<PAGE>
Annual Report
as of May 31, 2000
Evergreen
National Municipal Bond Funds
[MUTUAL FUND
[LOGO OF EVERGREEN FUNDS] SERVICE AWARD
SEAL]
<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 ...................................................... 5
Portfolio Manager Interview ........................................... 6
Evergreen Short-Intermediate Municipal Bond Fund
Fund at a Glance ...................................................... 8
Portfolio Manager Interview ........................................... 9
Evergreen Tax-Free High Income Fund
Fund at a Glance ...................................................... 11
Portfolio Manager Interview ........................................... 12
Financial Highlights
Evergreen High Grade Municipal Bond Fund .............................. 14
Evergreen Municipal Bond Fund ......................................... 16
Evergreen Short-Intermediate Municipal Bond Fund ...................... 18
Evergreen Tax-Free High Income Fund ................................... 20
Schedules of Investments
Evergreen High Grade Municipal Bond Fund .............................. 22
Evergreen Municipal Bond Fund ......................................... 25
Evergreen Short-Intermediate Municipal Bond Fund ...................... 34
Evergreen Tax-Free High Income Fund ................................... 37
Combined Notes to Schedules of Investments ............................... 44
Statements of Assets and Liabilities ..................................... 45
Statements of Operations ................................................. 46
Statements of Changes in Net Assets ...................................... 48
Combined Notes to Financial Statements ................................... 51
Independent Auditors' Report ............................................. 61
Additional Information ................................................... 62
Evergreen Funds
Evergreen Funds is one of the nation's fastest growing investment companies with
approximately $80 billion in assets under management.
With over 80 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 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: NOT FDIC INSURED MAY LOSE VALUE NOT BANK GUARANTEED
Evergreen Distributor,Inc.
Evergreen FundsSM is a service mark of Evergreen Investment Services,Inc.
<PAGE>
Letter to Shareholders
----------------------
July 2000
[PHOTO]
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, 2000.
U.S. Bond Markets Experience Volatility
The bond market environment has suffered a great deal of volatility and
unpredictability for the past twelve-month period as fixed income markets were
hit by rising interest rates and falling bond prices. Potential inflation
threats, including rising wage costs and higher energy prices, prompted the
Federal Reserve Board to take an aggressive stance with respect to its interest
rate policy, raising rates five times during the period. In addition, the U.S.
Treasury's announcement of a plan to curtail new and existing supplies of
long-term government bonds led investors to seek longer-term issues in
anticipation of possible shortages. These factors are indicative of an abnormal
investment environment where longer-term bonds paid lower rates than short-term
bonds, this is also known as an "inverted yield curve". Amidst this volatile
environment, we still believe that bonds are relatively attractive over the long
term.
We believe that sound investing is about taking steps to meet your long-term
financial needs and goals. We remind you to take advantage of your financial
advisor's expertise to develop and refine a financial plan that will enable you
to meet your objectives. Evergreen Funds offers a broad mix of stock, bond and
money market funds that could make it simple for you to choose the most
appropriate for your portfolio.
Website Enhancements
Please visit our enhanced website, evergreen-funds.com, for more information
about Evergreen Funds. The site offers an array of helpful information including
an investment education center, interactive calculators to assist your
investment planning and general information about Evergreen Funds.
Thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/ William M. Ennis
William M. Ennis
President and CEO
Evergreen Investment Company, Inc.
1
<PAGE>
EVERGREEN
High Grade Municipal Bond Fund
Fund at a Glance as of May 31, 2000
Portfolio
Management
------------
[PHOTO]
James T. Colby III
Tenure: February 1992
--------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE1
--------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of
5/31/2000.
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.
1Source: 2000 Morningstar, Inc.
2 Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses 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 for Classes B, C and Y prior to their inception dates is
based on the performance of Class A, the original class offered. The historical
returns for Classes B, C and Y have not been adjusted to reflect the effect of
each Class' 12b-1 fees. These fees are 0.25% for Class A and 1.00% for Classes B
and C. 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 includes the reinvestment of income
dividends and capital gain distributions.
The Fund's investment objective is non-fundamental and may be changed without
the vote of the Fund's shareholders.
The Fund's yield will fluctuate and there can be no guarantee that the Fund wil
achieve its objective or any particular tax-exempt yield. Income may be subject
to alternative minimum tax.
U.S. government guarantees apply only to underlying securities of the Fund's
portfolio and not to the Fund's shares.
Funds that invest in high yield, lower-rated bonds may contain more risks due to
the increased possibility of default.
All data is as of May 31, 2000 and subject to change.
--------------------------------------------------------------------------------
PERFORMANCE AND RETURN2
--------------------------------------------------------------------------------
Portfolio Inception Date: 2/21/1992 Class A Class B Class C Class Y
Class Inception Date 2/21/1992 1/11/1993 4/30/1999 2/28/1994
Average Annual Returns*
1 year with sales charge -8.13% -8.80% -6.08% n/a
1 year w/o sales charge -3.54% -4.27% -4.27% -3.30%
5 years 2.84% 2.74% 3.68% 4.11%
Since Portfolio Inception 4.85% 4.80% 5.42% 5.67%
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front End CDSC CDSC
30-day SEC Yield 4.64% 4.13% 4.12% 5.12%
Tax Equivalent Yield** 7.68% 6.84% 6.82% 8.48%
12-month income dividends
per share $0.48 $0.40 $0.40 $0.50
12-month capital gain distribution
per share $0.15 $0.15 $0.15 $0.15
* 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
--------------------------------------------------------------------------------
[GRAPH]
Consumer Price Lehman Brothers
High Grade Muni A Index - US Municipals
02/29/92 9,525 10,000 10,000
05/31/92 9,739 10,079 10,212
05/31/93 10,964 10,404 11,433
05/31/94 11,089 10,642 11,716
05/31/95 12,182 10,981 12,783
05/31/96 12,637 11,299 13,367
05/31/97 13,519 11,551 14,474
05/31/98 14,717 11,746 15,832
05/31/99 15,250 11,991 16,580
05/31/00 14,708 12,355 16,430
Comparison of a $10,000 investment in Evergreen High Grade Municipal Bond Fund,
Class A2, versus a similar investment in the Lehman Brothers Municipal Bond
Index (LBMBI) and the Consumer Price Index (CPI).
The LBMBI is an unmanaged market index which does not include transaction costs
associated with buying and selling securities or any mutual fund expenses. The
CPI 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?
For the twelve-month period ended May 31, 2000, Evergreen High Grade Municipal
Bond Fund, Class A shares, returned -3.54%. Fund returns are before the
deduction of any applicable sales charges. During the same period, the average
return of insured municipal bond funds was -3.01%, according to Lipper Inc., an
independent monitor of mutual fund performance, while the Lehman Brothers
Municipal Bond Index returned -0.86%.
While the Fund's performance, on a total return basis, was below median, it
improved substantially in the final three months of the fiscal period as well as
during the five month period January 1, 2000 through May 31, 2000. We
implemented strategies designed to give the Fund broader sector diversification.
Throughout the twelve-month period, the Fund provided generous levels of
tax-advantaged income, with dividend yields well above that of the Lipper funds'
average.
Portfolio
Characteristics
---------------
Total Net Assets $113,610,103
--------------------------------------------------------------------------------
Average Credit Quality AAA
--------------------------------------------------------------------------------
Average Maturity 15.9 years
--------------------------------------------------------------------------------
Average Duration 8.7 years
--------------------------------------------------------------------------------
What factors affected performance during the twelve-month period?
During the first seven months of the fiscal period, it was a very poor
environment for the municipal bond market, which was hurt by rising interest
rates and a loss of liquidity as many traditional retail investors sold bonds or
redeemed mutual fund shares. If anything, conditions were even worse for the
insured municipal bonds that the Fund emphasizes, especially in the first seven
months of the fiscal year. Insured bonds, which make up about 50% of the
municipal bond market, have the highest liquidity and are the easiest to sell of
all municipal bonds. While this often is an advantage, it can be a disadvantage
when the entire market suffers from a loss of liquidity, as occurred during the
fiscal year. Institutional investors, including mutual funds, who are forced to
sell holdings as a result of redemptions often find it easiest to sell insured
bonds. Because they are the first to be sold, insured bonds suffered significant
price losses during this period.
These general environmental conditions proved especially troublesome during the
first six months of the calendar year. In the second six months, we restructured
the portfolio to give it greater diversification among the various sectors of
the municipal bond markets. We also refrained from any hedging strategies
employing futures contracts. As a result, performance improved dramatically in
2000, especially in the final three months of the fiscal year. The Fund also was
able to continue to pay an above-average dividend to shareholders throughout the
period.
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------------
(as a percentage of 5/31/2000 portfolio assets)
[GRAPH]
23.1% Transportation
20.1% General Obligation-Local
11.3% Hospitals
11.2% Housing
7.8% Electric Power
6.7% Industrial Developement/Pollution
Control
5.2% Water & Sewer
4.6% Special Tax
3.5% Lease Revenue/COP
3.2% Education
3.3% Other
3
<PAGE>
EVERGREEN
High Grade Municipal Bond Fund
Portfolio Manager Interview
What strategies led to the improved performance?
We set aside the tactic of trying to manage the risks in a relatively illiquid
market through the use of futures contracts. Instead, we restructured the
portfolio to give it broader diversification among sectors, reflecting the
overall municipal bond market. As we did this, we de-emphasized housing, health
care and industrial development authority bonds. Prospects for the health care
sector were hurt by controversies over reimbursement formulas for health care
institutions and doubts about the financial health of HMOs. Industrial revenue
bonds became less attractive because of general concerns about a potential
slowing of economic growth. We increased our weightings in transportation and
general obligation bonds.
We also modestly reduced the Fund's interest rate sensitivity--or vulnerability
to rising interest rates--to a level consistent with industry benchmarks. At the
end of the fiscal year, average maturity was 15.9 years and duration was 8.7
years.
The overall credit quality of the portfolio rose during the twelve months.
Because all insured bonds have AAA-ratings, average credit quality of the Fund
typically also is AAA. However, during the twelve months, the allocation to
AAA-rated bonds in the Fund rose from 76% of net assets to 91% of net assets.
--------------------------------------------------------------------------------
PORTFOLIO QUALITY
--------------------------------------------------------------------------------
(as a percentage of 5/31/2000 portfolio assets)
[GRAPH]
91.2% AAA
5.2% AA
3.6% A
What is your outlook for the municipal bond market?
We think it is likely the Federal Reserve Board will raise short-term interest
rates further in its effort to slow economic growth and avert inflation. While
this is reason to be cautious about the fixed income markets in general in the
short-run, we think the environment for the municipal bond market is improving.
Longer-term municipal bonds continue to be very attractively priced, providing
almost as much yield as taxable bonds but with tax benefits that give them a
real, after-tax advantage. At the same time, the supply of new municipal issues
is relatively tight, giving support to the underlying prices of municipal
securities. Moreover, volatility in the equity market shows signs of encouraging
retail investors to again look at the municipal bond market, where the
tax-equivalent yields of some insured bonds are approaching 9%. Overall, we
believe the longer-term outlook for municipal bond investments is positive and
improving.
4
<PAGE>
EVERGREEN
Municipal Bond Fund
Fund at a Glance as of May 31, 2000
Portfolio
Management
------------
[PHOTO]
James T. Colby III
Tenure: March 1998
--------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE1
--------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of
5/31/2000.
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.
1Source: 2000 Morningstar, Inc.
2 Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses 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 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. These fees are 0.25% for Class A and 1.00% for
Classes B and C. Class Y does not pay a 12b-1 fee. If these fees had not been
adjusted, returns would have been lower. Performance includes the reinvestment
of income dividends and capital gains distributions.
The Fund's investment objective is non-fundamental and may be changed without
the vote of the Fund's shareholders.
The Fund's yield will fluctuate and there can be no guarantee that the Fund will
achieve its objective or any particular tax-exempt yield. Income may be subject
to alternative minimum tax.
U.S. government guarantees apply only to underlying securities of the Fund's
portfolio and not to the Fund's shares.
Funds that invest in high yield, lower-rated bonds may contain more risks due to
the increased possibility of default.
All data is as of May 31, 2000 and subject to change.
--------------------------------------------------------------------------------
PERFORMANCE AND RETURN2
--------------------------------------------------------------------------------
Portfolio Inception Date: 1/19/1978 Class A Class B Class C Class Y
Class Inception Date 1/20/1998 1/19/1978 1/26/1998 4/30/1999
Average Annual Returns*
1 year with sales charge -9.75% -10.48% -7.79% n/a
1 year w/o sales charge -5.29% -6.00% -6.00% -5.05%
5 years 2.34% 2.69% 2.58% 3.60%
10 years 5.12% 5.18% 4.76% 5.90%
Since Portfolio Inception 6.53% 6.28% 6.04% 6.97%
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front End CDSC CDSC
30-day SEC Yield 5.01% 4.51% 4.51% 5.51%
Tax Equivalent Yield** 8.29% 7.47% 7.47% 9.12%
12-month income dividends
per share $0.35 $0.30 $0.30 $0.37
12-month capital gain distribution
per share $0.04 $0.04 $0.04 $0.04
* 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
--------------------------------------------------------------------------------
[GRAPH]
Consumer Price Lehman Brothers
Muni Bond B Index - US Municipals
05/31/90 10,000 10,000 10,000
05/31/91 10,901 10,495 11,008
05/31/92 11,894 10,813 12,089
05/31/93 13,158 11,161 13,535
05/31/94 13,170 11,416 13,870
05/31/95 14,283 11,780 15,133
05/31/96 14,787 12,121 15,825
05/31/97 15,900 12,392 17,135
05/31/98 17,130 12,601 18,742
05/31/99 17,620 12,864 19,628
05/31/00 16,563 13,253 19,451
Comparison of a $10,000 investment in Evergreen Municipal Bond Fund, Class B2,
versus a similar investment in the Lehman Brothers Municipal Bond Index (LBMBI)
and the Consumer Price Index (CPI).
The LBMBI is an unmanaged market index which does not include transaction costs
associated with buying and selling securities or any mutual fund expenses. The
CPI is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
5
<PAGE>
EVERGREEN
Municipal Bond Fund
Portfolio Manager Interview
How did the Fund perform?
For the twelve-month period ended May 31, 2000, the Evergreen Municipal Bond
Fund Class B shares returned -6.00%. Fund returns are before the deduction of
any applicable sales charges. During the same period, the general municipal bond
fund average return was -3.29%, according to Lipper Inc., an independent monitor
of mutual fund performance, while the Lehman Brothers Municipal Bond Index
returned -0.86%.
While the Fund's overall total return was disappointing for the full fiscal
year, relative performance improved substantially during the final months of the
twelve-month period as we implemented a program to give the Fund broader
diversification across the municipal bond market and to avoid some hedging
strategies. At the same time, the Fund continued to provide a generous level of
tax-advantaged income. Dividend yields provided by the Fund remained
substantially above the Lipper funds' average.
Portfolio
Characteristics
---------------
Total Net Assets $1,001,121,864
--------------------------------------------------------------------------------
Average Credit Quality AA
--------------------------------------------------------------------------------
Average Maturity 15.9 years
--------------------------------------------------------------------------------
Average Duration 8.7 years
--------------------------------------------------------------------------------
What factors affected performance during the twelve months?
The Fund had performed very well for the first five months of 1999, but
conditions in the municipal bond market worsened substantially in the late
spring and summer. Interest rates started rising and the municipal bond market,
in general, suffered a general loss of liquidity as traditional investors sold
their bonds or redeemed their municipal bond fund shares in favor of equities.
In response, we implemented a more defensive strategy, which included the use of
futures contracts, to cushion the impact of the deteriorating conditions.
The general environment for investing in municipal bonds, however, continued to
deteriorate throughout the remainder of 1999. This made it extremely difficult
to employ a defensive strategy that included futures contracts. The value of
these contracts was undermined by the loss of liquidity in the market; a loss
that was exacerbated by the flight of the retail investor, heavy redemptions of
mutual funds and a general rise in interest rates. Bonds associated with the
health care and corporate sectors were among the poorest-performing areas of
the market.
In February 2000, we decided to restructure the portfolio to give it greater
diversification throughout all the sectors of the municipal market to ensure
performance would be more consistent with the overall market. This restructuring
included refraining from the use of futures contracts. In the final three months
of the fiscal year, performance improved greatly and was consistent with other
general municipal bond mutual funds.
6
<PAGE>
EVERGREEN
Municipal Bond Fund
Portfolio Manager Interview
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------------
(as a percentage of 5/31/2000 portfolio assets)
[GRAPH]
18.9% Transportation
15.3% General Obligation-Local
12.0% Hospitals
12.0% General Obligation-State
10.1% Industrial Developement/
8.4% Pollution Control
8.0% Electric Power
8.0% Housing
7.0% Water & Sewer
4.3% Education
3.5% Lease Revenue/COP
0.5% Other
What were some of the strategies you employed as you implemented this new
approach?
As we increased the Fund's overall diversification, we maintained a relatively
high quality orientation. Average credit quality remained AA. At the same time,
we reduced the Fund's interest rate sensitivity--or vulnerability to rising
interest rates--by shortening duration. At the end of the fiscal year, May 31,
2000, average maturity of bonds in the portfolio was 15.9 years, down from 18.0
years six months earlier, and duration was 8.7 years, down from 8.9 years six
months earlier.
The focus on giving the Fund greater diversification among sectors also led us
to reduce Fund holdings in the health care and industrial revenue sectors.
Controversies about reimbursement for health care institutions and the financial
stability of HMOs undermined values in the health care sector, while concerns
about a slowing economy made industrial revenue bonds less attractive. At the
same time, we increased Fund allocations in transportation and general
obligation issues.
--------------------------------------------------------------------------------
PORTFOLIO QUALITY
--------------------------------------------------------------------------------
(as a percentage of 5/31/2000 portfolio assets)
[GRAPH]
57.5% AAA
15.3% AA
10.5% A
12.0% BBB
2.2% BB
2.5% Not Rated
What is your outlook for municipal bond investing?
We think it is likely the Federal Reserve Board will raise short-term interest
rates further in its effort to slow economic growth and avert inflation. While
this is reason to be cautious about the fixed income markets in general in the
short-run, we think the environment for the municipal bond market is improving.
Longer-term municipal bonds continue to be very attractively priced, providing
almost as much yield as taxable bonds but with tax benefits that give them a
real, after-tax advantage. At the same time, supply of new municipal issues is
relatively tight, giving support to the underlying prices of municipal
securities. Moreover, volatility in the equity market shows signs of encouraging
retail investors to again look at the municipal bond market, where the
tax-equivalent yields of some municipal bonds are approaching 10%. Overall, we
believe the longer-term outlook for municipal bond investments is positive.
7
<PAGE>
EVERGREEN
Short-Intermediate Municipal Bond Fund
Fund at a Glance as of May 31, 2000
Portfolio
Management
--------------
[PHOTO]
Diane Beaver
Tenure: September 1998
--------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE1
--------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of
5/31/2000.
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.
1Source: 2000 Morningstar, Inc.
2 Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses 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 for Classes A and B prior to their inception dates 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 are 0.10% for Class A and 1.00% for
Class B. Class Y does not pay a 12b-1 fee. If these fees had been reflected,
returns would have been lower. Performance includes the reinvestment of income
dividends and capital gain distributions.
The Fund's investment objective is non-fundamental and may be changed without
the vote of the Fund's shareholders.
The Fund's yield will fluctuate and there can be no guarantee that the Fund will
achieve its objective or any particular tax-exempt yield. Income may be subject
to alternative minimum tax.
U.S. government guarantees apply only to underlying securities of the Fund's
portfolio and not to the Fund's shares.
Funds that invest in high yield, lower-rated bonds may contain more risks due to
the increased possibility of default.
All data is as of May 31, 2000 and subject to change.
--------------------------------------------------------------------------------
PERFORMANCE AND RETURN2
--------------------------------------------------------------------------------
Portfolio Inception Date: 7/17/1991 Class A Class B Class Y
Class Inception Date 1/5/1995 1/5/1995 7/17/1991
Average Annual Returns*
1 year with sales charge -2.51% -4.94% n/a
1 year w/o sales charge 0.77% -0.14% 0.87%
5 years 2.87% 2.29% 3.66%
Since Portfolio Inception 3.88% 3.71% 4.36%
Maximum Sales Charge 3.25% 5.00% n/a
Front End CDSC
30-day SEC Yield 4.46% 3.72% 4.72%
Tax Equivalent Yield** 7.38% 6.16% 7.81%
12-month income dividends
per share $0.41 $0.32 $0.42
12-month capital gain distribution
per share $0.07 $0.07 $0.07
* 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
--------------------------------------------------------------------------------
[GRAPH]
Short Intermediate Consumer Price Lehman Brothers
Muni A Index - US Munis 3-Yr
01/31/95 9,525 10,000 10,000
05/31/95 9,805 10,126 10,387
05/31/96 10,149 10,419 10,881
05/31/97 10,587 10,652 11,463
05/31/98 11,129 10,832 12,112
05/31/99 11,584 11,058 12,674
05/31/00 11,672 11,393 12,906
Comparison of a $10,000 investment in Evergreen Short-Intermediate Municipal
Bond Fund, Class A2, versus a similar investment in the Lehman Brothers 3 Year
Municipal Bond Index (LB3YMBI) and the Consumer Price Index (CPI).
The LB3YMBI is an unmanaged market index which does not include transaction
costs associated with buying and selling securities or any mutual fund expenses.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in an index.
8
<PAGE>
EVERGREEN
Short-Intermediate Municipal Bond Fund
Portfolio Manager Interview
How did the Fund perform?
For the twelve-month period ended May 31, 2000, the Evergreen Short-Intermediate
Municipal Bond Fund, Class A shares, had a total return of 0.77%. Fund returns
are before the deduction of any applicable sales charges. During the same
twelve-month period, the average return of short-intermediate municipal mutual
funds was 0.27%, according to Lipper Inc., an independent monitor of mutual fund
performance. The return of the Lehman Brothers 3-Year Municipal Bond Index was
1.82%. At the same time, the Fund generated tax-advantaged income to
shareholders at yields substantially better than the Lipper group's average.
Portfolio
Characteristics
---------------
Total Net Assets $152,831,753
--------------------------------------------------------------------------------
Average Credit Quality A+
--------------------------------------------------------------------------------
Average Maturity 3.4 years
--------------------------------------------------------------------------------
Average Duration 2.7 years
--------------------------------------------------------------------------------
What factors affected performance?
By emphasizing current income and a stable net asset value, the Fund was able to
generate above-average yields relative to its Lipper competitive group while
generating a competitive total return. The emphasis on yield-oriented sectors of
the short-intermediate municipal bond market, however, resulted in performance
that trailed that of the benchmark Lehman Brothers 3-Year Municipal Bond Index.
Especially in the final months of the year, higher-yielding, lower-credit
quality securities tended to lag higher quality securities as credit
spreads--the difference between the yields of high-quality and lower-quality
securities--widened. As a result of this widening, BBB- and lower-rated
securities and bonds in the health care sector tended to lag in performance.
To compensate for these factors while still focusing on yield, we tried to
invest in areas such as higher-coupon pre-refunded securities that had yield
advantages and yet had little credit risk.
In general, it was a difficult twelve-month period for municipal bond investing,
as the Federal Reserve Board raised short-term interest rates six different
times. It also was a period in which the municipal bond market lost some of its
liquidity--or ease of trading--as investors withdrew money from the market. At
the same time, the issuance of new municipal securities declined by more than
20%. The loss of liquidity combined with the decline in new issuance created a
challenging environment in which to try to reposition the portfolio.
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------------
(as a percentage of 5/31/2000 portfolio assets)
[GRAPH]
16.9% Industrial Development
15.1% Student Loans
13.2% Housing
8.4% General Obligation-Local
5.9% Public Facilities
5.2% Education
3.7% Airports
3.4% Hospitals
3.4% Escrowed
3.3% Electric Power
21.5% Other
9
<PAGE>
EVERGREEN
Short-Intermediate Municipal Bond Fund
Portfolio Manager Interview
What were your principal strategies in this environment?
We maintained our long-term strategy of seeking higher yield and a stable net
asset value. We think that aligns the Fund's strategy closely with the interests
of shareholders, who invest principally for tax-advantaged income. As a result,
we didn't make major changes in the portfolio during the year. The Fund's
duration--or sensitivity to interest rate changes--was reduced modestly from
3.13 years to 2.7 years over the twelve months, which is appropriate in a rising
interest-rate environment.
We sold one position when we had concerns about the credit-worthiness of the
underlying issuer, and maintained about 30% of the Fund's portfolio in
securities rated BBB or lower. To give balance, about 30% of the Fund was
invested in securities with AAA ratings, most of which were insured. About 70%
of the Fund was invested in securities rated A or better, and average credit
quality remained at about A+.
The Fund's largest sectors were in industrial development, housing and student
loans. We substantially increased our allocations to student loan and housing
bonds, which were a good source of yield, had stable prices, and yet carried
little credit risk.
--------------------------------------------------------------------------------
PORTFOLIO QUALITY
--------------------------------------------------------------------------------
(as a percentage of 5/31/2000 portfolio assets)
[GRAPH]
AAA -- 29.9%
AA -- 15.3%
A -- 23.7%
BBB -- 15.3%
Not Rated -- 15.8%
What is your outlook?
We think interest rates are at, or near, their highs. They should stay in this
range or trend lower in the short term. However, longer term, we believe rates
will again rise. At the same time, the relative lack of issuance of new bonds
may act as a price support for municipal securities in general.
We do not intend to make any major changes in our strategy. We will try to find
higher-yielding securities with as little credit risk as possible. Our focus
will be to continue to generate healthy income with stable prices, and we will
not be trying to guess the direction in which the market may be heading in the
short run. We believe this strategy should keep the Fund well positioned over
the longer term.
10
<PAGE>
EVERGREEN
Tax-Free High Income Fund
Fund at a Glance as of May 31, 2000
Portfolio
Management
-----------------
[PHOTO]
B. Clark Stamper
Tenure: June 1990
--------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE1
--------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 5/31/2000.
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.
1 Source: 2000 Morningstar, Inc.
2 Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads, fees and expenses 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. Performance includes the reinvestment of income
distributions and capital gain distributions.
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. The historical
returns for Class A, and Y have not been adjusted to eliminate the effect of the
higher 12b-1 fees applicable to Class B. These fees are 0.25% for Class A and
1.00% for Classes B and C. Class Y does not pay a 12b-1 fee. If 12b-1 fees were
adjusted for Class A and Y, returns would have been higher. Performance includes
the reinvestment of income dividends and capital gain distributions.
The Fund's investment objective is non-fundamental and may be changed without
the vote of the Fund's shareholders.
The Fund's yield will fluctuate and there can be no guarantee that the Fund will
achieve its objective or any particular tax-exempt yield. Income may be subject
to alternative minimum tax.
U.S. government guarantees apply only to underlying securities of the Fund's
portfolio and not to the Fund's shares.
Funds that invest in high yield, lower-rated bonds may contain more risks due to
the increased possibility of default.
All data is as of May 31, 2000 and subject to change.
--------------------------------------------------------------------------------
PERFORMANCE AND RETURN2
--------------------------------------------------------------------------------
Portfolio Inception Date: 3/21/1985 Class A Class B Class C Class Y
Class Inception Date 12/1/1994 3/21/1985 8/18/1997 10/6/1997
Average Annual Returns*
1 year with sales charge -6.14% -6.80% -3.95% n/a
1 year w/o sales charge -1.45% -2.17% -2.09% -1.34%
5 years 3.33% 3.23% 3.57% 4.04%
10 years 5.38% 5.44% 5.45% 5.69%
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front End CDSC CDSC
30-day SEC yield 6.22% 5.48% 5.43% 6.49%
Tax Equivalent Yield** 10.30% 9.07% 8.99% 10.75%
8-month income dividends
per share $0.37 $0.32 $0.32 $0.38
* 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
--------------------------------------------------------------------------------
[GRAPH]
Tax Free High Lehman Brothers Lehman Brothers Consumer Price
Income B Municipals Munis 10-Yr Index - US
05/31/90 10,000 10,000 10,000 10,000
05/31/91 10,682 11,008 11,039 10,495
05/31/92 11,715 12,089 12,064 10,813
05/31/93 12,770 13,535 13,551 11,161
05/31/94 13,399 13,870 14,013 11,416
05/31/95 14,259 15,133 15,272 11,780
05/31/96 14,883 15,825 15,995 12,121
05/31/97 15,901 17,135 17,301 12,392
05/31/98 16,886 18,742 18,905 12,601
05/31/99 17,351 19,628 19,777 12,864
05/31/00 16,973 19,451 19,743 13,253
Comparison of a $10,000 investment in Evergreen Tax-Free High Income Fund, Class
B2, versus a similar investment in the Lehman Brothers Municipal Bond Index
(LBMBI), the Lehman Brothers 10 year Municipal Bond Index (LBMBI10YR) and the
Consumer Price Index (CPI).
