<PAGE>
EVERGREEN
SELECT ADJUSTABLE RATE FUND
SEMIANNUAL REPORT
AUGUST 31, 1998
[LOGO OF EVERGREEN FUNDS APPEARS HERE]
<PAGE>
Evergreen Select Adjustable Rate Fund
Letter to Shareholders
October 1998
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DEAR SHAREHOLDERS:
Following is the semiannual report for the Select Adjustable Rate Fund, which
covers the six-month period ended on August 31, 1998. The Fund's fiscal year
end has changed from February 28 to September 30; therefore you will receive
an annual report with a more detailed discussion of your Fund and performance
as of September 30, 1998. This report will mail at the end of November.
Thank you for your continued investment in Evergreen Select Adjustable Rate
Fund.
Sincerely,
/s/ William M. Ennis
William M. Ennis
Managing Director
Evergreen Funds
/s/ David C. Francis
David C. Francis, C.F.A.
Chief Investment Officer,
Managing Director
First Capital Group
1
<PAGE>
Evergreen Select Adjustable Rate Fund
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Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
SIX MONTHS FIVE MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED SEPTEMBER 30,
AUGUST 31, 1998 FEBRUARY 28, FEBRUARY 28, ------------------------------
INSTITUTIONAL SHARES (UNAUDITED) 1998 1997 (A) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 9.75 $ 9.71 $ 9.68 $ 9.65 $ 9.61 $ 9.93
------- ------- ------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income.. 0.30 0.64 0.28 0.64(b) 0.63 0.63
Net gains or losses on
securities (both
realized and
unrealized)........... (0.05) 0.04 0(d) 0 0.01 (0.49)
------- ------- ------- -------- -------- --------
Total from investment
operations............. 0.25 0.68 0.28 0.64 0.64 0.14
Less dividends (from net
investment income)..... (0.30) (0.64) (0.25) (0.61) (0.60) (0.46)
------- ------- ------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD................. $ 9.70 $ 9.75 $ 9.71 $ 9.68 $ 9.65 $ 9.61
------- ------- ------- -------- -------- --------
TOTAL RETURN............ 2.56% 7.15% 2.97% 6.86% 6.87% 1.43%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (thousands)..... $24,324 $25,981 $70,264 $ 65,974 $ 23,616 $ 25,200
Ratios to average net
assets
Total expenses......... 0.33%(c) 0.30% 0.30%(c) 0.30% 0.30% 0.30%
Net investment income.. 6.08%(c) 6.63% 6.79%(c) 6.84% 6.61% 5.15%
Portfolio turnover
rate................... 44% 107% 44% 85% 56% 63%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MAY 23, 1994
SIX MONTHS YEAR FIVE MONTHS SEPTEMBER 30, (DATE OF INITIAL
ENDED ENDED ENDED ----------------- PUBLIC OFFERING)
INSTITUTIONAL SERVICE AUGUST 31, 1998 FEBRUARY 28, FEBRUARY 28, THROUGH
SHARES (UNAUDITED) 1998 1997 (A) 1996 1995 SEPTEMBER 30, 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 9.76 $ 9.72 $ 9.68 $ 9.65 $ 9.61 $9.73
------ ------- ------ ------- ------ -----
INCOME FROM INVESTMENT
OPERATIONS
Net investment income.. 0.28 0.59 0.28 0.65(b) 0.64 0.17
Net gains or losses on
securities (both
realized and
unrealized)........... (0.05) 0.06 0(d) (0.03) (0.02) (0.13)
------ ------- ------ ------- ------ -----
Total from investment
operations............. 0.23 0.65 0.28 0.62 0.62 0.04
Less dividends (from net
investment income)..... (0.28) (0.61) (0.24) (0.59) (0.58) (0.16)
------ ------- ------ ------- ------ -----
NET ASSET VALUE, END OF
PERIOD................. $ 9.71 $ 9.76 $ 9.72 $ 9.68 $ 9.65 $9.61
------ ------- ------ ------- ------ -----
TOTAL RETURN............ 2.43% 6.89% 2.97% 6.60% 6.60% 0.35%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (thousands)..... $9,619 $10,320 $3,564 $14,361 $2,871 $ 1
Ratios to average net
assets
Total expenses......... 0.57%(c) 0.55% 0.55%(c) 0.55% 0.55% 0.43%
Net investment income.. 5.78%(c) 6.15% 6.39%(c) 6.64% 6.70% 5.03%
Portfolio turnover
rate................... 44% 107% 44% 85% 56% 63%
</TABLE>
(a) The Fund changed its fiscal year end from September 30 to February 28.
