SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 7 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 7 [X]
EVERGREEN SELECT FIXED INCOME TRUST
___________________________________
(Exact Name of Registrant as Specified in Charter)
200 Berkeley Street, Boston, Massachusetts 02116-5034
(Address of Principal Executive Offices)
(617) 210-3200
(Registrant's Telephone Number)
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to paragraph (b)
[ ] on February 1, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
<PAGE>
EVERGREEN SELECT FIXED INCOME TRUST
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 7 TO
REGISTRATION STATEMENT ON FORM N-1A
This Post-Effective Amendment No. 7 to Registrant's Registration Statement
No.333-36019/811-08365 consists of the following pages, items of information and
documents, together with the exhibits indicated in Part C as being filed
herewith:
Facing Sheet
Contents Page
PART A
Prospectus for the Institutional shares and Institutional Service
shares of Evergreen Select Adjustable Rate Fund, Evergreen Select Core Bond
Fund, Evergreen Select Fixed Income Fund, Evergreen Select Income Plus Fund,
Evergreen Select Intermediate Term Municipal Bond Fund, Evergreen Select
International Bond Fund, Evergreen Select Limited Duration Fund and Evergreen
Select Total Return Bond Fund is contained herein.
Prospectus for the Institutional shares and Institutional Service shares of
Evergreen Select High Yield Bond Fund is contained in Post-Effective Amendment
No. 6 to Registration Statement No.333-36019/811-08365 filed on February 1, 1999
and is incorporated by reference herein.
PART B
Statement of Additional Information for the Institutional shares and
Institutional Service shares of Select Adjustable Rate Fund, Evergreen Select
Core Bond Fund, Evergreen Select Fixed Income Fund, Evergreen Select Income
Plus Fund, Evergreen Select Intermediate Term Municipal Bond Fund, Evergreen
Select International Bond Fund, Evergreen Select Limited Duration Fund, and
Evergreen Select Total Return Bond Fund is contained herein.
Statement of Additional Information for the Institutional shares and
Institutional Service shares of Evergreen Select High Yield Bond Fund is
contained in Post-Effective Amendment No. 6 to Registration Statement
No.333-36019/811-08365 filed on May 4, 1999 and is incorporated by reference
herein.
PART C
Exhibits
Idemnification
Business and Other Connections of Investment Advisors
Principal Underwriter
Location of Accounts and Records
Undertakings
Signatures
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EVERGREEN SELECT FIXED INCOME TRUST
PART A
PROSPECTUS
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[GRAPHIC APPEARS HERE]
Evergreen
Select Fixed Income Funds
Evergreen Select Adjustable Rate Fund
Evergreen Select Core Bond Fund
Evergreen Select Fixed Income Fund
Evergreen Select Income Plus Fund
Evergreen Select Intermediate Term Municipal Bond Fund
Evergreen Select International Bond Fund
Evergreen Select Limited Duration Fund
Evergreen Select Total Return Bond Fund
Institutional Shares [LOGO OF EVERGREEN FUNDS/SM/ APPEARS HERE]
Institutional Service Shares
Prospectus, June 18, 1999, as amended June 18, 1999
The Securities and Exchange Commission has not determined that the information
in this prospectus is accurate or complete, nor has it approved or disapproved
these securities. Anyone who tells you otherwise is committing a crime.
<PAGE>
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TABLE OF CONTENTS
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FUND SUMMARIES:
Evergreen Select Adjustable Rate Fund ..................................... 2
Evergreen Select Core Bond ................................................ 4
Evergreen Select Fixed Income Fund ........................................ 6
Evergreen Select Income Plus Fund ......................................... 8
Evergreen Select Intermediate Term
Municipal Bond Fund (Formerly known
as Evergreen Select Intermediate Tax
Exempt Bond Fund) ......................................................... 10
Evergreen Select International Bond Fund .................................. 12
Evergreen Select Limited Duration Fund .................................... 14
Evergreen Select Total Return Bond Fund ................................... 16
GENERAL INFORMATION:
The Funds' Investment Advisors ............................................ 18
The Funds' Portfolio Managers ............................................. 18
Calculating the Share Price ............................................... 19
How to Choose an Evergreen Fund ........................................... 20
How to Choose the Share Class
That Best Suits You ....................................................... 20
How to Buy Shares ......................................................... 21
How to Redeem Shares ...................................................... 22
Other Services ............................................................ 23
The Tax Consequences of
Investing in the Funds .................................................... 23
Fees and Expenses of the Funds ............................................ 24
Financial Highlights ...................................................... 25
Other Fund Practices ...................................................... 33
In general, Funds included in this prospectus seek to provide investors with
current income and total return consistent with the preservation of capital and
low volatility. The Funds emphasize investments in investment grade debt
securities and mortgage and asset-backed securities. Evergreen Select
Intermediate Term Municipal Bond Fund primarily seeks to invest in securities
exempt from federal income tax.
Fund Summaries Key
Each Fund's summary is organized around the following basic topics and
questions:
[GRAPHIC APPEARS HERE]
INVESTMENT GOAL
What is the Fund's financial objective? You can find clarification on how the
Fund seeks to achieve its objective by looking at the Fund's strategy and
investment policies. The Fund's Board of Trustees can change the investment
objective without a shareholder vote.
[GRAPHIC APPEARS HERE]
INVESTMENT STRATEGY
How does the Fund go about trying to meet its goals? What types of investments
does it contain? What style of investing and investment philosophy does it
follow? Does it have limits on the amount invested in any particular type of
security?
[GRAPHIC APPEARS HERE]
RISK FACTORS
What are the specific risks for an investor in the Fund?
[GRAPHIC APPEARS HERE]
PERFORMANCE
How well has the Fund performed in the past year? The past five years? The past
ten years? Since inception?
[GRAPHIC APPEARS HERE]
EXPENSES
How much does it cost to invest in the Fund? What is the difference between
sales charges and expenses?
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OVERVIEW
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Select Fixed Income Funds
typically rely on a combination of the following strategies:
. investing a portion of their assets in investment grade debt
securities, which are bonds rated within the four highest ratings
categories by the nationally recognized statistical ratings
organizations;
. investing a portion of their assets in mortgage and asset-backed
securities; and
. selling a portfolio investment when the issuer's investment
fundamentals begin to deteriorate, when the investment no
longer appears to meet the Fund's investment objective,
when the Fund must meet redemptions, or for other reasons which
the investment advisor deems necessary.
may be appropriate for investors who:
. seek high current income consistent with preservation of capital
and/or low volatility;
. seek to maximize total return; or
. seek current income exempt from federal income taxes (Intermediate
Term Municipal Bond Fund)
Following this overview, you will find information on each Fund's
specific investment strategies and risks.
................................................................................
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Risk Factors For All Mutual Funds
Please remember that mutual fund shares are:
. not guaranteed to achieve their investment goal
. not insured, endorsed or guaranteed by the FDIC, a bank or any
government agency
. subject to investment risks, including possible loss of your original
investment
Like most investments, your investment in an Evergreen Select Fixed Income Fund
could fluctuate significantly in value over time and could result in a loss of
money.
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Here are the most important factors that may affect the value of your
investment:
Interest Rate Risk
When interest rates go up, the value of debt securities tends to fall. Since
your Fund invests a significant portion of its portfolio in debt securities if
interest rates rise, then the value of and total return earned on your
investment may decline. When interest rates go down, interest earned by your
Fund on its debt securities may also decline, which could cause the Fund to
reduce the dividends it pays.
Credit Risk
The value of a debt security is directly affected by the issuer's ability to
repay principal and pay interest on time. Since your Fund invests in debt
securities, the value of your investment may decline if an issuer fails to pay
an obligation on a timely basis.
Foreign Investment Risk
A Fund's investment in non-U.S. securities could expose it to certain unique
risks of foreign investing. For example, political turmoil and economic
instability in the countries in which the Fund invests could adversely affect
the value of your investment. In addition, if the value of any foreign currency
in which the Fund's investments are denominated declines relative to the U.S.
dollar, the value of and total return earned on your investment in the Fund may
decline as well. Certain foreign countries have less developed and less
regulated securities markets and accounting systems than the U.S. This may make
it harder to get accurate information about a security or company, and increase
the likelihood that an investment will not perform as well as expected.
Below Investment Grade Bond Risk
Below investment grade bonds are commonly referred to as "junk bonds" because
they are usually backed by issuers of less proven or questionable financial
strength. Such issuers are more vulnerable to financial setbacks and less
certain to pay interest and principal than issuers of bonds offering lower
yields and risk. Markets may react to unfavorable news about issuers of below
investment grade bonds causing sudden and steep declines in value.
Mortgage-Backed Securities Risk
Like other debt securities, changes in interest rates generally affect the value
of a mortgage-backed security. Additionally, some mortgage-backed securities may
be structured so that they may be particularly sensitive to interest rates.
Early repayment of mortgages underlying these securities may expose a Fund to a
lower rate of return when it reinvests the principal.
SELECT FIXED INCOME FUNDS 1
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EVERGREEN
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Select Adjustable Rate Fund
FUND FACTS:
Goal:
. High Current Income
. Low Volatility
Principal Investments:
. Collateralized Mortgage
Obligations
. Mortgage-Backed
Securities
. U.S. Government
Obligations
Classes of Shares
Offered in this
Prospectus:
- - Institutional
- - Institutional Service
Investment Advisor:
. Evergreen Investment
Management Company
Portfolio Manager:
. Gary E. Pzegeo
NASDAQ Symbol:
EKIZX (Institutional)
Dividend Payment
Schedule:
Monthly
[GRAPHIC APPEARS HERE]
Investment Goal
The Fund seeks a high level of current income consistent with low volatility of
principal.
[GRAPHIC APPEARS HERE]
Investment Strategy
The following supplements the investment strategies discussed in the "Overview"
on page 1.
The Fund seeks to provide a relatively stable net asset value per share by
investing primarily in adjustable rate securities, whose interest rates are
periodically reset when market rates change. The average dollar-weighted reset
period of adjustable rate securities held by the Fund will not exceed one year.
Normally the Fund invests at least 65% of its assets in mortgage-backed
securities or other securities collateralized by or representing an interest in
a pool of mortgages, which securities have interest rates that reset at periodic
intervals and are issued or guaranteed by the U.S. government, its agencies or
instrumentality's, including collateralized mortgage obligations. The Fund may
also invest up to 35% of its assets in obligations of the U.S. government, its
agencies or instrumentalities.
The Fund may invest in high quality money market instruments in response to
adverse economic, political or market conditions. This strategy is inconsistent
with the Fund's principal investment strategy and investment goal, and if
employed could result in a lower return and loss of market opportunity.
[GRAPHIC APPEARS HERE]
Risk Factors
Your investment in the Fund is subject to the risks discussed in the "Overview"
on page 1 under the headings:
. Interest Rate Risk
. Credit Risk
. Mortgage-Backed Securities Risk
For further information regarding the Fund's investment strategy and risk
factors see "Other Fund Practices."
2 SELECT FIXED INCOME FUNDS
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EVERGREEN
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[GRAPHIC APPEARS HERE]
PERFORMANCE
The following charts show how the Fund has performed in the past. Past
performance is not an indication of future results.
The chart below shows the percentage gain or loss for Institutional shares of
the Fund in each calendar year since the Institutional shares' inception on
10/1/1991. It should give you a general idea of how the Fund's return has varied
from year-to-year. This graph includes the effects of Fund expenses.
Year-by-Year Total Return for Institutional Shares (%)
1989 [BAR CHART APPEARS HERE]
1990
1991
1992 4.13
1993 5.37
1994 1.06
1995 8.67
1996 6.92
1997 7.23
1998 4.81
Best Quarter: 1st Quarter 1995 3.13%
Worst Quarter: 2nd Quarter 1994 -0.26%
Year to date total return through 3/31/1999 is 1.57%.
The next table lists the Fund's average year-by-year return by class over the
past one and five years and since inception (through 12/31/1998). This table is
intended to provide you with some indication of the risks of investing in the
Fund. At the bottom of the table you can compare this performance with the
6-month Treasury Bill Index, which is derived from secondary market interest
rates as published by the Federal Reserve Bank; it is not an actual investment.
Average Annual Total Return
(for the period ended 12/31/1998)*
Inception Performance
Date Since
of Class 1 year 5 year 10 year 10/1/1991
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Institutional 10/1/1991 4.81% 5.70% N/A 5.51%
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Institutional
Service 5/23/1994 4.55% 5.40% N/A 5.30%
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6-month Treasury
Bill Index 4.55% 5.10% 5.38% 4.61%**
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* Performance for the Institutional Service shares prior to its inception is
based upon the historical performance of the Institutional shares, the original
class offered, the inception of which is 10/1/1991, and does not include 12b-1
fees. If such fees were reflected, returns would be lower.
** Performance since 5/23/1994 is 5.24%
[GRAPHIC APPEARS HERE]
EXPENSES
This section describes the fees and expenses you would pay if you bought and
held shares of the Fund.
You pay no shareholder transaction fees.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management 12b-1 Other Total Fund
Fees Fees Expenses Operating Expenses+
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Institutional .30% .00% .03% .33%
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Institutional
Service .30% .25% .02% .57%
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+Actual for the fiscal year ended 9/30/1998.
The table below shows the total expenses you would pay on a $10,000 investment
over one-, three-, five- and ten-year periods. The example is intended to help
you compare the cost of investing in this Fund versus other mutual funds and is
for illustration only. The example assumes a 5% average annual return and that
you reinvest all of your dividends. Your actual costs may be higher or lower.
Example of Fund Expenses
Institutional Institutional Service
- ---------------------------------------------------------------
After 1 year $34 $58
- ---------------------------------------------------------------
After 3 years $106 $183
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After 5 years $185 $318
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After 10 years $418 $714
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SELECT FIXED INCOME FUNDS 3
<PAGE>
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EVERGREEN
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Select Core Bond Fund
FUND FACTS:
Goal:
. Maximize Total Return
Principal Investments:
. Investment Grade Debt
Securities
. Mortgage and Asset-Backed
Securities
. U.S. Treasury and
Agency Obligations
Classes of Shares
Offered in this
Prospectus:
. Institutional
. Institutional Service
Investment Advisor:
. Tattersall Advisory
Group, Inc.
Portfolio Managers:
. A committee of
investment
professionals
NASDAQ Symbols:
ESBIX (Institutional)
ESBSX (Institutional
Service)
Dividend Payment
Schedule:
Monthly
[GRAPHIC APPEARS HERE]
INVESTMENT GOAL
The Fund seeks to maximize total return through a combination of current income
and capital appreciation.
[GRAPHIC APPEARS HERE]
INVESTMENT STRATEGY
The following supplements the investment strategies discussed in the "Overview"
on page 1.
The Fund invests at substantially all of its assets in investment grade
debt securities, including debt securities issued or guaranteed by the U.S.
Treasury or by an agency or instrumentality of the U.S. government. In addition,
the Fund may invest in mortgage and asset-backed securities. The Fund maintains
a bias toward corporate and mortgage-backed securities in order to capture
higher levels of income. The Fund expects duration to provide a better measure
of interest rate sensitivity than maturity. Accordingly, the Fund intends to
limit duration to a two-year minimum and a six year maximum while the average
maturity is expected to be longer than the average duration.
The Fund may invest in high quality money market instruments in response to
adverse economic, political or market conditions. This strategy is inconsistent
with the Fund's principal investment strategy and investment goal, and if
employed could result in a lower return and loss of market opportunity.
[GRAPHIC APPEARS HERE]
RISK FACTORS
Your investment in the Fund is subject to the risks discussed in the "Overview"
on page 1 under the headings:
. Interest Rate Risk
. Credit Risk
. Mortgage-Backed Securities Risk
For further information regarding the Fund's investment strategy and risk
factors see "Other Fund Practices."
4 SELECT FIXED INCOME FUNDS
<PAGE>
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EVERGREEN
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[GRAPHIC APPEARS HERE]
Performance
The following charts show how the Fund has performed in the past. Past
performance is not an indication of future results.
The chart below shows the percentage gain or loss for Institutional shares of
the Fund in each calendar year since the Institutional Shares' inception on
12/13/1990. It should give you a general idea of how the Fund's return has
varied from year-to-year. This graph includes the effects of Fund expenses.
Year-by-Year Total Return for Institutional Shares (%)*
1991 1.32
1992 5.96
1993 8.87
1994 -2.88
1995 18.85
1996 4.09
1997 9.78
1998 8.23
Best Quarter: 2nd Quarter 1989 7.54%*
Worst Quarter: 1st Quarter 1994 -3.28%*
Year to date total return through 3/31/1999 is -0.04%.
The next table lists the Fund's average year-by-year return by class over the
past one, five and ten years and since inception (through 12/31/1998). This
table is intended to provide you with some indication of the risks of investing
in the Fund. At the bottom of the table you can compare this performance with
the Lehman Brothers Aggregate Bond Index, which is an index comprised of
approximately 6,000 publicly traded bonds including U.S. government, mortgage-
backed, corporate and Yankee bonds with an average maturity of approximately 10
years; it is not an actual investment.
Average Annual Total Return
(for the period ended 12/31/1998)*+
Inception Performance
Date Since
of Class 1 year 5 year 10 year 12/13/1990
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Institutional 12/13/1990 8.23% 7.38% N/A 8.10%
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Institutional
Service 10/2/1997 8.07% 7.34% N/A 8.08%
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Lehman Brothers
Aggregate Bond Index 8.69% 7.27% N/A 8.77%**
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*The Select Core Bond Fund historical performance shown for Institutional shares
is based on the performance of the Institutional shares of the Fund's
predecessor fund, Tattersall Bond Fund. Historical performance shown for
Institutional Service shares is based on (1) the performance of the
Institutional Service shares of the Fund's predecessor fund, Tattersall Bond,
since 10/2/1997 and (2) the Institutional shares of Tattersall Bond Fund from
12/13/1990 to 10/2/1997 which have not been adjusted to reflect the .25% 12b-1
fee paid by Institutional service shares. Institutional shares do not pay a
12b-1 fee. If these fees had been reflected, returns would have been lower.
**Performance since 10/2/1997 is 9.40%
+ Average Annual Total Return of the Fund is based on the historical
performance of Tattersall Bond Fund, which exchanged substantially all of
its net assets for shares of Evergreen Select Core Bond Fund on June 7, 1999.
[GRAPHIC APPEARS HERE]
EXPENSES
This section describes the fees and expenses you would pay if you bought and
held shares of the Fund.
You pay no shareholder transaction fees.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management 12b-1 Other Total Fund
Fees Fees Expenses Operating Expenses++
Without With
Waiver Waiver
- --------------------------------------------------------------------------------
Institutional .40% .00% .14% .54% 42%
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Institutional
Service .40% .25% .14% .79% 67%
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+Restated to reflect current fees for the fiscal year ended 9/30/1998.
++Effective June 7, 1999, the Fund's investment advisor has contractually
agreed to limit its Management Fee to .28% for a period of three years.
The table below shows the total expenses you would pay on a $10,000 investment
over one-, three-, five- and ten-year periods. The example is intended to help
you compare the cost of investing in this Fund versus other mutual funds and is
for illustration only. The example assumes a 5% average annual return and that
you reinvest all of your dividends. Your actual costs may be higher or lower.
Example of Fund Expenses
Institutional Institutional Service
- --------------------------------------------------------------------------------
After 1 year $55 $81
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After 3 years $173 $252
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After 5 years $302 $439
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After 10 years $677 $978
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SELECT FIXED INCOME FUNDS 5
<PAGE>
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EVERGREEN
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Select Fixed Income Fund
FUND FACTS:
Goal:
. High Current Income
. Preservation of Capital
Principal Investments:
. Investment Grade Debt
Securities
. U.S. Treasury and
Agency Obligations
. Mortgage and Asset-Backed
Securities
Classes of Shares
Offered in this
Prospectus:
. Institutional
. Institutional Service
Investment Advisor:
. Evergreen Investment
Management
Portfolio Manager:
. Thomas L. Ellis
NASDAQ Symbols:
ESFIX (Institutional)
ESFSX (Institutional Service)
Dividend Payment
Schedule:
Monthly
[GRAPHIC APPEARS HERE]
INVESTMENT GOAL
The Fund seeks a high level of current income and a potential for capital
appreciation. As a secondary objective, the Fund seeks preservation of capital.
[GRAPHIC APPEARS HERE]
INVESTMENT STRATEGY
The following supplements the investment strategies discussed in the "Overview"
on page 1.
The Fund invests at least 65% of its assets in investment grade debt securities,
including debt securities issued or guaranteed by the U.S. Treasury or by an
agency or instrumentality of the U.S. government. In addition, the Fund may
invest in foreign securities and mortgage and asset-backed securities. The Fund
maintains a bias toward corporate and mortgage-backed securities in order to
capture higher levels of income. While the Fund does not currently intend to
invest a significant portion of its assets in below investment grade securities,
up to 35% of the Fund's total assets may be invested in these securities. The
Fund intends to maintain a dollar-weighted average maturity not to exceed five
years, further the Fund intends to maintain an effective duration of 2 1/4 to 4
1/4 years.
The Fund may invest in high quality money market instruments in response to
adverse economic, political or market conditions. This strategy is inconsistent
with the Fund's principal investment strategy and investment goal, and if
employed could result in a lower return and loss of market opportunity.
[GRAPHIC APPEARS HERE]
RISK FACTORS
Your investment in the Fund is subject to the risks discussed in the "Overview"
on page 1 under the headings:
. Interest Rate Risk
. Credit Risk
. Mortgage-Backed Securities Risk
. Foreign Investment Risk
. Below Investment Grade Bond Risk
For further information regarding the Fund's investment strategy and risk
factors see "Other Fund Practices."
6 SELECT FIXED INCOME FUNDS
<PAGE>
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EVERGREEN
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[GRAPHIC APPEARS HERE]
Performance
The following charts show how the Fund has performed in the past. Past
performance is not an indication of future results.
The chart below shows the percentage gain or loss for Institutional shares of
the Fund in each of the last ten calendar years. It should give you a general
idea of how the Fund's return has varied from year-to-year. This graph includes
the effects of Fund expenses.
Year-by-Year Total Return for Institutional Shares (%)*
1989 11.42
1990 10.78
1991 13.69
1992 5.77
1993 8.13
1994 -2.58
1995 14.54
1996 3.48
1997 6.67
1998 8.06
Best Quarter: 2nd Quarter 1989 6.85%*
Worst Quarter: 1st Quarter 1994 -2.31%*
Year to date total return through 3/31/1999 is -.24%.
The next table lists the Fund's average annual total return by class over the
past one, five and ten years and since inception (through 12/31/1998). This
table is intended to provide you with some indication of the risks of investing
in the Fund. At the bottom of the table you can compare this performance with
the Lehman Brothers Intermediate Government/Corporate Index, which is an index
based on all publicly issued intermediate government and corporate debt
securities with an average maturity of one to five years; it is not an actual
investment.
Average Annual Total Return
(for the period ended 12/31/1998)*
Inception Performance
Date Since
of Class 1 year 5 year 10 year 3/31/1971
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Institutional 3/31/1971 8.06% 5.88% 7.88% 8.40%
- --------------------------------------------------------------------------------
Institutional
Service 3/9/1998 7.82% 5.63% 7.62% 8.14%
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Lehman Brothers Intermediate
Government/Corporate Index 8.43% 6.60% 8.52% 8.94%**
- --------------------------------------------------------------------------------
*Fund performance information includes the performance of the Fund's predecessor
common trust fund for periods before the Fund's registration statement became
effective on 11/21/1997. Performance for the common trust fund has been adjusted
to include the effect of estimated mutual fund class gross expense ratios at the
time the Fund was converted to a mutual fund. If fee waivers and expense
reimbursements had been calculated into the mutual fund class expense ratio the
total returns would be as follows: Institutional - 5 year=5.97%, 10 year=7.98%
and since 3/31/1971=8.50%; Institutional Service - 5 year=5.71%, 10 year=7.72%
and since 3/31/1971=8.24%. The Institutional Service share performance
information for the period from 11/24/1997 through 3/2/1998 (class inception
date) is based upon the historical performance of the Institutional shares and
therefore does not reflect 12b-1 fees. If 12b-1 fees had been included,
performance for the Institutional Service shares for this period would be lower.
**The inception date of the index is 12/31/1972. Performance is since that date.
Performance since 3/2/1998 is 7.14%.
[GRAPHIC APPEARS HERE]
EXPENSES
This section describes the fees and expenses you would pay if you bought and
held shares of the Fund.
You pay no shareholder transaction fees.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management 12b-1 Other Total Fund
Fees Fees Expenses Operating Expenses++
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Institutional .50% .00% .13% .63%
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Institutional
Service .50% .25% .14% .89%
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+Actual for the fiscal period ended 9/30/1998.
+From time to time, the Fund's investment advisor may, at its discretion, reduce
or waive its fees or reimburse the Fund for certain of its expenses in order to
reduce expense ratios. The Fund's investment advisor may cease these waivers or
reimbursements at any time. The annual operating expenses do not reflect fee
waivers and expense reimbursements. Including current fee waivers and expense
reimbursements, Total Fund Operating Expenses for the Institutional shares would
be .52% and Institutional Service shares would be .77%.
The table below shows the total expenses you would pay on a $10,000 investment
over one-, three-, five- and ten-year periods. The example is intended to help
you compare the cost of investing in this Fund versus other mutual funds and is
for illustration only. The example assumes a 5% average annual return and that
you reinvest all of your dividends. Your actual costs may be higher or lower.
Example of Fund Expenses
Institutional Institutional Service
- ---------------------------------------------------------------------
After 1 year $ 64 $ 91
- ---------------------------------------------------------------------
After 3 years $ 202 $ 284
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After 5 years $ 351 $ 493
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After 10 years $ 785 $1,096
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SELECT FIXED INCOME FUNDS 7
<PAGE>
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EVERGREEN
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Select Income Plus Fund
FUND FACTS:
Goal:
. High Current Income
. Capital Appreciation
Principal Investments:
. Investment Grade Debt Securities
. U.S. Treasury and Agency Obligations
. Mortgage and Asset-Backed Securities
Classes of Shares Offered in this Prospectus:
. Institutional
. Institutional Service
Investment Advisor:
. Evergreen Investment Management
Portfolio Managers:
. George Prattos
. J.P. Weaver
NASDAQ Symbols:
ESIIX (Institutional)
ESISX (Institutional Service)
Dividend Payment Schedule:
Monthly
[GRAPHIC APPEARS HERE]
INVESTMENT GOAL
The Fund seeks a high level of current income and a potential for capital
appreciation.
[GRAPHIC APPEARS HERE]
INVESTMENT STRATEGY
The following supplements the investment strategies discussed in the "Overview"
on page 1.
The Fund seeks to achieve its objective by actively managing portfolio duration
for capital gain opportunities. The Fund also utilizes a proprietary credit
analysis and scoring system (Alert) to identify undervalued and overlooked fixed
income instruments with potential for appreciation. The Fund invests at least
65% of its assets in investment grade debt securities, including debt securities
issued or guaranteed by the U.S. Treasury or by an agency or instrumentality of
the U.S. government. In addition, the Fund may invest in foreign securities and
mortgage and asset-backed securities. While the Fund does not currently intend
to invest a significant portion of its assets in below investment grade
securities, up to 35% of the Fund's total assets may be invested in these
securities. The Fund currently does not expect to exceed a duration of 6 3/4
years and is unlikely to exceed a dollar-weighted average maturity of 10 years.
The Fund may invest in high quality money market instruments in response to
adverse economic, political or market conditions. This strategy is inconsistent
with the Fund's principal investment strategy and investment goal, and if
employed could result in a lower return and loss of market opportunity.
[GRAPHIC APPEARS HERE]
RISK FACTORS
Your investment in the Fund is subject to the risks discussed in the "Overview"
on page 1 under the headings:
. Interest Rate Risk
. Credit Risk
. Mortgage-Backed Securities Risk
. Foreign Investment Risk
. Below Investment Grade Bond Risk
For further information regarding the Fund's investment strategy and risk
factors see "Other Fund Practices."
8 SELECT FIXED INCOME FUNDS
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
PERFORMANCE
The following charts show how the Fund has performed in the past. Past
performance is not an indication of future results.
The chart below shows the percentage gain or loss for Institutional shares of
the Fund in each of the last ten calendar years. It should give you a general
idea of how the Fund's return has varied from year-to-year. This graph includes
the effects of Fund expenses.
Year-by-Year Total Return for Institutional Shares (%)*
1989 12.31
1990 8.45
1991 15.26
1992 5.12
1993 11.07
1994 -4.22
1995 18.65
1996 2.14
1997 8.87
1998 7.92
Best Quarter: 2nd Quarter 1989 7.99%*
Worst Quarter: 1st Quarter 1994 -3.46%*
Year to date total return through 3/31/1999 is -1.00%.
The next table lists the Fund's average annual total return by class over the
past one, five and ten years and since inception (through 12/31/1998). This
table is intended to provide you with some indication of the risks of investing
in the Fund. At the bottom of the table you can compare this performance with
the Lehman Brothers Government/Corporate Index, which is an index based on 5,500
publicly issued corporate and U.S. government debt rated Baa or better with at
least 1 year to maturity and at least $25 million par outstanding; it is not an
actual investment.
Average Annual Total Return
(for the period ended 12/31/1998)*
Inception Performance
Date Since
of Class 1 year 5 year 10 year 8/31/1988
- --------------------------------------------------------------------------------
Institutional 8/31/1988 7.92% 6.40% 8.37% 8.23%
- --------------------------------------------------------------------------------
Institutional
Service 3/2/1998 7.70% 6.15% 8.11% 7.97%
- --------------------------------------------------------------------------------
Lehman Brothers Government/
Corporate Index 9.47% 7.30% 9.33% 9.35%**
- --------------------------------------------------------------------------------
*Fund performance information includes the performance of the Fund's predecessor
common trust fund for periods before the Fund's registration statement became
effective on 11/21/1997. Performance for the common trust fund has been adjusted
to include the effect of estimated mutual fund class gross expense ratios at the
time the Fund was converted to a mutual fund. If fee waivers and expense
reimbursements had been calculated into the mutual fund class expense ratio the
total returns would be as follows: Institutional - 5 year=6.49%, 10 year=8.47%
and since 8/31/1988=8.33%; Institutional Service - 5 year=6.24%, 10 year=8.21%
and since 8/31/1988=8.07%. The Institutional Service share performance
information for the period from 11/24/1997 through 3/2/1998 (class inception
date) is based upon the historical performance of the Institutional shares and
therefore does not reflect 12b-1 fees. If 12b-1 fees had been included,
performance for the Institutional Service shares for this period would be
lower.
**Performance since 3/2/1998 is 8.18%.
[GRAPHIC APPEARS HERE]
EXPENSES
This section describes the fees and expenses you would pay if you bought and
held shares of the Fund.
You pay no shareholder transaction fees.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management 12b-1 Other Total Fund
Fees Fees Expenses Operating Expenses++
- --------------------------------------------------------------------------------
Institutional .50% .00% .11% .61%
- --------------------------------------------------------------------------------
Institutional
Service .50% .25% .11% .86%
- --------------------------------------------------------------------------------
+Restated to reflect current fees for the fiscal period ended 9/30/1998.
+From time to time, the Fund's investment advisor may, at its discretion, reduce
or waive its fees or reimburse the Fund for certain of its expenses in order to
reduce expense ratios. The Fund's investment advisor may cease these
reimbursements at any time. The annual operating expenses do not reflect fee
waivers and expense reimbursements. Including current fee waivers and expense
reimbursements, Total Fund Operating Expenses for the Institutional shares would
be .51% and Institutional Service shares would be .76%.
The table below shows the total expenses you would pay on a $10,000 investment
over one-, three-, five- and ten-year periods. The example is intended to help
you compare the cost of investing in this Fund versus other mutual funds and is
for illustration only. The example assumes a 5% average annual return and that
you reinvest all of your dividends. Your actual costs may be higher or lower.
Example of Fund Expenses
Institutional Institutional Service
- ----------------------------------------------------------
After 1 year $62 $88
- ----------------------------------------------------------
After 3 years $195 $274
- ----------------------------------------------------------
After 5 years $340 $477
- ----------------------------------------------------------
After 10 years $761 $1,061
- ----------------------------------------------------------
SELECT FIXED INCOME FUNDS 9
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
Select Intermediate Term
Municipal Bond Fund
FUND FACTS:
Goal:
. Current Income Exempt from Federal Income Taxes
Principal Investment:
. Municipal Securities
Classes of Shares Offered in this Prospectus:
. Institutional
. Institutional Service
Investment Advisor:
. Evergreen Investment Management
Portfolio Manager:
. Richard K. Marrone
NASDAQ Symbols:
ESTIX (Institutional)
ESTSX (Institutional Service)
Dividend Payment Schedule:
Monthly
[GRAPHIC APPEARS HERE]
INVESTMENT GOAL
The Fund seeks the highest possible current income, exempt from federal income
taxes, consistent with the Fund's maturity and preservation of capital.
[GRAPHIC APPEARS HERE]
INVESTMENT STRATEGY
The following supplements the investment strategies discussed in the "Overview"
on page 1.
Under normal market conditions, the Fund invests its assets according to
applicable guidelines issued by the Securities and Exchange Commission
concerning investment in tax-exempt securities. The Fund may not change this
investment policy without shareholder approval. To comply with this requirement,
the Fund normally invests at least 80% of its assets in securities exempt from
federal income tax (including the alternative minimum tax). Up to 20% of the
Fund's assets may be invested in securities subject to the alternative minimum
tax and/or taxable obligations. The Fund may invest up to 20% of its assets in
below investment grade bonds (not rated below B by Standard & Poor's Rating
Services). The Fund will maintain a dollar-weighted average maturity of three to
ten years.
The Fund may invest in high quality money market instruments in response to
adverse economic, political or market conditions. This strategy is inconsistent
with the Fund's principal investment strategy and investment goal, and if
employed could result in a lower return and loss of market opportunity.
[GRAPHIC APPEARS HERE]
RISK FACTORS
Your investment in the Fund is subject to the risks discussed in the "Overview"
on page 1 under the headings:
. Interest Rate Risk
. Credit Risk
. Below Investment Grade Bond Risk
For further information regarding the Fund's investment strategy and risk
factors see "Other Fund Practices."
10 SELECT FIXED INCOME FUNDS
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
PERFORMANCE
The following charts show how the Fund has performed in the past. Past
performance is not an indication of future results.
The chart below shows the percentage gain or loss for Institutional shares of
the Fund in each of the last ten calendar years. It should give you a general
idea of how the Fund's return has varied from year-to-year. This graph includes
the effects of Fund expenses.
Year-by-Year Total Return for Institutional Shares (%)*
[BAR CHART APPEARS HERE]
1989 8.22
1990 6.09
1991 8.88
1992 7.41
1993 9.23
1994 -2.74
1995 11.87
1996 3.85
1997 8.54
1998 5.86
Best Quarter: 1st Quarter 1995 4.25%*
Worst Quarter: 1st Quarter 1994 -2.69%*
Year to date total return through 3/31/1999 is .06%.
The next table lists the Fund's average annual total return by class over the
past one, five and ten years or since inception (through 12/31/1998). This table
is intended to provide you with some indication of the risks of investing in the
Fund. At the bottom of the table you can compare this performance with the
Lehman Brothers Municipal 7-Year Index, which is an index based on municipal
bonds having an approximate maturity of seven years; it is not an actual
investment.
Average Annual Total Return
(for the period ended 12/31/1998)*
Inception Performance
Date Since
of Class 1 year 5 year 10 year 1/31/1984
Institutional 1/31/1984 5.86% 5.36% 6.65% 7.34%
Institutional
Service 3/2/1998 5.65% 5.11% 6.40% 7.08%
Lehman Brothers Municipal
7-Year Index 6.22% 5.84% 6.76% 7.44%**
*Fund performance information includes the performance of the Fund's predecessor
common trust fund for periods before the Fund's registration statement became
effective on 11/21/1997. Performance for the common trust fund has been adjusted
to include the effect of estimated mutual fund class gross expense ratios at the
time the Fund was converted to a mutual fund. If fee waivers and expense
reimbursements had been calculated into the mutual fund class expense ratio the
total returns would be as follows: Institutional - 5 year=5.44%, 10 year=6.75%
and since 1/31/1984=7.40%; Institutional Service - 5 year=5.20%, 10 year=6.49%
and since 1/31/1984=7.18%. The Institutional Service share performance
information for the period from 11/24/1997 through 3/2/1998 (class inception
date) is based upon the historical performance of the Institutional shares and
therefore does not reflect 12b-1 fees. If 12b-1 fees had been included,
performance for the Institutional Service shares for this period would be lower.
**The inception date of the index is 1/31/1990. Performance is since that date.
Performance since 3/2/1998 is 5.03%.
[GRAPHIC APPEARS HERE]
EXPENSES
This section describes the fees and expenses you would pay if you bought and
held shares of the Fund.
You pay no shareholder transaction fees.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management 12b-1 Other Total Fund
Fees Fees Expenses Operating Expenses++
Institutional .60% .00% .09% .69%
Institutional
Service .60% .25% .09% .94%
+Restated to reflect current fees for the fiscal period ended 9/30/1998.
+From time to time, the Fund's investment advisor may, at its discretion, reduce
or waive its fees or reimburse the Fund for certain of its expenses in order to
reduce expense ratios. The Fund's investment advisor may cease these waivers or
reimbursements at any time. The annual operating expenses do not reflect fee
waivers and expense reimbursements. Including current fee waivers and expense
reimbursements, Total Fund Operating Expenses for the Institutional shares would
be .62% and Institutional Service shares would be .87%.
The table below shows the total expenses you would pay on a $10,000 investment
over one-, three-, five- and ten-year periods. The example is intended to help
you compare the cost of investing in this Fund versus other mutual funds and is
for illustration only. The example assumes a 5% average annual return and that
you reinvest all of your dividends. Your actual costs may be higher or lower.
Example of Fund Expenses
Institutional Institutional Service
After 1 year $74 $99
After 3 years $230 $309
After 5 years $401 $535
After 10 years $1,000 $1,190
SELECT FIXED INCOME FUNDS 11
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
- --------------------------------------------------------------------------------
Select International Bond Fund
FUND FACTS:
Goal:
. Current Income
. Capital Appreciation
Principal Investment:
. Investment Grade Debt Obligations of Foreign Issuers
Classes of Shares Offered in this Prospectus:
. Institutional
. Institutional Service
Investment Advisor:
. First International Advisers, Ltd.
Portfolio Manager:
. George McNeill
Dividend Payment Schedule:
Quarterly
[GRAPHIC APPEARS HERE]
INVESTMENT GOAL
The Fund seeks capital appreciation and current income.
[GRAPHIC APPEARS HERE]
INVESTMENT STRATEGY
The following supplements the investment strategies discussed in the "Overview"
on page 1.