The LBMBI and the LBMBI10YR are unmanaged market indices and do not include
transaction costs associated with buying and selling securities or any mutual
fund expenses. The CPI is a commonly used measure of inflation and does not
represent an investment return. It is not possible to invest directly in an
index.
11
<PAGE>
EVERGREEN
Tax-Free High Income Fund
Portfolio Manager Interview
How did the Fund perform?
In a difficult period for the high yield sector of the municipal bond market,
the Evergreen Tax-Free High Income Fund had relatively good performance,
although it posted negative returns. For the twelve-month period ended May 31,
2000, the Fund's Class B shares returned -2.17%. Fund performance was before the
deduction of any applicable sales charges. During the same twelve-month period,
the Lehman Brothers Municipal Bond Index returned -0.86% and the Lehman Brothers
10-Year Municipal Bond Index returned -0.18%. The Fund's fiscal year end was
changed to May 31, 2000. For the period covering October 1, 1999 to May 31,
2000, the return for Class A was 0.58%.
Portfolio
Characteristics
---------------
Total Net Assets $342,508,298
Average Credit Quality AA
Effective Maturity 16.9 years
What was the investment environment like during the twelve-month period?
It was a challenging period for municipal bonds in general, and especially for
lower quality municipal bonds. The fixed-income markets were hit by rising
interest rates and falling bond prices. The 30-year Treasury constituted the
best-performing area within the fixed-income market, helped by the U.S. Treasury
Department's ability to buy back existing bonds because of a federal budget
surplus. At the same time, the municipal bond market was hurt by a loss in
liquidity, as many traditional buyers, those in high personal income tax
brackets, were attracted to the equity markets because of the strong stock
market performance earlier in the twelve-month period. High yielding municipal
bonds performed poorly because of investor concern about potentially
deteriorating credit quality, especially among the lower-rated bonds, if
economic growth were to slow.
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------------
(as a percentage of 5/31/2000 portfolio assets)
[GRAPH]
Health Care -- 21.6%
Housing -- 16.2%
Industrial Development -- 9.4%
Community Development -- 7.3%
Education -- 7.1%
Residential Care -- 6.3%
Transportation -- 4.7%
General Obligation -- 4.1%
Public Facilities -- 3.3%
Utility -- 2.2%
Other -- 17.8%
What were your principal strategies during the twelve months?
We focused on higher quality bonds than those in the typical high yield
municipal bond fund. We believed that the lower quality bonds would be more
adversely affected by rising interest rates and a potential downturn in economic
growth. This emphasis on higher quality securities was a major factor in the
Fund's strong performance relative to its peers. On May 31, 2000, average credit
quality was AA, with only 8.3% of net assets invested in non-rated bonds. About
40% of net assets were invested in insured bonds, which are rated AAA.
12
<PAGE>
EVERGREEN
Tax-Free High Income Fund
Portfolio Manager Interview
Credit quality spreads--the difference in yields between high quality and low
quality bonds--were relatively narrow during the past twelve-month period. This
encouraged us to focus on the higher quality bonds. Investors were not being
paid enough additional income to compensate for the additional credit risk.
Our investment strategy is to concentrate on the risk/reward characteristics of
each security. We constantly evaluate municipal bonds in terms of their upside
potential and downside protection. We want to maximize total return relative to
the risk we are taking. We look at one bond at a time, analyzing its credit
quality and security characteristics in terms of upside opportunity and downside
protection. This process has led us to emphasize high quality, callable bonds,
which we think have been very attractively priced relative to their appreciation
potential and risk. Callable means that a bond may be called back by its issuer
after a pre-determined time. These bonds tend to have above-average interest
coupons, and trade at lower prices than if they were non-callable. When these
bonds pass their call dates without being called, investors receive better
returns than the market expects. We own many callable bonds that have been
passing their call dates without being called back. We believe the low prices of
these bonds, relative to the income they generate, provide the Fund some
protection--or cushion--if the overall market performs poorly. On May 31, 2000,
86% of net assets were invested in callable bonds, with 46.5% callable after
five years and the remainder callable within five years.
Because we emphasize individual security selection, our portfolio during the
past year has tended to be well-diversified among different sectors, with no
significant over-weightings in any one part of the market. Spreads--or
differences in yields--were relatively tight in the municipal market and we did
not find exceptional values in any one particular sector. The Fund had positions
in 302 different securities.
We have not taken very much interest rate risk--or the risk of price loss in a
rising interest rate environment. At the end of the investment period,
duration--a measure of interest rate sensitivity--was about 4 years.
--------------------------------------------------------------------------------
PORTFOLIO QUALITY
--------------------------------------------------------------------------------
(as a percentage of 5/31/2000 portfolio assets)
AAA -- 54.3%
AA -- 11.5%
A -- 16.3%
BBB -- 6.6%
BB -- 0.9%
B -- 1.8%
CCC -- 0.3%
Not Rated -- 8.3%
What is your outlook?
In the short run, we think interest rates may continue to rise. At the same
time, credit quality spreads should widen as investors perceive more credit risk
in lower-quality bonds. As spreads widen, lower-quality bonds tend to lose more
of their value relative to higher quality bonds. In this environment, the Fund
is well- positioned because of its high-quality emphasis.
At some point, the differences between yields may become wide enough that we may
be justified in investing in more lower quality, high-yielding securities that
meet our investment criteria.
We will continue our long-term strategy of emphasizing individual security
selection, examining the investment potential of each individual bond relative
to the opportunities it presents and the risks it poses.
13
<PAGE>
EVERGREEN
High Grade Municipal Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
Year Ended May 31, August 31,
----------------------------------- ----------------
2000 1999 1998 1997(a) 1996 1995(b)
CLASS A SHARES
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 11.01 $ 11.36 $ 10.89 $ 10.72 $ 10.69 $ 9.79
------- ------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.48 0.48 0.47 0.37 0.52 0.34
Net realized and
unrealized gains or
losses on securities
and futures contracts (0.87) (0.08) 0.48 0.17 0.03 0.90
------- ------- ------- ------- ------- -------
Total from investment
operations (0.39) 0.40 0.95 0.54 0.55 1.24
------- ------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.48) (0.48) (0.48) (0.37) (0.52) (0.34)
Net realized gains (0.15) (0.27) 0 0 0 0
------- ------- ------- ------- ------- -------
Total distributions to
shareholders (0.63) (0.75) (0.48) (0.37) (0.52) (0.34)
------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 9.99 $ 11.01 $ 11.36 $ 10.89 $ 10.72 $ 10.69
------- ------- ------- ------- ------- -------
Total return* (3.54%) 3.62% 8.88% 5.13% 5.21% 12.83%
Ratios and supplemental
data
Net assets, end of
period (thousands) $53,303 $63,018 $64,526 $45,814 $50,569 $58,751
Ratios to average net
assets
Expenses** 0.96% 0.95% 1.09% 1.11%+ 1.09% 1.09%+
Net investment income 4.61% 4.26% 4.25% 4.60%+ 4.78% 4.93%+
Portfolio turnover rate 108% 79% 127% 114% 65% 27%
<CAPTION>
Year Ended
Year Ended May 31, August 31,
----------------------------------- ----------------
2000 1999 1998 1997(a) 1996 1995(b)
CLASS B SHARES
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 11.01 $ 11.36 $ 10.89 $ 10.72 $ 10.69 $ 9.79
------- ------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.40 0.40 0.39 0.31 0.44 0.29
Net realized and
unrealized gains or
losses on securities
and futures contracts (0.87) (0.08) 0.48 0.17 0.03 0.90
------- ------- ------- ------- ------- -------
Total from investment
operations (0.47) 0.32 0.87 0.48 0.47 1.19
------- ------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.40) (0.40) (0.40) (0.31) (0.44) (0.29)
Net realized gains (0.15) (0.27) 0 0 0 0
------- ------- ------- ------- ------- -------
Total distributions to
shareholders (0.55) (0.67) (0.40) (0.31) (0.44) (0.29)
------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 9.99 $ 11.01 $ 11.36 $ 10.89 $ 10.72 $ 10.69
------- ------- ------- ------- ------- -------
Total return* (4.27%) 2.85% 8.07% 4.55% 4.42% 12.27%
Ratios and supplemental
data
Net assets, end of
period (thousands) $39,566 $32,088 $32,822 $31,874 $32,221 $34,206
Ratios to average net
assets
Expenses** 1.72% 1.70% 1.84% 1.86%+ 1.84% 1.84%+
Net investment income 3.89% 3.52% 3.51% 3.85%+ 4.03% 4.18%+
Portfolio turnover rate 108% 79% 127% 114% 65% 27%
</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.
** The ratio of expenses to average net assets includes fee waivers and ex-
cludes expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
14
<PAGE>
EVERGREEN
High Grade Municipal Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended May 31,
-------------------
2000 1999(a)#
<S> <C> <C>
CLASS C SHARES
Net asset value, beginning of period $11.01 $11.14
------ ------
Income from investment operations
Net investment income 0.40 0.03
Net realized and unrealized losses on securities and
futures contracts (0.87) (0.13)
------ ------
Total from investment operations (0.47) (0.10)
------ ------
Distributions to shareholders from
Net investment income (0.40) (0.03)
Net realized gains (0.15) 0
------ ------
Total distributions to shareholders (0.55) (0.03)
------ ------
Net asset value, end of period $ 9.99 $11.01
------ ------
Total return* (4.27%) (0.86%)
Ratios and supplemental data
Net assets, end of period (thousands) $1,620 $ 1
Ratios to average net assets
Expenses** 1.72% 1.66%+
Net investment income 3.92% 3.71%+
Portfolio turnover rate 108% 79%
</TABLE>
<TABLE>
<CAPTION>
Year Ended
Year Ended May 31, August 31,
------------------------------------ -----------------
2000 1999 1998 1997 (b) 1996 1995 (c)
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $ 11.01 $ 11.36 $ 10.89 $ 10.72 $ 10.69 $ 9.79
------- ------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.50 0.51 0.51 0.39 0.55 0.36
Net realized and
unrealized gains or
losses on securities
and futures contracts (0.87) (0.08) 0.47 0.17 0.03 0.90
------- ------- ------- ------- ------- -------
Total from investment
operations (0.37) 0.43 0.98 0.56 0.58 1.26
------- ------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.50) (0.51) (0.51) (0.39) (0.55) (0.36)
Net realized gains (0.15) (0.27) 0 0 0 0
------- ------- ------- ------- ------- -------
Total distributions to
shareholders (0.65) (0.78) (0.51) (0.39) (0.55) (0.36)
------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 9.99 $ 11.01 $ 11.36 $ 10.89 $ 10.72 $ 10.69
------- ------- ------- ------- ------- -------
Total return (3.30%) 3.88% 9.15% 5.32% 5.47% 13.02%
Ratios and supplemental
data
Net assets, end of
period (thousands) $19,121 $22,264 $24,976 $24,441 $25,112 $25,079
Ratios to average net
assets
Expenses** 0.71% 0.70% 0.84% 0.86%+ 0.84% 0.84%+
Net investment income 4.86% 4.51% 4.51% 4.85%+ 5.03% 5.18%+
Portfolio turnover rate 108% 79% 127% 114% 65% 27%
</TABLE>
(a) For the period from April 30, 1999 (commencement of class operations) to
May 31, 1999.
(b) 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.
(c) 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.
# Net investment income is based on average shares outstanding during the
period.
* Excluding applicable sales charges.
** The ratio of expenses to average net assets includes fee waivers and ex-
cludes expense reductions.
+ Annualized.
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,
---------------------------------
2000 1999 # 1998 (a) #
<S> <C> <C> <C>
CLASS A SHARES
Net asset value, beginning of period $ 7.48 $ 7.78 $ 7.91
-------- ---------- ----------
Income from investment operations
Net investment income 0.35 0.34 0.13
Net realized and unrealized losses on
securities and futures contracts (0.74) (0.07) (0.13)
-------- ---------- ----------
Total from investment operations (0.39) 0.27 0
-------- ---------- ----------
Distributions to shareholders from
Net investment income (0.35) (0.34) (0.13)
Net realized gains (0.04) (0.23) 0
-------- ---------- ----------
Total distributions to shareholders (0.39) (0.57) (0.13)
-------- ---------- ----------
Net asset value, end of period $ 6.70 $ 7.48 $ 7.78
-------- ---------- ----------
Total return* (5.29%) 3.64% 0.04%
Ratios and supplemental data
Net assets, end of period (thousands) $899,427 $1,099,718 $1,243,327
Ratios to average net assets
Expenses** 0.87% 0.85% 0.93%+
Net investment income 4.97% 4.49% 4.69%+
Portfolio turnover rate 86% 90% 77%
</TABLE>
<TABLE>
<CAPTION>
Year Ended May 31, Year Ended December 31,
----------------------------- ----------------------------------
2000 # 1999 # 1998 (b) # 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 7.48 $ 7.78 $ 7.82 $ 7.71 $ 7.86 $ 7.10
------- ------- -------- ---------- ---------- ----------
Income from investment
operations
Net investment income 0.30 0.29 0.12 0.38 0.41 0.41
Net realized and
unrealized gains or
losses on securities
and futures contracts (0.74) (0.07) (0.03) 0.23 (0.17) 0.74
------- ------- -------- ---------- ---------- ----------
Total from investment
operations (0.44) 0.22 0.09 0.61 0.24 1.15
------- ------- -------- ---------- ---------- ----------
Distributions to
shareholders from
Net investment income (0.30) (0.29) (0.13) (0.40) (0.39) (0.39)
Net realized gains (0.04) (0.23) 0 (0.10) 0 0
------- ------- -------- ---------- ---------- ----------
Total distributions to
shareholders (0.34) (0.52) (0.13) (0.50) (0.39) (0.39)
------- ------- -------- ---------- ---------- ----------
Net asset value, end of
period $ 6.70 $ 7.48 $ 7.78 $ 7.82 $ 7.71 $ 7.86
------- ------- -------- ---------- ---------- ----------
Total return* (6.00%) 2.86% 1.15% 8.15% 3.15% 16.61%
Ratios and supplemental
data
Net assets, end of
period (thousands) $54,673 $78,169 $124,664 $1,375,730 $1,557,886 $1,204,468
Ratios to average net
assets
Expenses** 1.62% 1.60% 1.26%+ 0.96% 0.87% 0.95%
Net investment income 4.22% 3.74% 4.32%+ 4.97% 5.34% 5.41%
Portfolio turnover rate 86% 90% 77% 126% 69% 56%
</TABLE>
(a) For the period from January 20, 1998 (commencement of class operations) to
May 31, 1998.
(b) 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.
# Net investment income is based on average shares outstanding during the
period.
* Excluding applicable sales charges.
** The ratio of expenses to average net assets includes fee waivers and ex-
cludes expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
16
<PAGE>
EVERGREEN
Municipal Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended May 31,
----------------------------
2000 1999 # 1998 (a) #
<S> <C> <C> <C>
CLASS C SHARES
Net asset value, beginning of period $ 7.48 $ 7.78 $ 7.85
------- ------ ------
Income from investment operations
Net investment income 0.29 0.29 0.11
Net realized and unrealized losses on securities
and futures contracts (0.73) (0.07) (0.07)
------- ------ ------
Total from investment operations (0.44) 0.22 0.04
------- ------ ------
Distributions to shareholders from
Net investment income (0.30) (0.29) (0.11)
Net realized gains (0.04) (0.23) 0
------- ------ ------
Total distributions to shareholders (0.34) (0.52) (0.11)
------- ------ ------
Net asset value, end of period $ 6.70 $ 7.48 $ 7.78
------- ------ ------
Total return* (6.00%) 2.87% 0.46%
Ratios and supplemental data
Net assets, end of period (thousands) $46,580 $6,899 $7,708
Ratios to average net assets
Expenses** 1.59% 1.60% 1.68%+
Net investment income 4.24% 3.75% 3.94%+
Portfolio turnover rate 86% 90% 77%
</TABLE>
<TABLE>
<CAPTION>
Year Ended May 31,
------------------------
2000 1999 (b) #
<S> <C> <C>
CLASS Y SHARES
Net asset value, beginning of period $ 7.48 $ 7.57
--------- ---------
Income from investment operations
Net investment income 0.36 0.04
Net realized and unrealized losses on securities and
futures contracts (0.73) (0.10)
--------- ---------
Total from investment operations (0.37) (0.06)
--------- ---------
Distributions to shareholders from
Net investment income (0.37) (0.03)
Net realized gains (0.04) 0
--------- ---------
Total distributions to shareholders (0.41) (0.03)
--------- ---------
Net asset value, end of period $ 6.70 $ 7.48
--------- ---------
Total return (5.05%) (0.79%)
Ratios and supplemental data
Net assets, end of period (thousands) $ 442 $ 1
Ratios to average net assets
Expenses** 0.61% 0.52%+
Net investment income 5.32% 5.44%+
Portfolio turnover rate 86% 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.
# Net investment income is based on average shares outstanding during the
period.
* Excluding applicable sales charges.
** The ratio of expenses to average net assets includes fee waivers and ex-
cludes expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
17
<PAGE>
EVERGREEN
Short-Intermediate Municipal Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended May 31, Year Ended August 31,
--------------------------------- -------------------------
2000 1999 1998 1997 (a) 1996 1995 (b)
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $10.12 $10.19 $10.09 $10.08 $ 10.17 $ 9.97
------ ------ ------ ------ ----------- ----------
Income from investment
operations
Net investment income 0.41 0.40 0.41 0.30 0.43 0.30
Net realized and
unrealized gains or
losses on securities (0.33) 0.01 0.10 0.01 (0.09) 0.20
------ ------ ------ ------ ----------- ----------
Total from investment
operations 0.08 0.41 0.51 0.31 0.34 0.50
------ ------ ------ ------ ----------- ----------
Distributions to
shareholders from
Net investment income (0.41) (0.40) (0.41) (0.30) (0.43) (0.30)
Net realized gains (0.07) (0.08) 0 0 0 0
------ ------ ------ ------ ----------- ----------
Total distributions to
shareholders (0.48) (0.48) (0.41) (0.30) (0.43) (0.30)
------ ------ ------ ------ ----------- ----------
Net asset value, end of
period $ 9.72 $10.12 $10.19 $10.09 $ 10.08 $ 10.17
------ ------ ------ ------ ----------- ----------
Total return* 0.77% 4.09% 5.11% 3.08% 3.37% 5.09%
Ratios and supplemental
data
Net assets, end of
period (thousands) $8,659 $7,975 $6,569 $6,072 $ 27,722 $ 6,820
Ratios to average net
assets
Expenses** 0.72% 0.75% 0.85% 0.96%+ 1.11% 1.14%+
Net investment income 4.16% 3.93% 4.01% 3.94%+ 4.05% 4.32%+
Portfolio turnover rate 43% 65% 78% 34% 29% 80%
<CAPTION>
Year Ended May 31, Year Ended August 31,
--------------------------------- -------------------------
2000 1999 1998 1997 (a) 1996 1995 (b)
CLASS B SHARES
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.12 $10.19 $10.10 $10.08 $ 10.17 $ 9.97
------ ------ ------ ------ ----------- ----------
Income from investment
operations
Net investment income 0.32 0.31 0.32 0.23 0.34 0.24
Net realized and
unrealized gains or
losses on securities (0.33) 0.01 0.09 0.02 (0.09) 0.20
------ ------ ------ ------ ----------- ----------
Total from investment
operations (0.01) 0.32 0.41 0.25 0.25 0.44
------ ------ ------ ------ ----------- ----------
Distributions to
shareholders from
Net investment income (0.32) (0.31) (0.32) (0.23) (0.34) (0.24)
Net realized gains (0.07) (0.08) 0 0 0 0
------ ------ ------ ------ ----------- ----------
Total distributions to
shareholders (0.39) (0.39) (0.32) (0.23) (0.34) (0.24)
------ ------ ------ ------ ----------- ----------
Net asset value, end of
period $ 9.72 $10.12 $10.19 $10.10 $ 10.08 $ 10.17
------ ------ ------ ------ ----------- ----------
Total return* (0.14%) 3.16% 4.07% 2.49% 2.44% 4.50%
Ratios and supplemental
data
Net assets, end of
period (thousands) $4,639 $6,232 $5,790 $6,742 $ 7,413 $ 6,050
Ratios to average net
assets
Expenses** 1.62% 1.65% 1.74% 1.86%+ 2.07% 2.26%+
Net investment income 3.23% 3.04% 3.11% 3.04%+ 3.28% 3.50%+
Portfolio turnover rate 43% 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.
** The ratio of expenses to average net assets includes fee waivers and ex-
cludes expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
18
<PAGE>
EVERGREEN
Short-Intermediate Municipal Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended May 31, Year Ended August 31,
------------------------------------- ------------------------
2000 1999 1998 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $ 10.12 $ 10.19 $ 10.10 $ 10.07 $ 10.17 $ 10.21
-------- -------- -------- ------- ----------- -----------
Income from investment
operations
Net investment income 0.42 0.41 0.42 0.30 0.43 0.46
Net realized and
unrealized gains or
losses on
securities (0.33) 0.01 0.09 0.03 (0.10) (0.04)
-------- -------- -------- ------- ----------- -----------
Total from investment
operations 0.09 0.42 0.51 0.33 0.33 0.42
-------- -------- -------- ------- ----------- -----------
Distributions to
shareholders from
Net investment income (0.42) (0.41) (0.42) (0.30) (0.43) (0.46)
Net realized gains (0.07) (0.08) 0 0 0 0
-------- -------- -------- ------- ----------- -----------
Total distributions to
shareholders (0.49) (0.49) (0.42) (0.30) (0.43) (0.46)
-------- -------- -------- ------- ----------- -----------
Net asset value, end of
period $ 9.72 $ 10.12 $ 10.19 $ 10.10 $ 10.07 $ 10.17
-------- -------- -------- ------- ----------- -----------
Total return 0.87% 4.20% 5.11% 3.36% 3.30% 4.20%
Ratios and supplemental
data
Net assets, end of
period (thousands) $139,534 $160,325 $167,905 $32,293 $ 34,893 $ 40,581
Ratios to average net
assets
Expenses** 0.62% 0.65% 0.70% 0.86%+ 0.90% 0.86%
Net investment income 4.23% 4.04% 4.18% 4.04%+ 4.27% 4.52%
Portfolio turnover rate 43% 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.
** The ratio of expenses to average net assets includes fee waivers and ex-
cludes expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
19
<PAGE>
(Formerly the
EVERGREEN Davis Tax-
Tax-Free High Income Fund Free High
Income Fund)
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended September 30,
Year Ended -------------------------------------------------
May 31, 2000 (b) 1999 1998 1997 1996 1995 (c)
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES (a)
Net asset value,
beginning of period $ 8.66 $ 9.19 $ 9.22 $ 9.15 $ 9.19 $ 8.90
-------- -------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.32 0.47 0.54 0.57 0.61 0.40
Net realized and
unrealized gains or
losses on securities (0.27) (0.52) 0.04 0.11 (0.05) 0.30
-------- -------- -------- -------- -------- --------
Total from investment
operations 0.05 (0.05) 0.58 0.68 0.56 0.70
-------- -------- -------- -------- -------- --------
Distributions to
shareholders from
Net investment income (0.37) (0.48) (0.56) (0.59) (0.54) (0.40)
Net realized gains 0 0 (0.05) (0.02) (0.06) (0.01)
-------- -------- -------- -------- -------- --------
Total distributions to
shareholders (0.37) (0.48) (0.61) (0.61) (0.60) (0.41)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 8.34 $ 8.66 $ 9.19 $ 9.22 $ 9.15 $ 9.19
-------- -------- -------- -------- -------- --------
Total return* 0.58% (0.61%) 6.53% 7.66% 6.33% 7.93%
Ratios and supplemental
data
Net assets, end of
period (thousands) $133,552 $174,441 $243,878 $ 92,020 $ 44,828 $ 45,461
Ratios to average net
assets
Expenses** 1.03%+ 1.06% 1.04% 1.26% 1.36% 1.43%+
Net investment income 5.75%+ 5.30% 5.37% 6.60% 6.64% 5.95%+
Portfolio turnover rate 30% 73% 126% 113% 107% 128%
<CAPTION>
Year Ended September 30,
Year Ended -------------------------------------------------
May 31, 2000 (b) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES (a)
Net asset value,
beginning of period $ 8.63 $ 9.16 $ 9.19 $ 9.12 $ 9.17 $ 9.09
-------- -------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.28 0.41 0.49 0.53 0.54 0.48
Net realized and
unrealized gains or
losses on securities (0.28) (0.53) 0.02 0.08 (0.05) 0.10
-------- -------- -------- -------- -------- --------
Total from investment
operations 0.00 (0.12) 0.51 0.61 0.49 0.58
-------- -------- -------- -------- -------- --------
Distributions to
shareholders from
Net investment income (0.32) (0.41) (0.49) (0.52) (0.48) (0.49)
Net realized gains 0 0 (0.05) (0.02) (0.06) (0.01)
-------- -------- -------- -------- -------- --------
Total distributions to
shareholders (0.32) (0.41) (0.54) (0.54) (0.54) (0.50)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 8.31 $ 8.63 $ 9.16 $ 9.19 $ 9.12 $ 9.17
-------- -------- -------- -------- -------- --------
Total return* 0.01% (1.39%) 5.74% 6.89% 5.51% 6.64%
Ratios and supplemental
data
Net assets, end of
period (thousands) $175,826 $228,440 $255,300 $132,934 $109,488 $126,727
Ratios to average net
assets
Expenses** 1.79%+ 1.82% 1.80% 2.02% 2.10% 2.14%
Net investment income 5.01%+ 4.54% 4.62% 5.87% 5.89% 5.37%
Portfolio turnover rate 30% 73% 126% 113% 107% 128%
</TABLE>
(a) On March 17, 2000, The Evergreen Tax-Free High Income Fund acquired the net
assets of the Davis Tax-Free High Income Fund, Inc. The Davis Tax-Free High
Income Fund, Inc. was the accounting and performance survivor in this
transaction. The above financial highlights for the periods prior to
March 17, 2000 are those of the Davis Tax-Free High Income Fund, Inc.
(b) For the eight months ended May 31, 2000. The Fund changed its fiscal year
end from September 30 to May 31, effective May 31, 2000.
(c) For the period from December 1, 1994 (commencement of class operations) to
September 30, 1995.
* Excluding applicable sales charges.
