1933 Act Registration No. 333-76053
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14AE
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[ ] Pre-Effective [X] Post-Effective
Amendment No. Amendment No. 1
EVERGREEN SELECT FIXED INCOME TRUST
(Evergreen Select Core Bond Fund)
[Exact Name of Registrant as Specified in Charter]
Area Code and Telephone Number: (617) 210-3200
200 Berkeley Street
Boston, Massachusetts 02116
-----------------------------------
(Address of Principal Executive Offices)
Michael H. Koonce, Esq.
Evergreen Investment Management Company
200 Berkeley Street
Boston, Massachusetts 02116
-----------------------------------------
(Name and Address of Agent for Service)
Copies of All Correspondence to:
Robert N. Hickey, Esq.
Sullivan & Worcester LLP 1025
Connecticut Avenue, N.W.
Washington, D.C. 20036
It is proposed that this filing will become effective on
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X immediately on filing pursuant to paragraph (b)
__ on ___________ pursuant to paragraph (b)
__ 60 days after filing pursuant to paragraph (a)(1)
__ on ___________ pursuant to paragraph (a)(1)
__ 75 days after filing pursuant to paragraph (a)(2) of Rule
485
__ This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
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EVERGREEN SELECT FIXED INCOME TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1933
<TABLE>
<CAPTION>
Location in Prospectus/Proxy
Item of Part A of Form N-14 Statement
<S> <C>
1. Beginning of Registration Cross Reference Sheet; Cover
Statement and Outside Page
Front Cover Page of
Prospectus
2. Beginning and Outside Table of Contents
Back Cover Page of
Prospectus
3. Fee Table, Synopsis and Comparison of Fees and
Risk Factors Expenses; Summary; Comparison
of Investment Objectives and
Policies; Risks
4. Information About the Summary; Reasons for the
Transaction Reorganization; Comparative
Information on Shareholders'
Rights; Exhibit A (Agreement
and Plan of Reorganization)
5. Information about the Cover Page; Summary; Risks;
Registrant Comparison of Investment
Objectives and Policies;
Comparative Information on
Shareholders' Rights;
Additional Information
6. Information about the Cover Page; Summary; Risks;
Company Being Acquired Comparison of Investment
Objective and Policies;
Comparative Information on
Shareholders' Rights;
Additional Information
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7. Voting Information Cover Page; Summary; Reasons
for the Reorganization -
Shareholder Information;
Voting Information Concerning
the Meeting
8. Interest of Certain Financial Statements and
Persons and Experts Experts; Legal Matters
9. Additional Information Inapplicable
Required for Reoffering
by Persons Deemed to be
Underwriters
Item of Part B of Form N-14
10. Cover Page Cover Page
11. Table of Contents Omitted
12. Additional Information Statement of Additional
About the Registrant Information of Evergreen
Select Core Bond Fund dated
February 1, 1999
13. Additional Information Statement of Additional
about the Company Being Information of The Tattersall
Acquired Bond Fund dated August 1,
1998, as revised December 31,
1998
14. Financial Statements Financial Statements dated
March 31, 1998 and September
30, 1998 (unaudited) of The
Tattersall Bond Fund;
Financial Statements dated
September 30, 1998 of
Evergreen Select Core Bond
Fund; Pro forma financial
statements dated September 30,
1998 of Evergreen Select Core
Bond Fund
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Item of Part C of Form N-14
15. Indemnification
Incorporated by Reference to
Part A Caption - "Comparative
Information on Shareholders'
Rights - Liability and
Indemnification of Trustees"
16. Exhibits Item 16. Exhibits
17. Undertakings Item 17. Undertakings
</TABLE>
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<PAGE>
WILLIAMSBURG INVESTMENT TRUST
THE TATTERSALL BOND FUND
P.O. BOX 5354
CINCINNATI, OHIO 45201-5354
May 10, 1999
Dear Shareholder,
As a result of the anticipated merger of Tattersall Advisory Group, Inc. with
and into a wholly-owned subsidiary of First Union Corporation scheduled to be
effective on June 4, 1999, I am writing to shareholders of The Tattersall Bond
Fund (the "Fund"), a series of Williamsburg Investment Trust, to inform you of a
Special Shareholders' meeting to be held on May 28, 1999. Before that meeting, I
would like your vote on the important issues affecting your Fund as described in
the attached Prospectus/Proxy Statement.
The Prospectus/Proxy Statement includes two proposals. The first proposal
requests that shareholders consider and act upon an Agreement and Plan of
Reorganization whereby all of the assets of the Fund would be acquired by
Evergreen Select Core Bond Fund in exchange for either Institutional or
Institutional Service shares of Evergreen Select Core Bond Fund and the
assumption by Evergreen Select Core Bond Fund of the identified liabilities of
the Fund. You will receive shares of Evergreen Select Core Bond Fund having an
aggregate net asset value equal to the aggregate net asset value of your Fund
shares. Details about Evergreen Select Core Bond Fund's investment objective,
performance, etc. are contained in the attached Prospectus/Proxy Statement.
Following completion of the reorganization, it is anticipated that Evergreen
Select Core Bond Fund will be managed by the same investment committee that
currently manages your Fund and will utilize the same investment strategies
currently employed for your Fund. For federal income tax purposes, the
transaction is a non-taxable event for shareholders.
The second proposal requests shareholder consideration of an Interim Investment
Advisory Agreement between the Fund and Tattersall Advisory Group, Inc., the
Fund's current investment adviser. It is anticipated that the Interim Investment
Advisory Agreement will be in effect from June 4, 1999 to the date the
reorganization is consummated (scheduled for June 7, 1999).
The Board of Trustees has approved the proposals and recommends that you vote
FOR these proposals.
I realize that this Prospectus/Proxy Statement will take time to review, but
your vote is very important. Please take the time to
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familiarize yourself with the proposals. If you attend the meeting, you may vote
your shares in person. If you do not expect to attend the meeting, complete,
date, sign and return the enclosed proxy card in the enclosed postage-paid
envelope. Instructions on how to complete the proxy card are included
immediately after the Notice of Special Meeting.
If you have any questions about the proxy, please call Evergreen Service Company
at 800-343-2898. You may also fax your completed and signed proxy card to
Countrywide Fund Services, Inc., our proxy tabulator at 513-629-2008.
Thank you for taking this matter seriously and participating in this important
process.
Sincerely,
John T. Bruce Fred T. Tattersall
Chairman President
Williamsburg Investment Trust
The
Tattesall Bond Fund
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<PAGE>
WILLIAMSBURG INVESTMENT TRUST
THE TATTERSALL BOND FUND
P.O. BOX 5354
CINCINNATI, OHIO 45201-5354
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 28, 1999
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of The Tattersall Bond Fund (the "Fund"), a series of Williamsburg
Investment Trust, will be held at the offices of Countrywide Fund Services,
Inc., 312 Walnut Street, Cincinnati, Ohio 45201-5354, on May 28, 1999 at 10:00
a.m. for the following purposes:
1. To consider and act upon the Agreement and Plan of Reorganization
(the "Plan") dated as of April 30, 1999, providing for the acquisition of all of
the assets of the Fund by Evergreen Select Core Bond Fund ("Evergreen Core
Bond"), a series of Evergreen Select Fixed Income Trust, in exchange for shares
of Evergreen Core Bond and the assumption by Evergreen Core Bond of the
identified liabilities of the Fund. The Plan also provides for distribution of
these shares of Evergreen Core Bond to shareholders of the Fund in liquidation
and subsequent termination of the Fund. A vote in favor of the Plan is a vote in
favor of the liquidation and termination of the Fund.
2. To consider and act upon the Interim Investment Advisory Agreement
between the Fund and Tattersall Advisory
Group, Inc.
3. To transact any other business which may properly come before the
Meeting or any adjournment or adjournments thereof.
On behalf of the Fund, the Trustees of Williamsburg Investment Trust
have fixed the close of business on April 30, 1999 as the record date for the
determination of shareholders of the Fund entitled to notice of and to vote at
the Meeting or any adjournment thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO
NOT EXPECT TO ATTEND IN PERSON ARE URGED TO SIGN AND RETURN THE ENCLOSED PROXY
IN THE ENCLOSED ENVELOPE WITHOUT DELAY, WHICH REQUIRES NO POSTAGE, SO THAT THEIR
SHARES MAY BE REPRESENTED AT THE MEETING. YOUR PROMPT ATTENTION TO THE ENCLOSED
PROXY WILL HELP TO AVOID THE EXPENSE OF FURTHER SOLICITATION.
By Order of the Board of Trustees
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<PAGE>
Tina Hosking
Secretary
May 10, 1999
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<PAGE>
INSTRUCTIONS FOR EXECUTING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and may help to avoid the time and expense involved in
validating your vote if you fail to sign your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it
appears in the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of
the party signing should conform exactly to a name shown in the
registration on the proxy card.
3. ALL OTHER ACCOUNTS: The capacity of the individual
signing the proxy card should be indicated unless it is reflected
in the form of registration. For example:
<TABLE>
<CAPTION>
REGISTRATION VALID SIGNATURE
<S> <C>
CORPORATE
ACCOUNTS
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp. John Doe, Treasurer
c/o John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee Jane B. Doe
u/t/d 12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust. John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith John B. Smith, Jr., Executor
</TABLE>
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<PAGE>
PROSPECTUS/PROXY STATEMENT DATED May 10, 1999
Acquisition of Assets of
THE TATTERSALL BOND FUND
a series of
Williamsburg Investment Trust
P.O. Box 5354
Cincinnati, Ohio 45201-5354
By and in Exchange for Shares of
EVERGREEN SELECT CORE BOND FUND
a series of
Evergreen Select Fixed Income Trust
200 Berkeley Street
Boston, Massachusetts 02116
This Prospectus/Proxy Statement is being furnished to shareholders of
The Tattersall Bond Fund ("Tattersall Bond") in connection with the Agreement
and Plan of Reorganization (the "Plan") to be submitted to shareholders of
Tattersall Bond for consideration at a Special Meeting of Shareholders to be
held on May 28, 1999 at 10:00 a.m. at the offices of Countrywide Fund Services,
Inc., 312 Walnut Street, Cincinnati, Ohio 45201-5354, and any adjournments
thereof (the "Meeting"). The Plan provides for all of the assets of Tattersall
Bond to be acquired by Evergreen Select Core Bond Fund ("Evergreen Core Bond")
in exchange for shares of Evergreen Core Bond and the assumption by Evergreen
Core Bond of the identified liabilities of Tattersall Bond (hereinafter referred
to as the "Reorganization"). Evergreen Core Bond and Tattersall Bond are
sometimes hereinafter referred to individually as the "Fund" and collectively as
the "Funds." Following the Reorganization, shares of Evergreen Core Bond will be
distributed to shareholders of Tattersall Bond in liquidation of Tattersall Bond
and such Fund will be terminated. Holders of Service Group shares of Tattersall
Bond will receive Institutional Service shares of Evergreen Core Bond, and
holders of Institutional shares of Tattersall Bond will receive Institutional
shares of Evergreen Core Bond. Each such class of shares of Evergreen Core Bond
has similar Rule 12b-1 distribution-related fees, if any, as the shares of the
respective class of Tattersall Bond held by them prior to the Reorganization. No
sales charges are imposed on Evergreen Core Bond's Institutional Service or
Institutional shares. As a result of the Reorganization, shareholders of
Tattersall Bond will receive that number of full and fractional shares of
Evergreen Core Bond having an aggregate net asset value equal to the
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aggregate net asset value of such shareholder's shares of Tattersall Bond. The
Reorganization is being structured as a tax-free reorganization for federal
income tax purposes.
Evergreen Core Bond is a separate series of Evergreen Select Fixed
Income Trust, an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The investment
objective of Evergreen Core Bond is to maximize total return through a
combination of current income and capital appreciation by investing primarily in
investment grade debt securities. The investment objective of Tattersall Bond is
to maximize total return, consisting of current income and capital appreciation,
consistent with the preservation of capital by investing primarily in investment
grade fixed income securities.
Shareholders of Tattersall Bond are also being asked to approve the
Interim Investment Advisory Agreement with Tattersall Advisory Group, Inc.
("TAG") (which on June 4, 1999 is scheduled to become a subsidiary of First
Union Corporation) (the "Interim Advisory Agreement"), with the same terms and
fees as the previous advisory agreement between Tattersall Bond and TAG. The
Interim Advisory Agreement will be in effect for the period of time between June
4, 1999, the date on which the merger of TAG with and into a wholly-owned
subsidiary of First Union Corporation is scheduled to be consummated, and the
date of the Reorganization (scheduled for on or about June 7, 1999).
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about Evergreen Core Bond that
shareholders of Tattersall Bond should know before voting on the Reorganization.
Certain relevant documents listed below, which have been filed with the
Securities and Exchange Commission ("SEC"), are incorporated in whole or in part
by reference. A Statement of Additional Information dated May 10, 1999, relating
to this Prospectus/Proxy Statement and the Reorganization which includes the
financial statements of Tattersall Bond dated March 31, 1998 and September 30,
1998 and the financial statements of Evergreen Core Bond dated September 30,
1998, has been filed with the SEC and is incorporated by reference in its
entirety into this Prospectus/Proxy Statement. A copy of such Statement of
Additional Information accompanies this Prospectus/Proxy Statement.
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The Prospectus of Evergreen Core Bond dated February 1, 1999 and its
Annual Report for the fiscal year ended September 30, 1998 are incorporated
herein by reference in their entirety, insofar as they relate to Evergreen Core
Bond only and not to any other fund described therein. The Prospectus, which
pertains to Institutional Service shares and Institutional shares, describes the
separate distribution and shareholder servicing arrangements applicable to the
classes. Shareholders of Tattersall Bond will receive, with this
Prospectus/Proxy Statement, a copy of the Prospectus of Evergreen Core Bond.
Additional information about Evergreen Core Bond is contained in its Statement
of Additional Information also dated February 1, 1999 which has been filed with
the SEC and is included in the Statement of Additional Information relating to
this Prospectus/Proxy Statement.
The two Prospectuses of Tattersall Bond which pertain (i) to Service
Group shares and (ii) to Institutional shares, each dated August 1, 1998, as
revised December 31, 1998, insofar as they relate to Tattersall Bond only, and
not to any other fund described therein, are incorporated herein in their
entirety by reference. Copies of the Prospectuses are available upon request and
without charge by writing to Tattersall Bond at the address listed on the cover
page of this Prospectus/Proxy Statement or by calling the Fund toll-free at
1-800-443-4249. The Statement of Additional Information dated the same date, the
Annual Report for the fiscal year ended March 31, 1998 and the Semi-Annual
Report for the six month period ended September 30, 1998 are included in the
Statement of Additional Information relating to this Prospectus/Proxy Statement
.
Included as Exhibits A and B to this Prospectus/Proxy Statement are a
copy of the Plan and the Interim Advisory Agreement, respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The shares offered by this Prospectus/Proxy Statement are not deposits or
obligations of any bank and are not insured or
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otherwise protected by the U.S. government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other government agency and
involve investment risk, including possible loss of capital.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
COMPARISON OF FEES AND EXPENSES...................................................................................6
SUMMARY .........................................................................................................9
Proposed Plan of Reorganization ..........10
Tax Consequences ............11
Investment Objectives and Policies of the Funds ......... 12
Comparative Performance Information for each Fund ............12
Management of the Funds ......... 14
Investment Advisers ............14
Administrators ............15
Portfolio Management ......... 16
Distribution of Shares ......... 16
Purchase and Redemption Procedures ......... 18
Exchange Privileges ......... 19
Dividend Policy ......... 19
Risks ......... 20
REASONS FOR THE REORGANIZATION................................................................................ 21
Agreement and Plan of Reorganization ......... 23
Federal Income Tax Consequences ......... 25
Pro-forma Capitalization ......... 27
Shareholder Information ......... 29
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES.............................................................. 30
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS............................................................... 32
Forms of Organization ......... 32
Capitalization ......... 33
Shareholder Liability ......... 33
Shareholder Meetings and Voting Rights ......... 34
Liquidation ......... 35
Liability and Indemnification of Trustees ......... 35
INFORMATION REGARDING THE INTERIM ADVISORY AGREEMENT.......................................................... 37
Introduction ......... 37
Comparison of the Interim Advisory Agreement
and the Previous Advisory Agreement ......... 38
Information About Tattersall Bond's Investment
Adviser ......... 39
ADDITIONAL INFORMATION........................................................................................ 39
VOTING INFORMATION CONCERNING THE MEETING..................................................................... 40
FINANCIAL STATEMENTS AND EXPERTS.............................................................................. 43
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LEGAL MATTERS................................................................................................. 43
OTHER BUSINESS................................................................................................ 43
APPENDIX A.................................................................................................... 44
EXHIBIT A.......................................................................................................A-1
EXHIBIT B.......................................................................................................B-1
EXHIBIT C.......................................................................................................C-1
</TABLE>
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COMPARISON OF FEES AND EXPENSES
The amounts for Institutional Service and Institutional shares of
Evergreen Core Bond set forth in the following tables and in the examples are
based on the estimated expenses of Evergreen Core Bond for the fiscal year
ending September 30, 1999. The amounts for Service Group and Institutional
shares of Tattersall Bond set forth in the following tables and in the examples
are based on the expenses for Tattersall Bond for the fiscal year ended March
31, 1998 as set forth in the current Prospectuses of Tattersall Bond. The pro
forma amounts for Institutional Service and Institutional shares of Evergreen
Core Bond are based on what the combined expenses would be for Evergreen Core
Bond for the fiscal period ending September 30, 1998.
The following tables show for Evergreen Core Bond, Tattersall Bond and
Evergreen Core Bond pro forma, assuming consummation of the Reorganization, the
shareholder transaction expenses and annual fund operating expenses associated
with an investment in the Institutional Service and Institutional shares of
Evergreen Core Bond and the Service Group and Institutional shares of Tattersall
Bond.
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<PAGE>
<TABLE>
<CAPTION>
Comparison of Institutional Service and Institutional
Shares of Evergreen Core Bond With Service Group and
Institutional Shares of Tattersall Bond
Evergreen Core Bond Tattersall Bond
Institutional Service
Service Institutional Group Institutional
<S> <C> <C> <C> <C>
Shareholder None None None None
Transaction
Expenses
Annual Fund
Operating Expenses
(as a percentage
of average daily
net assets)
Management 0.40% 0.40% 0.375% 0.375%
Fee
(1)
12b-1 Fees 0.25% None None
0.150%
Other Expenses 0.13% 0.13% 0.150%
----- ----- ----- -----
0.150%
Annual Fund 0.78% 0.53% 0.675% 0.525%
===== ===== ====== ======
Operating
Expenses
(2)
</TABLE>
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<TABLE>
<CAPTION>
Evergreen Core Bond Pro Forma
Institutional
Service Institutional
<S> <C> <C>
Shareholder Transaction Expenses None None
Annual Fund Operating Expenses (as
a percentage of average daily net
assets)
Management Fee 0.40%
0.40%
12b-1 Fees 0.25% None
Other Expenses 0.12% 0.12%
--------- ----------
0.77% 0.52%
Annual Fund Operating ====== =======
Expenses
Fee Waivers(3) 0.10% 0.10%
----- -----
Net Expenses 0.67% 0.42%
===== =====
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</TABLE>
(1) Including waivers, Evergreen Core Bond's Management Fee is 0.29% for
the Institutional Service and Institutional shares and Tattersall
Bond's Management Fee is 0.36% for the Service Group and Institutional
shares. These waivers may be modified or cancelled at any time.
(2) Including fee waivers, Annual Fund Operating Expenses for the
Institutional Service and Institutional shares of Evergreen Core Bond
would be 0.67% and 0.42%,
respectively, for the fiscal year ending September 30, 1999, and for
the Service Group and Institutional shares of Tattersall Bond
were 0.66% and 0.51%, respectively, for
the year ended March 31, 1998.
(3) In connection with the Reorganization, the investment adviser of
Evergreen Core Bond has contractually agreed for a period of at least
three years to limit the Fund's Annual Operating Expenses to 0.67% and
0.42% for Institutional Service and Institutional shares, respectively.
Examples. The following tables show for Evergreen Core Bond and
Tattersall Bond, and for Evergreen Core Bond pro forma, assuming consummation of
the Reorganization, examples of the cumulative effect of shareholder transaction
expenses and annual fund operating expenses indicated above on a $10,000
investment
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in each class of shares for the periods specified, assuming (i) a 5% annual
return and (ii) redemption at the end of such period.
<TABLE>
<CAPTION>
Evergreen Core Bond
Three Five Ten
One Year Years Years Years
<S> <C> <C> <C> <C>
Institutional $80 $249 $966
Service $433
Institutional $54 $170 $665
$296
</TABLE>
<TABLE>
<CAPTION>
Tattersall Bond
Three Five
One Year Years Years Ten Years
<S> <C> <C> <C> <C>
Service Group $69 $216 $841
$376
Institutional $54 $168 $659
$294
</TABLE>
<TABLE>
<CAPTION>
Evergreen Core Bond Pro Forma
Three Five Ten
One Year Years Years Years
<S> <C> <C> <C> <C>
Institutional $68 $214 $835
Service $373
Institutional $43 $135 $530
$235
</TABLE>
The purpose of the foregoing examples is to assist Tattersall Bond
shareholders in understanding the various costs and expenses that an investor in
Evergreen Core Bond as a result of the Reorganization would bear directly and
indirectly, as compared with the various direct and indirect expenses currently
borne by a shareholder in Tattersall Bond. These examples should
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not be considered a representation of past or future expenses or annual return.
Actual expenses may be greater or less than those shown.
SUMMARY
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Prospectus/Proxy Statement,
the Prospectus of Evergreen Core Bond dated February 1, 1999, the Prospectuses
of Tattersall Bond dated August 1, 1998, as revised December 31, 1998 (which are
incorporated herein by reference), the Plan and the Interim Advisory Agreement,
the forms of which are attached to this Prospectus/Proxy Statement as Exhibits A
and B, respectively.
Proposed Plan of Reorganization
The Plan provides for the transfer of all of the assets of Tattersall
Bond in exchange for shares of Evergreen Core Bond and the assumption by
Evergreen Core Bond of the identified liabilities of Tattersall Bond. The
identified liabilities consist only of those liabilities reflected on the Fund's
statement of assets and liabilities determined immediately preceding the
Reorganization. The Plan also calls for the distribution of shares of Evergreen
Core Bond to Tattersall Bond shareholders in liquidation of Tattersall Bond as
part of the Reorganization. As a result of the Reorganization, the holders of
Service Group and Institutional shares of Tattersall Bond will become the owners
of that number of full and fractional Institutional Service and Institutional
shares, respectively, of Evergreen Core Bond having an aggregate net asset value
equal to the aggregate net asset value of the shareholders' shares of Tattersall
Bond, as of the close of business immediately prior to the date that Tattersall
Bond's assets are exchanged for shares of Evergreen Core Bond. See "Reasons for
the Reorganization Agreement and Plan of Reorganization."
The Trustees of Williamsburg Investment Trust, including the Trustees
who are not "interested persons," as such term is defined in the 1940 Act (the
"Independent Trustees"), have concluded that the Reorganization would be in the
best interests of shareholders of Tattersall Bond, and that the interests of the
shareholders of Tattersall Bond will not be diluted as a result of the
transactions contemplated by the Reorganization. Accordingly, the Trustees have
submitted the Plan for the approval of Tattersall Bond's shareholders.
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<PAGE>
The Board of Trustees considered the Interim Advisory Agreement as part
of its overall approval of the Plan. In approving the Interim Advisory
Agreement, the Board of Trustees considered, among other things, that there were
no material differences between the terms of the Interim Advisory Agreement and
Tattersall Bond's existing investment advisory agreement.
THE BOARD OF TRUSTEES OF WILLIAMSBURG INVESTMENT TRUST RECOMMENDS
APPROVAL BY SHAREHOLDERS OF TATTERSALL BOND OF THE PLAN EFFECTING
THE REORGANIZATION AND THE INTERIM ADVISORY AGREEMENT.
The Trustees of Evergreen Select Fixed Income Trust have also approved the
Plan and, accordingly, Evergreen Core Bond's participation in the
Reorganization.
Approval of the Reorganization on the part of Tattersall Bond will
require the affirmative vote of a majority of Tattersall Bond's shares
outstanding and entitled to vote, with all classes voting together as a single
class at a Meeting at which a quorum of the Fund's shares is present. Fifty
percent of the outstanding shares, represented in person or by proxy, is
required to constitute a quorum at the Meeting. See "Voting Information
Concerning the Meeting."
It is anticipated that the merger of TAG with and into a wholly-owned
subsidiary of First Union Corporation ("First Union") (the "Merger") will be
consummated on June 4, 1999 and, as a result, by law the Merger will terminate
the investment advisory agreement between TAG and Tattersall Bond. Prior to
consummation of the Merger, shareholders of Tattersall Bond are being asked to
approve the Interim Advisory Agreement which will become effective on the date
of the closing of the Merger and continue through the date the Reorganization is
consummated. The Interim Advisory Agreement has the same terms and fees as the
previous investment advisory agreement between Tattersall Bond and TAG. The
Reorganization is scheduled to take place on or about June 7, 1999.
Approval of the Interim Advisory Agreement requires the affirmative
vote of (i) 67% or more of the shares of Tattersall Bond present in person or by
proxy at the Meeting, if holders of more than 50% of the shares of Tattersall
Bond outstanding on the record date are present, in person or by proxy, or (ii)
more than 50% of the outstanding shares of Tattersall Bond, whichever is less.
See "Voting Information Concerning the Meeting."
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<PAGE>
If the shareholders of Tattersall Bond do not vote to approve the
Reorganization, the Trustees will consider other possible courses of action in
the best interests of shareholders.
Tax Consequences
Prior to or at the completion of the Reorganization, Tattersall Bond
will have received an opinion of Piper & Marbury L.L.P. that the Reorganization
has been structured so that no gain or loss will be recognized by the Fund's
shareholders upon the receipt of shares of Evergreen Core Bond solely in
exchange for shares of the Fund. The aggregate adjusted basis of the shares of
Evergreen Core Bond received by each Fund shareholder will be the same as the
aggregate adjusted basis of the Fund shares surrendered in exchange therefor and
the holding period of the shares of Evergreen Core Bond received by each Fund
shareholder will include the holding period of the shares of the Fund
surrendered in exchange therefor, provided that the surrendered shares were held
as a capital asset in the hands of the Fund's shareholders on the date of the
exchange. In addition, no gain or loss will be recognized by the Fund on the
transfer of its assets to Evergreen Core Bond in exchange for the shares of
Evergreen Core Bond and the assumption of the identified liabilities and no gain
or loss will be recognized by the Fund on the distribution of the shares of
Evergreen Core Bond to its shareholders. Moreover, no gain or loss will be
recognized by Evergreen Core Bond upon the receipt of the assets of the Fund in
exchange for shares of Evergreen Core Bond and the assumption of the identified
liabilities, the adjusted basis of each asset of the Fund in the hands of
Evergreen Core Bond will be the same as the adjusted basis of such asset in the
hands of the Fund immediately prior to the Reorganization and the holding period
of each asset of the Fund in the hands of Evergreen Core Bond will include the
holding period of such asset in the hands of the Fund immediately prior to the
Reorganization.
Investment Objectives and Policies of the Funds
The investment objective of Evergreen Core Bond is to maximize total
return through a combination of current income and capital appreciation. Under
normal circumstances, the Fund invests at least 65% of its total assets in
investment grade debt securities, including securities issued or guaranteed by
the U.S. Treasury or by an agency or instrumentality of the U.S. government, and
corporate, mortgage- and asset-backed securities of U.S. and foreign issuers.
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<PAGE>
The investment objective of Tattersall Bond is to maximize total
return, consisting of current income and capital appreciation (realized and
unrealized), consistent with the preservation of capital. The Fund invests
primarily in U.S. government, investment grade corporate debt securities and
mortgage- and asset-backed securities. Upon completion of the Reorganization,
Evergreen Core Bond will be managed in accordance with Tattersall Bond's current
investment objective and policies. See "Comparison of Investment Objectives and
Policies" below.
Comparative Performance Information for each Fund
Discussions of the manner of calculation of total return are contained
in the respective Prospectuses and Statement of Additional Information of the
Funds. The following tables set forth the total return of the Service Group
shares of Tattersall Bond for the one year period ended September 30, 1998, of
the Institutional shares of Tattersall Bond for the one year and five year
periods ended September 30, 1998, of the Institutional Service and Institutional
shares of Evergreen Core Bond for the one year, five year and ten year periods
ended September 30, 1998 and for both Funds the period from inception through
September 30, 1998. The calculations of total return assume the reinvestment of
all dividends and capital gains distributions on the reinvestment date and the
deduction of all recurring expenses that were charged to shareholders' accounts.
<TABLE>
<CAPTION>
Average Annual Total Return (1)
1 Year 5 Years 10 Years From
Ended Ended Ended Inception To Inception
9/30/98 9/30/98 9/30/98 9/30/98 Date
------- -------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Tattersall
Bond
Service
Group Shares N/A N/A 9.13%
10.95% 10/1/97
Institutional
Shares 11.47% 7.42% N/A 8.39% 12/13/90
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<PAGE>
Evergreen
Core Bond(2)
Institutional
Service
Shares 5.80% 8.61% 8.06% 03/9/98
10.55%
Institutional
Shares 10.75% 6.05% 8.88% 8.33% 12/19/97
</TABLE>
- --------------
(1) Reflects waiver of advisory fees and reimbursements and/or waivers of
expenses. Without such reimbursements and/or waivers, the average
annual total returns during the periods would have been lower.
(2) Evergreen Core Bond performance information includes the
performance of the Fund's predecessor common trust fund for
periods before the Fund's registration statement became
effective on 11/21/97. Performance for the common trust
fund has been adjusted to include the effect of estimated
mutual fund class net expense ratios at the time the Fund
was converted to a mutual fund. If fee waivers and expense
reimbursements had not been calculated into the Evergreen
Core Bond class expense ratio, the total returns would be as
follows: Institutional - 1 year - 10.74%, 5 year - 5.96%,
10 year - 8.78% and since 2/28/86 -8.23%; Institutional
Service - 1 Year - 10.53%, 5 year - 5.71%, 10 year - 8.52%
and since 2/28/86 - 7.96%. Evergreen Core Bond has three
classes of shares, Institutional, Institutional Service and
Charitable. The Institutional share performance information
for the period from 11/24/97 through 12/9/97 (class
inception date) is based upon the historical performance of
the Charitable shares, the original shares offered. The
Institutional Service share performance information for the
period from 11/24/97 through 3/9/98 (class inception date)
is based upon the historical performance of the Charitable
shares and therefore does not reflect 12b-1 fees.
Performance for the Institutional Service shares for this
period would be lower had the 12b-1 fees been included.
Important information about Evergreen Core Bond is also contained in
management's discussion of Evergreen Core Bond's
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<PAGE>
performance attached hereto as Exhibit C. This information also appears in the
most recent Annual Report of Evergreen Core Bond.
Management of the Funds
The overall management of Evergreen Core Bond and of Tattersall Bond is
the responsibility of, and is supervised by, the Board of Trustees of Evergreen
Select Fixed Income Trust and the Board of Trustees of Williamsburg Investment
Trust, respectively.
Investment Advisers
The current investment adviser to Evergreen Core Bond is Evergreen
Investment Management ("EIM") (also known as First Capital Group or FCG), a
division of First Union National Bank ("FUNB"). EIM is located at 201 South
College Street, Charlotte, North Carolina 28288-0630. FUNB is a subsidiary of
First Union, the sixth largest bank holding company in the United States based
on total assets as of December 31, 1998. FUNB and its affiliates manage the
Evergreen family of mutual funds with assets of approximately $56.7 billion as
of March 31, 1999. Effective on the Merger, TAG will become the investment
adviser to Evergreen Core Bond.
EIM currently manages and, upon consummation of the Merger, TAG will
manage investments and supervise the daily business affairs of Evergreen Core
Bond subject to the authority of the Trustees. EIM is entitled to receive from
the Fund an annual fee equal to 0.40% of the Fund's average daily net assets.
EIM is currently waiving 0.10% of its management fee.
TAG serves as the investment adviser for Tattersall Bond. As investment
adviser, TAG has overall responsibility for portfolio management of the Fund.
For its services as investment adviser, TAG is entitled to receive a fee at an
annual rate of 0.375% of the Fund's average daily net assets. TAG's address is
6802 Paragon Place, Suite 200, Richmond, Virginia 23230.
Each investment adviser may, at its discretion, reduce or waive its fee
or reimburse a Fund for certain of its other expenses in order to reduce its
expense ratios. Each investment adviser may reduce or cease these voluntary
waivers and reimbursements at any time. However, effective upon consummation of
the Reorganization, Evergreen Core Bond Fund's annual operating expenses will be
limited for a period of at least three years to 0.67% and 0.42% for
Institutional Service and Institutional shares, respectively.
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<PAGE>
Year 2000 Risks. Like other investment companies, financial and
business organizations and individuals around the world, Evergreen Core Bond
could be adversely affected if the computer systems used by the Fund's
investment adviser and the Fund's other service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps to address the Year 2000 Problem with respect
to the computer systems that it uses and to obtain assurances that comparable
steps are being taken by the Fund's other major service providers. At this time,
however, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the Fund. In addition, issuers of securities in which the
Fund invests may be adversely affected by Year 2000 problems. Such problems
could negatively impact the value of the Fund's portfolio securities.
Administrators
Evergreen Investment Services, Inc. ("EIS") serves as administrator to
Evergreen Core Bond. As administrator, EIS provides facilities, equipment and
personnel to Evergreen Core Bond and is entitled to receive an administration
fee from the Fund based on the aggregate average daily net assets of all the
mutual funds advised by FUNB and its affiliates for which EIS serves as
administrator, calculated in accordance with the following schedule: 0.050% on
the first $7 billion, 0.035% on the next $3 billion, 0.030% on the next $5
billion, 0.20% on the next $10 billion, 0.015% on the next $5 billion and 0.010%
on assets in excess of $30 billion.
Countrywide Fund Services, Inc. ("Countrywide") acts as the
administrator for Tattersall Bond and provides the Fund with certain
administrative personnel and services including pricing, accounting, dividend
disbursing, shareholder servicing and transfer agent services. Countrywide is
entitled to receive a fee for such services at the annual rate of 0.075% of the
Fund's average daily net assets up to $200 million and 0.05% of such assets in
excess of $200 million with a minimum charge of $2,000 per month. Countrywide
will continue, during the term of the Interim Advisory Agreement, as Tattersall
Bond's administrator for the same compensation as currently received.
Portfolio Management
Tattersall Bond is, and upon consummation of the Merger, Evergreen Core
Bond will be, managed on a day-to-day basis by a committee composed of TAG's
fixed income portfolio management
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<PAGE>
professionals, with each portfolio professional responsible for designated
specific sectors of the fixed income market.
Distribution of Shares
Evergreen Distributor, Inc. ("EDI"), an affiliate of BISYS Fund Services,
acts as underwriter of Evergreen Core Bond's shares. EDI distributes the Fund's
shares directly or through broker-dealers, banks (including FUNB), or other
financial intermediaries. Evergreen Core Bond offers three classes of shares:
Institutional Service, Institutional and Charitable. Each class has separate
distribution arrangements. (See "Distribution-Related and Shareholder
Servicing-Related Expenses" below.) No class bears the distribution expenses
relating to the shares of any other class.
In the proposed Reorganization, Institutional shareholders of
Tattersall Bond will receive Institutional shares of Evergreen Core Bond, and
Service Group shareholders of Tattersall Bond will receive Institutional Service
shares of Evergreen Core Bond. The Institutional and Institutional Service
shares of Evergreen Core Bond have similar arrangements with respect to the
imposition of Rule 12b-1 distribution and service fees as the Service Group and
Institutional shares of Tattersall Bond. Because the Reorganization will be
effected at net asset value without the imposition of a sales charge, Evergreen
Core Bond shares acquired by shareholders of Tattersall Bond pursuant to the
proposed Reorganization will not be subject to any initial sales charge or
contingent deferred sales charge as a result of the Reorganization.
The following is a summary description of charges and fees for the
Institutional and Institutional Service shares of Evergreen Core Bond which will
be received by Tattersall Bond shareholders in the Reorganization. More detailed
descriptions of the distribution arrangements applicable to the classes of
shares are contained in the respective Evergreen Core Bond Prospectus and the
Tattersall Bond Prospectuses and in each Fund's Statement of Additional
Information.
Institutional Shares. Institutional shares are sold at net asset value
without any initial or deferred sales charge and are not subject to
distribution-related or shareholder servicing- related fees. Institutional
shares are only available to institutional investors. Tattersall Bond
shareholders who receive Evergreen Core Bond Institutional shares in the
Reorganization and who wish to make subsequent purchases of
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<PAGE>
Evergreen Core Bond shares will be able to purchase Institutional shares.
Institutional Service Shares. Institutional Service shares are sold at
net asset value without any initial sales charge or deferred sales charge and,
as indicated below, are subject to distribution-related or shareholder
servicing-related fees.
Additional information regarding the classes of shares of each Fund is
included in its respective Prospectuses and Statement of Additional Information.
Distribution-Related and Shareholder Servicing-Related Expenses.
Evergreen Core Bond has adopted a Rule 12b-1 plan with respect to its
Institutional Service shares under which the Class may pay for personal services
rendered to shareholders and/or maintenance of accounts at an annual rate which
may not exceed 0.25% of average daily net assets attributable to the Class.
Tattersall Bond has adopted a Rule 12b-1 plan with respect to its
Service Group shares under which the Class may pay for distribution-related
expenses at an annual rate of up to 0.15% of average daily net assets
attributable to the Class.
Neither Evergreen Core Bond with respect to its Institutional shares
nor Tattersall Bond with respect to its Institutional shares has adopted a Rule
12b-1 plan. A Rule 12b-1 plan can only be adopted with shareholder approval.
Consistent with the requirements of Rule 12b-1 and the applicable rules
of the National Association of Securities Dealers, Inc., following the
Reorganization Evergreen Core Bond may make distribution-related and shareholder
servicing-related payments with respect to Tattersall Bond shares sold prior to
the
Reorganization.
Additional information regarding the Rule 12b-1 plans adopted by each
Fund is included in its respective Prospectuses and Statement of Additional
Information.
Purchase and Redemption Procedures
Information concerning applicable sales charges and
distribution-related and shareholder servicing-related fees is provided above.
Investments in the Funds are not insured. The minimum initial purchase
requirement for Evergreen Core Bond is $1,000,000. The minimum initial purchase
requirement for Tattersall Bond is $500,000. There is no minimum for subsequent
-24-
<PAGE>
purchases of shares of Evergreen Core Bond. The minimum for subsequent purchases
of Tattersall Bond is $1,000. Each Fund provides for telephone, mail or wire
redemption of shares at net asset value as next determined after receipt of a
redemption request on each day the New York Stock Exchange ("NYSE") is open for
trading. Additional information concerning purchases and redemptions of shares,
including how each Fund's net asset value is determined, is contained in the
respective Prospectuses for each Fund. Tattersall Bond may involuntarily redeem
shareholders' accounts that have less than $100,000 of invested funds in Service
Group or Institutional shares. All funds invested in each Fund are invested in
full and fractional shares. The Funds reserve the right to reject any purchase
order.
Exchange Privileges
Tattersall Bond currently permits holders of Service Group and
Institutional shares to exchange such shares for Service Group and Institutional
shares, respectively, of The Tattersall Short Term Bond Fund. Holders of shares
of a class of Evergreen Core Bond generally may exchange their shares for shares
of the same class of any other Evergreen Select fund. Tattersall Bond
shareholders will be receiving Institutional and Institutional Service shares of
Evergreen Core Bond in the Reorganization and, accordingly, with respect to
shares of Evergreen Core Bond received by Tattersall Bond shareholders in the
Reorganization, the exchange privilege is limited to the Institutional and
Institutional Service shares, as applicable, of other Evergreen Select funds.
Evergreen Core Bond limits exchanges to five per calendar year and three per
calendar quarter. No sales charge is imposed on an exchange. An exchange which
represents an initial investment in another Evergreen Select fund must amount to
at least $1,000,000. The current exchange privileges, and the requirements and
limitations attendant thereto, are described in each Fund's respective
Prospectuses and Statement of Additional Information.
Dividend Policy
Evergreen Core Bond declares dividends from its net investment income
daily and distributes its income dividends monthly. Tattersall Bond declares and
pays distributions from net investment income quarterly. Distributions of any
net realized gains of each Fund will be made at least annually. Shareholders
begin to earn dividends on the first business day after shares are purchased
unless shares were not paid for, in which case dividends are not earned until
the next business day after payment is received. Dividends and distributions are
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<PAGE>
reinvested in additional shares of the same class of the respective Fund, or
paid in cash as a shareholder has elected. See the respective Prospectuses of
each Fund for further information concerning dividends and distributions.
After the Reorganization, shareholders of Tattersall Bond who have
elected to have their dividends and/or distributions reinvested will have
dividends and/or distributions received from Evergreen Core Bond reinvested in
shares of Evergreen Core Bond. Shareholders of Tattersall Bond who have elected
to receive dividends and/or distributions in cash will receive dividends and/or
distributions from Evergreen Core Bond in cash after the Reorganization,
although they may, after the Reorganization, elect to have such dividends and/or
distributions reinvested in additional shares of Evergreen Core Bond.
Each of Evergreen Core Bond and Tattersall Bond has qualified and
intends to continue to qualify, to be treated as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the "Code"). While so
qualified, so long as each Fund distributes all of its net investment company
taxable income and any net realized gains to shareholders, it is expected that a
Fund will not be required to pay any federal income taxes on the amounts so
distributed. A 4% nondeductible excise tax will be imposed on amounts not
distributed if a Fund does not meet certain distribution requirements by the end
of each calendar year. Each Fund anticipates meeting such distribution
requirements.
Risks
Many of the risks involved in investing in each Fund's shares are
similar. For a discussion of each Fund's objectives and policies, see
"Comparison of Investment Objectives and Policies." There is no assurance that
investment performances will be positive and that the Funds will meet their
investment objectives.
Each Fund invests in debt securities. The main risks of investing in
debt securities are:
Interest Rate Risk: The risk that a fixed income security's
price will fall when interest rates rise, and vice versa. Debt
securities have varying levels of sensitivity to interest
rates. Longer-term bonds are generally more sensitive to
changes in interest rates than short-term bonds.
-26-
<PAGE>
o Credit Risk: The chance that the issuer will have its credit
rating downgraded or will default (fail to make scheduled
interest and principal payments), potentially reducing the
Fund's income and/or share price.
Neither Fund is required to sell or otherwise dispose of any security
that loses its rating or has its rating reduced after the Fund has purchased it.
Each Fund may purchase zero coupon bonds. Such investments may
experience greater fluctuations in value due to changes in interest rates than
debt obligations that pay interest currently. Each Fund is also required by tax
laws to accrue interest income on such investments (even though they do not pay
interest currently) and to distribute such amounts at least annually to
shareholders. Thus, each Fund could be required at times to liquidate
investments in order to fulfill its distribution requirements and may not be
able to purchase additional income producing securities with cash used to make
such distributions, and its current income ultimately may be reduced as a
result.
Each Fund may invest in mortgage-backed and asset-backed securities.
Early repayment of the mortgages or other collateral underlying these securities
may expose a Fund to a lower rate of return when it reinvests the principal. The
rate of prepayments will affect the price and volatility of the mortgage-backed
security and may have the effect of shortening or extending the effective
maturity beyond what the Fund anticipated at the time of purchase. In addition,
asset-backed securities present certain risks. For instance, in the case of
credit card receivables, these securities may not have the benefit of any
security interest in the related collateral. 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 automobile receivables permit the Servicer to
retain possession of the underlying obligations. If the servicer 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 related automobile
receivables. 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 the automobile receivables may not have a proper security
interest in all the obligations backing such receivables. Therefore, there is
the possibility that recoveries on repossessed collateral may
-27-
<PAGE>
not, in some cases, be available to support payments on these
securities.
REASONS FOR THE REORGANIZATION
On February 19, 1999 First Union entered into an Agreement and Plan of
Merger with TAG, which provides, among other things, for the Merger of TAG with
and into a wholly-owned subsidiary of First Union. The Merger is expected to be
consummated on June 4, 1999. As a result of the Merger it is expected that TAG,
as a subsidiary of First Union, will continue to provide investment advisory
services to Tattersall Bond and will provide such services to Evergreen Core
Bond and other clients of FUNB and its affiliates.
Section 15(f) of the 1940 Act provides that when a change in the
control of an investment adviser occurs, the investment adviser or any of its
affiliated persons may receive any amount or benefit in connection therewith
under certain conditions. One condition is that for three years thereafter, at
least 75% of the board of directors of a surviving investment company are not
"interested persons" of the company's investment adviser or of the investment
adviser of the terminating investment company. The Board of Trustees of
Evergreen Select Fixed Income Trust complies with this condition.
Another condition is that no "unfair burden" is imposed on the
investment company as a result of the understandings applicable thereto. The
term "unfair burden" is considered under the 1940 Act to include any arrangement
during the two-year period after the transaction whereby the investment adviser
(or predecessor or successor adviser), or any "interested person" of any such
adviser, receives or is entitled to receive any compensation, directly or
indirectly, from the investment company or its security holders (other than fees
for bona fide investment advisory or other services) or from any person in
connection with the purchase or sale of securities or other property to, from or
on behalf of the investment company (other than fees for bona fide principal
underwriting services). FUNB and TAG advised the Board of Trustees of
Williamsburg Investment Trust that they were not aware of any circumstances
relating to the Merger or the Reorganization that might result in the imposition
of an "unfair burden" on Tattersall Bond.
The Board of Trustees of Williamsburg Investment Trust considered the
Reorganization at meetings held on March 30, 1999 and April 28, 1999, at which
the Trustees reviewed and discussed materials supplied by FUNB and TAG, and met
with
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<PAGE>
representatives of FUNB. The Trustees retained special counsel to assist them in
their deliberations. The Board of Trustees gave final approval to the
Reorganization at the April 28, 1999 meeting.
The Board of Trustees, including the Independent Trustees, determined
that the Reorganization is in the best interests of shareholders of Tattersall
Bond and that the interests of existing shareholders of Tattersall Bond will not
be diluted as a result of the transaction.
In approving the Reorganization and the Plan, the Board of Trustees of
Williamsburg Investment Trust considered the following factors, among others:
(i) the Agreement and Plan of Merger between TAG and First Union and the
recommendations of TAG and FUNB regarding the Reorganization; (ii) the fact that
shareholder interests will not be diluted as a result of the Reorganization;
(iii) the expected federal income tax consequences of the Reorganization; (iv)
the similarity and compatibility of the Funds' investment objectives and
policies; (v) the fact that TAG is expected to be the investment adviser of
Evergreen Core Bond and that, upon completion of the Reorganization, Evergreen
Core Bond will be managed in accordance with Tattersall Bond's current
investment objective and policies with the result that Tattersall Bond will be
the tax and accounting survivor of the Reorganization; (vi) the investment
advisory and other fees and expenses of Evergreen Core Bond and Tattersall Bond;
(vii) the potential economies of scale associated with larger mutual funds and
the operational efficiencies that may be achieved through the combination of
Evergreen Core Bond and Tattersall Bond; (viii) the investment experience,
expertise and resources of FUNB; (ix) the service and distribution resources
available to the Evergreen funds and the broad array of investment alternatives
available to shareholders of the Evergreen funds; (x) the personnel and
financial resources of First Union and its affiliates; and (xi) the fact that
FUNB will bear the expenses incurred by Tattersall Bond in connection with the
Reorganization.
After consideration of the factors listed above, together with other
factors and information considered to be relevant, the Board of Trustees of
Williamsburg Investment Trust unanimously approved the Plan and directed that
the Plan be submitted to the
shareholders of Tattersall Bond for approval.
THE TRUSTEES OF WILLIAMSBURG INVESTMENT TRUST
RECOMMEND THAT THE SHAREHOLDERS OF TATTERSALL BOND
APPROVE THE PROPOSED REORGANIZATION.
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<PAGE>
The Trustees of Evergreen Select Fixed Income Trust also concluded at a
meeting on March 12, 1999 that the proposed Reorganization would be in the best
interests of shareholders of Evergreen Core Bond and that the interests of the
shareholders of Evergreen Core Bond would not be diluted as a result of the
transactions contemplated by the Reorganization.
Agreement and Plan of Reorganization
The following summary is qualified in its entirety by reference to the
Plan (Exhibit A hereto).
The Plan provides that Evergreen Core Bond will acquire all of the
assets of Tattersall Bond in exchange for shares of Evergreen Core Bond and the
assumption by Evergreen Core Bond of the identified liabilities of Tattersall
Bond on or about June 7, 1999 or such other date as may be agreed upon by the
parties (the "Closing Date"). Prior to the Closing Date, Tattersall Bond will
endeavor to discharge all of its known liabilities and obligations. Evergreen
Core Bond will not assume any liabilities or obligations of Tattersall Bond
other than those reflected in an unaudited statement of assets and liabilities
of Tattersall Bond prepared as of the close of regular trading on the NYSE,
currently 4:00 p.m. Eastern time, on the business day immediately prior to the
Closing Date. Shareholders of Tattersall Bond will receive the number of full
and fractional shares of Evergreen Core Bond having an aggregate net asset value
equal to the aggregate net asset value of their shares of Tattersall Bond. Such
computations will take place as of the close of regular trading on the NYSE on
the business day immediately prior to the Closing Date. The net asset value per
share of each class will be determined by dividing assets, less liabilities, in
each case attributable to the respective class, by the total number of
outstanding shares.
