EVERGREEN
NATIONAL
MUNICIPAL BOND
FUNDS
NOVEMBER 30, 1997
SEMIANNUAL REPORT
(EVERGREEN LOGO APPEARS HERE)
<PAGE>
Table of Contents
Letter to Shareholders .................... 1
Evergreen High Grade Tax Free Fund
Fund at a Glance ......................... 2
Portfolio Manager Interview .............. 3
Evergreen Short-Intermediate
Municipal Fund
Fund at a Glance ......................... 5
Portfolio Manager Interview .............. 6
Evergreen Tax Free Income Fund
Fund at a Glance ......................... 8
Portfolio Manager Interview .............. 9
Financial Highlights
Evergreen High Grade Tax Free Fund ....... 11
Evergreen Short-Intermediate Municipal
Fund .................................. 14
Evergreen Tax Free Income Fund ........... 16
Schedule of Investments
Evergreen High Grade Tax Free Fund ....... 18
Evergreen Short-Intermediate Municipal
Fund .................................. 21
Evergreen Tax Free Income Fund ........... 25
Statements of Assets and Liabilities ........ 29
Statements of Operations .................... 30
Statements of Changes in Net Assets -
Six months ended November 30, 1997 ....... 31
Statements of Changes in Net Assets -
Prior Periods ............................ 32
Combined Notes to Financial
Statements .................................. 33
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Evergreen Funds
Evergreen Funds is one of the nation's fastest growing investment companies
with more than $40 billion in assets under management.
With 65 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broader range of quality investment products
and services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to the Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
This semiannual 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.
<TABLE>
<S> <C> <C>
MUTUAL FUNDS: ARE NOT FDIC INSURED May lose value o Are not bank guaranteed
</TABLE>
Evergreen Funds Distributor, Inc.
<PAGE>
Letter to Shareholders
----------------------
February 1998
Dear Shareholders:
(PHOTO OF
WILLIAM M. ENNIS) The past six months have been an excellent
period for most investors in municipal bond
WILLIAM M. ENNIS funds, and the shareholders of the Evergreen
Managing Director National Municipal Bond Funds have been able to
enjoy the benefits.
The bond market enjoyed an
extremely favorable environment, as moderate economic growth and an apparent
absence of any serious inflation resulted in a period in which interest rates
steadily declined. In fact, the 30-year Treasury Bond's yield fell nine-tenths
of one percent, or 90 basis points, to finish the six month fiscal period on
November 30, 1997 near the 6.00% level. While the yield, or income, of bond
funds tended to go down, the prices of bonds tended to increase, giving
investors strong positive real returns, even after allowing for inflation. The
municipal bond market, which usually follows the same trends as the Treasury
market, had strong performance, although not as impressive as the Treasury
market. The result was that AAA-rated municipal bonds, at the end of the six
month period, were paying investors as much as 85% of the yield of Treasury
bonds. We believe that makes municipal bonds a very attractive investment.
Municipal bond funds are designed to provide investors with tax-exempt income
and greater potential protection of principal than an equity fund. Of course,
they cannot be expected to provide the growth opportunities of an equity fund,
which invests primarily in stocks. Municipal bond funds are successful when
they produce steady income and relative stability of prices as they have during
the past year.
Advantages of Diversification
At Evergreen Funds, we believe bond funds have a place in virtually every
investor's portfolio, both because of their income and because they help
diversify and reduce the risk of the total portfolio of investments. Municipal
bond funds make sense for those investors attempting to limit their federal
income taxes. During
any short-term period, an undiversified portfolio of stock funds may give the
appearance of a performance advantage over a diversified mix of stock, bond and
international funds. Over the long term, however, proper diversification can
help smooth out the bumps in the market and provide greater consistency.
The right measure of diversification is different for each investor. This is
why we encourage investors to consult with their financial advisors, who can
help determine the right mix of investments for each person, given his or her
objectives and risk tolerances.
Upcoming Developments
In the next few weeks and months, shareholders of Evergreen and Keystone funds
will begin to notice some changes. The Evergreen Keystone Funds have become the
Evergreen Funds. On October 31, 1997, Keystone America Funds adopted the name
of Evergreen and in early 1998 the original Keystone Funds will also take the
Evergreen name.
We believe that by putting all the funds under the umbrella name of Evergreen
Funds we will be creating a simpler and more cohesive image. Importantly, we
expect to create substantial cost savings for shareholders as a result of
consolidating prospectuses, annual reports, legal registrations and other
materials. It also will be easier to find all the funds of the Evergreen
Family, to which you have exchange privileges, under one heading in newspapers
and electronic services.
What will not change will be our commitment to provide you with the finest
investment products and shareholder services possible.
If you have any questions about these changes or other issues affecting your
investments, we encourage you to consult your financial advisor or call
Evergreen Funds at 1-800-343-2898.
Sincerely,
/s/ William M. Ennis
- --------------------
William M. Ennis
Managing Director
1
<PAGE>
EVERGREEN
High Grade Tax Free Fund
Fund at a Glance as of November 30, 1997
We have a long-term strategy of trying to find the best value in the
marketplace, and not trying to guess short-term swings in interest rates.
Portfolio
Management
- ----------
[PHOTO OF JAMES T. COLBY III
APPEARS HERE]
James T. Colby III
Vice President
Evergreen Asset
Management Corp. and
Capital Management Group
Tenure: July 1995
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
Class A Class B Class Y
<S> <C> <C> <C>
Inception Date 2/21/92 1/11/93 2/28/94
Average Annual Returns*
6 months with sales charge 0.19% -0.21% 5.31%
6 months w/o sales charge 5.18% 4.79% 5.31%
One year with sales charge 0.48% -0.30% 5.74%
One year w/o sales charge 5.49% 4.70% 5.74%
3 years 8.82% 8.94% 10.88%
5 years 5.78% - -
Since Inception 6.39% 5.62% 5.86%
Cumulative Total Return
since inception 43.06% 30.61% 23.89%
Maximum Sales Charge 4.75% 5.00% n/a
Front End CDSC
SEC Yield 4.09% 3.54% 4.54%
6 month dividends per share $ 0.24 $ 0.20 $ 0.25
</TABLE>
*Adjusted for maximum applicable sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
[GRAPH APPEARS BELOW WITH THE FOLLOWING PLOT POINTS:]
Consumer Lehman
Class A Price Brothers Insured
Shares Index (CPI Bond Index (LBIB)
------ ---------- -----------------
2/92 $ 9,520 $10,000 $10,000
11/93 11,540 10,560 12,050
11/95 12,990 11,120 13,590
11/97 14,310 11,680 15,240
Comparisons of a $10,000 investment in Evergreen High Grade Tax Free Fund,
Class A shares, versus a similar investment in the Lehman Brothers Insured Bond
Index and the Consumer Price Index.
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholder
investing in the different classes. 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. The Lehman Brothers Insured
Bond Index is an unmanaged, market index. The index does not include
transaction costs associated with buying and selling securities, nor any
management fees. The Consumer Price Index, a measure of inflation, is through
November 30, 1997.
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE
Morningstar's Style Box is based on a portfolio date as
of 12/31/97.
[GRAPHIC OMITTED]
The Fixed Income Style Box placement is based on a fund's
average effective maturity or duration and the average
credit rating of the bond portfolio.
Source: 1997 Morningstar, Inc.
2
<PAGE>
EVERGREEN
High Grade Tax Free Fund
Portfolio Manager Interview
- --------------------------------------------------------------------------------
How did the Fund perform during the
six-month period?
The Fund performed well. For the six months that ended on November 30,
1997, the Fund's Class Y Shares had a total return of 5.31%, while Class A
Shares had a total return of 5.18% and Class B Shares had a return of
4.79%. These returns are before deduction of any sales charge, if
applicable.
- --------------------------------------------------------------------------------
What was the investment environment
like?
It was a very favorable environment. The fixed income markets, including
the municipal bond market, rallied as interest rates declined. To measure
that environment, you only have to look at the long-term Treasury Bond. At
the beginning of the fiscal period, its yield was in the 6.90% to 6.95%
range. Shortly after November 30, it was touching the 6.00% level. In
general, long-term municipal bonds improved in price as yields declined.
It was a somewhat bumpy ride, however, as periods of uncertainty caused
interest rates to spike up for short periods. The economic background
continued to be favorable, with a strong economy and no real evidence that
the prices of goods and services would cause inflation to increase.
Municipal bonds, however, did not perform as well as Treasuries and other
taxable bonds. We saw a great deal of new issuance of municipal bonds,
particularly in September, as municipalities took advantage of the lower
interest rates. In September, $30 billion in new municipal bond debt was
issued. It is a measure of the health of the municipal bond industry that
the marketplace was able to consume that new supply. However, this added
supply - without any significant increase in demand - did limit the price
appreciation of municipal bonds relative to the Treasury market.
We believe it is a very good time to buy and own municipal bonds, partly
as a consequence of this recent underperformance relative to Treasuries.
We believe municipal bonds are attractive both on an absolute basis
because of their value and on a relative basis because of their after-tax
yield advantage over taxable bonds. At the close of the six month fiscal
period, high-grade municipal bonds were trading with yields of about 84%
to 85% of Treasury Bonds. Historically, it has been a
"buy signal" when municipal bonds were trading at that level.
--------------------------------------------------------------------
PORTFOLIO COMPOSITION
[PIE CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:]
(as a percentage of net assets)
Industrial Development 13%
Water and Sewer 13%
Other 12%
Hospitals 11%
Port Authorities 11%
General Obligations-Local 10%
Utilities 10%
Transportation 9%
Airports 6%
Housing 5%
- --------------------------------------------------------------------------------
What strategies did you follow during
the period?
We have a long-term strategy of trying to find the best
value in the marketplace, and not trying to guess short-term swings in
interest rates. Our approach is to pay attention to economic fundamentals
and supply
fundamentals.
During the period, we did take note of declining interest rates to
increase the effective maturity and duration slightly. Average effective
maturity of bonds in the portfolio increased from 12.3 years to 13.3
years, while the duration increased from 8.2 years to 8.4 years. When we
purchased bonds, as we did in September, we extended maturity and duration
somewhat, as bonds of longer maturity tend to perform better during
periods of declining rates.
3
<PAGE>
EVERGREEN
High Grade Tax Free Fund
Portfolio Manager Interview
This Fund, by definition, focuses on insured municipal bonds, or bonds that
are insured as to timely payment of principal and interest.1 At the close
of the period, 94% of the Fund's assets were insured. The average credit
quality was AAA.
--------------------------------------------------------------------
PORTFOLIO QUALITY
[PIE CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:]
(as a percentage of net assets)
AAA 85%
AA 7%
A 7%
NR 1%
- --------------------------------------------------------------------------------
Were there any external factors that influenced performance during the six
months?
Two factors stand out.
First, as interest rates declined, some of the higher coupon bonds that we
held were refunded. Municipalities took advantage of the lower rates to
refinance their debt. When bonds are refunded, they typically increase in
price significantly. The Fund was the beneficiary, as its return was
enhanced.
The second factor was not as positive. During recent years, insured bonds
have become the "generic bond" of the municipal marketplace because of
their great liquidity due to their AAA credit quality. They can be bought
and sold very easily, and a high percentage of new issuance is insured.
Because of these features, insured municipal bonds did not have the price
appreciation of other bonds, particularly lower credit 1The Fund itself is
not insured, nor is the value of its shares guaranteed.
quality, high yield municipal bonds. High yield bonds benefited because
their issuance was less and demand was substantially higher as more
investors were willing to stretch for yield in an environment of lower
rates. Thus, there was greater performance in lower quality,
higher yielding bonds.
Portfolio
Characteristics
---------------
Total Net Assets $103,404,112
Average Credit Quality AAA
Average Maturity 13.3 years
Average Duration 8.4 years
- --------------------------------------------------------------------------------
What is your outlook?
The economic trends point toward lower interest rates, which would be very
good for municipal bonds and the Fund.
At the same time, I would point out that municipal
bonds - while they are unique to the United States -are still part of our
global economic system. Like Treasury Bonds, municipal bonds can be
affected by external events; from currency problems, volatility in the
Asian markets to a crisis in the Middle East.
Should nothing happen externally, I think there is a good opportunity for
the interest rates of the 30-year Treasury Bond to decline to the 5.5% to
5.75% range. The economy is healthy, the federal Treasury may even show a
surplus, and there is still no serious evidence of inflationary pressure.
Given this outlook, I expect we will continue to maintain our relative
position with respect to maturity and duration. If interest rates were to
go lower, the Fund has the potential to benefit from refundings, which can
add incremental returns.
Municipal bonds, on a value basis, are extremely attractive. This is a
good time to be a municipal bond investor or buyer.
4
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Fund at a Glance as of November 30, 1997
Positively, we would say that the dramatic downward move in interest rates
helped performance.
Portfolio
Management
- -----------------
[PHOTO OF RICHARD K. MARRONE
APPEARS HERE]
Richard K. Marrone
Vice President and
Senior Fixed Income
Portfolio Manager
Capital Management Group
Tenure: December 1, 1997
[PHOTO OF STEVEN SHACHAT
APPEARS HERE]
Steven Shachat
Vice President
Evergreen Asset Management Corp.
Tenure:
July 1991 - November 1997
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
Class A Class B Class Y
<S> <C> <C> <C>
Inception Date 1/5/95 1/5/95 7/17/91
Average Annual Returns*
6 months with sales charge -0.57% -2.69% 2.82 %
6 months w/o sales charge 2.77% 2.31% 2.82 %
One year with sales charge 0.30% -2.04% 3.98 %
One year w/o sales charge 3.67% 2.95% 3.98 %
3 years - - 5.00 %
5 years - - 4.22 %
Since Inception 3.76% 3.09% 4.95 %
Cumulative Total Return since
inception 11.34% 9.25% 33.91%**
Maximum Sales Charge 3.25% 5.00% n/a
Front End CDSC
SEC Yield 3.36% 2.57% 3.57 %
6 month dividends per share $ 0.20 $ 0.15 $ 0.20
</TABLE>
*Adjusted for maximum applicable sales charge.
**Since inception return for Class Y shares reflects total return from 11/18/91
when the Fund changed to a fluctuating net asset value fund.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
[GRAPH APPEARS BELOW WITH THE FOLLOWING PLOT POINTS:]
Consumer Lehman Brothers
Class A Price 3 Year Municipal
Shares Index (CPI Bond Index (LB3YMBI)
------ ---------- --------------------
1/95 $ 9,670 $10,000 $10,000
11/95 10,340 10,260 10,840
11/96 10,750 10,590 11,360
11/97 11,130 10,770 11,910
Comparisons of a $10,000 investment in Evergreen Short-Intermediate Municipal
Fund, Class A shares, versus a similar investment in the Lehman Brothers 3 Year
Municipal Bond Index and the Consumer Price Index.
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholder
investing in the different classes. 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. The Lehman Brothers 3 Year
Municipal Bond Index is an unmanaged, market index. The index does not include
transaction costs associated with buying and selling securities, nor any
management fees. The Consumer Price Index, a measure of inflation, is through
November 30, 1997.
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE
[GRAPHIC OMITTED]
Morningstar's Style Box is based on a portfolio date as
of 12/31/97.
The Fixed Income Style Box placement is based on a fund's
average effective maturity or duration and the average
credit rating of the bond
portfolio.
Source: 1997 Morningstar, Inc.
5
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Portfolio Manager Interview
Effective December 1, 1997, Richard K. Marrone is the portfolio manager
for the Fund. Since joining First Union in 1993, Mr. Marrone has been a
Vice President and Senior Fixed Income Portfolio Manager, with over 15
years of investment and market experience.
- --------------------------------------------------------------------------------
How did the Fund perform during the
six months?
We have managed the Fund to give investors a higher return than a money
fund, and still maintain relative stability in net asset value. The Fund
did its job.
For the six months that ended on November 30, 1997, the Fund's Class Y
Shares had a total return of 2.82%. During the same period, the Fund's
Class A Shares had a return of 2.77%, and the Class B Shares had a return
of 2.31%. These returns are before deduction of any
applicable sales charges.
- --------------------------------------------------------------------------------
How would you describe the investment environment during the six-month
period?
It was a very attractive time for the municipal bond market. Inflation
remained in check, the interest rate environment was very supportive, with
rates declining, even though there were a few periodic blips when the
market was concerned about the possibility of inflation increasing. Supply
and demand of municipal bonds remained in relative balance, so it was an
attractive time to be invested in the market.
--------------------------------------------------------------------
PORTFOLIO COMPOSITION
(as a percentage of net assets)
[PIE CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:]
General Obligations-State 23%
General Obligations-Local 22%
Escrow 17%
Utilities 10%
Other 7%
Industrial Development 5%
Transportation 5%
Hospitals 4%
Sales Tax 4%
Education 3%
- --------------------------------------------------------------------------------
What were your principal strategies
during the period?
We continued to maintain a laddered portfolio of securities by maturities.
By that, we mean we sought to maintain as stable a price as possible by
structuring a portfolio of maturities throughout the range in which the
Fund invests, up to 7 years. At the same time, we tried to take advantage
of the declining interest rate environment to increase our holdings in the
longer end of the maturity curve and to sell off some at the shorter end.
The Fund therefore had a somewhat higher weighting in the four-to-six year
range, versus the two-to-three year range. Overall, we wanted to maintain
a laddered structure because we have found that over the life of the Fund
this structure has worked well.
In terms of bond quality, we did take advantage of the higher yields in
lower-rated investment grade bonds to diversify somewhat from just AAA-
and AA-rated bonds, although the average credit quality remained at AA. We
believe this diversification to some bonds rated BBB+ helped performance.
6
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Portfolio Manager Interview
In terms of sectors, we stayed away from housing bonds and student loan
bonds, primarily because they did not offer significant opportunities for
capital appreciation. At the same time, we did emphasize bonds from the
healthcare sector. The consolidation among public
health institutions has given stability to the credit ratings of these
bonds.