** The ratio of expenses to average net assets includes fee waivers and ex-
cludes expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
20
<PAGE>
(formerly the
EVERGREEN Davis
Tax-Free High Income Fund Tax-Free High
Financial Highlights Income Fund)
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended September 30,
Year Ended ---------------------------
May 31, 2000 (b) 1999 1998 1997 (c)
<S> <C> <C> <C> <C>
CLASS C SHARES (a)
Net asset value, beginning of
period $ 8.69 $ 9.22 $ 9.25 $ 9.20
------- ------- ------- ------
Income from investment
operations
Net investment income 0.28 0.42 0.49 0.04
Net realized and unrealized
gains or losses on securities (0.28) (0.54) 0.03 0.03
------- ------- ------- ------
Total from investment operations 0.00 (0.12) 0.52 0.07
------- ------- ------- ------
Distributions to shareholders
from
Net investment income (0.32) (0.41) (0.50) (0.02)
Net realized gains 0 0 (0.05) 0
------- ------- ------- ------
Total distributions to
shareholders (0.32) (0.41) (0.55) (0.02)
------- ------- ------- ------
Net asset value, end of period $ 8.37 $ 8.69 $ 9.22 $ 9.25
------- ------- ------- ------
Total return* 0.05% (1.34%) 5.74% 0.77%
Ratios and supplemental data
Net assets, end of period
(thousands) $32,942 $41,642 $36,594 $2,430
Ratios to average net assets
Expenses** 1.77%+ 1.83% 1.77% 2.03%+
Net investment income 5.02%+ 4.53% 4.65% 5.85%+
Portfolio turnover rate 30% 73% 126% 113%
</TABLE>
<TABLE>
<CAPTION>
Year Ended
September 30,
Year Ended -----------------
May 31, 2000 (b) 1999 1998 (d)
<S> <C> <C> <C>
CLASS Y SHARES (a)
Net asset value, beginning of period $8.66 $ 9.19 $9.20
----- ------ -----
Income from investment operations
Net investment income 0.33 0.48 0.54
Net realized and unrealized gains or losses
on securities (0.28) (0.52) 0.03
----- ------ -----
Total from investment operations 0.05 (0.04) 0.57
----- ------ -----
Distributions to shareholders from
Net investment income (0.38) (0.49) (0.53)
Net realized gains 0 0 (0.05)
----- ------ -----
Total distributions to shareholders (0.38) (0.49) (0.58)
----- ------ -----
Net asset value, end of period $8.33 $ 8.66 $9.19
----- ------ -----
Total return 0.63% (0.51%) 6.34%
Ratios and supplemental data
Net assets, end of period (thousands) $ 189 $1,292 $ 883
Ratios to average net assets
Expenses** 0.83%+ 0.93% 0.93%+
Net investment income 5.95%+ 5.43% 5.49%+
Portfolio turnover rate 30% 73% 126%
</TABLE>
(a) On March 17, 2000, The Evergreen Tax-Free High Income Fund acquired the net
assets of the Davis Tax-Free High Income Fund, Inc. The Davis Tax-Free High
Income Fund, Inc. was the accounting and performance survivor in this
transaction. The above financial highlights for the periods prior to March
17, 2000 are those of the Davis Tax-Free High Income Fund, Inc.
(b) For the eight months ended May 31, 2000. The Fund changed its fiscal year
end from September 30 to May 31, effective May 31, 2000.
(c) For the period from August 18, 1997 (commencement of class operations) to
September 30, 1997.
(d) For the period from October 6, 1997 (commencement of class operations) to
September 30, 1998.
* Excluding applicable sales charges.
** The ratio of expenses to average net assets excludes expense reductions but
includes fee waivers.
+ Annualized.
See Combined Notes to Financial Statements.
21
<PAGE>
EVERGREEN
High Grade Municipal Bond Fund
Schedule of Investments
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - 97.2%
Alaska - 0.8%
$1,000,000 Alaska Student Loan Corp.
Student Loan RB, Ser. A,
5.45%, 7/1/2016, (AMBAC)........................... $ 924,670
------------
California - 13.4%
500,000 Bakersfield, CA COP,
Convention Ctr. Expansion Proj.,
5.80%, 4/1/2017, (MBIA)............................ 503,395
2,200,000 California Edl. Facs. Auth. RB,
Santa Clara Univ.,
0.00%, 9/1/2014, (AMBAC) (a)....................... 976,756
455,000 California HFA Home Mtge. RB,
Ser. L,
6.40%, 8/1/2027, (MBIA)............................ 459,263
1,000,000 California HFA MHRB, Ser. B,
6.05%, 8/1/2016, (AMBAC/FHA)....................... 995,820
830,000 California HFA SFHRB, Ser. A-1,
Class 3,
5.70%, 8/1/2011, (MBIA)............................ 835,337
California Hlth. Facs. Fin. Auth. RB:
500,000 Enloe Hlth. Sys., Ser. A,
5.00%, 11/15/2018, (FSA).......................... 445,150
1,000,000 Refunding, Ser. A,
5.75%, 7/1/2015................................... 1,006,300
350,000 California Pub. Works Board Lease RB, CA Univ.
Proj., Ser. B,
5.50%, 6/1/2019................................... 335,675
500,000 Elk Grove, CA Unified Sch. Dist. 1,
Spl. Tax, Refunding,
6.50%, 12/1/2024, (AMBAC)......................... 540,660
1,000,000 Los Angeles Cnty., CA Community Facs. Spl. Tax,
Refunding, Dist. 3, Ser. A,
5.50%, 9/1/2014, (FSA)............................ 1,002,060
500,000 Los Angeles, CA Community Redev. Agcy. Tax
Allocation, Refunding, Ser. H,
6.50%, 12/1/2016, (FSA)........................... 528,255
1,000,000 Orange Cnty., CA Pub. Fin. Auth. Wst. Mgmt. Sys.
RRB,
5.75%, 12/1/2010.................................. 1,035,880
1,000,000 Sacramento Cnty., CA Arpt. Sys. RB, Ser. A,
6.00%, 7/1/2011, (MBIA)........................... 1,040,820
2,000,000 San Francisco, CA, City & Cnty. Arpt. RB
5.50%, 5/1/2015, (FSA)............................ 1,958,100
1,100,000 San Jose, CA Redev. Agcy. Tax Allocation, Merged
Area Redev. Proj.,
6.00%, 8/1/2015, (MBIA)........................... 1,155,990
300,000 Santa Ana, CA Fin. Auth. Lease RB, Police
Administration & Holding Facs., Ser. A,
6.25%, 7/1/2015, (MBIA)........................... 323,166
1,000,000 South Orange Cnty., CA Pub. Fin. Auth. Spl. Tax, Sr.
Lien, Ser. A,
7.00%, 9/1/2009, (MBIA)........................... 1,137,830
1,000,000 Southern CA Pub. Pwr. Auth. Transmission Proj. RRB,
0.00%, 7/1/2014, (FGIC) (a)....................... 451,910
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
California - continued
$ 500,000 Watsonville, CA Solid Wst. RB,
5.50%, 5/15/2016, (MBIA).......................... $ 493,720
------------
15,226,087
------------
Colorado - 3.7%
1,500,000 Arapahoe Cnty., CO Capital Impt. Trust Fund Hwy. RB,
East 470 Hwy. Proj., 6.15%, 8/31/2026, (MBIA)..... 1,507,530
1,000,000 Colorado East 470 Pub. Hwy. Auth. RB, Sr. Ser. A,
5.75%, 9/1/2014, (MBIA)........................... 1,014,490
3,225,000 Metropolitan Football Stadium, CO Sales Tax RB, Ser.
A,
0.00%, 1/1/2012, (MBIA) (a)....................... 1,631,560
------------
4,153,580
------------
District of Columbia - 2.5%
1,000,000 Dist. of Columbia GO, Ser. B,
5.50%, 6/1/2012, (FSA)............................ 980,240
1,965,000 Dist. of Columbia HFA Mtge. SFHRB, Ser. B,
5.85%, 12/1/2018, (GNMA/FNMA)..................... 1,893,690
------------
2,873,930
------------
Florida - 1.7%
1,000,000 Broward Cnty., FL Arpt. Sys. RB, Ser. G,
5.125%, 10/1/2016................................. 905,740
Orange Cnty., FL Hlth. Facs. Auth. RB:
705,000 Prerefunded, Ser. C,
6.25%, 10/1/2016, (MBIA).......................... 747,336
295,000 Unrefunded, Ser. C,
6.25%, 10/1/2016, (MBIA).......................... 313,039
------------
1,966,115
------------
Georgia - 5.1%
2,500,000 Atlanta, GA Arpt. RB
5.50%, 1/1/2022, (FGIC)........................... 2,355,450
1,000,000 George L. Smith II, GA World Congress Ctr. Auth. RB,
6.00%, 7/1/2011................................... 1,026,820
2,500,000 Metropolitan Atlanta Rapid Trans. Auth., GA Sales
Tax RRB, Ser. A,
5.50%, 7/1/2016, (MBIA)........................... 2,424,650
------------
5,806,920
------------
Idaho - 2.2%
2,000,000 Idaho Hsg. & Fin. Assn. RB,
6.00%, 7/1/2014................................... 1,981,160
565,000 Idaho Hsg. Agcy. SFHRB, Ser. C-1,
6.30%, 7/1/2011, (FHA)............................ 568,639
------------
2,549,799
------------
Illinois - 7.0%
1,000,000 Chicago, IL, Wastewater Transmission RB, 2nd Lien
6.00%, 1/1/2013, (MBIA)........................... 1,022,740
1,000,000 Cook County, IL RB, Ser. A,
5.625%, 11/15/2016, (MBIA)........................ 978,460
3,000,000 Illinois Dev. Fin. Auth. PCRRB, Edison Co. Proj.,
Ser. D,
6.75%, 3/1/2015, (AMBAC).......................... 3,168,960
</TABLE>
22
<PAGE>
EVERGREEN
High Grade Municipal Bond Fund
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Illinois - continued
$1,000,000 Illinois Hlth. Facs. Auth. RB, Sherman Hlth. Sys.,
5.25%, 8/1/2017................................... $ 888,790
1,750,000 Illinois Hlth. Facs. Auth. RRB, Ser. AA,
6.50%, 6/1/2012, (MBIA)........................... 1,879,955
------------
7,938,905
------------
Indiana - 1.4%
1,500,000 Lawrence Township, IN Metropolitan Sch. Dist. GO,
6.875%, 7/5/2011, (MBIA/IBC)...................... 1,644,360
------------
Kansas - 0.9%
1,000,000 Wichita, KS Hosp. RRB, Facs. Impt., Ser. 11,
6.75%, 11/15/2019................................. 1,021,550
------------
Massachusetts - 2.9%
1,500,000 Massachusetts HFA SFHRB, Ser. 73,
5.90%, 12/1/2019, (FSA)........................... 1,446,525
1,000,000 Massachusetts IFA RB, Avon Assn., LLC, Ser. A,
5.375%, 4/1/2020, (MBIA).......................... 910,730
1,000,000 Massachusetts Port Auth. RRB, Ser. A,
5.50%, 7/1/2016, (MBIA/IBC)....................... 967,830
------------
3,325,085
------------
Michigan - 1.3%
1,500,000 Detroit, MI Wtr. Supply Sys., Sr. Lien, Ser. A,
5.50%, 7/1/2014, (FGIC)........................... 1,468,305
------------
Minnesota - 0.3%
360,000 Minnesota HFA SFHRB, Ser. H,
6.70%, 1/1/2018................................... 366,494
------------
Missouri - 1.8%
2,000,000 Kansas City, MO Muni. Assistance Corp. RB, Ser. B,
5.85%, 1/15/2016, (AMBAC)......................... 2,005,940
------------
Nevada - 0.9%
1,000,000 Clark Cnty., NV Sch. Dist. GO, Ser. A
5.75%, 6/15/2011.................................. 1,017,520
------------
New Jersey - 4.0%
1,000,000 New Jersey EDA RB, Trans. Proj., Ser. A,
5.25%, 5/1/2017, (FSA)............................ 936,050
New Jersey Trans. Trust Fund Auth. RB, Ser. A:
1,000,000 5.75%, 6/15/2015.................................. 1,010,010
1,000,000 5.75%, 6/15/2016.................................. 1,006,230
1,500,000 New Jersey Transit Corp. COP, Fed. Transit Admin.
Grants, Ser. A,
6.125%, 9/15/2015, (AMBAC)........................ 1,548,060
------------
4,500,350
------------
New Mexico - 0.5%
500,000 Albuquerque, NM Arpt. RB, Ser. A,
6.35%, 7/1/2007, (AMBAC).......................... 519,045
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
New York - 14.1%
$ 400,000 Albany Cnty., NY GO, Pub. Impt., Ser. B,
5.60%, 3/15/2014, (FGIC).......................... $ 398,064
550,000 Hempstead Town, NY RB, Ser. B
5.625%, 2/1/2015, (FGIC).......................... 550,736
100,000 Islip, NY Resources Recovery Agcy. RB, Ser. B,
7.25%, 7/1/2011, (AMBAC).......................... 112,644
Long Island, NY Pwr. Auth. Elec. Sys. RB:
1,000,000 0.00%, 6/1/2015, (FSA) (a)........................ 413,190
500,000 5.125%, 12/1/2016, (FSA).......................... 460,475
400,000 Metropolitan Trans. Auth., NY Svcs. Contract RB,
Ser. 7,
5.625%, 7/1/2016.................................. 383,444
695,000 Nassau Cnty., NY GO, Combined Swr. Dist., Refunding,
Ser. B,
6.00%, 5/1/2014, (FGIC)........................... 716,830
600,000 New Rochelle, NY GO, Ser. B,
6.15%, 8/15/2017, (MBIA).......................... 612,816
250,000 New York Dormitory Auth. RB, State Univ. Edl. Facs.,
Ser. A,
5.875%, 5/15/2011, (AMBAC/TCRS)................... 258,150
250,000 New York Env. Facs. Corp. RRB, Riverbank State Park,
5.50%, 4/1/2016, (AMBAC).......................... 242,278
1,000,000 New York HFA MHRB, Ser. B,
6.35%, 8/15/2023, (AMBAC/HFA)..................... 1,019,870
1,000,000 New York Mtge. Agcy. RB, Ser. 86,
5.95%, 10/1/2020.................................. 966,300
New York Thruway Auth. Svc. Contract RB:
700,000 5.75%, 4/1/2016................................... 681,506
1,000,000 6.00%, 4/1/2011................................... 1,038,780
500,000 New York Urban Dev. Corp. RB, Higher Ed. Tech.
Grants,
6.00%, 4/1/2010, (MBIA)........................... 509,195
1,000,000 New York Urban Dev. Corp. RRB, Correctional Facs.,
Ser. A,
6.50%, 1/1/2010, (FSA)............................ 1,082,950
95,000 New York, NY IDA RB, Japan Airlines Co.,
6.00%, 11/1/2015.................................. 96,400
New York, NY GO:
1,500,000 5.375%, 8/1/2017, (FGIC/TCRS)..................... 1,415,580
1,500,000 Ser. G, 5.35%, 8/1/2013, (FGIC)................... 1,453,335
Niagara Falls, NY GO, Pub. Impt.:
500,000 7.50%, 3/1/2014, (MBIA)........................... 589,665
750,000 7.50%, 3/1/2016, (MBIA)........................... 889,012
Niagara, NY Frontier Auth. Arpt. RB:
500,000 Buffalo Niagara Int'l. Arpt.,
5.00%, 4/1/2028, (FGIC)........................... 414,570
100,000 Greater Buffalo Int'l. Arpt., Ser. A,
6.125%, 4/1/2014, (AMBAC)......................... 101,703
500,000 Port Auth. NY & NJ, Ser. 97,
6.50%, 7/15/2019, (FGIC)......................... 514,740
1,000,000 Suffolk Cnty., NY IDA Southwest Swr. Sys. RB,
6.00%, 2/1/2008, (FGIC).......................... 1,037,810
------------
15,960,043
------------
</TABLE>
23
<PAGE>
EVERGREEN
High Grade Municipal Bond Fund
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
North Dakota - 2.7%
$3,000,000 Mercer Cnty., ND PCRRB, Basin Elec. Pwr. Proj.,
Ser. 2,
6.05%, 1/1/2019, (AMBAC)........................... $ 3,017,580
------------
Ohio - 2.7%
1,500,000 Forest Hills, OH Local Sch. Dist.
5.70%, 12/1/2016, (MBIA)........................... 1,490,820
1,000,000 Kings Local Sch. Dist., OH GO,
7.50%, 12/1/2016, (FGIC)........................... 1,190,860
430,000 Ohio HFA Mtge. RB, Ser. A-2,
6.625%, 3/1/2026, (GNMA)........................... 438,123
------------
3,119,803
------------
Oklahoma - 1.8%
2,000,000 Oklahoma Indl. Auth. RRB, Ser. A,
6.25%, 8/15/2015................................... 2,051,640
------------
Pennsylvania - 4.8%
2,000,000 Allegheny Cnty., PA Arpt. Auth. RRB, Pittsburgh
Int'l. Arpt.,
6.00%, 1/1/2015.................................... 2,007,640
1,000,000 Lehigh Cnty., PA IDA PCRRB, PA Pwr. & Light Co.
Proj., Ser. B,
6.40%, 9/1/2029, (MBIA)............................ 1,012,900
2,505,000 Pittsburgh, PA GO, Ser. A,
5.375%, 9/1/2014, (FGIC)........................... 2,418,953
------------
5,439,493
------------
South Carolina - 3.6%
2,300,000 Greenville Hosp. Sys., SC Hosp. Facs. RB, Ser. A,
5.75%, 5/1/2014, (MBIA/IBC)........................ 2,280,335
2,000,000 Piedmont Muni. Pwr. Agcy., SC Elec. RRB, Ser. A,
5.00%, 1/1/2015.................................... 1,794,740
------------
4,075,075
------------
Tennessee - 1.6%
1,700,000 Knox Cnty., TN Hlth. Edl. & Hsg. Facs. RRB, Fort
Sanders Alliance,
6.25%, 1/1/2013, (MBIA)............................ 1,775,293
------------
Texas - 4.7%
1,000,000 Houston, TX Wtr. Conveyance Sys. Contract COP,
Ser. H,
7.50%, 12/15/2014, (AMBAC)......................... 1,165,420
2,000,000 San Antonio, TX Arpt. Sys. RB,
5.70%, 7/1/2011, (FGIC)............................ 1,998,260
1,160,000 Texas Public Fin. Auth. Bldg. RB, Ser. A,
5.70%, 2/1/2013, (FSA)............................. 1,159,269
1,000,000 Upper Trinity Regl. Water Dist., Texas Water RB
6.00%, 8/1/2016, (FGIC)............................ 1,011,280
------------
5,334,229
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Utah - 1.7%
$1,000,000 Salt Lake City, UT Arpt. RB, Ser. A,
6.00%, 12/1/2012, (FGIC)........................... $ 1,011,180
1,000,000 Utah HFA SFHRB, Sr. Ser. E-1,
5.375%, 7/1/2018, (FHA)............................ 919,140
------------
1,930,320
------------
Washington - 0.8%
1,000,000 Snohomish Cnty., WA Sch. Dist. 015 GO, Refunding,
5.25%, 12/1/2015, (FGIC)........................... 939,400
------------
Wisconsin - 5.6%
4,500,000 Superior, WI Ltd. Obl. RRB, Midwest Energy, Ser. E,
6.90%, 8/1/2021, (FGIC)............................ 4,995,225
1,500,000 Wisconsin Trans. RB, Unrefunded, Ser. B,
5.50%, 7/1/2022.................................... 1,377,900
------------
6,373,125
------------
Puerto Rico - 2.7%
1,000,000 Puerto Rico Cmnwlth. Hwy. & Trans. RB
5.875%, 7/1/2035, (MBIA)........................... 990,260
320,000 Puerto Rico Hsg. Bank & Fin. Agcy. SFHRB,
6.10%, 10/1/2015, (GNMA/FNMA/FHLMC)................ 315,616
1,500,000 Puerto Rico Muni. Fin. Agcy. GO, Refunding, Ser. B,
5.75%, 8/1/2013.................................... 1,533,360
250,000 Puerto Rico Pub. Bldgs. Auth. RB, Ser. B,
5.00%, 7/1/2012, (MBIA)............................ 239,697
------------
3,078,933
------------
Total Municipal Obligations
(cost $110,835,814)................................ 110,403,589
------------
SHORT-TERM MUNICIPAL SECURITIES - 0.6%
Idaho - 0.6%
675,000 Idaho Health Facs. RB
4.40%, 6/1/2000 (b)
(cost $675,000).................................... 675,000
------------
<CAPTION>
Shares Value
<C> <S> <C>
MUTUAL FUND SHARES - 1.3%
1,478,962 Federated Municipal Obligations Fund
(cost $1,478,962).................................. 1,478,962
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $112,989,776).......................... 99.1% 112,557,551
Other Assets and
Liabilities - net............................ 0.9 1,052,552
----- ------------
Net Assets.................................... 100.0% $113,610,103
===== ============
</TABLE>
See Combined Notes to Schedules of Investments.
24
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - 92.9%
Alabama - 1.1%
$ 1,815,000 Alabama HFA, SFHRB, Ser. D-1,
6.00%, 10/1/2016, (GNMA)........................ $ 1,824,928
655,000 Birmingham, AL Arpt. Auth. RB,
5.625%, 7/1/2026, (MBIA)........................ 613,801
9,900,000 Jefferson Cnty., AL Swr. RB, Ser.
A54, 144A
6.17% 2/1/2027.................................. 9,058,698
--------------
11,497,427
--------------
Alaska - 1.6%
15,000,000 Alaska Energy Auth., Util. RB,
Linked Bulls/Bears FRN,
6.60%, 7/1/2015, (FSA).......................... 16,272,900
--------------
Arizona - 1.2%
850,000 Chandler, AZ Wtr. & Swr. RB,
6.75%, 7/1/2006, (FGIC)......................... 875,789
6,000,000 Maricopa Cnty., AZ Elementary Sch.
Dist. 69, GO, Ser. C,
8.125%, 1/1/2010, (MBIA)........................ 7,199,340
1,325,000 Pima Cnty., AZ IDA
7.25%, 7/15/2010................................ 1,406,567
2,030,000 Pima Cnty., AZ Unified Sch. Dist. 1,
GO, Refunding,
7.50%, 7/1/2003, (FGIC)......................... 2,168,608
--------------
11,650,304
--------------
California - 3.2%
2,500,000 Alameda, CA Corridor Transportation Auth.
0.00%, 10/1/2033 (a)............................ 307,375
1,000,000 Anaheim, CA Pub. Fin. Auth. Lease
RB, Pub. Impt. Proj., Ser. C,
6.00%, 9/1/2016, (FSA).......................... 1,049,840
7,000,000 California GO
5.625%, 5/1/2022................................ 6,747,930
2,500,000 California GO, Veteran's Bonds,
Ser. BH,
5.50%, 12/1/2018................................ 2,334,225
3,700,000 California Pub. Works Board Lease
RB, State Prison, Ser. E,
5.50%, 6/1/2015................................. 3,666,478
1,070,000 California Statewide Communities Dev. Auth.,
Special Assessment, United Air Lines, Inc.
5.625%, 10/1/2034............................... 874,115
1,000,000 Fontana, CA COP
5.00%, 9/1/2017................................. 913,620
1,300,000 Poway, CA Community Facs. Dist.,
Spl. Tax, Refunding, Parkway
Business Ctr.,
6.75%, 8/15/2015................................ 1,328,639
2,000,000 Riverside Cnty., CA Pub. Fin. Auth.
COP
5.75%, 5/15/2019................................ 1,722,900
1,000,000 San Diego, CA Unified Sch. Dist.
0.00%, 7/1/2019 (a)............................. 312,650
1,000,000 San Francisco, CA Int'l Airport RRB
6.30%, 5/1/2025................................. 1,015,060
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
California - continued
$ 2,000,000 San Jose, CA Redev. Agcy., Tax
Allocation, Merged Area Redev.
Proj., Ser. B,
5.75%, 8/1/2011................................. $ 2,047,220
400,000 San Juan, CA MSR Pub. Pwr. Agcy.
RB, Ser. E,
6.75%, 7/1/2011, (MBIA)......................... 416,628
10,000,000 Southern CA Pub. Pwr. Auth.,
Transmission Proj. RB,
0.00%, 7/1/2015, (FGIC) (a)..................... 4,211,900
2,000,000 University, CA RB, Refunding
Multiple Purpose Proj. Ser. C
4.75%, 9/1/2016................................. 1,787,660
4,450,000 Victor Valley, CA Joint Unified High
Sch. Dist., Capital Appreciation,
GO
0.00%, 9/1/2013, (MBIA) (a)..................... 2,100,978
625,000 Vista, CA Community Dev.
Commission, Tax Allocation, Vista
Redev. Proj. Area,
6.00%, 9/1/2010, (MBIA)......................... 669,894
--------------
31,507,112
--------------
Colorado - 7.0%
Colorado East 470 Pub. Hwy. Auth.
RB:
5,500,000 0.00%, 9/1/2012 (a)............................. 2,718,925
19,795,000 Capital Appreciation, Sr. Ser. B,
0.00%, 9/1/2013, (MBIA) (a)..................... 9,131,830
Colorado HFA, SFHRB:
315,000 7.00%, 11/1/2024................................ 323,269
2,275,000 Ser. A-2,
6.60%, 5/1/2028................................. 2,321,023
2,995,000 Ser. B-2,
6.40%, 11/1/2024................................ 3,008,567
Denver, CO City & Cnty. Arpt. RB:
140,000 Prerefunded Balance, Ser. A,
8.00%, 11/15/2025............................... 145,579
9,200,000 Ser. D,
7.75%, 11/15/2013............................... 10,424,152
Unrefunded Balance, Ser. A:
5,480,000 7.50%, 11/15/2023............................... 5,794,716
915,000 8.00%, 11/15/2025............................... 942,194
1,555,000 8.50%, 11/15/2023............................... 1,604,869
8,060,000 8.75%, 11/15/2023............................... 8,558,350
3,385,000 Unrefunded Balance, Ser. B,
7.25%, 11/15/2012............................... 3,542,233
9,700,000 Unrefunded Balance, Ser. D,
7.75%, 11/15/2021............................... 10,173,845
El Paso Cnty., CO GO, Sch. Dist. 11,
Colorado Springs:
2,310,000 6.50%, 12/1/2012................................ 2,512,333
2,000,000 7.10%, 12/1/2013................................ 2,285,460
1,000,000 7.10%, 12/1/2016................................ 1,143,730
3,000,000 Jefferson Cnty., CO Open Space
Sales Tax RB
5.00%, 11/1/2018................................ 2,680,350
2,250,000 Larimer Cnty., CO GO, Sch. Dist. 1
7.00%, 12/15/2016, (MBIA/IBC)................... 2,557,800
--------------
69,869,225
--------------
</TABLE>
25
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Connecticut - 0.1%
$ 1,000,000 Connecticut Dev. Auth. Wtr. Facs.,
RB
6.15%, 4/1/2035................................. $ 994,200
--------------
Delaware - 0.2%
1,600,000 Delaware Hlth. Facs. Auth. RRB,
Med. Ctr. of DE,
7.00%, 10/1/2015, (MBIA)........................ 1,708,208
--------------
District of Columbia - 1.4%
1,500,000 Dist. of Columbia American Assn. for
the Advancement of Science RB,
5.25%, 1/1/2016, (AMBAC)........................ 1,389,540
3,765,000 Dist. of Columbia Hosp. RRB,
Medatlantic Healthcare Group,
Ser. A,
6.00%, 8/15/2011, (MBIA)........................ 3,917,257
8,595,000 Dist. of Columbia RB, George
Washington University Ser. A
6.00%, 9/15/2014................................ 8,806,437
--------------
14,113,234
--------------
Florida - 4.1%
4,320,000 Broward Cnty., FL Arpt. Sys. RB,
Passenger Fac. Convertible Lien,
Ser. H1,
5.25%, 10/1/2015, (AMBAC)....................... 3,998,981
Florida Board of Ed. Capital Outlay:
8,665,000 Ser. A,
6.00%, 1/1/2006................................. 9,008,914
6,000,000 Ser. C,
5.85%, 6/1/2018................................. 6,193,380
4,185,000 Florida Port Fin. Commission RB,
Transportation Intermodal Program
5.75%, 10/1/2014, (FGIC)........................ 4,160,434
435,000 Gainesville, FL Util. Sys. RB, Ser. B,
7.50%, 10/1/2008................................ 497,735
330,000 Hillsborough Cnty., FL HFA, SFHRB,
Ser. A,
7.30%, 4/1/2022, (GNMA)......................... 337,006
1,250,000 Hillsborough Cnty., FL PCRB
6.25%, 12/1/2034................................ 1,267,925
3,580,000 Jacksonville, FL GO, Jacksonville
Transit Auth.,
9.20%, 1/1/2015................................. 4,707,199
300,000 Lee Cnty., FL IDA Hlth. Care Facs.
RB, Ser. B,
7.00%, 10/1/2011, (MBIA)........................ 313,176
6,000,000 Miami Dade Cnty., FL Sch. Dist. GO
5.375%, 8/1/2012................................ 5,928,480
2,960,000 Orlando-Orange Cnty., FL
Expressway Auth. RB, Jr. Lien,
8.25%, 7/1/2015, (FGIC)......................... 3,751,208
500,000 Tampa, FL Allegheny Hlth. Sys. RB,
St. Joseph's Hosp.,
6.50%, 12/1/2023................................ 537,205
--------------
40,701,643
--------------
Georgia - 4.1%
5,000,000 Fulton Cnty., GA Dev. Auth. Spl.
