<PAGE>
Annual Report
as of May 31, 1999
Evergreen
National Municipal Bond Funds
[GRAPHIC APPEARS HERE]
[LOGO OF EVERGREEN FUNDS APPEARS HERE]
<PAGE>
Table of Contents
Letter to Shareholders .................................................. 1
Evergreen High Grade Municipal
Bond Fund
Fund at a Glance ...................................................... 2
Portfolio Manager Interview ........................................... 3
Evergreen Municipal Bond Fund
Fund at a Glance ...................................................... 6
Portfolio Manager Interview ........................................... 7
Evergreen Short-Intermediate
Municipal Fund
Fund at a Glance ...................................................... 10
Portfolio Manager Interview ........................................... 11
Financial Highlights
Evergreen High Grade Municipal Bond Fund .............................. 13
Evergreen Municipal Bond Fund ......................................... 15
Evergreen Short-Intermediate Municipal Fund ........................... 17
Schedule of Investments
Evergreen High Grade Municipal Bond Fund .............................. 19
Evergreen Municipal Bond Fund ......................................... 23
Evergreen Short-Intermediate Municipal Fund ........................... 33
Statements of Assets and Liabilities .................................... 36
Statements of Operations ................................................ 37
Statements of Changes in Net Assets ..................................... 38
Combined Notes to Financial
Statements .............................................................. 41
Report of Independent Accountants ....................................... 49
Additional Information .................................................. 50
Evergreen Funds
Evergreen Funds is one of the nation's fastest growing investment companies with
over $60 billion in assets under management.
With over 70 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to the Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
This annual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.
Mutual Funds: ARE NOT FDIC INSURED May lose value o Are not bank guaranteed
Evergreen Distributor, Inc.
Evergreen/SM/ is a Service Mark of Evergreen Investment Services, Inc.
<PAGE>
Letter to Shareholders
----------------------
July 1999
[PHOTO OF WILLIAM M. ENNIS
APPEARS HERE]
William M. Ennis
President and CEO
Dear Evergreen Shareholders:
We are pleased to provide the Evergreen National Municipal Bond Funds annual
report, which covers the twelve-month period ended May 31, 1999.
Shift in the Interest Rate Environment
Following the Russian financial crisis in August 1998, there was a "flight to
quality" worldwide. Investors fled from risk-related securities, interest rates
fell sharply and the prices of high grade and U.S. government securities rose.
During the final six months of the period the flight to quality was reversed as
a result of actions to lower interest rates by the governments of the major
industrialized nations. Investors returned to more risky fixed income
securities, such as lower quality corporate bonds, international bonds and
emerging market bonds.
Going forward, we anticipate a more stable interest rate environment than we've
seen during the last year, both domestically and internationally. The moderately
growing domestic economy and the solid, long-term fundamentals underlying the
market lead us to a cautiously optimistic outlook.
Year 2000 Preparation/1/
At Evergreen, we continue to prepare ourselves to provide uninterrupted service
and communication with all our shareholders throughout the end of 1999 and right
through the date change into the year 2000 and beyond. As of the end of June,
when this report was finalized, we have completed 75% of the testing of internal
systems and are rapidly moving through the remaining systems. In March, we
successfully participated in industry-wide testing with the Securities Industry
Association. We are confident that our efforts will enable shareholders to
receive the same Evergreen products and services after December 1999 that we
deliver today.
As always, we encourage all shareholders to diversify their mutual fund
portfolios and we suggest you consult with your financial advisor for an
allocation strategy that helps you meet your investment goals and objectives.
Evergreen Funds offers a wide range of funds that includes multiple investment
styles to help you find one that is appropriate in your portfolio.
Thank you for your continued investment in Evergreen Funds.
Sincerely,
[SIGNATURE APPEARS HERE]
William M. Ennis
President and CEO
Evergreen Investment Company
/1/This information constitutes Year 2000 readiness disclosure. 1
<PAGE>
EVERGREEN
High Grade Municipal Bond Fund
Fund at a Glance as of May 31, 1999
We intend to continue a consistent, yield-oriented strategy that we believe will
give the Fund the potential to outperform its peer group both when markets go up
and when markets go down.
Portfolio Management
- --------------------
[PHOTO OF JAMES T. COLBY III
APPEARS HERE]
James T. Colby III
Tenure: February 1992
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 5/31/99.
The Fixed Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
Source: 1998 Morningstar, Inc.
/1/Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost.
Historical performance shown for Classes B, C and Y prior to their inception is
based on the performance of Class A, the original class offered. These
historical returns for Classes B, C and Y have not been adjusted to reflect the
effect of each Class' 12b-1 fees. These fees for Classes A, B and C are .25%,
1.00%, 1.00%, respectively. Class Y does not pay a 12b-1 fee. If these fees had
been reflected, returns for Classes B and C would have been lower, while returns
for Class Y would have been higher.
- --------------------------------------------------------------------------------
Performance and Returns/1/
- --------------------------------------------------------------------------------
Portfolio Inception Date: 2/21/92 Class A Class B Class C Class Y
Class Inception Date 2/21/92 1/11/93 4/30/99 2/28/94
Average Annual Returns*
1 year with sales charge -1.33% -2.00% 2.57% N/A
1 year w/o sales charge 3.62% 2.85% 3.56% 3.88%
3 years 4.77% 4.78% 6.45% 6.73%
5 years 5.54% 5.49% 6.57% 6.85%
Since Portfolio Inception 6.06% 6.14% 6.77% 6.97%
Maximum Sales Charge 4.75% 5.00% 1.00% N/A
Front End CDSC CDSC
30-day SEC Yield 4.17% 3.62% 3.20% 4.63%
Taxable Equivalent Yield** 6.90% 5.99% 5.30% 7.67%
12-month capital gain distribution
per share $0.27 $0.27 N/A $0.27
12 month dividends per share $0.48 $0.40 $0.04 $0.51
* Adjusted for maximum applicable sales charge.
** Assumes maximum 39.6% federal tax rate. Results for investors subject to
lower tax rates would not be as advantageous.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Evergreen High Grade Consumer Price Lehman Brothers
Municipal Bond A Index - US Municipals
2/29/92 9526 10000 10000
5/31/92 9740 10079 10212
5/31/93 10965 10404 11433
5/31/94 11089 10642 11716
5/31/95 12186 10981 12783
5/31/96 12642 11290 13367
5/31/97 13526 11551 14475
5/31/98 14727 11746 15832
5/31/99 15260 12078 16816
Comparison of a $10,000 investment in Evergreen High Grade Municipal Bond Fund,
Class A shares/1/, versus a similar investment in the Lehman Brothers Municipal
Bond Index (LBMBI) and the Consumer Price Index (CPI).
The Lehman Brothers Municipal Bond Index is an unmanaged index and does not
include transaction costs associated with buying and selling securities nor any
management fees. The Consumer Price Index is a commonly used measure of
inflation and does not represent an investment return. It is not possible to
invest directly in an index.
2
<PAGE>
EVERGREEN
High Grade Municipal Bond Fund
Portfolio Manager Interview
How did the Fund perform?
The Evergreen High Grade Municipal Bond Fund continued to perform very well
during the 12-month period ended May 31, 1999, outperforming competitive
benchmarks for insured municipal bond mutual funds. The Fund's Class A shares
had a total return of 3.62%. You can find more performance information for all
share classes on the preceding page. This return is before deduction of any
applicable sales charges. During the same 12-month period, the average insured
municipal bond fund had a total return of 3.30%, as measured by Lipper Inc., an
independent monitor of mutual fund performance.
Portfolio
Characteristics
----------------
Total Net Assets: $117,370,399
Average Credit Quality: AAA
Average Maturity: 21.39 years
Average Duration: 8.87 years
What was the investment environment like during the period?
It was a year of contrasts, with yields falling and bond prices rising during
the first six months, and yields rising and prices falling during the second six
months. Consistent with historic relationships, the movements in both yields and
prices were more dramatic in the Treasury market than in the municipal bond
market.
Over the full 12 months, the yields on 30-year Treasuries went from 5.80% to
below 5%, before ending the period on May 31, 1999 at 5.84%. The yields on
30-year, AAA-rated municipal bonds started the period at 5.23% and ended the
fiscal year at 5.38%. During the first six months of the fiscal period, interest
rates trended lower and bond prices rose as fears of a worldwide economic
slowdown encouraged a flight to quality in bonds, especially U.S. Treasury
bonds. These fears contributed to significant volatility in the market in the
late summer and early fall of 1998, following the Russian government's default
on part of its external debt and devaluation of its currency.
Over the final six months of the period, fears about the effects of
international economic problems abated. The Brazilian currency devaluation in
January 1999, for example, did not have nearly the negative impact of the
Russian crisis in August 1998. The actions by the U.S. Federal Reserve Board,
which eased the money supply in the fall of 1998, accomplished their goals, and
the economic slowdown was averted. In the United States, the economy grew faster
than investors had anticipated. Consumer spending, in particular, was very
strong. By the end of January 1999, long-term interest rates started to creep
back up. Toward the end of the 12-month period in April and May, economic
observers became concerned that economic growth was becoming very strong and
that inflationary pressures could appear. This triggered increased volatility in
the bond market, with interest rates rising and bond prices dropping.
During this latter period, municipal bonds fared comparatively better than
Treasuries for several reasons. The international factors that had favored
Treasuries in the first six months--the fear of a global slowdown--worked
against Treasuries as the fears receded and demand declined for the safest
possible securities.
Municipal bond yields had come close to equaling those of Treasuries in November
1998, which meant that on an after-tax basis, they offered more income to almost
all investors subject to personal income taxes in the United States. As a
consequence, demand held strong as investors recognized the relative value. At
the same time, the issuance of new municipal bonds declined by 30% from the
levels of 1998, which had experienced the second-highest rate of new issuance on
record. This limited supply provided a further underpinning for the prices of
municipal bonds.
3
<PAGE>
EVERGREEN
High Grade Municipal Bond Fund
Portfolio Manager Interview
Consistent with historical relationships, insured municipal bonds/1/--which the
Fund emphasizes--while offering greater credit protection, have proved to have
greater price volatility than uninsured municipal bonds. This volatility is the
result of the fact that insured bonds are the most liquid and easily tradable
bonds because of their very high quality. This means that they tend to be the
first bonds sold and the first bonds bought, contributing to greater price
fluctuations. Insured bonds currently make up about 50% of all newly issued
municipal bonds.
- --------------------------------------------------------------------------------
PORTFOLIO QUALITY
- --------------------------------------------------------------------------------
(as a percentage of net portfolio assets)
[PIE CHART APPEARS HERE]
AAA--76.4%
AA--16.3%
A--7.3%
What strategies did you pursue during this period?
We continued the strategy of the Evergreen municipal bond team, emphasizing
yield and focusing on sector and security selection. We believe this
yield-sensitive strategy not only increases the income potential of the
portfolio, but also would reduce volatility and result in greater consistency of
performance. This strategy resulted in above-average performance during both
parts of the year--in the first six months when yields fell and in the final six
months when yields started to rise again. Over the full year, the Fund finished
in the 33rd percentile of its competitive Lipper category.
During the period, we lowered the Fund's weighting in insured bonds/1/ from
about 87% of net assets on May 31, 1998 to about 71% of net assets on May 31,
1999. The Fund will always have at least 65% of assets in insured bonds. We
invested more in AA-rated and A-rated bonds, as well as bonds subject to the
alternative minimum tax, which accounted for 31.8% of assets at the end of the
fiscal year. These steps improved the income generation ability of the Fund,
while lowering potential price volatility. At the same time, the Fund maintained
its high-grade orientation, with 76.4% of net assets invested in AAA-rated
bonds, and an average credit rating of AAA.
We emphasized sectors such as healthcare, housing and industrial development
bonds because of the yield advantages they offered over other types of municipal
bonds.
/1/The insurance on these bonds relates to the underlying securities within the
fund and not the mutual funds' shares.
4
<PAGE>
EVERGREEN
High Grade Municipal Bond Fund
Portfolio Manager Interview
In the final three months of the fiscal year, we lowered the Fund's overall
interest rate sensitivity as yields were increasing. At the end of the Fund's
fiscal year on May 31, 1999, the Fund's average duration was 8.87 years and the
average maturity was 21.39 years. However, because of hedging tactics
implemented in the latter part of the year, the Fund's interest rate
sensitivity--or tendency to experience price losses as interest rates
rise--actually was less than the duration and average maturity figures would
indicate.
All these strategies helped performance. The Fund finished the fiscal year in
the second quartile of the Lipper insured municipal bond fund category.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(as a percentage of net assets)
[PIE CHART APPEARS HERE]
Housing--20.7%
Industrial Development/
Pollution Control--15.5%
Airports--14.0%
Water & Sewer--9.9%
Hospitals--8.7%
Electric Power--8.2%
Other Investments & other
assets and liabilities, net--6.3%
General Obligation-Local--5.2%
Transportation--3.6%
Education--2.7%
Special Revenue--2.6%
General Obligation-State--2.6%
What is your outlook?
We are cautiously optimistic. In recent weeks, we have seen a substantial
increase in interest rates and decline in bond prices. While rates may go up
more, we do not expect to see any significant rise. In this environment, we will
continue to focus on our yield strategy, emphasizing the sectors and individual
securities where we find income opportunities and relative value.
Looking at the general economy, it is possible that the rate of growth may start
to slow toward the end of 1999 and interest rates could again decline, which
would be positive for bond investors. We intend to continue a consistent,
yield-oriented strategy that we believe will give the Fund the potential to
outperform its peer group both when markets go up and when markets go down.
/1/Portfolio composition is subject to change 5
<PAGE>
EVERGREEN
Municipal Bond Fund
Fund at a Glance as of May 31, 1999
In this environment, we will continue to focus on our yield strategy,
emphasizing the sectors and individual securities where we find income
opportunities and relative value.
Portfolio
Management
- --------------------------------------------------------------------------------
[PHOTO OF JAMES T. COLBY [PHOTO OF GEORGE J. KIMBALL
APPEARS HERE] APPEARS HERE]
James T. Colby III George J. Kimball
Tenure: February 1992 Tenure: April 1998
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 5/31/99.
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
Source: 1998 Morningstar, Inc.
/1/Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost.
Historical performance shown for Classes A, C and Y prior to their inception is
based on the performance of Class B, the original class offered. These
historical returns for Classes A and Y have been adjusted to eliminate the
effect of higher 12b-1 fees applicable to Class B. The 12b-1 fees for Classes A,
B and C are .25%, 1.00%, and 1.00%, respectively. Class Y does not pay a 12b-1
fee. If these fees had not been eliminated, returns would have been lower.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/1/
- --------------------------------------------------------------------------------
Portfolio Inception Date: 1/19/78 Class A Class B Class C Class Y
Class Inception Date 1/20/98 1/19/78 1/26/98 4/30/99
Average Annual Returns*
1 year with sales charge -1.31% -1.94% 1.91% N/A
1 year w/o sales charge 3.64% 2.86% 2.87% 3.90%
3 years 4.55% 4.97% 5.51% 6.56%
5 years 5.15% 5.47% 5.39% 6.45%
10 years 6.36% 6.36% 5.97% 7.15%
Since Portfolio Inception 7.12% 6.85% 6.64% 7.57%
Maximum Sales Charge 4.75% 5.00% 1.00% N/A
Front End CDSC CDSC
30-day SEC Yield 4.33% 3.79% 3.79% 5.06%
Taxable Equivalent Yield** 7.17% 6.27% 6.27% 8.38%
12-month capital gain
distribution per share $0.23 $0.23 $0.23 N/A
12 month dividends per share $0.34 $0.29 $0.29 $0.03
* Adjusted for maximum applicable sales charge.
** Assumes maximum 39.6% federal tax rate. Results for investors subject to
lower tax rates would not be as advantageous.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Evergreen Municipal Consumer Price Lehman Brothers
Bond B Index - US Municipals
5/31/89 10000 10000 10000
5/31/90 10611 10436 10733
5/31/91 11567 10953 11814
5/31/92 12622 11284 12975
5/31/93 13964 11648 14527
5/31/94 13979 11914 14886
5/31/95 15087 12294 16242
5/31/96 15616 12640 16984
5/31/97 16717 12932 18391
5/31/98 18008 13150 20115
5/31/99 18523 13522 21367
Comparison of a $10,000 investment in Evergreen Municipal Bond Fund, Class B
shares/1/, versus a similar investment in the Lehman Brothers Municipal Bond
Index (LBMBI) and the Consumer Price Index (CPI).
The Lehman Brothers Municipal Bond Index is an unmanaged index and does not
include transaction costs associated with buying and selling securities nor any
management fees. The Consumer Price Index is a commonly used measure of
inflation and does not represent an investment return. It is not possible to
invest directly in an index.
6
<PAGE>
EVERGREEN
Municipal Bond Fund
Portfolio Manager Interview
How did the Fund perform?
The Evergreen Municipal Bond Fund performed well. Portfolio strategy changes
implemented a year ago resulted in above-average performance for the 12-month
period ended May 31, 1999. The Fund's Class B shares had a total return of
2.86%. You can find more performance information for all share classes on the
preceding page. Fund returns are before deduction of any applicable sales
charges. During the same 12-month period, the Lehman Brothers Municipal Bond
Index (LBMBI) had a return of 4.67%, while the average performance of general
municipal bond funds was 3.26%, as measured by Lipper, Inc., an independent
monitor of mutual fund performance.
Portfolio
Characteristics
---------------
Total Net Assets: $1,184,788,144
Average Credit Quality: AA
Average Maturity: 20.12 years
Average Duration: 5.04 years
How would you describe the investment environment during the year?
It was a year of contrasts, with yields falling and bond prices rising during
the first six months, and yields rising and prices falling during the second six
months. Consistent with historic relationships, the movements in both yields and
prices were more dramatic in the Treasury market than in the municipal bond
market.
Over the full 12 months, the yields on 30-year Treasuries went from 5.80% to
below 5%, before ending the period on May 31, 1999 at 5.84%. The yields on
30-year, AAA-rated municipal bonds started the period at 5.23% and ended the
fiscal year at 5.38%. During the first six months of the fiscal period, interest
rates trended lower and bond prices rose as fears of a worldwide economic
slowdown encouraged a flight to quality in bonds, especially U.S. Treasury
bonds. These fears contributed to significant volatility in the market in the
late summer and early fall of 1998, following the Russian government's default
on part of its external debt and devaluation of its currency.
Over the final six months of the period, fears about the effects of
international economic problems abated. The Brazilian currency devaluation in
January 1999, for example, did not have nearly the negative impact of the
Russian crisis in August 1998. The actions by the U.S. Federal Reserve Board,
which eased the money supply in the fall of 1998, accomplished their goals, and
the economic slowdown was averted. In the United States, the economy grew faster
than investors had anticipated. Consumer spending, in particular,
7
<PAGE>
EVERGREEN
Municipal Bond Fund
Portfolio Manager Interview
was very strong. By the end of January 1999, long-term interest rates started to
creep back up. Toward the end of the 12-month period in April and May, economic
observers became concerned that economic growth was becoming very strong and
that inflationary pressures could appear. This triggered increased volatility in
the bond market, with interest rates rising and bond prices dropping.
During this latter period, municipal bonds fared comparatively better than
Treasuries for several reasons. The international factors that had favored
Treasuries in the first six months--the fear of a global slowdown--worked
against Treasuries as the fears receded and demand declined for the safest
possible securities.
Municipal bond yields had come close to equaling those of Treasuries in November
1998, which meant that on an after-tax basis, they offered more income to almost
all investors subject to personal income taxes in the United States. As a
consequence, demand held strong as investors recognized the relative value. At
the same time, the issuance of new municipal bonds declined by 30% from the
levels of 1998, which had experienced the second-highest rate of new issuance on
record. The limited supply provided a further underpinning to the prices of
municipal bonds.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION/1/
- --------------------------------------------------------------------------------
(as a percentage of net assets)
[PIE CHART APPEARS HERE]
Hospitals--17.1%
Housing--13.3%
Industrial Development/
Pollution Control--11.3%
Water & Sewer--9.3%
Airports--8.5%
Other Investments & other
assets and liabilities, net--8.0%
Electric Power--7.8%
Transportation--7.3%
General Obligation-State--5.6%
Special Revenue--4.2%
General Obligation-Local--4.1%
Education--3.5%
What strategies did you pursue during this period?
We continued the strategy that we had put in place a year earlier, emphasizing
yield and focusing on sector and security selection. We believed this
yield-sensitive strategy not only would increase the income potential of the
portfolio, but also would reduce volatility and result in greater consistency of
performance. This strategy resulted in above-average performance, in comparison
to the Lipper Municipal Bond Funds' performance, during both parts of the year;
in the first six months when yields fell and in the final six months when yields
started to rise again. Over the full year, the Fund finished in the 37th
percentile of its competitive Lipper category, and in the 26th percentile for
the final six months of the year.
We emphasized sectors such as healthcare, housing and industrial development
bonds because of the yield advantages they offered over other types of municipal
bonds. We also increased the Fund's investments in municipal bonds subject to
the alternative minimum tax, which boosted the Fund's yield. At the end of the
fiscal year, bonds subject to the alternative minimum tax accounted for 26.5% of
net assets.
While the overall average credit quality of the Fund has remained at AA, we have
reduced the number of AA- and A-rated bonds, adding to the Fund's position in
BBB-rated and non-rated bonds because of the superior yields they tended to
offer. The Fund's AAA-rated investments remained fairly constant, beginning the
fiscal year at 57% of net assets and ending the fiscal year at 56% of assets.
The increased holdings of lower-quality bonds helped the Fund's performance both
by adding income and by reducing volatility during the rise in interest rates at
the end of the fiscal year. Lower-quality bonds tend to have less sensitivity to
interest rate changes than higher-quality bonds.