State Street Bank and Trust Company, the custodian for Evergreen Core
Bond, will compute the value of Tattersall Bond's portfolio securities. The
method of valuation employed will be consistent with the procedures set forth in
the Prospectus and Statement of Additional Information of Evergreen Core Bond,
Rule 22c-1 under the 1940 Act, and with the interpretations of such Rule by the
SEC's Division of Investment Management.
At or prior to the Closing Date, Tattersall Bond will have declared a
dividend or dividends and distribution or distributions which, together with all
previous dividends and distributions, shall have the effect of distributing to
the
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<PAGE>
Fund's shareholders (in shares of the Fund, or in cash, as the shareholder has
previously elected) all of the Fund's net investment company taxable income for
the taxable period ending on the Closing Date (computed without regard to any
deduction for dividends paid) and all of its net capital gains realized in all
taxable periods ending on the Closing Date (after reductions for any capital
loss carryforward).
As soon after the Closing Date as conveniently practicable, Tattersall
Bond will liquidate and distribute pro rata to shareholders of record as of the
close of business on the Closing Date the full and fractional shares of
Evergreen Core Bond received by Tattersall Bond. Such liquidation and
distribution will be accomplished by the establishment of accounts in the names
of the Fund's shareholders on Evergreen Core Bond's share records of its
transfer agent. Each account will represent the respective pro rata number of
full and fractional shares of Evergreen Core Bond due to the Fund's
shareholders. All issued and outstanding shares of Tattersall Bond, including
those represented by certificates, will be canceled. The shares of Evergreen
Core Bond to be issued will have no preemptive or conversion rights. After these
distributions and the winding up of its affairs, Tattersall Bond will be
terminated.
The consummation of the Reorganization is subject to the conditions set
forth in the Plan, including approval by Tattersall Bond's shareholders,
accuracy of various representations and warranties and receipt of opinions of
counsel, including opinions with respect to those matters referred to in
"Federal Income Tax Consequences" below. Notwithstanding approval of Tattersall
Bond's shareholders, the Plan may be terminated (a) by the mutual agreement of
Tattersall Bond and Evergreen Core Bond; or (b) at or prior to the Closing Date
by either party (i) because of a breach by the other party of any
representation, warranty, or agreement contained therein to be performed at or
prior to the Closing Date if not cured within 30 days, or (ii) because a
condition to the obligation of the terminating party has not been met and it
reasonably appears that it cannot be met.
The expenses of Tattersall Bond in connection with the Reorganization
(including the cost of any proxy soliciting agent) will be borne by FUNB whether
or not the Reorganization is consummated. No portion of such expenses will be
borne directly or indirectly by Tattersall Bond or its shareholders.
If the Reorganization is not approved by shareholders of Tattersall Bond,
the Board of Trustees of Williamsburg Investment
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<PAGE>
Trust will consider other possible courses of action in the best interests of
shareholders.
Federal Income Tax Consequences
The Reorganization is intended to qualify for federal income tax
purposes as a tax-free reorganization under section 368(a) of the Code. As a
condition to the closing of the Reorganization, Tattersall Bond will receive an
opinion of Piper & Marbury L.L.P. to the effect that, on the basis of the
existing provisions of the Code, U.S. Treasury regulations issued thereunder,
current administrative rules, pronouncements and court decisions, for federal
income tax purposes, upon consummation of the Reorganization:
(1) The transfer of all of the assets of Tattersall Bond solely in
exchange for shares of Evergreen Core Bond and the assumption by Evergreen Core
Bond of the identified liabilities of Tattersall Bond, followed by the
distribution of Evergreen Core Bond's shares by Tattersall Bond in dissolution
and liquidation of Tattersall Bond, will constitute a "reorganization" within
the meaning of section 368(a)(1)(C) of the Code, and Evergreen Core Bond and
Tattersall Bond will each be a "party to a reorganization" within the meaning of
section 368(b) of the Code;
(2) No gain or loss will be recognized by Tattersall Bond on the
transfer of all of its assets to Evergreen Core Bond solely in exchange for
Evergreen Core Bond's shares and the assumption by Evergreen Core Bond of the
identified liabilities of Tattersall Bond or upon the distribution of Evergreen
Core Bond's shares to Tattersall Bond's shareholders in exchange for their
shares of Tattersall Bond;
(3) The tax basis of the assets transferred will be the same to
Evergreen Core Bond as the tax basis of such assets to Tattersall Bond
immediately prior to the Reorganization, and the holding period of such assets
in the hands of Evergreen Core Bond will include the period during which the
assets were held by Tattersall Bond;
(4) No gain or loss will be recognized by Evergreen Core Bond upon the
receipt of the assets from Tattersall Bond solely in exchange for the shares of
Evergreen Core Bond and the assumption by Evergreen Core Bond of the identified
liabilities of Tattersall Bond;
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(5) No gain or loss will be recognized by Tattersall Bond's
shareholders upon the issuance of the shares of Evergreen Core Bond to them,
provided they receive solely such shares (including fractional shares) in
exchange for their shares of Tattersall Bond; and
(6) The aggregate tax basis of the shares of Evergreen Core Bond,
including any fractional shares, received by each of the shareholders of
Tattersall Bond pursuant to the Reorganization will be the same as the aggregate
tax basis of the shares of Tattersall Bond held by such shareholder immediately
prior to the Reorganization, and the holding period of the shares of Evergreen
Core Bond, including fractional shares, received by each such shareholder will
include the period during which the shares of Tattersall Bond exchanged therefor
were held by such shareholder (provided that the shares of Tattersall Bond were
held as a capital asset on the date of the Reorganization).
Opinions of counsel are not binding upon the Internal Revenue Service
or the courts. If the Reorganization is consummated but does not qualify as a
tax-free reorganization under the Code, a shareholder of Tattersall Bond would
recognize a taxable gain or loss equal to the difference between his or her tax
basis in his or her Fund shares and the fair market value of Evergreen Core Bond
shares he or she received. Shareholders of Tattersall Bond should consult their
tax advisers regarding the effect, if any, of the proposed Reorganization in
light of their individual circumstances. Since the foregoing discussion relates
only to the federal income tax consequences of the Reorganization, shareholders
of Tattersall Bond should also consult their tax advisers as to the state and
local tax consequences, if any, of the Reorganization.
Capital loss carryforwards of Tattersall Bond will be available to
Evergreen Core Bond to offset capital gains recognized after the Reorganization,
subject to limitations imposed by the Code. These limitations provide generally
that the amount of loss carryforward which may be used in any year following the
closing is an amount equal to the value of all of the outstanding stock of
Tattersall Bond immediately prior to the Reorganization, multiplied by a
long-term tax-exempt bond rate determined monthly by the Internal Revenue
Service. The rate for April, 1999 was 4.78%. A capital loss carryforward may
generally be used without any limit to offset gains recognized during the five
year period beginning on the date of the Reorganization on sale of assets
transferred by Tattersall Bond to Evergreen Core Bond pursuant to the
Reorganization, to the extent of the excess
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<PAGE>
of the value of any such asset on the Closing Date over its tax
basis.
It is not anticipated that the securities of Tattersall Bond will be
sold in significant amounts in order to comply with the policies and investment
practices of Evergreen Core Bond.
Pro-forma Capitalization
The following table sets forth the capitalization of Evergreen Core
Bond and Tattersall Bond as of September 30, 1998, and the capitalization of
Evergreen Core Bond on a pro forma basis as of that date, giving effect to the
proposed acquisition of assets at net asset value. The pro forma data reflects
an exchange ratio of approximately 1.0172414 and 1.0172414 for Institutional and
Institutional Service shares, respectively, of Evergreen Core Bond issued for
each Institutional and Service Group share, respectively, of Tattersall Bond.
<TABLE>
<CAPTION>
Capitalization of Tattersall Bond, Evergreen Core Bond
and Evergreen Core Bond (Pro Forma)
Evergreen Core
Bond (After
Tattersall Evergreen Core Reorgani-
Bond Bond zation)
---------- --------- ---------
<S> <C> <C> <C>
Net Assets
Institutional...................... $114,444,529 $125,069,522 $239,514,051
Institutional
Service............................ N/A $ 285,979 $3,145,754
Charitable . . . N/A $471,420,929 $471,420,929
Service Group . . $2,859,775 N/A N/A
---------- ------------ -------------
Total Net Assets $ 117,304,304 $596,776,430 $714,080,734
Net Asset Value Per
Share
Institutional . . $11.21 $11.02 $11.02
Institutional
Service . . . . N/A $11.02 $11.02
Charitable . . . N/A $11.02 $11.02
Service Group . . $11.21 N/A N/A
Shares Outstanding
Institutional . . 10,211,169 11,345,900 21,733,124
Institutional
Service . . . . N/A 25,943 285,529
Charitable . . . N/A 42,765,453 42,765,453
Service Group . . 255,186 N/A N/A
---------- ------------ ------------
All Classes . . . . 10,466,355 54,137,296 64,784,106
</TABLE>
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<PAGE>
The table set forth above should not be relied upon to reflect the
number of shares to be received in the Reorganization; the actual number of
shares to be received will depend upon the net asset value and number of shares
outstanding of each Fund at the time of the Reorganization.
Shareholder Information
As of April 30, 1999 (the "Record Date"), the following number of each
Class of shares of beneficial interest of Tattersall Bond was outstanding:
Class of Shares
- ---------------
Institutional ................................. 10,166,013
Service Group .................................
254,501
----------
All Classes.................................... 10,420,514
As of April 5, 1999, the officers and Trustees of Williamsburg
Investment Trust beneficially owned as a group less than 1% of the outstanding
shares of Tattersall Bond. To Williamsburg Investment Trust's knowledge, the
following persons owned beneficially or of record more than 5% of Tattersall
Bond's total outstanding shares as of March 31, 1999:
<TABLE>
<CAPTION>
Percentage
of Shares of Percentage of
Class Before Shares of Class
No. of Reorgani- After Reorgani-
Name and Address Class Shares zation zation
- ---------------- ----- ------ --------- ---------------
<S> <C> <C> <C> <C>
Halifax Regional Institutional 1,079,983 10.5747% 5.0550%
Hospital
Attn: Stewart Nelson
2204 Wilborn Avenue
South Boston, VA 24592
Portland Museum of Art Institutional 546,788 5.3539% 2.5593%
Attn: Business Manager
Seven Congress Square
Portland, ME 04101
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<PAGE>
Rockingham Health Institutional 1,546,893 15.1465% 7.2404%
Care, Inc.
Attn: Susan Holsinger
235 Cantrell Ave.
Harrisonburg, VA 22801
Rockingham Memorial Institutional 935,456 9.1595% 4.3785%
Hospital
Retirement Plan
Attn: Susan Holsinger
235 Cantrell Ave.
Harrisonburg, VA 22801
Calvert Memorial Institutional 878,638 8.6032% 4.1126%
Hospital
Attn: Janice Hubbard
V.P. - of Finance
100 Hospital Road
Prince Frederick, MD
20678
Virginia International Institutional 900,586 8.8181% 4.2153%
Terminals Inc. Pension
Plan
P.O. Box 1387
Norfolk, VA 23501
The Virginia United Service Group 202,228 80.0166% 72.0469%
Methodist Conference
Church Fixed Income
Acct.
P.O. Box 11367
Richmond, VA 23230-
1367
The Virginia United Service Group 50,504 19.9833% 17.9929%
Methodist Conference
Agencies & Affiliated
Organizations
P.O. Box 11367
Richmond, VA 23230-
1367
</TABLE>
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion is based upon and qualified in its entirety by
the descriptions of the respective investment objectives, policies and
restrictions set forth in the respective
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<PAGE>
Prospectuses and Statement of Additional Information of the Funds. The
investment objective, policies and restrictions of Evergreen Core Bond can be
found in the Prospectus of Evergreen Core Bond under the caption "Fund
Summaries." The investment objective, policies and restrictions of Tattersall
Bond can be found in the respective Prospectuses of the Fund under the caption
"Investment Objectives, Investment Policies and Risk Considerations." The
investment objective of each Fund is non- fundamental and can be changed by the
Board of Trustees without shareholder approval.
Evergreen Core Bond. The investment objective of Evergreen Core Bond is
to maximize total return through a combination of current income and capital
appreciation. Under the Fund's current investment policies, 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 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. Under its existing policies, while the Fund
does not intend to invest a significant portion of its assets in below
investment grade securities ("junk bonds"), up to 35% of the Fund's total assets
may be invested in these securities. The Fund currently expects to maintain a
dollar-weighted average maturity of seven to ten years and limit portfolio
duration to a three year minimum and a six year maximum. Investment grade means
the security is rated in one of the highest four rating categories by a
nationally recognized statistical rating organization.
The Fund may invest in derivative instruments including options and
futures in order to hedge its portfolio against changes in interest rates and to
adjust the portfolio's duration. In addition, to the extent the Fund invests in
foreign securities, the Fund may engage in foreign currency transactions
including foreign currency exchange contracts and the purchase and sale of
options on foreign currencies. There can be no assurance that these techniques
will be successful and the Fund may incur losses.
Upon completion of the Reorganization, it is anticipated that Evergreen
Core Bond's investment policies will be changed to the investment policies
employed by TAG in managing Tattersall Bond.
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<PAGE>
Tattersall Bond. The investment objective of Tattersall Bond is to
maximize total return, consisting of current income and capital appreciation
(realized and unrealized), through active management of a portfolio of
investment grade fixed income securities. Tattersall Bond invests in (1)
investment grade debt securities, (2) U.S. government securities, (3) mortgage
pass-through certificates, (4) collateralized mortgage obligations, (5)
mortgage-backed securities, and (6) asset-backed securities such as automobile
loans and credit card receivables. Tattersall Bond does not invest in foreign
securities, junk bonds or derivative instruments.
The investment adviser's philosophy in the management of fixed income
securities utilizes a disciplined balance between sector selection and moderate
duration shifts to maximize total return. The investment adviser believes that
for most fixed income securities "duration" provides a better measure of
interest rate sensitivity than "maturity." Whereas maturity takes into account
only the final principal payments to determine the risk of a particular bond,
duration weights all potential cash flows (principal, interest and reinvestment
income) on an expected present value basis, to determine the "effective life" of
the security. The investment adviser intends to limit the portfolio duration of
the Fund to a 2 year minimum and a 6 year maximum.
As of December 31, 1998 the average weighted maturity of Evergreen Core
Bond's portfolio and Tattersall Bond's portfolio was 8.7 years and 13.6 years,
respectively. The duration of the Evergreen Core Bond's portfolio and Tattersall
Bond's portfolio
was 5.1 years and 4.6 years, respectively.
Each Fund may also invest in money market securities for defensive and
other investment purposes.
The characteristics of each investment policy and the associated risks
are described in each Fund's respective Prospectuses and Statement of Additional
Information. The Funds have other investment policies and restrictions which are
also set forth in the Prospectuses and Statement of Additional Information of
each Fund.
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<PAGE>
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
Forms of Organization
Evergreen Select Fixed Income Trust and Williamsburg Investment Trust
are open-end management investment companies registered with the SEC under the
1940 Act, which continuously offer shares to the public. Evergreen Select Fixed
Income Trust is organized as a Delaware business trust and is governed by its
Declaration of Trust, By-Laws and a Board of Trustees. Williamsburg Investment
Trust is organized as a Massachusetts business trust and is governed by its
Agreement and Declaration of Trust, By-Laws and a Board of Trustees. Each entity
is also governed by applicable Delaware or Massachusetts and federal law.
Evergreen Core Bond is a series of Evergreen Select Fixed Income Trust and
Tattersall Bond is a series of Williamsburg Investment Trust.
Capitalization
The beneficial interests in Evergreen Core Bond are represented by an
unlimited number of transferable shares of beneficial interest, $.001 par value
per share. The beneficial interests in Tattersall Bond are represented by an
unlimited number of transferable shares of beneficial interest, no par value per
share. Evergreen Select Fixed Income Trust's Agreement and Declaration of Trust
and Williamsburg Investment Trust's Agreement and Declaration of Trust permit
the respective Trustees to allocate shares into an unlimited number of series,
and classes thereof, with rights determined by the respective Trustees, all
without shareholder approval. Fractional shares may be issued by either Fund.
Each Fund's shares represent equal proportionate interests in the assets
belonging to the Funds. Shareholders of each Fund are entitled to receive
dividends and other amounts as determined by the respective Trustees.
Shareholders of each Fund vote separately, by class, as to matters, such as
approval of or amendments to Rule 12b-1 distribution plans, that affect only
their particular class and by Fund as to matters, such as approval of or
amendments to investment advisory agreements or proposed reorganizations, that
affect only their particular Fund.
Shareholder Liability
Under Delaware law, shareholders of a Delaware business trust are
entitled to the same limitation of personal liability extended to stockholders
of Delaware corporations. No similar statutory or other authority limiting
business trust shareholder
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<PAGE>
liability exists in any other state. As a result, to the extent that Evergreen
Select Fixed Income Trust or a shareholder is subject to the jurisdiction of
courts in those states, it is possible that a court may not apply Delaware law,
and may thereby subject shareholders of Evergreen Select Fixed Income Trust to
liability. To guard against this risk, the Declaration of Trust of Evergreen
Select Fixed Income Trust (a) provides that any written obligation of the Trust
may contain a statement that such obligation may only be enforced against the
assets of the Trust or the particular series in question and the obligation is
not binding upon the shareholders of the Trust; however, the omission of such a
disclaimer will not operate to create personal liability for any shareholder;
and (b) provides for indemnification out of Trust property of any shareholder
held personally liable for the obligations of the Trust. Accordingly, the risk
of a shareholder of Evergreen Select Fixed Income Trust incurring financial loss
beyond that shareholder's investment because of shareholder liability is limited
to circumstances in which: (i) the court refuses to apply Delaware law; (ii) no
contractual limitation of liability was in effect; and (iii) the Trust itself is
unable to meet its obligations. In light of Delaware law, the nature of the
Trust's business, and the nature of its assets, the risk of personal liability
to a shareholder of Evergreen Select Fixed Income Trust is remote.
Under Massachusetts law, shareholders of a business trust could, under
certain circumstances, be held personally liable for the obligations of the
business trust. However, the Agreement and Declaration of Trust under which
Tattersall Bond was established disclaims shareholder liability for acts or
obligations of the series and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or executed by the Fund
or the Trustees. The Agreement and Declaration of Trust provides for
indemnification out of the series property for all losses and expenses of any
shareholder held personally liable for the obligations of the series. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is considered remote since it is limited to circumstances in which a
disclaimer is inoperative and the Fund or Williamsburg Investment Trust itself
would be unable to meet its obligations. A substantial number of mutual funds in
the United States are organized as Massachusetts business trusts.
Shareholder Meetings and Voting Rights
Neither Evergreen Select Fixed Income Trust on behalf of Evergreen Core
Bond nor Williamsburg Investment Trust on behalf
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<PAGE>
of Tattersall Bond is required to hold annual meetings of shareholders. However,
a meeting of shareholders for the purpose of voting upon the question of removal
of a Trustee must be called when requested in writing by the holders of at least
10% of the outstanding shares of Evergreen Select Fixed Income Trust or
Williamsburg Investment Trust. In addition, each is required to call a meeting
of shareholders for the purpose of electing Trustees if, at any time, less than
a majority of the Trustees then holding office were elected by shareholders.
Neither Evergreen Select Fixed Income Trust nor Williamsburg Investment Trust
currently intends to hold regular shareholder meetings and neither entity
permits cumulative voting. Except when a larger quorum is required by applicable
law, with respect to Evergreen Core Bond, twenty-five percent (25%) of the
outstanding shares entitled to vote, and with respect to Tattersall Bond, fifty
percent of the outstanding shares entitled to vote constitutes a quorum for
consideration of such matter. For Evergreen Core Bond, a majority of the votes
cast and entitled to vote, and for Tattersall Bond, a majority of the
outstanding shares, is sufficient to act on a matter (unless otherwise
specifically required by the applicable governing documents or other law,
including the 1940 Act).
Under the Declaration of Trust of Evergreen Select Fixed Income Trust,
each share of Evergreen Core Bond will be entitled to one vote for each dollar
of net asset value applicable to each share. Under the voting provisions
governing Tattersall Bond, each share is entitled to one vote. Over time, the
net asset values of the mutual funds which are each a series of Williamsburg
Investment Trust have changed in relation to one another and are expected to
continue to do so in the future. Because of the divergence in net asset values,
a given dollar investment in a fund with a lower net asset value will purchase
more shares, and under Tattersall Bond's voting provisions, have more votes,
than the same investment in a fund with a higher net asset value. Under the
Declaration of Trust of Evergreen Select Fixed Income Trust, voting power is
related to the dollar value of the shareholders' investment rather than to the
number of shares held.
Liquidation
In the event of the liquidation of Evergreen Core Bond or Tattersall
Bond, the shareholders are entitled to receive, when and as declared by the
respective Trustees, the excess of the assets belonging to such Fund or
attributable to the class over the liabilities belonging to the Fund or
attributable to the class. In either case, the assets so distributable to
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<PAGE>
shareholders of the Fund will be distributed among the shareholders in
proportion to the number of shares of a class of the Fund held by them and
recorded on the books of the Fund.
Liability and Indemnification of Trustees
The Agreement and Declaration of Trust of Williamsburg Investment Trust
provides that a Trustee shall be liable only for his own willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office, and shall not be liable for errors of judgment or
mistakes of fact or law. The Agreement and Declaration of Trust of Williamsburg
Investment Trust also provides that present and former Trustees or officers are
entitled to indemnification against liabilities and expenses with respect to
claims related to their position with the Trust unless it has been determined
that such Trustee or officer (i) did not act in good faith in the reasonable
belief that his action was in or not opposed to the best interests of the Trust
or (ii) had acted with willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office. In the
event of settlement, no such indemnification shall be provided unless approved
by a majority of the independent Trustees or by an independent legal counsel in
a written opinion. Approval by the independent Trustees of indemnification shall
not prevent recovery of indemnification from such Trustee or officer if
subsequently such person is adjudicated by a court of competent jurisdiction not
to have acted in good faith in the reasonable belief that his action was in or
not opposed to the best interests of the Trust or to have been liable to the
Trust or its shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
Under the Declaration of Trust of Evergreen Select Fixed Income Trust,
a Trustee is liable to the Trust and its shareholders only for such Trustee's
own willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of the office of Trustee or the discharge of
such Trustee's functions. As provided in the Declaration of Trust, each Trustee
of the Trust is entitled to be indemnified against all liabilities against him
or her, including the costs of litigation, unless it is determined that the
Trustee (i) did not act in good faith in the reasonable belief that such
Trustee's action was in or not opposed to the best interests of the Trust; (ii)
had acted with willful misfeasance, bad faith, gross negligence or reckless
disregard of such Trustee's duties; and (iii) in a criminal proceeding, had
reasonable cause to
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<PAGE>
believe that such Trustee's conduct was unlawful (collectively, "disabling
conduct"). A determination that the Trustee did not engage in disabling conduct
and is, therefore, entitled to indemnification may be based upon the outcome of
a court action or administrative proceeding or by (a) a vote of a majority of
those Trustees who are neither "interested persons" within the meaning of the
1940 Act nor parties to the proceeding or (b) an independent legal counsel in a
written opinion. The Trust may also advance money for such litigation expenses
provided that the Trustee undertakes to repay the Trust if his or her conduct is
later determined to preclude indemnification and certain other conditions are
met.
The foregoing is only a summary of certain characteristics of the
operations of the Declaration of Trust of Evergreen Select Fixed Income Trust,
the Agreement and Declaration of Trust of Williamsburg Investment Trust,
By-Laws, Delaware and Massachusetts law and is not a complete description of
those documents or law. Shareholders should refer to the provisions of the
Declaration of Trust, Agreement and Declaration of Trust, ByLaws, Delaware and
Massachusetts law directly for more complete information.
INFORMATION REGARDING THE INTERIM ADVISORY AGREEMENT
Introduction
In view of the Merger discussed above, and the factors discussed below,
the Board of Trustees of Williamsburg Investment Trust recommends that
shareholders of Tattersall Bond approve the Interim Advisory Agreement. The
Merger is scheduled become effective on June 4, 1999. The Interim Advisory
Agreement will remain in effect from the effective date of the Merger until the
earlier of the Closing Date for the Reorganization or two years from its
effective date. The terms of the Interim Advisory Agreement are essentially the
same as the Previous Advisory Agreement (as defined below). The only difference
between the Previous Advisory Agreement and the Interim Advisory Agreement, if
approved by shareholders, is the length of time each Agreement is in effect. A
description of the Interim Advisory Agreement pursuant to which TAG continues as
investment adviser to Tattersall Bond, as well as the services to be provided by
TAG pursuant thereto, is set forth below under "Advisory Services." The
description of the Interim Advisory Agreement in this Prospectus/Proxy Statement
is qualified in its entirety by reference to the Interim Advisory Agreement,
attached hereto as Exhibit B.
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<PAGE>
TAG, a Virginia corporation, is currently controlled by Fred T.
Tattersall. TAG's address is 6802 Paragon Place, Suite 200, Richmond, Virginia.
TAG has served as investment adviser pursuant to an Investment Advisory
Agreement dated February 28, 1997. As used herein, the Investment Advisory
Agreement for Tattersall Bond is referred to as the "Previous Advisory
Agreement." At a meeting of the Board of Trustees of Williamsburg Investment
Trust held on March 30, 1999, the Trustees, including a majority of the
Independent Trustees, approved the Interim Advisory Agreement for Tattersall
Bond.
The Trustees have authorized Williamsburg Investment Trust, on behalf
of Tattersall Bond, to enter into the Interim Advisory Agreement with TAG. Such
Agreement will become effective on June 4, 1999. If the Interim Advisory
Agreement for Tattersall Bond is not approved by shareholders, the Trustees will
consider appropriate actions to be taken with respect to Tattersall Bond's
investment advisory arrangement at that time. The Previous Advisory Agreement
was last approved by the Trustees, including a majority of the Independent
Trustees, on February 1, 1999.
Comparison of the Interim Advisory Agreement and the Previous
Advisory Agreement
Advisory Services. The management and advisory services to be provided
by TAG under the Interim Advisory Agreement are identical to those currently
provided by TAG under the Previous Advisory Agreement. Under the Previous
Advisory Agreement and Interim Advisory Agreement, TAG manages the investment
portfolio of Tattersall Bond, makes decisions about and places orders for all
purchases and sales of the Fund's securities, and maintains certain records
relating to these purchases and sales.
Fees. The investment advisory fees for Tattersall Bond under the Previous
Advisory Agreement and the Interim Advisory Agreement are identical. See
"Summary - Investment Advisers."
Payment of Expenses and Transaction Charges. Under the Previous
Advisory Agreement, TAG was required to pay all expenses incurred by it in
connection with its activities under the Agreement other than the cost of
securities (including brokerage commissions, if any) purchased for the Fund.
The Interim Advisory Agreement contains an identical provision.
Limitation of Liability. The Previous Advisory Agreement
provides that TAG was not liable for any error of judgment or
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<PAGE>
mistake of law or for any loss suffered by the Fund in connection with the
performance of the Agreement, except a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services or a loss
resulting from willful misfeasance, bad faith, or gross negligence on the part
of TAG in the performance of its duties or from reckless disregard by it of its
obligations and duties under the Agreement.
The Interim Advisory Agreement contains an identical provision.
Termination; Assignment. The Interim Advisory Agreement provides that
it may be terminated without penalty by a vote of a majority of the outstanding
voting securities of Tattersall Bond (as defined in the 1940 Act) or by a vote
of a majority of Williamsburg Investment Trust's entire Board of Trustees on 60
days' written notice to TAG or by TAG on 60 days' written notice to Williamsburg
Investment Trust. Also, the Interim Advisory Agreement will automatically
terminate in the event of its assignment (as defined in the 1940 Act).
The Previous Advisory Agreement contains an identical provision as to
termination and assignment.
Information About Tattersall Bond's Investment Adviser
TAG, a registered investment adviser, manages, in addition to the Fund,
The Tattersall Short Term Bond Fund. TAG also provides investment advice to
corporations, trusts, pension and profit sharing plans, other business and
institutional accounts and individuals. The name and address of each executive
officer and director of TAG, upon consummation of the Merger, is set forth in
Appendix A to this Prospectus/Proxy Statement.
During the fiscal years ended March 31, 1998, 1997 and 1996, TAG or its
predecessor received from Tattersall Bond management fees of $326,338, $430,381
and $305,247, respectively, and voluntarily waived fees of $16,111, $0, and $0,
respectively. TAG is currently waiving a portion of its management fee. See
"Comparison of Fees and Expenses."
The Board of Trustees considered the Interim Advisory Agreement as part
of its overall approval of the Plan. The Board of Trustees considered, among
other things, the factors set forth above in "Reasons for the Reorganization."
The Board of Trustees also considered the fact that there were no material
differences between the terms of the Interim Advisory Agreement and the terms of
the Previous Advisory Agreement.
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<PAGE>
THE TRUSTEES OF WILLIAMSBURG INVESTMENT TRUST
RECOMMEND THAT THE SHAREHOLDERS OF TATTERSALL BOND
APPROVE THE INTERIM ADVISORY AGREEMENT.
ADDITIONAL INFORMATION
Evergreen Core Bond. Information concerning the operation and
management of Evergreen Core Bond is incorporated herein by reference from the
Prospectus dated February 1, 1999, a copy of which is enclosed, and Statement of
Additional Information of the same date. A copy of such Statement of Additional
Information is included in the Statement of Additional Information relating to
this Prospectus/Proxy Statement , a copy of which is enclosed.
Tattersall Bond. Information about the Fund is included in its current
Prospectuses dated August 1, 1998, as revised December 31, 1998, and in the
Statement of Additional Information dated August 1, 1998, as revised December
31, 1998, that have been filed with the SEC, all of which are incorporated
herein by reference. Copies of the Prospectuses are available upon request and
without charge by writing to Tattersall Bond at the address listed on the cover
page of this Prospectus/Proxy Statement or by calling the Fund toll-free at
1-800-443-4249. The Statement of Additional Information is included in the
Statement of Additional Information relating to this Prospectus/Proxy Statement,
a copy of which is enclosed.
Evergreen Core Bond and Tattersall Bond are each subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, and in accordance therewith file reports and other information including
proxy material, and charter documents with the SEC. These items can be inspected
and copies obtained at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional
Offices located at Northwest Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661-2511 and Seven World Trade Center, Suite 1300, New York, New York
10048.
The SEC maintains a Web site (http://www.sec.gov) that contains each
Fund's Statement of Additional Information and other material incorporated by
reference herein together with other information regarding Evergreen Core Bond
and Tattersall Bond.
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<PAGE>
VOTING INFORMATION CONCERNING THE MEETING
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Trustees of Williamsburg Investment Trust to be
used at the Special Meeting of Shareholders to be held at 10:00 a.m., May 28,
1999, at the offices of Countrywide Fund Services, Inc., 312 Walnut Street
Cincinnati, Ohio 45201-4249, and at any adjournments thereof. This
Prospectus/Proxy Statement, along with a Notice of the Meeting and a proxy card,
is first being mailed to shareholders of Tattersall Bond on or about May 14,
1999. Only shareholders of record as of the close of business on the Record Date
will be entitled to notice of, and to vote at, the Meeting or any adjournment
thereof. The holders of fifty percent of the outstanding shares at the close of
business on the Record Date present in person or represented by proxy will
constitute a quorum for the Meeting. If the enclosed form of proxy is properly
executed and returned in time to be voted at the Meeting, the proxies named
therein will vote the shares represented by the proxy in accordance with the
instructions marked thereon. Unmarked proxies will be voted FOR the proposed
Reorganization, FOR the Interim Advisory Agreement and FOR any other matters
deemed appropriate. Proxies that reflect abstentions and "broker non-votes"
(i.e., shares held by brokers or nominees as to which (i) instructions have not
been received from the beneficial owners or the persons entitled to vote or (ii)
the broker or nominee does not have discretionary voting power on a particular
matter) will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum, but will have the effect of
being counted as votes against the Plan and the Interim Advisory Agreement which
must be approved by a percentage of the shares present at the Meeting or a
majority of the shares outstanding entitled to vote. A proxy may be revoked at
any time on or before the Meeting by written notice to the Secretary of
Williamsburg Investment Trust at the address set forth on the cover of this
Prospectus/Proxy Statement. Unless revoked, all valid proxies will be voted in
accordance with the specifications thereon or, in the absence of such
specifications, FOR approval of the Plan and the Reorganization contemplated
thereby and FOR approval of the Interim Advisory Agreement.
Approval of the Plan will require the affirmative vote of a majority of
the outstanding shares entitled to vote, with all classes voting together as a
single class at the Meeting at which a quorum of the Fund's shares is present.
Approval of the Interim Advisory Agreement will require the affirmative vote of
(i) 67% or more of holders of more than 50% of the outstanding
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<PAGE>
voting securities present at the Meeting if holders of more than 50% of the
outstanding voting securities are present in person or by proxy at the Meeting,
or (ii) more than 50% of the outstanding voting securities, whichever is less,
with all classes voting together as one class. Each full share outstanding is
entitled to one vote and each fractional share outstanding is entitled to a
proportionate share of one vote.
Proxy solicitations will be made primarily by mail, but proxy
solicitations may also be made by telephone or personal solicitations conducted
by officers and employees of FUNB or TAG, their affiliates or other
representatives of Tattersall Bond (who will not be paid for their soliciting
activities).
If you wish to participate in the Meeting, you may submit the proxy
card included with this Prospectus/Proxy Statement, vote by fax or attend in
person. Any proxy given by you is revocable.
In the event that sufficient votes to approve the Reorganization are
not received by May 28, 1999, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies. In
determining whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature of any further solicitation and the information
to be provided to shareholders with respect to the reasons for the solicitation.
Any such adjournment will require an affirmative vote by the holders of a
majority of the shares present in person or by proxy and entitled to vote at the
Meeting. The persons named as proxies will vote upon such adjournment after
consideration of all circumstances which may bear upon a decision to adjourn the
Meeting.
A shareholder who objects to the proposed Reorganization will not be
entitled under either Massachusetts law or the Agreement and Declaration of
Trust of Williamsburg Investment Trust to demand payment for, or an appraisal
of, his or her shares. However, shareholders should be aware that the
Reorganization as proposed is not expected to result in recognition of gain or
loss to shareholders for federal income tax purposes and that, if the
Reorganization is consummated, shareholders will be free to redeem the shares of
Evergreen Core Bond which they receive in the transaction at their then-current
net asset value. Shares of Tattersall Bond may be redeemed at any time prior to
the consummation of the Reorganization. Shareholders of Tattersall Bond may wish
to consult their tax
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advisers as to any differing consequences of redeeming Fund shares prior to the
Reorganization or exchanging such shares in the Reorganization.
Tattersall Bond does not hold annual shareholder meetings. If the
Reorganization is not approved, shareholders wishing to submit proposals for
consideration for inclusion in a proxy statement for a subsequent shareholder
meeting should send their written proposals to the Secretary of Williamsburg
Investment Trust at the address set forth on the cover of this Prospectus/Proxy
Statement such that they will be received by the Fund in a reasonable period of
time prior to any such meeting.
The votes of the shareholders of Evergreen Core Bond are not being
solicited by this Prospectus/Proxy Statement and are not required to carry out
the Reorganization.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES.
Please advise Tattersall Bond whether other persons are beneficial owners of
shares for which proxies are being solicited and, if so, the number of copies of
this Prospectus/Proxy Statement needed to supply copies to the beneficial owners
of the respective shares.
FINANCIAL STATEMENTS AND EXPERTS
The Annual Report of Evergreen Core Bond as of September 30, 1998 and
the financial highlights and financial statements for the periods indicated
therein have been incorporated by reference herein and in the Registration
Statement in reliance upon the report of PricewaterhouseCoopers LLP, independent
certified public accountants, incorporated by reference herein and upon the
authority of said firm as experts in accounting and auditing.
The financial statements and financial highlights of Tattersall Bond
incorporated in this Prospectus/Proxy Statement by reference from the Annual
Report of Williamsburg Investment Trust for the year ended March 31, 1998 have
been audited by Tait, Weller & Baker, independent auditors, as stated in their
report, which is incorporated herein by reference and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Evergreen
Core Bond will be passed upon by Sullivan & Worcester LLP, Washington, D.C.
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OTHER BUSINESS
The Trustees of Williamsburg Investment Trust do not intend to
present any other business at the Meeting. If, however, any other matters are
properly brought before the Meeting, the persons named in the accompanying form
of proxy will vote thereon in accordance with their judgment.
THE TRUSTEES OF WILLIAMSBURG INVESTMENT TRUST RECOMMEND APPROVAL OF THE
PLAN AND THE INTERIM ADVISORY AGREEMENT, AND ANY UNMARKED PROXIES WITHOUT
INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN FAVOR OF APPROVAL OF THE PLAN AND
THE INTERIM ADVISORY AGREEMENT.
May 10, 1999
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APPENDIX A
The name and addresses of the principal executive officers and
directors of Tattersall Advisory Group, upon consummation of the Merger, will be
as follows:
<TABLE>
<CAPTION>
OFFICERS:
Name Address
- ---- -------
<S> <C>
Fred T. Tattersall 6802 Paragon Place
President, Secretary, Suite 200
Treasurer Richmond, Virginia 23230
DIRECTORS:
Name Address
- ---- -------
Fred T. Tattersall 6802 Paragon Place
Suite 200
Richmond, Virginia 23230
Donald McMullen First Union National Bank
201 South College Street
Charlotte, North Carolina
28288-1195
Glen Insley First Union National Bank
201 South College Street
Charlotte, North Carolina
28288-1195
Thomas Pindelski First Union National Bank
201 South College Street
Charlotte, North Carolina
28288-1195
David Francis First Union National Bank
201 South College Street
Charlotte, North Carolina
28288-1195
</TABLE>
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this 30th day of April, 1999, by and between Evergreen Select Fixed Income
Trust, a Delaware business trust, with its principal place of business at 200
Berkeley Street, Boston, Massachusetts 02116 (the "Trust"), with respect to its
Evergreen Select Core Bond Fund series (the "Acquiring Fund"), and the
Williamsburg Investment Trust, a Massachusetts business trust, with its
principal place of business at 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202 ("Williamsburg"), with respect to its The Tattersall Bond Fund series (the
"Selling Fund").
This Agreement is intended to be, and is adopted as, a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of (i) the transfer of all of
the assets of the Selling Fund in exchange solely for Institutional Service and
Institutional shares of beneficial interest, $.001 par value per share, of the
Acquiring Fund (the "Acquiring Fund Shares"); (ii) the assumption by the
Acquiring Fund of the identified liabilities of the Selling Fund; and (iii) the
distribution, after the Closing Date hereinafter referred to, of the Acquiring
Fund Shares to the shareholders of the Selling Fund in liquidation of the
Selling Fund as provided herein, all upon the terms and conditions hereinafter
set forth in this Agreement.
WHEREAS, the Selling Fund and the Acquiring Fund are each a separate
investment series of an open-end, registered investment company of the
management type and the Selling Fund owns securities that generally are assets
of the character in which the Acquiring Fund is permitted to invest;
WHEREAS, both Funds are authorized to issue their shares of
beneficial interest;
WHEREAS, the Trustees of the Trust have determined that the exchange of
all of the assets of the Selling Fund for Acquiring Fund Shares and the
assumption of the identified liabilities of the Selling Fund by the Acquiring
Fund on the terms and conditions hereinafter set forth are in the best interests
of the Acquiring Fund's shareholders;
WHEREAS, based on the information furnished by Tattersall Advisory Group,
Inc. and First Union National Bank, the Trustees
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of Williamsburg have determined that the Selling Fund should exchange all of its
assets and the identified liabilities for Acquiring Fund Shares and that the
interests of the existing shareholders of the Selling Fund will not be diluted
as a result of the transactions contemplated herein;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
ARTICLE I
TRANSFER OF ASSETS OF THE SELLING FUND IN EXCHANGE FOR
THE ACQUIRING FUND SHARES AND ASSUMPTION OF SELLING FUND
LIABILITIES AND LIQUIDATION OF THE SELLING FUND
1.1 THE EXCHANGE. Subject to the terms and conditions herein set forth
and on the basis of the representations and warranties contained herein, the
Selling Fund agrees to transfer all of the Selling Fund's assets as set forth in
paragraph 1.2 to the Acquiring Fund. The Acquiring Fund agrees in exchange
therefor (i) to deliver to the Selling Fund the number of Acquiring Fund Shares,
including fractional Acquiring Fund Shares, computed in the manner and as of the
time and date set forth in paragraph 2.3; and (ii) to assume the identified
liabilities of the Selling Fund, as set forth in paragraph 1.3. Such
transactions shall take place on the Closing Date provided for in paragraph 3.1.
1.2 ASSETS TO BE ACQUIRED. The assets of the Selling Fund to be
acquired by the Acquiring Fund shall consist of all property, including, without
limitation, all cash, securities, commodities, interests in futures and
dividends or interest receivables, that is owned by the Selling Fund and any
deferred or prepaid expenses shown as an asset on the books of the Selling Fund
on the Closing Date.
The Selling Fund has provided the Acquiring Fund with its most recent
audited financial statements, which contain a list of all of Selling Fund's
assets as of the date thereof. The Selling Fund hereby represents that as of the
date of the execution of this Agreement there have been no material changes in
its financial position as reflected in said financial statements other than
those occurring in the ordinary course of its business in connection with the
purchase and sale of securities and the payment of its normal operating
expenses.
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The Acquiring Fund will, within a reasonable time prior to the Closing
Date, furnish the Selling Fund with a list of the securities, if any, on the
Selling Fund's list referred to in the second sentence of this paragraph that do
not conform to the Acquiring Fund's investment objectives, policies, and
restrictions. The Selling Fund will, within a reasonable period of time prior to
the Closing Date, furnish the Acquiring Fund with a list of its portfolio
securities and other investments. In the event that the Selling Fund holds any
investments that the Acquiring Fund may not hold, the Selling Fund, if requested
by the Acquiring Fund, will dispose of such securities prior to the Closing
Date. In addition, if it is determined that the Selling Fund and the Acquiring
Fund portfolios, when aggregated, would contain investments exceeding certain
percentage limitations imposed upon the Acquiring Fund with respect to such
investments, the Selling Fund if requested by the Acquiring Fund will dispose of
a sufficient amount of such investments as may be necessary to avoid violating
such limitations as of the Closing Date. Notwithstanding the foregoing, nothing
herein will require the Selling Fund to dispose of any investments or securities
if, in the reasonable judgment of the Selling Fund, such disposition would
adversely affect the tax-free nature of the Reorganization or would violate the
Selling Fund's fiduciary duty to its shareholders.
1.3 LIABILITIES TO BE ASSUMED. The Selling Fund will endeavor to
discharge all of its known liabilities and obligations prior to the Closing
Date. The Acquiring Fund shall assume only those liabilities, expenses, costs,
charges and reserves reflected on a Statement of Assets and Liabilities of the
Selling Fund prepared on behalf of the Selling Fund, as of the Valuation Date
(as defined in paragraph 2.1), in accordance with generally accepted accounting
principles consistently applied from the prior audited period. The Acquiring
Fund shall assume only those liabilities of the Selling Fund reflected in such
Statement of Assets and Liabilities and shall not assume any other liabilities,
whether absolute or contingent, known or unknown, accrued or unaccrued, all of
which shall remain the obligation of the Selling Fund.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the Closing Date
as is conveniently practicable (the "Liquidation Date"), (a) the Selling Fund
will liquidate and distribute pro rata to the Selling Fund's shareholders of
record, determined as of the close of business on the Valuation Date (the
"Selling Fund Shareholders"), the Acquiring Fund Shares received by the Selling
Fund pursuant to paragraph 1.1; and (b) the Selling Fund will thereupon proceed
to terminate as set forth in
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paragraph 1.8 below. Such liquidation and distribution will be accomplished by
the transfer of the Acquiring Fund Shares then credited to the account of the
Selling Fund on the books of the Acquiring Fund to open accounts on the share
records of the Acquiring Fund in the names of the Selling Fund Shareholders and
representing the respective pro rata number of the Acquiring Fund Shares due
such shareholders. All issued and outstanding shares of the Selling Fund will
simultaneously be canceled on the books of the Selling Fund. The Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares in
connection with such exchange.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be
shown on the books of the Acquiring Fund's transfer agent. Shares of the
Acquiring Fund will be issued in the manner described in the Prospectus and
Proxy Statement to be distributed to shareholders of the Selling Fund as
described in paragraph 5.7.
1.6 TRANSFER TAXES. Any transfer taxes payable upon issuance of the
Acquiring Fund Shares in a name other than the registered holder of the Selling
Fund shares on the books of the Selling Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of the
Selling Fund is and shall remain the responsibility of the Selling Fund up to
and including the Closing Date and such later date on which the Selling Fund is
terminated.
1.8 TERMINATION. The Selling Fund shall be terminated promptly
following the Closing Date and the making of all distributions pursuant to
paragraph 1.4.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Selling Fund's assets to be
acquired by the Acquiring Fund hereunder shall be the value of such assets
computed as of the close of business on the New York Stock Exchange on the
business day next preceding the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures set
forth in the Trust's Declaration of Trust and the Acquiring Fund's then current
prospectuses and statement of additional information or
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such other valuation procedures as shall be mutually agreed upon
by the parties.
2.2 VALUATION OF SHARES. The net asset value per share of the Acquiring
Fund Shares shall be the net asset value per share computed as of the close of
business on the New York Stock Exchange on the Valuation Date, using the
valuation procedures set forth in the Trust's Declaration of Trust and the
Acquiring Fund's then current prospectuses and statement of additional
information.
2.3 SHARES TO BE ISSUED. The number of the Acquiring Fund Shares of
each class to be issued (including fractional shares, if any) in exchange for
the Selling Fund's assets shall be determined by multiplying the shares
outstanding of each class of the Selling Fund by the ratio computed by dividing
the net asset value per share of the Selling Fund attributable to each of its
classes by the net asset value per share of the respective classes of the
Acquiring Fund determined in accordance with paragraph 2.2. Holders of Service
Group shares of the Selling Fund will receive Institutional Service shares of
the Acquiring Fund and holders of Institutional shares of the Selling Fund will
receive Institutional shares of the Acquiring Fund. No sales charge shall be
imposed in connection with the Acquiring Fund Shares issued pursuant to the
terms of this Agreement.
2.4 DETERMINATION OF VALUE. All computations of value shall be made by
State Street Bank and Trust Company in accordance with its regular practice in
pricing the shares and assets of the Acquiring Fund.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The Closing (the "Closing") shall take place on or
about June 7, 1999 or such other date as the parties may agree to in writing
(the "Closing Date"). All acts taking place at the Closing shall be deemed to
take place simultaneously immediately prior to the opening of business on the
Closing Date unless otherwise provided. The Closing shall be held as of 9:00
a.m. at the offices of the Evergreen Funds, 200 Berkeley Street, Boston, MA
02116, or at such other time and/or place as the parties may agree.
3.2 CUSTODIAN'S CERTIFICATE. FirstStar Bank, N.A., as custodian for the
Selling Fund (the "Custodian"), shall deliver at the Closing a certificate of an
authorized officer stating
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that (a) the Selling Fund's portfolio securities, cash, and any other assets
have been delivered in proper form to the Acquiring Fund on the Closing Date;
and (b) all necessary taxes including all applicable federal and state stock
transfer stamps, if any, have been paid, or provision for payment have been
made, in conjunction with the delivery of portfolio securities by the Selling
Fund.
3.3 EFFECT OF SUSPENSION IN TRADING. In the event that on the Valuation
Date (a) the New York Stock Exchange or another primary trading market for
portfolio securities of the Acquiring Fund or the Selling Fund shall be closed
to trading or trading thereon shall be restricted, or (b) trading or the
reporting of trading on said Exchange or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of the Acquiring Fund or the
Selling Fund is impracticable, the Closing Date shall be postponed until the
second business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.4 TRANSFER AGENT'S CERTIFICATE. Countrywide Fund Services, Inc., as
transfer agent for the Selling Fund as of the Closing Date, shall deliver at the
Closing a certificate of an authorized officer stating that its records contain
the names and addresses of the Selling Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver, or
cause Evergreen Service Company, its transfer agent, to issue and deliver, a
confirmation evidencing the Acquiring Fund Shares to be credited on the Closing
Date to the Secretary of Williamsburg or provide evidence satisfactory to the
Selling Fund that such Acquiring Fund Shares have been credited to the Selling
Fund's account on the books of the Acquiring Fund. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts and other documents as such other party or its
counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE SELLING FUND. The Selling Fund represents
and warrants to the Acquiring Fund as follows:
(a) The Selling Fund is a separate investment series of a
business trust duly organized, validly existing, and in good standing under the
laws of the Commonwealth of Massachusetts.
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(b) The Selling Fund is a separate investment series of a
Massachusetts business trust that is registered as an investment company
classified as a management company of the open-end type, and its registration
with the Securities and Exchange Commission (the "Commission") as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
is in full force and effect.
(c) The current prospectuses and statement of additional
information of the Selling Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(d) The Selling Fund is not, and the execution, delivery, and
performance of this Agreement (subject to shareholder approval) will not result,
in violation of any provision of Williamsburg's Declaration of Trust or By-Laws
or of any material agreement, indenture, instrument, contract, lease, or other
undertaking to which the Selling Fund is a party or by which it is bound.
(e) The Selling Fund has no material contracts or other
commitments (other than this Agreement) that will be terminated with liability
to it prior to the Closing Date, except for liabilities, if any, to be
discharged or reflected in the Statement of Assets and Liabilities as provided
in paragraph 1.3 hereof.