Facs. RB, Delta Airlines, Inc. Proj.,
5.45%, 5/1/2023................................. 4,108,850
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Georgia - continued
$ 2,000,000 Fulton Cnty., GA Facs. Corp. COP,
Pub. Purpose Proj.
6.00%, 11/1/2014, (AMBAC)....................... $ 2,061,700
1,500,000 George L. Smith II, GA World
Congress Ctr. Auth. RB
5.50%, 7/1/2020................................. 1,399,830
9,800,000 Georgia Muni. Elec. Auth. Pwr. RB,
Ser. B
6.375%, 1/1/2016................................ 10,507,854
Georgia, GO:
6,300,000 Refunding, Ser. E,
5.50%, 7/1/2003................................. 6,395,571
10,700,000 Ser. C,
5.25%, 4/1/2011................................. 10,586,152
4,255,000 Metropolitan Atlanta Rapid Transit
Auth., GA, Sales Tax RRB, Ser. P,
6.25%, 7/1/2011, (AMBAC)........................ 4,575,316
1,000,000 Monroe Cnty., GA PCRB
6.75%, 1/1/2010................................. 1,058,430
--------------
40,693,703
--------------
Hawaii - 0.3%
2,995,000 Hawaii, GO, Ser. CN
6.25%, 3/1/2007................................. 3,147,266
--------------
Idaho - 0.0%
395,000 Idaho HFA, SFHRB, Sr. Ser. D1,
8.00%, 1/1/2020, (FHA).......................... 420,541
--------------
Illinois - 3.4%
970,000 Broadview, IL Tax Increment RB
8.25%, 7/1/2013................................. 1,078,689
1,830,000 Chicago Heights, IL Residential Mtge. RB
0.00%, 6/1/2009 (a)............................. 973,194
Chicago, IL Capital Appreciation GO:
2,000,000 0.00%, 7/1/2016 (a)............................. 725,180
12,000,000 City Colleges,
0.00%, 1/1/2014, (FGIC) (a)..................... 5,379,240
1,800,000 Chicago, IL, SFHRB, Ser. B,
6.95%, 9/1/2028,
(GNMA/FNMA/FHLMC)............................... 1,872,036
4,000,000 Illinois Dev. Fin. Auth., PCRB, Edison
Co. Proj., Ser. D,
6.75%, 3/1/2015, (AMBAC)........................ 4,238,240
1,000,000 Illinois Edl. Facs. Auth. RB
5.50%, 11/15/2019............................... 751,450
9,000,000 Illinois, Sales Tax RB, Ser. P,
6.50%, 6/15/2022................................ 9,497,520
1,000,000 Kane Cnty., IL Sch. Dist. No. 129
5.50%, 2/1/2011................................. 999,120
3,000,000 Metropolitan Fair & Exposition Auth.
IL RB, Ser. A,
5.00%, 6/1/2015, (BIG).......................... 2,728,200
1,950,000 Metropolitan Pier & Exposition Auth.
IL RB
0.00%, 6/15/2021 (a)............................ 525,915
4,950,000 Quincy, IL, RB, Blessing Hosp. Proj.,
6.00%, 11/15/2018............................... 4,594,639
</TABLE>
26
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Illinois - continued
$ 1,650,000 St. Clair Cnty., IL Pub. Bldg.
Commerce RB
0.00%, 12/1/2016 (a)............................ $ 608,718
--------------
33,972,141
--------------
Indiana - 2.4%
3,000,000 Goshen, IN RB, Greencroft Obl.
Group,
5.75%, 8/15/2028................................ 2,272,320
6,800,000 Indiana HFA, SFHRB, Ser. A3,
5.375%, 1/1/2023, (FNMA/GNMA)................... 6,114,560
1,000,000 Indiana Trans. Fin. Auth. Hwy. RB
0.00%, 6/1/2017 (a)............................. 356,750
3,950,000 Indianapolis, IN Arpt. Auth. RB, Spl.
Facs.
7.10%, 1/15/2017................................ 4,033,701
9,275,000 Indianapolis, IN Pub. Impt. Bond
Bank RB
6.75%, 2/1/2020................................. 9,602,315
1,640,000 St. Joseph Cnty., IN Edl. Facs. RB,
Univ. of Notre Dame du Lac Proj.
6.50%, 3/1/2026................................. 1,783,024
--------------
24,162,670
--------------
Iowa - 0.1%
625,000 Iowa Student Loan Liquidity Corp.
RB
6.95%, 3/1/2006................................. 649,231
--------------
Kansas - 0.7%
2,000,000 Burlington, KS PCRRB, KS Gas &
Elec. Co. Proj.,
7.00%, 6/1/2031, (MBIA)......................... 2,076,600
5,000,000 Wichita, KS Hosp. RRB, Facs. Impt.,
Ser. 11,
6.75%, 11/15/2019............................... 5,127,950
--------------
7,204,550
--------------
Kentucky - 0.5%
3,000,000 Carroll Cnty., KY PCRB, KY Util. Co.,
Ser. A,
7.45%, 9/15/2016................................ 3,158,460
1,400,000 Kenton Cnty., KY Arpt. Brd. RB
7.50%, 2/1/2020................................. 1,430,156
--------------
4,588,616
--------------
Louisiana - 0.9%
5,755,000 Jefferson, LA Sales Tax Dist. RRB,
Capital Appreciation,
0.00%, 12/1/2016, (FSA) (a)..................... 2,119,739
1,000,000 Louisiana Pub. Facs. Auth., Hosp.
RB, Touro Infirmary Proj., Ser. A,
5.50%, 8/15/2019................................ 800,820
New Orleans, LA, GO, Cap.
App., Refunding:
6,960,000 0.00%, 9/1/2014, (AMBAC) (a).................... 3,028,575
2,800,000 0.00%, 9/1/2015, (AMBAC) (a).................... 1,135,708
2,000,000 5.50%, 12/1/2021................................ 1,905,600
--------------
8,990,442
--------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Maine - 1.0%
Maine HFA Mtge. Purchase, RB:
$ 6,235,000 Ser. D2,
5.80%, 11/15/2016............................... $ 6,023,446
Ser. C2:
560,000 6.875%, 11/15/2023.............................. 572,488
4,000,000 6.05%, 11/15/2028............................... 3,852,920
--------------
10,448,854
--------------
Massachusetts - 9.2%
305,000 Gloucester, MA, GO,
5.25%, 7/15/2015, (MBIA)........................ 288,737
250,000 Lowell, MA, GO,
5.50%, 12/15/2015, (AMBAC)...................... 246,153
Massachusetts Dev. Fin. Agcy. RB:
2,940,000 Curry College, Ser. A,
5.50%, 3/1/2029, (ACA).......................... 2,523,049
2,000,000 Eastern Nazarine College,
5.625%, 4/1/2029................................ 1,708,680
2,475,000 New England Ctr. for Children,
5.875%, 11/1/2018............................... 2,170,625
1,240,000 Regis College,
5.25%, 10/1/2018................................ 1,050,243
2,510,000 YMCA Greater Boston Issue,
5.35%, 11/1/2019................................ 2,180,939
400,000 Massachusetts Edl. Fin. Auth. RRB, Ser. A,
4.80%, 7/1/2012, (AMBAC)........................ 357,472
Massachusetts HFA SFHRB:
285,000 6.00%, 6/1/2014................................. 286,251
945,000 Ser. 59,
5.40%, 6/1/2020, (AMBAC)........................ 856,652
Massachusetts Hlth. & Edl. Facs. Auth. RB:
5,450,000 Boston Med. Ctr., Ser. A,
5.25%, 7/1/2014, (MBIA)......................... 5,078,582
2,250,000 Cape Cod Healthcare, Ser. B,
5.45%, 11/15/2023............................... 1,749,330
5,200,000 Jordan Hosp., Ser. D,
5.25%, 10/1/2023................................ 3,933,436
700,000 Milton Hosp., Ser. B,
7.25%, 7/1/2005, (MBIA)......................... 715,071
3,000,000 St. Mem. Med. Ctr., Ser. A,
6.00%, 10/1/2023................................ 2,325,870
Massachusetts IFA, RB:
5,000,000 Refunding, Ogden Haverhill Proj., Ser. A,
5.60%, 12/1/2019................................ 4,219,450
250,000 Wentworth Institute of Technology,
5.55%, 10/1/2013................................ 236,708
14,000,000 Massachusetts Muni. Wholesale Elec. Copower
Supply Sys. RB,
5.45%, 7/1/2018 (c)............................. 12,896,100
Massachusetts Port Auth. RB:
5,120,000 Refunding, Ser. A,
5.50%, 7/1/2014................................. 5,007,053
5,000,000 Ser. 1999A,
5.75%, 10/1/2029................................ 4,805,300
</TABLE>
27
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Massachusetts - continued
Massachusetts Port Auth. RB - continued
$ 400,000 Spl. Facs. Bosfuel Proj.,
5.30%, 7/1/2008, (MBIA)......................... $ 394,824
125,000 Massachusetts Wtr. Pollution
Abatement RB, Loan Program,
Ser. A,
6.375%, 2/1/2015................................ 129,751
Massachusetts, GO:
7,800,000 Ser. A,
5.75%, 8/1/2009................................. 8,045,700
Ser. B:
10,000,000 5.50%, 7/1/2011................................. 10,244,800
8,765,000 5.70%, 8/1/2007................................. 8,983,424
MBTA Gen. Trans. Sys., RB:
7,950,000 Refunding, Ser. A,
6.25%, 3/1/2012................................. 8,466,909
2,125,000 Refunding, Ser. B,
6.20%, 3/1/2016................................. 2,229,677
500,000 Methuen, MA GO
5.625%, 11/15/2015, (FSA)....................... 498,705
300,000 Worcester, MA GO, Muni. Purpose
Loan, Ser. A,
5.25%, 8/1/2012, (AMBAC)........................ 293,652
--------------
91,923,143
--------------
Michigan - 3.0%
4,000,000 Michigan Bldg. Auth. RB, Facs.
Program, Ser. II
5.50%, 10/15/2009............................... 4,037,560
10,000,000 Michigan Hosp. Fin. Auth. RRB,
Oakwood Hosp. Obl. Group,
Ser. A,
5.625%, 11/1/2018............................... 9,584,900
2,000,000 Michigan Muni. Bond Auth. RB,
Drinking Wtr. Revolving Fund,
5.50%, 10/1/2019................................ 1,897,280
10,000,000 Monroe Cnty., MI EDA, Ltd. Obl.
RRB, Detroit Edison Co.,
6.95%, 9/1/2022, (FGIC)......................... 11,223,200
4,000,000 Wayne Charter Cnty., MI Arpt. RB,
Ser. A
5.00%, 12/1/2022................................ 3,361,480
--------------
30,104,420
--------------
Mississippi - 0.8%
1,000,000 Harrison Cnty., MS Wst. Wtr.
Treatment Mgmt. Dist. RRB, Wst.
Wtr. Treatment Facs., Ser. A,
8.50%, 2/1/2013, (FGIC)......................... 1,277,200
5,000,000 Mississippi GO, Ser. R
5.90%, 11/15/2009............................... 5,201,650
1,995,000 Mississippi Home Corp., SFHRB,
Ser. B, Class 7,
6.20%, 6/1/2030, (FNMA/GNMA).................... 1,973,554
--------------
8,452,404
--------------
Missouri - 1.6%
5,150,000 Bridgeton, MO IDA Sr. Hsg. RB,
Sarah Community Proj.,
5.80%, 5/1/2018................................. 4,330,223
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Missouri - continued
$ 500,000 Cape Girardeau Cnty., MO IDA Solid
Wst. Disp. RB, Procter & Gamble
Paper Prod. Proj.,
5.30%, 5/15/2028................................ $ 434,005
500,000 Missouri COP, Psychiatric Rehab
Ctr. Proj., Ser. A,
6.00%, 11/1/2015................................ 505,935
Missouri Env. Impt. & Energy
Resource Auth., Wtr. PCRB:
1,000,000 Kansas City, Ser. A,
5.75%, 1/1/2016................................. 1,001,160
600,000 Ser. B,
7.20%, 7/1/2016................................. 653,700
520,000 Ser. E,
5.125%, 1/1/2019................................ 468,556
1,000,000 Missouri Higher Ed. Student Loan
RB, Sub. Ser. F,
6.75%, 2/15/2009................................ 1,013,030
500,000 Missouri Hlth. & Edl. Facs. Auth.
RB, BJC Hlth. Sys., Ser. A,
6.50%, 5/15/2020................................ 531,980
Missouri Hsg. Community Mtge. RB:
165,000 SFHRB, Ser. A,
7.125%, 12/1/2014, (FNMA/GNMA).................. 173,499
SFHRB, Ser. B:
380,000 6.25%, 9/1/2015, (FNMA/GNMA).................... 383,602
1,705,000 6.45%, 9/1/2027, (FNMA/GNMA).................... 1,714,514
475,000 SFHRB, Ser. D2,
6.50%, 9/1/2029, (FNMA/GNMA).................... 483,275
Sikeston, MO Elec. RRB:
325,000 6.00%, 6/1/2014, (MBIA)......................... 340,711
500,000 6.00%, 6/1/2015, (MBIA)......................... 519,585
495,000 St. Louis Cnty., MO IDA Hlth. Facs.
RB, Mother of Perpetual Help,
6.40%, 8/1/2035, (GNMA)......................... 502,821
950,000 St. Louis, MO Muni. Fin. Corp.
Leasehold RB, Impt. City Justice
Ctr., Ser. A,
5.75%, 2/15/2011, (AMBAC)....................... 972,420
500,000 St. Louis, MO Wtr. RRB
4.75%, 7/1/2014, (AMBAC)........................ 445,550
2,000,000 Valley Park, MO IDA Sr. Hsg. RB,
Cape Albeon Proj.,
6.15%, 12/1/2033................................ 1,685,360
--------------
16,159,926
--------------
Nebraska - 0.2%
2,560,000 American Public Energy Agcy.,
NE Gas Supply RB, Ser. A
4.375%, 6/1/2010................................ 2,249,421
--------------
Nevada - 1.6%
3,000,000 Clark Cnty., NV GO
6.00%, 6/1/2006................................. 3,120,570
</TABLE>
28
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Nevada - continued
$ 5,500,000 Clark Cnty., NV IDRB, Ser. B
5.90%, 10/1/2030................................ $ 4,696,890
8,000,000 Clark Cnty., NV IDRB, NV Pwr. Co.
Proj., Ser. A,
5.60%, 10/1/2030................................ 6,498,880
2,000,000 Las Vegas, NV New Convention &
Visitors Auth. RB,
5.75%, 7/1/2015, (AMBAC)........................ 1,999,900
--------------
16,316,240
--------------
New Hampshire - 0.3%
3,155,000 New Hampshire Higher Ed. & Hlth.
Facs. Auth. RB, Frisbie Memorial
Hosp.,
6.125%, 10/1/2013............................... 2,911,592
--------------
New Jersey - 2.2%
7,400,000 New Jersey EDA Spl. Facs. RB,
Continental Airlines, Inc. Proj.
6.25%, 9/15/2019................................ 6,672,284
430,000 New Jersey Hlth. Care Facs. Fin.
Auth. RB, Unrefunded,
6.125%, 7/1/2012, (AMBAC)....................... 443,025
3,000,000 New Jersey Trans. Trust Fund Auth.
RB, Trans. Sys. Ser. A,
5.75%, 6/15/2015................................ 3,039,150
10,000,000 New Jersey Turnpike Auth. Turnpike
RB
6.00%, 1/1/2012................................. 10,440,800
540,000 Ocean Cnty., NJ Util. Auth. Wst.
Wtr., Ser. A
4.00%, 1/1/2008................................. 482,101
1,055,000 Salem Cnty., NJ PCRB, E.I. Du Pont-
Chambers Works Proj., Ser. A,
6.50%, 11/15/2021............................... 1,082,335
--------------
22,159,695
--------------
New Mexico - 0.3%
1,500,000 Albuquerque, NM Hosp. Sys. RRB,
Ser. A,
6.375%, 8/1/2007, (MBIA)........................ 1,548,030
1,750,000 New Mexico Edl. Assistance
Foundation
5.50%, 11/1/2010................................ 1,615,565
--------------
3,163,595
--------------
New York - 11.7%
4,000,000 Dutchess Cnty., NY IDRB, IBM Proj.
5.45%, 12/1/2029................................ 3,910,280
6,000,000 Long Island Power Auth., NY RB
0.00%, 6/1/2014 (a)............................. 2,638,500
Metropolitan Trans. Auth., NY Trans.
Facs. RB:
11,600,000 Svc. Contract, Ser. 7,
5.625%, 7/1/2016................................ 11,154,792
9,360,000 Svc. Contract, Ser. R,
5.50%, 7/1/2017................................. 8,825,731
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
New York - continued
$ 2,005,000 Nassau Cnty., NY, General Impt.,
Ser. B
5.25%, 6/1/2015................................... $ 1,842,114
120,000 New York City, NY, Unrefunded
Balance Ser. H
7.20%, 2/1/2013................................... 125,538
14,900,000 New York City, NY Muni. Wtr. Fin.
Auth., Wtr. & Swr. Sys. RB, Ser.
A65, 144A (c)
6.77%, 6/15/2029.................................. 13,592,972
New York City, NY GO:
Prerefunded, Ser. A:
85,000 7.75%, 8/15/2014.................................. 89,103
135,000 7.75%, 8/15/2015.................................. 141,516
3,755,000 Ser. F,
5.25%, 8/1/2012, (FGIC)........................... 3,639,947
Unrefunded, Ser. A:
90,000 7.75%, 8/15/2008.................................. 94,259
55,000 7.75%, 8/15/2014.................................. 57,544
85,000 7.75%, 8/15/2015.................................. 88,870
5,000,000 Ser. M
5.75%, 6/1/2004................................... 5,112,300
2,500,000 New York City, NY Hlth. & Hosp.
Corp. RB, Hlth. Sys., Ser. A,
5.25%, 2/15/2017.................................. 2,173,925
500,000 New York City, NY IDA Spl. Facs.
RB, American Airlines, Inc. Proj.,
5.40%, 7/1/2019................................... 430,810
New York Dormitory Auth. RB:
1,000,000 5.20%, 2/15/2014.................................. 932,780
3,980,000 City Univ. Sys., Ser. D,
7.00%, 7/1/2009, (FGIC)........................... 4,334,737
4,000,000 New York Energy Research & Dev.
Auth. PCRB
5.15%, 3/1/2016................................... 3,664,320
New York Env. Facs. Corp., PCRB
Wtr. Revolving Fund:
545,000 Unrefunded, Ser. E,
6.875%, 6/15/2010................................. 563,459
4,500,000 NYC Muni. Wtr.
5.875%, 6/15/2014................................. 4,555,620
New York Ser. F:
5,700,000 5.25%, 9/15/2010.................................. 5,606,292
5,000,000 5.25%, 9/15/2011.................................. 4,879,150
7,000,000 New York Hsg. Corp. RB, Ser. A,
0.00%, 11/1/2010 (a).............................. 7,000,910
New York Med. Care Facs., Fin.
Agcy. RB:
Hlth. Ctr. Proj., Ser. A:
2,140,000 6.375%, 11/15/2019, (AMBAC)....................... 2,191,382
1,435,000 6.375%, 11/15/2019................................ 1,474,663
30,000 Unrefunded, Ser. E,
6.375%, 8/15/2014, (FGIC)......................... 31,041
New York Mtge. Agcy. RB:
3,000,000 5.95%, 10/1/2020.................................. 2,910,330
4,000,000 Homeowner Mtge. Ser. 27,
6.90%, 4/1/2015................................... 4,152,320
</TABLE>
29
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
New York - continued
$ 5,000,000 New York Thruway Auth. Hwy. &
Bridge RB, Ser. A,
5.50%, 4/1/2008................................. $ 5,066,150
1,000,000 New York Thruway Auth. Service
Contract,
6.00%, 1/1/2005................................. 1,034,600
New York Urban Dev. Corp. RB:
10,000,000 5.50%, 7/1/2016................................. 9,518,100
1,175,000 Correctional Facs., Ser. A,
6.50%, 1/1/2009................................. 1,246,981
1,500,000 New York, NY GO, Ser. L
5.625%, 8/1/2007................................ 1,517,025
500,000 Niagara Falls, NY Pub. Impt. GO
7.50%, 3/1/2014, (MBIA)......................... 592,805
1,500,000 Port Authority, New York & New
Jersey RB
5.875%, 9/15/2015............................... 1,504,230
400,000 Triborough Bridge & Tunnel Auth.,
NY, Spl. Obl., RRB, Ser. A,
5.25%, 1/1/2014, (FGIC)......................... 378,868
--------------
117,073,964
--------------
North Carolina - 0.2%
1,000,000 North Carolina Eastern Muni. Pwr.
Agcy., Pwr. Sys. RB,
5.70%, 1/1/2013, (MBIA)......................... 1,003,990
1,000,000 Sampson Area Dev. Corp., NC,
Installment Pmt. RB
4.70%, 6/1/2014................................. 886,250
--------------
1,890,240
--------------
Ohio - 0.8%
2,000,000 Adams Cnty., OH Valley Local Sch.
Dist. GO,
7.00%, 12/1/2015, (MBIA)........................ 2,289,680
2,000,000 Butler Cnty., OH Trans. Impt. Dist.
RB, Ser. A,
6.00%, 4/1/2012, (FSA).......................... 2,078,000
2,500,000 Montgomery Cnty., OH Hosp. RRB,
Kettering Med. Ctr.,
6.25%, 4/1/2020, (MBIA)......................... 2,586,350
1,260,000 Toledo Lucas Cnty., OH Port Auth.
5.40%, 5/15/2019................................ 1,071,214
--------------
8,025,244
--------------
Oklahoma - 0.1%
540,000 Oklahoma City, OK Ind. & Cultrl.
Facs. RB, Dist. Heating & Cooling
6.75%, 9/15/2017................................ 540,556
--------------
Oregon - 1.0%
Klamath Falls, OR Elec. RRB,
Sr. Lien, Klamath Cogen Proj.:
5,000,000 5.75%, 1/1/2013................................. 4,572,550
5,000,000 6.00%, 1/1/2025................................. 4,277,300
1,350,000 Multnomah Cnty, OR COP
4.125%, 8/1/2007................................ 1,232,523
--------------
10,082,373
--------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Pennsylvania - 4.9%
Allegheny Cnty., PA Arpt. Auth. RRB
Pittsburgh Int'l. Arpt:
$ 4,295,000 6.00%, 1/1/2014................................. $ 4,348,430
2,495,000 6.00%, 1/1/2015................................. 2,512,340
2,000,000 Lebanon Cnty., PA Hosp Auth. RB,
Good Samaritan Proj.,
6.00%, 11/15/2018............................... 1,761,080
1,000,000 Lehigh Cnty., PA IDA PCRB,
Refunding PA Pwr. & Light Co.
Proj., Ser. B,
6.40%, 9/1/2029, (MBIA)......................... 1,015,260
900,000 Montgomery Cnty., PA PCRRB,
Philadelphia Elec. Co.,
7.60%, 4/1/2021................................. 937,674
4,500,000 Pennsylvania EDA Solid Wst. Disp.,
RB, USG Corp. Proj.,
6.00%, 6/1/2031................................. 3,963,870
5,545,000 Pennsylvania HFA RRB, Residential
Dev., Section 8, Ser. A,
7.60%, 7/1/2013, (HUD Sec. 8)................... 5,714,067
1,750,000 Pennsylvania IDA RB, EDA,
6.00%, 1/1/2012, (AMBAC)........................ 1,790,583
5,125,000 Philadelphia, PA Arpt. RB
6.00%, 6/15/2006................................ 5,283,977
1,000,000 Philadelphia, PA Hosp. & Higher Edl.
Facs. Auth. RRB, Community
College, Ser. B,
6.50%, 5/1/2007, (MBIA)......................... 1,069,770
7,360,000 Philadelphia, PA Muni. Auth. RB,
Muni. Svcs. Bldg. Lease,
0.00%, 3/15/2014 (a)............................ 3,298,899
9,350,000 Philadelphia, PA Wtr. & Wst. Wtr. RB,
5.00%, 6/15/2016, (FSA)......................... 8,539,542
1,000,000 Pittsburgh, PA GO, Ser. A
5.50%, 9/1/2015, (FGIC)......................... 974,750
6,350,000 Sayre, PA Hlth. Care Facs. Auth. RB,
Guthrie Healthcare, Ser. A,
7.10%, 3/1/2017, (AMBAC)........................ 6,572,504
1,000,000 Susquehanna, PA Area Regl. Arpt.
Auth. RB, Aero Harrisburg LLC
Proj.,
5.50%, 1/1/2024................................. 831,990
--------------
48,614,736
--------------
Rhode Island - 0.0%
286,000 West Warwick, RI, Ser. A,
7.30%, 7/15/2008................................ 301,513
--------------
South Carolina - 0.7%
4,430,000 South Carolina GO, Cap. Impt.,
Ser. A,
5.50%, 10/1/2005................................ 4,521,701
2,500,000 South Carolina Hsg. Fin. & Dev.
Auth. RB
6.35%, 7/1/2019................................. 2,510,975
--------------
7,032,676
--------------
</TABLE>
30
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
South Dakota - 1.6%
$13,300,000 Ed. Loans Inc., SD Student Loans,
RB
5.60%, 6/1/2020................................. $ 11,958,562
4,000,000 South Dakota Hsg. Dev. Auth. RB,
Ser. G,
5.95%, 5/1/2020................................. 3,913,080
--------------
15,871,642
--------------
Tennessee - 4.3%
7,465,000 Bristol, TN Hlth. & Edl. Facs. Auth.
RRB, Bristol Mem. Hosp.,
6.75%, 9/1/2010, (FGIC)......................... 8,114,156
Knox Cnty., TN Hlth. & Edl. Facs.
Auth. RRB Fort Sanders Alliance:
9,000,000 Ser. B,
7.25%, 1/1/2010, (MBIA)......................... 10,074,150
4,500,000 Ser. C,
5.25%, 1/1/2015, (MBIA)......................... 4,279,770
1,875,000 Memphis, TN GO, Gen. Impt.
5.60%, 8/1/2010................................. 1,889,288
10,000,000 Metro Govt., Nashville & Davidson
Cnty., TN Wtr. & Swr. RRB
7.70%, 1/1/2012, (FGIC)......................... 11,826,700
1,500,000 Shelby Cnty., TN Arpt. Auth. Spl.
Facs. & Proj. RB
7.875%, 9/1/2009................................ 1,574,160
5,280,000 Tennsessee Hsg. Dev. Agcy. RB,
Ser. 2A,
5.70%, 7/1/2031................................. 4,788,854
--------------
42,547,078
--------------
Texas - 7.7%
6,000,000 Alliance, TX Arpt. Auth., TX Spl. Facs.
RB, Federal Express Corp. Proj.,
6.375%, 4/1/2021................................ 5,736,720
3,740,000 Austin, TX Hotel Occupancy
Tax RRB, Sub, Lien,
5.625%, 11/15/2017, (AMBAC)..................... 3,593,355
Austin, TX Util. Sys. RB:
1,530,000 Prerefunded,
5.75%, 5/15/2024, (FGIC)........................ 1,569,933
2,000,000 Refunded, Ser. B,
5.70%, 11/15/2021, (MBIA)....................... 1,965,920
25,000 Bexar, TX Metropolitan Wtr. Dist.
Wtr. Works Sys.
RB, Unrefunded Balance,
6.625%, 5/1/2014, (AMBAC)....................... 26,099
60,000 Brazos Cnty., TX HFA, SFHRB
5.80%, 9/1/2025, (GNMA/FNMA).................... 55,809
30,000 Brazos Cnty., TX Hlth. Facs. Dev.
RB, Franciscan
Svc. Corp., Ser. B,
5.375%, 1/1/2022, (MBIA)........................ 26,844
416,000 Brazos, TX Higher Ed. Auth., RB
7.10%, 11/1/2004................................ 426,833
2,400,000 Brownsville, TX Util. Sys. RRB
6.25%, 9/1/2014, (MBIA)......................... 2,551,440
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Texas - continued
Dallas Fort Worth, TX Int'l. Arpt.