/1/Portfolio composition is subject to change
8
<PAGE>
EVERGREEN
Municipal Bond Fund
Portfolio Manager Interview
- --------------------------------------------------------------------------------
PORTFOLIO QUALITY
- --------------------------------------------------------------------------------
(as a percentage of net portfolio assets)
[PIE CHART APPEARS HERE]
AAA--56.6%
AA--12.3%
A--13.4%
BBB--13.8%
BB--1.0%
B--0.3%
NR--2.6%
In the final three months of the fiscal year, we lowered the Fund's overall
interest rate sensitivity as yields were increasing. At the end of the Fund's
fiscal year on May 31, 1999, the Fund's average duration was 5.04 years and the
average maturity was 20.12 years. However, because of hedging tactics
implemented in the latter part of the year, the Fund's interest rate
sensitivity--tendency to experience price losses as interest rates
rise--actually was less than the duration and average maturity figures would
indicate.
All of these strategies helped the Fund experience a major turnaround in
performance during the year. The new investment team and new investment approach
contributed to the improved performance of the Fund.
What is your outlook?
We are cautiously optimistic. In recent weeks, we have seen a substantial
increase in interest rates and decline in bond prices. While rates may go up
more, we do not expect to see any significant rise. In this environment, we will
continue to focus on our yield strategy, emphasizing the sectors and individual
securities where we find income opportunities and relative value.
Looking at the general economy, it is possible that the rate of growth may start
to slow toward the end of 1999 and interest rates could again decline, which
would be positive for bond investors. We intend to continue a consistent, yield-
oriented strategy that, we believe, will give the Fund the potential to
outperform its peer group both when markets go up and when markets go down.
9
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Fund at a Glance as of May 31, 1999
Along with our team of municipal credit analysts, we will continue to monitor
the market for hidden and potential opportunities in order to meet the
Fund's--and our clients'--objectives.
Portfolio
Management
------------------
[PHOTO OF RICHARD K. MARRONE
APPEARS HERE]
Richard K. Marrone
Tenure: December 1997
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 5/31/99.
The Fixed Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
Source: 1998 Morningstar, Inc.
/1/Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost.
Historical performance shown for Classes A and B prior to their inception is
based on the performance of Class Y, the original class offered. These
historical returns for Classes A and B have not been adjusted to reflect the
effect of each class' 12b-1 fees. These fees for Classes A and B are .10% and
1.00%, respectively. Class Y does not pay a 12b-1 fee. If these fees had been
reflected, returns would have been lower.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/1/
- --------------------------------------------------------------------------------
Portfolio Inception Date: 7/17/91 Class A Class B Class Y
Class Inception Date 1/5/95 1/5/95 7/17/91
Average Annual Returns*
1 year with sales charge 0.73% -1.80% N/A
1 year w/o sales charge 4.09% 3.16% 4.20%
3 years 3.35% 2.63% 4.64%
5 years 3.46% 3.00% 4.23%
Since Portfolio Inception 4.30% 4.24% 4.83%
Maximum Sales Charge 3.25% 5.00% N/A
Front End CDSC
30-day SEC Yield 3.74% 2.96% 3.96%
Taxable Equivalent Yield** 6.19% 4.90% 6.56%
12-month capital distribution per share $0.08 $0.08 $0.08
12-month dividends per share $0.40 $0.31 $0.41
* Adjusted for maximum applicable sales charge.
** Assumes maximum 39.6% federal tax rate. Results for investors subject to
lower tax rates would not be as advantageous.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Evergreen Sh-Intermed X Consumer Price Lehman Brothers X
Muni Index - US Index - US
1/31/95 9671 10000 10000
5/31/95 9956 10126 10387
5/31/96 10305 10412 10881
5/31/97 10750 10652 11463
5/31/98 11299 10832 12112
5/31/99 11761 11138 12674
Comparison of a $10,000 investment in Evergreen Short Intermediate Municipal
Fund, Class A shares/1/, versus a similar investment in the Lehman Brothers 3
Year Municipal Bond Index (LB3YMBI) and the Consumer Price Index (CPI).
The Lehman Brothers 3 Year Municipal Bond Index is an unmanaged index and does
not include transaction costs associated with buying and selling securities nor
any management fees. The Consumer Price Index is a commonly used measure of
inflation and does not represent an investment return. It is not possible to
invest directly in an index.
10
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Portfolio Manager Interview
How did the Fund perform?
The Evergreen Short-Intermediate Municipal Bond Fund's Class A posted a total
return of 4.09% for the twelve-month period ended May 31, 1999. You can find
more performance information for all share classes on the preceding pages. Class
A shares out-performed the 3.68% average return for the 38 short-intermediate
municipal debt funds tracked by Lipper, Inc., an independent monitor of mutual
fund performance. In comparison, the Lehman Brothers 3 Year Municipal Bond Index
(LB3YMBI) had a return of 4.63% for the same period. These returns are before
deduction of any applicable sales charges.
Portfolio
Characteristics
---------------
Total Net Assets: $174,532,329
Average Credit Quality: A
Average Maturity: 4.98 years
Average Duration: 3.13 years
What was the environment like for bonds during the past twelve months?
The fiscal year was broken into two distinctly different periods for
fixed-income investors. The U.S. economy provided a very favorable backdrop for
most fixed-income securities during the opening months of the fiscal year.
Strong economic growth was tempered by relatively benign inflation, as interest
rates trended lower through early October. In fact, the yield on the bellwether
30-year Treasury Bond fell from 5.8% at the beginning of the period to 4.7% only
a few months later.
Investors then witnessed a dramatic turnaround, as interest rates rose
markedly--4.98% to 5.63% from September 30, 1999 to March 31, 1999--despite the
fact that the Federal Reserve Board cut the Fed Funds rate three times in three
months. Rates rose in response to investors' fears of a potential inflationary
flare-up resulting from robust economic growth and powerful consumer spending
levels.
- --------------------------------------------------------------------------------
PORTFOLIO QUALITY
- --------------------------------------------------------------------------------
(as a percentage of net portfolio assets)
[PIE CHART APPEARS HERE]
AAA--21.6%
AA--11.3%
A--30.7%
BBB--23.6%
SP1/MIG1--0.6%
NR--12.2%
11
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Portfolio Manager Interview
What strategies led to strong performance during the fiscal year?
Strong performance during the fiscal period, particularly in the opening months
of 1999, was fueled by strong security selection, as well as a favorable
duration strategy. The portfolio's duration was reduced from 3.62 years to 3.13
years from January 1 through May 31. The strategy to shorten duration enhanced
performance as interest rates fell significantly during this period.
We then made adjustments to the portfolio during the final months of the fiscal
year that focused on the Fund's two primary objectives: strong yield and price
stability. As a result, we sold all zero-coupon bonds since these issues
typically have significant price volatility. We also trimmed exposure to
securities with higher volatility and lower coupon structures. Most of these
sales took place in mid-to-late January and we spent early February re-investing
these funds.
Simply put, these adjustments resulted in a portfolio with higher yield, more
stable net asset value and a slightly lower duration.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION/1/
- --------------------------------------------------------------------------------
(as a percentage of net assets)
[PIE CHART APPEARS HERE]
Other--26.61%
Hospitals--14.4%
Industrial Development--12.01%
Housing--9.62%
Electric Power--8.56%
Education--6.52%
Public Facilities--5.38%
Escrow--4.50%
General Obligation-Local--3.90%
Sales--3.77%
Transportation--1.79%
General Obligation-State--1.77%
Water & Sewer--1.17%
/1/Portfolio composition is subject to change
What is your outlook going forward?
Going forward, we will continue to focus on securities consistent with our
income-oriented approach. We are confident this strategy of investing for income
and relatively stable net asset value will enhance total return and reward our
shareholders over the long term. Along with our team of municipal credit
analysts, we will continue to monitor the market for hidden and potential
opportunities in order to meet the Fund's--and our clients'--objectives.
12
<PAGE>
EVERGREEN
High Grade Municipal Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended May 31, Year Ended August 31, Year Ended
-------------------------- ------------------------ December 31,
1999 1998 1997 (a) 1996 1995 (b) 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 11.36 $ 10.89 $ 10.72 $ 10.69 $ 9.79 $ 11.16
======= ======= ======= ========== ========== =======
Income from investment
operations
Net investment income 0.48 0.47 0.37 0.52 0.34 0.52
Net realized and
unrealized gains or
losses on securities (0.08) 0.48 0.17 0.03 0.90 (1.37)
------- ------- ------- ---------- ---------- -------
Total from investment
operations 0.40 0.95 0.54 0.55 1.24 (0.85)
------- ------- ------- ---------- ---------- -------
Distributions to
shareholders from
Net investment income (0.48) (0.48) (0.37) (0.52) (0.34) (0.52)
Net realized gains (0.27) 0 0 0 0 0
------- ------- ------- ---------- ---------- -------
Total distributions to
shareholders (0.75) (0.48) (0.37) (0.52) (0.34) (0.52)
------- ------- ------- ---------- ---------- -------
Net asset value, end of
period $ 11.01 $ 11.36 $ 10.89 $ 10.72 $ 10.69 $ 9.79
======= ======= ======= ========== ========== =======
Total return* 3.62% 8.88% 5.13% 5.21% 12.83% (7.71)%
Ratios and supplemental
data
Net assets, end of
period (thousands) $63,018 $64,526 $45,814 $ 50,569 $ 58,751 $57,676
Ratios to average net
assets
Expenses++ 0.95% 1.09% 1.11%+ 1.09% 1.09%+ 1.02%
Net investment income 4.26% 4.25% 4.60%+ 4.78% 4.93%+ 5.04%
Portfolio turnover rate 79% 127% 114% 65% 27% 53%
<CAPTION>
Year Ended May 31, Year Ended August 31, Year Ended
-------------------------- ------------------------ December 31,
1999 1998 1997 (a) 1996 1995 (b) 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 11.36 $ 10.89 $ 10.72 $ 10.69 $ 9.79 $ 11.16
======= ======= ======= ========== ========== =======
Income from investment
operations
Net investment
income 0.40 0.39 0.31 0.44 0.29 0.46
Net realized and
unrealized gains or
losses on securities (0.08) 0.48 0.17 0.03 0.90 (1.37)
------- ------- ------- ---------- ---------- -------
Total from investment
operations 0.32 0.87 0.48 0.47 1.19 (0.91)
------- ------- ------- ---------- ---------- -------
Distributions to
shareholders from
Net investment income (0.40) (0.40) (0.31) (0.44) (0.29) (0.46)
Net realized gains (0.27) 0 0 0 0 0
------- ------- ------- ---------- ---------- -------
Total distributions to
shareholders (0.67) (0.40) (0.31) (0.44) (0.29) (0.46)
------- ------- ------- ---------- ---------- -------
Net asset value, end of
period $ 11.01 $ 11.36 $ 10.89 $ 10.72 $ 10.69 $ 9.79
======= ======= ======= ========== ========== =======
Total return* 2.85% 8.07% 4.55% 4.42% 12.27% (8.24)%
Ratios and supplemental
data
Net assets, end of
period (thousands) $32,088 $32,822 $31,874 $ 32,221 $ 34,206 $32,435
Ratios to average net
assets
Expenses++ 1.70% 1.84% 1.86%+ 1.84% 1.84%+ 1.59%
Net investment income 3.52% 3.51% 3.85%+ 4.03% 4.18%+ 4.47%
Portfolio turnover rate 79% 127% 114% 65% 27% 53%
</TABLE>
(a) For the nine months ended May 31, 1997. The Fund changed its fiscal year
end from August 31 to May 31, effective May 31, 1997.
(b) For the eight months ended August 31, 1995. The Fund changed its fiscal
year end from December 31 to August 31, effective August 31, 1995.
* Excluding applicable sales charges.
+ Annualized.
++ The ratio of expenses to average net assets excludes fee credits but in-
cludes fee waivers.
See Combined Notes to Financial Statements.
13
<PAGE>
EVERGREEN
High Grade Municipal Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Period Ended
May 31, 1999 (d)
<S> <C>
CLASS C SHARES
Net asset value, beginning of period $11.14
======
Income from investment operations
Net investment income 0.03#
Net realized and unrealized gains or losses on securities (0.13)
------
Total from investment operations (0.10)
------
Distributions to shareholders from
Net investment income (0.03)
Net realized gains 0
------
Total distributions to shareholders (0.03)
------
Net asset value, end of period $11.01
======
Total return* (0.86%)
Ratios and supplemental data
Net assets, end of period (thousands) $ 1
Ratios to average net assets
Expenses++ 1.66%+
Net investment income 3.71%+
Portfolio turnover rate 79%
</TABLE>
<TABLE>
<CAPTION>
Year Ended
Year Ended May 31, August 31,
-------------------------- ----------------- Period Ended
1999 1998 1997 (a) 1996 1995 (b) December 31, 1994 (c)
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $ 11.36 $ 10.89 $ 10.72 $ 10.69 $ 9.79 $10.93
======= ======= ======= ======= ======= ======
Income from investment
operations
Net investment income 0.51 0.51 0.39 0.55 0.36 0.46
Net realized and
unrealized gains or
losses on securities (0.08) 0.47 0.17 0.03 0.90 (1.14)
------- ------- ------- ------- ------- ------
Total from investment
operations 0.43 0.98 0.56 0.58 1.26 (0.68)
------- ------- ------- ------- ------- ------
Distributions to
shareholders from
Net investment income (0.51) (0.51) (0.39) (0.55) (0.36) (0.46)
Net realized gains (0.27) 0 0 0 0 0
------- ------- ------- ------- ------- ------
Total distributions to
shareholders (0.78) (0.51) (0.39) (0.55) (0.36) (0.46)
------- ------- ------- ------- ------- ------
Net asset value, end of
period $ 11.01 $ 11.36 $ 10.89 $ 10.72 $ 10.69 $ 9.79
======= ======= ======= ======= ======= ======
Total return 3.88% 9.15% 5.32% 5.47% 13.02% (6.29%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $22,264 $24,976 $24,441 $25,112 $25,079 $4,318
Ratios to average net
assets
Expenses++ 0.70% 0.84% 0.86%+ 0.84% 0.84%+ 0.77%+
Net investment income 4.51% 4.51% 4.85%+ 5.03% 5.18%+ 5.46%+
Portfolio turnover rate 79% 127% 114% 65% 27% 53%
</TABLE>
(a) For the nine months ended May 31, 1997. The Fund changed its fiscal year
end from August 31 to May 31, effective May 31, 1997.
(b) For the eight months ended August 31, 1995. The Fund changed its fiscal
year end from December 31 to August 31, effective August 31, 1995.
(c) For the period from February 28, 1994 (commencement of class operations) to
December 31, 1994.
(d) For the period from April 30, 1999 (commencement of class operations) to
May 31, 1999.
+ Annualized.
++ The ratio of expenses to average net assets excludes fee credits but in-
cludes fee waivers.
# Net investment income is based on average shares outstanding during the pe-
riod.
* Excluding applicable sales charges.
See Combined Notes to Financial Statements.
14
<PAGE>
EVERGREEN
Municipal Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended May 31,
----------------------
1999 1998 (b)
<S> <C> <C>
CLASS A SHARES
Net asset value, beginning of period $ 7.78 $ 7.91
========== ==========
Income from investment operations
Net investment income 0.34# 0.13#
Net realized and unrealized gains or losses on
securities (0.07) (0.13)
---------- ----------
Total from investment operations 0.27 0
---------- ----------
Distributions to shareholders from
Net investment income (0.34) (0.13)
Net realized gains (0.23) 0
---------- ----------
Total distributions to shareholders (0.57) (0.13)
---------- ----------
Net asset value, end of period $ 7.48 $ 7.78
========== ==========
Total return* 3.64% 0.04%
Ratios and supplemental data
Net assets, end of period (thousands) $1,099,718 $1,243,327
Ratios to average net assets
Expenses 0.85% 0.93%+
Net investment income 4.49% 4.69%+
Portfolio turnover rate 90% 77%
</TABLE>
<TABLE>
<CAPTION>
Year Ended May 31, Year Ended December 31,
--------------------- ----------------------------------------------
1999 1998 (a) 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 7.78 $ 7.82 $ 7.71 $ 7.86 $ 7.10 $ 8.12
======== ========= ========== ========== ========== ==========
Income from investment
operations
Net investment income 0.29# 0.12# 0.38 0.41 0.41 0.37
Net realized and
unrealized gains or
losses on securities (0.07) (0.03) 0.23 (0.17) 0.74 (0.96)
-------- --------- ---------- ---------- ---------- ----------
Total from investment
operations 0.22 0.09 0.61 0.24 1.15 (0.59)
-------- --------- ---------- ---------- ---------- ----------
Distributions to
shareholders from
Net investment income (0.29) (0.13) (0.40) (0.39) (0.39) (0.43)
Net realized gains (0.23) 0 (0.10) 0 0 0
-------- --------- ---------- ---------- ---------- ----------
Total distributions to
shareholders (0.52) (0.13) (0.50) (0.39) (0.39) (0.43)
-------- --------- ---------- ---------- ---------- ----------
Net asset value, end of
period $ 7.48 $ 7.78 $ 7.82 $ 7.71 $ 7.86 $ 7.10
======== ========= ========== ========== ========== ==========
Total return* 2.86% 1.15% 8.15% 3.15% 16.61% (7.34%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $ 78,169 $ 124,664 $1,375,730 $1,557,886 $1,204,468 $1,197,727
Ratios to average net
assets
Expenses++ 1.60% 1.26%+ 0.96% 0.87% 0.95% 1.55%
Net investment income 3.74% 4.32%+ 4.97% 5.34% 5.41% 4.92%
Portfolio turnover rate 90% 77% 126% 69% 56% 84%
</TABLE>
(a) For the five months ended May 31, 1998. The Fund changed its fiscal year
end from December 31 to May 31, effective May 31, 1998.
(b) For the period from January 20, 1998 (commencement of class operations) to
May 31, 1998.
* Excluding applicable sales charges.
+ Annualized.
++ The ratio of expenses to average net assets excludes fee credits.
# Net investment income is based on average shares outstanding during the pe-
riod.
See Combined Notes to Financial Statements.
15
<PAGE>
EVERGREEN
Municipal Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended May
31,
----------------
1999 1998 (a)
<S> <C> <C>
CLASS C SHARES
Net asset value, beginning of period $ 7.78 $ 7.85
====== ======
Income from investment operations
Net investment income 0.29# 0.11#
Net realized and unrealized gains or losses on securities (0.07) (0.07)
------ ------
Total from investment operations 0.22 0.04
------ ------
Distributions to shareholders from
Net investment income (0.29) (0.11)
Net realized gains (0.23) 0
------ ------
Total distributions to shareholders (0.52) (0.11)
------ ------
Net asset value, end of period $ 7.48 $ 7.78
====== ======
Total return* 2.87% 0.46%
Ratios and supplemental data
Net assets, end of period (thousands) $6,899 $7,708
Ratios to average net assets
Expenses++ 1.60% 1.68%+
Net investment income 3.75% 3.94%+
Portfolio turnover rate 90% 77%
</TABLE>
<TABLE>
<CAPTION>
Year Ended
May 31, 1999 (b)
<S> <C>
CLASS Y SHARES
Net asset value, beginning of period $7.57
=====
Income from investment operations
Net investment income 0.04#
Net realized and unrealized gains or losses on securities (0.10)
-----
Total from investment operations (0.06)
-----
Distributions to shareholders from
Net investment income (0.03)
Net realized gains 0
-----
Total distributions to shareholders (0.03)
-----
Net asset value, end of period $7.48
=====
Total return (0.79%)
Ratios and supplemental data
Net assets, end of period (thousands) $ 1
Ratios to average net assets
Expenses++ .52%+
Net investment income 5.44%+
Portfolio turnover rate 90%
</TABLE>
(a) For the period from January 26, 1998 (commencement of class operations) to
May 31, 1998.
(b) For the period from April 30, 1999 (commencement of class operations) to
May 31, 1999.
* Excluding applicable sales charges.
+ Annualized.
++ The ratio of expenses to average net assets excludes fee credits.
# Net investment income is based on average shares outstanding during the pe-
riod.
See Combined Notes to Financial Statements.