--------------------------------------------------------------------
PORTFOLIO QUALITY
(as a percentage of net assets)
[PIE CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:]
AAA 68%
AA 21%
A 6%
BBB 3%
NR 2%
- --------------------------------------------------------------------------------
What factors affected performance?
Positively, we would say that the dramatic downward move in interest rates
helped performance. During the six months, we took a conservative approach
in the maturity structure. Although we did overweight bonds with
maturities of four to six years, we didn't take too much risk. At the same
time, we balanced the shorter maturities by investing in some lower-rated
investment grade bonds. We helped reduce the risk of these bonds because
of the shorter life of the securities.
While we were conservative, we believe the approach was consistent with
the purpose of the Fund, to provide federally-tax-exempt income with
minimal fluctuations in share price.
- --------------------------------------------------------------------------------
What is your outlook?
We anticipate interest rates to remain relatively stable over the coming
months, with the possibility of a slight decline. Within this environment,
we will focus on structuring the portfolio to emphasize higher coupon
income and increase the Fund's yield.
In repositioning the portfolio to focus on yield, we will look for
opportunities in two particular areas: healthcare and callable bonds.
Bonds from the healthcare sector are not new to the portfolio, and will
continue to be utilized to enhance returns. Because issuers of callable
bonds need to compensate investors for their inherent features, this type
of bond traditionally offers higher coupon income and yield. Going
forward, we will look for opportunities to add callable bonds to the
portfolio in order to increase the yield. As new securities are added to
the portfolio, our municipal credit research group will continue to
evaluate and monitor holdings to ensure our high credit standards.
Portfolio
Characteristics
---------------
Total Net Assets $205,171,275
Average Credit Quality AA
Average Maturity 6.2 years
7
<PAGE>
EVERGREEN
Tax Free Income Fund
Fund at a Glance as of November 30, 1997
We continued to emphasize quality, by investing in higher-rated general
obligation bonds and doubling the Fund's investment in water and sewer bonds to
9%.
Portfolio
Management
- ----------------
[PHOTO OF BETSY A HUTCHINGS
APPEARS HERE]
Betsy A. Hutchings
Senior Vice President,
Head of Municipal Bond Group
Keystone Investment
Management Company
Tenure: April 1997
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Inception Date 2/13/87 2/1/93 2/1/93
Average Annual Returns*
6 months with sales charge -0.25% -0.75% 3.35%
6 months w/o sales charge 4.72% 4.25% 4.35%
One year with sales charge 1.09% 0.26% 4.37%
One year w/o sales charge 6.13% 5.26% 5.37%
3 years 7.61% 7.65% 8.54%
5 years 4.67% - -
10 years 6.81% - -
Since Inception 6.40% 4.34% 4.69%
Cumulative Total Return since
inception 93.59% 22.77% 24.82%
Maximum Sales Charge 4.75% 5.00% 1.00%
Front End CDSC CDSC
SEC Yield 4.46% 3.92% 3.92%
6 month dividends per share $ 0.23 $ 0.19 $ 0.19
</TABLE>
*Adjusted for maximum applicable sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
[GRAPH APPEARS BELOW WITH THE FOLLOWING PLOT POINTS:]
Consumer Lehman Brothers
Class A Price Municipal
Shares Index (CPI Bond Index (LMBI)
------ ---------- --------------------
11/87 $ 9,520 $10,000 $10,000
11/89 11,580 10,910 12,280
11/91 13,400 11,940 14,580
11/93 16,030 12,630 17,820
11/95 17,540 13,300 20,080
11/97 19,360 13,970 22,520
Comparisons of a $10,000 investment in Evergreen Tax Free Income Fund, Class A
shares, versus a similar investment in the Lehman Brothers Municipal Bond Index
and the Consumer Price Index.
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholder
investing in the different classes. 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. The Lehman Brothers Municipal Bond Index is an
unmanaged, market index. The index does not include transaction costs
associated with buying and selling securities, nor any management fees. The
Consumer Price Index, a measure of inflation, is through November 30, 1997.
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE
Morningstar's Style Box is based on a portfolio date as
of 12/31/97.
[GRAPHIC OMITTED]
The Fixed Income Style Box placement is based on a fund's
average effective maturity or duration and the average
credit rating of the bond portfolio. Source: 1997
Morningstar, Inc.
8
<PAGE>
EVERGREEN
Tax Free Income Fund
Portfolio Manager Interview
We are pleased to report that shareholders of the Evergreen Tax Free
Income Fund and the Keystone Tax Free Fund approved a proposal to
reorganize these funds into a new fund, the Evergreen Tax Free Fund. The
new fund's investment objective is substantially the same as that of the
former funds. The reorganization of these funds will take place on January
23, 1998.
- --------------------------------------------------------------------------------
What was the environment like for
municipal bonds over the last six months?
The market was favorable. Interest rates declined, as the economy grew at
a moderate pace and inflation remained low. In the tax-exempt market, the
economy's strength generated high tax receipts, which strengthened
municipal balance sheets and reduced the need to issue bonds. While
investors continue to monitor signs of excessive economic strength in
anticipation of future inflation, the fact that the economy has enjoyed
such a lengthy expansion with minimal price pressures has created a very
positive atmosphere in the fixed income market.
Toward the end of the period, municipal bonds became very "cheap" to U.S.
Treasuries. Heavier supply and lackluster demand put downward pressure on
tax-exempt bond prices, and a flight to quality - stemming from the Asian
currency crisis - drove U.S. Treasury prices higher. At that point,
municipals provided very attractive relative value on an historical basis.
Typically offering approximately 84% of the yield of U.S. Treasuries, the
yields of AAA-rated municipal bonds climbed to as much as 88% of that of
comparable U.S. Treasuries.
- --------------------------------------------------------------------------------
How was the Fund's performance, during
this time?
We were satisfied with the Fund's performance. We attribute its attractive
solid return to the successful implementation of our investment strategy,
as well as the positive conditions that prevailed in the municipal bond
market.
--------------------------------------------------------------------
PORTFOLIO QUALITY
(as a percentage of net assets)
[PIE CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:]
AAA 70%
AA 9%
A 7%
BBB 10%
NR 4%
- --------------------------------------------------------------------------------
What strategies did you use in managing
the Fund?
We continued to manage the Fund with an emphasis on quality and income. We
invested in AAA-rated and AA-rated general obligation bonds, increased
portfolio holdings in water and sewer bonds and took advantage of
supply/demand imbalances, which affected the relative value of certain
issues. We also adjusted the Fund's duration. Duration is a mathematical
formula that measures the portfolio's sensitivity to changes in interest
rates. The longer a Fund's duration, the more sensitive it is to changes
in interest rates.
We continued to emphasize quality, by investing in higher-rated general
obligation bonds and doubling the Fund's investment in water and sewer
bonds to 8%. We believed the higher-rated bonds offered the most
attractive relative value, since during the period the yields of
lower-rated bonds were only marginally higher than those of their
higher-rated counterparts.
9
<PAGE>
EVERGREEN
Tax Free Income Fund
Portfolio Manager Interview
--------------------------------------------------------------------
PORTFOLIO COMPOSITION
(as a percentage of net ssets)
[PIE CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:]
Hospitals 15%
Transportation 15%
General Obligations 12%
Industrial Development 10%
Education 10%
Water/Sewer 9%
Electric/Power 8%
Housing 8%
Other 7%
Pre-Refunded 6%
Water and sewer bonds enhanced the Fund's quality, because of their stable
revenue streams and liquidity. These bonds are known as "essential
purpose" revenue bonds, in reflection of the necessity of the service they
help provide. Water and sewer bonds are self-funding; because of this,
their revenue streams tend to be more stable than many other kinds of
bonds. These qualities typically enhance investor demand and increase
liquidity.
We scaled back on the Fund's New York holdings, a position we had
increased when heavy supply had driven their prices lower and yields
higher than alternative investments.
We also made several adjustments to the Fund's duration. We lengthened
duration when we anticipated a decline in interest rates and higher bond
prices and shortened it when we believed interest rates would rise and
bond prices would fall. Duration adjustments are made to correspond to
larger interest rate trends, rather than the short-term fluctuations that
often occur. We believe these changes to the Fund's duration coordinated
well with the longer-term interest rate trends during the period
particularly enhancing total return towards the end of the reporting
period. Some of these gains were offset, however, by a short-term swing
in interest rates.
Portfolio
Characteristics
---------------
Total Net Assets $101,574,339
Average Credit Quality AA+
Average Maturity 17 years
Average Duration 8.5 years
- --------------------------------------------------------------------------------
What is your outlook for municipal bonds
for the next six months?
We have a positive outlook. Near term, we expect municipals to benefit
from favorable seasonal patterns, as we head into the end of the calendar
year and demand strengthens as investors begin thinking about reducing
taxes. Longer term, we think the economy will remain healthy and inflation
will stay low. This combination should continue to strengthen the
financial conditions of many municipalities and provide a favorable
backdrop for fixed income investing.
10
<PAGE>
EVERGREEN
High Grade Tax Free Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
November 30, 1997 Nine Months Ended Year Ended
(Unaudited) May 31, 1997 (a) August 31, 1996
<S> <C> <C> <C>
CLASS A SHARES
Net asset value beginning
of period $ 10.89 $ 10.72 $ 10.69
=========== =========== =========
Income from investment
operations
Net investment income 0.24 0.37 0.52
Net realized and unrealized
gain (loss) on investments 0.32 0.17 0.03
----------- ----------- ---------
Total from investment
operations 0.56 0.54 0.55
----------- ----------- ---------
Less distributions from
Net investment income ( 0.24) ( 0.37) ( 0.52)
Net realized gains on
investments 0 0 0
----------- ----------- ----------
Total distributions ( 0.24) ( 0.37) ( 0.52)
----------- ----------- ----------
Net asset value end of
period $ 11.21 $ 10.89 $ 10.72
=========== =========== ==========
Total Return (c) 5.18% 5.13% 5.21%
Ratios/Supplemental Data
Ratios to average net
assets
Total expenses 1.10%(b) 1.03%(b) 0.89%
Total expenses excluding
indirectly paid expenses 1.10%(b) 1.03%(b) -
Total expenses excluding
waivers and
reimbursements 1.10%(b) 1.11%(b) 1.09%
Net investment income 4.35%(b) 4.60%(b) 4.78%
Portfolio turnover rate 50% 114% 65%
Net assets end of period
(thousands) $ 45,999 $ 45,814 $ 50,569
<CAPTION>
February 21, 1992
(Commencement
Eight Months Year Ended of Class Operations)
Ended December 31, through
August 31, 1995 (d) 1994 1993 December 31, 1992
<S> <C> <C> <C> <C>
CLASS A SHARES
Net asset value beginning
of period $ 9.79 $ 11.16 $ 10.42 $ 10.00
========== ========= ======== ===========
Income from investment
operations
Net investment income 0.34 0.52 0.54 0.51
Net realized and unrealized
gain (loss) on investments 0.90 ( 1.37) 0.81 0.42
---------- --------- -------- -----------
Total from investment
operations 1.24 ( 0.85) 1.35 0.93
---------- --------- -------- -----------
Less distributions from
Net investment income ( 0.34) ( 0.52) ( 0.54) ( 0.51)
Net realized gains on
investments 0 0 ( 0.07) 0
---------- --------- -------- -----------
Total distributions ( 0.34) ( 0.52) ( 0.61) ( 0.51)
---------- --------- -------- -----------
Net asset value end of
period $ 10.69 $ 9.79 $ 11.16 $ 10.42
========== ========= ======== ===========
Total Return (c) 12.83% ( 7.71%) 13.25% 9.48%
Ratios/Supplemental Data
Ratios to average net
assets
Total expenses 1.06%(b) 1.01% 0.85% 0.49%(b)
Total expenses excluding
indirectly paid expenses - - - -
Total expenses excluding
waivers and
reimbursements 1.09%(b) 1.02% 1.07% 1.11%(b)
Net investment income 4.93%(b) 5.04% 4.99% 5.79%(b)
Portfolio turnover rate 27% 53% 14% 7%
Net assets end of period
(thousands) $ 58,751 $ 57,676 $101,352 $ 90,738
</TABLE>
(a) The Fund changed its fiscal year end from August 31 to May 31.
(b) Annualized.
(c) Excluding applicable sales charges.
(d) The Fund changed its fiscal year end from December 31 to August 31.
See Combined Notes to Financial Statements.
11
<PAGE>
EVERGREEN
High Grade Tax Free Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
November 30, 1997 Nine Months Ended Year Ended
(Unaudited) May 31, 1997 (a) August 31, 1996
<S> <C> <C> <C>
CLASS B SHARES
Net asset value beginning of
period $ 10.89 $ 10.72 $ 10.69
=========== =========== =========
Income from investment
operations
Net investment income 0.20 0.31 0.44
Net realized and unrealized gain
(loss) on investments 0.32 0.17 0.03
----------- ----------- ---------
Total from investment operations 0.52 0.48 0.47
----------- ----------- ---------
Less distributions from
Net investment income ( 0.20) ( 0.31) ( 0.44)
Net realized gain on investments 0 0 0
----------- ----------- ----------
Total distributions ( 0.20) ( 0.31) ( 0.44)
----------- ----------- ----------
Net asset value end of period $ 11.21 $ 10.89 $ 10.72
=========== =========== ==========
Total Return (c) 4.79% 4.55% 4.42%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.85%(b) 1.78%(b) 1.64%
Total expenses excluding indirectly
paid expenses 1.85%(b) 1.78%(b) -
Total expenses excluding waivers
and reimbursements 1.85%(b) 1.86%(b) 1.84%
Net investment income 3.60%(b) 3.85%(b) 4.03%
Portfolio turnover rate 50% 114% 65%
Net assets end of period
(thousands) $ 32,329 $ 31,874 $ 32,221
<CAPTION>
January 11, 1993
(Commencement
Eight Months of Class Operations)
Ended Year Ended through
August 31, 1995 (d) December 31, 1994 December 31, 1993
<S> <C> <C> <C>
CLASS B SHARES
Net asset value beginning of
period $ 9.79 $ 11.16 $ 10.42
========== ========== ===========
Income from investment
operations
Net investment income 0.29 0.46 0.47
Net realized and unrealized gain
(loss) on investments 0.90 ( 1.37) 0.81
---------- ---------- -----------
Total from investment operations 1.19 ( 0.91) 1.28
---------- ---------- -----------
Less distributions from
Net investment income ( 0.29) ( 0.46) ( 0.47)
Net realized gain on investments 0 0 ( 0.07)
---------- ---------- -----------
Total distributions ( 0.29) ( 0.46) ( 0.54)
---------- ---------- -----------
Net asset value end of period $ 10.69 $ 9.79 $ 11.16
========== ========== ===========
Total Return (c) 12.27% ( 8.24%) 12.52%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.81%(b) 1.58% 1.35%(b)
Total expenses excluding indirectly
paid expenses - - -
Total expenses excluding waivers
and reimbursements 1.84%(b) 1.59% 1.57%(b)
Net investment income 4.18%(b) 4.47% 4.44%(b)
Portfolio turnover rate 27% 53% 14%
Net assets end of period
(thousands) $ 34,206 $ 32,435 $ 41,030
</TABLE>
(a) The Fund changed its fiscal year end from August 31 to May 31.
(b) Annualized.
(c) Excluding applicable sales charges.
(d) The Fund changed its fiscal year end from December 31 to August 31.
See Combined Notes to Financial Statements.
12
<PAGE>
EVERGREEN
High Grade Tax Free Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
November 30, 1997 Nine Months Ended
(Unaudited) May 31, 1997 (a)
<S> <C> <C>
CLASS Y SHARES
Net asset value beginning of period $ 10.89 $ 10.72
=========== ===========
Income from investment operations
Net investment income 0.25 0.39
Net realized and unrealized gain (loss) on
investments 0.32 0.17
----------- -----------
Total from investment operations 0.57 0.56
----------- -----------
Less distributions from
Net investment income ( 0.25) ( 0.39)
----------- -----------
Net asset value end of period $ 11.21 $ 10.89
=========== ===========
Total Return 5.31% 5.32%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.85%(b) 0.78%(b)
Total expenses excluding indirectly paid expenses 0.85%(b) 0.78%(b)
Total expenses excluding waivers and
reimbursements 0.85%(b) 0.86%(b)
Net investment income 4.60%(b) 4.85%(b)
Portfolio turnover rate 50% 114%
Net assets end of period (thousands) $ 25,076 $ 24,441
<CAPTION>
February 28, 1994
(Commencement
Eight Months of Class Operations)
Year Ended Ended through
August 31, 1996 August 31, 1995 (c) December 31, 1994
<S> <C> <C> <C>
CLASS Y SHARES
Net asset value beginning of period $ 10.69 $ 9.79 $ 10.93
========= ========== ===========
Income from investment operations
Net investment income 0.55 0.36 0.46
Net realized and unrealized gain (loss) on
investments 0.03 0.90 ( 1.14)
--------- ---------- -----------
Total from investment operations 0.58 1.26 ( 0.68)
--------- ---------- -----------
Less distributions from
Net investment income ( 0.55) ( 0.36) ( 0.46)
---------- ---------- -----------
Net asset value end of period $ 10.72 $ 10.69 $ 9.79
========== ========== ===========
Total Return 5.47% 13.02% ( 6.29%)
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.64% 0.81%(b) 0.76%(b)
Total expenses excluding indirectly paid expenses - - -
Total expenses excluding waivers and
reimbursements 0.84% 0.84%(b) 0.77%(b)
Net investment income 5.03% 5.18%(b) 5.46%(b)
Portfolio turnover rate 65% 27% 53%
Net assets end of period (thousands) $ 25,112 $ 25,079 $ 4,318
</TABLE>
(a) The Fund changed its fiscal year end from August 31 to May 31.
(b) Annualized.
(c) The Fund changed its fiscal year end from December 31 to August 31.
See Combined Notes to Financial Statements.