Facs. Impt. Corp. RB:
American Airlines, Inc.:
$ 3,000,000 6.375%, 5/1/2035................................ $ 2,767,080
1,000,000 7.25%, 11/1/2030................................ 1,014,140
2,000,000 7.50%, 11/1/2025................................ 2,032,600
2,000,000 Frisco, TX Ind. Sch. Dist. GO
5.75%, 8/15/2017................................ 1,967,660
2,500,000 Gulf Coast, TX IDA, Wst. Disp. RB,
Valero Refining Proj.,
5.60%, 12/1/2031................................ 2,036,225
3,215,000 Harris Cnty., TX Hlth. Facs. Dev.
Corp., Hosp. RB, Mem. Hosp.
Sys. Proj., Ser. A,
6.00%, 6/1/2009................................. 3,284,348
3,000,000 Harris Cnty., TX Sports Auth. Spl. RB,
5.00%, 11/15/2025............................... 2,544,300
Houston, TX Arpt. Sys. RB,
Continental Airlines Proj.:
5,000,000 6.125%, 7/15/2027............................... 4,309,950
5,500,000 Spl. Facs.
6.125%, 7/15/2027............................... 4,740,945
2,000,000 Matagorda Cnty., TX Navigation
District 1
5.125%, 11/1/2028............................... 1,712,860
2,000,000 Port Arthur, TX Navigation Dist. GO,
Refunding,
0.00%, 3/1/2009 (a)............................. 1,229,060
1,085,000 Rio Grande Valley, TX Hlth. Facs.
Corp., Hosp. RB, Baptist Med.
Proj.,
8.00%, 8/1/2017, (BIG).......................... 1,095,633
6,415,000 Tarrant Cnty., TX HFA, SFHRB,
Ser. A,
0.00%, 9/15/2016 (a)............................ 2,481,771
2,565,000 Tarrant Cnty., TX Hlth. Facs. Dev. RB,
TX Hlth. Resource Sys., Ser. A,
5.75%, 2/15/2015, (MBIA)........................ 2,559,716
Texas GO:
1,000,000 5.65%, 12/1/2017................................ 938,410
7,275,000 Pub. Fin. Auth., Ser. A,
5.50%, 10/1/2013................................ 7,391,691
Texas Muni. Pwr. Agcy. RRB:
1,000,000 0.00%, 9/1/2008 (a)............................. 633,920
175,000 5.25%, 9/1/2012, (MBIA)......................... 169,760
8,000,000 Texas Reg. Linked SAVRS & RIBS
6.20%, 9/30/2011................................ 8,467,200
4,000,000 Texas Turnpike Auth. Dallas
Thruway RRB
5.50%, 1/1/2015, (FGIC)......................... 3,886,680
Texas Wtr. Dev. Board RB, Sr. Lien,
Ser. B:
2,000,000 5.75%, 7/15/2013................................ 2,021,920
4,000,000 5.75%, 7/15/2014................................ 4,014,360
--------------
77,253,182
--------------
</TABLE>
31
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Utah - 0.2%
$ 230,000 Bountiful, UT Hosp. RB
9.50%, 12/15/2018............................... $ 265,151
Utah HFA, SFHRB, Ser. C2:
35,000 7.95%, 7/1/2010, (FHA).......................... 35,731
1,000,000 5.75%, 7/1/2021(FHA)............................ 939,710
6,500,000 Utah Intermountain Pwr. Agcy. RB,
Ser. C,
0.00%, 7/1/2020 (a)............................. 1,203,150
--------------
2,443,742
--------------
Vermont - 0.5%
5,000,000 Vermont EDA RB, Wake Robin
Corp. Proj., Ser. A,
6.30%, 3/1/2033................................. 4,838,200
--------------
Virginia - 1.9%
Metro Washington DC Arpt. Auth.
RB:
4,015,000 6.00%, 10/1/2005................................ 4,117,343
5,745,000 6.00%, 10/1/2006................................ 5,908,445
800,000 6.625%, 10/1/2019............................... 816,568
3,245,000 Virginia Hsg. Dev. Auth., MHRB,
Ser. E,
5.60%, 11/1/2017................................ 3,109,164
Winchester, VA IDA, Hosp. RRB
Winchester Med. Ctr., Inc.:
5,700,000 5.50%, 1/1/2015, (AMBAC)........................ 5,344,185
--------------
19,295,705
--------------
Washington - 2.4%
8,000,000 Chelan Cnty., WA Pub. Util. Dist. 1
RRB, Columbia River Rock Proj.,
Ser. A,
0.00%, 6/1/2013................................. 3,721,360
2,000,000 King Cnty., WA GO, Kent Sch.
Dist. 415,
5.875%, 6/1/2016, (FSA)......................... 2,011,500
2,065,000 Seattle, WA GO, Ser. B,
5.75%, 12/1/2019................................ 2,008,439
3,500,000 Seattle, WA Wtr. Sys. RRB
5.50%, 6/1/2018................................. 3,342,325
2,000,000 Spokane, WA Reg'l. Solid Wst.
Mgmt. Sys. RRB,
6.50%, 1/1/2011, (AMBAC)........................ 2,109,380
Washington GO Refunding:
6,000,000 5.75%, 9/1/2007................................. 6,163,680
Ser. A:
1,000,000 6.75%, 2/1/2015................................. 1,085,780
3,625,000 Washington HFA, SFHRB, Ser. 4A,
5.40%, 12/1/2024,
(FNMA/GNMA)..................................... 3,235,784
--------------
23,678,248
--------------
West Virginia - 0.2%
2,000,000 Harrison Cnty., WV Solid Wst. Disp.
6.75%, 8/1/2024................................. 2,109,660
--------------
Wisconsin - 0.4%
3,500,000 Wisconsin HFA & EDA RB, Ser. G,
5.75%, 4/1/2030................................. 3,211,110
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Wisconsin - continued
$ 1,500,000 Wisconsin Hlth. & Edl. Facs. RB
5.50%, 2/15/2028................................ $ 1,227,165
--------------
4,438,275
--------------
Puerto Rico - 1.8%
Cmnwlth. of Puerto Rico Hwy. &
Trans. RB:
2,000,000 6.00%, 7/1/2039................................. 1,970,240
Ser. X:
170,000 5.50%, 7/1/2015................................. 167,090
6,250,000 Cmnwlth. of Puerto Rico Pub.
Bldg. Auth. Hlth. & Edl. Facs. RB
5.70%, 7/1/2016................................. 6,210,687
Puerto Rico Muni. Fin. Agcy. GO:
4,130,000 Refunding, Ser. A,
5.875%, 8/1/2014, (FSA)......................... 4,254,024
5,510,000 Refunding, Ser. B,
5.75%, 8/1/2013, (FSA).......................... 5,646,372
--------------
18,248,413
--------------
Total Municipal Obligations
(cost $956,869,345)............................. 930,318,150
--------------
SHORT-TERM MUNICIPAL SECURITIES - 4.0%
Alabama - 1.0%
10,000,000 Jefferson Cnty., AL Swr. RB
4.40%, 6/7/2000 (b)............................. 10,000,000
--------------
Florida - 0.0%
40,000 Dade Cnty., FL Wtr. & Swr. Sys. RB
4.05%, 6/7/2000, (SPA:
Commerzbank) (FGIC) (b)......................... 40,000
--------------
Illinois - 0.3%
3,100,000 Illinois Hlth. Facs. Auth. RB
4.35%, 6/1/2000 (b)............................. 3,100,000
--------------
Indiana - 0.3%
1,375,000 Indiana Dev. Fin. Indl. Dev. RB, CC
Cook & Son Lumber Proj.
5.20%, 6/7/2000, (LOC: Fifth Third
Bank) (b)....................................... 1,375,000
1,250,000 Indiana Hlth. Fac. Fin. Auth. RB,
Capital Access,
4.25%, 6/7/2000, (LOC: Comerica
Bank) (b)....................................... 1,250,000
--------------
2,625,000
--------------
Iowa - 0.1%
1,100,000 Iowa Fin. Auth. RB, Burlington Med.
Ctr.,
4.50%, 6/1/2000, (SPA: Firstar
Bank Milawaukee) (FSA) (b)...................... 1,100,000
--------------
Minnesota - 0.1%
1,000,000 St. Paul, MN Hsg. & Redev. Auth.
RB
4.35%, 6/7/2000 (b)............................. 1,000,000
--------------
Missouri - 0.4%
1,100,000 Missouri Hlth. & Edl. Facs. RB
4.65%, 7/3/2000 (b)............................. 1,100,000
</TABLE>
32
<PAGE>
EVERGREEN
Municipal Bond Fund
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM MUNICIPAL SECURITIES - continued
Missouri - continued
$ 2,475,000 Mountain Grove, MO Ind. Dev.
Auth.
5.00%, 6/7/2000 (b)............................. $ 2,475,000
45,000 Missouri Hlth. & Edl. Facs. Auth.
RB, Christian Hlth. Svcs., Ser. A,
4.30%, 6/1/2000, (LOC: Morgan
Guaranty Trust) (b)............................. 45,000
--------------
3,620,000
--------------
New York - 1.5%
15,000,000 New York, NY City Muni. Wtr. Fin.
Auth. RB, Ser. A65
4.40%, 6/7/2000 (b)............................. 15,000,000
--------------
Ohio - 0.1%
1,150,000 Warren Cnty., OH IDR, Cincinnati
Electronic Co. Proj.
4.45%, 6/7/2000 (b)............................. 1,150,000
--------------
Tennessee - 0.2%
2,500,000 Wilson Cnty., TN Indl. Dev. Board
4.40%, 6/7/2000 (b)............................. 2,500,000
--------------
Total Short-Term Municipal
Securities
(cost $40,135,000).............................. 40,135,000
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
MUTUAL FUND SHARES - 1.7%
17,131,792 Federated Municipal Obligations
Fund
(cost $17,131,792)............................... 17,131,792
--------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $1,014,136,137).................... 98.6% 987,584,942
Other Assets and
Liabilities - net........................ 1.4 13,536,922
----- --------------
Net Assets................................ 100.0% $1,001,121,864
===== ==============
</TABLE>
See Combined Notes to Schedules of Investments.
33
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Schedule of Investments
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - 97.2%
Alabama - 4.6%
$ 7,000,000 Huntsville, AL, Warrants, Ser. A,
4.50%, 12/1/2000.................................. $ 6,977,810
------------
Alaska - 0.7%
1,000,000 Anchorage, AK Hosp. RRB, Sisters of
Providence Proj.,
7.125%, 10/1/2005................................. 1,043,660
------------
Arizona - 2.4%
2,000,000 Arizona Edl. Loan Marketing Corp. Edl.
Loan RB, Sr. Ser.,
6.125%, 9/1/2002.................................. 2,034,160
1,600,000 Pima Cnty., AZ GO, Refunding,
6.55%, 7/1/2001................................... 1,629,408
------------
3,663,568
------------
California - 2.2%
3,300,000 Central Valley, CA Fin. Auth. RB,
Carson Ice General Proj.,
5.80%, 7/1/2004................................... 3,331,020
------------
Colorado - 5.1%
4,025,000 Colorado Student Obl. Bond Auth., Sr.
Ser. B,
6.20%, 12/1/2008.................................. 4,072,535
Colorado, HFA SFHRB:
300,000 Ser. A3,
4.25%, 10/1/2005.................................. 292,728
1,000,000 Ser. B2,
4.90%, 4/1/2007................................... 983,370
1,085,000 Denver, CO Hlth. & Hosp. RB, Ser. A,
5.00%, 12/1/2003.................................. 1,054,295
1,300,000 Weld Cnty., CO IDRB, Monfort, Inc.
Proj.,
6.75%, 12/15/2001................................. 1,313,702
------------
7,716,630
------------
Connecticut - 0.6%
Connecticut Dev. Auth. Mtge. RB:
425,000 Church Homes, Inc.
4.90%, 4/1/2002................................... 418,982
460,000 Refunding,
4.80%, 4/1/2001................................... 457,047
------------
876,029
------------
Florida - 9.7%
3,320,000 Broward Cnty., FL Resource Recovery
RB, Wheelabrator Tech. Proj.,
7.95%, 12/1/2008.................................. 3,425,543
4,905,000 Jacksonville, FL IDRB, TTX Co. Proj.,
5.40%, 3/1/2001................................... 4,928,642
1,550,000 Leon Cnty., FL Edl. Facs. Auth. COP.,
Southgate Proj.:
9.00%, 9/1/2014 (ETM)............................. 1,598,499
1,550,000 Palm Beach Cnty., FL Solid Wst. Auth.
RRB,
5.50%, 12/1/2002, (MBIA).......................... 1,570,537
375,000 Pinellas Cnty., FL Edl. Facs. Auth.
RRB, Barry University Proj.,
4.55%, 10/1/2002.................................. 364,950
1,000,000 Sarasota, FL GO, Refunding,
6.85%, 8/1/2000................................... 1,003,740
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Florida - continued
$ 1,695,000 Volusia Cnty, FL Indl. Dev. Auth. First
Mtge. RB, Refunding Bishops Glen
Proj.,
7.50%, 11/1/2016.................................. $ 1,859,093
------------
14,751,004
------------
Hawaii - 2.0%
3,000,000 Hawaii Arpt. Sys. RB, Ser. B,
6.25%, 7/1/2006, (FGIC)........................... 3,125,820
------------
Illinois - 2.9%
1,000,000 Illinois Dev. Fin. Auth. RRB,
Community Rehabilitation Providers,
Ser. A,
5.35%, 7/1/2000................................... 999,840
3,410,000 Illinois Hsg. Dev. Auth. RB,
5.80%, 8/1/2017................................... 3,412,421
------------
4,412,261
------------
Indiana - 1.3%
2,000,000 Kokomo, IN Hosp. Auth. RB, St.
Joseph Hosp. & Hlth. Ctr.,
6.25%, 8/15/2005.................................. 2,055,960
------------
Iowa - 5.2%
Iowa Student Loan Liquidity Corp.:
3,500,000 Ser. B,
6.65%, 3/1/2003................................... 3,603,215
4,400,000 Sr. Ser. E,
5.35%, 6/1/2004................................... 4,379,716
------------
7,982,931
------------
Kansas - 0.8%
1,225,000 Kansas City, KS, Spl. Obl., Ser. 1992,
6.00%, 2/15/2003.................................. 1,254,914
------------
Louisiana - 5.3%
3,500,000 Lake Charles, LA Harbor & Terminal
Dist. RB, Updates-Reynolds Metals
Co. Proj.,
6.00%, 5/1/2006................................... 3,431,680
4,460,000 Louisiana Pub. Facs. Auth. RB,
Student Loan Subord., Ser. A3,
7.00%, 9/1/2006................................... 4,627,964
------------
8,059,644
------------
Massachusetts - 1.6%
Massachusetts IFA RB:
760,000 Ser. A, Refunding,
5.35%, 11/1/2007,
(LOC: Rabobank Nederland)......................... 760,304
905,000 Ser. B,
5.35%, 11/1/2007,
(LOC: Rabobank Nederland)......................... 905,362
340,000 Ser. G,
5.30%, 12/1/2006,
(LOC: Rabobank Nederland)......................... 341,265
430,000 Ser. I,
5.30%, 12/1/2006,
(LOC: First Natl. Bank of Grand Fork)............. 431,599
------------
2,438,530
------------
</TABLE>
34
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Michigan - 0.3%
$ 475,000 Grand Rapids Charter Turnpike, MI
RB, Porter Hills Obl. Group,
3.95%, 7/1/2001................................... $ 467,794
------------
Missouri - 1.9%
3,000,000 St. Louis Cnty., MO IDA MHRRB,
Ser. C,
5.20%, 11/15/2029................................. 2,970,600
------------
Montana - 1.9%
2,890,000 Montana Higher Ed. Student
Assistance RB, Sr. Ser. A,
5.15%, 12/1/2001.................................. 2,896,387
------------
Nevada - 1.0%
1,500,000 Nevada Hsg. Div., SFHRB Sr. Ser. A2,
5.75%, 4/1/2031................................... 1,491,930
------------
New Hampshire - 3.2%
5,000,000 New Hampshire Business Fin. Auth.
PCRB, United Illumination Co.
Proj. A,
4.35%, 7/1/2027................................... 4,872,550
------------
New Jersey - 6.3%
New Jersey EDA RB:
Franciscan Oaks Proj.:
1,545,000 5.20%, 10/1/2004.................................. 1,480,203
825,000 5.40%, 10/1/2006.................................. 777,719
1,075,000 5.50%, 10/1/2007.................................. 1,006,006
Keswick Pines, Refunding:
695,000 4.85%, 1/1/2001................................... 690,191
465,000 5.15%, 1/1/2004................................... 441,978
500,000 5.25%, 1/1/2005................................... 469,475
975,000 5.35%, 1/1/2006................................... 904,946
925,000 5.45%, 1/1/2007................................... 849,326
3,000,000 New Jersey Turnpike Auth. RB,
Ser. C,
6.50%, 1/1/2006................................... 3,074,700
------------
9,694,544
------------
New Mexico - 0.5%
795,000 New Mexico Edl. Assistance
Foundation Student Loan RB,
Ser. A,
6.70%, 4/1/2002, (AMBAC).......................... 811,790
------------
New York - 4.9%
1,000,000 Nassau Cnty., NY Tobacco Settlement
Corp., RB,
5.40%, 7/15/2012.................................. 988,560
New York, NY GO:
1,000,000 6.00%, 10/1/2007, (FSA)........................... 1,027,480
Prerefunded, Ser. L:
305,000 5.00%, 8/1/2001, (ETM)............................ 305,903
210,000 5.25%, 8/1/2000, (ETM)............................ 210,231
Unrefunded, Ser. L:
1,145,000 5.00%, 8/1/2001................................... 1,146,248
790,000 5.25%, 8/1/2000................................... 790,624
2,000,000 New York, NY IDA Spl. Facs. RB,
Terminal One Group Assn. Proj.,
6.00%, 1/1/2007................................... 2,033,960
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
New York - continued
$ 1,080,000 TSASC, Inc., NY RB, Ser. 1,
Plan Principle 2003,
5.00%, 7/15/2009.................................. $ 1,049,134
------------
7,552,140
------------
North Dakota - 2.2%
3,300,000 North Dakota HFA, Ser. A,
5.70%, 7/1/2030................................... 3,280,068
------------
Ohio - 3.8%
940,000 Cincinnati, OH Student Loan RB, The
Student Loan Funding Corp., Ser. A,
5.50%, 12/1/2001.................................. 938,910
2,000,000 Ohio Air Quality Dev. Auth. RB,
Ohio Edison Co. Proj. B,
4.25%, 6/1/2001................................... 1,967,740
3,000,000 Ohio Wtr. Dev. Auth. PCRRB,
Ohio Edison Co. Proj. A,
4.25%, 6/1/2001................................... 2,947,350
------------
5,854,000
------------
Oklahoma - 1.9%
Oklahoma, HFA SFHRB:
750,000 Mtge. Ser. B1,
6.80%, 9/1/2016................................... 779,625
1,990,000 Mtge. Ser. B2,
6.80%, 9/1/2026................................... 2,075,948
------------
2,855,573
------------
Pennsylvania - 4.8%
3,580,000 Dauphin Cnty., PA Gen. Auth. RB,
Office & Forum Parking Proj., Ser. A,
5.125%, 1/15/2003................................. 3,506,037
1,740,000 Pennsylvania Higher Edl. Facilities
Auth. RB, Thiel College Proj.,
6.75%, 9/1/2017................................... 1,835,578
1,950,000 Philadelphia, PA Wtr. & Swr. RB,
16th Ser., Prerefunded,
7.50%, 8/1/2010................................... 2,047,500
------------
7,389,115
------------
South Dakota - 0.6%
1,000,000 South Dakota Hsg. Dev. Auth. RB,
Homeownership Mtge., Ser. J,
4.60%, 5/1/2002, (FNMA)........................... 986,310
------------
Texas - 5.0%
2,500,000 Houston, TX Arpt. Sys. RB, Sub. Lien,
Ser. A,
6.75%, 7/1/2008, (FGIC)........................... 2,588,000
5,000,000 Texas Brazos River Pollution Ctl.
Auth. RRB, Texas Utility Electric Co.,
Ser. A,
5.00%, 4/1/2033................................... 4,988,750
------------
7,576,750
------------
Utah - 6.2%
Utah Board of Regents Student Loan
RB, Ser. F:
1,700,000 5.65%, 11/1/2006.................................. 1,709,350
3,000,000 7.05%, 11/1/2003, (AMBAC)......................... 3,086,010
1,760,000 Utah Intermountain Pwr. Agcy., Pwr.
Supply RB, Capital Appreciation
Bonds, Ser. B,
5.65%, 7/1/2000................................... 1,752,608
</TABLE>
35
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Utah - continued
$ 3,000,000 Utah State GO, Ser. F,
5.00%, 7/1/2003................................... $ 2,995,650
------------
9,543,618
------------
Vermont - 3.0%
4,385,000 Vermont Mun. RB, Ser. 2,
6.00%, 12/1/2006, (AMBAC)......................... 4,571,494
------------
Virginia - 0.7%
1,065,000 Alexandria, VA Redev. & Hsg. Auth.
MHRB, Buckingham Vlg. Apts.,
4.875%, 7/1/2006.................................. 1,022,954
------------
Washington - 2.0%
2,950,000 Washington GO, Motor Vehicle Fuel
Tax, Ser. R-92D,
5.60%, 9/1/2001................................... 2,978,084
------------
Wisconsin - 2.6%
1,000,000 Milwaukee, WI Metropolitan Swr.
Dist. GO, Ser. A,
7.00%, 9/1/2001................................... 1,025,460
3,000,000 Wisconsin Hsg. & Economic Dev.,
Ser. B,
5.75%, 3/1/2022................................... 2,985,690
------------
4,011,150
------------
Total Municipal Obligations
(cost $150,217,416)............................... 148,516,632
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM MUNICIPAL SECURITIES - 0.7%
Massachusetts - 0.7%
$ 1,000,000 New England Edl. Loan Marketing
Corp. RRB, Ser. B,
5.40%, 6/1/2000 (b)
(cost $1,000,000) ................................ $ 1,000,000
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
MUTUAL FUND SHARES - 3.2%
4,738,000 Federated Municipal Obligations
Fund .............................................. 4,738,000
209,000 Federated Tax Free Obligations
Fund............................................... 209,000
------------
Total Mutual Fund Shares
(cost $4,947,000).................................. 4,947,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments -
(cost $156,164,416)........................... 101.1% 154,463,632
Other Assets and
Liabilities - net............................. (1.1) (1,631,879)
----- ------------
Net Assets..................................... 100.0% $152,831,753
===== ============
</TABLE>
See Combined Notes to Schedules of Investments.
36
<PAGE>
EVERGREEN (Formerly Davis
Tax-Free High Income Fund Tax-Free High
Income Fund, Inc.)
Schedule of Investments
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - 94.2%
Alabama - 2.1%
$ 3,670,000 Birmingham Med. Ctr. East, AL Spl.
RB,
7.25%, 7/1/2015, (MBIA)....................... $ 3,676,900
295,000 Houston Cnty., AL Hosp. Board RB,
Southeast AL Med. Ctr. Proj.,
7.625%, 4/1/2007.............................. 295,699
990,000 Mobile, AL Hsg. Assistance Corp.
RRB,
7.625%, 8/1/2023, (MBIA)...................... 1,011,364
500,000 Pell City, AL Spl. Care Facs. RB,
Ser. A,
8.50%, 7/1/2018............................... 522,255
770,000 Selma, AL Indl. Dev. Board RB,
Hammermill Plant Proj.,
6.875%, 4/1/2004.............................. 772,772
935,000 West Jefferson, AL Amusement &
Pub. Park Auth. RB,
7.50%, 12/1/2008.............................. 1,021,459
------------
7,300,449
------------
Alaska - 0.3%
885,000 Alaska Indl. Dev. & Export Auth.
RB, Ser. A,
7.95%, 4/1/2010............................... 909,506
------------
Arizona - 0.6%
610,000 Casa Grande, AZ IDA RB,
8.25%, 12/1/2015.............................. 597,922
230,000 Coconino & Mohave Cnty., AZ GO,
0.00%, 7/1/2002 (a)........................... 204,173
455,000 Pima Cnty., AZ IDA Hlth. Care Corp.
RB,
8.00%, 7/1/2013............................... 456,229
400,000 Pima Cnty., AZ MHRB,
8.15%, 12/1/2025, (FHA)....................... 434,032
500,000 Sierra Vista, AZ Dev. Auth. RB,
8.50%, 8/1/2010............................... 512,395
------------
2,204,751
------------
Arkansas - 0.6%
Crittenden Cnty., AR Hosp. RB:
1,000,000 7.00%, 7/1/2020............................... 972,450
1,000,000 7.15%, 7/1/2025............................... 970,480
------------
1,942,930
------------
California - 7.2%
California HFA RB:
585,000 Ser. B,
8.625%, 8/1/2015.............................. 586,907
650,000 Ser. C,
7.60%, 8/1/2030, (FHA)........................ 653,231
155,000 Ser. D,
0.00%, 8/1/2020 (a)........................... 32,280
1,300,000 Ser. G,
7.25%, 8/1/2017............................... 1,324,973
California Hlth. Facs. Auth. RB:
375,000 9.875%, 7/1/2012.............................. 376,684
765,000 Victory Valley Community Hosp.,
9.875%, 7/1/2012, (FGIC)...................... 768,435
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
California - continued
California Hlth. Facs. Fin. RB:
$ 3,980,000 Ser. A,
8.00%, 10/1/2018.................................. $ 4,019,680
135,000 Ser. B,
7.20%, 1/1/2012................................... 135,215
420,000 California Pub. Capital Impt. RB,
8.10%, 3/1/2018................................... 425,292
Elk Grove, CA Unified Sch. Dist. Spl.
Tax:
2,145,000 0.00%, 12/1/2017, (MBIA) (a)...................... 757,142
2,790,000 0.00%, 12/1/2018, (MBIA) (a)...................... 916,320
Lancaster, CA Sch. Dist. COP:
1,730,000 0.00%, 4/1/2019, (FSA) (a)........................ 558,946
1,730,000 0.00%, 4/1/2022, (FSA) (a)........................ 456,132
785,000 Loma Linda, CA Hsg. Rev. MHRB
Redlands
7.375%, 6/1/2009.................................. 786,209
930,000 Los Angeles, CA Community Redev.
Agcy. Tax Allocation Ser. G,
6.75%, 7/1/2010................................... 936,175
280,000 Los Angeles, CA Home Mtge. RB,
8.10%, 5/1/2017, (GNMA)........................... 276,475
Los Angeles, CA MHRB:
175,000 7.30%, 7/20/2011, (GNMA).......................... 178,008
100,000 Ser. A:
7.00%, 5/1/2006, (FNMA)........................... 101,103
2,700,000 Menlo Park, CA Community Dev.
Agcy.,
8.25%, 12/1/2028, (FHA)........................... 2,771,091
725,000 Napa, CA Indl. RRB,
8.50%, 12/1/2007.................................. 725,000
New Haven, CA Unified Sch. Dist. GO
Ser. B:
650,000 0.00%, 8/1/2013, (FGIC) (a)....................... 308,542
985,000 0.00%, 8/1/2014, (FGIC) (a)....................... 435,784
1,200,000 0.00%, 8/1/2015, (FGIC) (a)....................... 496,068
1,400,000 0.00%, 8/1/2016, (FGIC) (a)....................... 540,036
1,650,000 0.00%, 8/1/2017, (FGIC) (a)....................... 594,082
Palmdale, CA Sch. Dist. COP
1,390,000 0.00%, 10/1/2018, (FSA) (a)....................... 466,067
1,580,000 0.00%, 10/1/2022, (FSA) (a)....................... 404,053
575,000 San Diego, CA MHRB,
9.50%, 10/20/2020................................. 577,329
San Francisco, CA City & Cnty. Tax Allocation:
3,915,000 0.00%, 8/1/2017 (a)............................... 1,381,682
3,910,000 0.00%, 8/1/2018 (a)............................... 1,282,753
1,400,000 Santa Maria CA Wtr. & Wastewater
COP,
0.00%, 8/1/2027, (AMBAC) (a)...................... 986,412
245,000 University, CA Faculty Residential
Mtge. RB,
7.20%, 9/1/2012................................... 245,473
------------
24,503,579
------------
Colorado - 0.2%
2,240,000 Colorado Hlth. Retirement Facs. RB,
0.00%, 7/15/2020 (a).............................. 575,389
</TABLE>
37
<PAGE>
EVERGREEN (Formerly Davis
Tax-Free High Income Fund Tax-Free High
Income Fund, Inc.)