The Fund will invest at least 65% of its total assets in securities or
obligations of supranational agencies (such as the World Bank) or issuers or
governments located in at least three countries other than the U.S. No more than
5% of the Fund's assets will be invested in debt obligations or similar
securities denominated in the currencies of developing countries. Up to 35% of
the Fund's total assets may be invested in mortgage and asset-backed securities
and/or bank obligations. The Fund currently expects to maintain a
dollar-weighted average maturity of five to ten years, and a duration of three
and one half to eight years.
The Fund may invest in high quality money market instruments in response to
adverse economic, political or market conditions. This strategy is inconsistent
with the Fund's principal investment strategy and investment goal, and if
employed could result in a lower return and loss of market opportunity.
[GRAPHIC APPEARS HERE]
RISK FACTORS
Your investment in the Fund is subject to the risks discussed in the "Overview"
on page 1 under the headings:
. Interest Rate Risk
. Credit Risk
. Foreign Investment Risk
. Mortgage-Backed Securities Risk
For further information regarding the Fund's investment strategy and risk
factors see "Other Fund Practices."
12 SELECT FIXED INCOME FUNDS
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
Performance
The following charts show how the Fund has performed in the past. Past
performance is not an indication of future results.
The chart below shows the percentage gain or loss for Institutional shares of
the Fund in each calendar year since the Institutional shares' inception on
12/15/1993. It should give you a general idea of how the Fund's return has
varied from year-to-year. This graph includes the effects of Fund expenses.
Year-by-Year Total Return for Institutional Shares (%)
[BAR CHART APPEARS HERE]
1989
1990
1991
1992
1993
1994 -9.81
1995 17.68
1996 5.61
1997 3.72
1998 8.97
Best Quarter: 1st Quarter 1995 5.50%
Worst Quarter: 1st Quarter 1994 -5.96%
Year to date total return through 3/31/1999 is -.84%.
The next table lists the Fund's average year-by-year return by class over one
and five years and since inception (through 12/31/1998). This table is intended
to provide you with some indication of the risks of investing in the Fund. At
the bottom of the table you can compare this performance with the J.P. Morgan
Global Government Bond Non-US Index, which is an index which calculates total
return based on gross price (clean price plus accrued interest) and assumes that
a coupon received in one currency is immediately reinvested back into the bonds
in that country's index; it is not an actual investment.
Average Annual Total Return
(for the period ended 12/31/1998)
Inception Performance
Date 1 year 5 year 10 year Since
of Class 12/15/1993
Institutional 12/15/1993 8.97% 4.85% N/A 4.93%
Institutional
Service 12/15/1993 8.68% 4.59% N/A 4.67%
JP Morgan Global
Government
Bond Non-US Index 18.28% 8.77% 8.75% 8.77%
[GRAPHIC APPEARS HERE]
Expenses
This section describes the fees and expenses you would pay if you bought and
held shares of the Fund.
You pay no shareholder transaction fees.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management 12b-1 Other Total Fund
Fees Fees Expenses Operating Expenses++
Institutional .60% .00% .62% 1.22%
Institutional
Service .60% .25% .61% 1.46%
+Actual for the fiscal period ended 9/30/1998.
+From time to time, the Fund's investment advisor may, at its discretion, reduce
or waive its fees or reimburse the Fund for certain of its expenses in order to
reduce expense ratios. The Fund's investment advisor may cease these waivers or
reimbursements at any time. The annual operating expenses do not reflect fee
waivers and expense reimbursements. Including current fee waivers and expense
reimbursements, Total Fund Operating Expenses for the Institutional shares would
be .76% and Institutional Service shares would be 1.00%.
The table below shows the total expenses you would pay on a $10,000 investment
over one-, three-, five- and ten-year periods. The example is intended to help
you compare the cost of investing in this Fund versus other mutual funds and is
for illustration only. The example assumes a 5% average annual return and that
you reinvest all of your dividends. Your actual costs may be higher or lower.
Example of Fund Expenses
Institutional Institutional Service
After 1 year $124 $149
After 3 years $387 $462
After 5 years $670 $797
After 10 years $1,476 $1,746
SELECT FIXED INCOME FUNDS 13
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
- --------------------------------------------------------------------------------
Select Limited Duration Fund
FUND FACTS:
Goal:
. Current Income
. Preservation of Capital
Principal Investments:
. Investment Grade Debt Securities
. U.S. Treasury and Agency Obligations
. Mortgage and Asset-Backed Securities
. Foreign Securities
Classes of Shares Offered in this Prospectus:
. Institutional
. Institutional Service
Investment Advisor:
. Evergreen Investment Management
Portfolio Managers:
. David Fowley
. Sam C. Paddison
. Andrew C. Zimmerman
NASDAQ Symbols:
ESDIX (Institutional)
ESDSX (Institutional Service)
Dividend Payment Schedule:
Monthly
[GRAPHIC APPEARS HERE]
Investment Goal
The Fund seeks to provide current income consistent with preservation of capital
and low principal fluctuation.
[GRAPHIC APPEARS HERE]
Investment Strategy
The following supplements the investment strategies discussed in the "Overview"
on page 1.
The Fund normally invests at least 65% of its assets in investment grade debt
securities, including debt securities issued or guaranteed by the U.S. Treasury
or by an agency or instrumentality of the U.S. government. In addition, the Fund
may invest in municipal and foreign securities. By emphasizing the use of high
quality corporate, mortgage and asset-backed securities maturing in less than
five years, the Fund seeks to provide investors a high level of current income
while reducing price volatility.
The Fund may invest in high quality money market instruments in response to
adverse economic, political or market conditions. This strategy is inconsistent
with the Fund's principal investment strategy and investment goal, and if
employed could result in a lower return and loss of market opportunity.
[GRAPHIC APPEARS HERE]
Risk Factors
Your investment in the Fund is subject to the risks discussed in the "Overview"
on page 1 under the headings:
. Interest Rate Risk
. Credit Risk
. Mortgage-Backed Securities Risk
. Foreign Investment Risk
For further information regarding the Fund's investment strategy and risk
factors see "Other Fund Practices."
14 SELECT FIXED INCOME FUNDS
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
PERFORMANCE
The following charts show how the Fund has performed in the past. Past
performance is not an indication of future results.
The chart below shows the percentage gain or loss for Institutional shares of
the Fund in each calendar year since the Institutional shares' inception on
4/30/1994. It should give you a general idea of how the Fund's return has varied
from year-to-year. This graph includes the effects of Fund expenses.
Year-by-Year Total Return for Institutional Shares (%)*
1995 9.98
1996 4.25
1997 6.50
1998 6.27
Best Quarter: 2nd Quarter 1995 2.93%*
Worst Quarter: 1st Quarter 1996 -0.03%*
Year to date total return through 3/31/1999 is .85%.
The next table lists the Fund's average annual total return by class over the
past year and since inception (through 12/31/1998). This table is intended to
provide you with some indication of the risks of investing in the Fund. At the
bottom of the table you can compare this performance with the Merrill Lynch 1-3
Year Treasury Bond Index, which is a subset of the Merrill Lynch Treasury Master
Index with a maturity range of between one to three years; it is not an actual
investment.
Average Annual Total Return
(for the period ended 12/31/1998)*
Inception Performance
Date Since
of Class 1 year 5 year 10 year 4/30/1994
-------- ------ ------ ------- -------
Institutional 4/30/1994 6.27% N/A N/A 6.13%
Institutional
Service 7/28/1998 6.13% N/A N/A 5.89%
Merrill Lynch 1-3 year
Treasury Bond Index 7.00% 5.99% 7.37% 6.62%**
*Fund performance information includes the performance of the Fund's predecessor
common trust fund for periods before the Fund's registration statement became
effective on 11/21/1997. Performance for the common trust fund has been adjusted
to include the effect of estimated mutual fund class gross expense ratios at the
time the Fund was converted to a mutual fund. If fee waivers and expense
reimbursements had been calculated into the mutual fund class expense ratio the
total returns would be as follows: Institutional - since 4/30/1994=6.34%;
Institutional Service - since 4/30/1994=6.11%. The Institutional Service share
performance information for the period from 11/24/1997 through 7/28/1998 (class
inception date) is based upon the historical performance of the Institutional
shares and therefore does not reflect 12b-1 fees. If 12b-1 fees had been
included, performance for the Institutional Service shares for this period would
be lower.
** Performance since 7/28/1998 is 3.37%.
[GRAPHIC APPEARS HERE]
EXPENSES
This section describes the fees and expenses you would pay if you bought and
held shares of the Fund.
You pay no shareholder transaction fees.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)+
Management 12b-1 Other Total Fund
Fees Fees Expenses Operating Expenses++
Institutional .30% .00% .17% .47%
Institutional
Service .30% .25% .17% .72%
+Estimated for the fiscal year ending 9/30/1999.
+From time to time, the Fund's investment advisor may, at its discretion, reduce
or waive its fees or reimburse the Fund for certain of its expenses in order to
reduce expense ratios. The Fund's investment advisor may cease these waivers or
reimbursements at any time. The annual operating expenses do not reflect fee
waivers and expense reimbursements. Including current fee waivers and expense
reimbursements, Total Fund Operating Expenses for the Institutional shares would
be .30% and Institutional Service shares would be .55%.
The table below shows the total expenses you would pay on a $10,000 investment
over one-, three-, five- and ten-year periods. The example is intended to help
you compare the cost of investing in this Fund versus other mutual Funds and is
for illustration only. The example assumes a 5% average annual return and that
you reinvest all of your dividends. Your actual costs may be higher or lower.
Example of Fund Expenses
Institutional Institutional Service
After 1 year $48 $74
After 3 years $151 $230
After 5 years $263 $401
After 10 years $591 $894
SELECT FIXED INCOME FUNDS 15
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
Select Total Return
Bond Fund
FUND FACTS:
Goal:
. Maximize Total Return
Principal Investments:
. Investment Grade Debt Securities
. U.S. Treasury and Agency Obligations
. Mortgage-Backed Securities
Classes of Shares Offered in this Prospectus:
. Institutional
. Institutional Service
Investment Advisor:
. Evergreen Investment Management
Sub-Advisor:
. First International Advisors, Ltd.
Portfolio Managers:
. Rollin C. Williams
. Richard Cryan
NASDAQ Symbols:
ESTIX (Institutional)
ESTSX (Institutional Service)
Dividend Payment Schedule:
Monthly
[GRAPHIC APPEARS HERE]
INVESTMENT GOAL
The Fund seeks to maximize total return through a combination of current income
and capital appreciation, by investing primarily in investment grade fixed
income securities with complementary investments in high yield foreign and fixed
income securities.
[GRAPHIC APPEARS HERE]
INVESTMENT STRATEGY
The following supplements the investment strategies discussed in the "Overview"
on page 1.
The Fund pursues a controlled risk approach which uses duration adjustments,
sector composition and security selection in an effort to exceed the return of
its benchmark, the Lehman Brothers Aggregate Bond Index. The Fund currently
expects the dollar-weighted average maturity of its investments to range from
three to eight years. The Fund invests at least 65% of its assets in investment
grade debt securities, including debt securities issued or guaranteed by the
U.S. Treasury or by an agency or instrumentality of the U.S. government. In
addition, the Fund may invest in foreign securities and mortgage and
asset-backed securities. Up to 35% of the Fund's total assets may be invested in
below investment grade corporate debt securities, and foreign bonds, including
non-dollar denominated bonds.
The Fund may invest in high quality money market instruments in response to
adverse economic, political or market conditions. This strategy is inconsistent
with the Fund's principal investment strategy and investment goal, and if
employed could result in a lower return and loss of market opportunity.
[GRAPHIC APPEARS HERE]
RISK FACTORS
Your investment in the Fund is subject to the risks discussed in the "Overview"
on page 1 under the headings:
. Interest Rate Risk
. Credit Risk
. Mortgage-Backed Securities Risk
. Foreign Investment Risk
. Below Investment Grade Bond Risk
For further information regarding the Fund's investment strategy and risk
factors see "Other Fund Practices."
16 SELECT FIXED INCOME FUNDS
<PAGE>
- --------------------------------------------------------------------------------
Evergreen
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
Performance
The total return for Institutional shares of the Fund in the calendar period
since the Institutional shares' inception on 4/20/1998 is 3.13%. Past
performance is not an indication of future results.
Year to date total return through 3/31/1999 is 68%.
[GRAPHIC APPEARS HERE]
Expenses
This section describes the fees and expenses you would pay if you bought and
held shares of the Fund.
You pay no shareholder transaction fees.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)*
Management 12b-1 Other Total Fund
Fees Fees Expenses Operating Expenses**
Institutional .40% .00% .15% .55%
Institutional
Service .40% .25% .15% .80%
*Estimated for the fiscal year ending 9/30/1999.
*From time to time, the Fund's investment advisor may, at its discretion, reduce
or waive its fees or reimburse the Fund for certain of its expenses in order to
reduce expense ratios. The Fund's investment advisor may cease these waivers or
reimbursements at any time. The annual operating expenses do not reflect fee
waivers and expense reimbursements. Including current fee waivers and expense
reimbursements, Total Fund Operating Expenses for the Institutional shares would
be .50% and Institutional Service shares would be .75%.
The table below shows the total expenses you would pay on a $10,000 investment
over one- and three-year periods. The example is intended to help
you compare the cost of investing in this Fund versus other mutual funds and is
for illustration only. The example assumes a 5% average annual return and that
you reinvest all of your dividends. Your actual costs may be higher or lower.
Example of Fund Expenses
Institutional Institutional Service
After 1 year $56 $82
After 3 years $176 $255
select fixed income funds 17
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
THE FUNDS' INVESTMENT ADVISORS
Each investment advisor manages a Fund's investments and supervises its daily
business affairs. There are three different investment advisors for the
Evergreen Select Fixed Income Funds. All investment advisors for the Evergreen
Funds are subsidiaries of First Union Corporation, the sixth largest bank
holding company in the United States, with over $237.4 billion in consolidated
assets as of 12/31/98. First Union Corporation is located at 301 South College
Street, Charlotte, North Carolina 28288-0013.
Tattersall Advisory Group, Inc. (TAG) is the investment advisor to:
. Select Core Bond Fund
TAG is a subsidiary of First Union National Bank. TAG has been managing mutual
funds and private accounts since 1976 and currently manages $5.3 billion in
assets. TAG is located at 6802 Paragon Place, Suite 200, Richmond, Virginia
23230.
Evergreen Investment Management Company (EIMC) is the investment advisor to:
. Select Adjustable Rate Fund
EIMC has been managing mutual funds and private accounts since 1932 and
currently manages over $8.9 billion in assets for 25 of the Evergreen Funds.
EIMC is located at 200 Berkeley Street, Boston, Massachusetts 02116-5034.
Evergreen Investment Management (EIM) is the investment advisor to:
. Select Fixed Income Fund
. Select Income Plus Fund
. Select Intermediate Term Municipal Bond Fund
. Select Limited Duration Fund
. Select Total Return Fund
EIM (also known as First Capital Group, or FCG), a division of First Union
National Bank (FUNB), has been managing mutual funds and private accounts since
1932 and currently manages $32.9 billion in assets for 43 of the Evergreen
Funds. EIM is located at 201 South College Street, Charlotte, North Carolina
28288-0630.
First International Advisers, Ltd. (FIA) is the investment advisor to:
. Select International Bond Fund and the sub-advisor to:
. Select Total Return Bond Fund
FIA (formerly known as Analytic . TSA International, Inc.) was acquired by FUNB
on August 28, 1998. FIA currently manages approximately $58 million in assets
for two of the Evergreen Funds. FIA is located at 25/28 Old Burlington Street,
London W1X 1LB, England.
Year 2000 Compliance
The investment advisors and other service providers for the Evergreen Funds are
taking steps to address any potential Year 2000-related computer problems.
However, there is some risk that these problems could disrupt the Funds'
operations or financial markets generally. In addition, issuers of securities,
especially foreign issuers, in which the Funds invest may be adversely affected
by Year 2000 problems. Such problems could negatively impact the value of the
Funds' securities.
European Currency Conversion Risk
Certain countries in Europe converted their different currencies to a single,
common currency on January 1, 1999. In connection with this change, investment
advisors, mutual funds and their service providers have modified their
accounting and recordkeeping systems to handle the new currency. Your investment
in the Fund may be adversely affected if these technical modifications have not
been implemented properly. Also, the conversion to a single currency may impair
the markets for securities denominated in the currencies eliminated, which may
also adversely impact your investment.
THE FUNDS' PORTFOLIO MANAGERS
Select Adjustable Rate Fund
Gary E. Pzegeo has been a Vice President and portfolio manager since 1997 and
has been a portfolio manager of the Fund since April 1997. Mr. Pzegeo has been
an investment professional at EIMC since 1990.
Select Core Bond Fund
The day-to-day management of Select Core will be handled by a committee composed
of fixed income portfolio management professionals, with each portfolio
professional responsible for designated specific sectors of the fixed income
market.
18 SELECT FIXED INCOME FUNDS
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
Select Fixed Income Fund
Thomas L. Ellis has been the portfolio manager of the Fund since November 1997.
Mr. Ellis has over 29 years of experience in investments. Since joining EIM in
1985, Mr. Ellis has been a Vice President and senior portfolio manager. At EIM
he is responsible for the portfolio management of over $1 billion in taxable
fixed income assets, including the Fund and Evergreen Short-Intermediate Bond
Fund, and 22 separate accounts.
Select Income Plus Fund
George Prattos has been a portfolio manager of the Fund since November 1997. Mr.
Prattos has over 18 years of investment experience. Since joining EIM in 1991,
Mr. Prattos has been a Vice President and Director of the Specialty Fixed Income
Group. He is primarily responsible for managing specialty fixed income products
throughout the EIM system. Mr. Prattos became a Senior Vice President of EIM in
1997.
J.P. Weaver has been a portfolio manager of the Fund since November 1997. Mr.
Weaver has over 14 years of market experience in fixed income investments. Since
joining EIM in 1994, Mr. Weaver has been a Vice President and Director of Fixed
Income Research. In addition, he manages several separate accounts within the
Specialty Fixed Income Group.
Select Intermediate Term Municipal Bond Fund
Richard K. Marrone has been a portfolio manager of the Fund since November 1997.
Mr. Marrone has over 15 years of investment and market experience. Since joining
EIM in 1993, Mr. Marrone has been a Vice President and senior portfolio manager.
Select International Bond Fund
George McNeill has been Managing Director of FIA since 1992. Prior to joining
FIA, he served as Director for Axe-Houghton, Ltd. From 1989 to 1992. Mr. McNeill
has been a portfolio manager of the Fund since December 1993.
Select Limited Duration Fund
David K. Fowley, CFA, has been a portfolio manager of the Fund since November
1997. Mr. Fowley has over 5 years of investment experience. Mr. Fowley joined
EIM in July 1992 as a Trust Investment Associate before becoming a Trust
Investment Officer in October 1994. Prior to becoming an Assistant Vice
President and portfolio manager of EIM in October 1997, Mr. Fowley served as a
Trust Investment Officer from 1994 to 1997.
Sam C. Paddison has been a portfolio manager of the Fund since November 1998.
Mr. Paddison has over 25 years of institutional investment experience. Since
joining EIM in 1996, Mr. Paddison has been Senior Vice President and Managing
Director of the Specialty Fixed Income Group-Northern Region. Prior to joining
EIM, Mr. Paddison was Head of Strategic Asset and Liability Management for First
Fidelity Bank from 1987 to 1996.
Andrew C. Zimmerman has been a portfolio manager of the Fund since November
1998. Mr. Zimmerman joined EIM in 1992 as an Investment Officer of the Specialty
Fixed Income Group.
Select Total Return Fund
Rollin Williams, CFA, and Sr. Vice President of EIM, has been a portfolio
manager of the Fund since April 1998. Mr. Williams has over 29 years of
investment and banking management experience. In addition to managing EIM's
Diversified Bond Group Trust, Stable Portfolio Group Trust, Evergreen U.S.
Government Fund and bond management for the Evergreen Select Balanced Fund, he
is also responsible for the management of over $2.2 billion in fixed income
portfolios. Mr. Williams was the head of fixed income investment at Dominion
Trust Company in Roanoke, VA, from 1988 until 1993, at which time Dominion was
acquired by FUNB and Mr. Williams was named Vice President and senior portfolio
manager.
Richard Cryan, Vice President and senior portfolio manager, has been managing
the Fund since April 1998. Mr. Cryan has been employed, as a portfolio manager
of EIM since June 1994, and as an analyst from April 1992 to June 1994, by EIM
since April 1992.
Investment decisions for the foreign bond component of the Fund are made by a
committee of three investment professionals at FIA.
CALCULATING THE SHARE PRICE
The value of one share of a Fund, also known as the net asset value, or NAV, is
calculated on each day the New York Stock Exchange is open as of the time the
Exchange closes (normally 4:00 p.m. Eastern time). We calculate the share price
for each share by adding up
SELECT FIXED INCOME FUNDS 19
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
the total assets of the Fund, subtracting all liabilities, then dividing the
result by the total number of shares outstanding. Each class of shares is
calculated separately. Each security held by a Fund is valued using the most
recent market quote for that security. If no market quotation is available
for a given security, we will price that security at fair value according to
policies established by the Fund's Board of Trustees. Short-term securities
with maturities of 60 days or less will be valued on the basis of amortized
cost.
The price per share you pay for a Fund purchase or the amount you receive for a
Fund redemption is based on the next price calculated after the order is
received and all required information is provided. The value of your account at
any given time is the latest share price multiplied by the number of shares you
own. Your account balance may change daily because the share price may change
daily.
How To Choose AN EVERGREEN Fund
When choosing an Evergreen Fund, you should:
. Most importantly, read the prospectus to see if the Fund is suitable for
you.
. Consider talking to an investment professional. He or she is qualified to
give you investment advice based on your investment goals and financial
situation and will be able to answer questions you may have after reading
the Fund's prospectus. He or she can also assist you through all phases of
opening your account.
. Request any additional information you want about the Fund, such as the
Statement of Additional Information, Annual Report or Semi-annual Report by
calling 1-800-343-2898.
HOW TO CHOOSE THE SHARE CLASS THAT BEST SUITS YOU
After choosing a Fund, you select a share class. All of the Funds offer two
different institutional classes. Each institutional class of shares has its own
expenses. Pay particularly close attention to this fee structure so you know how
much you will be paying before you invest.
Each class of shares is sold without a front-end sales charge or contingent
deferred sales charge. Institutional Service shares pay an ongoing service fee.
The minimum initial investment in either class of shares is $1 million, which
may be waived in certain situations. There is no minimum amount required for
subsequent purchases.
The Institutional Service shares have adopted a distribution plan which provides
for the payment of an annual service fee of up to 0.25% of the average daily net
assets of the class for personal service rendered to shareholders and/or the
maintenance of accounts. As a result, income distributions paid by the Fund with
respect to Institutional Service shares will generally be less than those paid
with respect to Institutional shares.
20 SELECT FIXED INCOME FUNDS
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
Institutional investors may buy shares through broker-dealers, banks and certain
other financial intermediaries, or directly through the Funds' distributor
Evergreen Distributor, Inc. (EDI).
Method
By Phone
Opening an Account
. Call 1-800-343-2898 to set up an account number and get wiring instructions
(call before 12 noon if you want wired funds to be credited that day).
. Instruct your bank to wire or transfer your purchase (they may charge a
wiring fee).
. Complete the account application and mail to:
Evergreen Service Company Overnight Address:
P.O. Box 2121 Evergreen Service Company
Boston, MA 02106-2121 200 Berkeley St.
Boston, MA 02116
. Wires received after 4 p.m. Eastern time on market trading days will
receive the next market day's closing price.***
Adding to an Account
. Call the Evergreen Express Line* at 1-800-346-3858 24 hours a day or
1-800-343-2898 between 8 a.m. and 6 p.m. Eastern time, on any business day.
. If your bank account is set up on file, you can request either:
- Federal Funds Wire (offers immediate access to funds) or
- Electronic transfer through the Automated Clearing House which avoids
wiring fees.
By Exchange
. You can make an additional investment by exchange from an existing
Evergreen Fund's account by contacting your investment representative or
calling the Evergreen Express Line* at 1-800-346-3858.**
. You can only exchange shares within the same class.
. There is no sales charge or redemption fee when exchanging funds within the
Evergreen Fund's family.
. Orders placed before 4 p.m. Eastern time on market trading days will
receive that day's closing share price (if not, you will receive the next
market day's closing price).
. Exchanges are limited to three per calendar quarter, but in no event no
more than five per calendar year.
. Exchanges between accounts that do not have identical ownership must be in
writing with a signature guarantee (see below).
SELECT FIXED INCOME FUNDS 21
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
We offer you several convenient ways to redeem your shares in any of the
Evergreen Funds:
Methods
Call Us
Requirements
. Call the Evergreen Express Line* at 1-800-346-3858 24 hours a day or
1-800-343-2898 between 8 a.m. and 6 p.m. Eastern time, on any business day.
. This service must be authorized ahead of time, and is only available for
regular accounts.**
. All authorized requests made before 4 p.m. Eastern time on market trading
days will be processed at that day's closing price. Requests after 4 p.m.
will be processed the following business day.
. We can either:
- wire the proceeds into your bank account (service charges may apply)
- electronically transmit the proceeds to your bank account via the
Automated Clearing House service
- mail you a check.
. All telephone calls are recorded for your protection. We are not
responsible for acting on telephone orders we believe are genuine.
. See exceptions list below for requests that must be made in writing.
Write Us
. You can mail a redemption request to:
Evergreen Service Company Overnight Address:
P.O. Box 2121 Evergreen Service Company
Boston, MA 02106-2121 200 Berkeley St.
Boston, MA 02116
. Your letter of instructions must:
- list the Fund name and the account number
- indicate the number of shares or dollar value you wish to redeem
- be signed by the registered owner(s)
. See exceptions list below for requests that must be signature guaranteed.
Redeem Your Shares in Person
. You may also redeem your shares through participating broker-dealers by
delivering a letter as described above to your broker-dealer.
. A fee may be charged for this service.
* The Evergreen Express Line is only available to Institutional Service shares.
**Once you have authorized either the telephone exchange or redemption service,
anyone with a Personal Identification Number (PIN) and the required account
information (including your broker) can request a telephone transaction in your
account. All calls are recorded or monitored for verification, recordkeeping and
quality-assurance purposes. The Evergreen Funds reserve the right to terminate
the exchange privilege of any shareholder who exceeds the listed maximum number
of exchanges, as well as to reject any large dollar exchange if placing it
would, in the judgment of the portfolio manager, adversely affect the price of
the Fund.
***The Fund's shares may be made available through financial service firms who
have a service agreement with the Fund, which are also investment dealers. The
Fund has approved the acceptance of purchase and repurchase request orders
effective as of the time of their receipt by certain authorized financial
intermediaries.
Timing of Proceeds
Normally, we will send your redemption proceeds on the next business day after
we receive your request; however, we reserve the right to wait up to seven
business days to redeem any investments made by check and five business days for
investments made by Automated Clearing House transfer. We also reserve the right
to redeem in kind by paying you the proceeds of a redemption in securities
rather than in cash, and to redeem the remaining amount in the account if your
redemption brings the account balance below the initial minimum of $1,000,000.
Exceptions: Redemption Requests That Require A Signature Guarantee
To protect you and Evergreen Funds against fraud, certain redemption requests
must be made in writing with your signature guaranteed. A signature guarantee
can be obtained at most banks and securities dealers. A notary public is not
authorized to provide a signature guarantee. The following circumstances require
signature guarantees:
. You want the proceeds transmitted to a bank account not listed on the
account
. You want the proceeds payable to anyone other than the registered owner(s)
of the account
. Either your address or the address of your bank account has been changed
within 30 days
Who Can Provide A Signature Guarantee:
. Commercial Bank
. Trust Company
. Savings Association
. Credit Union
. Member of a U.S. stock exchange
22 SELECT FIXED INCOME FUNDS
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
OTHER SERVICES
Evergreen Express Line
(Institutional Service shares only)
Use our automated, 24-hour service to check the value of your investment in a
Fund; purchase, redeem or exchange Fund shares; find a Fund's price, yield or
total return; order a statement or duplicate tax form; or hear market commentary
from Evergreen portfolio managers.
Automatic Reinvestment of Dividends
For the convenience of investors, all dividends and capital gains distributions
are automatically reinvested, unless you request otherwise. Distributions can be
made by check or electronic transfer through the Automated Clearing House to
your bank account. The details of your dividends and other distributions will be
included on your statement.
Telephone Investment Plan
You may make additional investments electronically in an existing Fund account.
Telephone requests received by 4:00 p.m. Eastern time will be invested the day
the request is received.
Dividend Exchange
You may elect on the application to reinvest capital gains and/or dividends
earned in one Evergreen Fund into an existing account in another Evergreen Fund
in the same share class -- automatically. Please indicate on the application the
Evergreen Fund(s) into which you want to invest the distributions.
Reinvestment Privileges
Under certain circumstances, shareholders may, within one year of redemption,
reinstate their accounts at the current price (NAV).
THE TAX CONSEQUENCES OF INVESTING IN THE FUNDS
You may be taxed in two ways:
. On Fund distributions (capital gains and dividends)
. On the profit you make when you sell any or all of your shares.
Fund Distributions
A mutual fund passes along to all of its shareholders the net income or profits
it receives from its investments. The shareholders of the Fund then pay any
taxes due, whether they receive these distributions in cash or elect to have
them reinvested. The Select Intermediate Term Municipal Bond Fund expects that
substantially all of their regular dividends will be exempt from federal income
tax. Otherwise, the Funds will distribute two types of taxable income to you:
. Dividends. To the extent that regular dividends are derived from interest
that is not tax exempt, or from short-term capital gains, you will have to
include them in your federal taxable income. Each Fund pays either a
monthly, quarterly or yearly dividend from the dividends, interest and
other income on the securities in which it invests. The frequency of
dividends for the Fund is listed under the Fund Facts section in the
summary of the Fund previously presented.
. Capital Gains. When a mutual fund sells a security it owns for a profit,
the result is a capital gain. Evergreen Select Fixed Income Funds generally
distribute capital gains at least once a year, near the end of the calendar
year. Short-term capital gains reflect securities held by the Fund for a
year or less and are considered ordinary income just like dividends.
Profits on securities held longer than 12 months are considered long-term
capital gains and are taxed at a special tax rate (20% for most taxpayers,
on sales made after January 1, 1998).
Dividend and Capital Gain Reinvestment
Unless you choose otherwise on the account application, all dividend and capital
gain payments will be reinvested to buy additional shares. Distribution checks
that are returned and distribution checks that are uncashed when the shareholder
has failed to respond to mailings from the shareholder servicing agent will
automatically be reinvested to buy additional shares.
No interest will accrue on amounts represented by uncashed distribution or
redemption checks.
We will send you a statement each January with the federal tax status of
dividends and distributions paid by each Fund during the previous calendar year.
Profits You Realize When You Redeem Shares
When you sell shares in a mutual fund, whether by redeeming or exchanging, you
have created a taxable event. You must report any gain or loss on your tax
SELECT FIXED INCOME FUNDS 23
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
return unless the transaction was entered into by a tax-deferred retirement plan
or occurred in a money market fund. It is your responsibility to keep accurate
records of your mutual fund transactions. You will need this information when
you file your income tax return, since you must report any capital gains or
losses you incur when you sell shares. Remember, an exchange is a purchase and a
sale for tax purposes.
Tax Reporting
Evergreen Service Company provides you with a tax statement of your dividend and
capital gains distributions for each calendar year on Form 1099 DIV. Proceeds
from a sale are reported on Form 1099B. You must report these on your tax
return. Since the IRS receives a copy as well, you could pay a penalty if you
neglect to report them.
Evergreen Service Company will send you a tax information guide each year during
tax season, which may include a cost basis statement detailing the gain or loss
on taxable transactions you had during the year. Please consult your own tax
advisor for further information regarding the federal, state and local tax
consequences of an investment in the Funds.
FEES AND EXPENSES OF THE FUNDS
Every mutual fund has fees and expenses that are assessed either directly or
indirectly. This section describes each of those fees.
Management Fee
The management fee pays for the normal expenses of managing the Fund, including
portfolio manager salaries, research costs, corporate overhead expenses and
related expenses.
12b-1 Fee
The Trustees of the Evergreen Funds have approved a policy to assess 12b-1 fees
for Institutional Service shares. These fees will increase the cost of your
investment. The Fund may use this fee as a "service fee" to pay broker-dealers
for additional shareholder services and/or the maintenance of accounts.
Other Expenses
Other expenses include miscellaneous fees from outside service providers. These
may include legal, audit, custodial and safekeeping fees, the printing and
mailing of reports and statements, automatic reinvestment of distributions and
other conveniences for which the shareholder pays no transaction fees.
Total Fund Operating Expenses
The total cost of running the Fund is called the expense ratio. As a
shareholder, you are not charged these fees directly; instead they are taken out
before the Fund's net asset value is calculated, and are expressed as a
percentage of the Fund's average daily net assets. The effect of these fees is
reflected in the performance results for that share class. Because these fees
are "invisible," investors should examine them closely in the prospectus,
especially when comparing one Fund with another fund in the same investment
category. There are three things to remember about expense ratios: 1) your total
return in the Fund is reduced in direct proportion to the fees; 2) expense
ratios can vary greatly between funds and fund families, from under 0.25% to
over 3.0%; and 3) the Fund's advisor may waive a portion of the Fund's expenses
for a time, reducing its expense ratio.
24 SELECT FIXED INCOME FUNDS
<PAGE>
[LOGO OF EVERGREEN APPEARS HERE]
FINANCIAL HIGHLIGHTS
This section looks in detail at the results for one share in each share class of
the Funds -- how much income it earned, how much of this income was passed along
as a distribution and how much the return was reduced by expenses. The tables
for Adjustable Rate Fund, except for the six months ended March 31, 1999, have
been derived from financial information audited by KPMG LLP, the Fund's
independent auditors. The International Bond Fund was formerly Global Bond Fund,
a portfolio of CoreFunds, Inc. The International Bond Fund information for the
periods ended June 30, 1994 to June 30, 1998 has
- --------------------------------------------------------------------------------
SELECT ADJUSTABLE RATE FUND
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
Six Months Ended Year Ended February 28, Year Ended September 30,
March 31, 1999 Year Ended ----------------------- ------------------------
(Unaudited) September 30, 1998 (a) 1998 1997 (b) 1996 # 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.68 $ 9.75 $ 9.71 $ 9.68 $ 9.65 $ 9.61 $ 9.93
======= ======= ======= ======= ======= ======= =======
...................................................................................................................................
Income from investment operations
...................................................................................................................................
Net investment income 0.30 0.35 0.64 0.28 0.64 0.63 0.63
...................................................................................................................................
Net realized and unrealized gains or
losses on securities (0.07) (0.07) 0.04 0++ 0 0.01 (0.49)
------- ------- ------- ------- ------- ------- -------
....................................................................................................................................
Total from investment operations 0.23 0.28 0.68 0.28 0.64 0.64 0.14
------- ------- ------- ------- ------- ------- -------
....................................................................................................................................
Distributions to shareholders from
....................................................................................................................................
Net investment income (0.30) (0.35) (0.64) (0.25) (0.61) (0.60) (0.46)
------- ------- ------- ------- ------- ------- -------
....................................................................................................................................
Net asset value, end of period $ 9.61 $ 9.68 $ 9.75 $ 9.71 $ 9.68 $ 9.65 $ 9.61
======= ======= ======= ======= ======= ======= =======
....................................................................................................................................
Total return 2.45% 2.88% 7.15% 2.97% 6.86% 6.87% 1.43%
....................................................................................................................................
Ratios and supplemental data
....................................................................................................................................
Net assets, end of period (thousands) $21,132 $23,174 $25,981 $70,264 $65,974 $23,616 $25,200
....................................................................................................................................
Ratios to average net assets
....................................................................................................................................
Expenses* 0.30%+ 0.33%+ 0.30% 0.30%+ 0.30% 0.30% 0.30%
....................................................................................................................................
Net investment income 6.23%+ 6.12%+ 6.63% 6.79%+ 6.84% 6.61% 5.15%
....................................................................................................................................
Portfolio turnover rate 29% 46% 107% 44% 85% 56% 63%
....................................................................................................................................
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
INSTITUTIONAL SERVICE SHARES
<TABLE>
<CAPTION>
Six Months Ended Year Ended February 28, Year Ended September 30,
March 31, 1999 Year Ended ----------------------- -------------------------
(Unaudited) September 30, 1998 (a) 1998 1997 (b) 1996 1995 1994 (c)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.68 $ 9.76 $ 9.72 $ 9.68 $ 9.65 $ 9.61 $ 9.73
======= ======= ======= ======= ======= ======= =======
...................................................................................................................................
Income from investment operations
...................................................................................................................................
Net investment income 0.28 0.33 0.59 0.28 0.65# 0.64 0.17
...................................................................................................................................
Net realized and unrealized gains or
losses on securities (0.06) (0.08) 0.06 0++ (0.03) (0.02) (0.13)
------- ------- ------- ------- ------- ------ ------
...................................................................................................................................
Total from investment operations 0.22 0.25 0.65 0.28 0.62 0.62 0.04
------- ------- ------- ------- ------- ------ ------
...................................................................................................................................
Distributions to shareholders from
...................................................................................................................................
Net investment income (0.29) (0.33) (0.61) (0.24) (0.59) (0.58) (0.16)
------- ------- ------- ------- ------- ------ ------
...................................................................................................................................
Net asset value, end of period $ 9.61 $ 9.68 $ 9.76 $ 9.72 $ 9.68 $ 9.65 $ 9.61
======= ======= ======= ======= ======= ======= =======
....................................................................................................................................
Total return 2.33% 2.63% 6.89% 2.97% 6.60% 6.60% 0.35%
....................................................................................................................................
Ratios and supplemental data
....................................................................................................................................
Net assets, end of period (thousands) $12,998 $ 9,645 $10,320 $ 3,564 $14,361 $ 2,871 $ 1
....................................................................................................................................
Ratios to average net assets
....................................................................................................................................
Expenses* 0.55%+ 0.57%+ 0.55% 0.55%+ 0.55% 0.55% 0.43%+
....................................................................................................................................
Net investment income 6.02%+ 5.82%+ 6.15% 6.39%+ 6.64% 6.70% 5.03%+
....................................................................................................................................
Portfolio turnover rate 29% 46% 107% 44% 85% 56% 63%
....................................................................................................................................
</TABLE>
(a) For the seven months ended September 30, 1998. The Fund changed its fiscal
year end from the last day of February to September 30, effective September
30, 1998.
(b) For the five months ended February 28, 1997. The Fund changed its fiscal
year end from September 30 to the last day of February, effective February
28, 1997.
(c) For the period from May 23, 1994 (commencement of class operations) to
September 30, 1994.
# Net investment income is based on weighted average shares throughout the
period.
+ Annualized.
++ Amount represents less than $0.01 per share.
* The ratio of expenses to average net assets excludes fee credits but
includes fee waivers.