(f) Except as otherwise disclosed in writing to and accepted
by the Acquiring Fund, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Selling Fund or any of its properties
or assets, which, if adversely determined, would materially and adversely affect
its financial condition, the conduct of its business, or the ability of the
Selling Fund to carry out the transactions contemplated by this Agreement. The
Selling Fund knows of no facts that might form the basis for the institution of
such proceedings and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the transactions
herein contemplated.
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(g) The financial statements of the Selling Fund at September
30, 1998 are in accordance with generally accepted accounting principles
consistently applied, and such statements (copies of which have been furnished
to the Acquiring Fund) fairly reflect the financial condition of the Selling
Fund as of such date, and there are no known contingent liabilities of the
Selling Fund as of such date not disclosed therein.
(h) Since September 30, 1998 there has not been any material
adverse change in the Selling Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Selling Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquiring Fund. For the purposes of this subparagraph (h), a
decline in the net asset value of the Selling Fund shall not constitute a
material adverse change.
(i) All federal and other tax returns and reports of the
Selling Fund required by law to have been filed by such dates have been filed,
and all federal and other taxes shown due on said returns and reports have been
paid, or provision have been made for the payment thereof. To the best of the
Selling Fund's knowledge, no such return is currently under audit, and no
assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Selling Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has distributed in each such
year all net investment income and realized capital gains.
(k) All issued and outstanding shares of the Selling Fund are,
and at the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable by the Selling Fund. All of the issued and outstanding
shares of the Selling Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the transfer agent as
provided in paragraph 3.4. The Selling Fund does not have outstanding any
options, warrants, or other rights to subscribe for or purchase any of the
Selling Fund shares, nor is there outstanding any security convertible into any
of the Selling Fund shares.
(l) The Selling Fund has good and marketable title to the
Selling Fund's assets to be transferred to the Acquiring Fund pursuant to
paragraph 1.2 and full right, power, and authority to sell, assign, transfer,
and deliver such assets hereunder, and,
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upon delivery and payment for such assets, the Acquiring Fund will acquire good
and marketable title thereto, subject to no restrictions on the full transfer
thereof, including such restrictions as might arise under the 1933 Act, other
than as disclosed to the Acquiring Fund and accepted by the Acquiring Fund.
(m) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the Selling
Fund and, subject to approval by the Selling Fund's shareholders, this Agreement
constitutes a valid and binding obligation of the Selling Fund, enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights and to general equity principles.
(n) The information furnished by the Selling Fund for use in
no-action letters, applications for orders, registration statements, proxy
materials, and other documents that may be necessary in connection with the
transactions contemplated hereby is accurate and complete in all material
respects and complies in all material respects with federal securities and other
laws and regulations thereunder applicable thereto.
(o) The Prospectus and Proxy Statement of the Selling Fund
included in the Registration Statement (as defined in paragraph 5.7)(other than
information therein that relates to the Acquiring Fund) does not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The Acquiring
Fund represents and warrants to the Selling Fund as follows:
(a) The Acquiring Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust that is registered as an investment company classified
as a management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect.
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(c) The current prospectuses and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of the Trust's
Declaration of Trust or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the Acquiring Fund is
a party or by which it is bound.
(e) Except as otherwise disclosed in writing to the Selling
Fund and accepted by the Selling Fund, no litigation, administrative proceeding
or investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets, which, if adversely determined, would materially and
adversely affect its financial condition and the conduct of its business or the
ability of the Acquiring Fund to carry out the transactions contemplated by this
Agreement. The Acquiring Fund knows of no facts that might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental body
that materially and adversely affects its business or its ability to consummate
the transactions contemplated herein.
(f) The financial statements of the Acquiring Fund at
September 30, 1998 are in accordance with generally accepted accounting
principles consistently applied, and such statements (copies of which have been
furnished to the Selling Fund) fairly reflect the financial condition of the
Acquiring Fund as of such date, and there are no known contingent liabilities of
the Acquiring Fund as of such date not disclosed therein.
(g) Since September 30, 1998, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Selling Fund. For the purposes
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of this subparagraph (g), a decline in the net asset value of the Acquiring Fund
shall not constitute a material adverse change.
(h) All federal and other tax returns and reports of the
Acquiring Fund required by law then to be filed by such dates have been filed,
and all federal and other taxes shown due on said returns and reports have been
paid or provision have been made for the payment thereof. To the best of the
Acquiring Fund's knowledge, no such return is currently under audit, and no
assessment has been asserted with respect to such returns.
(i) All issued and outstanding Acquiring Fund Shares are duly
and validly issued and outstanding, fully paid and non-assessable. The Acquiring
Fund does not have outstanding any options, warrants, or other rights to
subscribe for or purchase any Acquiring Fund Shares, nor is there outstanding
any security convertible into any Acquiring Fund Shares.
(j) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes a valid and binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other
laws relating to or affecting creditors' rights and to general equity
principles.
(k) The Acquiring Fund Shares to be issued and delivered to
the Selling Fund, for the account of the Selling Fund Shareholders, pursuant to
the terms of this Agreement, have been duly authorized and, when so issued and
delivered, will be duly and validly issued Acquiring Fund Shares, and will be
fully paid and non-assessable.
(l) The information furnished by the Acquiring Fund for use in
no-action letters, applications for orders, registration statements, proxy
materials, and other documents that may be necessary in connection with the
transactions contemplated hereby is accurate and complete in all material
respects and complies in all material respects with federal securities and other
laws and regulations applicable thereto.
(m) The Prospectus and Proxy Statement (as defined in
paragraph 5.7) included in the Registration Statement (only insofar as it
relates to the Acquiring Fund) does not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the
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statements therein, in light of the circumstances under which such statements
were made, not misleading.
(n) The Acquiring Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940 Act,
and such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE SELLING FUND
5.1 OPERATION IN ORDINARY COURSE. The Acquiring Fund and the Selling
Fund each will operate its business in the ordinary course between the date
hereof and the Closing Date, it being understood that such ordinary course of
business will include customary dividends and distributions.
5.2 APPROVAL OF SHAREHOLDERS. Williamsburg will call a meeting of the
Selling Fund's shareholders to consider and act upon this Agreement and to take
all other action necessary to obtain approval of the transactions contemplated
herein.
5.3 INVESTMENT REPRESENTATION. The Selling Fund covenants that the
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof other than in accordance with the
terms of this Agreement.
5.4 ADDITIONAL INFORMATION. The Selling Fund will assist the Acquiring
Fund in obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Selling Fund shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, the
Acquiring Fund and the Selling Fund will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, including any actions required to be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but
in any case within sixty days after the Closing Date, the Selling Fund shall
furnish the Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the Selling Fund for
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federal income tax purposes that will be carried over by the Acquiring Fund as a
result of Section 381 of the Code, and which will be reviewed by
PricewaterhouseCoopers LLP and certified by Williamsburg's President and
Treasurer.
5.7 PREPARATION OF FORM N-14 REGISTRATION STATEMENT. The Selling Fund will
provide the Acquiring Fund with information reasonably necessary for the
preparation of a prospectus, which will include the proxy statement, referred to
in paragraph 4.1(o) (the "Prospectus and Proxy Statement"), all to be included
in a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act in
connection with the meeting of the Selling Fund's shareholders to consider
approval of this Agreement and the transactions contemplated herein.
5.8 CAPITAL LOSS CARRYFORWARDS. As promptly as practicable, but in any
case within sixty days after the Closing Date, the Acquiring Fund and the
Selling Fund shall cause PricewaterhouseCoopers LLP to issue a letter addressed
to the Acquiring Fund and the Selling Fund, in form and substance satisfactory
to the Funds, setting forth the federal income tax implications relating to
capital loss carryforwards (if any) of the Selling Fund .
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING FUND
The obligations of the Selling Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1 All representations, covenants, and warranties of the Acquiring
Fund contained in this Agreement shall be true and correct as of the date hereof
and as of the Closing Date with the same force and effect as if made on and as
of the Closing Date, and the Acquiring Fund shall have delivered to the Selling
Fund a certificate executed in its name by the Trust's President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
reasonably satisfactory to the Selling Fund and dated
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as of the Closing Date, to such effect and as to such other matters as the
Selling Fund shall reasonably request.
6.2 The Selling Fund shall have received on the Closing Date an opinion
from Sullivan & Worcester LLP, counsel to the Acquiring Fund, dated as of the
Closing Date, in a form reasonably satisfactory to the Selling Fund, covering
the following points:
(a) The Acquiring Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the power to own all of its
properties and assets and to carry on its business as presently conducted.
(b) The Acquiring Fund is a separate investment series of a
Delaware business trust registered as an investment company under the 1940 Act,
and, to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed, and
delivered by the Acquiring Fund and, assuming due authorization, execution and
delivery of this Agreement by the Selling Fund, is a valid and binding
obligation of the Acquiring Fund enforceable against the Acquiring Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights generally and to general equity principles.
(d) Assuming that a consideration therefor not less than the
net asset value thereof has been paid, the Acquiring Fund Shares to be issued
and delivered to the Selling Fund on behalf of the Selling Fund Shareholders as
provided by this Agreement are duly authorized and upon such delivery will be
legally issued and outstanding and fully paid and non-assessable, and no
shareholder of the Acquiring Fund has any preemptive rights in respect thereof.
(e) The Registration Statement has been declared effective by
the Commission and, to such counsel's knowledge, no stop order under the 1933
Act pertaining thereto has been issued, and to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the State of Delaware is required for consummation by
the Acquiring Fund of the transactions contemplated herein, except such as have
been obtained under the
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1933 Act, the 1934 Act and the 1940 Act, and as may be required under state
securities laws.
(f) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of the Trust's Declaration of Trust or By-Laws or any provision of any
material agreement, indenture, instrument, contract, lease or other undertaking
(in each case known to such counsel) to which the Acquiring Fund is a party or
by which it or any of its properties may be bound or result in the acceleration
of any obligation or the imposition of any penalty, under any agreement,
judgment, or decree, known to such counsel, to which the Acquiring Fund is a
party or by which it is bound.
(g) Only insofar as they relate to the Acquiring Fund, the
descriptions in the Prospectus and Proxy Statement of statutes, legal and
governmental proceedings and material contracts, if any, are accurate and fairly
present the information required to be shown.
(h) Such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Acquiring Fund, existing on or
before the effective date of the Registration Statement or the Closing Date
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement which are not described or filed as
required.
(i) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Acquiring Fund or
any of its properties or assets and the Acquiring Fund is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body, which materially and adversely affects its business, other
than as previously disclosed in the Registration Statement.
Such counsel shall also state that they have participated in
conferences with officers and other representatives of the Acquiring Fund at
which the contents of the Prospectus and Proxy Statement and related matters
were discussed and, although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Prospectus and Proxy Statement (except to the extent indicated
in paragraph (g) of their above opinion), on the basis of the foregoing (relying
as to materiality to a large extent upon the opinions of the Trust's officers
and other
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representatives of the Acquiring Fund), no facts have come to their attention
that lead them to believe that the Prospectus and Proxy Statement as of its
date, as of the date of the meeting of the Selling Fund's shareholders, and as
of the Closing Date, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein regarding the Acquiring
Fund or necessary, in the light of the circumstances under which they were made,
to make the statements therein regarding the Acquiring Fund not misleading. Such
opinion may state that such counsel does not express any opinion or belief as to
the financial statements or any financial or statistical data, or as to the
information relating to the Selling Fund, contained in the Prospectus and Proxy
Statement or the Registration Statement, and that such opinion is solely for the
benefit of Williamsburg and the Selling Fund. Such opinion shall contain such
other assumptions and limitations as shall be in the opinion of Sullivan &
Worcester LLP appropriate to render the opinions expressed therein.
In this paragraph 6.2, references to the Prospectus and Proxy Statement
include and relate to only the text of such Prospectus and Proxy Statement and
not to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
6.3 The merger of Tattersall Advisory Group, Inc. and a
subsidiary of First Union National Bank shall be completed prior
to the Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Selling Fund of all the obligations to be performed by it hereunder on or before
the Closing Date and, in addition thereto, the following conditions:
7.1 All representations, covenants, and warranties of the Selling Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Closing Date with the same force and effect as if made on and as of
the Closing Date, and the Selling Fund shall have delivered to the Acquiring
Fund on the Closing Date a certificate executed in its name by Williamsburg's
President or Vice President and the Treasurer or Assistant Treasurer, in form
and substance satisfactory to the Acquiring Fund and dated as of the Closing
Date, to such effect
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and as to such other matters as the Acquiring Fund shall
reasonably request.
7.2 The Selling Fund shall have delivered to the Acquiring Fund a
statement of the Selling Fund's assets and liabilities, together with a list of
the Selling Fund's portfolio securities showing the tax costs of such securities
by lot and the holding periods of such securities, as of the Valuation Date,
certified by the Treasurer of Williamsburg.
7.3 The Acquiring Fund shall have received on the Closing Date an
opinion of Tina P. Hosking, Esq., Associate General counsel of Countrywide Fund
Services, Inc., the administrator of the Selling Fund, in a form satisfactory to
the
Acquiring Fund covering the following points:
(a) The Selling Fund is a separate investment series of a
business trust duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts and has the power to own all of its
properties and assets and to carry on its business as presently conducted.
(b) The Selling Fund is a separate investment series of a
Massachusetts business trust registered as an investment company under the 1940
Act, and, to such counsel's knowledge, such registration with the Commission as
an investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed and
delivered by the Selling Fund and, assuming due authorization, execution, and
delivery of this Agreement by the Acquiring Fund, is a valid and binding
obligation of the Selling Fund enforceable against the Selling Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and to general equity principles.
(d) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the United
States or the Commonwealth of Massachusetts is required for consummation by the
Selling Fund of the transactions contemplated herein, except such as have been
obtained under the 1933 Act, the 1934 Act and the 1940 Act, and as may be
required under state securities laws.
(e) The execution and delivery of this Agreement did
not, and the consummation of the transactions contemplated hereby
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will not, result in a violation of Williamsburg's Declaration of Trust or
By-laws, or any provision of any material agreement, indenture, instrument,
contract, lease or other undertaking (in each case known to such counsel) to
which the Selling Fund is a party or by which it or any of its properties may be
bound or result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree, known to such counsel, to
which the Selling Fund is a party or by which it is bound.
(f) Only insofar as they relate to the Selling Fund, the
descriptions in the Prospectus and Proxy Statement of statutes, legal and
government proceedings and material contracts, if any, are accurate and fairly
present the information required to be shown.
(g) Such counsel does not know of any legal or governmental
proceedings, insofar as they relate to the Selling Fund, existing on or before
the date of mailing of the Prospectus and Proxy Statement and the Closing Date,
required to be described in the Prospectus and Proxy Statement or to be filed as
an exhibit to the Registration Statement which are not described or filed as
required.
(h) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Selling Fund or
any of its respective properties or assets and the Selling Fund is neither a
party to nor subject to the provisions of any order, decree or judgment of any
court or governmental body, which materially and adversely affects its business
other than as previously disclosed in the Prospectus and Proxy Statement.
(i) Assuming that a consideration therefor of not less than
the net asset value thereof has been paid, and assuming that such shares were
issued in accordance with the terms of the Selling Fund's registration
statement, or any amendment thereto, in effect at the time of such issuance, all
issued and outstanding shares of the Selling Fund are legally issued and fully
paid and non-assessable.
Such counsel shall also state that she has participated in conferences
with officers and other representatives of the Selling Fund at which the
contents of the Prospectus and Proxy Statement and related matters were
discussed and, although she is not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of
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the statements contained in the Prospectus and Proxy Statement (except to the
extent indicated in paragraph (f) of her above opinion), on the basis of the
foregoing (relying as to materiality to a large extent upon the opinions of
Williamsburg's officers and other representatives of the Selling Fund), no facts
have come to her attention that lead her to believe that the Prospectus and
Proxy Statement as of its date, as of the date of the meeting of the Selling
Fund's shareholders, and as of the Closing Date, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein regarding the Selling Fund or necessary, in the light of the
circumstances under which they were made, to make the statements therein
regarding the Selling Fund not misleading. Such opinion may state that Tina D.
Hosking, Esq. does not express any opinion or belief as to the financial
statements or any financial or statistical data, or as to the information
relating to the Acquiring Fund, contained in the Prospectus and Proxy Statement
or Registration Statement, and that such opinion is solely for the benefit of
the Trust and the Acquiring Fund.
Such opinion shall contain such other assumptions and limitations as
shall be in the opinion of Tina Hosking, Esq. appropriate to render the opinions
expressed therein, and shall indicate, with respect to matters of Massachusetts
law that as Tina Hosking, Esq. is not admitted to the bar of Massachusetts, such
opinions are based either upon the review of published statutes, cases and rules
and regulations of the Commonwealth of Massachusetts or upon an opinion of
Massachusetts counsel.
In this paragraph 7.3, references to the Prospectus and Proxy Statement
include and relate to only the text of such Prospectus and Proxy Statement and
not to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
7.4 The merger of Tattersall Advisory Group, Inc. and a
subsidiary of First Union National Bank shall be completed prior
to the Closing Date.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING
FUND AND THE SELLING FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Selling Fund or the Acquiring Fund, the other
party to this Agreement shall, at its
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option, not be required to consummate the transactions contemplated by this
Agreement:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Selling Fund in accordance with the provisions of Williamsburg's Declaration
of Trust and By-Laws and certified copies of the resolutions evidencing such
approval shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, neither the Acquiring Fund nor the Selling Fund
may waive the conditions set forth in this paragraph 8.1.
8.2 On the Closing Date, the Commission shall not have issued an
unfavorable report under Section 25(b) of the 1940 Act, nor instituted any
proceeding seeking to enjoin the consummation of the transactions contemplated
by this Agreement under Section 25(c) of the 1940 Act and no action, suit or
other proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain damages or other
relief in connection with, this Agreement or the transactions contemplated
herein.
8.3 All required consents of other parties and all other consents,
orders, and permits of federal, state and local regulatory authorities
(including those of the Commission and of state Blue Sky securities authorities,
including any necessary "no-action" positions of and exemptive orders from such
federal and state authorities) to permit consummation of the transactions
contemplated hereby shall have been obtained, except where failure to obtain any
such consent, order, or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Selling Fund,
provided that either party hereto may waive any of such conditions as they
relate to the other party.
8.4 The Registration Statement shall have become effective under the
1933 Act, and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Selling Fund shall have declared a dividend or dividends which,
together with all previous such dividends, shall have the effect of distributing
to the Selling Fund's shareholders all of the Selling Fund's net investment
company taxable income for all taxable periods ending on or prior to the
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Closing Date (computed without regard to any deduction for dividends paid) and
all of its net capital gains realized in all taxable periods ending on or prior
to the Closing Date (after reduction for any capital loss carryforward).
8.6 The parties shall have received a favorable opinion of Piper &
Marbury L.L.P. addressed to the Acquiring Fund and the Selling Fund
substantially to the effect that for federal income tax purposes:
(a) The transfer of all of the Selling Fund assets in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund followed by the distribution of the
Acquiring Fund Shares to the Selling Fund in termination and liquidation of the
Selling Fund will constitute a "reorganization" within the meaning of Section
368(a)(1)(C) of the Code and the Acquiring Fund and the Selling Fund will each
be a "party to a reorganization" within the meaning of Section 368(b) of the
Code.
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Selling Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the identified
liabilities of the Selling Fund.
(c) No gain or loss will be recognized by the Selling Fund
upon the transfer of the Selling Fund assets to the Acquiring Fund in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund or upon the distribution (whether
actual or constructive) of the Acquiring Fund Shares to Selling Fund
Shareholders in exchange for their shares of the Selling Fund.
(d) No gain or loss will be recognized by the Selling Fund
Shareholders upon the exchange of their Selling Fund shares for the Acquiring
Fund Shares in liquidation of the Selling Fund.
(e) The aggregate tax basis for the Acquiring Fund Shares
received by each Selling Fund Shareholder pursuant to the Reorganization will be
the same as the aggregate tax basis of the Selling Fund shares held by such
shareholder immediately prior to the Reorganization, and the holding period of
the Acquiring Fund Shares to be received by each Selling Fund Shareholder will
include the period during which the Selling Fund shares exchanged therefor were
held by such shareholder (provided the Selling Fund shares were held as capital
assets on the date of the Reorganization).
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(f) The tax basis of the Selling Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the Selling
Fund immediately prior to the Reorganization, and the holding period of the
assets of the Selling Fund in the hands of the Acquiring Fund will include the
period during which those assets were held by the Selling Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Selling Fund may waive the conditions set forth in this paragraph
8.6.
8.7 The Acquiring Fund shall have received from PricewaterhouseCoopers
LLP a letter addressed to the Acquiring Fund, in form and substance satisfactory
to the Acquiring Fund, to the effect that:
(a) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards) consisting of a reading
of any unaudited pro forma financial statements included in the Registration
Statement and Prospectus and Proxy Statement, and inquiries of appropriate
officials of Williamsburg responsible for financial and accounting matters,
nothing came to their attention that caused them to believe that such unaudited
pro forma financial statements do not comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act and the published
rules and regulations thereunder;
(b) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the Capitalization Table
appearing in the Registration Statement and Prospectus and Proxy Statement has
been obtained from and is consistent with the accounting records of the Selling
Fund;
(c) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the pro forma financial
statements that are included in the Registration Statement and Prospectus and
Proxy Statement agree to the underlying accounting records of the Acquiring Fund
and
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Selling Fund or with written estimates provided by officers of the Evergreen
Funds who have responsibility for financial and reporting matters, and were
found to be mathematically correct; and
(d) on the basis of limited procedures agreed upon by the
Acquiring Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), the data utilized in the
calculations of the projected expense ratios appearing in the Registration
Statement and Prospectus and Proxy Statement agree with underlying accounting
records of the Selling Fund or with written estimates by the Selling Fund's
management and were found to be mathematically correct.
In addition, unless waived by the Acquiring Fund, the Acquiring Fund
shall have received from PricewaterhouseCoopers LLP a letter addressed to the
Acquiring Fund dated on the Closing Date, in form and substance satisfactory to
the Acquiring Fund, to the effect, that on the basis of limited procedures
agreed upon by the Acquiring Fund (but not an examination in accordance with
generally accepted auditing standards), the net asset value per share of the
Selling Fund as of the Valuation Date was computed and the valuation of the
portfolio was consistent with the valuation policy of the Acquiring Fund.
8.8 The Selling Fund shall have received from PricewaterhouseCoopers
LLP a letter addressed to the Selling Fund, in form and substance satisfactory
to the Selling Fund, indicating that:
(a) they are independent certified public accountants with
respect to the Acquiring Fund within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder;
(b) they had performed limited procedures agreed upon by the
Selling Fund and described in such letter (but not an examination in accordance
with generally accepted auditing standards) which consisted of a reading of any
unaudited pro forma financial statements included in the Registration Statement
and Prospectus and Proxy Statement, and making inquiries of appropriate
officials of the Trust responsible for financial and accounting matters whether
such unaudited pro forma financial statements
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comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the published rules and regulations thereunder;
(c) on the basis of limited procedures agreed upon by the
Selling Fund and described in such letter (but not an examination in accordance
with generally accepted auditing standards), the Capitalization Table appearing
in the Registration Statement and Prospectus and Proxy Statement has been
obtained from and is consistent with the accounting records of the Acquiring
Fund; and
(d) on the basis of limited procedures agreed upon by the
Selling Fund (but not an examination in accordance with generally accepted
auditing standards), the data utilized in the calculations of the projected
expense ratios appearing in the Registration Statement and Prospectus and Proxy
Statement agree with written estimates by each Fund's management and were found
to be mathematically correct.
ARTICLE IX
EXPENSES
9.1 Except as otherwise provided for herein, all expenses of the
transactions contemplated by this Agreement incurred by the Selling Fund and the
Acquiring Fund will be borne by First Union National Bank. Such expenses
include, without limitation, (a) expenses incurred in connection with the
entering into and the carrying out of the provisions of this Agreement; (b)
expenses associated with the preparation and filing of the Registration
Statement under the 1933 Act covering the Acquiring Fund Shares to be issued
pursuant to the provisions of this Agreement; (c) registration or qualification
fees and expenses of preparing and filing such forms as are necessary under
applicable state securities laws to qualify the Acquiring Fund Shares to be
issued in connection herewith in each state in which the Selling Fund
Shareholders are resident as of the date of the mailing of the Prospectus and
Proxy Statement to such shareholders; (d) postage; (e) printing; (f) accounting
fees; (g) legal fees; and (h) solicitation costs of the transaction.
Notwithstanding the foregoing, the Acquiring Fund shall pay its own federal and
state registration fees.
ARTICLE X
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ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Selling Fund agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties, and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall not survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Fund and the Selling Fund. In addition, either the Acquiring Fund or
the Selling Fund may at its option terminate this Agreement at or prior to the
Closing Date because:
(a) of a breach by the other of any representation, warranty,
or agreement contained herein to be performed at or prior to the Closing Date,
if not cured within 30 days; or
(b) a condition herein expressed to be precedent to the
obligations of the terminating party has not been met and it reasonably appears
that it will not or cannot be met.
11.2 In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either the
Acquiring Fund, the Selling Fund, the Trust, Williamsburg, their respective
Trustees or officers, to the other party or its Trustees or officers.
ARTICLE XII
AMENDMENTS
12.1 This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
the Selling Fund and the Acquiring Fund; provided, however, that following the
meeting of the Selling Fund's shareholders called by the Selling Fund pursuant
to paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions of this Agreement
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to the material detriment of such shareholders without their
further approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
13.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to the conflicts
of laws provisions thereof.
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but, except as provided in
this paragraph, no assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of the other
party. Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation, other than the parties
hereto and their respective successors and assigns, any rights or remedies under
or by reason of this Agreement.
13.5 It is expressly agreed that the obligations of the Acquiring Fund
and the Selling Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of the Trust or of
Williamsburg personally, but shall bind only the trust property of the Acquiring
Fund and of the Selling Fund, as provided in the Declaration of Trust of the
Trust and the Declaration of Trust of Williamsburg. The execution and delivery
of this Agreement have been authorized by the Trustees of the Trust on behalf of
the Acquiring Fund and the Trustees of Williamsburg on behalf of the Selling
Fund and signed by authorized officers of the Trust and Williamsburg, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officers shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Acquiring Fund and of the Selling Fund as
provided in the Declaration of Trust of the Trust and the Declaration of Trust
of Williamsburg.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement, all
as of the date first written above.
EVERGREEN SELECT FIXED INCOME
TRUST ON BEHALF OF EVERGREEN
SELECT CORE BOND FUND
By:
Name:/s/Michael H. Koonce
Title: Secretary
WILLIAMSBURG INVESTMENT TRUST
ON BEHALF OF THE TATTERSALL
BOND FUND
By:
Name:/s/John T. Bruce
Title: Chairman
A-78
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EXHIBIT B
INTERIM INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, entered into as of __________________, 1999, by and between
WILLIAMSBURG INVESTMENT TRUST, a Massachusetts business trust (the "Trust"), on
behalf of THE TATTERSALL BOND FUND, and TATTERSALL ADVISORY GROUP, INC., a
Virginia corporation (the "Adviser"), registered as an investment adviser under
the Investment Advisers Act of 1940, as amended.
WHEREAS, the Trust is registered as a no-load, open-end management investment
company of the series type under the Investment Company Act of 1940, as amended
(the "1940 Act"); and
WHEREAS, the Trust desires to retain the Adviser to furnish investment advisory
and administrative services to The Tattersall Bond Fund series of the Trust, and
the Adviser is willing to so furnish such services;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Adviser to
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act as investment adviser to The Tattersall Bond Fund
series of the Trust (the "Fund") for the period and on
the terms set forth in this Agreement. The Adviser
accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein
provided.
2. Delivery of Documents. The Trust has furnished the
Adviser with copies properly certified or authenticated
of each of the following:
(a) The Trust's Declaration of Trust, as filed with the
Commonwealth of Massachusetts (such Declaration, as presently
in effect and as it shall from time to time be amended, is
herein called the "Declaration");
(b) The Trust's Bylaws (such Bylaws, as presently in effect and as
they shall from time to time be amended, are herein called the
"Bylaws");
(c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Adviser and approving this Agreement;
(d) The Trust's Registration Statement on Form N-1A under the 1940
Act and under the Securities Act of 1933 as amended, relating
to shares of beneficial interest of the Trust (herein called
the "Shares") as filed with the Securities and Exchange
Commission ("SEC") and all amendments thereto;
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(e) The Fund's Prospectus (such Prospectus, as presently in effect
and all amendments and supplements thereto are herein called
the "Prospectus").
The Trust will furnish the Adviser from time to time with copies,
properly certified or authenticated, of all amendments of or supplements to the
foregoing at the same time as such documents are required to be filed with the
SEC.
3. Management. Subject to the supervision of the Trust's Board of Trustees, the
Adviser will provide a continuous investment program for the Fund, including
investment research and management with respect to all securities, investments,
cash and cash equivalents of the Fund. The Adviser will determine from time to
time what securities and other investments will be purchased, retained or sold
by the Fund. The Adviser will provide the services under this Agreement in
accordance with the Fund's investment objectives, policies and restrictions as
stated in its Prospectus. The Adviser further agrees that it:
(a) Will conform its activities to all applicable Rules and
Regulations of the SEC and will, in addition, conduct its
activities under this Agreement in accordance with regulations
of any other Federal and State agencies which may now or in
the future have jurisdiction over its activities under this
Agreement;
(b) Will place orders pursuant to its investment determinations
for the Fund either directly with the issuer or with any
broker or dealer. In placing orders with brokers or dealers,
the Adviser will attempt to obtain the best net price and the
most favorable execution of its orders. Consistent with this
obligation, when the Adviser believes two or more brokers or
dealers are comparable in price and execution, the Adviser may
prefer brokers and dealers who provide the Fund with research
advice and other valuable services;
(c) Will provide certain executive personnel for the Trust as may
be mutually agreed upon from time to time with the Board of
Trustees, the salaries and expenses of such personnel to be
borne by the Adviser unless otherwise mutually agreed upon;
and
(d) Will provide, at its own cost, all office space, facilities
and equipment necessary for the conduct of its advisory
activities on behalf of the Trust.
4. Services Not Exclusive. The advisory services furnished by the
Adviser hereunder are not to be deemed exclusive, and the Adviser
shall be free to furnish similar services
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to others so long as its services under this Agreement
are not impaired.
5. Books and Records. In compliance with the requirements
-----------------
of Rule 31a-3 under the 1940 Act, the Adviser hereby
agrees that all records which it maintains for the
benefit of the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust any of
such records upon the Trust's request. The Adviser
further agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act the records required to be
maintained by it pursuant to Rule 31a-1 under the 1940
Act that are not maintained by others on behalf of the
Trust.
6. Expenses. During the term of this Agreement, the Adviser
--------
will pay all expenses incurred by it in connection with
its investment advisory services pertaining to the Fund.
In the event that there is no distribution plan under
Rule 12b-1 of the 1940 Act in effect for the Fund, the
Adviser will pay the entire cost of the promotion and
sale of Fund shares.
Notwithstanding the foregoing, the Fund shall pay the expenses and
costs of the following:
(a) Taxes, interest charges and extraordinary
expenses;
(b) Brokerage fees and commissions with regard to portfolio
transactions of the Fund;
(c) Fees and expenses of the custodian of the Fund's portfolio
securities;
(d) Fees and expenses of the Fund's administration agent, the
Fund's transfer and shareholder servicing agent and the Fund's
accounting agent or, if the Trust performs any such services
without an agent, the costs of the same;
(e) Auditing and legal expenses;
(f) Cost of maintenance of the Trust's existence as a legal
entity;
(g) Compensation of Trustees who are not interested persons of the
Adviser as that term is defined by law;
(h) Costs of Trust meetings;
(i) Federal and State registration or qualification fees and
expenses;
(j) Costs of setting in type, printing and mailing Prospectuses,
reports and notices to existing shareholders; and
(k) The investment advisory fee payable to the Adviser, as
provided in paragraph 7 herein.
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7. Compensation. For the services provided and the expenses
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assumed by the Adviser pursuant to this Agreement, the
Fund will pay the Adviser and the Adviser will accept as
full compensation an investment advisory fee, based upon
the daily average net assets of the Fund, computed at the
end of each month and payable within five (5) business
days thereafter, at the annual rate of 0.375%.
8.(a) Limitation of Liability. The Adviser shall not be liable
-----------------------
for any error of judgment, mistake of law or for any
other loss whatsoever suffered by the Trust in connection
with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services or a loss
resulting from wilful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance
of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
8.(b) Indemnification of Adviser. Subject to the limitations
--------------------------
set forth in this Subsection 8(b), the Trust shall
indemnify, defend and hold harmless (from the assets of
the Fund or Funds to which the conduct in question
relates) the Adviser against all loss, damage and
liability, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by the Adviser in
connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body,
related to or resulting from this Agreement or the
performance of services hereunder, except with respect to
any matter as to which it has been determined that the
loss, damage or liability is a direct result of (i) a
breach of fiduciary duty with respect to the receipt of
compensation for services; or (ii) willful misfeasance,
bad faith or gross negligence on the part of the Adviser
in the performance of its duties or from reckless
disregard by it of its duties under this Agreement
(either and both of the conduct described in clauses (i)
and (ii) above being referred to hereinafter as
"Disabling Conduct"). A determination that the Adviser
-----------------
is entitled to indemnification may be made by (i) a final
decision on the merits by a court or other body before
whom the proceeding was brought that the Adviser was not
liable by reason of Disabling Conduct, (ii) dismissal of
a court action or an administrative proceeding against
the Adviser for insufficiency of evidence of Disabling
Conduct, or (iii) a reasonable determination, based upon
a review of the facts, that the Adviser was not liable by
reason of Disabling Conduct by (a) vote of a majority of
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a quorum of Trustees who are neither "interested persons" of the
Trust as the quoted phrase is defined in Section 2(a)(19) of the
1940 Act nor parties to the action, suit or other proceeding on
the same or similar grounds that is then or has been pending or
threatened (such quorum of Trustees being referred to hereinafter
as the "Independent Trustees"), or (b) an independent legal
counsel in a written opinion. Expenses, including accountants' and
counsel fees so incurred by the Adviser (but excluding amounts
paid in satisfaction of judgments, in compromise or as fines or
penalties), may be paid from time to time by the Fund or Funds to
which the conduct in question related in advance of the final
disposition of any such action, suit or proceeding; provided, that
the Adviser shall have undertaken to repay the amounts so paid if
it is ultimately determined that indemnification of such expenses
is not authorized under this Subsection 8(b) and if (i) the
Adviser shall have provided security for such undertaking, (ii)
the Trust shall be insured against losses arising by reason of any
lawful advances, or (iii) a majority of the Independent Trustees,
or an independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to
believe that the Adviser ultimately will be entitled to
indemnification hereunder.
As to any matter disposed of by a compromise payment by the
Adviser referred to in this Subsection 8(b), pursuant to a consent
decree or otherwise, no such indemnification either for said
payment or for any other expenses shall be provided unless such
indemnification shall be approved (i) by a majority of the
Independent Trustees or (ii) by an independent legal counsel in a
written opinion. Approval by the Independent Trustees pursuant to
clause (i) shall not prevent the recovery from the Adviser of any
amount paid to the Adviser in accordance with either of such
clauses as indemnification of the Adviser is subsequently
adjudicated by a court of competent jurisdiction not to have acted
in good faith in the reasonable belief that the Adviser's action
was in or not opposed to the best interests of the Trust or to
have been liable to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in its conduct under the
Agreement.
The right of indemnification provided by this Subsection 8(b)
shall not be exclusive of or affect any of the rights to
indemnification to which the Adviser may be entitled. Nothing
contained in this Subsection 8(b) shall affect any rights to
indemnification to which
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Trustees, officers or other personnel of the Trust, and other
persons may be entitled by contract or otherwise under law, nor
the power of the Trust to purchase and maintain liability
insurance on behalf of any such person.
The Board of Trustees of the Trust shall take all such action
as may be necessary and appropriate to authorize the Trust
hereunder to pay the indemnification required by this Subsection
8(b) including, without limitation, to the extent needed, to
determine whether the Adviser is entitled to indemnification
hereunder and the reasonable amount of any indemnity due it
hereunder, or employ independent legal counsel for that purpose.
8.(c) The provisions contained in Section 8 shall survive the expiration
or other termination of this Agreement, shall be deemed to include
and protect the Adviser and its directors, officers, employees and
agents and shall inure to the benefit of its/their respective
successors, assigns and personal representatives.
9. Duration and Termination. This Agreement shall be
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effective on the date hereof and, unless sooner
terminated as provided herein, shall continue in effect
for two years or until such time as the reorganization
and acquisition of the Tattersall Bond Fund by Evergreen
Select Core Bond Fund is complete, which ever is sooner.
Thereafter, this Agreement shall be renewable for
successive periods of one year each, provided such
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continuance is specifically approved annually:
(a) By a vote of the majority of those members of the Board of
Trustees who are not parties to this Agreement or interested
persons of any such party (as that term is defined in the 1940
Act), cast in person at a meeting called for the purpose of
voting on such approval; and
(b) By vote of either the Board or a majority (as that term is
defined in the 1940 Act) of the outstanding voting securities
of the Fund.
Notwithstanding the foregoing, this Agreement may be terminated by
the Fund or by the Adviser at any time on sixty (60) days' written notice,
without the payment of any penalty, provided that termination by the Fund must
be authorized either by vote of the Board of Trustees or by vote of a majority
of the outstanding voting securities of the Fund. This Agreement will
automatically terminate in the event of its assignment (as that term is defined
in the 1940 Act).
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10. Amendment of this Agreement. No provision of this
---------------------------
Agreement may be changed, waived, discharged or
terminated orally, but only by a written instrument
signed by the party against which enforcement of this
change, waiver, discharge or termination is sought. No
material amendment of this Agreement shall be effective
until approved by a vote of the holders of a majority of
the Fund's outstanding voting securities (as defined in
the 1940 Act).
11. Shareholder Liability. The Adviser is hereby expressly
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put on notice of the limitation of shareholder liability
as set forth in the Agreement and Declaration of Trust of
the Trust, which is on file with the Secretary of the
Commonwealth of Massachusetts, and agrees that
obligations assumed by the Trust pursuant to this
Agreement shall be limited in all cases to the Fund and
its assets. The Adviser agrees that it shall not seek
satisfaction of any such obligations from the
shareholders or any individual shareholder of the Fund,
nor from the Trustees or any individual Trustee of the
Trust.
12. Miscellaneous. The captions in this Agreement are
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included for convenience of reference only and in no way
define or limit any of the provisions hereof or otherwise
affect their construction or effect. If any provision of
this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of
the Agreement shall not be affected thereby. This
Agreement shall be binding and shall inure to the benefit
of the parties hereto and their respective successors.
13. Applicable Law. This Agreement shall be construed in
accordance with, and governed by, the laws of the
Commonwealth of Virginia.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
ATTEST: WILLIAMSBURG INVESTMENT TRUST
By:______________________ By:__________________________
Title:___________________ Title:_______________________
ATTEST: TATTERSALL ADVISORY GROUP, INC.
By:______________________ By:___________________________
Title:___________________ Title:________________________
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EXHIBIT C
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EVERGREEN
Select Core Bond Fund
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Fund at a Glance as of September 30, 1998
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PORTFOLIO PROFILE
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Philosophy
The Evergreen Select Core Bond Fund is designed to maximize total return by
focusing on current income and identifying opportunities to capture capital
gains. The portfolio maintains a bias toward corporate and mortgage securities
in order to capture higher levels of income.
Process
The portfolio managers seek to enhance performance, while pursuing a controlled
risk approach, by actively managing three specific characteristics within the
portfolio: duration, sector allocation, and security selection. The managers use
both quantitative tools and fundamental research in order to determine an
appropriate duration strategy as well as enhance the sector allocation and
security selection processes.
Benchmark
Lehman Brothers Aggregate Bond Index
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PERFORMANCE AND RETURNS
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Class I Class IS Class IC
Average Annual Returns
...............................................................................
1 year 10.75% 10.55% 10.75%
...............................................................................
3 years 7.62% 7.38% 7.62%
...............................................................................
5 years 6.05% 5.80% 6.05%
...............................................................................
10 years 8.88% 8.61% 8.88%
...............................................................................
Since Inception 8.33% 8.06% 8.33%
...............................................................................
30-day SEC Yield 5.66% 5.42% 5.67%
...............................................................................
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LONG TERM GROWTH
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[LINE GRAPH APPEARS HERE]
Date CPI LBABI Class I
---- --- ----- -------
9/30/88 $1,000,000 $1,000,000 $1,000,000
9/30/89 $1,043,400 $1,112,600 $1,105,800
9/30/90 $1,107,700 $1,196,800 $1,170,600
<PAGE>
9/30/91 $1,145,200 $1,388,200 $1,369,400
9/30/92 $1,179,500 $1,562,400 $1,554,600
<PAGE>
9/30/93 $1,211,200 $1,718,300 $1,745,100
9/30/94 $1,247,100 $1,662,900 $1,658,700
9/30/95 $1,278,800 $1,896,700 $1,888,000
9/30/96 $1,317,200 $1,989,600 $1,945,400
9/30/97 $1,345,600 $2,183,500 $2,113,700
9/30/98 $1,365,600 $2,434,100 $2,340,900
Comparison of a $1,000,000 investment in Evergreen Select Core Bond Fund, Class
I shares, versus a similar investment in the Lehman Brothers Aggregate Bond
Index (LBABI), and the Consumer Price Index (CPI).
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Class I, IS and IC performance
information includes the performance of the Fund's predecessor common trust fund
for periods before the Fund's registration statement became effective on
November 21, 1997. The inception date of the predecessor common trust fund was
February 28, 1986. Performance for the common trust fund has been adjusted to
include the effect of estimated mutual fund expense ratios at the time the
common trust funds were converted to mutual funds. Performance information for
Class IS also includes performance of the Fund's Class IC for the period from
November 24, 1997 to March 9, 1998 (commencement of Class IS operations) and
does not include the deduction of 12b-1 fees. If such fees had been included,
the returns would have been lower. Returns of Class I, IS and IC, since their
respective commencement of class operations, were 8.12%, 6.54% and 8.55%,
respectively. The common trust fund was not registered under the Investment
Company Act of 1940 (the "1940 Act") or subject to certain investment
restrictions that are imposed by the 1940 Act. If the common trust fund had been
registered under the 1940 Act, its performance may have been adversely affected.
Index returns do not reflect expenses, which have been deducted from the Fund's
return. It is not possible to invest directly in an index.
5
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EVERGREEN
Select Core Bond Fund
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Portfolio Manager Commentary
Portfolio Management Team
[PHOTO OF L. ROBERT CHESHIRE APPEARS HERE]
L. ROBERT CHESHIRE
[PHOTO OF BRUCE J. BESECKER APPEARS HERE]
BRUCE J. BESECKER, CFA
Performance
For the 12 month period ended September 30, 1998, the Evergreen Select Core Bond
Fund's Class I, IC and IS shares returned 10.75%, 10.75%, and 10.55%,
respectively. These returns modestly trailed the 11.50% return of the Lehman
Brothers Aggregate Index. The Fund's performance, however, compared favorably to
the 10.02% average return of 218 intermediate investment grade bond funds
tracked by Lipper Analytical Services, an independent monitor of mutual fund
performance. The Fund's strong total return relative to its peer group can be
attributed to the portfolio's long duration stance for much of the quarter,
which benefited performance amid steadily declining interest rates.
<PAGE>
Portfolio
Characteristics
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Total Net Assets $596,776,430
................................................................
Average Credit Quality AAA
................................................................
Average Maturity 7.9 years
................................................................
Average Duration 4.7 years
................................................................
A Good Year for Bond Investors
The past 12 months was a particularly rewarding period for bond investors and
was brought about, ironically, by the Asian financial crisis which flared up
roughly a year ago. While the crisis prompted volatility in financial markets
throughout the world, it also slowed U.S. economic growth and calmed
inflationary fears that, in turn, allowed interest rates to trend markedly
lower. In fact, over the past 12 months, the yield on the bellwether 30-year
Treasury bond fell from 6.40% to 4.98%.
The U.S. bond market rally was most pronounced in the final months of 1997 and
again in the third quarter of 1998. The flight to quality, reignited in August
and September, was a result of economic problems in Russia and its potential
"domino effect" on other world economies. As a result of this crisis and a
likely U.S. economic slowdown, the Federal Reserve Board moved away from a
tightening bias and actually reduced the Fed Funds Rate at the end of September
(and again in early October). The net result was a declining interest rate
environment which boosted bond prices.
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PORTFOLIO COMPOSITION
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(based on 9/30/98 net assets)
[PIE CHART APPEARS HERE]
Mortgage-Backed Securities -- 39.3% Corporate Notes/Bonds -- 19.6% Treasury
Notes/Bonds -- 13.3% Yankee Obligations -- 13.2% Other assets and liabilities,
net -- 8.7% Government Agency Notes/Bonds -- 3.8% Asset-Backed Securities --
1.6% Collateralized Mortgage Obligations -- 0.5%
6
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EVERGREEN
Select Core Bond Fund
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Portfolio Manager Commentary
Our Strategy
Since the beginning of 1998, we have forecasted two things in the midst of the
current global investment environment: increased volatility and range-bound --
or even declining -- interest rates. Consequently, we maintained a neutral-to-
<PAGE>
long duration stance for much of the fiscal year in order to take advantage of
declining interest rates. The portfolio's average duration currently stands at
4.7 years. Our duration strategy, as well as the portfolio's high-quality
emphasis, played a crucial role in allowing the Fund to outperform its peer
group average.
The most significant strategic adjustment made to the portfolio was the removal
of its barbell structure in late September. Typically, this type of portfolio
structure, distinguished by securities primarily on both ends of the yield curve
rather than in the middle, is beneficial during extended periods of economic
strength as well as when there is a narrowing yield curve; two themes in the
fixed-income market over the past several quarters. In fact, after being
implemented roughly a year ago, this strategy paid off handsomely during much of
the 12-month period. We felt, however, that fundamental changes taking place
within the economy warranted the removal of the barbell structure and going to a
more evenly distributed portfolio structure.
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PORTFOLIO QUALITY
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(based on 9/30/98 portfolio assets)
[PIE CHART APPEARS HERE]
U.S. Government Agency -- 50.5%
A -- 18.3%
U.S. Government -- 14.6%
AA -- 7.0%
AAA -- 4.8%
BAA -- 3.2%
Less than CAA -- 1.6%
Outlook
We maintain a very cautious outlook for the final months of 1998. Problems in
several international economies continue to filter back to the U.S. financial
markets in the form of increased volatility. Although we feel this turbulence is
likely to continue in the near term, we are confident that adjustments made to
the portfolio have positioned the Fund to perform well within this environment.
From a duration standpoint, we anticipate maintaining a neutral-to-modestly-long
duration as interest rates stay in their trading range and possibly trend lower.
We will continue to closely monitor the market and wait until the outcome of the
global crisis becomes clearer before taking more aggressive duration or sector
bets.
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of the Assets of
THE TATTERSALL BOND FUND
a Series of
WILLIAMSBURG INVESTMENT TRUST
P.O. Box 5354
Cincinnati, Ohio 45201-5354
(800) 433-4249
By and In Exchange For Shares of
EVERGREEN SELECT CORE BOND FUND
a Series of
EVERGREEN SELECT FIXED INCOME TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 343-2898
This Statement of Additional Information, relating specifically to the
proposed transfer of the assets and liabilities of The Tattersall Bond Fund
("Tattersall Bond"), a series of Williamsburg Investment Trust, to Evergreen
Select Core Bond Fund ("Evergreen Core Bond"), a series of Evergreen Select
Fixed Income Trust, in exchange for Institutional Service shares (to be issued
to holders of Service Group shares of Tattersall Bond) and Institutional shares
(to be issued to holders of Institutional shares of Tattersall Bond) of
beneficial interest, $.001 par value per share, of Evergreen Core Bond, consists
of this cover page and the following described documents, each of which is
attached hereto and incorporated by reference herein:
(1) The Statement of Additional Information of Evergreen
Core Bond dated February 1, 1999;
(2) The Statement of Additional Information of Tattersall Bond
dated August 1, 1998, as revised December 31, 1998;
(3) Annual Report of Tattersall Bond (formerly known as The
Jamestown Bond Fund) for the year ended March 31, 1998;
(4) Semi-Annual Report of Tattersall Bond for the six month period
ended September 30, 1998;
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<PAGE>
(5) Annual Report of Evergreen Core Bond for the year ended
September 30, 1998; and
(6) Pro-Forma Combining Financial Statements of Evergreen Core
Bond for September 30, 1998 and the twelve months then ended
(unaudited).
This Statement of Additional Information, which is not a prospectus,
supplements, and should be read in conjunction with, the Prospectus/Proxy
Statement of Evergreen Core Bond and Tattersall Bond dated May 10, 1999. A copy
of the Prospectus/Proxy Statement may be obtained without charge by calling or
writing to Evergreen Core Bond or Tattersall Bond at the telephone numbers or
addresses set forth above.
The date of this Statement of Additional Information is May 10, 1999.
EVERGREEN SELECT FIXED INCOME TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 633-2700
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1999
Evergreen Select Adjustable Rate
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 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 all classes of
shares of the Funds listed above. It is not a prospectus but should be read in
conjunction with the prospectuses dated February 1, 1999 for the Fund in which
you are interested. The Funds are offered through two separate prospectuses: one
offering Institutional and Institutional Service shares of each Fund, and one
offering Charitable shares of Evergreen Select Core Bond Fund. You may obtain
either of these prospectuses without charge by calling (800) 343-2898.