13
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended
November 30, 1997
(Unaudited)
<S> <C>
CLASS A SHARES
Net asset value beginning of period $ 10.09
===========
Income from investment operations
Net investment income 0.20
Net realized and unrealized gain (loss) on investments 0.08
-----------
Total from investment operations 0.28
-----------
Less distributions from
Net investment income ( 0.20)
-----------
Net asset value end of period $ 10.17
===========
Total Return (c) 2.77%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.87%(b)
Total expenses excluding indirectly paid expenses 0.87%(b)
Total expenses excluding waivers and reimbursements 0.91%(b)
Net investment income 3.92%(b)
Portfolio turnover rate 37%
Net assets end of period (thousands) $ 4,572
<CAPTION>
January 5, 1995
(Commencement
of Class Operations)
Nine Months Ended Year Ended through
May 31, 1997 (a) August 31, 1996 August 31, 1995
<S> <C> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 10.08 $ 10.17 $ 9.97
=========== ========= ==========
Income from investment operations
Net investment income 0.30 0.43 0.30
Net realized and unrealized gain (loss) on investments 0.01 ( 0.09) 0.20
----------- ---------- ----------
Total from investment operations 0.31 0.34 0.50
----------- ---------- ----------
Less distributions from
Net investment income ( 0.30) ( 0.43) ( 0.30)
----------- ---------- ----------
Net asset value end of period $ 10.09 $ 10.08 $ 10.17
=========== ========== ==========
Total Return (c) 3.08% 3.37% 5.09%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.84%(b) 0.80% 0.70%(b)
Total expenses excluding indirectly paid expenses 0.83%(b) - -
Total expenses excluding waivers and reimbursements 0.96%(b) 1.11% 1.14%(b)
Net investment income 3.94%(b) 4.05% 4.32%(b)
Portfolio turnover rate 34% 29% 80%
Net assets end of period (thousands) $ 6,072 $ 27,722 $ 6,820
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
November 30, 1997
(Unaudited)
<S> <C>
CLASS B SHARES
Net asset value beginning of period $ 10.10
===========
Income from investment operations
Net investment income 0.15
Net realized and unrealized gain (loss) on investments 0.08
-----------
Total from investment operations 0.23
-----------
Less distributions from
Net investment income ( 0.15)
-----------
Net asset value end of period $ 10.18
===========
Total Return (c) 2.31%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.77%(b)
Total expenses excluding indirectly paid expenses 1.77%(b)
Total expenses excluding waivers and reimbursements 1.81%(b)
Net investment income 3.00%(b)
Portfolio turnover rate 37%
Net assets end of period (thousands) $ 6,209
<CAPTION>
January 5, 1995
(Commencement
of Class Operations)
Nine Months Ended Year Ended through
May 31, 1997 (a) August 31, 1996 August 31, 1995
<S> <C> <C> <C>
CLASS B SHARES
Net asset value beginning of period $ 10.08 $ 10.17 $ 9.97
=========== ========= ==========
Income from investment operations
Net investment income 0.23 0.34 0.24
Net realized and unrealized gain (loss) on investments 0.02 ( 0.09) 0.20
----------- ---------- ----------
Total from investment operations 0.25 0.25 0.44
----------- ---------- ----------
Less distributions from
Net investment income ( 0.23) ( 0.34) ( 0.24)
----------- ---------- ----------
Net asset value end of period $ 10.10 $ 10.08 $ 10.17
=========== ========== ==========
Total Return (c) 2.49% 2.44% 4.50%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.73%(b) 1.67% 1.58%(b)
Total expenses excluding indirectly paid expenses 1.73%(b) - -
Total expenses excluding waivers and reimbursements 1.86%(b) 2.07% 2.26%(b)
Net investment income 3.04%(b) 3.28% 3.50%(b)
Portfolio turnover rate 34% 29% 80%
Net assets end of period (thousands) $ 6,742 $ 7,413 $ 6,050
</TABLE>
(a) The Fund changed its fiscal year end from August 31 to May 31.
(b) Annualized.
(c) Excluding applicable sales charges.
See Combined Notes to Financial Statements.
14
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Nine Months
November 30, 1997 Ended
(Unaudited) May 31, 1997 (a)
<S> <C> <C>
CLASS Y SHARES
Net asset value beginning of
period $ 10.10 $ 10.07
=========== ===========
Income from investment
operations
Net investment income 0.20 0.30
Net realized and unrealized
gain (loss) on investments 0.08 0.03
----------- -----------
Total from investment
operations 0.28 0.33
----------- -----------
Less distributions from
Net investment income ( 0.20) ( 0.30)
In excess of net investment
income 0 0
Net realized gain on
investments 0 0
----------- -----------
Total distributions ( 0.20) ( 0.30)
----------- -----------
Net asset value end of period $ 10.18 $ 10.10
=========== ===========
Total Return 2.82% 3.36%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.75%(b) 0.74%(b)
Total expenses excluding
indirectly paid expenses 0.75%(b) 0.73%(b)
Total expenses excluding
waivers and
reimbursements 0.79%(b) 0.86%(b)
Net investment income 4.04%(b) 4.04%(b)
Portfolio turnover rate 37% 34%
Net assets end of period
(thousands) $ 194,390 $ 32,293
<CAPTION>
July 17, 1991
(Commencement
of Class Operations)
Year Ended August 31, through
1996 1995 1994 1993 1992 (c) August 31, 1991 (c)
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value beginning of
period $ 10.17 $ 10.21 $ 10.58 $ 10.33 $ 10.00 $ 10.00
======== ======== ======== ======== ======== ==========
Income from investment
operations
Net investment income 0.43 0.46 0.47 0.49 0.51 0.06
Net realized and unrealized
gain (loss) on investments ( 0.10) ( 0.04) ( 0.32) 0.25 0.33 0
--------- --------- --------- -------- -------- -----------
Total from investment
operations 0.33 0.42 0.15 0.74 0.84 0.06
--------- --------- --------- -------- -------- -----------
Less distributions from
Net investment income ( 0.43) ( 0.46) ( 0.47) ( 0.49) ( 0.51) ( 0.06)
In excess of net investment
income 0 0 ( 0.03) 0 0 0
Net realized gain on
investments 0 0 ( 0.02) 0 0 0
--------- --------- --------- --------- --------- -----------
Total distributions ( 0.43) ( 0.46) ( 0.52) ( 0.49) ( 0.51) ( 0.06)
--------- --------- --------- --------- --------- -----------
Net asset value end of period $ 10.07 $ 10.17 $ 10.21 $ 10.58 $ 10.33 $ 10.00
========= ========= ========= ========= ========= ===========
Total Return 3.30% 4.20% 1.40% 7.40% 8.56% 0.62%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 0.70% 0.74% 0.58% 0.40% 0.17% 0.00%(b)
Total expenses excluding
indirectly paid expenses - - - - - -
Total expenses excluding
waivers and
reimbursements 0.90% 0.86% 0.83% 0.81% 0.86% 1.40%(b)
Net investment income 4.27% 4.52% 4.54% 4.73% 4.85% 4.93%(b)
Portfolio turnover rate 29% 80% 32% 37% 57% -
Net assets end of period
(thousands) $ 34,893 $ 40,581 $ 53,417 $ 66,607 $ 54,470 $ 4,025
</TABLE>
(a) The Fund changed its fiscal year end from August 31 to May 31.
(b) Annualized
(c) On November 18, 1991, the Fund was changed to a diversified municipal bond
fund with a fluctuating net asset value per share from a non-diversified
money market fund with a stable net asset value per share. The shares
outstanding and the related per share data as of August 31, 1991 are
restated to reflect both a 1 for 2 reverse share split on October 30, 1991
and a 1 for 5 reverse share split on August 19, 1992. Total return
calculated after November 18, 1991 reflects the fluctuation in net asset
value per share.
See Combined Notes to Financial Statements.
15
<PAGE>
EVERGREEN
Tax Free Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended Six Months
November 30, 1997 Ended
(Unaudited) May 31, 1997 (a)
<S> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 9.78 $ 9.90
========== ==========
Income from investment operations
Net investment income 0.23 (f) 0.24
Net realized and unrealized gain (loss) on
investments and futures contracts 0.23 ( 0.11)
---------- ----------
Total from investment operations 0.46 0.13
---------- ----------
Less distributions from
Net investment income ( 0.23) ( 0.24)
In excess of net investment income 0 ( 0.01)
Net realized gain on investments 0 0
Tax basis return of capital 0 0
---------- ----------
Total distributions ( 0.23) ( 0.25)
---------- ----------
Net asset value end of period $ 10.01 $ 9.78
========== ==========
Total Return (c) 4.72% 1.34%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.13%(b) 1.19%(b)
Total expenses excluding indirectly paid
expenses 1.12%(b) 1.18%(b)
Net investment income 4.61%(b) 4.85%(b)
Portfolio turnover rate 45% 54%
Net assets end of period (thousands) $ 66,825 $ 72,629
<CAPTION>
Year Ended November 30,
1996 1995 1994 1993
<S> <C> <C> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 10.05 $ 8.93 $ 10.25 $ 10.17
=========== ========= ========= ========
Income from investment operations
Net investment income 0.51 (f) 0.51 (f) 0.51 0.57
Net realized and unrealized gain (loss) on
investments and futures contracts ( 0.14) 1.13 ( 1.28) 0.36
----------- --------- --------- --------
Total from investment operations 0.37 1.64 ( 0.77) 0.93
----------- --------- --------- --------
Less distributions from
Net investment income ( 0.52) ( 0.51) ( 0.52) ( 0.57)
In excess of net investment income 0(e) ( 0.01) 0 ( 0.04)
Net realized gain on investments 0 0 0 ( 0.24)
Tax basis return of capital 0 0 ( 0.03) 0
----------- --------- --------- --------
Total distributions ( 0.52) ( 0.52) ( 0.55) ( 0.85)
----------- --------- --------- --------
Net asset value end of period $ 9.90 $ 10.05 $ 8.93 $ 10.25
=========== ========= ========= ========
Total Return (c) 3.83% 18.71% ( 7.81%) 9.37%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.13% 1.19% 1.13% 1.21%
Total expenses excluding indirectly paid
expenses 1.12% 1.18% - -
Net investment income 5.21% 5.35% 5.27% 5.40%
Portfolio turnover rate 128% 30% 98% 47%
Net assets end of period (thousands) $ 82,425 $ 94,183 $ 95,691 $124,102
</TABLE>
<TABLE>
<CAPTION>
February 13, 1987
(Commencement
Year Ended November 30, of Operations) to
1992 1991 1990 1989 1988 November 30, 1987
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value beginning of period $ 10.13 $ 9.94 $ 10.24 $ 9.96 $ 9.64 $ 10.00
========= ======== ========= ======== ======== ==========
Income from investment operations
Net investment income 0.63 0.61 0.59 0.62 0.63 0.33
Net realized and unrealized gain (loss) on
investments and futures contracts 0.30 0.31 ( 0.06) 0.34 0.37 ( 0.32)
--------- -------- ---------- -------- -------- ----------
Total from investment operations 0.93 0.92 0.53 0.96 1.00 0.01
--------- -------- ---------- -------- -------- ----------
Less distributions from
Net investment income ( 0.62) ( 0.61) ( 0.60) ( 0.63) ( 0.68) ( 0.37)
In excess of net investment income 0 0 ( 0.03) 0 0 0
Net realized gain on investments ( 0.27) ( 0.12) ( 0.20) ( 0.05) 0 0
---------- -------- ---------- -------- -------- ----------
Total distributions ( 0.89) ( 0.73) ( 0.83) ( 0.68) ( 0.68) ( 0.37)
---------- -------- ---------- -------- -------- ----------
Net asset value end of period $ 10.17 $ 10.13 $ 9.94 $ 10.24 $ 9.96 $ 9.64
========== ======== ========== ======== ======== ==========
Total Return (c) 9.35% 9.59% 5.55% 9.97% 10.60% 0.17%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.25% 1.58% 1.66% 1.62% 1.57% 1.00%(d)
Total expenses excluding indirectly paid
expenses - - - - - -
Net investment income 6.02% 5.95% 6.03% 6.15% 6.13% 6.85%(d)
Portfolio turnover rate 32% 37% 42% 49% 109% 67%
Net assets end of period (thousands) $ 120,660 $133,524 $ 146,335 $162,013 $179,191 $ 16,090
</TABLE>
(a) The Fund changed its fiscal year end from November 30 to May 31.
(b) Annualized.
(c) Excluding applicable sales charges.
(d) Annualized for the period April 14, 1987 (Commencement of Investment
Operations) to November 30, 1987.
(e) Amount represents less than $0.01 per share.
(f) Calculation based on average shares outstanding.
See Combined Notes to Financial Statements.
16
<PAGE>
EVERGREEN
Tax Free Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended Six Months
November 30, 1997 Ended
(Unaudited) May 31, 1997 (a)
<S> <C> <C>
CLASS B SHARES
Net asset value beginning of period $ 9.69 $ 9.81
========== ==========
Income from investment operations
Net investment income 0.19 (e) 0.19
Net realized and unrealized gain (loss)
on investments and futures contracts 0.22 ( 0.10)
---------- ----------
Total from investment operations 0.41 0.09
---------- ----------
Less distributions from
Net investment income ( 0.19) ( 0.20)
In excess of net investment income 0 ( 0.01)
Net realized gain on investments 0 0
Tax basis return of capital 0 0
---------- ----------
Total distributions ( 0.19) ( 0.21)
---------- ----------
Net asset value end of period $ 9.91 $ 9.69
========== ==========
Total Return (c) 4.25% 0.97%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.88%(b) 1.95%(b)
Total expenses excluding indirectly
paid expenses 1.88%(b) 1.94%(b)
Net investment income 3.85%(b) 4.09%(b)
Portfolio turnover rate 45% 54%
Net assets end of period (thousands) $ 26,216 $ 28,822
<CAPTION>
February 1, 1993
(Date of Initial
Year Ended November 30, Public Offering) to
1996 1995 1994 November 30, 1993
<S> <C> <C> <C> <C>
CLASS B SHARES
Net asset value beginning of period $ 9.97 $ 8.88 $ 10.25 $ 10.27
========== ========== ========== ===========
Income from investment operations
Net investment income 0.44 (e) 0.44 (e) 0.45 0.37
Net realized and unrealized gain (loss)
on investments and futures contracts ( 0.16) 1.11 ( 1.29) 0.30
---------- ---------- ---------- -----------
Total from investment operations 0.28 1.55 ( 0.84) 0.67
---------- ---------- ---------- -----------
Less distributions from
Net investment income ( 0.44) ( 0.45) ( 0.50) ( 0.37)
In excess of net investment income 0(d) ( 0.01) 0 ( 0.08)
Net realized gain on investments 0 0 0 ( 0.24)
Tax basis return of capital 0 0 ( 0.03) 0
---------- ---------- ---------- -----------
Total distributions ( 0.44) ( 0.46) ( 0.53) ( 0.69)
---------- ---------- ---------- -----------
Net asset value end of period $ 9.81 $ 9.97 $ 8.88 $ 10.25
========== ========== ========== ===========
Total Return (c) 2.99% 17.84% ( 8.43%) 6.59%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.90% 1.96% 1.88% 1.96%(b)
Total expenses excluding indirectly
paid expenses 1.89% 1.94% - -
Net investment income 4.44% 4.59% 4.60% 4.42%(b)
Portfolio turnover rate 128% 30% 98% 47%
Net assets end of period (thousands) $ 33,063 $ 33,449 $ 28,860 $ 14,091
</TABLE>
<TABLE>
<CAPTION>
Six Months
Ended Six Months
November 30, 1997 Ended
(Unaudited) May 31, 1997 (a)
<S> <C> <C>
CLASS C SHARES
Net asset value beginning of period $ 9.69 $ 9.81
========== ==========
Income from investment operations
Net investment income 0.19 (e) 0.18
Net realized and unrealized gain (loss)
on investments and futures contracts 0.23 ( 0.09)
---------- ----------
Total from investment operations 0.42 0.09
---------- ----------
Less distributions from
Net investment income ( 0.19) ( 0.20)
In excess of net investment income 0 ( 0.01)
Net realized gain on investments 0 0
Tax basis return of capital 0 0
---------- ----------
Total distributions ( 0.19) ( 0.21)
---------- ----------
Net asset value end of period $ 9.92 $ 9.69
========== ==========
Total Return (c) 4.35% 0.97%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.89%(b) 1.95%(b)
Total expenses excluding indirectly
paid expenses 1.89%(b) 1.94%(b)
-
Net investment income 3.85%(b) 4.09%(b)
Portfolio turnover rate 45% 54%
Net assets end of period (thousands) $ 8,533 $ 11,879
<CAPTION>
February 1, 1993
(Date of Initial
Year Ended November 30, Public Offering) to
1996 1995 1994 November 30, 1993
<S> <C> <C> <C> <C>
CLASS C SHARES
Net asset value beginning of period $ 9.97 $ 8.88 $ 10.26 $ 10.27
========== ========== ========== ===========
Income from investment operations
Net investment income 0.41 (e) 0.44 (e) 0.43 0.37
Net realized and unrealized gain (loss)
on investments and futures contracts ( 0.13) 1.11 ( 1.27) 0.31
---------- ---------- ---------- -----------
Total from investment operations 0.28 1.55 ( 0.84) 0.68
---------- ---------- ---------- -----------
Less distributions from
Net investment income ( 0.44) ( 0.45) ( 0.51) ( 0.37)
In excess of net investment income 0(d) ( 0.01) 0 ( 0.08)
Net realized gain on investments 0 0 0 ( 0.24)
Tax basis return of capital 0 0 ( 0.03) 0
---------- ---------- ---------- -----------
Total distributions ( 0.44) ( 0.46) ( 0.54) ( 0.69)
---------- ---------- ---------- -----------
Net asset value end of period $ 9.81 $ 9.97 $ 8.88 $ 10.26
========== ========== ========== ===========
Total Return (c) 2.99% 17.84% ( 8.52%) 6.70%
Ratios/Supplemental Data
Ratios to average net assets
Total expenses 1.90% 1.96% 1.89% 1.94%(b)
Total expenses excluding indirectly
paid expenses 1.89% 1.94% - -
-
Net investment income 4.44% 4.59% 4.52% 4.41%(b)
Portfolio turnover rate 128% 30% 98% 47%
Net assets end of period (thousands) $ 13,769 $ 20,386 $ 23,230 $ 27,261
</TABLE>
(a) The Fund changed its fiscal year end from November 30 to May 31.