16
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended May 31, Year Ended August 31,
------------------------ -------------------------
1999 1998 1997 (a) 1996 1995 (b)
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $10.19 $10.09 $10.08 $ 10.17 $ 9.97
====== ====== ====== =========== ==========
Income from investment
operations
Net investment income 0.40 0.41 0.30 0.43 0.30
Net realized and
unrealized gains or
losses on securities 0.01 0.10 0.01 (0.09) 0.20
------ ------ ------ ----------- ----------
Total from investment
operations 0.41 0.51 0.31 0.34 0.50
------ ------ ------ ----------- ----------
Distributions to
shareholders from
Net investment income (0.40) (0.41) (0.30) (0.43) (0.30)
Net realized gains (0.08) 0 0 0 0
------ ------ ------ ----------- ----------
Total distributions to
shareholders (0.48) (0.41) (0.30) (0.43) (0.30)
------ ------ ------ ----------- ----------
Net asset value, end of
period $10.12 $10.19 $10.09 $ 10.08 $ 10.17
====== ====== ====== =========== ==========
Total return* 4.09% 5.11% 3.08% 3.37% 5.09%
Ratios and supplemental
data
Net assets, end of
period (thousands) $7,975 $6,569 $6,072 $ 27,722 $ 6,820
Ratios to average net
assets
Expenses++ 0.75% 0.85% 0.96%+ 1.11% 1.14%+
Net investment income 3.93% 4.01% 3.94%+ 4.05% 4.32%+
Portfolio turnover rate 65% 78% 34% 29% 80%
<CAPTION>
Year Ended May 31, Year Ended August 31,
------------------------ -------------------------
1999 1998 1997 (a) 1996 1995 (b)
CLASS B SHARES
Net asset value,
beginning of period $10.19 $10.10 $10.08 $ 10.17 $ 9.97
====== ====== ====== =========== ==========
Income from investment
operations
Net investment income 0.31 0.32 0.23 0.34 0.24
Net realized and
unrealized gains or
losses on securities 0.01 0.09 0.02 (0.09) 0.20
------ ------ ------ ----------- ----------
Total from investment
operations 0.32 0.41 0.25 0.25 0.44
------ ------ ------ ----------- ----------
Distributions to
shareholders from
Net investment income (0.31) (0.32) (0.23) (0.34) (0.24)
Net realized gains (0.08) 0 0 0 0
------ ------ ------ ----------- ----------
Total distributions to
shareholders (0.39) (0.32) (0.23) (0.34) (0.24)
------ ------ ------ ----------- ----------
Net asset value, end of
period $10.12 $10.19 $10.10 $ 10.08 $ 10.17
====== ====== ====== =========== ==========
Total return* 3.16% 4.07% 2.49% 2.44% 4.50%
Ratios and supplemental
data
Net assets, end of
period (thousands) $6,232 $5,790 $6,742 $ 7,413 $ 6,050
Ratios to average net
assets
Expenses++ 1.65% 1.74% 1.86%+ 2.07% 2.26%+
Net investment income 3.04% 3.11% 3.04%+ 3.28% 3.50%+
Portfolio turnover rate 65% 78% 34% 29% 80%
</TABLE>
(a) For the nine months ended May 31, 1997. The Fund changed its fiscal year
end from August 31 to May 31, effective May 31, 1997.
(b) For the period from January 5, 1995 (commencement of class operations) to
August 31, 1995.
* Excluding applicable sales charges.
+ Annualized.
++ The ratio of expenses to average net assets excludes fee credits but in-
cludes fee waivers.
See Combined Notes to Financial Statements.
17
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended May 31, Year Ended August 31,
---------------------------- -------------------------
1999 1998 1997 (a) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $ 10.19 $ 10.10 $ 10.07 $ 10.17 $ 10.21 $ 10.58
======== ======== ======= ======= ======= =======
Income from investment
operations
Net investment income 0.41 0.42 0.30 0.43 0.46 0.47
Net realized and
unrealized gains or
losses on securities 0.01 0.09 0.03 (0.10) (0.04) (0.32)
-------- -------- ------- ------- ------- -------
Total from investment
operations 0.42 0.51 0.33 0.33 0.42 0.15
-------- -------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.41) (0.42) (0.30) (0.43) (0.46) (0.50)
Net realized gains (0.08) 0 0 0 0 (0.02)
-------- -------- ------- ------- ------- -------
Total distributions to
shareholders (0.49) (0.42) (0.30) (0.43) (0.46) (0.52)
-------- -------- ------- ------- ------- -------
Net asset value, end of
period $ 10.12 $ 10.19 $ 10.10 $ 10.07 $ 10.17 $ 10.21
======== ======== ======= ======= ======= =======
Total return 4.20% 5.11% 3.36% 3.30% 4.20% 1.40%
Ratios and supplemental
data
Net assets, end of
period (thousands) $160,325 $167,905 $32,293 $34,893 $40,581 $53,417
Ratios to average net
assets
Expenses++ 0.65% 0.70% 0.86%+ 0.90% 0.86% 0.83%
Net investment income 4.04% 4.18% 4.04%+ 4.27% 4.52% 4.54%
Portfolio turnover rate 65% 78% 34% 29% 80% 32%
</TABLE>
(a) For the nine months ended May 31, 1997. The Fund changed its fiscal year
end from August 31 to May 31, effective May 31, 1997.
+ Annualized.
++ The ratio of expenses to average net assets excludes fee credits but in-
cludes fee waivers.
See Combined Notes to Financial Statements.
18
<PAGE>
EVERGREEN
High Grade Municipal Bond Fund
Schedule of Investments
May 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - 97.1%
Alabama - 1.9%
Jefferson Cnty., AL, Swr. RB:
$1,000,000 Ser. A
5.375%, 2/1/36...................................... $ 1,001,380
1,215,000 Ser. D
5.75%, 2/1/27....................................... 1,278,338
------------
2,279,718
------------
Alaska - 0.9%
1,000,000 Valdez, AK, Marine Terminal RRB, Pipeline Inc.
Proj., Ser. B
5.50%, 10/1/28..................................... 998,470
------------
California - 5.3%
1,000,000 California, Dept. of Wtr. Resources, Central Valley
Proj. Wtr. Sys. RB, Ser. Q
5.375%, 12/1/27, (MBIA)............................ 1,014,610
2,200,000 California, Edl. Facs. Auth. RB, Santa Clara Univ.,
(Eff. Yield 5.48%)
0.00%, 9/1/14, (AMBAC)(a).......................... 1,020,250
1,000,000 California, Pub. Works Lease, CA State Univ. Proj.
RB, Ser. A
5.375%, 10/1/17, (AMBAC)........................... 1,023,150
1,000,000 Orange Cnty., CA, Pub. Fin. Auth. RB
5.75%, 12/1/10, (AMBAC)............................ 1,085,100
2,000,000 San Francisco, CA, City & Cnty. Int'l Arpt. RB,
Second Ser., Issue 10-A
5.70%, 5/1/26, (MBIA).............................. 2,070,600
------------
6,213,710
------------
Colorado - 5.0%
1,500,000 Arapahoe Cnty., CO, Pub. Hwy. Auth., Capital Impts.
Trust Fund RB,
(E-470 Proj.)
6.15%, 8/31/26, (MBIA)............................. 1,639,905
1,000,000 Colorado, Pub. Hwy. Auth. RB,
(E-470-Proj.), Ser. A
5.75%, 9/1/14...................................... 1,091,630
3,000,000 Denver, CO City & Cnty. Arpt. RRB, Ser. E
5.50%, 11/15/25, (MBIA)............................ 3,074,280
------------
5,805,815
------------
District of Columbia - 1.8%
2,000,000 Dist. of Columbia, RB, Carnegie Endowment
5.75%, 11/15/26.................................... 2,051,180
------------
Florida - 2.7%
2,000,000 Florida, Hsg. Fin. Corp. RB, Homeowner Mtge., Ser. 2
5.35%, 1/1/21, (MBIA) (b).......................... 2,009,220
50,000 Jacksonville, FL, Elec. Auth. RB,
Ser. 3-A
5.20%, 10/1/02..................................... 52,127
1,000,000 Orange Cnty., FL, Hlth. Facs. Auth. RB, Orlando
Reg'l. Healthcare Sys., Ser. 1996C
6.25%, 10/1/16, (MBIA)............................. 1,141,230
------------
3,202,577
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Georgia - 1.7%
$2,000,000 Burke Cnty. GA, Dev. Auth. PCRB, GA Pwr. Co. Plant
5.45%, 5/1/34...................................... $ 1,939,220
50,000 De Kalb Cnty., GA, Hlth. Facs., GO
5.30%, 1/1/03...................................... 52,289
------------
1,991,509
------------
Hawaii - 0.0%
50,000 Hawaii State, GO, Ser. CE
5.20%, 6/1/04...................................... 52,100
------------
Idaho - 0.6%
675,000 Idaho, Hsg. Agcy., SFHRB, Ser. C-1
6.30%, 7/1/11...................................... 714,022
------------
Illinois - 9.6%
85,000 Bloomingdale, IL, GO
5.45%, 1/1/09...................................... 88,583
1,000,000 Chicago, Illinois, Midway Arpt. RB, Ser. A
5.125%, 1/1/35..................................... 940,170
3,000,000 Illinois, Dev. Fin. Auth. PCRB, Cmnwlth. Edison Co.
Proj., Ser. 1994D
6.75%, 3/1/15, (AMBAC)............................. 3,352,740
1,750,000 Illinois, Hlth. Facs. Auth., Hlth. Facs. RRB, Ser.
1992AA
6.50%, 6/1/12, (MBIA).............................. 2,009,700
2,500,000 Illinois, Hlth. Facs. Auth. RB, Loyola Univ. Hlth.
Sys., Ser. A
6.00%, 7/1/13, (MBIA).............................. 2,761,250
1,000,000 Illinois, Metropolitan Pier & Exposition Auth.
Dedicated State Tax RB, McCormick Plantation
Expansion, Ser. A
5.25%, 6/15/27..................................... 979,840
Illinois, Sales Tax RB:
60,000 4.90%, 6/15/07...................................... 61,685
1,000,000 5.50%, 6/15/20...................................... 1,025,390
------------
11,219,358
------------
Indiana - 1.5%
1,500,000 Indiana, Middle Sch. Bldg. Corp., Lawrence Township
of Marion Cnty., First Mtge. RB
6.875%, 7/5/11, (MBIA)............................. 1,762,665
------------
Massachusetts - 0.9%
50,000 Massachusetts, Bay Trans. Auth., General Trans. Sys.
RB, Ser. A
5.30%, 3/1/05...................................... 52,706
1,000,000 Massachusetts, IFA RB, Parking Facs., Avon
Associates LLC, Ser. A
5.375%, 4/1/20, (MBIA)............................. 1,007,140
------------
1,059,846
------------
Michigan - 1.6%
2,000,000 Wayne Charter Cnty., MI, Arpt. RB, Detroit
Metropolitan Wayne Cnty., Ser. A
5.00%, 12/1/22, (MBIA)............................. 1,896,720
------------
</TABLE>
19
<PAGE>
EVERGREEN
High Grade Municipal Bond Fund
Schedule of Investments (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Minnesota - 0.4%
$ 450,000 Minnesota, HFA, SFHRB, Ser. H
6.70%, 1/1/18...................................... $ 479,583
------------
Mississippi - 0.9%
1,000,000 Mississippi, Home Corp., SFHRB, Class 7, Ser. B
5.25%, 6/1/30, (FNMA & GNMA)....................... 1,050,680
------------
Nebraska - 2.0%
2,355,000 Nebraska, Investment Fin. Auth., SFHRB, Ser. F
5.60%, 9/1/20, (GNMA).............................. 2,367,081
------------
Nevada - 2.5%
1,000,000 Clark Cnty., NV, Sch. Dist., Bldg. & Renovations,
GO, Ser. B
5.25%, 6/15/17, (FGIC)............................. 1,002,110
2,000,000 Nevada, Hsg. Division, SFHRB, Ser. A-2
5.20%, 10/1/18..................................... 1,975,840
------------
2,977,950
------------
New Jersey - 0.1%
65,000 Medford Township, NJ,
Board of Ed., GO
5.95%, 2/1/03, (FGIC).............................. 69,416
------------
New Mexico - 3.3%
500,000 Albuquerque, NM, Arpt. RB,
Ser. 1995 A
6.35%, 7/1/07, (AMBAC)............................. 537,535
2,100,000 Farmington, NM, PCRB, Pub. Service Co. of San Juan,
Ser. C
5.70%, 12/1/16, (AMBAC)............................ 2,207,247
1,190,000 New Mexico, Mtge. Fin. Auth. RB
5.15%, 9/1/19...................................... 1,173,709
------------
3,918,491
------------
New York - 13.5%
2,250,000 Long Island, NY, Pwr. Auth., Elec. Sys. RB, Ser. A
5.75%, 12/1/24..................................... 2,335,522
1,000,000 New York, Mtge. Agcy. RB, Homeowner Mtge., Ser. 70
5.375%, 10/1/17.................................... 1,010,090
New York & New Jersey, Port Auth.:
500,000 97th Ser.
6.50%, 7/15/19, (FGIC).............................. 549,185
1,000,000 104th Ser.
5.20%, 7/15/21, (AMBAC)............................. 1,000,620
New York City, NY, Wtr. & Swr. Sys. RB:
700,000 5.75%, 6/15/26, (MBIA).............................. 743,456
Muni. Wtr. Fin. Auth. RB, Ser. B:
1,000,000 5.50%, 6/15/27, (MBIA).............................. 1,032,330
2,000,000 5.75%, 6/15/29, (MBIA).............................. 2,112,500
2,000,000 New York, Energy Research & Dev. Auth., Lilco Proj.,
PCRB, Ser. B
5.15%, 3/1/16...................................... 1,958,100
1,475,000 New York, HFA RB, Ser. 1994 B
6.35%, 8/15/23, (AMBAC)............................ 1,581,731
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
New York - continued
$2,000,000 New York, Local Govt. Assist., RRB, Ser. B
5.00%, 4/1/21...................................... $ 1,935,320
1,600,000 New York, Mtge. Agcy. RB, Ser. 73-A
5.30%, 10/1/28..................................... 1,595,152
------------
15,854,006
------------
North Dakota - 2.7%
3,000,000 Mercer Cnty., ND, PCRB, Basin Elec. Pwr.,
Cooperative-Antelope Valley RB, 2nd Ser.
6.05%, 1/1/19, (AMBAC)............................. 3,183,180
------------
Ohio - 2.3%
1,000,000 Cleveland, OH, Arpt. Sys. RB, Ser. A
5.125%, 1/1/17..................................... 975,620
1,000,000 Ohio, Board of Ed., Kings Local Sch. Dist., City of
Warren, GO, Ser. 1995
7.50%, 12/1/16, (FGIC)............................. 1,288,020
455,000 Ohio, Hsg. Fin. Agcy., Residential Mtge. RB, 1995
Ser. A-2
6.625%, 3/1/26, (GNMA)............................. 486,349
------------
2,749,989
------------
Pennsylvania - 1.5%
100,000 Delaware Cnty., PA, Villanova Univ. RB, Ser. A
4.625%, 12/1/07, (MBIA)............................ 101,299
110,000 Lehigh Cnty., PA, GO
5.125%, 11/15/08, (FGIC)........................... 113,027
100,000 Pennsylvania, IDA RB, EDA
5.00%, 7/1/04, (AMBAC)............................. 103,537
50,000 Pennsylvania State Turnpike Commission, Turnpike RB,
Ser. F
7.25%, 12/1/17, (AMBAC)............................ 51,967
100,000 Pittsburgh, PA, Sch. Dist., GO, Ser. A
4.85%, 9/1/03...................................... 103,237
50,000 Scranton, Lackawanna, PA, Hlth. & Welfare Auth. RRB
5.00%, 1/1/06, (MBIA).............................. 51,583
100,000 Tunkhannock, PA, Area Sch. Dist., GO
4.55%, 7/15/08, (AMBAC)............................ 100,108
90,000 Univ. of Pittsburgh, PA, The Cmnwlth. Sys. of Higher
Ed., Univ. Capital Proj. RB
5.05%, 6/1/10, (FGIC).............................. 92,130
1,000,000 York Cnty., PA. Solid Wst. & Refuse
Auth., Solid Wst. Sys. RB
5.50%, 12/1/12, (FGIC)............................. 1,062,840
------------
1,779,728
------------
Rhode Island - 0.9%
1,000,000 Rhode Island, Clean Wtr. Fin. Agcy. RB, Wst. Wtr.
Treatment Sys.
5.80%, 9/1/22, (MBIA).............................. 1,039,080
------------
South Carolina - 2.1%
2,300,000 Greenville, SC, Hosp. Sys., Hosp. Facs. RB, Ser. A
5.75%, 5/1/14...................................... 2,412,746
------------
</TABLE>
20
<PAGE>
EVERGREEN
High Grade Municipal Bond Fund
Schedule of Investments (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Tennessee - 1.6%
$1,700,000 Knox Cnty., TN, Hlth., Edl. & Hsg. Facility Board,
Hosp. Facility RB, (Fort Sanders Alliance), Ser.
1993
6.25%, 1/1/13, (MBIA).............................. $ 1,918,467
------------
Texas - 8.1%
1,500,000 Austin, TX, Arpt. Sys. RB, Prior Lien, Ser. 1995A
6.125%, 11/15/25, (MBIA)........................... 1,613,130
1,000,000 Brazos River Auth. TX, RRB, Houston Inds. Inc. Proj.
C
5.125%, 5/1/19, (AMBAC)............................ 970,210
1,000,000 Dallas, TX, Spl. Tax RB, Ser. A
5.25%, 8/15/16, (AMBAC)............................ 1,008,360
1,500,000 Hays, TX, Cons. Independent Sch. Dist., GO
5.875%, 8/15/22.................................... 1,593,555
1,000,000 Houston, TX, Wtr. Conveyance Sys. Contract, COP,
Ser. 1993 H
7.50%, 12/15/14, (AMBAC)........................... 1,266,060
2,000,000 San Antonio, TX, Arpt. Sys. RB
5.70%, 7/1/11...................................... 2,100,880
1,000,000 Texas, Dept. of Hsg. & Community Affairs Residential
Mtge. RB, Ser. A
5.25%, 7/1/18, (GNMA & FNMA)....................... 993,990
------------
9,546,185
------------
Utah - 5.3%
2,500,000 Intermountain Pwr. Agcy. UT, Pwr. Supply, RRB, Ser.
A
5.00%, 7/1/19, (MBIA).............................. 2,422,850
1,000,000 Salt Lake City, UT, Salt Lake Cnty. Arpt. RB, Ser.
1993A
6.00%, 12/1/12, (FGIC)............................. 1,075,680
2,700,000 Utah, Hsg. Fin. Agcy., SFHRB, Ser. C
5.35%, 7/1/20...................................... 2,676,267
------------
6,174,797
------------
Virginia - 1.3%
1,545,000 Virginia, Hsg. Dev. Auth., Cmnwlth. Mtge. RB, Ser. D
5.40%, 7/1/21...................................... 1,542,945
------------
Washington - 3.7%
1,000,000 Chelan Cnty., WA, Pub. Utility Dist., Cons. RB, Ser.
A
5.25%, 7/1/33, (FSA)............................... 961,470
2,500,000 Port Seattle, WA, Passenger Fac. Charge RB, Ser. A
5.00%, 12/1/23, (MBIA)............................. 2,394,425
1,000,000 Seattle, WA, Port RB, Ser. A
5.50%, 10/1/22, (FGIC)............................. 1,019,680
------------
4,375,575
------------
West Virginia - 0.5%
$ 500,000 West Virginia, HDA Funding RB, Ser. A
6.05%, 5/1/27...................................... 529,795
------------
Wisconsin - 8.8%
4,500,000 Superior, WI, Limited Obl. RRB, Midwest Energy
Resource Co. Proj., Ser. E-1991
6.90%, 8/1/21, (FGIC).............................. 5,479,110
Wisconsin, Hsg. & EDA, Home Ownership RB:
1,250,000 Ser. B
5.60%, 3/1/28....................................... 1,265,500
2,500,000 Ser. H
5.75%, 9/1/28....................................... 2,550,225
Wisconsin, Trans. RB:
80,000 Prerefunded, Ser. B
5.50%, 7/1/22....................................... 83,691
920,000 Unrefunded Balance, Ser. B
5.50%, 7/1/22....................................... 929,835
------------
10,308,361
------------
Puerto Rico - 2.1%
1,000,000 Cmnwlth of Puerto Rico, Elec. Pwr. Auth. Pwr. RB,
Series AA
5.25%, 7/1/17, (MBIA).............................. 1,014,820
1,000,000 Cmnwlth of Puerto Rico, Pub. Fin. Corp., Cmnwlth.
Approp. RB, Ser. A
5.375%, 6/1/16, (AMBAC)............................ 1,052,010
335,000 Cmnwlth. of Puerto Rico, Hsg., Bank & Fin. Agcy.,
SFHRB
6.10%, 10/1/15, (GNMA, FNMA & FHLMC)............... 350,695
------------
2,417,525
------------
Total Municipal Obligations (cost $111,224,651)..... 113,943,270
------------
<CAPTION>
Shares Value
<C> <S> <C>
MUTUAL FUND SHARES - 1.5% (cost $1,769,345)
1,769,345 Federated Municipal Obligations Fund................ 1,769,345
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $112,993,996).......................... 98.6% 115,712,615
Other Assets and
Liabilities - net............................ 1.4 1,657,784
----- ------------
Net Assets.................................... 100.0% $117,370,399
===== ============
</TABLE>
21
<PAGE>
EVERGREEN
High Grade Municipal Bond Fund
Schedule of Investments (continued)
May 31, 1999
The Fund invests primarily in debt securities issued by municipalities.
The ability of issuers of debt securities to meet their obligations may
be affected by economic developments in a specific industry or municipal-
ity. In order to reduce risk associated with such economic developments,
at May 31, 1999, 67% of the securities, as a percentage of net assets,
are backed by bond insurance of various financial institutions and finan-
cial guaranty assurance agencies. At May 31, 1999, the Fund had securi-
ties backed by bond insurance of the following financial institutions
representing more than 5% of net assets:
MBIA 31.9%
AMBAC 17.7%
FGIC 12.1%
(a) Effective yield (calculated at the date of purchase) is the yield at
which the bond accretes on an annual basis until maturity date.
(b) At May 31, 1999, $2,009,220 principal amount of this security was
pledged to cover margin requirements for open futures contracts.
Summary of Abbreviations:
AMBAC Insured by American Municipal Bond Assurance Corporation
COP Certificates of Participation
EDA Economic Development Authority
FGIC Insured by Federal Guaranty Insurance Corporation
FHLMC Insured by Federal Home Loan Mortgage Corporation
FNMA Insured by Federal National Mortgage Association
FSA Insured by Financial Security Assurance Corporation
GNMA Insured by Government National Mortgage Association
GO General Obligation
HFA Housing Finance Authority
IDA Industrial Development Authority
IFA Industrial Financing Authority
LILCo. Long Island Lighting Company
MBIA Insured by Municipal Bond Investors Assurance Corporation
PCRB Pollution Control Revenue Bond
RB Revenue Bond
RRB Refunding Revenue Bond
SFHRB Single Family Housing Revenue Bond
FUTURES CONTRACTS - SHORT POSITIONS
<TABLE>
<CAPTION>
Number of Initial Contract Value at Unrealized
Expiration Contracts Amount May 31, 1999 Gain
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
June-99 2 Municipal Bond Index $ 249,375 $ 243,938 $ 5,438
June-99 15 Municipal Bond Index 1,866,198 1,829,531 36,667
June-99 31 Municipal Bond Index 3,813,000 3,781,031 31,969
---------- ---------- -------
$5,928,573 $5,854,500 $74,073
========== ========== =======
</TABLE>
See Combined Notes to Financial Statements.
