April 21, 2008
Ms. Sheila Stout
Staff Accountant
Securities and Exchange Commission
Division of Investment Management, Office of Disclosure
Mailstop 0505
Washington, DC 20549
This correspondence is being submitted via Edgar.
Dear Ms. Stout;
We thank you for your comments which you relayed to us in our telephone
conversation on the annual financial statements for the fiscal years ending
January 31, 2007 through December 31, 2007 of the Evergreen Funds that are
part of the following Trusts:
Evergreen Money Market Trust
Evergreen Asset Allocation Trust
Evergreen Equity Trust
Evergreen Fixed Income Trust
Evergreen International Trust
Evergreen Municipal Trust
Evergreen Select Equity Trust
Evergreen Select Fixed Income Trust
Evergreen Select Money Market Trust
Evergreen Variable Annuity Trust
Evergreen Global Dividend Opportunity Fund
Evergreen Multi-Sector Income Fund
Evergreen Utilities and High Income Fund
Evergreen International Balanced Income Fund
Evergreen Income Advantage Fund
With respect to your comments, we submit the following responses.
Additionally, Evergreen Investments acknowledges that the fund is responsible
for the adequacy and accuracy of the disclosure in the filings; staff comments
or changes to disclosure in response to staff comments in the filings reviewed
by the staff do not foreclose the Commission from taking any action with respect
to the filing; and the fund may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securitieslaws of the United States.
SEC FILINGS
SEC Comment:
The Staff noted within certain NSAR-B filings that the accounting letter
within the filing didn't include the signature of the audit firm.
Evergreen Response:
The accounting letter has been revised to include the name of the audit firm.
Any filing that was omitting this information is in the process of being re-
filed with the SEC.
SEC Comment:
The Staff noted there was an NT filing made for Evergreen International
Balanced
Income Fund indicating the semiannual report would not be filed by its deadline,
however the actual semiannual report was filed on the same date.
Evergreen Response:
Evergreen filed NT-NCSR on 1/10/2006 alerting the SEC of the inability to meet
its filing deadline of 1/9/2006. Subsequently, on 1/10/2006 the actual N-CSRS
wasfiled with the SEC. The filing of the NT-NCSR was required for this fund as
it was known that the filing would be late.
SEC Comment:
The Staff noted the Code of Ethics was not dated within some of the N-CSR
filings during the period.
Evergreen Response:
The Code of Ethics document will be dated within all filings going forward.
SEC Comment:
The Staff noted the N-CSR filing for the Money Market Trust includes a filing
number on its cover sheet that doesn't agree with the filing number under which
it was filed.
Evergreen Response:
Evergreen is submitting filings for this Trust under its current filing number
of 811-08555. Subsequent to these filings being accepted by EDGAR, the filing
number is apparently being converted to the Trust's former filing number of
811-05300. We have notified the Staff of this issue.
SEC Comment:
The Staff noted the 4/30/2007 N-Q filing for Evergreen Treasury Money Market
Fund includes a certification that is not dated.
Evergreen Response:
The N-Q is being re-filed and will include current dates on the
certifications.
Original copies of the certifications with the date they were originally
reviewed, June 29, 2007, are maintained on hand.
SEC Comment:
The Staff noted for Evergreen Pennsylvania Municipal Bond Fund, item 4 of
the N-CSR filing includes audit fee information for the incorrect time
period. Information for 2006 and 2005 are included; however, it should
include 2006 and 2007.
Evergreen Response:
This has been revised and is in the process of being re-filed.
* * * *
FINANCIAL HIGHLIGHTS
SEC Comment:
The Staff inquired of any Fund with a distribution of capital, to
confirm that shareholders were notified of such at the time of the
distribution.
Evergreen Response:
Returns of Capital are determined, in accordance with tax code, at
the end of a fund's fiscal year. As such, the annual shareholder
report serves as a communication of this distribution.
