanding Shares on not more than sixty (60) days
written notice to any other party to the Agreement; and shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
15. This Agreement shall be construed in accordance with the laws of
The Commonwealth of Massachusetts. All sales hereunder are to be made, and title
to the Shares shall pass, in Boston, Massachusetts.
16. The Fund is a series of a Delaware business trust established under
a Declaration of Trust, as it may be amended from time to time. The obligations
of the Fund are not personally binding upon, nor shall recourse be had against,
the private property of any of the Trustees, shareholders, officers, employees
or agents of the Fund, but only the property of the Fund shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized at Boston,
Massachusetts, as of the day and year first written above.
EVERGREEN MUNICIPAL TRUST
By: /s/ John J. Pileggi
-------------------------
Name: John J. Pileggi
Title: President
EVERGREEN DISTRIBUTOR, INC.
By: /s/ William J. Tomko
-------------------------
Name: William J. Tomko
Title: President
24156
5
<PAGE>
EXHIBIT A
EVERGREEN MUNICIPAL TRUST
Single State Tax Free Funds
-----------------------------
Evergreen California Tax Free Fund
Evergreen Connecticut Municipal Bond Fund
Evergreen Florida High Income Municipal Bond Fund**
Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund**
Evergreen Massachusetts Tax Free Fund
Evergreen Missouri Tax Free Fund
Evergreen New Jersey Tax Free Income Fund**
Evergreen New York Tax Free Fund
Evergreen North Carolina Municipal Bond Fund**
Evergreen Pennsylvania Tax Free Fund
Evergreen South Carolina Municipal Bond Fund**
Evergreen Virginia Municipal Bond Fund**
National Tax Free Funds
-----------------------
Evergreen High Grade Tax Free Fund**
Evergreen Short-Intermediate Municipal Fund**
Evergreen Tax Free Fund
**Class C Shares authorized but not issued
<PAGE>
EXHIBIT B
TO
PRINCIPAL UNDERWRITING AGREEMENT
DATED
SEPTEMBER 18, 1997
Schedule of Payments
--------------------
Class A Shares Up to 0.25% annually of the average daily net asset
value of Class A shares of a Fund
A sales charge, the difference between the current
offering price of Shares, as set forth in the current
prospectus for each Fund, and the net asset value, less
any reallowance that is payable in accordance with the
sales charge schedule in effect at any given time with
respect to the Shares
Class C Shares Up to 1.00% annually of the average daily net asset
value of Class C shares of a Fund, consisting of 12b-1
fees at the annual rate of 0.75% of the average daily
net asset value of a Fund and service fees of 0.25% of
the average daily net asset value of a Fund
PRINCIPAL UNDERWRITING AGREEMENT
FOR CLASS B-1 SHARES
OF
EVERGREEN MUNICIPAL TRUST
AGREEMENT made this 18th day of September 1997 by and between Evergreen
Municipal Trust, a Delaware business trust , on behalf of its series listed on
Exhibit A attached hereto (such Trust and series referred to herein as "Fund"
individually, or "Funds" collectively), and Evergreen Investment Services, Inc.,
a Delaware corporation (the "Principal Underwriter").
The Fund, individually and/or on behalf of its series, if any, referred to
above in the title of this Agreement, to which series, if any, this Agreement
shall relate, as applicable (the "Fund"), may act as the distributor of certain
securities of which it is the issuer pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act"). Accordingly, it is hereby mutually agreed
as follows:
1. The Fund hereby appoints the Principal Underwriter a principal
underwriter of the Class B-1 shares of beneficial interest of the Fund ("B-1
Shares") as an independent contractor upon the terms and conditions hereinafter
set forth. The general term "Shares" as used herein has the same meaning as is
provided therefor in Schedule I hereto. Except as the Fund may from time to time
agree, the Principal Underwriter will act as agent for the Fund and not as
principal.
2. The Principal Underwriter will use its best efforts to find purchasers
for the B-1 Shares and to promote distribution of the B-1 Shares and may obtain
orders from brokers, dealers or other persons for sales of B-1 Shares to them.
No such broker, dealer or other person shall have any authority to act as agent
for the Fund; such broker, dealer or other person shall act only as principal in
the sale of B-1 Shares.
3. Sales of B-1 Shares by the Principal Underwriter shall be at the public
offering price determined in the manner set forth in the prospectus and/or
statement of additional information of the Fund current at the time of the
Fund's acceptance of the order for B-1 Shares. All orders shall be subject to
acceptance by the Fund and the Fund reserves the right in its sole discretion to
reject any order received. The Fund shall not be liable to anyone for failure to
accept any order.
-1-
<PAGE>
4. On all sales of B-1 Shares the Fund shall receive the current net asset
value. The Fund shall pay the Principal Underwriter Distribution Fees (as
defined in Section 14 hereof), as commissions for the sale of B-1 Shares and
other Shares, which shall be paid in conjunction with distribution fees paid to
the Principal Underwriter by other classes of Shares of the Fund to the extent
required in order to comply with Section 14 hereof, and shall pay over to the
Principal Underwriter contingent deferred sales charges ("CDSCs") (as defined in
Section 14 hereof) as set forth in the Fund's current prospectus and statement
of additional information, and as required by Section 14 hereof. The Principal
Underwriter shall also receive payments consisting of shareholder service fees
("Service Fees") at the rate of .25% per annum of the average daily net asset
value of the Class B-1 Shares. The Principal Underwriter may allow all or a part
of said Distribution Fees and CDSCs received by it (not paid to others as
hereinafter provided) to such brokers, dealers or other persons as the Principal
Underwriter may determine.
5. Payment to the Fund for B-1 Shares shall be in New York or Boston
Clearing House funds received by the Principal Underwriter within three business
days after notice of acceptance of the purchase order and the amount of the
applicable public offering price has been given to the purchaser. If such
payment is not received within such period, the Fund reserves the right, without
further notice, forthwith to cancel its acceptance of any such order. The Fund
shall pay such issue taxes as may be required by law in connection with the
issue of the B-1 Shares.
6. The Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the B-1 Shares any representations concerning the B-1
Shares except those contained in the then current prospectus and/or statement of
additional information covering the Shares and in printed information approved
by the Fund as information supplemental to such prospectus and statement of
additional information. Copies of the then current prospectus and statement of
additional information and any such printed supplemental information will be
supplied by the Fund to the Principal Underwriter in reasonable quantities upon
request.
7. The Principal Underwriter agrees to comply with the Conduct Rules of the
National Association of Securities Dealers, Inc. (formerly Rules of Fair
Practice) (as defined in the Purchase and Sale Agreement, dated as of May 31,
1995 (the "Purchase Agreement"), between the Principal Underwriter, Citibank,
N.A. and Citicorp North America, Inc., as agent (the "Business Conduct Rules")).
8. The Fund appoints the Principal Underwriter as its agent to accept
orders for redemptions and repurchases of B-1 Shares at values and in the manner
-2-
<PAGE>
determined in accordance with the then current prospectus and/or statement of
additional information of the Fund.
9. The Fund agrees to indemnify and hold harmless the Principal
Underwriter, its officers and Directors and each person, if any, who controls
the Principal Underwriter within the meaning of Section 15 of the Securities Act
of 1933 ("1933 Act"), against any losses, claims, damages, liabilities and
expenses (including the cost of any legal fees incurred in connection therewith)
which the Principal Underwriter, its officers, Directors or any such controlling
person may incur under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon
a. any untrue statement or alleged untrue statement of a material fact
contained in the Fund's registration statement, prospectus or statement of
additional information (including amendments and supplements thereto) or
b. any omission or alleged omission to state a material fact required to be
stated in the Fund's registration statement, prospectus or statement of
additional information necessary to make the statements therein not misleading,
provided, however, that insofar as losses, claims, damages, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance and in conformity with
information furnished to the Fund by the Principal Underwriter for use in the
Fund's registration statement, prospectus or statement of additional
information, such indemnification is not applicable. In no case shall the Fund
indemnify the Principal Underwriter or its controlling person as to any amounts
incurred for any liability arising out of or based upon any action for which the
Principal Underwriter, its officers and Directors or any controlling person
would otherwise be subject to liability by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties or by reason of the
reckless disregard of its obligations and duties under this Agreement. 10. The
Principal Underwriter agrees to indemnify and hold harmless the Fund, its
officers and Trustees and each person, if any, who controls the Fund within the
meaning of Section 15 of the 1933 Act against any loss, claims, damages,
liabilities and expenses (including the cost of any legal fees incurred in
connection therewith) which the Fund, its officers, Trustees or any such
controlling person may incur under the 1933 Act, under any other statute, at
common law or otherwise arising out of the acquisition of any Shares by any
person which (a) may be based upon any wrongful act by the Principal Underwriter
or any of its employees or representatives, or (b) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in the Fund's
registration statement, prospectus or statement of additional information
(including amendments and supplements thereto), or any omission or alleged
omission to state a material fact required to be stated therein or necessary to
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make the statements therein not misleading, if such statement or omission was
made in reliance upon information furnished or confirmed in writing to the Fund
by the Principal Underwriter.
11. The Fund agrees to execute such papers and to do such acts and things
as shall from time to time be reasonably requested by the Principal Underwriter
for the purpose of qualifying the B-1 Shares for sale under the so-called "blue
sky" laws of any state or for registering B-1 Shares under the 1933 Act or the
Fund under the Investment Company Act of 1940 ("1940 Act"). The Principal
Underwriter shall bear the expenses of preparing, printing and distributing
advertising, sales literature, prospectuses, and statements of additional
information. The Fund shall bear the expense of registering B-1 Shares under the
1933 Act and the Fund under the 1940 Act, qualifying B-1 Shares for sale under
the so-called "blue sky" laws of any state, the preparation and printing of
prospectuses, statements of additional information and reports required to be
filed with the Securities and Exchange Commission and other authorities, the
preparation, printing and mailing of prospectuses and statements of additional
information to holders of B-1 Shares, and the direct expenses of the issue of
B-1 Shares.
12. The Principal Underwriter shall, at the request of the Fund, provide to
the Board of Trustees or Directors (together herein called the "Directors") of
the Fund in connection with sales of B-1 Shares not less than quarterly a
written report of the amounts received from the Fund therefor and the purposes
for which such expenditures by the Fund were made.
13. The term of this Agreement shall begin on the date hereof and, unless
sooner terminated or continued as provided below, shall expire after one year.
This Agreement shall continue in effect after such term if its continuance is
specifically approved by a majority of the outstanding voting securities of
Class B-1 of the Fund or by a majority of the Directors of the Fund and a
majority of the Directors who are not parties to this Agreement or "interested
persons," as defined in the 1940 Act, of any such party and who have no direct
or indirect financial interest in the operation of the Fund's Rule 12b-1 plan
for Class B-1 Shares or in any agreements related to the plan at least annually
in accordance with the 1940 Act and the rules and regulations thereunder.
This Agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Directors of the Fund, or a majority of
such Directors who are not parties to this Agreement or "interested persons," as
defined in the 1940 Act, of any such party and who have no direct or indirect
financial interest in the operation of the Fund's Rule 12b-1 plan for Class B-1
Shares or in any agreement related to the plan or by a vote of a majority of the
outstanding voting securities of Class B-1 on not more than sixty days written
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notice to any other party to the agreement; and shall terminate automatically in
the event of its assignment (as defined in the 1940 Act), which shall not
include assignment of the Principal Underwriter's Allocable Portion of
Distribution Fees (as hereinafter defined) and its Allocable Portion of CDSCs
(as hereinafter defined) provided for hereunder and/or rights related to such
Allocable Portions.
14. The provisions of this Section 14 shall be applicable to the extent
necessary to enable the Fund to comply with the obligation of the Fund to pay
the Principal Underwriter its Allocable Portion of Distribution Fees paid in
respect of Shares while the Fund is required to do so pursuant to the Principal
Underwriting Agreement, of even date herewith, in respect of Class B-1 Shares,
and shall remain in effect so long as any payments are required to be made by
the Fund pursuant to the irrevocable payment instruction (as defined in the
Purchase Agreement (the "Irrevocable Payment Instruction")).
14.1 The Fund shall pay to the Principal Underwriter the Principal
Underwriter's Allocable Portion (as hereinafter defined) of a fee (the
"Distribution Fee") at the rate of .75% per annum of the average daily net asset
value of the Shares, subject to the limitation on the maximum aggregate amount
of such fees under the Business Conduct Rules as applicable to such Distribution
Fee on the date hereof.
14.2 The Principal Underwriter's Allocable Portion of Distribution Fees
paid by the Fund in respect of Shares shall be equal to the portion of the Asset
Based Sales Charge allocable to Distributor Shares (as defined in Schedule I
hereto) in accordance with Schedule I hereto. The Fund agrees to cause its
transfer agent to maintain the records and arrange for the payments on behalf of
the Fund at the times and in the amounts and to the accounts required by
Schedule I hereto, as the same may be amended from time to time. It is
acknowledged and agreed that by virtue of the operation of Schedule I hereto,
the Principal Underwriter's Allocable Portion of Distribution Fees paid by the
Fund in respect of Shares, may, to the extent provided in Schedule I hereto,
take into account Distribution Fees payable by the Fund in respect of other
existing and future classes and/or sub-classes of shares of the Fund which would
be treated as "Shares" under Schedule I hereto. The Fund will limit amounts paid
to any subsequent principal underwriters of Shares to the portion of the Asset
Based Sales Charge paid in respect of Shares which is allocable to
Post-distributor Shares (as defined in Schedule I hereto) in accordance with
Schedule I hereto. The Fund's payments to the Principal Underwriter in
consideration of its services in connection with the sale of B-1 Shares shall be
the Distribution Fees attributable to B-1 Shares which are Distributor Shares
(as defined in Schedule I hereto), and all other amounts constituting the
Principal Underwriter's Allocable Portion of Distribution Fees shall be the
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Distribution Fees related to the sale of other Shares which are Distributor
Shares (as defined in Schedule I hereto).
The Fund shall cause its transfer agent and sub-transfer agents to withhold
from redemption proceeds payable to holders of Shares on redemption thereof the
contingent deferred sales charges payable upon redemption thereof as set forth
in the then current prospectus and/or statement of additional information of the
Fund ("CDSCs") and to pay over to the Principal Underwriter the Principal
Underwriter's Allocable Portion of said CDSCs paid in respect of Shares which
shall be equal to the portion thereof allocable to Distributor Shares (as
defined in Schedule I hereto) in accordance with Schedule I hereto.
14.3 The Principal Underwriter shall be considered to have completely
earned the right to the payment of its Allocable Portion of the Distribution
Fees and the right to payment over to it of its Allocable Portion of the CDSC in
respect of Shares as provided for hereby upon the completion of the sale of each
Commission Share (as defined in Schedule I hereto) taken into account as a
Distributor Share in computing the Principal Underwriter's Allocable Portion in
accordance with Schedule I hereto.
14.4 Except as provided in Section 14.5 hereof in respect of Distribution
Fees only, the Fund's obligation to pay the Principal Underwriter the
Distribution Fees and to pay over to the Principal Underwriter CDSCs provided
for hereby shall be absolute and unconditional and shall not be subject to
dispute, offset, counterclaim or any defense whatsoever (it being understood
that nothing in this sentence shall be deemed a waiver by the Fund of its right
separately to pursue any claims it may have against the Principal Underwriter
and enforce such claims against any assets (other than the Principal
Underwriter's right to its Allocable Portion of the Distribution Fees and CDSCs
(the "Collection Rights") of the Principal Underwriter).
14.5 Notwithstanding anything in this Agreement to the contrary, the Fund
shall pay to the Principal Underwriter its Allocable Portion of Distribution
Fees provided for hereby, notwithstanding its termination as Principal
Underwriter for the Shares or any termination of this Agreement and payment of
such Distribution Fees. The obligation and the method of computing such payment
shall not be changed or terminated except to the extent required by any change
in applicable law, including, without limitation, the 1940 Act, the Rules
promulgated thereunder by the Securities and Exchange Commission and the
Business Conduct Rules, in each case enacted or promulgated after June 1, 1995,
or in connection with a Complete Termination (as hereinafter defined). For the
purposes of this Section 14.5, "Complete Termination" means a termination of the
Fund's Rule 12b-1 plan for B-1 Shares involving the cessation of payments of the
Distribution Fees, and the cessation of payments of distribution fees pursuant
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to every other Rule 12b-1 plan of the Fund for every existing or future
B-Class-of-Shares (as hereinafter defined) and the Fund's discontinuance of the
offering of every existing or future B-Class-of-Shares, which conditions shall
be deemed satisfied when they are first complied with hereafter and so long
thereafter as they are complied with prior to the earlier of (i) the date upon
which all of the B-1 Shares which are Distributor Shares pursuant to Schedule I
hereto shall have been redeemed or converted or (ii) June 1, 2005. For purposes
of this Section 14.5, the term B-Class-of-Shares means each of the B-1 Class of
Shares of the Fund, the B-2 Class of Shares of the Fund and each other class of
shares of the Fund hereafter issued which would be treated as Shares under
Schedule I hereto or which has substantially similar economic characteristics to
the B-1 or B-2 Classes of Shares taking into account the total sales charge,
CDSC or other similar charges borne directly or indirectly by the holder of the
shares of such class. The parties agree that the existing C Class of Shares of
the Fund does not have substantially similar economic characteristics to the B-1
or B-2 Classes of Shares taking into account the total sales charge, CDSC or
other similar charges borne directly or indirectly by the holder of such shares.
For purposes of clarity the parties to this agreement hereby state that they
intend that a new installment load class of shares which may be authorized by
amendments to Rule 6(c)-10 under the 1940 Act will be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing B-1 or B-2 Classes of Shares taking
into account the total sale charge, CDSC or other similar charges borne directly
or indirectly by the holder of such shares and will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares.
14.6 The Principal Underwriter may assign any part of its Allocable
Portions and obligations of the Fund related thereto (but not the Principal
Underwriter's obligations to the Fund provided for in this Agreement) to any
person (an "Assignee"), and any such assignment shall be effective as to the
Fund upon written notice to the Fund by the Principal Underwriter. In connection
therewith the Fund shall pay all or any amounts in respect of its Allocable
Portions directly to the Assignee thereof as directed in a writing by the
Principal Underwriter in the Irrevocable Payment Instruction, as the same may be
amended from time to time with the consent of the Fund, and the Fund shall be
without liability to any person if it pays such amounts when and as so directed,
except for underpayments of amounts actually due, without any amount payable as
consequential or other damages due to such underpayment and without interest
except to the extent that delay in payment of Distribution Fees and CDSCs
results in an increase in the maximum Sales Charge allowable under the Business
Conduct Rules, which increases daily at a rate of prime plus one percent per
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annum.
14.7 The Fund will not, to the extent it may otherwise be empowered to do
so, change or waive any CDSC with respect to B-1 Shares, except as provided in
the Fund's prospectus or statement of additional information, without the
Principal Underwriter's or Assignee's consent, as applicable. Notwithstanding
anything to the contrary in this Agreement or any termination of this Agreement
or the Principal Underwriter as principal underwriter for the Shares of the
Fund, the Principal Underwriter shall be entitled to be paid its Allocable
Portion of the CDSCs whether or not the Fund's Rule 12b-1 plan for B-1 Shares is
terminated and whether or not any such termination is a Complete Termination, as
defined above.
15. This Agreement shall be construed in accordance with the laws of The
Commonwealth of Massachusetts. All sales hereunder are to be made, and title to
the Shares shall pass, in Boston, Massachusetts.
16. The Fund is a series of a Delaware business trust established under a
Declaration of Trust, as it may be amended from time to time. The obligations of
the Fund are not personally binding upon, nor shall recourse be had against, the
private property of any of the Trustees, shareholders, officers, employees or
agents of the Fund, but only the property of the Fund shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto duly authorized at Boston,
Massachusetts, as of the day and year first written above.
EVERGREEN MUNICIPAL TRUST
By: /s/ John J. Pileggi
________________________________
Name: John J. Pileggi
Title: President
EVERGREEN INVESTMENT SERVICES, INC.
By: /s/ Gordon Forrester
_______________________________
Name: Gordon Forrester
Title: Chief Administrative Officer
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SCHEDULE I
PRINCIPAL UNDERWRITING AGREEMENT
FOR CLASS B-1 SHARES
OF
EVERGREEN MUNICIPAL TRUST
TRANSFER AGENT PROCEDURES FOR DIFFERENTIATING
AMONG DISTRIBUTOR SHARES AND POST-DISTRIBUTOR SHARES
Amounts (in respect of Asset Based Sales Charges (as hereinafter defined)
and CDSCs (as hereinafter defined) in respect of Shares (as hereinafter defined)
of each Fund (as hereinafter defined) shall be allocated between Distributor
Shares (as hereinafter defined) and Post-distributor Shares (as hereinafter
defined) of such Fund in accordance with the rules set forth in clauses (B) and
(C). Clause (B) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account (as hereinafter defined)
in maintaining records relating to Distributor Shares and Post-distributor
Shares. Clause (C) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account in determining what
portion of the Asset Based Sales Charge (as hereinafter defined) payable in
respect of each class of Shares of such Fund and what portion of the CDSC (as
hereinafter defined) payable by the holders of Shares of such Fund is
attributable to Distributor Shares and Post-distributor Shares, respectively.
(A) DEFINITIONS:
Generally, for purposes of this Schedule I, defined terms shall be used
with the meaning assigned to them in the Agreement, except that for purposes of
the following rules the following definitions are also applicable:
"Agreement" shall mean the Principal Underwriting Agreement for Class B-2
Shares of the Instant Fund dated as of May 31, 1995 and the successor Agreement
dated December 11, 1996 between the Instant Fund and the Distributor.
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"Asset Based Sales Charge" shall have the meaning set forth in Section
26(b)(8)(C) of the Rules of Fair Practice it being understood that for purposes
of this Exhibit I such term does not include the Service Fee.
"Business Day" shall mean any day on which the banks and the New York Stock
Exchange are not authorized or required to close in New York City.
"Capital Gain Dividend" shall mean, in respect of any Share of any Fund, a
Dividend in respect of such Share which is designated by such Fund as being a
"capital gain dividend" as such term is defined in Section 852 of the Internal
Revenue Code of 1986, as amended.
"CDSC" shall mean with respect to any Fund, the contingent deferred sales
charge payable, either directly or by withholding from the proceeds of the
redemption of the Shares of such Fund, by the shareholders of such Fund on any
redemption of Shares of such Fund in accordance with the Prospectus relating to
such Fund.
"Commission Share" shall mean, in respect of any Fund, a Share of such Fund
issued prior to December 11, 1996 under circumstances where a CDSC would be
payable upon the redemption of such Share if such CDSC is not waived or shall
have not otherwise expired.
"Date of Original Purchase" shall mean, in respect of any Commission Share
of any Fund, the date on which such Commission Share was first issued by such
Fund; provided, that if such Share is a Commission Share and such Fund issued
the Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Date
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the date on which the Commission Share (or portion thereof) of the
other Fund was first issued by such other Fund (unless such Commission Share (or
portion thereof) was also issued by such other Fund in a Free Exchange, in which
case this proviso shall apply to that Free Exchange and this application shall
be repeated until one reaches a Commission Share (or portion thereof) which was
issued by a Fund other than in a Free Exchange).
"Distributor" shall mean Evergreen Investment Distributors Company, its
successors and assigns.
"Distributor's Account" shall mean the account of the Distributor, account
no. 9903-584-2, ABA No. 011 0000 28, entitled "General Account" maintained with
State Street Bank & Trust Company or such other account as the Distributor may
designate in a notice to the Transfer Agent.
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"Distributor Inception Date" shall mean, in respect of any Fund, the date
identified as the date Shares of such Fund are first sold by the Distributor.
"Distributor Last Sale Cut-off Date" shall mean, in respect of any Fund,
the date identified as the last sale of a Commission Share during the period the
Distributor served as principal underwriter under the Agreement.
"Distributor Shares" shall mean, in respect of any Fund, all Shares of such
Fund the Month of Original Purchase of which occurs on or after the Inception
Date for such Fund and on or prior to the Distributor Last Sale Cut-off Date in
respect of such Fund.
"Dividend" shall mean, in respect of any Share of any Fund, any dividend or
other distribution by such Fund in respect of such Share.
"Free Exchange" shall mean any exchange of a Commission Share (or portion
thereof) of one Fund (the "Redeeming Fund") for a Share (or portion thereof) of
another Fund (the "Issuing Fund"), under any arrangement which defers the
exchanging Shareholder's obligation to pay the CDSC in respect of the Commission
Share (or portion thereof) of the Redeeming Fund so exchanged until the later
redemption of the Share (or portion thereof) of the Issuing Fund received in
such exchange.
"Free Share" shall mean, in respect of any Fund, each Share of such Fund
issued prior to December 11, 1996 other than a Commission Share, including,
without limitation: (i) Shares issued in connection with the automatic
reinvestment of Capital Gain Dividends or Other Dividends by such Fund, (ii)
Special Free Shares issued by such Fund and (iii) Shares (or portion thereof)
issued by such Fund in connection with an exchange whereby a Free Share (or
portion thereof) of another Fund is redeemed and the Net Asset Value of such
redeemed Free Share (or portion thereof) is invested in such Shares (or portion
thereof) of such Fund.
"Fund" shall mean each of the regulated investment companies or series or
portfolios of regulated investment companies identified in Schedule II to the
Irrevocable Payment Instruction, as the same may be amended from time to time in
accordance with the terms thereof.
"Instant Fund" shall mean Evergreen Municipal Trust.
"ML Omnibus Account" shall mean, in respect of any Fund, the Omnibus
Account maintained by Merrill Lynch, Pierce, Fenner & Smith as subtransfer
agent.
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"Month of Original Purchase" shall mean, in respect of any Share of any
Fund, the calendar month in which such Share was first issued by such Fund;
provided, that if such Share is a Commission Share and such Fund issued the
Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Month
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the calendar month in which the Commission Share (or portion thereof)
of the other Fund was first issued by such other Fund (unless such Commission
Share (or portion thereof) was also issued by such other Fund in a Free
Exchange, in which case this proviso shall apply to that Free Exchange and this
application shall be repeated until one reaches a Commission Share (or portion
thereof) which was issued by a Fund other than in a Free Exchange); provided,
further, that if such Share is a Free Share and such Fund issued such Free Share
in connection with the automatic reinvestment of dividends in respect of other
Shares of such Fund, the Month of Original Purchase of such Free Share shall be
deemed to be the Month of Original Purchase of the Share in respect of which
such dividend was paid; provided, further, that if such Share is a Free Share
and such Fund issued such Free Share in connection with an exchange whereby a
Free Share (or portion thereof) of another Fund is redeemed and the Net Asset
Value of such redeemed Free Share (or portion thereof) is invested in a Free
Share (or portion thereof) of such Fund, the Month of Original Issue of such
Free Share shall be the Month of Original Issue of the Free Share of such other
Fund so redeemed (unless such Free Share of such other Fund was also issued by
such other Fund in such an exchange, in which case this proviso shall apply to
that exchange and this application shall be repeated until one reaches a Free
Share which was issued by a Fund other than in such an exchange); and provided,
finally, that for purposes of this Schedule I each of the following periods
shall be treated as one calendar month for purposes of applying the rules of
this Schedule I to any Fund: (i) the period of time from and including the
Distributor Inception Date for such Fund to and including the last day of the
calendar month in which such Distributor Inception Date occurs; (ii) the period
of time commencing with the first day of the calendar month in which the
Distributor Last Sale Cutoff Date in respect of such Fund occurs to and
including such Distributor Last Sale Cutoff Date; and (iii) the period of time
commencing on the day immediately following the Distributor Last Sale Cutoff
Date in respect of such Fund to and including the last day of the calendar month
in which such Distributor Last Sale Cut-off Date occurs.
"Omnibus Account" shall mean any Shareholder Account the record owner of
which is a registered broker-dealer which has agreed with the Transfer Agent to
provide sub-transfer agent functions relating to each Sub-shareholder Account
within such Shareholder Account as contemplated by this Schedule I in respect of
each of the Funds.
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"Omnibus Asset Based Sales Charge Settlement Date" shall mean, in respect
of each Omnibus Account, the Business Day next following the twentieth day of
each calendar month for the calendar month immediately preceding such date so
long as the record owner is able to allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund as contemplated by this Schedule I no
more frequently than monthly; provided, that at such time as the record owner of
such Omnibus Account is able to provide information sufficient to allocate the
Asset Based Sales Charge accruing in respect of such Shares of such Fund owned
of record by such Omnibus Account as contemplated by this Schedule I on a weekly
or daily basis, the Omnibus Asset Based Sales Charge Settlement Date shall be a
weekly date as in the case of the Omnibus CDSC Settlement Date or a daily date
as in the case of Asset Based Sales Charges accruing in respect of Shareholder
Accounts other than Omnibus Accounts, as the case may be.
"Omnibus CDSC Settlement Date" shall mean, in respect of each Omnibus
Account, the third Business Day of each calendar week for the calendar week
immediately preceding such date so long as the record owner of such Omnibus
Account is able to allocate the CDSCs accruing in respect of any Shares of any
Fund as contemplated by this Schedule I for no more frequently than weekly;
provided, that at such time as the record owner of such Shares of such Fund
owned of record by such Omnibus Account is able to provide information
sufficient to allocate the CDSCs accruing in respect of such Omnibus Account as
contemplated by this Schedule I on a daily basis, the Omnibus CDSC Settlement
Date for such Omnibus Account shall be a daily date as in the case of CDSCs
accruing in respect of Shareholder Accounts other than Omnibus Accounts.
"Original Purchase Amount" shall mean, in respect of any Commission Share
of any Fund, the amount paid (i.e., the Net Asset Value thereof on such date),
on the Date of Original Purchase in respect of such Commission Share, by such
Shareholder Account or Sub-shareholder Account for such Commission Share;
provided, that if such Fund issued the Commission Share (or portion thereof) in
question in connection with a Free Exchange for a Commission Share (or portion
thereof) of another Fund, the Original Purchase Amount for the Commission Share
(or portion thereof) in question shall be the Original Purchase Amount in
respect of such Commission Share (or portion thereof) of such other Fund (unless
such Commission Share (or portion thereof) was also issued by such other Fund in
a Free Exchange, in which case this proviso shall apply to that Free Exchange
and this application shall be repeated until one reaches a Commission Share (or
portion thereof) which was issued by a Fund other than in a Free Exchange).
"Other Dividend" shall mean in respect of any Share, any Dividend paid in
respect of such Share other than a Capital Gain Dividend.
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"Post-distributor Shares" shall mean, in respect of any Fund, all Shares of
such Fund the Month of Original Purchase of which occurs after the Distributor
Last Sale Cut-off Date for such Fund.
"Program Agent" shall mean Citicorp North America, Inc., as Program Agent
under the Purchase Agreement, and its successors and assigns in such capacity.
"Purchase Agreement" shall mean that certain Purchase and Sale Agreement
dated as of May 31, 1995, among Keystone Investment Distributors Company, as
Seller, Citibank, N.A., as Purchaser, and Citicorp North America, Inc., as
Program Agent.
"Share" shall mean in respect of any Fund any share of the classes of
shares specified in Schedule II to the Irrevocable Payment Instruction opposite
the name of such Fund, as the same may be amended from time to time by notice
from the Distributor and the Program Agent to the Fund and the Transfer Agent;
provided, that such term shall include, after the Distributor Last Sale Cut-off
Date, a share of a new class of shares of such Fund: (i) with respect to each
record owner of Shares which is not treated in the records of each Transfer
Agent and Sub-transfer Agent for such Fund as an entirely separate and distinct
class of shares from the classes of shares specified Schedule II to the
Irrevocable Payment Instruction or (ii) the shares of which class may be
exchanged for shares of another Fund of the classes of shares specified on
Schedule II to the Irrevocable Payment Instruction of any class existing on or
prior to the Distributor Last Sale Cut-off Date; or (iii) dividends on which can
be reinvested in shares of the classes specified on Schedule II to the
Irrevocable Payment Instruction under the automatic dividend reinvestment
options; or (iv) which is otherwise treated as though it were of the same class
as the class of shares specified on Schedule II to the Irrevocable Payment
Instruction.
"Shareholder Account" shall have the meaning set forth in clause (B)(1)
hereof.
"Special Free Share" shall mean, in respect of any Fund, a Share (other
than a Commission Share) issued by such Fund other than in connection with the
automatic reinvestment of Dividends and other than in connection with an
exchange whereby a Free Share (or portion thereof) of another Fund is redeemed
and the Net Asset Value of such redeemed Share (or portion thereof) is invested
in a Share (or portion thereof) of such Fund.
"Sub-shareholder Account" shall have the meaning set forth in clause
(B)(1) hereof.
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"Sub-transfer Agent" shall mean, in respect of each Omnibus Account, the
record owner thereof.
(B) RECORDS TO BE MAINTAINED BY THE TRANSFER AGENT FOR EACH FUND
AND THE
RECORD OWNER OF EACH OMNIBUS ACCOUNT:
The Transfer Agent shall maintain Shareholder Accounts, and shall cause
each record owner of each Omnibus Account to maintain Sub-shareholder Accounts,
each in accordance with the following rules:
(1) Shareholder Accounts and Sub-shareholder Accounts. The Transfer Agent
shall maintain a separate account (a "Shareholder Account") for each record
owner of Shares of each Fund. Each Shareholder Account (other than Omnibus
Accounts) will represent a record owner of Shares of such Fund, the records of
which will be kept in accordance with this Schedule I. In the case of an Omnibus
Account, the Transfer Agent shall require that the record owner of the Omnibus
Account maintain a separate account (a "Sub-shareholder Account") for each
record owner of Shares which are reflected in the Omnibus Account, the records
of which will be kept in accordance with this Schedule I. Each such Shareholder
Account and Sub-shareholder Account shall relate solely to Shares of such Fund
and shall not relate to any other class of shares of such Fund.
(2) Commission Shares. For each Shareholder Account (other than an Omnibus
Account), the Transfer Agent shall maintain daily records of each Commission
Share of such Fund which records shall identify each Commission Share of such
Fund reflected in such Shareholder Account by the Month of Original Purchase of
such Commission Share.
For each Omnibus Account, the Transfer Agent shall require that the
Sub-transfer Agent in respect thereof maintain daily records of such
Sub-shareholder Account which records shall identify each Commission Share of
such Fund reflected in such Sub- shareholder Account by the Month of Original
Purchase; provided, that until the Sub- transfer Agent in respect of the ML
Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain daily records of
Sub-shareholder Accounts which identify each Commission Share of such Fund
reflected in such Sub-shareholder Account by the Date of Original Purchase. Each
such Commission Share shall be identified as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such
Commission Share (or in the case of a Sub-shareholder Account within the ML
Omnibus Account, based upon the Date of Original Purchase).
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<PAGE>
(3) Free Shares. The Transfer Agent shall maintain daily records of each
Shareholder Account (other than an Omnibus Account) in respect of any Fund so as
to identify each Free Share (including each Special Free Share) reflected in
such Shareholder Account by the Month of Original Purchase of such Free Share.
In addition, the Transfer Agent shall require that each Shareholder Account
(other than an Omnibus Account) have in effect separate elections relating to
reinvestment of Capital Gain Dividends and relating to reinvestment of Other
Dividends in respect of any Fund. Either such Shareholder Account shall have
elected to reinvest all Capital Gain Dividends or such Shareholder Account shall
have elected to have all Capital Gain Dividends distributed. Similarly, either
such Shareholder Account shall have elected to reinvest all Other Dividends or
such Shareholder Account shall have elected to have all Other Dividends
distributed.
The Transfer Agent shall require that the Sub-transfer Agent in respect of
each Omnibus Account maintain daily records for each Sub-shareholder Account in
the manner described in the immediately preceding paragraph for Shareholder
Accounts(other than Omnibus Accounts); provided, that until the Sub-transfer
Agent in respect of the ML Omnibus Account develops the data processing
capability to conform to the foregoing requirements, such Sub-transfer Agent
shall not be obligated to conform to the foregoing requirements. Each
Sub-shareholder Account shall also have in effect Dividend reinvestment
elections as described in the immediately preceding paragraph.
The Transfer Agent and each Sub-transfer Agent in respect of an Omnibus
Account shall identify each Free Share as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such Free
Share; provided, that until the Sub-transfer Agent in respect of the ML Omnibus
Account develops the data processing capability to conform to the foregoing
requirements, the Transfer Agent shall require such Sub-transfer Agent to
identify each Free Share of a given Fund in the ML Omnibus Account as a
Distributor Share, or Post-distributor Share, as follows:
(a) Free Shares of such Fund which are outstanding on the
Distributor Last Sale Cut-off Date for such Fund shall be
identified as Distributor Shares.
(b) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a Free Share of another Fund)
to the ML Omnibus Account during any calendar month (or
portion thereof) after the Distributor Last Sale Cut-off Date
for such Fund shall be identified as Distributor Shares in a
number computed as follows:
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<PAGE>
A X (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus
Account during such calendar month (or portion
thereof)
B = Number of Commission Shares and Free Shares of such
Fund in the ML Omnibus Account identified as
Distributor Shares and outstanding as of the close of
business in the last day of the immediately preceding
calendar month (or portion thereof)
C = Total number of Commission Shares and Free Shares
of such Fund in the ML Omnibus Account and
outstanding as of the close of business on the last
day of the immediately preceding calendar month (or
portion thereof).
(c) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a free share of another Fund)
to the ML Omnibus Account during any calendar month (or
portion thereof) after the Distributor Last Sale Cut-off Date
for such Fund shall be identified as Post-distributor Shares
in a number computed as follows:
(A X (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus
Account during such calendar month (or portion
thereof)
B = Number of Commission Shares and Free Shares of such
Fund in the ML Omnibus Account identified as
Post-distributor Shares and outstanding as of the
close of business in the last day of the immediately
preceding calendar month (or portion thereof)
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<PAGE>
C = Total number of Commission Shares and Free Shares
of such Fund in the ML Omnibus Account and
outstanding as of the close of business on the last
day of the immediately preceding calendar month (or
portion thereof).
(d) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or
in connection with the conversion of such Shares into a Class
A Share of such Fund) from the ML Omnibus Account in any
calendar month (or portion thereof) after the Distributor Last
Sale Cut-off Date for such Fund shall be identified as
Distributor Shares in a number computed as follows:
A X (B/C)
Where:
A = Free Shares of such Fund which are redeemed
(whether or not in connection with an exchange for
Free Shares of another Fund or in connection with the
conversion of such Shares into a class A share of
such Fund) from the ML Omnibus Account during such
calendar month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account
identified as Distributor Shares and outstanding as
of the close of business on the last day of the
immediately preceding calendar month.
C = Total number of Free Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding
calendar month.
(e) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or
in connection with the conversion of such Shares into a class
A share of such Fund) from the ML Omnibus Account in any
calendar month (or portion thereof) after the Distributor Last
Sale Cut-off Date for such Fund shall be identified as
Post-distributor Shares in a number computed as follows:
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<PAGE>
A X (B/C)
where:
A = Free Shares of such Fund which are redeemed
(whether or not in connection with an exchange for
Free Shares of another Fund or in connection with the
conversion of such Shares into a class A share of
such Fund) from the ML Omnibus Account during such
calendar month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account
identified as Post-distributor Shares and outstanding
as of the close of business on the last day of the
immediately preceding calendar month.
C = Total number of Free Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding
calendar month.
(4) Appreciation Amount and Cost Accumulation Amount. The Transfer Agent
shall maintain on a daily basis in respect of each Shareholder Account (other
than Omnibus Accounts) a Cost Accumulation Amount representing the total of the
Original Purchase Amounts paid by such Shareholder Account for all Commission
Shares reflected in such Shareholder Account as of the close of business on each
day. In addition, the Transfer Agent shall maintain on a daily basis in respect
of each Shareholder Account (other than Omnibus Accounts) sufficient records to
enable it to compute, as of the date of any actual or deemed redemption or Free
Exchange of a Commission Share reflected in such Shareholder Account an amount
(such amount an "Appreciation Amount") equal to the excess, if any, of the Net
Asset Value as of the close of business on such day of the Commission Shares
reflected in such Shareholder Account minus the Cost Accumulation Amount as of
the close of business on such day. In the event that a Commission Share (or
portion thereof) reflected in a Shareholder Account is redeemed or under these
rules is deemed to have been redeemed (whether in a Free Exchange or otherwise),
the Appreciation Amount for such Shareholder Account shall be reduced, to the
extent thereof, by the Net Asset Value of the Commission Share (or portion
thereof) redeemed, and if the Net Asset Value of the Commission Share (or
portion thereof) being redeemed equals or exceeds the Appreciation Amount, the
Cost Accumulation Amount will be reduced to the extent thereof, by such excess.
If the Appreciation Amount for such Shareholder Account immediately prior to any
redemption of a Commission Share (or portion thereof) is equal to or greater
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<PAGE>
than the Net Asset Value of such Commission Share (or portion thereof) deemed to
have been tendered for redemption, no CDSCs will be payable in respect of such
Commission Share (or portion thereof).
The Transfer Agent shall require that the Sub-transfer Agent in respect of
each Omnibus Account maintain on a daily basis in respect of each
Sub-shareholder Account reflected in such Omnibus Account a Cost Accumulation
Amount and sufficient records to enable it to compute, as of the date of any
actual or deemed redemption or Free Exchange of a Commission Share reflected in
such Sub-shareholder Account an Appreciation Amount in accordance with the
preceding paragraph and to apply the same to determine whether a CDSC is payable
(as though such Sub-shareholder Account were a Shareholder Account other than an
Omnibus Account; provided, that until the Sub- transfer Agent in respect of the
ML Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain for each
Sub-shareholder Account a separate Cost Accumulation Amount and a separate
Appreciation Amount for each Date of Original Purchase of any Commission Share
which shall be applied as set forth in the preceding paragraph as if each Date
of Original Purchase were a separate Month of Original Purchase.