(b) Per share calculations based on weighted average shares outstanding.
(c) Annualized.
(d) Amount represents less than $0.01 per share.
See Notes to Financial Statements
2
<PAGE>
Evergreen Select Adjustable Rate Fund
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Schedule of Investments
August 31, 1998 (unaudited)
<TABLE>
<CAPTION>
INTEREST MATURITY PRINCIPAL MARKET
RATE DATE AMOUNT VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ADJUSTABLE RATE MORTGAGE SECURITIES--
75.3%
FHLMC--32.7%
FHLMC Pool #605343, Cap 13.639%,
Margin 2.125% + CMT, Resets Annually 7.603% 03/01/19 $ 813,247 $ 850,860
FHLMC Pool #605386, Cap 12.870%,
Margin 2.109% + CMT, Resets Annually 7.691 09/01/17 940,959 982,126
FHLMC Pool #606541, Cap 13.549%,
Margin 2.027% + CMT, Resets Annually 7.431 03/01/21 606,947 632,081
FHLMC Pool #606679, Cap 12.075%,
Margin 2.159% + CMT, Resets Annually 7.742 10/01/21 628,650 656,154
FHLMC Pool #607352, Cap 13.620%,
Margin 2.178% + CMT, Resets Annually 7.614 04/01/22 369,351 387,242
FHLMC Pool #608034, Cap 14.777%,
Margin 1.584% + CMT, Resets Annually 7.084 06/01/16 2,264,579 2,358,831
FHLMC Pool #785114, Cap 13.287%,
Margin 2.125% + CMT, Resets Annually 7.477 07/01/19 81,861 84,829
FHLMC Pool #845063, Cap 12.094%,
Margin 2.178% + CMT, Resets Annually 7.691 11/01/21 1,728,830 1,790,420
FHLMC Pool #845070, Cap 11.833%,
Margin 2.108% + CMT, Resets Annually 7.599 01/01/22 1,637,109 1,700,547
FHLMC Pool #845082, Cap 12.609%,
Margin 1.951% + CMT, Resets Annually 7.430 03/01/22 593,327 610,015
FHLMC Pool #846163, Cap 13.077%,
Margin 1.983% + CMT, Resets Annually 7.403 07/01/30 812,366 842,448
FHLMC Pool #865220, Cap 15.004%,
Margin 2.345% + CMT, Resets Annually 8.064 04/01/20 183,508 190,419
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Total FHLMC 11,085,972
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FNMA--42.6%
FNMA Pool #070033, Cap 14.311%,
Margin 2.596% + CMT, Resets Annually 7.254 10/01/17 269,245 278,416
FNMA Pool #070119, Cap 12.003%,
Margin 2.760% + CMT, Resets Annually 7.503 11/01/17 1,068,417 1,107,147
FNMA Pool #090678, Cap 13.151%,
Margin 2.700% + CMT, Resets Annually 7.536 09/01/18 838,456 877,235
FNMA Pool #092086, Cap 15.549%,
Margin 2.750% + CMT, Resets Annually 7.416 10/01/16 350,625 360,159
FNMA Pool #094564, Cap 15.835%,
Margin 2.500% + CMT, Resets Annually 7.322 01/01/16 762,792 787,583
FNMA Pool #095405, Cap 13.653%,
Margin 2.731% + CMT, Resets Annually 7.551 12/01/19 754,716 783,490
FNMA Pool #102905, Cap 13.105%,
Margin 2.822% + CMT, Resets Annually 7.363 07/01/20 224,776 235,313
FNMA Pool #124015, Cap 13.236%,
Margin 2.576% + CMT, Resets Annually 7.285 11/01/18 697,230 718,363
FNMA Pool #124204, Cap 13.505%,
Margin 2.705% + CMT, Resets Annually 7.496 01/01/22 571,742 590,684
FNMA Pool #124289, Cap 13.460%,
Margin 2.666% + CMT, Resets Annually 7.442 09/01/21 2,344,663 2,447,969
FNMA Pool #124945, Cap 12.541%,
Margin 2.782% + CMT, Resets Annually 7.545 01/01/31 1,216,418 1,259,370
FNMA Pool #142963, Cap 11.031%,
Margin 2.625% + CMT, Resets Annually 7.448 01/01/22 489,429 501,283
FNMA Pool #303247, Cap 11.081%,
Margin 2.712% + CMT, Resets Annually 7.322 12/01/22 199,880 205,502
FNMA Pool #313663, Cap 12.964%,
Margin 2.810% + CMT, Resets Annually 7.328 05/01/22 1,370,746 1,423,218
FNMA Pool #313994, Cap 9.831%, Margin
2.475% + LIBOR, Resets Semi-annually 7.467 12/01/23 742,010 753,132
FNMA Pool #331526, Cap 11.168%,
Margin 2.750% + CMT, Resets Annually 6.119 05/01/36 1,003,747 1,016,765
FNMA Pool #391290, Cap 12.682%,
Margin 2.661% + CMT, Resets Annually 7.516 02/01/17 109,180 110,698