Similarly, Rule 19a-1, under the 1940 act, requires the payment of
any dividend, or a distribution in the nature of a dividend payment,
to be accompanied by a written statement ("Section 19(a) Notice")
which adequately discloses the source(s) of the payment if it is made
from any source other than accumulated undistributed net income.
Evergreen distributed the appropriate 19(a) Notices as required.
SEC Comment:
The Staff inquired in regards to the Asset Allocation Trust, why the
expense ratio was zero.
Evergreen Response:
Evergreen Investment Services, Inc. has reimbursed all Trust expenses.
The only expenses attributable to the Trust are from custodian and
accounting fees and professional fees, both of which represent 0.00%
of average net assets even before the reimbursement.
* * * *
SCHEDULE OF INVESTMENTS
SEC Comment:
The Staff noted the disclosure of collateral for repurchase agreements
does not include sufficient detail describing the securities
representing collateral.
Evergreen Response:
For some of the repurchase agreements entered into and those invested
through the security lending program, numerous pieces of collateral
can be received for each agreement. In order to provide a meaningful
description of the collateral without detailing every piece of the
collateral, Evergreen will begin to list the collateralpieces by
general issue type and provide a range of coupon rates and maturity
dates in addition to the market value of all the collateral pieces.
SEC Comment:
The Staff inquired in regards to a long-term bond (Gulf Breeze)
held in the portfolio of Evergreen Strategic Municipal Bond Fund
whether the value of par was accurate.
Evergreen Response:
Evergreen verified the price of $100 from an external independent
approved pricing vendor as of the reporting date.
SEC Comment:
The Staff inquired in regards to Evergreen Institutional Mortgage
Portfolio. The principal investment strategy for the fund is to invest
at least 80% in mortgage and mortgage-backed securities, but the
Schedule Of Investments reflects 27% in short term investments.
How does the fund comply with its strategy at year end?
Evergreen Response:
The 27% represents an investment in an overnight cash vehicle.
This is not considered part of the fund's investment strategy and
thus should not be considered when determining whether 80% of the
fund is invested in mortgage or mortgage-backed securities.
Ignoring such, the Institutional Mortgage Portfolio has more than
80% of its securities invested in mortgage and mortgage
backed securities.
SEC Comment:
The Staff inquired in regards to Evergreen California Municipal
Money Market Fund.The principal investment strategy for the Fund is
to invest 80% in California bonds; however, it is not at year end.
Are there any other states below 80%?
Evergreen Response:
The shareholder reports identify securities by the issuing state.
Certain of the securities held by the California Municipal Money
Market Fund, that are not issued by a governing state, are considered
Exempt from federal income tax and to the extent possible California
personal income tax. Such investments would be disclosed as Non-State
Specific in the shareholder report. For the year ended January 31,
2007 the Fund was not in a violation of the 80% investment strategy.
We have also reviewed other State Specific Funds with a similar
investment strategy and have confirmed that there was no violation
of such strategy.
SEC Comment:
The Staff inquired in regards to Evergreen Pennsylvania Municipal
Bond Fund. The Schedule of Investments includes underlying securities
in an inverse floating rate structure but does not include any inverse
floaters.
Evergreen Response:
Investments in inverse floaters are treated as financing transactions
in accordance with SFAS 140. Based on this treatment, the security
held by the fund is the long-term bond underlying the floating rate
structure and not the inverse floater itself.
* * * *
STATEMENT OF ASSETS AND LIABILITIES
SEC Comment:
The Staff inquired whether all restricted cash was being separately
disclosed as such.
Evergreen Response:
The Evergreen funds identify any restricted cash separately on the
Statement of Assets and Liabilities. Any large positions of cash
during the review, not identified as restricted cash, represented
un-invested, non-restricted cash at the end of period.
* * * *
STATEMENT OF OPERTIONS
SEC Comment:
The Staff inquired in regards to Evergreen High Yield Bond Fund.