(5) NASD Cap. On the date the distribution fees paid in respect of any
class of Shares equals the maximum amount thereon under the Rules of Fair
Practice, in respect of such class, all outstanding Shares of such class of such
Fund shall be converted into Class A shares of such Fund and will be deemed to
have been redeemed for their Net Asset Value for purposes of this Schedule I.
(6) Identification of Redeemed Shares. If a Shareholder Account (other than
an Omnibus Account) tenders a Share of a Fund for redemption (other than in
connection with an exchange of such Share for a Share of another Fund or in
connection with the conversion of such Share pursuant to a Conversion Feature),
such tendered Share will be deemed to be a Free Share if there are any Free
Shares reflected in such Shareholder Account immediately prior to such tender.
If there is more than one Free Share reflected in such Shareholder Account
immediately prior to such tender, such tendered Share will be deemed to be the
Free Share with the earliest Month of Original Purchase. If there are no Free
Shares reflected in such Shareholder Account immediately prior to such tender,
such tendered Share will be deemed to be the Commission Share with the earliest
Month of Original Purchase reflected in such Shareholder Account.
If a Sub-shareholder Account reflected in an Omnibus Account tenders a
Share for redemption (other than in connection with an Exchange of such Share
for a Share of another Fund or in connection with the conversion of such Share
pursuant to a Conversion Feature), the Transfer Agent shall require that the
record owner of each Omnibus Account supply the Transfer Agent sufficient
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<PAGE>
records to enable the Transfer Agent to apply the rules of the preceding
paragraph to such Sub-shareholder Account (as though such Sub-shareholder
Account were a Shareholder Account other than an Omnibus Account); provided,
that until the Sub-transfer Agent in respect of the ML Omnibus Account develops
the data processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
regarding Free Shares (and the Transfer Agent shall account for such Free Shares
as provided in (3) above) but shall apply the foregoing rules to each Commission
Share with respect to the Date of Original Purchase of any Commission Share as
though each such Date were a separate Month of Original Purchase.
(7) Identification of Exchanged Shares. When a Shareholder Account (other
than an Omnibus Account) tenders Shares of one Fund (the "Redeeming Fund") for
redemption where the proceeds of such redemption are to be automatically
reinvested in shares of another Fund (the "Issuing Fund") to effect an exchange
(whether or not pursuant to a Free Exchange) into Shares of the Issuing Fund:
(1) such Shareholder Account will be deemed to have tendered Shares (or portions
thereof) of the Redeeming Fund with each Month of Original Purchase represented
by Shares of the Redeeming Fund reflected in such Shareholder Account
immediately prior to such tender in the same proportion that the number of
Shares of the redeeming Fund with such Month of Original Purchase reflected in
such Shareholder immediately prior to such tender bore to the total number of
Shares of the Redeeming Fund reflected in such Shareholder Account immediately
prior to such tender, and on that basis the tendered Shares of the Redeeming
Fund will be identified as Distributor Shares or Post-distributor Shares; (2)
such Shareholder Account will be deemed to have tendered Commission Shares (or
portions thereof) and Free Shares (or portions thereof) of the Redeeming Fund of
each category (i.e., Distributor Shares or Post-distributor Shares) in the same
proportion that the number of Commission Shares or Free Shares (as the case may
be) of the Redeeming Fund in such category reflected in such Shareholder Account
bore to the total number of Shares of the Redeeming Fund in such category
reflected in such Shareholder Account immediately prior to such tender, (3) the
Shares (or portions thereof) of the Issuing Fund issued in connection with such
exchange will be deemed to have the same Months of Original Purchase as the
Shares (or portions thereof) of the Redeeming Fund so tendered and will be
categorized as Distributor Shares and Post- distributor Shares accordingly, and
(4) the Shares (or portions thereof) of each Category of the Issuing Fund issued
in connection with such exchange will be deemed to be Commission Shares and Free
Shares in the same proportion that the Shares of such Category of the Redeeming
Fund were Commission Shares and Free Shares.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
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<PAGE>
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account); provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
relating to Free Shares (and the Sub-transfer Agent shall account for such Free
Shares as provided in (3) above) and shall apply a first-in-first-out procedure
(based upon the Date of Original Purchase) to determine which Commission Shares
(or portions thereof) of a Redeeming Fund were redeemed in connection with an
exchange.
(8) Identification of Converted Shares. The Transfer Agent records
maintained for each Shareholder Account (other than an Omnibus Account) will
treat each Commission Share of a Fund as though it were redeemed at its Net
Asset Value on the date such Commission Share converts into a class A share of
such Fund in accordance with an applicable Conversion Feature applied with
reference to its Month of Original Purchase and will treat each Free Share of
such Fund with a given Month of Original Purchase as though it were redeemed at
its Net Asset Value when it is simultaneously converted to a class A share at
the time the Commission Shares of such Fund with such Month of Original Purchase
are so converted.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account) ; provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall apply the foregoing rules to Commission Shares with
reference to the Date of Original Issue of each Commission Share (as though each
such date were a separate Month of Original Issue) and shall not be required to
apply the foregoing rules to Free Shares (and the Sub-transfer Agent shall
account for such Free Shares as provided in (3) above).
(C) ALLOCATIONS OF ASSET BASED SALE CHARGES AND CDSCS AMONG DISTRIBUTOR
SHARES AND POST-DISTRIBUTOR SHARES:
The Transfer Agent shall use the following rules to allocate the amounts of
Asset Based Sales Charges and CDSCs payable by each Fund in respect of Shares
between Distributor Shares and Post-distributor Shares:
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<PAGE>
(1) Receivables Constituting CDSCs: CDSCs will be treated as relating to
Distributor Shares or Post-distributor Shares depending upon the Month of
Original Purchase of the Commission Share the redemption of which gives rise to
the payment of a CDSC by a Shareholder Account.
The Transfer Agent shall cause each Sub-transfer Agent to apply the
foregoing rule to each Sub-shareholder Account based on the records maintained
by such Sub-transfer Agent; provided, that until the Sub-transfer Agent in
respect of the ML Omnibus Account develops the data processing capability to
conform to the foregoing requirements, such Sub-transfer Agent shall apply the
foregoing rules to each Sub- shareholder Account with respect to the Date of
Original Purchase of any Commission Share as though each such date were a
separate Month of Original Purchase.
(2) Receivables Constituting Asset Based Sales Charges:
The Asset Based Sales Charges accruing in respect of each Shareholder
Account (other than an Omnibus Account) shall be allocated to each Share
reflected in such Shareholder Account as of the close of business on such day on
an equal per share basis. For example, the Asset Based Sales Charges
attributable to Distributor Shares on any day shall be computed and allocated as
follows:
A X (B/C)
where:
A. = Total amount of Asset Based Sales Charge
accrued in respect of such Shareholder
Account (other than an Omnibus Account) on
such day.
B. = Number of Distributor Shares reflected in
such Shareholder Account (other than an
Omnibus Account) on the close of business
on such day
C. = Total number of Distributor Shares and
Post-Distributor Shares reflected in such
Shareholder Account (other than an Omnibus
Account) and outstanding as of the close of
business on such day.
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<PAGE>
The Portion of the Asset Based Sales Charges of such Fund accruing in
respect of such Shareholder Account for such day allocated to Post-distributor
Shares will be obtained using the same formula but substituting for "B" the
number of Post-distributor Shares, as the case may be, reflected in such
Shareholder Account and outstanding on the close of business on such day. The
foregoing allocation formula may be adjusted from time to time by notice to the
Fund and the transfer agent for the Fund from the Seller and the Program Agent
pursuant to Section 8.18 of the Purchase Agreement.
The Transfer Agent shall, based on the records maintained by the record
owner of such Omnibus Account, allocate the Asset Based Sales Charge accruing in
respect of each Omnibus Account on each day among all Sub-shareholder Accounts
reflected in such Omnibus Account on an equal per share basis based upon the
total number of Distributor Shares and Post-distributor Shares reflected in each
such Sub- shareholder Account as of the close of business on such day. In
addition, the Transfer Agent shall apply the foregoing rules to each
Sub-shareholder Account (as though it were a Shareholder Account other than an
Omnibus Account), based on the records maintained by the record owner, to
allocate the Asset Based Sales Charge so allocated to any Sub- shareholder
Account among the Distributor Shares and Post-distributor Shares reflected in
each such Sub-shareholder Account in accordance with the rules set forth in the
preceding paragraph; provided, that until the Sub-transfer Agent in respect of
the ML Omnibus Account develops the data processing capacity to apply the rules
of this Schedule I as applicable to Sub-shareholder Accounts other than ML
Omnibus Accounts, the Transfer Agent shall allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund in the ML Omnibus Account during any
calendar month (or portion thereof) among Distributor Shares and
Post-distributor Shares as follows:
(a) The portion of such Asset Based Sales Charge allocable to
Distributor Shares shall be computed as follows:
A X ((B + C)/2) ((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued
during such calendar month (or portion thereof) in
respect of Shares of such Fund in the ML Omnibus
Account
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<PAGE>
B = Shares of such Fund in the ML Omnibus Account and
identified as Distributor Shares and outstanding as of
the close of business on the last day of the
immediately preceding calendar month (or portion
thereof), times Net Asset Value per Share as of such
time
C = Shares of such Fund in the ML Omnibus Account and
identified as Distributor Shares and outstanding as of
the close of business on the last day of such calendar
month (or portion thereof), times Net Asset Value per
Share as of such time
D = Total number of Shares of such Fund in the ML Omnibus
Account and outstanding as of the close of business on
the last day of the immediately preceding calendar
month (or portion thereof), times Net Asset Value per
Share as of such time.
E = Total number of Shares of such Fund in the ML Omnibus
Account and outstanding as of the close of business on
the last day of such calendar month (or portion
thereof), times Net Asset Value per Share as of such
time.
(b) The portion of such Asset Based Sales Charge allocable to
Post-distributor Shares shall be computed s follows:
A X ((B + C)/2) ((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued
during such calendar month (or portion thereof) in
respect of Shares of such Fund in the ML Omnibus
Account
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<PAGE>
B = Shares of such Fund in the ML Omnibus Account and
identified as Post-distributor Shares and outstanding
as of the close of business on the last day of the
immediately preceding calendar month (or portion
thereof), times Net Asset Value per Share as of such
time
C = Shares of such Fund in the ML Omnibus Account and
identified as Post-distributor Shares and outstanding
as of the close of business on the last day of such
calendar month (or portion thereof), times Net Asset
Value per Share as of such time
D = Total number of Shares of such Fund in the ML Omnibus
Account and outstanding as of the close of business on
the last day of the immediately preceding calendar
month (or portion thereof), times Net Asset Value per
Share as of such time.
E = Total number of Shares of such Fund in the ML Omnibus
Account outstanding as of the close of business on the
last day of such calendar month, times Net Asset Value
per Share as of such time.
(3) Payments on behalf of each Fund.
On the close of business on each day the Transfer Agent shall cause payment
to be made of the amount of the Asset Based Sales Charge and CDSCs accruing on
such day in respect of the Shares of such Fund owned of record by Shareholder
Accounts (other than Omnibus Accounts) by two separate wire transfers, directly
from accounts of such Fund as follows:
1. The Asset Based Sales Charge and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to Distributor
Shares in accordance with the preceding rules shall be paid to the Distributor's
Account, unless the Distributor otherwise instructs the Fund in any irrevocable
payment instruction; and
2. The Asset Based Sales Charges and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to
Post-distributor Shares in accordance with the preceding rules shall be paid in
accordance with direction received from any future distributor of Shares of the
Instant Fund.
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<PAGE>
On each Omnibus CDSC Settlement Date, the Transfer Agent for each Fund
shall cause the applicable Sub-transfer Agent to cause payment to be made of the
amount of the CDSCs accruing during the period to which such Omnibus CDSC
Settlement Date relates in respect of the Shares of such Fund owned of record by
each Omnibus Account by two separate wire transfers directly from the account of
such Fund maintained by such Transfer Agent, as follows:
1. The CDSCs accruing in respect of such Omnibus Account and allocable to
Distributor Shares in accordance with the preceding rules shall be paid to the
Distributor's Account, unless the Distributor otherwise instructs the Fund in
any irrevocable payment instruction; and
2. The CDSCs accruing in respect of such Omnibus Account and allocable to
Post-distributor Shares in accordance with the preceding rules shall be paid in
accordance with direction received from any future distributor of Shares of the
Instant Fund.
On each Omnibus Asset Based Sales Charge Settlement Date the Transfer Agent
for each Fund shall cause payment to be made of the amount of the Asset Based
Sales Charge accruing for the period to which such Omnibus Asset Based Sales
Charge Settlement Date relates in respect of the Shares of such Fund owned of
record by each Omnibus Account by two separate wire transfers directly from
accounts of such Fund as follows:
1. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Distributor Shares shall be paid to the Distributor's
Collection Account, unless the Distributor otherwise instructs the Fund in any
irrevocable payment instruction; and
2. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Post-Distributor Shares shall be paid in accordance with
direction received from any future distributor of Shares of the Instant Fund.
F:\CEF\SALEM006\AGREEMEN\EVMUB1.AGR:1/27/98
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<PAGE>
EXHIBIT A
EVERGREEN MUNICIPAL TRUST
Single State Tax Free Funds
-----------------------------
Evergreen California Tax Free Fund
Evergreen Florida Municipal Bond Fund
Evergreen Massachusetts Tax Free Fund
Evergreen Missouri Tax Free Fund
Evergreen New York Tax Free Fund
Evergreen Pennsylvania Tax Free Fund
PRINCIPAL UNDERWRITING AGREEMENT
FOR CLASS B-2 SHARES
OF
EVERGREEN MUNICIPAL TRUST
AGREEMENT made this 18th day of September, 1997 by and between Evergreen
Municipal Trust, a Delaware business trust, on behalf of its series listed on
Exhibit A attached hereto (such Trust and series referred to herein as "Fund"
individually or "Funds" collectively), and Evergreen Distributor, Inc., a
Delaware corporation (the "Principal Underwriter").
The Fund, individually and/or on behalf of its series, if any, referred to
above in the title of this Agreement, to which series, if any, this Agreement
shall relate, as applicable (the "Fund'"), may act as the distributor of certain
securities of which it is the issuer pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act'"), Accordingly, it is hereby mutually agreed
as follows:
1. The Fund hereby appoints the Principal Underwriter a principal
underwriter of the Class B-2 shares of beneficial interest of the Fund ("B-2
Shares") as an independent contractor upon the terms and conditions hereinafter
set forth. The general term "Shares" as used herein has the same meaning as is
provided therefor in Schedule I hereto. Except as the Principal Underwriter and
the Fund may from time to time agree, the Principal Underwriter will act as
agent for the Fund and not as principal.
2. The Principal Underwriter will use its best efforts to find purchasers
for the B-2 Shares and to promote distribution of the B-2 Shares and may obtain
orders from brokers, dealers or other persons for sales of B-2 Shares to them.
No such dealer, broker or other person shall have any authority to act as agent
for the Fund; such dealer, broker or other person shall act only as principal in
the sale of B-2 Shares.
3. Sales of B-2 Shares by Principal Underwriter shall be at the public
offering price determined in the manner set forth in the Prospectus and/or
Statement of Additional Information of the Fund current at the time of the
Fund's acceptance of the order for B-2 Shares. All orders shall be subject to
acceptance by the Fund and the Fund reserves the right in its sole discretion to
reject any order received. The Fund shall not be liable to anyone for failure to
accept any order.
-1-
<PAGE>
4. On all sales of B-2 Shares the Fund shall receive the current net asset
value. The Fund shall pay the Principal Underwriter Distribution Fees (as
defined in Section 14 hereof), as commissions for the sale of B-2 Shares and
other Shares, which shall be paid in conjunction with distribution fees paid to
Evergreen Investment Services Company, Inc. ("EKISC") by other classes of Shares
of the Fund to the extent required in order to comply with Section 14 hereof,
and shall pay over to the Principal Underwriter CDSCs (as defined in Section 14
hereof) as set forth in the Fund's current Prospectus and Statement of
Additional Information, and as required by Section 14 hereof. The Principal
Underwriter shall also receive payments consisting of shareholder service fees
("Service Fees") at the rate of .25% per annum of the average daily net asset
value of the Class B-2 Shares. The Principal Underwriter may allow all or a part
of said Distribution Fees and CDSCs received by it (not paid to others as
hereinafter provided) to such brokers, dealers or other persons as Principal
Underwriter may determine.
5. Payment to the Fund for B-2 Shares shall be in New York or Boston
Clearing House funds received by the Principal Underwriter within three Business
Days after notice of acceptance of the purchase order and the amount of the
applicable public offering price has been given to the purchaser. If such
payment is not received within such period, the Fund reserves the right, without
further notice, forthwith to cancel its acceptance of any such order. The Fund
shall pay such issue taxes as may be required by law in connection with the
issue of the B-2 Shares.
6. The Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the B-2 Shares any representations concerning the B-2
Shares except those contained in the then current Prospectus and/or Statement of
Additional Information covering the Shares and in printed information approved
by the Fund as information supplemental to such Prospectus and Statement of
Additional Information. Copies of the then current Prospectus and Statement of
Additional Information and any such printed supplemental information will be
supplied by the Fund to the Principal Underwriter in reasonable quantities upon
request.
7. The Principal Underwriter agrees to comply with the National Association
of Securities Dealers, Inc. ("NASD") Business Conduct Rule 2830 (d) (2) (the
"Business Conduct Rules") or any successor rule (which succeeds the Rules of
Fair Practice of the NASD defined in the Purchase and Sale Agreement, dated as
of May 31, 1995 (the "Citibank Purchase Agreement"), between Evergreen Keystone
Investment Services Company (formerly Keystone Investment Distributors Company),
Citibank, N.A. and Citicorp North America, Inc., as agent).
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<PAGE>
8. The Fund appoints the Principal Underwriter as its agent to accept
orders for redemptions and repurchases of B-2 Shares at values and in the manner
determined in accordance with the then current Prospectus and/or Statement of
Additional Information of the Fund.
9. The Fund agrees to indemnify and hold harmless the Principal
Underwriter, its officers and Trustees and each person, if any, who controls the
Principal Underwriter within the meaning of Section 15 of the Securities Act of
1933 ("1933 Act"), against any losses, claims, damages, liabilities and expenses
(including the cost of any legal fees incurred in connection therewith) which
the Principal Underwriter, its officers, Trustees or any such controlling person
may incur under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon:
a. any untrue statement or alleged untrue statement of a material fact
contained in the Fund's registration statement, Prospectus or Statement of
Additional Information (including amendments and supplements thereto); or
b. any omission or alleged omission to state a material fact required to be
stated in the Fund's registration statement, Prospectus or Statement of
Additional Information necessary to make the statements therein not misleading,
provided, however, that insofar as losses, claims, damages, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance and in conformity with
information furnished to the Fund by the Principal Underwriter for use in the
Fund's registration statement, Prospectus or Statement of Additional
Information, such indemnification is not applicable. In no case shall the Fund
indemnify the Principal Underwriter or its controlling person as to any amounts
incurred for any liability arising out of or based upon any action for which the
Principal Underwriter, its officers and Trustees or any controlling person would
otherwise be subject to liability by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its duties or by reason of the
reckless disregard of its obligations and duties under this Agreement.
10. The Principal Underwriter agrees to indemnify and hold harmless the
Fund, its officers and Trustees and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act against any loss, claims,
damages, liabilities and expenses (including the cost of any legal fees incurred
in connection therewith) which the Fund, its officers, Trustees or any such
controlling person may incur under the 1933 Act, under any other statute, at
common law or otherwise arising out of the acquisition of any Shares by any
person which
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(a) may be based upon any wrongful act by the Principal Underwriter or any
of its employees or representatives, or
(b) may be based upon any untrue statement or alleged untrue statement of a
material fact contained in the Fund's registration statement, Prospectus or
Statement of Additional Information (including amendments and supplements
thereto), or any omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
if such statement or omission was made in reliance upon information furnished or
confirmed in writing to the Fund by the Principal Underwriter.
11. The Fund agrees to execute such papers and to do such acts and things
as shall from time to time be reasonably requested by the Principal Underwriter
for the purpose of qualifying the B-2 Shares for sale under the so-called "blue
sky'" laws of any state or for registering B-2 Shares under the 1933 Act or the
Fund under the Investment Company Act of 1940 ("1940 Act"). The Principal
Underwriter shall bear the expenses of preparing, printing and distributing
advertising, sales literature, prospectuses, and statements of additional
information. The Fund shall bear the expense of registering B-2 Shares under the
1933 Act and the Fund under the 1940 Act, qualifying B-2 Shares for sale under
the so called "blue sky" laws of any state, the preparation and printing of
Prospectuses, Statements of Additional Information and reports required to be
filed with the Securities and Exchange Commission and other authorities, the
preparation, printing and mailing of Prospectuses and Statements of Additional
Information to holders of B-2 Shares, and the direct expenses of the issue of
B-2 Shares.
12. The Principal Underwriter shall, at the request of the Fund, provide to
the Board of Trustees of the Fund in connection with sales of B-2 Shares not
less than quarterly a written report of the amounts received from the Fund
therefor and the purpose for which such expenditures by the Fund were made.
13. The term of this Agreement shall begin on the date hereof and, unless
sooner terminated or continued as provided below, shall expire after one year.
This Agreement shall continue in effect after such term if its continuance is
specifically approved by a majority of the outstanding voting securities of
Class B-2 of the Fund or by a majority of the Trustees of the Fund and a
majority of the Trustees who are not parties to this Agreement or "interested
persons", as defined in the 1940 Act, of any such party and who have no direct
or indirect financial interest in the operation of the Fund's Rule 12b-l plan
for Class B-2 Shares or in any agreements related to the plan at least annually
in accordance with the 1940 Act and the rules and regulations thereunder.
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This Agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Trustees of the Fund, or a majority of
such Trustees who are not parties to this Agreement or "interested persons", as
defined in the 1940 Act, of any such party and who have no direct or indirect
financial interest in the operation of the Fund's Rule 12b-1 plan for Class B-2
Shares or in any agreement related to the plan or by a vote of a majority of the
outstanding voting securities of Class B-2 on not more than sixty days written
notice to any other party to the Agreement; and shall terminate automatically in
the event of its assignment (as defined in the 1940 Act), which shall not
include assignment of the Principal Underwriter's Allocable Portion of
Distribution Fees (as hereinafter defined) and Allocable Portion of CDSCs
provided for hereunder and/or rights related to such Allocable Portions.
14. The provisions of this Section 14 shall be applicable to the extent
necessary to enable the Fund to comply with the obligation of the Fund to pay
the Principal Underwriter its Allocable Portion of Distribution Fees paid in
respect of B-2 Shares and also permit the Fund to pay, pursuant to the Principal
Underwriting Agreement dated as of December 11, 1996, between the Fund and EKISC
in respect of Class B-2 Shares, the Allocable Portion of Distribution Fees due
EKISC in respect of B-2 Shares and, pursuant to the Principal Underwriting
Agreement dated as of December 11, 1996 between the Fund and EKISC in respect of
Class B-1 Shares, the Allocable Portion of Distribution Fees due EKISC in
respect of B-1 Shares (together the "EKISC Underwriting Agreements"), and shall
remain in effect so long as any payments are required to be made by the Fund
pursuant to the irrevocable payment instructions pursuant to the Citibank
Purchase Agreement and the Master Sale Agreement between the Principal
Underwriter and Mutual Fund Funding 1994-1 dated as of December 6, 1996 (the
"Master Sale Agreement") (the "Irrevocable Payment Instructions")).
14.1 The Fund shall pay to the Principal Underwriter the Principal
Underwriter's Allocable Portion (as hereinafter defined) of a fee (the
"Distribution Fee") at the rate of .75% per annum of the average daily net asset
value of the Shares, subject to the limitation on the maximum aggregate amount
of such fees under the Business Conduct Rules as applicable to such Distribution
Fee on the date hereof.
14.2 The Principal Underwriter's Allocable Portion of Distribution Fees
paid by the Fund in respect of Shares shall mean the portion of the Asset Based
Sales Charge allocable to Distributor Shares (as defined in Schedule I hereto to
this Agreement) in accordance with Schedule I hereto. The Fund agrees to cause
its transfer agent (the "Transfer Agent") to maintain the records and arrange
for the payments on behalf of the Fund at the times and in the amounts and to
the accounts required by Schedule I hereto, as the same may be amended from time
to time. It is acknowledged and agreed that by virtue of the operation of
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Schedule I hereto the Principal Underwriter's Allocable Portion of Distribution
Fees paid by the Fund in respect of Shares, may, to the extent provided in
Schedule I hereto, take into account Distribution Fees payable by the Fund in
respect of other existing and future classes and/or subclasses of shares of the
Fund which would be treated as "Shares" under Schedule I hereto. The Fund will
limit amounts paid to any subsequent principal underwriters of Shares to the
portion of the Asset Based Sales Charge paid in respect of Shares which is
allocable to Post-distributor Shares (as defined in Schedule I hereto) in
accordance with Schedule I hereto. The Fund's payments to the Principal
Underwriter in consideration of its services in connection with the sale of B-2
Shares shall be the Distribution Fees attributable to B-2 Shares which are
Distributor Shares (as defined in Schedule I hereto) and all other amounts
constituting the Principal Underwriter's Allocable Portion of Distribution Fees
shall be the Distribution Fees related to the sale of other Shares which are
Distributor Shares (as defined in Schedule I hereto).
The Fund shall cause its transfer agent and sub-transfer agents to withhold
from redemption proceeds payable to holders of Shares on redemption thereof the
contingent deferred sales charges payable upon redemption thereof as set forth
in the then current Prospectus and/or Statement of Additional Information of the
Fund ("CDSCs") and to pay over to the Principal Underwriter the Principal
Underwriter's Allocable Portion of said CDSCs paid in respect of Shares which
shall mean the portion thereof allocable to Distributor Shares (as defined in
Schedule I hereto) in accordance with Schedule I hereto.
14.3 The Principal Underwriter shall be considered to have completely
earned the right to the payment of its Allocable Portion of the Distribution Fee
and the right to payment over to it of its Allocable Portion of the CDSC in
respect of Shares as provided for hereby upon the completion of the sale of each
Commission Share (as defined in Schedule I hereto) taken into account as a
Distributor Share in computing the Principal Underwriter's Allocable Portion in
accordance with Schedule I hereto.
14.4 Except as provided in Section 14.5 hereof in respect of Distribution
Fees only, the Fund's obligation to pay the Principal Underwriter the
Distribution Fees and to pay over to the Principal Underwriter CDSCs provided
for hereby shall be absolute and unconditional and shall not be subject to
dispute, offset, counterclaim or any defense whatsoever (it being understood
that nothing in this sentence shall be deemed a waiver by the Fund of its right
separately to pursue any claims it may have against the Principal Underwriter
and enforce such claims against any assets (other than the Principal
Underwriter's right to its Allocable Portion of the Distribution Fees and CDSCs
(the "Collection Rights") of the Principal Underwriter).
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<PAGE>
14.5 Notwithstanding anything in this Agreement to the contrary, the Fund
shall pay to the Principal Underwriter its Allocable Portion of Distribution
Fees provided for hereby notwithstanding its termination as Principal
Underwriter for the Shares or any termination of this Agreement and such payment
of such Distribution Fees, and that obligation and the method of computing such
payment, shall not be changed or terminated except to the extent required by any
change in applicable law, including, without limitation, the 1940 Act, the Rules
promulgated thereunder by the Securities and Exchange Commission and the
Business Conduct Rules, in each case enacted or promulgated after December 1,
1996, or in connection with a Complete Termination (as hereinafter defined). For
the purposes of this Section 14.5, "Complete Termination" means a termination of
the Fund's Rule 12b-l plan for B-2 Shares involving the cessation of payments of
the Distribution Fees, and the cessation of payments of distribution fees
pursuant to every other Rule 12b-1 plan of the Fund for every existing or future
B-Class-of-Shares (as hereinafter defined) and the Fund's discontinuance of the
offering of every existing or future B-Class-of Shares, which conditions shall
be deemed satisfied when they are first complied with hereafter and so long
thereafter as they are complied with prior to the date upon which all of the B-2
Shares which are Distributor Shares pursuant to Schedule I hereto shall have
been redeemed or converted. For purposes of this Section 14.5, the term
B-Class-of-Shares means each of the B-1 Class of Shares of the Fund, the B-2
Class of Shares of the Fund and each other class of shares of the Fund hereafter
issued which would be treated as Shares under Schedule I hereto or which has
substantially similar economic characteristics to the B-1 or B-2 Classes of
Shares taking into account the total sales charge, CDSC or other similar charges
borne directly or indirectly by the holder of the shares of such class. The
parties agree that the existing C Class of Shares of the Fund does not have
substantially similar economic characteristics to the B-1 or B-2 Classes of
Shares taking into account the total sales charge, CDSC or other similar charges
borne directly or indirectly by the holder of such shares. For purposes of
clarity the parties to this agreement hereby state that they intend that a new
installment load class of shares which may be authorized by amendments to Rule
6(c)-10 under the 1940 Act will be considered to be a B-Class-of-Shares if it
has economic characteristics substantially similar to the economic
characteristics of the existing B-1 or B-2 Classes of Shares taking into account
the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of such shares and will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares.
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<PAGE>
14.6 The Principal Underwriter may assign, sell or otherwise transfer any
part of its Allocable Portions and obligations of the Fund related thereto (but
not the Principal Underwriter's obligations to the Fund provided for in this
Agreement, provided, however, the Principal Underwriter may delegate and
sub-contract certain functions to other broker-dealers so long as it remains
employed by the Fund) to any person (an "Assignee") and any such assignment
shall be effective as to the Fund upon written notice to the Fund by the
Principal Underwriter. In connection therewith the Fund shall pay all or any
amounts in respect of its Allocable Portions directly to the Assignee thereof as
directed in a writing by the Principal Underwriter in the Irrevocable Payment
Instruction, as the same may be amended from time to time with the consent of
the Fund, and the Fund shall be without liability to any person if it pays such
amounts when and as so directed, except for underpayments of amounts actually
due, without any amount payable as consequential or other damages due to such
underpayment and without interest except to the extent that delay in payment of
Distribution Fees and CDSCs results in an increase in the maximum Sales Charge
allowable under the Business Conduct Rules, which increases daily at a rate of
prime plus one percent per annum.
14.7 The Fund will not, to the extent it may otherwise be empowered to do
so, change or waive any CDSC with respect to B-2 Shares, except as provided in
the Fund's Prospectus or Statement of Additional Information without the
Principal Underwriter's or Assignee's consent, as applicable. Notwithstanding
anything to the contrary in this Agreement or any termination of this Agreement
or the Principal Underwriter as principal underwriter for the Shares of the
Fund, the Principal Underwriter shall be entitled to be paid its Allocable
Portion of the CDSCs whether or not the Fund's Rule 12b-1 plan for B-2 Shares is
terminated and whether or not any such termination is a Complete Termination, as
defined above.
14.8 Notwithstanding anything contained herein in this Agreement to the
contrary, the Fund shall comply with its obligations under the EKISC
Underwriting Agreements and the attached Schedule I and any replacement
Agreement, provided that such replacement agreement does not increase the
Allocable Portion currently payable to EKISC, to pay to EKISC its Allocable
Portion (as defined in the EKISC Underwriting Agreement) of the Distribution
Fees (as defined in the EKISC Underwriting Agreement) in respect of Class B-2
Shares as required therein and to comply with its obligations under the
Irrevocable Payment Instructions (as defined in the Citibank Purchase Agreement,
as defined therein).
15. This Agreement shall be construed in accordance with the laws of The
Commonwealth of Massachusetts. All sales hereunder are to be made, and title to
the Shares shall pass, in Boston, Massachusetts.
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<PAGE>
16. The Fund is a series of a Delaware business trust established under a
Declaration of Trust, as it may be amended from time to time. The obligations of
the Fund are not personally binding upon, nor shall recourse be had against the
private property of any of the Trustees, shareholders, officers, employees or
agents of the Fund, but only the property of the Fund shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto duly authorized at Boston,
Massachusetts, as of the day and year first written above.
EVERGREEN MUNICIPAL TRUST EVERGREEN DISTRIBUTOR, INC.
By: /s/ John J. Pileggi By: /s/ J. David Huber
______________________ ________________________
Name: John J. Pileggi Name: J. David Huber
Title: President Title: President
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<PAGE>
EXHIBIT A
TO PRINCIPAL UNDERWRITING AGREEMENT
DATED SEPTEMBER 18, 1997
BETWEEN EVERGREEN MUNICIPAL TRUST AND
EVERGREEN DISTRIBUTOR, INC.
Evergreen Municipal Trust (the "Fund") and Evergreen Distributor, Inc.
("EDI") agree that the Collection Rights of EDI, as such term is defined in the
Principal Underwriting Agreement dated as of September 18, 1997 between the Fund
and EDI (the "Agreement"), paid by the Fund pursuant to the Agreement with
respect to Distributor Shares, as that term is defined in Schedule I to the
Agreement, sold on or after December 1, 1996 will be utilized by EDI as follows:
(a) to the extent that the total amount of Collection Rights received by
EDI with respect to Distributor Shares of all Funds, as that term is defined in
Schedule I, does not exceed 4.25% (except that in the case of Evergreen Capital
Preservation and Income Fund, the amount shall be 3%) of the aggregate net asset
value at the time of sale of the Distributor Shares sold on or after December 1,
1996, plus any interest and other fees, costs and expenses that may be paid in
accordance with the financing of commissions paid to selling brokers regarding
such Distributor Shares of such Funds (the "Brokers Commission and Expenses"),
the entire amount of the Collection Rights with respect to such Distributor
Shares may only be used by the Principal Underwriter for payment of the Brokers
Commission and Expenses and may not be used for any other purpose.
(b) to the extent that there is no longer any unrecovered Brokers
Commission and Expenses with respect to the Distributor Shares sold on or after
December 1, 1996 (including shares purchased in connection with the reinvestment
of dividends on such Distributor Shares as determined in accordance with
Schedule I ) as provided in (a), above, the Fund will pay the Principal
Underwriter a fee in an amount up to the remaining Collection Rights
attributable to such Shares to compensate Evergreen Investment Services, Inc.,
as marketing services agent for the Principal Underwriter (the "Marketing
Services Agent").
The foregoing calculations shall be the responsibility of the Transfer
Agent and Administrator and not the responsibility of the Principal Underwriter.
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SCHEDULE I
TO
PRINCIPAL UNDERWRITING AGREEMENT
RELATING TO CLASS B-2 SHARES
OF
EVERGREEN MUNICIPAL TRUST
TRANSFER AGENT PROCEDURES FOR DIFFERENTIATING
AMONG DISTRIBUTOR SHARES AND POST-DISTRIBUTOR SHARES
Amounts in respect of Asset Based Sales Charges (as hereinafter defined)
and CDSCs (as hereinafter defined) in respect of Shares (as hereinafter defined)
of each Fund (as hereinafter defined) shall be allocated between Distributor
Shares (as hereinafter defined) and Post-distributor Shares (as hereinafter
defined) of such Fund in accordance with the rules set forth in clauses (B) and
(C). Clause (B) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account (as hereinafter defined)
in maintaining records relating to Distributor Shares and Post-distributor
Shares. Clause (C) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account in determining what
portion of the Asset Based Sales Charge (as hereinafter defined) payable in
respect of each class of Shares of such Fund and what portion of the CDSC (as
hereinafter defined) payable by the holders of Shares of such Fund is
attributable to Distributor Shares and Post-distributor Shares, respectively.
Notwithstanding anything herein to the contrary, no amounts relating to the
EKISC Allocable Portion (as defined in the EKISC Underwriting Agreements) shall
be allocated hereunder and no Shares attributable to EKISC pursuant to the EKISC
Underwriting Agreements shall constitute Distributor Shares or Post-distributor
Shares or otherwise be allocated to any person or entity except as contemplated
by the EKISC Underwriting Agreements and the Irrevocable Payment Instructions.
(A) DEFINITIONS:
Generally, for purposes of this Schedule I, defined terms shall be used
with the meaning assigned to them in the Agreement, except that for purposes of
the following rules the following definitions are also applicable:
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<PAGE>
"Agreement" shall mean the Principal Underwriting Agreement for Class B-2
Shares of the Instant Fund dated as of September 18, 1997 between the Instant
Fund and the Distributor.
"Asset Based Sales Charge" shall have the meaning set forth in National
Association of Securities Dealers, Inc. ("NASD") Business Conduct Rule 2830 (d)
(2) or any successor rule (the "Business Conduct Rules) it being understood that
for purposes of this Schedule I such term does not include the Service Fee.
"Business Day" shall mean any day on which the banks and The New York Stock
Exchange are not authorized or required to close in New York City or the State
of North Carolina.
"Capital Gain Dividend" shall mean, in respect of any Share of any Fund, a
Dividend in respect of such Share which is designated by such Fund as being a
"capital gain dividend" as such term is defined in Section 852 of the Internal
Revenue Code of 1986, as amended.
"CDSC" shall mean with respect to any Fund, the contingent deferred sales
charge payable, either directly or by withholding from the proceeds of the
redemption of the Shares of such Fund, by the shareholders of such Fund on any
redemption of Shares of such Fund in accordance with the Prospectus relating to
such Fund.
"Commission Share" shall mean, in respect of any Fund, a Share of such Fund
issued under circumstances where a CDSC would be payable upon the redemption of
such Share if such CDSC is not waived or shall have not otherwise expired.
"Date of Original Purchase" shall mean, in respect of any Commission Share
of any Fund, the date on which such Commission Share was first issued by such
Fund; provided, that if such Share is a Commission Share and such Fund issued
the Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Date
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the date on which the Commission Share (or portion thereof) of the
other Fund was first issued by such other Fund (unless such Commission Share (or
portion thereof) was also issued by such other Fund in a Free Exchange, in which
case this proviso shall apply to that Free Exchange and this application shall
be repeated until one reaches a Commission Share (or portion thereof) which was
issued by a Fund other than in a Free Exchange).
"Distributor" shall mean Evergreen Distributor, Inc., its successors and
assigns.
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<PAGE>
"Distributor's Account" shall mean the account designated in the
Irrevocable Payment Instructions of the Distributor.
"Distributor Inception Date" shall mean, in respect of any Fund and solely
for the purpose of making the calculations contained herein, December 1, 1996.
"Distributor Last Sale Cut-off Date" shall mean, in respect of any Fund,
the date identified as the last sale of a Commission Share during the period the
Distributor served as principal underwriter under the Agreement.
"Distributor Shares" shall mean, in respect of any Fund, all Shares of such
Fund the Month of Original Purchase of which occurs on or after the Distributor
Inception Date and on or prior to the Distributor Last Sale Cut-off Date in
respect of such Fund.
"Dividend" shall mean, in respect of any Share of any Fund, any dividend or
other distribution by such Fund in respect of such Share.
"Free Exchange" shall mean any exchange of a Commission Share (or portion
thereof) of one Fund (the "Redeeming Fund") for a Share (or portion thereof) of
another Fund (the "Issuing Fund"), under any arrangement which defers the
exchanging Shareholder's obligation to pay the CDSC in respect of the Commission
Share (or portion thereof) of the Redeeming Fund so exchanged until the later
redemption of the Share (or portion thereof) of the Issuing Fund received in
such exchange.
"Free Share" shall mean, in respect of any Fund, each Share of such Fund
other than a Commission Share, including, without limitation: (i) Shares issued
in connection with the automatic reinvestment of Capital Gain Dividends or Other
Dividends by such Fund; (ii) Special Free Shares issued by such Fund; and (iii)
Shares (or portion thereof) issued by such Fund in connection with an exchange
whereby a Free Share (or portion thereof) of another Fund is redeemed and the
Net Asset Value of such redeemed Free Share (or portion thereof) is invested in
such Shares (or portion thereof) of such Fund.
"Fund" shall mean each of the regulated investment companies or series or
portfolios of regulated investment companies identified in Exhibit J to the
Master Sale Agreement, as the same may be amended from time to time in
accordance with the terms thereof.
"Instant Fund" shall mean Evergreen Municipal Trust.
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"ML Omnibus Account" shall mean, in respect of any Fund, the Omnibus
Account maintained by Merrill Lynch, Pierce, Fenner & Smith as subtransfer
agent.
"Month of Original Purchase" shall mean, in respect of any Share of any
Fund, the calendar month in which such Share was first issued by such Fund;
provided, that if such Share is a Commission Share and such Fund issued the
Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Month
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the calendar month in which the Commission Share (or portion thereof)
of the other Fund was first issued by such other Fund (unless such Commission
Share (or portion thereof) was also issued by such other Fund in a Free
Exchange, in which case this proviso shall apply to that Free Exchange and this
application shall be repeated until one reaches a Commission Share (or portion
thereof) which was issued by a Fund other than in a Free Exchange); provided,
further, that if such Share is a Free Share and such Fund issued such Free Share
in connection with the automatic reinvestment of dividends in respect of other
Shares of such Fund, the Month of Original Purchase of such Free Share shall be
deemed to be The Month of Original Purchase of the Share in respect of which
such dividend was paid; provided, further, that if such Share is a Free Share
and such Fund issued such Free Share in connection with an exchange whereby a
Free Share (or portion thereof) of another Fund is redeemed and the Net Asset
Value of such redeemed Free Share (or portion thereof) is invested in a Free
Share (or portion thereof) of such Fund, the Month of Original Issue of such
Free Share shall be the Month of Original Issue of the Free Share of such other
Fund so redeemed (unless such Free Share of such other Fund was also issued by
such other Fund in such an exchange, in which case this proviso shall apply to
that exchange and this application shall be repeated until one reaches a Free
Share which was issued by a Fund other than in such an exchange); and provided,
finally, that for purposes of this Schedule I each of the following periods
shall be treated as one calendar month for purposes of applying the rules of
this Schedule I to any Fund: (i) the period of time from and including the
Distributor Inception Date for such Fund to and including the last day of the
calendar month in which such Distributor Inception Date occurs; (ii) the period
of time commencing with the first day of the calendar month in which the
Distributor Last Sale Cutoff Date in respect of such Fund occurs to and
including such Distributor Last Sale Cutoff Date; and (iii) the period of time
commencing on the day immediately following the Distributor Last Sale Cutoff
Date in respect of such Fund to and including the last day of the calendar month
in which such Distributor Last Sale Cut-off Date occurs.