Certain information may be incorporated by reference to the Funds' Annual Report
dated September 30, 1998. You may obtain a copy of the Annual Report without
charge by calling (800) 343-2898.
TABLE OF CONTENTS
PART 1
TRUST HISTORY
INVESTMENT POLICIES
OTHER SECURITIES AND PRACTICES
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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
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
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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
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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.
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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
Municipal Bonds
Repurchase Agreements
Virgin Islands, Guam and Puerto Rico Reverse Repurchase Agreements Master Demand
Notes Options Obligations of Foreign Branches of U.S. Banks Futures Transactions
Obligations of U.S. Branches of Foreign Banks Foreign Securities Payment-In-Kind
Securities (PIKs) Foreign Currency Zero Coupon Bonds High Yield High Risk Bonds
Mortgage-Backed and Asset-Backed Securities Illiquid and Restricted Securities
Variable or Floating Rate Instruments Investment in Other Investment Companies
PRINCIPAL HOLDERS OF FUND SHARES
As of December 31, 1998 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 December 31, 1998.
Evergreen Select Adjustable Rate Fund 92.826%
Institutional Class
AMPEX Retirement Master Trust
PO Box 1992
Boston, Ma 02105-1992
First Union National BK BK/EB/INT 5.892%
Reinvest Acct
Attn Trust Oper FD GRP
401 S Tryon St 3rd Fl CMG 1151
Charlotte, NC 28201-1911
Evergreen Select Adjustable Rate Fund 11.297%
Institutional Service Class
Skyline Telephone Membership Corp.
Attn: Hobart G. Davis
PO Box 759
West Jefferson, NC 28694
Wexford Clearing Serv Corp 15.023%
FBO Carl F. McLarand
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695 Town Center Dr. STE 300
Costa Mesa, CA 92626-1924
William H. Morgan Jr. 13.395%
906 Weightman
Greenwood, MS 38930-2438
Star Telephone Membership Corp 9.942%
Milton R. TEW EXEC
PO Box 348
3900 N US 421 HWY Clinton,
NC 28329-0348
M & M Farms 6.565%
906 Weightman
Greenwood, MS 38930-2438
Union Pacific 8.264%
RR-UTU Crew Consist
G0569-Pool 090
1999 Michael Errico,
manager-payroll
Acc 1416 Dodge St, MC7080
Omaha, NE 68179-0001
Union Pacific 5.042%
RR-UTU Crew Consist
G0577-Pool 088 1999
Michael Errico,
manager-payroll Acct.
1416 Dodge St, MC7080
Omaha, NE 68179-0001
Evergreen Select Core Bond Fund 66.802%
Institutional Class
First Union National Bank
Trust Accounts
Attn Ginny Batten
11th FL CMG-1151
301 S. Tryon St
Charlotte, NC 28201-1910
First Union National 33.198%
BK BK/EB/INT Cash Acct
Attn Trust Oper FD GRP
401 S Tryon St 3rd Fl
CMG 1151 Charlotte, NC 28201-1911
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Evergreen Select Core Bond Fund 63.807%
Institutional Service Class
Thomas F. Hackett C/O Warren
S. Beebe Jr., CPA
PO Box 849
Oakhurst, NH 07755-0849
First Union Brokerage Services 36.193%
Essex CNTY Comm American Legion
A/C 5142-1648
29 Newell Drive
Bloomfield, NJ 07003
Evergreen Select Core Bond Fund 98.827%
Charitable Class
First Union National
BK BK/EB/INT Cash Acct
Attn Trust Oper FD GRP
401 S Tryon St 3rd Fl
CMG 1151
Charlotte, NC
28201-1911
Evergreen Select Fixed Income Fund 73.597%
Institutional Class
First Union National
BK BK/EB/INT
Cash Acct
Attn Trust Oper FD GRP
401 S Tryon St 3rd Fl
CMG 1151
Charlotte, NC 28201-1911
First Union National 32.852%
BK BK/EB/INT
Reinvest Acct
Attn Trust Oper FD GRP
401 S Tryon St 3rd Fl
CMG 1151
Charlotte, NC 28201-1911
Evergreen Select Fixed Income Fund 6.690%
Institutional Service Class
Wilbranch & Co.
FBO William D.
Martin A/C #30557600
PO Box 2887
Wilson, NC 27894
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Wachovia Bank FBO 5.492%
James E. Roberts
NA TTEE Revocable Trust
U/AA/D 9-2-98 PO Box 3073MC NC-31057 301 N.Main St Winston-Salem NC 27150
Evergreen Select Income Plus Fund 88.522%
Institutional Class
First Union National
BK BK/EB/INT Cash Acct
Attn Trust Oper FD GRP
401 S Tryon St 3rd Fl
CMG 1151
Charlotte, NC 28201-1911
First Union National 11.196%
BK BK/EB/INT
Reinvest Acct
Attn Trust Oper FD GRP
401 S Tryon St
3rd Fl
CMG 1151
Charlotte, NC 28201-1911
Evergreen Select Income Plus Fund 99.634%
Institutional Service Class
None
Evergreen Select Intermediate Term Municipal Bond Fund
Institutional Class
First Union National
BK BK/EB/INT
Cash Acct
Attn Trust Oper FD GRP
401 S Tryon St 3rd Fl
CMG 1151
Charlotte, NC 28201-1911
Evergreen Select Bond Fund 5.542%
Institutional Service Class
Fubs & Co FBO
Theodore Halus Children's Trust
A/C #885-74C53
201 S. College St
Charlotte, NC 28288-1167
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National Financial Services Corp. 7.627%
FBO Christopher Sturdy
A/C 051824364
One World Fin Center
New York, NY 10281
Dean Witter 5.218%
FBO TIA Rosengarten
A/C #428-017227-008
PO Box 836
Rutland, VT 05702-0836
Merrill Lynch FBO 5.279%
Francis B Lentz Trust
A/C #885-74C53
300 Davison Ave 2nd Fl
West Sommerset, NJ 08873
Evergreen Select International Bond Fund 11.021%
Institutional Class
First Union National BK BK/EB/INT
Cash Acct
Attn Trust Oper FD GRP
401 S Tryon St 3rd Fl CMG 1151
Charlotte, NC 28201-1911
First Union National BK BK/EB/INT 76.731%
Reinvest Acct
Attn Trust Oper FD GRP
401 S Tryon St 3rd Fl CMG 1151
Charlotte, NC 28201-1911
Post & Co 12.249%
350302
The Bank Of New York
Mutual Fund/Reorg
Dept. PO Box
1066 Wall Street Station
New York, NY 10258
Evergreen Select International Bond Fund 52.914%
Institutional Service Class
State Street Bank & Trust Co
Allen Luke
17 Bennett Court
East Bruswick, NJ 08816-3686
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<PAGE>
State Street Bank & Trust Co 10.071%
Cust For The IRA Of Jane M. Grove
217 W. High St
Red Lion, PA 17356-1527
Lowell J. Croshaw 7.032%
Debra H. Croshaw
Jtten 2137
Riverbend RD
Allentown, PA 18103-9682
First Union Brokerage Services 5.699%
Marquerite D. McKenna IRA
A/C 5728-2173
1460 Stockton RD
Meadowbrook, PA 19046-1131
Evergreen Select Limited Duration Fund 32.852%
Institutional Class
First Union National BK BK/EB/INT
Cash Acct
Attn Trust Oper FD GRP
401 S Tryon St 3rd Fl
CMG 1151
Charlotte, NC
28201-1911
First Union National 67.064%
BK BK/EB/INT
Reinvest Acct
Attn Trust Oper FD GRP
401 S Tryon St 3rd Fl
CMG 1151
Charlotte, NC 28201-1911
Evergreen Select Limited Duration Fund 66.888%
Institutional Service Class
State Street Bank & Trust Co
Cust For The Rollover IRA Of Frank L. Caiola
321 Evergreen Drive
North Wales, PA 19454-2701
First Union Brokerage Co 8.415%
Milton G. Hyde IRA
A/C 4445-2273
1695 Grandview Rd.
Pasadena, MD 21122
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<PAGE>
Fubs & Co 17.899%
FEBO
John M Ennis
IRA A/C 29887835
201 South College Street
Charlotte, NC 28288-1167
Evergreen Select Total Return Fund 79.611%
Institutional Class
First Union National Bank
BK/EB/INT
Reinvest Acct
Attn Trust Oper FD Grp
401 S Tryon St 3rd FL
CMG 1151
Charlotte, NC 28201-1911
First Union National Bank 20.389%
BK/EB/INT
Cash Acct
Attn Trust Oper FD Grp
401 S. Tryon St 3rd FL
CMG 1151
Charlotte, NC 28201-1911
Evergreen Select Total Return Fund 98.341%
Institutional Service Class
First Union National Bank
Trust Acct
Attn Ginny Batten
CMG 1151 11th Fl
301 S. Tryon Street
Charlotte, NC 28201-1910
EXPENSES
Advisory Fees
Each Fund has its own investment advisor. (For more information, see Investment
Advisory Agreements in Part 2 of this SAI.)
Evergreen Investment Management ("EIM"), formerly the First Capital Group of
First Union National Bank, is the investment advisor to Limited Duration, Core
Bond, Fixed Income, Income Plus, Total Return and Intermediate Term Municipal
Bond. EIM is entitled to receive from each of these Funds an annual fee based on
a percent of the Fund's average net assets, as follows:
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Limited Duration 0.30%
Core Bond 0.40%
Fixed Income 0.50%
Income Plus 0.50%
Total Return 0.40%
Intermediate Term 0.60%
Municipal Bond
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. EIMC is
entitled to receive from Adjustable Rate 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. FIA is
entitled to receive from International Bond 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 (1) $61,312 $0
Adjustable Rate (2) $137,489 $0
Core Bond (3) $1,862,392 $526,182
Fixed Income (3) $2,219,526 $504,930
Income Plus (3) $5,151,727 $1,033,751
Intermediate Term
Municipal Bond (3) $3,831,537 $639,284
International Bond (4) $60,189 $45,948
International Bond (5) $221,000 $36,000
Limited Duration (3) $154,868 $152,769
Total Return (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.
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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 (1) $101,412 $0
International Bond (2) $207,000 $32,160
Period Ended 1996
Adjustable Rate (3) $121,105 $0
International Bond (2) $145,856 $145,157
1. Five months ended February 28, 1997. The Fund changed its fiscal year end f
ro 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 and
Charitable shares do not pay 12b-1 fees. For more information, see "Distribution
Expenses Under Rule 12b-1" in Part 2 of this SAI.
Fund/Period Institutional Service
Shares
Service Fees
Period Ended 1998
Adjustable Rate $14,710
Core Bond $285
Fixed Income $8,535
Income Plus $6,981
Intermediate Term
Municipal Bond $3,458
International Bond $92
Limited Duration $268
Total Return $13
For the periods ended February 28, 1998, 1997 and September 30, 1996 the
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Institutional Service Shares of Adjustable Rate Fund paid $17,676, $9,161 and
$23,210, respectively in 12b-1 service fees.
The table below shows the aggregate sales charges payable for the fiscal years
ended June 30, 1996 and 1997 to SEI Investments Distribution Co. (SEI), the
predecessor fund's distributor.
Fund Aggregate Sales Charge Amount Retained BY SEI
Payable to SEI
1996 1997 1996 1997
International Bond -- $48 -- $0
The table below shows the distribution fees SEI received with respect to
Class A shares of the predecessor fund for the fiscal year ended June 30, 1997.
Amount Paid to
Fund Amount Received 3rd Parties
International Bond $421 $421
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.
Trustee Aggregate Total Compensation
Compensation from from Trust and Fund
Trust Complex Paid to
Trustees**
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
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Russell A. Salton, III $4,021 $81,625
Michael S. Scofield $4,047 $81,924
Richard J. Shima $3,865 $70,150
Robert J. Jeffries* $1,848 $28,437
Foster Bam* $1,848 $42,950
* Former Trustee; retired as of December 31, 1997. ** 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
PERFORMANCE
Total Return
Below are the annual total returns for each class of shares of the Funds as of
September 30, 1998. The returns for Select Total Return Fund are cummulative.
For more information, see "Total Return" under Performance Calculations in Part
2 of this SAI.
Fund/Class One Year Five Years Ten Years or Inception
Since Inception
Adjustable Rate
Institutional 5.54% 5.63% 5.58% 10/1/91
Institutional
Service 5.17% 5.33% 5.37% 5/23/94
Core Bond
Institutional 10.75% 5.96% 8.78% 12/19/97
Institutional
Service 10.55% 5.71% 8.52% 3/9/98
Charitable 10.75% 5.96% 8.78% 2/28/86
Fixed Income
Institutional 9.23% 5.78% 7.89% 3/31/71
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Institutional
Service 9.04% 5.53% 7.64% 3/2/98
Income Plus
Institutional 11.14% 6.40% 8.37% 8/31/88
Institutional
Service 10.96% 6.15% 8.10% 3/2/98
Intermediate Term
Municipal Bond
Institutional 8.62% 5.53% 6.75% 1/31/84
Institutional
Service 8.43% 5.28% 6.49% 3/2/98
International Bond
Institutional 6.31% N/A 4.58% 12/15/93
Institutional
Service 6.05% N/A 4.33% 12/15/93
Limited Duration
Institutional 7.27% N/A 6.32% 4/30/94
Institutional
Service 7.15% N/A 6.09% 7/28/98
Total Return
Institutional N/A N/A 2.83% 4/20/98
Institutional
Service N/A N/A 2.79% 8/03/98
1. On select Adjustable Rate Institutional Service shares, historical
performance prior to the class inception, reflects that of the
Institutional shares, the original shares offered and does not include
12b-1 fees. Performance for the Institutional Service shares for this
period would have been lower had the 12b-1 fees been included.
2. On Fixed Income, Income Plus, Intermediate Term Municipal and Limited
Duration, performance information includes the performance of the
Fund's predecessor common trust fund for the periods before the Fund's
registration statement became effective on 11/21/97. Performance for
the common trust fund has been adjusted to include the effect of
estimated mutual fund gross expense ratios at the time the fund was
converted to a mutual fund. Institutional Service shares performance
for the period between 11/24/97 and the classes' inception, is based
on the historical performance of the Institutional shares, original
shares offered, and therefore do not reflect 12b-1 fees. Performance
for the Institutional Service shares for this period would have been
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lower had the 12b-1 fees been included.
3. On Core Bond, performance information includes the performance of the
Fund's predecessor common trust fund for the periods before the Fund's
registration statement became effective on 11/21/97. Performance for
the common trust fund has been adjusted to include the effect of
estimated mutual fund gross expense ratios at the time the Fund was
converted to a mutual fund. Institutional share performance for the
period between 11/24/97 and the classes' inception, is based on the
historical performance of the Charitable shares, the original shares
offered. Since Institutional Service share performance for the period
between 11/24/97 and its inception, is based on the historical
performance of the Charitable shares, 12b-1 fees are not included.
Performance for the Institutional Service shares for this period
would be lower had the 12b-1 fees been included.
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.
30-Day SEC Yield
Fund Institutional Institutional Service Charitable
Adjustable Rate 5.75% 5.46% N/A
Core Bond 5.66% 5.42% 5.67%
Fixed Income 5.37% 5.12% N/A
Income Plus 5.45% 5.23% N/A
Intermediate Term
Municipal Bond 4.37% 4.12% N/A
International Bond 4.76% 4.50% N/A
Limited Duration 5.25% 4.99% N/A
Total Return 6.55% 6.32 N/A
Below are the tax equivalent yields for each class of shares of the Intermediate
Term Municipal Bond Fund for the seven-day period ended September 30, 1998. 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.
30 day SEC Tax Equivalent Yield
Institutional Institutional Service
Intermediate Term
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Municipal Bond 7.24% 6.82%
SERVICE PROVIDERS
Administrator
Evergreen Investment Services, Inc. ("EIS") serves as administrator to
each of the Funds other than Adjustable Rate, 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%
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. The Fund pays ESC annual fees as follows:
Fund Type Annual Fee Annual Fee
Per Open Per Closed
Account 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
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Distributor
Evergreen Distributor, Inc. (the "Distributor") markets the Funds
through broker-dealers and other financial representatives. Its address is 125
W. 55th Street, New York, NY 10019.
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 Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110, audits the
financial statements of Adjustable Rate.
Custodian
State Street Bank and Trust Company is the Funds' custodian. The bank
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.
FINANCIAL STATEMENTS
The audited financial statements and the reports thereon are hereby incorporated
by reference to the Funds' Annual Reports. The financial statements for
Evergreen Select International Bond Fund, for the periods ended June 30, 1994 to
June 30, 1998 have been audited by Ernst & Young LLP, independent auditors, and
are incorporated into the Fund's Annual Report. A copy of the Funds' Annual
Report may be obtained without charge from ESC, P.O. Box 2121, Boston,
Massachusetts 02106-2121.
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
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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 Fund for Total Return 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) Credit System, including the National Bank for Cooperatives,
Farm Credit Banks and Banks for Cooperatives;
(ii) 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.
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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
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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.
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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.
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
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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
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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
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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
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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
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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.
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
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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.
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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.
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
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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
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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. 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.
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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
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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.
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
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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 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
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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.
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
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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
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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
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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 other that the Evergreen Select Funds. 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.
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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 Fund's opinion, the last sales price does not reflect a 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:
P = initial payment of $1,000 T = average total return N = number of
years ERV = ending redeemable value of the initial $1,000
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,
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according to the following formula:
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:
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:
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
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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.
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DISTRIBUTION EXPENSES UNDER RULE 12b-1
The Fund bears some of the costs of selling its Class A, Class B, and, when
applicable, Class C shares, or Institutional Service shares, 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, and, when applicable, Class C
shares, or Institutional Service shares, 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 0.35%*
*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.
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 and, if applicable, Class C shares. 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%
*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
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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;
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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
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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"). If the (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
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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
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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
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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. 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
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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
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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
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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
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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 Evergreen Asset Management Corp., MFS Institutional
Advisors, Inc. ("MFS"), OppenheimerFunds, Inc. ("Oppenheimer") and Putnam
Investment Management, Inc. ("Putnam").
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The Trust and FUNB have filed an exemptive application with, and expect in the
near future to receive 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 will permit 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 will permit the Fund to disclose the
Managers' fees only in the aggregate.
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, and Messrs. Scofield and 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, other than Evergreen Variable
Trust of which Messrs. Howell, Salton and Scofield are the only Trustees.
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Principal Occupations
Name Position with Trust for Last Five Years
Laurence B. Ashkin Trustee
(DOB: 2/2/28) Real estate developer and
construction consultant; and
President of Centrum
Equities and Centrum
Properties, Inc.
Charles A. Austin III Trustee Investment Counselor to
DOB: (10/23/34) Appleton 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
(DOB: 10/12/38) Chairman of the Finance
Committee, Cambridge 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 Chairman,
Gifford, Drescher & Associates
(environmental consulting)
James S. Howell Chairman of the Former Chairman of the
(DOB: 8/13/24) Board of Trustees Distrubution Foundation for
the Carolinas; and former Vice
President of Lance Inc.
(food manufacturing)
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Leroy Keith, Jr. Trustee Chairman of the Board and
(DOB: 2/14/39) Chief 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
(DOB: 7/14/39) Nucor-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 Care/
(DOB: 6/2/47) Aetna Health Services; former
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Managed Health Care Consultant;
and former President, Primary
Physician Care.
Michael S. Scofield Trustee Attorney, Law Offices of Michael
DOB: 2/20/43) S. Scofield.
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
Corporation, 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
Corporation; 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 and Vice President, Tax, BISYS
(DOB: 6/6/63) Assistant Treasurer Fund Services; former
Assistant Vice President,
EAMC/First Union Bank;
former Senior Tax
Consulting/Acting Manager,
Investment Companies Group,
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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.
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)
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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
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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.
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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.
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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 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.
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- - -- 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.
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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
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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
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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
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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 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.
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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
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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.
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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
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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.
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STATEMENT OF ADDITIONAL INFORMATION
THE TATTERSALL BOND FUNDS
The Tattersall Bond Fund
The Tattersall Short Term Bond Fund
August 1, 1998
Revised December 31, 1998
Series of
WILLIAMSBURG INVESTMENT TRUST
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Telephone 1-800-443-4249
TABLE OF CONTENTS
-----------------
INVESTMENT OBJECTIVES AND POLICIES.......................................... 2
DESCRIPTION OF BOND RATINGS................................................. 5
INVESTMENT LIMITATIONS...................................................... 8
TRUSTEES AND OFFICERS....................................................... 10
INVESTMENT ADVISOR.......................................................... 15
ADMINISTRATOR............................................................... 16
OTHER SERVICES.............................................................. 16
BROKERAGE................................................................... 17
SPECIAL SHAREHOLDER SERVICES................................................ 18
PLAN OF DISTRIBUTION........................................................ 19
PURCHASE OF SHARES.......................................................... 20
REDEMPTION OF SHARES........................................................ 21
NET ASSET VALUE DETERMINATION............................................... 22
ALLOCATION OF TRUST EXPENSES................................................ 22
ADDITIONAL TAX INFORMATION.................................................. 22
CAPITAL SHARES AND VOTING................................................... 24
CALCULATION OF PERFORMANCE DATA............................................. 25
FINANCIAL STATEMENTS AND REPORTS............................................ 27
This Statement of Additional Information is not a prospectus and should only be
read in conjunction with the Prospectus of The Tattersall Bond Funds (the
"Funds") dated August 1, 1998, as revised December 31, 1998. The Prospectus may
be obtained from the Funds, at the address and phone number shown above, at no
charge.
INVESTMENT OBJECTIVES AND POLICIES
All information contained herein applies to both The Tattersall Bond Fund (the
"Bond Fund") and The Tattersall Short Term Bond Fund (the "Short Term Fund")
unless otherwise noted.
The investment objectives and policies of the Funds are described in the
Prospectus. Supplemental information about these policies is set forth below.
Certain capitalized terms used herein are defined in the Prospectus.
REPURCHASE AGREEMENTS. The Funds may acquire U.S. Government Securities subject
to repurchase agreements. A repurchase transaction occurs when, at the time a
Fund purchases a security (normally a U.S. Treasury obligation), it also resells
it to the vendor (normally a member bank of the Federal Reserve System or a
registered Government Securities dealer) and must deliver the security (and/or
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securities substituted for them under the repurchase agreement) to the vendor on
an agreed upon date in the future. Such securities, including any securities so
substituted, are referred to as the "Repurchase Securities." The repurchase
price exceeds the purchase price by an amount which reflects an agreed upon
market interest rate effective for the period of time during which the
repurchase agreement is in effect.
The majority of these transactions run day to day and the delivery pursuant to
the resale typically will occur within one to five days of the purchase. The
Funds' risk is limited to the ability of the vendor to pay the agreed upon sum
upon the delivery date; in the event of bankruptcy or other default by the
vendor, there may be possible delays and expenses in liquidating the instrument
purchased, decline in its value and loss of interest. These risks are minimized
when the Funds hold a perfected security interest in the Repurchase Securities
and can therefore sell the instrument promptly. Under guidelines issued by the
Trustees, the Advisor will carefully consider the creditworthiness during the
term of the repurchase agreement. Repurchase agreements are considered as loans
collateralized by the Repurchase Securities, such agreements being defined as
"loans" under the Investment Company Act of 1940 (the "1940 Act"). The return on
such "collateral" may be more or less than that from the repurchase agreement.
The market value of the resold securities will be monitored so that the value of
the "collateral" is at all times as least equal to the value of the loan,
including the accrued interest earned thereon. All Repurchase Securities will be
held by the Funds' custodian either directly or through a securities depository.
- 2 -
SECURITIES OF UNSEASONED COMPANIES. The securities of unseasoned companies
(those in business less than three years, including predecessors and, in the
case of bonds, guarantors) may have a limited trading market, which may
adversely affect disposition. If other investors attempt to dispose of such
holdings when the Funds desire to do so, the Funds could receive lower prices
than might otherwise be obtained. Because of the increased risk over larger,
better known companies, each Fund limits its investments in the securities of
unseasoned issuers to no more than 5% of its total assets.
U.S. GOVERNMENT SECURITIES. Each Fund may invest in debt obligations which are
issued or guaranteed by the U.S. Government, its agencies and instrumentalities
("U.S. Government Securities") as described herein. U.S. Government Securities
include the following securities: (1) U.S. Treasury obligations of various
interest rates, maturities and issue dates, such as U.S. Treasury bills (mature
in one year or less), U.S. Treasury notes (mature in one to seven years), and
U.S. Treasury bonds (mature in more than seven years), the payments of principal
and interest of which are all backed by the full faith and credit of the U.S.
Government; (2) obligations issued or guaranteed by U.S. Government agencies or
instrumentalities, some of which are backed by the full faith and credit of the
U.S. Government, e.g., obligations of the Government National Mortgage
Association ("GNMA"), the Farmers Home Administration and the Export Import
Bank; some of which do not carry the full faith and credit of the U.S.
Government but which are supported by the right of the issuer to borrow from the
U.S. Government, e.g., obligations of the Tennessee Valley Authority, the U.S.
Postal Service, the Federal National Mortgage Association ("FNMA"), and the
Federal Home Loan Mortgage Corporation ("FHLMC"); and some of which are backed
only by the credit of the issuer itself, e.g., obligations of the Student Loan
Marketing Association, the Federal Home Loan Banks and the Federal Farm Credit
Bank; and (3) any of the foregoing purchased subject to repurchase agreements as
described herein. The Funds do not intend to invest in "zero coupon" Treasury
securities. The guarantee of the U.S. Government does not extend to the yield or
value of the Funds' shares.
Obligations of GNMA, FNMA and FHLMC may include direct pass-through
"Certificates," representing undivided ownership interests in pools of
mortgages. Such Certificates are guaranteed as to payment of principal and
<PAGE>
interest (but not as to price and yield) by the U.S. Government or the issuing
agency. Mortgage Certificates are subject to more rapid prepayment than their
stated maturity date would indicate; their rate of prepayment tends to
accelerate during periods of declining interest rates and, as a result, the
proceeds from such prepayments may be reinvested in instruments which have lower
yields. To the extent such securities were purchased at a premium, such
prepayments could result in capital losses. The U.S. Government does not
guarantee premiums and market value of U.S. Government Securities.
- 3 -
DESCRIPTION OF MONEY MARKET INSTRUMENTS. Money market instruments may include
U.S. Government Securities or corporate debt obligations (including those
subject to repurchase agreements) as described herein, provided that they mature
in thirteen months or less from the date of acquisition and are otherwise
eligible for purchase by the Funds. Money market instruments also may include
Bankers' Acceptances and Certificates of Deposit of domestic branches of U.S.
banks, Commercial Paper and Variable Amount Demand Master Notes ("Master
Notes"). BANKERS' ACCEPTANCES are time drafts drawn on and "accepted" by a bank,
are the customary means of effecting payment for merchandise sold in
import-export transactions and are a source of financing used extensively in
international trade. When a bank "accepts" such a time draft, it assumes
liability for its payment. When the Funds acquire a Bankers' Acceptance, the
bank which "accepted" the time draft is liable for payment of interest and
principal when due. The Bankers' Acceptance, therefore, carries the full faith
and credit of such bank. A CERTIFICATE OF DEPOSIT ("CD") is an unsecured
interest-bearing debt obligation of a bank. CDs acquired by the Funds would
generally be in amounts of $100,000 or more. COMMERCIAL PAPER is an unsecured,
short-term debt obligation of a bank, corporation or other borrower. Commercial
Paper maturity generally ranges from two to 270 days and is usually sold on a
discounted basis rather than as an interest-bearing instrument. The Funds will
invest in Commercial Paper only if it is rated in the highest rating category by
any nationally recognized statistical rating organization ("NRSRO") or, if not
rated, the issuer must have an outstanding unsecured debt issue rated in the
three highest categories by any NRSRO or, if not so rated, be of equivalent
quality in the Advisor's assessment. Commercial Paper may include Master Notes
of the same quality. MASTER NOTES are unsecured obligations which are redeemable
upon demand of the holder and which permit the investment of fluctuating amounts
at varying rates of interest. Master Notes are acquired by the Funds only
through the Master Note program of the Funds' custodian, acting as administrator
thereof. The Advisor will monitor, on a continuous basis, the earnings power,
cash flow and other liquidity ratios of the issuer of a Master Note held by the
Funds.
FORWARD COMMITMENT AND WHEN-ISSUED SECURITIES. The Funds may purchase securities
on a when-issued basis or for settlement at a future date if the Funds hold
sufficient assets to meet the purchase price. In such purchase transactions the
Funds will not accrue interest on the purchased security until the actual
settlement. Similarly, if a security is sold for a forward date, the Funds will
accrue the interest until the settlement of the sale. When-issued security
purchases and forward commitments have a higher degree of risk of price movement
before settlement due to the extended time period between the execution and
- 4 -
settlement of the purchase or sale. As a result, the exposure to the
counterparty of the purchase or sale is increased. Although the Funds would
generally purchase securities on a forward commitment or when-issued basis with
the intention of taking delivery, the Funds may sell such a security prior to
the settlement date if the Advisor felt such action was appropriate. In such a
case, the Funds could incur a short-term gain or loss.
<PAGE>
RESTRICTED SECURITIES. Each Fund may purchase securities that are not registered
("restricted securities") under the 1933 Act, but can be offered and sold to
"qualified institutional buyers" under Rule 144A of the 1933 Act. However, a
Fund will not invest more than 10% of its assets in illiquid investments, which
includes securities that are not readily marketable and restricted securities,
unless the Board of Trustees determines, based upon a continuing review of the
trading markets for the specific restricted security, that such restricted
securities are liquid. The Board of Trustees may adopt guidelines and delegate
to the Advisor the daily function of determining and monitoring liquidity of
restricted securities. It is not possible to predict with accuracy how the
markets for certain restricted securities will develop. Investing in restricted
securities could have the effect of increasing the level of a Fund's illiquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities. Each Fund currently intends to
limit its investments in restricted securities to no more than 5% of its net
assets.
DESCRIPTION OF BOND RATINGS
The various ratings used by the NRSROs are described below. A rating by an NRSRO
represents the organization's opinion as to the credit quality of the security
being traded. However, the ratings are general and are not absolute standards of
quality or guarantees as to the creditworthiness of an issuer. Consequently, the
Advisor believes that the quality of fixed-income securities in which the Funds
may invest should be continuously reviewed and that individual analysts give
different weightings to the various factors involved in credit analysis. A
rating is not a recommendation to purchase, sell or hold a security because it
does not take into account market value or suitability for a particular
investor. When a security has received a rating from more than one NRSRO, each
rating is evaluated independently. Ratings are based on current information
furnished by the issuer or obtained by the NRSROs from other sources that they
consider reliable. Ratings may be changed, suspended or withdrawn as a result of
changes in or unavailability of such information, or for other reasons.
- 5 -
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S BOND RATINGS:
Aaa: Bonds rated Aaa are judged to be of the best quality. These bonds
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 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 in Aa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements that make the long term
risks appear somewhat larger than in Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are to be
considered upper medium grade obligations. Factors giving security to principal
and interest are considered adequate but elements may be present that suggest a
susceptibility to impairment sometime 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.
<PAGE>
Moody's applies numerical modifiers (1,2 and 3) with respect to bonds rated Aa,
A and Baa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category.
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S BOND RATINGS:
AAA: This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA: Bonds rated AA also qualify as high quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
- 6 -
A: Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
DESCRIPTION OF FITCH INVESTORS SERVICE INC.'S BOND RATINGS:
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA: Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA.
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore,
impair timely payment.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category.
DESCRIPTION OF DUFF & PHELPS CREDIT RATING CO.'S BOND RATINGS:
AAA: This is the highest rating credit quality. The risk factors are
negligible, being only slightly more than for risk- free U.S. Treasury debt.
<PAGE>
- 7 -
AA: Bonds rated AA are considered to be of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
A: Bonds rated A have average protection factors. However risk factors are
more variable and greater in periods of economic stress.
BBB: Bonds rated BBB have below average protection factors, but are
considered sufficient for prudent investment. There is considerable variability
in risk during economic cycles.
INVESTMENT LIMITATIONS
The Funds have adopted the following investment limitations, in addition to
those described in the Prospectus, which cannot be changed without approval by
holders of a majority of the outstanding voting shares of the Funds. A
"majority" for this purpose, means the lesser of (i) 67% of a Fund's outstanding
shares represented in person or by proxy at a meeting at which more than 50% of
its outstanding shares are represented, or (ii) more than 50% of its outstanding
shares.
Under these limitations, each Fund MAY NOT:
(1) Invest more than 5% of the value of its total assets in the securities of
any one issuer or acquire more than 10% of the outstanding voting
securities of any one issuer (except that securities of the U.S.
Government, its agencies or instrumentalities are not subject to these
limitations);
(2) Invest 25% or more of the value of its total assets in any one industry or
group of industries (except that securities of the U.S. Government, its
agencies and instrumentalities are not subject to these limitations);
(3) Invest in the securities of any issuer if any of the officers or trustees
of the Trust or its Advisor who own beneficially more than 1/2 of 1% of the
outstanding securities of such issuer together own more than 5% of the
outstanding securities of such issuer;
(4) Invest for the purpose of exercising control or management of another
issuer;
(5) Invest in interests in real estate, real estate mortgage loans, oil, gas or
other mineral exploration or development programs, except that the Funds
may invest in the securities of companies (other than those which are not
readily marketable) which own or deal in such things, and the Funds may
invest in certain mortgage backed securities as described in the Prospectus
under "Investment Objectives, Investment Policies and Risk Considerations";
- 8 -
(6) Underwrite securities issued by others, except to the extent a Fund may be
deemed to be an underwriter under the federal securities laws in connection
with the disposition of portfolio securities;
(7) Purchase securities on margin (but the Funds may obtain such short-term
credits as may be necessary for the clearance of transactions);
(8) Make short sales of securities or maintain a short position, except short
sales "against the box." (A short sale is made by selling a security the
Fund does not own. A short sale is "against the box" to the extent the Fund
<PAGE>
contemporaneously owns or has the right to obtain at no added cost
securities identical to those sold short.);
(9) Participate on a joint or joint and several basis in any trading account in
securities;
(10) Purchase real estate or interests in real estate, except that securities in
which the Funds invest may themselves have investment in real estate or
interests in real estate (the Funds do invest in securities composed of
mortgages against real estate);
(11) Invest more than 10% of the value of its net assets in the aggregate in
illiquid securities (potentially including repurchase agreements with a
maturity of greater than 7 days, Interest Only or Principal Only
securities, and mortgage backed strips which may not be readily
marketable); or
(12) Write, purchase or sell puts, calls or combinations thereof, or purchase or
sell commodities, commodities contracts, futures contracts or related
options, or purchase, sell or write warrants.
Percentage restrictions stated as an investment policy or investment limitation
apply at the time of investment; if a later increase or decrease in percentage
beyond the specified limits results from a change in securities values or total
assets, it will not be considered a violation.
While the Funds have reserved the right to make short sales "against the box"
(limitation number 8, above), the Advisor has no present intention of engaging
in such transactions at this time or during the coming year.
- 9 -
TRUSTEES AND OFFICERS
Following are the Trustees and executive officers of the Williamsburg Investment
Trust (the "Trust"), their present position with the Trust or Funds, age,
principal occupation during the past 5 years and their aggregate compensation
from the Trust for the fiscal year ended March 31, 1998:
<TABLE>
<CAPTION>
Name, Position, Principal Occupation Compensation
Age and Address During Past 5 Years From the Trust
- - ------------------ -------------------- --------------
<S> <C> <C>
Austin Brockenbrough III (age 61) President and Managing None
Trustee** Director of Lowe, Brockenbrough
President & Company, Inc.,
The Jamestown International Equity Richmond, Virginia;
The Jamestown Tax Exempt Virginia Fund Director of Tredegar Industries,
6620 West Broad Street Inc. (plastics manufacturer) and
Suite 300 Wilkinson O'Grady & Co. Inc.
Richmond, Virginia 23230 (global asset manager); Trustee
of University of Richmond
John T. Bruce (age 44) Principal of None
Trustee and Chairman** Flippin, Bruce & Porter, Inc.,
Vice President Lynchburg, Virginia
FBP Contrarian Balanced Fund
FBP Contrarian Equity Fund
800 Main Street
Lynchburg, Virginia 24504
Charles M. Caravati, Jr. (age 61) Physician $9,000
Trustee** Dermatology Associates of
5600 Grove Avenue Virginia, P.C.,
Richmond, Virginia 23226 Richmond, Virginia
J. Finley Lee (age 58) Julian Price Professor Emeritus of $9,000
<PAGE>
Trustee Business Administration
614 Croom Court University of North Carolina,
Chapel Hill, North Carolina 27514 Chapel Hill, North Carolina;
Director of Montgomery Indemnity
Insurance Co.; Trustee of Albemarle
Investment Trust (registered
investment company)
Richard Mitchell (age 49) Principal of None
Trustee** T. Leavell & Associates, Inc.,
President Mobile, Alabama
The Government Street Bond Fund
The Government Street Equity Fund
The Alabama Tax Free Bond Fund
150 Government Street
Mobile, Alabama 36602
- 10 -
Richard L. Morrill (age 59) Chancellor, $9,000
Trustee University of Richmond,
7000 River Road Richmond, Virginia;
Richmond, Virginia 23229 Director of Tredegar
Industries, Inc.
Harris V. Morrissette (age 38) President of $8,000
Trustee Marshall Biscuit Co. Inc.,
1500 S. Beltline Hwy. Mobile, Alabama;
Mobile, Alabama 36693 Chairman of Azalea Aviation, Inc.
(airplane fueling); Director of
South Alabama Bank and
South Alabama Bancorporation
Fred T. Tattersall (age 49) Managing Director of None
Trustee** Tattersall Advisory Group, Inc.,
President Richmond, Virginia
The Tattersall Bond Fund
The Tattersall Short Term Bond Fund
6802 Paragon Place
Suite 200
Richmond, Virginia 23230
Erwin H. Will, Jr. (age 65) Chief Investment Officer of $6,500
Trustee Virginia Retirement System,
P.O. Box 2500 Richmond, Virginia
Richmond, Virginia 23218
Samuel B. Witt III (age 62) Senior Vice President and $9,000
Trustee General Counsel of Stateside
2300 Clarendon Blvd. Associates, Inc., Arlington,
Suite 407 Virginia; Director of The Swiss
Arlington, Virginia 22201 Helvetia Fund, Inc. (closed-end
investment company)
John P. Ackerly IV (age 35) Portfolio Manager of
Vice President Davenport & Company LLC,
The Davenport Equity Fund Richmond, Virginia;
One James Center, 901 E. Cary St. prior to February 1994, a
Richmond, Virginia 23219 Portfolio Manager with
Central Fidelity Bank
Joseph L. Antrim III (age 53) Executive Vice President of
President Davenport & Company LLC,
The Davenport Equity Fund Richmond, Virginia
One James Center, 901 E. Cary St.
Richmond, Virginia 23219
- 11 -
Charles M. Caravati III (age 32) Portfolio Manager of
Vice President Lowe, Brockenbrough & Company, Inc.,
The Jamestown International Equity Fund Richmond, Virginia
6620 West Broad Street
Suite 300
Richmond, Virginia 23230
John M. Flippin (age 56) Principal of
President Flippin, Bruce & Porter, Inc.,
<PAGE>
FBP Contrarian Balanced Fund Lynchburg, Virginia
FBP Contrarian Equity Fund
800 Main Street
Lynchburg, Virginia 24504
Timothy S. Healey (age 45) Principal of
Vice President T. Leavell & Associates, Inc.,
The Alabama Tax Free Bond Fund Mobile, Alabama
150 Government Street
Mobile, Alabama 36602
J. Lee Keiger III (age 43) First Vice President and Chief Financial
Vice President Officer of Davenport & Company LLC,
The Davenport Equity Fund Richmond, Virginia
One James Center, 901 E. Cary St.
Richmond, Virginia 23219
R. Gregory Porter, III (age 57) Principal of
Vice President Flippin, Bruce & Porter, Inc.,
FBP Contrarian Balanced Fund Lynchburg, Virginia
FBP Contrarian Equity Fund
800 Main Street
Lynchburg, Virginia 24504
Mark J. Seger (age 36) Vice President of Countrywide Fund Services,
Treasurer Inc. (registered transfer agent and administrator
312 Walnut Street, 21st Floor to the Trust) and CW Fund Distributors, Inc.
Cincinnati, Ohio 45202 (registered broker-dealer); Treasurer of Countrywide
Investment Trust, Countrywide Tax-Free Trust and
Countrywide Strategic Trust (registered
investment companies), Cincinnati, Ohio
Henry C. Spalding, Jr. (age 60) Executive Vice President of
President Lowe, Brockenbrough & Company, Inc.,
The Jamestown Balanced Fund Richmond, Virginia
The Jamestown Equity Fund
6620 West Broad Street
Suite 300
Richmond, Virginia 23230
- 12 -
John F. Splain (age 41) Vice President, General Counsel and Secretary
Secretary of Countrywide Fund Services, Inc., CW Fund
312 Walnut Street, 21st Floor Distributors, Inc., Countrywide Investments, Inc. and
Cincinnati, Ohio Countrywide Financial Services, Inc.; Secretary of
45202 Countrywide Investment Trust, Countrywide Tax-Free Trust and
Countrywide Strategic Trust, Cincinnati, Ohio
Ernest H. Stephenson, Jr. (age 53) Vice President of
Vice President Lowe, Brockenbrough & Company, Inc.,
The Jamestown Balanced Fund Richmond, Virginia
The Jamestown Equity Fund
6620 West Broad St.
Suite 300
Richmond, Virginia 23230
Connie R. Taylor (age 47) Administrator of
Vice President Lowe, Brockenbrough & Company, Inc.,
The Jamestown Balanced Fund Richmond, Virginia
The Jamestown Equity Fund
6620 West Broad Street
Suite 300
Richmond, Virginia 23230
Craig D. Truitt (age 39) Senior Vice President of
Vice President Tattersall Advisory Group, Inc.,
The Tattersall Bond Fund Richmond, Virginia
The Tattersall Short Term Bond Fund
6802 Paragon Place
Suite 200
Richmond, Virginia 23230
Beth Ann Walk (age 39) Portfolio Manager of
Vice President Lowe, Brockenbrough & Company, Inc.,
The Jamestown Tax Exempt Virginia Fund Richmond, Virginia
6620 West Broad Street
Suite 300
Richmond, Virginia 23230
<PAGE>
Coleman Wortham III (age 52) President and Chief Executive
Vice President Officer of Davenport & Company LLC,
The Davenport Equity Fund Richmond, Virginia
One James Center, 901 E. Cary St.
Richmond, Virginia 23219
- - -----------------------------
</TABLE>
**Indicates that Trustee is an Interested Person for purposes of the 1940
Act. Charles M. Caravati, Jr. is the father of Charles M. Caravati III.
- 13 -
Messrs. Lee, Morrill, Morrissette, Will and Witt constitute the Trust's
Nominating Committee. Messrs. Caravati, Lee, Morrill, Morrissette, Will and Witt
constitute the Trust's Audit Committee. The Audit Committee reviews annually the
nature and cost of the professional services rendered by the Trust's independent
accountants, the results of their year-end audit and their findings and
recommendations as to accounting and financial matters, including the adequacy
of internal controls. On the basis of this review the Audit Committee makes
recommendations to the Trustees as to the appointment of independent accountants
for the following year.
PRINCIPAL HOLDERS OF VOTING SECURITIES. As of July 2, 1998, the Trustees and
Officers of the Trust as a group owned beneficially (i.e., had voting and/or
investment power) less than 1% of the then outstanding shares of the Bond Fund
and 28.2% of the then outstanding shares of the Short Term Fund. On the same
date, Rockingham Health Care, Inc., 235 Cantrell Avenue, Harrisonburg, Virginia
22801, owned of record 36.6% of the then outstanding shares of the Short Term
Fund and may therefore be deemed to control the Short Term Fund. On the same
date, Rockingham Health Care, Inc. owned of record 14.4% of the then outstanding
shares of the Bond Fund; Rockingham Memorial Hospital Retirement Plan, 235
Cantrell Avenue, Harrisonburg, Virginia 22801, owned of record 8.7% of the then
outstanding shares of the Bond Fund; Halifax Regional Hospital, 2204 Wilborn
Avenue, South Boston, Virginia 24592, owned of record 10.0% of the then
outstanding shares of the Bond Fund; First National Bank of Maryland as trustee
for Hourly Employees Norshipco Pension Plans, P.O. Box 1596, Baltimore, Maryland
21203, owned of record 5.1% of the then outstanding shares of the Bond Fund;
Calvert Memorial Hospital, 100 Hospital Road, Prince Frederick, Maryland 20678,
owned of record 8.2% of the then outstanding shares of the Bond Fund; Virginia
International Terminals, Inc. Pension Plan, P.O. Box 1387, Norfolk, Virginia
23501, owned of record 9.3% of the then outstanding shares of the Bond Fund;
Portland Museum of Art, Seven Congress Square, Portland, Maine 04101, owned of
record 5.8% of the then outstanding shares of the Bond Fund; Lowe, Brockenbrough
& Tattersall Inc., together with its Money Purchase Pension Plan, 6620 West
Broad Street, Richmond, Virginia 23230, owned of record 16.6% of the then
outstanding shares of the Short Term Fund; the Tattersall Advisory Group, Inc.
Money Purchase Pension Plan, 6620 West Broad Street, Richmond, Virginia 23230,
owned of record 11.6% of the then outstanding shares of the Short Term Fund; the
McKay-Dee Foundation, 3939 Harrison Boulevard, Ogden, Utah 84403, owned of
record 8.2% of the then outstanding shares of the Short Term Fund; and Centura
Investment Management & Trust Services, P.O. Box 1220, Rocky Mount, North
Carolina 27802, owned of record 6.5% of the then outstanding shares of the Short
Term Fund.
- 14 -
INVESTMENT ADVISOR
Tattersall Advisory Group, Inc. (the "Advisor") supervises each Fund's
investments pursuant to an Investment Advisory Agreement (the "Advisory
Agreement") described in the Prospectus. The Advisory Agreement is effective
<PAGE>
until February 28, 1999 and will be renewed thereafter for one year periods only
so long as such renewal and continuance is specifically approved at least
annually by the Board of Trustees or by vote of a majority of the Funds'
outstanding voting securities, provided the continuance is also approved by a
majority of the Trustees who are not "interested persons" of the Trust or the
Advisor by vote cast in person at a meeting called for the purpose of voting on
such approval. The Advisory Agreement is terminable without penalty on sixty
days notice by the Board of Trustees of the Trust or by the Advisor. The
Advisory Agreement provides that it will terminate automatically in the event of
its assignment.
The Advisor is a Virginia corporation controlled by its majority shareholder,
Fred T. Tattersall. Prior to February 28, 1997, the investment advisor to each
Fund was Lowe, Brockenbrough & Tattersall, Inc. ("LB&T"), of which Mr.
Tattersall and Austin Brockenbrough III were the controlling shareholders. On
February 28, 1997, LB&T was reorganized by means of a corporate restructuring
into two separate legal entities: LB&T, owned by Mr. Brockenbrough, and the
Advisor, principally owned by Mr. Tattersall. The Advisor manages the
fixed-income accounts formerly managed by LB&T. In addition to acting as Advisor
to the Funds, the Advisor provides investment advice to corporations, trusts,
pension and profit sharing plans, other business and institutional accounts and
individuals.
Compensation of the Advisor, with respect to each Fund, is at the annual rate of
0.375% of such Fund's average daily net assets. For the fiscal years ended March
31, 1998, 1997 and 1996, the Advisor and/or LB&T received investment advisory
fees of $310,227, $289,094 and $305,247, respectively, from the Bond Fund. For
the fiscal years ended March 31, 1998 and 1997, the Advisor and/or LB&T each
waived its entire investment advisory fee from the Short Term Fund and
reimbursed the Fund for $6,909 and $6,864, respectively, of other operating
expenses. For the fiscal year ended March 31, 1996, LB&T received investment
advisory fees of $3,786 (which was net of voluntary fee waivers of $43,635) from
the Short Term Fund.
The Advisor provides a continuous investment program for the Funds, including
investment research and management with respect to all securities, investments,
cash and cash equivalents of the Funds. The Advisor determines what securities
and other investments will be purchased, retained or sold by the Funds, and
- 15 -
does so in accordance with the investment objectives and policies of the Funds
as described herein and in the Prospectus. The Advisor places all securities
orders for the Funds, determining with which broker, dealer, or issuer to place
the orders.
The Advisor must adhere to the brokerage policies of the Funds in placing all
orders, the substance of which policies are that the Advisor must seek at all
times the most favorable price and execution for all securities brokerage
transactions.
The Advisor also provides, at its own expense, certain Executive Officers to the
Trust.
ADMINISTRATOR
Countrywide Fund Services, Inc. (the "Administrator") maintains the records of
each shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of each Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. The Administrator also provides accounting and pricing
services to the Funds and supplies non-investment related statistical and
research data, internal regulatory compliance services and executive and
<PAGE>
administrative services. The Administrator supervises the preparation of tax
returns, reports to shareholders of the Funds, reports to and filings with the
Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees.
For the performance of these administrative services, each Fund pays the
Administrator a base fee at the annual rate of 0.075% of the average value of
its daily net assets up to $200,000,000 and 0.05% of such assets in excess of
$200,000,000 (subject to a minimum fee of $2,000 per month for each Fund) plus a
surcharge of $1,000 per month. In addition, the Funds pay out-of-pocket
expenses, including but not limited to, postage, envelopes, checks, drafts,
forms, reports, record storage and communication lines.