On the Statement of Operations, there is income from affiliated
investments but on the Statement of Assets and Liabilities, there
is no reference to affiliated investments.
Evergreen Response:
Evergreen notes that the Fund held an investment in the Evergreen
Institutional Money Market Fund in the amount of $17,213,277 and
as such disclosed the position in the Statement of Assets and
Liabilities as an investment in affiliate.
* * * *
NOTES TO FINANCIAL STATEMTENTS
SEC Comment:
The Staff inquired whether any contractual waivers were subject
to a recapture agreement. If so, disclosure of the terms should
be made within the notes.
Evergreen Response:
There is no recapture agreement in effect for any waivers.
SEC Comment:
The Staff suggested disclosing the percent of securities fair
valued by the Board of Trustees within the Notes to Financial
Statements.
Evergreen Response:
Evergreen notes that all fair valued positions are clearly
marked on the SOI and generally, the amounts per fund are not
material.
SEC Comment:
The Staff noted tri-party repurchase agreements are referenced
n the Notes to Financial Statements; however, the third party
is not included in the disclosure describing the repos.
Evergreen Response:
The tri-party repurchase agreements which are entered into by
the funds are typically with a counterparty and a third party
custodian which administers the collateral. As the third party
to the transaction is the custodian and not counterparty to the
agreement, they are not disclosed in the description of the
repurchase agreement.
SEC Comment:
The Staff inquired in regards to Evergreen New York Municipal
Money Market Fund and California Municipal Money Market Fund.
Each fund has a principal investment strategy including Tender
Option Bonds but there is no disclosure of Tender Option Bonds at
period end. Other funds have disclosure regarding Credit Default
Swaps within the Notes to Financial Statements but no Credit
Default Swaps at period end. Why do some funds have this
disclosure and others do not?
Evergreen Response:
The significant accounting policy note in the shareholder reports
describes transaction types the funds have engaged in over the last
2 reporting cycles identified in the Statement of Changes. These
transaction types may or may not be held at period end. If a fund
did not actively trade in a specific transaction type, it is not
discussed in the notes.
SEC Comment:
The Staff suggested that regarding distribution fees, Evergreen
consider disclosing the approved amount as well as the limited
amount rather than just the limited amount. This comment was also
given during the review of an N-14.
Evergreen Response:
We already have a section in the prospectus disclosing approved
amounts so we will begin including this disclosure in the
shareholder reports as well.
SEC Comment:
The Staff noted in regards to Evergreen California Municipal
Money Market Fund, the MDFP includes a footnote stating that
12b-1 fees for Class S are being waived; however, there is no
mention of the waiver in the Notes to Financial Statements.
Evergreen Response:
Within the Notes to Financial Statements for this fund's
shareholder report, there is a note stating the amount waived
for Class S.
SEC Comment:
The Staff noted in regards to Evergreen Balanced Fund and
Evergreen Diversified Bond Fund, the Notes to Financial Statements
indicate there is a contractual waiver but the prospectus
indicates there is a voluntary waiver.
Evergreen Response:
On 4/15/2007 for Evergreen Balanced Fund and on 5/20/2007 for
Evergreen Diversified Bond Fund, the contractual waivers expired
and were not renewed.
* * * *
PROSPECTUS
SEC Comment:
The Staff noted for Evergreen Strategic Growth Fund, Evergreen
Special Equity Fund and Evergreen Short Intermediate Bond Fund,
the portfolio turnover exceeded 100% for
consecutive years. There is no risk disclosure related to high
turnover in the funds'
prospectuses. If high turnover is part of the fund's investment
strategy, there should
be risk disclosure included in the Fund's prospectus.