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<PAGE>
"Omnibus Account" shall mean any Shareholder Account the record owner of
which is a registered broker-dealer which has agreed with the Transfer Agent to
provide sub-transfer agent functions relating to each Sub-shareholder Account
within such Shareholder Account as contemplated by this Schedule I in respect of
each of the Funds.
"Omnibus Asset Based Sales Charge Settlement Date" shall mean, in respect
of each Omnibus Account, the Business Day next following the twentieth day of
each calendar month for the calendar month immediately preceding such date so
long as the record owner is able to allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund as contemplated by this Schedule I no
more frequently than monthly; provided, that at such time as the record owner of
such Omnibus Account is able to provide information sufficient to allocate the
Asset Based Sales Charge accruing in respect of such Shares of such Fund owned
of record by such Omnibus Account as contemplated by this Schedule I on a weekly
or daily basis, the Omnibus Asset Based Sales Charge Settlement Date shall be a
weekly date as in the case of the Omnibus CDSC Settlement Date or a daily date
as in the case of Asset Based Sales Charges accruing in respect of Shareholder
Accounts other than Omnibus Accounts, as the case may be.
"Omnibus CDSC Settlement Date" shall mean, in respect of each Omnibus
Account, the third Business Day of each calendar week for the calendar week
immediately preceding such date so long as the record owner of such Omnibus
Account is able to allocate the CDSCs accruing in respect of any Shares of any
Fund as contemplated by this Schedule I for no more frequently than weekly;
provided, that at such time as the record owner of such Shares of such Fund
owned of record by such Omnibus Account is able to provide information
sufficient to allocate the CDSCs accruing in respect of such Omnibus Account as
contemplated by this Schedule I on a daily basis, the Omnibus CDSC Settlement
Date for such Omnibus Account shall be a daily date as in the case of CDSCs
accruing in respect of Shareholder Accounts other than Omnibus Accounts.
"Original Purchase Amount" shall mean, in respect of any Commission Share
of any Fund, the amount paid (i.e., the Net Asset Value thereof on such date),
on the Date of Original Purchase in respect of such Commission Share, by such
Shareholder Account or Sub-shareholder Account for such Commission Share;
provided, that if such Fund issued the Commission Share (or portion thereof) in
question in connection with a Free Exchange for a Commission Share (or portion
thereof) of another Fund, the Original Purchase Amount for the Commission Share
(or portion thereof) in question shall be the Original Purchase Amount in
respect of such Commission Share (or portion thereof) of such other Fund (unless
such Commission Share (or portion thereof) was also issued by such other Fund in
a Free Exchange, in which case this proviso shall apply to that Free Exchange
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<PAGE>
and this application shall be repeated until one reaches a Commission Share (or
portion thereof) which was issued by a Fund other than in a Free Exchange).
"Other Dividend" shall mean in respect of any Share, any Dividend paid in
respect of such Share other than a Capital Gain Dividend.
"Post-distributor Shares" shall mean, in respect of any Fund, all Shares of
such Fund the Month of Original Purchase of which occurs after the Distributor
Last Sale Cut-off Date for such Fund.
"Buyer" shall mean Mutual Fund Funding, as Buyer under the Master Sale
Agreement, and its successors and assigns in such capacity.
"Master Sale Agreement" shall mean that certain Master Sale Agreement dated
as of December 6, 1996 between Evergreen Keystone Distributor, Inc., as Seller,
and Mutual Fund Funding, as Buyer.
"Share" shall mean in respect of any Fund any share of the classes of
shares specified in Exhibit G to the Master Sale Agreement under the designation
"Keystone America Funds", as the same may be amended from time to time by notice
from the Distributor and the Buyer to the Fund and the Transfer Agent; provided,
that such term shall include, after the Distributor Last Sale Cut-off Date, a
share of a new class of shares of such Fund: (i) with respect to each record
owner of Shares which is not treated in the records of each Transfer Agent and
Sub-transfer Agent for such Fund as an entirely separate and distinct class of
shares from the classes of shares specified Exhibit G to the Master Sale
Agreement or (ii) the shares of which class may be exchanged for shares of
another Fund of the classes of shares specified in Exhibit G to the Master Sale
Agreement under the designation "Keystone America Funds" of any class existing
on or prior to the Distributor Last Sale Cut-off Date; or (iii) dividends on
which can be reinvested in shares of the classes specified on Exhibit G to the
Master Sale Agreement under the automatic dividend reinvestment options; or (iv)
which is otherwise treated as though it were of the same class as the class of
shares specified on Schedule II to the Irrevocable Payment Instruction.
"Shareholder Account" shall have the meaning set forth in clause (B)(l)
hereof.
"Special Free Share" shall mean, in respect of any Fund, a Share (other
than a Commission Share) issued by such Fund other than in connection with the
automatic reinvestment of Dividends and other than in connection with an
exchange whereby a Free Share (or portion thereof) of another Fund is redeemed
and the Net Asset Value of such redeemed Share (or portion thereof) is invested
in a Share (or portion thereof) of such Fund.
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<PAGE>
"Sub-shareholder Account" shall have the meaning set forth in clause (B)(1)
hereof.
"Sub-transfer Agent" shall mean, in respect of each Omnibus Account, the
record owner thereof.
(B) RECORDS TO BE MAINTAINED BY THE TRANSFER AGENT FOR EACH FUND AND THE
RECORD OWNER OF EACH OMNIBUS ACCOUNT:
The Transfer Agent shall maintain Shareholder Accounts, and shall cause
each record owner of each Omnibus Account to maintain Sub-shareholder Accounts,
each in accordance with the following rules:
(1) Shareholder Accounts and Sub-shareholder Accounts. The Transfer Agent
shall maintain a separate account (a "Shareholder Account") for each record
owner of Shares of each Fund. Each Shareholder Account (other than Omnibus
Accounts) will represent a record owner of Shares of such Fund, the records of
which will be kept in accordance with this Schedule I. In the case of an Omnibus
Account, the Transfer Agent shall require that the record owner of the Omnibus
Account maintain a separate account (a "Sub-shareholder Account") for each
record owner of Shares which are reflected in the Omnibus Account, the records
of which will be kept in accordance with this Schedule I. Each such Shareholder
Account and Sub-shareholder Account shall relate solely to Shares of such Fund
and shall not relate to any other class of shares of such Fund.
(2) Commission Shares. For each Shareholder Account (other than an Omnibus
Account), the Transfer Agent shall maintain daily records of each Commission
Share of such Fund which records shall identify each Commission Share of such
Fund reflected in such Shareholder Account by the Month of Original Purchase of
such Commission Share.
For each Omnibus Account, the Transfer Agent shall require that the
Sub-transfer Agent in respect thereof maintain daily records of such
Sub-shareholder Account which records shall identify each Commission Share of
such Fund reflected in such Sub-shareholder Account by the Month of Original
Purchase; provided, that until the Sub-transfer Agent in respect of the ML
Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain daily records of
Sub-shareholder Accounts which identify each Commission Share of such Fund
reflected in such Sub-shareholder Account by the Date of Original Purchase. Each
such Commission Share shall be identified as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such
Commission Share (or in the case of a Sub-shareholder Account within the ML
Omnibus Account, based upon the Date of Original Purchase).
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<PAGE>
(3) Free Shares. The Transfer Agent shall maintain daily records of each
Shareholder Account (other than an Omnibus Account) in respect of any Fund so as
to identify each Free Share (including each Special Free Share) reflected in
such Shareholder Account by the Month of Original Purchase of such Free Share.
In addition, the Transfer Agent shall require that each Shareholder Account
(other than an Omnibus Account) have in effect separate elections relating to
reinvestment of Capital Gain Dividends and relating to reinvestment of Other
Dividends in respect of any Fund. Either such Shareholder Account shall have
elected to reinvest all Capital Gain Dividends or such Shareholder Account shall
have elected to have all Capital Gain Dividends distributed. Similarly, either
such Shareholder Account shall have elected to reinvest all Other Dividends or
such Shareholder Account shall have elected to have all Other Dividends
distributed.
The Transfer Agent shall require that the Sub-transfer Agent in respect
of each Omnibus Account maintain daily records for each Sub-shareholder Account
in the manner described in the immediately preceding paragraph for Shareholder
Accounts (other than Omnibus Accounts); provided, that until the Sub-transfer
Agent in respect of the ML Omnibus Account develops the data processing
capability to conform to the foregoing requirements, such Sub-transfer Agent
shall not be obligated to conform to the foregoing requirements. Each
Sub-shareholder Account shall also have in effect Dividend reinvestment
elections as described in the immediately preceding paragraph.
The Transfer Agent and each Sub-transfer Agent in respect of an Omnibus
Account shall identify each Free Share as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such Free
Share; provided, that until the Sub-transfer Agent in respect of the ML Omnibus
Account develops the data processing capability to conform to the foregoing
requirements, the Transfer Agent shall require such Sub-transfer Agent to
identify each Free Share of a given Fund in the ML Omnibus Account as a
Distributor Share, or Post- distributor Share, as follows:
(a) Free Shares of such Fund which are outstanding on the
Distributor Last Sale Cutoff Date for such Fund shall be
identified as Distributor Shares.
(b) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a Free Share of another Fund)
to the ML Omnibus Account during any calendar month (or
portion thereof) after the Distributor Last Sale Cutoff Date
for such Fund shall be identified as Distributor Shares in a
number computed as follows:
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<PAGE>
A * (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus
Account during such calendar month (or portion
thereof)
B = Number of Commission Shares and Free Shares of such
Fund in the ML Omnibus Account identified as
Distributor Shares and outstanding as of the close of
business in the last day of the immediately preceding
calendar month (or portion thereof)
C = Total number of Commission Shares and Free Shares
of such Fund in the ML Omnibus Account and
outstanding as of the close of business on the last
day of the immediately preceding calendar month (or
portion thereof).
(c) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a free share of another Fund)
to the ML Omnibus Account during any calendar month (or
portion thereof) after the Distributor Last Sale Cutoff Date
for such Fund shall be identified as Post-distributor Shares
in a number computed as follows:
(A * (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus
Account during such calendar month (or portion
thereof)
B = Number of Commission Shares and Free Shares of such
Fund in the ML Omnibus Account identified as
Post-distributor Shares and outstanding as of the
close of business in the last day of the immediately
preceding calendar month (or portion thereof)
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<PAGE>
C = Total number of Commission Shares and Free Shares
of such Fund in the ML Omnibus Account and
outstanding as of the close of business on the last
day of the immediately preceding calendar month (or
portion thereof).
(d) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or
in connection with the conversion of such Shares into a Class
A Share of such Fund) from the ML Omnibus Account in any
calendar month (or portion thereof) after the Distributor Last
Sale Cut-off Date for such Fund shall be identified as
Distributor Shares in a number computed as follows:
A * (B/C)
where:
A = Free Shares of such Fund which are redeemed
(whether or not in connection with an exchange for
Free Shares of another Fund or in connection with the
conversion of such Shares into a class A share of
such Fund) from the ML Omnibus Account during such
calendar month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account
identified as Distributor Shares and outstanding as
of the close of business on the last day of the
immediately preceding calendar month.
C = Total number of Free Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding
calendar month.
(e) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or
in connection with the conversion of such Shares into a class
A share of such Fund) from the ML Omnibus Account in any
calendar month (or portion thereof) after the Distributor Last
Sale Cutoff Date for such Fund shall be identified as
Post-distributor Shares in a number computed as follows:
-20-
<PAGE>
A * (B/C)
where:
A = Free Shares of such Fund which are redeemed
(whether or not in connection with an exchange for
Free Shares of another Fund or in connection with the
conversion of such Shares into a class A share of
such Fund) from the ML Omnibus Account during such
calendar month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account
identified as Post-distributor Shares and outstanding
as of the close of business on the last day of the
immediately preceding calendar month.
C = Total number of Free Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last to day of the immediately
preceding calendar month.
(4) Appreciation Amount and Cost Accumulation Amount. The Transfer Agent
shall maintain on a daily basis in respect of each Shareholder Account (other
than Omnibus Accounts) a Cost Accumulation Amount representing the total of the
Original Purchase Amounts paid by such Shareholder Account for all Commission
Shares reflected in such Shareholder Account as of the close of business on each
day. In addition, the Transfer Agent shall maintain on a daily basis in respect
of each Shareholder Account (other than Omnibus Accounts) sufficient records to
enable it to compute, as of the date of any actual or deemed redemption or Free
Exchange of a Commission Share reflected in such Shareholder Account an amount
(such amount an "Appreciation Amount") equal to the excess, if any, of the Net
Asset Value as of the close of business on such day of the Commission Shares
reflected in such Shareholder Account minus the Cost Accumulation Amount as of
the close of business on such day. In the event that a Commission Share (or
portion thereof) reflected in a Shareholder Account is redeemed or under these
rules is deemed to have been redeemed (whether in a Free Exchange or otherwise),
the Appreciation Amount for such Shareholder Account shall be reduced, to the
extent thereof, by the Net Asset Value of the Commission Share (or portion
thereof) redeemed, and if the Net Asset Value of the Commission Share (or
portion thereof) being redeemed equals or exceeds the Appreciation Amount, the
Cost Accumulation Amount will be reduced to the extent thereof, by such excess.
If the Appreciation Amount for such Shareholder Account immediately prior to any
redemption of a Commission Share (or portion thereof) is equal to or greater
than the Net Asset Value of such Commission Share (or portion thereof) deemed to
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<PAGE>
have been tendered for redemption, no CDSCs will be payable in respect of such
Commission Share (or portion thereof).
The Transfer Agent shall require that the Sub-transfer Agent in respect of
each Omnibus Account maintain on a daily basis in respect of each
Sub-shareholder Account reflected in such Omnibus Account a Cost Accumulation
Amount and sufficient records to enable it to compute, as of the date of any
actual or deemed redemption or Free Exchange of a Commission Share reflected in
such Sub-shareholder Account an Appreciation Amount in accordance with the
preceding paragraph and to apply the same to determine whether a CDSC is payable
(as though such Sub-shareholder Account were a Shareholder Account other than an
Omnibus Account); provided, that until the Sub-transfer Agent in respect of the
ML Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain for each
Sub-shareholder Account a separate Cost Accumulation Amount and a separate
Appreciation Amount for each Date of Original Purchase of any Commission Share
which shall be applied as set forth in the preceding paragraph as if each Date
of Original Purchase were a separate Month of Original Purchase.
(5) Identification of Redeemed Shares. If a Shareholder Account (other than
an Omnibus Account) tenders a Share of a Fund for redemption (other than in
connection with an exchange of such Share for a Share of another Fund or in
connection with the conversion of such Share pursuant to a Conversion Feature),
such tendered Share will be deemed to be a Free Share if there are any Free
Shares reflected in such Shareholder Account immediately prior to such tender.
If there is more than one Free Share reflected in such Shareholder Account
immediately prior to such tender, such tendered Share will be deemed to be the
Free Share with the earliest Month of Original Purchase. If there are no Free
Shares reflected in such Shareholder Account immediately prior to such tender,
such tendered Share will be deemed to be the Commission Share with the earliest
Month of Original Purchase reflected in such Shareholder Account.
If a Sub-shareholder Account reflected in an Omnibus Account tenders a
Share for redemption (other than in connection with an Exchange of such Share
for a Share of another Fund or in connection with the conversion of such Share
pursuant to a Conversion Feature), the Transfer Agent shall require that the
record owner of each Omnibus Account supply the Transfer Agent sufficient
records to enable the Transfer Agent to apply the rules of the preceding
paragraph to such Sub-shareholder Account (as though such Sub-shareholder
Account were a Shareholder Account other than an Omnibus Account); provided,
that until the Sub-transfer Agent in respect of the ML Omnibus Account develops
the data processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
regarding Free Shares (and the Transfer Agent shall account for such Free Shares
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<PAGE>
as provided in (3) above) but shall apply the foregoing rules to each Commission
Share with respect to the Date of Original Purchase of any Commission Share as
though each such Date were a separate Month of Original Purchase.
(6) Identification of Exchanged Shares. When a Shareholder Account (other
than an Omnibus Account) tenders Shares of one Fund (the "Redeeming Fund") for
redemption where the proceeds of such redemption are to be automatically
reinvested in shares of another Fund (the "Issuing Fund") to effect an exchange
(whether or not pursuant to a Free Exchange) into Shares of the Issuing Fund:
(1) such Shareholder Account will be deemed to have tendered Shares (or portions
thereof) of the Redeeming Fund with each Month of Original Purchase represented
by Shares of the redeeming Fund reflected in such Shareholder Account
immediately prior to such tender in the same proportion that the number of
Shares of the redeeming Fund with such Month of Original Purchase reflected in
such Shareholder immediately prior to such tender bore to the total number of
Shares of the Redeeming Fund reflected in such Shareholder Account immediately
prior to such tender, and on that basis the tendered Shares of the Redeeming
Fund will be identified as Distributor Shares or Post-distributor Shares; (2)
such Shareholder Account will be deemed to have tendered Commission Shares (or
portions thereof) and Free Shares (or portions thereof) of the Redeeming Fund of
each category (i.e., Distributor Shares or Post- distributor Shares) in the same
proportion that the number of Commission Shares or Free Shares (as the case may
be) of the Redeeming Fund in such category reflected in such Shareholder Account
bore to the total number of Shares of the Redeeming Fund in such category
reflected in such Shareholder Account immediately prior to such tender, (3) the
Shares (or portions thereof) of the Issuing Fund issued in connection with such
exchange will be deemed to have the same Months of Original Purchase as the
Shares (or portions thereof) of the Redeeming Fund so tendered and will be
categorized as Distributor Shares and Post-distributor Shares accordingly, and
(4) the Shares (or portions thereof) of each Category of the Issuing Fund issued
in connection with such exchange will be deemed to be Commission Shares and Free
Shares in the same proportion that the Shares of such Category of the Redeeming
Fund were Commission Shares and Free Shares.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account); provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
relating to Free Shares (and the Sub-transfer Agent shall account for such Free
Shares as provided in (3) above) and shall apply a first-in-first-out procedure
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<PAGE>
(based upon the Date of Original Purchase) to determine which Commission Shares
(or portions thereof) of a Redeeming Fund were redeemed in connection with an
exchange.
(7) Identification of Converted Shares. The Transfer Agent records
maintained for each Shareholder Account (other than an Omnibus Account) will
treat each Commission Share of a Fund as though it were redeemed at its Net
Asset Value on the date such Commission Share converts into a Class A share of
such Fund in accordance with an applicable Conversion Feature applied with
reference to its Month of Original Purchase and will treat each Free Share of
such Fund with a given Month of Original Purchase as though it were redeemed at
its Net Asset Value when it is simultaneously converted to a Class A share at
the time the Commission Shares of such Fund with such Month of Original Purchase
are so converted.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account) ; provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall apply the foregoing rules to Commission Shares with
reference to the Date of Original Issue of each Commission Share (as though each
such date were a separate Month of Original Issue) and shall not be required to
apply the foregoing rules to Free Shares (and the Sub-transfer Agent shall
account for such Free Shares as provided in (3) above).
(C) ALLOCATIONS OF ASSET BASED SALE CHARGES AND CDSCs AMONG DISTRIBUTOR
SHARES AND POST-DISTRIBUTOR SHARES:
The Transfer Agent shall use the following rules to allocate the amounts of
Asset Based Sales Charges and CDSCs payable by each Fund in respect of Shares
between Distributor Shares and Post-distributor Shares:
(1) Receivables Constituting CDSCs: CDSCs will be treated as relating to
Distributor Shares or Post-distributor Shares depending upon the Month of
Original Purchase of the Commission Share the redemption of which gives rise to
the payment of a CDSC by a Shareholder Account.
The Transfer Agent shall cause each Sub-transfer Agent to apply the
foregoing rule to each Sub-shareholder Account based on the records maintained
by such Sub-transfer Agent; provided, that until the Sub-transfer Agent in
respect of the ML Omnibus Account develops the data processing capability to
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<PAGE>
conform to the foregoing requirements, such Sub-transfer Agent shall apply the
foregoing rules to each Sub-shareholder Account with respect to the Date of
Original Purchase of any Commission Share as though each such date were a
separate Month of Original Purchase.
(2) Receivables Constituting Asset Based Sales Charges:
The Asset Based Sales Charges accruing in respect of each Shareholder
Account (other than an Omnibus Account) shall be allocated to each Share
reflected in such Shareholder Account as of the close of business on such day on
an equal per share basis. For example, the Asset Based Sales Charges
attributable to Distributor Shares on any day shall be computed and allocated as
follows:
A * (B/C)
where:
A = Total amount of Asset Based Sales Charge accrued in respect
of such Shareholder Account (other than an Omnibus Account) on
such day.
B = Number of Distributor Shares reflected in such Shareholder
Account (other than an Omnibus Account) on the close of
business on such day
C = Total number of Distributor Shares and Post-distributor
Shares reflected in such Shareholder Account (other than an
Omnibus Account) and outstanding as of the close of business
on such day.
The Portion of the Asset Based Sales Charges of such Fund accruing in
respect of such Shareholder Account for such day allocated to Post-distributor
Shares will be obtained using the same formula but substituting for "B" the
number of Post-distributor Shares, as the case may be, reflected in such
Shareholder Account and outstanding on the close of business on such day. The
foregoing allocation formula may be adjusted from time to time by notice to the
Fund and the transfer agent for the Fund from the Seller and the Buyer.
The Transfer Agent shall, based on the records maintained by the record
owner of such Omnibus Account, allocate the Asset Based Sales Charge accruing in
respect of each Omnibus Account on each day among all Sub-shareholder Accounts
reflected in such Omnibus Account on an equal per share basis based upon the
total number of Distributor Shares and Post-distributor Shares reflected in each
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<PAGE>
such Sub-shareholder Account as of the close of business on such day. In
addition, the Transfer Agent shall apply the foregoing rules to each
Sub-shareholder Account (as though it were a Shareholder Account other than an
Omnibus Account), based on the records maintained by the record owner, to
allocate the Asset Based Sales Charge so allocated to any Sub-shareholder
Account among the Distributor Shares and Post-distributor Shares reflected in
each such Sub-shareholder Account in accordance with the rules set forth in the
preceding paragraph; provided, that until the Sub-transfer Agent in respect of
the ML Omnibus Account develops the data processing capacity to apply the rules
of this Schedule I as applicable to Sub-shareholder Accounts other than ML
Omnibus Accounts, the Transfer Agent shall allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund in the ML Omnibus Account during any
calendar month (or portion thereof) among Distributor Shares and
Post-distributor Shares as follows:
(a) The portion of such Asset Based Sales Charge allocable to
Distributor Shares shall be computed as follows:
A * ((B + C)/2) ((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued
during such calendar month (or portion thereof) in
respect of Shares of such Fund in the ML Omnibus
Account
B = Shares of such Fund in the ML Omnibus Account and
identified as Distributor Shares and outstanding as
of the close of business on the last day of the
immediately preceding calendar month (or portion
thereof), times Net Asset Value per Share as of such
time
C = Shares of such Fund in the ML Omnibus Account and
identified as Distributor Shares and outstanding as
of the close of business on the last day of such
calendar month (or portion thereof), times Net Asset
Value per Share as of such time
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<PAGE>
D = Total number of Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding
calendar month (or portion thereof), times Net Asset
Value per Share as of such time.
E = Total number of Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of such calendar month (or
portion thereof), times Net Asset Value per Share as
of such time.
(b) The portion of such Asset Based Sales Charge allocable to
Post-distributor Shares shall be computed as follows:
A * ((B + C)/2) ((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued
during such calendar month (or portion thereof) in
respect of Shares of such Fund in the ML Omnibus
Account
B = Shares of such Fund in the ML Omnibus Account and
identified as Post- distributor Shares and
outstanding as of the close of business on the last
day of the immediately preceding calendar month (or
portion thereof), times Net Asset Value per Share as
of such time
C = Shares of such Fund in the ML Omnibus Account and
identified as Post- distributor Shares and
outstanding as of the close of business on the last
day of such calendar month (or portion thereof),
times Net Asset Value per Share as of such time
D = Total number of Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding
calendar month (or portion thereof), times Net Asset
Value per Share as of such time.
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<PAGE>
E = Total number of Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of such calendar month (or
portion thereof), times Net Asset Value per Share as
of such time.
(3) Payments on behalf of each Fund.
On the close of business on each day, or to the extent the parties agree
less frequently, the Transfer Agent shall cause payment to be made of the amount
of the Asset Based Sales Charge and CDSCs accruing on such day in respect of the
Shares of such Fund owned of record by Shareholder Accounts (other than Omnibus
Accounts) by two separate wire transfers, directly from accounts of such Fund as
follows:
1. The Asset Based Sales Charge and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to Distributor
Shares in accordance with the preceding rules shall be paid to the Distributor's
Account, unless the Distributor otherwise instructs the Fund in any irrevocable
payment instruction; and
2. The Asset Based Sales Charges and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to
Post-distributor Shares in accordance with the preceding rules shall be paid in
accordance with direction received from any future distributor of Shares of the
Instant Fund.
On each Omnibus CDSC Settlement Date, the Transfer Agent for each Fund
shall cause the applicable Sub-transfer Agent to cause payment to be made of the
amount of the CDSCs accruing during the period to which such Omnibus CDSC
Settlement Date relates in respect of the Shares of such Fund owned of record by
each Omnibus Account by two separate wire transfers directly from the account of
such Fund maintained by such Transfer Agent, as follows:
1. The CDSCs accruing in respect of such Omnibus Account and allocable to
Distributor Shares in accordance with the preceding rules shall he paid to the
Distributor's Account, unless the Distributor otherwise instructs the Fund in
any irrevocable payment instruction; and
2. The CDSCs accruing in respect of such Omnibus Account and allocable to
Post-distributor Shares in accordance with the preceding rules shall be paid in
accordance with direction received from any future distributor of Shares of the
Instant Fund.
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<PAGE>
On each Omnibus Asset Based Sales Charge Settlement Date the Transfer Agent
for each Fund shall cause payment to be made of the amount of the Asset Based
Sales Charge accruing for the period to which such Omnibus Asset Based Sales
Charge Settlement Date relates in respect of the Shares of such Fund owned of
record by each Omnibus Account by two separate wire transfers directly from
accounts of such Fund as follows:
1. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Distributor Shares shall be paid to the Distributor's
Collection Account, unless the Distributor otherwise instructs the Fund in any
irrevocable payment instruction; and
2. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Post-Distributor Shares shall be paid in accordance with
direction received from any future distributor of Shares of the Instant Fund.
F:\CEF\SALEM006\AGREEMEN\EVMUB2.AGR:1/27/98
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<PAGE>
EXHIBIT A
EVERGREEN MUNICIPAL TRUST
Single State Tax Free Funds
-----------------------------
Evergreen California Tax Free Fund
Evergreen Florida Municipal Bond Fund
Evergreen Massachusetts Tax Free Fund
Evergreen Missouri Tax Free Fund
Evergreen New York Tax Free Fund
Evergreen Pennsylvania Tax Free Fund
PRINCIPAL UNDERWRITING AGREEMENT
EVERGREEN MUNICIPAL TRUST
CLASS B SHARES
AGREEMENT, made as of the 18th day of September, 1997, by and between
Evergreen Municipal Trust (the "Trust") and Evergreen Distributor, Inc. ("EDI")
WHEREAS, The Trust, has adopted one or more Plans of Distribution with
respect to certain Classes of shares of its separate investment series (each a
"Plan", or collectively the "Plans") pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act") which Plans authorize the Trust
on behalf of the Funds to enter into agreements regarding the distribution of
such Classes of shares (the "Shares") of the separate investment series of the
Trust (the "Funds") set forth on Exhibit A; and
WHEREAS, the Trust has agreed that Evergreen Distributor, Inc. (the
"Distributor"), a Delaware corporation, shall act as the distributor of the
Shares; and
WHEREAS, the Distributor agrees to act as distributor of the Shares for the
period of this Distribution Agreement (the "Agreement");
NOW, THEREFORE, in consideration of the agreements hereinafter contained,
it is agreed as follows:
1. SERVICES AS DISTRIBUTOR.
1.1. The Distributor agrees to use appropriate efforts to promote each Fund
and to solicit orders for the purchase of Shares and will undertake such
advertising and promotion as it believes reasonable in connection with such
solicitation. The services to be performed hereunder by the Distributor are
described in more detail in Section 7 hereof. In the event that the Trust
establishes additional investment series with respect to which it desires to
retain the Distributor to act as distributor for Class B shares hereunder, it
shall promptly notify the Distributor in writing. If the Distributor is willing
to render such services it shall notify the Trust in writing whereupon such
portfolio shall become a Fund and its Class B shares shall become Shares
hereunder.
1.2. All activities by the Distributor and its agents and employees as the
distributor of Shares shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations made or
adopted pursuant to the 1940 Act by the Securities and Exchange Commission (the
"Commission") or any securities association registered under the Securities
Exchange Act of 1934, as amended.
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1.3 In selling the Shares, the Distributor shall use its best efforts in
all respects duly to conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the Distributor, any selected
dealer or any other person is authorized by the Trust to give any information or
to make any representations, other than those contained in the Trust's
registration statement (the "Registration Statement") or related Fund prospectus
and statement of additional information ("Prospectus and Statement of Additional
Information") and any sales literature specifically approved by the Trust.
1.4 The Distributor shall adopt and follow procedures, as approved by the
officers of the Trust, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the National Association of Securities
Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
1.5. The Distributor will transmit any orders received by it for purchase
or redemption of Shares to the transfer agent and custodian for the applicable
Fund.
1.6. Whenever in their judgment such action is warranted by unusual market,
economic or political conditions, or by abnormal circumstances of any kind, the
Trust's officers may decline to accept any orders for, or make any sales of
Shares until such time as those officers deem it advisable to accept such orders
and to make such sales.
1.7. The Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others. The
Distributor shall offer and sell Shares only to such selected dealers as are
members, in good standing, of the NASD.
1.8 The Distributor agrees to adopt compliance standards, in a form
satisfactory to the Trust, governing the operation of the multiple class
distribution system under which Shares are offered.
2. DUTIES OF THE TRUST.
2.1. The Trust agrees at its own expense to execute any and all documents
and to furnish, at its own expense, any and all information and otherwise to
take all actions that may be reasonably necessary in connection with the
qualification of Shares for sale in such states as the Trust and the Distributor
may designate.
2.2. The Trust shall furnish from time to time, for use in connection with
the sale of Shares such information with respect to the Funds and the Shares as
the Distributor may reasonably request; and the Trust warrants that any such
information shall be true and correct. Upon request, the Trust shall also
provide or cause to be provided to the Distributor: (a) unaudited
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semi-annual statements of each Fund's books and accounts, (b) quarterly earnings
statements of each Fund, (c) a monthly itemized list of the securities in each
Fund, (d) monthly balance sheets as soon as practicable after the end of each
month, and (e) from time to time such additional. information regarding each
Fund's financial condition as the Distributor may reasonably request.
3. REPRESENTATIONS OF THE TRUST.
3.1. The Trust represents to the Distributor that it is registered under
the 1940 Act and that the Shares of each of the Funds have been registered under
the Securities Act of 1933, as amended (the "Securities Act"). The Trust will
file such amendments to its Registration Statement as may be required and will
use its best efforts to ensure that such Registration Statement remains
accurate.
4. INDEMNIFICATION.
4.1 The Trust shall indemnify and hold harmless the Distributor, its
Officers and Directors, and each person, if any, who controls the Distributor
within the meaning of Section 15 of the Securities Act against any loss,
liability, claim, damage or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damage or expense
and reasonable counsel fees incurred in connection therewith), which the
Distributor or such Officer and Director or controlling person may incur under
the Securities Act or under common law or otherwise, arising out of or based
upon any untrue statement, or alleged untrue statement, of a material fact
contained in the Registration Statement, as from time to time amended or
supplemented, any prospectus or annual or interim report to shareholders of the
Trust, or arising out of or based upon any omission, or alleged omission, to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished to the Trust in
connection therewith by or on behalf of the Distributor, provided, however, that
in no case (i) is the indemnification of the Trust in favor of the Distributor,
its Officer and Directors, or any such controlling persons to be deemed to
protect such Distributor, any Officer or Director thereof, or any such
controlling persons thereof against any liability to the Trust of each Fund or
any securities holders thereof to which the Distributor any Officer or Director
thereof, or any such controlling persons would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of their
duties or by reason of the reckless disregard of their obligations and duties
under this Agreement; or (ii) is the Trust to be liable under its indemnity
agreement contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or such
controlling person, as the case maybe, shall have notified the Trust in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons
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shall have received notice of such service on any designated agent), but failure
to notify the Trust of any such claim shall not relieve it from any liability
which it may have to the person against whom such action it brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Trust will be entitled to participate at its own expense in the defense, or, if
it so elects, to assume the defense of any suit brought to enforce any such
liability, but if the Trust elects to assume the defense, such defense shall be
conducted by counsel chosen by it and satisfactory to the Distributor or such
controlling person or persons, defendant or defendants in the suit. In the event
the Trust elects to assume the defense of any such suit and retain such counsel,
the Distributor or such controlling person or persons, defendant or defendants
in the suit, shall bear the fees and expenses of any additional counsel retained
by them, but, in case the Trust does not elect to assume the defense of any such
suit, it will reimburse the Distributor or such controlling person or persons,
defendant or defendants in the suit, for the reasonable fees and expenses of any
counsel retained by them. The Trust shall promptly notify the Distributor of the
commencement of any litigation or proceeding against it or any of its officers
or directors in connection with the issuance or sale of any of the shares.
4.2 The Distributor shall indemnify and hold harmless the Trust and each of
its directors and officers and each person, if any, who controls the Trust
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in paragraph 4.1, but only with respect to statements or
omissions made in reliance upon , and in conformity with, information furnished
to the Trust in writing by or on behalf of the Distributor for uses in
connection with the Registration Statement, as from time to time amended, or the
annual or interim reports to shareholders. In case any action shall be brought
against the Trust or any persons so indemnified, in respect of which indemnity
may be sought against the Distributor, the Distributor shall have rights and
duties given to the Trust, and the Trust and each person so indemnified shall
have the rights and duties given to the Distributor by the provisions of
paragraph 4.1.
5. OFFERING OF SHARES.
5.1. None of the Shares shall be offered by either the Distributor or the
Trust under any of the provisions of this Agreement, and no orders for the
purchase or sale of Shares hereunder shall be accepted by the Trust, if and so
long as the effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the provisions of
the Securities Act or if and so long as a current prospectus and statement of
additional information as required by Section 10(b)(2) of the Securities Act, as
amended, is not on file with the Commission; provided, however, that nothing
contained in this paragraph 5.1 shall in any way restrict or have any
application to or bearing upon the Trust's obligation to repurchase Shares from
any shareholder in accordance with the provisions of the prospectus of each Fund
or the Trust's prospectus or Declaration of Trust.
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<PAGE>
6. AMENDMENTS TO REGISTRATION STATEMENT AND OTHER MATERIAL EVENTS.
6.1. The Trust agrees to advise the Distributor as soon as reasonably
practical by a notice in writing delivered to the Distributor: (a) of any
request or action taken by the Commission which is material to the Distributor's
obligations hereunder or (b) any material fact of which the Trust becomes aware
which affects the Distributor's obligations hereunder.
For purposes of this section, informal requests by or acts of the Staff of
the Commission shall not be deemed actions of or requests by the Commission.
7. COMPENSATION OF DISTRIBUTOR.
7.1 (a) On all sales of Shares of the Fund shall receive the current net
asset value. The Trust in respect of each Fund shall pay to the Distributor the
Distributor's Allocable Portion (as defined below) of a fee (the "Distribution
Fee") in respect of the Shares of each such Fund at the rate of .75% per annum
of the average daily net asset value of the Shares of such Fund, subject to the
limitation on the maximum amount of such fees under the Business Conduct Rules
as applicable to such Distribution Fee on the date hereof, as compensation to
the Distributor for its services in connection with the offer and sale of Shares
and shall also pay to the Distributor contingent deferred sales charges ("CDSC")
as set forth in the Fund's current Prospectus and Statement of Additional
Information, and as required by this Agreement. The Distributor shall also
receive payments consisting of shareholder service fees ("Service Fees") at the
rate of .25% per annum of the average daily net asset value of the Shares. The
Distributor may allow all or a part of said Distribution Fee and CDSCs received
by it (and not paid to others as hereinafter provided) to such brokers, dealers
or other persons as Distributor may determine. The Distributor may also pay
Service Fees to brokers, dealers or other persons providing services to
shareholders.
(b) The provisions of this Section 7.1 shall be applicable to the extent
necessary to enable the Trust to comply with its obligations in respect of each
Fund to pay Distributor its Allocable Portion (as hereinafter described) of the
Distribution Fee paid in respect of Shares of such Fund, and shall remain in
effect with respect to the Shares so long as any payments are required to be
made by the Trust with respect to the Shares of a Fund pursuant to the
irrevocable payment instructions as defined in the Purchase and Sale Agreement
dated as of May 31, 1995 (as amended and supplemented, the "Purchase Agreement")
among the Distributor, Evergreen Keystone Investment Services, Inc., Citibank,
N.A. and Citicorp North America, Inc. and the Amended and Restated Master Sale
Agreement between the Distributor and Mutual Fund Funding 1994-1 dated as of May
5, 1997, as amended and supplemented from time to time (the "Master Sale
Agreement") (the "Irrevocable Payment Instructions").
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(c) As promptly as possible after the first Business Day (as defined in the
Prospectus) following the twentieth day of each month, the Trust shall pay to
the Distributor the Distributor's Allocable Portion of the Distribution Fee, any
CDSCs and any Service Fees that may be due in respect of each Fund.
(d) The Distributor's Allocable Portion of the Distribution Fee paid by the
Trust in respect of Shares of a Fund shall mean the portion of the Asset Based
Sales Charge allocable to Distributor Shares of such Fund (as defined in
Schedule I to this Agreement) in accordance with Schedule I hereto. The Trust
agrees to cause its transfer agent to maintain the records and arrange for the
payments on behalf of the trust in respect of each Fund at the times and in the
amounts and to the accounts required by Schedule I hereto, as the same may be
amended from time to time. It is acknowledged and agreed that by virtue of the
operation of Schedule I hereto the Distributor's Allocable Portion of the
Distribution Fee paid by the Trust in respect of Shares of each Fund, may, to
the extent provided in Schedule I hereto, take into account the Distribution Fee
payable by such Fund in respect of other existing and future classes and/or
sub-classes of shares of such Fund which would be treated as "Shares: under
Schedule I hereto. The trust will limit amounts paid to any subsequent principal
underwriters of Shares of a Fund to the portion of the Asset Based Sales Charge
paid in respect of Shares attributable to such Shares which are Post-Distributor
Shares (as defined in Schedule I hereto) in accordance with Schedule I hereto.
The Trust shall cause the transfer agent and sub-transfer agents for each
Fund to withhold from redemption proceeds payable to holders of Shares of such
Fund on redemption thereof the CDSCs payable upon redemption thereof as set
forth in the then current Prospectus and/or Statement of Additional Information
of such Fund and to pay to the Distributor the Distributor's Allocable Portion
of such CDSCs paid in respect of Class B Shares of such Fund which shall be
equal to the portion thereof allocable to Distributor Shares of such Fund (as
defined in Schedule I hereto) in accordance with Schedule I hereto.
(e) The Distributor shall be considered to have completely earned the right
to the payment of its Allocable Portion of the Distribution Fee and the right to
payment over to it of its Allocable Portion of the CDSC in respect of Shares of
a Fund as provided for hereby upon the completion of the sales of each
Commission Share of such Fund (as defined in Schedule I hereto) taken into
account as a Distributor Share in computing the Distributor's Allocable Portion
in accordance with Schedule I hereto.
(f) Except as provided in Section 7(g) below in respect of the Distribution
Fee only, the Trust's obligation to pay the Distributor the Distribution Fee in
respect of a Fund and to pay over to the Distributor CDSCs provided for hereby
shall be absolute and unconditional and shall not be subject to dispute, offset,
counterclaim or any defense whatsoever (it being understood that nothing in this
sentence shall be deemed a waiver by the trust of its right separately to pursue
any claims it may have against the Distributor with respect to a Fund and
enforce such claims
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<PAGE>
against any assets (other than the Distributor's right to its Allocable Portion
of the Distribution Fee and CDSCs (the "Collection Rights")) of the Distributor.