For the fiscal years ended March 31, 1998, 1997 and 1996, the Administrator
received fees of $67,341, $57,859 and $61,029, respectively, from the Bond Fund
and $24,000, $24,000 and $24,000, respectively, from the Short Term Fund.
OTHER SERVICES
The firm of Tait, Weller & Baker, Two Penn Center Plaza, Philadelphia,
Pennsylvania 19102, has been retained by the Board of Trustees to perform an
independent audit of the books and records of the Trust, to review the Funds'
federal and state tax returns and to consult with the Trust as to matters of
accounting and federal and state income taxation.
- 16 -
The Custodian of the Funds' assets is Star Bank, N.A., 425 Walnut Street,
Cincinnati, Ohio 45202. The Custodian holds all cash and securities of the Funds
(either in its possession or in its favor through "book entry systems"
authorized by the Trustees in accordance with the 1940 Act), collects all income
and effects all securities transactions on behalf of the Funds.
BROKERAGE
It is the Funds' practice to seek the best price and execution for all portfolio
securities transactions. The Advisor (subject to the general supervision of the
Board of Trustees) directs the execution of the Funds' portfolio transactions.
The Trust has adopted a policy which prohibits the Advisor from effecting Fund
portfolio transactions with broker-dealers which may be interested persons of
either Fund, the Trust, any Trustee, officer or director of the Trust or its
investment advisors or any interested person of such persons.
The Funds' portfolio transactions will normally be principal transactions
executed in over-the-counter markets and will be executed on a "net" basis,
which may include a dealer markup. However, the Bond Fund typically transacts in
shares of closed-end investment companies on an agency basis, and pays
commissions in connection with these transactions.
For the fiscal years ended March 31, 1998, 1997 and 1996, the total amount of
brokerage commissions paid by the Bond Fund was $14,820, $25,248 and $126,787,
respectively. No brokerage commissions were paid by the Short Term Fund for the
last three fiscal years.
While there is no formula, agreement or undertaking to do so, the Advisor may
allocate a portion of either Fund's brokerage commissions to persons or firms
providing the Advisor with research services, which may typically include, but
are not limited to, investment recommendations, financial, economic, political,
fundamental and technical market and interest rate data, and other statistical
or research services. Much of the information so obtained may also be used by
the Advisor for the benefit of the other clients it may have. Conversely, the
Funds may benefit from such transactions effected for the benefit of other
clients. In all cases, the Advisor is obligated to effect transactions for the
<PAGE>
Funds based upon obtaining the most favorable price and execution. Factors
considered by the Advisor in determining whether the Funds will receive the most
favorable price and execution include, among other things: the size of the
order, the broker's ability to effect and settle the transaction promptly and
efficiently and the Advisor's perception of the broker's reliability, integrity
and financial condition.
- 17 -
In an effort to reduce the total operating expenses of the Bond Fund, a portion
of the Fund's custodian fees 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 for the year ended March
31, 1998 were $9,678.
As of March 31, 1998, the Bond Fund held securities issued by Lehman Brothers
Holdings (having a market value of $929,227). During the fiscal year ended March
31, 1998, the Short Term Fund acquired securities issued by Merill Lynch &
Company, Inc. (having a market value of $392,707 as of March 31, 1998). Lehman
Brothers Holdings and Merrill Lynch & Company, Inc. are the parents of two of
the Trust's "regular broker-dealers" as defined in the 1940 Act.
SPECIAL SHAREHOLDER SERVICES
As noted in the Prospectus, the Funds offer the following shareholder services:
REGULAR ACCOUNT. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Funds, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a statement showing the current transaction and all prior
transactions in the shareholder account during the calendar year to date.
PURCHASES IN KIND. The Funds may accept securities in lieu of cash in payment
for the purchase of shares of the Funds. The acceptance of such securities is at
the sole discretion of the Advisor based upon the suitability of the securities
accepted for inclusion as a long term investment of the Funds, the marketability
of such securities, and other factors which the Advisor may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "How Net Asset Value is Determined" in the Prospectus.
REDEMPTIONS IN KIND. The Funds do not intend, under normal circumstances, to
redeem their securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Funds to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in portfolio
securities or other property of the Funds. Securities delivered in payment of
redemptions would be valued at the same
- 18 -
value assigned to them in computing the net asset value per share. Shareholders
receiving them would incur brokerage costs when these securities are sold. An
irrevocable election may be filed under Rule 18f-1 of the 1940 Act, wherein each
Fund commits itself to pay redemptions in cash, rather than in kind, to any
shareholder of record of the Funds who redeems during any ninety day period, the
lesser of (a) $250,000 or (b) one percent (1%) of a Fund's net assets at the
beginning of such period.
<PAGE>
TRANSFER OF REGISTRATION. To transfer shares to another owner, send a written
request to the Funds at the address shown herein. Your request should include
the following: (1) the Fund name and existing account registration; (2)
signature(s) of the registered owner(s) exactly as the signature(s) appear(s) on
the account registration; (3) the new account registration, address, social
security or taxpayer identification number and how dividends and capital gains
are to be distributed; (4) signature guarantees (see the Prospectus under the
heading "Signature Guarantees"); and (5) any additional documents which are
required for transfer by corporations, administrators, executors, trustees,
guardians, etc. If you have any questions about transferring shares, call or
write the Funds.
PLAN OF DISTRIBUTION
As described in the Prospectus, Service Group Shares of the Fund have adopted a
plan of distribution (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940 which permits Service Group Shares to pay for expenses
incurred in the distribution and promotion of the Funds' Service Group Shares,
including but not limited to, the printing of prospectuses, statements of
additional information and reports used for sales purposes, advertisements,
expenses of preparation and printing of sales literature, promotion, marketing
and sales expenses, and other distribution related expenses, including any
distribution fees paid to securities dealers or other firms who have executed a
distribution or service agreement with the Advisor. The Plan expressly limits
payment of distribution expenses listed above in any fiscal year to a maximum of
.15% of the average daily net assets of Service Group Shares of the Fund.
Unreimbursed expenses will not be carried over from year to year.
For the fiscal year ended March 31, 1998, Service Group Shares of the Bond Fund
incurred distribution expenses of $2,672, which amount was paid to financial
intermediaries for the retention of Service Group Shares.
Agreements implementing the Plan (the "Implementation Agreements"), including
agreements with financial consultants and other intermediaries wherein such
financial consultants and other intermediaries agree for a fee to act as agents
for the sale of the Fund's Service Group Shares, are in writing and have been
approved by the Board of Trustees. All payments made pursuant to the Plan are
made in accordance with written agreements.
- 19 -
The continuance of the Plan and the Implementation Agreements must be
specifically approved at least annually by a vote of the Trustees who are not
interested persons of the Trust and have no direct or indirect financial
interest in the Plan or any Implementation Agreement (the "Independent
Trustees") at a meeting called for the purpose of voting on such continuance.
The Plan may be terminated at any time by a vote of the majority of the
Independent Trustees or by a vote of the holders of a majority of the
outstanding Service Group Shares of the Fund. In the event the Plan is
terminated in accordance with its terms, Service Group Shares will not be
required to make any payments for expenses incurred by the Advisor after the
termination date. Each Implementation Agreement terminates automatically in the
event of its assignment and may be terminated at any time by a vote of a
majority of the Independent Trustees or by a vote of the holders of a majority
of the outstanding Service Group Shares on not more than 60 days' written notice
to any other party to the Implementation Agreement. The Plan may not be amended
to increase materially the amount to be spent for distribution without
shareholder approval. All material amendments to the Plan must be approved by a
vote of the Independent Trustees.
In approving the Plan, the Trustees determined, in the exercise of their
business judgment and in light of their fiduciary duties as Trustees, that there
is a reasonable likelihood that the Plan will benefit the Funds and the holders
<PAGE>
of their Service Group Shares. The Board of Trustees believes that the
expenditure of assets of Service Group Shares for distribution expenses under
the Plan should assist in the growth of such shares which will benefit the Funds
and the holders of their Service Group Shares through increased economies of
scale, greater investment flexibility, greater portfolio diversification and
less chance of disruption of planned investment strategies. The Plan will be
renewed only if the Trustees make a similar determination for each subsequent
year of the Plan. There can be no assurance that the benefits anticipated from
the expenditure of Service Group Shares' assets for distribution will be
realized. While the Plan is in effect, all amounts spent by Service Group Shares
pursuant to the Plan and the purposes for which such expenditures were made must
be reported quarterly to the Board of Trustees for its review. The selection and
nomination of those Trustees who are not interested persons of the Trust are
committed to the discretion of the Independent Trustees during such period.
PURCHASE OF SHARES
The purchase price of shares of each Fund is the net asset value next determined
after the order is received. An order received prior to 4:00 p.m., Eastern time
will be executed at the price computed on the date of receipt; and an order
received after that time will be executed at the price computed on the next
Business
- 20 -
Day. An order to purchase shares is not binding on the Funds until confirmed in
writing (or unless other arrangements have been made with the Funds, for example
in the case of orders utilizing wire transfer of funds) and payment has been
received.
Each Fund reserves the right in its sole discretion (i) to suspend the offering
of its shares, (ii) to reject purchase orders when in the judgment of management
such rejection is in the best interest of the Fund and its shareholders, and
(iii) to reduce or waive the minimum for initial and subsequent investments
under circumstances where certain economies can be achieved in sales of Fund
shares.
EMPLOYEES AND AFFILIATES OF THE FUNDS. The Funds have adopted initial investment
minimums for the purpose of reducing the cost to the Funds (and consequently to
the shareholders) of communicating with and servicing their shareholders.
However, a reduced minimum initial investment requirement of $5,000 applies to
Trustees, officers and employees of the Funds, the Advisor and certain parties
related thereto, including clients of the Advisor or any sponsor, officer,
committee member thereof, or the immediate family of any of them. In addition,
accounts having the same mailing address may be aggregated for purposes of the
minimum investment if they consent in writing to share a single mailing of
shareholder reports, proxy statements (but each such shareholder would receive
his/her own proxy) and other Fund literature.
REDEMPTION OF SHARES
Each Fund may suspend redemption privileges or postpone the date of payment (i)
during any period that the New York Stock Exchange (the "Exchange") is closed,
or trading on the Exchange is restricted as determined by the Securities and
Exchange Commission (the "Commission"), (ii) during any period when an emergency
exists as defined by the rules of the Commission as a result of which it is not
reasonably practicable for the Fund to dispose of securities owned by it, or to
fairly determine the value of its assets, and (iii) for such other periods as
the Commission may permit.
No charge is made by the Funds for redemptions, although the Trustees could
impose a redemption charge in the future. Any redemption may be more or less
than the shareholder's cost depending on the market value of the securities held
<PAGE>
by the Funds.
- 21 -
NET ASSET VALUE DETERMINATION
Under the 1940 Act, the Trustees are responsible for determining in good faith
the fair value of the securities and other assets of the Funds, and they have
adopted procedures to do so, as follows. The net asset value of each Fund is
determined as of the close of trading of the Exchange (currently 4:00 p.m.,
Eastern time) on each "Business Day." A Business Day means any day, Monday
through Friday, except for the following holidays: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Fourth of July, Labor
Day, Columbus Day, Veterans Day, Thanksgiving Day and Christmas. Net asset value
per share is determined by dividing the total value of all Fund securities and
other assets, less liabilities, by the total number of shares then outstanding.
Net asset value includes interest on fixed income securities, which is accrued
daily.
ALLOCATION OF TRUST EXPENSES
Each Fund of the Trust pays all of its own expenses not assumed by the Advisor
or the Administrator, including, but not limited to, the following: custodian,
shareholder servicing, stock transfer and dividend disbursing expenses; clerical
employees and junior level officers of the Trust as and if approved by the Board
of Trustees; taxes; expenses of the issuance and redemption of shares (including
registration and qualification fees and expenses); costs and expenses of
membership and attendance at meetings of certain associations which may be
deemed by the Trustees to be of overall benefit to the Fund and its
shareholders; legal and auditing expenses; and the cost of stationery and forms
prepared exclusively for the Funds. General Trust expenses are allocated among
the series, or funds, on a fair and equitable basis by the Board of Trustees,
which may be based on relative net assets of each fund (on the date the expense
is paid) or the nature of the services performed and the relative applicability
to each fund.
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUNDS. Each Fund intends to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). Among its requirements to qualify under Subchapter M, each Fund
must distribute annually at least 90% of its net investment income. In addition
to this distribution requirement, each Fund must derive at least 90% of its
gross income each taxable year from dividends, interest, payments with respect
to securities' loans, gains from the disposition of stock or securities, and
certain other income.
- 22 -
While the above requirements are aimed at qualification of the Funds as
regulated investment companies under Subchapter M of the Code, the Funds also
intend to comply with certain requirements of the Code to avoid liability for
federal income and excise tax. If the Funds remain qualified under Subchapter M,
they will not be subject to federal income tax to the extent they distribute
their taxable net investment income and net realized capital gains. A
nondeductible 4% federal excise tax will be imposed on each Fund to the extent
it does not distribute at least 98% of its ordinary taxable income for a
calendar year, plus 98% of its capital gain net taxable income for the one year
period ending each October 31, plus certain undistributed amounts from prior
years. While each Fund intends to distribute its taxable income and capital
gains in a manner so as to avoid imposition of the federal excise and income
taxes, there can be no assurance that the Funds indeed will make sufficient
<PAGE>
distributions to avoid entirely imposition of federal excise or income taxes.
As of March 31, 1998, the Short Term Fund had capital loss carryforwards for
federal income tax purposes of $586,098, which expire on March 31, 2005. In
addition, the Short Term Fund had net realized capital losses of $5,918 during
the period from November 1, 1997 through March 31, 1998, which are treated for
federal income tax purposes as arising during the Fund's fiscal year ending
March 31, 1999. These capital loss carryforwards and "post-October" losses may
be utilized in future years to offset net realized gains prior to distributing
such gains to shareholders.
Should additional series, or funds, be created by the Trustees, each fund would
be treated as a separate tax entity for federal income tax purposes.
TAX STATUS OF THE FUNDS' DIVIDENDS AND DISTRIBUTIONS. Dividends paid by the
Funds derived from net investment income or net short-term capital gains are
taxable to shareholders as ordinary income, whether received in cash or
reinvested in additional shares. Distributions, if any, of long-term capital
gains are taxable to shareholders as long-term capital gains, whether received
in cash or reinvested in additional shares, regardless of how long Fund shares
have been held. For information on "backup" withholding, see "How to Purchase
Shares" in the Prospectus.
Each Fund will send shareholders information each year on the tax status of
dividends and disbursements. A dividend or capital gains distribution paid
shortly after shares have been purchased, although in effect a return of
investment, is subject to federal income taxation. Dividends from net investment
income, along with capital gains, will be taxable to shareholders, whether
received in cash or shares and no matter how long you have held
- 23 -
Fund shares, even if they reduce the net asset value of shares below your cost
and thus in effect result in a return of part of your investment.
CAPITAL SHARES AND VOTING
Shares of the Funds, when issued, are fully paid and non-assessable and have no
preemptive or conversion rights. Shareholders are entitled to one vote for each
full share and a fractional vote for each fractional share held. Shares have
noncumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Trustees can elect 100% of the Trustees
and, in this event, the holders of the remaining shares voting will not be able
to elect any Trustees. The Trustees will hold office indefinitely, except that:
(1) any Trustee may resign or retire and (2) any Trustee may be removed with or
without cause at any time (a) by a written instrument, signed by at least
two-thirds of the number of Trustees prior to such removal; or (b) by vote of
shareholders holding not less than two-thirds of the outstanding shares of the
Trust, cast in person or by proxy at a meeting called for that purpose; or (c)
by a written declaration signed by shareholders holding not less than two-thirds
of the outstanding shares of the Trust and filed with the Trust's custodian.
Shareholders have certain rights, as set forth in the Declaration of Trust,
including the right to call a meeting of the shareholders for the purpose of
voting on the removal of one or more Trustees. Shareholders holding not less
than ten percent (10%) of the shares then outstanding may require the Trustees
to call such a meeting and the Trustees are obligated to provide certain
assistance to shareholders desiring to communicate with other shareholders in
such regard (e.g., providing access to shareholder lists, etc.). In case a
vacancy or an anticipated vacancy shall for any reason exist, the vacancy shall
be filled by the affirmative vote of a majority of the remaining Trustees,
subject to the provisions of Section 16(a) of the 1940 Act. The Trust does not
expect to have an annual meeting of shareholders.
<PAGE>
Both Service Group Shares and Institutional Shares of a Fund represent an
interest in the same assets of the Fund, have the same rights and are identical
in all material respects except that (i) Service Group Shares bear the expenses
of distribution fee; (ii) certain class specific expenses will be borne solely
by the class to which such expenses are attributable, including transfer agent
fees attributable to a specific class of shares, printing and postage expenses
related to preparing and distributing materials to current shareholders of a
specific class, registration fees incurred by a specific class of shares, the
expenses of administrative personnel and services required to support the
shareholders of a specific class, litigation or other legal expenses relating to
a class of shares, Trustees' fees or
- 24 -
expenses incurred as a result of issues relating to a specific class of shares
and accounting fees and expenses relating to a specific class of shares; and
(iii) each class has exclusive voting rights with respect to matters affecting
only that class. The Board of Trustees may classify and reclassify shares of the
Funds into additional classes of shares at a future date.
Prior to January 24, 1994, the Trust was called The Nottingham Investment Trust.
CALCULATION OF PERFORMANCE DATA
As indicated in the Prospectus, each Fund may, from time to time, advertise
certain total return and yield information. The average annual total return of
the Funds for a period is computed by subtracting the net asset value per share
at the beginning of the period from the net asset value per share at the end of
the period (after adjusting for the reinvestment of any income dividends and
capital gain distributions), and dividing the result by the net asset value per
share at the beginning of the period. In particular, the average annual total
return of a Fund ("T") is computed by using the redeemable value at the end of a
specified period of time ("ERV") of a hypothetical initial investment of $1,000
("P") over a period of time ("n") according to the formula P(l+T)n=ERV. The
average annual total return quotations for Institutional Shares of the Bond Fund
for the one year period ended March 31, 1998, for the five year period ended
March 31, 1998 and for the period since inception (December 13, 1990) to March
31, 1998 are 12.06%, 7.03% and 8.05%, respectively. The average annual total
return quotations for the Short Term Fund for the one year period ended March
31, 1998, for the five year period ended March 31, 1998 and for the period since
inception (January 21, 1992) to March 31, 1998 are 5.76%, 5.08% and 5.16%,
respectively.
In addition, each Fund may advertise other total return performance data
("Nonstandardized Return"). Nonstandardized Return shows as a percentage rate of
return encompassing all elements of return (i.e., income and capital
appreciation or depreciation); it assumes reinvestment of all dividends and
capital gain distributions. Nonstandardized Return may consist of a cumulative
percentage of return, actual year-by-year rates or any combination thereof.
From time to time, each Fund may advertise its yield. A yield quotation is based
on a 30-day (or one month) period and is computed 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:
- 25 -
6
Yield = 2[(a-b/cd + 1) - 1]
Where:
a = dividends and interest earned during the period
<PAGE>
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
Generally, interest earned (for the purpose of "a" above) on debt obligations is
computed by reference to the yield to maturity of each obligation held based on
the market value of the obligation (including actual accrued interest) at the
close of business on the last business day prior to the start of the 30-day (or
one month) period for which yield is being calculated, or, with respect to
obligations purchased during the month, the purchase price (plus actual accrued
interest). The yields of the Bond Fund's Institutional Shares and Service Group
Shares for the 30 days ended March 31, 1998 were 5.78% and 5.63%, respectively.
The yield of the Short Term Fund for the 30 days ended March 31, 1998 was 5.28%.
The Funds' performance may be compared in advertisements, sales literature and
other communications to the performance of other mutual funds having similar
objectives or to standardized indices or other measures of investment
performance. In particular, the Bond Fund may compare its performance to the
Lehman Brothers Government/Corporate Index and the Lehman Brothers Aggregate
Index, which are generally considered to be representative of the performance of
taxable bonds, and the Short Term Fund may compare its performance to the
Merrill Lynch 1-3 Year Treasury Index. Comparative performance may also be
expressed by reference to a ranking prepared by a mutual fund monitoring
service, such as Lipper Analytical Services, Inc. or Morningstar, Inc., or by
one or more newspapers, newsletters or financial periodicals. Performance
comparisons may be useful to investors who wish to compare the Funds' past
performance to that of other mutual funds and investment products. Of course,
past performance is not a guarantee of future results.
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in net asset value over a specific period
of time.
o MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
- 26 -
Investors may use such indices in addition to the Funds' Prospectus to obtain a
more complete view of the Funds' performance before investing. Of course, when
comparing the Funds' performance to any index, factors such as composition of
the index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price. Advertisements and
other sales literature for the Funds may quote total returns that are calculated
on non-standardized base periods. The total returns represent the historic
change in the value of an investment in the Funds based on monthly reinvestment
of dividends over a specified period of time.
From time to time the Funds may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the effects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. The Funds may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
<PAGE>
such as S&P and Moody's). The Funds may also depict the historical performance
of the securities in which the Funds may invest over periods reflecting a
variety of market or economic conditions either alone or in comparison with
alternative investments, performance indices of those investments, or economic
indicators. The Funds may also include in advertisements and in materials
furnished to present and prospective shareholders statements or illustrations
relating to the appropriateness of types of securities and/or mutual funds that
may be employed to meet specific financial goals, such as saving for retirement,
children's education, or other future needs.
FINANCIAL STATEMENTS AND REPORTS
The books of the Funds will be audited at least once each year by independent
public accountants. Shareholders will receive annual audited and semiannual
(unaudited) reports when published and will receive written confirmation of all
confirmable transactions in their account. A copy of the Annual Report will
accompany the Statement of Additional Information ("SAI") whenever the SAI is
requested by a shareholder or prospective investor. The Financial Statements of
the Funds as of March 31, 1998, together with the report of the independent
accountants thereon, are included on the following pages.
- 27 -
THE JAMESTOWN BOND FUND
-----------------------
No Load Mutual Fund
Annual Report
March 31, 1998
Investment Adviser Administrator
------------------ -------------
Tattersall Advisory Group, Inc. Countrywide Fund Services, Inc.
6620 West Broad Street 312 Walnut Street
Suite 300 P.O. Box 5354
Richmond, Virginia 23230 Cincinnati, Ohio 45201-5354
1.804.288.0404 1.800.443.4249
THE JAMESTOWN BOND FUND
MANAGEMENT DISCUSSION AND ANALYSIS
March 31, 1998
PERFORMANCE OF THE JAMESTOWN BOND FUND
FISCAL YEAR ENDED MARCH 31, 1998
There is something about the beginning of a year that encourages thoughts of a
slowdown. It could be that after the normal Christmas retail frenzy, consumers
are expected to be "spent out." Or it could be that during the inclement weather
of the winter months, consumers are supposed to stay at home. Not only did they
not stay at home, but they were out buying homes! During the so-called slow
months, housing activity soared in response to the unbeatable combination of
unusually mild weather and low interest rates. Consumer and business spending
more than offset the Asian-induced weakness from the trade sector so that the
economy is on track to turn in a 1st quarter performance that will most likely
exceed the 3% level. Activity in Europe was also brisk, with inflation as
elusive there as it is in the U.S. Interest rates fell for all G-7 countries
with rates in Japan and the U.S. falling the least. With interest rates
<PAGE>
basically unchanged for the first quarter of 1998, the bond market's performance
was dominated by coupon return. The Jamestown Bond Fund's Institutional Shares
provided a return of 12.06% for the fiscal year ended March 31, 1998, and the
Service Group Shares provided a return of 8.55% for the period from October 2,
1998 through March 31, 1998. For the year ended March 31, 1998, the Lehman
Aggregate Index returned 11.99% while the Lehman Government/Corporate Index
returned 12.39%.
With no clear trend in the direction of rates, duration strategy for us or for
any manager was a non-event as sectors saw all of the action. Battered by huge
new issuance and Asian credit concerns, corporates started the year with
historically attractive yield spreads versus Treasuries, reached a peak in late
January, before narrowing again with the help of decent earnings reports and a
strong stock market. Our strategy was to be overweighted in corporates relative
to the Index. We were also overweighted in mortgages. This sector was initially
hurt by the acceleration in prepayment speeds, an event for which we had
prepared the portfolio, but began to outperform as low interest rate volatility
helped to calm investors' concerns. The asset-backed market outperformed
Treasuries, which was quite an accomplishment considering the huge amount of new
issues the market was forced to digest during the quarter. Closed-end funds
basically held their own.
LOOKING AHEAD
We expect the market to establish a trend before this year ends, and that trend
will most likely be to lower rates. Between now and then, however, the market
will stay on edge purely from inflation worries associated with a strong
economy. The Federal Reserve should remain firmly on hold. The risk to bond
holders is that domestic demand remains too strong and the effect of the Asian
slowdown too weak for the Federal Reserve to pursue price stability with
unchanged interest rates. The latest unemployment report should help to mitigate
this risk, and we expect to extend the duration if more weakness materializes.
As opposed to this time last year when we were frustrated by the lack of
opportunity in sectors, we are energized by what we see this year. Having
claimed victory in the first quarter with long industrials and REITS, we start
the second quarter equally weighted in corporates versus the Index. We will
watch carefully the trend of corporate earnings, realizing that the stock
market, and thus, corporate spreads are vulnerable to negative surprises. We are
currently overweighted in the mortgage sector with an emphasis on those
securities that are protected from prepayments. This strategy has worked well
since the end of last year, and we expect it to continue to work well with call
protection priced as cheaply as it is. Asset-backed securities provide another
cheap source of prepayment protection and we plan to remain overweighted in this
sector as well. Finally, we expect closed-end funds to continue to provide a
steady source of outperformance as prices converge to net asset values.
Although interest rates are essentially unchanged so far this year, there
certainly have been opportunities to outperform the bond market. We not only
expect these opportunities to continue, but we intend to fully participate in
all of them.
THE JAMESTOWN BOND FUND
Comparison of the Change in Value of a $10,000 Investment in The Jamestown Bond
Fund, the Lehman Government/Corporate Index, the Lehman Aggregate Index and the
Consumer Price Index.
LINE CHART:
LEHMAN GOVERNMENT/ THE JAMESTOWN BOND FUND:
CORPORATE INDEX:
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
12/31/90 10,000 12/31/90 10,000
03/31/91 2.52% 10,252 03/31/91 1.63% 10,163
<PAGE>
06/30/91 1.78% 10,434 06/30/91 1.39% 10,305
09/30/91 4.77% 10,932 09/30/91 5.02% 10,822
12/31/91 5.33% 11,515 12/31/91 5.18% 11,382
03/31/92 -1.50% 11,342 03/31/92 -1.49% 11,213
06/30/92 4.06% 11,803 06/30/92 3.35% 11,588
09/30/92 4.88% 12,379 09/30/92 3.83% 12,033
12/31/92 0.07% 12,387 12/31/92 0.27% 12,065
03/31/93 4.66% 12,965 03/31/93 3.81% 12,524
06/30/93 3.01% 13,355 06/30/93 2.26% 12,807
09/30/93 3.32% 13,798 09/30/93 2.22% 13,091
12/31/93 -0.29% 13,758 12/31/93 0.25% 13,124
03/31/94 -3.15% 13,325 03/31/94 -2.55% 12,789
06/30/94 -1.24% 13,160 06/30/94 -1.04% 12,656
09/30/94 0.50% 13,225 09/30/94 0.51% 12,719
12/31/94 0.37% 13,274 12/31/94 0.26% 12,752
03/31/95 4.98% 13,935 03/31/95 4.87% 13,372
06/30/95 6.49% 14,840 06/30/95 5.87% 14,157
09/30/95 1.91% 15,123 09/30/95 2.45% 14,505
12/31/95 4.66% 15,828 12/31/95 4.49% 15,156
03/31/96 -2.34% 15,458 03/31/96 -1.86% 14,874
06/30/96 0.47% 15,530 06/30/96 0.82% 14,996
09/30/96 1.76% 15,804 09/30/96 1.84% 15,272
12/31/96 3.06% 16,287 12/31/96 3.29% 15,775
03/31/97 -0.86% 16,147 03/31/97 -0.50% 15,696
06/30/97 3.64% 16,735 06/30/97 3.75% 16,285
09/30/97 3.50% 17,321 09/30/97 3.15% 16,798
12/31/97 3.21% 17,876 12/31/97 3.10% 17,318
03/31/98 1.52% 18,148 03/31/98 1.56% 17,589
LEHMAN AGGREGATE INDEX: CONSUMER PRICE INDEX:
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
12/31/90 10,000 12/31/90 10,000
03/31/91 2.81% 10,281 03/31/91 0.90% 10,090
06/30/91 1.62% 10,448 06/30/91 0.40% 10,130
09/30/91 5.68% 11,041 09/30/91 0.60% 10,191
12/31/91 5.07% 11,601 12/31/91 0.90% 10,283
03/31/92 -1.27% 11,453 03/31/92 0.70% 10,355
06/30/92 4.04% 11,916 06/30/92 0.80% 10,438
09/30/92 4.30% 12,429 09/30/92 0.70% 10,511
12/31/92 0.26% 12,461 12/31/92 0.80% 10,595
03/31/93 4.14% 12,977 03/31/93 0.90% 10,690
06/30/93 2.66% 13,322 06/30/93 0.60% 10,754
09/30/93 2.61% 13,670 09/30/93 0.40% 10,797
12/31/93 0.05% 13,676 12/31/93 0.70% 10,873
03/31/94 -2.87% 13,284 03/31/94 0.50% 10,927
06/30/94 -1.03% 13,147 06/30/94 0.60% 10,993
09/30/94 0.61% 13,227 09/30/94 0.90% 11,092
12/31/94 0.38% 13,278 12/31/94 0.60% 11,158
03/31/95 5.04% 13,947 03/31/95 0.80% 11,248
06/30/95 6.09% 14,796 06/30/95 0.90% 11,349
09/30/95 1.96% 15,086 09/30/95 0.40% 11,395
12/31/95 4.26% 15,729 12/31/95 0.50% 11,452
03/31/96 -1.77% 15,450 03/31/96 0.80% 11,544
06/30/96 0.57% 15,538 06/30/96 1.10% 11,671
09/30/96 1.85% 15,826 09/30/96 0.44% 11,723
12/31/96 3.00% 16,301 12/31/96 0.82% 11,819
03/31/97 -0.56% 16,209 03/31/97 0.69% 11,901
06/30/97 3.67% 16,804 06/30/97 0.19% 11,924
09/30/97 3.32% 17,362 09/30/97 0.44% 11,976
12/31/97 2.94% 17,873 12/31/97 0.62% 12,050
03/31/98 1.56% 18,151 03/31/98 0.12% 12,064
<PAGE>
The Jametown Bond Fund Average Annual Total Returns
1 Year 5 Years Since Inception*
12.06% 7.03% 8.05%
*The chart above represents the performance of Institution shares only, which
will vary from the performance of Service Group Shares based on the difference
in fees paid by shareholders in the different classes. The Fund commenced
operations on December 13, 1990, and the initial public offering of Service
Group Shares commenced on October 2, 1997.
Past performance is not predictive of future performance.
THE JAMESTOWN BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities:
At acquisition cost $ 91,630,430
==============
At value (Note 1) $ 93,694,603
Investments in repurchase agreements (Note 1) 6,753,000
Cash 9,739
Receivable for securities sold 3,192,094
Interest receivable 1,027,791
Other assets 1,985
--------------
TOTAL ASSETS 104,679,212
--------------
LIABILITIES
Dividends payable 45,034
Payable for securities purchased 5,283,937
Accrued advisory fees (Note 3) 14,308
Accrued administration fees (Note 3) 5,980
Accrued distribution expenses (Note 3) 1,291
Other accrued expenses 9,962
--------------
TOTAL LIABILITIES 5,360,512
--------------
NET ASSETS $ 99,318,700
==============
Net assets consist of:
Paid-in capital $ 96,949,176
Accumulated net realized gains from security transactions 297,227
Undistributed net investment income 8,124
Net unrealized appreciation on investments 2,064,173
--------------
Net assets $ 99,318,700
==============
PRICING OF INSTITUTIONAL SHARES
Net assets attributable to Institutional Shares $ 96,250,111
==============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) 8,886,698
<PAGE>
==============
Net asset value, offering price and redemption price per share (Note 1) $ 10.83
==============
PRICING OF SERVICE GROUP SHARES
Net assets applicable to Service Group Shares $ 3,068,589
==============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) 283,310
==============
Net asset value, offering price and redemption price per share (Note 1) $ 10.83
==============
See accompanying notes to financial statements.
</TABLE>
<TABLE>
THE JAMESTOWN BOND FUND
STATEMENT OF OPERATIONS
Year Ended March 31, 1998
<S> <C>
INVESTMENT INCOME
Interest $ 5,328,394
Dividends 383,282
--------------
TOTAL INVESTMENT INCOME 5,711,676
--------------
EXPENSES
Investment advisory fees (Note 3) 326,338
Administration fees (Note 3) 67,341
Custodian fees 16,026
Professional fees 15,996
Pricing costs 10,442
Registration fees 8,212
Trustees' fees and expenses 5,405
Insurance expense 4,675
Printing of shareholder reports 2,917
Distribution expenses, Service Group Shares (Note 3) 2,672
Other expenses 3,555
--------------
TOTAL EXPENSES 463,579
Fees waived by the Adviser (Note 3) (16,111)
Expenses reimbursed through a directed brokerage arrangement (Note 4) (9,678)
--------------
NET EXPENSES 437,790
--------------
NET INVESTMENT INCOME 5,273,886
--------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions 1,826,210
Net change in unrealized appreciation/depreciation on investments 2,574,722
--------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 4,400,932
<PAGE>
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 9,674,818
==============
See accompanying notes to financial statements.
</TABLE>
THE JAMESTOWN BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
Year Year
Ended Ended
March 31, March 31,
1998 1997
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 5,273,886 $ 5,005,951
Net realized gains (losses) from security transactions 1,826,210 (391,414)
Net change in unrealized appreciation/depreciation
on investments 2,574,722 (405,910)
-------------- --------------
Net increase in net assets from operations 9,674,818 4,208,627
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Institutional Shares (5,189,396) (5,104,234)
From net investment income, Service Group Shares (99,842) --
-------------- --------------
Decrease in net assets from distributions from shareholders (5,289,238) (5,104,234)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS:
INSTITUTIONAL SHARES
Proceeds from shares sold 15,597,164 9,262,915
Net asset value of shares issued in reinvestment
of distributions to shareholders 5,049,237 4,238,186
Payments for shares redeemed (5,227,155) (10,880,119)
-------------- --------------
Net increase in net assets from Institutional Shares transactions 15,419,246 2,620,982
-------------- --------------
SERVICE GROUP SHARES
Proceeds from shares sold 4,316,277 --
Net asset value of shares issued in reinvestment
of distributions to shareholders 99,842 --
Payments for shares redeemed (1,401,739) --
-------------- --------------
Net increase in net assets from Service Group Shares transactions 3,014,380 --
-------------- --------------
TOTAL INCREASE IN NET ASSETS 22,819,206 1,725,375
NET ASSETS:
Beginning of year 76,499,494 74,774,119
-------------- --------------
End of year - (including undistributed net investment
income of $8,124 and $23,476, respectively) $ 99,318,700 $ 76,499,494
============== ==============
Capital share activity:
Institutional Shares
Sold 1,446,450 892,247
Reinvested 472,113 409,635
Redeemed (486,114) (1,043,163)
-------------- --------------
Net increase in shares outstanding 1,432,449 258,719
Shares outstanding, beginning of year 7,454,249 7,195,530
-------------- --------------
Shares outstanding, end of year 8,886,698 7,454,249
============== ==============
Service Group Shares
Sold 402,367 --
Reinvested 9,229 --
Redeemed (128,286) --
-------------- --------------
<PAGE>
Net increase in shares outstanding 283,310 --
Shares outstanding, beginning of year -- --
-------------- --------------
Shares outstanding, end of year 283,310 --
============== ==============
</TABLE>
See accompanying notes to financial statements.
THE JAMESTOWN 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,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year $10.26 $10.39 $9.97 $10.15 $10.82
------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.58 0.68 0.70 0.62 0.55
Net realized and unrealized gains (losses) on investments 0.63 (0.12) 0.41 (0.18) (0.30)
------ ------ ------ ------ ------
Total from investment operations 1.21 0.56 1.11 0.44 0.25
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income (0.64) (0.69) (0.69) (0.62) (0.55)
Distributions from net realized gains -- -- -- -- (0.19)
Distributions in excess of net realized gains -- -- -- -- (0.18)
------ ------ ------ ------ ------
Total distributions (0.64) (0.69) (0.69) (0.62) (0.92)
------ ------ ------ ------ ------
Net asset value at end of year $10.83 $10.26 $10.39 $9.97 $10.15
====== ====== ====== ====== ======
Total return 12.06% 5.52% 11.23% 4.56% 2.12%
====== ====== ====== ====== ======
Net assets at end of year (000's) $96,250 $76,499 $74,774 $72,029 $64,029
======= ======= ======= ======= =======
Ratio of gross expenses to average net assets 0.53% 0.53% 0.56% 0.57% 0.60%
Ratio of net expenses to average net assets (a) 0.50% 0.50% 0.53% 0.53% 0.60%
Ratio of net investment income to average net assets 6.06% 6.48% 6.54% 6.28% 5.03%
Portfolio turnover rate 235% 207% 268% 381% 381%
(a) Ratios were determined based on net expenses after reimbursements through a
directed brokerage arrangement for periods after March 31, 1994 (Note 4) and
investment advisory fees waived for the year ended March 31, 1998 (Note 3).
See accompanying notes to financial statements.
</TABLE>
<TABLE>
THE JAMESTOWN BOND FUND - Service Group Shares
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a Share Outstanding Throughout the Period
<CAPTION>
Period
Ended
March 31,
1998 (a)
<S> <C>
Net asset value at beginning of period $10.69
------
Income from investment operations:
Net investment income 0.37
<PAGE>
Net realized and unrealized gains on investments 0.08
------
Total from investment operations 0.45
------
Less distributions:
Dividends from net investment income (0.31)
------
Net asset value at end of period $10.83
======
Total return 8.55%(c)
======
Net assets at end of period (000's) $3,069
======
Ratio of gross expenses to average net assets 0.68%(c)
Ratio of net expenses to average net assets (b) 0.65%(c)
Ratio of net investment income to average net assets 5.96%(c)
Portfolio turnover rate 235%
(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 reimbursements through a
directed brokerage arrangement (Note 4) and investment advisory fees waived for
the year ended March 31, 1998 (Note 3).
(c) Annualized.
See accompanying notes to financial statements.
</TABLE>
<TABLE>
THE JAMESTOWN BOND FUND
PORTFOLIO OF INVESTMENTS
March 31, 1998
<CAPTION>
Par Value Value
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 20.9%
U.S. Treasury Bonds - 9.9%
$ 7,535,000 8.50%, due 02/15/2020 $ 9,789,623
---------------
U.S. Treasury Notes - 8.6%
8,380,000 6.50%, due 05/31/2001 8,582,964
---------------
U.S. Treasury Inflation-Protection Notes - 2.4%
1,600,000 3.625%, due 07/15/2002 1,598,288
760,000 3.375%, due 01/15/2007 751,557
---------------
2,349,845
---------------
Total U.S. Treasury Obligations (Cost $19,648,349) $ 20,722,432
---------------
MORTGAGE-BACKED SECURITIES - 36.2%
Federal Home Loan Mortgage Corporation - 6.0%
$ 975,000 Pool #1472, 6.75%, due 05/15/2006 $ 986,573
1,118,285 Pool #1561-ZB, 6.00%, due 08/15/2006 1,118,285
825,000 Pool #1197-H, 6.75%, due 02/15/2007 839,437
1,000,000 Pool #1221-I, 7.00%, due 03/15/2007 1,018,750
825,000 Pool #1655-HB, 6.50%, due 10/15/2008 831,955
1,246,864 Pool #C80393, 6.00%, due 03/15/2026 1,205,406
<PAGE>
---------------
6,000,406
---------------
Federal National Mortgage Association - 9.7%
817,497 Pool #313443, 6.775%, due 04/01/2004 839,467
1,191,744 Pool #375139, 7.13% due 05/01/2004 1,245,744
1,467,421 Pool #375299, 6.81%, due 08/01/2004 1,512,361
601,498 Pool #73061, 8.66%, due 01/01/2005 667,005
626,778 Pool #73126, 7.00%, due 07/01/2005 649,687
603,222 Series #92-61-ZB, 7.50%, due 05/25/2007 640,923
765,000 Series #92-179-H, 7.00%, due 09/01/2007 785,081
548,352 Pool #375538, 6.70%, due 11/01/2007 564,631
750,000 Series #98-M3, 6.45%, due 01/01/2011 747,422
1,100,000 Series #97-M3, 7.20%, adjustable rate, due 08/17/2018 1,162,219
746,312 Series #G92-44-Z, 8.00%, due 07/25/2022 811,846
---------------
9,626,386
---------------
<CAPTION>
Par Value Value
<S> <C> <C>
MORTGAGE-BACKED SECURITIES - Continued
Government National Mortgage Association - 11.1%
$ 80,114 Pool #223997, 8.85%, due 05/15/2018 $ 86,382
607,105 Pool #224002, 8.85%, due 07/15/2018 654,599
398,317 Pool #333658, 7.50%, due 01/15/2023 409,402
859,923 Pool #342526, 7.50%, due 02/15/2023 883,855
995,361 Pool #349314, 7.50%, due 02/15/2023 1,023,062
733,877 Pool #352143, 7.50%, due 07/15/2023 754,300
726,327 Pool #346772, 7.50%, due 09/15/2023 746,540
755,992 Pool #372822, 7.50%, due 11/15/2023 777,032
999,619 Pool #359451, 7.50%, due 12/15/2023 1,027,438
415,962 Pool #354831, 7.50%, due 06/15/2024 427,018
860,611 Pool #8459, 7.00%, adjustable rate, due 07/20/2024 882,393
604,064 Pool #28484, 7.00%, adjustable rate, due 08/20/2024 619,262
519,837 Pool #8482, 7.00%, adjustable rate, due 08/20/2024 532,916
739,638 Pool #8542, 7.00%, adjustable rate, due 11/20/2024 757,323
486,214 Pool #441273, 8.00%, due 10/15/2026 503,460
900,000 TBA, 8.00%, due 04/15/2028 932,062
---------------
11,017,044
---------------
Student Loan Marketing Association - 3.3%
499,735 Series #96-2-A1, 5.678%, adjustable rate, due 10/25/2004 498,174
2,468,492 Series #97-2-A1, 5.704%, adjustable rate, due 10/25/2005 2,460,778
331,516 Series #97-3-A1, 5.884%, adjustable rate, due 04/25/2006 330,791
---------------
3,289,743
---------------
Other Mortgage-Backed Securities - 6.1%
Deutsche Mortgage and Asset Receiving Corporation #98-C1-A2,
1,915,000 6.538%, due 06/01/2031 1,928,764
First Union-Lehman Brothers Commercial Mortgage Trust #97-C2-A1,
825,869 6.479%, due 03/01/2004 832,579
LB Commercial Conduit Mortgage Trust #98-C1-A3,
975,000 6.48%, due 02/01/2030 978,656
Lehman Brothers Mortgage Trust #91-2-A1,
380,286 8.00%, due 03/20/1999 383,257
Morgan Stanley Capital I #98-WF1-A2,
1,065,000 6.55%, due 12/15/2007 1,076,482
Resolution Funding Mortgage Security I #94-S12-A2,
800,000 6.50%, due 04/25/2009 801,248
---------------
6,000,986
---------------
Total Mortgage-Backed Securities (Cost $35,765,832) $ 35,934,565
---------------
<CAPTION>
Par Value Value
<S> <C> <C>
ASSET-BACKED SECURITIES - 5.6%
Bank America Manufactured Housing Contract #96-1-A6,
$ 650,000 8.00%, due 10/10/2026 $ 696,995
CIT RV Trust #95-B-A1,
242,235 6.50%, due 04/15/2011 243,824
CIT RV Trust #96-A-A1,
613,215 5.40%, due 12/15/2011 607,273
Fleetwood Credit Corporation Grantor Trust #94-A-A,
461,658 4.70%, due 07/15/2009 453,432
Fleetwood Credit Corporation Grantor Trust #96-A-A,
455,884 6.75%, due 10/15/2011 459,586
Green Tree Financial Corporation, #97-2-A6,
775,000 7.24%, due 06/15/2028 800,908
Green Tree Financial Corporation, #97-2-A7,
700,000 7.62%, due 04/15/2028 726,467
Green Tree Financial Corporation, #98-A,
<PAGE>
1,550,000 6.18%, due 04/01/2018 1,546,590
--------------
Total Asset-Backed Securities (Cost $5,459,617) $ 5,535,075
--------------
CORPORATE BONDS - 24.4%
Allmerica Financial Corporation,
$ 390,000 7.625%, due 10/15/2025 $ 411,575
Associates Corporation,
700,000 5.75%, due 10/15/2003 684,775
Avalon Properties, Inc.,
485,000 6.625%, due 01/15/2005 479,573
Baltimore Gas & Electric Corporation,
1,000,000 8.90%, due 07/01/1998 1,007,470
Bank of New York,
610,000 6.50%, due 12/01/2003 617,265
Beneficial Corporation Medium Term Notes,
800,000 6.33%, due 10/09/2001 801,952
BRE Properties, Inc.,
425,000 7.125%, due 02/15/2013 422,450
Chrysler Corporation,
340,000 7.45%, due 03/01/2027 364,970
Coca-Cola Enterprises,
440,000 6.75%, due 01/15/2038 434,500
Dayton Hudson Corporation,
370,000 6.75%, due 01/01/2028 363,862
Dominion Capital Trust,
310,000 7.83%, due 12/01/2027 316,808
<CAPTION>
Par Value Value
<S> <C> <C>
CORPORATE BONDS - Continued
Duke Realty Limited Partnership,
$ 470,000 7.05%, due 03/01/2016 $ 473,351
Equity Residential Properties Trust,
875,000 6.55%, due 11/15/2001 877,153
Firstar Bank Milwaukee,
2,450,000 6.25%, due 12/01/2002 2,461,638
Ford Motor Company,
275,000 8.875%, due 01/15/2022 336,465
Ford Motor Credit Medium Term Notes,
950,000 7.45%, due 04/13/2000 975,498
General Motors,
235,000 8.80%, due 03/01/2021 286,265
General Motors Acceptance Corporation Medium Term Notes,
1,400,000 6.80%, due 04/17/2001 1,425,886
IBM Corporation,
420,000 6.50%, due 01/15/2028 411,247
International Lease Finance Medium Term Notes,
1,315,000 6.42%, due 09/11/2000 1,325,112
JDN Realty Corporation,
375,000 6.95%, due 08/01/2007 372,011
JP Realty, Inc.,
485,000 7.29%, due 03/11/2008 487,692
Lehman Brothers Holdings,
925,000 6.40%, due 12/27/1999 929,227
May Department Stores Company,
275,000 7.45%, due 09/15/2011 299,107
Mellon Financial Company,
915,000 7.625%, due 11/15/1999 935,505
Morgan Stanley Group,
500,000 6.09%, due 03/09/2011 499,975
National City Corporation,
900,000 7.20%, due 05/15/2005 942,444
Norfolk Southern Corporation,
370,000 7.80%, due 05/15/2027 413,960
Norwest Financial, Inc.,
450,000 6.05%, due 11/19/1999 451,138
SBC Communications, Inc.,
600,000 6.625%, due 11/01/2009 614,034
<CAPTION>
Par Value Value
<S> <C> <C>
CORPORATE BONDS - Continued
Sears Roebuck & Company,
$ 750,000 6.86%, due 07/03/2001 $ 765,525
750,000 6.99%, due 09/30/2002 770,947
Spieker Properties LP,
370,000 6.75%, due 01/15/2008 364,361
Suntrust Bank,
340,000 6.125%, due 02/15/2004 337,175
Textron, Inc.,
510,000 6.625%, due 11/15/2007 518,399
TRW Inc.,
425,000 6.25%, due 01/15/2010 411,816
Union Camp Corporation,
325,000 6.50%, due 11/15/2007 326,905
United Parcel Service of America, Inc.,
300,000 8.375%, due 04/01/2030 368,007
<PAGE>
--------------
Total Corporate Bonds (Cost $24,078,849) $ 24,286,043
--------------
Shares
CLOSED-END MUTUAL FUNDS - 7.2%
37,400 Blackrock 1999 Term Trust, Inc. $ 352,963
180,600 Blackrock 2001 Term Trust, Inc. 1,568,963
1,200 Blackrock Broad Investment Grade 2009 Term Trust, Inc. 15,225
53,900 Blackrock Investment Quality Term Trust, Inc. 454,781
10,000 Blackrock North American Government Income Trust 106,250
125,300 Blackrock Strategic Term Trust, Inc. 1,080,713
12,000 Dean Witter Government Income Trust 103,500
7,400 Excelsior Income Shares, Inc. 126,262
202,200 Hyperion 1999 Term Trust, Inc. 1,415,400
201,000 Hyperion 2002 Term Trust, Inc. 1,608,000
4,100 Hyperion 2005 Investment Grade Opportunity Term Trust, Inc. 34,337
16,400 Income Opportunities Fund, Inc. - 1999 156,825
28,900 MFS Government Markets Income Trust 193,269
--------------
Total Closed-End Funds (Cost $6,677,783) $ 7,216,488
--------------
Total Investments at Value (Cost $91,630,430) - 94.3% $ 93,694,603
--------------
<CAPTION>
Face
Amount Value
<S> <C> <C>
REPURCHASE AGREEMENTS (a) - 6.8%
Star Bank, N.A., 5.25%, dated 03/31/1998, due 04/01/1998
$ 6,753,000 repurchase proceeds $6,753,985 (Cost $6,753,000) $ 6,753,000
---------------
Total Investments and Repurchase Agreements
at Value - 101.1% $ 100,447,603
Liabilities in Excess of Other Assets - (1.1)% (1,128,903)
---------------
Net Assets - 100.0% $ 99,318,700
===============
(a) Joint repurchase agreement is fully collateralized by $12,715,000 GNMA II,
Pool #8421, 7.375%, due 05/20/24; $14,335,000 GNMA II, Pool #8932, 7.00%, due
03/20/22; and $1,120,000 GNMA II, Pool #8359, 7.00% due 01/20/24. The aggregate
market value of the collateral at March 31, 1998 was $28,948,985. The Fund's
pro-rata interest in the collateral at March 31, 1998 was $6,947,756.