22
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments
May 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - 98.9%
Alabama - 2.1%
$ 1,955,000 Alabama, HFA, SFHRB, Ser. D-1
6.00%, 10/1/16, (GNMA)........................... $ 2,047,511
2,000,000 Alabama, Wtr. PCRB, Revolving Fund Loan, Ser. B
5.50%, 8/15/16, (AMBAC).......................... 2,054,820
655,000 Birmingham, AL, Arpt. Auth. RB
5.625%, 7/1/26, (MBIA)........................... 682,124
Jefferson Cnty., AL:
3,895,000 Board of Ed., Sch. Warrants, Ser. A
5.80%, 2/15/20, (FSA)............................ 4,165,858
5,000,000 Swr. RB, Ser. A
5.75%, 2/1/38, (FGIC)............................ 5,252,400
9,900,000 Swr. RB, Ser. A54
7.77%, 6/2/99 (d)................................ 10,942,074
--------------
25,144,787
--------------
Alaska - 3.9%
15,000,000 Alaska, Energy Auth., Util. RB, Linked
Bulls/Bears FRN
6.60%, 7/1/15, (FSA) (c)......................... 17,429,700
15,580,000 Alaska, Hsg. Fin. Corp., RB, Ser. A-2
5.75%, 6/1/24.................................... 15,949,713
Alaska, IDA & Export Auth., RB,
Refunding, Revolving Fund:
5,000,000 Ser. A,
5.20%, 4/1/18, (MBIA)............................ 4,905,500
6,000,000 Snettisham Hydroelec, Ser. 1,
5.25%, 1/1/22, (AMBAC)........................... 5,890,800
2,000,000 Alaska, Int'l. Arpt. RB, Ser. A
5.125%, 10/1/15, (AMBAC)......................... 1,983,480
--------------
46,159,193
--------------
Arizona - 0.9%
850,000 Chandler, AZ, Wtr. & Swr. RB
6.75%, 7/1/06, (FGIC)............................ 906,942
6,000,000 Maricopa Cnty., AZ, Elementary Sch. Dist., No.
069, GO, Ser. C
8.125%, 1/1/10, (MBIA)........................... 7,708,740
2,030,000 Pima Cnty., AZ, Unified Sch. Dist. No. 1, GO
7.50%, 7/1/03, (FGIC)............................ 2,296,437
--------------
10,912,119
--------------
California - 6.1%
1,500,000 Abag, CA, Rhoda Haas Goldman Plaza Fin. Auth. for
Non Profit Corps., COP
5.125%, 5/15/15.................................. 1,478,280
1,500,000 Alameda Corridor Trans. Auth., RB, Sr. Lien, Ser.
A
5.125%, 10/1/18.................................. 1,495,335
1,000,000 Anaheim, CA, Pub. Fin. Auth., Lease RB Pub. Impt.
Proj., Ser. C
6.00%, 9/1/16, (FSA)............................. 1,114,560
2,500,000 California, GO Ser. BH, Veteran's Bonds
5.50%, 12/1/18................................... 2,556,075
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
California - continued
California, HFA RB:
$12,000,000 Ser. D,
5.85%, 8/1/17.................................... $ 12,541,200
1,975,000 Ser. H,
6.25%, 8/1/27, (FHA)............................. 2,071,617
California, Pub. Works Board, Lease RB:
CA Univ. Proj., Ser. A:
350,000 5.25%, 10/1/16................................... 353,112
8,775,000 5.50%, 10/1/14................................... 9,198,218
9,400,000 5.50%, 10/1/15................................... 9,796,116
5,195,000 Community College Proj., Ser. B
5.625%, 3/1/16, (AMBAC).......................... 5,478,751
3,700,000 State Prison, Ser. E,
5.50%, 6/1/15.................................... 3,910,419
4,325,000 Foothill/Eastern Trans. Corridor Sr. Lien, Ser. A
0.00%, 1/1/30, (Eff. Yield 7.30%) (b)............ 810,375
200,000 Los Angeles Cnty., CA, Pub. Works Fin. Auth.,
Lease RB Multiple Capital Facs. Proj., Ser. B
5.125%, 12/1/17, (AMBAC)......................... 199,880
2,750,000 Palm Desert, CA, Fin. Auth., Tax Allocation RB,
Proj. Area No. 1
5.625%, 4/1/23, (MBIA)........................... 2,871,110
550,000 Poway, CA, Community Facs. Dist., Spl. Tax,
Parkway Business Ctr.
6.75%, 8/15/15................................... 593,950
San Francisco, CA, Bldg. Auth., Lease RB, San
Francisco
Civic Ctr., Complex A:
500,000 5.25%, 12/1/16, (AMBAC).......................... 508,220
500,000 6.00%, 12/1/09, (AMBAC).......................... 564,245
3,765,000 San Francisco, CA, Int'l. & Cnty. Arpt. RB, Ser.
2, Issue 10-A
5.70%, 5/1/26, (MBIA)............................ 3,941,428
3,000,000 San Jose, CA, Redev. Agcy., Tax Allocation,
Merged Area Redev. Proj., Ser. B
5.75%, 8/1/11.................................... 3,189,330
400,000 San Juan, CA, MSR Pub. Pwr. Agcy. RB, Ser. E
6.75%, 7/1/11.................................... 429,408
10,000,000 Southern CA, Pub. Pwr. Auth., Transmission Proj.
RB
0.00%, 7/1/15, (Eff. Yield
5.93%) (FGIC) (b)................................ 4,492,000
Victor Valley, CA, Joint Unified High
Sch. Dist., Capital Appreciation GO:
3,780,000 0.00%, 9/1/11, (Eff. Yield
6.25%) (MBIA) (b)................................ 2,107,161
4,450,000 0.00%, 9/1/13, (Eff. Yield
6.35%) (MBIA) (b)................................ 2,205,242
625,000 Vista, CA, Community Dev.
Commission, Tax Allocation, Vista Redev. Proj.
6.00%, 9/1/10, (MBIA)............................ 702,269
--------------
72,608,301
--------------
</TABLE>
23
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments(continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Colorado - 6.1%
$ 4,000,000 Araphoe Cnty., CO, SFHRB
0.00%, 9/1/10, (Eff. Yield 11.875%) (b).......... $ 2,293,080
Colorado East 470 Pub. Hwy. Auth. RB, Capital
Appreciation, Sr. Ser. B:
9,795,000 0.00%, 9/1/13, (Eff. Yield 5.30%) (b) (MBIA)..... 4,833,735
8,000,000 0.00%, 9/1/14, (Eff. Yield
5.35%) (b) (MBIA)................................ 3,734,720
5,000,000 0.00%, 9/1/17, (Eff. Yield
5.449%) (b) (MBIA)............................... 1,935,600
8,300,000 0.00%, 9/1/20, (Eff. Yield
5.50%) (b) (MBIA)................................ 2,682,145
Colorado HFA, SFHRB:
2,275,000 Ser. A-2,
6.60%, 5/1/28.................................... 2,498,155
3,000,000 Ser. B-2,
6.40%, 11/1/24................................... 3,216,270
Denver, CO, City & Cnty. Arpt. RB:
140,000 Prerefunded Balance, Ser. A,
8.00%, 11/15/25.................................. 153,318
865,000 Prerefunded Balance, Ser. B,
7.25%, 11/15/12.................................. 969,821
8,200,000 Ser. D,
7.75%, 11/15/13.................................. 10,153,404
Unrefunded Balance, Ser. A,
5,480,000 7.50%, 11/15/23.................................. 6,198,812
1,300,000 8.00%, 11/15/25.................................. 1,389,732
8,060,000 8.75%, 11/15/23.................................. 8,930,802
3,385,000 Unrefunded Balance, Ser. B,
7.25%, 11/15/21.................................. 3,705,424
9,700,000 Unrefunded Balance, Ser. D,
7.75%, 11/15/21.................................. 10,559,323
El Paso Cnty., CO, GO, Sch. Dist. No. 11,
Colorado Springs:
2,310,000 6.50%, 12/1/12................................... 2,706,835
2,000,000 7.10%, 12/1/13................................... 2,474,080
1,000,000 7.10%, 12/1/16................................... 1,247,000
2,250,000 Larimer Cnty., CO, GO, Sch. Dist. No. 1
7.00%, 12/15/16, (MBIA).......................... 2,777,332
--------------
72,459,588
--------------
Connecticut - 0.4%
Connecticut, HFA RB,
2,000,000 Ser. B-2
5.375%, 11/15/18................................. 2,005,680
3,000,000 Ser. D-2
5.45%, 11/15/24.................................. 3,009,720
--------------
5,015,400
--------------
Delaware - 0.2%
1,600,000 Delaware, Hlth. Facs. Auth. RB, Med. Ctr. of DE
7.00%, 10/1/15, (MBIA)........................... 1,801,248
--------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
District of Columbia - 1.7%
$ 1,500,000 District of Columbia, American Assn. for the
Advancement of Science RB
5.25%, 1/1/16, (AMBAC)........................... $ 1,513,275
5,910,000 District of Columbia, Arpt. Auth. RB, Ser. B
5.50%, 10/1/23................................... 5,960,471
3,765,000 District of Columbia, Hosp. RB, Medatlantic
Healthcare Group, Ser. A
6.00%, 8/15/11, (MBIA)........................... 4,167,215
8,000,000 District of Columbia, Hsg. RB, Carnegie Endowment
for Int'l. Peace
5.75%, 11/15/26.................................. 8,264,640
--------------
19,905,601
--------------
Florida - 3.1%
10,000,000 Florida, Board of Ed. Capital Outlay GO, Ser. B
5.75%, 6/1/17.................................... 10,781,600
3,580,000 Florida, GO, Jacksonville Transit Auth.
9.20%, 1/1/15 (e)................................ 5,057,394
Gainesville, FL, Util. Sys. RB,
Ser. B:
435,000 7.50%, 10/1/08................................... 532,736
695,000 7.50%, 10/1/09................................... 859,805
370,000 Hillsborough Cnty., FL, HFA, SFHRB, Ser. A
7.30%, 4/1/22, (GNMA)............................ 383,505
3,400,000 Lee Cnty., FL, IDA Hlth. Care Facs. RB, Shell
Point Village Proj., Ser. A
5.50%, 11/15/29.................................. 3,269,848
300,000 Lee Cnty., FL, Solid Wst. Sys. RB, Ser. B
7.00%, 10/1/11................................... 322,962
8,000,000 Miami-Dade Cnty., FL, Spl. Obl., Ser. A
0.00%, 10/1/16, (Eff. Yield 5.50%) (b)........... 3,207,520
495,000 Orange Cnty., FL, HFA SFHRB,
Ser. B
6.85%, 10/1/27, (GNMA/FNMA)...................... 524,710
2,000,000 Orange Cnty., FL, Hlth. Facs. Auth. RB, Orlando
Reg'l. Healthcare, Ser. A
6.25%, 10/1/18, (MBIA)........................... 2,272,420
2,960,000 Orlando-Orange Cnty., FL, Expressway Auth. RB
8.25%, 7/1/15, (FGIC)............................ 4,050,198
3,600,000 Palm Beach Cnty. FL, Hlth. Facs. Auth., Acts
Retirement Life Communities
5.125%, 11/15/29................................. 3,361,284
1,000,000 Sarasota Cnty., FL, Util. Sys. RB
6.50%, 10/1/22................................... 1,129,860
500,000 Tampa, FL, Allegheny Hlth. Sys. RB, St. Joseph's
Hosp.
6.50%, 12/1/23................................... 566,500
--------------
36,320,342
--------------
</TABLE>
24
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments(continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Georgia - 4.8%
Burke Cnty., GA, Dev. Auth. PCRB, GA Pwr. Plant
Vogtle Proj.:
$ 3,400,000 Ser. 1,
5.40%, 5/1/34.................................... $ 3,343,050
9,100,000 Ser. 3,
5.45%, 5/1/34.................................... 8,879,780
3,000,000 Forsyth Cnty., GA, Sch. Dist., GO
6.75%, 7/1/16.................................... 3,572,490
6,500,000 Fulton Cnty., GA, Dev. Auth. Spl. Facs. RB
5.45%, 5/1/23.................................... 6,330,285
Georgia, GO:
5,000,000 Ser. B,
5.75%, 7/1/05.................................... 5,427,800
10,700,000 Ser. C,
5.25%, 4/1/11.................................... 11,228,580
9,800,000 Georgia, Muni. Elec. Auth., RB, Ser. B
6.375%, 1/1/16................................... 11,198,264
2,000,000 Georgia, Private Colleges & Univ. Auth. RB,
Mercer Univ. Proj., Ser. A
5.375%, 10/1/29.................................. 1,966,040
4,255,000 Metropolitan Atlanta Rapid Transit Auth., GA,
Sales Tax RB, Ser. P
6.25%, 7/1/11, (AMBAC)........................... 4,865,848
--------------
56,812,137
--------------
Hawaii - 0.5%
2,000,000 Hawaii, Dept. of Budget & Fin., Spl. Purpose RB,
Hawaiian Elec. Co., Inc., Ser. A
5.65%, 10/1/27, (MBIA)........................... 2,116,980
4,060,000 Hawaii, Hsg. Fin. & Dev. Corp. RB, Ser. C
5.35%, 7/1/20, (FNMA)............................ 4,024,353
--------------
6,141,333
--------------
Idaho - 0.1%
590,000 Idaho, HFA, SFHRB, Ser. D-1
8.00%, 1/1/20, (FHA)............................. 641,548
--------------
Illinois - 5.8%
5,000,000 Chicago, IL, Midway Arpt. RB, Ser. A
5.125%, 1/1/35, (MBIA)........................... 4,702,100
Chicago, IL, Ohare Int'l. Arpt. RB:
5,000,000 Refunding, Sr. Lien, Ser. A,
5.00%, 1/1/16, (MBIA)............................ 4,878,750
12,900,000 Refunding, United Air Lines, Inc. Proj., Ser. A,
5.35%, 9/1/16.................................... 12,628,842
1,890,000 Chicago, IL, SFHRB Ser. B
6.95%, 9/1/28,
(GNMA/FNMA/FHLMC)................................ 2,087,807
4,000,000 Illinois, Dev. Fin. Auth.,
PCRB Edison Co. Proj., Ser. D
6.75%, 3/1/15, (AMBAC)........................... 4,521,440
3,000,000 Illinois, Hlth. Facs. Auth. RB, Centegra Hlth.
Sys.
5.25%, 9/1/24.................................... 2,827,830
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Illinois - continued
$10,500,000 Illinois, Sales Tax RB, Ser. P
6.50%, 6/15/22................................... $ 12,199,845
2,965,000 Kankakee, IL, Swr. RB
6.875%, 5/1/11, (FGIC)........................... 3,321,452
Metropolitan Fair & Exposition Auth., IL:
McCormick Plan Expansion,
14,000,000 0.00%, 6/15/16, (Eff. Yield 6.75%) (b)........... 5,724,320
3,000,000 Ser. A,
5.00%, 6/1/15, (BIG)............................. 2,954,580
6,000,000 Northern IL, Univ. RB, Auxiliary Facs. Sys.
5.75%, 4/1/22, (FGIC)............................ 6,327,840
4,950,000 Quincy, IL, RB Blessing Hosp. Proj.
6.00%, 11/15/18.................................. 5,123,399
1,760,000 Southwestern IL, Dev. Auth.
RB, Anderson Hosp. Proj.
5.625%, 8/15/29.................................. 1,716,176
--------------
69,014,381
--------------
Indiana - 1.0%
3,000,000 Goshen, IN, RB, Greencroft Obl. Group
5.75%, 8/15/28................................... 2,873,070
6,800,000 Indiana, HFA, SFHRB Ser. A3
5.375%, 1/1/23, (FNMA/GNMA)...................... 6,759,200
1,640,000 St. Joseph Cnty., IN, Edl. Facs. RB, Univ. of
Notre Dame du Lac Proj.
6.50%, 3/1/26.................................... 1,953,994
--------------
11,586,264
--------------
Kansas - 0.2%
2,000,000 Burlington, KS, PCRB, KS Gas & Elec. Co. Proj.
7.00%, 6/1/31, (MBIA)............................ 2,149,280
--------------
Kentucky - 0.3%
3,000,000 Carroll Cnty., KY, PCRB, KY Util. Co., Ser. A
7.45%, 9/15/16................................... 3,356,070
--------------
Louisiana - 1.5%
Louisiana, Pub. Facs. Auth., Hosp. RB:
Franciscan Missionaries:
5,000,000 Ser. A,
5.50%, 7/1/10.................................... 5,324,350
4,345,000 Ser. C,
5.375%, 7/1/13................................... 4,485,865
3,000,000 Touro Infirmary Proj., Ser. A,
5.50%, 8/15/19................................... 2,928,270
New Orleans, LA, GO:
6,960,000 0.00%, 9/1/14, (Eff. Yield
6.05%) (AMBAC) (b)............................... 3,234,730
2,800,000 0.00%, 9/1/15, (Eff. Yield
7.10%) (AMBAC) (b)............................... 1,225,840
--------------
17,199,055
--------------
</TABLE>
25
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments(continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Maine - 0.3%
$ 4,000,000 Maine, HFA, RB, Mtge. Purchase Ser. C2
6.05%, 11/15/28.................................. $ 4,120,360
--------------
Massachusetts - 6.7%
Massachusetts, Dev. Fin. Agcy. RB:
3,800,000 Curry College, Ser. A,
5.50%, 3/1/29, (ACA)............................. 3,761,202
2,000,000 Eastern Nazarine College,
5.625%, 4/1/29................................... 1,939,660
2,200,000 New England Ctr. for Children,
5.875%, 11/1/18.................................. 2,196,084
1,000,000 Regis College,
5.25%, 10/1/18................................... 975,040
2,250,000 YMCA Greater Boston Issue,
5.35%, 11/1/19................................... 2,198,003
Massachusetts, HFA RB:
1,000,000 Ser. 59,
5.40%, 6/1/20, (AMBAC)........................... 998,320
4,250,000 Ser. D,
5.40%, 6/1/20, (MBIA)............................ 4,274,480
Massachusetts, Hlth. & Edl. Facs. Auth. RB:
5,450,000 Boston Med. Ctr., Ser. A,
5.25%, 7/1/14, (MBIA)............................ 5,532,131
1,900,000 Cape Cod Healthcare, Ser. B,
5.45%, 11/15/23.................................. 1,844,995
4,000,000 Caregroup Issue, Ser. A,
5.00%, 7/1/18.................................... 3,870,880
5,000,000 Jordan Hosp., Ser. D,
5.25%, 10/1/23................................... 4,724,250
2,900,000 Milford-Whitinsville Reg'l. Hosp., Ser. C,
5.25%, 7/15/18................................... 2,749,055
700,000 Milton Hosp., Ser. B,
7.25%, 7/1/05, (MBIA)............................ 738,913
500,000 North Adams Reg'l. Hosp., Ser. C,
6.75%, 7/1/09.................................... 549,515
Massachusetts, IFA, RB:
Parking Facs., Avon Assoc.,
1,650,000 Ser. A,
5.375%, 4/1/20, (MBIA)........................... 1,654,372
4,750,000 Refunding, Ogden Haverhill Proj., Ser. A,
5.60%, 12/1/19................................... 4,750,000
2,838,529 Refunding, Sr. Lien, MA Paper Co. Proj.,
8.50%, 11/1/12................................... 2,781,759
13,600,000 Massachusetts, Muni. Wholesale Elec. Co. Pwr.
Supply Sys. RB
5.308%, 7/1/18, (c).............................. 13,784,824
18,000,000 Massachusetts, Turnpike Auth. RB Sr. Ser. C,
Metropolitan Hwy. Sys.
0.00%, 1/1/22, (Eff. Yield 5.549%) (MBIA) (b).... 5,428,980
610,000 Massachusetts, Wtr. Pollution Abatement Trust RB,
Pool Loan Program, Ser. 2
6.125%, 2/1/08................................... 682,730
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Massachusetts - continued
Massachusetts Bay Transit Authority, Gen. Trans.
Sys., RB:
Ser. A:
$ 7,950,000 6.25%, 3/1/12.................................... $ 8,965,771
1,950,000 7.00%, 3/1/21, (MBIA)............................ 2,379,800
2,125,000 Ser. B,
6.20%, 3/1/16.................................... 2,410,090
--------------
79,190,854
--------------
Michigan - 3.5%
10,000,000 Michigan, Hosp. Fin. Auth. RB, Oakwood Hosp. Obl.
Group, Ser. A
5.625%, 11/1/18.................................. 10,272,500
10,000,000 Monroe Cnty., MI, EDA, Ltd. Obl. RB, Detroit
Edison Co.
6.95%, 9/1/22, (FGIC)............................ 12,469,500
Wayne Charter Cnty. MI, Arpt. RB, Ser. A:
5,000,000 5.00%, 12/1/19, (MBIA)........................... 4,789,750
6,000,000 5.00%, 12/1/22................................... 5,697,960
5,000,000 5.25%, 12/1/14................................... 5,075,750
3,500,000 5.25%, 12/1/18, (MBIA)........................... 3,462,130
--------------
41,767,590
--------------
Minnesota - 1.2%
Minneapolis, & St. Paul, MN Metropolitan Arpt.