FNMA Pool #423207, Cap 11.866%,
Margin 2.750% + CMT, Resets Annually 5.866 04/01/38 1,006,966 1,014,830
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Total FNMA 14,471,157
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TOTAL ADJUSTABLE RATE MORTGAGE
SECURITIES (COST--$25,573,768) 25,557,129
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</TABLE>
See Notes to Financial Statements
3
<PAGE>
Evergreen Select Adjustable Rate Fund
- -------------------------------------------------------------------------------
Schedule of Investments (continued)
August 31, 1998 (unaudited)
<TABLE>
<CAPTION>
INTEREST MATURITY PRINCIPAL MARKET
RATE DATE AMOUNT VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIXED RATE MORTGAGE SECURITIES--12.0%
COLLATERALIZED MORTGAGE OBLIGATIONS--
2.7%
FHLMC STRIPS, Series 20, Class F
(Estimated Maturity 2000) (a) 6.620% 07/01/29 $ 895,692 $ 897,092
FNMA REMIC, Series 1993--160, Class PD
(Estimated Maturity 1998) (a) 5.600 10/25/12 10,543 10,503
- -------------------------------------------------------------------------------
Total Collateralized Mortgage
Obligations 907,595
- -------------------------------------------------------------------------------
FHLMC--0.7%
FHLMC Pool #B00475 10.500 04/01/04 193,398 201,297
FHLMC Pool #277831 7.250 11/01/08 29,712 30,004
- -------------------------------------------------------------------------------
Total FHLMC 231,301
- -------------------------------------------------------------------------------
FNMA--4.7%
FNMA Pool #004534 10.750 10/01/12 565,057 621,326
FNMA Pool #058442 11.000 01/01/18 400,029 439,888
FNMA Pool #070472 10.500 03/01/01 410,293 422,638
FNMA Pool #100051 9.500 04/15/05 120,487 125,608
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Total FNMA 1,609,460
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GNMA--3.9%
GNMA Pool #268164 10.250 11/15/29 1,285,512 1,328,127
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TOTAL FIXED RATE MORTGAGE SECURITIES
(COST--$4,102,606) 4,076,483
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GOVERNMENT AGENCY NOTES--0.7% (COST--
$249,297)
Federal Home Loan Bank 5.500 08/13/01 250,000 251,680
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES--7.1%
U.S. Treasury Notes 6.250 08/31/02 155,000 161,660
U.S. Treasury Notes 5.750 11/30/02 1,400,000 1,437,842
U.S. Treasury Notes 5.500 05/31/03 400,000 408,500
U.S. Treasury Notes 5.250 08/15/03 400,000 406,436
- -------------------------------------------------------------------------------
TOTAL U.S. TREASURY NOTES (COST--
$2,386,721) 2,414,438
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<CAPTION>
INTEREST MATURITY MATURITY MARKET
RATE DATE VALUE VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENT--3.5% (COST--
$1,180,000)
Keystone Joint Repurchase Agreement
(Investments in repurchase
agreements, in a joint trading
account, purchased 8/31/98) (b) 5.780 09/01/98 1,180,189 1,180,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST--$33,492,392) 98.6% 33,479,730
OTHER ASSETS AND LIABILITIES--NET 1.4 463,076
- -------------------------------------------------------------------------------
NET ASSETS 98.6% $33,942,806
- -------------------------------------------------------------------------------
</TABLE>
(a) The estimated maturity of a Collateralized Mortgage Obligation (CMO) is
based on current and projected prepayment rates. Changes in interest rates
can cause the estimated maturity to differ from the listed dates.
(b) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at August 31, 1998.