SELECT FIXED INCOME FUNDS 25
<PAGE>
[LOGO OF EVERGREEN APPEARS HERE]
been audited by Ernst & Young LLP, independent auditors. The International
Bond Fund information for the period ended September 30, 1998, as well as the
tables for each of the other Funds, except for the six months ended March 31,
1999, have been derived from financial statements audited by
PricewaterhouseCoopers LLP, the Funds' independent accountants. The Select Core
Bond Fund information has been derived from financial statements audited by
Tait, Weller & Baker, independent accountants. The information for each Fund
except Core Bond Fund for the six months ended March 31, 1999 is unaudited and
has been derived from the financial statements and notes thereto incorporated by
reference into the Statement of Additional Information. For a more complete
picture of the Funds' financial statements, please see the Funds' Annual Report
as well as the Statement of Additional Information.
- --------------------------------------------------------------------------------
SELECT CORE BOND FUND
INSTITUTIONAL SHARES*
<TABLE>
<CAPTION>
Years Ended March 31,
--------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $ 10.83 $ 10.26 $ 10.39 $ 9.97 $ 10.15
======== ======= ======= ======= =======
...............................................................................
Income from investment operations
...............................................................................
Net investment income 0.61 0.58 0.68 0.70 0.62
...............................................................................
Net realized and unrealized gains
(losses) on investments 0.09 0.63 (0.12) 0.41 (0.18)
-------- ------- ------- ------- -------
...............................................................................
Total from investment operations 0.70 1.21 0.56 1.11 0.44
-------- ------- ------- ------- -------
...............................................................................
Less distributions
...............................................................................
Dividends from net investment
income (0.63) (0.64) (0.69) (0.69) (0.62)
...............................................................................
Distributions from net realized
gains (0.22) -- -- -- --
-------- ------- ------- ------- -------
...............................................................................
Total distributions (0.85) (0.64) (0.69) (0.69) (0.62)
-------- ------- ------- ------- -------
...............................................................................
Net asset value, end of year $ 10.68 $ 10.83 $ 10.26 $ 10.39 $ 9.97
======== ======= ======= ======= =======
...............................................................................
Total return 6.53% 12.06% 5.52% 11.23% 4.56%
...............................................................................
Net assets, end of year (000's) $109,028 $96,250 $76,499 $74,774 $72,029
...............................................................................
Ratio of gross expenses to
average net assets 0.54% 0.53% 0.53% 0.56% 0.57%
...............................................................................
Ratio of net expenses to average
net assets (a) 0.50% 0.50% 0.50% 0.53% 0.53%
...............................................................................
Ratio of net investment income to
average net assets 5.73% 6.06% 6.48% 6.54% 6.28%
...............................................................................
Portfolio turnover rate 221% 235% 207% 268% 381%
...............................................................................
</TABLE>
- --------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES*
<TABLE>
<CAPTION>
Year Ended Period Ended
March 31, 1999 March 31, 1998 (b)
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 10.83 $ 10.69
======= =======
...............................................................................
Income from investment operations
...............................................................................
Net investment income 0.61 0.37
...............................................................................
Net realized and unrealized gains on
investments 0.07 0.08
------- -------
...............................................................................
Total from investment operations 0.68 0.45
------- -------
...............................................................................
Less distributions
...............................................................................
Dividends from net investment income (0.61) (0.31)
...............................................................................
Distributions from net realized gains (0.22) --
------- -------
...............................................................................
Total distributions (0.83) (0.31)
------- -------
...............................................................................
Net asset value, end of period $ 10.68 $ 10.83
======= =======
...............................................................................
Total return 6.37% 8.55%(d)
...............................................................................
Net assets, end of period (000's) $ 2,721 $ 3,069
...............................................................................
Ratio of gross expenses to average net
assets 0.69% 0.68%(d)
...............................................................................
Ratio of net expenses to average net
assets (c) 0.65% 0.65%(d)
...............................................................................
Ratio of net investment income to average
net assets 5.59% 5.96%(d)
...............................................................................
Portfolio turnover rate 221% 235%
...............................................................................
</TABLE>
(a) Ratios were determined based on net expenses after investment advisory fee
waivers for the years ended March 31, 1999 and 1998 and expense
reimbursements through a directed brokerage arrangement.
(b) Represents the period from the initial public offering of Service Group
Shares (October 2, 1997) through March 31, 1998.
(c) Ratios were determined based on net expenses after investment advisory fee
waivers and expense reimbursements through a directed brokerage arrangement.
(d) Annualized.
* On June 7, 1999, Tattersall Bond Fund exchanged substantially all of its net
assets for shares of Evergreen Select Core Bond Fund. Tattersall Bond Fund
is the accounting survivor and as such its basis of accounting for assets
and liabilities and its operating results for the periods prior to June 7,
1999 have been carried forward in these financial highlights.
26 SELECT FIXED INCOME FUNDS
<PAGE>
[LOGO OF EVERGREEN APPEARS HERE]
- --------------------------------------------------------------------------------
SELECT FIXED INCOME FUND
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
Six Months Ended
March 31, 1999 Period Ended
(Unaudited) September 30, 1998 (a)
- ------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 6.12 $ 5.96
======== ========
............................................................................
Income from investment operations
............................................................................
Net investment income 0.17 0.31
............................................................................
Net realized and unrealized gains or
losses on securities (0.16) 0.16
-------- --------
............................................................................
Total from investment operations 0.01 0.47
-------- --------
............................................................................
Distributions to shareholders from
............................................................................
Net investment income (0.17) (0.31)
-------- --------
............................................................................
Net asset value, end of period $ 5.96 $ 6.12
======== ========
............................................................................
Total return 0.23% 8.06%
............................................................................
Ratios and supplemental data
............................................................................
Net assets, end of period (thousands) $602,077 $668,907
............................................................................
Ratios to average net assets
Expenses* 0.49%+ 0.52%+
............................................................................
Net investment income 5.76%+ 5.99%+
............................................................................
Portfolio turnover rate 23% 46%
............................................................................
- ------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES
<CAPTION>
Six Months Ended
March 31, 1999 Period Ended
(Unaudited) September 30, 1998 (b)
- ------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 6.12 $ 5.97
======== ========
............................................................................
Income from investment operations
............................................................................
Net investment income 0.17 0.20
............................................................................
Net realized and unrealized gains or
losses on securities (0.16) 0.15
-------- --------
............................................................................
Total from investment operations 0.01 0.35
-------- --------
............................................................................
Distributions to shareholders from
............................................................................
Net investment income (0.17) (0.20)
-------- --------
............................................................................
Net asset value, end of period $ 5.96 $ 6.12
======== ========
............................................................................
Total return 0.11% 5.94%
............................................................................
Ratios and supplemental data
............................................................................
Net assets, end of period (thousands) $ 12,135 $ 9,808
............................................................................
Ratios to average net assets
Expenses* 0.74%+ 0.77%+
............................................................................
Net investment income 5.55%+ 5.65%+
............................................................................
Portfolio turnover rate 23% 46%
............................................................................
</TABLE>
(a) For the period from November 24, 1997 (commencement of operations) to
September 30, 1998.
(b) For the period from March 9, 1998 (commencement of class operations) to
September 30, 1998.
+ Annualized
* The ratio of expenses to average net assets excludes fee credits but
includes fee waivers.
SELECT FIXED INCOME FUNDS 27
<PAGE>
[LOGO OF EVERGREEN APPEARS HERE]
- --------------------------------------------------------------------------------
SELECT INCOME PLUS FUND
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
Six Months Ended
March 31, 1999 Period Ended
(Unaudited) September 30, 1998 (a)
- ------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 5.92 $ 5.72
========== ==========
............................................................................
Income from investment operations
............................................................................
Net investment income 0.17 0.30
............................................................................
Net realized and unrealized gains or
losses on securities (0.25) 0.20
---------- ----------
............................................................................
Total from investment operations (0.08) 0.50
---------- ----------
............................................................................
Distributions to shareholders from
............................................................................
Net investment income (0.17) (0.30)
............................................................................
Net realized gains (0.05) 0
---------- ----------
............................................................................
Total distributions to shareholders (0.22) (0.30)
---------- ----------
............................................................................
Net asset value, end of period $ 5.62 $ 5.92
========== ==========
............................................................................
Total return (1.34%) 8.99%
............................................................................
Ratios and supplemental data
............................................................................
Net assets, end of period (thousands) $1,294,116 $1,367,240
............................................................................
Ratios to average net assets
Expenses* 0.49%+ 0.51%+
............................................................................
Net investment income 5.86%+ 6.09%+
............................................................................
Portfolio turnover rate 26% 37%
............................................................................
- ------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES
<CAPTION>
Six Months Ended
March 31, 1999 Period Ended
(Unaudited) September 30, 1998 (b)
- ------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 5.92 $ 5.71
========== ==========
............................................................................
Income from investment operations
............................................................................
Net investment income 0.16 0.19
............................................................................
Net realized and unrealized gains or
losses on securities (0.25) 0.21
---------- ----------
............................................................................
Total from investment operations (0.09) 0.40
---------- ----------
............................................................................
Distributions to shareholders from
............................................................................
Net investment income (0.16) (0.19)
............................................................................
Net realized gains (0.05) 0
---------- ----------
............................................................................
Total distributions to shareholders (0.21) (0.19)
---------- ----------
............................................................................
Net asset value, end of period $ 5.62 $ 5.92
========== ==========
............................................................................
Total return (1.46%) 7.21%
............................................................................
Ratios and supplemental data
............................................................................
Net assets, end of period (thousands) $ 9,748 $ 7,528
............................................................................
Ratios to average net assets
Expenses* 0.74%+ 0.75%+
............................................................................
Net investment income 5.66%+ 5.80%+
............................................................................
Portfolio turnover rate 26% 37%
............................................................................
</TABLE>
(a) For the period from November 24, 1997 (commencement of operations) to
September 30, 1998.
(b) For the period from March 2, 1998 (commencement of class operations) to
September 30, 1998.
+ Annualized.
* The ratio of expenses to average net assets excludes fee credits but
includes fee waivers.
28 SELECT FIXED INCOME FUNDS
<PAGE>
[LOGO OF EVERGREEN APPEARS HERE]
- --------------------------------------------------------------------------------
SELECT INTERMEDIATE TERM MUNICIPAL BOND FUND
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
Six Months Ended
March 31, 1999 Period Ended
(Unaudited) September 30, 1998 (a)
- ------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 67.11 $ 64.84
======== ========
.............................................................................
Income from investment operations
.............................................................................
Net investment income 1.49 2.57
.............................................................................
Net realized and unrealized gains or
losses on securities (1.32) 2.27
-------- --------
.............................................................................
Total from investment operations 0.17 4.84
-------- --------
.............................................................................
Distributions to shareholders from
.............................................................................
Net investment income (1.49) (2.57)
-------- --------
.............................................................................
Net realized gains (0.89) 0
-------- --------
.............................................................................
Total distributions to shareholders (2.38) (2.57)
-------- --------
.............................................................................
Net asset value, end of period $ 64.90 $ 67.11
======== ========
.............................................................................
Total return 0.27% 7.61%
.............................................................................
Ratios and supplemental data
.............................................................................
Net assets, end of period (thousands) $724,569 $746,874
.............................................................................
Ratios to average net assets
Expenses* 0.58%+ 0.62%+
.............................................................................
Net investment income 4.52%+ 4.59%+
.............................................................................
Portfolio turnover rate 53% 47%
.............................................................................
- ------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES
<CAPTION>
Six Months Ended
March 31, 1999 Period Ended
(Unaudited) September 30, 1998 (b)
- ------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 67.11 $ 65.91
======== ========
............................................................................
Income from investment operations
............................................................................
Net investment income 1.40 1.66
............................................................................
Net realized and unrealized gains or
losses on securities (1.31) 1.20
-------- --------
............................................................................
Total from investment operations 0.09 2.86
-------- --------
............................................................................
Distributions to shareholders from
............................................................................
Net investment income (1.41) (1.66)
............................................................................
Net realized gains (0.89) 0
-------- --------
............................................................................
Total distributions to shareholders (2.30) (1.66)
-------- --------
............................................................................
Net asset value, end of period $ 64.90 $ 67.11
======== ========
............................................................................
Total return 0.15% 4.41%
............................................................................
Ratios and supplemental data
............................................................................
Net assets, end of period (thousands) $ 5,633 $ 4,736
............................................................................
Ratios to average net assets
Expenses* 0.83%+ 0.89%+
............................................................................
Net investment income 4.29%+ 4.35%+
............................................................................
Portfolio turnover rate 53% 47%
............................................................................
</TABLE>
(a) For the period from November 24, 1997 (commencement of operations) to
September 30, 1998.
(b) For the period from March 2, 1998 (commencement of class operations) to
September 30, 1998.
+ Annualized.
* The ratio of expenses to average net assets excludes fee credits but
includes fee waivers.
SELECT FIXED INCOME FUNDS 29
<PAGE>
[LOGO OF EVERGREEN APPEARS HERE]
- --------------------------------------------------------------------------------
SELECT INTERNATIONAL BOND FUND
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
Six Months Ended Period Ended Year
Ended June 30, March 31, 1999
September 30,
---------------------------------------------------
(Unaudited) # 1998 # (a) 1998 (b)
1997 (b) 1996 (b) 1995 (b) 1994
(b)(c)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.52 $ 9.32 $ 9.54 $ 9.70 $ 9.62 $ 9.06 $ 10.00
======= ======= ======= ======= ======= ======= =======
.................................................................................................................................
Income from investment operations
.................................................................................................................................
Net investment income 0.22 0.11 0.47 0.49 0.47 0.62 0.25
.................................................................................................................................
Net realized and unrealized gains or losses
on securities (0.03) 0.22 (0.06) 0.09 0.30 0.24 (1.15)
------- ------- ------- ------- ------- ------- -------
.................................................................................................................................
Total from investment operations 0.19 0.33 0.41 0.58 0.77 0.86 (0.90)
------- ------- ------- ------- ------- ------- -------
.................................................................................................................................
Distributions to shareholders from
.................................................................................................................................
Net investment income (0.33) (0.13) (0.63) (0.74) (0.69) (0.30) (0.04)
------- ------- ------- ------- ------- ------- -------
.................................................................................................................................
Net asset value, end of period $ 9.38 $ 9.52 $ 9.32 $ 9.54 $ 9.70 $ 9.62 $ 9.06
======= ======= ======= ======= ======= ======= =======
.................................................................................................................................
Total return 1.98% 3.56% 4.42% 6.18% 8.00% 9.70% 9.00%
.................................................................................................................................
Ratios and supplemental data
.................................................................................................................................
Net assets, end of period (thousands) $44,390 $46,607 $36,722 $34,590 $32,998 $26,898 $24,957
.................................................................................................................................
Ratios to average net assets
Expenses* 0.67%+ 0.76%+ 0.81% 0.85% 0.71% 0.64% 0.73%+
.................................................................................................................................
Net investment income 4.55%+ 4.89%+ 4.90% 5.14% 5.81% 6.84% 5.04%+
.................................................................................................................................
Portfolio turnover rate 58% 3% 46% 90% 67% 133% 161%
.................................................................................................................................
- ---------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES
<CAPTION>
Six Months Ended Period Ended Year
Ended June 30, March 31, 1999
September 30,
---------------------------------------------------
(Unaudited) # 1998 # (a) 1998 (b)
1997 (b) 1996 (b) 1995 (b) 1994
(b)(c)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.51 $ 9.30 $ 9.52 $ 9.68 $ 9.61 $ 9.04 $ 10.00
======= ======= ======= ======= ======= ======= =======
.................................................................................................................................
Income from investment operations
.................................................................................................................................
Net investment income 0.20 0.11 0.40 0.42 0.61 0.61 0.19
.................................................................................................................................
Net realized and unrealized gains or
losses on securities (0.02) 0.23 (0.01) 0.14 0.12 0.24 (1.11)
------- ------- ------- ------- ------- ------- -------
.................................................................................................................................
Total from investment operations 0.18 0.34 0.39 0.56 0.73 0.85 (0.92)
------- ------- ------- ------- ------- ------- -------
.................................................................................................................................
Distributions to shareholders from
.................................................................................................................................
Net investment income (0.32) (0.13) (0.61) (0.72) (0.66) (0.28) (0.04)
------- ------- ------- ------- ------- ------- -------
.................................................................................................................................
Net asset value, end of period $ 9.37 $ 9.51 $ 9.30 $ 9.52 $ 9.68 $ 9.61 $ 9.04
======= ======= ======= ======= ======= ======= =======
.................................................................................................................................
Total return 1.84% 3.61% 4.16% 5.92% 7.74% 9.57% 9.22%
.................................................................................................................................
Ratios and supplemental data
.................................................................................................................................
Net assets, end of period (thousands) $ 130 $ 129 $ 198 $ 182 $ 152 $ 170 $ 167
.................................................................................................................................
Ratios to average net assets
Expenses* 0.92%+ 1.00%+ 1.06% 1.10% 0.96% 0.89% 0.98%+
.................................................................................................................................
Net investment income 4.29%+ 4.65%+ 4.65% 4.89% 5.56% 6.59% 1.37%+
.................................................................................................................................
Portfolio turnover rate 58% 3% 46% 90% 67% 133% 161%
.................................................................................................................................
</TABLE>
(a) For the three months ended September 30, 1998. The Fund changed its fiscal
year end from June 30 to September 30, effective September 30, 1998.
(b) On August 28, 1998, CoreFund Global Bond Fund exchanged substantially all of
its net assets for shares of Evergreen Select International Bond Fund.
CoreFund Global Bond Fund is the accounting survivor and as such its basis
of accounting for assets and liabilities and its operating results for the
periods prior to August 28, 1998 have been carried forward in these
financial highlights.
(c) For the period from December 15, 1993 (commencement of operations) to June
30, 1994.
# Net investment income is based on weighted average shares outstanding
throughout the period.
+ Annualized.
* The ratio of expenses to average net assets excludes fee credits but
includes fee waivers.
30 SELECT FIXED INCOME FUNDS
<PAGE>
[LOGO OF EVERGREEN APPEARS HERE]
- --------------------------------------------------------------------------------
SELECT LIMITED DURATION FUND
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
Six Months Ended
March 31, 1999 Period Ended
(Unaudited) September 30, 1998 # (a)
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 10.52 $ 10.42
======= =======
............................................................................
Income from investment operations
............................................................................
Net investment income 0.30 0.53
............................................................................
Net realized and unrealized gains or
losses on securities (0.14) 0.10
------- -------
............................................................................
Total from investment operations 0.16 0.63
------- -------
............................................................................
Distributions to shareholders from
............................................................................
Net investment income (0.30) (0.53)
............................................................................
Net realized gains (0.02) 0
------- -------
............................................................................
Total distributions to shareholders (0.32) (0.53)
------- -------
............................................................................
Net asset value, end of period $ 10.36 $ 10.52
======= =======
............................................................................
Total return 1.54% 6.21%
............................................................................
Ratios and supplemental data
............................................................................
Net assets, end of period (thousands) $75,799 $70,810
............................................................................
Ratios to average net assets
Expenses* 0.30%+ 0.30%+
............................................................................
Net investment income 5.82%+ 5.97%+
............................................................................
Portfolio turnover rate 59% 78%
............................................................................
- -------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES
<CAPTION>
Six Months Ended
March 31, 1999 Period Ended
(Unaudited) September 30, 1998 # (b)
- -------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 10.52 $ 10.41
======= =======
............................................................................
Income from investment operations
............................................................................
Net investment income 0.29 0.11
............................................................................
Net realized and unrealized gains or
losses on securities (0.14) 0.11
------- -------
............................................................................
Total from investment operations 0.15 0.22
------- -------
............................................................................
Distributions to shareholders from
............................................................................
Net investment income (0.29) (0.11)
............................................................................
Net realized gains (0.02) 0
------- -------
............................................................................
Total distributions to shareholders (0.31) (0.11)
------- -------
............................................................................
Net asset value, end of period $ 10.36 $ 10.52
======= =======
............................................................................
Total return 1.42% 2.12%
............................................................................
Ratios and supplemental data
............................................................................
Net assets, end of period (thousands) $ 693 $ 614
............................................................................
Ratios to average net assets
Expenses* 0.55%+ 0.55%+
............................................................................
Net investment income 5.58%+ 5.84%+
............................................................................
Portfolio turnover rate 59% 78%
............................................................................
</TABLE>
(a) For the period from November 24, 1997 (commencement of operations) to
September 30, 1998.
(b) For the period from July 28, 1998 (commencement of class operations) to
September 30, 1998.
# Net investment income is based on weighted average shares throughout the
period.
+ Annualized.
* The ratio of expenses to average net assets excludes fee credits but
includes fee waivers.
SELECT FIXED INCOME FUNDS 31
<PAGE>
[LOGO OF EVERGREEN APPEARS HERE]
- --------------------------------------------------------------------------------
SELECT TOTAL RETURN BOND FUND
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
Six Months Ended
March 31, 1999 Period Ended
(Unaudited) September 30, 1998 (a)
- ------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 99.71 $ 100.00
======== ========
............................................................................
Income from investment operations
............................................................................
Net investment income 3.17 3.08
............................................................................
Net realized and unrealized gains or
losses on securiities (3.56) (0.29)
-------- --------
............................................................................
Total from investment operations (0.39) 2.79
-------- --------
............................................................................
Distributions to shareholders from
............................................................................
Net investment income (3.17) (3.08)
-------- --------
............................................................................
Net asset value, end of period $ 96.15 $ 99.71
======== ========
............................................................................
Total return (0.42%) 2.83%
............................................................................
Ratios/supplemental data
............................................................................
Net assets, end of period (thousands) $137,583 $135,998
............................................................................
Ratios to average net assets
............................................................................
Expenses* 0.48%+ 0.41%+
............................................................................
Net investment income 6.49%+ 6.88%+
............................................................................
Portfolio turnover rate 79% 80%
............................................................................
- ------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES
<CAPTION>
Six Months Ended
March 31, 1999 Period Ended
(Unaudited) September 30, 1998 (b)
- ------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 99.71 $ 99.67
======== ========
............................................................................
Income from investment operations
............................................................................
Net investment income 3.04 1.05
............................................................................
Net realized and unrealized gains or
losses on securities (3.55) 0.04
-------- --------
............................................................................
Total from investment operations (0.51) 1.09
-------- --------
............................................................................
Distributions to shareholders from
............................................................................
Net investment income (3.05) (1.05)
-------- --------
............................................................................
Net asset value, end of period $ 96.15 $ 99.71
======== ========
............................................................................
Total return (0.54%) 1.10%
............................................................................
Ratios/supplemental data
............................................................................
Net assets, end of period (thousands) $ 6,603 $ 24
............................................................................
Ratios to average net assets
............................................................................
Expenses* 0.74%+ 0.66%+
............................................................................
Net investment income 6.31%+ 6.51%+
............................................................................
Portfolio turnover rate 79% 80%
............................................................................
</TABLE>
(a) For the period from April 20, 1998 (commencement of class operations to
September 30, 1998.
(b) For the period from August 3, 1998 (commencement of class operations to
September 30, 1998.
+ Annualized.
* The ratio of expenses to average net assets excludes fee credits but
includes fee waivers.
32 SELECT FIXED INCOME FUNDS
<PAGE>
SELECT FIXED INCOME FUNDS
32
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
OTHER FUND PRACTICES
The Funds may invest in a variety of derivative instruments. Derivatives are
financial contracts whose value is based on an underlying asset, such as a stock
or a bond, or an underlying economic factor, such as an index or an interest
rate. Small price movements in the underlying asset can result in immediate and
substantial gains or losses in the value of derivatives.
The Funds may invest in futures and options, which are forms of derivatives.
Such practices are used to hedge a Fund's portfolio to protect against changes
in interest rates and to adjust the portfolio's duration. Although this is
intended to increase returns, these practices may actually reduce returns or
increase volatility.
In addition, the Funds may borrow money and lend their securities. Borrowing is
a form of leverage that may magnify a Fund's gain or loss. Lending securities
may cause the Fund to lose the opportunity to sell these securities at the most
desirable price and, therefore, lose money.
- --------------------------------------------------------------------------------
Please consult the Statement of Additional Information for more information
regarding these and other investment practices used by the Funds, including
risks.
- --------------------------------------------------------------------------------
SELECT FIXED INCOME FUNDS 33
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
Notes
34 SELECT FIXED INCOME FUNDS
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
Notes
SELECT FIXED INCOME FUNDS 35
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
Evergreen Select Funds
Select Money Market
Select Money Market Fund
Select Treasury Money Market Fund
Select Municipal Money Market Fund
Select 100% Treasury Money Market Fund
Select U.S. Government Money Market Fund
Select Fixed Income
Select Adjustable Rate Fund
Select Core Bond Fund
Select Fixed Income Fund
Select Income Plus Fund
Select Intermediate Term Municipal Bond Fund
Select International Bond Fund
Select Limited Duration Fund
Select Total Return Fund
Select Equity Trust
Select Strategic Value Fund
Select Large Cap Blend Fund
Select Strategic Growth Fund
Select Social Principles Fund
Select Equity Income Fund
Select Small Company Value Fund
Select Core Equity Fund
Select Small Cap Growth Fund
Select Balanced Fund
Select Diversified Value Fund
Select Special Equity Fund
Select Equity Index Fund
Express Line
(Institutional Service shares only)
800.346.3858
Investor Services
800.343.2898
Retirement Plan Services
800.247.4075
www.evergreen-funds.com
36 SELECT FIXED INCOME FUNDS
<PAGE>
- --------------------------------------------------------------------------------
Quick Reference Guide
- --------------------------------------------------------------------------------
1 Evergreen Express Line
(Institutional Service shares only)
Call 1-800-346-3858
24 hours a day to
. check your account
. order a statement
. get a Fund's current price, yield and total return
. buy, redeem or exchange Fund shares
2 Investor Services
Call 1-800-343-2898
Each business day, 8 a.m. to 6 p.m.
Eastern time to
. buy, redeem or exchange shares
. order applications
. get assistance with your account
3 Information Line for Hearing and Speech
Impaired (TTY/TDD)
Call 1-800-343-2888
Each business day, 8 a.m. to 6 p.m.
Eastern time
4 Write us a letter
Evergreen Service Company
P.O. Box 2121
Boston, MA 02106-2121
. to buy, redeem or exchange shares
. to change the registration on your account
. for general correspondence
5 For express, registered, or certified mail:
Evergreen Service Company
200 Berkeley Street
Boston, MA 02116-5039
6 Contact us on-line:
www.evergreen-funds.com
7 Regular communications you will receive:
Account Statements -- You will receive quarterly statements for each Fund
you own.
Confirmation Notices -- We send a confirmation of any transaction you make
within five days of the transaction.
Annual and Semiannual reports -- You will receive a detailed financial
report on your Fund(s) twice a year.
Tax Forms -- Each January you will receive any tax forms you need to file
your taxes as well as the Evergreen Tax Information Guide.
<PAGE>
- --------------------------------------------------------------------------------
For More Information About the
Evergreen Select Fixed Income Funds, Ask for:
The Funds' most recent Annual or Semi-annual Report, which contains a complete
financial accounting for each Fund and a complete list of portfolio holdings as
of a specific date, as well as commentary from the Fund's portfolio manager.
This Report discusses the market conditions and investment strategies that
significantly affected the Fund's performance during the most recent fiscal year
or period.
The Statement of Additional Information (SAI), which contains more detailed
information about the policies and procedures of the Funds. The SAI has been
filed with the Securities and Exchange Commission (SEC) and its contents are
legally considered to be part of this prospectus.
For questions, other information, or to request a copy, without charge, of any
of the documents, call 1.800.343.2898 or ask your investment representative. We
will mail material within three business days.
Information about these Funds (including the SAI) is also available on the SEC's
Internet web site at http://www.sec.gov, or, for a duplication fee, by writing
the SEC Public Reference Section, Washington DC 20549-6009. This material can be
reviewed and copied at the SEC's Public Reference Room in Washington, DC. For
more information, call the SEC at 1.800.SEC.0330.
Evergreen Distributor, Inc.
90 Park Avenue
New York, New York 10016
SEC Fil No.811-08367
48842 541908 RV1
<PAGE>
EVERGREEN SELECT FIXED INCOME TRUST
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
EVERGREEN SELECT FIXED INCOME TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 633-2700
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1999, as amended June 18, 1999
Evergreen Select Adjustable Rate Fund ("Adjustable Rate Fund")
Evergreen Select Core Bond Fund ("Core Bond Fund")
Evergreen Select Fixed Income Fund ("Fixed Income Fund")
Evergreen Select Income Plus Fund ("Income Plus Fund")
Evergreen Select Intermediate Term Municipal Bond Fund("Intermediate Term Fund")
Evergreen Select International Bond Fund ("International Bond Fund")
Evergreen Select Limited Duration Fund ("Limited Duration Fund")
Evergreen Select Total Return Bond Fund ("Total Return Bond Fund")
(Each a "Fund"; together, the "Funds")
Each Fund is a series of Evergreen Select Fixed Income Trust
(the "Trust").
This statement of additional information ("SAI") pertains to both
classes of shares of the Funds listed above. It is not a prospectus but should
be read in conjunction with the prospectus dated February 1, 1999, as amended
June 18, 1999. The Funds are offered through a prospectus offering Institutional
and Institutional Service shares of each Fund. You may obtain the prospectus
without charge by calling (800) 343-2898.
Certain information may be incorporated by reference to the Funds'
Semi-annual Report dated March 31, 1999 or the Annual Report dated September 30,
1998. You may obtain either document without charge by calling (800) 343-2898.
<PAGE>
TABLE OF CONTENTS
PART 1
TRUST HISTORY.........................................
INVESTMENT POLICIES...................................
OTHER SECURITIES AND PRACTICES........................
PRINCIPAL HOLDERS OF FUND SHARES......................
EXPENSES..............................................
PERFORMANCE...........................................
SERVICE PROVIDERS.....................................
FINANCIAL STATEMENTS..................................
PART 2
ADDITIONAL INFORMATION ON SECURITIES AND INVESTMENT PRACTICES...
PURCHASE, REDEMPTION AND PRICING OF SHARES......................
SALES CHARGE WAIVERS AND REDUCTIONS.............................
PERFORMANCE CALCULATIONS........................................
PRINCIPAL UNDERWRITER...........................................
DISTRIBUTION EXPENSES UNDER RULE 12b-1
TAX INFORMATION.................................................
BROKERAGE.......................................................
ORGANIZATION....................................................
INVESTMENT ADVISORY AGREEMENT...................................
MANAGEMENT OF THE TRUST.........................................
CORPORATE AND MUNICIPAL BOND RATINGS............................
ADDITIONAL INFORMATION..........................................
<PAGE>
PART 1
TRUST HISTORY
The Evergreen Select Fixed Income Trust is an open-end management
investment company, which was organized as a Delaware business trust on
September 18, 1997. A copy of the Declaration of Trust is on file as an exhibit
to the Trust's Registration Statement, of which this SAI is a part. This summary
is qualified in its entirety by reference to the Declaration of Trust.
INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT RESTRICTIONS
Each Fund has adopted the fundamental investment restrictions set forth
below which may not be changed without the vote of a majority of the Fund's
outstanding shares, as defined in the Investment Company Act of 1940 (the "1940
Act"). Where necessary, an explanation beneath a fundamental policy describes
the Fund's practices with respect to that policy, as allowed by current law. If
the law governing a policy changes, the Fund's practices may change accordingly
without a shareholder vote. Unless otherwise stated, all references to the
assets of the Fund are in terms of current market value.
1. Diversification
Each Fund may not make any investment that is inconsistent with its
classification as a diversified investment company under the 1940 Act.
Further Explanation of Diversification Policy:
To remain classified as a diversified investment company under the 1940
Act, each Fund must conform with the following: With respect to 75% of its total
assets, a diversified investment company may not invest more than 5% of its
total assets, determined at market or other fair value at the time of purchase,
in the securities of any one issuer, or invest in more than 10% of the
outstanding voting securities of any one issuer, determined at the time of
purchase. These limitations do not apply to investments in securities issued or
guaranteed by the United States (U.S.) government or its agencies or
instrumentalities.
2. Concentration
Each Fund may 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).
Further Explanation of Concentration Policy:
Each Fund not invest more than 25% of its total assets, taken at market
value, in the securities of issuers primarily engaged in any particular industry
(other than securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities).
3. Issuing Senior Securities
Except as permitted under the 1940 Act, each Fund may not issue senior
securities.
4. Borrowing
Each Fund may not borrow money, except to the extent permitted by
applicable law.
Further Explanation of Borrowing Policy:
Each Fund may borrow from banks and enter into reverse repurchase
agreements in an amount up to 33 1/3% of its total assets, taken at market
value. Each Fund may also borrow up to an additional 5% of its total assets from
banks or others. A Fund may borrow only as a temporary measure for extraordinary
or emergency purposes such as the redemption of Fund shares. A Fund may purchase
additional securities so long as borrowings do not exceed 5% of its total
assets. Each Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities. Each Fund may purchase
securities on margin and engage in short sales to the extent permitted by
applicable law.
5. Underwriting
Each Fund may not underwrite securities of other issuers, except
insofar as a Fund may be deemed to be an underwriter in connection with the
disposition of its portfolio securities.
6. Real Estate
Each Fund may not purchase or sell real estate, except that, to the
extent permitted by applicable law, a Fund may invest in (a) securities that are
directly or indirectly secured by real estate, or (b) securities issued by
issuers that invest in real estate.
7. Commodities
Each Fund may not purchase or sell commodities or contracts on
commodities, except to the extent that a Fund may engage in financial futures
contracts and related options and currency contracts and related options and may
otherwise do so in accordance with applicable law and without registering as a
commodity pool operator under the Commodity Exchange Act.
8. Lending
Each Fund may not make loans to other persons, except that a Fund may
lend its portfolio securities in accordance with applicable law. The acquisition
of investment securities or other investment instruments shall not be deemed to
be the making of a loan.
Further Explanation of Lending Policy:
To generate income and offset expenses, a Fund may lend portfolio
securities to broker-dealers and other financial institutions in an amount up to
33 1/3% of its total assets, taken at market value. While securities are on
loan, the borrower will pay the Fund any income accruing on the security. The
Fund may invest any collateral it receives in additional portfolio securities,
such as U.S. Treasury notes, certificates of deposit, other high-grade,
short-term obligations or interest bearing cash equivalents. Gains or losses in
the market value of a security lent will affect the Fund and its shareholders.
When a Fund lends its securities, it will require the borrower to give
the Fund collateral in cash or government securities. The Fund will require
collateral in an amount equal to at least 100% of the current market value of
the securities lent, including accrued interest. The Fund has the right to call
a loan and obtain the securities lent any time on notice of not more than five
business days. The Fund may pay reasonable fees in connection with such loans.
9. Investment in Federally Tax Exempt Securities
Intermediate Term Fund will, during periods of normal market
conditions, invest its assets in accordance with applicable guidelines issued by
the Securities and Exchange Commission or its staff concerning investment in
tax-exempt securities for funds with the words "tax exempt," tax free" or
"municipal" in their names.
OTHER SECURITIES AND PRACTICES
For information regarding certain securities the Funds may purchase and
certain investment practices the Funds may use, see the following sections under
Additional Information on Securities and Investment Practices in Part 2 of this
SAI:
U.S. Government Securities
When-Issued, Delayed-Delivery and Forward Commitment Transactions
Repurchase Agreements
Reverse Repurchase Agreements
Options (excluding Core Bond Fund)
Futures Transactions (excluding Core Bond Fund)
Foreign Securities (excluding Adjustable Rate Fund, Core Bond Fund, Intermediate
Term Fund, and Limited Duration Fund) Foreign Currency (excluding Adjustable
Rate Fund, Core Bond Fund, Intermediate Term Fund, and Limited Duration Fund)
High Yield High Risk Bonds (excluding Adjustable Rate Fund, Core Bond Fund,
International Bond Fund, and Limited Duration Fund) Illiquid and Restricted
Securities Investment in Other Investment Companies Municipal Bonds
(Intermediate Term Fund only) Virgin Islands, Guam and Puerto Rico (Intermediate
Term Fund only) Master Demand Notes Obligations of Foreign Branches of U.S.
Banks Obligations of U.S. Branches of Foreign Banks Payment-In-Kind Securities
(PIKs) Zero Coupon Bonds Mortgage-Backed and Asset-Backed Securities Variable or
Floating Rate Instruments
PRINCIPAL HOLDERS OF FUND SHARES
As of May 31, 1999 the officers and Trustees of the Trust owned as a
group less than 1% of the outstanding shares of any class of each Fund.
Set forth below is information with respect to each person who, to each
Fund's knowledge, owned beneficially or of record more than 5% of the
outstanding shares of any class of each Fund as of May 31, 1999.