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Colorado - continued
$ 180,000 Hamilton Creek, CO Metro Dist. GO,
11.25%, 12/1/2004................................. $ 101,795
------------
677,184
------------
Connecticut - 0.4%
100,000 Bristol, CT GO,
7.40%, 6/15/2004.................................. 101,210
600,000 Connecticut Dev. Hlth. Care RB,
Independent Living Proj., Ser. B,
8.00%, 7/1/2017................................... 656,418
610,000 Connecticut Higher Ed. Loan RB,
7.375%, 11/15/2005................................ 614,435
------------
1,372,063
------------
Delaware - 1.2%
195,000 Delaware Economic Dev. Commission
RB, 9.75%, 7/20/2020, (GNMA)...................... 205,185
16,825,000 Delaware Economic Dev. MHRB,
0.00%, 12/20/2027 (a)............................. 1,636,231
Delaware EDA RB:
1,500,000 Delmarva Pwr. & Light Co.,
7.60%, 3/1/2020, (MBIA)........................... 1,532,970
830,000 Supermarkets Gen. Corp.,
10.875%, 12/1/2003, (GNMA)........................ 702,512
------------
4,076,898
------------
Florida - 4.4%
295,000 Broward Cnty., FL HFA RB,
0.00%, 4/1/2014 (a)............................... 74,204
385,000 Charlotte Cnty., FL IDA RB,
10.00%, 6/1/2011.................................. 405,355
2,000,000 Crossings At Fleming Island, FL RRB,
Ser. A
5.60%, 5/1/2012................................... 2,009,620
260,000 Dade Cnty., FL Hlth. Facility Hosp. RB,
Miami Childrens Hosp.,
6.875%, 8/15/2017, (FGIC)......................... 260,406
7,080,000 Duval Cnty., FL HFA SFMRB, Capital
Appreciation, 0.00%, 10/1/2032 (a)................ 767,826
Florida Hsg. Fin. Agcy. RB,:
565,000 0.00%, 7/15/2016 (a).............................. 81,467
900,000 8.10%, 10/1/2002.................................. 864,234
Florida Hsg. Fin. Corp. RB,:
5,545,000 0.00%, 12/1/2029, (FSA) (a)....................... 758,168
17,500,000 0.00%, 7/1/2030, (FSA) (a)........................ 2,323,750
555,000 Gulf Breeze, FL RB,
7.75%, 12/1/2015, (FGIC MBIA-IBC)................. 556,249
90,000 Highlands Cnty., FL IDA RB, Beverly
Enterprises Florida Proj.,
9.25%, 7/1/2007................................... 95,485
Jacksonville, FL Hlth. Facs. Hosp. RB:
460,000 Ser. A,
8.00%, 10/1/2015.................................. 421,839
280,000 Ser. B,
8.00%, 10/1/2015.................................. 256,771
108,680 Manatee Cnty., FL HFA Mtge. RB,
0.00%, 10/1/2015 (a).............................. 19,384
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Florida - continued
Miami Dade Cnty., FL Spl. Obl. RB:
$ 1,000,000 Ser. B,
0.00%, 10/1/2028, (MBIA) (a)...................... $ 163,850
4,320,000 Ser. C,
0.00%, 10/1/2013, (MBIA) (a)...................... 1,948,882
2,990,000 Miami Dade Cnty., FL Spl. Obl. RRB,
Ser. A,
0.00%, 10/1/2024, (MBIA) (a)...................... 637,976
290,000 Miami, FL Spl. Obl. RB, Ser. A,
7.375%, 7/1/2006, (MBIA).......................... 290,615
460,000 Orange Cnty., FL Hsg. Fin. Mtge.
RRB, Ser. A,
7.25%, 9/1/2019................................... 468,809
745,000 Orange Cnty., FL IDA RB,
9.25%, 8/1/2010................................... 781,088
80,000 Pinellas Park, FL Wtr. & Swr. RB,
10.00%, 10/1/2002, (MBIA)......................... 80,340
150,000 South Indian River Wtr. Ctl. Dist.
FL Spl. Assmt.,
8.00%, 11/1/2018.................................. 157,312
750,000 St. Petersburg, FL Hlth. Facs. Auth.
RB,
7.00%, 12/1/2015, (MBIA).......................... 783,750
2,510,000 Tampa, FL Home Mtge. RB,
0.00%, 10/1/2014, (FHA) (a)....................... 493,215
470,000 Winter Garden, FL IDA RB, Beverly
Enterprises,
8.75%, 7/1/2012................................... 494,717
------------
15,195,312
------------
Georgia - 1.7%
1,290,000 Atlanta, GA RB, Delta Airlines,
7.90%, 12/1/2018.................................. 1,306,448
Colquitt Cnty., GA Dev. Auth. RB:
4,280,000 0.00%, 12/1/2021 (a).............................. 906,675
200,000 Gainesville, GA Redev. Auth. RB, First
Mtge. Autumn Breeze, Ser. A,
8.00%, 4/1/2026................................... 204,144
200,000 Liberty Cnty., GA IDRB,
7.875%, 12/1/2014................................. 208,268
750,000 Macon Cnty., GA Med. Foundation
Inc. RRB, Flint River Community
Hosp.,
9.00%, 3/1/2011................................... 751,155
1,000,000 Savannah, GA EDA RB,
7.75%, 9/1/2027................................... 850,000
8,000,000 Washington, GA Wilkes Payroll RB,
0.00%, 12/1/2021 (a).............................. 1,694,720
------------
5,921,410
------------
Hawaii - 3.9%
10,000,000 Hawaii Arpt. Sys. RB,
7.00%, 7/1/2018................................... 10,271,300
170,000 Hawaii Dept. Trans. Spl. Facility RB,
Continental Airlines, Inc.,
9.60%, 6/1/2008................................... 173,771
3,000,000 Honalulu, HI City & Cnty. MHRB,
6.90%, 6/20/2035, (GNMA).......................... 3,061,770
------------
13,506,841
------------
</TABLE>
38
<PAGE>
EVERGREEN (Formerly Davis
Tax-Free High Income Fund Tax-Free High
Income Fund, Inc.)
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Illinois - 15.2%
Bolingbrook, IL GO Ser. B:
$ 1,380,000 0.00%, 1/1/2029, (MBIA) (a)....................... $ 218,689
2,500,000 0.00%, 1/1/2030, (MBIA) (a)....................... 371,450
2,500,000 0.00%, 1/1/2031, (MBIA) (a)....................... 348,250
1,500,000 0.00%, 1/1/2032, (MBIA) (a)....................... 195,315
2,500,000 0.00%, 1/1/2033, (MBIA) (a)....................... 304,225
Chicago, IL Board Of Ed. GO:
10,000,000 Capital Appreciation Sch. Reform B-1,
0.00%, 12/1/2014 (a).............................. 4,166,500
11,225,000 Ser. A
0.00%, 12/1/2015, (FGIC) (a)...................... 4,369,893
6,115,000 Chicago, IL Pub. Bldg. Commerce RB,
Ser. A,
7.125%, 1/1/2015, (MBIA).......................... 6,248,857
250,000 Chicago, IL Sch. Fin. Auth. GO,
Ser. B,
7.60%, 6/1/2001, (MBIA)........................... 253,448
75,000 Cook Cnty., IL SFMRB,
0.00%, 7/1/2015 (a)............................... 14,957
3,975,000 Illinois Dedicated Tax RB,
7.00%, 12/15/2010, (AMBAC)........................ 4,097,629
Illinois Edl. Facs. Auth. RB:
7,000,000 5.00%, 6/1/2018................................... 6,021,750
6,535,000 Alexian Brothers Hlth. Sys.,
5.125%, 1/1/2028.................................. 5,469,141
500,000 Illinois Edl. Facs. Auth. RRB:
5.50%, 11/15/2019................................. 391,440
1,000,000 Silver Cross Hosp. & Med,
5.50%, 8/15/2019.................................. 846,490
Illinois Hlth. Facs. Auth. RB:
10,160,000 9.00%, 11/15/2015................................. 10,556,748
2,970,000 9.50%, 11/15/2019, (MBIA)......................... 3,092,572
395,000 Ser. A,
7.90%, 8/15/2003, (MBIA).......................... 395,995
8,897,526 Illinois Hsg. Dev. Auth. RB,
0.00%, 7/1/2025 (a)............................... 673,365
91,000 Sauget, IL IDRB, Pillsbury Co. Proj.,
8.375%, 5/1/2005.................................. 91,827
Sherman, IL RB:
500,000 8.375%, 7/1/2025.................................. 516,345
550,000 First Mtge. Villa Vianney
7.75%, 10/1/2022.................................. 595,661
Southern IL Univ. RB:
2,975,000 0.00%, 4/1/2025, (MBIA) (a)....................... 626,892
2,000,000 0.00%, 4/1/2028, (MBIA) (a)....................... 347,380
1,000,000 St. Clair Cnty., IL Pub. Bldg. GO,
8.00%, 12/1/2005, (MBIA).......................... 1,002,680
1,000,000 Wataga, IL Hlth. Facility RB,
10.00%, 9/1/2016.................................. 720,000
------------
51,937,499
------------
Indiana - 3.9%
450,000 Carmel, IN Retirement Rental Hsg.
RB,
8.75%, 12/1/2008.................................. 475,294
2,000,000 Dyer, IN Redev. Auth. Economic RB,
6.625%, 1/15/2024................................. 1,960,540
39,723 Elwood, IN EDRB, Steamships Kresge
Co.,
8.50%, 10/15/2000................................. 39,774
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Indiana - continued
$ 6,000,000 Indiana Hlth. Fac. Fin. Auth. Hosp. RB,
Sisters St. Francis Hlth., Ser. A,
5.00%, 11/1/2029, (MBIA).......................... $ 4,940,580
4,125,000 Indiana Hlth. Fac. Hosp. RB,
6.85%, 7/1/2022................................... 4,315,286
1,585,000 Madison Cnty., IN Hosp. Auth. Facility
RB,
8.00%, 1/1/2014, (BIG)............................ 1,588,883
------------
13,320,357
------------
Iowa - 0.0%
88,363 Creston, IA IDRB, Steamships Kresge
Co.,
8.50%, 8/1/2000................................... 88,464
------------
Kentucky - 2.1%
7,000,000 Trimble Co., KY PCRB,
7.625%, 11/1/2020................................. 7,199,430
------------
Louisiana - 2.4%
23,045,000 East Baton Rouge, LA SFHRB,
0.00%, 10/1/2030,
(GNMA/FNMA) (a)................................... 3,341,986
1,000,000 Lake Charles, LA Non Profit Hsg. RB,
7.875%, 2/15/2025, (FSA).......................... 1,000,850
500,000 Louisiana Pub. Facs. Auth. Hosp. RB,
Ser. A,
7.00%, 11/1/2002, (MBIA).......................... 510,860
1,333,333 Louisiana Pub. Facs. Auth. RB,
8.00%, 10/1/2009 (d).............................. 1,066,667
335,000 New Orleans, LA Hsg. Dev. Corp. RB,
Tulane Avenue Proj., Sec. 8,
7.875%, 6/1/2010.................................. 336,564
2,000,000 St. Charles Parish, LA PCRB,
7.35%, 11/1/2022.................................. 2,067,680
------------
8,324,607
------------
Maryland - 2.0%
700,000 Allegany Cnty., MD IDRB, Morgan
Manor Care Ctr.,
12.45%, 2/1/2027, (FHA)........................... 806,750
290,000 Maryland Indl. Financing Auth. RB,
7.125%, 7/1/2006.................................. 290,479
460,000 Montgomery Cnty., MD EDRB, Brink
Reservoir Facility,
10.375%, 12/15/2014............................... 463,192
Montgomery Cnty., MD Hsg.
Opportunities RB, Ser. A:
220,000 8.10%, 7/1/2008................................... 220,572
2,310,000 8.25%, 7/1/2019................................... 2,318,177
2,710,000 Upper Potomac River Commission
MD RB,
9.125%, 8/1/2015.................................. 2,773,685
------------
6,872,855
------------
Massachusetts - 3.7%
205,000 Lawrence, MA IDRB,
10.00%, 10/1/2003................................. 205,779
165,000 Massachusetts Ed. Loan Auth. RB,
Ser. A,
7.65%, 1/1/2007................................... 166,683
</TABLE>
39
<PAGE>
EVERGREEN (Formerly Davis
Tax-Free High Income Fund Tax-Free High
Income Fund, Inc.)
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Massachusetts - continued
Massachusetts Hlth. & Ed. Fac. RB:
Brockton Hosp., Ser. B:
$ 1,705,000 8.00%, 7/1/2007................................... $ 1,709,092
2,280,000 8.10%, 7/1/2013................................... 2,285,654
2,000,000 Caregroup Issue,
4.75%, 7/1/2020................................... 1,620,080
New England Sch. Law,:
125,000 8.30%, 7/1/2003................................... 125,337
125,000 8.30%, 7/1/2004................................... 125,336
1,750,000 Southcoast Hlth. Sys.,
4.75%, 7/1/2027, (MBIA)........................... 1,367,608
180,000 Massachusetts Indl. Fin. Agcy. RB,
Ser. A,
8.75%, 7/15/2009.................................. 180,185
Rail Connections Inc., MA RB:
3,855,000 0.00%, 7/1/2023 (a)............................... 777,091
4,000,000 0.00%, 7/1/2024 (a)............................... 748,760
4,140,000 0.00%, 7/1/2025 (a)............................... 721,147
4,195,000 0.00%, 7/1/2026 (a)............................... 681,562
4,430,000 0.00%, 7/1/2027 (a)............................... 669,550
4,495,000 0.00%, 7/1/2028 (a)............................... 633,570
4,640,000 0.00%, 7/1/2029 (a)............................... 608,211
------------
12,625,645
------------
Michigan - 0.9%
310,000 Kentwood, MI Economic Dev. Corp.
RB,
7.85%, 9/1/2001................................... 310,267
545,000 Michigan Muni. Bond Auth. RB,
8.625%, 11/1/2016................................. 549,300
375,000 Michigan Strategic Fund, RB, NSF Intl.
Proj., Ser. A,
5.75%, 8/1/2019................................... 351,007
500,000 Michigan Strategic Ltd. Obl. RRB,
Welch Foods Inc.,
6.75%, 7/1/2001................................... 502,170
100,000 Oakland Cnty., MI Clint & Oak
Sewage RB,
7.00%, 5/1/2001................................... 101,883
100,000 River Dist., MI Community Hosp.
Auth. RRB,
7.40%, 5/1/2001................................... 100,361
1,090,000 Westland, MI Economic Dev. Corp.
RB, Weyerhauser Co. Proj.,
9.80%, 12/1/2000.................................. 1,108,890
------------
3,023,878
------------
Minnesota - 0.1%
St. Paul, MN Port Auth. Indl. Dev. RB:
235,000 9.50%, 12/1/2014, (FGIC).......................... 242,393
250,000 10.00%, 12/1/2014, (FGIC)......................... 258,475
------------
500,868
------------
Mississippi - 0.7%
1,500,000 Amory, MS Dock & Wharf RB,
Weyerhauser Co. Proj.,
9.50%, 9/1/2000................................... 1,501,995
200,000 Hinds Community College Dist., MS
COP,
6.50%, 9/1/2014................................... 202,634
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Mississippi - continued
$ 850,000 Mississippi Business Fin. Corp.
PCRRB,
5.90%, 5/1/2022.................................... $ 718,344
------------
2,422,973
------------
Missouri - 0.8%
150,000 Kansas City, MO EDA RB,
8.00%, 12/1/2002................................... 152,122
Missouri Hsg. Dev. Commission RB:
635,000 0.00%, 9/1/2012, (FHA) (a)......................... 266,020
430,000 7.00%, 9/15/2021, (FHA)............................ 435,276
450,000 7.00%, 9/15/2022, (FHA)............................ 455,548
200,000 8.00%, 7/1/2013.................................... 202,192
210,000 8.00%, 7/1/2017, (FHA)............................. 212,302
65,000 9.375%, 4/1/2016, (FHA)............................ 65,740
105,000 Missouri Sch. Boards Assn. COP,
7.375%, 3/1/2006................................... 105,516
1,500,000 St. Louis, MO Municipal Fin. Corp.
RB,
0.00%, 7/15/2014, (AMBAC) (a)...................... 607,815
250,000 West Plains, MO IDA RB,
8.75%, 8/1/2007.................................... 250,585
------------
2,753,116
------------
Montana - 1.1%
4,900,000 Lewis & Clark Cnty., MT Env. RB,
5.85%, 10/1/2033................................... 3,623,844
------------
Nebraska - 0.2%
1,700,000 Nebhelp Inc., NE RB,
0.00%, 12/15/2015, (MBIA) (a)...................... 607,393
------------
Nevada - 2.1%
4,250,000 Clark Cnty., NV IDRB,
7.80%, 6/1/2020.................................... 4,344,137
2,000,000 Clark Cnty., NV PCRB, Southern CA
Edison Co.,
7.125%, 6/1/2009................................... 2,056,280
Nevada GO:
500,000 8.40%, 9/1/2001.................................... 521,720
105,000 8.50%, 9/1/2005.................................... 105,982
------------
7,028,119
------------
New Hampshire - 2.7%
Manchester, NH Hsg. & Redev. Auth.
RB, Ser. B:
5,140,000 0.00%, 1/1/2016, (ACA) (a)......................... 1,777,875
5,140,000 0.00%, 1/1/2017, (ACA) (a)......................... 1,647,524
5,110,000 0.00%, 1/1/2018, (ACA) (a)......................... 1,518,948
2,570,000 0.00%, 1/1/2019, (ACA) (a)......................... 709,166
3,140,000 0.00%, 1/1/2020, (ACA) (a)......................... 803,871
500,000 New Hampshire Higher Edl. & Hlth.
RB,
8.40%, 8/1/2011.................................... 533,685
2,225,000 New Hampshire IDA RB,
7.65%, 5/1/2021.................................... 2,270,234
------------
9,261,303
------------
</TABLE>
40
<PAGE>
EVERGREEN (Formerly Davis
Tax-Free High Income Fund Tax-Free High
Income Fund, Inc.)
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
New Jersey - 1.3%
$ 650,000 Bordentown, NJ Sewage Auth. RB,
Ser. C,
6.80%, 12/1/2025, (MBIA).......................... $ 668,928
1,350,000 New Jersey EDA RB, Baker Protective
Svcs. Proj.,
9.95%, 12/1/2003.................................. 1,373,935
1,000,000 New Jersey EDA RRB,
8.40%, 12/15/2015................................. 977,620
605,000 New Jersey Hlth. Care Facs. Fin. RB,
8.00%, 7/1/2018, (AMBAC).......................... 606,501
Muhlenberg Regl. Med. Ctr. Ser. B:
300,000 7.60%, 7/1/2002, (AMBAC).......................... 300,687
590,000 8.00%, 7/1/2018, (MBIA-IBC)....................... 591,463
------------
4,519,134
------------
New Mexico - 0.0%
120,000 Albuquerque, NM Hlth. Care Sys. RB,
Lovelace Med. Foundation Proj.,
12.00%, 3/1/2011.................................. 120,656
------------
New York - 4.7%
300,000 Battery Park City Auth., NY RB,
10.00%, 6/1/2023, (FHA)........................... 301,401
200,000 New York Dormitory Auth. RB,
5.30%, 7/1/2017................................... 186,816
4,250,000 New York Energy Research & Dev.
RB,
7.50%, 1/1/2026, (AMBAC).......................... 4,300,745
785,000 New York Local Govt. Assistance
Corp. RB, Ser. A,
4.375%, 4/1/2018, (FGIC).......................... 631,650
New York Med. Care Facs. Fin. Agcy.
RB:
2,000,000 7.40%, 11/1/2004, (MBIA).......................... 2,021,540
965,000 Ser. A
8.875%, 8/15/2007................................. 984,300
700,000 Long Term Hlth. Care
7.375%, 11/1/2011, (FSA).......................... 715,274
7,000,000 Port Auth. NY & NJ RB,
7.125%, 6/1/2025.................................. 7,070,000
------------
16,211,726
------------
North Carolina - 0.4%
500,000 Brevard, NC Hsg. Auth. RB,
7.50%, 3/1/2028................................... 428,400
500,000 Charlotte, NC Hsg. Auth. RB,
7.50%, 3/1/2028................................... 428,400
500,000 Piedmont Hlth. Dev. NC First Mtge.
RRB,
8.00%, 1/1/2013................................... 502,095
------------
1,358,895
------------
North Dakota - 0.3%
900,000 Ward Cnty., ND Hlth. Care Facility RB,
St. Joseph Hosp. Corp. Proj.,
8.875%, 11/15/2014................................ 1,039,104
------------
Ohio - 1.2%
2,200,000 Belmont Cnty., OH Hlth. Sys. RRB,
5.80%, 1/1/2018................................... 1,724,602
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Ohio - continued
Hamilton Cnty., OH Hosp. Facs. RB:
$ 680,000 7.00%, 1/1/2009, (MBIA-IBC)....................... $ 681,109
440,000 7.00%, 1/1/2009, (MBIA)........................... 440,717
Mahoning Cnty., OH San Sewage Sys.
RB:
500,000 7.50%, 2/1/2009, (MBIA)........................... 511,090
250,000 7.50%, 2/1/2019, (MBIA)........................... 255,520
515,000 Montgomery Cnty., OH Hosp. RB,
7.40%, 4/1/2009................................... 521,159
240,000 Ohio Hsg. Fin. Agcy. Single Family
Mtge. RB,
0.00%, 1/15/2015 (a).............................. 58,586
------------
4,192,783
------------
Oklahoma - 1.3%
530,000 Oklahoma Dev. Fin. Auth. RB,
5.625%, 8/15/2019................................. 420,576
Oklahoma Hsg. Fin. Agcy.
SFHRB:
16,935,000 0.00%, 3/1/2029 (a)............................... 2,762,096
6,150,000 0.00%, 3/1/2029
(GNMA/FNMA) (a)................................... 1,002,512
200,000 Oklahoma Indl. Auth. RB, Hlth. Sys.
Baptist Ctr.,
7.00%, 8/15/2003.................................. 211,208
------------
4,396,392
------------
Pennsylvania - 2.9%
1,645,000 Berks Cnty., PA IDA RB,
Supermarkets Gen. Corp.,
10.50%, 11/1/2003................................. 1,391,867
500,000 Clarion Cnty., PA IDA RRB,
5.875%, 5/1/2007.................................. 460,195
400,000 Columbia Cnty., PA IDA RB,
Orangeville Nursing Ctr. Associates
9.00%, 12/1/2012.................................. 388,832
1,000,000 Delaware Cnty., PA Auth. RB,
4.875%, 11/15/2018................................ 840,960
635,000 Luzerne Cnty., PA Hsg. Corp. RB,
8.125%, 12/1/2008................................. 636,073
200,000 Mckean Cnty., PA IDA RB, Corning
Glass Wks. Proj.,
7.75%, 6/1/2005................................... 201,966
920,000 Mercer Cnty., PA IDA RB, Kroger Co.,
13.00%, 6/1/2007.................................. 967,408
250,000 Montgomery Cnty., PA Ed. & Hlth. RB,
6.80%, 2/1/2013, (MBIA-IBC)....................... 250,755
2,025,000 Montgomery Cnty., PA IDA RB,
7.50%, 1/1/2012................................... 2,070,603
Pennsylvania Hsg. Fin. Agcy. RB,:
11,000,000 0.00%, 4/1/2030 (a)............................... 1,689,160
45,000 9.00%, 8/1/2001, (HUD Sect. 8).................... 45,225
45,000 Pittsburgh, PA Urban Redev. Auth.
RB,
7.125%, 8/1/2004, (FHA)........................... 45,364
750,000 Sayre, PA Hlth. Care Facs. Auth. RB
7.70%, 12/1/2015,
(AMBAC/MBIA)...................................... 758,595
</TABLE>
41
<PAGE>
EVERGREEN (Formerly Davis
Tax-Free High Income Fund Tax-Free High
Income Fund, Inc.)
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Pennsylvania - continued
$ 250,000 Warren Cnty., PA IDA RRB,
9.00%, 11/1/2012.................................. $ 262,250
------------
10,009,253
------------
South Carolina - 2.0%
100,000 Clemson University, SC COP,
6.90%, 12/1/2007.................................. 100,172
5,165,000 Piedmont Muni. Pwr. Agcy. SC Elec.
RRB, Ser. A,
5.00%, 1/1/2014, (MBIA)........................... 4,685,068
South Carolina Ports Auth. RB:
1,110,000 6.625%, 7/1/2011, (AMBAC)......................... 1,150,016
495,000 6.75%, 7/1/2021, (AMBAC).......................... 513,488
355,000 Sumter Cnty., SC Sch. Dist.
Number 2 RB,
8.125%, 4/1/2010.................................. 362,664
------------
6,811,408
------------
South Dakota - 0.1%
250,000 Aberdeen, SD GO,
6.90%, 7/1/2004................................... 250,428
------------
Tennessee - 0.4%
500,000 Crossville, TN Hlth. & Edl. Board RB,
7.75%, 6/1/2013................................... 508,460
285,000 Dover, TN Hlth. & Edl. Facs. RB,
9.50%, 9/1/2011................................... 285,445
53,249 Dyer Cnty., TN Indl. Dev. Board RB,
8.10%, 11/1/2000.................................. 53,279
35,000 McMinnesota Cnty., TN IDRB
8.00%, 11/1/2000.................................. 35,170
430,000 New Tazewell, TN Hlth. Edl. RB,
10.00%, 6/1/2017.................................. 431,010
------------
1,313,364
------------
Texas - 11.4%
7,335,000 Austin, TX Hsg. Fin. Corp. SFMRB,
0.00%, 2/1/2016 (a)............................... 696,752
1,550,000 Baytown Area Wtr. Auth., TX Wtr. RB,
6.375%, 5/1/2002.................................. 1,556,866
Bexar, TX Metropolitan Wtr. Dist.
Wtrwks. RB:
6,305,000 0.00%, 5/1/2032, (FHA) (a)........................ 802,752
6,305,000 0.00%, 5/1/2034, (MBIA) (a)....................... 703,386
20,000 Coastal Wtr. Auth., TX
Conveyance RB,
7.50%, 12/15/2016, (FGIC)......................... 20,166
Coppell, TX Independent Sch.
Dist. GO:
5,205,000 0.00%, 8/15/2016 (a).............................. 1,901,907
5,205,000 0.00%, 8/15/2017 (a).............................. 1,772,511
5,205,000 0.00%, 8/15/2018 (a).............................. 1,653,212
5,200,000 0.00%, 8/15/2019 (a).............................. 1,545,024
625,000 Dallas Cnty., TX Utility &
Reclamation GO,
0.00%, 2/15/2014, (MBIA) (a)...................... 273,206
10,110,000 Dallas, TX Civic Ctr. Convention RB,
4.875%, 8/15/2023, (MBIA)......................... 8,450,646
11,185,000 Harris Cnty. Houston, TX Spl.
RB, Ser. B,
0.00%, 11/15/2018, (MBIA) (a)..................... 3,497,102
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Texas - continued
$ 120,000 Houston, TX Hsg. Fin. Corp.
RB, Ser. A,
8.00%, 6/1/2014................................... $ 127,393
10,000,000 Houston, TX Independent Sch.
Dist. GO, Ser. A,
0.00%, 2/15/2013 (a).............................. 4,677,800
22,055,000 Leander, TX Independent Sch.
Dist. GO
0.00%, 8/15/2028, (a)............................. 3,350,375
425,000 Leon County, Texas PCRB,
8.00%, 7/1/2006................................... 425,825
500,000 Matagorda Cnty., TX
Navigation Dist. 1 RRB,
5.25%, 11/1/2029, (MBIA).......................... 428,895
1,000,000 Panhandle, TX Regl. Hsg. Fin. Corp.