(g) Notwithstanding anything in this Agreement to the contrary, the Trust
in respect of each Fund shall pay to the Distributor its Allocable Portion of
the Distribution Fee provided for hereby notwithstanding its termination as
Distributor for the Shares of such Fund or any termination of this Agreement and
such payment of such Distribution fee, and that obligation and the method of
computing such payment, shall not be changed or terminated except to the extent
required by any change in applicable law, including, without limitation, the
1940 Act, the Rules promulgated thereunder by the Securities and Exchange
Commission and the Business Conduct Ruled, in each case enacted or promulgated
after May 1, 1997, or in connection with a Complete Termination (as hereinafter
defined). For the purposes of this Section 7, "Complete Termination" means in
respect of a Fund a termination of such Fund's Rule 12b-1 plan for Class B
Shares involving the cessation of payments of the Distribution Fee, and the
cessation of payments of Distribution Fee pursuant to every other Rule 12b-1
plan of such Fund for every existing or future B-Class-of-Shares (as hereinafter
defined) and the Fund's discontinuance of the offering of every existing or
future B-Class-of-Shares, which conditions shall be deemed satisfied when they
are first complied with hereafter and so long thereafter as they are complied
with prior to the date upon which all of the Shares which are Distributor Shares
pursuant to Schedule I hereto shall have been redeemed or converted. For
purposes of this Section 7, the term B-Class-of-Shares means the Shares of each
Fund and each other class of shares of such Fund hereafter issued which would be
treated as Shares under Schedule I hereto or which has substantially similar
economic characteristics to the B Class of Shares taking into account the total
sales charge, CDSC or other similar charges borne directly or indirectly by the
holder of the shares of such class. The parties agree that the existing C Class
of Shares of any Fund does not have substantially similar economic
characteristics to the B-Class-of-Shares taking into account the total sales
charges, CDSCs or other similar charges borne directly or indirectly by the
holder of such shares. For purposes of clarity the parties to the Agreement
hereby state that they intend that a new installment load class of shares which
may be authorized by amendment to Rule 6(c)-10 under the 1940 Act will be
considered to be a B-class-of-Shares if it has economic characteristics
substantially similar to the economic characteristics of the existing Class B
Shares taking into account the total sale charge, CDCSs or other similar charges
borne directly or indirectly by the holder of such charges and will not be
considered to be a B-Class-of-Shares if it has economic characteristics
substantially similar to the economic characteristics of the existing Class C
shares of the Fund taking into account the total sales charge, CDSCs or other
similar charges home directly or indirectly by the holder of such shares.
(h) The Distributor may assign, sell or otherwise transfer any part of its
Allocable Portions of the Distribution Fees and CDSCs and obligations of the
Trust with respect to a Fund related thereto (but not the Distributor's
obligations to the Trust with respect to such Fund provided for in this
Agreement) to any person (an "assignee") and any such assignment shall be
effective upon written notice to the Trust by the Distributor. In connection
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<PAGE>
therewith the Trust shall pay all or any amounts in respect of its Allocable
Portions directly to the Assignee thereof as directed in a writing by the
Distributor in the Irrevocable Payment Instructions, as the same may be amended
from time to time with the consent of the Trust, and the trust shall be without
liability to any person of it pays such amounts when and as so directed, except
for underpayments of amounts actually due without any amount payable as
consequential or other damages due to such underpayment and without interest
except to the extent that delay in payment of Distribution Fee and CDSCs results
in an increase in the maximum amount allowable under the NASD Business Conduct
Rules, which increases daily at a rate of prime plus one percent per annum.
Each Fund will not, to the extent it may otherwise be empowered to do so,
change or waive any CDSC with respect to Class B Shares, except as provided in
the Fund's Prospectus or Statement of Additional Information without the
Distributor's or Assignee's consent, as applicable. Notwithstanding anything to
the contrary in this Agreement or any termination of this Agreement or the
Distributor as principal underwriter for the Shares of the Funds, the
Distributor shall be entitled to be paid its Allocable Portion of the CDSCs
whether or not a Fund's Rule 12b- 1 plan for B Shares is terminated and whether
or not any such termination is a Complete Termination, as defined above.
(i) Under this Agreement, the Distributor shall: (i) make payments to
securities dealers and others engaged in the sale of Shares; (ii) make payments
of principal and interest in connection with the financing of commission
payments made by the Distributor in connection with the sale of Shares (iii)
incur the expense of obtaining such support services, telephone facilities and
shareholder services as may reasonably be required in connection with its duties
hereunder; (iv) formulate and implement marketing and promotional activities,
including, but not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (v) prepare, print and
distribute sales literature; (vi) prepare, print and distribute Prospectuses of
the Funds and reports for recipients other than existing shareholders of the
Funds; and (vii) provide to the Trust such information, analyses and opinions
with respect to marketing and promotional activities as the Trust may, from time
to time, reasonably request.
(j) The Distributor shall prepare and deliver reports to the Treasurer of
the Trust on a regular, at least monthly, basis, showing the distribution
expenditures incurred by the Distributor in connection with its services
rendered pursuant to this Agreement and the Plan and the purposes therefor, as
well as any supplemental reports as the Trustees, from time to time, may
reasonably request.
(k) The Distributor may retain the difference between the current offering
price of Shares, as set forth in the current prospectus for each Fund, and net
asset value, less any reallowance that is payable in accordance with the sales
charge schedule in effect at any given time with respect to the Shares.
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<PAGE>
(l) The Distributor may retain any CDSCs payable with respect to the
redemption of any Shares, provided however, that any CDSCs received by the
Distributor shall first be applied by the Distributor or its Assignee to any
outstanding amounts payable or which may in the future be payable by the
Distributor or its Assignee under financing arrangements entered into in
connection with the payment of commissions on the sale of Shares.
8. CONFIDENTIALITY, NON-EXCLUSIVE AGENCY.
8.1. The Distributor agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records and other
information relative to the Funds and its prior, present or potential
shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and to obtain approval in writing by
the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Distributor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust.
8.2. Nothing contained in this Agreement shall prevent the Distributor, or
any affiliated person of the Distributor, from performing services similar to
those to be performed hereunder for any other person, firm, or corporation or
for its or their own accounts or for the accounts of others.
9. TERM.
9.1. This Agreement shall continue for two years from the date of
commencement of operations and thereafter for successive annual periods,
provided such continuance is specifically approved at least annually by (i) a
vote of the majority of the Trustees of the Trust and (ii) a vote of the
majority of those Trustees of the Trust who are not interested persons of the
Trust and who have no direct or indirect financial interest in the operation of
the Plan, in this Agreement or any agreement related to the Plan (the
"Independent Trustees") by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable at any time,
with respect to the Trust, without penalty, (a) on not less than 60 days'
written notice by vote of a majority of the Independent Trustees, or by vote of
the holders of a majority of the outstanding voting securities of the Trust, or
(b) upon not less than 60 days' written notice by the Distributor. This
Agreement may remain in effect with respect to a Fund even if it has been
terminated in accordance with this paragraph with respect to one or more other
Funds of the Trust. This Agreement will also terminate automatically in the
event of its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested persons," and "assignment" shall
have the same meaning as such terms have in the 1940 Act.)
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10. MISCELLANEOUS.
10.1. This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts. All sales hereunder are to be made, and title to the Shares shall
pass, in Boston, Massachusetts.
10.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their constructions or effect.
10.3 The obligations of the Trust hereunder are not personally binding
upon, nor shall resort be had to the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Trust and only the Trust's
property shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below.
EVERGREEN MUNICIPAL TRUST
By: /s/ John J. Pileggi
-------------------------
Name: John J. Pileggi
Title: President
EVERGREEN DISTRIBUTOR, INC.
By: /s/ J. David Huber
-------------------------
Name: J. David Huber
Title: President
<PAGE>
SCHEDULE A
EVERGREEN MUNICIPAL TRUST
Single State Tax Free Funds
-----------------------------
Evergreen California Tax Free Fund
Evergreen Connecticut Municipal Bond Fund
Evergreen Florida High Income Municipal Bond Fund
Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund
Evergreen Massachusetts Tax Free Fund
Evergreen Missouri Tax Free Fund
Evergreen New Jersey Tax Free Income Fund
Evergreen New York Tax Free Fund
Evergreen North Carolina Municipal Bond Fund
Evergreen Pennsylvania Tax Free Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
National Tax Free Funds
-----------------------
Evergreen High Grade Tax Free Fund
Evergreen Short-Intermediate Municipal Fund
Evergreen Tax Free Fund
<PAGE>
EXHIBIT A
(Amended February 28, 1998)
EVERGREEN MUNICIPAL TRUST
Single State Tax Free Funds
-----------------------------
Evergreen California Tax Free Fund
Evergreen Connecticut Municipal Bond Fund
Evergreen Florida High Income Municipal Bond Fund
Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund
Evergreen Maryland Municipal Bond Fund
Evergreen Massachusetts Tax Free Fund
Evergreen Missouri Tax Free Fund
Evergreen New Jersey Tax Free Income Fund
Evergreen New York Tax Free Fund
Evergreen North Carolina Municipal Bond Fund
Evergreen Pennsylvania Tax Free Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
National Tax Free Funds
-----------------------
Evergreen High Grade Tax Free Fund
Evergreen Short-Intermediate Municipal Fund
Evergreen Tax Free Fund
PRINCIPAL UNDERWRITING AGREEMENT
EVERGREEN MUNICIPAL TRUST
CLASS Y SHARES
AGREEMENT made this 18th day of September, 1997 by and between
Evergreen Municipal Trust on behalf of its series listed on Exhibit A attached
hereto (such Trust and series referred to herein as "Fund" individually or
"Funds" collectively) and Evergreen Distributor, Inc., a Delaware corporation
("Principal Underwriter").
It is hereby mutually agreed as follows:
1. The Fund hereby appoints Principal Underwriter a principal
underwriter of the Class Y shares of beneficial interest of the Fund ("Shares")
as an independent contractor upon the terms and conditions hereinafter set
forth. Except as the Fund may from time to time agree, Principal Underwriter
will act as agent for the Fund and not as principal.
2. Principal Underwriter will use its best efforts to find purchasers
for the Shares, to promote distribution of the Shares and may obtain orders from
brokers, dealers or other persons for sales of Shares to them. No such brokers,
dealers or other persons shall have any authority to act as agent for the Fund;
such brokers, dealers or other persons shall act only as principal in the sale
of Shares.
3. Sales of Shares by Principal Underwriter shall be at the applicable
public offering price determined in the manner set forth in the prospectus
and/or statement of additional information of the Fund current at the time of
the Fund's acceptance of the order for Shares. Principal Underwriter shall have
the right to sell Shares at net asset value, if such sale is permissible under
and consistent with applicable statutes, rules, regulations and orders. All
orders shall be subject to acceptance by the Fund, and the Fund reserves the
right, in its sole discretion, to reject any order received. The Fund shall not
be liable to anyone for failure to accept any order.
4. On all sales of Shares, the Fund shall receive the current net asset
value.
5. Payment to the Fund for Shares shall be in New York or Boston
Clearing House funds received by Principal Underwriter within three (3) business
days after notice of acceptance of the purchase order and the amount of the
applicable public offering price has been given to the purchaser. If such
payment is not received within such three-day period, the Fund reserves the
right, without further notice, forthwith to cancel its acceptance of any such
order. The Fund shall pay such issue taxes as may be required by law in
connection with the issuance of the Shares.
6. Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the Shares any representations concerning the Shares
except those contained in the then
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current prospectus and/or statement of additional information covering the
Shares and in printed
information approved by the Fund as information supplemental to such prospectus
and statement of additional information. Copies of the then current prospectus
and statement of additional information and any such printed supplemental
information will be supplied by the Fund to Principal Underwriter in reasonable
quantities upon request.
7. Principal Underwriter agrees to comply with the Business Conduct
Rules of the National Association of Securities Dealers, Inc.
8. The Fund appoints Principal Underwriter as its agent to accept
orders for redemptions and repurchases of Shares at values and in the manner
determined in accordance with the then current prospectus and/or statement of
additional information of the Fund.
9. The Fund agrees to indemnify and hold harmless the Principal
Underwriter, its officers and Directors and each person, if any, who controls
the Principal Underwriter within the meaning of Section 15 of the Securities Act
of 1933 ("1933 Act"), against any losses, claims, damages, liabilities and
expenses (including the cost of any legal fees incurred in connection therewith)
which the Principal Underwriter, its officers, Directors or any such controlling
person may incur under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon
a) any untrue statement or alleged untrue statement of a
material fact contained in the Fund's registration statement,
prospectus or statement of additional information (including amendments
and supplements thereto), or
b) any omission or alleged omission to state a material fact
required to be stated in the Fund's registration statement, prospectus
or statement of additional information necessary to make the statements
therein not misleading, provided, however, that insofar as losses,
claims, damages, liabilities or expenses arise out of or are based upon
any such untrue statement or omission or alleged untrue statement or
omission made in reliance and in conformity with information furnished
to the Fund by the Principal Underwriter for use in the Fund's
registration statement, prospectus or statement of additional
information, such indemnification is not applicable. In no case shall
the Fund indemnify the Principal Underwriter or its controlling person
as to any amounts incurred for any liability arising out of or based
upon any action for which the Principal Underwriter, its officers and
Directors or any controlling person would otherwise be subject to
liability by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of the
reckless disregard of its obligations and duties under this Agreement.
10. The Principal Underwriter agrees to indemnify and hold harmless the
Fund, its officers, Trustees and each person, if any, who controls the Fund
within the meaning of Section
23932
2
<PAGE>
15 of the 1933 Act against any loss, claims, damages, liabilities and expenses
(including the cost
of any legal fees incurred in connection therewith) which the Fund, its
officers, Trustees or any such controlling person may incur under the 1933 Act,
under any other statute, at common law or otherwise arising out of the
acquisition of any Shares by any person which
a) may be based upon any wrongful act by the Principal
Underwriter or any of its employees or representatives, or
b) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in the Fund's registration
statement, prospectus or statement of additional information (including
amendments and supplements thereto), or any omission or alleged
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
or confirmed in writing to the Fund by the Principal Underwriter.
11. The Fund agrees to execute such papers and to do such acts and
things as shall from time to time be reasonably requested by Principal
Underwriter for the purpose of qualifying the Shares for sale under the
so-called "blue sky" laws of any state or for registering Shares under the 1933
Act or the Fund under the Investment Company Act of 1940 ("1940 Act"). Principal
Underwriter shall bear the expense of preparing, printing and distributing
advertising, sales literature, prospectuses and statements of additional
information. The Fund shall bear the expense of registering Shares under the
1933 Act and the Fund under the 1940 Act, qualifying Shares for sale under the
so-called "blue sky" laws of any state, the preparation and printing of
prospectuses, statements of additional information and reports required to be
filed with the Securities and Exchange Commission and other authorities, the
preparation, printing and mailing of prospectuses and statements of additional
information to shareholders of the Fund, and the direct expenses of the issuance
of Shares.
12. This Agreement shall become effective as of the date of the
commencement of operations of the Fund and shall remain in force for two years
unless sooner terminated or continued as provided below. This Agreement shall
continue in effect after such term if its continuance is specifically approved
by a majority of the Trustees of the Fund at least annually in accordance with
the 1940 Act and the rules and regulations thereunder.
This Agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Trustees or by a vote of a majority of the
Fund's outstanding Shares on not more than sixty (60) days written notice to any
other party to the Agreement; and shall terminate automatically in the event of
its assignment (as defined in the 1940 Act).
23932
3
<PAGE>
13. This Agreement shall be construed in accordance with the laws of
The Commonwealth of Massachusetts. All sales hereunder are to be made, and title
to the Shares shall pass, in Boston, Massachusetts.
14. The Fund is a series of a Delaware business trust established under
a Declaration of Trust, as it may be amended from time to time. The obligations
of the Fund are not personally binding upon, nor shall recourse be had against,
the private property of any of the Trustees, shareholders, officers, employees
or agents of the Fund, but only the property of the Fund shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized at Boston,
Massachusetts, as of the day and year first written above.
EVERGREEN MUNICIPAL TRUST
By: /s/ John J. Pileggi
---------------------------
Name: John J. Pileggi
Title: President
EVERGREEN DISTRIBUTOR, INC.
By: /s/ William J. Tomko
---------------------------
Name: William J. Tomko
Title: President
<PAGE>
EXHIBIT A
EVERGREEN MUNICIPAL TRUST
Single State Tax Free Funds
-----------------------------
Evergreen California Tax Free Fund*
Evergreen Connecticut Municipal Bond Fund*
Evergreen Florida High Income Municipal Bond Fund
Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund
Evergreen Massachusetts Tax Free Fund*
Evergreen Missouri Tax Free Fund*
Evergreen New Jersey Tax Free Income Fund
Evergreen New York Tax Free Fund*
Evergreen North Carolina Municipal Bond Fund
Evergreen Pennsylvania Tax Free Fund*
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
National Tax Free Funds
-----------------------
Evergreen High Grade Tax Free Fund*
Evergreen Short-Intermediate Municipal Fund
Evergreen Tax Free Fund*
*authorized but not issued
CUSTODIAN AGREEMENT
This Agreement between EVERGREEN MUNICIPAL TRUST, a business trust
organized and existing under the laws of Delaware with its principal place of
business at 200 Berkeley Street, Boston, Massachusetts 02116 (the "Fund"), and
STATE STREET BANK and TRUST COMPANY, a Massachusetts trust company with its
principal place of business at 225 Franklin Street, Boston, Massachusetts 02110
(the "Custodian"),
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends that this Agreement be applicable to the
series set forth on Schedule C hereto (such series together with all other
series subsequently established by the Fund and made subject to this Agreement
in accordance with Section 18, be referred to herein as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Fund's
Declaration of Trust. The Fund on behalf of the Portfolio(s) agrees to deliver
to the Custodian all securities and cash of the Portfolios, and all payments of
income, payments of principal or capital distributions received by it with
respect to all securities owned by the Portfolio(s) from time to time, and the
cash consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolios ("Shares") as may
be issued or sold from time to time. The Custodian shall not be responsible for
any property of a Portfolio held or received by the Portfolio and not delivered
to the Custodian.
Upon receipt of "Proper Instructions" (as such term is defined in
Section 6 hereof), the Custodian shall on behalf of the applicable Portfolio(s)
from time to time employ one or more sub-custodians located in the United
States, but only in accordance with an applicable vote by the Board of Trustees
of the Fund (the "Board of Trustees") on behalf of the applicable Portfolio(s),
and provided that the Custodian shall have no more or less responsibility or
liability to the Fund on
<PAGE>
account of any actions or omissions of any sub-custodian so employed than any
such sub-custodian has to the Custodian. The Custodian may employ as
sub-custodian for the Fund's foreign securities on behalf of the applicable
Portfolio(s) the foreign banking institutions and foreign securities
depositories designated in Schedules A and B hereto but only in accordance with
the applicable provisions of Sections 3 and 4.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY
THE CUSTODIAN IN THE UNITED STATES
SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to Section
2.8 in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury (each, a
"U.S. Securities System") and (b) commercial paper of an issuer for which State
Street Bank and Trust Company acts as issuing and paying agent ("Direct Paper")
which is deposited and/or maintained in the Direct Paper System of the Custodian
(the "Direct Paper System") pursuant to Section 2.9.
SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions on behalf of the applicable Portfolio, which may
be continuing instructions when deemed appropriate by the parties, and only in
the following cases:
1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a U.S. Securities
System, in accordance with the provisions of Section 2.8
hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee
<PAGE>
name of any agent appointed pursuant to Section 2.7 or into
the name or nominee name of any sub-custodian appointed
pursuant to Section 1; or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to the
Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall
have no responsibility or liability for any loss arising from
the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Portfolio, but only against receipt of adequate
collateral as agreed upon from time to time by the Custodian
and the Fund on behalf of the Portfolio, which may be in the
form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the
receipt of such collateral;
11) For delivery as security in connection with any borrowing by
the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance
<PAGE>
with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio
of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered under
the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by
the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent for the
Fund (the "Transfer Agent") for delivery to such Transfer
Agent or to the holders of Shares in connection with
distributions in kind, as may be described from time to time
in the currently effective prospectus and statement of
additional information of the Fund related to the Portfolio
(the "Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper trust purpose, but only upon receipt of,
in addition to Proper Instructions from the Fund on behalf of
the applicable Portfolio, a copy of a resolution of the Board
of Trustees or of the Executive Committee thereof signed by an
officer of the Fund and certified by the Secretary or an
Assistant Secretary thereof (a "Certified Resolution"),
specifying the securities of the Portfolio to be delivered,
setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper trust purpose, and
naming the person or persons to whom delivery of such
securities shall be made.
SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio
or of any nominee of the Custodian which nominee shall be assigned exclusively
to the Portfolio, unless the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered investment companies having
the same investment adviser as the Portfolio, or in the name or nominee name of
any agent appointed pursuant to Section 2.7 or in the name or nominee name of
any sub-custodian appointed pursuant to Section 1. All securities accepted by
the Custodian on behalf of the Portfolio under the terms of this Agreement shall
be in "street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls, maturities,
tender or exchange offers.
SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain
a separate bank account or accounts in the United States in the name of each
Portfolio of the Fund, subject only to
<PAGE>
draft or order by the Custodian acting pursuant to the terms of this Agreement,
and shall hold in such account or accounts, subject to the provisions hereof,
all cash received by it from or for the account of the Portfolio, other than
cash maintained by the Portfolio in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of 1940, as amended
(the "1940 Act"). Funds held by the Custodian for a Portfolio may be deposited
by it to its credit as Custodian in the Banking Department of the Custodian or
in such other banks or trust companies as it may in its discretion deem
necessary or desirable; provided, however, that every such bank or trust company
shall be qualified to act as a custodian under the 1940 Act and that each such
bank or trust company and the funds to be deposited with each such bank or trust
company shall on behalf of each applicable Portfolio be approved by vote of a
majority of the Board of Trustees. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
SECTION 2.5 COLLECTION OF INCOME. Subject to the provisions of Section
2.3, the Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer domestic securities if, on the date of payment
by the issuer, such securities are held by the Custodian or its agent thereof
and shall credit such income, as collected, to such Portfolio's custodian
account. Without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest when due on
securities held hereunder. Income due each Portfolio on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be the responsibility of
the Fund. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or data as may
be necessary to assist the Fund in arranging for the timely delivery to the
Custodian of the income to which the Portfolio is properly entitled.
SECTION 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions
on behalf of the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out monies of a
Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Portfolio but only (a) against the delivery of such
securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the 1940 Act
to act as a custodian and has been designated by the Custodian
as its agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
U.S. Securities System, in accordance with the conditions
<PAGE>
set forth in Section 2.8 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.9; (d) in the case of
repurchase agreements entered into between the Fund on behalf
of the Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery
of the securities either in certificate form or through an
entry crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against delivery of the
receipt evidencing purchase by the Portfolio of securities
owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from
the Portfolio or (e) for transfer to a time deposit account of
the Fund in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation
from a broker and/or the applicable bank pursuant to Proper
Instructions from the Fund as defined herein;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued as set forth
in Section 5 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares declared pursuant
to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper trust purpose, but only upon receipt of,
in addition to Proper Instructions from the Fund on behalf of
the Portfolio, a copy of a Certified Resolution specifying the
amount of such payment, setting forth the purpose for which
such payment is to be made, declaring such purpose to be a
proper trust purpose, and naming the person or persons to whom
such payment is to be made.
SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or
times in its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the 1940 Act to act as a
custodian, as its agent to carry out such of the provisions of this Section 2 as
the Custodian may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The
Custodian may deposit and/or maintain securities owned by a Portfolio in a
clearing agency registered with the
<PAGE>
United States Securities and Exchange Commission (the "SEC") under Section 17A
of the Exchange Act , which acts as a securities depository, or in the
book-entry system authorized by the U.S. Department of the Treasury and certain
federal agencies, collectively referred to herein as "U.S. Securities System" in
accordance with applicable Federal Reserve Board and SEC rules and regulations,
if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are
represented in an account of the Custodian in the U.S.
Securities System (the "U.S. Securities System Account") which
account shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from the
U.S. Securities System that such securities have been
transferred to the U.S. Securities System Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the
Portfolio. The Custodian shall transfer securities sold for
the account of the Portfolio upon (i) receipt of advice from
the U.S. Securities System that payment for such securities
has been transferred to the U.S. Securities System Account,
and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account
of the Portfolio. Copies of all advices from the U.S.
Securities System of transfers of securities for the account
of the Portfolio shall identify the Portfolio, be maintained
for the Portfolio by the Custodian and be provided to the Fund
at its request. Upon request, the Custodian shall furnish the
Fund on behalf of the Portfolio confirmation of each transfer
to or from the account of the Portfolio in the form of a
written advice or notice and shall furnish to the Fund on
behalf of the Portfolio copies of daily transaction sheets
reflecting each day's transactions in the U.S. Securities
System for the account of the Portfolio;
4) The Custodian shall provide the Fund with any report obtained
by the Custodian on the U.S. Securities System's accounting
system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities
System;
5) The Custodian shall have received from the Fund on behalf of
the Portfolio the initial or annual certificate, as the case
may be, required by Section 15 hereof;
<PAGE>
6) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Fund for the benefit of
the Portfolio for any loss or damage to the Portfolio
resulting from use of the U.S. Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or
any of its agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the
Portfolio has not been made whole for any such loss or damage.
SECTION 2.9 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM.
The Custodian may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented in
the Direct Paper System Account, which account shall not
include any assets of the Custodian other than assets held as
a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and transfer
of securities to the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for
the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio, in the form of a written advice or notice,
of Direct Paper on the next business day following such
transfer and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each
day's transaction in the Direct Paper System for the account
of the Portfolio;
<PAGE>
6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on its system of internal accounting
control as the Fund may reasonably request from time to time.
SECTION 2.10 SEGREGATED ACCOUNT. The Custodian shall upon receipt of
Proper Instructions on behalf of each applicable Portfolio establish and
maintain a segregated account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by the Custodian
pursuant to Section 2.8 hereof, (i) in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Portfolio, (ii) for purposes of segregating cash or
government securities in connection with options purchased, sold or written by
the Portfolio or commodity futures contracts or options thereon purchased or
sold by the Portfolio, (iii) for the purposes of compliance by the Portfolio
with the procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the SEC relating to the maintenance of
segregated accounts by registered investment companies and (iv) for other proper
trust purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the applicable
Portfolio, a copy of a Certified Resolution setting forth the purpose or
purposes of such segregated account and declaring such purpose(s) to be a proper
trust purpose.
SECTION 2.11 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian
shall execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other payments
with respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
SECTION 2.12 PROXIES. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting materials
and all notices relating to such securities.
SECTION 2.13 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject
to the provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without limitation,
pendency of calls and maturities of domestic securities and expirations of
rights in connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian from
issuers of the securities being held for the
<PAGE>
Portfolio. With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Portfolio all written information received by the
Custodian from issuers of the securities whose tender or exchange is sought and
from the party (or his agents) making the tender or exchange offer. If the
Portfolio desires to take action with respect to any tender offer, exchange
offer or any other similar transaction, the Portfolio shall notify the Custodian
at least three business days prior to the date on which the Custodian is to take
such action.
SECTION 3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER OF THE PORTFOLIOS
SECTION 3.1. DEFINITIONS. The following capitalized terms shall have
the indicated meanings:
"Country Risk" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment; economic and financial infrastructure
(including financial institutions such as any Mandatory Securities Depositories
operating in the country); prevailing or developing custody and settlement
practices; and laws and regulations applicable to the safekeeping and recovery
of Foreign Assets held in custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the SEC, or a foreign branch of a Bank (as defined in Section 2(a)(5)
of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of
the 1940 Act, except that the term does not include Mandatory Securities
Depositories.
"Foreign Assets" means any of the Portfolios' investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Portfolios'
transactions in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(2) of Rule
17f-5.
"Mandatory Securities Depository" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Fund, on the Portfolios' behalf, determines to place Foreign Assets in a country
outside the United States (i) because required by law or regulation; (ii)
because securities cannot be withdrawn from such foreign securities depository
or clearing agency; or (iii) because maintaining or effecting trades in
securities outside the foreign securities depository or clearing agency is not
consistent with prevailing or developing custodial or market practices.
SECTION 3.2. DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Fund, by resolution adopted by the Board of Trustees, hereby delegates to
the Custodian with
<PAGE>
respect to the Portfolios, subject to Section (b) of Rule 17f-5, the
responsibilities set forth in this Section 3 with respect to Foreign Assets of
the Portfolios held outside the United States, and the Custodian hereby accepts
such delegation, as Foreign Custody Manager with respect to the Portfolios.
SECTION 3.3. COUNTRIES COVERED. The Foreign Custody Manager shall be
responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A of this Contract, which may be amended from time to time by
the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule
A the Eligible Foreign Custodians selected by the Foreign Custody Manager to
maintain the assets of the Portfolios. Mandatory Securities Depositories are
listed on Schedule B to this Contract, which may be amended from time to time by
the Foreign Custody Manager. The Foreign Custody Manager will provide amended
versions of Schedules A and B in accordance with Section 3.7 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions
to open an account or to place or maintain Foreign Assets in a country listed on
Schedule A, and the fulfillment by the Fund on behalf of the Portfolios of the
applicable account opening requirements for the country, the Foreign Custody
Manager shall be deemed to have been delegated by the Board of Trustees on
behalf of the Portfolios responsibility as Foreign Custody Manager with respect
to that country and to have accepted such delegation. Following the receipt of
Proper Instructions directing the Foreign Custody Manager to close the account
of a Portfolio with the Eligible Foreign Custodian selected by the Foreign
Custody Manager in a designated country, the delegation by the Board of Trustees
on behalf of the Portfolios to the Custodian as Foreign Custody Manager for that
country shall be deemed to have been withdrawn and the Custodian shall
immediately cease to be the Foreign Custody Manager of the Portfolios with
respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer period as to which the parties agree in
writing) after receipt of any such notice by the Fund, the Custodian shall have
no further responsibility as Foreign Custody Manager to the Fund with respect to
the country as to which the Custodian's acceptance of delegation is withdrawn.
SECTION 3.4. SCOPE OF DELEGATED RESPONSIBILITIES.
3.4.1. Selection of Eligible Foreign Custodians. Subject to the
provisions of this Section 3, the Portfolios' Foreign Custody Manager may place
and maintain the Foreign Assets in the care of the Eligible Foreign Custodian
selected by the Foreign Custody Manager in each country listed on Schedule A, as
amended from time to time.
<PAGE>
In performing its delegated responsibilities as Foreign Custody Manager
to place or maintain Foreign Assets with an Eligible Foreign Custodian, the
Foreign Custody Manager shall determine that the Foreign Assets will be subject
to reasonable care, based on the standards applicable to custodians in the
country in which the Foreign Assets will be held by that Eligible Foreign
Custodian, after considering all factors relevant to the safekeeping of such
assets, including, without limitation:
(i) the Eligible Foreign Custodian's practices, procedures, and
internal controls, including, but not limited to, the physical
protections available for certificated securities (if
applicable), its methods of keeping custodial records, and its
security and data protection practices;
(ii) whether the Eligible Foreign Custodian has the financial
strength to provide reasonable care for Foreign Assets;
(iii) the Eligible Foreign Custodian's general reputation and
standing and, in the case of a foreign securities depository
or clearing agency which is not a Mandatory Securities
Depository, the foreign securities depository's or clearing
agency's operating history and the number of participants in
the foreign securities depository or clearing agency; and
(iv) whether the Fund will have jurisdiction over and be able to
enforce judgments against the Eligible Foreign Custodian, such
as by virtue of the existence of any offices of the Eligible
Foreign Custodian in the United States or the Eligible Foreign
Custodian's consent to service of process in the United
States.
3.4.2. Contracts With Eligible Foreign Custodians. The Foreign Custody
Manager shall determine that the contract (or the rules or established practices
or procedures in the case of an Eligible Foreign Custodian that is a foreign
securities depository or clearing agency) governing the foreign custody
arrangements with each Eligible Foreign Custodian selected by the Foreign
Custody Manager will provide reasonable care for the Foreign Assets held by that
Eligible Foreign Custodian based on the standards applicable to custodians in
the particular country. Each such contract shall include provisions that
provide:
(i) for indemnification or insurance arrangements (or any
combination of the foregoing) such that each Portfolio will be
adequately protected against the risk of loss of the Foreign
Assets held in accordance with such contract;
(ii) that the Foreign Assets will not be subject to any right,
security interest, or lien or claim of any kind in favor of
the Eligible Foreign Custodian or its creditors except a claim
of payment for their safe custody or administration or, in the
case of cash deposits, liens or rights in favor of creditors
of the Eligible Foreign Custodian arising under bankruptcy,
insolvency, or similar laws;
<PAGE>
(iii) that beneficial ownership of the Foreign Assets will be freely
transferable without the payment of money or value other than
for safe custody or administration;
(iv) that adequate records will be maintained identifying the
Foreign Assets as belonging to the applicable Portfolio or as
being held by a third party for the benefit of such Portfolio;
(v) that the independent public accountants for each Portfolio
will be given access to those records or confirmation of the
contents of those records; and
(vi) that the Fund will receive periodic reports with respect to
the safekeeping of the Foreign Assets, including, but not
limited to, notification of any transfer of the Foreign Assets
to or from a Portfolio's account or a third party account
containing the Foreign Assets held for the benefit of the
Portfolio,
or, in lieu of any or all of the provisions set forth in (i) through (vi) above,
such other provisions that the Foreign Custody Manager determines will provide,
in their entirety, the same or greater level of care and protection for the
Foreign Assets as the provisions set forth in (i) through (vi) above, in their
entirety.
3.4.3. Monitoring. In each case in which the Foreign Custody Manager
maintains Foreign Assets with an Eligible Foreign Custodian selected by the
Foreign Custody Manager, the Foreign Custody Manager shall establish a system to
monitor (i) the appropriateness of maintaining the Foreign Assets with such
Eligible Foreign Custodian and (ii) the contract governing the custody
arrangements established by the Foreign Custody Manager with the Eligible
Foreign Custodian. In the event the Foreign Custody Manager determines that the
custody arrangements with an Eligible Foreign Custodian it has selected are no
longer appropriate, the Foreign Custody Manager shall notify the Board of
Trustees in accordance with Section 3.7 hereunder.
SECTION 3.5. GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For
purposes of this Section 3, the Board of Trustees shall be deemed to have
considered and determined to accept such Country Risk as is incurred by placing
and maintaining the Foreign Assets in each country for which the Custodian is
serving as Foreign Custody Manager of the Portfolios. The Fund, on behalf of the
Portfolios, and the Custodian each expressly acknowledge that the Foreign
Custody Manager shall not be delegated any responsibilities under this Section 3
with respect to Mandatory Securities Depositories.
<PAGE>
SECTION 3.6. STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF THE
PORTFOLIOS. In performing the responsibilities delegated to it, the Foreign
Custody Manager agrees to exercise reasonable care, prudence and diligence such
as a person having responsibility for the safekeeping of assets of management
investment companies registered under the 1940 Act would exercise.
SECTION 3.7. REPORTING REQUIREMENTS. The Foreign Custody Manager shall
report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian
and the placement of such Foreign Assets with another Eligible Foreign Custodian
by providing to the Board of Trustees amended Schedules A or B at the end of the
calendar quarter in which an amendment to either Schedule has occurred. The
Foreign Custody Manager shall make written reports notifying the Board of
Trustees of any other material change in the foreign custody arrangements of the
Portfolios described in this Article 3 after the occurrence of the material
change.
SECTION 3.8. REPRESENTATIONS WITH RESPECT TO RULE 17f-5. The Foreign
Custody Manager represents to the Fund that it is a U.S. Bank as defined in
section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the
Board of Trustees has determined that it is reasonable for the Board of Trustees
to rely on the Custodian to perform the responsibilities delegated pursuant to
this Agreement to the Custodian as the Foreign Custody Manager of the
Portfolios.
SECTION 3.9. EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN
CUSTODY MANAGER. The Board of Trustees' delegation to the Custodian as Foreign
Custody Manager of the Portfolios shall be effective as of the date of execution
of this Agreement and shall remain in effect until terminated at any time,
without penalty, by written notice from the terminating party to the
non-terminating party. Termination will become effective thirty (30) days after
receipt by the non-terminating party of such notice. The provisions of Section
3.3 hereof shall govern the delegation to and termination of the Custodian as
Foreign Custody Manager of the Portfolios with respect to designated countries.
SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS
HELD OUTSIDE OF THE UNITED STATES
SECTION 4.1 DEFINITIONS. Capitalized terms in this Section 4 shall
-----------
have the following meanings:
"Foreign Securities System" means either a clearing agency or a securities
depository listed on Schedule A hereto or a Mandatory Securities Depository
listed on Schedule B hereto.
"Foreign Sub-Custodian" means a foreign banking institution serving as an
Eligible Foreign Custodian.
<PAGE>
SECTION 4.2. HOLDING SECURITIES. The Custodian shall identify on its
books as belonging to the Portfolios the foreign securities held by each Foreign
Sub-Custodian or Foreign Securities System. The Custodian may hold foreign
securities for all of its customers, including the Portfolios, with any Foreign
Sub-Custodian in an account that is identified as belonging to the Custodian for
the benefit of its customers, provided however, that (i) the records of the
Custodian with respect to foreign securities of the Portfolios which are
maintained in such account shall identify those securities as belonging to the
Portfolios and (ii) the Custodian shall require that securities so held by the
Foreign Sub-Custodian be held separately from any assets of such Foreign
Sub-Custodian or of other customers of such Foreign Sub-Custodian.
SECTION 4.3. FOREIGN SECURITIES SYSTEMS. Foreign securities shall be
maintained in a Foreign Securities System in a designated country only through
arrangements implemented by the Foreign Sub-Custodian in such country pursuant
to the terms of this Agreement.
SECTION 4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. Delivery of Foreign Securities. The Custodian or a Foreign
Sub-Custodian shall release and deliver foreign securities of the Portfolios
held by such Foreign Sub-Custodian, or in a Foreign Securities System account,
only upon receipt of Proper Instructions, which may be continuing instructions
when deemed appropriate by the parties, and only in the following cases:
(i) upon the sale of such foreign securities for the Portfolios in
accordance with reasonable market practice in the country
where such foreign securities are held or traded, including,
without limitation: (A) delivery against expectation of
receiving later payment; or (B) in the case of a sale effected
through a Foreign Securities System in accordance with the
rules governing the operation of the Foreign Securities
System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other
similar offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign
securities are called, redeemed, retired or otherwise become
payable;
(v) to the issuer thereof, or its agent, for transfer into the
name of the Custodian (or the name of the respective Foreign
Sub-Custodian or of any nominee of the Custodian or such
Foreign Sub-Custodian) or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units;
<PAGE>
(vi) to brokers, clearing banks or other clearing agents for
examination or trade execution in accordance with market
custom; provided that in any such case the Foreign
Sub-Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise from
the Foreign Sub-Custodian's own negligence or willful
misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities,
the surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts or
temporary securities for definitive securities;
(ix) or delivery as security in connection with any borrowing by
the Portfolios requiring a pledge of assets by the Portfolios;
(x) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other proper trust purpose, but only upon receipt of,
in addition to Proper Instructions, a copy of a Certified
Resolution specifying the foreign securities to be delivered,
setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper trust purpose, and
naming the person or persons to whom delivery of such
securities shall be made.
4.4.2. Payment of Portfolio Monies. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out, or direct the respective Foreign
Sub-Custodian or the respective Foreign Securities System to pay out, monies of
a Portfolio in the following cases only:
(i) upon the purchase of foreign securities for the Portfolio,
unless otherwise directed by Proper Instructions, by (A)
delivering money to the seller thereof or to a dealer therefor
(or an agent for such seller or dealer) against expectation of
receiving later delivery of such foreign securities; or (B) in
the case of a purchase effected through a Foreign Securities
System, in accordance with the rules governing the operation
of such Foreign Securities System;
<PAGE>
(ii) in connection with the conversion, exchange or surrender of
foreign securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio,
including but not limited to the following payments: interest,
taxes, investment advisory fees, transfer agency fees, fees
under this Agreement, legal fees, accounting fees, and other
operating expenses;
(iv) for the purchase or sale of foreign exchange or foreign
exchange contracts for the Portfolio, including transactions
executed with or through the Custodian or its Foreign
Sub-Custodians;
(v) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(vii) in connection with the borrowing or lending of foreign
securities; and
(viii) for any other proper trust purpose, but only upon receipt of,
in addition to Proper Instructions, a copy of a Certified
Resolution specifying the amount of such payment, setting
forth the purpose for which such payment is to be made,
declaring such purpose to be a proper trust purpose, and
naming the person or persons to whom such payment is to be
made.
4.4.3. Market Conditions. Notwithstanding any provision of this
Agreement to the contrary, settlement and payment for Foreign Assets received
for the account of the Portfolios and delivery of Foreign Assets maintained for
the account of the Portfolios may be effected in accordance with the customary
established securities trading or processing practices and procedures in the
country or market in which the transaction occurs, including, without
limitation, delivering Foreign Assets to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) with the expectation of
receiving later payment for such Foreign Assets from such purchaser or dealer.
SECTION 4.5. REGISTRATION OF FOREIGN SECURITIES. The foreign securities
maintained in the custody of a Foreign Custodian (other than bearer securities)
shall be registered in the name of the applicable Portfolio or in the name of
the Custodian or in the name of any Foreign Sub-Custodian or in the name of any
nominee of the foregoing, and the Fund on behalf of such Portfolio agrees to
hold any such nominee harmless from any liability as a holder of record of such
foreign securities. The Custodian or a Foreign Sub-Custodian shall not be
obligated to accept securities on behalf of a Portfolio under the terms of this
Agreement unless the form of such securities and the manner in which they are
delivered are in accordance with reasonable market practice.
<PAGE>
SECTION 4.6. BANK ACCOUNTS. A bank account or bank accounts opened and
maintained outside the United States on behalf of a Portfolio with a Foreign
Sub-Custodian shall be subject only to draft or order by the Custodian or such
Foreign Sub-Custodian, acting pursuant to the terms of this Agreement to hold
cash received by or from or for the account of the Portfolio.
SECTION 4.7. COLLECTION OF INCOME. The Custodian shall use reasonable
endeavors to collect all income and other payments in due course with respect to
the Foreign Assets held hereunder to which the Portfolios shall be entitled and
shall credit such income, as collected, to the applicable Portfolio. In the
event that extraordinary measures are required to collect such income, the Fund
and the Custodian shall consult as to such measures and as to the compensation
and expenses of the Custodian relating to such measures.