LEGEND OF PORTFOLIO ABBREVIATIONS:
CMT--1, 3 or 5 year Constant Maturity Treasury Index
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
GNMA--Government National Mortgage Association
LIBOR--6-Month London Inter-Bank Offer Rate
REMIC--Real Estate Mortgage Investment Conduit
STRIPS--Separate Trading of Registered Interest and Principal of Securities
See Notes to Financial Statements
4
<PAGE>
Evergreen Select Adjustable Rate Fund
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
August 31, 1998 (unaudited)
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments at market value (identified cost--$33,492,392)....... $33,479,730
Cash............................................................. 486
Interest receivable.............................................. 283,756
Receivable for principal paydowns................................ 232,158
- --------------------------------------------------------------------------------
Total assets..................................................... 33,996,130
- --------------------------------------------------------------------------------
LIABILITIES
Dividends payable................................................ 22,814
Due to advisor................................................... 19,721
Payable for for Fund shares redeemed............................. 5,000
Distribution fee payable......................................... 4,290
Accrued Trustees' fees and expenses.............................. 952
Accrued expenses and other liabilities........................... 547
- --------------------------------------------------------------------------------
Total liabilities................................................ 53,324
- --------------------------------------------------------------------------------
NET ASSETS........................................................ $33,942,806
- --------------------------------------------------------------------------------
NET ASSETS REPRESENTED BY
Paid-in capital.................................................. $34,560,405
Accumulated distributions in excess of net investment income..... (10,097)
Accumulated net realized loss on investments..................... (594,840)
Net unrealized depreciation on investments....................... (12,662)
- --------------------------------------------------------------------------------
Total net assets................................................. $33,942,806
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Institutional Shares............................................. $24,324,100
Institutional Service Shares..................................... 9,618,706
- --------------------------------------------------------------------------------
$33,942,806
- --------------------------------------------------------------------------------
SHARES OUTSTANDING
Institutional Shares............................................. 2,506,583
Institutional Service Shares..................................... 990,403
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
Institutional Shares............................................. $ 9.70
- --------------------------------------------------------------------------------
Institutional Service Shares..................................... $ 9.71
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
Evergreen Select Adjustable Rate Fund
- --------------------------------------------------------------------------------
Statements of Operations
Six Months Ended August 31, 1998 (unaudited)
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest.......................................................... $1,128,511
- --------------------------------------------------------------------------------
EXPENSES
Management fee.................................................... 52,968
Distribution Plan expenses........................................ 12,734
Professional fees................................................. 3,140
Trustees' fees and expenses....................................... 1,642
- --------------------------------------------------------------------------------
Total expenses.................................................... 70,484
- --------------------------------------------------------------------------------
Net investment income............................................. 1,058,027
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments.................................. (66,234)
Net change in unrealized gains or losses on investments........... (98,778)
- --------------------------------------------------------------------------------
Net realized and unrealized loss on investments................... (165,012)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. $ 893,015
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
6
<PAGE>
Evergreen Select Adjustable Rate Fund
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, 1998 YEAR ENDED
(UNAUDITED) FEBRUARY 28, 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income....................... $ 1,058,027 $ 3,007,633
Net realized gains or losses on
investments................................ (66,234) 297,743
Net change in unrealized gains or losses on
investments................................ (98,778) (69,974)
- --------------------------------------------------------------------------------
Net increase in net assets resulting from
operations................................. 893,015 3,235,402
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME
Institutional Shares........................ (761,864) (2,543,452)
Institutional Service Shares................ (296,163) (437,527)
- --------------------------------------------------------------------------------
Total distributions to shareholders......... (1,058,027) (2,980,979)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold................... 12,589,013 17,099,051
Proceeds from reinvestment of
distributions.............................. 761,177 2,868,485
Payment for shares redeemed................. (15,542,776) (57,749,240)
- --------------------------------------------------------------------------------
Net decrease from capital share
transactions............................... (2,192,586) (37,781,704)
- --------------------------------------------------------------------------------
Total decrease in net assets................ (2,357,598) (37,527,281)
- --------------------------------------------------------------------------------
NET ASSETS
Beginning of period......................... 36,300,404 73,827,685
- --------------------------------------------------------------------------------
End of period............................... $ 33,942,806 $ 36,300,404
- --------------------------------------------------------------------------------
Accumulated distributions in excess of net
investment income.......................... ($10,097) ($10,097)
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
7
<PAGE>
Evergreen Select Adjustable Rate Fund
- -------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The Evergreen Select Adjustable Rate Fund (the "Fund") is a diversified series
of Evergreen Select Fixed Income Trust (the "Trust"). The Trust is a Delaware
business trust organized on September 18, 1997 as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act").