Common Aprt. RB, Ser. B:
5,000,000 5.25%, 1/1/14, (AMBAC)........................... 5,056,450
9,150,000 5.25%, 1/1/15, (AMBAC)........................... 9,201,240
--------------
14,257,690
--------------
Mississippi - 0.7%
1,000,000 Harrison Cnty., MS, Wst. Wtr. Treatment Mgmt.
Dist. RB
8.50%, 2/1/13, (FGIC)............................ 1,384,750
4,650,000 Mississippi, Business Fin. Corp., PCRB, Energy
Resource, Inc. Proj.
5.90%, 5/1/22.................................... 4,651,023
2,000,000 Mississippi, Home Corp., SFHRB, Ser. B, Class 7
5.25%, 6/1/99, (FNMA/GNMA)....................... 2,137,320
--------------
8,173,093
--------------
Missouri - 1.1%
4,900,000 Bridgeton, MO, IDA, Sr. Hsg. RB, Sarah Community
Proj.
5.80%, 5/1/18.................................... 4,795,189
1,300,000 Joplin, MO, IDA RB Catholic Hlth. Initiatives,
Ser. A
5.125%, 12/1/15.................................. 1,286,454
1,915,000 Missouri, Hsg. Dev. Commission, SFHRB, Ser. B
6.45%, 9/1/27.................................... 2,009,869
500,000 Missouri, Wtr. PCRB, Revolving Fund Kansas City,
Ser. A
5.75%, 1/1/16.................................... 525,250
200,000 Sikeston, MO, Elec. RB
6.00%, 6/1/14, (MBIA)............................ 224,762
</TABLE>
26
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments(continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Missouri - continued
$ 3,400,000 Valley Park, MO, IDA RB Cape Albeon Proj.
6.15%, 12/1/33................................... $ 3,273,146
1,150,000 West Plains, MO, IDA, Hosp. RB Ozarks Med. Ctr.
5.65%, 11/15/22.................................. 1,105,231
--------------
13,219,901
--------------
Nebraska - 1.0%
11,760,000 Nebraska, IFA SFHRB Ser. F
5.60%, 9/1/20, (GNMA/FNMA/FHLMC)................. 11,855,491
--------------
Nevada - 0.9%
4,905,000 Clark Cnty., NV, Arpt RB, Ser. A
5.50%, 7/1/15, (MBIA)............................ 5,146,277
6,000,000 Clark Cnty., NV, IDRB, Nevada Pwr. Co. Proj.
5.60%, 10/1/30................................... 5,870,460
--------------
11,016,737
--------------
New Hampshire - 2.4%
New Hampshire, Higher Ed. & Hlth. Facs. Auth. RB:
3,500,000 Dartmouth College,
5.70%, 6/1/27.................................... 3,671,220
3,155,000 Frisbie Memorial Hosp.,
6.125%, 10/1/13.................................. 3,260,598
20,615,000 New Hampshire, Turnpike Sys, RB
5.75%, 4/1/20.................................... 21,403,524
--------------
28,335,342
--------------
New Jersey - 0.6%
1,000,000 Gloucester Cnty., NJ, Impt. Auth., Solid Wst.
Resource Recovery RB, Ser. A
8.125%, 7/1/10, (LOC: Fuji Bank Ltd.)............ 1,003,120
New Jersey, Hlth. Care Facs. Fin. Auth. RB:
1,000,000 Jersey Shore Med. Ctr.,
6.125%, 7/1/12, (AMBAC).......................... 1,087,520
3,710,000 St. Banabas Hlth, Ser. B,
5.25%, 7/1/14.................................... 3,788,392
1,055,000 Salem Cnty., NJ, PCRB E.I. Du Pont-Chambers Works
Proj.
6.50%, 11/15/21.................................. 1,131,245
--------------
7,010,277
--------------
New Mexico - 1.6%
1,500,000 Albuquerque, NM, Hosp. Sys. RB, Ser. A
6.375%, 8/1/07, (MBIA)........................... 1,608,885
Farmington, NM, PCRB:
10,000,000 Pub. Svc. Co. of San Juan, Ser. C,
5.70%, 12/1/16, (AMBAC).......................... 10,625,000
5,000,000 Southern CA Edison Co., Ser. A,
5.875%, 6/1/23, (MBIA)........................... 5,319,250
1,000,000 Univ. of NM, RB, Ser. A
6.00%, 6/1/21.................................... 1,100,600
--------------
18,653,735
--------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
New York - 13.1%
Huntington, NY, HFA Sr. Hsg. Facs. RB
Gurwin Jewish Sr. Residences:
$ 1,000,000 6.00%, 5/1/29.................................... $ 982,410
3,000,000 6.00%, 5/1/39.................................... 2,928,720
Long Island Pwr. Auth. NY, Elec. Sys. RB, Ser. A:
3,000,000 5.00%, 12/1/15, (FSA)............................ 2,960,220
12,750,000 5.75%, 12/1/24................................... 13,255,792
Metropolitan Trans. Auth., NY,
10,000,000 Trans. Facs. RB: Ser. A,
5.70%, 7/1/17, (MBIA)............................ 10,556,500
11,600,000 Service Contract, Ser. 7,
5.625%, 7/1/16................................... 11,975,492
5,000,000 Service Contract, Ser. R,
5.50%, 7/1/17.................................... 5,141,850
2,250,000 New York City, NY, IDA Spl. Facs. RB, British
Airways Plc. Proj.
5.25%, 12/1/32................................... 2,171,003
New York City, NY, Muni. Wtr. Fin. Auth., Wtr. &
Swr. Sys. RB:
14,400,000 Ser. A65,
7.87%, 6/2/99 (a) (d)............................ 15,915,024
6,000,000 Ser. B,
5.75%, 6/15/26, (MBIA)........................... 6,359,580
40,000 New York City, NY, GO, Prerefunded Balance, Ser.
A
5.75%, 8/1/10, (FGIC)............................ 42,710
2,500,000 New York City, NY, GO, Refunded Balance, Ser. G
6.75%, 2/1/09, (FGIC)............................ 2,908,900
New York City, NY, GO, Unrefunded Balance, Ser.
A:
250,000 7.75%, 8/15/08................................... 271,807
140,000 7.75%, 8/15/14................................... 152,151
220,000 7.75%, 8/15/15................................... 239,094
5,255,000 New York City, NY, GO,
Unrefunded Balance, Ser. H
5.25%, 3/15/18................................... 5,210,805
2,000,000 New York City, NY, Hlth. & Hosp. Corp. RB, Hlth.
Sys. Ser. A
5.25%, 2/15/17................................... 1,961,440
New York, Dormitory Auth. RB:
3,980,000 City Univ. Ed'l. Facs., Ser. D,
7.00%, 7/1/09, (FGIC)............................ 4,636,660
5,000,000 Mental Hlth. Svcs. Facs., Ser. A,
5.75%, 8/15/22................................... 5,261,450
3,800,000 Refunding Secured, Brookdale Hosp. Med. Ctr.,
5.10%, 2/15/12, (ACA/FSA)........................ 3,913,506
2,500,000 Secured Hosp., Interfaith Med. Ctr.,
5.25%, 2/15/16................................... 2,491,550
10,000,000 State Univ. Edl. Facs, Ser. B,
6.25%, 5/15/20................................... 11,117,700
5,000,000 New York, Energy Research & Dev. Auth., PCRB
LILCo. Proj. Ser. B
5.15%, 9/1/99.................................... 5,002,450
545,000 New York, Envl. Facs. Corp., PCRB, Wtr. Revolving
Fund, Unrefunded Balance, Ser. E
6.875%, 6/15/10.................................. 583,690
</TABLE>
27
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments(continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
New York - continued
$ 5,435,000 New York, GO, Env. Quality
5.125%, 1/15/15.................................. $ 5,429,782
7,000,000 New York, Hsg. Corp. RB, Ser. A
0.00%, 11/1/10, (Eff. Yield 6.17%) (b)........... 6,789,440
New York, Med. Care Facs., Fin. Agcy. RB:
Hlth. Ctr. Proj., Ser. A:
1,435,000 6.375%, 11/15/19................................. 1,570,966
2,140,000 6.375%, 11/15/19, (AMBAC)........................ 2,362,817
30,000 Unrefunded, Ser. E,
6.375%, 8/15/14, (FGIC).......................... 33,115
New York, Mtge. Agcy. RB, Homeowner Mtge.:
4,000,000 Ser. 27,
6.90%, 4/1/15.................................... 4,257,480
6,400,000 Ser. 69,
5.50%, 10/1/28................................... 6,435,520
New York, Urban Dev. Corp. RB:
1,175,000 Correctional Facs., Ser. A,
6.50%, 1/1/09.................................... 1,330,734
5,000,000 Sr. Lien Corp. Purpose,
5.50%, 7/1/26, (HUD Sec. 236).................... 5,099,950
500,000 Niagara Falls, NY, Pub. Impt. GO
7.50%, 3/1/14, (MBIA)............................ 640,825
4,200,000 Port Auth. of NY & NJ RB, Spl. Obl., JFK Intl.
Arpt. Terminal 6
5.75%, 12/1/25, (MBIA)........................... 4,383,330
400,000 Triborough Bridge & Tunnel Auth., NY, Spl. Obl.,
Refunding Ser. A
5.25%, 1/1/14, (FGIC)............................ 409,440
--------------
154,783,903
--------------
North Dakota - 1.7%
North Dakota, HFA RB:
14,975,000 Hsg. Fin. Program, Home Mtge., Ser. B,
5.50%, 7/1/29, (MBIA)............................ 15,073,086
4,985,000 Hsg. Fin. Program, Home Mtge., Ser. C,
5.55%, 7/1/29.................................... 5,017,552
--------------
20,090,638
--------------
Ohio - 0.6%
2,000,000 Adams Cnty., OH, Valley Local Sch. Dist. GO
7.00%, 12/1/15, (MBIA)........................... 2,458,520
2,000,000 Butler Cnty., OH, Trans. Impt. Dist. RB, Ser. A
6.00%, 4/1/12, (FSA)............................. 2,204,840
2,500,000 Montgomery Cnty., OH, Hosp. RB, Kettering Med.
Ctr.
6.25%, 4/1/20, (MBIA)............................ 2,859,025
--------------
7,522,385
--------------
Oklahoma - 0.7%
8,315,000 Oklahoma, Dev. Fin. Auth. RB, Hillcrest
Healthcare Sys.
5.625%, 8/15/29.................................. 8,084,841
--------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Oregon - 1.0%
Klamath Falls, OR, Elec. RB Sr. Lien, Klamath
Cogen Proj.:
$ 5,000,000 5.75%, 1/1/13.................................... $ 4,959,300
7,000,000 6.00%, 1/1/25.................................... 6,945,820
--------------
11,905,120
--------------
Pennsylvania - 4.2%
2,500,000 Allegheny Cnty., PA, Swr. RB
0.00%, 6/1/15, (Eff. Yield 6.10%) (FGIC) (b)..... 1,113,700
2,000,000 Lebanon Cnty., PA, Hosp Auth. RB, Good Samaritan
Proj.
6.00%, 11/15/18.................................. 2,058,200
2,000,000 McKeesport, PA, Area Sch. Dist. GO Ser. B
0.00%, 10/1/15, (Eff. Yield 6.25%) (FSA) (b)..... 864,980
5,000,000 Montgomery Cnty., PA, IDRB, Acts Retirement-Life
Communities
5.25%, 11/15/28.................................. 4,680,500
900,000 Montgomery Cnty., PA, PCRB, Philadelphia Elec.
Co.
7.60%, 4/1/21.................................... 960,993
2,650,000 Penn Hills Township, PA, GO, Ser. B
0.00%, 6/1/13, (Eff. Yield 6.79%) (AMBAC) (b).... 1,311,485
5,545,000 Pennsylvania, HFA RB, Residential Dev., Section
8, Ser. A
7.60%, 7/1/13, (HUD Sec. 8)...................... 5,871,323
4,000,000 Pennsylvania, Higher Ed. Facs. Auth. RB,
Allegheny General Hosp., Ser. A
7.125%, 9/1/07................................... 3,983,400
1,750,000 Pennsylvania, IDA RB, EDA
6.00%, 1/1/12, (AMBAC)........................... 1,874,688
1,000,000 Philadelphia, PA, Hosp. & Higher Ed. Facs. Auth.
RB, Community College, Ser. B
6.50%, 5/1/07, (MBIA)............................ 1,136,830
7,360,000 Philadelphia, PA, Muni. Auth. RB, Muni. Svcs.
Bldg. Lease
0.00%, 3/15/14, (Eff. Yield 7.50%) (FSA) (b)..... 3,495,779
Philadelphia, PA, Wtr. & Wst. Wtr. RB:
9,600,000 5.00%, 6/15/16, (FSA)............................ 9,448,512
5,000,000 5.60%, 8/1/18, (MBIA)............................ 5,181,700
6,350,000 Sayre, PA, Hlth. Care Facs. Auth. Guthrie
Healthcare, Ser. A
7.10%, 3/1/17.................................... 6,764,211
1,000,000 Susquehanna, PA, Area Regl. Arpt., RB, Aero
Harrisburg LLC Proj.
5.50%, 1/1/24.................................... 937,260
--------------
49,683,561
--------------
</TABLE>
28
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments(continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Rhode Island - 0.5%
$ 2,000,000 Rhode Island, Clean Wtr. Fin. Agcy. RB,
Wastewater Treatment Sys. Cranston
5.80%, 9/1/22, (MBIA)............................ $ 2,109,600
4,000,000 Rhode Island, Hlth. & Ed. Bldg., Hosp. Fin.
Newport Hosp.
5.30%, 7/1/29.................................... 3,781,840
--------------
5,891,440
--------------
South Carolina - 0.5%
3,095,000 South Carolina, Port Auth. RB
5.375%, 7/1/15, (FSA)............................ 3,153,093
2,500,000 Spartanburg, SC, Wtr. Works RB, Jr. Lien
5.25%, 6/1/28, (FGIC)............................ 2,510,300
--------------
5,663,393
--------------
South Dakota - 0.6%
6,620,000 South Dakota, Hsg. Dev. Auth. RB, Homeownership
Mtge., Ser. F
5.80%, 5/1/28.................................... 6,790,134
--------------
Tennessee - 3.1%
7,465,000 Bristol, TN, Hlth & Edl. Facs. Auth. RB, Bristol
Memorial Hosp.
6.75%, 9/1/10, (FGIC)............................ 8,767,643
Knox Cnty., TN, Hlth. & Edl. Facs. Auth. RB:
Fort Sanders Alliance
9,000,000 Ser. B,
7.25%, 1/1/10, (MBIA)............................ 10,870,110
4,500,000 Ser. C,
5.25%, 1/1/15, (MBIA)............................ 4,610,745
10,000,000 Metro Govt., Nashville & Davidson Cnty., TN, Wtr.
& Swr. RB
7.70%, 1/1/12, (Eff. Yield 4.92%) (FGIC) (b)..... 12,659,500
--------------
36,907,998
--------------
Texas - 7.6%
10,000,000 Alliance, TX, Arpt. Auth., TX Spl. Facs. RB,
Federal Express Corp. Proj.
6.375%, 4/1/21................................... 10,626,000
Austin, TX, Util. Sys. RB:
1,530,000 Prerefunded,
5.75%, 5/15/24, (FGIC)........................... 1,675,901
2,000,000 Refunded, Ser. B,
5.70%, 11/15/21, (MBIA).......................... 2,110,300
3,470,000 Unrefunded Balance,
5.75%, 5/15/24, (FGIC)........................... 3,597,349
25,000 Bexar, TX, Metropolitan Wtr. Dist. Wtr. Works
Sys. RB, Unrefunded Balance
6.625%, 5/1/14, (AMBAC).......................... 26,979
60,000 Brazos Cnty., TX, HFA, SFHRB
5.80%, 9/1/25, (GNMA/FNMA)....................... 61,489
30,000 Brazos Cnty., TX, Hlth. Facs. Dev. RB, Franciscan
Svc. Corp., Ser. B
5.375%, 1/1/22, (MBIA)........................... 30,103
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Texas - continued
$ 6,000,000 Brazos River Auth. TX, RB, Reliant Energy, Inc.
Proj. A
5.375%, 4/1/29................................... $ 5,888,280
2,400,000 Brownsville, TX, Util. Sys. RB
6.25%, 9/1/14, (MBIA)............................ 2,739,312
10,000,000 Gulf Coast, TX, IDA, Wst. Disposal RB, Valero
Refining Proj.
5.60%, 12/1/31................................... 9,751,700
Harris Cnty., TX, Hlth. Facs. Dev. Corp., Hosp.
RB:
Memorial Hosp. Sys. Proj., Ser. A:
3,215,000 6.00%, 6/1/09.................................... 3,561,513
1,990,000 6.00%, 6/1/12.................................... 2,190,512
2,525,000 7.125%, 6/1/15................................... 2,761,138
Sch. Hlth. Care Sys., Ser. B:
10,000,000 5.75%, 7/1/27, (MBIA)............................ 10,563,300
5,000,000 5.75%, 7/1/27, (AMBAC)........................... 5,281,650
Houston, TX, Arpt. Sys. RB, Continental Airlines
Proj.:
5,000,000 Ser. B,
6.125%, 7/15/27.................................. 5,119,850
5,000,000 Ser. C,
5.70%, 7/15/29................................... 4,894,000
Houston, TX, Wtr. & Swr. Sys. RB:
2,700,000 Jr. Lien, Ser. C,
0.00%, 12/1/10,
(Eff. Yield 6.85%) (b)........................... 1,556,469
5,000,000 Refunding, Jr. Lien, Ser. A,
5.375%, 12/1/27.................................. 5,021,900
3,000,000 Ser. C,
0.00%, 12/1/11, (Eff. Yield 6.90%) (b)........... 1,628,520
6,900,000 Sr. Lein Ser. A,
0.00%, 12/1/26, (Eff. Yield 5.50%) (FSA) (b)..... 1,594,452
1,090,000 Montgomery Cnty., TX, GO
0.00%, 3/1/10, (Eff. Yield 5.30%) (MBIA) (b)..... 637,835
2,000,000 Port Arthur, TX, Navigation Dist. GO
0.00%, 3/1/09, (Eff. Yield 4.90%) (AMBAC) (b).... 1,262,180
1,085,000 Rio Grande Valley, TX, Hlth. Facs.
Corp., Hosp. RB, Baptist Med. Proj.
8.00%, 8/1/17, (BIG)............................. 1,107,243
6,415,000 Tarrant Cnty., TX, HFA, SFHRB, Ser. A
0.00%, 9/15/16, (Eff. Yield 11.00%) (MBIA) (b)... 2,588,773
2,565,000 Tarrant Cnty., TX, Hlth. Facs., Dev. RB, Ser. A
5.75%, 2/15/15, (MBIA)........................... 2,760,735
Texas, Muni. Pwr. Agcy. RB:
1,125,000 0.00%, 9/1/08, (Eff. Yield 7.35%) (AMBAC) (b).... 736,864
175,000 5.25%, 9/1/12, (MBIA)............................ 177,375
130,000 6.10%, 9/1/09, (MBIA)............................ 146,342
--------------
90,098,064
--------------
</TABLE>
29
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments(continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Utah - 0.1%
$ 80,000 Utah, HFA, SFHRB Ser. C2
7.95%, 7/1/10, (FHA)............................. $ 83,015
6,500,000 Utah, Intermountain Pwr. Agcy. RB, Ser. C
0.00%, 7/1/20, (Eff. Yield 6.80%) (b)............ 1,186,575
--------------
1,269,590
--------------
Vermont - 0.3%
3,000,000 Vermont, Edl. & Hlth. Bldg. Fin. Agcy. RB,
Middlebury College Proj.
6.00%, 11/1/22................................... 3,233,670
--------------
Virginia - 1.7%
Virginia, Hsg. Dev. Auth., MFHRB:
3,245,000 Ser. E
5.60%, 11/1/17................................... 3,330,830
11,445,000 Sub. Ser. B,
5.50%, 1/1/22.................................... 11,508,291
5,500,000 Winchester, VA, IDA, Hosp. RB, Winchester Med.
Ctr.
5.50%, 1/1/15, (AMBAC)........................... 5,704,270
--------------
20,543,391
--------------
Washington - 1.2%
3,675,000 Chelan Cnty., WA, Pub. Util., Dist. No. 1,
Conservation RB, Chelan Hydro Div. II, Ser. A
0.00%, 7/1/33, (Eff. Yield 5.249%) (FSA) (b)..... 3,567,065
2,000,000 King Cnty., WA, GO, Kent Schl. Dist. No. 415
5.875%, 6/1/16, (FSA)............................ 2,147,320
1,000,000 Washington, GO, Ser. A
6.75%, 2/1/15.................................... 1,178,300
3,650,000 Washington, HFA, SFHRB, Ser. 4-A
5.40%, 12/1/24, (FNMA/GNMA)...................... 3,639,963
Washington, Pub. Pwr. Supply Sys., Nuclear Proj.