SECTION 4.8. PROXIES. The Custodian will generally with respect to the
foreign securities held under this Section 4 use its reasonable endeavors to
facilitate the exercise of voting and other shareholder proxy rights, subject
always to the laws, regulations and practical constraints that may exist in the
country where such securities are issued. The Fund acknowledges that local
conditions, including lack of regulation, onerous procedural obligations, lack
of notice and other factors may have the effect of severely limiting the ability
of the Fund to exercise shareholder rights.
SECTION 4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The
Custodian shall transmit promptly to the Fund written information (including,
without limitation, pendency of calls and maturities of foreign securities and
expirations of rights in connection therewith) received by the Custodian via the
Foreign Sub-Custodians from issuers of the foreign securities being held for the
account of the Portfolios. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Fund written information so received by
the Custodian from issuers of the foreign securities whose tender or exchange is
sought or from the party (or its agents) making the tender or exchange offer.
The Custodian shall not be liable for any untimely exercise of any tender,
exchange or other right or power in connection with foreign securities or other
property of the Portfolios at any time held by it unless (i) the Custodian or
the respective Foreign Sub-Custodian is in actual possession of such foreign
securities or property and (ii) the Custodian receives Proper Instructions with
regard to the exercise of any such right or power, and both (i) and (ii) occur
at least three (3) business days prior to the date on which such right or power
is to be exercised.
<PAGE>
SECTION 4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN
SECURITIES SYSTEMS. Each agreement pursuant to which the Custodian employs as a
Foreign Sub-Custodian shall, to the extent possible, require the Foreign
Sub-Custodian to exercise reasonable care in the performance of its duties and,
to the extent possible, to indemnify, and hold harmless, the Custodian from and
against any loss, damage, cost, expense, liability or claim arising out of or in
connection with the Foreign Sub-Custodian's performance of such obligations. At
the Fund's election, the Portfolios shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a Foreign
Sub-Custodian as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Portfolios have not been made
whole for any such loss, damage, cost, expense, liability or claim.
SECTION 4.11. TAX LAW. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund, the
Portfolios or the Custodian as custodian of the Portfolios by the tax law of the
United States or of any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations imposed on
the Fund with respect to the Portfolios or the Custodian as custodian of the
Portfolios by the tax law of countries other than those mentioned in the above
sentence, including responsibility for withholding and other taxes, assessments
or other governmental charges, certifications and governmental reporting. The
sole responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for exemption or
refund under the tax law of countries for which the Fund has provided such
information.
SECTION 4.12. CONFLICT. If the Custodian is delegated the
responsibilities of Foreign Custody Manager pursuant to the terms of Section 3
hereof, in the event of any conflict between the provisions of Sections 3 and 4
hereof, the provisions of Section 3 shall prevail.
SECTION 5. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent and deposit into the account of the appropriate Portfolio
such payments as are received for Shares thereof issued or sold from time to
time by the Fund. The Custodian will provide timely notification to the Fund on
behalf of each such Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Fund's Declaration of Trust and any applicable votes of the
Board of Trustees pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a
<PAGE>
commercial bank designated by the redeeming shareholders. In connection with the
redemption or repurchase of Shares, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
SECTION 6. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Agreement means a writing
signed or initialed by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees accompanied
by a detailed description of procedures approved by the Board of Trustees,
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board of Trustees and
the Custodian are satisfied that such procedures afford adequate safeguards for
the Portfolios' assets. For purposes of this Section, Proper Instructions shall
include instructions received by the Custodian pursuant to any three - party
agreement which requires a segregated asset account in accordance with Section
2.10.
SECTION 7. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Agreement, provided that all such payments
shall be accounted for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Portfolio except as otherwise directed by the Board of
Trustees.
<PAGE>
SECTION 8. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a Certified Resolution as conclusive
evidence (a) of the authority of any person to act in accordance with such
resolution or (b) of any determination or of any action by the Board of Trustees
pursuant to the Fund's Declaration of Trust as described in such resolution, and
such resolution may be considered as in full force and effect until receipt by
the Custodian of written notice to the contrary.
SECTION 9. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees to keep the books of
account of each Portfolio and/or compute the net asset value per Share of the
outstanding Shares or, if directed in writing to do so by the Fund on behalf of
the Portfolio, shall itself keep such books of account and/or compute such net
asset value per Share. If so directed, the Custodian shall also calculate daily
the net income of the Portfolio as described in the Prospectus and shall advise
the Fund and the Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to do so, shall advise
the Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per Share and the
daily income of each Portfolio shall be made at the time or times described from
time to time in the Prospectus.
SECTION 10. RECORDS
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Agreement in
such manner as will meet the obligations of the Fund under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the SEC. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
SECTION 11. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
<PAGE>
The Custodian shall take all reasonable action, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the preparation of the Fund's
Form N-1A, and Form N-SAR or other annual reports to the SEC and with respect to
any other requirements thereof.
SECTION 12. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or maintained
in a U.S. Securities System or a Foreign Securities System (collectively
referred to herein as the "Securities Systems"), relating to the services
provided by the Custodian under this Agreement; such reports, shall be of
sufficient scope and in sufficient detail, as may reasonably be required by the
Fund to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
SECTION 13. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
SECTION 14. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Agreement,
but shall be kept indemnified by and shall be without liability to the Fund for
any action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. The Custodian shall be
without liability to the Fund and the Portfolios for any loss, liability, claim
or expense resulting from or caused by anything which is (A) part of Country
Risk (as defined in Section 3 hereof), including without limitation
nationalization, expropriation, currency restrictions, or acts of war,
revolution, riots or terrorism,
<PAGE>
or (B) part of the "prevailing country risk" of the Portfolios, as such term is
used in SEC Release Nos. IC-22658; IS-1080 (May 12, 1997) or as such term or
other similar terms are now or in the future interpreted by the SEC or by the
staff of the Division of Investment Management thereof.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, work
stoppages, natural disasters, or other similar events or acts; (ii) errors by
the Fund or the Investment Advisor in their instructions to the Custodian
provided such instructions have been in accordance with this Agreement; (iii)
the insolvency of or acts or omissions by a Securities System; (iv) any delay or
failure of any broker, agent or intermediary, central bank or other commercially
prevalent payment or clearing system to deliver to the Custodian's sub-custodian
or agent securities purchased or in the remittance or payment made in connection
with securities sold; (v) any delay or failure of any company, corporation, or
other body in charge of registering or transferring securities in the name of
the Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or
any consequential losses arising out of such delay or failure to transfer such
securities including non-receipt of bonus, dividends and rights and other
accretions or benefits; (vi) delays or inability to perform its duties due to
any disorder in market infrastructure with respect to any particular security or
Securities System; and (vii) changes to any existing, or any provision of any
future, law or regulation or order of the United States of America, or any state
thereof, or any other country, or political subdivision thereof or of any court
of competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian (as defined in Section 4 hereof) to the same extent as set forth
with respect to sub-custodians generally in this Agreement.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement) or
in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the
<PAGE>
performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable Portfolio shall
be security therefor and should the Fund fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
SECTION 15. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided,
however that the Custodian shall not with respect to a Portfolio act under
Section 2.8 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Trustees has approved the
initial use of a particular Securities System by such Portfolio, as required by
Rule 17f-4 under the 1940 Act and that the Custodian shall not with respect to a
Portfolio act under Section 2.9 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees has approved the initial use of the Direct Paper System by such
Portfolio; provided further, however, that the Fund shall not amend or terminate
this Agreement in contravention of any applicable federal or state regulations,
or any provision of the Fund's Declaration of Trust, and further provided, that
the Fund on behalf of one or more of the Portfolios may at any time by action of
its Board of Trustees (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Agreement, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as may be due
as of the date of such termination and shall likewise reimburse the Custodian
for its costs, expenses and disbursements.
SECTION 16. SUCCESSOR CUSTODIAN
If a successor custodian for one or more Portfolios shall be appointed
by the Board of Trustees, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed and in the
form for transfer, all securities of each applicable Portfolio then held by it
hereunder and shall transfer to an account of the successor custodian all of the
securities of each such Portfolio held in a Securities System.
<PAGE>
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a Certified Resolution, deliver at the office of
the Custodian and transfer such securities, funds and other properties in
accordance with such resolution.
In the event that no written order designating a successor custodian or
Certified Resolution shall have been delivered to the Custodian on or before the
date when such termination shall become effective, then the Custodian shall have
the right to deliver to a bank or trust company, which is a "bank" as defined in
the 1940 Act, doing business in Boston, Massachusetts, or New York, New York, of
its own selection, having an aggregate capital, surplus, and undivided profits,
as shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian on behalf of each
applicable Portfolio and all instruments held by the Custodian relative thereto
and all other property held by it under this Agreement on behalf of each
applicable Portfolio, and to transfer to an account of such successor custodian
all of the securities of each such Portfolio held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the Custodian
under this Agreement.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the Certified Resolution to appoint a successor
custodian, the Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such securities, funds
and other properties and the provisions of this Agreement relating to the duties
and obligations of the Custodian shall remain in full force and effect.
SECTION 17. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Agreement, the Custodian and
the Fund on behalf of each of the Portfolios, may from time to time agree on
such provisions interpretive of or in addition to the provisions of this
Agreement as may in their joint opinion be consistent with the general tenor of
this Agreement. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Fund's Declaration of
Trust. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Agreement.
SECTION 18. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to those set forth on Schedule C with respect to which it desires to
have the Custodian render services as
<PAGE>
custodian under the terms hereof, it shall so notify the Custodian in writing,
and if the Custodian agrees in writing to provide such services, such series of
Shares shall become a Portfolio hereunder.
SECTION 19. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
SECTION 20. PRIOR AGREEMENTS
This Agreement supersedes and terminates, as of the date hereof, all
prior Agreements between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
SECTION 21. NOTICES.
Any notice, instruction or other instrument required to be given
hereunder may be delivered in person to the offices of the parties as set forth
herein during normal business hours or delivered prepaid registered mail or by
telex, cable or telecopy to the parties at the following addresses or such other
addresses as may be notified by any party from time to time.
To the Fund: EVERGREEN MUNICIPAL TRUST
c/o First Union Corporation - Legal Division
200 Berkeley Street
Boston, Massachusetts 02116-5034
Attention: Terrence J. Cullen, Esq.
Telephone: 617-210-3200
Telecopy: 617-210-3468
To the Custodian: STATE STREET BANK AND TRUST COMPANY
One Heritage Drive, 3rd Floor South
North Quincy, Massachusetts 02171
Attention: Ronald F. Mauriello
Telephone: 617-985-1891
Telecopy: 617-537-5203
Such notice, instruction or other instrument shall be deemed to have
been served in the case of a registered letter at the expiration of five
business days after posting, in the case of cable twenty-four hours after
dispatch and, in the case of telex, immediately on dispatch and if
<PAGE>
delivered outside normal business hours it shall be deemed to have been received
at the next time after delivery when normal business hours commence and in the
case of cable, telex or telecopy on the business day after the receipt thereof.
Evidence that the notice was properly addressed, stamped and put into the post
shall be conclusive evidence of posting.
SECTION 22. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
SECTION 23. SHAREHOLDER COMMUNICATIONS ELECTION
SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held by
the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the Fund
to indicate whether it authorizes the Custodian to provide the Fund's name,
address, and share position to requesting companies whose securities the Fund
owns. If the Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes" or
does not check either "yes" or "no" below, the Custodian is required by the rule
to treat the Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate communications.
Please indicate below whether the Fund consents or objects by checking one of
the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name, address,
and share positions.
NO [ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of September 18, 1997.
EVERGREEN MUNICIPAL TRUST FUND SIGNATURE ATTESTED TO BY:
By: /s/ John J. Pileggi By: /s/ George O. Martinez
--------------------------- ---------------------------
Name: John J. Pileggi Name: George O. Martinez
Title: President Title: Secretary
STATE STREET BANK AND TRUST COMPANY SIGNATURE ATTESTED TO BY:
By: /s/ Ronald E. Logue By: /s/ Glenn Ciotti
--------------------------- ---------------------------
Name: Ronald E. Logue Name: Glenn Ciotti
Title: Executive Vice President Title: VP and Assoc. Counsel
<PAGE>
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Non-Mandatory
Country Subcustodian Depositories
- --------- ------------ -------------
Argentina Citibank, N.A. --
Australia Westpac Banking Corporation --
Austria Erste Bank der oesterreichischen --
Sparkasen AG
Bahrain The British Bank of the Middle East --
(as delegate of the Hongkong and
Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank --
Belgium Generale Bank --
Bermuda The Bank of Bermuda Limited --
Bolivia Banco Boliviano Americano --
Botswana Barclays Bank of Botswana Limited --
Brazil Citibank, N.A. --
Bulgaria ING Bank N.V. --
Canada Canada Trustco Mortgage Company --
Chile Citibank, N.A. --
People's Republic The Hongkong and Shanghai --
of China Banking Corporation Limited,
Shanghai and Shenzhen branches
Colombia Cititrust Colombia S.A. --
Sociedad Fiduciaria
Croatia Privredana banka Zagreb d.d --
Cyprus Barclays Bank PLC --
Cyprus Offshore Banking Unit
Czech Republic Ceskoslovenska Obchodni --
Banka A.S.
Denmark Den Danske Bank --
Ecuador Citibank, N.A. --
Egypt National Bank of Egypt --
Estonia Hansabank --
Finland Merita Bank Ltd. --
France Banque Paribas --
Germany Dresdner Bank AG --
Ghana Barclays Bank of Ghana Limited --
Greece National Bank of Greece S.A Bank of Greece
Hong Kong Standard Chartered Bank --
Hungary Citibank Budapest Rt. --
India Deutsche Bank AG; --
The Hongkong and Shanghai
Banking Corporation Limited
Indonesia Standard Chartered Bank --
Ireland Bank of Ireland --
Israel Bank Hapoalim B.M. --
Italy Banque Paribas --
Ivory Coast Societe Generale de Banques --
en Cote d'Ivoire
Jamaica Scotiabank Trust and Merchant Bank --
Japan The Daiwa Bank, Limited; Japan Securities
The Fuji Bank, Limited Depository
Center;
Jordan The British Bank of the Middle East --
(as delegate of the Hongkong and
Shanghai Banking Corporation Limited)
Kenya Barclays Bank of Kenya Limited --
Republic of Korea The Hongkong and Shanghai Banking --
Corporation Limited
Latvia Hansabank --
Lebanon The British Bank of the Middle East Custodian and
(as delegate of the Hongkong and Clearing Center
Shanghai Banking Corporation Limited) of Financial
Instruments
for Lebanon
(MIDCLEAR)
S.A.L.;
Lithuania Vilniaus Bankas AB --
Malaysia Standard Chartered Bank --
Malaysia Berhad
Mauritius The Hongkong and Shanghai --
Banking Corporation Limited
Mexico Citibank Mexico, S.A. --
Morocco Banque Commerciale du Maroc --
Namibia (via) Standard Bank of South Africa -
The Netherlands MeesPierson N.V. --
New Zealand ANZ Banking Group --
(New Zealand) Limited
Norway Christiania Bank og --
Kreditkasse
Oman The British Bank of the Middle East --
(as delegate of the Hongkong and
Shanghai Banking Corporation Limited)
Pakistan Deutsche Bank AG --
Peru Citibank, N.A. --
Philippines Standard Chartered Bank --
Poland Citibank Poland S.A. --
Portugal Banco Comercial Portugues --
Romania ING Bank, N.V. --
Russia Credit Suisse First Boston, Zurich --
via Credit Suisse First Boston
Limited, Moscow
Singapore The Development Bank --
of Singapore Ltd.
Slovak Republic Ceskoslovenska Obchodna -
Banka A.S.
Slovenia Banka Creditanstalt d.d. --
South Africa Standard Bank of South Africa Limited --
Spain Banco Santander, S.A. --
Sri Lanka The Hongkong and Shanghai --
Banking Corporation Limited
Swaziland Barclays Bank of Swaziland Limited --
Sweden Skandinaviska Enskilda Banken --
Switzerland Union Bank of Switzerland --
Taiwan - R.O.C. Central Trust of China --
Thailand Standard Chartered Bank --
Trinidad & Tobago Republic Bank Ltd. --
Tunisia Banque Internationale Arabe de Tunisie --
Turkey Citibank, N.A. --
United Kingdom State Street Bank and Trust --
Uruguay Citibank, N.A. --
Venezuela Citibank, N.A. --
Zambia Barclays Bank of Zambia Limited --
Zimbabwe Barclays Bank of Zimbabwe Limited --
Euroclear (The Euroclear System)
Cedel (Cedel Bank, societe anonyme)
INTERSETTLE (for EASDAQ Securities)
<PAGE>
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
- ---------- ------------------------------------------
Argentina -Caja de Valores S.A.;
-CRYL
Australia -Austraclear Limited;
-Reserve Bank Information and
Transfer System
Austria -Oesterreichische Kontrollbank AG
(Wertpapiersammelbank Division)
Belgium -Caisse Interprofessionnelle de Depots et
de Virements de Titres S.A.;
-Banque Nationale de Belgique
Brazil - Camara de Liquidacao de Sao Paulo, (Calispa);
-Bolsa de Valores de Rio de Janeiro
- All SSB clients presently use Calispa
-Central de Custodia e de Liquidacao Financeira
de Titulos
-Banco Central do Brasil,
Systema Especial de Liquidacao e
Custodia
Bulgaria - Central Depository AD
Canada -The Canadian Depository
for Securities Limited; West Canada
Depository Trust Company [depositories linked]
People's Republic -Shanghai Securities Central Clearing and
of China Registration Corporation;
-Shenzhen Securities Central Clearing Co., Ltd.
Croatia Ministry of Finance
Czech Republic --Stredisko cennych papiru;
-Czech National Bank
Denmark -Vaerdipapircentralen - The Danish
Securities Center
Egypt -Misr Company for Clearing, Settlement,
and Central Depository
Estonia - Eesti Vaartpaberite Keskdepositooruim
Finland -The Finnish Central Securities
Depository
France -Societe Interprofessionnelle
pour la Compensation des
Valeurs Mobilieres;
-Banque de France,
Saturne System
Germany -The Deutscher Kassenverein AG
Greece -The Central Securities Depository
(Apothetirion Titlon A.E.);
Hong Kong -The Central Clearing and
Settlement System;
-The Central Money Markets Unit
Hungary -The Central Depository and Clearing
House (Budapest) Ltd.
[Mandatory for Gov't Bonds only;
SSB does not use for other securities]
India The National Securities Depository Limited
Indonesia -Bank of Indonesia
Ireland -The Central Bank of Ireland,
The Gilt Settlement Office
Israel -The Clearing House of the
Tel Aviv Stock Exchange;
-Bank of Israel
Italy -Monte Titoli S.p.A.;
-Banca d'Italia
Japan -Bank of Japan Net System
Republic of Korea -Korea Securities Depository Corporation
Latvia - The Latvian Central Depository
Lebanon -The Central Bank of Lebanon
Lithuania - The Central Securities Depository of Lithuania
Malaysia -Malaysian Central Depository Sdn.
Bhd.;
-Bank Negara Malaysia,
Scripless Securities Trading and Safekeeping
Systems
Mauritius -The Central Depository & Settlement
Co. Ltd.
Mexico -S.D. INDEVAL, S.A. de C.V.
(Instituto para el Deposito de
Valores);
The Netherlands -Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V. ("NECIGEF");
New Zealand -New Zealand Central Securities
Depository Limited
Norway -Verdipapirsentralen - The Norwegian
Registry of Securities
Oman -Muscat Securities Market
Peru -Caja de Valores y Liquidaciones
(CAVALI, S.A.)
Philippines -The Philippines Central Depository Inc.
-The Book-Entry-System of Bangko
Sentral ng Pilipinas;
-The Registry of Scripless Securities of the
Bureau of the Treasury
Poland -The National Depository of Securities
(Krajowy Depozyt Papierow Wartos'ciowych);
-National Bank of Poland
Portugal -Central de Valores Mobiliarios
Romania -National Securities Clearing, Settlement and
Depository Co.;
-Bucharest Stock Exchange;
-National Bank of Romania
Singapore -The Central Depository (Pvt.)
Limited;
-Monetary Authority of Singapore
Slovak Republic -Stredisko Cennych Papierov;
-National Bank of Slovakia
Slovenia - Klirinsko Depotna Bruzba
South Africa -The Central Depository Limited
Spain -Servicio de Compensacion y
Liquidacion de Valores, S.A.;
-Banco de Espana,
Anotaciones en Cuenta
Sri Lanka -Central Depository System
(Pvt) Limited
Sweden -Vardepapperscentralen VPC AB -
The Swedish Central Securities Depository
Switzerland -Schweizerische Effekten - Giro AG;
Taiwan - R.O.C. -The Taiwan Securities Central
Depository Company, Ltd.
Thailand -Thailand Securities Depository
Company Limited
Tunisia -STICODEVAM;
-Central Bank of Tunisia;
-Tunisian Treasury
Turkey -Takas ve Saklama Bankasi A.S.;
-Central Bank of Turkey
United Kingdom -The Bank of England,
The Central Gilts Office;
The Central Moneymarkets Office
Uruguay -Central Bank of Uruguay
Zambia -Lusaka Central Depository
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
<PAGE>
SCHEDULE C
Pursuant to the custodian agreement between Evergreen Municipal Trust (the
"Fund") and State Street Bank and Trust Company dated September 18, 1997 (the
"Agreement"), as of September 18, 1997, the Fund had made the following
Portfolios (as such term is defined in the Agreement) subject to the Agreement:
Evergreen California Tax Free Fund
Evergreen Connecticut Municipal Bond Fund
Evergreen Florida High Income Municipal Bond Fund
Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund
Evergreen Massachusetts Tax Free Fund
Evergreen Missouri Tax Free Fund
Evergreen New Jersey Tax Free Income Fund
Evergreen New York Tax Free Fund
Evergreen North Carolina Municipal Bond Fund
Evergreen Pennsylvania Tax Free Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
Evergreen High Grade Tax Free Fund
Evergreen Short-Intermediate Municipal Fund
Evergreen Tax Free Fund
<PAGE>
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
Addendum to the Custodian Agreement between EVERGREEN MUNICIPAL TRUST
(the "Customer") and State Street Bank and Trust Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain assets
of the Customer pursuant to a certain Custodian Agreement (the "Custodian
Agreement") dated as of September 18, 1997;
WHEREAS, State Street has developed and utilizes proprietary accounting
and other systems, including State Street's proprietary Multicurrency HORIZONSM
Accounting System, in its role as custodian of the Customer, and maintains
certain Customer-related data ("Customer Data") in databases under the control
and ownership of State Street (the "Data Access Services"); and
WHEREAS, State Street makes available to the Customer certain Data
Access Services solely for the benefit of the Customer, and intends to provide
additional services, consistent with the terms and conditions of this Addendum.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a. System. Subject to the terms and conditions of this Addendum, State
Street hereby agrees to provide the Customer with access to State Street's
Multicurrency HORIZONSM Accounting System and the other information systems
(collectively, the "System") as described in Attachment A, on a remote basis for
the purpose of obtaining reports and information, solely on computer hardware,
system software and telecommunication links as listed in Attachment B (the
"Designated Configuration") of the Customer, or certain third parties approved
by State Street that serve as investment advisors or investment managers of the
Customer (the "Investment Advisor"), and solely with respect to the Customer or
on any designated substitute or back-up equipment configuration with State
Street's written consent, such consent not to be unreasonably withheld.
b. Data Access Services. State Street agrees to make available to the
Customer the Data Access Services subject to the terms and conditions of this
Addendum and data access operating standards and procedures as may be issued by
State Street from time to time. The ability of the Customer to originate
electronic instructions to State Street on behalf of the Customer in order to
(i) effect the transfer or movement of cash or securities held under custody by
State Street or (ii) transmit accounting or other information (such transactions
are referred to herein as "Client Originated Electronic Financial
Instructions"), and (iii) access data for the purpose of reporting and analysis,
shall be deemed to be Data Access Services for purposes of this Addendum.
c. Additional Services. State Street may from time to time agree to
make available to the Customer additional Systems that are not described in the
attachments to this Addendum. In the absence of any other written agreement
concerning such additional systems, the term "System" shall include, and this
Addendum shall govern, the Customer's access to and use of any additional System
made available by State Street and/or accessed by the Customer.
2. NO USE OF THIRD PARTY SYSTEMS-LEVEL SOFTWARE
State Street and the Customer acknowledge that in connection with the
Data Access Services provided under this Addendum, the Customer will have
access, through the Data Access Services, to Customer Data and to functions of
State Street's proprietary systems; provided, however that in no event will the
Customer have direct access to any third party systems-level software that
retrieves data for, stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a. Designated Equipment; Designated Location. The System and the Data
Access Services shall be used and accessed solely on and through the Designated
Configuration at the offices of the Customer or the Investment Advisor located
in Boston, Massachusetts ("Designated Location").
b. Designated Configuration; Trained Personnel. State Street shall be
responsible for supplying, installing and maintaining the Designated
Configuration at the Designated Location. State Street and the Customer agree
that each will engage or retain the services of trained personnel to enable both
parties to perform their respective obligations under this Addendum. State
Street agrees to use commercially reasonable efforts to maintain the System so
that it remains serviceable, provided, however, that State Street does not
guarantee or assure uninterrupted remote access use of the System.
c. Scope of Use. The Customer will use the System and the Data Access
Services only for the processing of securities transactions, the keeping of
books of account for the Customer and accessing data for purposes of reporting
and analysis. The Customer shall not, and shall cause its employees and agents
not to (i) permit any third party to use the System or the Data Access Services,
(ii) sell, rent, license or otherwise use the System or the Data Access Services
in the operation of a service bureau or for any purpose other than as expressly
authorized under this Addendum, (iii) use the System or the Data Access Services
for any fund, trust or other investment vehicle without the prior written
consent of State Street, (iv) allow access to the System or the Data Access
Services through terminals or any other computer or telecommunications
facilities located outside the Designated Locations, (v) allow or cause any
information (other than portfolio holdings, valuations of portfolio holdings,
and other information reasonably necessary for the management or distribution of
the assets of the Customer) transmitted from State Street's databases, including
data from third party sources, available through use of the System or the Data
Access Services to be redistributed or retransmitted to another computer,
terminal or other device for other than use for or on behalf of the Customer or
(vi) modify the System in any way, including without limitation, developing any
software for or attaching any devices or computer programs to any equipment,
system, software or database which forms a part of or is resident on the
Designated Configuration.
d. Other Locations. Except in the event of an emergency or of a planned
System shutdown, the Customer's access to services performed by the System or to
Data Access Services at the Designated Location may be transferred to a
different location only upon the prior written consent of State Street. In the
event of an emergency or System shutdown, the Customer may use any back-up site
included in the Designated Configuration or any other back-up site agreed to by
State Street, which agreement will not be unreasonably withheld. The Customer
may secure from State Street the right to access the System or the Data Access
Services through computer and telecommunications facilities or devices complying
with the Designated Configuration at additional locations only upon the prior
written consent of State Street and on terms to be mutually agreed upon by the
parties.
e. Title. Title and all ownership and proprietary rights to the System,
including any enhancements or modifications thereto, whether or not made by
State Street, are and shall remain with State Street.
f. No Modification. Without the prior written consent of State Street,
the Customer shall not modify, enhance or otherwise create derivative works
based upon the System, nor shall the Customer reverse engineer, decompile or
otherwise attempt to secure the source code for all or any part of the System.
g. Security Procedures. The Customer shall comply with data access
operating standards and procedures and with user identification or other
password control requirements and other security procedures as may be issued
from time to time by State Street for use of the System on a remote basis and to
access the Data Access Services. The Customer shall have access only to the
Customer Data and authorized transactions agreed upon from time to time by State
Street and, upon notice from State Street, the Customer shall discontinue remote
use of the System and access to Data Access Services for any security reasons
cited by State Street; provided, that, in such event, State Street shall, for a
period not less than 180 days (or such other shorter period specified by the
Customer) after such discontinuance, assume responsibility to provide accounting
services under the terms of the Custodian Agreement.
h. Inspections. State Street shall have the right to inspect the use of
the System and the Data Access Services by the Customer and the Investment
Advisor to ensure compliance with this Addendum. The on-site inspections shall
be upon prior written notice to the Customer and the Investment Advisor and at
reasonably convenient times and frequencies so as not to result in an
unreasonable disruption of the Customer's or the Investment Advisor's business.
4. PROPRIETARY INFORMATION
a. Proprietary Information. The Customer acknowledges and State Street
represents that the System and the databases, computer programs, screen formats,
report formats, interactive design techniques, documentation and other
information made available to the Customer by State Street as part of the Data
Access Services and through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to State Street.
Any and all such information provided by State Street to the Customer shall be
deemed proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The Customer agrees that it will hold such
Proprietary Information in the strictest confidence and secure and protect it in
a manner consistent with its own procedures for the protection of its own
confidential information and to take appropriate action by instruction or
agreement with its employees who are permitted access to the Proprietary
Information to satisfy its obligations hereunder. The Customer further
acknowledges that State Street shall not be required to provide the Investment
Advisor with access to the System unless it has first received from the
Investment Advisor an undertaking with respect to State Street's Proprietary
Information in the form of Attachment C to this Addendum. The Customer shall use
all commercially reasonable efforts to assist State Street in identifying and
preventing any unauthorized use, copying or disclosure of the Proprietary
Information or any portions thereof or any of the logic, formats or designs
contained therein.
b. Cooperation. Without limitation of the foregoing, the Customer shall
advise State Street immediately in the event the Customer learns or has reason
to believe that any person to whom the Customer has given access to the
Proprietary Information, or any portion thereof, has violated or intends to
violate the terms of this Addendum, and the Customer will, at its expense,
co-operate with State Street in seeking injunctive or other equitable relief in
the name of the Customer or State Street against any such person.
c. Injunctive Relief.The Customer acknowledges that the disclosure of
any Proprietary Information, or of any information which at law or equity ought
to remain confidential, will immediately give rise to continuing irreparable
injury to State Street inadequately compensable in damages at law. In addition,
State Street shall be entitled to obtain immediate injunctive relief against the
breach or threatened breach of any of the foregoing undertakings, in addition to
any other legal remedies which may be available.
d. Survival.The provisions of this Section 4 shall survive the
termination of this Addendum.
5. LIMITATION ON LIABILITY
a. Limitation on Amount and Time for Bringing Action. The Customer
agrees that any liability of State Street to the Customer or any third party
arising out of State Street's provision of Data Access Services or the System
under this Addendum shall be limited to the amount paid by the Customer for the
preceding 24 months for such services. In no event shall State Street be liable
to the Customer or any other party for any special, indirect, punitive or
consequential damages even if advised of the possibility of such damages. No
action, regardless of form, arising out of this Addendum may be brought by the
Customer more than two years after the Customer has knowledge that the cause of
action has arisen.
b. Limited Warranties. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, ARE MADE BY STATE STREET.
c. Third-Party Data. Organizations from which State Street may obtain
certain data included in the System or the Data Access Services are solely
responsible for the contents of such data, and State Street shall have no
liability for claims arising out of the contents of such third-party data,
including, but not limited to, the accuracy thereof.
d. Regulatory Requirements. As between State Street and the Customer,
the Customer shall be solely responsible for the accuracy of any accounting
statements or reports produced using the Data Access Services and the System and
the conformity thereof with any requirements of law.
e. Force Majeure. Neither party shall be liable for any costs or
damages due to delay or nonperformance under this Addendum arising out of any
cause or event beyond such party's control, including without limitation,
cessation of services hereunder or any damages resulting therefrom to the other
party, or the Customer as a result of work stoppage, power or other mechanical
failure, computer virus, natural disaster, governmental action, or communication
disruption.
6. INDEMNIFICATION
The Customer agrees to indemnify and hold State Street harmless from any loss,
damage or expense including reasonable attorney's fees, (a "loss") suffered by
State Street arising from (i) the negligence or willful misconduct in the use by
the Customer of the Data Access Services or the System, including any loss
incurred by State Street resulting from a security breach at the Designated
Location or committed by the Customer's employees or agents or the Investment
Advisor and (ii) any loss resulting from incorrect Client Originated Electronic
Financial Instructions. State Street shall be entitled to rely on the validity
and authenticity of Client Originated Electronic Financial Instructions without
undertaking any further inquiry as long as such instruction is undertaken in
conformity with security procedures established by State Street from time to
time.
7. FEES
Fees and charges for the use of the System and the Data Access Services and
related payment terms shall be as set forth in the Custody Fee Schedule in
effect from time to time between the parties (the "Fee Schedule"). Any tariffs,
duties or taxes imposed or levied by any government or governmental agency by
reason of the transactions contemplated by this Addendum, including, without
limitation, federal, state and local taxes, use, value added and personal
property taxes (other than income, franchise or similar taxes which may be
imposed or assessed against State Street) shall be borne by the Customer. Any
claimed exemption from such tariffs, duties or taxes shall be supported by
proper documentary evidence delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide training, at a designated
State Street training facility or at the Designated Location, to the Customer's
personnel in connection with the use of the System on the Designated
Configuration. The Customer agrees that it will set aside, during regular
business hours or at other times agreed upon by both parties, sufficient time to
enable all operators of the System and the Data Access Services, designated by
the Customer, to receive the training offered by State Street pursuant to this
Addendum.
b. Installation and Conversion. State Street shall be responsible for
the technical installation and conversion ("Installation and Conversion") of the
Designated Configuration. The Customer shall have the following responsibilities
in connection with Installation and Conversion of the System:
(i) The Customer shall be solely responsible for the
timely acquisition and maintenance of the hardware
and software that attach to the Designated
Configuration in order to use the Data Access
Services at the Designated Location.
(ii) State Street and the Customer each agree that they
will assign qualified personnel to actively
participate during the Installation and Conversion
phase of the System implementation to enable both
parties to perform their respective obligations under
this Addendum.
9. SUPPORT
During the term of this Addendum, State Street agrees to provide the
support services set out in Attachment D to this Addendum.
10. TERM OF ADDENDUM
a. Term of Addendum. This Addendum shall become effective on the date
of its execution by State Street and shall remain in full force and effect until
terminated as herein provided.
b. Termination of Addendum. Either party may terminate this Addendum
(i) for any reason by giving the other party at least one-hundred and eighty
days' prior written notice in the case of notice of termination by State Street
to the Customer or thirty days' notice in the case of notice from the Customer
to State Street of termination; or (ii) immediately for failure of the other
party to comply with any material term and condition of the Addendum by giving
the other party written notice of termination. In the event the Customer shall
cease doing business, shall become subject to proceedings under the bankruptcy
laws (other than a petition for reorganization or similar proceeding) or shall
be adjudicated bankrupt, this Addendum and the rights granted hereunder shall,
at the option of State Street, immediately terminate with notice to the
Customer. This Addendum shall in any event terminate as to any Customer within
90 days after the termination of the Custodian Agreement applicable to such
Customer.
c. Termination of the Right to Use. Upon termination of this Addendum
for any reason, any right to use the System and access to the Data Access
Services shall terminate and the Customer shall immediately cease use of the
System and the Data Access Services. Immediately upon termination of this
Addendum for any reason, the Customer shall return to State Street all copies of
documentation and other Proprietary Information in its possession; provided,
however, that in the event that either party terminates this Addendum or the
Custodian Agreement for any reason other than the Customer's breach, State
Street shall provide the Data Access Services for a period of time and at a
price to be agreed upon by the parties.
11. MISCELLANEOUS
a. Assignment; Successors. This Addendum and the rights and obligations
of the Customer and State Street hereunder shall not be assigned by either party
without the prior written consent of the other party, except that State Street
may assign this Addendum to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by, or under common control with
State Street.
b. Year 2000. State Street will take all steps necessary to ensure that
its products (and those of its third-party suppliers) reflect the available
state of the art technology to offer products that are Year 2000 compliant,
including, but not limited to, century recognition of dates, calculations that
correctly compute same century and multi century formulas and date values, and
interface values that reflect the date issues arising between now and the next
one-hundred years. If any changes are required, State Street will make the
changes to its products at no cost to Customer and in a commercially reasonable
time frame and will require third-party suppliers to do likewise.
c. Survival. All provisions regarding indemnification, warranty,
liability and limits thereon, and confidentiality and/or protection of
proprietary rights and trade secrets shall survive the termination of this
Addendum.
d. Entire Agreement. This Addendum and the attachments hereto
constitute the entire understanding of the parties hereto with respect to the
Data Access Services and the use of the System and supersedes any and all prior
or contemporaneous representations or agreements, whether oral or written,
between the parties as such may relate to the Data Access Services or the
System, and cannot be modified or altered except in a writing duly executed by
the parties. This Addendum is not intended to supersede or modify the duties and
liabilities of the parties hereto under the Custodian Agreement or any other
agreement between the parties hereto except to the extent that any such
agreement specifically refers to the Data Access Services or the System. No
single waiver of any right hereunder shall be deemed to be a continuing waiver.
e. Severability. If any provision or provisions of this Addendum shall
be held to be invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired.
f. Governing Law. This Addendum shall be interpreted and construed in
accordance with the internal laws of The Commonwealth of Massachusetts without
regard to the conflict of laws provisions thereof.
<PAGE>
ATTACHMENT A
Multicurrency HORIZONSM Accounting System
System Product Description
I. The Multicurrency HORIZONSM Accounting System is designed to provide
lot level portfolio and general ledger accounting for SEC and ERISA
type requirements and includes the following services: 1) recording of
general ledger entries; 2) calculation of daily income and expense; 3)
reconciliation of daily activity with the trial balance, and 4)
appropriate automated feeding mechanisms to (i) domestic and
international settlement systems, (ii) daily, weekly and monthly
evaluation services, (iii) portfolio performance and analytic services,
(iv) customer's internal computing systems and (v) various State Street
provided information services products.
II. GlobalQuestR is designed to provide customer access to the following
information maintained on The Multicurrency HORIZONSM Accounting
System: 1) cash transactions and balances; 2) purchases and sales; 3)
income receivables; 4) tax refund receivables; 5) daily priced
positions; 6) open trades; 7) settlement status; 8) foreign exchange
transactions; 9) trade history, and 10) daily, weekly and monthly
evaluation services.
III. SaFiReSM. SaFiReSM is designed to provide the customer with the ability
to prepare its own financial reports by permitting the customer to
access customer information maintained on the Multicurrency HORIZONR
Accounting System, to organize such information in a flexible reporting
format and to have such reports printed on the customer's desktop or by
its printing provider.
<PAGE>
ATTACHMENT B
Designated Configuration
<PAGE>
ATTACHMENT C
Undertaking
The undersigned understands that in the course of its employment as
Investment Advisor to *[FUND NAME] (the "Customer") it will have access to State
Street Bank and Trust Company's ("State Street") Multicurrency HORIZONSM
Accounting System and other information systems (collectively, the "System").
The undersigned acknowledges that the System and the databases,
computer programs, screen formats, report formats, interactive design
techniques, documentation and other information made available to the
undersigned by State Street as part of the Data Access Services provided to the
Customer and through the use of the System constitute copyrighted, trade secret,
or other proprietary information of substantial value to State Street. Any and
all such information provided by State Street to the Undersigned shall be deemed
proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The undersigned agrees that it will hold such
Proprietary Information in confidence and secure and protect it in a manner
consistent with its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or agreement with its
employees who are permitted access to the Proprietary Information to satisfy its
obligations hereunder.
The undersigned will not attempt to intercept data, gain access to data
in transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System
and access to the Data Access Services shall terminate and the undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
First Union National Bank
By: _________________________
Title: _________________________
Date: _________________________
<PAGE>
ATTACHMENT C-1
Undertaking
The undersigned understands that in the course of its employment as
Independent Auditor to EVERGREEN MUNICIPAL TRUST (the "Customer") it will
have access to State Street Bank and Trust Company's ("State Street")
Multicurrency HORIZON Accounting System and other information systems
(collectively, the "System").
The undersigned acknowledges that the System and the databases,
computer programs, screen formats, report formats, interactive design
techniques, documentation, and other information made available to the
Undersigned by State Street as part of the Data Access Services provided to the
Customer and through the use of the System constitute copyrighted, trade secret,
or other proprietary information of substantial value to State Street. Any and
all such information provided by State Street to the Undersigned shall be deemed
proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The Undersigned agrees that it will hold such
Proprietary Information in confidence and secure and protect it in a manner
consistent with its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or agreement with its
employees who are permitted access to the Proprietary Information to satisfy its
obligations hereunder.
The Undersigned will not attempt to intercept data, gain access to data
in transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System
and access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
*[Name of Independent Auditor]
By:
Title:
Date:
<PAGE>
ATTACHMENT D
Support
During the term of this Addendum, State Street agrees to provide the
following on-going support services:
a. Telephone Support. The Customer Designated Persons may contact State
Street's Multicurrency HORIZONSM Help Desk and Customer Assistance Center
between the hours of 8 a.m. and 6 p.m. (Eastern time) on all business days for
the purpose of obtaining answers to questions about the use of the System, or to
report apparent problems with the System. From time to time, the Customer shall
provide to State Street a list of persons, not to exceed five in number, who
shall be permitted to contact State Street for assistance (such persons being
referred to as "the Customer Designated Persons").
b. Technical Support. State Street will provide technical support to
assist the Customer in using the System and the Data Access Services. The total
amount of technical support provided by State Street shall not exceed 10
resource days per year. State Street shall provide such additional technical
support as is expressly set forth in the fee schedule in effect from time to
time between the parties (the "Fee Schedule"). Technical support, including
during installation and testing, is subject to the fees and other terms set
forth in the Fee Schedule.
c. Maintenance Support. State Street shall use commercially reasonable
efforts to correct system functions that do not work according to the System
Product Description as set forth on Attachment A in priority order in the next
scheduled delivery release or otherwise as soon as is practicable.
d. System Enhancements. State Street will provide to the Customer any
enhancements to the System developed by State Street and made a part of the
System; provided that, sixty (60) days prior to installing any such enhancement,
State Street shall notify the Customer and shall offer the Customer reasonable
training on the enhancement. Charges for system enhancements shall be as
provided in the Fee Schedule. State Street retains the right to charge for
related systems or products that may be developed and separately made available
for use other than through the System.
e. Custom Modifications. In the event the Customer desires custom
modifications in connection with its use of the System, the Customer shall make
a written request to State Street providing specifications for the desired
modification. Any custom modifications may be undertaken by State Street in its
sole discretion in accordance with the Fee Schedule.
f. Limitation on Support. State Street shall have no obligation to
support the Customer's use of the System: (i) for use on any computer equipment
or telecommunication facilities which does not conform to the Designated
Configuration or (ii) in the event the Customer has modified the System in
breach of this Addendum.