------------------------------------------------------
Adjustable Rate Fund
Institutional Shares
------------------------------------------------------
----------------------------------------- ------------
AMPEX Retirement Master Trust 92.91%
P.O. Box 1992
Boston, MA 02105-1992
----------------------------------------- ------------
----------------------------------------- ------------
First Union National Bank/EB/INT 5.84%
Reinvest Account
Attn Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG 1151
Charlotte, NC 28202-1911
----------------------------------------- ------------
------------------------------------------------------
Adjustable Rate Fund
Institutional Service Shares
------------------------------------------------------
----------------------------------------- ------------
Union Pacific RR-UTU Crew Consist 18.94%
GO569 - Pool 090 1999 Michael Errico, Manager - Payroll
Account 1416 Dodge Street, MC 7080 Omaha, NE 68179-0001
----------------------------------------- ------------
----------------------------------------- ------------
MLPF & S for the Sole Benefit of 10.60%
Its Customers
Attn Fund Administration #97P31
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
----------------------------------------- ------------
----------------------------------------- ------------
Union Pacific RR-UTU Crew Consist 10.40%
GO577 - Pool 088 1999 Michael Errico, Manager - Payroll
Account 1416 Dodge Street, MC 7080 Omaha, NE 68179-0001
----------------------------------------- ------------
----------------------------------------- ------------
UPRR (Eastern District) UTU 9.65%
Fund 101 1999
Michael Errico, Manager - Payroll
Account
1416 Dodge Street, MC 7080
Omaha, NE 68179-0001
----------------------------------------- ------------
----------------------------------------- ------------
Skyline Telephone Membership Corp. 8.11%
Attn Hobart G. Davis
P.O. Box 759
West Jefferson, NC 28694
----------------------------------------- ------------
----------------------------------------- ------------
Star Telephone Membership Corp. 7.14%
Milton R. Tew, Exec
P.O. Box 348
3900 N. US 421 Highway
Clinton, NC 28329-0348
----------------------------------------- ------------
----------------------------------------- ------------
UPRR (Western Region) OUR&D and UTU 6.37%
Fund 505 1999
Michael Errico, Manager - Payroll
Account
1416 Dodge Street, MC 7080
Omaha, NE 68179-0001
----------------------------------------- ------------
<PAGE>
------------------------------------------------------
Core Bond Fund
Institutional Shares
------------------------------------------------------
----------------------------------------- ------------
First Union National Bank 84.48%
BK/EB/INT
Cash Account
Attn: Trust Operations Fund Group
401 S Tryon Street 3rd Floor
CMG 1151
Charlotte, NC 28202-1911
----------------------------------------- ------------
----------------------------------------- ------------
First Union National Bank 15.41%
Trust Accounts
Attn: Ginny Batten
11th Floor - CMG 1151
301 S. Tryon Street
Charlotte, NC 28208-1910
----------------------------------------- ------------
------------------------------------------------------
Core Bond Fund
Institutional Service Shares
------------------------------------------------------
----------------------------------------- ------------
First Union National Bank 43.98%
Trust Accounts
Attn Ginny Batten CMG-1151-2
401 S. Tryon Street 3rd Floor
Charlotte, NC 28202-1911
----------------------------------------- ------------
----------------------------------------- ------------
First Union National Bank 20.22%
Trust Accounts
Attn Ginny Batten
CMG - 1151 11th Floor
301 S. Tryon Street
Charlotte, NC 28202-1910
----------------------------------------- ------------
----------------------------------------- ------------
Wilmington Trust Co. 18.19%
FBO Roman Catholic Alumni Association
Attn Mutual Funds
1100 N. Market Street
Wilmington, DE 19890
----------------------------------------- ------------
----------------------------------------- ------------
Raymond James & Assoc. Inc. CSDN 9.66%
Charles A. Yost IRA
P.O. Box 138
17164 Green Turtle Lane West
Sugarloaf Shores, FL 33044
----------------------------------------- ------------
------------------------------------------------------
Fixed Income Fund
Institutional Shares
------------------------------------------------------
----------------------------------------- ------------
First Union National Bank BK/EB/INT 79.18%
Cash Account
Attn Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor CMG 1151
Charlotte, NC 28202-1911
----------------------------------------- ------------
<PAGE>
----------------------------------------- ------------
First Union National Bank BK/EB/INT 19.96%
Reinvest Account
Attn Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor CMG -
1151
Charlotte, NC 28202-1911
----------------------------------------- ------------
------------------------------------------------------
Fixed Income Fund
Institutional Service Shares
------------------------------------------------------
----------------------------------------- ------------
FUBS & Co. 5.30%
FBO Marvin Reingold IRA
201 S. College Street
Charlotte, NC 28288
----------------------------------------- ------------
------------------------------------------------------
Income Plus Fund
Institutional Shares
------------------------------------------------------
----------------------------------------- ------------
First Union National Bank BK/EB/INT 90.50%
Cash Account
Attn Trust Operations Fund Group
401 S. Tryon Street,3rd Floor
CMG 1151
Charlotte, NC 28202-1911
----------------------------------------- ------------
----------------------------------------- ------------
First Union National Bank 9.22%
BK/EB/INT
Reinvest Account
Attn Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG - 1151
Charlotte, NC 28202-1911
----------------------------------------- ------------
------------------------------------------------------
Income Plus Fund
Institutional Service Shares
------------------------------------------------------
----------------------------------------- ------------
BT Alex Brown Incorporated 5.57%
FBO 229-09384-10
P.O. Box 1346
Baltimore, MD 21203
----------------------------------------- ------------
------------------------------------------------------
Intermediate Term Fund
Institutional Shares
------------------------------------------------------
----------------------------------------- ------------
First Union National Bank BK/EB/INT 99.56%
Cash Account
Attn Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG - 1151
Charlotte, NC 28202-1911
----------------------------------------- ------------
------------------------------------------------------
Intermediate Term Fund Institutional Service Shares
------------------------------------------------------
----------------------------------------- ------------
FUBS & Co. 8.58%
Harry F. West
201 S. College Street
Charlotte, NC 28288-1167
----------------------------------------- ------------
----------------------------------------- ------------
Susanne P. Glass 5.34%
3264 Primera Place
Los Angeles, CA 90068
----------------------------------------- ------------
----------------------------------------- ------------
FUBS & Co. 5.30%
Theodore Halus Children's Trust
201 S. College Street
Charlotte, NC 28288-1167
----------------------------------------- ------------
----------------------------------------- ------------
Merrill Lynch 5.05%
FBO Francis B. Lentz Trust
300 Davison Avenue, 2nd Fl, West
Sommerset, NJ 08873
----------------------------------------- ------------
------------------------------------------------------
International Bond Fund
Institutional Shares
------------------------------------------------------
----------------------------------------- ------------
First Union National Bank 83.47%
BK/EB/INT
Reinvest Account
Attn Trust Operations Fund Group
401 S Tryon Street, 3rd Floor
CMG - 1151
Charlotte, NC 28202-1911
----------------------------------------- ------------
----------------------------------------- ------------
Post & Co. 11.35%
350302
The Bank of New York
Mutual Fund/Reorg Dept
P.O. Box 1066
Wall Street Station
New York, NY 10258
----------------------------------------- ------------
----------------------------------------- ------------
First Union National Bank 5.16%
BK/EB/INT
Cash Account
Attn Trust Operations Fund Group
401 S Tryon Street, 3rd Floor
CMG- -1151
Charlotte, NC 28202-1911
----------------------------------------- ------------
------------------------------------------------------
International Bond Fund
Institutional Service Shares
------------------------------------------------------
----------------------------------------- ------------
First Union National Bank 28.03%
BK/EB/INT
Cash Account
Attn Trust Operations Fund Group
401 S Tryon Street, 3rd Floor
CMG- -1151
Charlotte, NC 28202-1911
----------------------------------------- ------------
----------------------------------------- ------------
State Street Bank and Trust Co. 25.49%
Allen Luke
17 Bennett Court
East Brunswick, NJ 08816-3686
----------------------------------------- ------------
----------------------------------------- ------------
First Union National Bank 18.12%
BK/EB/INT
Reinvest Account
Attn Trust Operations Fund Group
401 S Tryon Street, 3rd Floor
CMG- -1151
Charlotte, NC 28202-1911
----------------------------------------- ------------
----------------------------------------- ------------
Dean Witter Reynolds Inc. 6.13%
Attn IRA Receive Dept.
FBO Lois R. Bransfield
P.O. Box 290
Church Street Station
New York, NY 10008
----------------------------------------- ------------
------------------------------------------------------
Limited Duration Fund
Institutional Shares
------------------------------------------------------
----------------------------------------- ------------
First Union National Bank 56.23%
BK/EB/INT
Reinvest Account
Attn Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG - 1151
Charlotte, NC 28202-1911
----------------------------------------- ------------
----------------------------------------- ------------
First Union National Bank 43.69%
BK/EB/INT
Cash Account
Attn Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG - 1151
Charlotte, NC 28202-1911
----------------------------------------- ------------
------------------------------------------------------
Limited Duration Fund
Institutional Service Shares
------------------------------------------------------
----------------------------------------- ------------
State Street Bank & Trust Co. 44.73%
Cust. for the Rollover IRA of Frank L.
Caiola
321 Evergreen Drive
North Wales, PA 19545-2701
----------------------------------------- ------------
----------------------------------------- ------------
First Union National Bank/EB/INT 22.43%
Reinvest Account
Attn Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG - 1151
Charlotte, NC 28202-1911
----------------------------------------- ------------
----------------------------------------- ------------
FUBS & Co. 11.97%
John M. Ennis IRA
201 S. College Street
Charlotte, NC 28288-1167
----------------------------------------- ------------
----------------------------------------- ------------
FUBS & Co. 9.66%
FBO Dolores Boulware IRA
201 S. College Street - 5th Floor
Charlotte, NC 28288
----------------------------------------- ------------
----------------------------------------- ------------
First Union Brokerage Services 5.62%
Milton G. Hyde IRA
1695 Grandview Road
Pasadena, MD 21122
----------------------------------------- ------------
------------------------------------------------------
Total Return Bond Fund
Institutional Shares
------------------------------------------------------
----------------------------------------- ------------
First Union National Bank 79.29%
BK/EB/INT
Reinvest Account
Attn Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG - 1151
Charlotte, NC 28202-1911
----------------------------------------- ------------
----------------------------------------- ------------
First Union National Bank 20.70%
BK/EB/INT
Cash Account
Attn Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG - 1151
Charlotte, NC 28202-1911
----------------------------------------- ------------
------------------------------------------------------
Total Return Bond Fund
Institutional Service Shares
------------------------------------------------------
----------------------------------------- ------------
First Union National Bank 98.44%
Trust Accounts
Attn Ginny Batten
301 S. Tryon Street, 11th Floor
CMG - 1151
Charlotte, NC 28202-1910
----------------------------------------- ------------
EXPENSES
Advisory Fees
Each Fund has its own investment advisor. (For more information, see
Investment Advisory Agreements in Part 2 of this SAI.)
Tattersall Advisory Group ("TAG") is the investment advisor to Core
Bond Fund. TAG is entitled to receive from Core Bond Fund an annual fee equal to
0.40% of the Fund's average net assets.
Evergreen Investment Management ("EIM"), also known as the First
Capital Group, a division of First Union National Bank, is the investment
advisor to Limited Duration Fund, Fixed Income Fund, Income Plus Fund, Total
Return Bond Fund and Intermediate Term Fund. EIM is entitled to receive from
each of these Funds an annual fee based on a percentage of the Fund's average
net assets, as follows:
--------------------------------- ==================
Limited Duration Fund 0.30%
--------------------------------- ==================
--------------------------------- ==================
Fixed Income Fund 0.50%
--------------------------------- ==================
--------------------------------- ==================
Income Plus Fund 0.50%
--------------------------------- ==================
--------------------------------- ==================
Total Return Bond Fund 0.40%
--------------------------------- ==================
--------------------------------- ==================
Intermediate Term Fund 0.60%
--------------------------------- ==================
EIM has voluntarily agreed to reduce the investment advisory fee on
each Fund by 0.10%.
Evergreen Investment Management Company ("EIMC"), formerly Keystone
Investment Management Company, is the investment advisor to Adjustable Rate
Fund. EIMC is entitled to receive from Adjustable Rate Fund an annual fee equal
to 0.30% of the average net assets of the Fund.
First International Advisers, Ltd. ("FIA"), formerly Analytic TSA
International, Inc., is the investment advisor to International Bond Fund. FIA
is entitled to receive from International Bond Fund an annual fee equal to 0.60%
of the Fund's average net assets.
Advisory Fees Paid
Below are the advisory fees paid by each Fund for the fiscal period
ended September 30, 1998 and when applicable for fiscal periods ended in 1997
and 1996.
------------------------------------- ---------------------- =================
Fiscal Period/Fund Advisory Fee Waiver
------------------------------------- ---------------------- =================
==============================================================================
Period Ended 1998
==============================================================================
------------------------------------- ---------------------- =================
Adjustable Rate Fund (1) $61,312 $0
------------------------------------- ---------------------- =================
------------------------------------- ---------------------- =================
Adjustable Rate Fund (2) $137,489 $0
------------------------------------- ---------------------- =================
------------------------------------- ---------------------- =================
Core Bond Fund(3) $1,862,392 $526,182
------------------------------------- ---------------------- =================
------------------------------------- ---------------------- =================
Fixed Income Fund(3) $2,219,526 $504,930
------------------------------------- ---------------------- =================
------------------------------------- ---------------------- =================
Income Plus Fund (3) $5,151,727 $1,033,751
------------------------------------- ---------------------- =================
------------------------------------- ---------------------- =================
Intermediate Term Fund (3) $3,831,537 $639,284
------------------------------------- ---------------------- =================
------------------------------------- ---------------------- =================
International Bond Fund (4) $60,189 $45,948
------------------------------------- ---------------------- =================
------------------------------------- ---------------------- =================
International Bond Fund(5) $221,000 $36,000
------------------------------------- ---------------------- =================
------------------------------------- ---------------------- =================
Limited Duration Fund(3) $154,868 $152,769
------------------------------------- ---------------------- =================
------------------------------------- ---------------------- =================
Total Return Bond Fund(6) $209,962 $135,770
------------------------------------- ---------------------- =================
1. Seven months ended September 30, 1998. The Fund changed its fiscal year
end from the last day of February to September 30, effective September
30, 1998.
2. Fiscal year ended February 28, 1998.
3. Period from November 24, 1997 to September 30, 1998.
4. Three months ended September 30, 1998. The Fund changed its fiscal year
end from June 30 to September 30, effective September 30, 1998.
5. Fiscal year ended June 30, 1998.
6. The Fund commenced investment operations on April 20, 1998.
----------------------------------- ------------------ ===================
Fiscal Period/Fund Advisory Fee Waiver
----------------------------------- ------------------ ===================
==========================================================================
Period Ended 1997
==========================================================================
----------------------------------- ------------------ ===================
Adjustable Rate Fund (1) $101,412 $0
----------------------------------- ------------------ ===================
----------------------------------- ------------------ ===================
International Bond Fund (2) $207,000 $32,160
----------------------------------- ------------------ ===================
==========================================================================
Period Ended 1996
==========================================================================
----------------------------------- ------------------ ===================
Adjustable Rate Fund (3) $121,105 $0
----------------------------------- ------------------ ===================
----------------------------------- ------------------ ===================
International Bond Fund (2) $145,856 $45,157
----------------------------------- ------------------ ===================
1. Five months ended February 28, 1997. The Fund changed its fiscal year
end fro m September 30 to the last day of February, effective February
28, 1997.
2. Predecessor fund information for the periods ended June 30, 1997 and 1996. 3.
Year ended September 30, 1996.
12b-1 Fees
Below are the 12b-1 service fees paid by the Institutional Service
shares of each Fund for the fiscal period ended September 30, 1998. The
Institutional shares do not pay 12b-1 fees. For more information, see
"Distribution Expenses Under Rule 12b-1" in Part 2 of this SAI.
- --------------------------------- ===========================
Institutional Service
Fund/Period Shares
Service Fees
- --------------------------------- ===========================
=============================================================
Period Ended 1998
=============================================================
- --------------------------------- ===========================
Adjustable Rate Fund $14,710
- --------------------------------- ===========================
- --------------------------------- ===========================
Core Bond Fund $285
- --------------------------------- ===========================
- --------------------------------- ===========================
Fixed Income Fund $8,535
- --------------------------------- ===========================
- --------------------------------- ===========================
Income Plus Fund $6,981
- --------------------------------- ===========================
- --------------------------------- ===========================
Intermediate Term Fund $3,458
- --------------------------------- ===========================
- --------------------------------- ===========================
International Bond Fund $92
- --------------------------------- ===========================
- --------------------------------- ===========================
Limited Duration Fund $268
- --------------------------------- ===========================
- --------------------------------- ===========================
Total Return Bond Fund $13
- --------------------------------- ===========================
The Institutional Service shares of Adjustable Rate Fund paid $17,676
in 12b-1 service fees for the period ended February 28, 1998.
<PAGE>
Trustee Compensation
Listed below is the Trustee compensation paid by the Trust individually
and by the Trust and the eight other trusts in the Evergreen Fund complex for
the fiscal period ended September 30, 1998. The Trustees do not receive pension
or retirement benefits from the Funds. For more information, see Management of
the Trust in Part 2 of this SAI.
<TABLE>
<CAPTION>
<S> <C> <C>
------------------------------- ------------------------------ =============================
Total Compensation from
Trust and Fund Complex Paid
Aggregate Compensation from to Trustees*
Trustee Trust
------------------------------- ------------------------------ =============================
------------------------------- ------------------------------ =============================
Laurence B. Ashkin $3,996 $73,450
------------------------------- ------------------------------ =============================
------------------------------- ------------------------------ =============================
Charles A. Austin, III $3,996 $65,450
------------------------------- ------------------------------ =============================
------------------------------- ------------------------------ =============================
K. Dun Gifford $3,865 $63,575
------------------------------- ------------------------------ =============================
------------------------------- ------------------------------ =============================
James S. Howell $5,093 $99,425
------------------------------- ------------------------------ =============================
------------------------------- ------------------------------ =============================
Leroy Keith Jr. $3,865 $63,575
------------------------------- ------------------------------ =============================
------------------------------- ------------------------------ =============================
Gerald M. McDonnell $3,996 $79,200
------------------------------- ------------------------------ =============================
------------------------------- ------------------------------ =============================
Thomas L. McVerry $4,571 $88,275
------------------------------- ------------------------------ =============================
------------------------------- ------------------------------ =============================
William Walt Pettit $3,498 $72,325
------------------------------- ------------------------------ =============================
------------------------------- ------------------------------ =============================
David M. Richardson $3,822 $62,950
------------------------------- ------------------------------ =============================
------------------------------- ------------------------------ =============================
Russell A. Salton, III $4,021 $81,625
------------------------------- ------------------------------ =============================
------------------------------- ------------------------------ =============================
Michael S. Scofield $4,047 $81,924
------------------------------- ------------------------------ =============================
------------------------------- ------------------------------ =============================
Richard J. Shima $3,865 $70,150
------------------------------- ------------------------------ =============================
</TABLE>
* Certain Trustees have elected to defer all or part of their
total compensation for the fiscal period ended September 30,
1998. The amounts listed below will be payable in later years
to the respective Trustees:
Austin $8,512
McVerry $88,275
Howell $76,119
Salton $81,625
Pettit $72,325
McDonnell $79,200
Scofield $11,740
<PAGE>
PERFORMANCE
Total Return
Below are the annual total returns for each class of shares of the
Funds as of March 31, 1999. The returns for Total Return Bond Fund are
cumulative. For more information, see "Total Return" under Performance
Calculations in Part 2 of this SAI.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- --------------------------- ----------------- ------------------ -------------------- --------------------
Ten Years or Since Class
Fund/Class One Year Five Years Inception Inception Date
- --------------------------- ----------------- ------------------ -------------------- --------------------
- ----------------------------------------------------------------------------------------------------------
Adjustable Rate Fund(1)
- ----------------------------------------------------------------------------------------------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional 4.98% 5.90% 5.54% 10/1/1991
- --------------------------- ----------------- ------------------ -------------------- --------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional Service 4.61% 5.58% 5.38% 5/23/1994
- --------------------------- ----------------- ------------------ -------------------- --------------------
- ----------------------------------------------------------------------------------------------------------
Core Bond Fund (2)
- ----------------------------------------------------------------------------------------------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional 6.53% 7.93% 7.87% 12/13/1990
- --------------------------- ----------------- ------------------ -------------------- --------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional Service 6.37% 7.88% 7.82% 10/2/1997
- --------------------------- ----------------- ------------------ -------------------- --------------------
- ----------------------------------------------------------------------------------------------------------
Fixed Income Fund (3)
- ----------------------------------------------------------------------------------------------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional 6.00% 6.34% 7.77% 3/31/1977
- --------------------------- ----------------- ------------------ -------------------- --------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional Service 5.74% 6.06% 7.50% 3/9/1998
- --------------------------- ----------------- ------------------ -------------------- --------------------
- ----------------------------------------------------------------------------------------------------------
Income Plus Fund (4)
- ----------------------------------------------------------------------------------------------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional 5.39% 6.95% 8.16% 8/31/1988
- --------------------------- ------------------ -------------------- --------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional Service 5.14% 6.67% 7.89% 3/2/1998
- --------------------------- ----------------- ------------------ -------------------- --------------------
- ----------------------------------------------------------------------------------------------------------
Intermediate Term Fund (5)
- ----------------------------------------------------------------------------------------------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional 4.83% 5.94% 6.66% 1/31/1984
- --------------------------- ----------------- ------------------ -------------------- --------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional Service 4.58% 5.69% 6.40% 3/2/1998
- --------------------------- ----------------- ------------------ -------------------- --------------------
- ----------------------------------------------------------------------------------------------------------
International Bond Fund (6)
- ----------------------------------------------------------------------------------------------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional 6.13% 5.96% 4.52% 12/15/1993
- --------------------------- ----------------- ------------------ -------------------- --------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional Service 5.85% 5.71% 4.27% 12/15/1993
- --------------------------- ----------------- ------------------ -------------------- --------------------
- ----------------------------------------------------------------------------------------------------------
Limited Duration Fund (7)
- ----------------------------------------------------------------------------------------------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional 5.84% N/A 5.99% 4/30/1994
- --------------------------- ----------------- ------------------ -------------------- --------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional Service 5.64% N/A 5.75% 7/28/1998
- --------------------------- ----------------- ------------------ -------------------- --------------------
- ----------------------------------------------------------------------------------------------------------
Total Return Bond Fund (8)
- ----------------------------------------------------------------------------------------------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional N/A N/A 2.56% 4/20/1998
- --------------------------- ----------------- ------------------ -------------------- --------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional Service N/A N/A 2.39% 8/03/1998
- --------------------------- ----------------- ------------------ -------------------- --------------------
</TABLE>
(1) The Adjustable Rate Fund historical performance shown for
Institutional Service shares prior to their inception is based on the
performance of Institutional shares and has not been adjusted to
reflect the effect of the 0.25% 12b-1 fee applicable to Institutional
Service shares. Institutional shares pay no 12b-1 fee. If these fees
had been reflected, returns would have been lower.
(2) The Core Bond Fund historical performance shown for
Institutional shares is based on the performance of the Institutional
shares of the Fund's predecessor fund, Tattersall Bond Fund. Historical
performance shown for Institutional Service Shares is based on (1) the
performance of the Institutional Service shares of the Fund's
predecessor fund, Tattersall Bond Fund, since 10/2/1997 and (2) the
Institutional shares of Tattersall Bond Fund from 12/13/1990 to
10/2/1997 which have not been adjusted to reflect the .25% 12b-1 fee
paid by Institutional Service shares. Institutional shares do not pay a
12b-1 fee. If these fees had been reflected, returns would have been
lower.
(3) The Fixed Income Fund historical performance shown for
Institutional Service shares from 11/24/1997 to their inception is
based on the performance of Institutional shares and has not been
adjusted to reflect the effect of the 0.25% 12b-1 fee applicable to
Institutional Service shares. Institutional shares pay no 12b-1 fee. If
these fees had been reflected, returns would have been lower. Prior to
11/24/1997, the returns for Institutional shares and Institutional
service shares are based on the Fund's predecessor common trust fund's
(CTF's) performance, adjusted for estimated mutual fund expenses. The
CTF was not registered under the 1940 Act and were not subject to
certain investment restrictions. If the CTF had been registered, its
performance might have been adversely affected. Performance for the
common trust fund has been adjusted to include the effect of estimated
mutual fund class gross expense ratios at the time the Fund was
converted to a mutual fund. If fee waivers and expense reimbursements
had been calculated into the mutual fund class expense ratio the total
returns would be as follows: Institutional shares - 5 year = 6.42%, 10
year = 7.87% and since 3/31/1977 = 8.39%; Institutional Service shares
- 5 year = 6.14%, 10 year = 7.60% and since 3/31/1977 = 8.12%.
(4) The Income Plus Fund historical performance shown for Institutional
Service shares from 11/24/1997 to their inception is based on the
performance of Institutional shares and has not been adjusted to
reflect the effect of the 0.25% 12b-1 fee applicable to Institutional
Service shares. Institutional shares pay no 12b-1 fee. If these fees
had been reflected, returns would have been lower. Prior to 11/24/1997,
the returns for Institutional shares and Institutional Service shares
are based on the Fund's predecessor common trust fund's (CTF's)
performance, adjusted for estimated mutual fund expenses. The CTF was
not registered under the 1940 Act and were not subject to certain
investment restrictions. If the CTF had been registered, its
performance might have been adversely affected. Performance for the
common trust fund has been adjusted to include the effect of estimated
mutual fund class gross expense ratios at the time the Fund was
converted to a mutual fund. If fee waivers and expense reimbursements
had been calculated into the mutual fund class expense ratio the total
returns would be as follows: Institutional shares - 5 year = 7.03%, 10
year = 8.26% and since 8/31/1988 = 8.02%; Institutional Service shares
- 5 year = 6.75%, 10 year = 7.98% and since 8/31/1988 = 7.75%.
(5) The Intermediate Term Fund historical performance shown for
Institutional Service shares from 11/24/1997 to their inception is
based on the performance of Institutional shares and has not been
adjusted to reflect the effect of the 0.25% 12b-1 fee applicable to
Institutional Service shares. Institutional shares pay no 12b-1 fee. If
these fees had been reflected, returns would have been lower. Prior to
11/24/1997, the returns for Institutional shares and Institutional
service shares are based on the Fund's predecessor common trust fund's
(CTF's) performance, adjusted for estimated mutual fund expenses. The
CTF was not registered under the 1940 Act and was not subject to
certain investment restrictions. If the CTF had been registered, its
performance might have been adversely affected. Performance for the
common trust fund has been adjusted to include the effect of estimated
mutual fund class gross expense ratios at the time the Fund was
converted to a mutual fund. If fee waivers and expense reimbursements
had been calculated into the mutual fund class expense ratio the total
returns would be as follows: Institutional shares - 5 year = 6.02%, 10
year = 6.75% and since 1/31/1984 = 7.28%; Institutional Service shares
- 5 year = 5.77%, 10 year = 6.49% and since 1/31/1984 = 7.02%.
(6) The International Bond Fund historical performance shown for
Institutional shares is based on the performance of the Class Y Shares
of the Fund's predecessor fund, CoreFund Global Bond Fund. Historical
performance shown for Institutional Service shares is based on the
performance of the Class A Shares of the Fund's predecessor fund,
CoreFund Global Bond Fund, and reflects the same 0.25% 12b-1fee
applicable to Institutional Service shares.
(7) The Limited Duration Fund historical performance shown for
Institutional Service shares from 11/24/1997 to their inception is
based on the performance of Institutional shares and has not been
adjusted to reflect the effect of the 0.25% 12b-1 fee applicable to
Institutional Service shares. Institutional shares pay no 12b-1 fee. If
these fees had been reflected, returns would have been lower. Prior to
11/24/1997, the returns for Institutional and Institutional Service
shares are based on the Fund's predecessor common trust fund's (CTF's)
performance, adjusted for estimated mutual fund expenses. The CTF was
not registered under the 1940 Act and was not subject to certain
investment restrictions. If the CTF had been registered, its
performance might have been adversely affected. Performance for the
common trust fund has been adjusted to include the effect of estimated
mutual fund class gross expense ratios at the time the Fund was
converted to a mutual fund. If fee waivers and expense reimbursements
had been calculated into the mutual fund class expense ratio the total
returns would be as follows: Institutional shares - since 4/30/1994 =
6.20%; Institutional Service shares since 4/30/1994 = 5.96%.
(8) The Total Return Bond Fund historical performance shown for
Institutional Service shares prior to their inception is based on the
performance of Institutional shares and has not been adjusted to
reflect the effect of the 0.25% 12b-1 fee applicable to Institutional
Service shares. Institutional shares pay no 12b-1 fee. If these fees
had been reflected, returns would have been lower.
Current Yield
Below are the current yields for each class of shares of the Funds as
of September 30, 1998. For more information, see "30-day Yield under Performance
Calculation in Part 2 of this SAI.
- ----------------------------- --------------------- ============================
Fund Institutional Institutional Service
- ----------------------------- --------------------- ============================
- ----------------------------- --------------------- ============================
Adjustable Rate Fund 6.29% 6.05%
- ----------------------------- --------------------- ============================
- ----------------------------- --------------------- ============================
Core Bond Fund 5.60% 5.45%
- ----------------------------- --------------------- ============================
- ----------------------------- --------------------- ============================
Fixed Income Fund 5.74% 5.49%
- ----------------------------- --------------------- ============================
- ----------------------------- --------------------- ============================
Income Plus Fund 5.77% 5.52%
- ----------------------------- --------------------- ============================
- ----------------------------- --------------------- ============================
Intermediate Term Fund
4.58% 4.32%
- ----------------------------- --------------------- ============================
- ----------------------------- --------------------- ============================
International Bond Fund 3.55% 3.30%
- ----------------------------- --------------------- ============================
Limited Duration Fund 5.70% 5.45%
- ----------------------------- --------------------- ============================
Total Return Bond Fund 6.06% 5.80%
- ----------------------------- --------------------- ============================
Below are the tax equivalent yields for each class of shares of the
Intermediate Term Fund for the seven-day period ended March 31, 1999. The
maximum federal tax rate of 39.6% is assumed. For more information, see "Tax
Equivalent Yield" under Performance Calculations in Part 2 of this SAI.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
===========================================================================
30 day SEC Tax Equivalent Yield
===========================================================================
----------------------------- -------------------- ========================
Institutional Institutional Service
----------------------------- -------------------- ========================
----------------------------- -------------------- ========================
Intermediate Term 7.58% 7.15%
Fund
----------------------------- -------------------- ========================
</TABLE>
SERVICE PROVIDERS
Administrator
Evergreen Investment Services, Inc. ("EIS") serves as administrator to
each of the Funds other than Adjustable Rate Fund, subject to the supervision
and control of the Trust's Board of Trustees. EIS provides the Funds with
facilities, equipment and personnel and is entitled to receive a fee from the
Fund based on the total assets of all mutual funds for which EIS serves as
administrator and a First Union Corporation subsidiary serves as advisor. The
fee paid to EIS is calculated in accordance with the following schedule:
---------------------- =================
Assets Fee
---------------------- =================
---------------------- =================
First $7 billion 0.050%
---------------------- =================
---------------------- =================
Next $3 billion 0.035%
---------------------- =================
---------------------- =================
Next $5 billion 0.030%
---------------------- =================
---------------------- =================
Next $10 billion 0.020%
---------------------- =================
---------------------- =================
Next $5 billion 0.015%
---------------------- =================
---------------------- =================
Over $30 billion 0.010%
---------------------- =================
EIS also provides facilities, equipment and personnel to Adjustable
Rate Fund on behalf of the investment advisor. Adjustable Rate Fund reimburses
EIS for the cost of providing such services.
Transfer Agent
Evergreen Service Company ("ESC"), a subsidiary of First Union
Corporation, is the Funds' transfer agent. ESC issues and redeems shares, pays
dividends and performs other duties in connection with the maintenance of
shareholder accounts. The transfer agent's address is P.O. Box 2121, Boston,
Massachusetts 02106-2121. Each Fund pays ESC annual fees as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
----------------------------- -------------------- ===================
Annual Fee Per Annual Fee Per
Fund Type Open Account* Closed Account**
----------------------------- -------------------- ===================
----------------------------- -------------------- ===================
Monthly Dividend Funds $25.50 $9.00
----------------------------- -------------------- ===================
----------------------------- -------------------- ===================
Quarterly Dividend Funds $24.50 $9.00
----------------------------- -------------------- ===================
----------------------------- -------------------- ===================
Semiannual Dividend Funds $23.50 $9.00
----------------------------- -------------------- ===================
----------------------------- -------------------- ===================
Annual Dividend Funds $23.50 $9.00
----------------------------- -------------------- ===================
----------------------------- -------------------- ===================
Money Market Funds $25.50 $9.00
----------------------------- -------------------- ===================
*For shareholder accounts only. Each Fund pays ESC cost plus 15% for broker accounts
** Closed account are maintained on the system in order to facilitate historical and tax
information.
</TABLE>
Distributor
Evergreen Distributor, Inc. (the "Distributor") markets the Funds through
broker-dealers and otherfinancial representatives. Its address is 90 Park
Avenue, New York, NY 10016.
Independent Accountants
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New
York 10036 audits the financial statements of each Fund other than Adjustable
Rate.
Independent Auditors
KPMG LLP, 99 High Street, Boston, Massachusetts 02110, audits the
financial statements of Adjustable Rate.
Custodian
State Street Bank and Trust Company keeps custody of each Fund's
securities and cash and performs other related duties. The custodian's address
is 225 Franklin Street, Boston, Massachusetts 02110.
Legal Counsel
Sullivan & Worcester LLP provides legal advice to the Funds.
Its address is 1025 Connecticut Avenue,N.W., Washington, D.C. 20036.
2-1
EVERGREEN FUNDS
Statement of Additional Information ("SAI")
PART 2
ADDITIONAL INFORMATION ON SECURITIES
AND INVESTMENT PRACTICES
The prospectus describes the Fund's investment objective and the
securities in which it primarily invests. The following describes other
securities the Fund may purchase and investment strategies it may use. Some of
the information below will not apply to the Fund in which you are interested.
See the list under Other Securities and Practices in Part 1 of this SAI to
determine which of the sections below are applicable.
Defensive Investments
The Fund may invest up to 100% of its assets in high quality money
market instruments, such as notes, certificates of deposit, commercial paper,
banker's acceptances, bank deposits or U.S. government securities if, in the
opinion of the advisor, market conditions warrant a temporary defensive
investment strategy. Evergreen Equity Income Fund may also invest in debt
securities and high grade preferred stocks for defensive purposes when its
investment advisor determines a temporary defensive strategy is warranted.
U.S. Government Securities
The Fund may invest in securities issued or guaranteed by U.S.
Government agencies or instrumentalities.
These securities are backed by (1) the discretionary authority of the
U.S. Government to purchase certain obligations of agencies or instrumentalities
or (2) the credit of the agency or instrumentality issuing the obligations.
Some government agencies and instrumentalities may not receive financial
support from the U.S. Government. Examples of such agencies are:
(i) Farm Credit System, including the National Bank for Cooperatives, Farm
Credit Banks and Banks for Cooperatives;
(ii) Farmers Home Administration;
(iii) Federal Home Loan Banks;
(iv) Federal Home Loan Mortgage Corporation;
(v) Federal National Mortgage Association; and
(vi) Student Loan Marketing Association.
Securities Issued by the Government National Mortgage Association ("GNMA")
The Fund may invest in securities issued by the GNMA, a corporation
wholly-owned by the U.S. Government. GNMA securities or "certificates" represent
ownership in a pool of underlying mortgages. The timely payment of principal and
interest due on these securities is guaranteed.
Unlike conventional bonds, the principal on GNMA certificates is not
paid at maturity but over the life of the security in scheduled monthly
payments. While mortgages pooled in a GNMA certificate may have maturities of up
to 30 years, the certificate itself will have a shorter average maturity and
less principal volatility than a comparable 30-year bond.
The market value and interest yield of GNMA certificates can vary due
not only to market fluctuations, but also to early prepayments of mortgages
within the pool. Since prepayment rates vary widely, it is impossible to
accurately predict the average maturity of a GNMA pool. In addition to the
guaranteed principal payments, GNMA certificates may also make unscheduled
principal payments resulting from prepayments on the underlying mortgages.
Although GNMA certificates may offer yields higher than those available
from other types of U.S. Government securities, they may be less effective as a
means of locking in attractive long-term rates because of the prepayment
feature. For instance, when interest rates decline, prepayments are likely to
increase as the holders of the underlying mortgages seek refinancing. As a
result, the value of a GNMA certificate is not likely to rise as much as the
value of a comparable debt security would in response to same decline. In
addition, these prepayments can cause the price of a GNMA certificate originally
purchased at a premium to decline in price compared to its par value, which may
result in a loss.
When-Issued, Delayed-Delivery and Forward Commitment Transactions
The Fund may purchase securities on a when-issued or delayed delivery
basis and may purchase or sell securities on a forward commitment basis.
Settlement of such transactions normally occurs within a month or more after the
purchase or sale commitment is made.
The Fund may purchase securities under such conditions only with the
intention of actually acquiring them, but may enter into a separate agreement to
sell the securities before the settlement date. Since the value of securities
purchased may fluctuate prior to settlement, the Fund may be required to pay
more at settlement than the security is worth. In addition, the purchaser is not
entitled to any of the interest earned prior to settlement.
Upon making a commitment to purchase a security on a when-issued,
delayed delivery or forward commitment basis the Fund will hold liquid assets
worth at least the equivalent of the amount due. The liquid assets will be
monitored on a daily basis and adjusted as necessary to maintain the necessary
value.
Purchases made under such conditions may involve the risk that yields
secured at the time of commitment may be lower than otherwise available by the
time settlement takes place, causing an unrealized loss to the Fund. In
addition, when the Fund engages in such purchases, it relies on the other party
to consummate the sale. If the other party fails to perform its obligations, the
Fund may miss the opportunity to obtain a security at a favorable price or
yield.
Repurchase Agreements
The Fund may enter into repurchase agreements with entities that are
registered as U.S. Government securities dealers, including member banks of the
Federal Reserve System having at least $1 billion in assets, primary dealers in
U.S. government securities or other financial institutions believed by the
investment advisor to be creditworthy. In a repurchase agreement the Fund
obtains a security and simultaneously commits to return the security to the
seller at a set price (including principal and interest) within period of time
usually not exceeding seven days. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the underlying security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is in
effect secured by the value of the underlying security.
The Fund's custodian or a third party will take possession of the
securities subject to repurchase agreements, and these securities will be marked
to market daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by the Fund
might be delayed pending court action. The Fund's investment advisor believes
that under the regular procedures normally in effect for custody of the Fund's
portfolio securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or disposition
of such securities. The Fund will only enter into repurchase agreements with
banks and other recognized financial institutions, such as broker-dealers, which
are deemed by the investment advisor to be creditworthy pursuant to guidelines
established by the Board of Trustees.
Reverse Repurchase Agreements
As described herein, the Fund may also enter into reverse repurchase
agreements. These transactions are similar to borrowing cash. In a reverse
repurchase agreement, the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in return
for a percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable the Fund to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.
Options
An option is a right to buy or sell a security for a specified price
within a limited time period. The option buyer pays the option seller (known as
the "writer") for the right to buy, which is a "call" option, or the right to
sell, which is a "put" option. Unless the option is terminated, the option
seller must then buy or sell the security at the agreed-upon price when asked to
do so by the option buyer.
The Fund may buy or sell put and call options on securities it holds or
intends to acquire, and may purchase put and call options for the purpose of
offsetting previously written put and call options of the same series. The Fund
may also buy and sell options on financial futures contracts. The Fund will use
options as a hedge against decreases or increases in the value of securities it
holds or intends to acquire.
The Fund may write only covered options. With regard to a call option,
this means that the Fund will own, for the life of the option, the securities
subject to the call option. The Fund will cover put options by holding, in a
segregated account, liquid assets having a value equal to or greater than the
price of securities subject to the put option. If the Fund is unable to effect a
closing purchase transaction with respect to the covered options it has sold, it
will not be able to sell the underlying securities or dispose of assets held in
a segregated account until the options expire or are exercised, resulting in a
potential loss of value to the Fund.
Futures Transactions
The Fund may enter into financial futures contracts and write options
on such contracts. The Fund intends to enter into such contracts and related
options for hedging purposes. The Fund will enter into futures on securities or
index-based futures contracts in order to hedge against changes in interest or
exchange rates or securities prices. A futures contract on securities is an
agreement to buy or sell securities at a specified price during a designated
month. A futures contract on a securities index does not involve the actual
delivery of securities, but merely requires the payment of a cash settlement
based on changes in the securities index. The Fund does not make payment or
deliver securities upon entering into a futures contract. Instead, it puts down
a margin deposit, which is adjusted to reflect changes in the value of the
contract and which continues until the contract is terminated.