RB, Ser. C,
8.125%, 3/1/2031.................................. 991,980
Panhandle, TX Regl. Hsg. Fin. RB
Ser. A:
1,000,000 6.625%, 3/1/2020.................................. 963,150
1,000,000 6.75%, 3/1/2031................................... 962,350
1,000,000 Pearlland, TX GO,
0.00%, 3/1/2009 (a)............................... 538,620
720,000 Redeemable River Auth., TX
Indl. Dev. RB,
7.90%, 4/1/2007................................... 728,424
1,000,000 Richardson, TX Hosp. Auth. RB,
5.625%, 12/1/2028................................. 765,050
1,250,000 San Antonio, TX Hlth. Facs. RB,
8.25%, 12/1/2019.................................. 1,306,162
100,000 Texas Higher Ed. Board College RB,
7.20%, 4/1/2002................................... 102,663
190,000 Texas Hsg. Agcy. Residential Dev.
RB, Ser. A,
7.60%, 7/1/2016, (GNMA)........................... 194,076
75,000 Texoma Hsg. Fin. Corp., TX SFHRB,
5.80%, 9/1/2028, (GNMA/FNMA)...................... 68,900
1,000,000 Tomball, TX Independent Sch.
Dist. GO,
0.00%, 2/15/2013 (a).............................. 413,898
------------
38,919,091
------------
Utah - 0.3%
1,000,000 Utah Hsg. Fin. Agcy. RB,
6.875%, 7/1/2027.................................. 909,230
------------
Virginia - 4.0%
Chesapeake, VA IDA RB Nursing
Home Revenue Sentara Life:
1,000,000 7.875%, 11/1/2008................................. 1,011,630
4,000,000 8.00%, 11/1/2018.................................. 4,048,120
140,000 Covington Alleghany Cnty., VA RB,
9.375%, 9/1/2001.................................. 141,576
110,000 Montgomery Cnty., VA GO,
6.70%, 4/1/2007................................... 110,710
Norfolk, VA IDA RB Nursing Home
Rev. Sentara Life:
1,000,000 7.875%, 11/1/2008................................. 1,011,630
2,000,000 7.90%, 11/1/2018.................................. 2,022,420
</TABLE>
42
<PAGE>
EVERGREEN (Formerly Davis
Tax-Free High Income Fund Tax-Free High
Income Fund, Inc.)
Schedule of Investments (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Virginia - continued
$ 500,000 Peninsula Port Auth., VA Hosp.
RB, 8.70%, 8/1/2023, (FHA)........................ $ 537,500
Virginia Hsg. Dev. Auth. RB
Ser. A:
600,000 7.10%, 1/1/2017................................... 615,138
1,000,000 7.10%, 1/1/2022................................... 1,022,020
3,000,000 7.10%, 1/1/2025................................... 3,061,290
215,000 Virginia Resources Auth. Wtr. & Swr.
RB, Ser. A,
7.50%, 11/1/2017.................................. 217,328
------------
13,799,362
------------
Washington - 1.0%
500,000 Chelan Cnty., WA Pub. Utility Dist.
RB, Ser. A,
5.60%, 7/1/2032................................... 464,860
1,000,000 Port Seattle Passenger Facs. RB,
Ser. A,
5.00%, 12/1/2023.................................. 854,740
2,300,000 Washington Nonprofit Hsg. RB,
5.30%, 7/1/2031................................... 1,924,617
------------
3,244,217
------------
West Virginia - 1.1%
375,000 Beverly, WV Hsg. Corp. Mtge. RB,
11.00%, 11/15/2022, (FHA)......................... 411,507
135,000 Glasgow, WV Hlth. Facs. RB,
9.50%, 9/1/2001................................... 136,794
4,400,000 West Virginia GO,
0.00%, 11/1/2023, (FGIC) (a)...................... 1,038,928
2,190,000 West Virginia Hsg. Dev. Fund RB,
Ser. B,
7.20%, 11/1/2020, (FHA)........................... 2,228,500
------------
3,815,729
------------
Wisconsin - 1.1%
300,000 Clear Lake Village, WI Sewage Sys.
RB,
8.00%, 8/1/2011................................... 305,745
115,000 Sturgeon Bay, WI Combined Utility
RB,
7.50%, 1/1/2010................................... 118,678
Wisconsin Hlth. & Edl. Facs. RB:
1,595,000 7.375%, 7/15/2027................................. 1,405,737
500,000 7.50%, 8/1/2011................................... 506,935
1,435,000 Wisconsin Hsg. & EDA RB, Home
Ownership, Ser. 2
6.875%, 9/1/2024.................................. 1,451,359
------------
3,788,454
------------
Puerto Rico - 0.2%
780,000 Puerto Rico Cmnwlth. Infrastructure
RB, Ser. A,
7.75%, 7/1/2008................................... 781,724
------------
Total Municipal Obligations
(cost $338,560,613)............................... 322,682,224
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM MUNICIPAL SECURITIES - 0.1%
Florida - 0.1%
$ 215,000 Dade Cnty., FL HFA Mtge. RB,
Ser. H,
10.50%, 6/1/2000 (b)
(cost $215,000) .................................. $ 215,000
------------
<CAPTION>
Shares Value
<C> <S> <C>
MUTUAL FUND SHARES - 4.3%
14,799,168 State Street Global Advisers
Tax Free Money Market Fund
(cost $14,799,168)................................ 14,799,168
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $353,574,781)..................... 98.6% 337,696,392
Other Assets and
Liabilities - net....................... 1.4 4,811,906
------ ------------
Net Assets............................... 100.00% $342,508,298
====== ============
</TABLE>
See Combined Notes to Schedules of Investments.
43
<PAGE>
Combined Notes to Schedules of Investments
May 31, 2000
(a) Security issued in zero coupon form with no periodic interest payments but
is acquired at a discount that results in a current yield to maturity. An
effective interest rate is applied to recognize interest income daily for
the bond. This rate is based on total expected income to be earned over the
life of the bond from amortization of discount at acquisition.
(b) Security is a variable or floating rate instrument with periodic demand
features. The Funds are entitled to full payment of principal and accrued
interest upon surrendering the security to the issuing agent.
(c) Inverse floater, resets monthly.
(d) Security which has defaulted on payment of interest and/or principal.
144A Securities that may be resold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933 as amended. These
securities have been determined to be liquid under guidelines
established by the Board of Trustees.
Summary of Abbreviations:
ACA American Capital Access
AMBAC American Municipal Bond Assurance Corp.
BIG Bond Investors Guaranty
COP Certificates of Participation
EDA Economic Development Authority
EDRB Economic Development Revenue Bond
ETM Escrowed to Maturity
FGIC Financial Guaranty Insurance Corp.
FHA Federal Housing Authority
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage Association
FRN Floating Rate Note
FSA Financial Security Assurance, Inc.
GNMA Government National Mortgage Association
GO General Obligation
HFA Housing Finance Authority
HUD Housing and Urban Development
IBC Insured Bond Certificate
IDA Industrial Development Authority
IDRB Industrial Development Revenue Bond
IFA Industrial Finance Agency
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corp.
MHRB Multifamily Housing Revenue Bond
MHRRB Multifamily Housing Refunding Revenue Bond
PCRB Pollution Control Revenue Bond
PCRRB Pollution Control Refunding Revenue Bond
RB Revenue Bond
RRB Refunding Revenue bond
SFHRB Single Family Housing Revenue Bond
SFMRB Single Family Mortgage Reveue Bond
SPA Securities Purchase Agreement
TCRS Transferable Custody Receipts
The Evergreen National Municipal Bond Funds invest 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 indus-
try or municipality. In order to reduce risk associated with such economic de-
velopments, securities may possess municipal bond insurance from various finan-
cial institutions and financial guaranty assurance agencies. Therefore, the
Funds may be more affected by developments in the insurance industry or a spe-
cific municipal bond insurer. At May 31, 2000, the percentages of securities
for each Fund, as a percentage of net assets, that are backed by bond insurance
of various financial institutions and financial guaranty assurance agencies for
High Grade Fund, Municipal Fund, Short-Intermediate Fund and Tax-Free High In-
come Fund are 72.0%, 23.8%, 11.0% and 18.6%, respectively. At May 31, 2000, the
Funds had securities backed by bond insurance from the following financial in-
stitutions representing more than 5% of total net assets were as follows:
High Grade Fund
MBIA 26.8%
FGIC 21.4%
AMBAC 14.6%
FSA 9.2%
Municipal Fund
MBIA 7.6%
FGIC 6.8%
Short-Intermediate Fund
AMBAC 5.5%
Tax-Free High Income Fund
MBIA 11.7%
See Combined Notes to Financial Statements.
44
<PAGE>
EVERGREEN
National Municipal Bond Funds
Statements of Assets and Liabilities
May 31, 2000
<TABLE>
<CAPTION>
Short- Tax-Free
High Grade Intermediate High Income
Fund Municipal Fund Fund Fund (a)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Identified cost of
securities............. $112,989,776 $1,014,136,137 $156,164,416 $353,574,781
Net unrealized losses on
securities............. (432,225) (26,551,195) (1,700,784) (15,878,389)
-------------------------------------------------------------------------------------
Market value of
securities............. 112,557,551 987,584,942 154,463,632 337,696,392
Cash.................... 0 0 538 0
Receivable for
securities sold........ 4,042,074 10,295,702 0 87,976
Receivable for Fund
shares sold............ 975,406 351,482 179 1,366,834
Interest receivable..... 2,050,329 16,719,981 2,646,824 5,724,274
Prepaid expenses and
other assets........... 75,687 240,675 26,675 42,848
-------------------------------------------------------------------------------------
Total assets........... 119,701,047 1,015,192,782 157,137,848 344,918,324
-------------------------------------------------------------------------------------
Liabilities
Distributions payable... 211,103 2,189,103 467,355 1,583,172
Payable for securities
purchased.............. 5,426,188 10,779,724 3,429,778 0
Payable for Fund shares
redeemed............... 424,193 936,309 333,553 770,762
Advisory fee payable.... 1,288 9,685 1,672 882
Distribution Plan
expenses payable....... 1,486 8,863 150 6,630
Due to other related
parties................ 307 2,722 418 939
Accrued expenses and
other liabilities...... 26,379 144,512 73,169 47,641
-------------------------------------------------------------------------------------
Total liabilities...... 6,090,944 14,070,918 4,306,095 2,410,026
-------------------------------------------------------------------------------------
Net assets.............. $113,610,103 $1,001,121,864 $152,831,753 $342,508,298
-------------------------------------------------------------------------------------
Net assets represented
by
Paid-in capital......... $121,162,049 $1,094,810,530 $157,304,319 $381,502,398
Undistributed
(overdistributed) net
investment income...... 90,555 165,268 22,313 (1,583,172)
Accumulated net realized
losses on securities
and futures contracts.. (7,210,276) (67,302,739) (2,794,095) (21,532,539)
Net unrealized losses on
securities............. (432,225) (26,551,195) (1,700,784) (15,878,389)
-------------------------------------------------------------------------------------
Total net assets........ $113,610,103 $1,001,121,864 $152,831,753 $342,508,298
-------------------------------------------------------------------------------------
Net assets consists of
Class A................. $ 53,302,619 $ 899,427,046 $ 8,658,581 $133,551,893
Class B................. 39,566,380 54,672,653 4,638,781 175,825,807
Class C................. 1,620,000 46,579,722 0 32,941,976
Class Y................. 19,121,104 442,443 139,534,391 188,622
-------------------------------------------------------------------------------------
Total net assets........ $113,610,103 $1,001,121,864 $152,831,753 $342,508,298
-------------------------------------------------------------------------------------
Shares outstanding
Class A................. 5,336,349 134,212,545 890,905 16,020,463
Class B................. 3,961,057 8,158,202 477,319 21,153,081
Class C................. 162,181 6,950,732 0 3,938,059
Class Y................. 1,914,247 66,012 14,358,182 22,633
-------------------------------------------------------------------------------------
Net asset value per
share
Class A................. $ 9.99 $ 6.70 $ 9.72 $ 8.34
-------------------------------------------------------------------------------------
Class A--Offering price
(based on sales charge
of 4.75%, 4.75%, 3.25%
and 4.75%,
respectively).......... $ 10.49 $ 7.03 $ 10.05 $ 8.76
-------------------------------------------------------------------------------------
Class B................. $ 9.99 $ 6.70 $ 9.72 $ 8.31
-------------------------------------------------------------------------------------
Class C................. $ 9.99 $ 6.70 -- $ 8.37
-------------------------------------------------------------------------------------
Class Y................. $ 9.99 $ 6.70 $ 9.72 $ 8.33
-------------------------------------------------------------------------------------
</TABLE>
(a) Formerly the Davis Tax-Free High Income Fund, Inc.
See Combined Notes to Financial Statements.
45
<PAGE>
EVERGREEN
National Municipal Bond Funds
Statements of Operations
Year Ended May 31, 2000
<TABLE>
<CAPTION>
Short- Tax-Free
High Grade Municipal Intermediate High Income
Fund Fund Fund Fund (a)(b)
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income
Interest............... $ 7,142,237 $ 61,638,930 $ 7,926,606 $ 16,927,424
----------------------------------------------------------------------------------
Expenses
Advisory fee........... 599,533 4,263,739 751,529 1,512,631
Distribution Plan
expenses.............. 614,076 3,302,455 64,928 1,774,767
Administrative services
fees.................. 58,536 511,542 65,224 76,557
Transfer agent fee..... 136,419 1,060,014 38,318 227,524
Trustees' fees and
expenses.............. 2,617 21,273 3,274 18,701
Printing and postage
expenses.............. 24,257 148,610 25,409 78,051
Custodian fee.......... 43,456 313,627 51,435 90,335
Registration and filing
fees.................. 15,620 105,984 29,337 25,936
Professional fees...... 26,857 57,827 28,314 66,456
Other.................. 5,846 17,786 14,777 72,965
----------------------------------------------------------------------------------
Total expenses......... 1,527,217 9,802,857 1,072,545 3,943,923
Less: Expense
reductions............ (5,306) (47,804) (7,002) (10,811)
Fee waivers............ 0 0 0 (200,656)
----------------------------------------------------------------------------------
Net expenses........... 1,521,911 9,755,053 1,065,543 3,732,456
----------------------------------------------------------------------------------
Net investment income.. 5,620,326 51,883,877 6,861,063 13,194,968
----------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities
and futures
transactions
Net realized gains or
losses on:
Securities............. (7,029,416) (60,626,494) (2,794,096) (16,592,585)
Futures contracts...... 19,300 617,763 0 0
----------------------------------------------------------------------------------
Net realized losses on
securities and futures
transactions.......... (7,010,116) (60,008,731) (2,794,096) (16,592,585)
----------------------------------------------------------------------------------
Net change in
unrealized gains or
losses on securities.. (3,935,476) (52,983,262) (2,876,236) 2,990,838
----------------------------------------------------------------------------------
Net realized and
unrealized losses on
securities and futures
transactions.......... (10,945,592) (112,991,993) (5,670,332) (13,601,747)
----------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ $ (5,325,266) $ (61,108,116) $ 1,190,731 $ (406,779)
----------------------------------------------------------------------------------
</TABLE>
(a) For the eight months ended May 31, 2000. The Fund changed its fiscal year
from September 30 to May 31, effective May 31, 2000.
(b) Formerly the Davis Tax-Free High Income Fund, Inc.
See Combined Notes to Financial Statements.
46
<PAGE>
EVERGREEN
National Municipal Bond Funds
Statement of Operations
Year Ended September 30, 1999
<TABLE>
<CAPTION>
Tax-Free
High Income
Fund (a)
--------------------------------------------------------------------------------
<S> <C>
Investment income
Interest....................................................... $31,699,670
--------------------------------------------------------------------------------
Expenses
Advisory fee................................................... 3,107,801
Distribution Plan expenses..................................... 3,405,752
Transfer agent fee............................................. 397,516
Trustees' fees and expenses.................................... 77,697
Printing and postage expenses.................................. 115,596
Custodian fee.................................................. 138,916
Registration and filing fees................................... 157,471
Professional fees.............................................. 62,198
Other.......................................................... 31,909
--------------------------------------------------------------------------------
Total expenses................................................ 7,494,856
Less: Expense reductions...................................... (2,705)
--------------------------------------------------------------------------------
Net expenses.................................................. 7,492,151
--------------------------------------------------------------------------------
Net investment income............................................ 24,207,519
--------------------------------------------------------------------------------
Net realized and unrealized gains or losses on securities
Net realized loss on securities................................ (4,702,920)
Net change in unrealized losses on securities.................. (24,020,731)
--------------------------------------------------------------------------------
Net realized and unrealized losses on securities............... (28,723,651)
--------------------------------------------------------------------------------
Net decrease in net assets resulting from operations........... $(4,516,132)
</TABLE>
--------------------------------------------------------------------------------
(a) Formerly the Davis Tax-Free High Income Fund, Inc.
See Combined Notes to Financial Statements.
47
<PAGE>
EVERGREEN
National Municipal Bond Funds
Statements of Changes in Net Assets
Year Ended May 31, 2000
<TABLE>
<CAPTION>
Short- Tax-Free
High Grade Municipal Intermediate High Income
Fund Fund Fund Fund (a)(b)(c)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income... $ 5,620,326 $ 51,883,877 $ 6,861,063 $ 13,194,968
Net realized gains or
losses on securities
and futures
transactions........... (7,010,116) (60,008,731) (2,794,096) (16,592,585)
Net change in
unrealized gains or
losses on securities
and futures
transactions........... (3,935,476) (52,983,262) (2,876,236) 2,990,838
-------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting from
operations............ (5,325,266) (61,108,116) 1,190,731 (406,779)
-------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class A................ (2,803,589) (48,213,384) (369,964) (6,126,438)
Class B................ (1,739,102) (3,088,963) (178,959) (7,444,698)
Class C................ (62,090) (706,020) 0 (1,325,062)
Class Y................ (1,018,574) (10,825) (6,257,596) (22,685)
Net realized gains
Class A................ (886,167) (5,315,286) (56,794) 0
Class B................ (723,643) (465,890) (40,076) 0
Class C................ (28,625) (42,380) 0 0
Class Y................ (326,940) (792) (1,024,920) 0
-------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (7,588,730) (57,843,540) (7,928,309) (14,918,883)
-------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold................... 24,497,616 344,390,330 46,661,878 52,152,436
Payment for shares
redeemed............... (61,752,661) (551,769,876) (64,069,452) (145,107,757)
Net asset value of
shares issued in
reinvestment of
distributions.......... 4,514,561 29,411,952 2,444,576 4,974,480
Net asset value of
shares issued in
acquisitions........... 41,894,184 113,252,970 0 0
-------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting from
capital share
transactions.......... 9,153,700 (64,714,624) (14,962,998) (87,980,841)
-------------------------------------------------------------------------------------
Total decrease in net
assets............... (3,760,296) (183,666,280) (21,700,576) (103,306,503)
Net assets
Beginning of period..... 117,370,399 1,184,788,144 174,532,329 445,814,801
-------------------------------------------------------------------------------------
End of period........... $113,610,103 $1,001,121,864 $152,831,753 $ 342,508,298
-------------------------------------------------------------------------------------
Undistributed
(overdistributed) net
investment income...... $ 90,555 $ 165,268 $ 22,313 $ (1,583,172)
-------------------------------------------------------------------------------------
</TABLE>
(a) For eight months ended May 31, 2000. The Fund changed its fiscal year end
from September 30 to May 31, effective May 31, 2000.
(b) On March 17, 2000, Evergreen Tax-Free High Income Fund acquired the net as-
sets of Davis Tax-Free High Income Fund, Inc. The Davis Tax-Free High In-
come Fund, Inc. was the accounting and performance survivor in this trans-
action.
(c) Formerly the Davis Tax-Free High Income Fund, Inc.
See Combined Notes to Financial Statements.
48
<PAGE>
EVERGREEN
National Municipal Bond Funds
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended
September 30,
Year Ended May 31, 1999 1999
------------------------------------------ -------------
Short- Tax-Free
High Grade Municipal Intermediate High Income
Fund Fund Fund Fund (a)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income... $ 5,122,886 $ 57,042,037 $ 6,980,138 $ 24,207,519
Net realized gains or
losses on securities
and futures
transactions........... 3,299,428 23,258,046 1,924,186 (4,702,920)
Net change in
unrealized losses on
securities and futures
transactions........... (4,092,412) (32,853,414) (1,867,258) (24,020,731)
-------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting from
operations............ 4,329,902 47,446,669 7,037,066 (4,516,132)
-------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class A................ (2,850,300) (52,828,617) (275,716) (11,085,707)
Class B................ (1,160,127) (4,001,229) (186,375) (11,311,322)
Class C................ (4) (276,027) 0 (1,940,285)
Class Y................ (1,128,806) (4) (6,537,604) (67,634)
Net realized gains
Class A................ (1,616,602) (35,326,187) (56,521) 0
Class B................ (780,637) (3,564,827) (44,004) 0
Class C................ 0 (220,155) 0 0
Class Y................ (641,983) 0 (1,185,596) 0
-------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (8,178,459) (96,217,046) (8,285,816) (24,404,948)
-------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold................... 18,319,059 197,057,932 59,101,241 105,307,443
Payment for shares
redeemed............... (26,775,934) (393,166,651) (65,832,372) (177,098,255)
Net asset value of
shares issued in
reinvestment of
distributions.......... 5,405,970 53,968,092 2,248,570 9,872,090
Net asset value of
shares issued in
acquisition............ 1,945,718 0 0 0
-------------------------------------------------------------------------------------
Net decrease in net
assets resulting from
capital share
transactions.......... (1,105,187) (142,140,627) (4,482,561) (61,918,722)
-------------------------------------------------------------------------------------
Total decrease in net
assets............... (4,953,744) (190,911,004) (5,731,311) (90,839,802)
Net assets
Beginning of period..... 122,324,143 1,375,699,148 180,263,640 536,654,603
-------------------------------------------------------------------------------------
End of period........... $117,370,399 $1,184,788,144 $174,532,329 $ 445,814,801
-------------------------------------------------------------------------------------
Undistributed
(overdistributed) net
investment income...... $ 90,985 $ 324,047 $ (19,557) $ 0
-------------------------------------------------------------------------------------
</TABLE>
(a) Formerly the Davis Tax-Free High Income Fund, Inc.
See Combined Notes to Financial Statements.
49
<PAGE>
EVERGREEN
National Municipal Bond Funds
Statement of Changes in Net Assets
Year Ended September 30, 1998
<TABLE>
<CAPTION>
Tax-Free
High Income
Fund (a)
-------------------------------------------------------------------------------
<S> <C>
Operations
Net investment income......................................... $ 21,973,208
Net realized losses on securities............................. (237,034)
Net change in unrealized gains on securities ................. 3,568,267
-------------------------------------------------------------------------------
Net increase in net assets resulting from operations.......... 25,304,441
-------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income
Class A....................................................... (12,297,637)
Class B....................................................... (10,788,546)
Class C....................................................... (1,069,063)
Class Y....................................................... (21,941)
Net realized gains
Class A....................................................... (673,758)
Class B....................................................... (790,190)
Class C....................................................... (46,345)
Class Y....................................................... (294)
-------------------------------------------------------------------------------
Total distributions to shareholders........................... (25,687,774)
-------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold..................................... 519,872,514
Payment for shares redeemed................................... (221,062,245)
Net asset value of shares issued in reinvestment of
distributions................................................ 10,843,278
-------------------------------------------------------------------------------
Net increase in net assets resulting from capital share
transactions................................................. 309,653,547
-------------------------------------------------------------------------------
Total increase in net assets................................. 309,270,214
Net assets
Beginning of period........................................... 227,384,389
-------------------------------------------------------------------------------
End of period................................................. $ 536,654,603
-------------------------------------------------------------------------------
Undistributed net investment income............................ $ 1,264
-------------------------------------------------------------------------------
</TABLE>
(a) Formerly the Davis Tax-Free High Income Fund, Inc.
See Combined Notes to Financial Statements.
50
<PAGE>
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"), Evergreen Municipal Bond Fund ("Munici-
pal Fund"), Evergreen Short-Intermediate Municipal Bond Fund ("Short-Intermedi-
ate Fund") and Evergreen Tax-Free High Income Fund ("Tax-Free High Income
Fund") (formerly Davis Tax-Free High Income Fund, Inc.), (collectively, the
"Funds"). Each Fund is a diversified series of Evergreen Municipal Trust (the
"Trust"), a Delaware business trust organized on September 18, 1997. The Trust
is an open-end management investment company registered 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 High Grade Fund,
Municipal Fund and Tax-Free High Income Fund and a maximum front-end sales
charge of 3.25% for 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 purchased after January 1, 1997
will automatically convert to Class A shares after seven years. Class B shares
purchased prior to January 1, 1997 follow the conversion rights at the time the
shares were initially purchased. Class C shares are sold subject to a 2.00%
contingent deferred sales charge payable on shares redeemed within one year af-
ter the month of purchase and a 1.00% contingent deferred sales charge if such
shares are redeemed within two years after the month of purchase. Class C
shares purchased prior to February 1, 2000 follow the contingent deferred sales
charge schedule at the time the shares were initially purchased. 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 advi-
sory 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.
Mutual fund shares held in a Fund are valued at the net asset value of each mu-
tual fund.
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.
51
<PAGE>
Combined Notes to Financial Statements (continued)
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 under the contract. Futures contracts also involve
elements of market risk in excess of the amount reflected in the Statements of
Assets and Liabilities.
C. When-issued and Delayed Delivery Transactions
The Funds record when-issued or delayed delivery transactions on the trade date
and will segregate with the custodian qualifying assets having a value suffi-
cient to make payment for the securities purchased. Securities purchased on a
when-issued or delayed delivery basis are marked-to-market daily and the Fund
begins earning interest on the settlement date. Losses may arise due to changes
in the market value of the underlying securities or if the counterparty does
not perform under the contract.
D. 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.
E. 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.
F. Distributions
Distributions from net investment income for each Fund, except Tax-Free High
Income Fund, are declared daily and paid monthly. Distributions from net in-
vestment income for Tax-Free High Income Fund are declared and paid monthly.
Distributions from net realized capital gains, if any, are paid at least annu-
ally. 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 accre-
tion of market discount and certain capital loss carryforwards assumed as a re-
sult of acquisitions.
G. 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.
H. 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.
52
<PAGE>
Combined Notes to Financial Statements (continued)
3. INVESTMENT ADVISORY AGREEMENTS 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 daily at an annual rate of 0.42% of the Fund's average daily
net assets. Prior to January 3, 2000, the management fee was computed daily at
an annual rate of 0.50% of the Fund's average daily net assets.
Evergreen Investment Management Company ("EIMC"), an indirect wholly owned sub-
sidiary of FUNB, is the investment advisor for Municipal Fund and Tax-Free High
Income Fund. In return for providing investment management services, the Funds
pay EIMC a management fee that is computed and paid daily. For Municipal Fund,
the management fee is computed at an annual rate of 2.00% of gross investment
income plus an amount determined by applying percentage rates, starting at
0.41% and declining to 0.16% per annum as net assets increase, to the average
daily net assets of the Fund. Prior to January 3, 2000, the management fee was
computed daily at an annual rate of 2.00% of Municipal Fund's gross investment
income plus an amount determined by applying percentage rates, which started at
0.50% and declined to 0.25% per annum as net assets increased, to the average
daily net assets of the Fund.
The Tax-Free High Income Fund pays EIMC a management fee that is computed and
paid daily by applying percentage rates, starting at 0.55% and declining to
0.45% per annum as net assets increase, to the average daily net assets of the
Fund. Prior to March 20, 2000, Davis Selected Advisers, L.P. ("Davis") was the
investment adviser to the Tax-Free High Income Fund and was paid a management
fee that was computed by applying percentage rates, which started at 0.65% and
declined to 0.55% per annum as net assets increased, to the average daily net
assets of the Fund. Davis was also reimbursed for registering Fund shares for
sale in various states, certain transfer agent services and certain accounting
services. For the period from October 1, 1999 through March 17, 2000, these
fees amounted to $6,079, $13,290 and $8,815, respectively.