ADMINISTRATIVE SERVICES AGREEMENT
EVERGREEN MUNICIPAL TRUST
This Administrative Services Agreement is made as of this 18th day of
September, 1997 between Evergreen Municipal Trust, a Delaware business trust
(herein called the "Trust"), and Evergreen Investment Services, Inc., a Delaware
corporation (herein called "EIS").
W I T N E S S E T H:
WHEREAS, the Trust is a Delaware business trust consisting of one or
more portfolios which operates as an open-end management investment company and
is so registered under the Investment Company Act of 1940; and
WHEREAS, the Trust desires to retain EIS as its Administrator to
provide it with administrative services, and EIS is willing to render such
services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR. The Trust hereby appoints EIS as
administrator of the Trust and each of its portfolios listed on SCHEDULE A
attached hereto on the terms and conditions set forth in this Agreement; and EIS
hereby accepts such appointment and agrees to perform the services and duties
set forth in Section 2 of this Agreement in consideration of the compensation
provided for in Section 4 hereof.
2. SERVICES AND DUTIES. As Administrator, and subject to the
supervision and control of the Trustees of the Trust, EIS will hereafter provide
facilities, equipment and personnel to carry out the following administrative
services for operation of the business and affairs of the Trust and each of its
portfolios:
(a) prepare, file and maintain the Trust's governing documents,
including the Declaration of Trust (which has previously been
prepared and filed), the By-laws, minutes of meetings of
Trustees and shareholders, and proxy statements for meetings
of shareholders;
(b) prepare and file with the Securities and Exchange Commission
and the appropriate state securities authorities the
registration statements for the Trust and the Trust's shares
and all amendments thereto, reports to regulatory authorities
and shareholders, prospectuses, proxy statements, and such
other documents as may be necessary or convenient to enable
the Trust to make a continuous offering of its shares;
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<PAGE>
(c) prepare, negotiate and administer contracts on behalf of the
Trust with, among others, the Trust's distributor, custodian
and transfer agent;
(d) supervise the Trust's fund accounting agent in the maintenance
of the Trust's general ledger and in the preparation of the
Trust's financial statements, including oversight of expense
accruals and payments and the determination of the net asset
value of the Trust's assets and of the Trust's shares, and of
the declaration and payment of dividends and other
distributions to shareholders;
(e) calculate performance data of the Trust for dissemination to
information services covering the investment company industry;
(f) prepare and file the Trust's tax returns;
(g) examine and review the operations of the Trust's custodian and
transfer agent;
(h) coordinate the layout and printing of publicly disseminated
prospectuses and reports;
(i) prepare various shareholder reports;
(j) assist with the design, development and operation of new
portfolios of the Trust;
(k) coordinate shareholder meetings;
(l) provide general compliance services; and
(m) advise the Trust and its Trustees on matters concerning the
Trust and its affairs.
The foregoing, along with any additional services that EIS shall agree
in writing to perform for the Trust hereunder, shall hereafter be referred to as
"Administrative Services." Administrative Services shall not include any duties,
functions, or services to be performed for the Trust by the Trust's investment
adviser, distributor, custodian or transfer agent pursuant to their agreements
with the Trust.
3. EXPENSES. EIS shall be responsible for expenses incurred in
providing office space, equipment and personnel as may be necessary or
convenient to provide the Administrative Services to the Trust. The Trust shall
be responsible for all other expenses incurred by EIS on behalf of the Trust,
including without limitation postage and courier expenses, printing expenses,
registration fees, filing fees, fees of outside counsel and independent
auditors, insurance premiums, fees payable to Trustees who are not EIS
employees, and trade association dues.
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<PAGE>
4. COMPENSATION. For the Administrative Services provided, the Trust
hereby agrees to pay and EIS hereby agrees to accept as full compensation for
its services rendered hereunder an administrative fee, calculated daily and
payable monthly, at an annual rate determined in accordance with the table
below.
Aggregate Daily Net Assets of Funds
Administered by EIS for Which Any
Affiliate of First Union National Bank
Administrative Fee Serves as Investment Adviser
------------------ --------------------------------------
.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
Each portfolio of the Trust shall pay a portion of the administrative fee equal
to the rate determined above times that portfolio's average annual daily net
assets.
5. RESPONSIBILITY OF ADMINISTRATOR. EIS shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates, except a loss
resulting from wilful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. EIS shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for the Trust) on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice. Any person, even though also an officer,
director, partner, employee or agent of EIS, who may be or become an officer,
trustee, employee or agent of the Trust, shall be deemed, when rendering
services to the Trust or acting on any business of the Trust (other than
services or business in connection with the duties of EIS hereunder) to be
rendering such services to or acting solely for the Trust and not as an officer,
director, partner, employee or agent or one under the control or direction of
EIS even though paid by EIS.
6. DURATION AND TERMINATION.
(a) This Agreement shall continue in effect from year to year
thereafter, provided it is
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<PAGE>
approved, at least annually, by a vote of a majority of
Trustees of the Trust including a majority of the
disinterested Trustees.
(b) This Agreement may be terminated at any time, without
payment of any penalty, on sixty (60) day's prior written
notice by a vote of a majority of the Trust's Trustees or
by EIS.
7. AMENDMENT. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which an enforcement of the change, waiver, discharge or
termination is sought.
8. NOTICES. Notices of any kind to be given to the Trust hereunder by
EIS shall be in writing and shall be duly given if delivered to the Trust and to
its investment adviser at the following address: First Union National Bank, One
First Union Center, Charlotte, North Carolina 28288. Notices of any kind to be
given to EIS hereunder by the Trust shall be in writing and shall be duly given
if delivered to EIS at 200 Berkeley Street, Boston, Massachusetts 02116.
Attention: Chief Administrative Officer.
9. LIMITATION OF LIABILITY. EIS is hereby expressly put on notice of
the limitation of liability as set forth in the Declaration of Trust and agrees
that the obligations pursuant to this Agreement of a particular portfolio and of
the Trust with respect to that particular portfolio be limited solely to the
assets of that particular portfolio, and EIS shall not seek satisfaction of any
such obligation from the assets of any other portfolio, the shareholders of any
portfolio, the Trustees, officers, employees or agents of the Trust, or any of
them.
10. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court or
regulatory agency decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. Subject to the provisions of Section 5
hereof, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and shall be governed by
Delaware law; provided, however, that nothing herein shall be construed in a
manner inconsistent with the Investment Company Act of 1940 or any rule or
regulation promulgated by the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Administrative
Services Agreement to be executed by their officers designated below as of the
day and year first above written.
EVERGREEN MUNICIPAL TRUST
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<PAGE>
ATTEST:/s/ Carol Churns By:/s/ John J. Pileggi
---------------------- -------------------------
Name: John J. Pileggi
Title: President
EVERGREEN INVESTMENT SERVICES, INC.
ATTEST:_______________________ By:/s/ Gordon Forrester
-------------------------
Name: Gordon Forrester
Title: Chief Administrative Officer
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<PAGE>
SCHEDULE A
(Amended February 28, 1998)
EVERGREEN MUNICIPAL TRUST
Single State Tax Free Funds
-----------------------------
Evergreen California Tax Free Fund
Evergreen Florida High Income Municipal Bond Fund
Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund
Evergreen Maryland Municipal Bond Fund
Evergreen New Jersey Tax Free Income Fund
Evergreen North Carolina Municipal Bond Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
National Tax Free Funds
-----------------------
Evergreen High Grade Tax Free Fund
MASTER TRANSFER AND RECORDKEEPING AGREEMENT
AGREEMENT made as of the 18th day of September, 1997 by and between
each of the parties listed on Exhibit A which is attached hereto and made a part
hereof (each a "Fund" or "Funds"), each for itself and not jointly, each having
its principal place of business at 200 Berkeley Street, Boston, Massachusetts
02116, and Evergreen Service Company ("ESC"), having its principal place of
business at 200 Berkeley Street, Boston, Massachusetts 02116.
W I T N E S S E T H T H A T
WHEREAS, each Fund desires ESC to perform certain services for the
Fund, and ESC is willing to perform such services.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, each party, for itself and not jointly, agrees as follows:
1. ADDITIONAL PARTIES - Any other registered investment company for
which Keystone Investment Management Company (KIMCO), Evergreen Asset Management
Corp. ("Evergreen Asset"), First Union National Bank or one of its affiliates
serves as investment adviser, trustee or manager may become a Fund party to this
Agreement, for itself and not jointly, by giving written notice to ESC that it
has elected to become a Fund party hereto, to which election ESC has given its
written consent.
2. SERVICES - ESC shall perform for each Fund the services set forth on
Exhibit B which is attached hereto and made a part hereof. ESC shall also
perform for each Fund, without additional charge, any services which it
customarily performs in the ordinary course of business without additional
charge for the investment companies for which ESC acts as transfer agent,
dividend disbursing agent, or shareholder servicing and recordkeeping agent.
ESC shall perform such other services in addition to those set forth on
Exhibit B hereto as a Fund shall request in writing. Any of the services to be
performed hereunder, and the manner in which such services are to be performed,
shall be changed only pursuant to a written agreement signed by the parties
hereto.
ESC will undertake no activity which, in its judgment, will adversely
effect the performance of its obligations to a Fund under this Agreement.
3. FEES - Each Fund shall pay ESC for the services to be performed
pursuant to this Agreement in accordance with and in the manner set forth with
respect to such Fund on Exhibit C attached hereto and made a part hereof.
4. EFFECTIVE DATE - This Agreement shall become effective as of the
date set forth above and shall become effective as to each Fund which gives
written notice to ESC
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pursuant to Paragraph 1 hereof that it elects to become a party hereto as of the
date of such notice.
5. TERM - This Agreement shall be in effect until terminated in
accordance with Section 17 hereof.
6. USE OF ESC'S NAME - The Funds will not use ESC's name in any sales
literature or other material in a manner not approved by ESC in writing before
such use, unless a similar use was previously approved. Notwithstanding the
foregoing, ESC hereby consents to all uses of ESC's name which merely refer in
accurate terms to ESC's appointments hereunder or which are required by the
Securities and Exchange Commission or a state securities commission, and
provided, further, that in no case will such approval be unreasonably withheld
or delayed.
7. STANDARD OF CARE - ESC shall at all times use its best efforts and
act in good faith and in a non-negligent manner in performing all services
pursuant to this Agreement.
8. UNCONTROLLABLE EVENTS - ESC shall not be liable for damage, loss of
data, delays or errors occurring by reason of circumstances beyond its control,
including, but not limited to, acts of civil or military authority, national
emergencies, fire, flood or catastrophe, acts of God, insurrection, war, riots,
or failure of transportation, communication or power supply. However, ESC shall
keep in a separate and safe place additional copies of all records required to
be maintained pursuant to this Agreement or additional tapes or discs necessary
to reproduce all such records. Furthermore, at all times during this Agreement,
ESC shall maintain an arrangement whereby ESC will have a backup computer
facility available for its use in providing the services required hereunder in
the event circumstances beyond ESC's control result in ESC not being able to
process the necessary work at its principal computer facility. ESC shall, from
time to time, upon request from any Fund provide written evidence and details of
its arrangement for obtaining the use of such a backup computer facility. ESC
shall use reasonable care to minimize the likelihood of all damage, loss of
data, delays and errors resulting from an uncontrollable event. Should such
damage, loss of data, delays or errors occur, ESC shall use its best efforts to
mitigate the effects of such occurrence. Representatives of each Fund shall be
entitled to inspect the ESC premises and operating capabilities within
reasonable business hours and upon reasonable notice to ESC.
9. INDEMNIFICATION - Each Fund shall indemnify and hold ESC, its
employees and agents harmless against any losses, claims, damages, judgments,
liabilities or expenses (including reasonable counsel fees and expenses)
resulting from (1) transactions which occurred prior to the date ESC began
serving as Transfer Agent to the Fund; (2) action taken or permitted by ESC in
good faith with due care and without negligence in reliance upon instructions
received from such Fund in accordance with Section 10 hereof or with respect to
a Fund upon the opinion of counsel for the Fund, as to anything arising in
connection with its performance under this Agreement; or (3) any act done or
suffered by ESC with respect to a Fund in good faith with due care and without
negligence in connection with its performance under this Agreement in reliance
upon any instruction, order, stock certificate or other instrument reasonably
believed by it to be
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genuine and to bear the genuine signature of any person or persons authorized to
sign, countersign, or execute same, and which complies with all applicable
requirements of the Fund's current prospectus(es) and statement of additional
information, this Agreement and instructions and other governing documents
provided to ESC by the Fund. For purposes of this indemnification, it is
specifically agreed that if any instruction received by ESC in accordance with
Section 10 hereof differs from the requirements set forth in the Fund's current
prospectus(es) or statement of additional information then, with regard to that
difference, the instruction, order, stock certificate or other instrument relied
upon by ESC, ESC need only comply with such instruction (and not the current
prospectus(es) or statement of additional information).
In the event that ESC requests any Fund to indemnify or hold it
harmless hereunder, ESC shall use its best efforts to inform the Fund of the
relevant facts concerning the matter in question. ESC shall use reasonable care
to identify and promptly notify a Fund concerning any matter which ESC believes
may result in a claim for indemnification against such Fund, and shall notify
the Fund within seven days of notice to ESC of the filing of any suit or other
legal action or the institution by a government agency of any administrative
action or investigation against ESC which involves its duties under this
Agreement. Each Fund shall have the election of defending ESC against any claim
with respect to such Fund which may be the subject of indemnification or holding
it harmless hereunder. In the event a Fund so elects, it will so notify ESC.
Thereupon the Fund shall take over defense of the claim, and, if so requested by
a Fund, ESC shall incur no further legal or other expenses related thereto for
which it shall be entitled to indemnity or holding harmless hereunder; provided,
however, that nothing herein shall prevent ESC from retaining counsel to defend
any claim at ESC's own expense.
Except with the prior written consent of a Fund, ESC shall in no event
confess any claim or make any compromise in any matter in which such Fund will
be asked to indemnify or hold ESC harmless hereunder. ESC shall be without
liability to a Fund with respect to anything done or omitted to be done in
accordance with the terms of this Agreement or instructions properly received
pursuant hereto if done in good faith and without negligence or willful or
wanton misconduct. In no event shall ESC be liable for consequential damages,
lost profits, or other special damages, even if ESC has been informed of the
possibility of such damage or loss by the Fund or by third parties.
Notwithstanding the foregoing, ESC shall be liable to each Fund for
any damage or losses suffered by such Fund as a result of a delay or negligence
on the part of ESC in processing a purchase or liquidation transaction or in
making payment to a shareholder of such Fund; it being agreed that, without in
any way limiting ESC's liability for other transactions hereunder, that such
damages shall not be deemed to be consequential or special.
10. INSTRUCTIONS - ESC shall comply with all instructions issued by a
Fund in the form prescribed below which are permitted or required under Exhibit
B attached hereto. Whenever ESC takes action hereunder pursuant to instructions
from a Fund, ESC shall be entitled to rely upon such instructions only when such
instructions are signed by the President or Treasurer of
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the Fund or by an individual designated in writing by the President or Treasurer
as a person authorized to give instructions hereunder. A Fund may waive the
requirement that all instructions be in writing, if such waiver defines the
occurrences not requiring written instruction, indicates the persons authorized
to give such non-written instructions, and is signed by one of the persons
pursuant to the immediately preceding sentence of this Section 10. In the event
ESC obtains a Fund's written waiver, it may rely on non-written instructions
received pursuant thereto.
11. CONFIDENTIALITY - ESC agrees to treat as confidential all records
and other information relative to a Fund and the Fund's shareholders. ESC, on
behalf of itself and its employees, agrees to keep confidential all such
information, except, after prior notification to and approval by a Fund (which
approval shall not be unreasonably withheld and may not be withheld where ESC
may be exposed to civil or criminal contempt proceedings) when requested to
divulge such information by duly constituted authorities or when requested by a
shareholder of a Fund seeking information about his own or an appropriately
related account.
12. REPORTS - ESC will furnish to each Fund and to properly authorized
auditors, examiners, investment companies, dealers, salesmen, insurance
companies, transfer agents, registrars, investors, and others designated by each
Fund in writing, such reports at such times as are prescribed for each service
in Exhibit B.
13. RIGHT OF OWNERSHIP - ESC agrees that all records and other data
received, computed, developed, used and/or stored pursuant to this Agreement are
the exclusive property of each respective Fund and that all such records and
other data will be furnished without additional charge to a Fund in available
machine readable data form immediately upon termination of this Agreement with
respect to such Fund for any reason whatsoever. Furthermore, upon a Fund's
request at any time or times while this Agreement is in effect, ESC shall
deliver to such Fund, at the Fund's expense, any or all of the data and records
held by ESC pursuant to this Agreement, in the form as requested by the Fund. On
the effective date of termination of this Agreement with respect to a Fund or,
if later, on the date a Fund ceases to use ESC's services, ESC will promptly
return to the Fund any and all records and other data belonging to the Fund free
of any claim or retention of rights by ESC.
14. REDEMPTION OF SHARES - The parties hereto agree that ESC shall
process liquidations, redemptions or repurchases of shares of each Fund, as the
agent for such Fund, in the manner described in the then current prospectus(es)
and statement of additional information for the Fund. Notwithstanding the
foregoing, ESC shall be liable for any losses, damages, claims or expenses
resulting from ESC's failure to obtain the appropriate signature guarantee with
regard to any redemption or transfer processed by ESC even if the current
prospectus(es) or statement of additional information authorizes ESC to waive
the requirement of a signature guarantee unless ESC is authorized in writing by
an appropriate party to waive such a requirement.
15. SUBCONTRACTING - Each Fund may require that ESC, or ESC may, with
the prior written consent of such Fund, subcontract with one or more of its
affiliated or other persons to
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perform all or part of its obligations hereunder, provided, however, that,
notwithstanding any such subcontract, ESC shall be fully responsible to each
Fund hereunder.
16. ASSIGNMENT - This Agreement and the rights and duties hereunder
shall not be assignable by ESC or any of the Fund parties hereto except by the
specific written consent of the other party.
17. TERMINATION - This Agreement may be terminated with respect to a
Fund on such date on which ESC has given such Fund not less than 180 days prior
written notice or on which such Fund has given ESC not less than 90 days prior
written notice. Upon such termination, ESC will use its best efforts to
cooperate and assist in accomplishing a timely, efficient and accurate
conversion to the person or firm which will provide the services described
hereunder. This Agreement may be terminated by any Fund without the payment of
any penalty, forfeiture, compulsory buyout amount or performance of any other
obligation which could deter termination; provided, however, that for the
purpose of this Section 17 any amount due under Section 3 of this Agreement
which is undisputed is not considered a penalty, forfeiture, compulsory buyout
amount or performance of any other obligation which could deter termination.
This Agreement may be terminated with respect to a Fund after written
notice to ESC by the Fund if there is a material breach or violation of this
Agreement or if ESC fails to perform any of its obligations under this Agreement
and the failure continues for more than 30 days after the Fund gives notice of
the failure to ESC or bankruptcy or insolvency proceedings of any nature are
instituted by or against ESC.
18. INSURANCE - ESC shall maintain throughout the term of this
Agreement a fidelity bond(s) in an amount in excess of the minimum amount
required to be obtained by the Funds which are parties hereto pursuant to Rule
17g-1 under the Investment Company Act of 1940 (the "1940 Act") covering the
acts of its officers, employees or agents in performing any and all of the
services required to be performed hereunder. ESC agrees to promptly notify each
Fund in writing of any material amendment or cancellation of such bond(s). ESC
shall at such times as the Fund may request, but at least once each year, notify
each Fund of any claims made pursuant to such bond(s).
19. AMENDMENT - This Agreement may be amended at any time by an
instrument in writing executed by both ESC and any Fund which is a party hereto,
or each of their respective successors, provided that any such amendment will
conform to the requirements set forth in the 1940 Act and the rules and
regulations thereunder.
20. NOTICE - Any notice shall be sufficiently given when sent by
registered or certified mail to any party at the address of such party set forth
above or at such other address as such party may from time to time specify in
writing to the other party.
21. SECTION HEADINGS - Section headings are included for convenience
only and are not
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to be used to construe or interpret this Agreement.
22. INTERPRETIVE PROVISIONS - In connection with the operation of this
Agreement, ESC and one or more of the Funds may agree with respect to such Funds
and ESC from time to time on such provisions interpretive of or in addition to
the provisions of this Agreement as may in their combined opinion be consistent
with the general tenor of this Agreement. Furthermore, ESC and such Fund(s) may
agree to add to, delete from or change the services set forth with respect to
such Fund(s) in Exhibit B of the Agreement. Each such interpretive or additional
provision, and each addition, deletion or change is to be signed by all parties
affected and annexed hereto, and no such provision, addition, deletion or change
shall contravene any applicable federal or state law or regulation and no such
provision, addition, deletion or change shall be deemed to be an amendment of
any provision of this Agreement with the exception of Exhibit B hereto.
23. GOVERNING LAW - This Agreement shall be governed by and its
provisions shall be construed in accordance with the laws of The Commonwealth of
Massachusetts.
24. DELAWARE BUSINESS TRUST - Each of the Funds listed on Exhibit A
attached hereto is a Delaware business trust established under a Declaration of
Trust. The obligations of such Funds are not personally binding upon, nor shall
recourse be had against the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Funds, but only the property
of such Funds shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
EVERGREEN SERVICE COMPANY
By: /s/ Edward J. Falvey
------------------------
Edward J. Falvey
President
Evergreen Select Fixed Income Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Select Limited Duration Fund Evergreen Select Fixed Income
Fund Evergreen Select Income Plus Fund Evergreen Select Intermediate
Tax Exempt Bond Fund Evergreen Select Core Bond Fund Evergreen Select
Intermediate Bond Fund Evergreen Select Adjustable Rate Fund
Evergreen Select Equity Trust, a Delaware Business Trust consisting of the
following series:
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Evergreen Select Strategic Value Fund Evergreen Select Large Cap Blend
Fund Evergreen Select Strategic Growth Fund Evergreen Select Social
Principles Fund Evergreen Select Equity Income Fund Evergreen Select
Small Company Value Fund Evergreen Select Common Stock Fund Evergreen
Select Small Cap Growth Fund Evergreen Select Balanced Fund Evergreen
Select Diversified Value Fund
Evergreen Select Money Market Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Select 100% Treasury Money Market Fund
Evergreen Institutional Money Market Fund
Evergreen Institutional Tax Exempt Money Market Fund
Evergreen Institutional Treasury Money Market Fund
Evergreen Municipal Trust, a Delaware Business Trust consisting of the
following series:
Evergreen California Tax Free Fund Evergreen Connecticut Municipal Bond
Fund Evergreen Florida High Income Municipal Bond Fund Evergreen
Florida Municipal Bond Fund Evergreen Georgia Municipal Bond Fund
Evergreen Massachusetts Tax Free Fund Evergreen Missouri Tax Free Fund
Evergreen New Jersey Tax Free Income Fund Evergreen New York Tax Free
Fund Evergreen North Carolina Municipal Bond Fund Evergreen
Pennsylvania Tax Free Fund Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund Evergreen High Grade Tax Free
Fund Evergreen Short-Intermediate Municipal Fund Evergreen Tax Free
Fund
Evergreen Equity Trust, a Delaware Business Trust consisting of the following
series:
Evergreen Aggressive Growth Fund Evergreen Fund Evergreen Micro Cap
Fund Evergreen Omega Fund Evergreen Small Company Growth Fund Keystone
Strategic Growth Fund (K-2) Evergreen American Retirement Fund
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Evergreen Foundation Fund Evergreen Tax Strategic Foundation Fund
Evergreen Balanced Fund Evergreen Fund for Total Return Evergreen
Growth & Income Fund Evergreen Income & Growth Fund Evergreen Small Cap
Equity Income Fund Evergreen Value Fund Evergreen Utility Fund Keystone
Growth and Income Fund (S-1)
Evergreen Fixed Income Trust, a Delaware Business Trust consisting of the
following series:
Evergreen U.S. Government Fund
Evergreen Strategic Income Fund
Evergreen Diversified Bond Fund
Keystone High Income Bond Fund (B-4)
Evergreen Capital Preservation and Income Fund
Evergreen Intermediate Term Bond Fund
Evergreen Intermediate-Term Government Securities Fund
Evergreen Short-Intermediate Bond Fund
Evergreen International Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Emerging Markets Growth Fund Evergreen Global Leaders Fund
Evergreen Global Opportunities Fund Evergreen International Equity Fund
Evergreen Latin America Fund Evergreen Natural Resources Fund Keystone
Precious Metals Holdings Keystone International Fund
Evergreen Money Market Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Money Market Fund
Evergreen Pennsylvania Tax Free Money Market Fund
Evergreen Tax Exempt Money Market Fund
Evergreen Treasury Money Market Fund
By: /s/ John Pileggi
------------------------------------
John Pileggi
President and Treasurer of each
Delaware Business Trust listed above
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EXHIBIT A
Evergreen Select Fixed Income Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Select Limited Duration Fund Evergreen Select Fixed Income
Fund Evergreen Select Income Plus Fund Evergreen Select Intermediate
Tax Exempt Bond Fund Evergreen Select Core Bond Fund Evergreen Select
Intermediate Bond Fund Evergreen Select Adjustable Rate Fund
Evergreen Select Equity Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Select Strategic Value Fund Evergreen Select Large Cap Blend
Fund Evergreen Select Strategic Growth Fund Evergreen Select Social
Principles Fund Evergreen Select Equity Income Fund Evergreen Select
Small Company Value Fund Evergreen Select Common Stock Fund Evergreen
Select Small Cap Growth Fund Evergreen Select Balanced Fund Evergreen
Select Diversified Value Fund
Evergreen Select Money Market Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Select 100% Treasury Money Market Fund
Evergreen Institutional Money Market Fund
Evergreen Institutional Tax Exempt Money Market Fund
Evergreen Institutional Treasury Money Market Fund
Evergreen Municipal Trust, a Delaware Business Trust consisting of the following
series:
Evergreen California Tax Free Fund Evergreen Connecticut Municipal Bond
Fund Evergreen Florida High Income Municipal Bond Fund Evergreen
Florida Municipal Bond Fund Evergreen Georgia Municipal Bond Fund
Evergreen Massachusetts Tax Free Fund Evergreen Missouri Tax Free Fund
Evergreen New Jersey Tax Free Income Fund Evergreen New York Tax Free
Fund Evergreen North Carolina Municipal Bond Fund
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Evergreen Pennsylvania Tax Free Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
Evergreen High Grade Tax Free Fund
Evergreen Short-Intermediate Municipal Fund
Evergreen Tax Free Fund
Evergreen Equity Trust, a Delaware Business Trust consisting of the following
series:
Evergreen Aggressive Growth Fund Evergreen Fund Evergreen Micro Cap
Fund Evergreen Omega Fund Evergreen Small Company Growth Fund Keystone
Strategic Growth Fund (K-2) Evergreen American Retirement Fund
Evergreen Foundation Fund Evergreen Tax Strategic Foundation Fund
Evergreen Balanced Fund Evergreen Fund for Total Return Evergreen
Growth & Income Fund Evergreen Income & Growth Fund Evergreen Small Cap
Equity Income Fund Evergreen Value Fund Evergreen Utility Fund Keystone
Growth and Income Fund (S-1)
Evergreen Fixed Income Trust, a Delaware Business Trust consisting of the
following series:
Evergreen U.S. Government Fund
Evergreen Strategic Income Fund
Evergreen Diversified Bond Fund
Keystone High Income Bond Fund (B-4)
Evergreen Capital Preservation and Income Fund
Evergreen Intermediate Term Bond Fund
Evergreen Intermediate-Term Government Securities Fund
Evergreen Short-Intermediate Bond Fund
Evergreen International Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Emerging Markets Growth Fund
Evergreen Global Leaders Fund
Evergreen Global Opportunities Fund
Evergreen International Equity Fund
Evergreen Latin America Fund
Evergreen Natural Resources Fund
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<PAGE>
Keystone Precious Metals Holdings
Keystone International Fund
Evergreen Money Market Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Money Market Fund
Evergreen Pennsylvania Tax Free Money Market Fund
Evergreen Tax Exempt Money Market Fund
Evergreen Treasury Money Market Fund
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<PAGE>
EXHIBIT B
The services provided for in this Agreement shall be performed by ESC,
or any agent appointed by ESC pursuant to Section 15 of this Agreement, under
the name of Evergreen Service Company (ESC) and this name or any similar name or
logo will not be used by ESC or its agents for any purposes other than those
related to this Agreement or to any other agreement which ESC may enter into
with any of the Fund (s) or with companies affiliated with the Fund (s).
The offices of ESC shall be open to perform the services pursuant to
this Agreement on all days when the Fund is open to transact business.
ESC will perform all services normally provided to investment companies
such as the Fund(s), and the quality of such services shall be equal to or
better than that provided to the other investment companies serviced by ESC.
With respect to each Fund, by way of illustration, but not limitation, these
services will include:
1. Establishing, maintaining, safeguarding and reporting on
shareholder account information and account histories,
(including registration, name and address recorded in
generally accepted form, dealer, representative, branch, and
territory information, mailing address, distribution address,
various codes and specific information relating to (if
applicable); withdrawal plans, letters of intent, systematic
investing, insured redemptions plans, account groupings for
rights of accumulation discount processing, and for account
group reporting for plan accounts and other accounts grouped
for master sub-account reporting.)
2. Recording and controlling shares outstanding in certificate
("issued") and non-certificate ("unissued") form.
3. Maintaining a record for each certificate issued to include
certificate number, account number, issued date, number of
shares, canceled date or stop date, where appropriate.
4. Reconciling the number of outstanding shares of each Fund on a
daily basis with the Fund and the Fund's custodian, promptly
correcting any differences noted.
5. Establishing and maintaining a trade file on behalf of each
Fund based on trade information furnished to the transfer
agent by the Fund or its distributors.
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B-1
<PAGE>
6. Accepting and processing direct cash investments however
received and investing such investments promptly in
shareholder accounts.
7. Passing upon the adequacy of documents properly endorsed and
guaranteed submitted by or on behalf of a shareholder to
transfer ownership or redeem shares.
8. Transferring ownership of shares upon the books of each Fund.
9. Redeeming shares and preparing and mailing redemption checks
or wire proceeds as instructed.
10. Preparing and promptly mailing account statements to the
shareholder or such other authorized address and, when
appropriate, as instructed by a Fund, to the dealer or dealer
branch, whenever transaction activity effecting share balances
are posted to a Fund account that is of the type that should
receive such statement.
11. Checking surrendered certificates for stop transfer
instructions.
12. Canceling certificates surrendered.
13. Issuing certificates as replacements for those canceled, or as
an original issue of additional shares or upon the reduction
of an equal number of unissued shares.
14. Maintaining and updating a stop transfer file, promptly
placing stop transfer codes upon notification of possible
loss, destruction or disappearance of a certificate. Upon
receipt of proper documentation obtaining necessary insurance
forms and issuing replacement certificates.
15. Balancing outstanding shares of record with the custodian
prior to each distribution and calculating and paying or
reinvesting distributions to shareholders of record and to
open trade receivables and free stock.
16. Processing exchanges of shares of one Fund or Portfolio for
another, calculating proper sales charges and collecting fees
as required.
17. Processing withdrawal plan liquidations according to plan
instructions.
18. Reporting to each Fund and its custodian daily the capital
stock activities and dollar amounts of transactions.
19. Promptly answering inquiries from shareholders, dealers, Fund
personnel, and others as requested in accordance with the
terms of this Agreement as to account
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<PAGE>
matters, referring policy or investment matters to the Fund.
20. Mailing reports and special mailings, as directed by a Fund,
to all shareholders or selected holders or dealers.
21. Providing services with regard to the annual or special
meetings of a Fund, including preparation and timely mailing
of proxy material to shareholders of record and others as
directed by the Fund, and receiving, examining and recording
all properly executed proxies and performing such follow-up as
required by the Fund.
22. Providing periodic listings and tallies of shareholder votes
and certifying the final tally.
23. Providing an inspector of elections at the annual or any
special meetings of a Fund.
24. Maintaining tax information for each account, deducting
amounts where required and furnishing to a Fund, its
shareholders, dealers and, when appropriate, regulatory
bodies, the necessary tax information, all in compliance with
the various applicable laws.
25. Maintaining records of account and distribution information
for checks and confirmations returned as undeliverable by the
Post Office.
26. Maintaining records and reporting sales information for Blue
Sky reporting purposes.
27. Calculating and processing Fund mergers or stock dividends, as
directed by a Fund.
28. Maintaining all Fund records as outlined in the record and
tape retention schedule delivered by a Fund.
29. Reconciling all investment, distribution and redemption
accounts.
30. Providing for the replacement of uncashed distribution or
redemption checks.
31. Maintaining and safeguarding an inventory of unissued blank
stock certificates, checks and other Fund records.
32. Making available to a Fund and its distributors at their
locations devices which will provide immediate electronic
access to computerized records maintained for a Fund.
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<PAGE>
33. Providing space and such technical expertise as may be
required to enable a Fund and its properly authorized
auditors, examiners and others designated by the Fund in
writing to properly understand and examine all books, records,
computer files, microfilm and other items maintained pursuant
to this Agreement, and to assist as required in such
examination.
34. Assigning a single account number to each shareholder
regardless of the number of Funds or Portfolios owned for
which Keystone Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank or one of its
affiliates is the trustee, investment adviser or manager
(except as instructed otherwise.)
35. Mailing prospectuses to existing accounts on receipt of the
first direct investment transaction after a new prospectus has
been issued by a Fund.
36. Mailing cash election notices when required prior to capital
gains distributions.
37. Maintaining information, performing the necessary research and
producing reports required to comply with all applicable state
escheat or abandoned property laws.
With respect to each Fund, the Transfer Agent will produce reports as requested
by a Fund including, but not limited to, the following:
Shareholder Account Confirmation As required
Redemption Checks When redemption is made
Certificates When requested
Withdrawal plan payment checks On payment cycle
Distribution checks As required
Name and address labels
(per account registration) As requested
Proxy When required
1099 Annually
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<PAGE>
1042-S Annually
Transaction journals Daily
Record date position control Daily
Daily and (monthly) cash proof Daily
Daily and (monthly) share proof Daily
Daily master control Daily
Blue Sky exception Daily
Blue Sky master list Monthly and whenever a new
permit is issued by a state
Blue Sky sales report Cycle as designated in
advance by distributor
Check register Daily
Account information reports When requested
(Monthly) Cumulative Monthly
transaction
New account list Monthly
Shareholder master list When requested
Sales by State Monthly
Activities statistics Monthly
Distribution journals As required
Proxy tallies and vote listings When requested
Withdrawal plan account check Monthly
reconciliation
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<PAGE>
Dividend account check As required
reconciliation
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<PAGE>
EXHIBIT C
TRANSFER AGENT FEE SCHEDULE
CHARGES TO FUNDS
GROUP 1 - MONTHLY DIVIDEND FUNDS
Per open account per year $26.50
Per closed account per year 9.00
Per new account 10.00
GROUP 2 - QUARTERLY DIVIDEND FUNDS
Per open account per year $25.50
Per closed account per year 9.00
Per new account 10.00
GROUP 3 - SEMI-ANNUAL AND ANNUAL DIVIDEND FUNDS
Per open account per year $24.50
Per closed account per year 9.00
Per new account 10.00
GROUP 4 - MONEY MARKET FUNDS
Per open account per year $26.50
Per closed account per year 9.00
Per new account 10.00
CHARGES TO SHAREHOLDERS
GROUP 5 - ERISA*
Per IRA participant per year $10.00 with a maximum of $20.00**
Per Keogh participant per year $10.00 with a maximum of $20.00
Per TSA per year $10.00 with a maximum of $20.00
*These fees are not borne by the Funds, but are direct shareholder charges.
**Fee waived for participants with assets in excess of $25,000. Funds that have
"seed" capital only will not be charged until the Fund has public shareholders.
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<PAGE>
This Fee Schedule is exclusive of out-of-pocket reimbursable expenses.
Out-of-pocket expenses include but are not limited to the following:
Stationery and supplies
Checks
Express Delivery
Postage
Printing of forms
Telephone
Photocopies and Microfilm
C-2
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CONSENT OF INDEPENDENT AUDITORS
The Trustees and Shareholders
Evergreen Municipal Trust:
We consent to the use of our report dated May 1, 1998 for Evergreen California
Tax Free Fund, Evergreen Connecticut Municipal Bond Fund, Evergreen
Massachusetts Tax Free Fund, Evergreen Missouri Tax Free Fund, Evergreen New
Jersey Tax Free Income Fund, Evergreen New York Tax Free Fund and Evergreen
Pennsylvania Tax Free Fund incorporated herein by reference and to the
references to our firm under the captions "FINANCIAL HIGHLIGHTS" in the
prospectus and "Independent Auditors" in the statement of additional
information.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
July 29, 1998
DISTRIBUTION PLAN OF CLASS A SHARES
THE EVERGREEN MUNICIPAL TRUST
SECTION 1. The Evergreen Municipal Trust (the "Trust") individually
and/or on behalf of its series (each a "Fund") referred to in Exhibit A to this
Rule 12b-1 Plan of Distribution (the "Plan") may act as the distributor of
securities which are issued in respect of the Fund's Class A shares ("Shares"),
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act")
according to the terms of this Plan.
SECTION 2. The Trust on behalf of each Fund may expend daily amounts at
an annual rate of 0.75% of the average daily net asset value of Class A shares
("Shares") of the Fund. Such amounts may be expended to finance 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 make payments to
the Principal Underwriter or others of sales commissions, other fees or other
compensation for services provided or to be provided, to enable payments to be
made by the Principal Underwriter or others for any activity primarily intended
to result in the sale of Shares, to pay interest expenses associated with
payments in connection with the sale of Shares and to pay any expenses of
financing permitted by this clause (i); (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 service fee, maintenance or other fee
in respect of such services, at such intervals as the Principal Underwriter or
such others 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 or others for efforts
(including without limitation any financing of payments under (i) and (ii) for
the sale of shares) in respect of sales of Shares since inception of the Plan or
any predecessor 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 Trust on behalf of any Fund with respect to the Class in excess of
the applicable limit imposed on asset based, front end and deferred sales
charges under subsection (d) of Rule 2830 of the Business Conduct Rules of the
National Association of Securities Dealers Regulation, Inc. (The "NASDR"). In
addition, to the extent any amounts paid hereunder fall within the definition of
an "asset based sales charge" under said NASDR Rule such payments shall be
limited to 0.75 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 NASDR 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 until it has been approved
together with any related agreements by votes of a majority of both (a) the
Board of Trustees of the Trust and (b) those Trustees of the Trust who are not
"interested persons" of the Trust (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 Fund or any other person related to this Plan ("Rule 12b-1
Trustees"), cast in person
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at a meeting called for the purpose of voting on this Plan or such agreements.
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 so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 3.
SECTION 5. Any person authorized to direct the disposition of monies
paid or payable by the Trust on behalf of each Fund pursuant to this Plan or any
related agreement shall provide to the Trust's Board of Trustees 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 Rule 12b-1 Trustees or by vote of a majority
of such Fund's outstanding Shares.
SECTION 7. Any agreement of the Fund related to this Plan shall be in
writing and shall provide:
(a) that such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Rule
12b-1 Trustees or by a vote of a majority of such Fund's
outstanding Shares 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 hereof unless such
amendment is approved by a vote of at least a majority (as defined in the 1940
Act) of each Fund's outstanding Shares, and no material amendment to this Plan
shall be made unless approved in the manner provided for in Section 3 hereof.
23937
DISTRIBUTION PLAN FOR CLASS B-1 SHARES
EVERGREEN MUNICIPAL TRUST
Section 1. The Evergreen Municipal Trust (the "Trust"), individually
and/or on behalf of its series, (each a "Fund"), referred to in Exhibit A to
this 12b-1 Plan of Distribution (the "Plan"), may act as the distributor of
certain securities of which it is the issuer pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act") according to the terms of this
Plan.