(b) Annualized.
(c) Excluding applicable sales charges.
(d) Amount represents less than $0.01 per share.
(e) Calculation based on average shares oustanding.
See Combined Notes to Financial Statements.
17
<PAGE>
EVERGREEN
High Grade Tax Free Fund
Schedule of Investments
November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - 95.5%
Arizona - 1.1%
$ 1,000,000 Creighton, Arizona, Elem. School
District No. 14 of Maricopa County,
School Improvements Bonds (Project
of 1990), Series C 1991
6.50%, 7/1/07, (FGIC) .................... $1,145,970
----------
California - 3.5%
1,000,000 Orange County, California, Public
Finance Authority
5.75%, 12/1/10, (AMBAC) .................. 1,067,040
1,000,000 San Joaquin Hills, California,
Transportation Corridor Agency, Toll
Revenue, Series A
5.25%, 1/15/30 ........................... 986,180
500,000 San Mateo County, California, Joint
Powers Financing Authority, Lease
Revenue (Capital Projects Program),
Refunding Revenue, Series A
6.50%, 7/1/16, (MBIA) .................... 583,740
1,000,000 Southern California, Public Power
Authority, Mead Adelanto Project,
Series A
5.00%, 7/1/17, (AMBAC) ................... 973,160
----------
3,610,120
----------
Colorado - 2.6%
1,000,000 Arapahoe County, Colorado, Public
Highway Authority, Capital
Improvements Trust Fund Revenue
(E-470 Projects)
6.15%, 8/31/26, (MBIA) ................... 1,091,510
500,000 City & County of Denver, Colorado,
School District No. 1, General
Obligation Refunding Bonds,
Series 1994A
6.50%, 6/1/10, (MBIA) .................... 575,675
1,000,000 Colorado State, Public Highway
Authority, Senior Series A
5.75%, 9/1/14 ............................ 1,071,390
----------
2,738,575
----------
Florida - 2.2%
1,000,000 Coral Springs, Florida, Improvements
District, Refunding Revenue, Water
and Sewer
6.00%, 6/1/10, (MBIA) .................... 1,111,870
1,000,000 Orange County, Florida, Health Facilities
Authority Revenue, Orlando Regional
Healthcare Systems, Series 1996C
6.25%, 10/1/16, (MBIA) ................... 1,135,220
----------
2,247,090
----------
Georgia - 3.9%
500,000 City of Atlanta, Georgia, Airport
Facilities Refunding Revenue,
Series 1994A
6.50%, 1/1/10, (AMBAC) ................... 574,285
Georgia State, Municipal Electric
Authority, Special Obligation, Fifth
Crossover, Project One:
1,000,000 6.40%, 1/1/13, (AMBAC) .................. 1,139,050
2,000,000 6.50%, 1/1/17, (MBIA) ................... 2,324,220
----------
4,037,555
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Hawaii - 2.7%
$ 1,000,000 Hawaii State, Airport System Revenue,
Second Series of 1990
7.50%, 7/1/20, (FGIC) .................... $1,085,240
1,500,000 Hawaii State, General Obligation,
Series CM
6.00%, 12/1/10, (FGIC) ................... 1,666,515
----------
2,751,755
----------
Idaho - 0.8%
800,000 Idaho State, Housing Agency, Single
Family Mortgage, Mezzanine,
Series C-1
6.30%, 7/1/11, (FHA) ..................... 837,728
----------
Illinois - 16.9%
1,000,000 Chicago, Illinois, Board of Education,
Chicago School Reform, Series A
5.25%, 12/1/18, (AMBAC) .................. 983,750
2,150,000 City of Chicago, Illinois, General
Obligation, Series 1995
6.13%, 1/1/16, (AMBAC) ................... 2,318,796
4,725,000 City of Chicago, Illinois, Water
Refunding Revenue, Series 1993
6.50%, 11/1/15, (FGIC) ................... 5,495,884
Illinois State, Development Finance
Authority, Pollution Control Refunding
Revenue (Commonwealth Edison Co.
Project):
Series 1991
2,000,000 7.25%, 6/1/11, (MBIA) ................... 2,197,160
Series 1994D
3,000,000 6.75%, 3/1/15, (AMBAC) .................. 3,348,180
1,750,000 Illinois State, Health Facilities Authority,
Health Facilities Refunding Revenue,
Series 1992AA
6.50%, 6/1/12, (MBIA) .................... 2,000,968
1,000,000 Illinois State, Regional Transportation
Authority Revenue
6.00%, 6/1/15 ............................ 1,103,390
----------
17,448,128
----------
Indiana - 3.9%
1,500,000 Indiana State, Middle School Building
Corp., Lawrence Township of Marion
County, First Mortgage Bond
6.88%, 7/5/11, (MBIA) .................... 1,788,225
1,000,000 Indiana State, Municipal Power Agency,
Power Supply System, Refunding
Revenue, 1993 Series B
6.00%, 1/1/13, (MBIA) .................... 1,102,790
1,000,000 Indiana State, Transportation Finance
Authority, Highway Revenue,
Series 1992A
6.80%, 12/1/16, (MBIA) ................... 1,187,940
----------
4,078,955
----------
Maine - 1.2%
1,000,000 Maine State, Turnpike Authority,
Turnpike Revenue, Series 1994
7.13%, 7/1/08, (MBIA) .................... 1,201,380
----------
Massachusetts - 5.8%
1,000,000 Massachusetts State, General
Obligation, Series A
6.50%, 11/1/14, (AMBAC) .................. 1,161,130
</TABLE>
18
<PAGE>
EVERGREEN
High Grade Tax Free Fund
Schedule of Investments (continued)
November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Massachusetts - continued
$ 500,000 Massachusetts State, Housing Finance
Agency, Housing Project Revenue,
1993 Series A
6.15%, 10/1/15, (AMBAC) ............. $ 520,900
2,000,000 Massachusetts State, Port Authority
Revenue, Series A
5.00%, 7/1/27 ....................... 1,910,780
1,000,000 Massachusetts State, Turnpike
Authority Revenue, Metropolitan
Highway System, Series B
5.13%, 1/1/23, (MBIA) ............... 974,460
1,500,000 Massachusetts State, Turnpike
Authority Revenue, Senior Series A
5.13%, 1/1/23 ....................... 1,461,690
----------
6,028,960
----------
Michigan - 4.9%
Detroit, Michigan, Water Supply
Systems Revenue:
1,250,000 Second Lien Series A
5.55%, 7/1/12, (MBIA) .............. 1,317,887
2,500,000 Senior Lien Series A
6.00%, 7/1/14 ...................... 2,746,775
1,000,000 Michigan State, Building Authority
Revenue Facility Program, Series II
5.38%, 10/15/10 ..................... 1,031,420
----------
5,096,082
----------
Minnesota - 0.5%
480,000 Minnesota State, Housing Finance
Agency, Single Family Mortgage,
1994 Series H
6.70%, 1/1/18 ....................... 514,018
----------
New Mexico - 1.0%
City of Albuquerque, New Mexico,
Airport Revenue:
500,000 Series 1995 A
6.35%, 7/1/07, (AMBAC) .............. 544,640
500,000 Series 1995 B
7.00%, 7/1/16, (AMBAC) .............. 501,090
----------
1,045,730
----------
New York - 10.3%
2,000,000 New York City, New York, Transportation
Finance Authority Revenue (Future
Tax), Series A
5.00%, 8/15/27 ...................... 1,919,220
1,500,000 New York State, Housing Finance
Agency Revenue, Series 1994 B
6.35%, 8/15/23, (AMBAC) ............. 1,587,180
1,000,000 New York State, Triborough Bridge and
Tunnel Authority Revenue, Refunding
Revenue, General Purpose, Series A
5.25%, 1/1/28 ....................... 982,140
500,000 Port Authority New York & New Jersey
Consolidated Bonds, Fifth
Installment, Ninety-Seventh Series
6.50%, 7/15/19, (FGIC) .............. 543,300
5,000,000 Port Authority New York & New Jersey
Special Obligation (Special Project
JFK Intl. Airport)
6.25%, 12/1/10, (MBIA) .............. 5,617,950
----------
10,649,790
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - continued
North Dakota - 3.1%
$3,000,000 Mercer County, North Dakota, Pollution
Control Refunding Revenue (Basin
Electric Power Cooperative-Antelope
Valley), Second 1995 Series
6.05%, 1/1/19, (AMBAC) .............. $3,205,110
----------
Ohio - 4.3%
1,500,000 City of Toledo, Ohio, Housing
Improvements, Macy's Project,
Series 1995A
6.35%, 12/1/25, (MBIA) .............. 1,637,340
1,000,000 Cleveland, Ohio, Airport System
Revenue, Series A
5.13%, 1/1/17 ....................... 969,750
1,000,000 Ohio State, Board of Education, Kings
Local School District, City of Warren
School Improvements, Series 1995
7.50%, 12/1/16, (FGIC) .............. 1,283,440
475,000 Ohio State, Housing Finance Agency,
Residential Mortgage Revenue, 1995
Series A-2
6.63%, 3/1/26, (GNMA) ............... 507,271
----------
4,397,801
----------
Pennsylvania - 1.9%
2,000,000 Pittsburgh, Pennsylvania, General
Obligation, Series B
5.00%, 9/1/10, (AMBAC) .............. 1,997,980
----------
Puerto Rico - 2.1%
Puerto Rico, Electric Power Authority,
Refunding Revenue:
1,000,000 Series B
6.25%, 7/1/10, (MBIA) .............. 1,133,760
500,000 Series Y
6.50%, 7/1/06, (MBIA) .............. 570,580
495,000 Puerto Rico, Housing Bank & Finance
Agency, Affordable Housing
Mortgage Subsidy Program, Single
Family Mortgage
6.10%, 10/1/15, (GNMA, FNMA &
FHLMC) .............................. 512,043
----------
2,216,383
----------
South Carolina - 2.1%
2,000,000 South Carolina State, Port Authority
Revenue, Series 1991
6.63%, 7/1/11, (AMBAC) .............. 2,154,800
----------
Tennessee - 3.2%
1,200,000 Bristol, Tennessee, Health &
Educational Facility, Bristol Memorial
Hospital, Series 1993
6.75%, 9/1/07, (FGIC) ............... 1,388,628
1,700,000 Knox County, Tennessee, Health,
Educational & Housing Facility Board,
Hospital Facility Revenue (Fort
Sanders Alliance), Series 1993
6.25%, 1/1/13, (MBIA) ............... 1,921,272
----------
3,309,900
----------
Texas - 2.8%
1,500,000 City of Austin, Texas, Airport System,
Prior Lien Revenue, Series 1995A
6.13%, 11/15/25, (MBIA) ............. 1,590,030
</TABLE>
19
<PAGE>
EVERGREEN
High Grade Tax Free Fund
Schedule of Investments (continued)
November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Texas - continued
$ 1,000,000 City of Houston, Texas, Water
Conveyance System Contract, COP,
Series 1993 H
7.50%, 12/15/14, (AMBAC) ........... $ 1,276,450
------------
2,866,480
------------
Utah - 1.0%
1,000,000 Salt Lake City, Utah, Salt Lake County
Airport Revenue, Series 1993A
6.00%, 12/1/12, (FGIC) ............. 1,057,220
------------
Virginia - 2.2%
2,000,000 Hanover County, Virginia, Industrial
Development Authority, Memorial
Regional Medical Center Project,
Series 1995
6.38%, 8/15/18, (MBIA) ............. 2,300,120
------------
Washington - 3.6%
2,500,000 City of Tacoma, Washington, Electric
Systems Refunding Revenue,
Series 1994
6.25%, 1/1/15, (FGIC) .............. 2,711,625
1,000,000 King County III, Washington, King
Street Center Project
5.00%, 6/1/10 ...................... 999,070
------------
3,710,695
------------
West Virginia - 0.5%
500,000 West Virginia State, Housing
Development Fund, Series A
6.05%, 5/1/27 ...................... 520,250
------------
Wisconsin - 7.4%
4,500,000 City of Superior, Wisconsin, Limited
Obligation Refunding Revenue
(Midwest Energy Resource Co.
Project), Series E-1991
6.90%, 8/1/21, (FGIC) .............. 5,485,860
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Wisconsin - continued
$ 2,000,000 Wisconsin State, Health & Educational
Facilities Authority Revenue (Wausau
Hospitals, Inc. Project), Series 1991B
6.63%, 8/15/11, (AMBAC) ............ $ 2,147,880
------------
7,633,740
------------
Total Municipal Obligations
(cost $93,474,172) ................. 98,802,315
------------
</TABLE>
<TABLE>
<CAPTION>
Shares
<S> <C> <C>
MUTUAL FUND SHARES - 0.4%
(cost $412,000)
412,000 Federated Tax Free Fund 412,000
---------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES - 7.2%
New York - 5.8%
New York City, New York, Municipal
Water Finance Authority, Water and
Sewer System Revenue, Series C:
$ 4,000,000 3.85%, 6/15/23, (FGIC) (a) ....... 4,000,000
2,000,000 3.85%, 6/15/22, (FGIC) (a) ....... 2,000,000
---------
6,000,000
---------
Wyoming - 1.4%
1,400,000 Lincoln County, Wyoming, Pollution
Control Revenue, Dates Exxon
Project, Series A
3.85%, 11/1/14 (a) ................ 1,400,000
---------
Total Short-Term Municipal Securities
(cost $7,400,000) ................. 7,400,000
---------
Total Investments
(cost $101,286,172)..... 103.1% 106,614,315
Other Assets and
Liabilities - Net ...... ( 3.1) (3,210,203)
------ -------------
Net Assets .............. 100.0% $103,404,112
====== =============
</TABLE>
(a) Security is a variable rate demand note which is payable on demand at par
on no more than seven calendar days' notice given by the Fund to the issuer
or other parties not affiliated with the issuer. Interest rates are
determined and reset by the issuer daily or weekly depending upon the terms
of the security. The interest rates presented for these securities are
those in effect at November 30, 1997.
Summary of Abbreviations:
AMBAC American Municipal Bond Assurance Corp.
COP Certificate of Participation
FGIC Financial Guaranty Insurance Corp.
FHA Federal Housing Authority
FHLMC Federal Home Loan Mortgage Association
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
MBIA Municipal Bond Investors Assurance Corp.
See Combined Notes to Financial Statements.