Evergreen Response:
Each fund's prospectus currently includes disclosure relating to
Portfolio Turnover in the section entitled: "Other Fund Practices"
(Please see page 53 of the Evergreen Domestic Equity Funds I
prospectus dated February 1, 2008 in connection with Evergreen
Strategic Growth Fund and Evergreen Special Equity Fund and page
31 of the Evergreen Short and Intermediate Term Bond Funds
prospectus dated November 1, 2007 in connection with
Evergreen Short Intermediate Bond Fund.) In the disclosure, each
fund notes that consideration of portfolio turnover is not a part
of the fund's investment strategy and therefore turnover could be
high. The risks associated with high turnover are discussed
in the disclosure.
SEC Comment:
The Staff noted for Evergreen Strategic Growth Fund, 40% of the
fund is invested in Information Technology and for Evergreen
Municipal Money Market Fund, 40% of the fund is
invested in Housing but there is no disclosure in the prospectus
indicating a principal investment strategy or risk to concentrate
investments. Item 4 of N1a requires such
disclosure if the fund has a policy to concentrate.
Evergreen Response:
As stated in each fund's current Statement of Additional
Information, the funds are managed under a fundamental policy
that states that the fund will not concentrate its
investments in the securities of issuers primarily engaged in any
particular industry (other than securities that are issued or
guaranteed by the U.S. government or its agencies or
instrumentalities). (Please see the "Evergreen Domestic Equity
Funds I" Statement of Additional Information dated February 1,
2008 in connection with Evergreen Strategic Growth Fund and the
"Evergreen Money Market Funds" Statement of Additional
Information dated June 1, 2007 as supplemented November 1, 2007
in connection with Evergreen Municipal Money Market Fund.) In
the regards to Evergreen Strategic Growth
Fund, the category entitled "Information Technology" in the fund's
most recent shareholder report denotes a sector not an industry
classification. Within the "Information Technology"
sector as noted in the report are various industries such as
"Communications Equipment" and "Software" none of which represents
greater than 25% of the fund's portfolio. In regards to
Evergreen Municipal Money Market Fund, the portion of the fund
invested in "Housing" includes government securities which are
specifically excluded from the concentration policy for the
fund.
SEC Comment:
The Staff noted for Evergreen Ultra Short Opportunity Fund, there is
no disclosure regarding the acceptable average maturity level of the
fund's investments within the prospectus. The table at the end of the
Schedule of Investments indicates a significant portion of securities
in the > 3 year range, which seems long for an ultra short fund. What
is the acceptable average maturity range for this fund?
Evergreen Response:
As disclosed in the fund's current prospectus dated November 1, 2007,
the fund's portfolio of securities is managed based an average
portfolio duration. Please see page 9 of the fund's
prospectus which includes the following statement: "Under normal
market conditions, the fund intends to maintain an average portfolio
duration of approximately one year or less."
OTHER
SEC Comment:
The Staff noted for Evergreen Pennsylvania Municipal Bond Fund and
Evergreen Balanced Fund, there is disclosure within the first few
pages of the N-CSR that the strategy had changed.
How were shareholders notified? What are the details of the change?
Why was there no A filing if part of the principal
investment strategy changed?
Evergreen Response:
Within the 3/31/2007 annual report for Evergreen Pennsylvania
Municipal Bond Fund, there was a shareholder notification
text box that included the details of the change related to
investments in derivatives to be effective on 7/1/2007. The
3/31/2007 annual report for Evergreen Balanced Fund also
included a shareholder notification text box that included the
details of the strategy change effective 6/1/2007. This change
was also included in a sticker to the prospectus for both funds.
* * * *
If you have any further questions regarding the responses contained
herein, please contact me at 617.210.3588.
Sincerely,
Kasey Phillips
Senior Vice President, Evergreen Investment Services, Inc.
Treasurer, Evergreen Funds
Jeremy DePalma
Senior Vice President, Evergreen Investment Services, Inc.
Treasurer, Evergreen Funds
cc: The Audit Committee of the Evergreen Funds
Steve Bowen, Partner KPMG
Steve Callahan, Partner KPMG
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