The Fund may sell or purchase futures contracts. When a futures
contract is sold by the Fund, the value of the contract will tend to rise when
the value of the underlying securities declines and to fall when the value of
such securities increases. Thus, the Fund sells futures contracts in order to
offset a possible decline in the value of its securities. If a futures contract
is purchased by the Fund, the value of the contract will tend to rise when the
value of the underlying securities increases and to fall when the value of such
securities declines. The Fund intends to purchase futures contracts in order to
establish what is believed by the investment advisor to be a favorable price or
rate of return for securities the Fund intends to purchase.
The Fund also intends to purchase put and call options on futures
contracts for hedging purposes. A put option purchased by the Fund would give it
the right to assume a position as the seller of a futures contract. A call
option purchased by the Fund would give it the right to assume a position as the
purchaser of a futures contract. The purchase of an option on a futures contract
requires the Fund to pay a premium. In exchange for the premium, the Fund
becomes entitled to exercise the benefits, if any, provided by the futures
contract, but is not required to take any action under the contract. If the
option cannot be exercised profitably before it expires, the Fund's loss will be
limited to the amount of the premium and any transaction costs.
The Fund may enter into closing purchase and sale transactions in order
to terminate a futures contract and may sell put and call options for the
purpose of closing out its options positions. The Fund's ability to enter into
closing transactions depends on the development and maintenance of a liquid
secondary market. There is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. As a result, there
can be no assurance that the Fund will be able to enter into an offsetting
transaction with respect to a particular contract at a particular time. If the
Fund is not able to enter into an offsetting transaction, the Fund will continue
to be required to maintain the margin deposits on the contract and to complete
the contract according to its terms, in which case it would continue to bear
market risk on the transaction.
Although futures and options transactions are intended to enable the
Fund to manage market, interest rate or exchange rate risk, unanticipated
changes in interest rates or market prices could result in poorer performance
than if it had not entered into these transactions. Even if the investment
advisor correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of the Fund's futures position did not
correspond to changes in the value of its investments. This lack of correlation
between the Fund's futures and securities positions may be caused by differences
between the futures and securities markets or by differences between the
securities underlying the Fund's futures position and the securities held by or
to be purchased for the Fund. The Fund's investment advisor will attempt to
minimize these risks through careful selection and monitoring of the Fund's
futures and options positions.
The Fund does not intend to use futures transactions for speculation or
leverage. The Fund has the ability to write options on futures, but currently
intends to write such options only to close out options purchased by the Fund.
The Fund will not change these policies without supplementing the information in
the prospectus and SAI.
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the aggregate,
the value of the open positions (marked to market) exceeds the current market
value of its securities portfolio plus or minus the unrealized gain or loss on
those open positions, adjusted for the correlation of volatility between the
hedged securities and the futures contracts. If this limitation is exceeded at
any time, the Fund will take prompt action to close out a sufficient number of
open contracts to bring its open futures and options positions within this
limitation.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather the Fund
is required to deposit an amount of "initial margin" in cash or U.S. Treasury
bills with its custodian (or the broker, if legally permitted). The nature of
initial margin in futures transactions is different from that of margin in
securities transactions in that futures contract initial margin does not involve
the borrowing of funds by the Fund to finance the transactions. Initial margin
is in the nature of a performance bond or good faith deposit on the contract
which is returned to the Fund upon termination of the futures contract, assuming
all contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund pays
or receives cash, called "variation margin," equal to the daily change in value
of the futures contract. This process is known as "marking to market". Variation
margin does not represent a borrowing or loan by the Fund but is instead
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing its daily net asset value the Fund
will mark-to-market its open futures positions. The Fund is also required to
deposit and maintain margin when it writes call options on futures contracts.
Foreign Securities
The Fund may invest in foreign securities or U.S. securities traded in
foreign markets. In addition to securities issued by foreign companies,
permissible investments may also consist of obligations of foreign branches of
U.S. banks and of foreign banks, including European certificates of deposit,
European time deposits, Canadian time deposits and Yankee certificates of
deposit. The Fund may also invest in Canadian commercial paper and Europaper.
These instruments may subject the Fund to investment risks that differ in some
respects from those related to investments in obligations of U.S. issuers. Such
risks include the possibility of adverse political and economic developments;
imposition of withholding taxes on interest or other income; seizure,
nationalization, or expropriation of foreign deposits; establishment of exchange
controls or taxation at the source; greater fluctuations in value due to changes
in exchange rates, or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on such
obligations. Such investments may also entail higher custodial fees and sales
commissions than domestic investments. Foreign issuers of securities or
obligations are often subject to accounting treatment and engage in business
practices different from those respecting domestic issuers of similar securities
or obligations. Foreign branches of U.S. banks and foreign banks may be subject
to less stringent reserve requirements than those applicable to domestic
branches of U.S. banks.
Foreign Currency Transactions
As one way of managing exchange rate risk, the Fund may enter into
forward currency exchange contracts (agreements to purchase or sell currencies
at a specified price and date). The exchange rate for the transaction (the
amount of currency the Fund will deliver and receive when the contract is
completed) is fixed when the Fund enters into the contract. The Fund usually
will enter into these contracts to stabilize the U.S. dollar value of a security
it has agreed to buy or sell. The Fund intends to use these contracts to hedge
the U.S. dollar value of a security it already owns, particularly if the Fund
expects a decrease in the value of the currency in which the foreign security is
denominated. Although the Fund will attempt to benefit from using forward
contracts, the success of its hedging strategy will depend on the investment
advisor's ability to predict accurately the future exchange rates between
foreign currencies and the U.S. dollar. The value of the Fund's investments
denominated in foreign currencies will depend on the relative strengths of those
currencies and the U.S. dollar, and the Fund may be affected favorably or
unfavorably by changes in the exchange rates or exchange control regulations
between foreign currencies and the U.S. dollar. Changes in foreign currency
exchange rates also may affect the value of dividends and interest earned, gains
and losses realized on the sale of securities and net investment income and
gains, if any, to be distributed to shareholders by the Fund. The Fund may also
purchase and sell options related to foreign currencies in connection with
hedging strategies.
High Yield, High Risk Bonds
The Fund may invest a portion of its assets in lower rated bonds. Bonds
rated below BBB by Standard & Poor's Ratings Services ("S&P") or Fitch IBCA,
Inc. ("Fitch") or below Baa by Moody's Investors Service, Inc. ("Moody's"),
commonly known as "junk bonds," offer high yields, but also high risk. While
investment in junk bonds provides opportunities to maximize return over time,
they are considered predominantly speculative with respect to the ability of the
issuer to meet principal and interest payments.
Investors should be aware of the following risks:
(1) The lower ratings of junk bonds reflect a greater possibility that
adverse changes in the financial condition of the issuer or in general economic
conditions, or both, or an unanticipated rise in interest rates may impair the
ability of the issuer to make payments of interest and principal, especially if
the issuer is highly leveraged. Such issuer's ability to meet its debt
obligations may also be adversely affected by the issuer's inability to meet
specific forecasts or the unavailability of additional financing. Also, an
economic downturn or an increase in interest rates may increase the potential
for default by the issuers of these securities.
(2) The value of junk bonds may be more susceptible to real or
perceived adverse economic or political events than is the case for higher
quality bonds.
(3) The value of junk bonds, like those of other fixed income
securities, fluctuates in response to changes in interest rates, generally
rising when interest rates decline and falling when interest rates rise. For
example, if interest rates increase after a fixed income security is purchased,
the security, if sold prior to maturity, may return less than its cost. The
prices of junk bonds, however, are generally less sensitive to interest rate
changes than the prices of higher-rated bonds, but are more sensitive to news
about an issuer or the economy which is, or investors perceive as, negative.
(4) The secondary market for junk bonds may be less liquid at certain
times than the secondary market for higher quality bonds, which may adversely
effect (a) the bond's market price, (b) the Fund's ability to sell the bond and
the Fund's ability to obtain accurate market quotations for purposes of valuing
its assets.
For bond ratings descriptions, see "Corporate and Municipal Bond
Ratings" below.
Illiquid and Restricted Securities
The Fund may not invest more than 15% of its net assets in securities
that are illiquid. A security is illiquid when the Fund cannot dispose of it in
the ordinary course of business within seven days at approximately the value at
which the Fund has the investment on its books.
The Fund may invest in "restricted" securities, i.e., securities
subject to restrictions on resale under federal securities laws. Rule 144A under
the Securities Act of 1933 ("Rule 144A") allows certain restricted securities to
trade freely among qualified institutional investors. Since Rule 144A securities
may have limited markets, the Board of Trustees will determine whether such
securities should be considered illiquid for the purpose of determining the
Fund's compliance with the limit on illiquid securities indicated above. In
determine the liquidity of Rule 144A securities, the Trustees will consider: (1)
the frequency of trades and quotes for the security; (2) the number of dealers
willing to purchase or sell the security and the number of other potential
buyers; (3) dealer undertakings to make a market in the security; and (4) the
nature of the security and the nature of the marketplace trades.
Investment in Other Investment Companies
The Fund may purchase the shares of other investment companies to the
extent permitted under the 1940 Act. Currently, the Fund may not (1) own more
than 3% of the outstanding voting stocks of another investment company, (2)
invest more than 5% of its assets in any single investment company, and (3)
invest more than 10% of its assets in investment companies. However, the Fund
may invest all of its investable assets in securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and limitations as the Fund. Investing in other investment
companies may expose a Fund to duplicate expenses and lower it value.
Short Sales
A short sale is the sale of a security the Fund has borrowed. The Fund
expects to profit from a short sale by selling the borrowed security for more
than the cost of buying it to repay the lender. After a short sale is completed,
the value of the security sold short may rise. If that happens, the cost of
buying it to repay the lender may exceed the amount originally received for the
sale by the Fund.
The Fund may engage in short sales, but it may not make short sales of
securities or maintain a short position unless, at all times when a short
position is open, it owns an equal amount of such securities or of securities
which, without payment of any further consideration, are convertible into or
exchangeable for securities of the same issue as, and equal in amount to, the
securities sold short. The Fund may effect a short sale in connection with an
underwriting in which the Fund is a participant.
Municipal Bonds
The Fund may invest in municipal bonds of any state, territory or
possession of the United States ("U.S."), including the District of Columbia.
The Fund may also invest in municipal bonds of any political subdivision, agency
or instrumentality (e.g., counties, cities, towns, villages, districts,
authorities) of the U.S. or its possessions. Municipal bonds are debt
instruments issued by or for a state or local government to support its general
financial needs or to pay for special projects such as airports, bridges,
highways, public transit, schools, hospitals, housing and water and sewer works.
Municipal bonds may also may be issued to refinance public debt.
Municipal bonds are mainly divided between "general obligation" and
"revenue" bonds. General obligation bonds are backed by the full faith and
credit of governmental issuers with the power to tax. They are repaid from the
issuer's general revenues. Payment, however, may be dependent upon legislative
approval and may be subject to limitations on the issuer's taxing power.
Enforcement of payments due under general obligation bonds varies according to
the law applicable to the issuer. In contrast, revenue bonds are supported only
by the revenues generated by the project or facility.
The Fund may also invest in industrial development bonds. Such bonds
are usually revenue bonds issued to pay for facilities with a public purpose
operated by private corporations. The credit quality of industrial development
bonds is usually directly related to the credit standing of the owner or user of
the facilities. To qualify as a municipal bond, the interest paid on an
industrial development bond must qualify as fully exempt from federal income
tax. However, the interest paid on an industrial development bond may be subject
to the federal alternative minimum tax.
The yields on municipal bonds depend on such factors as market
conditions, the financial condition of the issuer and the issue's size, maturity
date and rating. Municipal bonds are rated by S&P, Moody's and Fitch. Such
ratings, however, are opinions, not absolute standards of quality. Municipal
bonds with the same maturity, interest rates and rating may have different
yields, while municipal bonds with the same maturity and interest rate, but
different ratings, may have the same yield. Once purchased by the Fund, a
municipal bond may cease to be rated or receive a new rating below the minimum
required for purchase by the Fund. Neither event would require the Fund to sell
the bond, but the Fund's investment advisor would consider such events in
determining whether the Fund should continue to hold it.
The ability of the Fund to achieve its investment objective depends
upon the continuing ability of issuers of municipal bonds to pay interest and
principal when due. Municipal bonds are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors. Such
laws extend the time for payment of principal and/or interest, and may otherwise
restrict the Fund's ability to enforce its rights in the event of default. Since
there is generally less information available on the financial condition of
municipal bond issuers compared to other domestic issuers of securities, the
Fund's investment advisor may lack sufficient knowledge of an issue's
weaknesses. Other influences, such as litigation, may also materially affect the
ability of an issuer to pay principal and interest when due. In addition, the
market for municipal bonds is often thin and can be temporarily affected by
large purchases and sales, including those by the Fund.
From time to time, Congress has considered restricting or eliminating
the federal income tax exemption for interest on municipal bonds. Such actions
could materially affect the availability of municipal bonds and the value of
those already owned by the Fund. If such legislation were passed, the Trust's
Board of Trustees may recommend changes in the Fund's investment objectives and
policies or dissolution of the Fund.
Virgin Islands, Guam and Puerto Rico
The Fund may invest in obligations of the governments of the Virgin
Islands, Guam and Puerto Rico to the extent such obligations are exempt from the
income or intangibles taxes, as applicable, of the state for which the Fund is
named. The Fund does not presently intend to invest more than (a) 10% of its net
assets in the obligations of each of the Virgin Islands and Guam or (b) 25% of
its net assets in the obligations of Puerto Rico. Accordingly, the Fund may be
adversely affected by local political and economic conditions and developments
within the Virgin Islands, Guam and Puerto Rico affecting the issuers of such
obligations.
Master Demand Notes
The Fund may invest in master demand notes. These are unsecured obligations that
permit the investment of fluctuating amounts by the Fund at varying rates of
interest pursuant to direct arrangements between the Fund, as lender, and the
issuer, as borrower. Master demand notes may permit daily fluctuations in the
interest rate and daily changes in the amounts borrowed. The Fund has the right
to increase the amount under the note at any time up to the full amount provided
by the note agreement, or to decrease the amount. The borrower may repay up to
the full amount of the note without penalty. Master demand notes permit the Fund
to demand payment of principal and accrued interest at any time (on not more
than seven days' notice). Notes acquired by the Fund may have maturities of more
than one year, provided that (1) the Fund is entitled to payment of principal
and accrued interest upon not more than seven days' notice, and (2) the rate of
interest on such notes is adjusted automatically at periodic intervals, which
normally will not exceed 31 days, but may extend up to one year. The notes are
deemed to have a maturity equal to the longer of the period remaining to the
next interest rate adjustment or the demand notice period. Because these types
of notes are direct lending arrangements between the lender and borrower, such
instruments are not normally traded and there is no secondary market for these
notes, although they are redeemable and thus repayable by the borrower at face
value plus accrued interest at any time. Accordingly, the Fund's right to redeem
is dependent on the ability of the borrower to pay principal and interest on
demand. In connection with master demand note arrangements, the Fund`s
investment advisor considers, under standards established by the Board of
Trustees, earning power, cash flow and other liquidity ratios of the borrower
and will monitor the ability of the borrower to pay principal and interest on
demand. These notes are not typically rated by credit rating agencies. Unless
rated, the Fund may invest in them only if at the time of an investment the
issuer meets the criteria established for commercial paper discussed in this
statement of additional information (which limits such investments to commercial
paper rated A-1 by S&P, Prime-1 by Moody's or F-1 by Fitch.
Brady Bonds
The Fund may also invest in Brady Bonds. Brady Bonds are created
through the exchange of existing commercial bank loans to foreign entities for
new obligations in connection with debt restructurings under a plan introduced
by former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan").
Brady Bonds have been issued only recently, and, accordingly, do not have a long
payment history. They may be collateralized or uncollateralized and issued in
various currencies (although most are U.S.
dollar-denominated) and they are actively traded in the over-the-counter
secondary market.
U.S. dollar-denominated, collateralized Brady Bonds, which may be
fixed-rate par bonds or floating rate discount bonds, are generally
collateralized in full as to principal due at maturity by U.S. Treasury zero
coupon obligations that have the same maturity as the Brady Bonds. Interest
payments on these Brady Bonds generally are collateralized by cash or securities
in an amount that, in the case of fixed rate bonds, is equal to at least one
year of rolling interest payments based on the applicable interest rate at that
time and is adjusted at regular intervals thereafter. Certain Brady Bonds are
entitled to "value recovery payments" in certain circumstances, which in effect
constitute supplemental interest payments, but generally are not collateralized.
Brady Bonds are often viewed as having up to four valuation components: (1)
collateralized repayment of principal at final maturity, (2) collateralized
interest payments, (3) uncollateralized interest payments, and (4) any
uncollateralized repayment of principal at maturity (these uncollateralized
amounts constitute the "residual risk"). In the event of a default with respect
to collateralized Brady Bonds as a result of which the payment obligations of
the issuer are accelerated, the U.S. Treasury zero coupon obligations held as
collateral for the payment of principal will not be distributed to investors,
nor will such obligations be sold and the proceeds distributed. The collateral
will be held by the collateral agent to the scheduled maturity of the defaulted
Brady Bonds, which will continue to be outstanding, at which time the face
amount of the collateral will equal the principal payments that would have then
been due on the Brady Bonds in the normal course. In addition, in light of the
residual risk of Brady Bonds and, among other factors, the history of defaults
with respect to commercial bank loans by public and private entities of
countries issuing Brady Bonds, investments in Brady Bonds are to be viewed as
speculative.
Obligations of Foreign Branches of United States Banks
The Fund may invest in obligations of foreign branches of U.S. banks.
These may be general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and by
government regulation. Payment of interest and principal upon these obligations
may also be affected by governmental action in the country of domicile of the
branch (generally referred to as sovereign risk). In addition, evidences of
ownership of such securities may be held outside the U.S. and the Fund may be
subject to the risks associated with the holding of such property overseas.
Examples of governmental actions would be the imposition of currency controls,
interest limitations, withholding taxes, seizure of assets or the declaration of
a moratorium. Various provisions of federal law governing domestic branches do
not apply to foreign branches of domestic banks.
Obligations of United States Branches of Foreign Banks
The Fund may invest in obligations of U.S. branches of foreign banks.
These may be general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and by federal
and state regulation as well as by governmental action in the country in which
the foreign bank has its head office. In addition, there may be less publicly
available information about a U.S. branch of a foreign bank than about a
domestic bank.
Payment-in-kind Securities
The Fund may invest in payment-in-kind ("PIK") securities. PIKs pay
interest in either cash or additional securities, at the issuer's option, for a
specified period. The issuer's option to pay in additional securities typically
ranges from one to six years, compared to an average maturity for all PIK
securities of eleven years. Call protection and sinking fund features are
comparable to those offered on traditional debt issues.
PIKs, like zero coupon bonds, are designed to give an issuer
flexibility in managing cash flow. Several PIKs are senior debt. In other cases,
where PIKs are subordinated, most senior lenders view them as equity
equivalents.
An advantage of PIKs for the issuer -- as with zero coupon securities
- -- is that interest payments are automatically compounded (reinvested) at the
stated coupon rate, which is not the case with cash-paying securities. However,
PIKs are gaining popularity over zeros since interest payments in additional
securities can be monetized and are more tangible than accretion of a discount.
As a group, PIK bonds trade flat (i.e., without accrued interest).
Their price is expected to reflect an amount representing accredit interest
since the last payment. PIKs generally trade at higher yields than comparable
cash-paying securities of the same issuer. Their premium yield is the result of
the lesser desirability of non-cash interest, the more limited audience for
non-cash paying securities, and the fact that many PIKs have been issued to
equity investors who do not normally own or hold such securities.
Calculating the true yield on a PIK security requires a discounted cash
flow analysis if the security (ex interest) is trading at a premium or a
discount because the realizable value of additional payments is equal to the
current market value of the underlying security, not par.
Regardless of whether PIK securities are senior or deeply subordinated,
issuers are highly motivated to retire them because they are usually their most
costly form of capital.
Zero Coupon "Stripped" Bonds
The Fund may invest in zero coupon "stripped" bonds. These represent
ownership in serially maturing interest payments or principal payments on
specific underlying notes and bonds, including coupons relating to such notes
and bonds. The interest and principal payments are direct obligations of the
issuer. Coupon zero coupon bonds of any series mature periodically from the date
of issue of such series through the maturity date of the securities related to
such series. Principal zero coupon bonds mature on the date specified therein,
which is the final maturity date of the related securities. Each zero coupon
bond entitles the holder to receive a single payment at maturity. There are no
periodic interest payments on a zero coupon bond. Zero coupon bonds are offered
at discounts from their face amounts.
In general, owners of zero coupon bonds have substantially all the
rights and privileges of owners of the underlying coupon obligations or
principal obligations. Owners of zero coupon bonds have the right upon default
on the underlying coupon obligations or principal obligations to proceed
directly and individually against the issuer and are not required to act in
concert with other holders of zero coupon bonds.
For federal income tax purposes, a purchaser of principal zero coupon
bonds or coupon zero coupon bonds (either initially or in the secondary market)
is treated as if the buyer had purchased a corporate obligation issued on the
purchase date with an original issue discount equal to the excess of the amount
payable at maturity over the purchase price. The purchaser is required to take
into income each year as ordinary income an allocable portion of such discounts
determined on a "constant yield" method. Any such income increases the holder's
tax basis for the zero coupon bond, and any gain or loss on a sale of the zero
coupon bonds relative to the holder's basis, as so adjusted, is a capital gain
or loss. If the holder owns both principal zero coupon bonds and coupon zero
coupon bonds representing interest in the same underlying issue of securities, a
special basis allocation rule (requiring the aggregate basis to be allocated
among the items sold and retained based on their relative fair market value at
the time of sale) may apply to determine the gain or loss on a sale of any such
zero coupon bonds.
Mortgage-Backed or Asset-Backed Securities
The Fund may invest in mortgage-backed securities and asset-backed
securities. Two principal types of mortgage-backed securities are collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs"). CMOs are securities collateralized by mortgages, mortgage
pass-throughs, mortgage pay-through bonds (bonds representing an interest in a
pool of mortgages where the cash flow generated from the mortgage collateral
pool is dedicated to bond repayment), and mortgage-backed bonds (general
obligations of the issuers payable out of the issuers' general funds and
additionally secured by a first lien on a pool of single family detached
properties). Many CMOs are issued with a number of classes or series which have
different maturities and are retired in sequence.
Investors purchasing CMOs in the shortest maturities receive or are
credited with their pro rata portion of the scheduled payments of interest and
principal on the underlying mortgages plus all unscheduled prepayments of
principal up to a predetermined portion of the total CMO obligation. Until that
portion of such CMO obligation is repaid, investors in the longer maturities
receive interest only. Accordingly, the CMOs in the longer maturity series are
less likely than other mortgage pass-throughs to be prepaid prior to their
stated maturity. Although some of the mortgages underlying CMOs may be supported
by various types of insurance, and some CMOs may be backed by GNMA certificates
or other mortgage pass-throughs issued or guaranteed by U.S. government agencies
or instrumentalities, the CMOs themselves are not generally guaranteed.
REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities.
In addition to mortgage-backed securities, the Fund may invest in
securities secured by other assets including company receivables, truck and auto
loans, leases, and credit card receivables. These issues may be traded
over-the-counter and typically have a short-intermediate maturity structure
depending on the pay down characteristics of the underlying financial assets
which are passed through to the security holder.
Credit card receivables are generally unsecured and the debtors are
entitled to the protection of a number of state and federal consumer credit
laws, many of which give such debtors the right to set off certain amounts owed
on the credit cards, thereby reducing the balance due. Most issuers of
asset-backed securities backed by automobile receivables permit the servicers of
such receivables to retain possession of the underlying obligations. If the
services were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
rated asset-backed securities. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of asset-backed securities backed by
automobile receivables may not have a proper security interest in all of the
obligations backing such receivables. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on these securities.
In general, issues of asset-backed securities are structured to include
additional collateral and/or additional credit support to protect against the
risk that a portion of the collateral supporting the asset-backed securities may
default and/or may suffer from these defects. In evaluating the strength of
particular issues of asset-backed securities, the investment advisor considers
the financial strength of the guarantor or other provider of credit support, the
type and extent of credit enhancement provided as well as the documentation and
structure of the issue itself and the credit support.
Variable or Floating Rate Instruments
The Fund may invest in variable or floating rate instruments which may
involve a demand feature and may include variable amount master demand notes
which may or may not be backed by bank letters of credit. Variable or floating
rate instruments bear interest at a rate which varies with changes in market
rates. The holder of an instrument with a demand feature may tender the
instrument back to the issuer at par prior to maturity. A variable amount master
demand note is issued pursuant to a written agreement between the issuer and the
holder, its amount may be increased by the holder or decreased by the holder or
issuer, it is payable on demand, and the rate -of interest varies based upon an
agreed formula. The quality of the underlying credit must, in the opinion of the
investment advisor, be equivalent to the long-term bond or commercial paper
ratings applicable to permitted investments for the Fund. The investment advisor
will monitor, on an ongoing basis, the earning power, cash flow, and liquidity
ratios of the issuers of such instruments and will similarly monitor the ability
of an issuer of a demand instrument to pay principal and interest on demand.
Limited Partnerships
Each Fund may invest in limited and master limited partnerships. A
limited partnership is a partnership consisting of one or more general partners,
jointly and severally responsible as ordinary partners, and by whom the business
is conducted, and one or more limited partners who contribute cash as capital to
the partnership and who generally are not liable for the debts of the
partnership beyond the amounts contributed. Limited partners are not involved in
the day-to-day management of the partnership. They receive income, capital gains
and other tax benefits associated with the partnership project in accordance
with terms established in the partnership agreement. Typical limited
partnerships are in real estate, oil and gas and equipment leasing, but they
also finance movies, research and development, and other projects.
For an organization classified as a partnership under the Internal
Revenue Code of 1986, as amended (the "Code"), each item of income, gain, loss,
deduction, and credit is not taxed at the partnership level but flows through to
the holder of the partnership unit. This allows the partnership to avoid double
taxation and to pass through income to the holder of the partnership unit at
lower individual rates.
A master limited partnership is a publicly traded limited partnership.
The partnership units are registered with the Securities and Exchange Commission
("SEC") and are freely exchanged on a securities exchange or in the
over-the-counter market.
PURCHASE, REDEMPTION AND PRICING OF SHARES
You may buy shares of the Fund through the Distributor, broker-dealers
that have entered into special agreements with the Distributor or certain other
financial institutions. The Fund offers up to different classes of shares that
differ primarily with respect to sales charges and distribution fees. Depending
upon the class of shares, you will pay an initial sales charge when you buy the
Fund's shares, a contingent deferred sales charge (a "CDSC") when you redeem the
Fund's shares or no sales charges at all.
Class A Shares
With certain exceptions, when you purchase Class A shares you will pay
a maximum sales charge of 4.75%. The prospectus contains a complete table of
applicable sales charges and a discussion of sales charge reductions or waivers
that may apply to purchases. If you purchase Class A shares in the amount of $1
million or more, without an initial sales charge, the Fund will charge a CDSC of
1.00% if you redeem during the month of your purchase or the 12-month period
following the month of your purchase (see "Contingent Deferred Sales Charge"
below).
No front-end sales charges are imposed on Class A shares purchased by
(a) institutional investors, which may include bank trust departments and
registered investment advisors; (b) investment advisors, consultants or
financial planners who place trades for their own accounts or the accounts of
their clients and who charge such clients a management, consulting, advisory or
other fee; (c) clients of investment advisors or financial planners who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisors or financial planners on the books of the
broker-dealer through whom shares are purchased; (d) institutional clients of
broker-dealers, including retirement and deferred compensation plans and the
trusts used to fund these plans, which place trades through an omnibus account
maintained with the Fund by the broker-dealer; (e) shareholders of record on
October 12, 1990 in any series of Evergreen Investment Trust in existence on
that date, and the members of their immediate families; (f) current and retired
employees of First Union National Bank ("FUNB") and its affiliates, EDI and any
broker-dealer with whom EDI has entered into an agreement to sell shares of the
Fund, and members of the immediate families of such employees; and (g) upon the
initial purchase of an Evergreen fund by investors reinvesting the proceeds from
a redemption within the preceding 30 days of shares of other mutual funds,
provided such shares were initially purchased with a front-end sales charge or
subject to a CDSC.
Class B Shares
The Fund offers Class B shares at net asset value without an initial
sales charge. With certain exceptions, however, the Fund will charge a CDSC on
shares you redeem within 72 months after the month of your purchase, in
accordance with the following schedule:
REDEMPTION TIME CDSC RATE
Month of purchase and the first 12-month
period following the month of purchase. ........................5.00%
Second 12-month period following the month of purchase..........4.00%
Third 12-month period following the month of purchase...........3.00%
Fourth 12-month period following the month of purchase .........3.00%
Fifth 12-month period following the month of purchase...........2.00%
Sixth 12-month period following the month of purchase...........1.00%
Thereafter......................................................0.00%
Class B shares that have been outstanding for seven years after the
month of purchase will automatically convert to Class A shares without
imposition of a front-end sales charge or exchange fee. Conversion of Class B
shares represented by stock certificates will require the return of the stock
certificate to ESC.
Class C Shares
Class C shares are available only through broker-dealers who have
entered into special distribution agreements with the Distributor. The Fund
offers Class C shares at net asset value without an initial sales charge. With
certain exceptions, however, the Fund will charge a CDSC of 1.00% on shares you
redeem within 12-months after the month of your purchase. See "Contingent
Deferred Sales Charge" below.
Class Y Shares
No CDSC is imposed on the redemption of Class Y shares. Class Y shares
are not offered to the general public and are available only to (1) persons who
at or prior to December 31, 1994 owned shares in a mutual fund advised by (2)
certain institutional investors and (3) investment advisory clients of EIM,
EAMC, EIMC, MIC, First International Advisors, Ltd., or their affiliates. Class
Y shares are offered at net asset value without a front-end or back-end sales
charge and do not bear any Rule 12b-1 distribution expenses.
INSTITUTIONAL SHARES, INSTITUTIONAL SERVICE SHARES AND CHARITABLE SHARES
Each institutional class of shares is sold without a front-end sales
charge or contingent deferred sales charge. Institutional Service shares pay an
ongoing service fee. The minimum initial investment in any institutional class
of shares is $1 million, which may be waived in certain circumstances. There is
no minimum amount required for subsequent purchases.
Contingent Deferred Sales Charge
The Fund charges a CDSC as reimbursement for certain expenses, such as
commissions or shareholder servicing fees, that it has incurred in connection
with the sale of its shares (see "Distribution Expenses Under Rule 12b-1,"
below). Institutional, Institutional Service and Charitable shares do not charge
a CDSC. If imposed, the Fund deducts the CDSC from the redemption proceeds you
would otherwise receive. The CDSC is a percentage of the lesser of (1) the net
asset value of the shares at the time of redemption or (2) the shareholder's
original net cost for such shares. Upon request for redemption, to keep the CDSC
a shareholder must pay as low as possible, the Fund will first seek to redeem
shares not subject to the CDSC and/or shares held the longest, in that order.
The CDSC on any redemption is, to the extent permitted by the National
Association of Securities Dealers, Inc. ("NASD"), paid to the Distributor or its
predecessor.
<PAGE>
SALES CHARGE WAIVERS AND REDUCTIONS
The following information is not applicable to Institutional,
Institutional Service and Charitable shares.
If you making a large purchase, there are several ways you can combine
multiple purchases of Class A shares in Evergreen Funds and take advantage of
lower sales charges. These are described below.
Combined Purchases
You can reduce your sales charge by combining purchases of Class A
shares of multiple Evergreen Funds. For example, if you invested $75,000 in each
of two different Evergreen Funds, you would pay a sales charge based on a
$150,000 purchase (i.e., 3.75% of the offering price, rather than 4.75%).
Rights of Accumulation
You can reduce your sales charge by adding the value of Class A shares
of Evergreen Funds you already own to the amount of your next Class A
investment. For example, if you hold Class A shares valued at $99,999 and
purchase an additional $5,000, the sales charge for the $5,000 purchase would be
at the next lower sales charge of 3.75%, rather than 4.75%.
Your account, and therefore your rights of accumulation, can be linked
to immediate family members which includes father and mother, brothers and
sisters, and sons and daughters. The same rule applies with respect to
individual retirement plans. Please note, however, that retirement plans
involving employees stand alone and do not pass on rights of accumulation.
Letter of Intent
You can, by completing the "Letter of Intent" section of the
application, purchase Class A shares over a 13-month period and receive the same
sales charge as if you had invested all the money at once. All purchases of
Class A shares of an Evergreen Fund during the period will qualify as Letter of
Intent purchases.
Waiver of Initial Sales Charges
The Fund may sell its shares at net asset value without an initial
sales charge to:
1. purchasers of shares in the amount of $1 million or more;
2. a corporate or certain other qualified retirement plan or a
non-qualified deferred compensation plan or a Title 1
tax-sheltered annuity or TSA plan sponsored by an organization
having 100 or more eligible employees (a "Qualifying Plan") or
a TSA plan sponsored by a public educational entity having
5,000 or more eligible employees (an "Educational TSA Plan");
3. institutional investors, which may include bank trust departments
and registered investment advisors;
4. investment advisors, consultants or financial planners who
place trades for their own accounts or the accounts of their
clients and who charge such clients a management, consulting,
advisory or other fee;
5. clients of investment advisors or financial planners who place
trades for their own accounts if the accounts are linked to a
master account of such investment advisors or financial
planners on the books of the broker-dealer through whom shares
are purchased;
6. institutional clients of broker-dealers, including retirement
and deferred compensation plans and the trusts used to fund
these plans, which place trades through an omnibus account
maintained with the Fund by the broker-dealer;
7. employees of First Union National Bank ("FUNB"), its
affiliates, the Distributor, any broker-dealer with whom the
Distributor, has entered into an agreement to sell shares of
the Fund, and members of the immediate families of such
employees;
8. certain Directors, Trustees, officers and employees of the
Evergreen Funds, the Distributor or their affiliates and to
the immediate families of such persons; or
9. a bank or trust company in a single account in the name of
such bank or trust company as Trustee if the initial
investment in or any Evergreen fund made pursuant to this
waiver is at least $500,000 and any commission paid at the
time of such purchase is not more than 1% of the amount
invested.
With respect to items 8 and 9 above, the Fund will only sell shares to
these parties upon the purchasers written assurance that the purchase is for
their personal investment purposes only. Such purchasers may not resell the
securities except through redemption by the Fund. The Fund will not charge any
CDSC on redemptions by such purchasers.
Waiver of CDSCS
The Fund does not impose a CDSC when the shares you are redeeming
represent:
1. an increase in the share value above the net cost of such shares;
2. certain shares for which the Fund did not pay a commission on
issuance, including shares acquired through reinvestment of
dividend income and capital gains distributions;
3. shares that are in the accounts of a shareholder who has died or become
disabled;
4. a lump-sum distribution from a 401(k) plan or other benefit
plan qualified under the Employee Retirement Income Security
Act of 1974 ("ERISA");
5. an automatic withdrawal from the ERISA plan of a shareholder who is a
least 59 years old;
6. shares in an account that we have closed because the account has an
aggregate net asset value of less than $1,000;
7. an automatic withdrawal under an Systematic Income Plan of up to 1.0%
per month of your initial account balance;
8. a withdrawal consisting of loan proceeds to a retirement plan
participant;
9. a financial hardship withdrawal made by a retirement plan participant;
10. a withdrawal consisting of returns of excess contributions or
excess deferral amounts made to a retirement plan; or
11. a redemption by an individual participant in a Qualifying Plan
that purchased Class C shares (this waiver is not available in
the event a Qualifying Plan, as a whole, redeems substantially
all of its assets).
Exchanges
Investors may exchange shares of the Fund for shares of the same class
of any other Evergreen fund which offers the same class of shares. Shares of any
class of the Evergreen Select Funds may be exchanged for the same class of
shares of any other Evergreen Select Fund. See "By Exchange" under "How to Buy
Shares" in the prospectus. Before you make an exchange, you should read the
prospectus of the Evergreen fund into which you want to exchange. The Trust's
Board of Trustees reserves the right to discontinue, alter or limit the exchange
privilege at any time.
Automatic Reinvestment
As described in the prospectus, a shareholder may elect to receive
dividends and capital gains distributions in cash instead of shares. However,
ESC will automatically reinvest all dividends and distributions in additional
shares when it learns that the postal or other delivery service is unable to
deliver checks or transaction confirmations to the shareholder's address of
record. When a check is returned, the Fund will hold the check amount in a
no-interest account in the shareholder's name until the shareholder updates his
or her address or automatic reinvestment begins. Uncashed or returned redemption
checks will also be handled in the manner described above.
Calculation of Net Asset Value
The Fund calculates its net asset value ("NAV") once daily on Monday
through Friday, as described in the prospectus. The Fund will not compute its
NAV on the days the New York Stock Exchange is closed: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
The NAV of the Fund is calculated by dividing the value of the Fund's
net assets attributable to that class by all of the shares issued for that
class.
Valuation of Portfolio Securities
Current values for the Fund's portfolio securities are determined as
follows:
(1) Securities that are traded on an established securities exchange or
the over-the-counter National Market System ("NMS") are valued on the
basis of the last sales price on the exchange where primarily traded or
on the NMS prior to the time of the valuation, provided that a sale has
occurred.
(2) Securities traded on an established securities exchange or in the
over-the-counter market for which there has been no sale and other
securities traded in the over-the-counter market are valued at the mean
of the bid and asked prices at the time of valuation.
(3) Short-term investments maturing in more than 60 days, for which
market quotations are readily available, are valued at current market
value.
(4) Short-term investments maturing in sixty days or less are valued at
amortized cost, which approximates market.
(5) Securities, including restricted securities, for which market
quotations are not readily available; listed securities or those on NMS
if, in the investment advisor's opinion, the last sales price does not
reflect an accurate current market value; and other assets are valued
at prices deemed in good faith to be fair under procedures established
by the Board of Trustees.
PERFORMANCE CALCULATIONS
Total Return
Total return quotations for a class of shares of the Fund as they may
appear from time to time in advertisements are calculated by finding the average
annual compounded rates of return over one, five and ten year periods, or the
time periods for which such class of shares has been effective, whichever is
relevant, on a hypothetical $1,000 investment that would equate the initial
amount invested in the class to the ending redeemable value. To the initial
investment all dividends and distributions are added, and all recurring fees
charged to all shareholder accounts are deducted. The ending redeemable value
assumes a complete redemption at the end of the relevant periods. The following
is the formula used to calculate average annual total return:
[OBJECT OMITTED]
P = initial payment of $1,000 T = average total return N = number of
years
ERV = ending redeemable value of the initial $1,000
<PAGE>
Yield
Described below are yield calculations the Fund may use. Yield
quotations are expressed in annualized terms and may be quoted on a compounded
basis. Yields based on these calculations do not represent the Fund's yield for
any future period.