No. 3:
4,000,000 0.00%, 7/1/12, (Eff. Yield 10.09%) (b)........... 2,096,880
2,000,000 Ser. 1993-B
5.60%, 7/1/15, (MBIA)............................ 2,046,360
--------------
14,675,888
--------------
Wisconsin - 1.0%
5,000,000 Wisconsin, HFA & EDA, GO, Ser. D
5.40%, 9/1/18.................................... 4,987,700
Wisconsin, Hlth. & Edl. Facs. RB:
3,100,000 Auroro Hlth. Care, Inc., Ser. A,
5.60%, 2/15/29................................... 3,012,766
4,100,000 Monroe Clinic, Inc.,
5.375%, 2/15/22.................................. 3,966,586
--------------
11,967,052
--------------
Wyoming - 0.4%
4,715,000 Wyoming, Community Dev. Auth., Hsg. RB, Ser. 4
5.85%, 6/1/28.................................... 4,863,994
--------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Puerto Rico - 1.9%
$ 3,200,000 Cmnwlth. of Puerto Rico, GO
0.00%, 7/1/14, (Eff. Yield 5.53%) (MBIA) (b)..... $ 1,555,936
Cmnwlth. of Puerto Rico, Hwy. & Trans. Auth. RB:
10,000,000 Ser. A,
0.00%, 7/1/15, (Eff. Yield 4.95%) (AMBAC) (b).... 4,534,500
5,000,000 Ser. Y,
5.50%, 7/1/26.................................... 5,136,350
4,030,000 Cmnwlth. of Puerto Rico, Indl., Tourist, Edl.,
Med., Envl. Ctl. Facs., Fin. Auth. RB, Hops.
Auxilio Mutuo
6.25%, 7/1/24.................................... 4,424,618
6,250,000 Cmnwlth. of Puerto Rico, Pub. Bldg. Auth. GO,
Gtd. Pub. Ed. & Hlth. Facs., Ser. M
5.70%, 7/1/16.................................... 6,493,187
--------------
22,144,591
--------------
Total Municipal Obligations
(cost $1,142,820,308)........................... 1,170,947,370
--------------
SHORT-TERM MUNICIPAL SECURITIES - 0.1%
California - 0.0%
175,000 Irvine Ranch, CA, Wtr. Dist. RB
3.25%, 6/1/99, (LOC: Landesbank Hessen) (a)...... 175,000
--------------
Florida - 0.0%
40,000 Dade Cnty., FL, Wtr. & Swr. Sys. RB
3.15%, 6/2/99, (SPA: Commerzbank) (FGIC) (a)..... 40,000
--------------
Massachusetts - 0.0%
725,000 Massachusetts Wtr. Resources Auth., Multi Modal
Subordinated General, Ser. B
3.05%, 6/2/99 (a)................................ 725,000
--------------
Missouri - 0.1%
Kansas City, MO, IDA Hosp. RB
Insured Research Hlth. Svcs. Sys.:
185,000 3.30%, 6/1/99, (SPA: Bank of America, Illinois &
Ins. by
MBIA) (a)........................................ 185,000
180,000 3.30%, 6/1/99, (SPA: Bank of America, Illinois)
(MBIA) (a)....................................... 180,000
50,000 Missouri, Hlth. & Edl. Facs. Auth. RB, Christian
Hlth. Svcs., Ser. A
3.20%, 6/3/99, (LOC: Morgan
Guaranty Trust) (a).............................. 50,000
--------------
415,000
--------------
</TABLE>
30
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments(continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES - continued
New York - 0.0%
185,000 Long Island Pwr. Auth., NY, Elec. Sys RB, Ser. 5
3.30%, 6/1/99, (LOC: ABN Amro Bank N.V. & Morgan
Guaranty Trust) (a)................................ $ 185,000
35,000 New York City, NY, Muni. Wtr. Fin. Auth., Wtr. &
Swr. Sys RB, Ser. G
3.30%, 6/1/99, (SPA: FGIC) (a)..................... 35,000
--------------
Total Short-Term Municipal Securities (cost
$1,575,000)....................................... 1,575,000
--------------
<CAPTION>
Shares Value
<C> <S> <C> <C>
MUTUAL FUND SHARES - 0.2% (cost $2,291,033)
2,291,033 Federated Municipal Obligations Fund........ 2,291,033
--------------
Total Investments -
(cost $1,146,686,341)...................... 99.2% 1,174,813,403
Other Assets and
Liabilities - net.......................... 0.8 9,974,741
----- --------------
Net Assets.................................. 100.0% $1,184,788,144
===== ==============
</TABLE>
The Fund invests primarily in debt securities issued by municipalities.
The ability of the issuers of debt securities to meet their obligations
may be affected by economic developments in a specific industry or munic-
ipality. In order to reduce risk associated with such economic develop-
ments, at May 31, 1999, 39.6% of the securities, as a percentage of net
assets, are backed by bond insurance of various financial institutions
and financial guaranty assurance agencies. At May 31, 1999, the Fund had
securities backed by bond insurance of the following financial institu-
tions representing more than 5% of net assets:
AMBAC6.9%
FGIC6.7%
MBIA 16.5%
(a) Securities are variable or floating rate instruments with periodic
demand features. The Fund is entitled to full payment of principal
and accrued interest upon surrendering the security to the issuing
agent.
(b) Effective yield (calculated at date of purchase) is the annual yield
at which the bond accretes until its maturity date.
(c) At the discretion of the portfolio manager, these securities may be
separated into securities with interest or principal payments that
are linked to another rate or index and therefore would be considered
derivative securities.
(d) Securities that may be resold to "qualified institutional buyers" un-
der rule 144a or securities offered pursuant to Section 4(2) of the
Securities Act of 1933, as amended. These securities have been deter-
mined to be liquid under the guidelines established by the Board of
Trustees.
(e) At May 31, 1999, $5,032,394 principal amount of this security was
pledged to cover margin requirements for open futures contracts.
31
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments (continued)
May 31, 1999
Summary of Abbreviations:
ACA American Capital Access
AMBAC Insured by American Municipal Bond Assurance Corporation
BIG Bond Investors Guaranty
COP Certificates of Participation
EDA Economic Development Authority
FGIC Insured by Federal Guaranty Insurance Corporation
FHA Federal Housing Authority
FHLMC Insured by Federal Home Loan Mortgage Corporation
FNMA Insured by Federal National Mortgage Association
FRN Floating Rate Note
FSA Insured by Financial Security Assurance Corporation
GNMA Insured by Government National Mortgage Association
GO General Obligation
HFA Housing Finance Authority
HUD Housing and Urban Development
IDA Industrial Development Authority
IDRB Industrial Development Revenue Bond
IFA Industrial Finance Agency
LILCo. Long Island Lighting Company
LOC Letter of Credit
MBIA Insured by Municipal Bond Investors Assurance Corporation
MFHRB Multi-Family Housing Revenue Bond
PCRB Pollution Control Revenue Bond
RB Revenue Bond
SFHRB Single Family Housing Revenue Bond
SPA Securities Purchase Agreement
FUTURES CONTRACTS - SHORT POSITIONS
<TABLE>
<CAPTION>
Number of Initial Contract Value at Unrealized
Expiration Contracts Amount May 31, 1999 Gain
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
June-99 480 Municipal Bond Index $59,764,413 $58,545,000 $1,219,413
</TABLE>
See Combined Notes to Financial Statements.
32
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Schedule of Investments
May 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - 98.2%
Alabama - 4.0%
$7,000,000 Huntsville, AL Warrants, Ser. A
4.50%, 12/1/00 (a)................................. $ 7,003,780
------------
Arizona - 1.0%
1,600,000 Pima Cnty., AZ GO, Ser. 1992
6.55%, 7/1/01...................................... 1,688,256
------------
California - 1.7%
1,995,000 Intercommunity Hosp. Financing Auth., COP, 4.50%,
11/1/07............................................ 1,932,357
1,025,000 Stockton, CA, Hlth. Facs. RB, Ser. A
5.00%, 12/1/01..................................... 1,049,200
------------
2,981,557
------------
Colorado - 2.5%
300,000 Colorado HFA, Single Family Program, Ser. A-3
4.25%, 10/1/05..................................... 300,069
Denver, CO:
1,500,000 City & Cnty. Arpt. RB, Ser. C
6.35%, 11/15/01..................................... 1,567,170
1,085,000 Hlth. & Hosp. RB, Ser. A
5.00%, 12/1/03...................................... 1,106,863
1,300,000 Weld Cnty., CO, Ind'l. Dev. RB Monfort, Inc.
6.75%, 12/15/01..................................... 1,363,557
------------
4,337,659
------------
Florida - 15.1%
3,520,000 Broward Cnty., FL, Resource Recovery RB,
Wheelabrator Technologies
7.95%, 12/1/08..................................... 3,688,890
3,000,000 Florida State, GO Board of Ed.,
Capital Outlay
6.75%, 6/1/00...................................... 3,103,200
Florida, Hlth. Care Facs. RB,
Halifax Hosp. Med. Ctr., Ser. A:
1,080,000 4.40%, 4/1/04....................................... 1,079,006
1,300,000 4.50%, 4/1/06....................................... 1,291,615
Hillsborough Cnty. FL, Ind'l. Dev. RB, Hlth. Facs.
Proj., Univ. Community Hosp., Ser. A:
1,000,000 4.50%, 8/15/03...................................... 994,940
500,000 4.90%, 8/15/07...................................... 496,295
4,905,000 Jacksonville, FL, Ind'l. Dev. RRB, TTX Co. Proj.
5.40%, 3/1/01...................................... 5,035,032
1,150,000 Lee Cnty. FL, IDA, Hlth. Care Facs. RB, Shell Point
Village Proj., Ser. A
5.25%, 11/15/04.................................... 1,178,750
Leon Cnty., FL, Edl. Facs. Auth., COP,
Southgate Proj.:
680,000 9.00%, 9/1/99, (ETM)................................ 689,758
740,000 9.00%, 9/1/00, (ETM)................................ 790,327
810,000 9.00%, 9/1/01, (ETM)................................ 900,996
880,000 9.00%, 9/1/02, (ETM)................................ 1,015,115
960,000 9.00%, 9/1/03, (ETM)................................ 1,144,061
1,550,000 Palm Beach Cnty., FL, Solid Wst. Auth. Revenue,
Refunding & Impt.
5.50%, 12/1/02, (MBIA)............................. 1,634,211
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Florida - continued
Pinellas Cnty., FL, Edl. Facs. Auth. RB, Barry
University Proj.:
$ 330,000 4.10%, 10/1/99...................................... $ 330,614
375,000 4.55%, 10/1/02...................................... 376,999
390,000 4.60%, 10/1/03...................................... 391,654
410,000 4.65%, 10/1/04...................................... 410,553
470,000 4.90%, 10/1/07...................................... 469,652
320,000 4.95%, 10/1/08...................................... 318,560
1,000,000 Sarasota, FL, GO
6.85%, 8/1/00...................................... 1,039,500
------------
26,379,728
------------
Illinois - 2.2%
Illinois, Dev. Fin. Auth. RB:
1,000,000 Community Rehabilitation Providers, Ser. A
5.35%, 7/1/00....................................... 1,013,450
2,765,000 Lockport Sch. Dist.
5.00%, 7/1/06....................................... 2,750,207
------------
3,763,657
------------
Iowa - 1.2%
2,000,000 Iowa, Loan Liquidity Corp.,
Student Loan RB, Ser. B
6.65%, 3/1/03...................................... 2,140,980
------------
Kansas - 5.8%
10,000,000 Burlington, KS, Environmental Impt. RB, Kansas City
Pwr. & Light Co., Proj. D
4.35%, 10/1/17 (c)................................. 10,050,700
------------
Louisiana - 2.7%
4,460,000 Louisiana Pub. Facs. Auth. RB,
Student Loan Subord., Ser. A-3
7.00%, 9/1/06...................................... 4,776,928
------------
Maine - 1.7%
3,000,000 Baileyville, ME, PCRB,
Georgia-Pacific Corp. Proj.
4.75%, 6/1/05...................................... 3,009,330
------------
Massachusetts - 3.5%
1,400,000 Massachusetts, Hlth. & Edl.
Facs. Auth. RB, Caritas Christi Obl. Group
5.25%, 7/1/06...................................... 1,425,466
970,000 Fairview Extended Care Services, Inc. Obl. Group
4.55%, 1/1/21 (c).................................. 980,098
Massachusetts, Ind'l. Dev. RB:
380,000 Ser. 1986G
5.30%, 12/1/06...................................... 383,876
475,000 Ser. 1986I
5.30%, 12/1/06...................................... 479,845
835,000 Ser. 1996A
5.35%, 11/1/07 (c).................................. 859,666
995,000 Ser. 1996B
5.35%, 11/1/07 (c).................................. 1,024,392
1,000,000 New England Edl. Loan Marketing Corp. Student Loan
RB, Ser. 1993B
5.40%, 6/1/00...................................... 1,018,080
------------
6,171,423
------------
</TABLE>
33
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Schedule of Investments(continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Michigan - 1.4%
Grand Rapids Charter Twp., MI, Economic Dev. Corp.
RB, Porter Hills Obl. Group:
$ 475,000 3.95%, 7/1/01....................................... $ 472,630
210,000 4.25%, 7/1/04....................................... 206,129
600,000 4.50%, 7/1/06....................................... 587,148
610,000 4.60%, 7/1/07....................................... 595,799
690,000 4.70%, 7/1/08....................................... 672,833
------------
2,534,539
------------
Minnesota - 0.6%
1,015,000 City of Minneapolis & St. Paul, MN, Hsg. & Redev.
Auth. RB, Single Family Mtge., Ser. 1996A
5.125%, 6/1/32, (FGIC) (c)......................... 1,018,025
------------
Missouri - 0.4%
710,000 North Kansas City, MO, School District, GO, Direct
Deposit Program, Ser. 1996
6.70%, 3/1/00...................................... 728,247
------------
Nebraska - 1.8%
American Public Energy Agcy., NE, Nebraska Public
Gas Agcy. Proj., Ser. A:
1,000,000 4.50%, 6/1/02, (AMBAC).............................. 1,013,750
2,000,000 5.00%, 6/1/05....................................... 2,068,080
------------
3,081,830
------------
New Hampshire - 2.9%
5,000,000 New Hampshire, Business Fin. Auth., PCRB, United
Illumination Co., Proj. A
4.35%, 7/1/27 (c).................................. 4,983,750
------------
New Jersey - 9.2%
New Jersey, EDA RB, First Mtge.:
Franciscan Oaks Proj.:
1,545,000 5.20%, 10/1/04...................................... 1,579,623
825,000 5.40%, 10/1/06...................................... 849,247
1,075,000 5.50%, 10/1/07...................................... 1,111,066
Keswick Pines:
480,000 4.70%, 1/1/00....................................... 481,618
695,000 4.85%, 1/1/01....................................... 701,464
805,000 5.00%, 1/1/02....................................... 816,004
845,000 5.10%, 1/1/03....................................... 857,886
465,000 5.15%, 1/1/04....................................... 471,980
500,000 5.25%, 1/1/05....................................... 509,865
975,000 5.35%, 1/1/06....................................... 997,103
925,000 5.45%, 1/1/07....................................... 948,513
3,365,000 New Jersey, Hlth. Care Facs. Financing Auth. RB,
Atlantic City Med. Ctr., Ser. C
6.30%, 7/1/01...................................... 3,519,925
3,000,000 New Jersey, Turnpike Auth. RB, Ser. C
6.50%, 1/1/06...................................... 3,153,810
------------
15,998,104
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
New Mexico - 4.3%
$6,680,000 Alamogordo, NM, Hosp. RB, Gerald Champion Memorial
Hosp. Proj.
5.00%, 1/1/08...................................... $ 6,754,081
795,000 New Mexico, Edl. Assistance Foundation, Student Loan
RB, Ser. A
6.70%, 4/1/02, (AMBAC).............................. 842,152
------------
7,596,233
------------
New York - 2.7%
New York City, NY, GO:
Prerefunded Bonds, Ser. L:
305,000 5.00%, 8/1/01, (ETM)................................ 312,222
175,000 5.25%, 8/1/00, (ETM)................................ 178,787
Unrefunded Balance, Ser. L:
1,145,000 5.00%, 8/1/01....................................... 1,172,114
825,000 5.25%, 8/1/00....................................... 842,490
2,000,000 New York City, NY, IDA, Spl. Facs. RB, Terminal One
Group Association Proj.
6.00%, 1/1/07...................................... 2,135,900
------------
4,641,513
------------
Ohio - 3.4%
940,000 Cincinnati, OH, The Student Loan Funding Corp.,
Student Loan RB, Ser. 1993A
5.50%, 12/1/01..................................... 955,416
2,000,000 Ohio, Air Quality Dev. Auth. RB,
Ohio Edison Co., Proj. B
4.25%, 6/1/33, (c)................................. 1,994,180
3,000,000 Ohio, Water Dev. Auth. Pollution Control Facs., Ohio
Edison Co., Proj. A
4.25%, 6/1/33 (c).................................. 2,991,270
------------
5,940,866
------------
Oklahoma - 9.0%
2,340,000 Oklahoma Dev. Fin. Auth. RB, Hillcrest Sys. Proj.
4.70%, 8/15/05..................................... 2,330,383
Oklahoma, HFA, Single Family Hsg. RB:
5,500,000 Mtge. Homeownership Loan D-2
6.25%, 9/1/29....................................... 5,926,635
750,000 Mtge. Ser. B1
6.80%, 9/1/16....................................... 820,237
2,000,000 Mtge. Ser. B2
6.80%, 9/1/26....................................... 2,189,260
4,450,000 Oklahoma, Hsg. Dev. Auth. RB, Lease Purchase
Program, Ser. A
4.75%, 12/1/02..................................... 4,474,519
------------
15,741,034
------------
Pennsylvania - 3.9%
4,620,000 Dauphin Cnty., PA, General Auth. RB, Ser. A
5.125%, 1/15/03.................................... 4,633,352
1,950,000 Philadelphia, PA, Wtr. & Swr. RB, 16th Ser.
7.50%, 8/1/10...................................... 2,138,487
------------
6,771,839
------------
</TABLE>
34
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Schedule of Investments (continued)
May 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
South Dakota - 0.6%
$1,000,000 South Dakota, Hsg. Dev. Auth. RB, Homeownership
Mtge., Ser. J
4.60%, 5/1/02, (FNMA).............................. $ 1,008,730
------------
Texas - 2.9%
1,000,000 Austin, TX, Utility Sys. RB, Ser. A
9.50%, 5/15/15..................................... 1,057,940
2,500,000 Houston, TX, Arpt. Sys. RB, Sub. Lien, Ser. A
6.75%, 7/1/08...................................... 2,674,175
1,315,000 North Texas, Hlth. Facs. Dev. Corp., Hosp. RB,
Limited Reg'l. Hlth. Care Sys., Inc. Project
4.40%, 9/1/01...................................... 1,330,175
------------
5,062,290
------------
Utah - 3.9%
3,000,000 Utah, Board of Regents, Student Loan RB, Ser. F
7.05%, 11/1/03, (AMBAC)............................ 3,195,960
Utah, Intermountain Pwr. Agcy., Pwr. Supply RB,
Capital Appreciation Bonds:
1,000,000 1985 Ser. D (Eff. Yield 9.70%) (b)
0.00%, 7/1/00....................................... 960,660
1,760,000 Ser. B (Eff. Yield 7.00%) (b)
0.00%, 7/1/00....................................... 1,690,762
1,000,000 Ser. B (Eff. Yield 7.50%) (b)
0.00%, 7/1/00....................................... 960,660
------------
6,808,042
------------
Vermont - 2.8%
4,385,000 Vermont State, GO
6.00%, 12/1/06, (AMBAC)............................ 4,841,259
------------
Virginia - 0.7%
1,175,000 Alexandria, VA, Redev. & Hsg. Auth., Refunding
Mtge., Buckingham Village Apartments
4.875%, 7/1/06..................................... 1,163,849
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Washington - 2.5%
$1,360,000 Washington, Pub. Pwr. Supply RB, Ser. B
5.00%, 7/1/01...................................... $ 1,390,818
2,950,000 Washington State, GO, Motor Vehicle Fuel Tax, Ser.
R-92D
5.60%, 9/1/01...................................... 3,065,640
------------
4,456,458
------------
Wisconsin - 0.6%
1,000,000 Milwaukee, WI, Metropolitan Sewage Dist., GO, Ser.
1989A
7.00%, 9/1/01...................................... 1,067,880
------------
U.S. Virgin Islands - 3.2%
3,500,000 Virgin Islands, Pub. Fin. Auth. RB, Sr. Lien, Ser. C
5.00%, 10/1/03..................................... 3,576,405
2,000,000 Virgin Islands, Wtr. & Pwr. Auth., Electric Sys. RB
5.125%, 7/1/03..................................... 2,064,640
------------
5,641,045
------------
Total Municipal Obligations (cost $170,214,079)..... 171,389,531
------------
<CAPTION>
Shares Value
<C> <S> <C>
MUTUAL FUND SHARES - 6.3%
9,034,000 Federated Municipal Obligations Fund................ 9,034,000
1,963,000 Federated Tax Free Obligations Fund................. 1,963,000
------------
Total Mutual Fund Shares (cost $10,997,000)......... 10,997,000
------------
Total Investments -(cost $181,211,079)....... 104.5% 182,386,531
Other Assets and
Liabilities - net........................... (4.5) (7,854,202)
----- ------------
Net Assets................................... 100.0% $174,532,329
===== ============
</TABLE>
(a) Securities that may be resold to "qualified institutional buyers" un-
der Rule 144A or securities offered pursant to Section 4(2) of the
Securities Act of 1933, as amended. These securities have been deter-
mined to be liquid under guide-lines established by the Board of
Trustees.
(b) Effective yield (calculated at the date of purchase) is the yield at
which the bond accretes on an annual basis until maturity date.
(c) Security is a variable or floating rate instrument with periodic de-
mand features. The Fund is entitled to full payment of principal and
accrued interest upon surrendering the security to the issuing agent.
The Fund invests primarily in debt securities issued by municipalities.