Section 2. The Trust on behalf of each Fund may expend daily amounts at
an annual rate of up to 1.00% of the average daily net asset value of the Fund
attributable to the Fund's Class B-1 shares (the "Shares"). Such amounts may be
expended to finance any activity that is principally intended to result in the
sale of Shares, including, without limitation, expenditures consisting of
payments to a principal underwriter of the Fund or others as sales commissions
or other compensation for services provided or to be provided ("Distribution
Fees") or as reimbursement for expenses that are incurred or accrued at any time
during which this Plan or any predecessor plan is in effect, together with
interest on any such amounts, at rates approved by the Rule 12b-1 Trustees (as
defined below) in the manner referred to below, all whether or not this Plan or
any predecessor plan has been otherwise terminated, if such payment of such
expenditures is for services theretofore provided or for reimbursement of
expenses theretofore incurred or accrued prior to termination of this Plan or
any predecessor plan in other respects and if such payment is or has been so
approved by such Rule 12b-1 Trustees, or agreed to on behalf of the Fund with
such approval, all subject to such specific implementation as such 12b-1
Trustees may approve; provided that, at the time any such payment is made,
whether or not this Plan or any predecessor plan has been otherwise terminated,
the making of such payment will not cause the limitation upon such payments set
forth in the preceding sentence to be exceeded. Without limiting the generality
of the foregoing, the Trust on behalf of each Fund may pay to, or on the order
of, any person who has served from time to time as principal underwriter (a
"Principal Underwriter") amounts for distribution services pursuant to a
principal underwriting agreement or otherwise. No principal underwriting
agreement or other agreement shall be an agreement related to this Plan, as
referred to in Rule 12b-1 of the Securities and Exchange Commission, unless it
specifically states that it is such a related agreement. Any such principal
underwriting agreement may, but need not, provide that such Principal
Underwriter may be paid for distribution services to Class B-1 Shares and/or
other specified classes of shares of the Fund (together the
"B-Class-of-Shares"), a fee which may be designated a Distribution Fee and may
23927
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be paid at a rate per annum up to .75% of the average daily net asset value of
such B-Class-of-Shares of the Fund and may, but need not, also provide: (i) that
a Principal Underwriter will be deemed to have fully earned its "Allocable
Portion" of the Distribution Fee upon the sale of the Commission Shares (as
defined in the Allocation Schedule) taking into account in determining its
Allocable Portion; (ii) that the Fund's obligation to pay such Principal
Underwriter its Allocable Portion of the Distribution Fees shall be absolute and
unconditional and shall not be subject to dispute, offset, counterclaim or any
defense whatsoever (it being understood that such provision is not a waiver of
the Fund's right to pursue such Principal Underwriter and enforce such claims
against the assets of such Principal Underwriter other than its right to its
Allocable Portion of the Distribution Fees and CDSCs (as defined below); (iii)
that the Fund's obligation to pay such Principal Underwriter its Allocable
Portion of the Distribution Fees shall not be changed or terminated except to
the extent required by any change in applicable law, including without
limitation, the 1940 Act, the Rules promulgated thereunder by the Securities and
Exchange Commission and the Business Conduct Rules of the National Association
of Securities Dealers, Inc., in each case enacted or promulgated after June
1995, or in connection with a "Complete Termination" (as hereinafter defined);
(iv) that the Trust on behalf of any Fund will not waive or change any
contingent deferred sales charge ("CDSC") in respect of the Distributor's
Allocable Portion thereof, except as provided in the Fund's prospectus or
statement of additional information without the consent of the Principal
Underwriter or any assignee of such Principal Underwriter's rights to its
Allocable Portion; (v) that the termination of the Principal Underwriter, the
principal underwriting agreement or this Plan will not terminate the Principal
Underwriter's rights to its Allocable Portion of the CDSCs; and (vi) that any
Principal Underwriter may assign its rights to its Allocable Portion of the
Distribution Fees and CDSCs (but not such Principal Underwriter's obligations to
the Fund under its principal underwriting agreement) to raise funds to make
expenditures described in Section 2 above and in connection therewith, and upon
receipt of notice of such assignment, the Trust on behalf of any Fund shall pay
to the assignee such portion of the Principal Underwriter's Allocable Portion of
the Distribution Fees and CDSCs so assigned. For purposes of such principal
underwriting agreement, the term Allocable Portion of Distribution Fees as
applied to any Principal Underwriter may mean the portion of the Distribution
Fee allocable to Distributor Shares in accordance with the "Allocation Schedule"
attached to such Principal Underwriter's principal underwriting agreement. For
purposes of such principal underwriting agreement, the term Allocable Portion of
CDSCs as applied to any Principal Underwriter may mean the portion of the CDSCs
allocable to Distributor Shares in accordance with the Allocation Schedule
attached to such Principal Underwriter's principal underwriting agreement. For
purposes of such principal underwriting agreement, the term "Complete
Termination" may mean a termination of this Plan involving
23927
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<PAGE>
the cessation of payments of the Distribution Fees thereunder, the cessation of
payments of distribution fees pursuant to every other Rule 12b-1 plan of the
Fund for every existing or future B-Class-of-Shares and the cessation of the
offering by the Fund of existing or future B-Class-of-Shares, which conditions
shall be deemed to be satisfied when they are first complied with and so long
thereafter as they are complied with prior to the earlier of (i) the date upon
which all of the B-1 Shares which are Distributor Shares pursuant to the
Allocation Schedule shall have been redeemed or converted or (ii) a specified
date, after either of which times such conditions need no longer be complied
with. For purposes of such principal underwriting agreement, the term
"B-Class-of-Shares" may mean each of the B-1 Class of Shares of a Fund, the B-2
Class of Shares of the Fund and each other class of shares of the Fund hereafter
issued which would be treated as "Shares" under such Allocation Schedule or
which has economic characteristics substantially similar to those of the B-1 or
B-2 Classes of Shares taking into account the total sales charge, CDSC or other
similar charges borne directly or indirectly by the holder of the shares of such
classes. The parties may agree that the existing C Class of Shares of the Fund
does not have substantially similar economic characteristics to the B-1 or B-2
Classes of Shares taking into account the total sales charge, CDSC or other
similar charges borne directly or indirectly by the holder of such shares. For
purposes of clarity the parties to such principal underwriting agreement may
state that they intend that a new installment load class of shares which may be
authorized by amendments to Rule 6(c)-10 under the 1940 Act will not be
considered to be a B-Class-of-Shares if it has economic characteristics
substantially similar to the economic characteristics of the existing C Class of
Shares of the Fund taking into account the total sales charge, CDSC or other
similar charges borne directly or indirectly by the holder of such shares. For
purposes of such principal underwriting agreement, "Allocation Schedule" may
mean a schedule which shall be approved by Trustees (as defined below) in
connection with their required approval of such principal underwriting agreement
as assigning to each principal Underwriter of Shares the portion of the total
Distribution Fees payable by the Trust on behalf of each Fund under such
principal underwriting agreement which has been earned by such Principal
Underwriter to the extent necessary so that the continued payments thereof if
such Principal Underwriter ceases to serve in that capacity does not penalize
the Fund by requiring the Trust on behalf of such Fund to pay for services that
have not been earned.
Section 3. This Plan, and the specific implementation of expenditures
provided for under this Plan, shall not take effect until this Plan, and such
implementation, have been approved, together with any related agreements, by
votes of both (a) a majority of the Board of Trustees of the Trust and (b) a
majority of those Trustees of the Trust who are not "interested persons" of the
Trust (as said term is defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of
23927
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<PAGE>
this Plan or any agreements of the Fund or any other person related to this Plan
(the "Rule 12b-1 Trustees"), cast in person at a meeting called for the purpose
of voting on this Plan or such agreements.
Section 4. Unless sooner terminated pursuant to Section 6 hereof, this
Plan shall continue in effect for a period of one year from the date it takes
effect and thereafter shall continue in effect so long a such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 3 hereof, except that, if terminated except for payments
provided to be made after termination of other aspects of this Plan, such
payments may be made pursuant to approvals made, and or agreements approved, as
provided above.
Section 5. Any person authorized to direct the disposition of monies
paid or payable by the Trust on behalf of any Fund pursuant to this Plan or any
related agreement shall provide to the Trust's Board of Trustees, 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 as to any Fund, in whole or in
part, at any time by vote of a majority of the Rule 12b-1 Trustees or by vote of
a majority of the outstanding Shares of such Fund, with the effects provided for
in Section 2, as applicable.
Section 7. Any agreement of the Fund related to this Plan shall be in
writing, and shall provide as follows:
(a) That such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the Rule 12b-1 Trustees or by a vote of
a majority of the outstanding Shares of the 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 hereof unless such
amendment is approved by a vote of at least a majority (as defined by the 1940
Act) of the outstanding Shares of each Fund, and no material amendment to this
Plan shall be made unless approved in the manner provided for in Section 3
hereof.
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DISTRIBUTION PLAN FOR CLASS B-2 SHARES
EVERGREEN MUNICIPAL TRUST
Section 1. The Evergreen Municipal Trust (the "Trust"), individually
and/or on behalf of its series (each a "Fund"), referred to in Exhibit A to
this12b-1 Plan of Distribution (the "Plan"), may act as the distributor of
certain securities of which it is the issuer pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act") according to the terms of this
Plan.
Section 2. The Trust on behalf of each Fund may expend daily amounts at
an annual rate of up to 1.00% of the average daily net asset value of the Fund
attributable to the Fund's Class B-2 shares (the "Shares"). Such amounts may be
expended to finance any activity that is principally intended to result in the
sale of Shares, including, without limitation, expenditures consisting of
payments to a principal underwriter of the Fund or others as sales commissions
or other compensation for services provided or to be provided ("Distribution
Fees") or as reimbursement for expenses that are incurred or accrued at any time
during which this Plan or any predecessor plan is in effect, together with
interest on any such amounts, at rates approved by the Rule 12b-1 Trustees (as
defined below) in the manner referred to below, all whether or not this Plan or
any predecessor plan has been otherwise terminated, if such payment of such
expenditures is for services theretofore provided or for reimbursement of
expenses theretofore incurred or accrued prior to termination of this Plan or
any predecessor plan in other respects and if such payment is or has been so
approved by such Rule 12b-1 Trustees, or agreed to on behalf of the Fund with
such approval, all subject to such specific implementation as such 12b-1
Trustees may approve; provided that, at the time any such payment is made,
whether or not this Plan or any predecessor plan has been otherwise terminated,
the making of such payment will not cause the limitation upon such payments set
forth in the preceding sentence to be exceeded. Without limiting the generality
of the foregoing, the Trust on behalf of each Fund may pay to, or on the order
of, any person who has served from time to time as principal underwriter (a
"Principal Underwriter") amounts for distribution services pursuant to a
principal underwriting agreement or otherwise. No principal underwriting
agreement or other agreement shall be an agreement related to this Plan, as
referred to in Rule 12b-1 of the Securities and Exchange Commission, unless it
specifically states that it is such a related agreement. Any such principal
underwriting agreement may, but need not, provide that such Principal
Underwriter may be paid for distribution services to Class B-2 Shares and/or
other specified classes of shares of the Fund (together the
"B-Class-of-Shares"), a fee which may be designated a Distribution Fee and may
be paid at a rate per annum up to .75% of the average daily net asset value of
such B-Class-of-Shares of the Fund and may, but need not, also provide: (i) that
a Principal Underwriter will be deemed to have fully earned its "Allocable
Portion" of the Distribution Fee upon the sale of the Commission Shares (as
defined in the Allocation Schedule) taking into account in determining its
Allocable Portion; (ii) that the Fund's obligation to pay such Principal
Underwriter its Allocable Portion of the Distribution Fees shall be absolute and
unconditional and shall not be subject to dispute, offset, counterclaim or any
defense whatsoever (it being
23924
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<PAGE>
understood that such provision is not a waiver of the Fund's right to pursue
such Principal Underwriter and enforce such claims against the assets of such
Principal Underwriter other than its right to its Allocable Portion of the
Distribution Fees and CDSCs (as defined below); (iii) that the Fund's obligation
to pay such Principal Underwriter its Allocable Portion of the Distribution Fees
shall not be changed or terminated except to the extent required by any change
in applicable law, including without limitation, the 1940 Act, the Rules
promulgated thereunder by the Securities and Exchange Commission and the
Business Conduct Rules of the National Association of Securities Dealers, Inc.,
in each case enacted or promulgated after June 1995, or in connection with a
"Complete Termination" (as hereinafter defined); (iv) that the Trust on behalf
of any Fund will not waive or change any contingent deferred sales charge
("CDSC") in respect of the Distributor's Allocable Portion thereof, except as
provided in the Fund's prospectus or statement of additional information without
the consent of the Principal Underwriter or any assignee of such Principal
Underwriter's rights to its Allocable Portion; (v) that the termination of the
Principal Underwriter, the principal underwriting agreement or this Plan will
not terminate the Principal Underwriter's rights to its Allocable Portion of the
CDSCs; and (vi) that any Principal Underwriter may assign its rights to its
Allocable Portion of the Distribution Fees and CDSCs (but not such Principal
Underwriter's obligations to the Fund under its principal underwriting
agreement) to raise funds to make expenditures described in Section 2 above and
in connection therewith, and upon receipt of notice of such assignment, the
Trust on behalf of any Fund shall pay to the assignee such portion of the
Principal Underwriter's Allocable Portion of the Distribution Fees and CDSCs so
assigned. For purposes of such principal underwriting agreement, the term
Allocable Portion of Distribution Fees as applied to any Principal Underwriter
may mean the portion of the Distribution Fee allocable to Distributor Shares in
accordance with the "Allocation Schedule" attached to such Principal
Underwriter's principal underwriting agreement. For purposes of such principal
underwriting agreement, the term Allocable Portion of CDSCs as applied to any
Principal Underwriter may mean the portion of the CDSCs allocable to Distributor
Shares in accordance with the Allocation Schedule attached to such Principal
Underwriter's principal underwriting agreement. For purposes of such principal
underwriting agreement, the term "Complete Termination" may mean a termination
of this Plan involving the cessation of payments of the Distribution Fees
thereunder, the cessation of payments of distribution fees pursuant to every
other Rule 12b-1 plan of the Fund for every existing or future B-Class-of-Shares
and the cessation of the offering by the Fund of existing or future
B-Class-of-Shares, which conditions shall be deemed to be satisfied when they
are first complied with and so long thereafter as they are complied with prior
to the earlier of (i) the date upon which all of the B-2 Shares which are
Distributor Shares pursuant to the Allocation Schedule shall have been redeemed
or converted or (ii) a specified date, after either of which times such
conditions need no longer be complied with. For purposes of such principal
underwriting agreement, the term "B-Class-of- Shares" may mean each of the B-1
Class of Shares of a Fund, the B-2 Class of Shares of the Fund and each other
class of shares of the Fund hereafter issued which would be treated as "Shares"
under such Allocation Schedule or which has economic characteristics
substantially similar to those of the B-1 or B-2 Classes of Shares taking into
account the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of the shares of such classes. The parties may agree
that the existing C
23924
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<PAGE>
Class of Shares of the Fund does not have substantially similar economic
characteristics to the B-1 or B-2 Classes of Shares taking into account the
total sales charge, CDSC or other similar charges borne directly or indirectly
by the holder of such shares. For purposes of clarity the parties to such
principal underwriting agreement may state that they intend that a new
installment load class of shares which may be authorized by amendments to Rule
6(c)-10 under the 1940 Act will not be considered to be a B-Class-of-Shares if
it has economic characteristics substantially similar to the economic
characteristics of the existing C Class of Shares of the Fund taking into
account the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of such shares. For purposes of such principal
underwriting agreement, "Allocation Schedule" may mean a schedule which shall be
approved by Trustees (as defined below) in connection with their required
approval of such principal underwriting agreement as assigning to each Principal
Underwriter of Shares the portion of the total Distribution Fees payable by the
Trust on behalf of each Fund under such principal underwriting agreement which
has been earned by such Principal Underwriter to the extent necessary so that
the continued payments thereof if such Principal Underwriter ceases to serve in
that capacity does not penalize the Fund by requiring the Trust on behalf of
such Fund to pay for services that have not been earned.
Section 3. This Plan, and the specific implementation of expenditures
provided for under this Plan, shall not take effect until this Plan, and such
implementation, have been approved, together with any related agreements, by
votes of both (a) a majority of the Board of Trustees (the "Trustees") of the
Trust and (b) a majority of those Trustees of the Trust who are not "interested
persons" of the Trust (as said term is 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 Fund or any other person related to this Plan (the "Rule 12b-1
Trustees"), cast in person at a meeting called for the purpose of voting on this
Plan or such agreements.
Section 4. Unless sooner terminated pursuant to Section 6 hereof, this
Plan shall continue in effect for a period of one year from the date it takes
effect and thereafter shall continue in effect so long a such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 3 hereof, except that, if terminated except for payments
provided to be made after termination of other aspects of this Plan, such
payments may be made pursuant to approvals made, and or agreements approved, as
provided above.
Section 5. Any person authorized to direct the disposition of monies
paid or payable by the Trust on behalf of any Fund pursuant to this Plan or any
related agreement shall provide to the Trust's Board of Trustees, 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 as to any Fund, in whole or in
part, at any time by vote of a majority of the Rule 12b-1 Trustees or by vote of
a majority of the outstanding Share of such Fund, with the effects provided for
in Section 2, as applicable.
Section 7. Any agreement of the Fund related to this Plan shall be in
writing, and shall
23924
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<PAGE>
provide as follows:
(a) That such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the Rule 12b-1 Trustees or by a vote of
a majority of the outstanding Shares of the 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 hereof unless such
amendment is approved by a vote of at least a majority (as defined in the 1940
Act) of the outstanding Shares of each Fund, and no material amendment to this
Plan shall be made unless approved in the manner provided for in Section 3
hereof.
::ODMA\SOFTSOL\311\LEGAL\23924\0:2/2/98
23924
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DISTRIBUTION PLAN OF CLASS B SHARES
EVERGREEN MUNICIPAL TRUST
Section 1. The Evergreen Municipal Trust (the "Trust"), individually
and/or on behalf of its series (each a "Fund") referred to in Exhibit A to this
12b-1 Distribution Plan (the "Plan") may act as the distributor of certain
securities of which it is the issuer, pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act") according to the terms of this
Plan.
Section 2. The Trust on behalf of each Fund may expend daily amounts at an
annual rate of 1.00% of the average daily net asset value of its Class B shares
("Shares") 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 or such others 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 or such others for their efforts in respect
of sales of Shares since inception of the Plan or any predecessor 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 on behalf of
any Fund with respect to Class B Shares in excess of any limit imposed on asset
based, front end and deferred sales charges under any rule or regulations
adopted by the National Association of Securities Dealers, Inc. (the "NASD
Rules"). In addition, to the extent any amounts paid hereunder fall within the
definition of an "asset based sales charge" under said NASD Rules such payments
shall be limited to .75 of 1% of the aggregate net asset value of the Shares on
an annual
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basis and, to the extent that any such payments are made in respect of
"shareholder services" as that term is defined in the NASD Rules, 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 Trustees of the Trust,
and (b) those 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 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 Trust on behalf of 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, provided that payments for services theretofore
provided or for reimbursement of expenses theretofore incurred or accrued prior
to termination of this Plan in accordance with Section 2 may be continued by the
Fund to the extent provided for in Section 6, below, as applicable.
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. Payments with respect to services provided by the Principal
Underwriter or others pursuant to Section 2, above, shall be authorized
hereunder, whether or not this Plan has been otherwise terminated, if such
payments are for services theretofore provided or for reimbursement of expenses
theretofore incurred or accrued prior to termination of this Plan in other
respects and if such payment is or has been so approved by the Board, including
the Disinterested Trustees, or agreed to on behalf of the Fund with such
approval, all subject to such specific implementation as the Board, including
the Disinterested Trustees, may approve; provided that, at the time any such
payment
23936
-2-
<PAGE>
is made, whether or not this Plan has been otherwise terminated, the making of
such payment will not cause the limitation upon such payments set forth in
Section 2 to be exceeded. Without limiting the generality of the foregoing, the
Trust on behalf of any Fund may pay to, or on the order of, any person who has
served from time to time as Principal Underwriter amounts for distribution
services pursuant to a principal underwriting agreement or otherwise. Any such
principal underwriting agreement may, but need not, provide that such Principal
Underwriter may be paid for distribution services to Class B Shares and/or other
specified classes of shares of any Fund (together the "B-Class-of-Shares"), a
fee which may be designated a Distribution Fee and may be paid at a rate per
annum up to .75 % of the average daily net asset value of such B-Class-of-Shares
of the Fund and may, but need not, also provide: (i) that a Principal
Underwriter will be deemed to have fully earned its "Allocable Portion" of the
Distribution Fee upon the sale of the Commission Shares (as defined in the
Allocation Schedule) taken into account in determining its Allocable Portion;
(ii) that the Fund's obligation to pay such Principal Underwriter its Allocable
Portion of the Distribution Fee shall be absolute and unconditional and shall
not be subject to dispute, offset, counterclaim or any defense whatsoever (it
being understood that such provision is not a waiver of the Fund's right to
pursue such Principal Underwriter and enforce such claims against the assets of
such Principal Underwriter other than its right to its Allocable Portion of the
Distribution Fee and CDSCs (as defined below); (iii) that the Fund's obligation
to pay such Principal Underwriter its Allocable Portion of the Distribution Fee
shall not be changed or terminated except to the extent required by any change
in applicable law, including without limitation, the 1940 Act, the Rules
promulgated thereunder by the Securities and Exchange Commission and the
Business Conduct Rules of the National Association of Securities Dealers, Inc.,
in each case enacted or promulgated after May 5, 1997, or in connection with a
"Complete Termination" (as hereinafter defined); (iv) that the Trust on behalf
of any Fund will not waive or change any contingent deferred sales charge
("CDSC") in respect of the Distributor's Allocable Portion thereof, except as
provided in the Fund's prospectus or statement of additional
information without the consent of the Principal Underwriter or any assignee of
such Principal Underwriter's rights to its Allocable Portion; (v) that the
termination of the Principal Underwriter, the principal underwriting agreement
or this Plan will not terminate such Principal Underwriter's rights to its
Allocable Portion of the CDSCs; and (vi) that any Principal Underwriter may
assign its rights to its Allocable Portion of the Distribution Fee and CDSCs
(but not such Principal Underwriter's obligations to the Fund under its
principal underwriting agreement) to raise funds to make expenditures described
in Section 2 above and in connection therewith, and upon receipt of notice of
such assignment, the Trust on behalf of any Fund shall pay to the assignee such
portion of the Principal Underwriter's Allocable Portion of the Distribution Fee
and CDSCs so assigned. For purposes of such principal underwriting agreement,
the term Allocable Portion of Distribution Fee
23936
-3-
<PAGE>
as applied to any Principal Underwriter may mean the portion of the Distribution
Fee allocable to Distributor Shares in accordance with the "Allocation Schedule"
attached to such Principal Underwriter's principal underwriting agreement. For
purposes of such principal underwriting agreement, the term Allocable Portion of
CDSCs as applied to any Principal Underwriter may mean the portion of the CDSCs
allocable to Distributor Shares in accordance with the Allocation Schedule
attached to such Principal Underwriter's principal underwriting agreement. For
purposes of such principal underwriting agreement, the term "Complete
Termination" may mean a termination of this Plan involving the cessation of
payments of the Distribution Fee thereunder, the cessation of payments of
distribution fees pursuant to every other Rule 12b-1 plan of the Fund for every
existing or future B-Class-of-Shares and the cessation of the offering by the
Fund of existing or future B-Class-of-Shares, which conditions shall be deemed
to be satisfied when they are first complied with and so long thereafter as they
are complied with prior to the earlier of (i) the date upon which all of the B
Shares which are Distributor Shares pursuant to the Allocation Schedule shall
have been redeemed or converted or (ii) a specified date, after either of which
times such conditions need no longer be complied with. For purposes of such
principal underwriting agreement, the term "B-Class-of-Shares" may mean the B
Class of Shares of the Fund and each other class of shares of the Fund hereafter
issued which would be treated as "Shares" under such Allocation Schedule or
which has economic characteristics substantially similar to those of the B Class
of Shares taking into account the total sales charge, CDSC or other similar
charges borne directly or indirectly by the holder of the shares of such
classes.
The parties may agree that the existing C Class of Shares of the Fund does
not have substantially similar economic characteristics to the B Classes of
Shares taking into account the total sales charge, CDSC or other similar charges
borne directly or indirectly by the holder of such shares. For purposes of
clarity the parties to such principal underwriting agreement may state that they
intend that a new installment load class of shares which may be authorized by
amendments to Rule 6(c)-10 under the 1940 Act will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of Shares taking into
account the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of such shares and will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares. For purposes of such
principal underwriting agreement, "Allocation Schedule" may mean a schedule
which shall be approved by Trustees (as defined below) in connection with their
23936
-4-
<PAGE>
required approval of such principal underwriting agreement as assigning to each
Principal Underwriter of Shares the portion of the total Distribution Fee
payable by the Trust on behalf of each Fund under such principal underwriting
agreement which has been earned by such Principal Underwriter to the extent
necessary so that the continued payments thereof if such Principal Underwriter
ceases
23936
-5-
<PAGE>
to serve in that capacity does not penalize the Fund by requiring the Trust on
behalf of such Fund to pay for services that have not been earned.
Section 7. 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 such Fund, provided that payments for services theretofore
provided or for reimbursement of expenses theretofore incurred or accrued prior
to termination of this Plan in accordance with Section 2 may be continued by the
Fund to the extent provided for in Section 6, above, as applicable.
Section 8. 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 any 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 9. 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.
23936
-6-
DISTRIBUTION PLAN OF CLASS C SHARES
EVERGREEN MUNICIPAL TRUST
SECTION 1. The Evergreen Municipal Trust (the "Trust") individually
and/or on behalf of its series (the "Fund") referred to in Exhibit A to this
Rule 12b-1 Plan of Distribution (the "Plan") may act as the distributor of
securities which are issued in respect of the Fund's Class C shares ("Shares"),
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act")
according to the terms of this Plan.
SECTION 2. The Trust on behalf of each Fund may expend daily amounts at
an annual rate of 1.00% of the average daily net asset value of the Shares. Such
amounts may be expended to finance 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 make payments to the Principal
Underwriter or others of sales commissions, other fees or other compensation for
services provided or to be provided, to enable payments to be made by the
Principal Underwriter or others for any activity primarily intended to result in
the sale of Shares, to pay interest expenses associated with payments in
connection with the sale of Shares and to pay any expenses of financing
permitted by this clause (i); (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 service fee, maintenance or other fee in
respect of such services, at such intervals as the Principal Underwriter or such
others 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 or others for efforts
(including without limitation any financing of payments under (i) and (ii) for
the sale of shares) in respect of sales of Shares since inception of the Plan or
any predecessor 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 Trust on behalf of any Fund with respect to the Class in excess of
the applicable limit imposed on asset based, front end and deferred sales
charges under subsection (d) of Rule 2830 of the Business Conduct Rules of the
National Association of Securities Dealers Regulation, Inc. (The "NASDR"). In
addition, to the extent any amounts paid hereunder fall within the definition of
an "asset based sales charge" under said NASDR Rule, such payments shall be
limited to 0.75 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 NASDR 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 until it has been approved
together with any related agreements by votes of a majority of both (a) the
Board of Trustees of the Trust and (b)
23935
-1-
<PAGE>
those Trustees of the Trust who are not "interested persons" of the Trust (as
said term is 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 Fund
or any other person related to this Plan (the "Rule 12b-1 Trustees"), cast in
person at a meeting called for the purpose of voting on this Plan or such
agreements.
SECTION 4. Unless sooner terminated pursuant to Section 6 hereof, this
Plan shall continue in effect for a period of one year from the date it takes
effect and thereafter shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 3 hereof.
SECTION 5. Any person authorized to direct the disposition of monies
paid or payable by the Trust on behalf of each Fund pursuant to this Plan or any
related agreement shall provide to the Trust's Board of Trustees 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 with respect to any Fund at any
time by vote of a majority of the Rule 12b-1 Trustees or by vote of a majority
of such Fund's outstanding Shares.
SECTION 8. Any agreement of the Fund related to this Plan shall be in
writing, and shall provide as follows:
(a) that such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Rule
12b-1 Trustees or by a vote of a majority of such Fund's
outstanding Shares 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 hereof unless such
amendment is approved by a vote of at least a majority (as defined in the 1940
Act) of each Fund's outstanding Shares, and no material amendment to this Plan
shall be made unless approved in the manner provided for in Section 3 hereof.
23935
-2-
California - Class A
<TABLE>
<CAPTION>
$952.50
A NAV A A
TIME ACCOUNT A AVERAGE A/C VALUE A AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL W/LOAD CLASS ANNNUAL
<S> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 1,238.41 0.00% 952.5 -4.75% -4.75%
30-Sep-97 6 MO 1,191.44 3.94% 3.94% 990.05 -1.00% -1.00%
31-Dec-97 QTD 1,225.52 1.05% 1.05% 962.52 -3.75% -3.75%
31-Dec-97 YTD 1,225.52 1.05% 1.05% 962.52 -3.75% -3.75%
31-Mar-97 1 1,120.24 10.55% 10.55% 1,052.98 5.30% 5.30%
31-Mar-95 3 993.5 24.65% 7.62% 1,187.31 18.73% 5.89%
31-Mar-93 5
31-Mar-88 10
1-Feb-94 INCEPT. 1,000.00 23.84% 5.27% 1,179.59 17.96% 4.05%
INCEPTION FACTOR: 4.1644
</TABLE>
California - Class B
<TABLE>
<CAPTION>
$1,000
B B NAV LEVEL VALUE OF VALUE OF B
TIME ACCOUNT B AVERAGE LOAD CLASS B CLASS B INIB. AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 1,207.58 0.00% 50 1,000.00 1,000.00 0.00%
30-Sep-97 6 MO 1,164.83 3.67% 3.67% 50 1,036.70 1,018.44 -1.33% -1.33%
31-Dec-97 QTD 1,197.19 0.87% 0.87% 50 1,008.68 1,000.00 -4.13% -4.13%
31-Dec-97 YTD 1,197.19 0.87% 0.87% 50 1,008.68 1,000.00 -4.13% -4.13%
31-Mar-97 1 1,100.26 9.75% 9.75% 50 1,097.54 1,057.45 4.75% 4.75%
31-Mar-95 3 990.03 21.97% 6.85% 30 1,219.74 1,071.12 18.97% 5.96%
31-Mar-93 5
31-Mar-88 10
1-Feb-94 INCEPT. 1,000.00 20.76% 4.63% 19.88 1,207.58 994 18.77% 4.22%
INCEPTION FACTOR: 4.1644
</TABLE>
California - Class C
<TABLE>
<CAPTION>
$1,000
C C NAV LEVEL VALUE OF VALUE OF C
ACCOUNT C AVERAGE LOAD CLASS C CLASS C INIC. AVERAGE
YEARS VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 1,203.95 0.00% 10 1,000.00 1,000.00 0.00%
30-Sep-97 6 MO 1,162.47 3.57% 3.57% 10 1,035.69 1,017.44 2.57% 2.57%
31-Dec-97 QTD 1,193.59 0.87% 0.87% 10 1,008.68 1,000.00 -0.13% -0.13%
31-Dec-98 YTD 1,193.59 0.87% 0.87% 10 1,008.68 1,000.00 -0.13% -0.13%
31-Mar-97 1 1,096.82 9.77% 9.77% 10 1,097.67 1,057.57 8.77% 8.77%
31-Mar-95 3 987.86 21.87% 6.82% 1,218.74 1,070.12 21.87% 6.82%
31-Mar-93 5
31-Mar-88 10
1-Feb-94 INCEPT. 1,000.00 20.40% 4.56% 0 1,203.95 992 20.40% 4.56%
INCEPTION FACTOR: 4.1644
</TABLE>
Massachusetts - Class A
<TABLE>
<CAPTION>
$952.50
A NAV A A
TIME ACCOUNT A AVERAGE A/C VALUE A AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL W/LOAD CLASS ANNNUAL
<S> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 1,216.42 0.00% 952.5 -4.75% -4.75%
30-Sep-97 6 MO 1,172.93 3.71% 3.71% 987.81 -1.22% -1.22%
31-Dec-97 QTR 1,204.10 1.02% 1.02% 962.24 -3.78% -3.78%
31-Dec-97 YTD 1,204.10 1.02% 1.02% 962.24 -3.78% -3.78%
31-Mar-97 1 1,100.79 10.50% 10.50% 1,052.55 5.25% 5.25%
31-Mar-95 3 983.75 23.65% 7.33% 1,177.78 17.78% 5.61%
31-Mar-93 5
31-Mar-88 10
3-Feb-94 INCEPT. 1,000.00 21.64% 4.82% 1,158.64 15.86% 3.60%
INCEPTION FACTOR: 4.1589
</TABLE>
Massachusetts - Class B
<TABLE>
<CAPTION>
$1,000
B B NAV LEVEL VALUE OF VALUE OF B
TIME ACCOUNT B AVERAGE LOAD CLASS B CLASS B INIB. AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 1,182.20 0.00% 50 1,000.00 1,000.00 0.00%
30-Sep-97 6 MO 1,144.05 3.33% 3.33% 50 1,033.34 1,015.72 -1.67% -1.67%
31-Dec-97 QTR 1,173.55 0.74% 0.74% 49.948 1,007.36 998.97 -4.26% -4.26%
31-Dec-97 YTD 1,173.55 0.74% 0.74% 49.948 1,007.36 998.97 -4.26% -4.26%
31-Mar-97 1 1,078.62 9.60% 9.60% 50 1,096.03 1,056.71 4.60% 4.60%
31-Mar-95 3 978.22 20.85% 6.52% 30 1,208.51 1,059.02 17.85% 5.63%
31-Mar-93 5
31-Mar-88 10
3-Feb-94 INCEPT. 1,000.00 18.22% 4.11% 19.38 1,182.20 969 16.28% 3.69%
INCEPTION FACTOR: 4.1589
</TABLE>
Massachusetts - Class C
<TABLE>
<CAPTION>
$1,000
C C NAV LEVEL VALUE OF VALUE OF C
ACCOUNT C AVERAGE LOAD CLASS C CLASS C INIC. AVERAGE
YEARS VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 1,179.91 0.00% 10 1,000.00 1,000.00 0.00%
30-Sep-97 6 MO 1,143.01 3.23% 3.23% 10 1,032.29 1,014.68 2.23% 2.23%
31-Dec-97 QTR 1,171.28 0.74% 0.74% 9.99 1,007.37 998.97 -0.26% -0.26%
31-Dec-97 YTD 1,171.28 0.74% 0.74% 9.99 1,007.37 998.97 -0.26% -0.26%
31-Mar-97 1 1,076.41 9.62% 9.62% 10 1,096.15 1,056.77 8.62% 8.62%
31-Mar-95 3 976.15 20.87% 6.52% 1,208.74 1,059.08 20.87% 6.52%
31-Mar-93 5
31-Mar-88 10
3-Feb-94 INCEPT. 1,000.00 17.99% 4.06% 0 1,179.91 968 17.99% 4.06%
INCEPTION FACTOR: 4.1589
</TABLE>
Missouri - Class A
<TABLE>
<CAPTION>
952.50
A NAV A A
TIME ACCOUNT A AVERAGE A/C VALUE A AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL W/LOAD CLASS ANNNUAL
<S> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 1,266.21 0.00% 952.5 -4.75% -4.75%
30-Sep-97 6 MO 1,219.44 3.84% 3.84% 989.03 -1.10% -1.10%
31-Dec-97 QTR 1,253.37 1.02% 1.02% 962.26 -3.77% -3.77%
31-Dec-97 YTD 1,253.37 1.02% 1.02% 962.26 -3.77% -3.77%
31-Mar-97 1 1,140.67 11.01% 11.01% 1,057.33 5.73% 5.73%
31-Mar-95 3 1,002.07 26.36% 8.11% 1,203.57 20.36% 6.37%
31-Mar-93 5
31-Mar-88 10
1-Feb-94 INCEPT. 1,000.00 26.62% 5.83% 1,206.07 20.61% 4.60%
INCEPTION FACTOR: 4.1644 4.1644
</TABLE>
Missouri - Class B
<TABLE>
<CAPTION>
$1,000
B B NAV LEVEL VALUE OF VALUE OF B
TIME ACCOUNT B AVERAGE LOAD CLASS B CLASS B INIB. AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 1,226.48 0.00% 50 1,000.00 1,000.00 0.00%
30-Sep-97 6 MO 1,185.39 3.47% 3.47% 50 1,034.67 1,015.09 -1.53% -1.53%
31-Dec-97 QTR 1,216.27 0.84% 0.84% 49.95 1,008.39 999.01 -4.16% -4.16%
31-Dec-97 YTD 1,216.27 0.84% 0.84% 49.95 1,008.39 999.01 -4.16% -4.16%
31-Mar-97 1 1,112.33 10.26% 10.26% 50 1,102.63 1,059.87 5.26% 5.26%
31-Mar-95 3 992.51 23.57% 7.31% 30 1,235.74 1,084.95 20.57% 6.44%
31-Mar-93 5
31-Mar-88 10
1-Feb-94 INCEPT. 1,000.00 22.65% 5.02% 20 1,226.48 1,009.00 20.65% 4.61%
INCEPTION FACTOR: 4.1644
</TABLE>
Missouri - Class C
<TABLE>
<CAPTION>
$1,000
C C NAV LEVEL VALUE OF VALUE OF C
ACCOUNT C AVERAGE LOAD CLASS C CLASS C INIC. AVERAGE
YEARS VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK8 1,223.92 0.00% 10 1,000.00 1,000.00 0.00%
30-Sep-97 6 MO 1,184.17 3.36% 3.36% 10 1,033.57 1,014.08 2.36% 2.36%
31-Dec-97 QTR 1,213.82 0.83% 0.83% 9.99 1,008.32 999.01 -0.17% -0.17%
31-Dec-97 YTD 1,213.82 0.83% 0.83% 9.99 1,008.32 999.01 -0.17% -0.17%
31-Mar-97 1 1,111.18 10.15% 10.15% 10 1,101.46 1,058.82 9.15% 9.15%
31-Mar-95 3 990.36 23.58% 7.31% 1,235.83 1,085.04 23.58% 7.31%
31-Mar-93 5
31-Mar-88 10
1-Feb-94 INCEPT. 1,000.00 22.39% 4.97% 0 1,223.92 1,008.00 22.39% 4.97%