The Fund offers Institutional Shares (formerly, Class Z) and Institutional
Service Shares (formerly, Class Y) to institutional investors. Both classes of
shares are sold at net asset value and are not subject to contingent deferred
sales charges. Institutional Service Shares pay ongoing distribution fees.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its 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--U.S. government obligations held by the Fund are
valued at the mean between the over-the-counter bid and asked prices.
Corporate bonds, other fixed-income securities and mortgage and other asset-
backed securities are valued at prices provided by an independent pricing
service. In determining value for normal institutional-size transactions, the
pricing service uses methods based on market transactions for comparable
securities and analysis of various relationships between similar securities
which are generally recognized by institutional traders. 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. Short-term
securities with greater than 60 days to maturity are valued at market value.
B. Repurchase Agreements--The Fund may invest in repurchase agreements.
Securities pledged as collateral for repurchase agreements are held by the
custodian on the Fund's behalf. The Fund monitors the adequacy of the
collateral daily and will require the seller to provide additional collateral
in the event the market value of the securities pledged falls below the
carrying value of the repurchase agreement, including accrued interest. The
Fund will only enter into repurchase agreements with banks and other financial
institutions which are deemed by the investment advisor to be creditworthy
pursuant to guidelines established by the Board of Trustees.
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the Fund, along with certain other funds managed by Keystone
Investment Management Company ("Keystone"), may transfer uninvested cash
balances into a joint trading account. These balances are invested in one or
more repurchase agreements that are fully collateralized by U.S. Treasury
and/or federal agency obligations.
C. Reverse Repurchase Agreements--To obtain short-term financing, the Fund may
enter into reverse repurchase agreements with qualified third-party broker-
dealers. Interest on the value of reverse repurchase agreements is based upon
competitive market rates at the time of issuance. At the time the Fund enters
into a reverse repurchase agreement, it will establish and maintain a
segregated account with the custodian containing qualifying assets having a
value not less than the repurchase price, including accrued interest. If the
counter party to the transaction is rendered insolvent, the ultimate
realization of the securities to be repurchased by the Fund may be delayed or
limited.
D. Security Transactions and Investment Income--Securities transactions are
accounted for no later than one business day after the trade date. Realized
gains and losses are computed on the identified cost basis. Interest income is
recorded on the accrual basis and includes accretion of discounts and
amortization of premiums.
J. Federal Taxes--The Fund has qualified and intends to continue to qualify as
a regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code"). Thus, the Fund will not incur any federal income tax
liability since it is expected to distribute all of its net investment company
taxable income and net capital gains, if any, to its shareholders. The Fund
also intends to avoid any excise tax liability by making the required
distributions under the Code. Accordingly, no provision for federal income
taxes is required. To the extent that realized capital gains can be offset by
capital loss carryforwards, it is the Fund's policy not to distribute such
gains.
K. Distributions--Distributions from net investment income for the Fund 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 distribution and distributions made in
accordance with income tax regulations are primarily due to differing
treatment for principal paydown gains and losses.
L. 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 Plan for
Institutional Service Shares.
8
<PAGE>
Evergreen Select Adjustable Rate Fund
- -------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
2. CAPITAL SHARE TRANSACTIONS
The Fund has an unlimited number of $0.001 par value shares of beneficial
interest authorized. Shares of beneficial interest of the Fund are currently
divided into Institutional Shares and Institutional Service Shares.
Transactions in shares of the Fund were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1998 1998
--------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES
Shares sold.................. 694,346 $ 6,750,374 756,542 $ 7,370,775
Shares issued in reinvestment
of distributions............ 63,361 614,731 254,776 2,481,417
Shares redeemed.............. (916,036) (8,906,957) (5,579,904) (54,382,797)
- -------------------------------------------------------------------------------
Net decrease................. (158,329) $(1,541,852) (4,568,586) $(44,530,605)
- -------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, 1998 1998
--------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSTITUTIONAL SERVICE SHARES
Shares sold.................. 600,329 $ 5,838,639 996,337 $ 9,728,276
Shares issued in reinvestment
of distributions............ 15,084 146,446 39,661 387,068
Shares redeemed.............. (682,679) (6,635,819) (344,863) (3,366,443)
- -------------------------------------------------------------------------------
Net increase (decrease)...... (67,266) $ (650,734) 691,135 $ 6,748,901
- -------------------------------------------------------------------------------
</TABLE>
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (excluding short-term
securities) were $15,530,610 and $14,898,123, respectively.