The ability of the issuers of debt securities to meet their obligations
may be affected by economic developments in a specific industry or munic-
ipality. In order to reduce risk associated with such economic develop-
ments, securities may possess municipal bond insurance from various fi-
nancial institutions and financial guaranty assurance agencies. There-
fore, the Funds may be more affected by developments in the insurance in-
dustry or a specific municipal bond insurer. At May 31, 1999, 7.7% of the
securities, as a percentage of net assets, are backed by bond insurance
of various financial institutions and financial guaranty assurance agen-
cies. At May 31, 1999, the Fund had securities backed by bond insurance
of the following financial institutions representing more than 5% of net
assets:
AMBAC 5.7%
Summary of Abbreviations:
AMBAC Insured by American Municipal Bond Assurance Corporation
COP Certficates of Participation
EDA Economic Development Authority
ETM Escrowed to Maturity
FGIC Insured by Federal Guaranty Insurance Corporation
FNMA Insured by Federal National Mortgage Association
GO General Obligation
HFA Housing Finance Authority
IDA Industrial Development Authority
MBIA Insured by Municipal Bond Investors Assurance Corporation
PCRB Pollution Control Revenue Bond
RB Revenue Bond
RRB Refunding Revenue Bond
See Combined Notes to Financial Statements.
35
<PAGE>
EVERGREEN
National Municipal Bond Funds
Statements of Assets and Liabilities
May 31, 1999
<TABLE>
<CAPTION>
High Grade Short Intermediate
Fund Municipal Fund Fund
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Identified cost of securities.. $112,993,996 $1,146,686,341 $181,211,079
Net unrealized gains on
securities.................... 2,718,619 28,127,062 1,175,452
- ---------------------------------------------------------------------------------
Market value of securities..... 115,712,615 1,174,813,403 182,386,531
Cash........................... 0 0 160
Receivable for securities
sold.......................... 0 9,149,710 0
Receivable for Fund shares
sold.......................... 139,683 134,172 17,375
Interest receivable............ 1,971,442 18,637,543 2,855,385
Prepaid expenses and other
assets........................ 32,573 252,640 20,338
- ---------------------------------------------------------------------------------
Total assets................... 117,856,313 1,202,987,468 185,279,789
- ---------------------------------------------------------------------------------
Liabilities
Dividend payable............... 145,037 2,154,759 441,847
Payable for securities
purchased..................... 0 12,774,109 9,519,941
Payable for Fund shares
redeemed...................... 176,575 2,026,696 664,754
Payable for daily variation
margin on open futures
contracts..................... 16,500 165,000 0
Advisory fee payable........... 50,850 333,568 74,653
Distribution Plan expenses
payable....................... 61,222 566,739 7,949
Accrued expenses and other
liabilities................... 35,730 178,453 38,316
- ---------------------------------------------------------------------------------
Total liabilities.............. 485,914 18,199,324 10,747,460
- ---------------------------------------------------------------------------------
Net assets..................... $117,370,399 $1,184,788,144 $174,532,329
=================================================================================
Net assets represented by
Paid-in capital................ $112,600,007 $1,150,623,431 $172,267,317
Undistributed (overdistributed)
net investment income......... 90,985 324,047 (19,557)
Accumulated net realized gains
on securities and futures
contracts..................... 1,886,715 4,494,191 1,109,117
Net unrealized gains on
securities and futures
contracts..................... 2,792,692 29,346,475 1,175,452
- ---------------------------------------------------------------------------------
Total net assets............... $117,370,399 $1,184,788,144 $174,532,329
=================================================================================
Net assets consists of
Class A........................ $ 63,017,667 $1,099,718,428 $ 7,975,337
Class B........................ 32,087,657 78,169,398 6,231,759
Class C........................ 991 6,899,330 0
Class Y........................ 22,264,084 988 160,325,233
- ---------------------------------------------------------------------------------
Total net assets............... $117,370,399 $1,184,788,144 $174,532,329
=================================================================================
Shares outstanding
Class A........................ 5,725,066 147,008,498 787,826
Class B........................ 2,915,118 10,449,662 615,658
Class C........................ 90 922,319 0
Class Y........................ 2,022,657 132 15,838,905
- ---------------------------------------------------------------------------------
Net asset value per share
Class A........................ $ 11.01 $ 7.48 $ 10.12
=================================================================================
Class A--Offering price (based
on sales charge of 4.75%,
4.75% and 3.25%,
respectively)................. $ 11.56 $ 7.85 $ 10.46
=================================================================================
Class B........................ $ 11.01 $ 7.48 $ 10.12
=================================================================================
Class C........................ $ 11.01 $ 7.48 --
=================================================================================
Class Y........................ $ 11.01 $ 7.48 $ 10.12
=================================================================================
</TABLE>
See Combined Notes to Financial Statements.
36
<PAGE>
EVERGREEN
National Municipal Bond Funds
Statements of Operations
Year Ended May 31, 1999
<TABLE>
<CAPTION>
Short
High Grade Municipal Intermediate
Fund Fund Fund
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income
Interest............................ $ 6,484,249 $ 68,808,929 $ 8,164,810
- -------------------------------------------------------------------------------
Expenses
Advisory fee........................ 622,316 5,346,723 871,813
Distribution Plan expenses.......... 495,255 4,076,199 68,086
Administrative services fees........ 32,706 198,862 0
Transfer agent fee.................. 105,361 1,450,176 40,489
Trustees' fees and expenses......... 2,540 38,203 2,738
Custodian fee....................... 31,645 378,390 74,029
Other............................... 76,893 345,781 140,263
- -------------------------------------------------------------------------------
Total expenses..................... 1,366,716 11,834,334 1,197,418
Less: Fee credits.................. (5,353) (67,442) (12,746)
- -------------------------------------------------------------------------------
Net expenses....................... 1,361,363 11,766,892 1,184,672
- -------------------------------------------------------------------------------
Net investment income............... 5,122,886 57,042,037 6,980,138
=================================================================================
Net realized and unrealized gains or
losses on securities and closed
futures contracts
Net realized gains or losses on:
Securities......................... 3,259,985 23,342,562 1,924,186
Closed futures contracts........... 39,443 (84,516) 0
- -------------------------------------------------------------------------------
Net realized gains on securities and
closed futures contracts........... 3,299,428 23,258,046 1,924,186
Net change in unrealized losses on
securities and futures contracts... (4,092,412) (32,853,414) (1,867,258)
- -------------------------------------------------------------------------------
Net realized and unrealized gains or
losses on securities and futures
contracts.......................... (792,984) (9,595,368) 56,928
- -------------------------------------------------------------------------------
Net increase in net assets resulting
from operations.................... $ 4,329,902 $ 47,446,669 $ 7,037,066
=================================================================================
</TABLE>
See Combined Notes to Financial Statements.
37
<PAGE>
EVERGREEN
National Municipal Bond Funds
Statements of Changes in Net Assets
Year Ended May 31, 1999
<TABLE>
<CAPTION>
Short
High Grade Intermediate
Fund Municipal Fund Fund
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income............ $ 5,122,886 $ 57,042,037 $ 6,980,138
Net realized gains on securities
and closed futures contracts ... 3,299,428 23,258,046 1,924,186
Net change in unrealized losses
on securities and futures
contracts....................... (4,092,412) (32,853,414) (1,867,258)
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from operations...... 4,329,902 47,446,669 7,037,066
- -------------------------------------------------------------------------------
Distributions to shareholders
from
Net investment income
Class A......................... (2,850,300) (52,828,617) (275,716)
Class B......................... (1,160,127) (4,001,229) (186,375)
Class C......................... (4) (276,027) 0
Class Y......................... (1,128,806) (4) (6,537,604)
Net realized gains
Class A......................... (1,616,602) (35,326,187) (56,521)
Class B......................... (780,637) (3,564,827) (44,004)
Class C......................... 0 (220,155) 0
Class Y......................... (641,983) 0 (1,185,596)
- -------------------------------------------------------------------------------
Total distributions to
shareholders................... (8,178,459) (96,217,046) (8,285,816)
- -------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold........ 18,319,059 197,057,932 59,101,241
Payment for shares redeemed...... (26,775,934) (393,166,651) (65,832,372)
Net asset value of shares issued
in reinvestment of
distributions................... 5,405,970 53,968,092 2,248,570
Net asset value of shares issued
in connection with the
acquisition of
CoreFund Intermediate Municipal
Bond Fund...................... 1,945,718 0 0
- -------------------------------------------------------------------------------
Net decrease in net assets
resulting from capital share
transactions................... (1,105,187) (142,140,627) (4,482,561)
- -------------------------------------------------------------------------------
Total decrease in net assets... (4,953,744) (190,911,004) (5,731,311)
Net assets
Beginning of period.............. 122,324,143 1,375,699,148 180,263,640
- -------------------------------------------------------------------------------
End of period.................... $117,370,399 $1,184,788,144 $174,532,329
===============================================================================
Undistributed (overdistributed)
net investment income........... $ 90,985 $ 324,047 $ (19,557)
===============================================================================
</TABLE>
See Combined Notes to Financial Statements.
38
<PAGE>
EVERGREEN
National Municipal Bond Funds
Statements of Changes in Net Assets
Year Ended May 31, 1998
<TABLE>
<CAPTION>
Short
High Grade Municipal Intermediate
Fund Fund* Fund
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income............ $ 4,436,727 $ 26,943,450 $ 5,133,040
Net realized gains or losses on
securities and closed futures
contracts....................... 3,360,972 16,376,119 1,471,537
Net change in unrealized gains
or losses on securities and
futures contracts............... 1,019,154 (25,411,876) (795,050)
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from operations...... 8,816,853 17,907,693 5,809,527
- -------------------------------------------------------------------------------
Distributions to shareholders
from
Net investment income
Class A......................... (2,198,256) (21,756,580) (225,168)
Class B......................... (1,156,701) (5,153,488) (197,697)
Class C......................... 0 (109,908) 0
Class Y......................... (1,132,786) 0 (4,710,175)
- -------------------------------------------------------------------------------
Total distributions to
shareholders................... (4,487,743) (27,019,976) (5,133,040)
- -------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold........ 14,810,240 21,942,896 22,513,095
Payment for shares redeemed...... (23,942,474) (125,945,502) (52,702,874)
Net asset value of shares issued
in reinvestment of
distributions................... 2,594,120 12,966,083 1,482,137
Net asset value of shares issued
in acquisition of:
Blanchard Flexible Tax Free
Bond Fund...................... 22,403,925 0 0
Common Trust Fund-Intermediate
Tax Exempt Bond Fund........... 0 0 148,714,787
Evergreen Short Intermediate
Municipal Fund-California...... 0 0 14,473,407
Evergreen Tax Free Income
Fund........................... 0 100,118,341 0
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from capital share
transactions................... 15,865,811 9,081,818 134,480,552
- -------------------------------------------------------------------------------
Total increase (decrease) in
net assets.................... 20,194,921 (30,465) 135,157,039
Net assets
Beginning of period.............. 102,129,222 1,375,729,613 45,106,601
- -------------------------------------------------------------------------------
End of period.................... $122,324,143 $1,375,699,148 $180,263,640
===============================================================================
Undistributed net investment
income.......................... $ 98,606 $ 385,382 $ 0
===============================================================================
</TABLE>
* For the five months ended May 31, 1998. The Municipal Fund changed its fiscal
year end from December 31 to May 31, effective May 31, 1998.
See Combined Notes to Financial Statements.
39
<PAGE>
EVERGREEN
National Municipal Bond Funds
Statements of Changes in Net Assets
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Municipal Fund
- -------------------------------------------------------------------------------
<S> <C>
Operations
Net investment income......................................... $ 70,854,337
Net realized gain on securities and closed futures
contracts.................................................... 37,097,062
Net change in unrealized appreciation (depreciation) on
securities................................................... 2,027,467
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations......... 109,978,866
- -------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income
Class B...................................................... (73,972,795)
Net realized gain on investments
Class B...................................................... (17,063,591)
- -------------------------------------------------------------------------------
Total distributions to shareholders.......................... (91,036,386)
- -------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold..................................... 39,118,274
Proceeds from reinvestment of distributions................... 53,790,716
Payment for shares redeemed................................... (294,007,649)
- -------------------------------------------------------------------------------
Net decrease in net assets resulting from capital share
transactions................................................ (201,098,659)
- -------------------------------------------------------------------------------
Total decrease in net assets................................ (182,156,179)
Net assets
Beginning of period........................................... 1,557,885,792
- -------------------------------------------------------------------------------
End of period................................................. $1,375,729,613
===============================================================================
Undistributed net investment income........................... $ 467,027
===============================================================================
</TABLE>
See Combined Notes to Financial Statements.
40
<PAGE>
[LOGO APPEARS HERE]
Combined Notes to Financial Statements
1. ORGANIZATION
The Evergreen National Municipal Bond Funds consist of Evergreen High Grade Mu-
nicipal Bond Fund ("High Grade Fund") (formerly Evergreen High Grade Tax Free
Fund), Evergreen Municipal Bond Fund ("Municipal Fund") (formerly Evergreen Tax
Free Fund) and Evergreen Short Intermediate Municipal Fund ("Short Intermediate
Fund"), (collectively, the "Funds"). Each Fund is a diversified series of Ever-
green Municipal Trust (the "Trust"), a Delaware business trust organized on
September 18, 1997. The Trust is an open-end management investment company reg-
istered under the Investment Company Act of 1940, as amended (the "1940 Act").
The Funds offer Class A, Class B, Class C and/or Class Y shares. Class A shares
are sold with a maximum front-end sales charge of 4.75% for both High Grade
Fund and Municipal Fund and a maximum front-end sales charge of 3.25% for the
Short Intermediate Fund. Class B and Class C shares are sold without a front-
end sales charge, but pay a higher ongoing distribution fee than Class A. Class
B shares are sold subject to a contingent deferred sales charge that is payable
upon redemption and decreases depending on how long the shares have been held.
Class B shares of Municipal Fund purchased after January 1, 1997 will automati-
cally convert to Class A shares after seven years. Class B shares of Municipal
Fund purchased prior to January 1, 1997 retain their existing conversion
rights. Class C shares are sold subject to a contingent deferred sales charge
payable on shares redeemed within one year after the month of purchase. Class Y
shares are sold at net asset value and are not subject to contingent deferred
sales charges or distribution fees. Class Y shares are sold only to investment
advisory clients of First Union Corporation ("First Union") and its affiliates,
certain institutional investors or Class Y shareholders of record of certain
other funds managed by First Union and its affiliates as of December 30, 1994.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Funds in the preparation of their financial statements. The poli-
cies are in conformity with generally accepted accounting principles, which re-
quire management to make estimates and assumptions that affect amounts reported
herein. Actual results could differ from these estimates.
A. Valuation of Securities
An independent pricing service values each Fund's municipal bonds at fair value
using a variety of factors which may include yield, liquidity, interest rate
risk, credit quality, coupon, maturity and type of issue. Securities for which
valuations are not available from an independent pricing service may be valued
by brokers which use prices provided by market makers or estimates of market
value obtained from yield data relating to investments or securities with simi-
lar characteristics. Otherwise, securities for which valuations are not avail-
able from an independent pricing service (including restricted securities) are
valued at fair value as determined in good faith according to procedures estab-
lished by the Board of Trustees.
Short-term investments with remaining maturities of 60 days or less are carried
at amortized cost, which approximates market value.
B. Futures Contracts
In order to gain exposure to or protect against changes in security values, the
Funds may buy and sell futures contracts.
The initial margin deposited with a broker when entering into a futures trans-
action is subsequently adjusted by daily payments or receipts ("variation mar-
gin") as the value of the contract changes. Such changes are recorded as
unrealized gains or losses. Realized gains or losses are recognized on closing
the contract.
Risks of entering into futures contracts include (i) the possibility of an il-
liquid market for the contract, (ii) the possibility that a change in the value
of the contract may not correlate with changes in the value of the underlying
instrument or index, and (iii) the credit risk that the other party will not
fulfill their obligations
41
<PAGE>
[LOGO APPEARS HERE]
Combined Notes to Financial Statements (continued)
under the contract. Futures contracts also involve elements of market risk in
excess of the amount reflected in the statement of assets and liabilities.
C. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts and amortization of premiums.
D. Federal Taxes
The Funds have qualified and intend to continue to qualify as regulated invest-
ment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Funds will not incur any federal income tax liability since
they are expected to distribute all of their net investment company taxable in-
come, net tax-exempt income and net capital gains, if any, to their sharehold-
ers. The Funds also intend to avoid any excise tax liability by making the re-
quired distributions under the Code. Accordingly, no provision for federal
taxes is required. To the extent that realized capital gains can be offset by
capital loss carryforwards, it is each Fund's policy not to distribute such
gains.
E. Distributions
Distributions from net investment income for the Funds are declared daily and
paid monthly. Distributions from net realized capital gains, if any, are paid
at least annually. Distributions to shareholders are recorded at the close of
business on the ex-dividend date.
Income and capital gains distributions to shareholders are determined in accor-
dance with income tax regulations, which may differ from generally accepted ac-
counting principles.
The significant differences between financial statement amounts available for
distributions and distributions made in accordance with income tax regulations
are primarily due to differing treatment for the accretion of market discount
and certain capital loss carryovers.
Certain distributions paid during previous years have been reclassified to con-
form to current year presentation.
F. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the rela-
tive net assets of each class. Currently, class specific expenses are limited
to expenses incurred under the Distribution Plans for each class.
G. Derivative Securities
The Municipal Fund may invest in derivative securities. A derivative security
is any investment that derives its value from an underlying security, asset or
market index. Greater market fluctuations may result if these securities are
leveraged. The Fund invests in these types of securities when it is consistent
with its investment objectives.
3. INVESTMENT ADVISORY AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
First Union National Bank, ("FUNB"), a subsidiary of First Union, serves as the
investment advisor to the High Grade Fund and is paid a management fee that is
computed and paid monthly at an annual rate of 0.50% of the Fund's average
daily net assets.
Evergreen Investment Management Company ("EIMC"), a subsidiary of First Union,
is the investment advisor for Municipal Fund. In return for providing invest-
ment management and administrative services to Municipal Fund, the Fund pays
EIMC a management fee that is calculated daily and paid monthly. The management
fee is computed at an annual rate of 2.00% of Municipal Fund's gross investment
income plus an amount determined by applying percentage rates, starting at
0.50% and declining to 0.25% per annum as net assets increase, to the average
daily net assets of the Fund.
42
<PAGE>
[LOGO APPEARS HERE]
Combined Notes to Financial Statements (continued)
Evergreen Asset Management Corp. ("EAMC"), a wholly-owned subsidiary of First
Union, serves as the investment advisor to the Short Intermediate Fund and is
paid a management fee that is computed daily and paid monthly at an annual rate
of 0.50% of the Fund's average daily net assets.
Lieber & Company, an affiliate of First Union, is the investment sub-advisor to
Short Intermediate Fund. Lieber & Company is reimbursed by EAMC for providing
investment sub-advisory services at no additional expense to the Short Interme-
diate Fund.
For each of the Funds, Evergreen Investment Services ("EIS"), a subsidiary of
First Union, serves as the administrator and The BISYS Group, Inc. ("BISYS")
serves as the sub-administrator for each Fund. As administrator, EIS provides
the Funds with facilities, equipment and personnel. As sub-administrator to the
Funds, BISYS provides the officers of the Funds. Officers of the Funds and af-
filiated Trustees receive no compensation directly from the Funds.
The administrator and sub-administrator for the High Grade Fund are entitled to
an annual fee based on the average daily net assets of the funds administered
by EIS for which First Union or its investment advisory subsidiaries are also
the investment advisors. The administration fee is calculated by applying per-
centage rates, which start at 0.05% and decline to 0.01% per annum as net as-
sets increase, to the average daily net assets of the Fund. The sub-administra-
tion fee is calculated by applying percentage rates, which start at 0.01% and
decline to 0.004% per annum as net assets increase, to the average daily net
assets of the Fund.
During the year ended May 31, 1999, the High Grade Fund paid or accrued $26,050
and $6,656, respectively, for administrative and sub-administrative services.
For the Municipal Fund and Short Intermediate Fund, the administration and sub-
administration fee is paid by the investment advisor and is not a fund expense.
During the year ended May 31, 1999, the Municipal Fund reimbursed EIMC $198,862
for certain administration and accounting expenses.
Evergreen Service Company ("ESC"), an indirectly, wholly owned subsidiary of
First Union, serves as the transfer and dividend disbursing agent for the
Funds.
At May 31, 1999, FUNB owned directly or beneficially, 74% of the outstanding
shares of the Short Intermediate Fund.
4. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI"), a wholly owned subsidiary of BISYS, serves
as principal underwriter to the Funds.
Each Fund has adopted Distribution Plans, as allowed by Rule 12b-1 of the 1940
Act, for each class of shares, except Class Y. Distribution plans permit a Fund
to compensate its principal underwriter for costs related to selling shares of
the Fund and for various other services. These costs, which consist primarily
of commissions and service fees to broker-dealers who sell shares of the Fund,
are paid by the Fund through "Distribution Plan expenses". Each class, except
Class Y of each fund and Class A of Short Intermediate Fund, currently pays a
service fee equal to 0.25% of average daily net assets of the respective class
of shares. Class A shares of Short Intermediate Fund pays a service fee equal
to 0.10% of average daily net assets. In addition, Class B and Class C also pay
distribution fees equal to 0.75% of the average daily net assets of the class.
Distribution Plan expenses are calculated daily and paid monthly.
During the year ended May 31, 1999, amounts paid or accrued to EDI pursuant to
each Fund's Class A, Class B, Class C Distribution Plans were as follows:
<TABLE>
<CAPTION>
Class A Class B Class C
-------------------------------
<S> <C> <C> <C>
High Grade Fund.................. $ 166,596 $ 328,658 $ 1
Municipal Fund................... 2,935,274 1,067,530 73,395
Short Intermediate Fund.......... 7,006 61,080 0
</TABLE>
43
<PAGE>
[LOGO APPEARS HERE]
Combined Notes to Financial Statements (continued)
With respect to Class B and Class C shares, the principal underwriter may pay
distribution fees greater than the allowable annual amounts each Fund is per-
mitted to pay under the Distribution Plans.