See accompanying notes to financial statements.
</TABLE>
THE JAMESTOWN BOND FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
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, as amended. 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 subjuect 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 thta (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.
<PAGE>
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 business of the regular session of the New York Stock Exchange
(currently 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 on 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 market 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.
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, which may differ from generally accepted accounting
principles.
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.
<PAGE>
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 priciples 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.
The following information is based upon the Federal income tax cost of portfolio
investments of $91,682,263 as of March 31, 1998:
Gross unrealized appreciation....................................$ 2,271,814
Gross unrealized depreciation.......................................(259,474)
----------
Net unrealized appreciation......................................$ 2,012,340
===========
The difference between the Federal income tax cost of portfolio investments and
financial statement cost is due to certain timing differences in the recognition
of capital losses under generally accepted accounting principles and income tax
regulations.
2. INVESTMENT TRANSACTIONS
During the year ended March 31, 1998, purchases and proceeds from sales and
maturities of investment securities, other than short-term investments, amounted
to $204,131,539 and $194,635,139, 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 .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 .50% of its
average daily net assets, and to limit the total operating expenses of the
Service Group Shares of the Fund to .65% of its average daily net assets;
accordingly, the Adviser waived $16,111 of its investment advisory fee for the
year ended March 31, 1998. 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
<PAGE>
services for the Fund. For these services, CFS receives a monthly fee from the
Fund at an annual rate of .075% of its average daily net assets up to $200
million and .05% of 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 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.
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 period ended March 31, 1998, Service Group Shares incurred
$2,672 of distribution expenses under the Plan.
4. DIRECTED BROKERAGE ARRANGEMENT
In order to reduce the total operating expenses of the Fund, a portion of the
Fund's custodian fees 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 $9,678 for the year ended
March 31, 1998.
<PAGE>
THE JAMESTOWN BOND FUND
No Load Mutual Fund
Annual Report
March 31, 1998
Investment Adviser
Tattersall Advisory Group, Inc.
6620 West Broad Street
Suite 300
Richmond, Virginia 23230
1.804.288.0404
Administrator
Countrywide Fund Services, Inc.
312 Walnut Street
P.O. Box 5354
Cincinnati, Ohio 45201-5354
1.800.443.4249
THE JAMESTOWN BOND FUND
MANAGEMENT DISCUSSION AND ANALYSIS
March 31, 1998
PERFORMANCE OF THE JAMESTOWN BOND FUND
FISCAL YEAR ENDED MARCH 31, 1998
There is something about the beginning of a year that encourages thoughts of a
slowdown. It could be that after the normal Christmas retail frenzy, consumers
are expected to be "spent out." Or it could be that during the inclement weather
of the winter months, consumers are supposed to stay at home. Not only did they
not stay at home, but they were out buying homes! During the so-called slow
months, housing activity soared in response to the unbeatable combination of
unusually mild weather and low interest rates. Consumer and business spending
more than offset the Asian-induced weakness from the trade sector so that the
economy is on track to turn in a 1st quarter performance that will most likely
exceed the 3% level. Activity in Europe was also brisk, with inflation as
elusive there as it is in the U.S. Interest rates fell for all G-7 countries
with rates in Japan and the U.S. falling the least. With interest rates
basically unchanged for the first quarter of 1998, the bond market's performance
was dominated by coupon return. The Jamestown Bond Fund's Institutional Shares
provided a return of 12.06% for the fiscal year ended March 31, 1998, and the
Service Group Shares provided a return of 8.55% for the period from October 2,
1998 through March 31, 1998. For the year ended March 31, 1998, the Lehman
Aggregate Index returned 11.99% while the Lehman Government/Corporate Index
returned 12.39%.
With no clear trend in the direction of rates, duration strategy for us or for
any manager was a non-event as sectors saw all of the action. Battered by huge
new issuance and Asian credit concerns, corporates started the year with
historically attractive yield spreads versus Treasuries, reached a peak in late
<PAGE>
January, before narrowing again with the help of decent earnings reports and a
strong stock market. Our strategy was to be overweighted in corporates relative
to the Index. We were also overweighted in mortgages. This sector was initially
hurt by the acceleration in prepayment speeds, an event for which we had
prepared the portfolio, but began to outperform as low interest rate volatility
helped to calm investors' concerns. The asset-backed market outperformed
Treasuries, which was quite an accomplishment considering the huge amount of new
issues the market was forced to digest during the quarter. Closed-end funds
basically held their own.
LOOKING AHEAD
We expect the market to establish a trend before this year ends, and that trend
will most likely be to lower rates. Between now and then, however, the market
will stay on edge purely from inflation worries associated with a strong
economy. The Federal Reserve should remain firmly on hold. The risk to bond
holders is that domestic demand remains too strong and the effect of the Asian
slowdown too weak for the Federal Reserve to pursue price stability with
unchanged interest rates. The latest unemployment report should help to mitigate
this risk, and we expect to extend the duration if more weakness materializes.
As opposed to this time last year when we were frustrated by the lack of
opportunity in sectors, we are energized by what we see this year. Having
claimed victory in the first quarter with long industrials and REITS, we start
the second quarter equally weighted in corporates versus the Index. We will
watch carefully the trend of corporate earnings, realizing that the stock
market, and thus, corporate spreads are vulnerable to negative surprises. We are
currently overweighted in the mortgage sector with an emphasis on those
securities that are protected from prepayments. This strategy has worked well
since the end of last year, and we expect it to continue to work well with call
protection priced as cheaply as it is. Asset-backed securities provide another
cheap source of prepayment protection and we plan to remain overweighted in this
sector as well. Finally, we expect closed-end funds to continue to provide a
steady source of outperformance as prices converge to net asset values.
Although interest rates are essentially unchanged so far this year, there
certainly have been opportunities to outperform the bond market. We not only
expect these opportunities to continue, but we intend to fully participate in
all of them.
THE JAMESTOWN BOND FUND
Comparison of the Change in Value of a $10,000 Investment in The Jamestown Bond
Fund, the Lehman Government/Corporate Index, the Lehman Aggregate Index and the
Consumer Price Index.
LINE CHART:
LEHMAN GOVERNMENT/ THE JAMESTOWN BOND FUND:
CORPORATE INDEX:
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
12/31/90 10,000 12/31/90 10,000
03/31/91 2.52% 10,252 03/31/91 1.63% 10,163
06/30/91 1.78% 10,434 06/30/91 1.39% 10,305
09/30/91 4.77% 10,932 09/30/91 5.02% 10,822
12/31/91 5.33% 11,515 12/31/91 5.18% 11,382
03/31/92 -1.50% 11,342 03/31/92 -1.49% 11,213
06/30/92 4.06% 11,803 06/30/92 3.35% 11,588
09/30/92 4.88% 12,379 09/30/92 3.83% 12,033
12/31/92 0.07% 12,387 12/31/92 0.27% 12,065
03/31/93 4.66% 12,965 03/31/93 3.81% 12,524
06/30/93 3.01% 13,355 06/30/93 2.26% 12,807
09/30/93 3.32% 13,798 09/30/93 2.22% 13,091
12/31/93 -0.29% 13,758 12/31/93 0.25% 13,124
03/31/94 -3.15% 13,325 03/31/94 -2.55% 12,789
<PAGE>
06/30/94 -1.24% 13,160 06/30/94 -1.04% 12,656
09/30/94 0.50% 13,225 09/30/94 0.51% 12,719
12/31/94 0.37% 13,274 12/31/94 0.26% 12,752
03/31/95 4.98% 13,935 03/31/95 4.87% 13,372
06/30/95 6.49% 14,840 06/30/95 5.87% 14,157
09/30/95 1.91% 15,123 09/30/95 2.45% 14,505
12/31/95 4.66% 15,828 12/31/95 4.49% 15,156
03/31/96 -2.34% 15,458 03/31/96 -1.86% 14,874
06/30/96 0.47% 15,530 06/30/96 0.82% 14,996
09/30/96 1.76% 15,804 09/30/96 1.84% 15,272
12/31/96 3.06% 16,287 12/31/96 3.29% 15,775
03/31/97 -0.86% 16,147 03/31/97 -0.50% 15,696
06/30/97 3.64% 16,735 06/30/97 3.75% 16,285
09/30/97 3.50% 17,321 09/30/97 3.15% 16,798
12/31/97 3.21% 17,876 12/31/97 3.10% 17,318
03/31/98 1.52% 18,148 03/31/98 1.56% 17,589
LEHMAN AGGREGATE INDEX: CONSUMER PRICE INDEX:
QTRLY QTRLY
DATE RETURN BALANCE DATE RETURN BALANCE
12/31/90 10,000 12/31/90 10,000
03/31/91 2.81% 10,281 03/31/91 0.90% 10,090
06/30/91 1.62% 10,448 06/30/91 0.40% 10,130
09/30/91 5.68% 11,041 09/30/91 0.60% 10,191
12/31/91 5.07% 11,601 12/31/91 0.90% 10,283
03/31/92 -1.27% 11,453 03/31/92 0.70% 10,355
06/30/92 4.04% 11,916 06/30/92 0.80% 10,438
09/30/92 4.30% 12,429 09/30/92 0.70% 10,511
12/31/92 0.26% 12,461 12/31/92 0.80% 10,595
03/31/93 4.14% 12,977 03/31/93 0.90% 10,690
06/30/93 2.66% 13,322 06/30/93 0.60% 10,754
09/30/93 2.61% 13,670 09/30/93 0.40% 10,797
12/31/93 0.05% 13,676 12/31/93 0.70% 10,873
03/31/94 -2.87% 13,284 03/31/94 0.50% 10,927
06/30/94 -1.03% 13,147 06/30/94 0.60% 10,993
09/30/94 0.61% 13,227 09/30/94 0.90% 11,092
12/31/94 0.38% 13,278 12/31/94 0.60% 11,158
03/31/95 5.04% 13,947 03/31/95 0.80% 11,248
06/30/95 6.09% 14,796 06/30/95 0.90% 11,349
09/30/95 1.96% 15,086 09/30/95 0.40% 11,395
12/31/95 4.26% 15,729 12/31/95 0.50% 11,452
03/31/96 -1.77% 15,450 03/31/96 0.80% 11,544
06/30/96 0.57% 15,538 06/30/96 1.10% 11,671
09/30/96 1.85% 15,826 09/30/96 0.44% 11,723
12/31/96 3.00% 16,301 12/31/96 0.82% 11,819
03/31/97 -0.56% 16,209 03/31/97 0.69% 11,901
06/30/97 3.67% 16,804 06/30/97 0.19% 11,924
09/30/97 3.32% 17,362 09/30/97 0.44% 11,976
12/31/97 2.94% 17,873 12/31/97 0.62% 12,050
03/31/98 1.56% 18,151 03/31/98 0.12% 12,064
The Jametown Bond Fund Average Annual Total Returns
1 Year 5 Years Since Inception*
12.06% 7.03% 8.05%
*The chart above represents the performance of Institution shares only, which
will vary from the performance of Service Group Shares based on the difference
in fees paid by shareholders in the different classes. The Fund commenced
operations on December 13, 1990, and the initial public offering of Service
Group Shares commenced on October 2, 1997.
Past performance is not predictive of future performance.
<PAGE>
THE JAMESTOWN BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities:
At acquisition cost $ 91,630,430
==============
At value (Note 1) $ 93,694,603
Investments in repurchase agreements (Note 1) 6,753,000
Cash 9,739
Receivable for securities sold 3,192,094
Interest receivable 1,027,791
Other assets 1,985
--------------
TOTAL ASSETS 104,679,212
--------------
LIABILITIES
Dividends payable 45,034
Payable for securities purchased 5,283,937
Accrued advisory fees (Note 3) 14,308
Accrued administration fees (Note 3) 5,980
Accrued distribution expenses (Note 3) 1,291
Other accrued expenses 9,962
--------------
TOTAL LIABILITIES 5,360,512
--------------
NET ASSETS $ 99,318,700
==============
Net assets consist of:
Paid-in capital $ 96,949,176
Accumulated net realized gains from security transactions 297,227
Undistributed net investment income 8,124
Net unrealized appreciation on investments 2,064,173
--------------
Net assets $ 99,318,700
==============
PRICING OF INSTITUTIONAL SHARES
Net assets attributable to Institutional Shares $ 96,250,111
==============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) 8,886,698
==============
Net asset value, offering price and redemption price per share (Note 1) $ 10.83
==============
PRICING OF SERVICE GROUP SHARES
Net assets applicable to Service Group Shares $ 3,068,589
==============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) 283,310
==============
<PAGE>
Net asset value, offering price and redemption price per share (Note 1) $ 10.83
==============
See accompanying notes to financial statements.
</TABLE>
<TABLE>
THE JAMESTOWN BOND FUND
STATEMENT OF OPERATIONS
Year Ended March 31, 1998
<S> <C>
INVESTMENT INCOME
Interest $ 5,328,394
Dividends 383,282
--------------
TOTAL INVESTMENT INCOME 5,711,676
--------------
EXPENSES
Investment advisory fees (Note 3) 326,338
Administration fees (Note 3) 67,341
Custodian fees 16,026
Professional fees 15,996
Pricing costs 10,442
Registration fees 8,212
Trustees' fees and expenses 5,405
Insurance expense 4,675
Printing of shareholder reports 2,917
Distribution expenses, Service Group Shares (Note 3) 2,672
Other expenses 3,555
--------------
TOTAL EXPENSES 463,579
Fees waived by the Adviser (Note 3) (16,111)
Expenses reimbursed through a directed brokerage arrangement (Note 4) (9,678)
--------------
NET EXPENSES 437,790
--------------
NET INVESTMENT INCOME 5,273,886
--------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions 1,826,210
Net change in unrealized appreciation/depreciation on investments 2,574,722
--------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 4,400,932
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 9,674,818
==============
See accompanying notes to financial statements.
</TABLE>
<TABLE>
THE JAMESTOWN BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
<PAGE>
Years Ended March 31, 1998 and 1997
<CAPTION>
Year Year
Ended Ended
March 31, March 31,
1998 1997
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 5,273,886 $ 5,005,951
Net realized gains (losses) from security transactions 1,826,210 (391,414)
Net change in unrealized appreciation/depreciation
on investments 2,574,722 (405,910)
-------------- --------------
Net increase in net assets from operations 9,674,818 4,208,627
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Institutional Shares (5,189,396) (5,104,234)
From net investment income, Service Group Shares (99,842) --
-------------- --------------
Decrease in net assets from distributions from shareholders (5,289,238) (5,104,234)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS:
INSTITUTIONAL SHARES
Proceeds from shares sold 15,597,164 9,262,915
Net asset value of shares issued in reinvestment
of distributions to shareholders 5,049,237 4,238,186
Payments for shares redeemed (5,227,155) (10,880,119)
-------------- --------------
Net increase in net assets from Institutional Shares transactions 15,419,246 2,620,982
-------------- --------------
SERVICE GROUP SHARES
Proceeds from shares sold 4,316,277 --
Net asset value of shares issued in reinvestment
of distributions to shareholders 99,842 --
Payments for shares redeemed (1,401,739) --
-------------- --------------
Net increase in net assets from Service Group Shares transactions 3,014,380 --
-------------- --------------
TOTAL INCREASE IN NET ASSETS 22,819,206 1,725,375
NET ASSETS:
Beginning of year 76,499,494 74,774,119
-------------- --------------
End of year - (including undistributed net investment
income of $8,124 and $23,476, respectively) $ 99,318,700 $ 76,499,494
============== ==============
Capital share activity:
Institutional Shares
Sold 1,446,450 892,247
Reinvested 472,113 409,635
Redeemed (486,114) (1,043,163)
-------------- --------------
Net increase in shares outstanding 1,432,449 258,719
Shares outstanding, beginning of year 7,454,249 7,195,530
-------------- --------------
Shares outstanding, end of year 8,886,698 7,454,249
============== ==============
Service Group Shares
Sold 402,367 --
Reinvested 9,229 --
Redeemed (128,286) --
-------------- --------------
Net increase in shares outstanding 283,310 --
Shares outstanding, beginning of year -- --
-------------- --------------
Shares outstanding, end of year 283,310 --
============== ==============
See accompanying notes to financial statements.
</TABLE>
<TABLE>
THE JAMESTOWN BOND FUND - Institutional Shares
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each Year
<PAGE>
<CAPTION>
Years Ended March 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year $10.26 $10.39 $9.97 $10.15 $10.82
------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.58 0.68 0.70 0.62 0.55
Net realized and unrealized gains (losses) on investments 0.63 (0.12) 0.41 (0.18) (0.30)
------ ------ ------ ------ ------
Total from investment operations 1.21 0.56 1.11 0.44 0.25
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income (0.64) (0.69) (0.69) (0.62) (0.55)
Distributions from net realized gains -- -- -- -- (0.19)
Distributions in excess of net realized gains -- -- -- -- (0.18)
------ ------ ------ ------ ------
Total distributions (0.64) (0.69) (0.69) (0.62) (0.92)
------ ------ ------ ------ ------
Net asset value at end of year $10.83 $10.26 $10.39 $9.97 $10.15
====== ====== ====== ====== ======
Total return 12.06% 5.52% 11.23% 4.56% 2.12%
====== ====== ====== ====== ======
Net assets at end of year (000's) $96,250 $76,499 $74,774 $72,029 $64,029
======= ======= ======= ======= =======
Ratio of gross expenses to average net assets 0.53% 0.53% 0.56% 0.57% 0.60%
Ratio of net expenses to average net assets (a) 0.50% 0.50% 0.53% 0.53% 0.60%
Ratio of net investment income to average net assets 6.06% 6.48% 6.54% 6.28% 5.03%
Portfolio turnover rate 235% 207% 268% 381% 381%
(a) Ratios were determined based on net expenses after reimbursements through a
directed brokerage arrangement for periods after March 31, 1994 (Note 4) and
investment advisory fees waived for the year ended March 31, 1998 (Note 3).
See accompanying notes to financial statements.
</TABLE>
<TABLE>
THE JAMESTOWN BOND FUND - Service Group Shares
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a Share Outstanding Throughout the Period
<CAPTION>
Period
Ended
March 31,
1998 (a)
<S> <C>
Net asset value at beginning of period $10.69
------
Income from investment operations:
Net investment income 0.37
Net realized and unrealized gains on investments 0.08
------
Total from investment operations 0.45
------
Less distributions:
Dividends from net investment income (0.31)
------
Net asset value at end of period $10.83
======
Total return 8.55%(c)
<PAGE>
======
Net assets at end of period (000's) $3,069
======
Ratio of gross expenses to average net assets 0.68%(c)
Ratio of net expenses to average net assets (b) 0.65%(c)
Ratio of net investment income to average net assets 5.96%(c)
Portfolio turnover rate 235%
(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 reimbursements through a
directed brokerage arrangement (Note 4) and investment advisory fees waived for
the year ended March 31, 1998 (Note 3).
(c) Annualized.
See accompanying notes to financial statements.
</TABLE>
<TABLE>
THE JAMESTOWN BOND FUND
PORTFOLIO OF INVESTMENTS
March 31, 1998
<CAPTION>
Par Value Value
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 20.9%
U.S. Treasury Bonds - 9.9%
$ 7,535,000 8.50%, due 02/15/2020 $ 9,789,623
---------------
U.S. Treasury Notes - 8.6%
8,380,000 6.50%, due 05/31/2001 8,582,964
---------------
U.S. Treasury Inflation-Protection Notes - 2.4%
1,600,000 3.625%, due 07/15/2002 1,598,288
760,000 3.375%, due 01/15/2007 751,557
---------------
2,349,845
---------------
Total U.S. Treasury Obligations (Cost $19,648,349) $ 20,722,432
---------------
MORTGAGE-BACKED SECURITIES - 36.2%
Federal Home Loan Mortgage Corporation - 6.0%
$ 975,000 Pool #1472, 6.75%, due 05/15/2006 $ 986,573
1,118,285 Pool #1561-ZB, 6.00%, due 08/15/2006 1,118,285
825,000 Pool #1197-H, 6.75%, due 02/15/2007 839,437
1,000,000 Pool #1221-I, 7.00%, due 03/15/2007 1,018,750
825,000 Pool #1655-HB, 6.50%, due 10/15/2008 831,955
1,246,864 Pool #C80393, 6.00%, due 03/15/2026 1,205,406
---------------
6,000,406
---------------
Federal National Mortgage Association - 9.7%
817,497 Pool #313443, 6.775%, due 04/01/2004 839,467
1,191,744 Pool #375139, 7.13% due 05/01/2004 1,245,744
1,467,421 Pool #375299, 6.81%, due 08/01/2004 1,512,361
601,498 Pool #73061, 8.66%, due 01/01/2005 667,005
626,778 Pool #73126, 7.00%, due 07/01/2005 649,687
603,222 Series #92-61-ZB, 7.50%, due 05/25/2007 640,923
765,000 Series #92-179-H, 7.00%, due 09/01/2007 785,081
548,352 Pool #375538, 6.70%, due 11/01/2007 564,631
750,000 Series #98-M3, 6.45%, due 01/01/2011 747,422
1,100,000 Series #97-M3, 7.20%, adjustable rate, due 08/17/2018 1,162,219
746,312 Series #G92-44-Z, 8.00%, due 07/25/2022 811,846
---------------
9,626,386
<PAGE>
---------------
<CAPTION>
Par Value Value
<S> <C> <C>
MORTGAGE-BACKED SECURITIES - Continued
Government National Mortgage Association - 11.1%
$ 80,114 Pool #223997, 8.85%, due 05/15/2018 $ 86,382
607,105 Pool #224002, 8.85%, due 07/15/2018 654,599
398,317 Pool #333658, 7.50%, due 01/15/2023 409,402
859,923 Pool #342526, 7.50%, due 02/15/2023 883,855
995,361 Pool #349314, 7.50%, due 02/15/2023 1,023,062
733,877 Pool #352143, 7.50%, due 07/15/2023 754,300
726,327 Pool #346772, 7.50%, due 09/15/2023 746,540
755,992 Pool #372822, 7.50%, due 11/15/2023 777,032
999,619 Pool #359451, 7.50%, due 12/15/2023 1,027,438
415,962 Pool #354831, 7.50%, due 06/15/2024 427,018
860,611 Pool #8459, 7.00%, adjustable rate, due 07/20/2024 882,393
604,064 Pool #28484, 7.00%, adjustable rate, due 08/20/2024 619,262
519,837 Pool #8482, 7.00%, adjustable rate, due 08/20/2024 532,916
739,638 Pool #8542, 7.00%, adjustable rate, due 11/20/2024 757,323
486,214 Pool #441273, 8.00%, due 10/15/2026 503,460
900,000 TBA, 8.00%, due 04/15/2028 932,062
---------------
11,017,044
---------------
Student Loan Marketing Association - 3.3%
499,735 Series #96-2-A1, 5.678%, adjustable rate, due 10/25/2004 498,174
2,468,492 Series #97-2-A1, 5.704%, adjustable rate, due 10/25/2005 2,460,778
331,516 Series #97-3-A1, 5.884%, adjustable rate, due 04/25/2006 330,791
---------------
3,289,743
---------------
Other Mortgage-Backed Securities - 6.1%
Deutsche Mortgage and Asset Receiving Corporation #98-C1-A2,
1,915,000 6.538%, due 06/01/2031 1,928,764
First Union-Lehman Brothers Commercial Mortgage Trust #97-C2-A1,
825,869 6.479%, due 03/01/2004 832,579
LB Commercial Conduit Mortgage Trust #98-C1-A3,
975,000 6.48%, due 02/01/2030 978,656
Lehman Brothers Mortgage Trust #91-2-A1,
380,286 8.00%, due 03/20/1999 383,257
Morgan Stanley Capital I #98-WF1-A2,
1,065,000 6.55%, due 12/15/2007 1,076,482
Resolution Funding Mortgage Security I #94-S12-A2,
800,000 6.50%, due 04/25/2009 801,248
---------------
6,000,986
---------------
Total Mortgage-Backed Securities (Cost $35,765,832) $ 35,934,565
---------------
<CAPTION>
Par Value Value
<S> <C> <C>
ASSET-BACKED SECURITIES - 5.6%
Bank America Manufactured Housing Contract #96-1-A6,
$ 650,000 8.00%, due 10/10/2026 $ 696,995
CIT RV Trust #95-B-A1,
242,235 6.50%, due 04/15/2011 243,824
CIT RV Trust #96-A-A1,
613,215 5.40%, due 12/15/2011 607,273
Fleetwood Credit Corporation Grantor Trust #94-A-A,
461,658 4.70%, due 07/15/2009 453,432
Fleetwood Credit Corporation Grantor Trust #96-A-A,
455,884 6.75%, due 10/15/2011 459,586
Green Tree Financial Corporation, #97-2-A6,
775,000 7.24%, due 06/15/2028 800,908
Green Tree Financial Corporation, #97-2-A7,
700,000 7.62%, due 04/15/2028 726,467
Green Tree Financial Corporation, #98-A,
1,550,000 6.18%, due 04/01/2018 1,546,590
--------------
Total Asset-Backed Securities (Cost $5,459,617) $ 5,535,075
--------------
CORPORATE BONDS - 24.4%
Allmerica Financial Corporation,
$ 390,000 7.625%, due 10/15/2025 $ 411,575
Associates Corporation,
700,000 5.75%, due 10/15/2003 684,775
Avalon Properties, Inc.,
485,000 6.625%, due 01/15/2005 479,573
Baltimore Gas & Electric Corporation,
1,000,000 8.90%, due 07/01/1998 1,007,470
Bank of New York,
610,000 6.50%, due 12/01/2003 617,265
Beneficial Corporation Medium Term Notes,
800,000 6.33%, due 10/09/2001 801,952
<PAGE>
BRE Properties, Inc.,
425,000 7.125%, due 02/15/2013 422,450
Chrysler Corporation,
340,000 7.45%, due 03/01/2027 364,970
Coca-Cola Enterprises,
440,000 6.75%, due 01/15/2038 434,500
Dayton Hudson Corporation,
370,000 6.75%, due 01/01/2028 363,862
Dominion Capital Trust,
310,000 7.83%, due 12/01/2027 316,808
<CAPTION>
Par Value Value
<S> <C> <C>
CORPORATE BONDS - Continued
Duke Realty Limited Partnership,
$ 470,000 7.05%, due 03/01/2016 $ 473,351
Equity Residential Properties Trust,
875,000 6.55%, due 11/15/2001 877,153
Firstar Bank Milwaukee,
2,450,000 6.25%, due 12/01/2002 2,461,638
Ford Motor Company,
275,000 8.875%, due 01/15/2022 336,465
Ford Motor Credit Medium Term Notes,
950,000 7.45%, due 04/13/2000 975,498
General Motors,
235,000 8.80%, due 03/01/2021 286,265
General Motors Acceptance Corporation Medium Term Notes,
1,400,000 6.80%, due 04/17/2001 1,425,886
IBM Corporation,
420,000 6.50%, due 01/15/2028 411,247
International Lease Finance Medium Term Notes,
1,315,000 6.42%, due 09/11/2000 1,325,112
JDN Realty Corporation,
375,000 6.95%, due 08/01/2007 372,011
JP Realty, Inc.,
485,000 7.29%, due 03/11/2008 487,692
Lehman Brothers Holdings,
925,000 6.40%, due 12/27/1999 929,227
May Department Stores Company,
275,000 7.45%, due 09/15/2011 299,107
Mellon Financial Company,
915,000 7.625%, due 11/15/1999 935,505
Morgan Stanley Group,
500,000 6.09%, due 03/09/2011 499,975
National City Corporation,
900,000 7.20%, due 05/15/2005 942,444
Norfolk Southern Corporation,
370,000 7.80%, due 05/15/2027 413,960
Norwest Financial, Inc.,
450,000 6.05%, due 11/19/1999 451,138
SBC Communications, Inc.,
600,000 6.625%, due 11/01/2009 614,034
<CAPTION>
Par Value Value
<S> <C> <C>
CORPORATE BONDS - Continued
Sears Roebuck & Company,
$ 750,000 6.86%, due 07/03/2001 $ 765,525
750,000 6.99%, due 09/30/2002 770,947
Spieker Properties LP,
370,000 6.75%, due 01/15/2008 364,361
Suntrust Bank,
340,000 6.125%, due 02/15/2004 337,175
Textron, Inc.,
510,000 6.625%, due 11/15/2007 518,399
TRW Inc.,
425,000 6.25%, due 01/15/2010 411,816
Union Camp Corporation,
325,000 6.50%, due 11/15/2007 326,905
United Parcel Service of America, Inc.,
300,000 8.375%, due 04/01/2030 368,007
--------------
Total Corporate Bonds (Cost $24,078,849) $ 24,286,043
--------------
Shares
CLOSED-END MUTUAL FUNDS - 7.2%
37,400 Blackrock 1999 Term Trust, Inc. $ 352,963
180,600 Blackrock 2001 Term Trust, Inc. 1,568,963
1,200 Blackrock Broad Investment Grade 2009 Term Trust, Inc. 15,225
53,900 Blackrock Investment Quality Term Trust, Inc. 454,781
10,000 Blackrock North American Government Income Trust 106,250
125,300 Blackrock Strategic Term Trust, Inc. 1,080,713
12,000 Dean Witter Government Income Trust 103,500
7,400 Excelsior Income Shares, Inc. 126,262
202,200 Hyperion 1999 Term Trust, Inc. 1,415,400
201,000 Hyperion 2002 Term Trust, Inc. 1,608,000
4,100 Hyperion 2005 Investment Grade Opportunity Term Trust, Inc. 34,337
16,400 Income Opportunities Fund, Inc. - 1999 156,825
<PAGE>
28,900 MFS Government Markets Income Trust 193,269
--------------
Total Closed-End Funds (Cost $6,677,783) $ 7,216,488
--------------
Total Investments at Value (Cost $91,630,430) - 94.3% $ 93,694,603
--------------
<CAPTION>
Face
Amount Value
<S> <C> <C>
REPURCHASE AGREEMENTS (a) - 6.8%
Star Bank, N.A., 5.25%, dated 03/31/1998, due 04/01/1998
$ 6,753,000 repurchase proceeds $6,753,985 (Cost $6,753,000) $ 6,753,000
---------------
Total Investments and Repurchase Agreements
at Value - 101.1% $ 100,447,603
Liabilities in Excess of Other Assets - (1.1)% (1,128,903)
---------------
Net Assets - 100.0% $ 99,318,700
===============
(a) Joint repurchase agreement is fully collateralized by $12,715,000 GNMA II,
Pool #8421, 7.375%, due 05/20/24; $14,335,000 GNMA II, Pool #8932, 7.00%, due
03/20/22; and $1,120,000 GNMA II, Pool #8359, 7.00% due 01/20/24. The aggregate
market value of the collateral at March 31, 1998 was $28,948,985. The Fund's
pro-rata interest in the collateral at March 31, 1998 was $6,947,756.
See accompanying notes to financial statements.
</TABLE>
THE JAMESTOWN BOND FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
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, as amended. 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 subjuect 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 thta (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 business of the regular session of the New York Stock Exchange
(currently 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
<PAGE>
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 on 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 market 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.
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, which may differ from generally accepted accounting
principles.
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 priciples 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
<PAGE>
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.
The following information is based upon the Federal income tax cost of portfolio
investments of $91,682,263 as of March 31, 1998:
Gross unrealized appreciation....................................$ 2,271,814
Gross unrealized depreciation.......................................(259,474)
----------
Net unrealized appreciation......................................$ 2,012,340
===========
The difference between the Federal income tax cost of portfolio investments and
financial statement cost is due to certain timing differences in the recognition
of capital losses under generally accepted accounting principles and income tax
regulations.
2. INVESTMENT TRANSACTIONS
During the year ended March 31, 1998, purchases and proceeds from sales and
maturities of investment securities, other than short-term investments, amounted
to $204,131,539 and $194,635,139, 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 .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 .50% of its
average daily net assets, and to limit the total operating expenses of the
Service Group Shares of the Fund to .65% of its average daily net assets;
accordingly, the Adviser waived $16,111 of its investment advisory fee for the
year ended March 31, 1998. 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 .075% of its average daily net assets up to $200
million and .05% of 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 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.
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
<PAGE>
Shares, not to exceed 0.15% of average daily net assets applicable to Service
Group Shares. For the period ended March 31, 1998, Service Group Shares incurred
$2,672 of distribution expenses under the Plan.
4. DIRECTED BROKERAGE ARRANGEMENT
In order to reduce the total operating expenses of the Fund, a portion of the
Fund's custodian fees 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 $9,678 for the year ended
March 31, 1998.
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 Jamestown Bond Fund (a series of The Williamsburg Investment Trust),
including the portfolio of investments, as of March 31, 1998, 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, 1998 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 Jamestown Bond Fund as of March 31, 1998, 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 24, 1998
<PAGE>
- ------------------------------------------------------------------------------
THE JAMESTOWN BOND FUND
-----------------------
No Load Mutual Fund
SEMI-ANNUAL REPORT
September 30, 1998
(Unaudited)
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
- -------------------------------------------------------------------------------
THE JAMESTOWN BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998
(Unaudited)
ASSETS
Investments in securities:
At acquisition cost $106,172,374
============
At value (Note 1) $110,205,868
Investments in repurchase agreements (Note 1) 11,785,000
Cash 39,332
Interest and dividends receivable 1,063,048
Receivable for securities sold 5,657,871
Receivable for capital shares sold 1,125,000
Other assets 13,565
------------
TOTAL ASSETS 129,889,684
------------
LIABILITIES
Dividends payable 49,998
Payable for securities purchased 12,398,526
Payable for capital shares redeemed 102,375
Accrued investment advisory fees (Note 3) 24,465
Accrued administration fees (Note 3) 8,165
Accrued distribution expenses (Note 3) 1,051
Other accrued expenses 800
------------
TOTAL LIABILITIES 12,585,380
------------
NET ASSETS $117,304,304
============
Net assets consist of:
Paid-in capital $111,185,140
<PAGE>
Undistributed net investment income 8,115
Accumulated net realized gains from security transactions 2,077,555
Net unrealized appreciation on investments 4,033,494
------------
Net assets $117,304,304
============
PRICING OF INSTITUTIONAL SHARES
Net assets attributable to Institutional Shares $114,444,529
============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 10,211,169
============
Net asset value, offering price and redemption
price per share (Note 1) $ 11.21
============
PRICING OF SERVICE GROUP SHARES
Net assets applicable to Service Group Shares $ 2,859,775
============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 255,186
============
Net asset value, offering price and
redemption price per share (Note 1) $ 11.21
============
See accompanying notes to financial statements.
THE JAMESTOWN BOND FUND
STATEMENT OF OPERATIONS
Six Months Ended September 30, 1998
(Unaudited)
INVESTMENT INCOME
Interest $ 3,180,766
Dividends 224,355
-----------
TOTAL INVESTMENT INCOME 3,405,121
-----------
EXPENSES
Investment advisory fees (Note 3) 202,997
Administration fees (Note 3) 50,515
Custodian fees 9,129
Professional fees 7,463
Pricing costs 6,582
Printing of shareholder reports 4,375
Trustees' fees and expenses 3,210
Distribution expenses, Service Group Shares (Note 3) 2,151
Insurance expense 1,634
Postage and supplies 1,339
Registration fees 1,293
Other expenses 1,986
-----------
TOTAL EXPENSES 292,674
<PAGE>
Fees waived by the Adviser (Note 3) (10,866)
Expenses reimbursed through a directed
brokerage arrangement (Note 4) (8,994)
-----------
NET EXPENSES 272,814
-----------
NET INVESTMENT INCOME 3,132,307
-----------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions 1,780,328
Net change in unrealized
appreciation/depreciation on investments 1,969,321
-----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 3,749,649
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 6,881,956
===========
See accompanying notes to financial statements.
THE JAMESTOWN BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
Periods Ended September 30, 1998 and March 31, 1998
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
SEPTEMBER 30, ENDED
1998 MARCH 31,
(UNAUDITED) 1998
------------- -------------
FROM OPERATIONS:
<S> <C> <C>
Net investment income $ 3,132,307 $ 5,273,886
Net realized gains from security transactions 1,780,328 1,826,210
Net change in unrealized appreciation/depreciation
on investments 1,969,321 2,574,722
------------- -------------
Net increase in net assets from operations 6,881,956 9,674,818
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income, Institutional Shares (3,055,068) (5,189,396)
From net investment income, Service Group Shares (77,248) (99,842)
------------- -------------
Decrease in net assets from distributions from shareholders (3,132,316) (5,289,238)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
INSTITUTIONAL SHARES
Proceeds from shares sold 13,187,869 15,597,164
Net asset value of shares issued in reinvestment
of distributions to shareholders 2,952,334 5,049,237
Payments for shares redeemed (1,597,130) (5,227,155)
------------- -------------
Net increase in net assets from Institutional Shares transactions 14,543,073 15,419,246
------------- -------------
SERVICE GROUP SHARES
Proceeds from shares sold 153,370 4,316,277
Net asset value of shares issued in reinvestment
of distributions to shareholders 77,248 99,842
Payments for shares redeemed (537,727) (1,401,739)
------------- -------------
Net increase (decrease) in net assets from
Service Group Shares transactions (307,109) 3,014,380
------------- -------------
<PAGE>
TOTAL INCREASE IN NET ASSETS 17,985,604 22,819,206
NET ASSETS:
Beginning of period 99,318,700 76,499,494
------------- -------------
End of period - (including undistributed net investment
income of $8,115 and $8,124, respectively) $ 117,304,304 $ 99,318,700
============= =============
CAPITAL SHARE ACTIVITY:
INSTITUTIONAL SHARES
Sold 1,202,850 1,446,450
Reinvested 266,695 472,113
Redeemed (145,074) (486,114)
------------- -------------
Net increase in shares outstanding 1,324,471 1,432,449
Shares outstanding, beginning of period 8,886,698 7,454,249
------------- -------------
Shares outstanding, end of period 10,211,169 8,886,698
============= =============
SERVICE GROUP SHARES
Sold 14,036 402,367
Reinvested 6,981 9,229
Redeemed (49,141) (128,286)
------------- -------------
Net increase (decrease) in shares outstanding (28,124) 283,310
Shares outstanding, beginning of period 283,310 --
------------- -------------
Shares outstanding, end of period 255,186 283,310
============= =============
</TABLE>
See accompanying notes to financial statements.
THE JAMESTOWN BOND FUND - INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a
Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED MARCH 31,
1998 --------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period ................... $ 10.83 $ 10.26 $ 10.39 $ 9.97 $ 10.15 $ 10.82
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income ................................. 0.30 0.58 0.68 0.70 0.62 0.55
Net realized and unrealized gains
(losses) on investments ............................ 0.39 0.63 (0.12) 0.41 (0.18) (0.30)
-------- -------- -------- -------- -------- --------
Total from investment operations ......................... 0.69 1.21 0.56 1.11 0.44 0.25
-------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income .................. (0.31) (0.64) (0.69) (0.69) (0.62) (0.55)
Distributions from net realized gains ................. -- -- -- -- -- (0.19)
Distributions in excess of net realized gains ......... -- -- -- -- -- (0.18)
-------- -------- -------- -------- -------- --------
Total distributions ...................................... (0.31) (0.64) (0.69) (0.69) (0.62) (0.92)
-------- -------- -------- -------- -------- --------
Net asset value at end of period ......................... $ 11.21 $ 10.83 $ 10.26 $ 10.39 $ 9.97 $ 10.15
======== ======== ======== ======== ======== ========
Total return ............................................. 6.45% 12.06% 5.52% 11.23% 4.56% 2.12%
======== ======== ======== ======== ======== ========
Net assets at end of period (000's) ...................... $114,445 $ 96,250 $ 76,499 $ 74,774 $ 72,029 $ 64,029
======== ======== ======== ======== ======== ========
Ratio of gross expenses to average net assets ............ 0.54%(b) 0.53% 0.53% 0.56% 0.57% 0.60%
Ratio of net expenses to average net assets (a) .......... 0.50%(b) 0.50% 0.50% 0.53% 0.53% 0.60%
Ratio of net investment income to average net assets ..... 5.78%(b) 6.06% 6.48% 6.54% 6.28% 5.03%
<PAGE>
Portfolio turnover rate .................................. 114% 235% 207% 268% 381% 381%
</TABLE>
(a) Ratios were determined based on net expenses after expense reimbursements
through a directed brokerage arrangement for periods after March 31, 1994
(Note 4) and investment advisory fee waivers for the periods ended
September 30, 1998 and March 31, 1998 (Note 3).
(b) Annualized.
See accompanying notes to financial statements.
THE JAMESTOWN BOND FUND - SERVICE GROUP SHARES
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a
Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
SEPTEMBER 30, ENDED
1998 MARCH 31,
(UNAUDITED) 1998 (A)
-------- --------
<S> <C> <C>
Net asset value at beginning of period .................. $ 10.83 $ 10.69
-------- --------
Income from investment operations:
Net investment income ................................ 0.32 0.37
Net realized and unrealized gains on investments ..... 0.37 0.08
-------- --------
Total from investment operations ........................ 0.69 0.45
-------- --------
Less distributions:
Dividends from net investment income ................. (0.31) (0.31)
-------- --------
Net asset value at end of period ........................ $ 11.21 $ 10.83
======== ========
Total return ............................................ 6.38% 8.55%(c)
======== ========
Net assets at end of period (000's) ..................... $ 2,860 $ 3,069
======== ========
Ratio of gross expenses to average net assets ........... 0.69%(c) 0.68%(c)
Ratio of net expenses to average net assets (b) ......... 0.65%(c) 0.65%(c)
Ratio of net investment income to average net assets .... 5.64%(c) 5.96%(c)
Portfolio turnover rate ................................. 114% 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 expense reimbursements
<PAGE>
through a directed brokerage arrangement (Note 4) and investment advisory
fee waivers (Note 3).
(c) Annualized.
See accompanying notes to financial statements.
THE JAMESTOWN BOND FUND
PORTFOLIO OF INVESTMENTS
September 30, 1998
(Unaudited)
Par Value Value
--------- -----
U.S. TREASURY OBLIGATIONS - 14.6%
U.S. TREASURY BONDS - 8.1%
$6,855,000 8.125%, due 08/15/2021 ..................... $ 9,505,966
-----------
U.S. TREASURY NOTES - 5.1%
3,155,000 6.50%, due 05/31/2001 ...................... 3,321,142
2,260,000 7.00%, due 07/15/2006 ...................... 2,632,900
-----------
5,954,042
-----------
U.S. TREASURY INFLATION-PROTECTION NOTES - 1.4%
1,700,000 3.375%, due 01/15/2007 ..................... 1,679,194
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST $16,266,026) $17,139,202
-----------
MORTGAGE-BACKED SECURITIES - 37.7%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 4.3%
$ 825,000 Pool #1197-H, 6.75%, due 02/15/2007 $ 883,781
900,194 Pool #1221-I, 7.00%, due 03/15/2007 933,384
700,000 Pool #1457-PK, 7.00%, due 01/15/2008 759,717
925,000 Pool #1460-I, 7.00%, due 01/15/2008 1,001,313
825,000 Pool #1655-HB, 6.50%, due 10/15/2008 873,980
600,000 Pool #1857-D, 6.50%, due 11/15/2022 636,372
-----------
5,088,547
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 19.9%
813,175 Pool #313443, 6.775%, due 04/01/2004 864,508
1,186,519 Pool #375139, 7.13%, due 05/01/2004 1,283,851
1,460,650 Pool #375299, 6.81%, due 08/01/2004 1,561,755
597,119 Pool #73061, 8.66%, due 01/01/2005 682,022
621,824 Pool #73126, 7.00%, due 07/01/2005 646,175
557,395 Pool #73443, 6.87%, due 04/01/2006 603,032
626,199 Series #92-61-ZB, 7.50%, due 05/25/2007 675,312
765,000 Series #92-179-H, 7.00%, due 09/01/2007 809,462
545,801 Pool #375538, 6.70%, due 11/01/2007 589,397
1,425,000 Series #93-10-PH, 6.50%, due 12/01/2007 1,503,375
1,275,000 Pool #380701, 6.19%, due 09/01/2008 1,338,152
750,000 Series #98-M3, 6.45%, due 01/01/2011 778,125
1,410,000 Series #96-53-PG, 6.50%, due 12/18/2011 1,502,087
1,011,096 Pool #398341, 6.00%, due 04/01/2013 1,021,794
1,889,531 Pool #424298, 6.00%, due 06/01/2013 1,909,523
605,877 Series #G92-23-Z, 7.50%, due 05/01/2021 659,649
776,666 Series #G92-44-Z, 8.00%, due 07/25/2022 857,727
<PAGE>
2,885,000 TBA, 6.00%, due 10/01/2028 2,877,787
1,375,000 TBA, 6.50%, due 10/01/2028 1,397,773
1,800,000 TBA, 6.00%, due 11/01/2028 1,794,375
-----------
23,355,881
-----------
THE JAMESTOWN BOND FUND
PORTFOLIO OF INVESTMENTS
September 30, 1998
(Unaudited)
Par Value Value
--------- -----
MORTGAGE-BACKED SECURITIES - CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 10.8%
$ 64,741 Pool #223997, 8.85%, due 05/15/2018 $ 69,491
515,853 Pool #224002, 8.85%, due 07/15/2018 553,702
127,328 Pool #316205, 7.50%, due 02/15/2022 132,126
1,829,230 Pool #373331, 7.50%, due 05/15/2022 1,898,156
346,789 Pool #333658, 7.50%, due 01/15/2023 359,855
741,440 Pool #342526, 7.50%, due 02/15/2023 769,377
304,450 Pool #349314, 7.50%, due 02/15/2023 315,922
649,155 Pool #352143, 7.50%, due 07/15/2023 673,615
532,223 Pool #008505, 7.00%, adjustable rate,
due 09/20/2024 541,787
1,559,804 Pool #8541, 7.00%, adjustable rate,
due 11/20/2024 1,586,368
575,011 Pool #8552, 7.00%, adjustable rate,
due 11/20/2024 584,982
484,999 Pool #455413, 7.50%, due 08/15/2027 502,974
674,375 Pool #780798, 7.50%, due 12/15/2027 699,368
1,350,000 Pool #433882, 7.00%, due 07/15/2028 1,394,118
485,000 Pool #473853, 7.00%, due 09/15/2028 500,850
2,000,000 TBA, 7.00%, due 10/15/2028 2,062,500
-----------
12,645,191
-----------
OTHER MORTGAGE-BACKED SECURITIES - 2.7%
Contimortgage Home Equity Loan Trust #98-2-A4,
925,000 6.19%, due 01/15/2014 936,849
CS First Boston Mortgage Securities
Corporation #98-C1-A1A,
811,923 6.26%, due 12/17/2007 837,296
GS Mortgage Securities Corporation II #98-GLII-A1,
1,195,370 6.312%, due 04/13/2031 1,231,606
Lehman Brothers Mortgage Trust #91-2-A1,
184,074 8.00%, due 03/20/1999 184,074
-----------
3,189,825
-----------
TOTAL MORTGAGE-BACKED SECURITIES (COST $43,203,593) $44,279,444
-----------
ASSET-BACKED SECURITIES - 8.8%
STUDENT LOAN MARKETING ASSOCIATION - 4.4%
$2,138,651 Series #97-2-A1, 5.083%, adjustable rate,
due 10/25/2005 $ 2,122,612
2,611,940 Series #97-3-A1, 5.817%, adjustable rate,
<PAGE>
due 04/25/2006 2,592,351
428,277 Series #98-1-A1, 5.253%, adjustable rate,
due 01/25/2007 428,277
-----------
5,143,240
-----------
THE JAMESTOWN BOND FUND
PORTFOLIO OF INVESTMENTS
September 30, 1998
(Unaudited)
Par Value Value
--------- -----
ASSET-BACKED SECURITIES - CONTINUED
OTHER ASSET-BACKED SECURITIES - 4.4%
Bank America Manufactured Housing Contract #96-1-A6,
$ 650,000 8.00%, due 10/10/2026 $ 705,510
CIT RV Trust #95-B-A1,
197,137 6.50%, due 04/15/2011 200,771
CIT RV Trust #96-A-A1,
499,320 5.40%, due 12/15/2011 502,127
Fleetwood Credit Corporation Grantor Trust #94-A-A,
397,429 4.70%, due 07/15/2009 395,812
Fleetwood Credit Corporation Grantor Trust #96-A-A,
378,938 6.75%, due 10/15/2011 391,845
Green Tree Financial Corporation, #97-2-A6,
775,000 7.24%, due 06/15/2028 812,293
Green Tree Financial Corporation, #97-2-A7,
700,000 7.62%, due 04/15/2028 753,151
Green Tree Financial Corporation, #98-A,
1,337,868 6.18%, due 04/01/2018 1,353,922
-----------
5,115,431
-----------
TOTAL ASSET-BACKED SECURITIES (COST $10,115,395) $10,258,671
-----------
CORPORATE BONDS - 25.2%
Aluminum Company of American,
$ 775,000 6.50%, due 06/15/2018 $ 794,693
Allmerica Financial Corporation,
390,000 7.625%, due 10/15/2025 415,892
Associates Corporation,
700,000 5.75%, due 10/15/2003 709,303
Avalon Properties, Inc.,
485,000 6.625%, due 01/15/2005 483,623
Bank of New York Company, Inc.,
610,000 6.50%, due 12/01/2003 638,566
BellSouth Telecommunications,
1,075,000 6.375%, due 06/01/2028 1,128,965
Beneficial Corporation Medium Term Notes,
800,000 6.33%, due 10/09/2001 824,472
BRE Properties, Inc.,
425,000 7.125%, due 02/15/2013 427,486
Coca-Cola Enterprises,
325,000 6.75%, due 09/15/2028 335,692
440,000 6.75%, due 01/15/2038 448,052
Dana Corporation,
<PAGE>
425,000 7.00%, due 03/15/2028 429,246
THE JAMESTOWN BOND FUND
PORTFOLIO OF INVESTMENTS
September 30, 1998
(Unaudited)
Par Value Value
--------- -----
CORPORATE BONDS - CONTINUED
Dayton Hudson Corporation,
$ 370,000 6.75%, due 01/01/2028 $ 376,242
Duke Realty LP,
470,000 7.05%, due 03/01/2006 478,394
510,000 6.75%, due 05/30/2008 507,460
Equity Residential Properties Trust,
875,000 6.55%, due 11/15/2001 887,399
450,000 6.63%, due 04/13/2005 449,240
Finova Capital Corporation,
385,000 6.25%, due 08/15/2000 390,425
Firstar Bank Milwaukee,
2,450,000 6.25%, due 12/01/2002 2,556,820
Ford Motor Company,
300,000 6.625%, due 02/15/2028 303,759
900,000 6.625%, due 10/01/2028 912,519
335,000 8.90%, due 01/15/2032 428,706
General Motors Corporation,
235,000 8.80%, due 03/01/2021 295,797
General Motors Acceptance Corporation
Medium Term Notes,
1,400,000 6.80%, due 04/17/2001 1,456,210
IBM Corporation,
950,000 6.50%, due 01/15/2028 992,417
International Lease Finance Medium Term Notes,
1,315,000 6.42%, due 09/11/2000 1,348,953
JDN Realty Corporation,
375,000 6.95%, due 08/01/2007 395,456
May Department Stores,
275,000 7.45%, due 09/15/2011 314,168
650,000 6.70%, due 09/15/2028 670,969
Mellon Financial Company,
915,000 7.625%, due 11/15/1999 938,616
Morgan Stanley Dean Witter & Company,
500,000 6.09%, due 11/19/1999 510,885
National City Corporation,
900,000 7.20%, due 05/15/2005 975,384
Norwest Financial, Inc.,
450,000 6.05%, due 11/19/1999 455,076
Philips Petroleum Company,
375,000 6.65%, due 07/15/2018 384,581
Price Development Company,
485,000 7.29%, due 03/11/2008 484,370
SBC Communications, Inc.,
600,000 6.625%, due 11/01/2009 667,074
THE JAMESTOWN BOND FUND
PORTFOLIO OF INVESTMENTS
<PAGE>
September 30, 1998
(Unaudited)
Par Value Value
--------- -----
CORPORATE BONDS - CONTINUED
Sears Roebuck & Company,
$1,500,000 5.63%, due 02/07/2001 $ 1,518,075
750,000 6.86%, due 07/03/2001 782,288
750,000 6.99%, due 09/30/2002 798,382
Suntrust Banks,
340,000 6.125%, due 02/15/2004 352,230
Textron, Inc.,
510,000 6.625%, due 11/15/2007 548,444
TRW, Inc.,
425,000 6.25%, due 01/15/2010 451,180
350,000 9.35%, due 06/04/2020 453,968
Union Camp Corporation,
325,000 6.50%, due 11/15/2007 339,540
United Parcel Service of America, Inc.,
420,000 8.375%, due 04/01/2030 534,790
-----------
TOTAL CORPORATE BONDS (COST $28,512,167) $29,595,807
-----------
Shares Value
------ -----
CLOSED-END MUTUAL FUNDS - 7.6%
37,400 Blackrock 1999 Term Trust, Inc. $ 364,650
226,400 Blackrock 2001 Term Trust, Inc. 2,037,600
53,900 Blackrock Investment Quality Term Trust, Inc. 485,100
63,200 Blackrock North American Government Income Trust 639,900
125,300 Blackrock Strategic Term Trust, Inc. 1,151,194
12,000 Dean Witter Government Income Trust 108,000
7,400 Excelsior Income Shares, Inc. 125,800
15,500 First Commonwealth Fund 165,656
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. 36,131
16,400 Income Opportunities Fund, Inc. - 1999 157,850
41,700 MFS Government Markets Income Trust 281,475
------------
TOTAL CLOSED-END FUNDS (COST $8,075,193) $ 8,932,744
------------
TOTAL INVESTMENTS AT VALUE
(COST $106,172,374) - 93.9% $110,205,868
------------
THE JAMESTOWN BOND FUND
PORTFOLIO OF INVESTMENTS
September 30, 1998
(Unaudited)
Face Amount Value
- - ----------- -----
REPURCHASE AGREEMENTS (A) - 10.1%
$11,785,000 Star Bank, N.A., 5.15%, dated 09/30/1998,
due 10/01/1998 repurchase proceeds
<PAGE>
$11,786,686 (Cost $11,785,000) $ 11,785,000
------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS
AT VALUE - 104.0% $121,990,868
LIABILITIES IN EXCESS OF OTHER ASSETS - (4.0)% (4,686,564)
------------
NET ASSETS - 100.0% $117,304,304
============
(a) Joint repurchase agreement is fully collateralized by $12,560,000 GNMA II,
Pool #8375, 6.875%, due 02/20/24; $12,360,000 GNMA II, Pool #8932, 6.875%,
due 03/20/22; and $5,510,000 GNMA II, Pool #8395, 6.875%, due 03/20/24. The
aggregate market value of the collateral at September 30, 1998 was
$30,730,289. The Fund's pro-rata interest in the collateral at September
30, 1998 was $13,245,427.