The average daily balance of reverse repurchase agreements outstanding during
the six months ended August 31, 1998 was $48,633 at a weighted average
interest rate of 5.55%. The maximum amount of borrowing outstanding during the
six months ended August 31, 1998 was $1,440,888 (including accrued interest).
As of August 31, 1998, the Fund had no outstanding reverse repurchase
agreements.
As of February 28, 1998, the Fund had a capital loss carryover for federal
income tax purposes of approximately $522,000 which expires as follows:
$198,000--2001, $281,000--2002 and $43,000--2004.
4. DISTRIBUTION PLAN
Evergreen Distributor, Inc. ("EDI"), a wholly-owned subsidiary of The BISYS
Group Inc. ("BISYS"), serves as principal underwriter to the Fund.
The Fund has adopted a Distribution Plan for its Institutional Service Shares
as allowed by Rule 12b-1 of the 1940 Act. The Distribution Plan permits the
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 services fees to broker-dealers who sell shares
of the Fund, are paid by shareholders through expenses called "Distribution
Plan expenses". Institutional Service Shares pay a distribution fee which is
limited to 0.25% per annum of its average daily net assets. Distribution Plan
expenses are calculated daily and paid monthly.
The Distribution Plan may be terminated at any time by vote of the Independent
Trustees or by vote of a majority of the outstanding Institutional Service
Shares' voting shares. However, after the termination of the 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.
5. INVESTMENT ADVISORY AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
Keystone, a subsidiary of First Union Corporation ("First Union"), is the
investment advisor for the Fund. In return for providing investment management
and administrative services to the Fund, the Fund pays Keystone a management
fee that is calculated daily and paid monthly. The management fee is computed
at an annual rate of 0.30% of the average daily net asset value of the Fund.
Evergreen Service Company ("ESC"), a subsidiary of First Union, serves as the
transfer and dividend disbursing agent for the Fund.
Officers of the Funds and affiliated Trustees receive no compensation directly
from the Fund.
6. FINANCING AGREEMENT
On December 22, 1997, a financing agreement among all of the Evergreen Funds,
State Street Bank & Trust ("State Street") and a group of banks (the "Banks")
became effective. Under this agreement, the Banks provide an unsecured credit
facility in the aggregate amount of $400 million ($275 million committed and
$125 million uncommitted). The credit facility is allocated, under the terms
of the financing agreement,
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Evergreen Select Adjustable Rate Fund
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Notes to Financial Statements (unaudited) (continued)
among the Banks. The credit facility is to be accessed by the Funds for
temporary or emergency purposes only and is subject to each Fund's borrowing
restrictions. Borrowings under this facility bear interest at 0.50% per annum
above the Federal Funds rate. A commitment fee of 0.065% per annum will be
incurred on the unused portion of the committed facility, which will be
allocated to all Funds. For its assistance in arranging this financing
agreement, the Capital Market Group of First Union was paid a one time
arrangement fee of $27,500. State Street serves as administrative agent for
the Banks, and as administrative agent is entitled to a fee of $20,000 per
annum which is allocated to all of the Funds.
During the six months ended August 31, 1998, the Fund had borrowings
outstanding for 1 day under its line of credit and incurred $94 in interest
charges related to these borrowings. The Fund's average amount of debt
outstanding during the period was $2,826 at a weighted average interest rate
of 6.50%. The Fund had no borrowings as of August 31, 1998.
7. YEAR 2000
Like other investment companies, the Fund could be adversely affected if the
computer systems used by the Fund's investment advisor and the Fund's other
service providers are not able to perform their intended functions effectively
after 1999 because of the inability of computer software to distinguish the
year 2000 from the year 1900. The Fund's investment advisor is taking steps to
address this potential year 2000 problem with respect to the computer systems
that they use and to obtain satisfactory assurances that comparable steps are
being taken by the Fund's other major service providers. At this time,
however, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on the Fund from this problem.
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This 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.
NOT May lose value
FDIC
INSURED No bank guarantee
EVERGREEN FUNDS DISTRIBUTORS, INC.
SELADJ RV0 10/98