20
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Schedule of Investments
November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - 96.5%
Arizona - 4.3%
$ 2,000,000 Arizona State, Transportation Board,
Excise Tax Revenue, Maricopa
County Regional Area Road Fund,
Subordinated Lien
6.80%, 7/1/98, (MBIA) ................. $2,034,860
5,000,000 Arizona State, Transportation Board,
Highway Revenue
6.70%, 7/1/98 ......................... 5,082,650
1,600,000 Pima County, Arizona, General
Obligation, Series 1992
6.55%, 7/1/01 ......................... 1,728,496
----------
8,846,006
----------
California - 8.8%
5,000,000 California State, General Obligation
6.35%, 11/1/04, (FGIC) ................ 5,608,050
320,000 California State, Housing Finance
Agency, Multi Unit Rental Housing
Revenue, Series A
5.25%, 2/1/98 ......................... 320,704
1,090,000 City of Los Angeles, California,
Judgement Obligation Bonds,
Series A
5.00%, 8/1/00 ......................... 1,114,830
775,000 City of Santa Ana, California,
Environment Finance Corp.,
Recycling Project, Series A
5.25%, 5/1/00, (AMBAC) ................ 794,987
900,000 County of Los Angeles, California,
Municipal Improvements Corp., COP
4.50%, 12/1/99 ........................ 908,946
5,080,000 Sacramento, California, School
Insurance Authority Revenue, Liability
Program, Series D
5.70%, 6/1/03 ......................... 5,357,267
880,000 San Diego County, California, Regional
Transportation Commission, Sales Tax
Revenue, Second Sr., Series A
4.40%, 4/1/01, (FGIC) ................. 889,768
1,000,000 Stanislaus County, California
Improvement Program, Series A
4.50%, 5/1/02, (MBIA) ................. 1,013,180
900,000 State of California, General Obligation
7.00%, 8/1/02, (FGIC) ................. 1,008,315
1,025,000 Stockton, California, Health Facilities
Revenue, Series A
5.00%, 12/1/01 ........................ 1,041,349
----------
18,057,396
----------
Colorado - 1.0%
520,000 Colorado State, Student Obligation
Board Authority, Student Loan
Revenue, Series B
6.13%, 12/1/98 ........................ 528,440
1,500,000 Denver, Colorado, City and County
Airport Revenue, Series C
6.35%, 11/15/01 ....................... 1,595,775
----------
2,124,215
----------
Connecticut - 1.2%
2,500,000 Connecticut State, Special Tax
Obligation Revenue, Transportation
Infrastructure, Series B
4.70%, 10/1/04, (FGIC) ................ 2,542,275
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Delaware - 1.1%
$ 2,200,000 Delaware State, Transportation
Authority, Motor Fuel Tax Revenue
7.50%, 7/1/99 ......................... $2,317,480
----------
District of Columbia - 3.1%
6,000,000 District of Columbia, General
Obligation, Series A
5.75%, 6/1/03, (MBIA) ................. 6,362,280
----------
Florida - 25.1%
Broward County, Florida, School
District:
1,000,000 6.75%, 2/15/98 ....................... 1,006,210
2,925,000 7.75%, 2/15/07 ....................... 3,007,397
2,000,000 Charlotte County, Florida, Utility
Revenue
6.88%, 10/1/21, (FGIC) ................ 2,223,440
1,000,000 Dade County, Florida, School District
7.00%, 7/1/98 ......................... 1,018,540
Florida State, Board of Education,
Capital Outlay:
3,000,000 6.75%, 6/1/00 ........................ 3,191,340
Public Education, Series B
4,000,000 5.30%, 6/1/98 ........................ 4,030,720
1,000,000 Florida State, Board of Regents,
University Systems Improvements
Revenue
5.90%, 7/1/98, (AMBAC) ................ 1,012,290
2,200,000 Florida State, Municipal Power Agency
Revenue, All Requirements Power
Supply Project
4.30%, 10/1/01, (AMBAC) ............... 2,215,400
Florida State, Turnpike Authority,
Turnpike Revenue:
4,000,000 7.75%, 7/1/09 ........................ 4,305,920
3,000,000 Series A
9.50%, 7/1/98, (AMBAC) ............... 3,099,390
2,645,000 Fort Lauderdale, Florida, Water and
Sewer Revenue, Series 78
6.10%, 9/1/98 ......................... 2,689,727
5,800,000 Jacksonville, Florida, Electric Authority
Revenue, Series 10
4.40%, 10/1/99 ........................ 5,845,646
4,600,000 Jacksonville, Florida, Industrial
Development Revenue, Refunding
TTX Company Project
5.40%, 3/1/01 ......................... 4,754,836
3,675,000 Orange County, Florida, Health Facilities
Authority Revenue, Series 3
5.20%, 10/1/04 ........................ 3,843,315
Palm Beach County, Florida, School
District:
2,000,000 4.50%, 8/1/99, (FGIC) ................ 2,017,880
3,000,000 5.20%, 8/1/98, (AMBAC) ............... 3,027,750
3,000,000 Palm Beach County, Florida, Solid
Waste Authority Revenue, Refunding
and Improvements
5.50%, 12/1/02, (MBIA) ................ 3,174,480
1,000,000 Sarasota, Florida, General Obligation
6.85%, 8/1/00 ......................... 1,068,660
----------
51,532,941
----------
</TABLE>
21
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Schedule of Investments (continued)
November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Georgia - 3.6%
$ 6,795,000 Georgia State, General Obligation,
Series B
5.95%, 3/1/04 ...................... $7,380,661
----------
Illinois - 3.7%
1,000,000 Central Lake County, Illinois, Joint
Action Water Agency, Interim Water
Revenue, Series A
7.00%, 5/1/00, (AMBAC) ............. 1,084,380
1,345,000 Chicago, Illinois, General Obligation
5.00%, 1/1/01 ...................... 1,376,231
1,000,000 Illinois State, Development Finance
Authority Revenue, Refunding
Community Rehab. Providers,
Series A
5.35%, 7/1/00 ...................... 1,022,500
2,000,000 Illinois State, General Obligation
6.30%, 8/1/99 ...................... 2,072,360
2,000,000 Illinois State, Sales Tax Revenue,
Series I
6.95%, 6/15/98 ..................... 2,033,480
----------
7,588,951
----------
Maryland - 0.9%
635,000 Maryland State, Energy Financing
Administration, Solid Waste Disposal
Revenue (Wheelabrator Water
Technologies Baltimore L.L.C.
Projects), Series 1996
4.80%, 12/1/98 ..................... 639,108
1,140,000 Montgomery County, Maryland,
General Obligation,
Consolidated Public Improvement
Revenue, Series 1992A
5.30%, 7/1/01 ...................... 1,185,988
----------
1,825,096
----------
Massachusetts - 3.5%
2,000,000 Massachusetts State, General
Obligation, Series A
5.00%, 8/1/01 ...................... 2,053,160
1,000,000 Massachusetts State, Health and
Educational Facilities Revenue
4.55%, 1/1/21 ...................... 1,007,420
Massachusetts State, Industrial
Development Revenue:
460,000 Series 1986G
5.30%, 12/1/06 .................... 474,794
565,000 Series 1986I
5.30%, 12/1/06 .................... 583,170
910,000 Series 1996A
5.35%, 11/1/07 .................... 944,607
1,085,000 Series 1996B
5.35%, 11/1/07 .................... 1,126,263
1,000,000 New England Education Loan
Marketing Corp., Student Loan
Revenue, Series 1993B
5.40%, 6/1/00 ...................... 1,017,320
----------
7,206,734
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Minnesota - 4.2%
$ 1,015,000 City of Minneapolis, Minnesota,
Housing and Redevelopment
Authority of the City of St. Paul,
Single Family Mortgage Refunding
Revenue Bond, Series 1996A
5.13%, 6/1/32 ...................... $1,017,030
Minnesota State, General Obligation
Various Purpose:
3,000,000 6.40%, 8/1/99 ..................... 3,116,790
1,300,000 6.60%, 8/1/99 ..................... 1,323,868
1,000,000 6.60%, 8/1/00 ..................... 1,041,650
2,000,000 State of Minnesota, General Obligation
6.60%, 8/1/99 ...................... 2,084,280
----------
8,583,618
----------
Missouri - 0.4%
710,000 North Kansas City School District,
General Obligation, Direct Deposit
Program, Series 1996
6.70%, 3/1/00 ...................... 749,370
----------
Nevada - 3.8%
5,000,000 Clark County, Nevada, School District,
Series A
7.00%, 6/15/05, (MBIA) ............. 5,774,950
2,000,000 Nevada State, General Obligation,
Series A
6.45%, 8/1/98 ...................... 2,034,700
----------
7,809,650
----------
New Jersey - 1.1%
2,000,000 New Jersey State, General Obligation,
Series 1991
5.90%, 8/1/02 ...................... 2,140,200
----------
New York - 2.7%
New York, New York, General
Obligation:
1,000,000 Series 1997L
5.25%, 8/1/00 ..................... 1,023,700
1,450,000 Series L
5.00%, 8/1/01 ..................... 1,477,158
1,000,000 New York State, Dormitory Authority
Revenue, State University
Educational Facilities
5.00%, 5/15/03 ..................... 1,025,420
1,000,000 New York State, Environmental
Facilities, Refunding State Water
Subordinated Revolving Fund
5.50%, 6/15/03 ..................... 1,055,610
1,000,000 New York State, Power Authority,
General Purpose Bonds, Series Z
5.85%, 1/1/00 ...................... 1,034,900
----------
5,616,788
----------
Ohio - 0.7%
940,000 Cincinnati, Ohio, The Student Loan
Funding Corp., Student Loan
Revenue, Series 1993A
5.50%, 12/1/01 ..................... 961,667
</TABLE>
22
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Schedule of Investments (continued)
November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Ohio - continued
$ 500,000 Ohio State, Public Facilities
Commission of Higher Education,
Capital Facilities, Series II-C
4.70%, 12/1/97 ........................ $ 500,035
----------
1,461,702
----------
Pennsylvania - 2.3%
1,000,000 Berks County, Pennsylvania, Municipal
Authority, Reading Hospital Medical
Center Project
5.00%, 10/1/02 ........................ 1,029,810
1,000,000 Lancaster County, Pennsylvania,
Hospital Authority Revenue (The
Lancaster General Hospital Project),
Series 1992
5.60%, 7/1/00, (AMBAC) ................ 1,035,740
1,950,000 Philadelphia, Pennsylvania, Water and
Sewer Revenue, 16th Series
7.50%, 8/1/10 ......................... 2,198,196
500,000 State of Pennsylvania, General
Obligation, Series 1971
6.00%, 12/15/98 ....................... 502,080
----------
4,765,826
----------
South Carolina - 1.4%
500,000 Charleston County, South Carolina,
Airport System Refunding Revenue,
Series 1993
8.25%, 7/1/00, (MBIA) ................. 549,465
2,200,000 South Carolina State, General
Obligation, Series W
6.00%, 5/1/99 ......................... 2,263,360
----------
2,812,825
----------
South Dakota - 0.5%
1,000,000 South Dakota State, Housing
Development, Homeownership
Mortgage, Series J
4.60%, 5/1/02, (FNMA) ................. 1,002,900
----------
Texas - 4.0%
1,000,000 Austin, Texas, Utility Systems Revenue,
Series A
9.50%, 5/15/15 ........................ 1,124,180
500,000 City of Dallas, Texas, General Obligation
5.90%, 2/15/01 ........................ 526,345
1,300,000 Dallas County, Texas, Tax-Permanent
Improvements, Series 1992A
6.00%, 8/15/01 ........................ 1,382,810
1,000,000 Houston, Texas, General Obligation,
Series 1992C
5.70%, 3/1/01 ......................... 1,045,470
1,315,000 North Texas, Health Facilities
Development Corp., Limited Regional
Health Care Systems Inc. Project
4.40%, 9/1/01 ......................... 1,323,521
505,000 San Antonio, Texas, Independent School
District, Public Facilities Corp.
Revenue, Series 1996
5.00%, 10/15/00, (AMBAC) .............. 516,383
1,215,000 Texas State, Department of Housing
and Community Affairs, Single Family
Mortgage Revenue, Series 1996E
4.45%, 3/1/99, (MBIA) ................. 1,220,419
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Texas - continued
$1,000,000 Victoria County, Texas, Hospital
Revenue, Citizens Medical Center
5.50%, 1/1/01 ......................... $1,038,160
----------
8,177,288
----------
Utah - 4.1%
245,000 Utah State, Housing Finance Agency,
Single Family Mortgage Refunding
Revenue, Series 1993A
5.20%, 1/1/01 ......................... 250,130
Utah State, Intermountain Power
Agency:
Power Supply Revenue, Series C
2,500,000 6.00%, 7/1/00, (MBIA) ................ 2,612,425
Special Obligation, Series B
5,000,000 6.50%, 7/1/04, (MBIA) ................ 5,576,750
----------
8,439,305
----------
Vermont - 2.4%
4,385,000 Vermont State, General Obligation
6.00%, 12/1/06, (AMBAC) ............... 4,857,440
----------
Virginia - 3.6%
5,000,000 Roanoke, Virginia, Industrial
Development Authority, Roanoke
Memorial Hospital
6.50%, 7/1/25, (MBIA) ................. 5,289,450
2,000,000 Virginia State, Public School Authority
Revenue, Series B
6.75%, 1/1/00 ......................... 2,045,180
----------
7,334,630
----------
Washington - 6.9%
5,000,000 Washington State, General Obligation,
Series R93B
4.88%, 10/1/02 ........................ 5,135,200
2,950,000 Washington State, General Obligation
Revenue, Motor Vehicle Fuel Tax,
Series R-92D
5.60%, 9/1/01 ......................... 3,097,234
1,360,000 Washington State, Public Power Supply,
Series B
5.00%, 7/1/01 ......................... 1,389,050
Washington State, Public Power Supply,
Systems Nuclear Project No. 2
Revenue Bond:
675,000 Series 1992A
5.00%, 7/1/99 ........................ 683,930
3,500,000 Series C
7.63%, 7/1/10 ........................ 3,897,950
----------
14,203,364
----------
Wisconsin - 2.1%
1,000,000 Milwaukee, Wisconsin, General
Obligation Corp. Purpose Bonds,
Public Improvements, Series BZ
6.30%, 6/15/01 ........................ 1,070,220
</TABLE>
23
<PAGE>
EVERGREEN
Short-Intermediate Municipal Fund
Schedule of Investments (continued)
November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Wisconsin - continued
Milwaukee, Wisconsin, Metropolitan
Sewage District, General Obligation:
$ 1,000,000 Series 1989A
7.00%, 9/1/01 .................... $ 1,097,420
2,000,000 Series A
6.50%, 10/1/98 .................. 2,042,980
------------
4,210,620
------------
Total Municipal Obligations
(cost $193,928,137)............... 197,949,561
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C> <C>
MUTUAL FUND SHARES - 1.8%
(cost $3,728,000)
3,728,000 Federated Municipal Obligation Fund $ 3,728,000
------------
Total Investments
(cost $197,656,137)..... 98.3% 201,677,561
Other Assets and
Liabilities - Net ...... 1.7 3,493,714
----- ------------
Net Assets ............. 100.0% $205,171,275
===== ============
</TABLE>
Summary of Abbreviations:
AMBAC American Municipal Bond Assurance Corp.
COP Certificate of Participation
FGIC Financial Guaranty Insurance Corp.
FNMA Federal National Mortgage Association
MBIA Municipal Bond Investors Assurance Corp.
See Combined Notes to Financial Statements.
24
<PAGE>
EVERGREEN
Tax Free Income Fund
Schedule of Investments
November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - 99.6%
Alabama - 0.2%
$ 240,000 Alabama Housing Finance Agency,
Single Family Mortgage,
10.75%, 6/1/13 ....................... $ 259,123
----------
Alaska - 0.3%
300,000 Alaska Housing Finance Corp.,
Collateralized Home Mortgage,
8.75%, 12/1/16 ....................... 308,175
----------
Arizona - 0.5%
500,000 Salt River Project Arizona Agricultural
Improvement,
5.00%, 1/1/20 ........................ 485,670
----------
California - 8.3%
500,000 Anaheim, California, Public Financing
Authority, Series C,
6.00%, 9/1/16 ........................ 551,310
1,000,000 California State Revenue Bond,
5.00%, 10/1/23 ....................... 963,540
1,020,000 California State, Department Water
Resources, Central Valley Project
Revenue, Water Systems, Series S,
5.00%, 12/1/16 ....................... 995,489
2,115,000 Central Coast, California, Water
Authority Revenue, State Water
Project, Regional Facilities,
Series A,
5.00%, 10/1/16, (AMBAC) .............. 2,066,757
1,785,000 East Bay, California, Municipal Utility
District, Water System Revenue,
5.00%, 6/1/16, (FGIC) ................ 1,734,467
500,000 Santa Clara County, California,
Financing Authority, Lease
Revenue, Refunding, Series A,
5.00%, 11/15/17, (AMBAC) ............. 485,220
1,295,000 Santa Maria, California, Water and
Waste Revenue, COP, Capital
Appreciation, Subordinated
Debenture, Series A,
(effective yield 5.42%) (a),
0.00%, 8/1/12, (AMBAC) ............... 597,254
2,450,000 Victor Valley, California, Joint Union
High School District, Capital
Appreciation,
(effective yield 5.69%) (a),
0.00%, 9/1/13, (MBIA) ................ 1,070,479
----------
8,464,516
----------
Colorado - 6.7%
City and County of Denver, Colorado,
Airport System, Series A:
200,000 7.25%, 11/15/25 ..................... 228,806
1,000,000 8.00%, 11/15/25 ..................... 1,109,405
750,000 8.75%, 11/15/23 ..................... 879,052
750,000 City and County of Denver, Colorado,
Airport System, Series B,
7.25%, 11/15/12 ...................... 838,182
1,100,000 City and County of Denver, Colorado,
Airport System, Series D,
7.75%, 11/15/13 ...................... 1,373,999
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Colorado - continued
Colorado Public Highway Authority,
Senior, Series A:
$ 1,000,000 5.00%, 9/1/15, (MBIA) ............... $ 982,500
1,500,000 5.00%, 9/1/21 ....................... 1,443,495
----------
6,855,439
----------
District of Columbia - 2.2%
2,000,000 District of Columbia Hospital
Revenue, Medlantic Healthcare,
Refunding, Series A,
6.00%, 8/15/11, (MBIA) ............... 2,191,880
----------
Florida - 10.0%
250,000 Florida State, Board of Education,
Capital Outlay, Series A,
5.00%, 1/1/11 ........................ 251,053
500,000 Florida State, Department of
Transportation, Right of Way,
Series B,
5.00%, 7/1/27 ........................ 479,235
1,500,000 Indian Trace District, Florida,
Community Development District,
Water Management Special
Benefit Assessment,
5.00%, 5/1/17, (MBIA) ................ 1,462,905
2,000,000 Orange County, Florida, Health
Facilities Authority, Orlando
Hospital Regional Healthcare,
Series A,
6.25%, 10/1/18 ....................... 2,268,040
495,000 Orange County, Florida, Housing
Finance Authority, GNMA and
FNMA Mortgage-Backed Securities
Program,
6.85%, 10/1/27 ....................... 535,209
1,000,000 Sarasota County, Florida, Utility
Systems Revenue,
6.50%, 10/1/22, (FGIC) ............... 1,137,470
2,640,000 Tallahassee, Florida, Health Facilities,
Tallahassee Memorial Regional
Medical Project,
6.63%, 12/1/13, (MBIA) ............... 3,003,686
960,000 Tampa, Florida, Subordinated
Guaranteed Entitlement Revenue,
Series 1988B,
8.40%, 10/1/08 (b) ................... 995,558
----------
10,133,156
----------
Illinois - 2.2%
910,000 Chicago, Illinois, Gas Supply
Revenue, People's Gas, Light and
Coke Co., Series A,
8.10%, 5/1/20 ........................ 999,034
1,000,000 Illinois Health Facilities Authority,
United Medical Center,
8.38%, 7/1/12 ........................ 1,191,930
----------
2,190,964
----------
Indiana - 3.3%
1,300,000 Indiana Municipal Power Supply
Systems Revenue,
5.50%, 1/1/16 ........................ 1,348,308
</TABLE>
25
<PAGE>
EVERGREEN
Tax Free Income Fund
Schedule of Investments (continued)
November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Indiana - continued
$ 1,640,000 St. Joseph County, Indiana,
Educational Facilities Revenue,
University of Notre Dame,
6.50%, 3/1/26 ...................... $1,968,213
----------
3,316,521
----------
Louisiana - 1.5%
1,415,000 Louisiana Public Facilities Authority,
Health and Education, Prerefunded,
7.90%, 12/1/15 ..................... 1,491,325
----------
Massachusetts - 7.9%
Massachusetts Bay Transportation
Authority, Series A:
600,000 5.00%, 3/1/16 ..................... 584,478
1,875,000 6.25%, 3/1/12 ..................... 2,103,113
1,000,000 7.00%, 3/1/11 ..................... 1,203,670
1,950,000 7.00%, 3/1/21 ..................... 2,432,995
1,490,000 Massachusetts State Housing
Finance Agency, Residential
Housing, Series A,
8.40%, 8/1/21 ...................... 1,543,759
500,000 Massachusetts State Industrial
Finance Agency, Senior Lien,
Massachusetts Recycling
Association,
9.00%, 8/1/16 (d) .................. 187,500
----------
8,055,515
----------
Michigan - 0.6%
500,000 Monroe County, Michigan, Economic
Development Corp.,
Detroit Edison Co.,