See accompanying notes to financial statements.
THE JAMESTOWN BOND FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
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
(currently 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
<PAGE>
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.
THE JAMESTOWN BOND FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
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, which may differ from generally accepted accounting
principles.
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
<PAGE>
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.
THE JAMESTOWN BOND FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
The following information is based upon the federal income tax cost of portfolio
investments of $106,181,654 as of September 30, 1998:
Gross unrealized appreciation............................... $ 4,105,603
Gross unrealized depreciation............................... (81,389)
Net unrealized appreciation................................. $ 4,024,214
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 six months ended September 30, 1998, cost of purchases and proceeds
from sales and maturities of investment securities, other than short-term
investments, amounted to $122,341,098 and $108,594,862, 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 $10,866 of its investment advisory
fees for the six months ended September 30, 1998. 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
<PAGE>
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 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.
THE JAMESTOWN BOND FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
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 six months ended September 30, 1998, Service Group Shares
incurred $2,151 of distribution expenses under the Plan.
4. DIRECTED BROKERAGE ARRANGEMENT
In order to reduce the total operating expenses of the Fund, a portion of the
Fund's custodian fees 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 $8,994 for the six months
ended September 30, 1998.
<PAGE>
September 30, 1998
[GRAPHIC APPEARS HERE]
Evergreen Select
Fixed Income Funds
Annual Report
[LOGO OF EVERGREEN FUNDS(SM) APPEARS HERE]
- - ---------------------------------------------------------------------------
Table of Contents
- - ----------------------------------------------------------------------------
Letter to Shareholders ................................................... 1
Evergreen Select Adjustable Rate Fund
Fund at a Glance ...................................................... 2
Portfolio Manager Commentary .......................................... 3
Evergreen Select Core Bond Fund
Fund at a Glance ...................................................... 5
Portfolio Manager Commentary .......................................... 6
Evergreen Select Fixed Income Fund
Fund at a Glance ...................................................... 8
Portfolio Manager Commentary .......................................... 9
Evergreen Select Income Plus Fund
Fund at a Glance ...................................................... 11
Portfolio Manager Commentary .......................................... 12
Evergreen Select Intermediate
Tax Exempt Bond Fund
Fund at a Glance ...................................................... 14
Portfolio Manager Commentary .......................................... 15
Evergreen Select International
Bond Fund
Fund at a Glance ...................................................... 17
Portfolio Manager Commentary .......................................... 18
Evergreen Select Limited Duration Fund
Fund at a Glance ...................................................... 20
Portfolio Manager Commentary .......................................... 21
Evergreen Select Total Return Bond Fund
Fund at a Glance ...................................................... 23
Portfolio Manager Commentary .......................................... 24
Financial Highlights
Evergreen Select Adjustable Rate Fund.................................. 26
Evergreen Select Core Bond Fund........................................ 28
Evergreen Select Fixed Income Fund..................................... 29
Evergreen Select Income Plus Fund...................................... 30
Evergreen Select Intermediate
Tax Exempt Bond Fund................................................. 31
Evergreen Select International
<PAGE>
Bond Fund ........................................................... 32
Evergreen Select Limited Duration Fund................................. 33
Evergreen Select
Total Return Bond Fund............................................... 34
Schedules of Investments
Evergreen Select Adjustable Rate Fund.................................. 35
Evergreen Select Core Bond Fund........................................ 37
Evergreen Select Fixed Income Fund..................................... 39
Evergreen Select Income Plus Fund...................................... 44
Evergreen Select Intermediate
Tax Exempt Bond Fund................................................. 49
Evergreen Select International
Bond Fund ........................................................... 55
Evergreen Select Limited Duration Fund................................. 57
Evergreen Select
Total Return Bond Fund............................................... 59
Statements of Assets and
Liabilities .............................................................. 62
Statements of Operations ................................................. 63
Statements of Changes in
Net Assets ............................................................... 65
Combined Notes to Financial
Statements ............................................................... 67
Independent Auditors' Report ............................................. 77
Report of Independent Accountants......................................... 78
Additional Information (Unaudited)........................................ 79
- - ----------------------------------------------------------------------------
EVERGREEN FUNDS
- - ----------------------------------------------------------------------------
Evergreen Funds is one of the nation's fastest growing investment companies with
approximately $50 billion in assets under management.
With over 70 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to the Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
This annual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.
Mutual Funds: ARE NOT FDIC INSURED May lose value . Are not bank guaranteed
Evergreen Distributor, Inc.
Evergreen(SM) is a Service Mark of Evergreen Investment Services, Inc.
<PAGE>
<PAGE>
Letter to Shareholders
----------------------
November 1998
Dear Shareholders:
We are pleased to provide you the Evergreen Select Fixed Income Funds annual
report covering the fiscal year ended September 30, 1998.
Market Volatility
[PHOTO OF WILLIAM M. ENNIS APPEARS HERE]
WILLIAM M. ENNIS
[PHOTO OF DAVID C. FRANCIS APPEARS HERE]
DAVID C. FRANCIS
The financial markets have certainly experienced volatility in the past few
months. The Dow Jones Industrial Average peaked in mid-July, when prices were at
historic highs relative to benchmarks such as corporate profit and dividends. A
few weeks later, the markets began a downward turn tipped off by the debt
troubles in Russia and general loss of confidence in emerging markets. Investors
began a "flight to quality" by seeking safety in U.S. Treasuries, pushing
long-term Treasury bonds' yields to record low levels.
While we anticipate continued volatility throughout the world markets, we want
to emphasize the strong fundamentals of the U.S. economy: low unemployment, low
inflation, low interest rates, relatively high levels of consumer confidence and
business optimism, responsible fiscal policy and a moderately growing economy.
The Federal Reserve has started the necessary steps to sustain the economic
momentum by its recent rate cuts. The U.S. Treasury market continues to be the
global safe haven and our Evergreen Select Fixed Income Funds offer various
strategies to keep your portfolio diversified and invested in the fixed income
sector which has enjoyed increasing growth.
Year 2000/1/
The year 2000 is nearly upon us, and unlike some we are looking forward to it.
We have been addressing the Year 2000 issue since February 1996 and have adopted
an industry best practices methodology for the project. Our team is on schedule
to complete the following milestones: Inventory and Assessment, Remediation,
Testing and Contingency. We believe that for Evergreen shareholders, the
transition into the next millennium should be seamless, with virtually no impact
on the products and services you receive from us.
Cost Savings
In an effort to achieve efficiencies and cost savings, we are combining your
funds' required mailings so you only receive one per household, based on the
registration last name and exact address/2/. This reduces the mailing costs, not
to mention the amount of paper needed to print, which in turn benefits your
funds by reducing the overall expenses. If you prefer to receive separate copies
of reports and prospectuses for each registered holder in your household, please
notify us by calling the number on your statement and we will adjust our records
accordingly.
Thank you for your continued investment with Evergreen Funds.
Sincerely,
/s/ William M. Ennis
<PAGE>
William M. Ennis
Managing Director
Evergreen Funds
/s/ David C. Francis
David C. Francis, C.F.A.
Managing Director
Chief Investment Officer
First Capital Group
Good News!
Effective for the 1998 Tax Year, long-term capital gains taxes are reduced to
20%.
/1/ The information above constitutes Year 2000 readiness disclosure.
/2/ If you purchased your shares through a financial representative, we may not
be able to consolidate your mailings by last name and address, because that
institution controls the mailings.
1
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Adjustable Rate Fund
- - ----------------------------------------------------------------------------
Fund at a Glance as of September 30, 1998
- - ----------------------------------------------------------------------------
PORTFOLIO PROFILE
- - ----------------------------------------------------------------------------
Philosophy
Evergreen Select Adjustable Rate Fund seeks a high level of current income
consistent with low volatility of principal.
Process
Portfolio management emphasizes non-convertible, one-year CMT-indexed ARMS to
achieve coupon sensitivity to changing interest rates. A series of laddered
maturities help to ensure a gradual response to changing interest rates.
Benchmark
6-month Treasury Bill
- - ----------------------------------------------------------------------------
PERFORMANCE AND RETURNS
- - ----------------------------------------------------------------------------
Class I Class IS
Inception Date 10/1/91 5/23/94
...............................................................................
Average Annual Returns
<PAGE>
...............................................................................
1 year 5.54% 5.17%
................................................................................
3 years 6.65% 6.38%
...............................................................................
5 years 5.63% --
...............................................................................
Since Inception 5.58% 5.99%
...............................................................................
30-day SEC Yield 5.75% 5.46%
...............................................................................
- - ----------------------------------------------------------------------------
LONG TERM GROWTH
- - ----------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date CPI 6 mo. T-bill Class I
---- --- ------------ -------
10/1/91 $1,000,000 $1,000,000 $1,000,000
9/30/92 $1,029,900 $1,044,900 $1,053,900
9/30/93 $1,057,600 $1,079,300 $1,112,200
9/30/94 $1,088,900 $1,120,500 $1,128,100
9/30/95 $1,116,600 $1,186,700 $1,205,600
9/30/96 $1,150,100 $1,251,400 $1,288,300
9/30/97 $1,174,900 $1,319,400 $1,385,700
9/30/98 $1,192,400 $1,390,500 $1,462,400
Comparison of a $1,000,000 investment in Evergreen Select Adjustable Rate Fund
Class I, versus a similar investment in the 6-month Treasury Bill, and the
Consumer Price Index (CPI).
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost. The 6-month Treasury Bill does not include transaction costs
associated with buying and selling securities nor any management fees. The CPI
is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
2
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Adjustable Rate Fund
- - ----------------------------------------------------------------------------
Portfolio Management Commentary
Portfolio Management
[PHOTO OF GARY PZEGEO APPEARS HERE]
GARY PZEGEO
Performance
Evergreen Select Adjustable Rate Fund posted strong performance during the 12
months ended September 30, 1998. For the period, the Fund's Institutional Shares
returned 5.54% and the Institutional Service Shares returned 5.17%, generously
<PAGE>
surpassing the 4.73% average return generated by the 34 funds in the Lipper
Adjustable Mortgage category. Lipper Analytical Services, Inc. is an independent
monitor of mutual fund performance.
Portfolio
Characteristics
---------------
Total Net Assets $32,818,552
.......................................................
Average Credit Quality AAA
.......................................................
Average Maturity 4.9 years
.......................................................
Average Duration 0.5 years
.......................................................
Investment Environment
Investors in adjustable-rate mortgage securities (ARMS) faced a challenging
investment environment over the past 12 months. Continued low interest rates
across all maturities, the decline of long-term interest rates relative to
short-term interest rates, fewer buyers, and concerns about the liquidity of
ARMS all limited the securities' potential for price appreciation. Offsetting
some of the hurdles, however, was a reduced supply of ARMS. A lower supply tends
to support prices.
The lowest interest rates in nearly 30 years prompted many consumers to
refinance -- or prepay -- their existing higher-cost mortgages and replace them
with ones that carried lower interest rates. The interest rate climate also
fueled a strong housing market. This contributed to a rapid pace of prepayments
by creating a high turnover rate for those mortgages already in existence. The
fact that ARMS can be prepaid creates the possibility of their underperformance
versus other fixed-income securities, such as U.S. Treasuries, when interest
rates are low or declining. When bonds can be prepaid prior to maturity,
investors face the risk of reinvesting the proceeds from prepaid principal at
lower rates than those that prevailed at the time of the original investment.
In addition to a rapid pace of prepayments, investors were confronted with
concerns about the market's liquidity when a large institutional buyer
experienced financial difficulties. The firm's uncertain condition not only
removed it as a buyer, but caused many investors to be exceptionally cautious
about taking on additional, potentially risky positions, as they waited for
market conditions to stabilize. Although the ARMS market remains extremely
liquid, these events exerted further downward pressure on the securities'
prices.
3
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Adjustable Rate Fund
- - ----------------------------------------------------------------------------
Portfolio Manager Commentary
Low and declining long-term interest rates meant that the supply of ARMS fell
because many consumers chose to lock in historically low mortgage rates by
selecting fixed-rate mortgages rather than their adjustable-rate counterparts.
Often, this involved paying off an adjustable rate mortgage and replacing it
with one that carried a fixed rate. This restrained the growth of outstanding
ARMS and provided investors with some relief during a challenging market.
<PAGE>
- - ----------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- - ----------------------------------------------------------------------------
(based on 9/30/98 net assets)
[PIE CHART APPEARS HERE]
ARMS -- 77.6%
Fixed-rate mortgage-backed securities -- 12.0% U.S. Treasuries/Government Agency
Notes/Bond -- 7.1% Other assets less liabilities, net -- 3.3%
Investment Strategy
Over the past 12 months, we reduced the Fund's position in ARMS and increased
holdings in fixed-rate mortgage securities, U.S. Treasuries and cash. Within the
ARMS sector, we invested in securities with lower coupons and emphasized
"hybrid-ARMS", which contain a fixed-rate component for a number of years before
converting to an adjustable rate bond. The combination of these strategies
reduced prepayment risk, increased the Fund's potential for price appreciation
in a declining interest rate environment and improved liquidity. As of September
30, 1998, the Fund was invested as follows: ARMS -- 77.6%; Fixed-rate
mortgage-backed securities -- 12.0%; U.S. Treasuries -- 7.1% and Other assets
less liabilities, net -- 3.3%.
Outlook
We believe that ARMS will reward the patient investor with attractive total
return in the coming months, after we endure some continued price fluctuations
and concerns about liquidity in the near term. During the past year, the
performance of mortgage-backed securities lagged other types of bonds, such as
U.S. Treasuries, and, in our opinion, this has created significant value in the
mortgage-backed sector. We think conditions will remain favorable for
fixed-income investors over the next six months. Inflation should stay low -- in
the range of 1 1/2% to 2%. Further, we expect the world's central bankers and
fiscal authorities to continue to focus their efforts on stimulating global
economies, which could include lowering interest rates and weakening the U.S.
dollar. We think this will improve international economic conditions and
increase investors' confidence in investing in a wider range of securities.
4
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Core Bond Fund
- - ----------------------------------------------------------------------------
Fund at a Glance as of September 30, 1998
- - ----------------------------------------------------------------------------
PORTFOLIO PROFILE
- - ----------------------------------------------------------------------------
Philosophy
The Evergreen Select Core Bond Fund is designed to maximize total return by
focusing on current income and identifying opportunities to capture capital
gains. The portfolio maintains a bias toward corporate and mortgage securities
in order to capture higher levels of income.
Process
<PAGE>
The portfolio managers seek to enhance performance, while pursuing a controlled
risk approach, by actively managing three specific characteristics within the
portfolio: duration, sector allocation, and security selection. The managers use
both quantitative tools and fundamental research in order to determine an
appropriate duration strategy as well as enhance the sector allocation and
security selection processes.
Benchmark
Lehman Brothers Aggregate Bond Index
- - ----------------------------------------------------------------------------
PERFORMANCE AND RETURNS
- - ----------------------------------------------------------------------------
Class I Class IS Class IC
Average Annual Returns
...............................................................................
1 year 10.75% 10.55% 10.75%
...............................................................................
3 years 7.62% 7.38% 7.62%
...............................................................................
5 years 6.05% 5.80% 6.05%
...............................................................................
10 years 8.88% 8.61% 8.88%
...............................................................................
Since Inception 8.33% 8.06% 8.33%
...............................................................................
30-day SEC Yield 5.66% 5.42% 5.67%
...............................................................................
- - ----------------------------------------------------------------------------
LONG TERM GROWTH
- - ----------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date CPI LBABI Class I
---- --- ----- -------
9/30/88 $1,000,000 $1,000,000 $1,000,000
9/30/89 $1,043,400 $1,112,600 $1,105,800
9/30/90 $1,107,700 $1,196,800 $1,170,600
9/30/91 $1,145,200 $1,388,200 $1,369,400
9/30/92 $1,179,500 $1,562,400 $1,554,600
9/30/93 $1,211,200 $1,718,300 $1,745,100
9/30/94 $1,247,100 $1,662,900 $1,658,700
9/30/95 $1,278,800 $1,896,700 $1,888,000
9/30/96 $1,317,200 $1,989,600 $1,945,400
9/30/97 $1,345,600 $2,183,500 $2,113,700
9/30/98 $1,365,600 $2,434,100 $2,340,900
Comparison of a $1,000,000 investment in Evergreen Select Core Bond Fund, Class
I shares, versus a similar investment in the Lehman Brothers Aggregate Bond
Index (LBABI), and the Consumer Price Index (CPI).
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Class I, IS and IC performance
information includes the performance of the Fund's predecessor common trust fund
for periods before the Fund's registration statement became effective on
November 21, 1997. The inception date of the predecessor common trust fund was
February 28, 1986. Performance for the common trust fund has been adjusted to
include the effect of estimated mutual fund expense ratios at the time the
common trust funds were converted to mutual funds. Performance information for
<PAGE>
Class IS also includes performance of the Fund's Class IC for the period from
November 24, 1997 to March 9, 1998 (commencement of Class IS operations) and
does not include the deduction of 12b-1 fees. If such fees had been included,
the returns would have been lower. Returns of Class I, IS and IC, since their
respective commencement of class operations, were 8.12%, 6.54% and 8.55%,
respectively. The common trust fund was not registered under the Investment
Company Act of 1940 (the "1940 Act") or subject to certain investment
restrictions that are imposed by the 1940 Act. If the common trust fund had been
registered under the 1940 Act, its performance may have been adversely affected.
Index returns do not reflect expenses, which have been deducted from the Fund's
return. It is not possible to invest directly in an index.
5
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Core Bond Fund
- - ----------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management Team
[PHOTO OF L. ROBERT CHESHIRE APPEARS HERE]
L. ROBERT CHESHIRE
[PHOTO OF BRUCE J. BESECKER APPEARS HERE]
BRUCE J. BESECKER, CFA
Performance
For the 12 month period ended September 30, 1998, the Evergreen Select Core Bond
Fund's Class I, IC and IS shares returned 10.75%, 10.75%, and 10.55%,
respectively. These returns modestly trailed the 11.50% return of the Lehman
Brothers Aggregate Index. The Fund's performance, however, compared favorably to
the 10.02% average return of 218 intermediate investment grade bond funds
tracked by Lipper Analytical Services, an independent monitor of mutual fund
performance. The Fund's strong total return relative to its peer group can be
attributed to the portfolio's long duration stance for much of the quarter,
which benefited performance amid steadily declining interest rates.
Portfolio
Characteristics
---------------
Total Net Assets $596,776,430
................................................................
Average Credit Quality AAA
................................................................
Average Maturity 7.9 years
................................................................
Average Duration 4.7 years
................................................................
A Good Year for Bond Investors
The past 12 months was a particularly rewarding period for bond investors and
was brought about, ironically, by the Asian financial crisis which flared up
roughly a year ago. While the crisis prompted volatility in financial markets
throughout the world, it also slowed U.S. economic growth and calmed
inflationary fears that, in turn, allowed interest rates to trend markedly
lower. In fact, over the past 12 months, the yield on the bellwether 30-year
Treasury bond fell from 6.40% to 4.98%.
<PAGE>
The U.S. bond market rally was most pronounced in the final months of 1997 and
again in the third quarter of 1998. The flight to quality, reignited in August
and September, was a result of economic problems in Russia and its potential
"domino effect" on other world economies. As a result of this crisis and a
likely U.S. economic slowdown, the Federal Reserve Board moved away from a
tightening bias and actually reduced the Fed Funds Rate at the end of September
(and again in early October). The net result was a declining interest rate
environment which boosted bond prices.
- - ----------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- - ----------------------------------------------------------------------------
(based on 9/30/98 net assets)
[PIE CHART APPEARS HERE]
Mortgage-Backed Securities -- 39.3% Corporate Notes/Bonds -- 19.6% Treasury
Notes/Bonds -- 13.3% Yankee Obligations -- 13.2% Other assets and liabilities,
net -- 8.7% Government Agency Notes/Bonds -- 3.8% Asset-Backed Securities --
1.6% Collateralized Mortgage Obligations -- 0.5%
6
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Core Bond Fund
- - ----------------------------------------------------------------------------
Portfolio Manager Commentary
Our Strategy
Since the beginning of 1998, we have forecasted two things in the midst of the
current global investment environment: increased volatility and range-bound --
or even declining -- interest rates. Consequently, we maintained a neutral-to-
long duration stance for much of the fiscal year in order to take advantage of
declining interest rates. The portfolio's average duration currently stands at
4.7 years. Our duration strategy, as well as the portfolio's high-quality
emphasis, played a crucial role in allowing the Fund to outperform its peer
group average.
The most significant strategic adjustment made to the portfolio was the removal
of its barbell structure in late September. Typically, this type of portfolio
structure, distinguished by securities primarily on both ends of the yield curve
rather than in the middle, is beneficial during extended periods of economic
strength as well as when there is a narrowing yield curve; two themes in the
fixed-income market over the past several quarters. In fact, after being
implemented roughly a year ago, this strategy paid off handsomely during much of
the 12-month period. We felt, however, that fundamental changes taking place
within the economy warranted the removal of the barbell structure and going to a
more evenly distributed portfolio structure.
- - ----------------------------------------------------------------------------
PORTFOLIO QUALITY
- - ----------------------------------------------------------------------------
(based on 9/30/98 portfolio assets)
<PAGE>
[PIE CHART APPEARS HERE]
U.S. Government Agency -- 50.5%
A -- 18.3%
U.S. Government -- 14.6%
AA -- 7.0%
AAA -- 4.8%
BAA -- 3.2%
Less than CAA -- 1.6%
Outlook
We maintain a very cautious outlook for the final months of 1998. Problems in
several international economies continue to filter back to the U.S. financial
markets in the form of increased volatility. Although we feel this turbulence is
likely to continue in the near term, we are confident that adjustments made to
the portfolio have positioned the Fund to perform well within this environment.
From a duration standpoint, we anticipate maintaining a neutral-to-modestly-long
duration as interest rates stay in their trading range and possibly trend lower.
We will continue to closely monitor the market and wait until the outcome of the
global crisis becomes clearer before taking more aggressive duration or sector
bets.
7
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Fixed Income Fund
- - ----------------------------------------------------------------------------
Fund at a Glance as of September 30, 1998
- - ----------------------------------------------------------------------------
PORTFOLIO PROFILE
- - ----------------------------------------------------------------------------
Philosophy
The Evergreen Select Fixed Income Fund seeks to increase total return by
focusing on current income and identifying opportunities to capture capital
gains. The portfolio maintains a bias toward corporate and mortgage securities
in order to capture higher levels of income.
Process
The Fund's portfolio manager seeks to enhance performance, while controlling
risk, by actively managing three specific characteristics within the portfolio:
duration, sector allocation and security selection. The manager utilizes both
quantitative tools and fundamental research to determine an appropriate duration
strategy as well as to enhance the sector allocation and security selection
processes.
Benchmark
Lehman Brothers Intermediate
Government/Corporate Index
- - ----------------------------------------------------------------------------
PERFORMANCE AND RETURNS
- - ----------------------------------------------------------------------------
<PAGE>
Class I Class IS
Average Annual Returns
..........................................................................
1 year 9.23% 9.04%
..........................................................................
3 years 7.24% 7.00%
..........................................................................
5 years 5.86% 5.61%
..........................................................................
10 years 7.99% 7.73%
..........................................................................
Since Inception 8.59% 8.32%
..........................................................................
30-day SEC Yield 5.37% 5.12%
..........................................................................
- - ----------------------------------------------------------------------------
LONG TERM GROWTH
- - ----------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date CPI LBIGCBI Class I
---- --- ------- -------
9/30/88 $1,000,000 $1,000,000 $1,000,000
9/30/89 $1,043,400 $1,097,200 $1,091,900
9/30/90 $1,107,700 $1,189,300 $1,193,200
9/30/91 $1,145,200 $1,354,100 $1,350,000
9/30/92 $1,179,500 $1,526,400 $1,503,000
9/30/93 $1,211,200 $1,651,800 $1,622,200
9/30/94 $1,247,100 $1,624,500 $1,582,700
9/30/95 $1,278,800 $1,807,900 $1,748,800
9/30/96 $1,317,200 $1,900,600 $1,836,700
9/30/97 $1,345,600 $2,056,400 $1,974,700
9/30/98 $1,365,600 $2,270,800 $2,156,900
Comparison of a $1,000,000 investment in Evergreen Select Fixed Income Fund
Class I, versus a similar investment in the Lehman Brothers Intermediate
Government/Corporate Index (LBIGCBI), and the Consumer Price Index (CPI).
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Class I and IS performance information
includes the performance of the Fund's predecessor common trust fund for periods
before the Fund's registration statement became effective on November 21, 1997.
The inception date of the predecessor common trust fund was March 31, 1971.
Performance for the common trust fund has been adjusted to include the effect of
estimated mutual fund expense ratios at the time the common trust funds were
converted to mutual funds. Performance information for Class IS also includes
performance of the Fund's Class I for the period from November 24, 1997 to March
9, 1998 (commencement of Class IS operations) and does not include the deduction
of 12b-1 fees. If such fees had been included, the returns would have been
lower. Returns of Class I and IS, since their respective commencement of class
operations, were 8.06% and 5.94%, respectively. The common trust fund was not
registered under the Investment Company Act of 1940 (the "1940 Act") or subject
to certain investment restrictions that are imposed by the 1940 Act. If the
common trust fund had been registered under the 1940 Act, its performance may
have been adversely affected. Index returns do not reflect expenses, which have
been deducted from the Fund's return. It is not possible to invest directly in
an index.
8
<PAGE>
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Fixed Income Fund
- - ----------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management
[PHOTO OF THOMAS L. ELLIS APPEARS HERE]
THOMAS L. ELLIS
Performance
For the fiscal period ended September 30, 1998, the Evergreen Select Fixed
Income Fund's Class I and IS shares returned 9.23% and 9.04%, respectively,
trailing the 10.42% return for the Lehman Brother Intermediate
Government/Corporate Index. The Fund's annual return did compare very favorably
to the 8.04% average return of 91 short-intermediate investment grade funds
tracked by Lipper Analytical Services, an independent monitor of mutual fund
performance. The Fund's strong performance relative to its peer group can be
attributed to the portfolio's long duration, which positively impacted
performance throughout the fiscal period.
Portfolio
Characteristics
---------------
Total Net Assets $678,715,328
.......................................................
Average Credit Quality AA
.......................................................
Average Maturity 4.5 years
.......................................................
Average Duration 3.5 years
.......................................................
A Turbulent but Positive Period for Bonds
During the 12 months, bond investors witnessed a particularly strong performance
by fixed income investments. At the beginning of the period, investors were
concerned that an overly strong U.S. economy would cause an inflationary flare-
up. As the Asian financial crisis began to spread and international economies
began to weaken, the focus switched to a potential slowdown, or even recession,
in the U.S. economy. Global economic uncertainty prompted a bit of volatility as
well as a flight to quality to U.S. bonds, and fueled an especially strong
performance by U.S. Treasuries.
In effect, the Asian financial crisis slowed U.S. economic growth, calmed
inflation fears and created a "bond-friendly" environment. Consequently,
interest rates continued their steady decline which, in turn, boosted bond
prices. In fact, over the past twelve months, the yield on the bellwether 30-
year Treasury bond fell from 6.40% to 4.98%. In addition, the U.S. economic
slowdown became the Federal Reserve Board's primary concern, prompting a shift
in monetary policy from a tightening bias to an actual reduction in the Fed
Funds rate at the end of September, and again in early October.
Portfolio Management Amid Global Volatility
The Fund's annual return, which outperformed the vast majority of funds in its
<PAGE>
peer group, can be primarily attributed to a positive duration strategy. During
the first six months of the fiscal year, we increased the portfolio's duration
and kept it at roughly 105% to 110% of the benchmark. The extended duration
positively impacted the Fund's total return because of the declining interest
rate
9
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Fixed Income Fund
- - ----------------------------------------------------------------------------
Portfolio Manager Commentary
environment. In the final half of the period, we modestly shortened duration --
from 3.6 years to 3.5 years -- but still kept it near 105% of the benchmark.
During the final months of the period, poor performances within the mortgage and
corporate sectors partially offset our favorable duration stance and had a
negative impact on performance. The portfolio's modest exposure to foreign bonds
also hurt the Fund, because returns of these issues were weakened by the
volatile global investing environment. Despite some poor performing sectors,
however, the Fund's especially strong duration strategy more than offset any
negative factors and allowed us to perform strongly against our peer group.
- - ----------------------------------------------------------------------------
Portfolio Composition
- - ----------------------------------------------------------------------------
(based on 9/30/98 net assets)
[PIE CHART APPEARS HERE]
Treasury Notes/Bonds -- 27.2% Corporate Notes/Bond -- 23.8% Asset-Backed
Securities -- 12.6%
Collateralized Mortgage Obligations -- 12.5% Government Agency Notes/Bond --
11.7% Yankee Obligations -- 6.6% Other assets and liabilities, net -- 3.3%
Mortgage-Backed Securities -- 2.3%
Outlook
Looking ahead, we anticipate more turbulence in the financial markets as
overseas economies continue to struggle. In response, we will adjust the
portfolio and reduce exposure of corporate bonds and mortgages while bolstering
the weighting of U.S. Treasuries and Agencies. In fact, the vast majority of
purchases over the past few weeks were U.S. Treasuries and Agencies. Should the
global crisis continue to worsen -- a scenario we expect in the near term -- we
anticipate a continued strong performance by Treasuries while the corporate and
mortgage sectors lag. Finally, we anticipate an eventual reallocation of the
portfolio to both the corporate and mortgage sectors as widening yield spreads
improve their expected return profile over Treasuries and Agencies.
- - ----------------------------------------------------------------------------
PORTFOLIO QUALITY
- - ----------------------------------------------------------------------------
(based on 9/30/98 portfolio assets)
[PIE CHART APPEARS HERE]
<PAGE>
AAA -- 30.1% U.S. Government -- 28.2% A -- 16.0% U.S. Government Agency -- 8.7%
AA -- 8.0% BAA --8.0% BA -- 1.0%
10
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Income Plus Fund
- - ----------------------------------------------------------------------------
Fund at a Glance as of September 30, 1998
- - ----------------------------------------------------------------------------
PORTFOLIO PROFILE
- - ----------------------------------------------------------------------------
Philosophy
The Evergreen Select Income Plus Fund seeks to increase total return by pursuing
a high level of current income and a potential for capital appreciation. The
portfolio managers seek to achieve the Fund's objective by actively managing
portfolio duration for capital gain opportunities.
Process
The portfolio managers complement fundamental research with quantitative tools
which identify undervalued or over-looked fixed income securities with potential
for appreciation. In an effort to achieve a high level of current income, the
Fund emphasizes corporate and mortgage-backed securities.
Benchmark
Lehman Brothers Government/Corporate Index
- - ----------------------------------------------------------------------------
PERFORMANCE AND RETURNS
- - ----------------------------------------------------------------------------
Class I Class IS
Average Annual Returns
...........................................................................
1 year 11.14% 10.96%
...........................................................................
3 years 8.05% 7.81%
...........................................................................
5 years 6.49% 6.24%
...........................................................................
10 years 8.46% 8.20%
...........................................................................
Since Inception 8.58% 8.32%
...........................................................................
30-day SEC Yield 5.45% 5.23%
...........................................................................
- - ----------------------------------------------------------------------------
LONG TERM GROWTH
- - ----------------------------------------------------------------------------
<PAGE>
[LINE GRAPH APPEARS HERE]
Date CPI LBGCBI Class I
---- --- ------ -------
9/30/88 $1,000,000 $1,000,000 $1,000,000
9/30/89 $1,043,400 $1,113,200 $1,088,700
9/30/90 $1,107,700 $1,188,400 $1,156,500
9/30/91 $1,145,200 $1,376,800 $1,333,400
9/30/92 $1,179,500 $1,559,000 $1,478,600
9/30/93 $1,211,200 $1,737,400 $1,645,800
9/30/94 $1,247,100 $1,665,500 $1,567,100
9/30/95 $1,278,800 $1,904,500 $1,786,700
9/30/96 $1,317,200 $1,990,300 $1,853,000
9/30/97 $1,345,600 $2,181,100 $2,027,700
9/30/98 $1,365,600 $2,461,800 $2,253,600
Comparison of a $1,000,000 investment in Evergreen Select Income Plus Fund Class
I, versus a similar investment in the Lehman Brothers Government/Corporate Bond
Index (LBGCBI), and the Consumer Price Index (CPI).
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Class I and IS performance information
includes the performance of the Fund's predecessor common trust fund for periods
before the Fund's registration statement became effective on November 21, 1997.
The inception date of the predecessor common trust fund was August 31, 1988.
Performance for the common trust fund has been adjusted to include the effect of
estimated mutual fund expense ratios at the time the common trust funds were
converted to mutual funds. Performance information for Class IS also includes
performance of the Fund's Class I for the period from November 24, 1997 to March
2, 1998 (commencement of Class IS operations) and does not include the deduction
of 12b-1 fees. If such fees had been included, the returns would have been
lower. Returns of Class I and IS, since their respective commencement of class
operations, were 8.99% and 7.02%, respectively. The common trust fund was not
registered under the Investment Company Act of 1940 (the "1940 Act") or subject
to certain investment restrictions that are imposed by the 1940 Act. If the
common trust fund had been registered under the 1940 Act, its performance may
have been adversely affected. Index returns do not reflect expenses, which have
been deducted from the Fund's return. It is not possible to invest directly in
an index.
11
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Income Plus Fund
- - ----------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management Team
[PHOTO OF GEORGE PRATTOS APPEARS HERE]
GEORGE PRATTOS
[PHOTO OF J.P. WEAVER, CFA APPEARS HERE]
J.P. WEAVER, CFA
Performance
For the 12 months ended September 30, 1998, the Evergreen Select Income Plus
Bond Fund's Class I and IS shares returned 11.14% and 9.43%, respectively,
trailing the 12.84% total return for the Lehman Brothers Government/Corporate
<PAGE>
Index. The Fund's performance, however, compared very favorably to the 7.91%
average return of 92 BBB-rated corporate debt funds tracked by Lipper Analytical
Services, an independent monitor of mutual fund performance.
Portfolio
Characteristics
---------------
Total Net Assets $1,374,768,556
........................................................
Average Credit Quality AA
........................................................
Average Maturity 5.8 years
........................................................
Average Duration 5.7 years
........................................................
Overall, A Positive Period for Bond Investors
Over the past 12 months, U.S. investors witnessed strong returns by fixed income
investments. In fact, during this period bonds (represented by the Lehman
Brothers Government Corporate Index) outpaced the S&P 500 Index by nearly 4%.
This "bond-friendly" fiscal period was brought about, ironically, by the global
financial crisis that began in southeast Asia. Overseas turmoil essentially
slowed U.S. economic growth and calmed inflationary fears. Consequently,
interest rates trended markedly lower as the yield on the bellwether 30-year
Treasury bond fell from 6.40% to 4.98% during the year.
- - ----------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- - ----------------------------------------------------------------------------
(based on 9/30/98 net assets)
[PIE CHART APPEARS HERE]
Corporate Notes/Bonds -- 29.7% Treasury Notes/Bonds -- 25.6% Federal Agency
Notes/Bonds -- 18.1% Yankee Obligations -- 10.6% Other Assets and Liabilities,
net -- 5.7% Asset-Backed Securities -- 3.2% Mortgage-Backed Securities -- 3.1%
Collateralized Mortgage Obligations -- 2.9% Taxable Municipal Bonds -- 1.1%
Sector Performance
During the second half of the fiscal period, investors' appetite for safety
fueled a flight to quality to U.S. Treasuries, and nearly every sector of the
U.S. fixed income market trailed the strong performance by Treasuries.
Consequently, the portfolio's weighting of U.S. Treasuries and Agencies, which
was increased from 37% to 40% during the final three months, positively impacted
performance. Despite reducing corporate and mortgage-backed securities during
the past six months by 15%, the portfolio's overweight relative to its benchmark
detracted from performance.
12
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
<PAGE>
Select Income Plus Fund
- - ----------------------------------------------------------------------------
Portfolio Manager Commentary
- - ----------------------------------------------------------------------------
PORTFOLIO QUALITY
- - ----------------------------------------------------------------------------
(based on 9/30/98 portfolio assets)
[PIE CHART APPEARS HERE]
U.S. Government -- 26.0%
A -- 21.6%
AAA -- 16.2%
U.S. Government Agency -- 14.3%
BAA -- 12.2%
AA -- 9.7%
Duration Strategy
During the past 12 months, we felt that underlying market fundamentals supported
the case for lower interest rates. Consistent with our analysis, we increased
the portfolio's duration, from 5.14 years to 5.66 years during the fiscal year,
in order to benefit from lower-trending interest rates. As rates declined
steadily over the twelve months, our increased duration stance made a positive
contribution to the Fund's total return and was the primary reason we
outperformed the average of our Lipper peer group.
Outlook
For the remainder of 1998, our outlook for the domestic economy and corporate
profits remains fairly gloomy. We anticipate the global economic crisis to
result in a slowdown in the U.S. economy as well as deteriorating corporate
earnings. Based on this assessment, we have increased the percentage of U.S.
Treasury and Agency securities during the final months of the fiscal year. We
also foresee a period of increased rate volatility and economic fragility ahead,
but given the Fund's long-term bias toward capitalizing upon income enhancement
opportunities, we may begin to add to the corporate and mortgage-backed sectors
as 1998 comes to a close.
13
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Intermediate Tax Exempt Bond Fund
- - ----------------------------------------------------------------------------
Fund at a Glance as of September 30, 1998
- - ----------------------------------------------------------------------------
PORTFOLIO PROFILE
- - ----------------------------------------------------------------------------
Philosophy
The Evergreen Select Intermediate Tax Exempt Bond Fund seeks the highest
possible current income, exempt from federal income taxes, consistent with the
Fund's maturity and preservation of capital./1/ The Fund provides stable,
non-taxable income flows at competitive rates by primarily investing in tax-free
bonds.
<PAGE>
Process
The portfolio manager utilizes both quantitative tools and hands-on, fundamental
research to identify attractive tax-exempt investment opportunities. In order to
increase total return, the Fund may also lend portfolio securities and enter
into repurchase and reverse repurchase agreements.
Benchmark
Lehman Brothers Municipal 7-Year Index
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Class I and IS performance information
includes the performance of the Fund's predecessor common trust fund for periods
before the Fund's registration statement became effective on November 21, 1997.
The inception date of the predecessor common trust fund was January 31, 1984.
Performance for the common trust fund has been adjusted to include the effect of
estimated mutual fund expense ratios at the time the common trust funds were
converted to mutual funds. Performance information for Class IS also includes
performance of the Fund's Class I for the period from November 24, 1997 to March
2, 1998 (commencement of Class IS operations) and does not include the deduction
of 12b-1 fees. If such fees had been included, the returns would have been
lower. Returns of Class I and IS, since their respective commencement of class
operations, were 7.61% and 4.43%, respectively. The common trust fund was not
registered under the Investment Company Act of 1940 (the "1940 Act") or subject
to certain investment restrictions that are imposed by the 1940 Act. If the
common trust fund had been registered under the 1940 Act, its performance may
have been adversely affected. Index returns do not reflect expenses, which have
been deducted from the Fund's return. It is not possible to invest directly in
an index.
- - ----------------------------------------------------------------------------
PERFORMANCE AND RETURNS
- - ----------------------------------------------------------------------------
Class I Class IS
Average Annual Returns
............................................................................
1 year 8.62% 8.43%
............................................................................
3 years 7.00% 6.77%
............................................................................
5 years 5.61% 5.37%
............................................................................
10 years 6.84% 6.59%
............................................................................
Since Inception 7.56% 7.30%
............................................................................
30-day SEC Yield 4.37% 4.12%
............................................................................
Tax Equivalent Yield* 7.24% 6.82%
............................................................................
* Assumes maximum 39.6% federal tax rate. Results for investors subject to lower
tax rates would not be as advantageous.
- - ----------------------------------------------------------------------------
LONG TERM GROWTH
- - ----------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date Class I LBMB7YI CPI
<PAGE>
---- ------- ------- ---
9/30/88 $1,000,000 $1,000,000 $1,000,000
9/30/89 $1,063,700 $1,073,900 $1,043,400
9/30/90 $1,129,600 $1,151,000 $1,107,700
9/30/91 $1,241,300 $1,292,000 $1,145,200
9/30/92 $1,341,400 $1,418,700 $1,179,500
9/30/93 $1,475,600 $1,573,500 $1,211,200
9/30/94 $1,463,800 $1,563,400 $1,247,100
9/30/95 $1,582,500 $1,723,800 $1,278,800
9/30/96 $1,654,600 $1,800,200 $1,317,200
9/30/97 $1,784,700 $1,943,400 $1,345,600
9/30/98 $1,938,500 $2,096,200 $1,365,600
Comparison of a $1,000,000 investment in Evergreen Select Intermediate Tax
Exempt Bond Fund, Class I shares, versus a similar investment in the Lehman
Brothers Municipal Bond 7-year Index (LBMB7YI**), and the Consumer Price Index
(CPI).
**The Lehman Brothers Municipal Bond 7-Year Index inception date was 1/31/90.
The Lehman Brothers Municipal Bond 10-Year Index was used for the period 8/31/88
- - - 1/31/90.
/1/ Some portion of the Fund's income may be subject to the Federal Alternative
Minimum Tax.
14
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Intermediate Tax Exempt Bond Fund
- - ----------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management
[PHOTO OF RICHARD K. MARRONE APPEARS HERE]
RICHARD K. MARRONE
Performance
For the 12 months ended September 30, 1998, the Evergreen Select Intermediate
Tax Exempt Bond Funds' Class I and IS shares returned 8.62% and 8.43%,
respectively. This performance compares very favorably to the 7.04% average
return of 145 intermediate municipal debt funds tracked by Lipper Analytical
Services, an independent monitor of mutual fund performance.
Portfolio
Characteristics
---------------
Total Net Assets $751,609,852
.......................................................
Average Credit Quality AA-
.......................................................
Average Maturity 9.4 years
.......................................................
Average Duration 7.3 years
.......................................................
<PAGE>
A Good Year for Municipal Bond Investors
During the course of the fiscal year, investors shifted their focus from an
inflationary flare-up to concerns of an economic slowdown in the U.S. Many
market participants felt the Asian financial crisis would serve as the catalyst
which would negatively impact earnings of U.S. companies and trigger an economic
slowdown. This shift in sentiment prompted lower-trending interest rates which,
in turn, boosted municipal bond prices.
In fact, the yield on the bellwether 30-year Treasury bond dropped markedly
lower, from 6.40% to 4.98%. Declining interest rates served as the primary
determinant in record new issuances in the market, as municipalities rushed to
capitalize upon attractive new rates.
- - ----------------------------------------------------------------------------
PORTFOLIO QUALITY
- - ----------------------------------------------------------------------------
(based on 9/30/98 portfolio assets)
[PIE CHART APPEARS HERE]
AAA -- 39.8%
BBB -- 24.0%
A -- 14.9%
AA -- 14.0%
Not Rated -- 7.3%
Our Strategy
Our primary strategy continues to be to emphasize higher-yielding securities to
bolster the Fund's income orientation. In addition to this strategy, decisions
regarding duration and sector allocation fueled total return and allowed us to
outperform our peer group average.
The Fund's duration strategy had a positive impact on performance throughout the
fiscal period. In anticipation of lower-trending interest rates, we maintained a
long duration within the portfolio, currently at 7.3 years. This decision proved
timely as rates declined steadily throughout the period.