30-Day Yield
If the Fund invests primarily in bonds, it may quote its 30-day yield
in advertisements or in reports or other communications to shareholders. It is
calculated by dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of the period,
according to the following formula:
[OBJECT OMITTED] [OBJECT OMITTED]
Where:
a = Dividends and interest earned during the period b = Expenses
accrued for the period (net of reimbursements) c = The average daily
number of shares outstanding during the period
that were entitled to receive dividends
d = The maximum offering price per share on the last day of the period
7-Day Current and Effective Yield
If the Fund invests primarily in money market instruments, it may
quote its 7-day current yield or effective yield in advertisements or in reports
or other communications to shareholders.
The current yield is calculated by determining the net change,
excluding capital changes and income other than investment income, in the value
of a hypothetical, pre-existing account having a balance of one share at the
beginning of the 7-day base period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then multiplying the base period return by (365/7).
The effective yield is based on a compounding of the current yield,
according to the following formula:
[OBJECT OMITTED]
<PAGE>
Tax Equivalent Yield
If the Fund invests primarily in municipal bonds, it may quote in
advertisements or in reports or other communications to shareholders a tax
equivalent yield, which is what an investor would generally need to earn from a
fully taxable investment in order to realize, after income taxes, a benefit
equal to the tax free yield provided by the Fund. Tax equivalent yield is
calculated using the following formula:
[OBJECT OMITTED]
The quotient is then added to that portion, if any, of the Fund's
yield that is not tax exempt. Depending on the Fund's objective, the income tax
rate used in the formula above may be federal or a combination of federal and
state.
PRINCIPAL UNDERWRITER
The Distributor is the principal underwriter for the Trust and with
respect to each class of shares of the Fund. The Trust has entered into a
Principal Underwriting Agreement ("Underwriting Agreement") with the Distributor
with respect to each class of the Fund. The Distributor is a subsidiary of The
BISYS Group, Inc.
The Distributor, as agent, has agreed to use its best efforts to find
purchasers for the shares. The Distributor may retain and employ representatives
to promote distribution of the shares and may obtain orders from broker-dealers,
and others, acting as principals, for sales of shares to them. The Underwriting
Agreement provides that the Distributor will bear the expense of preparing,
printing, and distributing advertising and sales literature and prospectuses
used by it.
All subscriptions and sales of shares by the Distributor are at the
public offering price of the shares, which is determined in accordance with the
provisions of the Trust's Declaration of Trust, By-Laws, current prospectuses
and SAI. All orders are subject to acceptance by the Fund and the Fund reserves
the right, in its sole discretion, to reject any order received. Under the
Underwriting Agreement, the Fund is not liable to anyone for failure to accept
any order.
The Distributor has agreed that it will, in all respects, duly conform
with all state and federal laws applicable to the sale of the shares. The
Distributor has also agreed that it will indemnify and hold harmless the Trust
and each person who has been, is, or may be a Trustee or officer of the Trust
against expenses reasonably incurred by any of them in connection with any
claim, action, suit, or proceeding to which any of them may be a party that
arises out of or is alleged to arise out of any misrepresentation or omission to
state a material fact on the part of the Distributor or any other person for
whose acts the Distributor is responsible or is alleged to be responsible,
unless such misrepresentation or omission was made in reliance upon written
information furnished by the Trust.
The Underwriting Agreement provides that it will remain in effect as
long as its terms and continuance are approved annually (I) by a vote of a
majority of the Trust's Trustees who are not interested persons of the Fund, as
defined in the 1940 Act (the "Independent Trustees"), and (ii) by vote of a
majority of the Trust's Trustees, in each case, cast in person at a meeting
called for that purpose.
The Underwriting Agreement may be terminated, without penalty, on 60
days' written notice by the Board of Trustees or by a vote of a majority of
outstanding shares subject to such agreement. The Underwriting Agreement will
terminate automatically upon its "assignment," as that term is defined in the
1940 Act.
From time to time, if, in the Distributor's judgment, it could benefit
the sales of shares, the Distributor may provide to selected broker-dealers
promotional materials and selling aids, including, but not limited to, personal
computers, related software, and data files.
DISTRIBUTION EXPENSES UNDER RULE 12b-1
The Fund bears some of the costs of selling its Class A, Class B, Class
C and Institutional Service shares, as applicable, including certain
advertising, marketing and shareholder service expenses, pursuant to Rule 12b-1
of the 1940 Act. These "12b-1 fees" or "distribution fees" are indirectly paid
by the shareholder, as shown by the Fund's expense table in the prospectus.
Under the Distribution Plans (each a "Plan," together, the "Plans")
that the Fund has adopted for its Class A Class B, Class C and Institutional
Service shares, as applicable, the Fund may incur expenses for distribution
costs up to a maximum annual percentage of the average daily net assets
attributable to a class, as follows:
------------------------------- ---------------
Class A 0.75%*
------------------------------- ---------------
------------------------------- ---------------
Class B 1.00%
------------------------------- ---------------
------------------------------- ---------------
Class C 1.00%
------------------------------- ---------------
------------------------------- ---------------
Institutional Service 0.75%*
------------------------------- ---------------
*Currently limited to 0.25% or less. See the expense table in the
prospectus of the Fund in which you are interested.
Of the amounts above, each class may pay under its Plan a maximum
service fee of 0.25% to compensate organizations, which may include the Fund's
investment advisor or its affiliates, for personal services provided to
shareholders and the maintenance of shareholder accounts. The Fund may not,
during any fiscal period, pay distribution or service fees greater than the
amounts above.
<PAGE>
Amounts paid under the Plans are used to compensate the Distributor
pursuant to Distribution Agreements (each an "Agreement," together, the
"Agreements") that the Fund has entered into with respect to its Class A, Class
B, Class C and Institutional Service shares, as applicable. The compensation is
based on a maximum annual percentage of the average daily net assets
attributable to a class, as follows:
----------------------------- -------------
Class A 0.25%*
----------------------------- -------------
----------------------------- -------------
Class B 1.00%
----------------------------- -------------
----------------------------- -------------
Class C 1.00%
----------------------------- -------------
----------------------------- -------------
Institutional Service 0.25%*
----------------------------- -------------
*May be lower. See the expense table in the prospectus of the Fund in which
you are interested.
The Agreements provide that the Distributor will use the distribution
fees received from the Fund for the following purposes:
(1) to compensate broker-dealers or other persons for distributing Fund
shares;
(2) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative,
accounting and other services with respect to the Fund's
shareholders; and
(3) to otherwise promote the sale of Fund shares.
The Agreements also provide that the Distributor may use distribution
fees to make interest and principal payments in respect of amounts that have
been financed to pay broker-dealers or other persons for distributing Fund
shares. The Distributor may assign its rights to receive compensation under the
Plans to secure such financings. FUNB or its affiliates may finance payments
made by the Distributor to compensate broker-dealers or other persons for
distributing shares of the Fund.
In the event the Fund acquires the assets of another mutual fund,
compensation paid to the Distributor under the Agreements may be paid by the
Fund's Distributor to the acquired fund's distributor or its predecessor.
Since the Distributor's compensation under the Agreements is not
directly tied to the expenses incurred by the Distributor, the compensation
received by it under the Agreements during any fiscal year may be more or less
than its actual expenses and may result in a profit to the Distributor.
Distribution expenses incurred by the Distributor in one fiscal year that exceed
the compensation paid to the Distributor for that year may be paid from
distribution fees received from the Fund in subsequent fiscal years.
Distribution fees are accrued daily and paid at least monthly on Class
A, Class B and Class C shares and are charged as class expenses, as accrued. The
distribution fees attributable to the Class B and Class C shares are designed to
permit an investor to purchase such shares through broker-dealers without the
assessment of a front-end sales charge, while at the same time permitting the
Distributor to compensate broker-dealers in connection with the sale of such
shares. In this regard, the purpose and function of the combined contingent
deferred sales charge and distribution services fee on the Class B shares are
the same as those of the front-end sales charge and distribution fee with
respect to the Class A
shares in that in each case the sales charge and/or distribution fee provide for
the financing of the distribution of the Fund's shares.
Under the Plans, the Treasurer of the Trust reports the amounts
expended under the Plans and the purposes for which such expenditures were made
to the Trustees of the Trust for their review on a quarterly basis. Also, each
Plan provides that the selection and nomination of the Independent Trustees are
committed to the discretion of such Independent Trustees then in office.
The investment advisor may from time to time from its own funds or such
other resources as may be permitted by rules of the Securities and Exchange
Commission ("SEC") make payments for distribution services to the Distributor;
the latter may in turn pay part or all of such compensation to brokers or other
persons for their distribution assistance.
Each Plan and the Agreement will continue in effect for successive
12-month periods provided, however, that such continuance is specifically
approved at least annually by the Trustees of the Trust or by vote of the
holders of a majority of the outstanding voting securities of that class and, in
either case, by a majority of the Independent Trustees of the Trust.
The Plans permit the payment of fees to brokers and others for
distribution and shareholder-related administrative services and to
broker-dealers, depository institutions, financial intermediaries and
administrators for administrative services as to Class A, Class B, Class C and
Institutional Service shares. The Plans are designed to (i) stimulate brokers to
provide distribution and administrative support services to the Fund and holders
of Class A, Class B, Class C and Institutional Service shares and (ii) stimulate
administrators to render administrative support services to the Fund and holders
of Class A, Class B, Class C and Institutional shares. The administrative
services are provided by a representative who has knowledge of the shareholder's
particular circumstances and goals, and include, but are not limited to
providing office space, equipment, telephone facilities, and various personnel
including clerical, supervisory, and computer, as necessary or beneficial to
establish and maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries regarding Class A, Class B, Class C
and Institutional Service shares; assisting clients in changing dividend
options, account designations, and addresses; and providing such other services
as the Fund reasonably requests for its Class A, Class B, Class C and
Institutional Service shares.
In the event that the Plan or Distribution Agreement is terminated or
not continued with respect to one or more classes of the Fund, (i) no
distribution fees (other than current amounts accrued but not yet paid) would be
owed by the Fund to the Distributor with respect to that class or classes, and
(ii) the Fund would not be obligated to pay the Distributor for any amounts
expended under the Distribution Agreement not previously recovered by the
Distributor from distribution services fees in respect of shares of such class
or classes through deferred sales charges.
All material amendments to any Plan or Agreement must be approved by a
vote of the Trustees of the Trust or the holders of the Fund's outstanding
voting securities, voting separately by class, and in either case, by a majority
of the Independent Trustees, cast in person at a meeting called for the purpose
of voting on such approval; and any Plan or Distribution Agreement may not be
amended in order to increase materially the costs that a particular class of
shares of the Fund may bear pursuant to the Plan or Distribution Agreement
without the approval of a majority of the holders of the outstanding voting
shares of the class affected. Any Plan or Distribution Agreement may be
terminated (I) by the Fund without penalty at any time by a majority vote of the
holders of the outstanding voting securities of the Fund, voting separately by
class or by a majority vote of the Independent Trustees, or (ii) by the
Distributor. To terminate any Distribution Agreement, any party must give the
other parties 60 days' written notice; to terminate a Plan only, the Fund need
give no notice to the Distributor. Any Distribution Agreement will terminate
automatically in the event of its assignment. For more information about 12b-1
fees, see "Expenses" in the prospectus and "12b-1 Fees" under "Expenses" in Part
1 of this SAI.
TAX INFORMATION
Requirements for Qualifications as a Regulated Investment Company
The Fund intends to qualify for and elect the tax treatment applicable
to regulated investment companies ("RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). (Such qualification does not
involve supervision of management or investment practices or policies by the
Internal Revenue Service.) In order to qualify as a RIC, the Fund must, among
other things, (i) derive at least 90% of its gross income from dividends,
interest, payments with respect to proceeds from securities loans, gains from
the sale or other disposition of securities or foreign currencies and other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in such securities; and (ii) diversify its
holdings so that, at the end of each quarter of its taxable year, (a) at least
50% of the market value of the Fund's total assets is represented by cash, U.S.
government securities and other securities limited in respect of any one issuer,
to an amount not greater than 5% of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and (b) not more than 25% of the
value of its total assets is invested in the securities of any one issuer (other
than U.S. government securities and securities of other regulated investment
companies). By so qualifying, the Fund is not subject to federal income tax if
it timely distributes its investment company taxable income and any net realized
capital gains. A 4% nondeductible excise tax will be imposed on the Fund to the
extent it does not meet certain distribution requirements by the end of each
calendar year. The Fund anticipates meeting such distribution requirements.
Taxes on Distributions
Unless the Fund is a municipal bond fund, distributions will be taxable
to shareholders whether made in shares or in cash. Shareholders electing to
receive distributions in the form of additional shares will have a cost basis
for federal income tax purposes in each share so received equal to the net asset
value of a share of the Fund on the reinvestment date.
To calculate ordinary income for federal income tax purposes,
shareholders must generally include dividends paid by the Fund from its
investment company taxable income (net taxable investment income plus net
realized short-term capital gains, if any). The Fund will include dividends it
receives from domestic corporations when the Fund calculates its gross
investment income. Unless the Fund is a municipal bond fund or U.S. Treasury
money market fund, it anticipates that all or a portion of the ordinary
dividends which it pays will qualify for the 70% dividends-received deduction
for corporations. The Fund will inform shareholders of the amounts that so
qualify. If the Fund is a municipal bond fund or U.S. Treasury money market
fund, none of its income will consist of corporate dividends; therefore, none of
its distributions will qualify for the 70% dividends-received deduction for
corporations.
From time to time, the Fund will distribute the excess of its net
long-term capital gains over its short-term capital loss to shareholders (i.e.,
capital gain dividends). For federal tax purposes, shareholders must include
such capital gain dividends when calculating their net long-term capital gains.
Capital gain dividends are taxable as net long-term capital gains to a
shareholder, no matter how long the shareholder has held the shares.
Distributions by the Fund reduce its NAV. A distribution that reduces
the Fund's NAV below a shareholder's cost basis is taxable as described above,
although from an investment standpoint, it is a return of capital. In
particular, if a shareholder buys Fund shares just before the Fund makes a
distribution, when the Fund makes the distribution the shareholder will receive
what is in effect a return of capital. Nevertheless, the shareholder may incur
taxes on the distribution. Therefore, shareholders should carefully consider the
tax consequences of buying Fund shares just before a distribution.
All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her federal income tax return. Each shareholder
should consult a tax advisor to determine the state and local tax implications
of Fund distributions.
If more than 50% of the value of the Fund's total assets at the end of
a fiscal year is represented by securities of foreign corporations and the Fund
elects to make foreign tax credits available to its shareholders, a shareholder
will be required to include in his gross income both cash dividends and the
amount the Fund advises him is his pro rata portion of income taxes withheld by
foreign governments from interest and dividends paid on the Fund's investments.
The shareholder may be entitled, however, to take the amount of such foreign
taxes withheld as a credit against his U.S. income tax, or to treat the foreign
tax withheld as an itemized deduction from his gross income, if that should be
to his advantage. In substance, this policy enables the shareholder to benefit
from the same foreign tax credit or deduction that he would have received if he
had been the individual owner of foreign securities and had paid foreign income
tax on the income therefrom. As in the case of individuals receiving income
directly from foreign sources, the credit or deduction is subject to a number of
limitations.
Special Tax Information for Municipal Bond Fund Shareholders
The Fund expects that substantially all of its dividends will be
"exempt interest dividends," which should be treated as excludable from federal
gross income. In order to pay exempt interest dividends, at least 50% of the
value of the Fund's assets must consist of federally tax-exempt obligations at
the close of each quarter. An exempt interest dividend is any dividend or part
thereof (other than a capital gain dividend) paid by the Fund with respect to
its net federally excludable municipal obligation interest and designated as an
exempt interest dividend in a written notice mailed to each shareholder not
later than 60 days after the close of its taxable year. The percentage of the
total dividends paid by the Fund with respect to any taxable year that qualifies
as exempt interest dividends will be the same for all shareholders of the Fund
receiving dividends with respect to such year. If a shareholder receives an
exempt interest dividend with respect to any share and such share has been held
for six months or less, any loss on the sale or exchange of such share will be
disallowed to the extent of the exempt interest dividend amount.
Any shareholder of the Fund who may be a "substantial user" (as defined
by the Code) of a facility financed with an issue of tax-exempt obligations or a
"related person" to such a user should consult his tax advisor concerning his
qualification to receive exempt interest dividends should the Fund hold
obligations financing such facility.
Under regulations to be promulgated, to the extent attributable to
interest paid on certain private activity bonds, the Fund's exempt interest
dividends, while otherwise tax-exempt, will be treated as a tax preference item
for alternative minimum tax purposes. Corporate shareholders should also be
aware that the receipt of exempt interest dividends could subject them to
alternative minimum tax under the provisions of Section 56(g) of the Code
(relating to "adjusted current earnings").
Interest on indebtedness incurred or continued by shareholders to
purchase or carry shares of the Fund will not be deductible for federal income
tax purposes to the extent of the portion of the interest expense relating to
exempt interest dividends. Such portion is determined by multiplying the total
amount of interest paid or accrued on the indebtedness by a fraction, the
numerator of which is the exempt interest dividends received by a shareholder in
his taxable year and the denominator of which is the sum of the exempt interest
dividends and the taxable distributions out of the Fund's investment income and
long-term capital gains received by the shareholder.
Taxes on The Sale or Exchange of Fund Shares
Upon a sale or exchange of Fund shares, a shareholder will realize a
taxable gain or loss depending on his or her basis in the shares. A shareholder
must treat such gains or losses as a capital gain or loss if the shareholder
held the shares as capital assets. Capital gain on assets held for more than 12
months is generally subject to a maximum federal income tax rate of 20% for an
individual. Generally, the Code will not allow a shareholder to realize a loss
on shares he or she has sold or exchanged and replaced within a 61-day period
beginning 30 days before and ending 30 days after he or she sold or exchanged
the shares. The Code will not allow a shareholder to realize a loss on the sale
of Fund shares held by the shareholder for six months or less to the extent the
shareholder received exempt interest dividends on such shares. Moreover, the
Code will treat a shareholder's loss on shares held for six months or less as a
long-term capital loss to the extent the shareholder received distributions of
net capital gains on such shares.
Shareholders who fail to furnish their taxpayer identification numbers
to the Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends or
capital gain distributions to these shareholders, whether taken in cash or
reinvested in additional shares, and any redemption proceeds will be reduced by
the amounts required to be withheld. Investors may wish to consult their own tax
advisors about the applicability of the backup withholding provisions.
Other Tax Considerations
The foregoing discussion relates solely to U.S. federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
domestic corporations, partnerships, trusts and estates). It does not reflect
the special tax consequences to certain taxpayers (e.g., banks, insurance
companies, tax exempt organizations and foreign persons). Shareholders are
encouraged to consult their own tax advisors regarding specific questions
relating to federal, state and local tax consequences of investing in shares of
the Fund.
<PAGE>
Each shareholder who is not a U.S. person should consult his or her tax advisor
regarding the U.S. and foreign tax consequences of ownership of shares of the
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 30% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
BROKERAGE
Brokerage Commissions
If the Fund invests in equity securities, it expects to buy and sell
them through brokerage transactions for which commissions are payable. Purchases
from underwriters will include the underwriting commission or concession, and
purchases from dealers serving as market makers will include a dealer's mark-up
or reflect a dealer's mark-down. Where transactions are made in the
over-the-counter market, the Fund will deal with primary market makers unless
more favorable prices are otherwise obtainable.
If the Fund invests in fixed income securities, it expects to buy and
sell them directly from the issuer or an underwriter or market maker for the
securities. Generally, the Fund will not pay brokerage commissions for such
purchases. When the Fund buys a security from an underwriter, the purchase price
will usually include an underwriting commission or concession. The purchase
price for securities bought from dealers serving as market makers will similarly
include the dealer's mark up or reflect a dealer's mark down. When the Fund
executes transactions in the over-the-counter market, it will deal with primary
market makers unless more favorable prices are otherwise obtainable.
Selection of Brokers
When buying and selling portfolio securities, the advisor seeks brokers
who can provide the most benefit to the Fund. When selecting a broker, the
investment advisor will primarily look for the best price at the lowest
commission, but in the context of the broker's:
1. ability to provide the best net financial result to the Fund;
2. efficiency in handling trades;
3. ability to trade large blocks of securities;
4. readiness to handle difficult trades;
5. financial strength and stability; and
6. provision of "research services," defined as (a) reports and analyses
concerning issuers, industries, securities and economic factors and (b) other
information useful in making investment decisions.
The Fund may pay higher brokerage commissions to a broker providing it
with research services, as defined in item 6, above. Pursuant to Section 28(e)
of the Securities Exchange Act of 1934, this practice is permitted if the
commission is reasonable in relation to the brokerage and research services
provided. Research services provided by a broker to the investment advisor do
not replace, but supplement, the services the investment advisor is required to
deliver to the Fund. It is impracticable for the investment advisor to allocate
the cost, value and specific application of such research services among its
clients because research services intended for one client may indirectly benefit
another.
When selecting a broker for portfolio trades, the investment advisor
may also consider the amount of Fund shares a broker has sold, subject to the
other requirements described above.
If the Fund is advised by EAMC, Lieber & Company, an affiliate of EAMC
and a member of the New York and American Stock Exchanges, will to the extent
practicable effect substantially all of the portfolio transactions effected on
those exchanges for the Fund.
Simultaneous Transactions
The investment advisor makes investment decisions for the Fund
independently of decisions made for its other clients. When a security is
suitable for the investment objective of more than one client, it may be prudent
for the investment advisor to engage in a simultaneous transaction, that is, buy
or sell the same security for more than one client. The investment advisor
strives for an equitable result in such transactions by using an allocation
formula. The high volume involved in some simultaneous transactions can result
in greater value to the Fund, but the ideal price or trading volume may not
always be achieved for the Fund.
ORGANIZATION
Description of Shares
The Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest of series and classes of shares. Each share of
the Fund represents an equal proportionate interest with each other share of
that series and/or class. Upon liquidation, shares are entitled to a pro rata
share of the Trust based on the relative net assets of each series and/or class.
Shareholders have no preemptive or conversion rights. Shares are redeemable and
transferable.
Voting Rights
Under the terms of the Declaration of Trust, the Trust is not required
to hold annual meetings. At meetings called for the initial election of Trustees
or to consider other matters, each share is entitled to one vote for each dollar
of "NAV"applicable to such share. Shares generally vote together as one class on
all matters. Classes of shares of the Fund have equal voting rights. No
amendment may be made to the Declaration of Trust that adversely affects any
class of shares without the approval of a majority of the votes applicable to
the shares of that class. Shares have non-cumulative voting rights, which means
that the holders of more than 50% of the votes applicable to shares voting for
the election of Trustees can elect 100% of the Trustees to be elected at a
meeting and, in such event, the holders of the remaining shares voting will not
be able to elect any Trustees.
After the initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law (for such reasons as electing or removing Trustees, changing fundamental
policies, and approving advisory agreements or 12b-1 plans), unless and until
such time as less than a majority of the Trustees holding office have been
elected by shareholders, at which time, the Trustees then in office will call a
shareholders' meeting for the election of Trustees.
Limitation of Trustees' Liability
The Declaration of Trust provides that a Trustee will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.
Banking Laws
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered, open-end investment companies such as the Trust. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment advisor, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer, FUNB and
its affiliates are subject to, and in compliance with, the aforementioned laws
and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in FUNB and its affiliates being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of
the Fund by its customers. If FUNB and its affiliates were prevented from
continuing to provide for services called for under the investment advisory
agreement, it is expected that the Trustees would identify, and call upon the
Fund's shareholders to approve a new investment advisor. If this were to occur,
it is not anticipated that the shareholders of the Fund would suffer any adverse
financial consequences.
INVESTMENT ADVISORY AGREEMENT
On behalf of the Fund, the Trust has entered into an investment
advisory agreement with the Fund's investment advisor (the "Advisory
Agreement"). Under the Advisory Agreement, and subject to the supervision of the
Trust's Board of Trustees, the investment advisor furnishes to the Fund (unless
the Fund is Masters ) investment advisory, management and administrative
services, office facilities, and equipment in connection with its services for
managing the investment and reinvestment of the Fund's assets. The investment
advisor pays for all of the expenses incurred in connection with the provision
of its services.
If the Fund is Masters, the Advisory Agreement is similar to the above
except that the investment advisor selects sub-advisors (hereinafter referred to
as "Managers") for the Fund and monitors each Manager's investment program and
results. The investment advisor has primary responsibility under the
multi-manager strategy to oversee the Managers, including making recommendations
to the Trust regarding the hiring, termination and replacement of Managers.
The Fund pays for all charges and expenses, other than those
specifically referred to as being borne by the investment advisor, including,
but not limited to, (1) custodian charges and expenses; (2) bookkeeping and
auditors' charges and expenses; (3) transfer agent charges and expenses; (4)
fees and expenses of Independent Trustees; (5) brokerage commissions, brokers'
fees and expenses; (6) issue and transfer taxes; (7) applicable costs and
expenses under the Distribution Plan (as described above) (8) taxes and trust
fees payable to governmental agencies; (9) the cost of share certificates; (10)
fees and expenses of the registration and qualification of the Fund and its
shares with the SEC or under state or other securities laws; (11) expenses of
preparing, printing and mailing prospectuses, SAIs, notices, reports and proxy
materials to shareholders of the Fund; (12) expenses of shareholders' and
Trustees' meetings; (13) charges and expenses of legal counsel for the Fund and
for the Independent Trustees on matters relating to the Fund; (14) charges and
expenses of filing annual and other reports with the SEC and other authorities;
and (15) all extraordinary charges and expenses of the Fund. For information on
advisory fees paid by the Fund, see "Expenses" in Part 1 of this SAI.
The Advisory Agreement continues in effect for two years from its
effective date and, thereafter, from year to year only if approved at least
annually by the Board of Trustees of the Trust or by a vote of a majority of the
Fund's outstanding shares. In either case, the terms of the Advisory Agreement
and continuance thereof must be approved by the vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such approval. The Advisory Agreement may be terminated, without
penalty, on 60 days' written notice by the Trust's Board of Trustees or by a
vote of a majority of outstanding shares. The Advisory Agreement will terminate
automatically upon its "assignment" as that term is defined in the 1940 Act.
Managers (Masters only)
Masters' investment program is based upon the investment advisor's
multi-manager concept. The investment advisor allocates the Fund's portfolio
assets on an equal basis among a number of investment management organizations -
currently four in number - each of which employs a different investment style,
and periodically rebalances the Fund's portfolio among the Managers so as to
maintain an approximate equal allocation of the portfolio among them throughout
all market cycles. Each Manager provides these services under a Portfolio
Management Agreement. Each Manager has discretion, subject to oversight by the
Trustees and the investment advisor, to purchase and sell portfolio assets
consistent with the Fund's investment objectives, policies and restrictions and
specific investment strategies developed by the investment advisor. The Fund's
current Managers are, EAMC MFS Institutional Advisors, Inc. ("MFS"),
OppenheimerFunds, Inc. ("Oppenheimer") and Putnam Investment Management, Inc.
("Putnam").
The Trust and FUNB have received an order from, the SEC that will
permit the investment advisor to employ a "manager of managers" strategy in
connection with its management of the Fund. The exemptive order permits the
investment advisor, subject to certain conditions, and without shareholder
approval, to: (a) select new Managers who are unaffiliated with the investment
advisor with the approval of the Trust's Board of Trustees; (b) change the
material terms of the Portfolio Management Agreements with the Managers; and (c)
continue the employment of a Manager after an event which would otherwise cause
the automatic termination of a Portfolio Management Agreement. Shareholders
would be notified of any Manager changes. Shareholders have the right to
terminate arrangements with a Manager by vote of a majority of the outstanding
shares of the Fund. The order also permits the Fund to disclose the Managers'
fees only in the aggregate.
<PAGE>
Transactions Among Advisory Affiliates
The Trust has adopted procedures pursuant to Rule 17a-7 of the 1940 Act
("Rule 17a-7 Procedures"). The Rule 17a-7 Procedures permit the Fund to buy or
sell securities from another investment company for which a subsidiary of First
Union Corporation is an investment advisor. The Rule 17a-7 Procedures also allow
the Fund to buy or sell securities from other advisory clients for whom a
subsidiary of First Union Corporation is an investment advisor. The Fund may
engage in such transaction if it is equitable to each participant and consistent
with each participant's investment objective.
MANAGEMENT OF THE TRUST
The Trust is supervised by a Board of Trustees that is responsible for
representing the interest of the shareholders. The Trustees meet periodically
throughout the year to oversee the Fund's activities, reviewing, among other
things, the Fund's performance and its contractual arrangements with various
service providers. Each Trustee is paid a fee for his or her services.
See "Expenses-Trustee Compensation" in Part 1 of this SAI.
The Trust has an Executive Committee which consists of the Chairman of
the Board, James Howell, the Vice Chairman of the Board, Michael Scofield, and
Russell Salton, each of whom is an Independent Trustee. The Executive Committee
recommends Trustees to fill vacancies, prepares the agenda for Board Meetings
and acts on routine matters between scheduled Board meetings.
Set forth below are the Trustees and officers of the Trust and their
principal occupations and affiliations over the last five years. Unless
otherwise indicated, the address for each Trustee and officer is 200 Berkeley
Street, Boston, Massachusetts 02116. Each Trustee is also a Trustee of each of
the other Trusts in the Evergreen Fund complex..
Name Position with Trust Principal Occupations for Last
Five Years
Laurence B. Ashkin Trustee Real estate developer and
(DOB: 2/2/28) construction consultant; and
President of Centrum Equities
and Centrum Properties, Inc.
Charles A. Austin III Trustee Investment Counselor to Appleton
(DOB: 10/23/34) Partners, Inc.; former Director,
Executive Vice President and
Treasurer, State Street Research
& Management Company (investment
advice); Director, The Andover
Companies (Insurance); and
Trustee, Arthritis Foundation of
New England.
K. Dun Gifford Trustee Trustee, Treasurer and Chairman
of the Finance Committee, Cam-
bridge College; Chairman Emeritus
and Director, American Institute
of Food and Wine; Chairman and
President, Oldways Preservation
and Exchange Trust (education);
former Chairman of the Board,
Director, and Executive Vice
President, The London Harness
Company; former Managing Partner,
Roscommon Capital Corp.; former
Chief Executive Officer, Gifford
Gifts of Fine Foods; former
Chairan, Gifford, Drescher &
Associates (environmental
consulting).
James S. Howell Chairman of The Former Chairman of the
(DOB: 8/13/24) Board of Trustees Distribution Foundation for the
Carolinas; and former Vice
President of Lance Inc. (food
manufacturing).
Leroy Keith, Jr. Trustee Chairman of the Board and Chief
(DOB: 2/14/39) Executive Officer, Carson
Products Company; Director of
Phoenix Total Return Fund and
Equifax, Inc.; Trustee of Phoenix
Series Fund, Phoenix Multi-
Portfolio Fund, and The Phoenix
Big Edge Series Fund; and former
President, Morehouse College.
Gerald M. McDonnell Trustee Sales Representative with Nucor-
(DOB: 7/14/39) Yamoto, Inc. (steel producer).
Thomas L. McVerry Trustee Former Vice President and
(DOB: 8/2/39) Director of Rexham Corporation
(manufacturing); and former
Director of Carolina Cooperative
Federal Credit Union.
William Walt Pettit Trustee Partner in the law firm of
(DOB: 8/26/55) William Walt Pettit, P.A.
David M. Richardson Trustee Vice Chair and former Executive
(DOB: 9/14/41) Vice President, DHR International
Inc. (executive recruitment);
former Senior Vice President,
Boyden International Inc.
(executive recruitment); and
Director, Commerce and Industry
Association of New Jersey, 411
International, Inc., and J&M
Cumming Paper Co.
Russell A. Salton, III MD Trustee Medical Director, U.S. Health
(DOB: 6/2/47) Care/Aetna Health Services;
former Managed Health Care
Consultant; and former President,
Primary Physician Care.
Michael S. Scofield Vice Chairman Attorney, Law Offices of Michael
(DOB: 2/20/43) of the Board of S. Scofield.
Trustees
Richard J. Shima Trustee Former Chairman, Environmental
(DOB: 8/11/39 Warranty, Inc. (insurance
agency); Executive Consultant,
Drake Beam Morin, Inc. (executive
outplacement); Director of
Connecticut Natural Gas Corpora-
tion, Hartford Hospital, Old
State House Association,
Middlesex Mutual Assurance
Company, and Enhance Financial
Services, Inc.; Chairman, Board
of Trustees, Hartford Graduate
Center; Trustee, Greater Hartford
YMCA; former Director, Vice
Chairman and Chief Investment
Officer, The Travelers Corpora-
tion; former Trustee, Kingswood-
Oxford School; and former
Managing Director and Consultant,
Russell Miller, Inc.
William J. Tomko* President and Executive Vice President/
(DOB: 8/30/58) Treasurer Operations, BISYS Fund Services.
Nimish S. Bhatt* Vice President Vice President, Tax, BISYS Fund
(DOB: 6/6/63) and Assistant Services; former Assistant Vice
Treasurer President, EAMC/First Union Bank;
former Senior Tax Consulting/
Acting Manager, Ivestment
Companies Group,
PricewaterhouseCoopers LLP, New
York.
Bryan Haft* Vice President Team Leader, Fund Administration,
(DOB: 1/23/65) BISYS Fund Services.
Michael H. Koonce Secretary Senior Vice President and
(DOB: 4/20/60) Assistant General Counsel, First
Union Corporation; former Senior
Vice President and General
Counsel, Colonial Management
Associates, Inc.
*Address: BISYS, 3435 Stelzer Road, Columbus, Ohio 43219-8001
CORPORATE AND MUNICIPAL BOND RATINGS
The Fund relies on ratings provided by independent rating services to
help determine the credit quality of bonds and other obligations the Fund
intends to purchase or already owns. A rating is an opinion of an issuer's
ability to pay interest and/or principal when due. Ratings reflect an issuer's
overall financial strength and whether it can meet its financial commitments
under various economic conditions.
If a security held by the Fund loses its rating or has its rating
reduced after the Fund has purchased it, the Fund is not required to sell or
otherwise dispose of the security, but may consider doing so.
The principal rating services, commonly used by the Fund and investors
generally, are S&P and Moody's. The Fund may also rely on ratings provided by
Fitch. Rating systems are similar among the different services. As an example,
the chart below compares basic ratings for long-term bonds. The "Credit Quality"
terms in the chart are for quick reference only. Following the chart are the
specific definitions each service provides for its ratings.
<PAGE>
COMPARISON OF LONG-TERM BOND RATINGS
----------------- ---------------- --------------- ========================
MOODY'S S&P FITCH Credit Quality
----------------- ---------------- --------------- ========================
----------------- ---------------- --------------- ========================
Aaa AAA AAA Excellent Quality
(lowest risk)
----------------- ---------------- --------------- ========================
----------------- ---------------- --------------- ========================
Aa AA AA Almost Excellent
Quality (very low risk)
----------------- ---------------- --------------- ========================
----------------- ---------------- --------------- ========================
A A A Good Quality (low risk)
----------------- ---------------- --------------- ========================
----------------- ---------------- --------------- ========================
Baa BBB BBB Satisfactory Quality
(some risk)
----------------- ---------------- --------------- ========================
----------------- ---------------- --------------- ========================
Ba BB BB Questionable Quality
(definite risk)
----------------- ---------------- --------------- ========================
----------------- ---------------- --------------- ========================
B B B Low Quality (high risk)
----------------- ---------------- --------------- ========================
----------------- ---------------- --------------- ========================
Caa/Ca/C CCC/CC/C CCC/CC/C In or Near Default
----------------- ---------------- --------------- ========================
----------------- ---------------- --------------- ========================
D DDD/DD/D In Default
----------------- ---------------- --------------- ========================
CORPORATE BONDS
LONG-TERM RATINGS
Moody's Corporate Long-Term Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than the Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium-grade obligations, (i.e.
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to Caa. The modifier 1 indicates that the company ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range raking and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
S&P Corporate Long-Term Bond Ratings
AAA An obligation rated AAA has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA An obligation rated AA differs from the highest-rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC and C: As described below, obligations rated BB, B, CCC, CC, and
C are regarded as having significant speculative characteristics. BB indicates
the least degree of speculation and C the highest. While such obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.
BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions, which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet it financial
commitment on the obligation.
CCC An obligation rated CCC is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment.
C The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.
D The D rating, unlike other ratings, is not prospective; rather, it is used
only where a default has actually occurred--and not where a default is only
expected. S&P changes ratings to D either:
! On the day an interest and/or principal payment is due and is not paid.
An exception is made if there is a grace period and S&P believes that a payment
will be made, in which case the rating can be maintained; or
! Upon voluntary bankruptcy filing or similar action. An exception is
made if S&P expects that debt service payments will continue to be made
on a specific issue. In the absence of a payment default or bankruptcy
filing, a technical default (i.e., covenant violation) is not
sufficient for assigning a D rating.
Plus (+) or minus (-) The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
Fitch Corporate Long-Term Bond Ratings
Investment Grade
AAA Highest credit quality. AAA ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA Very high credit quality. AA ratings denote a very low expectation of credit
risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.
A High credit quality. A ratings denote a lower expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. BBB ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
<PAGE>
Speculative Grade
BB Speculative. BB ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time;
however, business or financial alternatives may be available to allow financial
commitments to be met.
Securities rated in this category are not investment grade.
B Highly speculative. B ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitment is solely reliant upon sustained, favorable
business or economic developments. A CC rating indicates that default of some
kind appears probable. C ratings signal imminent default.
DDD, DD, D Default. Securities are not meeting current obligations and are
extremely speculative. DDD designates the highest potential for recovery of
amounts outstanding on any securities involved. For U.S. corporates, for
example, DD indicates expected recovery of 50%-90% of such outstandings,
and D the lowest recovery potential, i.e. below 50%.
+ or - may be appended to a rating to denote relative status within major rating
categories. Such suffixes are not added to the AAA rating category or to
categories below CCC.
CORPORATE SHORT-TERM RATINGS
Moody's Corporate Short-Term Issuer Ratings
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics.
- -- Leading market positions in well-established industries.
- -- High rates of return on funds employed.
- -- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
- -- Broad margins in earnings coverage of fixed financial changes and high
internal cash generation.
- -- Well-established access to a range of financial markets and assured sources
of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Not Prime Issuers rated Not Prime do not fall within any of the Prime rating
categories.
S&P Corporate Short-Term Obligation Ratings
A-1 A short-term obligation rated A-1 is rated in the highest category by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category certain obligations are designated with a plus sign
(+). This indicates that the obligor's capacity to meet its financial commitment
on these obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B A short-term obligation rated B is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
C A short-term obligation rated C is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
D The D rating, unlike other ratings, is not prospective; rather, it is used
only where a default has actually occurred--and not where a default is only
expected. S&P changes ratings to D either:
! On the day an interest and/or principal payment is due and is not paid.