6.95%, 9/1/22, (FGIC) .............. 619,535
----------
Minnesota - 0.6%
595,000 Minnesota Housing Finance Agency,
Single Family Mortgage, Series A,
8.20%, 8/1/19 ...................... 612,017
----------
Nevada - 1.0%
1,000,000 Clark County, Nevada, Passenger
Facilities Charge Revenue, Las
Vegas McCarran International
Airport, 1992 Series A,
6.00%, 7/1/22, (AMBAC) ............. 1,051,310
----------
New Jersey - 5.6%
1,000,000 New Jersey Economic Development
Authority, Water Facilities Revenue,
New Jersey American Water Co.,
Inc. Project,
6.50%, 4/1/22, (FGIC) .............. 1,077,000
4,325,000 Salem County, New Jersey, Pollution
Control Financing Authority, Waste
Disposal Revenue,
6.50%, 11/15/21 .................... 4,635,622
----------
5,712,622
----------
New Mexico - 3.8%
1,950,000 Albuquerque, New Mexico, Joint
Water and Sewer System Revenue,
Capital Appreciation, Series A,
(effective yield 5.42%) (a),
0.00%, 7/1/08, (FGIC) .............. 1,164,891
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - continued
New Mexico - continued
$ 1,560,000 New Mexico Mortgage Finance
Authority, Single Family Mortgage,
8.63%, 7/1/17, (FGIC) .............. $1,607,658
1,000,000 University of New Mexico, University
Revenue, Series A,
6.00%, 6/1/21 ...................... 1,106,530
----------
3,879,079
----------
New York - 9.2%
2,500,000 New York City, New York, GO,
Series G,
6.75%, 2/1/09 ...................... 2,833,000
New York State Dormitory Authority,
State University Educational
Facilities Revenue:
800,000 Series A,
5.25%, 5/15/15 .................... 822,080
1,300,000 Series C,
7.38%, 5/15/10 .................... 1,568,437
1,600,000 New York State Local Government
Assistance Corp., Series A,
5.50%, 4/1/17 ...................... 1,636,272
1,000,000 New York State Thruway Authority,
Highway and Bridge Trust Fund,
Series B,
5.00%, 4/1/17, (FSA) ............... 965,010
805,000 New York State Urban Development
Corp., Higher Education Technology
Grants,
6.00%, 4/1/10, (MBIA) .............. 868,152
650,000 Triborough Bridge and Tunnel
Authority, New York, General
Purpose, Series A
5.13%, 1/1/17 ...................... 639,438
----------
9,332,389
----------
Ohio - 2.3%
1,000,000 Montgomery County, Ohio, Hospital
Revenue, Kettering Medical Center,
6.25%, 4/1/20 ...................... 1,132,100
1,250,000 North Olmsted, Ohio, GO,
5.00%, 12/1/16, (AMBAC) ............ 1,222,913
----------
2,355,013
----------
Pennsylvania - 8.0%
1,000,000 Allegheny County, Pennsylvania,
Airport Revenue, Series B,
5.00%, 1/1/17, (MBIA) .............. 972,330
1,000,000 North Wales, Pennsylvania, Water
Authority,
5.00%, 11/1/22, (FGIC) ............. 968,230
1,500,000 Pennsylvania Convention Center
Authority, Series A,
(effective yield 5.39%) (a),
0.00%, 9/1/08, (FGIC) .............. 895,410
1,750,000 Pennsylvania State, Industrial
Development Authority Revenue,
Economic Development,
6.00%, 1/1/12, (AMBAC) ............. 1,873,935
1,000,000 Philadelphia, Pennsylvania, Hospital
and Higher Education Facilities,
Community College, Series B,
6.50%, 5/1/07, (MBIA) .............. 1,131,880
</TABLE>
26
<PAGE>
EVERGREEN
Tax Free Income Fund
Schedule of Investments (continued)
November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Pennsylvania - continued
$ 4,000,000 Pittsburgh, Pennsylvania, School
District, Capital Appreciation,
Series B, (effective yield 5.42%)
(a),
0.00%, 8/1/09, (AMBAC) ........... $ 2,282,520
------------
8,124,305
------------
South Carolina - 0.5%
500,000 Piedmont Municipal Power Agency,
South Carolina, Electric Revenue,
5.38%, 1/1/25, (MBIA) ............ 506,874
------------
Tennessee - 5.6%
2,000,000 Bristol, Tennessee, Health and
Education Authority, Bristol
Memorial Hospital,
6.75%, 9/1/10, (FGIC) ............ 2,342,860
Knox County, Tennessee, Health and
Education Facilities, Fort Sanders
Hospital Alliance:
1,000,000 Series B
7.25%, 1/1/10, (MBIA) ........... 1,204,900
1,000,000 Series C
5.25%, 1/1/15, (MBIA) ........... 1,015,670
1,000,000 Metropolitan Government of
Nashville and Davidson County,
Tennessee Water and Sewer, step
bond, (effective yield 5.20%) (a),
0.00%, 1/1/12, (FGIC) ............ 1,173,380
------------
5,736,810
------------
Texas - 11.4%
500,000 Austin, Texas, Utility Systems
Revenue, Capital Appreciation
Refunding,
(effective yield 5.30%) (a),
0.00%, 11/15/11, (AMBAC) ......... 245,025
2,000,000 Bexar, Texas, Metropolitan Water
District Waterworks,
5.88%, 5/1/22, (MBIA) ............ 2,087,760
3,000,000 Brazos River Authority, Texas,
Revenue Refunding, Houston Light
and Power Project
8.10%, 5/1/19, (MBIA) ............ 3,108,780
1,990,000 Harris County, Texas, Health
Facilities
Development Corp., Hospital
Revenue, Memorial Hospital
Systems Project, Series A,
6.00%, 6/1/12 .................... 2,177,995
1,000,000 Harris County, Texas,
Toll Road, Senior Lien, Series A,
7.00%, 8/15/10 ................... 1,202,860
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Texas - continued
$ 3,000,000 Houston, Texas, Water and Sewer
System Revenue, Jr. Lien, Series C,
(effective yield 5.55%) (a),
0.00%, 12/1/11, (AMBAC) .......... $ 1,466,820
1,090,000 Montgomery County, Texas, Capital
Appreciation Refunding,
(effective yield 5.35%) (a),
0.00%, 3/1/10, (MBIA) ............ 578,605
1,125,000 Texas Municipal Power Agency
Revenue,
(effective yield 7.09%) (a),
0.00%, 9/1/08, (AMBAC) ........... 666,630
------------
11,534,475
------------
Utah - 0.5%
750,000 Intermountain Power Agency, Utah,
Power Supply Refunding, Series A,
(effective yield 6.95%) (a),
0.00%, 7/1/07 .................... 472,560
------------
Washington - 5.0%
3,000,000 Chelan County, Washington, Public
Utilities District, Series A,
(effective yield 5.53%) (a),
0.00%, 6/1/09 .................... 1,694,880
1,000,000 Tacoma, Washington, Electric System
Revenue, Series 1994,
6.25%, 1/1/15, (FGIC) ............ 1,071,240
1,000,000 Washington State GO, Series A,
6.75%, 2/1/15 .................... 1,179,510
1,000,000 Washington State Public Power
Supply System, Nuclear Project #2,
Series C,
7.63%, 7/1/10 (b) ................ 1,113,930
------------
5,059,560
------------
Puerto Rico - 2.4%
2,000,000 Commonwealth of Puerto Rico, GO,
7.00%, 7/1/10, (MBIA) ............ 2,421,580
------------
Total Municipal Obligations
(cost $96,026,749) ............... 101,170,413
------------
SHORT-TERM MUNICIPAL SECURITIES - 0.3%
Wyoming - 0.3%
270,000 Uinta County, Wyoming, Pollution
Control Revenue,
3.85%, 12/1/22 (c)
(cost $270,000) .................. 270,000
------------
Total Investments
(cost $96,296,749) ..... 99.9% 101,440,413
Other Assets and
Liabilities - Net ....... 0.1 133,926
----- ------------
Net Assets .............. 100.0% $101,574,339
===== ============
</TABLE>
(a) Effective yield (calculated at date of purchase) is the yield at which the
bond accretes on an annual basis until its maturity date.
(b) At November 30, 1997, these securities were pledged to cover margin
requirements for open futures contracts.
(c) Security is a variable rate demand note which is payable on demand at par
on no more than seven calendar days' notice given by the Fund to the issuer
or other parties not affiliated with the issuer. Interest rates are
determined and reset by the issuer daily or weekly depending upon the terms
of the security. The interest rates presented for these securities are
those in effect at November 30, 1997.
(d) Securities which have defaulted on payment of interest and/or principal.
The Fund has stopped accruing income on those so identified.
27
<PAGE>
EVERGREEN
Tax Free Income Fund
Schedule of Investments (continued)
November 30, 1997 (Unaudited)
Summary of Abbreviations:
AMBAC American Municipal Bond Assurance Corp.
COP Certificates of Participation
FGIC Financial Guaranty Insurance Corp.
FNMA Federal National Mortgage Association
FSA Financial Security Assurance Corp.
GNMA Government National Mortgage Association
GO General Obligation
MBIA Municipal Bond Investors Assurance Corp.
FUTURES CONTRACTS - SHORT POSITIONS
<TABLE>
<CAPTION>
Unrealized
Number Initial Contract Value at Appreciation/
Expiration of Contracts Amount November 30, 1997 (Depreciation)
- -------------- -------------- ------------------ ------------------- ---------------
<S> <C> <C> <C> <C> <C>
December '97 86 5 Year U.S. Treasury Note Index $9,295,412 $9,260,412 $ (35,000)
December '97 24 Municipal Bond Index 2,899,750 2,904,475 4,725
</TABLE>
See Combined Notes to Financial Statements.
28
<PAGE>
EVERGREEN
National Municipal Bond Funds
Statements of Assets and Liabilities
November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
High Grade
Fund
-----------------
<S> <C>
Assets
Investments at market value (identified cost - $101,286,172, $197,656,137 and
$96,296,749, respectively)........................................................ $ 106,614,315
Cash .............................................................................. 306
Interest receivable ............................................................... 1,955,001
Receivable for investments sold ................................................... 502,521
Receivable for Fund shares sold ................................................... 96,143
Receivable for daily variation margin on open futures contracts ................... 0
Prepaid expenses and other assets ................................................. 45,364
- ------------------------------------------------------------------------------------ -------------
Total assets .................................................................... 109,213,650
- ------------------------------------------------------------------------------------ -------------
Liabilities
Payable for investments purchased ................................................. 5,476,505
Dividends payable ................................................................. 136,008
Distribution fees payable ......................................................... 80,025
Due to related parties ............................................................ 45,112
Accrued Trustees' fees and expenses ............................................... 5,387
Payable for Fund shares redeemed .................................................. 1,682
Due to custodian bank ............................................................. 0
Accrued expenses and other liabilities ............................................ 64,819
- ------------------------------------------------------------------------------------ -------------
Total liabilities ............................................................... 5,809,538
- ------------------------------------------------------------------------------------ -------------
Net assets ......................................................................... $ 103,404,112
==================================================================================== =============
Net assets represented by
Paid-in capital ................................................................... $ 97,305,043
Undistributed net investment income (accumulated distributions in excess of net
investment income) ............................................................... 124,532
Accumulated net realized gain (loss) on investments and futures contracts ......... 646,394
Net unrealized appreciation on investments and futures contracts .................. 5,328,143
- ------------------------------------------------------------------------------------ -------------
Total net assets ................................................................ $ 103,404,112
==================================================================================== =============
Net assets consist of
Class A ........................................................................... $ 45,998,662
Class B ........................................................................... 32,328,925
Class C ........................................................................... -
Class Y ........................................................................... 25,076,525
- ------------------------------------------------------------------------------------ -------------
Total net assets ................................................................ $ 103,404,112
==================================================================================== =============
Shares outstanding
Class A ........................................................................... 4,101,659
Class B ........................................................................... 2,882,720
Class C ........................................................................... -
Class Y ........................................................................... 2,236,001
- ------------------------------------------------------------------------------------ -------------
Net asset value per share
Class A ........................................................................... $ 11.21
==================================================================================== =============
Class A - Offering price (based on sales charge of 4.75%, 3.25% and 4.75%,
respectively) .................................................................... $ 11.77
==================================================================================== =============
Class B ........................................................................... $ 11.21
==================================================================================== =============
Class C ........................................................................... -
==================================================================================== =============
Class Y ........................................................................... $ 11.21
==================================================================================== =============
<CAPTION>
Tax Free
Short-Intermediate Income
Fund Fund
--------------------- ---------------
<S> <C> <C>
Assets
Investments at market value (identified cost - $101,286,172, $197,656,137 and
$96,296,749, respectively)........................................................ $201,677,561 $101,440,413
Cash .............................................................................. 0 1,447
Interest receivable ............................................................... 3,817,843 1,481,827
Receivable for investments sold ................................................... 0 0
Receivable for Fund shares sold ................................................... 176,161 10,000
Receivable for daily variation margin on open futures contracts ................... 0 5,968
Prepaid expenses and other assets ................................................. 54,200 38,199
- ------------------------------------------------------------------------------------- ------------ ------------
Total assets .................................................................... 205,725,765 102,977,854
- ------------------------------------------------------------------------------------- ------------ ------------
Liabilities
Payable for investments purchased ................................................. 0 0
Dividends payable ................................................................. 177,298 171,511
Distribution fees payable ......................................................... 11,431 42,190
Due to related parties ............................................................ 35,034 40,532
Accrued Trustees' fees and expenses ............................................... 6,859 3,136
Payable for Fund shares redeemed .................................................. 173,262 1,092,659
Due to custodian bank ............................................................. 128,325 0
Accrued expenses and other liabilities ............................................ 22,281 53,487
- ------------------------------------------------------------------------------------- ------------ ------------
Total liabilities ............................................................... 554,490 1,403,515
- ------------------------------------------------------------------------------------- ------------ ------------
Net assets ......................................................................... $205,171,275 $101,574,339
===================================================================================== ============ ============
Net assets represented by
Paid-in capital ................................................................... $201,688,998 $ 98,562,693
Undistributed net investment income (accumulated distributions in excess of net
investment income) ............................................................... 0 (245,279)
Accumulated net realized gain (loss) on investments and futures contracts ......... (539,147) (1,856,464)
Net unrealized appreciation on investments and futures contracts .................. 4,021,424 5,113,389
- ------------------------------------------------------------------------------------- ------------ ------------
Total net assets ................................................................ $205,171,275 $101,574,339
===================================================================================== ============ ============
Net assets consist of
Class A ........................................................................... $ 4,572,263 $ 66,825,229
Class B ........................................................................... 6,209,437 26,216,479
Class C ........................................................................... - 8,532,631
Class Y ........................................................................... 194,389,575 -
- ------------------------------------------------------------------------------------ ------------ ------------
$205,171,275 $101,574,339
==================================================================================== ============ ============
Shares outstanding
Class A ........................................................................... 449,778 6,676,928
Class B ........................................................................... 610,203 2,644,273
Class C ........................................................................... - 860,374
Class Y ........................................................................... 19,103,142 -
- ------------------------------------------------------------------------------------- ------------ ------------
Net asset value per share
Class A ........................................................................... $ 10.17 $ 10.01
===================================================================================== ============ ============
Class A - Offering price (based on sales charge of 4.75%, 3.25% and 4.75%,
respectively) .................................................................... $ 10.51 $ 10.51
===================================================================================== ============ ============
Class B ........................................................................... $ 10.18 $ 9.91
===================================================================================== ============ ============
Class C ........................................................................... - $ 9.92
===================================================================================== ============ ============
Class Y ........................................................................... $ 10.18 -
===================================================================================== ============ ============
</TABLE>
See Combined Notes to Financial Statements.