INCEPTION FACTOR: 4.1644
</TABLE>
New York - Class A
<TABLE>
<CAPTION>
$952.50
A NAV A A
TIME ACCOUNT A AVERAGE A/C VALUE A AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL W/LOAD CLASS ANNNUAL
<S> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 1,258.68 0.00% 952.5 -4.75% -4.75%
30-Sep-97 6 MO 1,217.48 3.38% 3.38% 984.69 -1.53% -1.53%
31-Dec-97 QTR 1,248.85 0.79% 0.79% 960 -4.00% -4.00%
31-Dec-97 YTD 1,248.85 0.79% 0.79% 960 -4.00% -4.00%
31-Mar-97 1 1,138.43 10.56% 10.56% 1,053.12 5.31% 5.31%
31-Mar-95 3 1,007.52 24.93% 7.70% 1,189.94 18.99% 5.97%
31-Mar-93 5
31-Mar-88 10
3-Feb-94 INCEPT. 1,000.00 25.87% 5.69% 1,198.90 19.89% 4.46%
INCEPTION FACTOR: 4.1589
</TABLE>
New York - Class B
<TABLE>
<CAPTION>
$1,000
B B NAV LEVEL VALUE OF VALUE OF B
TIME ACCOUNT B AVERAGE LOAD CLASS B CLASS B INIB. AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 1,222.41 0.00% 50 1,000.00 1,000.00 0.00%
30-Sep-97 6 MO 1,185.49 3.11% 3.11% 50 1,031.14 1,006.02 -1.89% -1.89%
31-Dec-97 QTR 1,215.10 0.60% 0.60% 49.851 1,006.02 997.02 -4.38% -4.38%
31-Dec-97 YTD 1,215.10 0.60% 0.60% 49.851 1,006.02 997.02 -4.38% -4.38%
31-Mar-97 1 1,113.30 9.80% 9.80% 50 1,098.00 1,050.26 4.80% 4.80%
31-Mar-95 3 1,000.01 22.24% 6.92% 30 1,222.39 1,069.30 19.24% 6.04%
31-Mar-93 5
31-Mar-88 10
3-Feb-94 INCEPT. 1,000.00 22.24% 4.95% 20 1,222.41 1,003.00 20.24% 4.53%
INCEPTION FACTOR: 4.1589
</TABLE>
New York - Class C
<TABLE>
<CAPTION>
$1,000
C C NAV LEVEL VALUE OF VALUE OF C
ACCOUNT C AVERAGE LOAD CLASS C CLASS C INIC. AVERAGE
YEARS VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 1,219.96 0.00% 10 1,000.00 1,000.00 0.00%
30-Sep-97 6 MO 1,184.30 3.01% 3.01% 10 1,030.11 1,005.02 2.01% 2.01%
31-Dec-97 QTR 1,213.88 0.50% 0.50% 9.96 1,005.01 996.02 -0.50% -0.50%
31-Dec-97 YTD 1,213.88 0.50% 0.50% 9.96 1,005.01 996.02 -0.50% -0.50%
31-Mar-97 1 1,112.19 9.69% 9.69% 10 1,096.91 1,049.21 8.69% 8.69%
31-Mar-95 3 997.92 22.25% 6.93% 1,222.51 1,069.37 22.25% 6.93%
31-Mar-93 5
31-Mar-88 10
3-Feb-94 INCEPT. 1,000.00 22.00% 4.90% 0 1,219.96 1,002.00 22.00% 4.90%
INCEPTION FACTOR: 4.1589
</TABLE>
Connecticut - Class A
<TABLE>
<CAPTION>
$952.50
A NAV A A
TIME ACCOUNT A AVERAGE A/C VALUE A AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL W/LOAD CLASS ANNNUAL
<S> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 1,007.70 0.00% 952.5 -4.75% -4.75%
28-Feb-98 1 MO 1,009.08 -0.14% -0.14% 951.2 -4.88% -4.88%
31-Dec-97 QTR 1,000.37 0.73% 0.73% 959.48 -4.05% -4.05%
31-Dec-97 YTD 1,000.37 0.73% 0.73% 959.48 -4.05% -4.05%
31-Mar-97 1
31-Mar-95 3
31-Mar-93 5
31-Mar-88 10
30-Dec-97 INCEPT. 1,000.00 0.77% 3.09% 959.83 -4.02% -15.01%
INCEPTION FACTOR: 0.2521
</TABLE>
Connecticut- Class B
<TABLE>
<CAPTION>
1000
B LEVEL VALUE OF VALUE OF B
ACCOUNT B AVERAGE LOAD CLASS B CLASS B INIB. AVERAGE
YEARS VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 997.9 0.00% 50 1,000.00 1,000.00 0.00%
28-Feb-98 1 MO 999.89 -0.20% -0.20% 49.766 998.01 995.32 -5.18% -5.18%
31-Dec-97 QTR
31-Dec-96 YTD
31-Mar-97 1
31-Mar-95 3
31-Mar-93 5
31-Mar-88 10
9-Jan-98 INCEPT. 1,000.00 -0.21% -0.93% 49.534 997.9 990.68 -5.16% -21.02%
INCEPTION FACTOR: 0.2247
</TABLE>
Connecticut - Class Y
<TABLE>
<CAPTION>
Y
ACCOUNT Y AVERAGE
YEARS VALUE CLASS ANNNUAL
<S> <C> <C> <C> <C>
31-Mar-98 BLANK 1,023.90 0.00%
28-Feb-98 1 MO 1,026.69 -0.27% -0.27%
31-Dec-97 QTR 1,017.51 0.63% 0.63%
31-Dec-96 YTD
31-Mar-97 1
31-Mar-95 3
31-Mar-93 5
31-Mar-88 10
24-Nov-97 INCEPT. 1,000.00 2.39% 6.97%
INCEPTION FACTOR: 0.3507
</TABLE>
Pennsylvania - Class A
<TABLE>
<CAPTION>
$952.50
A NAV A A
TIME ACCOUNT A AVERAGE A/C VALUE A AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL W/LOAD CLASS ANNNUAL
<S> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 1,779.06 0.00% 952.5 -4.75% -4.75%
30-Sep-97 6 MO 1,721.76 3.33% 3.33% 984.22 -1.58% -1.58%
31-Dec-97 QTR 1,765.96 0.74% 0.74% 959.57 -4.04% -4.04%
31-Dec-97 YTD 1,765.96 0.74% 0.74% 959.57 -4.04% -4.04%
31-Mar-97 1 1,617.01 10.02% 10.02% 1,047.96 4.80% 4.80%
31-Mar-95 3 1,426.11 24.75% 7.65% 1,188.24 18.82% 5.92%
31-Mar-93 5 1,325.21 34.25% 6.07% 1,278.71 27.87% 5.04%
31-Mar-88 10
27-Dec-90 INCEPT. 1,000.00 77.91% 8.25% 1,694.56 69.46% 7.53%
INCEPTION FACTOR: 7.2658
</TABLE>
Pennsylvania - Class B
<TABLE>
<CAPTION>
$1,000
B B NAV LEVEL VALUE OF VALUE OF B
TIME ACCOUNT B AVERAGE LOAD CLASS B CLASS B INIB. AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 1,328.60 0.00% 50 1,000.00 1,000.00 0.00%
30-Sep-97 6 MO 1,290.47 2.95% 2.95% 50 1,029.55 1,010.50 -2.05% -2.05%
31-Dec-97 QTR 1,321.32 0.55% 0.55% 49.827 1,005.51 996.55 -4.43% -4.43%
31-Dec-97 YTD 1,321.32 0.55% 0.55% 49.827 1,005.51 996.55 -4.43% -4.43%
31-Mar-97 1 1,215.93 9.27% 9.27% 50 1,092.66 1,050.96 4.27% 4.27%
31-Mar-95 3 1,089.10 21.99% 6.85% 30 1,219.91 1,068.46 18.99% 5.97%
31-Mar-93 5 1,028.22 29.21% 5.26% 20 1,292.13 1,011.38 27.21% 4.93%
31-Mar-88 10
1-Feb-93 INCEPT. 1,000.00 32.86% 5.66% 10 1,328.60 1,031.25 31.86% 5.50%
INCEPTION FACTOR: 5.1644
</TABLE>
Pennsylvania - Class C
<TABLE>
<CAPTION>
$1,000
C C NAV LEVEL VALUE OF VALUE OF C
ACCOUNT C AVERAGE LOAD CLASS C CLASS C INIC. AVERAGE
YEARS VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 1,330.01 0.00% 10 1,000.00 1,000.00 0.00%
30-Sep-97 6 MO 1,290.76 3.04% 3.04% 10 1,030.40 1,011.34 2.04% 2.04%
31-Dec-97 QTR 1,321.58 0.64% 0.64% 9.97 1,006.38 997.42 -0.36% -0.36%
31-Dec-97 YTD 1,321.58 0.64% 0.64% 9.97 1,006.38 997.42 -0.36% -0.36%
31-Mar-97 1 1,216.35 9.34% 9.34% 10 1,093.44 1,051.72 8.34% 8.34%
31-Mar-95 3 1,088.79 22.15% 6.90% 1,221.54 1,070.18 22.15% 6.90%
31-Mar-93 5 1,028.13 29.36% 5.28% 1,293.61 1,014.89 29.36% 5.28%
31-Mar-88 10
1-Feb-93 INCEPT. 1,000.00 33.00% 5.68% 0 1,330.01 1,034.82 33.00% 5.68%
INCEPTION FACTOR: 5.1644
</TABLE>
Pennsylvania - Class Y
<TABLE>
<CAPTION>
A NAV
TIME ACCOUNT A AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL
<S> <C> <C> <C> <C>
31-Mar-98 BLANK 1,025.40 0.00%
28-Feb-97 1 MO 1,025.19 0.02% 0.02%
31-Dec-97 QTR 1,017.18 0.81% 0.81%
31-Dec-97 YTD 1,017.18 0.81% 0.81%
31-Mar-97 1
31-Mar-95 3
31-Mar-93 5
31-Mar-88 10
24-Nov-97 INCEPT. 1,000.00 2.54% 7.41%
INCEPTION FACTOR: 0.3507
</TABLE>
New Jersey - Class A
<TABLE>
<CAPTION>
$952.50
A NAV A A
TIME ACCOUNT A AVERAGE A/C VALUE A AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL W/LOAD CLASS ANNNUAL
<S> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 1,604.41 0.00% 952.5 -4.75% -4.75%
30-Sep-97 6 MO 1,547.02 3.71% 3.71% 987.83 -1.22% -1.22%
31-Dec-97 QTR 1,591.76 0.79% 0.79% 960.07 -3.99% -3.99%
31-Dec-97 YTD 1,591.76 0.79% 0.79% 960.07 -3.99% -3.99%
31-Mar-97 1 1,467.34 9.34% 9.34% 1,041.48 4.15% 4.15%
31-Mar-95 3 1,306.97 22.76% 7.07% 1,169.27 16.93% 5.35%
31-Mar-93 5 1,198.42 33.88% 6.01% 1,275.18 27.52% 4.98%
31-Mar-88 10
16-Jul-91 INCEPT. 1,000.00 60.44% 7.29% 1,528.20 52.82% 6.52%
INCEPTION FACTOR: 6.7151 6.7151
</TABLE>
New Jersey - Class B
<TABLE>
<CAPTION>
1000
B B NAV LEVEL VALUE OF VALUE OF B
TIME ACCOUNT B AVERAGE LOAD CLASS B CLASS B INIB. AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Mar-98 BLANK 1,103.80 0.00% 50 1000 1000 0.00%
30-Sep-97 6 MO 1,069.14 3.24% 3.24% 50 1032.42 1005.43 -1.76% -1.76%
31-Dec-97 QTR 1,097.53 0.57% 0.57% 49.82 1005.71 996.41 -4.41% -4.41%
31-Dec-97 YTD 1,097.53 0.57% 0.57% 49.82 1005.71 996.41 -4.41% -4.41%
31-Mar-97 1 1,018.71 8.35% 8.35% 50 1083.53 1034.45 3.35% 3.35%
31-Mar-95 3
31-Mar-93 5
31-Mar-88 10
30-Jan-96 INCEPT. 1,000.00 10.38% 4.66% 30 1103.8 1002.71 7.38% 3.34%
INCEPTION FACTOR: 2.1699 2.1699
</TABLE>
New Jersey - Class Y
<TABLE>
<CAPTION>
Y
ACCOUNT Y AVERAGE
YEARS VALUE CLASS ANNNUAL
<S> <C> <C> <C> <C>
31-Mar-98 BLANK 1,118.52 0 0.00%
30-Sep-97 6 MO 1,078.02 3.76% 3.76%
31-Dec-97 QTR 1,109.46 0.82% 0.82%
31-Dec-97 YTD 1,109.46 0.82% 0.82%
31-Mar-97 1 1,022.07 9.44% 9.44%
31-Mar-95 3
31-Mar-93 5
31-Mar-88 10
8-Feb-96 INCEPT. 1,000.00 11.85% 5.36%
INCEPTION FACTOR: 2.1452 2.1452
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> EVERGREEN CALIFORNIA TAX FREE FUND CLASS A
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 25,045,496
<INVESTMENTS-AT-VALUE> 26,341,725
<RECEIVABLES> 988,041
<ASSETS-OTHER> 24,122
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 27,353,888
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 232,112
<TOTAL-LIABILITIES> 232,112
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,230,144
<SHARES-COMMON-STOCK> 643,160
<SHARES-COMMON-PRIOR> 444,050
<ACCUMULATED-NII-CURRENT> 14,026
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (10,486)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 186,170
<NET-ASSETS> 6,419,854
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 247,210
<OTHER-INCOME> 0
<EXPENSES-NET> (35,661)
<NET-INVESTMENT-INCOME> 211,549
<REALIZED-GAINS-CURRENT> 46,394
<APPREC-INCREASE-CURRENT> 218,049
<NET-CHANGE-FROM-OPS> 475,992
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (205,595)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 271,096
<NUMBER-OF-SHARES-REDEEMED> (79,526)
<SHARES-REINVESTED> 7,540
<NET-CHANGE-IN-ASSETS> 199,110
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 5,263
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25,287
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 35,661
<AVERAGE-NET-ASSETS> 4,596,261
<PER-SHARE-NAV-BEGIN> 9.44
<PER-SHARE-NII> 0.45
<PER-SHARE-GAIN-APPREC> 0.53
<PER-SHARE-DIVIDEND> (0.44)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.98
<EXPENSE-RATIO> 0.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 102
<NAME> EVERGREEN CALIFORNIA TAX FREE FUND CLASS B
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 25,045,496
<INVESTMENTS-AT-VALUE> 26,341,725
<RECEIVABLES> 988,041
<ASSETS-OTHER> 24,122
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 27,353,888
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 232,112
<TOTAL-LIABILITIES> 232,112
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,853,788
<SHARES-COMMON-STOCK> 1,908,772
<SHARES-COMMON-PRIOR> 2,319,559
<ACCUMULATED-NII-CURRENT> (63,739)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 119,242
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,057,585
<NET-ASSETS> 18,966,876
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,124,994
<OTHER-INCOME> 0
<EXPENSES-NET> (317,146)
<NET-INVESTMENT-INCOME> 807,848
<REALIZED-GAINS-CURRENT> 174,374
<APPREC-INCREASE-CURRENT> 989,970
<NET-CHANGE-FROM-OPS> 1,972,192
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (781,308)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 153,832
<NUMBER-OF-SHARES-REDEEMED> (603,156)
<SHARES-REINVESTED> 38,537
<NET-CHANGE-IN-ASSETS> (410,787)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (103,044)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 114,767
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 317,146
<AVERAGE-NET-ASSETS> 20,867,568
<PER-SHARE-NAV-BEGIN> 9.4
<PER-SHARE-NII> 0.37
<PER-SHARE-GAIN-APPREC> 0.53
<PER-SHARE-DIVIDEND> (0.36)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.94
<EXPENSE-RATIO> 1.52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> EVERGREEN CALIFORNIA TAX FREE FUND CLASS C
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-1-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 25,045,496
<INVESTMENTS-AT-VALUE> 26,341,725
<RECEIVABLES> 988,041
<ASSETS-OTHER> 24,122
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 27,353,888
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 232,112
<TOTAL-LIABILITIES> 232,112
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,853,788
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (63,739)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 119,242
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,057,585
<NET-ASSETS> 18,966,876
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,124,994
<OTHER-INCOME> 0
<EXPENSES-NET> (317,146)
<NET-INVESTMENT-INCOME> 807,848
<REALIZED-GAINS-CURRENT> 174,374
<APPREC-INCREASE-CURRENT> 989,970
<NET-CHANGE-FROM-OPS> 1,972,192
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (103,044)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> EVERGREEN CONNECTICUT MUNICIPAL BOND FUND CLASS A
<CAPTION>
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> NOV-24-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 65,481,487
<INVESTMENTS-AT-VALUE> 67,429,235
<RECEIVABLES> 1,025,789
<ASSETS-OTHER> 8,952
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 68,463,976
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 311,735
<TOTAL-LIABILITIES> 311,735
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 146,292
<SHARES-COMMON-STOCK> 22,925
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 473
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (614)
<NET-ASSETS> 146,151
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,138
<OTHER-INCOME> 0
<EXPENSES-NET> (185)
<NET-INVESTMENT-INCOME> 953
<REALIZED-GAINS-CURRENT> 473
<APPREC-INCREASE-CURRENT> (614)
<NET-CHANGE-FROM-OPS> 812
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (953)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22,857
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 68
<NET-CHANGE-IN-ASSETS> 146,128
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 135
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (187)
<AVERAGE-NET-ASSETS> 86,349
<PER-SHARE-NAV-BEGIN> 6.4
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> (0.07)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.38
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 102
<NAME> EVERGREEN CONNECTICUT MUNICIPAL BOND FUND CLASS B
<CAPTION>
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> NOV-24-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 65,481,487
<INVESTMENTS-AT-VALUE> 67,429,235
<RECEIVABLES> 1,025,789
<ASSETS-OTHER> 8,952
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 68,463,976
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 311,735
<TOTAL-LIABILITIES> 311,735
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 332,998
<SHARES-COMMON-STOCK> 51,933
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 488
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,356)
<NET-ASSETS> 331,130
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,031
<OTHER-INCOME> 0
<EXPENSES-NET> (654)
<NET-INVESTMENT-INCOME> 1,377
<REALIZED-GAINS-CURRENT> 488
<APPREC-INCREASE-CURRENT> (2,355)
<NET-CHANGE-FROM-OPS> (490)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,377)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 51,780
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 153
<NET-CHANGE-IN-ASSETS> 331,079
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 239
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (659)
<AVERAGE-NET-ASSETS> 182,222
<PER-SHARE-NAV-BEGIN> 6.44
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> (0.06)
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.38
<EXPENSE-RATIO> 1.6
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> EVERGREEN CONNECTICUT MUNICIPAL BOND FUND CLASS Y
<CAPTION>
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> NOV-24-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 65,481,487
<INVESTMENTS-AT-VALUE> 67,429,235
<RECEIVABLES> 1,025,789
<ASSETS-OTHER> 8,952
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 68,463,976
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 311,735
<TOTAL-LIABILITIES> 311,735
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 65,300,077
<SHARES-COMMON-STOCK> 10,616,012
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 424,165
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,950,718
<NET-ASSETS> 67,674,960
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,194,574
<OTHER-INCOME> 0
<EXPENSES-NET> (140,688)
<NET-INVESTMENT-INCOME> 1,053,886
<REALIZED-GAINS-CURRENT> 424,165
<APPREC-INCREASE-CURRENT> 58,330
<NET-CHANGE-FROM-OPS> 1,536,381
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,053,886)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,277,341
<NUMBER-OF-SHARES-REDEEMED> (661,430)
<SHARES-REINVESTED> 101
<NET-CHANGE-IN-ASSETS> 67,675,034
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 140,685
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (142,276)
<AVERAGE-NET-ASSETS> 66,851,527
<PER-SHARE-NAV-BEGIN> 6.32
<PER-SHARE-NII> 0.1
<PER-SHARE-GAIN-APPREC> 0.05
<PER-SHARE-DIVIDEND> (0.10)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.37
<EXPENSE-RATIO> 0.6
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> EVERGREEN MASSACHUSETTS TAX FREE FUND CLASS A
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-98
<PERIOD-START> APR-01-97
<PERIOD-END> MAR-31-98
<INVESTMENTS-AT-COST> 9,555,261
<INVESTMENTS-AT-VALUE> 10,013,115
<RECEIVABLES> 113,018
<ASSETS-OTHER> 5,913
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,132,046
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32,939
<TOTAL-LIABILITIES> 32,939
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,039,195
<SHARES-COMMON-STOCK> 212,751
<SHARES-COMMON-PRIOR> 223,575
<ACCUMULATED-NII-CURRENT> 11,433
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (7,049)
<ACCUM-APPREC-OR-DEPREC> 32,902
<NET-ASSETS> 2,076,481
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 114,295
<OTHER-INCOME> 0
<EXPENSES-NET> (16,238)
<NET-INVESTMENT-INCOME> 98,057
<REALIZED-GAINS-CURRENT> 70,279
<APPREC-INCREASE-CURRENT> 39,168
<NET-CHANGE-FROM-OPS> 207,504
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (93,495)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 48,781
<NUMBER-OF-SHARES-REDEEMED> (65,265)
<SHARES-REINVESTED> 5,660
<NET-CHANGE-IN-ASSETS> 13,156
<ACCUMULATED-NII-PRIOR> 6,399
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (86,124)
<GROSS-ADVISORY-FEES> 11,652
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 39,415
<AVERAGE-NET-ASSETS> 2,112,664
<PER-SHARE-NAV-BEGIN> 9.23
<PER-SHARE-NII> 0.45
<PER-SHARE-GAIN-APPREC> 0.50
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.42)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.76
<EXPENSE-RATIO> 0.77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 102
<NAME> EVERGREEN MASSACHUSETTS TAX FREE FUND CLASS B
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-98
<PERIOD-START> APR-01-97
<PERIOD-END> MAR-31-98
<INVESTMENTS-AT-COST> 9,555,261
<INVESTMENTS-AT-VALUE> 10,013,115
<RECEIVABLES> 113,018
<ASSETS-OTHER> 5,913
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,132,046
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32,939
<TOTAL-LIABILITIES> 32,939
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,999,464
<SHARES-COMMON-STOCK> 658,769
<SHARES-COMMON-PRIOR> 851,347
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (14,290)
<ACCUMULATED-NET-GAINS> 62,586
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 336,186
<NET-ASSETS> 6,383,946
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 397,239
<OTHER-INCOME> 0
<EXPENSES-NET> (111,524)
<NET-INVESTMENT-INCOME> 285,715
<REALIZED-GAINS-CURRENT> 239,008
<APPREC-INCREASE-CURRENT> 174,738
<NET-CHANGE-FROM-OPS> 699,461
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (270,195)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 64,229
<NUMBER-OF-SHARES-REDEEMED> (276,117)
<SHARES-REINVESTED> 19,310
<NET-CHANGE-IN-ASSETS> (1,419,541)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (31,447)
<OVERDIST-NET-GAINS-PRIOR> (195,938)
<GROSS-ADVISORY-FEES> 40,461
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 136,866
<AVERAGE-NET-ASSETS> 7,336,005
<PER-SHARE-NAV-BEGIN> 9.17
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> 0.51
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.35)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.69
<EXPENSE-RATIO> 1.52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> EVERGREEN MASSACHUSETTS TAX FREE FUND CLASS C
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-98
<PERIOD-START> APR-01-97
<PERIOD-END> MAR-31-98
<INVESTMENTS-AT-COST> 9,555,261
<INVESTMENTS-AT-VALUE> 10,013,115
<RECEIVABLES> 113,018
<ASSETS-OTHER> 5,913
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,132,046
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32,939
<TOTAL-LIABILITIES> 32,939
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,555,861
<SHARES-COMMON-STOCK> 169,219
<SHARES-COMMON-PRIOR> 225,545
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (3,893)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2,776)
<ACCUM-APPREC-OR-DEPREC> 89,488
<NET-ASSETS> 1,638,680
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 99,846
<OTHER-INCOME> 0
<EXPENSES-NET> (27,951)
<NET-INVESTMENT-INCOME> 71,895
<REALIZED-GAINS-CURRENT> 60,267
<APPREC-INCREASE-CURRENT> 44,218
<NET-CHANGE-FROM-OPS> 176,380
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (68,044)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,224
<NUMBER-OF-SHARES-REDEEMED> (65,364)
<SHARES-REINVESTED> 4,814
<NET-CHANGE-IN-ASSETS> (426,911)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (8,152)
<OVERDIST-NET-GAINS-PRIOR> (70,852)
<GROSS-ADVISORY-FEES> 10,058
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 34,022
<AVERAGE-NET-ASSETS> 1,823,598
<PER-SHARE-NAV-BEGIN> 9.16
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> 0.51
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.35)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.68
<EXPENSE-RATIO> 1.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> EVERGREEN MISSOURI TAX FREE FUND CLASS A
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 23,528,568
<INVESTMENTS-AT-VALUE> 25,234,114
<RECEIVABLES> 338,218
<ASSETS-OTHER> 40,014
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,612,346
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 173,148
<TOTAL-LIABILITIES> 173,148
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,624,402
<SHARES-COMMON-STOCK> 479,612
<SHARES-COMMON-PRIOR> 272,424
<ACCUMULATED-NII-CURRENT> 19,313
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13,214
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 240,098
<NET-ASSETS> 4,897,027
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 222,561
<OTHER-INCOME> 0
<EXPENSES-NET> (30,847)
<NET-INVESTMENT-INCOME> 191,714
<REALIZED-GAINS-CURRENT> 38,745
<APPREC-INCREASE-CURRENT> 182,857
<NET-CHANGE-FROM-OPS> 413,316
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (185,708)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 262,047
<NUMBER-OF-SHARES-REDEEMED> (61,382)
<SHARES-REINVESTED> 6,523
<NET-CHANGE-IN-ASSETS> 207,188
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 21,834
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 30,847
<AVERAGE-NET-ASSETS> 3,969,659
<PER-SHARE-NAV-BEGIN> 9.64
<PER-SHARE-NII> 0.46
<PER-SHARE-GAIN-APPREC> 0.58
<PER-SHARE-DIVIDEND> (0.47)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.21
<EXPENSE-RATIO> 0.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 102
<NAME> EVERGREEN MISSOURI TAX FREE FUND CLASS B
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 23,528,568
<INVESTMENTS-AT-VALUE> 25,234,114
<RECEIVABLES> 338,218
<ASSETS-OTHER> 40,014
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,612,346
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 173,148
<TOTAL-LIABILITIES> 173,148
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18,145,421
<SHARES-COMMON-STOCK> 1,938,595
<SHARES-COMMON-PRIOR> 2,113,361
<ACCUMULATED-NII-CURRENT> (59,031)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 101,827
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,364,186
<NET-ASSETS> 19,552,403
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,125,867
<OTHER-INCOME> 0
<EXPENSES-NET> (303,588)
<NET-INVESTMENT-INCOME> 822,279
<REALIZED-GAINS-CURRENT> 186,277
<APPREC-INCREASE-CURRENT> 919,268
<NET-CHANGE-FROM-OPS> 1,927,824
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (792,663)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 366,631
<NUMBER-OF-SHARES-REDEEMED> (577,779)
<SHARES-REINVESTED> 36,382
<NET-CHANGE-IN-ASSETS> (174,766)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 109,763
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 303,588
<AVERAGE-NET-ASSETS> 19,956,519
<PER-SHARE-NAV-BEGIN> 9.52
<PER-SHARE-NII> 0.4
<PER-SHARE-GAIN-APPREC> 0.56
<PER-SHARE-DIVIDEND> (0.39)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.09
<EXPENSE-RATIO> 1.53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> EVERGREEN MISSOURI TAX FREE FUND CLASS C
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-1-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 23,528,568
<INVESTMENTS-AT-VALUE> 25,234,114
<RECEIVABLES> 338,218
<ASSETS-OTHER> 40,014
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,612,346
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 173,148
<TOTAL-LIABILITIES> 173,148
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18,145,421
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (59,031)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 101,827
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,364,186
<NET-ASSETS> 19,552,403
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,125,867
<OTHER-INCOME> 0
<EXPENSES-NET> (303,588)
<NET-INVESTMENT-INCOME> 822,279
<REALIZED-GAINS-CURRENT> 186,277
<APPREC-INCREASE-CURRENT> 919,268
<NET-CHANGE-FROM-OPS> 1,927,824
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> EVERGREEN NEW JERSEY TAX FREE INCOME FUND CLASS A
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 144,046,052
<INVESTMENTS-AT-VALUE> 149,575,374
<RECEIVABLES> 4,803,816
<ASSETS-OTHER> 4,873
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 154,384,063
<PAYABLE-FOR-SECURITIES> 130,978
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,663,354
<TOTAL-LIABILITIES> 3,794,332
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,896,299
<SHARES-COMMON-STOCK> 2,844,866
<SHARES-COMMON-PRIOR> 2,926,484
<ACCUMULATED-NII-CURRENT> 729
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (36,874)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,754,277
<NET-ASSETS> 31,614,431
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,670,618
<OTHER-INCOME> 0
<EXPENSES-NET> (158,334)
<NET-INVESTMENT-INCOME> 1,512,284
<REALIZED-GAINS-CURRENT> 467,494
<APPREC-INCREASE-CURRENT> 849,994
<NET-CHANGE-FROM-OPS> 2,829,772
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,518,372)
<DISTRIBUTIONS-OF-GAINS> (240,378)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 252,683
<NUMBER-OF-SHARES-REDEEMED> (431,044)
<SHARES-REINVESTED> 96,743
<NET-CHANGE-IN-ASSETS> 180,372
<ACCUMULATED-NII-PRIOR> 6,088
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (263,278)
<GROSS-ADVISORY-FEES> 158,510
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (158,334)
<AVERAGE-NET-ASSETS> 31,701,578
<PER-SHARE-NAV-BEGIN> 10.74
<PER-SHARE-NII> 0.53
<PER-SHARE-GAIN-APPREC> 0.46
<PER-SHARE-DIVIDEND> (0.53)
<PER-SHARE-DISTRIBUTIONS> (0.09)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.11
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 102
<NAME> EVERGREEN NEW JERSEY TAX FREE INCOME FUND CLASS B
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 144,046,052
<INVESTMENTS-AT-VALUE> 149,575,374
<RECEIVABLES> 4,803,816
<ASSETS-OTHER> 4,873
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 154,384,063
<PAYABLE-FOR-SECURITIES> 130,978
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,663,354
<TOTAL-LIABILITIES> 3,794,332
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,387,231
<SHARES-COMMON-STOCK> 1,227,877
<SHARES-COMMON-PRIOR> 730,515
<ACCUMULATED-NII-CURRENT> 250
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 82,617
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 174,661
<NET-ASSETS> 13,644,759
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 571,426
<OTHER-INCOME> 0
<EXPENSES-NET> (153,238)
<NET-INVESTMENT-INCOME> 418,188
<REALIZED-GAINS-CURRENT> 155,274
<APPREC-INCREASE-CURRENT> 263,161
<NET-CHANGE-FROM-OPS> 836,623
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (419,808)
<DISTRIBUTIONS-OF-GAINS> (86,039)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 559,918
<NUMBER-OF-SHARES-REDEEMED> (97,634)
<SHARES-REINVESTED> 35,078
<NET-CHANGE-IN-ASSETS> 5,798,049
<ACCUMULATED-NII-PRIOR> 1,620
<ACCUMULATED-GAINS-PRIOR> 13,641
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 54,362
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (153,238)
<AVERAGE-NET-ASSETS> 10,872,284
<PER-SHARE-NAV-BEGIN> 10.74
<PER-SHARE-NII> 0.43
<PER-SHARE-GAIN-APPREC> 0.46
<PER-SHARE-DIVIDEND> (0.43)
<PER-SHARE-DISTRIBUTIONS> (0.09)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.11
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> EVERGREEN NEW JERSEY TAX FREE INCOME FUND CLASS Y
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 144,046,052
<INVESTMENTS-AT-VALUE> 149,575,374
<RECEIVABLES> 4,803,816
<ASSETS-OTHER> 4,873
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 154,384,063
<PAYABLE-FOR-SECURITIES> 130,978
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,663,354
<TOTAL-LIABILITIES> 3,794,332
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 101,384,153
<SHARES-COMMON-STOCK> 9,478,550
<SHARES-COMMON-PRIOR> 878,516
<ACCUMULATED-NII-CURRENT> 998
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 345,006
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,600,384
<NET-ASSETS> 105,330,541
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,259,596
<OTHER-INCOME> 0
<EXPENSES-NET> (177,960)
<NET-INVESTMENT-INCOME> 2,081,636
<REALIZED-GAINS-CURRENT> 392,653
<APPREC-INCREASE-CURRENT> 802,546
<NET-CHANGE-FROM-OPS> 3,276,835
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,083,453)
<DISTRIBUTIONS-OF-GAINS> (81,674)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,202,193
<NUMBER-OF-SHARES-REDEEMED> (611,893)
<SHARES-REINVESTED> 9,734
<NET-CHANGE-IN-ASSETS> 95,894,201
<ACCUMULATED-NII-PRIOR> 1,817
<ACCUMULATED-GAINS-PRIOR> 35,033
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 217,123
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (177,960)
<AVERAGE-NET-ASSETS> 43,423,971
<PER-SHARE-NAV-BEGIN> 10.74
<PER-SHARE-NII> 0.54
<PER-SHARE-GAIN-APPREC> 0.46
<PER-SHARE-DIVIDEND> (0.54)
<PER-SHARE-DISTRIBUTIONS> (0.09)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.11
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> EVERGREEN NEW YORK TAX FREE FUND CLASS A
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 20,480,387
<INVESTMENTS-AT-VALUE> 22,028,567
<RECEIVABLES> 284,456
<ASSETS-OTHER> 6,655
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,319,678
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51,070
<TOTAL-LIABILITIES> 51,070
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,265,554
<SHARES-COMMON-STOCK> 351,689
<SHARES-COMMON-PRIOR> 383,164
<ACCUMULATED-NII-CURRENT> 15,690
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 19,727
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 258,271
<NET-ASSETS> 3,559,242
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 198,278
<OTHER-INCOME> 0
<EXPENSES-NET> (27,370)
<NET-INVESTMENT-INCOME> 170,908
<REALIZED-GAINS-CURRENT> 72,280
<APPREC-INCREASE-CURRENT> 112,176
<NET-CHANGE-FROM-OPS> 355,364
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (163,491)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (21,835)
<NUMBER-OF-SHARES-SOLD> 101,515
<NUMBER-OF-SHARES-REDEEMED> (143,942)
<SHARES-REINVESTED> 10,952
<NET-CHANGE-IN-ASSETS> (134,024)
<ACCUMULATED-NII-PRIOR> 8,089
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (19,612)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (36,181)
<AVERAGE-NET-ASSETS> 3,571,764
<PER-SHARE-NAV-BEGIN> 9.64
<PER-SHARE-NII> 0.48
<PER-SHARE-GAIN-APPREC> 0.52
<PER-SHARE-DIVIDEND> (0.46)
<PER-SHARE-DISTRIBUTIONS> (0.06)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.12
<EXPENSE-RATIO> 0.77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 102
<NAME> EVERGREEN NEW YORK TAX FREE FUND CLASS B
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 20,480,387
<INVESTMENTS-AT-VALUE> 22,028,567
<RECEIVABLES> 284,456
<ASSETS-OTHER> 6,655
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,319,678
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51,070
<TOTAL-LIABILITIES> 51,070
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,988,860
<SHARES-COMMON-STOCK> 1,720,078
<SHARES-COMMON-PRIOR> 1,996,424
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (26,300)
<ACCUMULATED-NET-GAINS> 177,505
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,104,756
<NET-ASSETS> 17,244,821
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,051,285
<OTHER-INCOME> 0
<EXPENSES-NET> (286,836)
<NET-INVESTMENT-INCOME> 764,449
<REALIZED-GAINS-CURRENT> 384,812
<APPREC-INCREASE-CURRENT> 655,904
<NET-CHANGE-FROM-OPS> 1,805,165
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (725,699)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (118,363)
<NUMBER-OF-SHARES-SOLD> 139,740
<NUMBER-OF-SHARES-REDEEMED> (469,593)
<SHARES-REINVESTED> 53,507
<NET-CHANGE-IN-ASSETS> (1,818,998)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (66,022)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (104,014)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (332,862)
<AVERAGE-NET-ASSETS> 18,903,569
<PER-SHARE-NAV-BEGIN> 9.55
<PER-SHARE-NII> 0.40
<PER-SHARE-GAIN-APPREC> 0.52
<PER-SHARE-DIVIDEND> (0.38)
<PER-SHARE-DISTRIBUTIONS> (0.06)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.03
<EXPENSE-RATIO> 1.52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> EVERGREEN NEW YORK TAX FREE FUND CLASS C
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 23,673,346
<INVESTMENTS-AT-VALUE> 24,401,137
<RECEIVABLES> 346,754
<ASSETS-OTHER> 3,543
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24,751,434
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 123,314
<TOTAL-LIABILITIES> 123,314
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,785,438
<SHARES-COMMON-STOCK> 195,980
<SHARES-COMMON-PRIOR> 239,549
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (6,993)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (40,253)
<ACCUM-APPREC-OR-DEPREC> 132,843
<NET-ASSETS> 1,871,035
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 127,033
<OTHER-INCOME> 0
<EXPENSES-NET> (33,079)
<NET-INVESTMENT-INCOME> 93,954
<REALIZED-GAINS-CURRENT> (6,021)
<APPREC-INCREASE-CURRENT> 4,265
<NET-CHANGE-FROM-OPS> 92,198
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (96,591)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,357
<NUMBER-OF-SHARES-REDEEMED> (71,587)
<SHARES-REINVESTED> 7,661
<NET-CHANGE-IN-ASSETS> (424,805)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (4,481)
<OVERDIST-NET-GAINS-PRIOR> (33,673)
<GROSS-ADVISORY-FEES> 12,124
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (33,079)
<AVERAGE-NET-ASSETS> 2,209,762
<PER-SHARE-NAV-BEGIN> 9.58
<PER-SHARE-NII> 0.40
<PER-SHARE-GAIN-APPREC> (0.01)
<PER-SHARE-DIVIDEND> (0.42)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.55
<EXPENSE-RATIO> 1.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> EVERGREEN PENNSYLVANIA TAX FREE FUND CLASS A
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 65,665,797
<INVESTMENTS-AT-VALUE> 67,571,456
<RECEIVABLES> 1,323,777
<ASSETS-OTHER> 5,841
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 68,901,074
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 320,995
<TOTAL-LIABILITIES> 320,995
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23,199,538
<SHARES-COMMON-STOCK> 2,202,803
<SHARES-COMMON-PRIOR> 2,575,175
<ACCUMULATED-NII-CURRENT> 41,531
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (968,334)
<ACCUM-APPREC-OR-DEPREC> 2,261,786
<NET-ASSETS> 24,534,521
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,619,221
<OTHER-INCOME> 0
<EXPENSES-NET> (201,768)
<NET-INVESTMENT-INCOME> 1,417,453
<REALIZED-GAINS-CURRENT> 97,368
<APPREC-INCREASE-CURRENT> (112,033)
<NET-CHANGE-FROM-OPS> 1,402,788
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,419,449)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 185,067
<NUMBER-OF-SHARES-REDEEMED> (622,861)
<SHARES-REINVESTED> 65,422
<NET-CHANGE-IN-ASSETS> (4,175,782)
<ACCUMULATED-NII-PRIOR> 40,718
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (1,051,774)
<GROSS-ADVISORY-FEES> (143,674)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (201,768)
<AVERAGE-NET-ASSETS> 26,960,095
<PER-SHARE-NAV-BEGIN> 11.15
<PER-SHARE-NII> 0.59
<PER-SHARE-GAIN-APPREC> (0.01)
<PER-SHARE-DIVIDEND> (0.59)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.14
<EXPENSE-RATIO> 0.76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 102
<NAME> EVERGREEN PENNSYLVANIA TAX FREE FUND CLASS B
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 65,665,797
<INVESTMENTS-AT-VALUE> 67,571,456
<RECEIVABLES> 1,323,777
<ASSETS-OTHER> 5,841
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 68,901,074
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 320,995
<TOTAL-LIABILITIES> 320,995
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38,342,710
<SHARES-COMMON-STOCK> 3,385,350
<SHARES-COMMON-PRIOR> 3,428,337
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (207,589)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (742,649)
<ACCUM-APPREC-OR-DEPREC> (177,393)
<NET-ASSETS> 37,215,079
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,298,303
<OTHER-INCOME> 0
<EXPENSES-NET> (573,230)
<NET-INVESTMENT-INCOME> 1,725,073
<REALIZED-GAINS-CURRENT> 168,842
<APPREC-INCREASE-CURRENT> (176,467)
<NET-CHANGE-FROM-OPS> 1,717,448
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,723,506)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 542,771
<NUMBER-OF-SHARES-REDEEMED> (677,087)
<SHARES-REINVESTED> 91,329
<NET-CHANGE-IN-ASSETS> (503,530)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (213,146)
<OVERDIST-NET-GAINS-PRIOR> (891,707)
<GROSS-ADVISORY-FEES> (204,114)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (573,230)
<AVERAGE-NET-ASSETS> 38,294,610
<PER-SHARE-NAV-BEGIN> 11.00
<PER-SHARE-NII> 0.49
<PER-SHARE-GAIN-APPREC> (0.01)
<PER-SHARE-DIVIDEND> (0.49)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.99
<EXPENSE-RATIO> 1.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> EVERGREEN PENNSYLVANIA TAX FREE FUND CLASS C
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 65,665,797
<INVESTMENTS-AT-VALUE> 67,571,456
<RECEIVABLES> 1,323,777
<ASSETS-OTHER> 5,841
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 68,901,074
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 320,995
<TOTAL-LIABILITIES> 320,995
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,389,749
<SHARES-COMMON-STOCK> 619,545
<SHARES-COMMON-PRIOR> 877,001
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (52,455)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (328,081)
<ACCUM-APPREC-OR-DEPREC> (178,734)
<NET-ASSETS> 6,830,479
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 480,213
<OTHER-INCOME> 0
<EXPENSES-NET> (119,470)
<NET-INVESTMENT-INCOME> 360,743
<REALIZED-GAINS-CURRENT> 26,650
<APPREC-INCREASE-CURRENT> (32,553)
<NET-CHANGE-FROM-OPS> 354,840
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (359,246)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 75,398
<NUMBER-OF-SHARES-REDEEMED> (356,046)
<SHARES-REINVESTED> 23,192
<NET-CHANGE-IN-ASSETS> (2,844,679)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (54,783)
<OVERDIST-NET-GAINS-PRIOR> (350,608)
<GROSS-ADVISORY-FEES> (42,578)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (119,470)
<AVERAGE-NET-ASSETS> 7,981,369
<PER-SHARE-NAV-BEGIN> 11.03
<PER-SHARE-NII> 0.47
<PER-SHARE-GAIN-APPREC> 0.01
<PER-SHARE-DIVIDEND> (0.49)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.02
<EXPENSE-RATIO> 1.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> EVERGREEN PENNSYLVANIA TAX FREE FUND CLASS Y
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 25,045,496
<INVESTMENTS-AT-VALUE> 26,341,725
<RECEIVABLES> 988,041
<ASSETS-OTHER> 24,122
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 27,353,888
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 232,112
<TOTAL-LIABILITIES> 232,112
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,660,844
<SHARES-COMMON-STOCK> 174,887
<SHARES-COMMON-PRIOR> 197,043
<ACCUMULATED-NII-CURRENT> (3,165)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 22,030
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 55,337
<NET-ASSETS> 1,735,046
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 99,196
<OTHER-INCOME> 0
<EXPENSES-NET> (27,974)
<NET-INVESTMENT-INCOME> 71,222
<REALIZED-GAINS-CURRENT> 15,590
<APPREC-INCREASE-CURRENT> 87,304
<NET-CHANGE-FROM-OPS> 174,116
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (68,869)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,602
<NUMBER-OF-SHARES-REDEEMED> (43,562)
<SHARES-REINVESTED> 2,804
<NET-CHANGE-IN-ASSETS> (22,156)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (6,644)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,123
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27,974
<AVERAGE-NET-ASSETS> 1,840,280
<PER-SHARE-NAV-BEGIN> 9.38
<PER-SHARE-NII> 0.37
<PER-SHARE-GAIN-APPREC> 0.53
<PER-SHARE-DIVIDEND> (0.36)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.92
<EXPENSE-RATIO> 1.52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ K. Dun Gifford
- -------------------------------- Trustee
K. Dun Gifford
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ Charles A. Austin III
- ----------------------------- Trustee
Charles A. Austin III
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ Laurence B. Ashkin
- -------------------------------- Trustee
Laurence B. Ashkin
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ William Walt Pettit
- -------------------------------- Trustee
William Walt Pettit
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ James S. Howell
- -------------------------------- Trustee
James S. Howell
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ Leroy Keith, Jr.
- -------------------------------- Trustee
Leroy Keith, Jr.
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ Gerald M. McDonnell
- -------------------------------- Trustee
Gerald M. McDonnell
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ Thomas L. McVerry
- -------------------------------- Trustee
Thomas L. McVerry
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ David M. Richardson
- -------------------------------- Trustee
David M. Richardson
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ Richard J. Shima
- -------------------------------- Trustee
Richard J. Shima
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ Michael S. Scofield
- -------------------------------- Trustee
Michael S. Scofield
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ Russell A. Salton, III, M.D. Trustee
- --------------------------------
Russell A. Salton, III M.D.
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ William J. Tomko
- ----------------------- President and Treasurer
William J. Tomko