An exception is made if there is a grace period and S&P believes that a payment
will be made, in which case the rating can be maintained; or
! Upon voluntary bankruptcy filing or similar action, An exception is
made if S&P expects that debt service payments will continue to be made
on a specific issue. In the absence of a payment default or bankruptcy
filing, a technical default (i.e., covenant violation) is not
sufficient for assigning a D rating.
Fitch Corporate Short-Term Obligation Ratings
F1 Highest credit quality. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.
F2 Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
higher ratings.
F3 Fair credit quality. The capacity for timely payment of financial commitments
is adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.
B Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D Default. Denotes actual or imminent payment default.
MUNICIPAL BONDS
LONG-TERM RATINGS
Moody's Municipal Long-Term Bond Ratings
Aaa Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than the Aaa securities.
A Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa Bonds rated Baa are considered as medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds rated Ba are judged to have speculative elements; their future cannot
be considered as well-assured. Often the protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa Bonds rated Caa are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal or interest.
Ca Bonds rated Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
C Bonds rated C are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range raking and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
S&P Municipal Long-Term Bond Ratings
AAA An obligation rated AAA has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA An obligation rated AA differs from the highest-rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC and C: As described below, obligations rated BB, B, CCC,
CC, and C are regarded as having significant speculative characteristics. BB
indicates the least degree of speculation and C the highest. While such
obligations will likely have some quality and protective characteristics, these
may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions, which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet it financial
commitment on the obligation.
<PAGE>
CCC An obligation rated CCC is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment.
C The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.
D An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.
Plus (+) or minus (-) The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
Fitch Municipal Long-Term Bond Ratings
Investment Grade
AAA Highest credit quality. AAA ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA Very high credit quality. AA ratings denote a very low expectation of credit
risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.
A High credit quality. A ratings denote a lower expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. BBB ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Speculative Grade
BB Speculative. BB ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time;
however, business or financial alternatives may be available to allow financial
commitments to be met.
Securities rated in this category are not investment grade.
B Highly speculative. B ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A CC rating indicates that default of some
kind appears probable. C ratings signal imminent default.
DDD, DD, D Default. Securities are not meeting current obligations and are
extremely speculative. DDD designates the highest potential for recovery of
amounts outstanding on any securities involved. DD designates lower recovery
potential and D the lowest.
+ or - may be appended to a rating to denote relative status within major rating
categories. Such suffixes are not added to the AAA rating category or to
categories below CCC.
SHORT-TERM MUNICIPAL RATINGS
Moody's Municipal Short-Term Issuer Ratings
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidence by many of the following characteristics.
- -- Leading market positions in well-established industries.
- -- High rates of return on funds employed.
- -- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
- -- Broad margins in earnings coverage of fixed financial changes and high
internal cash generation.
- -- Well-established access to a range of financial markets and assured sources
of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Not Prime Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Moody's Municipal Short-Term Loan Ratings
MIG 1 This designation denotes best quality. There is strong protection by
established cash flows, superior liquidity support, or demonstrated broad-based
access to the market for refinancing.
MIG 2 This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG 3 This designation denotes favorable quality. Liquidity and cash-flow
protection may be narrow and market access for refinancing is likely to be less
well established.
SG This designation denotes speculative quality. Debt instruments in this
category may lack margins of protection.
S&P Commercial Paper Ratings
A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is satisfactory.
However, the relative degree of safety is not as high as for issues designated
A-1.
A-3 Issues carrying this designation have an adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B Issues rated B are regarded as having only speculative capacity for timely
payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated D is in payment default. The D rating category is used when
interest payments of principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes such payments
will be made during such grace period.
S&P Municipal Short-Term Obligation Ratings
SP-1 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3 Speculative capacity to pay principal and interest.
Fitch Municipal Short-Term Obligation Ratings
F1 Highest credit quality. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.
F2 Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
higher ratings.
F3 Fair credit quality. The capacity for timely payment of financial commitments
is adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.
B Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D Default. Denotes actual or imminent payment default.
ADDITIONAL INFORMATION
Except as otherwise stated in its prospectus or required by law, the
Fund reserves the right to change the terms of the offer stated in its
prospectus without shareholder approval, including the right to impose or change
fees for services provided.
No dealer, salesman or other person is authorized to give any
information or to make any representation not contained in the Fund's
prospectus, SAI or in supplemental sales literature issued by the Fund or the
Distributor, and no person is entitled to rely on any information or
representation not contained therein.
The Fund's prospectus and SAI omit certain information contained in the
Trust's registration statement, which you may obtain for a fee from the SEC in
Washington, D.C.
<PAGE>
FINANCIAL STATEMENTS
The financial statements for International Bond Fund for the periods from
June 30, 1994 through June 30, 1998 have been audited by Ernst & Young, LLP,
independent auditors. The financial statements of International Bond Fund for
the three-month period ended September 30, 1998 have been audited by
PricewaterhouseCoopers LLP, independent accountants. Reports of Ernst & Young
LLP for the period ended June 30, 1998 and PricewaterhouseCoopers LLP for the
period ended September 30, 1998 on the financial statements for International
Bond Fund appear in the Funds' Annual Reports which are incorporated by
reference. The financial statements for Adjustable Rate Fund, except for the
period ended March 31, 1999, have been audited by KPMG LLP, independent
auditors. The report of KPMG LLP on the financial statements for Adjustable Rate
Fund appears in the Fund's Annual Report which is incorporated by reference. The
financial statements for Core Bond Fund have been audited by Tait, Weller &
Baker, independent accountants. The financial statements for Fixed Income Fund,
Income Plus Fund, Intermediate Term Fund, Limited Duration Fund and Total Return
Bond Fund, except for the period ended March 31, 1999, have been audited by
PricewaterhouseCoopers LLP, independent accountants. The information for all the
Funds except Core Bond Fund for the period ended March 31, 1999 is unaudited and
has been derived from the financial statements and notes thereto found in the
Fund's semi-annual report. A report of PricewaterhouseCoopers LLP on the
financial statements for those Funds appears in the Funds' Annual Report which
is incorporated by reference. Annual Reports may be obtained without charge by
writing to ESC, P.O. Box 2121, Boston, Massachusetts 02106-2121, or by calling
ESC toll-free at 1-800-343-2898.
<PAGE>
EVERGREEN SELECT FIXED INCOME TRUST
PART C
OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23 Exhibits
Number Description Location
- ------- ----------- -----------
<S> <C> <C>
(a) Declaration of Trust Incorporated by reference to
Registrant's Pre-Effective Amendment No. 1
Filed on November 17, 1997
(b) By-laws Incorporated by reference to
Registrant's Pre-Effective Amendment
No. 1 filed on November 17, 1997
(c) Provisions of instruments defining the rights Included as part of Exhibits 1 and 2
of holders of the securities being registered of Registrant's Pre-Effective Amendment
are contained in the Declaration of Trust No. 1 Filed on November 17, 1997
Articles II, V, VI, VIII, IX and By-laws
Articles II and VI
(d)(1) Investment Advisory Agreement between Incorporated by reference to Registrant's
the Registrant and Evergreen Investment Post-Effective Amendment No. 3 filed on June
Management (formerly known as the First 30, 1998
Capital Group of First Union National
Bank.)
(d)(2) Investment Advisory Agreement between the Incorporated by reference to Registrant's
Registrant and Evergreen Investment Management Post-Effective Amendment No. 6 filed on
Company (formerly known as Keystone Investment May 4, 1998
Management Company)
(d)(3) Form of Investment Advisory Agreement between First Incorporated by reference to
Union National Bank and First International Registrant's Post-Effective Amendment
Advisers, Ltd. (formerly known as Analytic.TSA No. 2 filed on June 8, 1998
International,Inc.)
(d)(4) Investment Advisory Agreement between the Registrant Contained herein.
and Tattersall Advisory Group, Inc.
(d)(5) Sub-Advisory Agreement between First Union National Incorporated by reference to Registrant's
Bank and First International Advisers, Ltd. Post-Effective Amendment No. 4 filed on December
2, 1998
(e) Principal Underwriting Agreement between the Incorporated by reference to Registrant's
Registrant and Evergreen Distributor, Inc. Post-Effective Amendment No. 3 filed on June 30, 1998
(f) Deferred Compensation Plan Incorporated by reference to
Registrant's Pre-Effective Amendment
No. 1 filed on November 17, 1997
(g) Custodian Agreement between the Registrant Incorporated by reference to Registrant's
and State Street Bank and Trust Company Post-Effective Amendment No. 3 filed on June 30, 1998
(h)(1) Administration Agreement between Evergreen Incorporated by reference to Registrant's
Investment Services, Inc. and the Registrant Post-Effective Amendment No. 3 filed on June 30, 1998
(h)(2) Transfer Agent Agreement between the Incorporated by reference to Registrant's
Registrant and Evergreen Service Company Post-Effective Amendment No. 3 filed on June 30, 1998
(i) Opinion and Consent of Sullivan & Worcester LLP Incorporated by reference to Registrant's Post-Effective
Amendment No. 1 filed on December 12, 1997
(j)(1) Consent of Tait, Weller & Baker Contained herein.
(k) Tattersall Bond Fund Annual Report dated Contained herein.
March 31, 1999
(l) Not applicable
(m) 12b-1 Distribution Plan for the Incorporated by reference to Registrant's
Institutional Service Shares Post-Effective No. 3 filed on June 30, 1998
(n) Not applicable
(o) Multiple Class Plan Incorporated by reference to Registrant's
Post-Effective Amendment No. 6 filed on
May 4, 1998
</TABLE>
Item 24. Persons Controlled by or Under Common Control with Registrant.
None
Item 25. Indemnification.
Registrant has obtained from a major insurance carrier a trustees and
officers liability policy covering certain types of errors and ommissions.
Provisions for the indemnification of the Registrant's Trustees and
officers are also contained in the Registrant's Declaration of Trust.
Provisions for the indemnification of the Registrant's Investment
Advisors are contained in their respective Investment Advisory and Management
Agreements.
Provisions for the indemnification of Evergreen Distributor, Inc., the
Registrant's principal underwriter, are contained in the Principal Underwriting
Agreement between Evergreen Distributor, Inc. and the Registrant.
Provisions for the indemnification of Evergreen Service Company, the
Registrant's transfer agent, are contained in the Master Transfer and
Recordkeeping Agreement between Evergreen Service Company and the Registrant.
Provisions for the indemnification of State Street Bank and Trust Co., the
Registrant's custodian, are contained in the Custodian Agreement between State
Street Bank and Trust Co., and the Registrant.
Item 26. Business or Other Connections of Investment Advisor.
The Directors and principal executive officers of First Union National Bank
are:
Edward E. Crutchfield, Jr. Chairman and Chief Executive Officer,
First Union Corporation; Chief Executive
Officer and Chairman, First Union National
Bank
Anthony Terracciano President, First Union Corporation;
President, First Union National Bank
John R. Georgius Vice Chairman, First Union Corporation;
Vice Chairman, First Union National Bank
Marion A. Cowell, Jr. Executive Vice President, Secretary &
General Counsel, First Union Corporation;
Secretary and Executive Vice President,
First Union National Bank
Robert T. Atwood Executive Vice President and Chief Financial
Officer, First Union Corporation; Chief
Financial Officer and Executive Vice
President, First Union National Bank
All of the above persons are located at the following address: First Union
National Bank, One First Union Center, Charlotte, NC 28288.
The information required by this item with respect to Evergreen Investment
Management Company is incorporated by reference to the Form ADV (File No.
801-5436) of Evergreen Investment Management Company
The information required by this item with respect to First International
Advisers, Ltd. is incorporated by reference to the Form ADV (File No. 801-42427)
of First International Advisers, Ltd.
Item 27. Principal Underwriters.
Evergreen Distributor, Inc. acts as principal underwriter for each
registered investment company or series thereof that is a part of the Evergreen
"fund Complex" as such term is defined in Item 22(a) of Schedule 14A under the
Securities Exchange Act of 1934.
The Directors and principal executive officers of Evergreen Distributor,
Inc. are:
Lynn C. Mangum Director, Chairman and Chief Executive
Officer
Dennis Sheehan Director, Chief Financial Officer
J. David Huber President
Kevin J. Dell Vice President, General Counsel and Secretary
All of the above persons are located at the following address: Evergreen
Distributor, Inc., 90 Park Avenue, New York, New York 10016.
The Registrant has not paid, directly or indirectly, any commissions or
other compensation to the principal underwriter in the last fiscal year.
Item 28. Location of Accounts and Records.
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Evergreen Investment Services, Inc., Evergreen Service Company and
Evergreen Investment Management Company (Formaly known as Keystone
Investment Management Company), all located at 200 Berkeley Street,
Boston, Massachusetts 02110
First Union National Bank, One First Union Center, 301 S. College Street,
Charlotte, North Carolina 28288
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase,
New York 10577
First International Advisers, Ltd., 25/28 Old Burlington Street, London
W1X 1LB, England
Iron Mountain, 3431 Sharp Slot Road, Swansea, Massachusetts 02777
State Street Bank and Trust Company, 2 Heritage Drive, North Quincy,
Massachusetts 02171
Item 29. Management Services.
Not Applicable
Item 30. Undertakings.
The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Columbus, and State of Ohio, on the 4th day of May,
1999.
EVERGREEN SELECT FIXED INCOME TRUST
By: /s/ William J. Tomko
-----------------------------
Name: William J. Tomko
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 18th day of June, 1999.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/William J. Tomko /s/ Laurence B. Ashkin /s/ Charles A. Austin, III
- ------------------------- ----------------------------- --------------------------------
William J. Tomko Laurence B. Ashkin* Charles A. Austin III*
President and Treasurer (Principal Trustee Trustee
Financial and Accounting Officer)
/s/ K. Dun Gifford /s/ James S. Howell /s/ William Walt Pettit
- ---------------------------- ---------------------------- --------------------------------
K. Dun Gifford* James S. Howell* William Walt Pettit*
Trustee Trustee Trustee
/s/ Gerald M. McDonnell /s/ Thomas L. McVerry /s/ Michael S. Scofield
- ------------------------------- ----------------------------- --------------------------------
Gerald M. McDonell* Thomas L. McVerry* Michael S. Scofield*
Trustee Chairman of the Board and Trustee
Trustee
/s/ David M. Richardson /s/ Russell A. Salton, III MD /s/ Leroy Keith, Jr.
- ------------------------------ ------------------------------- ---------------------------------
David M. Richardson* Russell A. Salton, III MD* Leroy Keith, Jr.*
Trustee Trustee Trustee
/s/ Richard J. Shima
- ------------------------------
Richard J. Shima*
</TABLE>
*By: /s/ Beth K. Werths
- -------------------------------
Beth K. Werths
Attorney-in-Fact
*Beth K. Werths, by signing her name hereto, does hereby sign this
document on behalf of each of the above-named individuals pursuant to powers of
attorney duly executed by such persons and incorporated by reference to Exhibit
19 to the Registrant's Post-Effective Amendment No. 2 filed on June 8, 1998.
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------- -------
(d)(4) Investment Advisory and Management Agreement
between the Registrant and Tattersall Advisory Group, Inc.
(k) Tattersall Bond Fund Annual Report dated March 31, 1999
(j) Consent of Tait, Weller & Baker
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
AGREEMENT made the 18th day of June 1999, by and between EVERGREEN
SELECT FIXED INCOME TRUST, a Delaware business trust (the "Trust") and
TATTERSALL ADVISORY GROUP, INC., a Virginia Corporation (the "Adviser").
WHEREAS, the Trust and the Adviser wish to enter into an Agreement
setting forth the terms on which the Adviser will perform certain services for
the Trust, its series of shares as listed on Schedule 1 to this agreement and
each series of shares subsequently issued by the Trust and added to the Schedule
(each singly a "Fund" or collectively the "Funds").
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Trust and the Adviser agree as follows:
1. (a) The Trust hereby employs the Adviser to manage and administer
the operation of the Trust and each of its Funds, to supervise the provision of
the services to the Trust and each of its Funds by others, and to manage the
investment and reinvestment of the assets of each Fund of the Trust in
conformity with such Fund's investment objectives and restrictions as may be set
forth from time to time in the Fund's then current prospectus and statement of
additional information, if any, and other governing documents, all subject to
the supervision of the Board of Trustees of the Trust, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations set forth herein, for the compensation provided herein.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
(b) In the event that the Trust establishes one or more Funds, in
addition to the Funds listed on Schedule 1, for which it wishes the Adviser to
perform services hereunder, it shall notify the Adviser in writing. If the
Adviser is willing to render such services, it shall notify the Trust in writing
and such Fund shall become a Fund hereunder and the compensation payable to the
Adviser by the new Fund will be as agreed in writing at the time.
2. The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of each Fund with broker-dealers selected
by the Adviser. In executing portfolio transactions and selecting
broker-dealers, the Adviser will use its best efforts to seek best execution on
behalf of each Fund. In assessing the best execution available for any
transaction, the Adviser shall consider all factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any (all for the specific transaction and
on a continuing basis). In evaluating the best execution available, and in
selecting the broker-dealer to execute a particular transaction, the Adviser may
also consider the brokerage and research services (as those terms are used in
Section 28(e) of the Securities
Exchange Act of 1934 (the "1934 Act")) provided to a Fund and/or other accounts
over which the Adviser or an affiliate of the Adviser exercises investment
discretion. The Adviser is authorized to pay a broker-dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for a Fund which is in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction if, but only if,
the Adviser determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer viewed in terms of that particular transaction or in terms of all
of the accounts over which investment discretion is so exercised.
3. The Adviser, at its own expense, shall furnish to the Trust office
space in the offices of the Adviser or in such other place as may be agreed upon
by the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Trust, for members of the Adviser's organization to serve without
salaries from the Trust as officers or, as may be agreed from time to time, as
agents of the Trust. The Adviser assumes and shall pay or reimburse the Trust
for:
(a) the compensation (if any) of the Trustees of the Trust who are
affiliated with the Adviser or with its affiliates, or with any adviser retained
by the Adviser, and of all officers of the Trust as such; and
(b) all expenses of the Adviser incurred in connection with its
services hereunder.
The Trust assumes and shall pay all other expenses of the Trust and its
Funds, including, without limitation: (a) all charges and expenses of
any custodian or depository appointed by the Trust for the safekeeping
of the
cash, securities and other property of any of its Funds;
(b) all charges and expenses for bookkeeping and auditors;
(c) all charges and expenses of any transfer agents and registrars
appointed by the Trust; (d) all fees of all Trustees of the Trust who
are not affiliated with the Adviser or any of its affiliates, or
with any adviser retained by the Adviser;
(e) all brokers' fees, expenses, and commissions and issue and transfer
taxes chargeable to a Fund in connection with transactions involving securities
and other property to which the Fund is a party;
(f) all costs and expenses of distribution of shares of its Funds
incurred pursuant to Plans of Distribution adopted under Rule 12b-1 under the
Investment Company Act of 1940 ("1940 Act");
(g) all taxes and trust fees payable by the Trust or its Funds to
Federal, state, or other governmental agencies; (h) all costs of
certificates representing shares of the Trust or its Funds; (i) all
fees and expenses involved in registering and maintaining registrations
of the Trust, its Funds and of
their shares with the Securities and Exchange Commission (the "Commission") and
registering or qualifying the Funds' shares under state or other securities
laws, including, without limitation, the preparation and printing of
registration statements, prospectuses, and statements of additional information
for filing with the Commission and other authorities;
(j) expenses of preparing, printing, and mailing prospectuses and
statements of additional information to shareholders of each Fund of the Trust;
(k) all expenses of shareholders' and Trustees' meetings and of
preparing, printing, and mailing notices, reports, and proxy materials to
shareholders of the Funds;
(l) all charges and expenses of legal counsel for the Trust and its
Funds and for Trustees of the Trust in connection with legal matters relating to
the Trust and its Funds, including, without limitation, legal services rendered
in connection with the Trust and its Funds' existence, trust, and financial
structure and relations with its shareholders, registrations and qualifications
of securities under Federal, state, and other laws, issues of securities,
expenses which the Trust and its Funds has herein assumed, whether customary or
not, and extraordinary matters, including, without limitation, any litigation
involving the Trust and its Funds, its Trustees, officers, employees, or agents;
(m) all charges and expenses of filing annual and other reports with
the Commission and other authorities; and (n) all extraordinary
expenses and charges of the Trust and its Funds.
In the event that the Adviser provides any of these services or pays
any of these expenses, the Trust and any affected Fund will promptly reimburse
the Adviser therefor.
The services of the Adviser to the Trust and its Funds hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others.
4. As compensation for the Adviser's services to the Trust with respect
to each Fund during the period of this Agreement, the Trust will pay to the
Adviser a fee at the annual rate set forth on Schedule 2 for such Fund.
The Adviser's fee is computed as of the close of business on each
business day.
A pro rata portion of the Trust's fee with respect to a Fund shall be
payable in arrears at the end of each day or calendar month as the Adviser may
from time to time specify to the Trust. If and when this Agreement terminates,
any compensation payable hereunder for the period ending with the date of such
termination shall be payable upon such termination. Amounts payable hereunder
shall be promptly paid when due.
5. The Adviser may enter into an agreement to retain, at its own
expense, a firm or firms ("SubAdviser") to provide the Trust with respect to all
or any of its Funds all of the services to be provided by the Adviser hereunder,
if such agreement is approved as required by law. Such agreement may delegate to
such SubAdviser all of Adviser's rights, obligations, and duties hereunder.
6. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust or any of its Funds in connection
with the performance of this Agreement, except a loss resulting from the
Adviser's willful misfeasance, bad faith, gross negligence, or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also an officer, Director, partner, employee, or agent of the
Adviser, who may be or become an officer, Trustee, employee, or agent of the
Trust, shall be deemed, when rendering services to the Trust or any of its Funds
or acting on any business of the Trust or any of its Funds (other than services
or business in connection with the Adviser's duties hereunder), to be rendering
such services to or acting solely for the Trust or any of its Funds and not as
an officer, Director, partner, employee, or agent or one under the control or
direction of the Adviser even though paid by it.
7. The Trust shall cause the books and accounts of each of its Funds to
be audited at least once each year by a reputable independent public accountant
or organization of public accountant or organization of public accountants who
shall render a report to the Trust.
8. Subject to and in accordance with the Declaration of Trust of the
Trust, the governing documents of the Adviser and the governing documents of any
SubAdviser, it is understood that Trustees, Directors, officers, agents and
shareholders of the Trust or any Adviser are or may be interested in the Adviser
(or any successor thereof) as Directors and officers of the Adviser or its
affiliates, as stockholders of First Union Corporation or otherwise; that
Directors, officers and agents of the Adviser and its affiliates or stockholders
of First Union Corporation are or may be interested in the Trust or any Adviser
as Trustees, Directors, officers, shareholders or otherwise; that the Adviser
(or any such successor) is or may be interested in the Trust or any SubAdviser
as shareholder, or otherwise; and that the effect of any such adverse interests
shall be governed by the Declaration of Trust of the Trust, governing documents
of the Adviser and governing documents of any SubAdviser.
9. Agreement shall continue in effect for two years from the date set forth
above and after such date (a) such continuance is specifically approved at least
annually by the Board of Trustees of the Trust or by a vote of a majority of the
outstanding voting securities of the Trust, and (b) such renewal has been
approved by the vote of the majority of Trustees of the Trust who are not
interested persons, as that term is defined in the 1940 Act, of the Adviser or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval.
10. On sixty days' written notice to the Adviser, this Agreement may be
terminated
at any time without the payment of any penalty by the Board of Trustees of the
Trust or by vote of the holders of a majority of the outstanding voting
securities of the unaffected Funds; and on sixty days' written notice to the
Trust, this Agreement may be terminated at any time without the payment of any
penalty by the Adviser. This Agreement shall automatically terminate upon its
assignment (as that term is defined in the 1940 Act). Any notice under this
Agreement shall be given in writing, addressed and delivered, or mailed postage
prepaid, to the other party at the main office of such party.
11. This Agreement may be amended at any time by an instrument in
writing executed by both parties hereto or their respective successors, provided
that with regard to amendments of substance such execution by the Trust shall
have been first approved by the vote of the holders of a majority of the
outstanding voting securities of the affected Funds and by the vote of a
majority of Trustees of the Trust who are not interested persons (as that term
is defined in the 1940 Act) of the Adviser, any predecessor of the Adviser, or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval. A "majority of the outstanding voting securities of the Trust or
the affected Funds" shall have, for all purposes of this Agreement, the meaning
provided therefor in the 1940 Act.
12. Any compensation payable to the Adviser hereunder for any period
other than a full year shall be proportionately adjusted.
13. The provisions of this Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EVERGREEN SELECT FIXED
INCOME TRUST
By: /s/ Michael H. Koonce
Name: Michael H. Koonce
Title: Secretary
TATTERSALL ADVISORY GROUP, INC.
By: /s/ Fred T. Tattersall
Name: Fred T. Tattersall
Title: Managing Director
Schedule 1
Evergreen Select Core Bond Fund
Schedule 2
As compensation for the Adviser's services to each Fund during
the period of this Agreement, each Fund will pay to the Adviser a fee at the
annual rate of:
Evergreen Select Core Bond Fund
0.40% of Average Daily Net Assets of the Fund
THE TATTERSALL BOND FUND
------------------------
No Load Mutual Fund
ANNUAL REPORT
March 31, 1999
INVESTMENT ADVISER ADMINISTRATOR
TATTERSALL ADVISORY GROUP, INC. COUNTRYWIDE FUND SERVICES, INC.
6802 Paragon Place, Suite 200 P.O. Box 5354
Richmond, Virginia 23230-1655 Cincinnati, Ohio 45201-5354
1.804.289.2663 1.800.443.4249
- --------------------------------------------------------------------------------
<PAGE>
THE TATTERSALL FUNDS
Dear Tattersall Bond Fund Shareholder:
All of us at Tattersall Advisory Group are excited about the opportunities our
clients will have through our association with The First Capital Group of First
Union. As a result of access to First Capital Group's additional research and
human resources, we will soon be able to incorporate enhanced investment
capabilities into our products. Although this will not occur immediately, we
should be able to utilize these enhancing strategies by year-end. We would like
to emphasize the fact that we will remain an autonomous company with the same
people, the same investment philosophy, the same investment process, and the
same location. Another benefit afforded by the merger and one specifically for
Bond Fund clients, will take the form of lower expenses within the Fund. Overall
expenses paid will be reduced by 15 to 20% immediately upon formal shareholder
approval of the merger between The Tattersall Bond Fund and Evergreen's current
institutional Core Bond Fund.
The Tattersall Bond Fund continues to perform well, relative to the Lehman
Aggregate Index. The Fund's returns are as follows:
Bond Fund Lehman Aggregate
1Qtr99 -0.04% -0.51%
1 Year 6.33% 6.27%
3 Years 11.49% 11.09%
5 Years 8.12% 8.03%
Since Inception 7.81% 8.22%
As always we ask that you feel free to call should you have any questions or if
we may be of any assistance.
Sincerely,
/s/ Craig D. Truitt
Craig D. Truitt
Vice President
Tattersall Funds
Shareholder Services o Countrywide Fund Services, Inc. o P.O. Box 5354
Cincinnati, Ohio 45201-5354 o 800-443-4249
Investment Advisor o Tattersal Advisory Group o 6802 Paragon Place, Suite 200
Richmond, Virginia 23230-1655 o 804-289-2663
<PAGE>
THE TATTERSALL BOND FUND
- --------------------------------------------------------------------------------
Comparison of the Change in Value of a $10,000 Investment in The Tattersall
Bond Fund, the Lehman Brothers Government Corporate Index, the Consumer Price
Index and the Lehman Brothers Aggregate Index
03/31/99
--------
The Tattersall Bond Fund $18,737
Lehman Brothers Government Corporate Index $19,336
Consumer Price Index $12,263
Lehman Brothers Aggregate Index $19,331
- --------------------------------------------------------------------------------
---------------------------------------
The Tattersall Bond Fund
Average Annual Total Returns
1 Year 5 Years Since Inception*
6.53% 7.94% 7.87%
---------------------------------------
* Initial public offering of shares was July 3, 1989
Past performance is not predictive of future performance.
<PAGE>
THE TATTERSALL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1999
ASSETS
Investments in securities:
At acquisition cost $ 103,941,499
=============
At value (Note 1) $ 104,555,927
Investments in repurchase agreements (Note 1) 9,779,000
Cash 631
Interest and dividends receivable 1,187,714
Receivable for securities sold 7,228,233
Receivable for capital shares sold 3,721
Other assets 6,353
-------------
TOTAL ASSETS 122,761,579
-------------
LIABILITIES
Dividends payable 65,219
Payable for securities purchased 10,903,286
Payable for capital shares redeemed 6,459
Accrued investment advisory fees (Note 3) 24,938
Accrued administration fees (Note 3) 7,200
Accrued distribution expenses (Note 3) 978
Other accrued expenses and liabilities 3,869
-------------
TOTAL LIABILITIES 11,011,949
-------------
NET ASSETS $ 111,749,630
=============
Net assets consist of:
Paid-in capital $ 111,144,935
Distributions in excess of net realized gains (9,733)
Net unrealized appreciation on investments 614,428
-------------
Net assets $ 111,749,630
=============
PRICING OF INSTITUTIONAL SHARES
Net assets applicable to Institutional Shares $ 109,028,154
=============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 10,212,863
=============
Net asset value, offering price and
redemption price per share (Note 1) $ 10.68
=============
PRICING OF SERVICE GROUP SHARES
Net assets applicable to Service Group Shares $ 2,721,476
=============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 254,932
=============
Net asset value, offering price and
redemption price per share (Note 1) $ 10.68
=============
See accompanying notes to financial statements.
<PAGE>
THE TATTERSALL BOND FUND
STATEMENT OF OPERATIONS
Year Ended March 31, 1999
INVESTMENT INCOME
Interest $ 6,473,084
Dividends 483,139
-----------
TOTAL INVESTMENT INCOME 6,956,223
-----------
EXPENSES
Investment advisory fees (Note 3) 418,525
Administration fees (Note 3) 98,726
Custodian fees 18,459
Professional fees 15,245
Pricing costs 15,146
Trustees' fees and expenses 8,220
Printing of shareholder reports 7,441
Registration fees 6,234
Distribution expenses, Service Group Shares (Note 3) 4,201
Postage and supplies 3,799
Insurance expense 3,269
Other expenses 4,317
-----------
TOTAL EXPENSES 603,582
Fees waived by the Adviser (Note 3) (23,693)
Expenses reimbursed through a directed
brokerage arrangement (Note 4) (18,717)
-----------
NET EXPENSES 561,172
-----------
NET INVESTMENT INCOME 6,395,051
-----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions 1,960,347
Net change in unrealized appreciation/
depreciation on investments (1,449,745)
-----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 510,602
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 6,905,653
===========
See accompanying notes to financial statements.
<PAGE>
THE TATTERSALL BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
MARCH 31, MARCH 31,
1999 1998
------------- -------------
FROM OPERATIONS
<S> <C> <C>
Net investment income $ 6,395,051 $ 5,273,886
Net realized gains from security transactions 1,960,347 1,826,210
Net change in unrealized appreciation/depreciation
on investments (1,449,745) 2,574,722
------------- -------------
Net increase in net assets from operations 6,905,653 9,674,818
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Institutional Shares (6,248,934) (5,189,396)
From net investment income, Service Group Shares (154,241) (99,842)
From net realized gains from security transactions, Institutional Shares (2,212,023) --
From net realized gains from security transactions, Service Group Shares (55,284) --
------------- -------------
Decrease in net assets from distributions to shareholders (8,670,482) (5,289,238)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
INSTITUTIONAL SHARES
Proceeds from shares sold 17,978,857 15,597,164
Net asset value of shares issued in reinvestment
of distributions to shareholders 8,176,315 5,049,237
Payments for shares redeemed (11,649,216) (5,227,155)
------------- -------------
Net increase in net assets from Institutional Shares transactions 14,505,956 15,419,246
------------- -------------
SERVICE GROUP SHARES
Proceeds from shares sold 378,203 4,316,277
Net asset value of shares issued in reinvestment
of distributions to shareholders 209,525 99,842
Payments for shares redeemed (897,925) (1,401,739)
------------- -------------
Net increase (decrease) in net assets from Service Group Shares transactions (310,197) 3,014,380
------------- -------------
TOTAL INCREASE IN NET ASSETS 12,430,930 22,819,206
NET ASSETS
Beginning of year 99,318,700 76,499,494
------------- -------------
End of year - (including undistributed net investment
income of $0 and $8,124, respectively) $ 111,749,630 $ 99,318,700
============= =============
CAPITAL SHARE ACTIVITY
INSTITUTIONAL SHARES
Sold 1,641,524 1,446,450
Reinvested 747,985 472,113
Redeemed (1,063,344) (486,114)
------------- -------------
Net increase in shares outstanding 1,326,165 1,432,449
Shares outstanding, beginning of year 8,886,698 7,454,249
------------- -------------
Shares outstanding, end of year 10,212,863 8,886,698
============= =============
SERVICE GROUP SHARES
Sold 34,302 402,367
Reinvested 19,167 9,229
Redeemed (81,847) (128,286)
------------- -------------
Net increase (decrease) in shares outstanding (28,378) 283,310
Shares outstanding, beginning of year 283,310 --
------------- -------------
Shares outstanding, end of year 254,932 283,310
============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE TATTERSALL BOND FUND - INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each Year
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 10.83 $ 10.26 $ 10.39 $ 9.97 $ 10.15
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.61 0.58 0.68 0.70 0.62
Net realized and unrealized gains (losses) on investments 0.09 0.63 (0.12) 0.41 (0.18)
-------- -------- -------- -------- --------
Total from investment operations 0.70 1.21 0.56 1.11 0.44
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.63) (0.64) (0.69) (0.69) (0.62)
Distributions from net realized gains (0.22) -- -- -- --
-------- -------- -------- -------- --------
Total distributions (0.85) (0.64) (0.69) (0.69) (0.62)
-------- -------- -------- -------- --------
Net asset value at end of year $ 10.68 $ 10.83 $ 10.26 $ 10.39 $ 9.97
======== ======== ======== ======== ========
Total return 6.53% 12.06% 5.52% 11.23% 4.56%
======== ======== ======== ======== ========
Net assets at end of year (000's) $109,028 $ 96,250 $ 76,499 $ 74,774 $ 72,029
======== ======== ======== ======== ========
Ratio of gross expenses to average net assets 0.54% 0.53% 0.53% 0.56% 0.57%
Ratio of net expenses to average net assets (a) 0.50% 0.50% 0.50% 0.53% 0.53%
Ratio of net investment income to average net assets 5.73% 6.06% 6.48% 6.54% 6.28%
Portfolio turnover rate 221% 235% 207% 268% 381%
</TABLE>
(a) Ratios were determined based on net expenses after investment advisory fee
waivers for the years ended March 31, 1999 and 1998 (Note 3) and expense
reimbursements through a directed brokerage arrangement (Note 4).
See accompanying notes to financial statements.
<PAGE>
THE TATTERSALL BOND FUND - SERVICE GROUP SHARES
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a
Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
MARCH 31, MARCH 31,
1999 1998 (A)
-------- --------
<S> <C> <C>
Net asset value at beginning of period $ 10.83 $ 10.69
-------- --------
Income from investment operations:
Net investment income 0.61 0.37
Net realized and unrealized gains on investments 0.07 0.08
-------- --------
Total from investment operations 0.68 0.45
-------- --------
Less distributions:
Dividends from net investment income (0.61) (0.31)
Distributions from net realized gains (0.22) --
-------- --------
Total distributions (0.83) (0.31)
-------- --------
Net asset value at end of period $ 10.68 $ 10.83
======== ========
Total return 6.37% 8.55%(c)
======== ========
Net assets at end of period (000's) $ 2,721 $ 3,069
======== ========
Ratio of gross expenses to average net assets 0.69% 0.68%(c)
Ratio of net expenses to average net assets (b) 0.65% 0.65%(c)
Ratio of net investment income to average net assets 5.59% 5.96%(c)
Portfolio turnover rate 221% 235%
</TABLE>
(a) Represents the period from the initial public offering of Service Group
Shares (October 2, 1997) through March 31, 1998.
(b) Ratios were determined based on net expenses after investment advisory fee
waivers (Note 3) and expense reimbursements through a directed brokerage
arrangement (Note 4).
(c) Annualized.
See accompanying notes to financial statements.