29
<PAGE>
EVERGREEN
National Municipal Bond Funds
Statements of Operations
Six Months Ended November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
High Grade
Fund
-------------
<S> <C>
Investment income
Interest ................................................................................ $2,798,121
- ------------------------------------------------------------------------------------------ ----------
Expenses
Management fee .......................................................................... 256,875
Distribution Plan expenses .............................................................. 219,355
Transfer agent fees ..................................................................... 60,753
Printing fees ........................................................................... 38,547
Custodian fees .......................................................................... 29,248
Administrative services fees ............................................................ 17,644
Professional fees ....................................................................... 13,646
Registration and filing fees ............................................................ 12,542
Trustees' fees and expenses ............................................................. 1,884
Other ................................................................................... 5,277
Fee waivers by investment manager ....................................................... 0
- ------------------------------------------------------------------------------------------ ----------
Total expenses ......................................................................... 655,771
Less: Indirectly paid expenses .......................................................... (41)
- ------------------------------------------------------------------------------------------ ----------
Net expenses ........................................................................... 655,730
- ------------------------------------------------------------------------------------------ ----------
Net investment income ................................................................... 2,142,391
========================================================================================== ==========
Net realized and unrealized gain on investments and futures contracts
Net realized gain (loss) on:
Investments ............................................................................ 1,911,107
Futures contracts ...................................................................... 0
- ------------------------------------------------------------------------------------------ ----------
Net realized gain on investments and futures contracts .................................. 1,911,107
- ------------------------------------------------------------------------------------------ ----------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................................................ 1,125,429
Futures contracts ...................................................................... 0
- ------------------------------------------------------------------------------------------ ----------
Net change in unrealized appreciation (depreciation) on investments and futures 1,125,429
- ------------------------------------------------------------------------------------------ ----------
contracts
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and futures contracts ................... 3,036,536
- ------------------------------------------------------------------------------------------ ----------
Net increase in net assets resulting from operations .................................... $5,178,927
========================================================================================== ==========
<CAPTION>
Tax Free
Short-Intermediate Income
Fund Fund
--------------------- -------------
<S> <C> <C>
Investment income
Interest ................................................................................ $1,428,654 $3,122,606
- ------------------------------------------------------------------------------------------- ---------- ----------
Expenses
Management fee .......................................................................... 149,134 332,778
Distribution Plan expenses .............................................................. 35,444 275,956
Transfer agent fees ..................................................................... 26,443 65,595
Printing fees ........................................................................... 15,945 13,566
Custodian fees .......................................................................... 12,816 12,805
Administrative services fees ............................................................ 0 2,024
Professional fees ....................................................................... 14,209 1,463
Registration and filing fees ............................................................ 16,520 42,226
Trustees' fees and expenses ............................................................. 989 6,676
Other ................................................................................... 2,051 4,454
Fee waivers by investment manager ....................................................... (11,968) 0
- ------------------------------------------------------------------------------------------- ---------- ----------
Total expenses ......................................................................... 261,583 757,543
Less: Indirectly paid expenses .......................................................... (400) (1,066)
- ------------------------------------------------------------------------------------------- ---------- ----------
Net expenses ........................................................................... 261,183 756,477
- ------------------------------------------------------------------------------------------- ---------- ----------
Net investment income ................................................................... 1,167,471 2,366,129
=========================================================================================== ========== ==========
Net realized and unrealized gain on investments and futures contracts
Net realized gain (loss) on:
Investments ............................................................................ 142,619 2,291,322
Futures contracts ...................................................................... 0 (614,857)
- ------------------------------------------------------------------------------------------- ---------- ----------
Net realized gain on investments and futures contracts .................................. 142,619 1,676,465
- ------------------------------------------------------------------------------------------- ---------- ----------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................................................ 183,645 868,549
Futures contracts ...................................................................... 0 7,225
- ------------------------------------------------------------------------------------------- ---------- ----------
Net change in unrealized appreciation (depreciation) on investments and futures 183,645 875,774
- ------------------------------------------------------------------------------------------- ---------- ----------
contracts
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and futures contracts ................... 326,264 2,552,239
- ------------------------------------------------------------------------------------------- ---------- ----------
Net increase in net assets resulting from operations .................................... $1,493,735 $4,918,368
=========================================================================================== ========== ==========
</TABLE>
See Combined Notes to Financial Statements.
30
<PAGE>
EVERGREEN
National Municipal Bond Funds
Statements of Changes in Net Assets
Six Months Ended November 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
High Grade
Fund
---------------
<S> <C>
Operations
Net investment income ................................................................ $ 2,142,391
Net realized gain on investments and futures contracts ............................... 1,911,107
Net change in unrealized appreciation (depreciation) on investments and futures
contracts ........................................................................... 1,125,429
- --------------------------------------------------------------------------------------- ------------
Net increase in net assets resulting from operations ................................ 5,178,927
- --------------------------------------------------------------------------------------- ------------
Distributions to shareholders from
Net investment income
Class A ............................................................................. (1,000,889)
Class B ............................................................................. (581,803)
Class C ............................................................................. 0
Class Y ............................................................................. (559,699)
- --------------------------------------------------------------------------------------- ------------
Total distributions to shareholders ................................................. (2,142,391)
- --------------------------------------------------------------------------------------- ------------
Capital share transactions
Shares issued in connection with the acquisition of:
Evergreen Short Intermediate Municipal Fund - California ............................ 0
Common Trust Fund - Intermediate Tax Exempt Bond Fund ............................... 0
Proceeds from shares sold ............................................................ 6,478,867
Proceeds from reinvestment of distributions .......................................... 1,204,270
Payment for shares redeemed .......................................................... (9,444,783)
- --------------------------------------------------------------------------------------- ------------
Net increase (decrease) in net assets resulting from capital share transactions ..... (1,761,646)
- --------------------------------------------------------------------------------------- ------------
Total increase (decrease) in net assets ............................................ 1,274,890
Net assets
Beginning of period .................................................................. 102,129,222
- --------------------------------------------------------------------------------------- ------------
End of period ........................................................................ $103,404,112
======================================================================================= ============
Undistributed net investment income (accumulated distributions in excess of net
investment income) ................................................................... $ 124,532
======================================================================================= ============
<CAPTION>
Short-Intermediate Tax Free
Fund Income Fund
--------------------- ---------------
<S> <C> <C>
Operations
Net investment income ................................................................ $ 1,167,471 $ 2,366,129
Net realized gain on investments and futures contracts ............................... 142,619 1,676,465
Net change in unrealized appreciation (depreciation) on investments and futures
contracts ........................................................................... 183,645 875,774
- ---------------------------------------------------------------------------------------- ------------- -------------
Net increase in net assets resulting from operations ................................ 1,493,735 4,918,368
- ---------------------------------------------------------------------------------------- ------------- -------------
Distributions to shareholders from
Net investment income
Class A ............................................................................. (114,650) (1,633,540)
Class B ............................................................................. (97,638) (534,576)
Class C ............................................................................. 0 (199,125)
Class Y ............................................................................. (955,183) 0
- ---------------------------------------------------------------------------------------- ------------- -------------
Total distributions to shareholders ................................................. (1,167,471) (2,367,241)
- ---------------------------------------------------------------------------------------- ------------- -------------
Capital share transactions
Shares issued in connection with the acquisition of:
Evergreen Short Intermediate Municipal Fund - California ............................ 14,473,407 0
Common Trust Fund - Intermediate Tax Exempt Bond Fund ............................... 148,714,787 0
Proceeds from shares sold ............................................................ 6,406,648 1,003,980
Proceeds from reinvestment of distributions .......................................... 714,271 1,191,429
Payment for shares redeemed .......................................................... (10,570,703) (16,501,996)
- ---------------------------------------------------------------------------------------- ------------- -------------
Net increase (decrease) in net assets resulting from capital share transactions ..... 159,738,410 (14,306,587)
- ---------------------------------------------------------------------------------------- ------------- -------------
Total increase (decrease) in net assets ............................................ 160,064,674 (11,755,460)
Net assets
Beginning of period .................................................................. 45,106,601 113,329,799
- ---------------------------------------------------------------------------------------- ------------- -------------
End of period ........................................................................ $ 205,171,275 $ 101,574,339
======================================================================================== ============= =============
Undistributed net investment income (accumulated distributions in excess of net
investment income) ................................................................... $ 0 $ (245,279)
======================================================================================== ============= =============
</TABLE>
See Combined Notes to Financial Statements.
31
<PAGE>
EVERGREEN
National Municipal Bond Funds
Statements of Changes in Net Assets
Prior Periods
<TABLE>
<CAPTION>
High Grade Fund Short-Intermediate Fund
--------------------------------- ----------------------------------
Nine Months Nine Months
Ended Year Ended Ended Year Ended
May 31, 1997* August 31, 1996 May 31, 1997* August 31, 1996
--------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Operations
Net investment income ....... $ 3,542,168 $ 5,304,418 $ 1,936,277 $ 2,353,029
Net realized gain on
investments and futures
contracts .................. 640,025 1,622,360 18,940 161,202
Net change in unrealized
appreciation
(depreciation) on
investments and futures
contracts .................. 982,691 (1,135,792) 139,624 (564,810)
- ------------------------------ ------------- ------------- -------------- --------------
Net increase in net
assets resulting from
operations ................ 5,164,884 5,790,986 2,094,841 1,949,421
- ------------------------------ ------------- ------------- -------------- --------------
Distributions to
shareholders from
Net investment income
Class A .................... (1,696,428) (2,655,984) (755,942) (541,615)
Class B .................... (934,247) (1,385,989) (159,979) (229,080)
Class C .................... 0 0 0 0
Class Y .................... (929,415) (1,262,445) (1,020,356) (1,582,334)
In excess of net
investment income
Class A .................... 0 0 0 0
Class B .................... 0 0 0 0
Class C .................... 0 0 0 0
- ------------------------------ ------------- ------------- -------------- --------------
Total distributions to
shareholders .............. (3,560,090) (5,304,418) (1,936,277) (2,353,029)
- ------------------------------ ------------- ------------- -------------- --------------
Capital share transactions
Proceeds from shares sold.... 9,286,983 16,695,647 9,393,392 37,737,994
Proceeds from shares
issued in acquisition of
Keystone Texas Tax Free
Fund ....................... 0 0 0 0
Proceeds from
reinvestment of
distributions .............. 2,003,093 3,093,850 973,716 1,651,747
Payment for shares
redeemed ................... (18,667,515) (30,410,409) (35,446,549) (22,410,625)
- ------------------------------ ------------- ------------- -------------- --------------
Net increase (decrease)
in net assets resulting
from capital share
transactions .............. (7,377,439) (10,620,912) (25,079,441) 16,979,116
- ------------------------------ ------------- ------------- -------------- --------------
Total increase
(decrease) in net
assets ................... (5,772,645) (10,134,344) (24,920,877) 16,575,508
Net assets
Beginning of period ......... 107,901,867 118,036,211 70,027,478 53,451,970
- ------------------------------ ------------- ------------- -------------- --------------
End of period ............... $ 102,129,222 $ 107,901,867 $ 45,106,601 $ 70,027,478
============================== ============= ============= ============== ==============
Undistributed net investment
income (accumulated
distributions in excess of
net investment income) ...... $ 124,532 $ 115,656 $ 0 $ 0
============================== ============= ============= ============== ==============
<CAPTION>
Tax Free Income Fund
-----------------------------------
Six Months
Ended Year Ended
May 31, 1997** November 30, 1996
---------------- ------------------
<S> <C> <C>
Operations
Net investment income ....... $ 2,755,244 $ 6,794,938
Net realized gain on
investments and futures
contracts .................. 1,262,611 1,999,413
Net change in unrealized
appreciation
(depreciation) on
investments and futures
contracts .................. (2,704,951) (4,259,520)
- ------------------------------- ------------- -------------
Net increase in net
assets resulting from
operations ................ 1,312,904 4,534,831
- ------------------------------- ------------- -------------
Distributions to
shareholders from
Net investment income
Class A .................... (1,868,216) (4,538,414)
Class B .................... (649,369) (1,498,516)
Class C .................... (262,024) (758,007)
Class Y .................... 0 0
In excess of net
investment income
Class A .................... (73,369) (31,491)
Class B .................... (25,502) (10,398)
Class C .................... (10,290) (5,260)
- ------------------------------- ------------- -------------
Total distributions to
shareholders .............. (2,888,770) (6,842,086)
- ------------------------------- ------------- -------------
Capital share transactions
Proceeds from shares sold.... 1,652,335 6,339,187
Proceeds from shares
issued in acquisition of
Keystone Texas Tax Free
Fund ....................... 0 5,119,680
Proceeds from
reinvestment of
distributions .............. 1,527,184 3,629,202
Payment for shares
redeemed ................... (17,530,768) (31,540,948)
- ------------------------------- ------------- -------------
Net increase (decrease)
in net assets resulting
from capital share
transactions .............. (14,351,249) (16,452,879)
- ------------------------------- ------------- -------------
Total increase
(decrease) in net
assets ................... (15,927,115) (18,760,134)
Net assets
Beginning of period ......... 129,256,914 148,017,048
- ------------------------------- ------------- -------------
End of period ............... $ 113,329,799 $ 129,256,914
=============================== ============= =============
Undistributed net investment
income (accumulated
distributions in excess of
net investment income) ...... $ (244,167) $ (245,552)
=============================== ============= =============
</TABLE>
* During the period, the Fund changed its fiscal year end from August 31 to
May 31.
** During the period, the Fund changed its fiscal year end from November 30 to
May 31.
See Combined Notes to Financial Statements.
32
<PAGE>
Combined Notes to Financial Statements (Unaudited)
1. ORGANIZATION
The Evergreen National Municipal Bond Funds consist of Evergreen High Grade Tax
Free Fund ("High Grade Fund"), Evergreen Short-Intermediate Municipal Fund
("Short-Intermediate Fund") and Evergreen Tax Free Income Fund (formerly,
Keystone Tax Free Income Fund) ("Tax Free Income Fund") which are registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as
diversified, open-end management investment companies. The High Grade Fund,
Short-Intermediate Fund and Tax Free Income Fund are collectively referred to
herein as the "Funds".
The Funds offer Class A, Class B, Class C or Class Y shares. Class A shares are
sold with a maximum front-end sales charge of 4.75% for both the High Grade and
Tax Free Income Funds and a maximum front-end sales charge of 3.25% for the
Short-Intermediate Fund. Class B and Class C shares are sold without a
front-end sales charge, but pay a higher ongoing distribution fee than Class A.
Class B shares are sold subject to a contingent deferred sales charge that is
payable upon redemption and decreases depending on how long the shares have
been held. Class B shares of Tax Free Income Fund purchased after January 1,
1997 will automatically convert to Class A shares after seven years. Class B
shares of Tax Free Income Fund purchased prior to January 1, 1997 retain their
existing conversion rights. Class C shares are sold subject to a contingent
deferred sales charge payable on shares redeemed within one year after the
month of purchase. Class Y shares are sold at net asset value and are not
subject to contingent deferred sales charges or distribution fees. Class Y
shares are sold only to investment advisory clients of First Union Corporation
("First Union") and its affiliates, certain institutional investors or Class Y
shareholders of record of certain other funds managed by First Union and its
affiliates as of
December 30, 1994.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles, which
require 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, including
restricted securities, are valued at fair value as determined in good faith
according to procedures established by the Board of Trustees.
Short-term investments with remaining maturities of 60 days or less are carried
at amortized cost, which approximates market value.
B. Futures Contracts
In order to gain exposure to or protect against changes in security values, Tax
Free Income Fund may buy and sell futures contracts.
The initial margin deposited with a broker when entering into a futures
transaction is subsequently adjusted by daily payments or receipts as the value
of the contract changes. Such changes are recorded as unrealized gains or
losses. Realized gains or losses are recognized on closing the contract.
Risks of entering into futures contracts include (i) the possibility of an
illiquid 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
statement of assets and liabilities.
C. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts and amortization of premiums.
D. Federal Taxes
The Funds have qualified and intend to continue to qualify as regulated
investment 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
income, net tax-exempt income and net capital gains, if any, to their
shareholders. The Funds also intend to avoid any excise tax liability by making
the required distributions under the Code. Accordingly, no provision for
33
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
federal taxes is required. To the extent that realized capital gains can be
offset by capital loss carryforwards, it is each Fund's policy not to
distribute such gains.
E. Distributions
Distributions from net investment income for the Funds are declared daily and
paid monthly. Distributions from net realized capital gains, if any, are paid
at least annually. Distributions to shareholders are recorded at the close of
business on the ex-dividend date.
Income and capital gains distributions to shareholders are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting 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 market discount on securities.
F. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the
relative net assets of each class. Currently, class specific expenses are
limited to expenses incurred under the Distribution Plans for each class.