Stamper Capital & Investments, Inc. ("Stamper") is the sub-adviser of the Tax-
Free High Income Fund and is paid by EIMC. The Fund pays no fees directly to
Stamper. Prior to March 20, 2000, Davis Selected Advisers-NY, Inc. ("DSA-NY"),
a wholly owned subsidiary of Davis, was also the investment sub-adviser to the
Fund. The Fund paid no fees directly to DSA-NY.
Evergreen Asset Management Corp. ("EAMC"), an indirect wholly owned subsidiary
of FUNB, is the investment advisor to the Short-Intermediate Fund and is paid a
management fee that is computed and paid daily at an annual rate of 0.40% of
the Fund's average daily net assets. Prior to January 3, 2000, the management
fee was computed daily 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 Fund.
During the period ended May 31, 2000, investment advisory fees of $200,656 were
waived for Tax-Free High Income Fund. This amount represents 0.08% of the
Fund's average daily net assets.
Evergreen Investment Services ("EIS"), an indirect, wholly owned subsidiary of
FUNB, serves as the administrator to the Funds. As administrator, EIS provides
the Funds with facilities, equipment and personnel. Prior to April 30, 2000,
The BISYS Group, Inc. ("BISYS") served as the sub-administrator to each Fund,
except for Tax-Free High Income Fund, and provided the officers of the Funds.
Officers of the Funds and affiliated Trustees receive no compensation directly
from the Funds.
For its services, High Grade Fund pays the administrator a fee at the annual
rate of 0.10% of the Fund's average daily net assets. The sub-administrator was
paid by the administrator out of its fees until the sub-administration agree-
ment with BISYS was terminated on April 30, 2000. Prior to January 3, 2000, the
administrator and sub-administrator for the Fund were entitled to an annual fee
based on the combined average daily net assets of all the funds administered by
EIS for which First Union or its investment advisory subsidiaries are also the
investment advisors. The administration fee was calculated by applying percent-
age rates, which
53
<PAGE>
Combined Notes to Financial Statements (continued)
started at 0.05% and declined to 0.01% per annum as net assets increased, to
the average daily net assets of the Fund. The sub-administration fee was calcu-
lated by applying percentage rates, which started at 0.01% and declined to
0.004% per annum as net assets increased, to the average daily net assets of
the Fund.
For its services, Municipal Fund, Short-Intermediate Fund and Tax-Free High In-
come Fund each pay the administrator a fee at the annual rate of 0.10% of each
Fund's average daily net assets. The sub-administration fee for Municipal Bond
was paid by the investment advisor until the sub-administration agreement with
BISYS was terminated on April 30, 2000. Prior to January 3, 2000, the adminis-
tration fee for Municipal Fund and Short-Intermediate Fund was paid by the in-
vestment advisor and was not a fund expense.
During the year ended May 31, 2000, the Funds paid or accrued to EIS the fol-
lowing amounts for administrative and sub-administrative services:
<TABLE>
<CAPTION>
Administration Sub-Administration
Fee Fee
---------------------------------
<S> <C> <C>
High Grade Fund............... $ 53,428 $5,108
Municipal Fund................ 511,542 0
Short-Intermediate Fund....... 65,224 0
Tax-Free High Income Fund #... 76,557 0
</TABLE>
-------
# The amount paid by Tax-Free High Income Fund includes $8,815
paid to Davis and $67,742 paid to EIS.
Evergreen Service Company ("ESC"), an indirect, wholly owned subsidiary of
FUNB, is the transfer and dividend disbursing agent for the Funds. Prior to
March 20, 2000, State Street Bank and Trust Company ("State Street") served as
the transfer and dividend disbursing agent for Tax-Free High Income Fund. For
the period ended May 31, 2000, Tax-Free High Income Fund paid $13,290 to ESC
for transfer agent services.
4. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI"), a wholly owned subsidiary of BISYS, serves
as principal underwriter to the Funds. Prior to March 20, 2000, Davis Distribu-
tors, LLC, ("Davis Distributors") served as the principal underwriter to the
former Davis Tax-Free High Income Fund, Inc.
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". Under the Distribu-
tion Plans, Class A incurs distributions fees equal to 0.25% of the average
daily net asset of the class, all of which is used to pay for shareholder serv-
ice fees. Class B and Class C incur distribution fees equal to 1.00% of the av-
erage daily net assets of each class. Of this amount, 0.25% is used to pay for
shareholder service fees and 0.75% is used to pay for distribution-related
costs. Distribution Plan expenses are calculated and paid daily.
During the year ended May 31, 2000, amounts paid or accrued to EDI pursuant to
each Fund's Class A, Class B and Class C Distribution Plans were as follows:
<TABLE>
<CAPTION>
Class A Class B Class C
----------------------------
<S> <C> <C> <C>
High Grade Fund................... $ 151,413 $446,858 $ 15,805
Municipal Fund.................... 2,411,607 728,886 161,962
Short-Intermediate Fund........... 8,975 55,953 0
Tax-Free High Income Fund......... 64,907 362,822 63,623
</TABLE>
Prior to March 20, 2000, amounts paid or accrued to Davis Distributors for Tax-
Free High Income Fund's Class A, Class B and Class C Distribution Plans were
$153,894, $960,288 and $169,233, respectively.
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.
54
<PAGE>
Combined Notes to Financial Statements (continued)
5. ACQUISITIONS
During the year ended May 31, 2000, several of the Funds had acquired various
open-end management investment companies registered under the 1940 Act.
Effective on the close of business on March 17, 2000, Tax-Free High Income Fund
acquired substantially all the assets and assumed certain liabilities of Davis
Tax-Free High Income Fund, Inc. ("Davis Fund"), an open-end management invest-
ment company registered under the 1940 Act, through a tax-free exchange of
shares. Shareholders of Class A, Class B, Class C and Class Y of Davis Fund be-
came owners of that number of full and fractional shares of Class A, Class B,
Class C and Class Y shares, respectively, of Tax-Free High Income Fund having
an aggregate net asset value equal to the aggregate net asset value of their
shares of Davis Fund immediately prior to close of business on March 17, 2000.
Tax-Free High Income Fund had no operations prior to the acquisition. Since the
Tax-Free High Income and the Davis Fund were similar funds and the Davis Fund
contributed the majority of the net assets and shareholders, the basis of ac-
counting for assets and liabilities, and operating results for prior periods of
Davis Fund are carried forward as the accounting survivor.
On March 10, 2000, Municipal Fund acquired substantially all the assets and as-
sumed certain liabilities of Evergreen Municipal Income Fund ("Municipal Income
Fund") in an exchange of shares for Class A, Class C and Class Y shares of Mu-
nicipal Fund.
On July 30, 1999, High Grade Fund acquired substantially all the assets and as-
sumed certain liabilities of Evergreen California Municipal Bond Fund ("Cali-
fornia Fund") and Evergreen New York Municipal Bond Fund ("New York Fund"), in
an exchange of shares for Class A, Class B, Class C and/or Class Y shares of
High Grade Fund.
On July 30, 1999, Municipal Fund acquired substantially all the assets and as-
sumed certain liabilities of Evergreen Massachusetts Municipal Bond Fund ("Mas-
sachusetts Fund") and Evergreen Missouri Municipal Bond Fund ("Missouri Fund"),
in exchange for Class A, Class B and Class C shares of Municipal Fund.
On July 24, 1998, High Grade Fund acquired substantially all the assets and as-
sumed certain liabilities of CoreFund Intermediate Municipal Bond Fund
("CoreFund Intermediate Fund") in exchange for Class A and Class Y shares of
High Grade 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 (depreciation) acquired and the aggregate net assets of
each Fund immediately after the acquisition were as follows:
<TABLE>
<CAPTION>
Number Unrealized Net Assets
Value of Net of Shares Appreciation/ After
Acquiring Fund Acquired Fund Assets Acquired Issued (Depreciation) Acquisition
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Municipal Fund Municipal Income Fund $86,841,679 6,172,529 $(2,955,586) $1,044,503,926
----------- --------- ----------- --------------
High Grade Fund California Fund $20,712,329 1,929,521 $ 546,303
High Grade Fund New York Fund 21,181,855 1,973,255 164,251
----------- --------- -----------
$41,894,184 3,902,776 $ 710,554 $ 154,453,020
----------- --------- ----------- --------------
Municipal Fund Massachusetts Fund $ 7,793,205 1,070,536 $ (23,637)
Municipal Fund Missouri Fund 18,618,086 2,557,538 64,815
----------- --------- -----------
$26,411,291 3,628,074 $ 41,178 $1,149,023,461
----------- --------- ----------- --------------
High Grade Fund CoreFund Intermediate
Fund $ 1,945,718 171,570 $ 51,328 $ 127,732,184
----------- --------- ----------- --------------
</TABLE>
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:
55
<PAGE>
Combined Notes to Financial Statements (continued)
High Grade Fund
<TABLE>
<CAPTION>
Year Ended May 31, 2000 Year Ended May 31, 1999
------------------------ ------------------------
Shares Amount Shares Amount
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............... 1,749,309 $ 18,084,084 751,068 $ 8,521,661
Automatic conversion of
Class B shares to Class A
shares................... 144,662 1,443,237 1,811 20,337
Shares redeemed........... (3,353,433) (34,589,666) (1,053,272) (11,920,506)
Shares issued in
reinvestment of
distributions............ 216,844 2,221,710 270,601 3,051,015
Shares issued in
acquisition of:
CoreFund Intermediate
Fund.................... 0 0 76,637 869,114
California Fund.......... 513,840 5,515,701 0 0
New York Fund............ 340,061 3,650,317 0 0
-------------------------------------------------------------------------------
Net increase (decrease)... (388,717) (3,674,617) 46,845 541,621
-------------------------------------------------------------------------------
Class B
Shares sold............... 170,306 1,749,509 412,546 4,682,255
Automatic conversion of
Class B shares to Class A
shares................... (144,662) (1,443,237) (1,811) (20,337)
Shares redeemed........... (1,727,068) (17,700,289) 107,295 1,209,317
Shares issued in
reinvestment of
distributions............ 133,454 1,364,614 (491,173) (5,569,981)
Shares issued in
acquisition of:
California Fund.......... 1,280,928 13,750,122 0 0
New York Fund............ 1,332,981 14,308,891 0 0
-------------------------------------------------------------------------------
Net increase.............. 1,045,939 12,029,610 26,857 301,254
-------------------------------------------------------------------------------
Class C*
Shares sold............... 24,333 246,328 90 1,000
Shares redeemed........... (97,909) (997,523) 0 0
Shares issued in
reinvestment of
distributions............ 5,857 59,627 0 4
Shares issued in
acquisition of:
California Fund.......... 134,753 1,446,506 0 0
New York Fund............ 95,057 1,020,389 0 0
-------------------------------------------------------------------------------
Net increase.............. 162,091 1,775,327 90 1,004
-------------------------------------------------------------------------------
Class Y
Shares sold............... 429,346 4,417,695 452,470 5,114,143
Shares redeemed........... (827,765) (8,465,183) (824,354) (9,285,447)
Shares issued in
reinvestment of
distributions............ 84,853 868,610 101,709 1,145,634
Shares issued in
acquisition of:
CoreFund Intermediate
Fund.................... 0 0 94,933 1,076,604
New York Fund............ 205,156 2,202,258 0 0
-------------------------------------------------------------------------------
Net decrease.............. (108,410) (976,620) (175,242) (1,949,066)
-------------------------------------------------------------------------------
Net increase (decrease)... $ 9,153,700 $ (1,105,187)
-------------------------------------------------------------------------------
</TABLE>
* For the year ended May, 31, 1999, the activity is from April 30, 1999 (com-
mencement of operations) through May 31, 1999.
56
<PAGE>
Combined Notes to Financial Statements (continued)
Municipal Fund
<TABLE>
<CAPTION>
Year Ended May 31, 2000 Year Ended May 31, 1999
--------------------------- ---------------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............. 52,145,348 $ 337,678,257 23,978,424 $ 182,234,205
Automatic conversion of
Class B shares to Class
A shares............... 2,645,405 17,857,774 4,188,100 31,927,957
Shares redeemed......... (75,408,870) (524,195,653) (47,475,315) (362,485,428)
Shares issued in
reinvestment of
distributions.......... 3,951,489 27,418,791 6,444,544 49,344,612
Shares issued in
acquisition of:
Massachusetts Fund..... 274,088 1,995,306 0 0
Missouri Fund.......... 418,545 3,046,937 0 0
Municipal Income Fund.. 3,178,042 44,727,258 0 0
-----------------------------------------------------------------------------------
Net decrease............ (12,795,953) (91,471,330) (12,864,247) (98,978,654)
-----------------------------------------------------------------------------------
Class B
Shares sold............. 686,377 4,771,825 1,822,072 13,980,072
Automatic conversion of
Class B shares to Class
A shares............... (2,645,405) (17,857,774) (4,188,253) (31,927,957)
Shares redeemed......... (3,251,891) (22,662,268) (3,771,056) (28,951,245)
Shares issued in
reinvestment of
distributions.......... 225,514 1,569,982 556,665 4,265,017
Shares issued in
acquisition of:
Massachusetts Fund..... 631,521 4,597,283 0 0
Missouri Fund.......... 2,062,424 15,013,754 0 0
-----------------------------------------------------------------------------------
Net decrease............ (2,291,460) (14,567,198) (5,580,572) (42,634,113)
-----------------------------------------------------------------------------------
Class C
Shares sold............. 3,428,539 1,354,430 109,350 842,655
Shares redeemed......... (696,866) (4,774,321) (224,935) (1,729,978)
Shares issued in
reinvestment of
distributions.......... 60,826 416,648 46,787 358,459
Shares issued in
acquisition of:
Massachusetts Fund..... 164,927 1,200,616 0 0
Missouri Fund.......... 76,569 557,395 0 0
Municipal Income Fund.. 2,994,418 42,113,419 0 0
-----------------------------------------------------------------------------------
Net increase
(decrease)............. 6,028,413 40,868,187 (68,798) (528,864)
-----------------------------------------------------------------------------------
Class Y*
Shares sold............. 84,222 585,818 132 1,004
Shares redeemed......... (19,365) (137,634) 0 0
Shares issued in
reinvestment of
distributions.......... 954 6,531 0 0
Shares issued in
acquisition of
Municipal Income Fund.. 69 1,002 0 0
-----------------------------------------------------------------------------------
Net increase............ 65,880 455,717 132 1,004
-----------------------------------------------------------------------------------
Net decrease............ $ (64,714,624) $(142,140,627)
-----------------------------------------------------------------------------------
</TABLE>
* For the year ended May 31, 1999, the activity is from April 30, 1999 (com-
mencement of operations) through May 31, 1999.
57
<PAGE>
Combined Notes to Financial Statements (continued)
Short-Intermediate Fund
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 2000 May 31, 1999
------------------------ ------------------------
Shares Amount Shares Amount
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............... 657,990 $ 6,475,840 1,277,930 $ 13,013,571
Automatic conversion of
Class B shares to Class A
shares................... 13,591 133,035 9,774 114,565
Shares redeemed........... (595,631) (5,836,383) (1,160,473) (11,819,868)
Shares issued in
reinvestment of
distributions............ 27,129 267,177 15,911 162,316
-------------------------------------------------------------------------------
Net increase.............. 103,079 1,039,669 143,142 1,470,584
-------------------------------------------------------------------------------
Class B
Shares sold............... 54,629 543,869 150,861 1,539,699
Automatic conversion of
Class B shares to Class A
shares................... (13,591) (133,035) (9,774) (114,565)
Shares redeemed........... (194,038) (1,912,895) (109,499) (1,103,599)
Shares issued in
reinvestment of
distributions............ 14,661 144,728 15,998 163,268
-------------------------------------------------------------------------------
Net increase (decrease)... (138,339) (1,357,333) 47,586 484,803
-------------------------------------------------------------------------------
Class Y
Shares sold............... 4,015,657 39,642,169 4,363,929 44,547,971
Shares redeemed........... (5,702,362) (56,320,174) (5,186,456) (52,908,905)
Shares issued in
reinvestment of
distributions............ 205,982 2,032,671 188,565 1,922,986
-------------------------------------------------------------------------------
Net decrease.............. (1,480,723) (14,645,334) (633,962) (6,437,948)
-------------------------------------------------------------------------------
Net decrease.............. $(14,962,998) $ (4,482,561)
-------------------------------------------------------------------------------
</TABLE>
Tax-Free High Income Fund
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
May 31, 2000* September 30, 1999 September 30, 1998
------------------------ -------------------------- --------------------------
Shares Amount Shares Amount Shares Amount
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A
Shares sold............. 3,546,874 $ 29,865,901 5,092,150 $ 45,945,933 35,588,566 $ 326,191,003
Shares redeemed......... (7,944,144) (67,192,944) (12,047,128) (108,692,234) (19,676,340) (179,925,895)
Shares issued in
reinvestment of
distributions.......... 278,164 2,355,405 564,534 5,078,931 640,064 5,842,119
----------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. (4,119,106) (34,971,638) (6,390,444) (57,667,370) 16,522,280 152,107,227
----------------------------------------------------------------------------------------------------------
Class B
Shares sold............. 1,658,099 13,981,329 4,239,576 38,228,135 17,056,260 155,837,641
Shares redeemed......... (7,232,703) (60,843,507) (6,090,773) (54,563,766) (4,154,386) (37,903,497)
Shares issued in
reinvestment of
distributions.......... 257,019 2,168,015 444,771 3,985,404 511,231 4,656,040
----------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. (5,317,585) (44,694,163) (1,406,426) (12,350,227) 13,413,105 122,590,184
----------------------------------------------------------------------------------------------------------
Class C
Shares sold............. 974,432 8,270,791 2,125,712 19,312,493 4,003,278 36,794,143
Shares redeemed......... (1,882,225) (15,955,282) (1,388,222) (12,483,845) (333,673) (3,060,421)
Shares issued in
reinvestment of
distributions.......... 51,762 439,550 86,645 780,258 37,685 345,114
----------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. (856,031) (7,244,941) 824,135 7,608,906 3,707,290 34,078,836
----------------------------------------------------------------------------------------------------------
Class Y
Shares sold............. 4,107 34,415 200,923 1,820,882 115,009 1,049,727
Shares redeemed......... (131,922) (1,116,024) (151,024) (1,358,410) (18,903) (172,432)
Shares issued in
reinvestment of
distributions.......... 1,349 11,510 3,093 27,497 1 5
----------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. (126,466) (1,070,099) 52,992 489,969 96,107 877,300
----------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. $(87,980,841) $ (61,918,722) $ 309,653,547
----------------------------------------------------------------------------------------------------------
</TABLE>
* For the eight months ended May 31, 2000. The Fund changed its fiscal year
from September 30 to May 31, effective May 31, 2000.
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, 2000:
<TABLE>
<CAPTION>
Cost of Proceeds
Purchases from Sales
-------------------------
<S> <C> <C>
High Grade Fund....................... $137,624,059 $131,047,924
Municipal Fund........................ 880,115,601 983,549,861
Short-Intermediate Fund............... 67,284,349 82,625,995
Tax-Free High Income Fund*............ 42,029,087 50,594,819
</TABLE>
-------
* For the eight months ended May 31, 2000.
58
<PAGE>
Combined Notes to Financial Statements (continued)
On May 31, 2000, 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 Unrealized Unrealized
Tax Cost Appreciation Depreciation Depreciation
----------------------------------------------------
<S> <C> <C> <C> <C>
High Grade
Fund.......... $ 113,001,468 $ 1,230,804 $ (1,674,721) $ (443,917)
Municipal
Fund.......... 1,014,235,324 13,572,892 (40,223,274) (26,650,382)
Short-
Intermediate
Fund.......... 156,164,416 123,213 (1,823,997) (1,700,784)
Tax-Free High
Income Fund... 358,269,825 0 (20,573,433) (20,573,433)
</TABLE>
As of May 31, 2000, the Funds had capital loss carryovers for federal income
tax purposes as follows:
<TABLE>
<CAPTION>
Capital Expiration
Loss --------------------------------------------------------
Carryover 2002 2003 2005 2006 2007 2008
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
High Grade Fund......... $ 3,830,981 -- -- -- -- $ 102,334 $ 3,728,647
Municipal Fund.......... 22,639,617 $8,142 $1,616,817 $295,480 -- 1,042,665 19,676,513
Short-Intermediate
Fund................... 317,634 -- -- -- -- -- 317,634
Tax-Free High Income
Fund................... 6,269,055 -- -- -- $7,834 241,156 6,020,065
</TABLE>
Capital losses incurred after October 31 within a Fund's fiscal year are deemed
to arise on the first business day of the Fund's following fiscal year. The
High Grade Fund, Municipal Fund, Short-Intermediate Fund and Tax-Free High In-
come Fund have incurred and will elect to defer post October losses of
$3,367,603, $44,563,934, $2,476,462 and $10,568,440, respectively.
8. EXPENSE REDUCTIONS
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 expense reductions re-
ceived by each Fund and the impact of the total expense reductions on each
Fund's annualized expense ratio represented as a percentage of its average net
assets were as follows:
<TABLE>
<CAPTION>
Total
Expense % of Average
Reductions Net Assets
-----------------------
<S> <C> <C>
High Grade Fund......................... $ 5,306 0.00%*
Municipal Fund.......................... 47,804 0.00%*
Short-Intermediate Fund................. 7,002 0.00%*
Tax-Free High Income Fund............... 10,811 0.00%*
</TABLE>
-------
* Amounts represent less than 0.01% of average net assets.
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 Fund's Trustees' fees and
expenses. At the election of the Trustees, the deferral account will be paid
either in one lump sum or in quarterly installments for up to ten years.
10. FINANCING AGREEMENTS
Certain Evergreen Funds, State Street and The Bank of New York ("BONY") entered
into an amended financing agreement on December 22, 1998. Under this agreement,
State Street and BONY provided an unsecured credit facility in the aggregate
amount of $150 million ($125 million committed and $25 million uncommitted).
The credit facility was allocated under the terms of the financing agreement
between State Street and BONY. The credit facility was accessed by the Funds
for temporary or emergency purposes only and was subject to each Fund's borrow-
ing restrictions. Borrowings under this facility bore interest at 0.50% per an-
num above the Federal Funds rate. A commitment fee of 0.065% per annum was in-
curred on the unused portion of the com-
59
<PAGE>
Combined Notes to Financial Statements (continued)
mitted facility, which was allocated to all funds. State Street served as ad-
ministrative agent and was entitled to a fee of $20,000 per annum which was al-
located to all of the funds. This agreement was terminated on July 27, 1999.
On July 27, 1999, certain Evergreen Funds and a group of banks (the "Lenders")
entered into a credit agreement. Under this agreement, the Lenders provide an
unsecured revolving credit commitment in the aggregate amount of $1.050 bil-
lion. The credit facility is allocated, under the terms of the financing agree-
ment, among the Lenders. The credit facility is accessed by the Funds for tem-
porary or emergency purposes to fund the redemption of their shares or for gen-
eral working capital purposes as permitted by each Fund's borrowing restric-
tions. Borrowings under this facility bear interest at 0.75% per annum above
the Federal Funds rate (1.50% per annum above the Federal Funds rate during the
period from and including December 1, 1999 through and including January 31,
2000). A commitment fee of 0.10% per annum is incurred on the average daily un-
used portion of the revolving credit commitment. The commitment fee is allo-
cated to all funds. For its assistance in arranging this financing agreement,
First Union Capital Markets Corp. was paid a one-time arrangement fee of
$250,000. State Street serves as paying agent for the funds and as paying agent
is entitled to a fee of $20,000 per annum which is allocated to all the funds.
During the year ended May 31, 2000, the Funds did not borrow under the agree-
ments.
60
<PAGE>
Independent Auditors' Report
Board of Trustees and Shareholders
Evergreen Municipal Trust
We have audited the accompanying statements of assets and liabilities, includ-
ing the schedules of investments, of the Evergreen High Grade Municipal Bond
Fund, Evergreen Municipal Bond Fund and Evergreen Short-Intermediate Municipal
Bond Fund, portfolios of Evergreen Municipal Trust, as of May 31, 2000 and the
related statements of operations, changes in net assets and financial high-
lights for the year then ended. We have also audited the accompanying state-
ments of assets and liabilities, including the schedule of investments of the
Evergreen Tax-Free High Income Fund (formerly Davis Tax-Free High Income Fund,
Inc.), also a portfolio of Evergreen Municipal Trust, as of May 31, 2000, and
the related statements of operations for the eight months then ended and the
year ended September 30, 1999, statements of changes in net assets for the
eight months then ended and each of the years in the two year period ended Sep-
tember 30, 1999, and the financial highlights for the eight months then ended
and each of the years or periods in the five year period ended September 30,
1999. These financial statements and financial highlights are the responsibil-
ity of the Funds' management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits. For
the Evergreen High Grade Municipal Bond Fund, Evergreen Municipal Bond Fund and
Evergreen Short-Intermediate Municipal Bond Fund the statements of changes in
net assets for the year ended May 31, 1999 and the financial highlights for the
years or periods in the four year period then ended for Evergreen High Grade
Municipal Bond Fund and Evergreen Short-Intermediate Municipal Bond Fund and
for the year then ended for Evergreen Municipal Bond Fund were audited by other
auditors, whose report dated July 19, 1999 expressed an unqualified opinion on
those financial statements and financial highlights.
We conducted our audits in accordance with auditing standards generally ac-
cepted in the United States of America. Those standards require that we plan
and perform our audit to obtain reasonable assurance about whether the finan-
cial statements and financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of May 31, 2000 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall fi-
nancial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Ever-
green High Grade Municipal Bond Fund, Evergreen Municipal Bond Fund, Evergreen
Short-Intermediate Municipal Bond Fund and Evergreen Tax-Free High Income Fund
as of May 31, 2000, the results of their operations, changes in their net as-
sets and financial highlights for each of the years or periods described above
in conformity with accounting principles generally accepted in the United
States of America.
/s/ KPMG LLP
Boston, Massachusetts
July 7, 2000
61
<PAGE>
Additional Information
FEDERAL INCOME TAX STATUS OF DISTRIBUTIONS
Pursuant to section 852 of the Internal Revenue Code, the Funds have designated
the following amounts as long-term capital gain distributions for the fiscal
year ended May 31, 2000:
<TABLE>
<CAPTION>
Aggregate Per Share
<S> <C> <C>
-----------------
High Grade Fund............................ $1,936,281 $0.149
Municipal Fund............................. 5,800,358 0.039
Short-Intermediate Municipal Bond Fund..... 884,660 0.068
</TABLE>
For the fiscal year ended May 31, 2000, the following percentages represent the
portion of distributions from net investment income, which are exempt from fed-
eral income tax, other than alternative minimum tax:
<TABLE>
<CAPTION>
Percentage
----------
<S> <C>
High Grade Fund....................................... 99.01%
Municipal Fund........................................ 99.54%
Short-Intermediate Fund............................... 99.96%
Tax-Free High Income Fund............................. 91.76%
</TABLE>
62
<PAGE>
Evergreen Funds
Money Market
Treasury Money Market Fund
Money Market Fund
Municipal Money Market Fund
Florida Municipal Money Market Fund
New Jersey Municipal Money Market Fund
Pennsylvania Municipal Money Market Fund
Tax Advantaged
Short-Intermediate Municipal Bond 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
Tax-Free High Income Fund
Income
Intermediate Term Bond Fund
U.S. Government Fund
Diversified Bond Fund
Strategic Income Fund
High Yield Bond Fund
Quality Income Fund
Short-Duration Income Fund
Balanced
Balanced Fund
Tax Strategic Foundation Fund
Foundation Fund
Growth & Income
Utility Fund
Value Fund
Blue Chip Fund
Growth and Income Fund
Small Cap Value Fund
Equity Index Fund
Equity Income Fund
Domestic Growth
Tax Strategic Equity Fund
Large Company Growth Fund
Stock Selector Fund
Evergreen Fund
Masters Fund
Omega Fund
Small Company Growth Fund
Aggressive Growth Fund
Growth Fund
Capital Growth Fund
Special Equity Fund
Global International
Global Leaders Fund
International Growth Fund
Global Opportunities Fund
Precious Metals Fund
Emerging Markets Growth Fund
Latin America Fund
Perpetual Global Fund
Perpetual International Fund
Express Line
800.346.3858
Investor Services
800.343.2898
www.evergreen-funds.com
58931 543689 7/2000
----------------
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----------------