<PAGE>
THE TATTERSALL BOND FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999
PAR VALUE VALUE
--------- -----
U.S. TREASURY OBLIGATIONS - 16.3%
U.S. TREASURY BONDS - 8.5%
$ 7,450,000 8.125%, due 08/15/2021 $ 9,469,620
------------
U.S. TREASURY NOTES - 6.8%
6,015,000 5.75%, due 10/31/2002 6,125,917
1,380,000 7.00%, due 07/15/2006 1,509,803
------------
7,635,720
------------
U.S. TREASURY INFLATION-PROTECTION NOTES - 1.0%
1,152,213 3.375%, due 01/15/2007 1,109,005
------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $18,336,756) $ 18,214,345
------------
MORTGAGE-BACKED SECURITIES - 38.1%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 7.3%
$ 825,000 Pool #1197-H, 6.75%, due 02/15/2007 $ 840,205
1,000,000 Pool #1457-PK, 7.00%, due 01/15/2008 1,033,750
925,000 Pool #1460-I, 7.00%, due 01/15/2008 957,079
834,652 Pool #E00220, 7.00%, due 06/01/2008 854,084
825,000 Pool #1655-HB, 6.50%, due 10/15/2008 841,236
1,375,000 Series #2110-PJ, 6.00%, due 08/15/2019 1,371,122
1,076,227 Series #1251-Z, 8.00%, due 04/15/2022 1,125,324
1,175,000 Series #2132-PD, 6.00%, due 11/15/2027 1,137,180
------------
8,159,980
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 17.9%
1,181,081 Pool #375139, 7.13%, due 05/01/2004 1,234,599
1,453,618 Pool #375299, 6.81%, due 08/01/2004 1,502,677
592,534 Pool #73061, 8.66%, due 01/01/2005 651,787
616,662 Pool #73126, 7.00%, due 07/01/2005 635,661
1,503,000 Series #92-52G, 8.00%, due 04/25/2007 1,589,888
650,052 Series #92-61-ZB, 7.50%, due 05/25/2007 675,644
765,000 Series #92-179-H, 7.00%, due 09/01/2007 783,406
543,154 Pool #375538, 6.70%, due 11/01/2007 560,722
973,132 Pool #381276, 5.99%, due 01/01/2009 966,746
535,000 TBA, 6.09%, due 05/01/2009 531,489
1,410,000 Series #96-53-PG, 6.50%, due 12/18/2011 1,425,411
1,425,000 TBA, 6.00%, due 04/01/2014 1,413,867
628,956 Series #G92-23-Z, 7.50%, due 05/25/2021 664,335
808,255 Series #G92-44-Z, 8.00%, due 07/25/2022 854,472
1,508,080 Pool #426608, 6.00%, due 10/01/2028 1,466,035
572,548 Pool #442336, 6.00%, due 10/01/2028 556,586
1,353,113 Pool #443196, 6.00%, due 10/01/2028 1,315,388
584,399 Pool #444515, 6.50%, due 10/01/2028 581,898
964,485 Pool #451862, 6.50%, due 11/01/2028 960,357
650,582 Pool #456436, 6.00%, due 12/01/2028 632,444
1,000,000 TBA, 6.00%, due 04/01/2029 971,563
------------
19,974,975
------------
<PAGE>
THE TATTERSALL BOND FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999
PAR VALUE VALUE
--------- -----
MORTGAGE-BACKED SECURITIES - CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 10.7%
$ 919,195 Pool #780897, 7.50%, due 09/15/2010 $ 949,988
58,769 Pool #223997, 8.85%, due 05/15/2018 62,921
456,932 Pool #224002, 8.85%, due 07/15/2018 489,219
103,000 Pool #316205, 7.50%, due 02/15/2022 106,352
1,406,943 Pool #373331, 7.50%, due 05/15/2022 1,452,725
284,021 Pool #333658, 7.50%, due 01/15/2023 293,263
245,835 Pool #349314, 7.50%, due 02/15/2023 253,835
586,194 Pool #342526, 7.50%, due 02/15/2023 605,269
524,914 Pool #352143, 7.50%, due 07/15/2023 541,994
663,848 Pool #780798, 7.50%, due 12/15/2027 684,201
2,082,227 Pool #780728, 7.50%, due 03/15/2028 2,146,068
1,649,667 Pool #2660, 7.50%, due 10/20/2028 1,694,060
1,408,773 Pool #503000, 6.50%, due 02/15/2029 1,403,546
1,250,000 TBA, 7.50%, due 05/15/2029 1,285,547
------------
11,968,988
------------
OTHER MORTGAGE-BACKED SECURITIES - 2.2%
Contimortgage Home Equity Loan Trust #98-2-A4,
925,000 6.19%, due 01/15/2014 921,235
GMAC Commercial Mortgage Securities, Inc. #98-C1-A2,
625,000 6.70%, due 03/15/2008 636,133
GS Mortgage Securities Corporation II #98-C1-A2,
875,000 6.62%, due 10/18/2030 880,196
------------
2,437,564
------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $42,583,006) $ 42,541,507
------------
ASSET-BACKED SECURITIES - 6.7%
STUDENT LOAN MARKETING ASSOCIATION - 4.6%
$ 1,845,962 Series #97-2-A1, 5.042%, adjustable rate,
due 10/25/2005 $ 1,837,237
1,568,080 Series #97-3-A1, 5.604%, adjustable rate,
due 04/25/2006 1,561,342
1,770,140 Series #98-1-A1, 5.212%, adjustable rate,
due 01/25/2007 1,765,645
------------
5,164,224
------------
<PAGE>
THE TATTERSALL BOND FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999
PAR VALUE VALUE
--------- -----
ASSET-BACKED SECURITIES - CONTINUED
OTHER ASSET-BACKED SECURITIES - 2.1%
CIT RV Trust #95-B-A1,
$ 165,331 6.50%, due 04/15/2011 $ 167,066
CIT RV Trust #96-A-A1,
413,917 5.40%, due 12/15/2011 412,675
Fleetwood Credit Corporation Grantor Trust #94-A-A,
333,684 4.70%, due 07/15/2009 328,679
Fleetwood Credit Corporation Grantor Trust #96-A-A,
316,937 6.75%, due 10/15/2011 322,008
Green Tree Financial Corporation #98-A,
1,104,418 6.18%, due 06/15/2019 1,107,179
------------
2,337,607
------------
TOTAL ASSET-BACKED SECURITIES (COST $7,494,857) $ 7,501,831
------------
CORPORATE BONDS - 24.3%
Alcoa, Inc.,
$ 775,000 6.50%, due 06/15/2018 $ 752,169
Associates Corporation N.A.,
700,000 5.75%, due 10/15/2003 695,639
Avalon Properties, Inc.,
485,000 6.625%, due 01/15/2005 479,141
Bank of New York Company, Inc.,
610,000 6.50%, due 12/01/2003 623,926
BellSouth Telecommunications,
445,000 6.375%, due 06/01/2028 423,791
Beneficial Corporation Medium Term Notes,
800,000 6.33%, due 10/09/2001 805,288
Boeing Company,
350,000 6.625%, due 02/15/2038 332,626
BRE Properties, Inc.,
425,000 7.125%, due 02/15/2013 402,815
Coca-Cola Enterprises,
440,000 6.75%, due 01/15/2038 428,630
Dana Corporation,
425,000 7.00%, due 03/15/2028 413,359
<PAGE>
THE TATTERSALL BOND FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999
PAR VALUE VALUE
--------- -----
CORPORATE BONDS - CONTINUED
Duke Realty LP,
$ 470,000 7.05%, due 03/01/2006 $ 471,316
Equity Residential Properties Trust,
875,000 6.55%, due 11/15/2001 879,121
450,000 6.63%, due 04/13/2005 444,384
Finova Capital Corporation,
385,000 6.25%, due 08/15/2000 387,749
Firstar Bank Milwaukee,
2,450,000 6.25%, due 12/01/2002 2,478,322
Ford Motor Company,
335,000 8.90%, due 01/15/2032 418,924
Ford Motor Credit Company,
1,395,000 5.80%, due 01/12/2009 1,340,051
General Motors Acceptance Corporation,
500,000 5.85%, due 01/14/2009 481,380
General Motors Acceptance Corporation Medium Term Notes,
725,000 6.80%, due 04/17/2001 741,421
General Motors Corporation,
235,000 8.80%, due 03/01/2021 285,739
Household Finance Corporation,
1,000,000 6.50%, due 11/15/2008 997,970
International Lease Finance Corporation Medium Term Notes,
1,315,000 6.42%, due 09/11/2000 1,329,005
May Department Stores,
275,000 7.45%, due 09/15/2011 300,908
650,000 6.70%, due 09/15/2028 641,914
Mellon Financial Company,
915,000 7.625%, due 11/15/1999 928,167
Morgan Stanley Dean Witter & Company,
500,000 6.09%, due 03/09/2001 502,495
National City Corporation,
900,000 7.20%, due 05/15/2005 932,337
Norwest Financial, Inc.,
450,000 6.05%, due 11/19/1999 452,174
PNC Funding Corporation,
600,000 6.125%, due 02/15/2009 587,268
Prologis Trust,
450,000 7.00%, due 10/01/2003 450,711
SBC Communications, Inc.,
600,000 6.625%, due 11/01/2009 622,692
<PAGE>
THE TATTERSALL BOND FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999
PAR VALUE VALUE
--------- -----
CORPORATE BONDS - CONTINUED
Sears Roebuck Acceptance Corporation,
$ 1,500,000 5.63%, due 02/07/2001 $ 1,498,770
750,000 6.86%, due 07/03/2001 766,762
750,000 6.99%, due 09/30/2002 774,203
Sprint Capital Corporation,
1,240,000 6.875%, due 11/15/2028 1,224,376
Suntrust Banks,
340,000 6.125%, due 02/15/2004 339,504
Union Camp Corporation,
325,000 6.50%, due 11/15/2007 325,400
United Parcel Service of America, Inc.,
420,000 8.375%, due 04/01/2030 503,979
Wachovia Corporation,
675,000 6.15%, due 03/15/2009 667,568
------------
TOTAL CORPORATE BONDS (COST $27,118,496) $ 27,131,994
------------
SHARES
------
CLOSED-END MUTUAL FUNDS - 8.2%
37,400 Blackrock 1999 Term Trust, Inc. $ 369,325
241,400 Blackrock 2001 Term Trust, Inc. 2,172,600
104,700 Blackrock North American Government Income Trust 1,047,000
125,300 Blackrock Strategic Term Trust, Inc. 1,151,194
7,400 Excelsior Income Shares, Inc. 121,175
15,500 First Commonwealth Fund 160,812
232,200 Hyperion 1999 Term Trust, Inc. 1,683,450
201,000 Hyperion 2002 Term Trust, Inc. 1,695,938
4,100 Hyperion 2005 Investment Grade
Opportunity Term Trust, Inc. 34,594
16,400 Income Opportunities Fund, Inc. - 1999 159,900
73,100 MFS Government Markets Income Trust 466,012
12,000 Morgan Stanley Dean Witter Government Income Trust 104,250
------------
TOTAL CLOSED-END FUNDS (COST $8,408,384) $ 9,166,250
------------
TOTAL INVESTMENTS AT VALUE
(COST $103,941,499) - 93.6% $104,555,927
------------
<PAGE>
THE TATTERSALL BOND FUND
PORTFOLIO OF INVESTMENTS
March 31, 1999
FACE AMOUNT VALUE
- ----------- -----
REPURCHASE AGREEMENTS (A) - 8.7%
Firstar Bank., 3.75%, dated 03/31/99, due 04/01/99
$ 9,779,000 repurchase proceeds $9,780,019 (Cost $9,779,000) $ 9,779,000
------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS
AT VALUE - 102.3% $114,334,927
LIABILITIES IN EXCESS OF OTHER ASSETS - (2.3)% (2,585,297)
------------
NET ASSETS - 100.0% $111,749,630
============
(a) Joint repurchase agreement is fully collateralized by $28,093,565 U.S.
Treasury Note, 5.625%, due 02/28/2001. The aggregate market value of the
collateral at March 31, 1999 was $28,533,385. The Fund's pro-rata interest
in the collateral at March 31, 1999 was $10,130,236.
See accompanying notes to financial statements.
<PAGE>
THE TATTERSALL BOND FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
The Tattersall Bond Fund, formerly The Jamestown Bond Fund, (the Fund) is a
no-load, diversified series of the Williamsburg Investment Trust (the Trust), an
open-end management investment company registered under the Investment Company
Act of 1940 (the 1940 Act). The Trust was organized as a Massachusetts business
trust on July 18, 1988. The Fund began operations on December 13, 1990.
The Fund offers two classes of shares: Service Group Shares, sold subject to a
12b-1 fee up to 0.15% of average daily net assets, and Institutional Shares,
sold without a 12b-1 fee. Each Service Group and Institutional Share of the Fund
represents identical interests in the Fund's investment portfolio and has the
same rights, except that (i) Service Group Shares bear the expenses of the
distribution fees, which will cause Service Group Shares to have a higher
expense ratio and to pay lower dividends than Institutional Shares; (ii) certain
class specific expenses will be borne solely by the class to which such expenses
are attributable; and (iii) each class has exclusive voting rights with respect
to matters affecting only that class.
The Fund's investment objective is to maximize total return, consisting of
current income and capital appreciation (both realized and unrealized),
consistent with the preservation of capital through active management of
investment grade fixed income securities.
The following is a summary of the Fund's significant accounting policies:
Securities valuation -- The Fund's portfolio securities are valued as of the
close of the regular session of trading on the New York Stock Exchange (normally
4:00 p.m., Eastern time). Securities which are traded over-the-counter are
valued at the last sales price, if available, otherwise, at the last quoted bid
price. Securities traded on a national exchange are valued based upon the
closing price on the principal exchange where the security is traded. It is
expected that fixed income securities of the Fund will ordinarily be traded in
the over-the-counter market. When market quotations are not readily available,
securities may be valued on the basis of prices provided by an independent
pricing service. If a pricing service cannot provide a valuation, securities
will be valued in good faith at fair value using methods consistent with those
determined by the Board of Trustees.
Repurchase agreements -- The Fund generally enters into joint repurchase
agreements with other funds within the Trust. The joint repurchase agreement,
which is collateralized by U.S. Government obligations, is valued at cost which,
together with accrued interest, approximates market. At the time the Fund enters
into the joint repurchase agreement, the seller agrees that the value of the
underlying securities, including accrued interest, will at all times be equal to
or exceed the face amount of the repurchase agreement. In addition, the Fund
actively monitors and seeks additional collateral, as needed.
Share valuation -- The net asset value per share of each class of shares of the
Fund is calculated daily by dividing the total value of the Fund's assets
attributable to that class, less liabilities attributable to that class, by the
number of shares of that class outstanding. The offering price and redemption
price per share of each class of shares of the Fund is equal to the net asset
value per share.
<PAGE>
THE TATTERSALL BOND FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
Investment income and distributions to shareholders -- Dividend income is
recorded on the ex-dividend date. Interest income is accrued as earned.
Discounts and premiums on securities purchased are amortized in accordance with
income tax regulations. Dividends arising from net investment income are
declared and paid quarterly to shareholders of the Fund. Net realized short-term
capital gains, if any, may be distributed throughout the year and net realized
long-term capital gains, if any, are distributed at least once each year. Income
distributions and capital gain distributions are determined in accordance with
income tax regulations.
Allocations between classes -- Investment income earned, realized capital gains
and losses, and unrealized appreciation and depreciation for the Fund are
allocated daily to each class of shares based upon its proportionate share of
total net assets of the Fund. Class specific expenses are charged directly to
the class incurring the expense. Common expenses which are not attributable to a
specific class are allocated daily to each class of shares based upon its
proportionate share of total net assets of the Fund.
Security transactions -- Security transactions are accounted for on trade date.
Cost of securities sold is determined on a specific identification basis.
Securities traded on a "to-be-announced" basis -- The Fund occasionally trades
securities on a "to-be-announced" (TBA) basis. In a TBA transaction, the Fund
has committed to purchase securities for which all specific information is not
yet known at the time of the trade, particularly the face amount in
mortgage-backed securities transactions. Securities purchased on a TBA basis are
not settled until they are delivered to the Fund, normally 15 to 45 days later.
These transactions are subject to market fluctuations and their current value is
determined in the same manner as for other portfolio securities.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code applicable to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies
and distributes at least 90% of its taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
<PAGE>
THE TATTERSALL BOND FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
The following information is based upon the federal income tax cost of portfolio
investments of $104,098,150 as of March 31, 1999:
Gross unrealized appreciation................. $ 1,320,656
Gross unrealized depreciation................. (862,879)
-----------
Net unrealized appreciation................... $ 457,777
===========
The difference between the federal income tax cost of portfolio investments and
the financial statement cost is due to certain timing differences in the
recognition of capital losses under income tax regulations and generally
accepted accounting principles.
2. INVESTMENT TRANSACTIONS
During the year ended March 31, 1999, cost of purchases and proceeds from sales
and maturities of investment securities, other than short-term investments,
amounted to $239,650,862 and $229,306,091, respectively.
3. TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AGREEMENT
The Fund's investments are managed by Tattersall Advisory Group, Inc. (the
Adviser) under the terms of an Investment Advisory Agreement. Under the
Investment Advisory Agreement, the Fund pays the Adviser a fee, which is
computed and accrued daily and paid monthly, at an annual rate of 0.375% of its
average daily net assets. The Adviser currently intends to limit the total
operating expenses of the Institutional Shares of the Fund to 0.50% of its
average daily net assets, and to limit the total operating expenses of the
Service Group Shares of the Fund to 0.65% of its average daily net assets.
Accordingly, the Adviser voluntarily waived $23,693 of its investment advisory
fees for the year ended March 31, 1999. Certain trustees and officers of the
Trust are also officers of the Adviser.
ADMINISTRATIVE SERVICES AGREEMENT
Under the terms of an Administrative Services Agreement with the Trust,
Countrywide Fund Services, Inc. (CFS) provides administrative, pricing,
accounting, dividend disbursing, shareholder servicing and transfer agent
services for the Fund. For these services, CFS receives a monthly fee from the
Fund at an annual rate of 0.075% on its average daily net assets up to $200
million and 0.05% on such net assets in excess of $200 million, subject to a
$2,000 minimum monthly fee, plus a surcharge of $1,000 per month. In addition,
the Fund pays CFS out-of-pocket expenses including, but not limited to, postage,
supplies and cost of pricing the Fund's portfolio securities. Certain officers
of the Trust are also officers of CFS.
<PAGE>
THE TATTERSALL BOND FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the Plan) with respect to Service
Group Shares pursuant to Rule 12b-1 under the 1940 Act. The Plan provides that
the Fund may incur certain costs related to the distribution of Service Group
Shares, not to exceed 0.15% of average daily net assets applicable to Service
Group Shares. For the year ended March 31, 1999, Service Group Shares incurred
$4,201 of distribution expenses under the Plan.
4. DIRECTED BROKERAGE ARRANGEMENT
In order to reduce the total operating expenses of the Fund, the Fund's
custodian fees and a portion of other operating expenses have been paid through
an arrangement with a third-party broker-dealer who is compensated through
security trades. Expenses reimbursed through the directed brokerage arrangement
totaled $18,717 for the year ended March 31, 1999.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees
The Williamsburg Investment Trust
Cincinnati, Ohio
We have audited the accompanying statement of assets and liabilities of
The Tattersall Bond Fund, formerly The Jamestown Bond Fund, (a series of The
Williamsburg Investment Trust), including the portfolio of investments, as of
March 31, 1999, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 31, 1999 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
The Tattersall Bond Fund as of March 31, 1999, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended and the financial highlights for each of the
five years in the period then ended, in conformity with generally accepted
accounting principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
April 30, 1999
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm in the Prospectus and Statement of
Additional Information of Evergreen Select Fixed Income Trust and to the
incorporation by reference of our report dated April 30, 1999 on the financial
statements and financial highlights of the Tattersall Bond Fund.
/s/ Tait, Weller & Baker
Tait, Weller & Baker
Philadelphia, Pennsylvania
June 17, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
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<SERIES>
<NUMBER> 105
<NAME> EVERGREEN SELECT FIXED INCOME FUND CLASS I
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<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-01-1998
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<INVESTMENTS-AT-VALUE> 609,367,188
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<OTHER-ITEMS-ASSETS> 41,282
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<INTEREST-INCOME> 20,086,217
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[AVG-DEBT-PER-SHARE] 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
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<SERIES>
<NUMBER> 106
<NAME> EVERGREEN SELECT FIXED INCOME FUND CLASS IS
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<INVESTMENTS-AT-VALUE> 609,367,188
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<GROSS-EXPENSE> 41,656
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<SERIES>
<NUMBER> 105
<NAME> EVERGREEN SELECT INTERNATIONAL BOND CLASS I
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<SERIES>
<NUMBER> 106
<NAME> EVERGREEN SELECT INTERNATIONAL BOND CLASS IS
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 6
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</LEGEND>
<SERIES>
<NUMBER> 105
<NAME> EVERGREEN SELECT INTERMEDIATE MUNICIPAL BOND FUND CLASS I
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> FEB-28-1999
<INVESTMENTS-AT-COST> 710,852,391
<INVESTMENTS-AT-VALUE> 728,276,710
<RECEIVABLES> 26,203,509
<ASSETS-OTHER> 21,861
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 754,502,080
<PAYABLE-FOR-SECURITIES> 18,758,824
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,541,450
<TOTAL-LIABILITIES> 24,300,274
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 694,637,332
<SHARES-COMMON-STOCK> 11,164,134
<SHARES-COMMON-PRIOR> 11,129,384
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (57,042)
<ACCUMULATED-NET-GAINS> 12,439,711
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17,548,624
<NET-ASSETS> 724,568,625
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 18,397,749
<OTHER-INCOME> 262,273
<EXPENSES-NET> (2,113,191)
<NET-INVESTMENT-INCOME> 16,546,831
<REALIZED-GAINS-CURRENT> 12,668,297
<APPREC-INCREASE-CURRENT> (27,214,655)
<NET-CHANGE-FROM-OPS> 2,000,473
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (16,614,366)
<DISTRIBUTIONS-OF-GAINS> (9,895,453)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 512,936
<NUMBER-OF-SHARES-REDEEMED> (608,363)
<SHARES-REINVESTED> 130,177
<NET-CHANGE-IN-ASSETS> (22,305,075)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 9,666,867
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (2,197,864)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (2,113,191)
<AVERAGE-NET-ASSETS> 734,652,731
<PER-SHARE-NAV-BEGIN> 67.11
<PER-SHARE-NII> 1.49
<PER-SHARE-GAIN-APPREC> (1.32)
<PER-SHARE-DIVIDEND> (1.49)
<PER-SHARE-DISTRIBUTIONS> (0.89)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 64.90
<EXPENSE-RATIO> 0.00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 106
<NAME> EVERGREEN SELECT INTERMEDIATE MUNICIPAL BOND FUND CLASS IS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> FEB-28-1999
<INVESTMENTS-AT-COST> 710,852,391
<INVESTMENTS-AT-VALUE> 728,276,710
<RECEIVABLES> 26,203,509
<ASSETS-OTHER> 21,861
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 754,502,080
<PAYABLE-FOR-SECURITIES> 18,758,824
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,541,450
<TOTAL-LIABILITIES> 24,300,274
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,718,738
<SHARES-COMMON-STOCK> 86,796
<SHARES-COMMON-PRIOR> 70,574
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (505)
<ACCUMULATED-NET-GAINS> 39,252
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (124,305)
<NET-ASSETS> 5,633,180
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 127,604
<OTHER-INCOME> 1,622
<EXPENSES-NET> (20,943)
<NET-INVESTMENT-INCOME> 108,283
<REALIZED-GAINS-CURRENT> 89,133
<APPREC-INCREASE-CURRENT> (191,608)
<NET-CHANGE-FROM-OPS> 5,808
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (108,820)
<DISTRIBUTIONS-OF-GAINS> (67,252)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 83,319
<NUMBER-OF-SHARES-REDEEMED> (68,765)
<SHARES-REINVESTED> 1,668
<NET-CHANGE-IN-ASSETS> 897,366
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (15,216)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (20,942)
<AVERAGE-NET-ASSETS> 5,066,310
<PER-SHARE-NAV-BEGIN> 67.11
<PER-SHARE-NII> 1.40
<PER-SHARE-GAIN-APPREC> (1.31)
<PER-SHARE-DIVIDEND> (1.41)
<PER-SHARE-DISTRIBUTIONS> (0.89)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 64.90
<EXPENSE-RATIO> 0.83
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 105
<NAME> EVERGREEN SELECT INCOME PLUS CLASS I
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 1,261,811,246
<INVESTMENTS-AT-VALUE> 1,292,164,083
<RECEIVABLES> 37,458,728
<ASSETS-OTHER> 142,421
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,329,765,232
<PAYABLE-FOR-SECURITIES> 19,050,151
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,851,649
<TOTAL-LIABILITIES> 25,901,800
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,262,007,325
<SHARES-COMMON-STOCK> 230,425,301
<SHARES-COMMON-PRIOR> 231,012,949
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (553,369)
<ACCUMULATED-NET-GAINS> 1,966,036
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 30,695,809
<NET-ASSETS> 1,294,115,801
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 41,848,874
<OTHER-INCOME> 0
<EXPENSES-NET> (3,214,321)
<NET-INVESTMENT-INCOME> 38,634,553
<REALIZED-GAINS-CURRENT> 3,181,419
<APPREC-INCREASE-CURRENT> (60,331,555)
<NET-CHANGE-FROM-OPS> (18,515,583)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (38,946,064)
<DISTRIBUTIONS-OF-GAINS> (12,260,419)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,106,970
<NUMBER-OF-SHARES-REDEEMED> (21,236,961)
<SHARES-REINVESTED> 2,542,342
<NET-CHANGE-IN-ASSETS> (73,124,280)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 11,045,017
<OVERDISTRIB-NII-PRIOR> (241,857)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (3,314,065)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (3,914,616)
<AVERAGE-NET-ASSETS> 1,329,324,628
<PER-SHARE-NAV-BEGIN> 5.92
<PER-SHARE-NII> 0.17
<PER-SHARE-GAIN-APPREC> (0.25)
<PER-SHARE-DIVIDEND> (0.17)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 5.62
<EXPENSE-RATIO> 0.49
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 106
<NAME> EVERGREEN SELECT INCOME PLUS CLASS IS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 1,261,811,246
<INVESTMENTS-AT-VALUE> 1,292,164,083
<RECEIVABLES> 37,458,728
<ASSETS-OTHER> 142,421
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,329,765,232
<PAYABLE-FOR-SECURITIES> 19,050,151
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,851,649
<TOTAL-LIABILITIES> 25,901,800
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,120,656
<SHARES-COMMON-STOCK> 1,735,630
<SHARES-COMMON-PRIOR> 1,272,214
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (2,936)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (27,117)
<ACCUM-APPREC-OR-DEPREC> (342,972)
<NET-ASSETS> 9,747,631
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 270,813
<OTHER-INCOME> 0
<EXPENSES-NET> (31,374)
<NET-INVESTMENT-INCOME> 239,439
<REALIZED-GAINS-CURRENT> 18,293
<APPREC-INCREASE-CURRENT> (388,792)
<NET-CHANGE-FROM-OPS> (131,060)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (241,414)
<DISTRIBUTIONS-OF-GAINS> (77,203)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,327,865
<NUMBER-OF-SHARES-REDEEMED> (903,224)
<SHARES-REINVESTED> 38,775
<NET-CHANGE-IN-ASSETS> 2,219,156
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 31,792
<OVERDISTRIB-NII-PRIOR> (962)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 21,416
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (35,898)
<AVERAGE-NET-ASSETS> 8,533,005
<PER-SHARE-NAV-BEGIN> 5.92
<PER-SHARE-NII> 0.16
<PER-SHARE-GAIN-APPREC> (0.25)
<PER-SHARE-DIVIDEND> (0.16)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 5.62
<EXPENSE-RATIO> 0.74
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 105
<NAME> EVERGREEN SELECT LIMITED DURATION CLASS I
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> #VALUE!
<INVESTMENTS-AT-COST> 70,111,444
<INVESTMENTS-AT-VALUE> 70,075,022
<RECEIVABLES> 1,001,657
<ASSETS-OTHER> 22,636
<OTHER-ITEMS-ASSETS> 7,774,982
<TOTAL-ASSETS> 78,874,297
<PAYABLE-FOR-SECURITIES> 1,995,800
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 387,170
<TOTAL-LIABILITIES> 2,382,970
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75,711,647
<SHARES-COMMON-STOCK> 7,315,775
<SHARES-COMMON-PRIOR> 6,731,896
<ACCUMULATED-NII-CURRENT> 9,777
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 110,982
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (33,894)
<NET-ASSETS> 75,798,512
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,089,311
<OTHER-INCOME> 99,606
<EXPENSES-NET> (106,078)
<NET-INVESTMENT-INCOME> 2,082,839
<REALIZED-GAINS-CURRENT> 119,269
<APPREC-INCREASE-CURRENT> (1,077,156)
<NET-CHANGE-FROM-OPS> 1,124,952
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,078,035)
<DISTRIBUTIONS-OF-GAINS> (125,867)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,187,449
<NUMBER-OF-SHARES-REDEEMED> (1,733,846)
<SHARES-REINVESTED> 130,275
<NET-CHANGE-IN-ASSETS> 4,988,420
<ACCUMULATED-NII-PRIOR> 4,974
<ACCUMULATED-GAINS-PRIOR> 117,581
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (107,373)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (106,079)
<AVERAGE-NET-ASSETS> 71,778,651
<PER-SHARE-NAV-BEGIN> 10.52
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> (0.14)
<PER-SHARE-DIVIDEND> (0.29)
<PER-SHARE-DISTRIBUTIONS> (0.02)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.36
<EXPENSE-RATIO> 0.55
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 106
<NAME> EVERGREEN SELECT LIMITED DURATION CLASS IS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> #VALUE!
<INVESTMENTS-AT-COST> 70,111,444
<INVESTMENTS-AT-VALUE> 70,075,022
<RECEIVABLES> 1,001,657
<ASSETS-OTHER> 22,636
<OTHER-ITEMS-ASSETS> 7,774,982
<TOTAL-ASSETS> 78,874,297
<PAYABLE-FOR-SECURITIES> 1,995,800
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 387,170
<TOTAL-LIABILITIES> 2,382,970
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 694,927
<SHARES-COMMON-STOCK> 66,865
<SHARES-COMMON-PRIOR> 58,402
<ACCUMULATED-NII-CURRENT> 101
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 316
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,528)
<NET-ASSETS> 692,816
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 18,115
<OTHER-INCOME> 859
<EXPENSES-NET> (1,694)
<NET-INVESTMENT-INCOME> 17,280
<REALIZED-GAINS-CURRENT> 1,099
<APPREC-INCREASE-CURRENT> (9,583)
<NET-CHANGE-FROM-OPS> 8,796
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (17,228)
<DISTRIBUTIONS-OF-GAINS> (1,052)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14,369
<NUMBER-OF-SHARES-REDEEMED> (7,648)
<SHARES-REINVESTED> 1,743
<NET-CHANGE-IN-ASSETS> 78,463
<ACCUMULATED-NII-PRIOR> 49
<ACCUMULATED-GAINS-PRIOR> 269
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (930)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,694)
<AVERAGE-NET-ASSETS> 621,575
<PER-SHARE-NAV-BEGIN> 614,338.00
<PER-SHARE-NII> 6,249.00
<PER-SHARE-GAIN-APPREC> 914.00
<PER-SHARE-DIVIDEND> (6,249.00)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 615,252.00
<EXPENSE-RATIO> 0.54
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 105
<NAME> EVERGREEN SELECT TOTAL RETURN BOND FUND CLASS I
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 146,929,235
<INVESTMENTS-AT-VALUE> 145,359,676
<RECEIVABLES> 3,105,435
<ASSETS-OTHER> 412,858
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 148,877,969
<PAYABLE-FOR-SECURITIES> 4,397,836
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 293,812
<TOTAL-LIABILITIES> 4,691,648
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 142,901,714
<SHARES-COMMON-STOCK> 1,430,977
<SHARES-COMMON-PRIOR> 1,363,876
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (3,013)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (3,783,682)
<ACCUM-APPREC-OR-DEPREC> (1,531,873)
<NET-ASSETS> 137,583,146
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,739,456
<OTHER-INCOME> 0
<EXPENSES-NET> (325,627)
<NET-INVESTMENT-INCOME> 4,413,829
<REALIZED-GAINS-CURRENT> (2,064,586)
<APPREC-INCREASE-CURRENT> (2,929,603)
<NET-CHANGE-FROM-OPS> (580,360)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,421,593)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 41,761
<NUMBER-OF-SHARES-REDEEMED> (10,513)
<SHARES-REINVESTED> 35,853
<NET-CHANGE-IN-ASSETS> 1,584,745
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (4,750)
<OVERDIST-NET-GAINS-PRIOR> (1,719,095)
<GROSS-ADVISORY-FEES> (271,875)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (364,620)
<AVERAGE-NET-ASSETS> 136,341,298
<PER-SHARE-NAV-BEGIN> 99.71
<PER-SHARE-NII> 3.17
<PER-SHARE-GAIN-APPREC> (3.56)
<PER-SHARE-DIVIDEND> (3.17)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 96.15
<EXPENSE-RATIO> 0.48
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 106
<NAME> EVERGREEN SELECT TOTAL RETURN BOND FUND CLASS IS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 146,929,235
<INVESTMENTS-AT-VALUE> 145,359,676
<RECEIVABLES> 3,105,435
<ASSETS-OTHER> 412,858
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 148,877,969
<PAYABLE-FOR-SECURITIES> 4,397,836
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 293,812
<TOTAL-LIABILITIES> 4,691,648
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,734,151
<SHARES-COMMON-STOCK> 68,678
<SHARES-COMMON-PRIOR> 237
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (343)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (69,918)
<ACCUM-APPREC-OR-DEPREC> (60,715)
<NET-ASSETS> 6,603,175
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 203,475
<OTHER-INCOME> 0
<EXPENSES-NET> (21,298)
<NET-INVESTMENT-INCOME> 182,177
<REALIZED-GAINS-CURRENT> (69,702)
<APPREC-INCREASE-CURRENT> (60,847)
<NET-CHANGE-FROM-OPS> 51,628
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (182,520)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 68,163
<NUMBER-OF-SHARES-REDEEMED> (1,600)
<SHARES-REINVESTED> 1,878
<NET-CHANGE-IN-ASSETS> 6,579,520
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (1)
<OVERDIST-NET-GAINS-PRIOR> (217)
<GROSS-ADVISORY-FEES> (11,671)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (22,808)
<AVERAGE-NET-ASSETS> 5,790,164
<PER-SHARE-NAV-BEGIN> 99.71
<PER-SHARE-NII> 3.04
<PER-SHARE-GAIN-APPREC> (3.55)
<PER-SHARE-DIVIDEND> (3.05)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 96.15
<EXPENSE-RATIO> 0.74
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 105
<NAME> EVERGREEN SELECT ADJUSTABLE RATE FUND CLASS I
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 33,639,370
<INVESTMENTS-AT-VALUE> 33,461,866
<RECEIVABLES> 937,158
<ASSETS-OTHER> 364
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34,399,388
<PAYABLE-FOR-SECURITIES> 246,801
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22,507
<TOTAL-LIABILITIES> 269,308
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,017,179
<SHARES-COMMON-STOCK> 2,199,595
<SHARES-COMMON-PRIOR> 2,395,201
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (21,833)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (740,562)
<ACCUM-APPREC-OR-DEPREC> (122,561)
<NET-ASSETS> 21,132,223
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 682,515
<OTHER-INCOME> 0
<EXPENSES-NET> (31,622)
<NET-INVESTMENT-INCOME> 650,893
<REALIZED-GAINS-CURRENT> (94,083)
<APPREC-INCREASE-CURRENT> (62,558)
<NET-CHANGE-FROM-OPS> 494,252
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (659,689)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 35,348
<NUMBER-OF-SHARES-REDEEMED> (298,145)
<SHARES-REINVESTED> 67,191
<NET-CHANGE-IN-ASSETS> (2,065,158)
<ACCUMULATED-NII-PRIOR> (16,793)
<ACCUMULATED-GAINS-PRIOR> (666,140)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (31,270)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (31,622)
<AVERAGE-NET-ASSETS> 20,937,016
<PER-SHARE-NAV-BEGIN> 9.68
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> (0.07)
<PER-SHARE-DIVIDEND> (0.30)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.61
<EXPENSE-RATIO> 0.30
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 106
<NAME> EVERGREEN SELECT ADJUSTABLE RATE FUND CLASS IS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 33,639,370
<INVESTMENTS-AT-VALUE> 33,461,866
<RECEIVABLES> 937,158
<ASSETS-OTHER> 364
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34,399,388
<PAYABLE-FOR-SECURITIES> 246,801
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22,507
<TOTAL-LIABILITIES> 269,308
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,029,053
<SHARES-COMMON-STOCK> 1,351,884
<SHARES-COMMON-PRIOR> 996,046
<ACCUMULATED-NII-CURRENT> 11,286
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,461
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (54,943)
<NET-ASSETS> 12,997,857
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 344,254
<OTHER-INCOME> 0
<EXPENSES-NET> (28,948)
<NET-INVESTMENT-INCOME> 315,306
<REALIZED-GAINS-CURRENT> (14,210)
<APPREC-INCREASE-CURRENT> (12,460)
<NET-CHANGE-FROM-OPS> 288,636
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (319,933)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 856,227
<NUMBER-OF-SHARES-REDEEMED> (524,600)
<SHARES-REINVESTED> 24,211
<NET-CHANGE-IN-ASSETS> 3,376,686
<ACCUMULATED-NII-PRIOR> 6,697
<ACCUMULATED-GAINS-PRIOR> 59,306
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (15,760)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (28,948)
<AVERAGE-NET-ASSETS> 10,502,218
<PER-SHARE-NAV-BEGIN> 9.68
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> (0.06)
<PER-SHARE-DIVIDEND> (0.29)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.61
<EXPENSE-RATIO> 0.55
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 105
<NAME> EVERGREEN SELECT CORE BOND FUND CLASS I
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 570,271,446
<INVESTMENTS-AT-VALUE> 575,397,105
<RECEIVABLES> 7,858,603
<ASSETS-OTHER> 20,954
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 583,276,662
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,659,287
<TOTAL-LIABILITIES> 5,659,287
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 124,241,979
<SHARES-COMMON-STOCK> 11,539,441
<SHARES-COMMON-PRIOR> 11,345,900
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (62,181)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (392,458)
<ACCUM-APPREC-OR-DEPREC> (3,142,495)
<NET-ASSETS> 120,644,845
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,721,792
<OTHER-INCOME> 0
<EXPENSES-NET> (250,842)
<NET-INVESTMENT-INCOME> 3,470,950
<REALIZED-GAINS-CURRENT> (345,486)
<APPREC-INCREASE-CURRENT> (3,559,245)
<NET-CHANGE-FROM-OPS> (433,781)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,493,259)
<DISTRIBUTIONS-OF-GAINS> (2,487,138)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,101,413
<NUMBER-OF-SHARES-REDEEMED> (2,374,653)
<SHARES-REINVESTED> 466,781
<NET-CHANGE-IN-ASSETS> (4,425,359)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,440,167
<OVERDISTRIB-NII-PRIOR> (39,871)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (244,720)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (315,799)
<AVERAGE-NET-ASSETS> 122,612,857
<PER-SHARE-NAV-BEGIN> 11.02
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> (0.34)
<PER-SHARE-DIVIDEND> (0.31)
<PER-SHARE-DISTRIBUTIONS> (0.22)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.45
<EXPENSE-RATIO> 0.42
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 106
<NAME> EVERGREEN SELECT CORE BOND FUND CLASS IS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 570,271,446
<INVESTMENTS-AT-VALUE> 575,397,105
<RECEIVABLES> 7,858,603
<ASSETS-OTHER> 20,954
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 583,276,662
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,659,287
<TOTAL-LIABILITIES> 5,659,287
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 785,941
<SHARES-COMMON-STOCK> 74,694
<SHARES-COMMON-PRIOR> 25,943
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (142)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1,053)
<ACCUM-APPREC-OR-DEPREC> (3,861)
<NET-ASSETS> 780,885
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,897
<OTHER-INCOME> 0
<EXPENSES-NET> (958)
<NET-INVESTMENT-INCOME> 7,939
<REALIZED-GAINS-CURRENT> (2,105)
<APPREC-INCREASE-CURRENT> (6,683)
<NET-CHANGE-FROM-OPS> (849)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8,008)
<DISTRIBUTIONS-OF-GAINS> (3,470)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 72,635
<NUMBER-OF-SHARES-REDEEMED> (24,637)
<SHARES-REINVESTED> 753
<NET-CHANGE-IN-ASSETS> 494,906
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,521
<OVERDISTRIB-NII-PRIOR> (73)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (579)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,113)
<AVERAGE-NET-ASSETS> 288,685
<PER-SHARE-NAV-BEGIN> 11.02
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> (0.35)
<PER-SHARE-DIVIDEND> (0.29)
<PER-SHARE-DISTRIBUTIONS> (0.22)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.45
<EXPENSE-RATIO> 0.67
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