3. CAPITAL SHARE TRANSACTIONS
The High Grade and Short-Intermediate Funds have an unlimited number of shares
of beneficial interest with a par value of $0.0001 authorized. The Tax Free
Income Fund has an unlimited number of shares of beneficial interest with no
par value authorized. Shares of beneficial interest of the Funds are currently
divided into Class A, Class B, Class C or Class Y. Transactions in shares of
the Funds were as follows:
- --------------------------------------------------------------------------------
HIGH GRADE FUND
<TABLE>
<CAPTION>
Six Months Ended Nine Months Ended
November 30, 1997 May 31, 1997
----------------------------- -----------------------------
Shares Amount Shares Amount
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Class A
Shares sold ................................... 127,960 $ 1,426,027 138,267 $ 1,503,579
Shares issued in reinvestment of distributions 53,841 600,943 91,672 998,917
Shares redeemed ............................... (287,609) (3,194,718) (737,802) (8,010,676)
- ----------------------------------------------- ----------- ------------- ----------- -------------
Net decrease .................................. (105,808) $ (1,167,748) (507,863) $ (5,508,180)
- ----------------------------------------------- ----------- ------------- ----------- -------------
Class B
Shares sold ................................... 209,560 $ 2,332,428 418,834 $ 4,553,869
Shares issued in reinvestment of distributions 30,756 343,297 50,410 549,306
Shares redeemed ............................... (284,791) (3,171,884) (546,605) (5,937,166)
- ----------------------------------------------- ----------- ------------- ----------- -------------
Net decrease .................................. (44,475) $ (496,159) (77,361) $ (833,991)
- ----------------------------------------------- ----------- ------------- ----------- -------------
Class Y
Shares sold ................................... 244,116 $ 2,720,412 296,083 $ 3,229,535
Shares issued in reinvestment of distributions 23,295 260,030 41,755 454,870
Shares redeemed ............................... (275,999) (3,078,181) (434,833) (4,719,673)
- ----------------------------------------------- ----------- ------------- ----------- -------------
Net decrease .................................. (8,588) $ (97,739) (96,996) $ (1,035,268)
=============================================== =========== ============= =========== =============
<CAPTION>
Year Ended
August 31, 1996
--------------------------------
Shares Amount
--------------- ----------------
<S> <C> <C>
Class A
Shares sold ................................... 728,801 $ 7,875,800
Shares issued in reinvestment of distributions 144,023 1,571,241
Shares redeemed ............................... (1,652,697) (17,891,048)
- ------------------------------------------------------------- --------------
Net decrease .................................. (779,873) $ (8,444,007)
- ------------------------------------------------------------- --------------
Class B
Shares sold ................................... 420,508 $ 4,595,803
Shares issued in reinvestment of distributions 75,686 825,507
Shares redeemed ............................... (691,236) (7,495,373)
- ------------------------------------------------------------- --------------
Net decrease .................................. (195,042) $ (2,074,063)
- ------------------------------------------------------------- --------------
Class Y
Shares sold ................................... 387,417 $ 4,224,044
Shares issued in reinvestment of distributions 63,909 697,102
Shares redeemed ............................... (455,583) (5,023,988)
- ------------------------------------------------------------- --------------
Net decrease .................................. (4,257) $ (102,842)
============================================================= ==============
</TABLE>
34
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------
SHORT-INTERMEDIATE FUND
<TABLE>
<CAPTION>
Six Months Ended Nine Months Ended
November 30, 1997 May 31, 1997
------------------------------ --------------------------------
Shares Amount Shares Amount
-------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Class A
Shares issued in acquisition of:
Evergreen Short-Intermediate Municipal
Fund-California .................................. 736 $ 7,495 0 $ 0
Shares sold ........................................ 56,252 570,605 182,673 1,860,992
Shares issued in reinvestment of distributions ..... 9,120 92,613 17,182 174,056
Shares redeemed .................................... (218,093) (2,213,937) (2,348,922) (23,711,903)
- ---------------------------------------------------- ------------ ------------- ------------- --------------
Net increase (decrease) ............................ (151,985) $ (1,543,224) (2,149,067) $ (21,676,855)
- ---------------------------------------------------- ------------ ------------- ------------- --------------
Class B
Shares issued in acquisition of:
Evergreen Short-Intermediate Municipal
Fund-California .................................. 6,897 $ 70,307 0 $ 0
Shares sold ........................................ 40,383 410,143 144,261 1,461,443
Shares issued in reinvestment of distributions ..... 7,123 72,416 11,819 119,733
Shares redeemed .................................... (111,492) (1,132,788) (224,553) (2,272,638)
- ---------------------------------------------------- ------------ ------------- ------------- --------------
Net increase (decrease) ............................ (57,089) $ (579,922) (68,473) $ (691,462)
- ---------------------------------------------------- ------------ ------------- ------------- --------------
Class Y
Shares issued in acquisition of:
Evergreen Short-Intermediate Municipal
Fund-California .................................. 1,412,138 $ 14,395,605 0 $ 0
Common Trust Fund - Intermediate Tax Exempt
Bond Fund ........................................ 14,616,570 148,714,787 0 0
Shares sold ........................................ 533,840 5,425,900 600,756 6,070,957
Shares issued in reinvestment of distributions ..... 54,021 549,242 67,156 679,927
Shares redeemed .................................... (710,749) (7,223,978) (934,601) (9,462,008)
- ---------------------------------------------------- ------------ ------------- ------------- --------------
Net increase (decrease) ............................ 15,905,820 $161,861,556 (266,689) $ (2,711,124)
==================================================== ============ ============= ============= ==============
<CAPTION>
Year Ended
August 31, 1996
-------------------------------
Shares Amount
--------------- ---------------
<S> <C> <C>
Class A
Shares issued in acquisition of:
Evergreen Short-Intermediate Municipal
Fund-California .................................. 0 $ 0
Shares sold ........................................ 2,806,176 28,333,550
Shares issued in reinvestment of distributions ..... 24,978 253,579
Shares redeemed .................................... (750,660) (7,689,314)
- ------------------------------------------------------------------ --------------
Net increase (decrease) ............................ 2,080,494 $ 20,897,815
- ------------------------------------------------------------------ --------------
Class B
Shares issued in acquisition of:
Evergreen Short-Intermediate Municipal
Fund-California .................................. 0 $ 0
Shares sold ........................................ 291,382 2,967,713
Shares issued in reinvestment of distributions ..... 16,079 163,265
Shares redeemed .................................... (166,441) (1,686,967)
- ------------------------------------------------------------------ --------------
Net increase (decrease) ............................ 141,020 $ 1,444,011
- ------------------------------------------------------------------ --------------
Class Y
Shares issued in acquisition of:
Evergreen Short-Intermediate Municipal
Fund-California .................................. 0 $ 0
Common Trust Fund - Intermediate Tax Exempt
Bond Fund ........................................ 0 0
Shares sold ........................................ 635,204 6,436,731
Shares issued in reinvestment of distributions ..... 121,645 1,234,903
Shares redeemed .................................... (1,283,965) (13,034,344)
- ------------------------------------------------------------------ --------------
Net increase (decrease) ............................ (527,116) $ (5,362,710)
================================================================== ==============
</TABLE>
- --------------------------------------------------------------------------------
TAX FREE INCOME FUND
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
November 30, 1997 May 31, 1997
----------------------------- --------------------------------
Shares Amount Shares Amount
------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Class A
Shares sold ........................................ 30,321 $ 301,912 32,393 $ 317,311
Shares issued in acquisition of Keystone Texas
Tax Free Fund ..................................... 0 0 0 0
Shares issued in reinvestment of distributions ..... 82,837 825,745 105,269 1,024,777
Shares redeemed .................................... (861,176) (8,572,690) (1,038,464) (10,140,338)
- ---------------------------------------------------- ----------- ------------- ------------- --------------
Net decrease ....................................... (748,018) $ (7,445,033) (900,802) $ (8,798,250)
- ---------------------------------------------------- ----------- ------------- ------------- --------------
Class B
Shares sold ........................................ 64,573 $ 634,871 136,707 $ 1,324,403
Shares issued in acquisition of Keystone Texas
Tax Free Fund ..................................... 0 0 0 0
Shares issued in reinvestment of distributions ..... 25,413 250,985 35,437 341,830
Shares redeemed .................................... (420,079) (4,143,042) (568,355) (5,489,766)
- ---------------------------------------------------- ----------- ------------- ------------- --------------
Net increase (decease) ............................. (330,093) $ (3,257,186) (396,211) $ (3,823,533)
- ---------------------------------------------------- ----------- ------------- ------------- --------------
Class C
Shares sold ........................................ 6,816 $ 67,197 1,101 $ 10,621
Shares issued in acquisition of Keystone Texas
Tax Free Fund ..................................... 0 0 0 0
Shares issued in reinvestment of distributions ..... 11,614 114,699 16,648 160,577
Shares redeemed .................................... (383,615) (3,786,264) (195,509) (1,900,664)
- ---------------------------------------------------- ----------- ------------- ------------- --------------
Net decrease ....................................... (365,185) $ (3,604,368) (177,760) $ (1,729,466)
==================================================== =========== ============= ============= ==============
<CAPTION>
Year Ended
November 30, 1996
--------------------------------
Shares Amount
--------------- ----------------
<S> <C> <C>
Class A
Shares sold ........................................ 181,417 $ 1,689,450
Shares issued in acquisition of Keystone Texas
Tax Free Fund ..................................... 131,228 1,269,729
Shares issued in reinvestment of distributions ..... 243,221 2,380,811
Shares redeemed .................................... (1,600,793) (15,690,464)
- ------------------------------------------------------------------ --------------
Net decrease ....................................... (1,044,927) $ (10,350,474)
- ------------------------------------------------------------------ --------------
Class B
Shares sold ........................................ 332,958 $ 3,194,770
Shares issued in acquisition of Keystone Texas
Tax Free Fund ..................................... 374,545 3,592,334
Shares issued in reinvestment of distributions ..... 80,112 776,860
Shares redeemed .................................... (773,268) (7,498,073)
- ------------------------------------------------------------------ --------------
Net increase (decease) ............................. 14,347 $ 65,891
- ------------------------------------------------------------------ --------------
Class C
Shares sold ........................................ 140,724 $ 1,454,967
Shares issued in acquisition of Keystone Texas
Tax Free Fund ..................................... 26,855 257,617
Shares issued in reinvestment of distributions ..... 48,553 471,531
Shares redeemed .................................... (857,965) (8,352,411)
- ------------------------------------------------------------------ --------------
Net decrease ....................................... (641,833) $ (6,168,296)
================================================================== ==============
</TABLE>
35
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
4. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the six months ended November 30,
1997:
<TABLE>
<CAPTION>
Cost of Proceeds
Purchases from Sales
-------------- --------------
<S> <C> <C>
High Grade Fund ................ $ 49,848,383 $53,564,973
Short-Intermediate Fund ........ 170,334,783 19,677,298
Tax Free Income Fund ........... 41,567,751 61,125,924
</TABLE>
As of May 31, 1997, the Funds had capital loss carryovers for federal income
tax purposes as follows:
<TABLE>
<CAPTION>
Expiration
-------------------------------------
2002 2003 2004
------------- ----------- -----------
<S> <C> <C> <C>
High Grade Fund ........ $1,265,000 - -
Short-Intermediate Fund - $249,000 $433,000
Tax Free Income Fund ... 2,704,000 867,000 -
</TABLE>
5. DISTRIBUTION PLANS
Evergreen Distributor, Inc. (formerly, Evergreen Keystone Distributor, Inc.)
("EDI"), a wholly-owned subsidiary of The BISYS Group Inc. ("BISYS"), serves as
principal underwriter to the Funds.
Each Fund has adopted Distribution Plans for each class of shares, except Class
Y, as allowed by Rule 12b-1 of the 1940 Act. Distribution plans permit a fund
to reimburse 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 expenses called "Distribution Plan expenses". Each
class, except Class Y, currently pays a service fee equal to 0.25% of the
average daily net assets of the class. The expenses are currently limited to
0.25% annually of the average daily net assets of the Class A shares of the
High Grade and Tax Free Income Funds and limited to 0.10% annually of the
average daily net assets of the Class A shares of the Short-Intermediate Fund.
Class B and Class C shares also pay distribution fees equal to 0.75% of the
average daily net assets of the class. Distribution Plan expenses are
calculated daily and paid monthly.
During the six months ended November 30, 1997, amounts paid 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 ................ $57,564 $161,791 -
Short-Intermediate Fund ........ 2,924 32,520 -
Tax Free Income Fund ........... 85,548 138,752 $51,656
</TABLE>
With respect to Class B and Class C shares, the principal underwriter may pay
distribution fees greater than the allowable annual amounts the Fund is
permitted to pay under the Distribution Plans. Tax Free Income Fund may
reimburse the principal underwriter for such excess amounts in later years with
annual interest at prime plus 1.00%. EDI intends to seek full payment of such
distribution costs from Tax Free Income Fund at such time in the future as, and
to the extent that, payment thereof by the Class B or Class C shares would be
within permitted limits.
Each of the Distribution Plans may be terminated at any time by vote of the
Independent Trustees or by vote of a majority of the outstanding voting shares
of the respective class. However, for Tax Free Income Fund, after the
termination of any Distribution Plan and subject to the discretion of the
Independent Trustees, payments to EDI may continue as compensation for services
which had been provided while the Distribution Plan was in effect.
6. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND OTHER AFFILIATED
TRANSACTIONS
Capital Management Group of First Union National Bank ("CMG"), a subsidiary of
First Union, serves as the investment adviser to the High Grade Fund and is
paid a management fee that is computed daily and paid monthly at an annual rate
of 0.50% of the Fund's average daily net assets.
Evergreen Investment Services, Inc. (formerly, Evergreen Keystone Investment
Services, Inc.) ("EIS"), a wholly-owned subsidiary of Keystone Investment
Management Company ("Keystone"), is the administrator and BISYS is
sub-administrator to each Fund. As sub-administrator to the Funds, BISYS
provides the officers of the Funds. The administrator and sub-administrator for
each Fund are entitled
36
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
to an annual fee based on the average daily net assets of the funds
administered by EIS for which First Union or its investment advisory
subsidiaries are also the investment advisers. The administration fee is
calculated by applying percentage rates, which start at 0.05% and decline to
0.01% per annum as net assets increase, to the average daily net assets of each
Fund. The sub-administration fee is calculated by applying percentage rates,
which start at 0.01% and decline to .004% per annum as net assets increase, to
the average daily net assets of each Fund
Evergreen Asset Management Corp. ("Evergreen Asset"), a wholly-owned subsidiary
of First Union, is the investment adviser for the Short-Intermediate Fund and
is paid a management fee that is computed daily and paid monthly at an annual
rate of 0.50% of the Fund's average daily net assets. Out of its fee, Evergreen
Asset pays EIS for its services as administrator, BISYS for its services as
sub-administrator and Lieber & Company, an affiliate of First Union, for its
services as sub-adviser.
Keystone, a subsidiary of First Union, is the investment adviser for Tax Free
Income Fund and is paid a management fee that is computed daily and paid
monthly. The management fee is computed at an annual rate of 2.00% of Tax Free
Income Fund's gross investment income plus an amount determined by applying
percentage rates, starting at 0.50% and declining to 0.25% per annum as net
assets increase, to the average daily net assets of the Fund. For the Tax Free
Income Fund, the sub-administration fee is paid by Keystone and is not a fund
expense.
During the six months ended November 30, 1997, High Grade Fund and Tax Free
Income Fund paid or accrued to EIS $14,497 and $2,024, respectively, for
certain administrative services.
During the six months ended November 30, 1997, the investment adviser for the
Short-Intermediate Fund waived its management fees in the amount of $11,968.
Evergreen Service Company (formerly, Evergreen Keystone Service Company)
("ESC"), a wholly-owned subsidiary of Keystone, serves as the transfer and
dividend disbursing agent for the Funds.
For certain accounts, First Union had been sub-contracted to maintain
shareholder sub-account records, take fund purchase and redemption orders and
answer inquiries. During the six months ended November 30, 1997, First Union
earned no fee for each account of the High Grade and Short-Intermediate Funds.
Officers of the Funds and affiliated Trustees receive no compensation directly
from the Funds.
At November 30, 1997, First Union National Bank of North Carolina, a
wholly-owned subsidiary of First Union, owned directly or beneficially, 78% of
the outstanding shares of Short-Intermediate Fund.
7. EXPENSE OFFSET ARRANGEMENT
The Funds have entered into an expense offset arrangement with their custodian.
The assets deposited with the custodian under this expense offset arrangement
could have been invested in income-producing assets.
8. ACQUISITIONS
On July 31, 1997, Short-Intermediate Fund acquired substantially all the assets
and assumed certain liabilities of Evergreen Short-Intermediate Municipal
Fund-California in exchange for Class A, Class B and Class Y shares of
Short-Intermediate Fund.
Also, on November 21, 1997, Short-Intermediate Fund acquired substantially all
the assets and assumed certain liabilities of Common Trust Fund - Intermediate
Tax Exempt Bond Fund in exchange for Class Y shares of Short-Intermediate Fund.
On April 30, 1996, Tax Free Income Fund acquired substantially all the assets
and assumed certain liabilities of Keystone Texas Tax Free Fund in exchange for
Class A, Class B and Class C shares of Tax Free Income Fund.
37
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
These acquisitions were accomplished by a tax-free exchange of the respective
shares of each fund. The value of net assets acquired, number of shares issued,
unrealized appreciation acquired and the aggregate net assets of each fund
immediately after the acquisition are as follows:
<TABLE>
<CAPTION>
Value of Net Number of Unrealized Net Assets
Acquiring Fund Acquired Fund Assets Acquired Shares Issued Appreciation After Acquisition
- -------------------------- --------------------------------- ----------------- --------------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
Evergreen
Short-Intermediate
Short-Intermediate Fund .. Municipal Fund - California $ 14,473,407 1,419,771 $ 203,594 $ 59,045,106
Common Trust Fund - Intermediate
Short-Intermediate Fund .. Tax Exempt Bond Fund 148,714,787 14,616,570 3,195,888 194,719,999
Keystone
Tax Free Income Fund ..... Texas Tax Free Fund 5,119,680 532,628 81,550 140,303,798
</TABLE>
9. DEFERRED TRUSTEES' FEES
Each Independent Trustee of the High Grade and Short-Intermediate Funds 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 Funds Trustees' fees and expenses. Trustees will
be paid either in one lump sum or in quarterly installments for up to ten years
at their election, not earlier than either the year in which the Trustee ceases
to be a member of the Board of Trustees or January 1, 2000. As of November 30,
1997, the value of the Trustees' deferral account was $5,387 for the High Grade
Fund and $6,463 for the Short-Intermediate Fund.
10. FINANCING AGREEMENT
On October 31, 1996, a financing agreement among participating Evergreen Funds,
State Street Bank & Trust ("State Street") and a group of banks (the "Banks")
became effective. Under this agreement, the Banks provided an unsecured credit
facility in the aggregate amount of $225 million ($112.5 million committed and
$112.5 million uncommitted) allocated evenly among the Banks. Borrowings under
this facility bore interest at 0.75% per annum above the Federal Funds rate. A
commitment fee of 0.10% per annum was incurred on the unused portion of the
committed facility, which was allocated to all participating funds. State
Street served as agent for the Banks, and as agent was entitled to a fee of
$15,000 which was allocated to participating Evergreen Funds. This agreement
was terminated on October 31, 1997.
On October 31, 1997, a temporary financing agreement between all of the
Evergreen Funds and First Union became effective. Under this agreement, First
Union provides a fully committed unsecured credit facility in the aggregate
amount of $300 million. Borrowings under this facility bear interest at 1.00%
per annum above the Federal Funds rate. State Street serves as administrative
agent under this agreement, but receives no compensation for its services.
During the six months ended November 30, 1997, the Funds had no borrowings
under these agreements.
11. CONCENTRATION OF CREDIT RISK
The Short-Intermediate Fund invested a substantial portion of its assets in
issuers located in a single state, therefore, it may be affected by economic
and political developments in that state or region.
38
<PAGE>
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<PAGE>
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<PAGE>
64756 541257 RV2
1/98
BULK RATE
U.S. POSTAGE
PAID
CHARLOTTE, NC
PERMIT NO. 136
[EVERGREEN FUNDS LOGO APPEARS HERE]
SINCE 1932
201 S. College St.
Charlotte, NC 28288