Each of the Distribution Plans may be terminated at any time by vote of the In-
dependent Trustees or by vote of a majority of the outstanding voting shares of
the respective class.
Contingent deferred sales charges paid by redeeming shareholders are paid to
EDI.
5. ACQUISITIONS
On July 24, 1998, High Grade Fund acquired all of the assets and assumed cer-
tain liabilities of CoreFund Intermediate Municipal Bond Fund, in an exchange
for Class A and Class Y shares of High Grade Fund.
On February 28, 1998, High Grade Fund acquired all of the assets and assumed
certain liabilities of Blanchard Flexible Tax-Free Bond Fund, in an exchange
for Class A shares of High Grade Fund.
On January 23, 1998, Municipal Fund acquired substantially all the assets and
assumed certain liabilities of Evergreen Tax Free Income Fund, in an exchange
for Class A, Class B and Class C shares of Municipal Fund.
On November 21, 1997, Short Intermediate Fund acquired substantially all the
assets and assumed certain liabilities of Common Trust Fund--Intermediate Tax
Exempt Bond Fund in exchange for Class Y shares of Short Intermediate Fund.
On July 31, 1997, Short Intermediate Fund acquired substantially all the assets
and assumed certain liabilities of Evergreen Short Intermediate Municipal Fund-
California in exchange for Class A, Class B and Class Y shares of Short Inter-
mediate Fund.
These acquisitions were accomplished by a tax-free exchange of the respective
shares of each Fund. The value of net assets acquired, number of shares issued,
unrealized appreciation acquired and the aggregate net assets of each Fund im-
mediately after the acquisition were as follows:
<TABLE>
<CAPTION>
Value of Net Number of Unrealized Net Assets
Acquiring Fund Acquired Fund Assets Acquired Shares Issued Appreciation After Acquisition
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
High Grade Fund... CoreFund Intermediate $ 1,945,718 171,570 $ 51,328 $ 127,732,184
Municipal Bond Fund
High Grade Fund... Blanchard Flexible Tax- 22,403,925 1,966,629 1,611,908 127,402,909
Free Bond Fund
Municipal Fund.... Evergreen Tax Free 100,118,341 12,757,974 6,341,257 1,467,541,556
Income Fund
Short Intermediate Common Trust Fund-- 148,714,787 14,616,570 3,195,888 194,719,999
Fund............. Intermediate Tax Exempt
Bond Fund
Short Intermediate Evergreen Short 14,473,407 1,419,771 203,594 59,045,106
Fund............. Intermediate Municipal
Fund--California
</TABLE>
44
<PAGE>
[LOGO APPEARS HERE]
Combined Notes to Financial Statements (continued)
6. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with $0.001
par value authorized. Shares of beneficial interest of the Funds are currently
divided into Class A, Class B, Class C and/or Class Y. Transactions in shares
of the Funds were as follows:
Evergreen High Grade Fund
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1999 May 31, 1998
------------------------ -----------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold................. 751,068 $ 8,521,661 352,430 $ 3,971,088
Automatic conversion of
Class B shares to Class A
shares..................... 1,811 20,337
Shares redeemed............. (1,053,272) (11,920,506) (971,142) (10,944,155)
Shares issued in
reinvestment of
distributions.............. 270,601 3,051,015 122,837 1,383,168
Shares issued in acquisition
of:
Blanchard Flexible Tax-Free
Bond Fund................. 0 0 1,966,629 22,403,925
CoreFund Intermediate
Municipal Bond Fund....... 76,637 869,114 0 0
- --------------------------------------------------------------------------------
Net increase................ 46,845 $ 541,621 1,470,754 $ 16,814,026
- --------------------------------------------------------------------------------
Class B
Shares sold................. 412,546 $ 4,682,255 414,162 $ 4,656,253
Automatic conversion of
Class B shares to Class A
shares..................... (1,811) (20,337)
Shares redeemed............. (491,173) (5,569,981) (514,611) (5,780,674)
Shares issued in
reinvestment of
distributions.............. 107,295 1,209,317 61,515 692,436
- --------------------------------------------------------------------------------
Net increase (decrease)..... 26,857 $ 301,254 (38,934) $ (431,985)
- --------------------------------------------------------------------------------
Class C*
Shares sold................. 90 $ 1,000 0 0
Shares redeemed............. 0 0 0 0
Shares issued in
reinvestment of
distributions.............. 0 4 0 0
- --------------------------------------------------------------------------------
Net increase................ 90 $ 1,004 0 0
- --------------------------------------------------------------------------------
Class Y
Shares sold................. 452,470 $ 5,114,143 548,341 $ 6,182,899
Shares redeemed............. (824,354) (9,285,447) (641,096) (7,217,645)
Shares issued in
reinvestment of
distributions.............. 101,709 1,145,634 46,065 518,516
Shares issued in acquisition
of CoreFund Intermediate
Municipal Bond Fund........ 94,933 1,076,604 0 0
- --------------------------------------------------------------------------------
Net decrease................ (175,242) $ (1,949,066) (46,690) $ (516,230)
- --------------------------------------------------------------------------------
Net increase (decrease)..... $ (1,105,187) $ 15,865,811
- --------------------------------------------------------------------------------
</TABLE>
* For the period from April 30, 1999 (Commencement of Operations) to May 31,
1999.
45
<PAGE>
[LOGO APPEARS HERE]
Combined Notes to Financial Statements (continued)
Municipal Fund
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1999 May 31, 1998
-------------------------- -----------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............. 23,978,424 $ 182,234,205 404,689 $ 3,409,126
Automatic conversion of
Class B shares to Class
A shares............... 4,188,100 31,927,957 162,305,257 1,285,292,084
Shares redeemed......... (47,475,315) (362,485,428) (12,806,920) (100,036,093)
Shares issued in
reinvestment of
distributions.......... 6,444,544 49,344,612 1,526,223 11,889,303
Shares issued in
acquisition of
Evergreen Tax Free
Income Fund............ 0 0 8,443,496 66,261,386
- ------------------------------------------------------------------------------------
Net increase
(decrease)............. (12,864,247) (98,978,654) 159,872,745 1,266,815,806
- ------------------------------------------------------------------------------------
Class B
Shares sold............. 1,822,072 13,980,072 2,346,134 18,452,022
Automatic conversion of
Class B shares to Class
A shares............... (4,188,253) (31,927,957) (162,305,257) (1,285,292,084)
Shares redeemed......... (3,771,056) (28,951,245) (3,205,499) (25,180,245)
Shares issued in
reinvestment of
distributions.......... 556,665 4,265,017 130,151 1,014,991
Shares issued in
acquisition of
Evergreen Tax Free
Income Fund............ 0 0 3,247,599 25,484,520
- ------------------------------------------------------------------------------------
Net decrease............ (5,580,572) (42,634,113) (159,786,872) (1,265,520,796)
- ------------------------------------------------------------------------------------
Class C*
Shares sold............. 109,350 842,655 10,499 81,748
Shares redeemed......... (224,935) (1,729,978) (94,211) (729,164)
Shares issued in
reinvestment of
distributions.......... 46,787 358,459 7,950 61,789
Shares issued in
acquisition of
Evergreen Tax Free
Income Fund............ 0 0 1,066,879 8,372,435
- ------------------------------------------------------------------------------------
Net increase
(decrease)............. (68,798) (528,864) 991,117 7,786,808
- ------------------------------------------------------------------------------------
Class Y
Shares sold............. 132 1,000 0 0
Shares redeemed......... 0 0 0 0
Shares issued in
reinvestment of
distributions.......... 0 4 0 0
- ------------------------------------------------------------------------------------
Net increase............ 132 1,004 0 0
- ------------------------------------------------------------------------------------
Net increase
(decrease)............. $(142,140,627) $ 9,081,818
- ------------------------------------------------------------------------------------
</TABLE>
* For the period from April 30, 1999 (Commencement of Operations) to May 31,
1999.
Short Intermediate Fund
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1999 May 31, 1998
------------------------ ------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............... 1,277,930 $ 13,013,571 383,419 $ 3,907,614
Automatic conversion of
Class B shares to Class A
shares................... 9,774 114,565 0 0
Shares redeemed........... (1,160,473) (11,819,868) (356,623) (3,624,581)
Shares issued in
reinvestment of
distributions............ 15,911 162,316 15,389 156,458
Shares issued in
acquisition of
Evergreen Short
Intermediate Municipal
Fund--California......... 0 0 736 7,495
- -------------------------------------------------------------------------------
Net increase.............. 143,142 1,470,584 42,921 446,986
- -------------------------------------------------------------------------------
Class B
Shares sold............... 150,861 1,539,699 107,260 1,092,900
Automatic conversion of
Class B shares to Class A
shares................... (9,774) (114,565) 0 0
Shares redeemed........... (109,499) (1,103,599) (227,503) (2,313,782)
Shares issued in
reinvestment of
distributions............ 15,998 163,268 14,126 143,788
Shares issued in
acquisition of
Evergreen Short
Intermediate Municipal
Fund--California......... 0 0 6,897 70,307
- -------------------------------------------------------------------------------
Net increase (decrease)... 47,586 484,803 (99,220) (1,006,787)
- -------------------------------------------------------------------------------
Class Y
Shares sold............... 4,363,929 44,547,971 1,719,348 17,512,581
Shares redeemed........... (5,186,456) (52,908,905) (4,588,604) (46,764,511)
Shares issued in
reinvestment of
distributions............ 188,565 1,922,986 116,093 1,181,891
Shares issued in
acquisition of:
Common Trust Fund--
Intermediate Tax Exempt
Bond Fund............... 0 0 14,616,570 148,714,787
Evergreen Short
Intermediate Municipal
Fund--California........ 0 0 1,412,138 14,395,605
- -------------------------------------------------------------------------------
Net increase (decrease)... (633,962) (6,437,948) 13,275,545 135,040,353
- -------------------------------------------------------------------------------
Net increase (decrease)... $ (4,482,561) $134,480,552
- -------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
[LOGO APPEARS HERE]
Combined Notes to Financial Statements (continued)
7. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the year ended May 31, 1999:
<TABLE>
<CAPTION>
Cost of
Purchases Proceeds from Sales
----------------------------------
<S> <C> <C>
High Grade Fund.............. $ 96,516,736 $ 102,629,274
Municipal Fund............... 1,152,170,265 1,359,564,802
Short Intermediate Fund...... 112,291,529 111,097,104
</TABLE>
On July 24, 1998, High Grade Fund acquired securities with a cost basis of
$1,825,647 resulting from the Fund's acquisition of CoreFund Intermediate Mu-
nicipal Bond Fund.
On May 31, 1999, the composition of unrealized appreciation and depreciation on
securities based on the aggregate cost of securities for federal income tax
purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Tax Unrealized Unrealized Appreciation
Cost Appreciation Depreciation (Depreciation)
-------------------------------------------------------
<S> <C> <C> <C> <C>
High Grade
Fund.......... $ 112,993,996 3,486,801 (768,182) 2,718,619
Municipal
Fund.......... 1,146,773,095 38,049,844 (10,009,536) 28,040,308
Short
Intermediate
Fund.......... 181,211,079 1,509,794 (334,342) 1,175,452
</TABLE>
8. EXPENSE OFFSET ARRANGEMENTS
The Funds have entered into expense offset arrangements with ESC and their cus-
todian whereby credits realized as a result of uninvested cash balances were
used to reduce a portion of each Fund's related expenses. The assets deposited
with ESC and the custodian under these expense offset arrangements could have
been invested in income-producing assets. The amount of fee credits received by
each Fund and the impact on each Fund's expense ratio represented as a percent-
age of its average net assets were as follows:
<TABLE>
<CAPTION>
Total
Fee Credits % of Average
Received Net Assets
-------------------------
<S> <C> <C>
High Grade Fund........................ $ 5,353 0.00%
Municipal Bond Fund.................... $67,442 0.01%
Short Intermediate Fund................ $12,746 0.01%
</TABLE>
9. DEFERRED TRUSTEES' FEES
Each Independent Trustee of each Fund may defer any or all compensation related
to performance of their duties as Trustees. The Trustees' deferred balances are
allocated to deferral accounts, which are included in the accrued expenses for
the Fund. The investment performance of the deferral accounts are based on the
investment performance of certain Evergreen Funds. Any gains earned or losses
incurred in the deferral accounts are reported in the Trustees' fees and ex-
penses. Trustees will be paid either in one lump sum or in quarterly install-
ments for up to ten years at their election, not earlier than either the year
in which the Trustee ceases to be a member of the Board of Trustees or January
1, 2000.
10. FINANCING AGREEMENTS
Certain Evergreen Funds, State Street Bank and Trust Company ("State Street")
and a group of banks (collectively, the "Banks") entered into a financing
agreement dated December 22, 1997, as amended on November 20, 1998. Under this
agreement, the Banks provided an unsecured credit facility in the aggregate
amount of $400 million ($275 million committed and $125 million uncommitted).
The credit facility was allocated, under the terms of the financing agreement,
among the Banks. The credit facility is to be accessed by the Funds for tempo-
rary or emergency purposes only and is subject to each Fund's borrowing re-
strictions. Borrowings under this facility bear interest at 0.50% per annum
above the Federal Funds rate. A commitment fee of 0.065% per annum will be in-
curred on the unused portion of the committed facility, which was allocated to
all funds. For its assistance in arranging this financing agreement, the Capi-
tal Market Group of First Union was paid a
47
<PAGE>
[LOGO APPEARS HERE]
Combined Notes to Financial Statements (continued)
one-time arrangement fee of $27,500. State Street serves as administrative
agent for the Banks, and as administrative agent is entitled to a fee of
$20,000 per annum which is allocated to all of the funds.
This agreement was amended and renewed on December 22, 1998. The amended fi-
nancing agreement became effective on December 22, 1998 among all of the Ever-
green Funds, State Street and The Bank of New York ("BONY"). Under this agree-
ment, State Street and BONY provide an unsecured credit facility in the aggre-
gate amount of $150 million ($125 million committed and $25 million uncommit-
ted). The remaining terms and conditions of the agreement are unaffected.
During the year ended May 31, 1999, the Funds had no borrowings under these ar-
rangements.
11. NAME CHANGES
Effective January 4, 1999, Evergreen High Grade Tax Free Fund and Evergreen Tax
Free Fund changed their names to Evergreen High Grade Municipal Bond Fund and
Evergreen Municipal Bond Fund, respectively. Additionally, the investment pol-
icy of the Funds has changed with respect to municipal bonds subject to the
federal Alternative Minimum Tax ("AMT"). Formerly, the Funds could not invest
more than 20% of their assets in municipal bonds subject to AMT. Currently, the
Funds may invest up to 100% of their assets in such bonds.
12. CHANGE IN INDEPENDENT AUDITOR
Based on the recommendation of the Audit Committee of the High Grade Fund, Mu-
nicipal Fund and Short-Intermediate Fund, the Board of Trustees has determined
not to retain PricewaterhouseCoopers LLP as the Funds' independent auditor and
voted to appoint KPMG LLP for the fiscal year ended May 31, 2000. During the
two most recent fiscal years, as applicable, PricewaterhouseCoopers' audit re-
ports contained no adverse opinion or disclaimer of opinion; nor were its re-
ports qualified or modified as to uncertainty, audit scope, or accounting prin-
ciple. Further, in connection with its audits for the two most recent fiscal
years and through July 20, 1999, as applicable, there were no disagreements be-
tween the Funds and PricewaterhouseCoopers on any matter of accounting princi-
ples or practices, financial statement disclosure or auditing scope or proce-
dure, which if not resolved to the satisfaction of PricewaterhouseCoopers would
have caused it to make reference to the disagreements in its report on the fi-
nancial statements for such years. Prior to the fiscal year just ended, Munici-
pal Bond Fund had retained KPMG LLP as its independent auditor.
13. SUBSEQUENT EVENTS
At a regular meeting of Board of Trustees on March 12, 1999, the
Trustees of Evergreen California Municipal Bond Fund and Evergreen New
York Municipal Bond Fund approved a Plan of Reorganization ("Plan").
Under the Plan, Evergreen High Grade Municipal Bond Fund will acquire
substantially all of the assets and certain identified liabilities of
Evergreen California Municipal Bond Fund and Evergreen New York Munic-
ipal Bond Fund, in exchange for shares of Evergreen High Grade Munici-
pal Bond Fund.
In addition, at a regular meeting of Board of Trustees on March 12,
1999, the Trustees of Evergreen Massachusetts Municipal Bond Fund and
Evergreen Missouri Municipal Bond Fund approved a Plan of Reorganiza-
tion ("Plan"). Under the Plan, Evergreen Municipal Bond Fund will ac-
quire substantially all of the assets and certain identified liabili-
ties of Evergreen Massachusetts Municipal Bond Fund and Evergreen Mis-
souri Municipal Bond Fund, in exchange for shares of Evergreen Munici-
pal Bond Fund.
A special meeting of shareholders of the Evergreen California Munici-
pal Bond Fund, Evergreen New York Municipal Bond Fund, Evergreen Mas-
sachusetts Municipal Bond Fund and Evergreen Missouri Municipal Bond
Fund will be held on July 23, 1999 to consider and vote on the pro-
posed plans of reorganization. Shareholders of record on May 5, 1999
are eligible to attend and vote at the meeting.
48
<PAGE>
[LOGO APPEARS HERE]
Report of Independent Accountants
To the Board of Trustees and Shareholders of
Evergreen High Grade Municipal Bond Fund
Evergreen Municipal Bond Fund
Evergreen Short Intermediate Municipal Fund
In our opinion, the accompanying statements of assets and liabilities, includ-
ing the schedules of investments, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Evergreen High Grade Municipal
Bond Fund (formerly Evergreen High Grade Tax Free Fund), Evergreen Municipal
Bond Fund (formerly Evergreen Tax Free Fund) and Evergreen Short Intermediate
Municipal Fund (the "Funds"), each a series of Evergreen Municipal Trust, at
May 31, 1999, and the results of each of their operations, the changes in each
of their net assets and the financial highlights for each of the periods indi-
cated in conformity with generally accepted accounting principles. These finan-
cial statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibil-
ity is to express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with gener-
ally accepted auditing standards which require that we plan and perform the au-
dit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by man-
agement, and evaluating the overall financial statement presentation. We be-
lieve that our audits, which included confirmation of securities at May 31,
1999 by correspondence with the custodians and brokers, provide a reasonable
basis for the opinion expressed above. The financial statements of Evergreen
Municipal Bond Fund for the year ended May 31, 1998, and indicated periods
prior to May 31, 1998 were audited by other independent accountants whose re-
port thereon dated July 3, 1998 expressed an unqualified opinion.
PricewaterhouseCoopers LLP
160 Federal Street Boston, MA
July 19 1999
49
<PAGE>
[LOGO APPEARS HERE]
Year 2000 (unaudited)
Like other investment companies, the Funds could be adversely affected
if the computer systems used by the Funds' investment advisors and the
Funds' other service providers are not able to perform their intended
functions effectively after 1999 because of the inability of computer
software to distinguish the year 2000 from the year 1900. The Funds'
investment advisors are taking steps to address this potential year
2000 problem with respect to the computer systems that they use and to
obtain satisfactory 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 from this problem.
FEDERAL INCOME TAX STATUS OF DISTRIBUTIONS (Unaudited)
Pursuant to section 852 of the Internal Revenue Code, the Funds have
designated the following amounts as long-term capital gain distribu-
tions for the fiscal year ended May 31, 1999:
<TABLE>
<CAPTION>
Aggregate Per Share
----------- ---------
<S> <C> <C>
High Grade Fund........................... $ 2,839,566 0.256
Municipal Fund............................ 30,696,791 0.194
Short Intermediate Fund................... 1,202,608 0.072
</TABLE>
For the fiscal period ended May 31, 1999, the following percentages
represent the portion of distributions from net investment income,
which are exempt from federal income tax, other than alternative mini-
mum tax:
<TABLE>
<S> <C>
High Grade Fund........................................... 99.90%
Municipal Fund............................................ 99.92%
Short Intermediate Fund................................... 99.33%
</TABLE>
50
<PAGE>
Evergreen Funds
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Money Market Fund
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Florida Municipal Money Market Fund
New Jersey Municipal Money Market Fund
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Short Intermediate Municipal Fund
High Grade Municipal Bond Fund
Municipal Bond Fund
Connecticut Municipal Bond Fund
Florida Municipal Bond Fund
Florida High Income Municipal Bond Fund
Georgia Municipal Bond Fund
Maryland Municipal Bond Fund
New Jersey Municipal Bond Fund
North Carolina Municipal Bond Fund
Pennsylvania Municipal Bond Fund
South Carolina Municipal Bond Fund
Virginia Municipal Bond Fund
Income
Capital Preservation and Income Fund
Short Intermediate Bond Fund
Intermediate Term Bond Fund
U.S. Government Fund
Diversified Bond Fund
Strategic Income Fund
High Yield Bond Fund
Balanced
Balanced Fund
Tax Strategic Foundation Fund
Foundation Fund
Growth & Income
Utility Fund
Income and Growth Fund
Equity Income Fund
Value Fund
Blue Chip Fund
Growth and Income Fund
Small Cap Value Fund
Domestic Growth
Tax Strategic Equity Fund
Strategic Growth Fund
Stock Selector Fund
Evergreen Fund
Masters Fund
Omega Fund
Small Company Growth Fund
Aggressive Growth Fund
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International Growth Fund
Global Opportunities Fund
Precious Metals Fund
Emerging Markets Growth Fund
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