15
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Intermediate Tax Exempt Bond Fund
- - ----------------------------------------------------------------------------
Portfolio Manager Commentary
The portfolio's exposure of non-callable bonds also enhanced total return within
the declining interest rate environment, as many issuers "called" their bonds to
reissue at more attractive rates. Moreover, the decision to actively pursue
zero-coupon bonds, a security that enjoys significant price appreciation in
periods of declining rates, also had a positive impact on performance.
- - ----------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- - ----------------------------------------------------------------------------
(based on 9/30/98 net assets)
[PIE CHART APPEARS HERE]
Other Revenue Bonds -- 21.6%
<PAGE>
General Obligation Notes/Bonds -- 17.8% Hospitals/Nursing Homes/Health Care --
14.3% Escrow -- 13.8% Residential Care -- 6.7% Housing -- 6.6% Transportation --
6.5% Public Facilities -- 6.1% Sales Tax -- 5.0% Other assets and liabilities,
net -- 1.0% Mutual fund shares -- 0.6%
Outlook
From an historical perspective, valuation levels of municipal bonds, relative to
Treasuries, are at very attractive levels. In our opinion, this has created a
buying opportunity that we expect to capitalize upon in the final months of 1998
and into 1999. It is worth noting that despite a volatile investment landscape,
municipal bonds have posted solid returns over the 12 months. In fact, the
Evergreen Select Intermediate Tax Exempt Bond Fund's total return during the
fiscal year performed in line with the S&P 500 Index, which was 9.05%.
Looking ahead, we anticipate more turbulence in the financial markets as
overseas economies continue to struggle. On a positive note, we believe the
Federal Reserve Board will likely further reduce the Fed Funds rate to protect
the U.S. from the international meltdown and stimulate a slowing economy. Within
this environment, we anticipate keeping a neutral to modestly long duration
stance and will continue to pursue our high-yield strategy.
16
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select International Bond Fund
- - ----------------------------------------------------------------------------
Fund at a Glance as of September 30, 1998
- - ----------------------------------------------------------------------------
PORTFOLIO PROFILE
- - ----------------------------------------------------------------------------
Philosophy
The Evergreen Select International Bond Fund seeks to capitalize upon the
unprecedented opportunities taking place in international capital markets and
economies worldwide. The investment management team aims to add yield, provide
diversification, control currency risk while adding value, and utilize the low
to negative correlation to U.S. asset classes.
Process
The investment process incorporates quantitative tools to manage a massive amo
unt of financial data and to complement the team's fundamental research. A
minimum of 80% of the portfolio is invested in investment grade securities of 19
of the world's top economies*. Up to 20% can be invested into below investment
grade bonds from those 19 countries, or in emerging market bonds. The team
actively uses currency hedging for more efficient risk control
*AUSTRALIA, AUSTRIA, BELGIUM, CANADA, DENMARK, FINLAND, FRANCE, GERMANY,
IRELAND, ITALY, JAPAN, NETHERLANDS, NEW ZEALAND, NORWAY, PORTUGAL, SPAIN,
SWEDEN, SWITZERLAND, UNITED KINGDOM.
<PAGE>
Benchmark
J. P. Morgan International Bond Index
- - ----------------------------------------------------------------------------
PERFORMANCE AND RETURNS
- - ----------------------------------------------------------------------------
Class I Class IS
Performance Inception Date 12/15/93 12/15/93
...............................................................................
Average Annual Returns
...............................................................................
1 year 6.31% 6.05%
...............................................................................
3 years 6.80% 6.55%
...............................................................................
Since Inception 4.58% 4.33%
...............................................................................
30-day SEC Yield 4.76% 4.50%
...............................................................................
- - ----------------------------------------------------------------------------
LONG TERM GROWTH
- - ----------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date CPI JPMGGI Class I
---- --- ------ -------
12/31/93 $1,000,000 $1,000,000 $1,000,000
9/30/94 $1,024,700 $1,042,500 $898,500
9/30/95 $1,050,800 $1,236,500 $1,011,000
9/30/96 $1,082,300 $1,302,700 $1,098,500
9/30/97 $1,105,600 $1,299,700 $1,158,700
9/30/98 $1,122,100 $1,448,100 $1,231,800
Comparison of a $1,000,000 investment in Evergreen Select International Bond
Fund Class I, versus a similar investment in the J.P. Morgan Global Government
Index--excluding U.S. (JPMGGI), and the Consumer Price Index (CPI).
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost. The JPMGGI does not include transaction costs associated
with buying and selling securities or any management fees. The CPI is a commonly
used measure of inflation and does not represent an investment return. It is not
possible to invest directly in an index.
17
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select International Bond Fund
- - ----------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management
<PAGE>
[PHOTO OF GEORGE MCNEILL APPEARS HERE]
GEORGE MCNEILL
First International Advisors, Ltd.
Performance
Reflecting changes in its investment objectives and parameters, the former
CoreFund Global Bond Fund was renamed Evergreen Select International Bond Fund
during the past quarter. Under its new guidelines, the Fund seeks to maximize
total return by investing exclusively in foreign (non-U.S.) debt obligations,
denominated in both U.S. dollars and foreign currencies.
The Fund's first fiscal year closed on September 30, 1998, aligning it with the
fiscal years of the other Evergreen Select Fixed-Income Funds. For the three
months ended September 30, 1998 -- a period incorporating both former and
current investment parameters -- the Fund's Class I and Class IS shares produced
total returns of 3.56% and 3.61%, respectively. In comparison, the Fund's
benchmark, the J.P. Morgan International Bond Index generated a total return of
9.96% for the same time period.
Portfolio
Characteristics
---------------
Total Net Assets $46,736,061
.....................................................................
Average Credit Quality AA
.....................................................................
Average Maturity 9.2 years
.....................................................................
Average Duration 6.1 years
.....................................................................
Investment Environment and Strategy
Over the past three months, investors' concerns about stability and liquidity in
the world's financial markets refueled the "flight to quality" that has existed
throughout most of 1998. Russia's economic turmoil and renewed problems in Asia
prompted investors to make safety their paramount consideration when making
investment decisions. The prices of high quality bonds rose, pushing their
yields lower. Government bonds of the highest quality were the top-performers,
while the yield advantage provided by corporate bonds relative to their
government counterparts, increased.
The Fund eliminated nearly all obligations of U.S. issuers during the period, in
accordance with its new investment parameters. As of June 30, 1998, 15% of the
Fund had been invested in U.S. dollar-denominated obligations of U.S. issuers.
As these positions were sold, assets were reinvested in foreign government and
corporate securities that were denominated in both U.S. dollars and foreign
currencies.
The Fund maintained a strong emphasis on quality, investing 62% of its assets in
securities rated Aaa, as of September 30, 1998. The Fund's Aaa-rated government
holdings -- totaling 33% of net assets -- included the governments of Canada,
France, Germany, New South Wales, New Zealand and Sweden. These countries
represent extremely solid political and economic situations and have large,
liquid securities markets. The remaining 29% of the Fund's Aaa-rated position
was invested in corporate securities. As of September 30, 1998, the Fund also
was invested in the following: Bonds rated Aa -- 24%; A -- 6%; Baa -- 4%; Ba --
4%. Ba is considered to be the highest level of quality within the high-yield
bond sector.
18
<PAGE>
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select International Bond Fund
- - ----------------------------------------------------------------------------
Portfolio Manager Commentary
Investors' reactions to global events over the past three months often prompted
considerable price fluctuations. At times, certain bonds became "cheaper" than
we believed was warranted, creating an attractive investment opportunity. We
used these situations to selectively add higher-yielding bonds to the Fund,
adding to both the Fund's income and its potential for total return. As of
September 30, 1998, high-yield holdings included the governments of Lithuania,
Slovakia, South Korea and Thailand. The economies of South Korea and Thailand,
in our opinion, already have begun to recover. We expect to increase the fund's
high-yield positions as these markets stabilize further.
In our opinion, the Fund also benefited from its currency positions,
particularly as the U.S. dollar weakened. As of June 30, 1998, 92% of assets
were invested in a U.S. dollar hedge. We reduced those holdings to 77% by
September 30, 1998. The remaining 23% of the Fund was invested in the following
currencies, exclusive of the effects of hedging: Deutschmark -- 10%; New Zealand
Dollar -- 5%; Dutch Guilder -- 4%; Australian Dollar -- 2%; Other European
Currencies -- 2%.
Outlook
We believe the global economic slowdown that is currently underway -- combined
with continued low inflation -- will last into 1999, prompting lower bond yields
and higher bond prices. Much of the future course of the world's economies will
depend on the speed and degree to which central bankers lower interest rates.
In our opinion, many investors have factored in a greater slowdown than what we
think will take place. We look for stability to be restored to the financial
markets over the next few months, as investors realize their anticipated
scenario was worse than what actually developed.
- - ----------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- - ----------------------------------------------------------------------------
(based on 9/30/98 net assets)
[PIE CHART APPEARS HERE]
Foreign Bonds -- 97.3% Corporate Notes/Bonds -- 1.4% Other Assets and
Liabilities, net -- 1.3%
- - ----------------------------------------------------------------------------
GEOGRAPHICAL ALLOCATION
- - ----------------------------------------------------------------------------
(based on 9/30/98 net assets)
Germany 21.6%
............................................................................
France 13.1%
............................................................................
Netherlands 10.7%
............................................................................
<PAGE>
United Kingdom 9.7%
............................................................................
Canada 9.0%
............................................................................
Sweden 8.2%
............................................................................
Norway 3.9%
............................................................................
Japan 3.4%
............................................................................
Austria 3.4%
............................................................................
New Zealand 2.8%
............................................................................
Australia 2.5%
............................................................................
Supernational 2.1%
............................................................................
Denmark 2.0%
............................................................................
Other countries 6.3%
............................................................................
Other assets and liabilities, net 1.3%
............................................................................
19
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Limited Duration Fund
- - ----------------------------------------------------------------------------
Fund at a Glance as of September 30, 1998
- - ----------------------------------------------------------------------------
PORTFOLIO PROFILE
- - ----------------------------------------------------------------------------
Philosophy
Evergreen Select Limited Duration Fund seeks higher yields consistent with
preservation of capital and low principal fluctuation. 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.
Process
The Fund's portfolio manager seeks to enhance performance, while reducing
principal fluctuation, by actively managing three specific characteristics
within the portfolio: maturity structure, sector allocation and security
selection. In addition, quantitative tools are utilized to analyze interest rate
movement and to determine an appropriate duration strategy.
Benchmark
Merrill Lynch 1-3 Year Treasury
Bond Index
- - ----------------------------------------------------------------------------
PERFORMANCE AND RETURNS
- - ----------------------------------------------------------------------------
<PAGE>
Class I Class IS
Average Annual Returns
............................................................................
1 year 7.27% 7.15%
............................................................................
3 years 6.58% 6.37%
............................................................................
Since Inception 6.55% 6.32%
............................................................................
30-day SEC Yield 5.25% 4.99%
............................................................................
- - ----------------------------------------------------------------------------
LONG TERM GROWTH
- - ----------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date CPI ML1-3YTBI Class I
---- --- --------- -------
4/30/94 $1,000,000 $1,000,000 $1,000,000
9/30/95 $1,039,400 $1,098,300 $1,093,000
9/30/96 $1,070,600 $1,160,200 $1,155,100
9/30/97 $1,093,600 $1,240,100 $1,233,700
9/30/98 $1,109,900 $1,338,400 $1,323,400
Comparison of a $1,000,000 investment in Evergreen Select Limited Duration Fund,
Class I shares, versus a similar investment in the Merrill Lynch 1-3 Year
Treasury Bond Index (ML1-3YTBI), and the Consumer Price Index (CPI).
Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. Class I and IS performance information
includes the performance of the Fund's predecessor common trust fund for periods
before the Fund's registration statement became effective on November 21, 1997.
The inception date of the predecessor common trust fund was April 30, 1994.
Performance for the common trust fund has been adjusted to include the effect of
estimated mutual fund expense ratios at the time the common trust funds were
converted to mutual funds. Performance information for Class IS also includes
performance of the Fund's Class I for the period from November 24, 1997 to July
28, 1998 (commencement of Class IS operations) and does not include the
deduction of 12b-1 fees. If such fees had been included, the returns would have
been lower. Returns of Class I and IS, since their respective commencement of
class operations, were 6.21% and 2.12%, respectively. The common trust fund was
not registered under the Investment Company Act of 1940 (the "1940 Act") or
subject to certain investment restrictions that are imposed by the 1940 Act. If
the common trust fund had been registered under the 1940 Act, its performance
may have been adversely affected. Index returns do not reflect expenses, which
have been deducted from the Fund's return. It is not possible to invest directly
in an index.
20
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Limited Duration Fund
- - ----------------------------------------------------------------------------
Portfolio Manager Commentary
<PAGE>
Portfolio Management
[PHOTO OF DAVID FOWLEY APPEARS HERE]
DAVID FOWLEY
[PHOTO OF SAM C. PADDISON APPEARS HERE]
SAM C. PADDISON
[PHOTO OF ANDREW C. ZIMMERMAN APPEARS HERE]
ANDREW C. ZIMMERMAN
Performance
For the 12 months ended September 30, 1998, the Evergreen Select Limited
Duration Fund Class I and IS shares returned 7.27% and 7.15%, respectively,
ahead of the average return of 6.68% for short investment grade funds tracked by
Lipper Analytical Services, an independent monitor of mutual fund performance.
The Fund's return was slightly lower than the Merrill Lynch 1-3 year Treasury
Index, which returned 7.99%.
Portfolio
Characteristics
---------------
Total Net Assets $71,424,432
...............................................................
Average Credit Quality AA
...............................................................
Average Maturity 2.0 years
...............................................................
Average Duration 1.7 years
...............................................................
Investment Environment
The last 12 months have been predominantly characterized by a strong
acceleration in the descent of interest rates along with a broad widening in
corporate spreads. These were the results of investors seeking the relative
safety of U.S. Treasury securities in a world gripped with fear of deflation.
The economic rumblings of deflation increased during the quarter as new evidence
continued to be presented that "Asian storm clouds," which Fed Chairman
Greenspan alluded to in his last Humphrey-Hawkins testimony, are indeed
spreading to other sectors of the global economy. Russia, surprising many
investors, had a de facto default on their government debt. While not the cause,
this event started a vicious cycle of a dramatic flight to quality, prompting
world equity markets, corporate bonds and even U.S. Agency debt to underperform
U.S. Treasuries. The stream of bad news continued during the quarter as the
Japanese economy showed a continuation of its recessionary (some fear
depressionary) trend.
Latin America seems to be the next area of concern as economies slow in this
area of the world, prompting fears of devaluation in the Brazilian Real. The IMF
acknowledged that the world economy is much worse off than they anticipated,
calling for a global decrease in interest rates to stem the economic weakness.
The Fed demonstrated its resolve to stave off the global crisis as it lowered
interest rates by 25 basis points.
- - ----------------------------------------------------------------------------
PORTFOLIO COMPOSITION
<PAGE>
- - ----------------------------------------------------------------------------
(based on 9/30/98 net assets)
[PIE CHART APPEARS HERE]
Corporate Notes/Bonds -- 38.9% Treasury Notes/Bonds -- 25.2% Asset-Backed
Securities -- 14.5% U.S. Agency Obligations -- 8.4% Other Assets and Liabilities
net -- 6.0% Yankee Obligations -- 3.0% Funding Agreement -- 2.8% Collateralized
Mortgage Obligations -- 1.2%
21
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Limited Duration Fund
- - ----------------------------------------------------------------------------
Portfolio Manager Commentary
Investment Strategy
Our fundamental assessment of factors affecting the direction of interest rates
was very positive over the last six months. We felt that the Fed would, in the
end, be forced to give up on its fight against inflation, as the signs of
deflation grew stronger. Moreover, the technical position of the market was very
strong for falling interest rates. As a result, we were longer in duration than
the benchmark during the quarter. This resulted in strong performance in the
Treasury portion of the portfolio, helping to offset the underperformance in the
corporate and mortgage-backed sectors.
Our sector allocation favored a modest overweighting of high quality corporates,
mortgage, and asset-backed securities. We have avoided the lower quality
spectrum of securities because their value has been less than overwhelming up
until the recent declines in these sectors of the bond market. Unfortunately,
the extreme flight to quality led to underperformance of all corporates and
mortgages relative to Treasuries. In staying with only high quality securities,
however, we were able to significantly outperform our peers, and be positioned
to take advantage of what now may be an opportunity in the lower quality
sectors.
- - ----------------------------------------------------------------------------
PORTFOLIO QUALITY
- - ----------------------------------------------------------------------------
(based on 9/30/98 portfolio assets)
[PIE CHART APPEARS HERE]
A -- 31.2% U.S. Government -- 26.8% AAA -- 19.3% U.S. Government Agency -- 8.9%
AA -- 7.4% BAA -- 6.4%
Outlook
<PAGE>
It is now quite clear that the Fed is much more concerned with the lack of
liquidity stemming from the declines in world equity and bond markets than any
potential uptick in inflation due to the strong domestic economy. In fact, while
the pundits believed that the U.S. economy was insulated from international
problems, it now appears that our economy, in fact, will be affected by the
tumult internationally. The question is to what extent. Will there only be a
mild profit recession, or are we in store for a full scale economic recession?
This will be the ongoing debate over the next few months. We believe that the
fundamental factors that prompted the Fed to ease up are still in place, and
that the general direction of interest rates will be down.
Valuations on corporate securities have been much improved over the last few
months. It seems as if the widening that has occurred is due more to a lack of
liquidity than to a significant deterioration in credit quality. As such, we are
preparing to increase our exposure to the corporate sector, where we have
avoided a significant overweighting for the past several months.
Valuations in mortgage-backed securities have also dramatically improved as
fears of prepayments have swept through this market. Because we believe that
rates could be somewhat range bound over the short-term, we will be using this
as an opportunity to increase our exposure here as well.
22
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Total Return Bond Fund
- - ----------------------------------------------------------------------------
Fund at a Glance as of September 30, 1998
- - ----------------------------------------------------------------------------
PORTFOLIO PROFILE
- - ----------------------------------------------------------------------------
Philosophy
The Evergreen Select Total Return Bond Fund uses a core-plus, fixed income
approach which seeks to enhance returns by opportunistically investing up to 35%
of the portfolio in the high yield and international fixed income markets.
Process
The managers maintain a focus on sector allocation, credit analysis and security
selection as opposed to interest rate anticipation. Asset allocation among the
three portfolio components - domestic high grade, domestic high yield and
international -- is aided by quantitative models, and determined through dynamic
discussions among the three portfolio managers that revolve around several
factors, including underlying market fundamentals.
Benchmark
Lehman Brothers Aggregate Bond Index
- - ----------------------------------------------------------------------------
PERFORMANCE AND RETURNS
- - ----------------------------------------------------------------------------
Class I Class IS
Performance Inception Date 4/20/98 8/3/98
............................................................................
Since Inception 2.83% 2.79%
<PAGE>
............................................................................
30-day SEC Yield 6.55% 6.32%
............................................................................
- - ----------------------------------------------------------------------------
GROWTH CHART
- - ----------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Date CPI LBABI Class I
---- --- ----- -------
4/30/98 $1,000,000 $1,000,000 $1,000,000
5/31/98 $1,001,800 $1,010,200 $1,008,800
6/30/98 $1,003,100 $1,018,700 $1,016,300
7/31/98 $1,004,300 $1,020,900 $1,019,100
8/31/98 $1,005,500 $1,037,500 $1,015,400
9/30/98 $1,006,800 $1,061,800 $1,030,900
Comparison of a $1,000,000 investment in Evergreen Select Total Return Bond Fund
Class I, versus a similar investment in the Lehman Brothers Aggregate Bond Index
(LBABI), and the Consumer Price Index (CPI).
Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost. Performance information for Class IS also includes
performance of the Fund's Class I for the period from April 20, 1998 to August
3, 1998 (commencement of Class IS operations) and does not include the deduction
of 12b-1 fees. If such fees had been included returns would have been lower. The
LBABI is an unmanaged index and does not include transaction costs associated
with buying and selling securities nor any management fees. The CPI is a
commonly used measure of inflation and does not represent an investment return.
It is not possible to invest directly in an index.
23
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Total Return Bond Fund
- - ----------------------------------------------------------------------------
Portfolio Manager Commentary
Portfolio Management Team
[PHOTO OF ROLLIN C. WILLIAMS APPEARS HERE]
ROLLIN C. WILLIAMS, CFA
[PHOTO OF RICHARD CRYAN APPEARS HERE]
RICHARD CRYAN
[PHOTO OF ANTHONY NORRIS APPEARS HERE]
ANTHONY NORRIS
First International Advisers, Ltd.
<PAGE>
Performance
For the fiscal period ended September 30, the Evergreen Select Total Return Bond
Fund's Class I and IS shares returned 2.83% and 2.79%, respectively. These
returns are from the Fund's inception date of April 20, 1998, and do not
represent an annual return.
Portfolio
Characteristics
---------------
Total Net Assets $136,022,056
.......................................................
Average Credit Quality A
.......................................................
Average Maturity 7.9 years
.......................................................
Average Duration 4.8 years
.......................................................
An Opportunistic Fixed Income Approach
The Total Return Bond Fund uses a core-plus, fixed income approach which seeks
to enhance returns by opportunistically investing up to 35% of the portfolio in
the high yield and international fixed income markets. The managers seek to add
value over the benchmark, the Lehman Brothers Aggregate Index, by focusing
primarily on sector allocation, credit analysis and security selection. In
addition, because the Fund's different components tend to have a low correlation
(returns don't necessarily rise and fall in sync with each other), the Fund's
risk profile is reduced and returns are smoothed over time.
A Positive Backdrop for Bonds
The past 12 months represented a particularly strong period for bond investors,
especially within the U.S. The Asian financial crisis effectively slowed U.S.
economic growth and had a calming effect on inflation. As a result, interest
rates fell and bond prices rose. In fact, the yield on the bellwether 30-year
Treasury bond declined markedly, from 6.40% to 4.98% during the 12-month period
ended September 30, 1998. A worldwide flight to quality fueled a spectacular
performance of U.S. Treasuries while corporate bonds, mortgages and high-yield
issues lagged behind.
- - ----------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- - ----------------------------------------------------------------------------
(based on 9/30/98 net assets)
[PIE CHART APPEARS HERE]
Corporate Notes/Bonds -- 39.0% Treasury Notes/Bonds -- 29.3% Mortgage-Backed
Securities -- 21.8% Foreign Bonds -- 5.4%
Other assets and liabilities, net -- 3.1%
Yankee Obligations -- 1.4%
24
<PAGE>
- - ----------------------------------------------------------------------------
EVERGREEN
Select Total Return Bond Fund
- - ----------------------------------------------------------------------------
<PAGE>
Portfolio Manager Commentary
Sector Allocation and Investment
Strategy
During the past three months, the portfolio's weighting of international
securities increased from 0% to 4.3%; purchases in this sector focused primarily
on higher quality issues. These securities were typically from countries which
enjoy solid political and economic stability and have large, liquid securities
markets. It is also worth noting that effective October 1, 1998, the portfolio's
fixed income component is being managed by First International Advisors, Ltd., a
London-based international fixed income management firm that was acquired in
August 1998. The Board approved appointing First International Advisers, Ltd.
(formerly Analytic TSA International) as a sub-adviser for the Select Total
Return Bond Fund.
The Fund's domestic high yield weighting was reduced from roughly 29% to 17%
during the past three months. This move was undertaken to shelter the Fund from
an especially turbulent period of underperformance in the high yield market.
Conversely, following a modest weighting increase, domestic investment grade
securities now represent 79% of the portfolio. Underlying this exposure was a
nearly 30% weighting of U.S. Government and Agency issues, an area that enjoyed
especially strong performance over the past several months.
- - ----------------------------------------------------------------------------
PORTFOLIO QUALITY
- - ----------------------------------------------------------------------------
(based on 9/30/98 portfolio assets)
[PIE CHART APPEARS HERE]
U.S. Government -- 29.0%
U.S. Government Agency -- 21.7%
A -- 14.3% B -- 10.9% BAA - 9.8% AAA - 7.5% BA -- 5.0%
Not Rated -- 1.0%
AA -- 0.8%
Outlook
Looking to the remainder of the year, we believe the volatile, fixed income
investing has created a degree of emotional overreaction and, consequently, has
presented some attractive opportunities. Due to the spread widening near
quarter-end, we are actively looking to increase the portfolio's international
exposure to over 7%. Similarly, we believe recent problems in the high yield
market have increased the attractiveness in some areas, and expect to increase
this weighting by capitalizing on these opportunities.
25
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Adjustable Rate Fund
- - ----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Year Ended September
30,
---------------------------
Seven Months Five Months
<PAGE>
Ended Year Ended Ended
September 30, 1998 (e) February 28, 1998 February 28, 1997 (a) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL SHARES
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.75 $ 9.71 $ 9.68 $ 9.65 $ 9.61 $ 9.93
------- ------- ------- ------- ------- -------
.........................................................................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................................................................
Net investment income 0.35 0.64 0.28 0.64(b) 0.63 0.63
.........................................................................................................................
Net gains or losses on
securities (both
realized and
unrealized) (0.07) 0.04 0(d) 0 0.01 (0.49)
------- ------- ------- ------- ------- -------
.........................................................................................................................
Total from investment
operations 0.28 0.68 0.28 0.64 0.64 0.14
------- ------- ------- ------- ------- -------
.........................................................................................................................
LESS DIVIDENDS (FROM NET
INVESTMENT INCOME) (0.35) (0.64) (0.25) (0.61) (0.60) (0.46)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD $ 9.68 $ 9.75 $ 9.71 $ 9.68 $ 9.65 $ 9.61
------- ------- ------- ------- ------- -------
.........................................................................................................................
TOTAL RETURN 2.88% 7.15% 2.97% 6.86% 6.87% 1.43%
.........................................................................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................................................................
NET ASSETS, END OF
PERIOD (THOUSANDS) $23,174 $25,981 $70,264 $65,974 $23,616 $25,200
.........................................................................................................................
RATIOS TO AVERAGE NET
ASSETS
Total expenses 0.33%(c) 0.30% 0.30%(c) 0.30% 0.30% 0.30%
.........................................................................................................................
Net investment income 6.12%(c) 6.63% 6.79%(c) 6.84% 6.61% 5.15%
.........................................................................................................................
PORTFOLIO TURNOVER RATE 46% 107% 44% 85% 56% 63%
.........................................................................................................................
</TABLE>
<TABLE>
<CAPTION>
May 23, 1994
Year Ended (Date of Initial
Seven Months Five Months September 30, Public Offering)
Ended Year Ended Ended ----------------- to
September 30, 1998 (e) February 28, 1998 February 28, 1997 (a) 1996 1995 September 30, 1994
<S> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL SERVICE SHARES
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.76 $ 9.72 $ 9.68 $ 9.65 $ 9.61 $9.73
------ ------- ------ ------- ------ -----
...................................................................................................................................
INCOME FROM INVESTMENT
OPERATIONS
...................................................................................................................................
Net investment income 0.33 0.59 0.28 0.65(b) 0.64 0.17
...................................................................................................................................
Net gains or losses on
securities (both
realized and unrealized) (0.08) 0.06 0(d) (0.03) (0.02) (0.13)
------ ------- ------ ------- ------ -----
...................................................................................................................................
Total from investment
operations 0.25 0.65 0.28 0.62 0.62 0.04
------ ------- ------ ------- ------ -----
...................................................................................................................................
LESS DIVIDENDS (FROM NET
INVESTMENT INCOME) (0.33) (0.61) (0.24) (0.59) (0.58) (0.16)
------ ------- ------ ------- ------ -----
...................................................................................................................................
NET ASSET VALUE, END OF
PERIOD $ 9.68 $ 9.76 $ 9.72 $ 9.68 $ 9.65 $9.61
------ ------- ------ ------- ------ -----
...................................................................................................................................
TOTAL RETURN 2.63% 6.89% 2.97% 6.60% 6.60% 0.35%
...................................................................................................................................
RATIOS/SUPPLEMENTAL DATA
...................................................................................................................................
NET ASSETS, END OF PERIOD
(THOUSANDS) $9,645 $10,320 $3,564 $14,361 $2,871 $ 1
...................................................................................................................................
RATIOS TO AVERAGE NET
ASSETS
<PAGE>
Total expenses 0.57%(c) 0.55% 0.55%(c) 0.55% 0.55% 0.43%(c)
...................................................................................................................................
Net investment income 5.82%(c) 6.15% 6.39%(c) 6.64% 6.70% 5.03%(c)
...................................................................................................................................
PORTFOLIO TURNOVER RATE 46% 107% 44% 85% 56% 63%
...................................................................................................................................
</TABLE>
(a) The Fund changed its fiscal year end from September 30 to the last day of
February, effective February 28, 1997
(b) Per share calculations based on weighted average shares outstanding. (c)
Annualized.
(d) Amount represents less than $0.01 per share.
(e) The Fund changed its fiscal year end from the last day of February to Sep-
tember 30, effective September 30 1998.
See Combined Notes to Financial Statements.
26
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Core Bond Fund
- - ----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
December 19, 1997
(Commencement of
Class Operations) to
September 30, 1998
<S> <C>
INSTITUTIONAL SHARES
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.68
--------
.............................................................................
INCOME FROM INVESTMENT OPERATIONS
.............................................................................
Net investment income 0.51
.............................................................................
Net gains on securities (both realized and unrealized) 0.34
--------
.............................................................................
Total from investment operations 0.85
--------
.............................................................................
LESS DIVIDENDS (FROM NET INVESTMENT INCOME) (0.51)
--------
.............................................................................
NET ASSET VALUE, END OF PERIOD $ 11.02
--------
.............................................................................
TOTAL RETURN 8.12%
.............................................................................
RATIOS/SUPPLEMENTAL DATA
.............................................................................
NET ASSETS, END OF PERIOD (THOUSANDS) $125,070
.............................................................................
RATIOS TO AVERAGE NET ASSETS
Expenses 0.42%(a)
.............................................................................
Expenses, excluding indirectly paid expenses 0.42%(a)
.............................................................................
Expenses, excluding waivers and reimbursements 0.54%(a)
.............................................................................
Net investment income 5.99%(a)
<PAGE>
.............................................................................
PORTFOLIO TURNOVER RATE 77%
.............................................................................
<CAPTION>
March 9, 1998
(Commencement of
Class Operations) to
September 30, 1998
<S> <C>
INSTITUTIONAL SERVICE SHARES
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.66
--------
.............................................................................
INCOME FROM INVESTMENT OPERATIONS
.............................................................................
Net investment income 0.35
.............................................................................
Net gains on securities (both realized and unrealized) 0.36
--------
.............................................................................
Total from investment operations 0.71
--------
.............................................................................
LESS DIVIDENDS (FROM NET INVESTMENT INCOME) (0.35)
--------
.............................................................................
NET ASSET VALUE, END OF PERIOD $ 11.02
--------
.............................................................................
TOTAL RETURN 6.74%
.............................................................................
RATIOS/SUPPLEMENTAL DATA
.............................................................................
NET ASSETS, END OF PERIOD (THOUSANDS) $ 286
.............................................................................
RATIOS TO AVERAGE NET ASSETS
Expenses 0.68%(a)
.............................................................................
Expenses, excluding indirectly paid expenses 0.68%(a)
.............................................................................
Expenses, excluding waivers and reimbursements 0.79%(a)
.............................................................................
Net investment income 5.76%(a)
.............................................................................
PORTFOLIO TURNOVER RATE 77%
.............................................................................
</TABLE>
(a) Annualized.
See Combined Notes to Financial Statements.
27
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Core Bond Fund
- - ----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<PAGE>
<CAPTION>
November 24, 1997
(Commencement of
Class Operations) to
September 30, 1998
<S> <C>
INSTITUTIONAL CHARITABLE SHARES
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.68
--------
.............................................................................
INCOME FROM INVESTMENT OPERATIONS
.............................................................................
Net investment income 0.55
.............................................................................
Net gains on securities (both realized and unrealized) 0.34
--------
.............................................................................
Total from investment operations 0.89
--------
.............................................................................
LESS DIVIDENDS (FROM NET INVESTMENT INCOME) (0.55)
--------
.............................................................................
NET ASSET VALUE, END OF PERIOD $ 11.02
--------
.............................................................................
TOTAL RETURN 8.55%
.............................................................................
RATIOS/SUPPLEMENTAL DATA
.............................................................................
NET ASSETS, END OF PERIOD (THOUSANDS) $471,421
.............................................................................
RATIOS TO AVERAGE NET ASSETS
Expenses 0.42%(a)
.............................................................................
Expenses, excluding indirectly paid expenses 0.42%(a)
.............................................................................
Expenses, excluding waivers and reimbursements 0.53%(a)
.............................................................................
Net investment income 5.98%(a)
.............................................................................
PORTFOLIO TURNOVER RATE 77%
.............................................................................
</TABLE>
(a) Annualized.
See Combined Notes to Financial Statements.
28
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Fixed Income Fund
- - ----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
November 24, 1997
(Commencement of
Class Operations) to
<PAGE>
September 30, 1998
<S> <C>
INSTITUTIONAL SHARES
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.96
--------
.............................................................................
INCOME FROM INVESTMENT OPERATIONS
.............................................................................
Net investment income 0.31
.............................................................................
Net gains on securities (both realized and unrealized) 0.16
--------
.............................................................................
Total from investment operations 0.47
--------
.............................................................................
LESS DIVIDENDS (FROM NET INVESTMENT INCOME) (0.31)
--------
.............................................................................
NET ASSET VALUE, END OF PERIOD $ 6.12
--------
.............................................................................
TOTAL RETURN 8.06%
.............................................................................
RATIOS/SUPPLEMENTAL DATA
.............................................................................
NET ASSETS, END OF PERIOD (THOUSANDS) $668,907
.............................................................................
RATIOS TO AVERAGE NET ASSETS
Expenses 0.52%(a)
.............................................................................
Expenses, excluding indirectly paid expenses 0.52%(a)
.............................................................................
Expenses, excluding waivers and reimbursements 0.63%(a)
.............................................................................
Net investment income 5.99%(a)
.............................................................................
PORTFOLIO TURNOVER RATE 46%
.............................................................................
<CAPTION>
March 9, 1998
(Commencement of
Class Operations) to
September 30, 1998
<S> <C>
INSTITUTIONAL SERVICE SHARES
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.97
--------
.............................................................................
INCOME FROM INVESTMENT OPERATIONS
.............................................................................
Net investment income 0.20
.............................................................................
Net gains on securities (both realized and unrealized) 0.15
--------
.............................................................................
Total from investment operations 0.35
--------
.............................................................................
LESS DIVIDENDS (FROM NET INVESTMENT INCOME) (0.20)
--------
.............................................................................
NET ASSET VALUE, END OF PERIOD $ 6.12
<PAGE>
--------
.............................................................................
TOTAL RETURN 5.94%
.............................................................................
RATIOS/SUPPLEMENTAL DATA
.............................................................................
NET ASSETS, END OF PERIOD (THOUSANDS) $ 9,808
.............................................................................
RATIOS TO AVERAGE NET ASSETS
Expenses 0.77%(a)
.............................................................................
Expenses, excluding indirectly paid expenses 0.77%(a)
.............................................................................
Expenses, excluding waivers and reimbursements 0.89%(a)
.............................................................................
Net investment income 5.65%(a)
.............................................................................
PORTFOLIO TURNOVER RATE 46%
.............................................................................
</TABLE>
(a) Annualized.
See Combined Notes to Financial Statements.
29
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Income Plus Fund
- - ----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
November 24, 1997
(Commencement of
Class Operations) to
September 30, 1998
<S> <C>
INSTITUTIONAL SHARES
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.72
----------
.............................................................................
INCOME FROM INVESTMENT OPERATIONS
.............................................................................
Net investment income 0.30
.............................................................................
Net gains on securities (both realized and unrealized) 0.20
----------
.............................................................................
Total from investment operations 0.50
----------
.............................................................................
LESS DIVIDENDS (FROM NET INVESTMENT INCOME) (0.30)
----------
.............................................................................
NET ASSET VALUE, END OF PERIOD $ 5.92
----------
.............................................................................
TOTAL RETURN 8.99%
.............................................................................
<PAGE>
RATIOS/SUPPLEMENTAL DATA
.............................................................................
NET ASSETS, END OF PERIOD (THOUSANDS) $1,367,240
.............................................................................
RATIOS TO AVERAGE NET ASSETS
Expenses 0.51%(a)
.............................................................................
Expenses, excluding indirectly paid expenses 0.51%(a)
.............................................................................
Expenses, excluding waivers and reimbursements 0.61%(a)
.............................................................................
Net investment income 6.09%(a)
.............................................................................
PORTFOLIO TURNOVER RATE 37%
.............................................................................
<CAPTION>
March 2, 1998
(Commencement of
Class Operations) to
September 30, 1998
<S> <C>
INSTITUTIONAL SERVICE SHARES
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.71
----------
.............................................................................
INCOME FROM INVESTMENT OPERATIONS
.............................................................................
Net investment income 0.19
.............................................................................
Net gains on securities (both realized and unrealized) 0.21
----------
.............................................................................
Total from investment operations 0.40
----------
.............................................................................
LESS DIVIDENDS (FROM NET INVESTMENT INCOME) (0.19)
----------
.............................................................................
NET ASSET VALUE, END OF PERIOD $ 5.92
----------
.............................................................................
TOTAL RETURN 7.21%
.............................................................................
RATIOS/SUPPLEMENTAL DATA
.............................................................................
NET ASSETS, END OF PERIOD (THOUSANDS) $ 7,528
.............................................................................
RATIOS TO AVERAGE NET ASSETS
Expenses 0.75%(a)
.............................................................................
Expenses, excluding indirectly paid expenses 0.75%(a)
.............................................................................
Expenses, excluding waivers and reimbursements 0.84%(a)
.............................................................................
Net investment income 5.80%(a)
.............................................................................
PORTFOLIO TURNOVER RATE 37%
.............................................................................
</TABLE>
(a) Annualized.
See Combined Notes to Financial Statements.
<PAGE>
30
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Intermediate Tax Exempt Bond Fund
- - ----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
November 24, 1997
(Commencement of
Class Operations) to
September 30, 1998
<S> <C>
INSTITUTIONAL SHARES
NET ASSET VALUE, BEGINNING OF PERIOD $ 64.84
--------
.............................................................................
INCOME FROM INVESTMENT OPERATIONS
.............................................................................
Net investment income 2.57
.............................................................................
Net gains on securities (both realized and unrealized) 2.27
--------
.............................................................................
Total from investment operations 4.84
--------
.............................................................................
LESS DIVIDENDS (FROM NET INVESTMENT INCOME) (2.57)
--------
.............................................................................
NET ASSET VALUE, END OF PERIOD $ 67.11
--------
.............................................................................
TOTAL RETURN 7.61%
.............................................................................
RATIOS/SUPPLEMENTAL DATA
.............................................................................
NET ASSETS, END OF PERIOD (THOUSANDS) $746,874
.............................................................................
RATIOS TO AVERAGE NET ASSETS
Expenses 0.62%(a)
.............................................................................
Expenses, excluding indirectly paid expenses 0.62%(a)
.............................................................................
Expenses, excluding waivers and reimbursements 0.72%(a)
.............................................................................
Net investment income 4.59%(a)
.............................................................................
PORTFOLIO TURNOVER RATE 47%
.............................................................................
<CAPTION>
March 2, 1998
(Commencement of
Class Operations) to
September 30, 1998
<S> <C>
INSTITUTIONAL SERVICE SHARES
NET ASSET VALUE, BEGINNING OF PERIOD $ 65.91
<PAGE>
--------
.............................................................................
INCOME FROM INVESTMENT OPERATIONS
.............................................................................
Net investment income 1.66
.............................................................................
Net gains on securities (both realized and unrealized) 1.20
--------
.............................................................................
Total from investment operations 2.86
--------
.............................................................................
LESS DIVIDENDS (FROM NET INVESTMENT INCOME) (1.66)
--------
.............................................................................
NET ASSET VALUE, END OF PERIOD $ 67.11
--------
.............................................................................
TOTAL RETURN 4.41%
.............................................................................
RATIOS/SUPPLEMENTAL DATA
.............................................................................
NET ASSETS, END OF PERIOD (THOUSANDS) $ 4,736
.............................................................................
RATIOS TO AVERAGE NET ASSETS
Expenses 0.89%(a)
.............................................................................
Expenses, excluding indirectly paid expenses 0.89%(a)
.............................................................................
Expenses, excluding waivers and reimbursements 0.99%(a)
.............................................................................
Net investment income 4.35%(a)
.............................................................................
PORTFOLIO TURNOVER RATE 47%
.............................................................................
</TABLE>
(a) Annualized.
See Combined Notes to Financial Statements.
31
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select International Bond Fund
- - ----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
December 15, 1993
Three Months Year Ended June 30, (Commencement of
Ended ---------------------------------- Operations) to
September 30, 1998** 1998* 1997* 1996* 1995* June 30, 1994*
<S> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL SHARES
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.32 $ 9.54 $ 9.70 $ 9.62 $ 9.06 $ 10.00
------- ------- ------- ------- ------- -------
.........................................................................................................
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................................................
Net investment income 0.11(b) 0.47 0.49 0.47 0.62 0.25
.........................................................................................................
<PAGE>
Net gains or losses on
securities (both realized
and unrealized) 0.22 (0.06) 0.09 0.30 0.24 (1.15)
------- ------- ------- ------- ------- -------
.........................................................................................................
Total from investment
operations 0.33 0.41 0.58 0.77 0.86 (0.90)
------- ------- ------- ------- ------- -------
LESS DIVIDENDS (FROM NET
INVESTMENT INCOME) (0.13) (0.63) (0.74) (0.69) (0.30) (0.04)
------- ------- ------- ------- ------- -------
.........................................................................................................
NET ASSET VALUE, END OF
PERIOD $ 9.52 $ 9.32 $ 9.54 $ 9.70 $ 9.62 $ 9.06
------- ------- ------- ------- ------- -------
.........................................................................................................
TOTAL RETURN 3.56% 4.42% 6.18% 8.00% 9.70% (9.00)%
.........................................................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................................................
NET ASSETS, END OF PERIOD
(THOUSANDS) $46,607 $36,722 $34,590 $32,998 $26,898 $24,957
.........................................................................................................
RATIOS TO AVERAGE NET ASSETS
Expenses 0.76%(a) 0.81% 0.85% 0.71% 0.64% 0.73%(a)
.........................................................................................................
Expenses, excluding waivers
and reimbursements 1.22%(a) 1.00% 1.03% 0.95% 1.03% 1.12%(a)
.........................................................................................................
Net investment income 4.89%(a) 4.90% 5.14% 5.81% 6.84% 5.04%(a)
.........................................................................................................
PORTFOLIO TURNOVER RATE 3% 46% 90% 67% 133% 161%
.........................................................................................................
<CAPTION>
December 15, 1993
Three Months Year Ended June 30, (Commencement of
Ended ---------------------------------- Operations) to
September 30, 1998** 1998* 1997* 1996* 1995* June 30, 1994*
<S> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL SERVICE SHARES
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.30 $ 9.52 $ 9.68 $ 9.61 $ 9.04 $ 10.00
------- ------- ------- ------- ------- -------
.........................................................................................................
Net gains or losses on
securities (both realized
and unrealized) 0.23 (0.01) 0.14 0.12 0.24 (1.11)
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
.........................................................................................................
Total from investment
operations 0.34 0.39 0.56 0.73 0.85 (0.92)
------- ------- ------- ------- ------- -------
Net investment income 0.11(b) 0.40 0.42 0.61 0.61 0.19
.........................................................................................................
LESS DIVIDENDS (FROM NET
INVESTMENT INCOME) (0.13) (0.61) (0.72) (0.66) (0.28) (0.04)
------- ------- ------- ------- ------- -------
.........................................................................................................
NET ASSET VALUE, END OF
PERIOD $ 9.51 $ 9.30 $ 9.52 $ 9.68 $ 9.61 $ 9.04
------- ------- ------- ------- ------- -------
.........................................................................................................
TOTAL RETURN 3.61% 4.16% 5.92% 7.74% 9.57% (9.22)%
.........................................................................................................
RATIOS/SUPPLEMENTAL DATA
.........................................................................................................
NET ASSETS, END OF PERIOD
(THOUSANDS) $ 129 $ 198 $ 182 $ 152 $ 170 $ 167
.........................................................................................................
RATIOS TO AVERAGE NET ASSETS
Expenses 1.00%(a) 1.06% 1.10% 0.96% 0.89% 0.98%(a)
.........................................................................................................
Expenses, excluding waivers
and reimbursements 1.46%(a) 1.25% 1.28% 1.20% 1.28% 1.37%(a)
.........................................................................................................
Net investment income 4.65%(a) 4.65% 4.89% 5.56% 6.59% 4.79%(a)
.........................................................................................................
<PAGE>
PORTFOLIO TURNOVER RATE 3% 46% 90% 67% 133% 161%
.........................................................................................................
</TABLE>
(a) Annualized.
(b) Calculation based on average shares outstanding.
* On August 28, 1998, CoreFund Global Bond Fund exchanged substantially all of
its net assets to Evergreen Select International Bond Fund. As CoreFund
Global Bond Fund is the accounting survivor, 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.
** The Fund changed its fiscal year end from June 30 to September 30.
See Combined Notes to Financial Statements.
32
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Limited Duration Fund
- - ----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
November 24, 1997
(Commencement of
Class Operations) to
September 30, 1998
<S> <C>
INSTITUTIONAL SHARES
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.42
-------
.............................................................................
INCOME FROM INVESTMENT OPERATIONS
.............................................................................
Net investment income 0.53(b)
.............................................................................
Net gains on securities (both realized and unrealized) 0.10
-------
.............................................................................
Total from investment operations 0.63
-------
.............................................................................
LESS DIVIDENDS (FROM NET INVESTMENT INCOME) (0.53)
-------
.............................................................................
NET ASSET VALUE, END OF PERIOD $ 10.52
-------
.............................................................................
TOTAL RETURN 6.21%
.............................................................................
RATIOS/SUPPLEMENTAL DATA
.............................................................................
NET ASSETS, END OF PERIOD (THOUSANDS) $70,810
.............................................................................
RATIOS TO AVERAGE NET ASSETS
Expenses 0.30%(a)
.............................................................................
Expenses, excluding indirectly paid expenses 0.30%(a)
.............................................................................
Expenses, excluding waivers and reimbursements 0.60%(a)
.............................................................................
<PAGE>
Net investment income 5.97%(a)
.............................................................................
PORTFOLIO TURNOVER RATE 78%
.............................................................................
<CAPTION>
July 28, 1998
(Commencement of
Class Operations) to
September 30, 1998
<S> <C>
INSTITUTIONAL SERVICE SHARES
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.41
-------
.............................................................................
INCOME FROM INVESTMENT OPERATIONS
.............................................................................
Net investment income 0.11(b)
.............................................................................
Net gains on securities (both realized and unrealized) 0.11
-------
.............................................................................
Total from investment operations 0.22
-------
.............................................................................
LESS DIVIDENDS (FROM NET INVESTMENT INCOME) (0.11)
-------
.............................................................................
NET ASSET VALUE, END OF PERIOD $ 10.52
-------
.............................................................................
TOTAL RETURN 2.12%
.............................................................................
RATIOS/SUPPLEMENTAL DATA
.............................................................................
NET ASSETS, END OF PERIOD (THOUSANDS) $ 614
.............................................................................
RATIOS TO AVERAGE NET ASSETS
Expenses 0.55%(a)
.............................................................................
Expenses, excluding indirectly paid expenses 0.55%(a)
.............................................................................
Expenses, excluding waivers and reimbursements 0.94%(a)
.............................................................................
Net investment income 5.84%(a)
.............................................................................
PORTFOLIO TURNOVER RATE 78%
.............................................................................
</TABLE>
(a) Annualized.
(b) Calculation based on average shares outstanding.
See Combined Notes to Financial Statements.
33
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Total Return Bond Fund
- - ----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each year)
<PAGE>
<TABLE>
<CAPTION>
April 20, 1998
(Commencement of
Class Operations) to
September 30, 1998
<S> <C>
INSTITUTIONAL SHARES
NET ASSET VALUE, BEGINNING OF PERIOD $ 100.00
--------
.............................................................................
INCOME FROM INVESTMENT OPERATIONS
.............................................................................
Net investment income 3.08
.............................................................................
Net gains on securities (both realized and unrealized) (0.29)
--------
.............................................................................
Total from investment operations 2.79
--------
.............................................................................
LESS DIVIDENDS (FROM NET INVESTMENT INCOME) (3.08)
--------
.............................................................................
NET ASSET VALUE, END OF PERIOD $ 99.71
--------
.............................................................................
TOTAL RETURN 2.83%
.............................................................................
RATIOS/SUPPLEMENTAL DATA
.............................................................................
NET ASSETS, END OF PERIOD (THOUSANDS) $135,998
.............................................................................
RATIOS TO AVERAGE NET ASSETS
.............................................................................
Expenses 0.41%(a)
.............................................................................
Expenses, excluding indirectly paid expenses 0.41%(a)
.............................................................................
Expenses, excluding waivers and reimbursements 0.67%(a)
.............................................................................
Net investment income 6.88%(a)
.............................................................................
PORTFOLIO TURNOVER RATE 80%
.............................................................................
<CAPTION>
August 3, 1998
(Commencement of
Class Operations) to
September 30, 1998
<S> <C>
INSTITUTIONAL SERVICE SHARES
NET ASSET VALUE, BEGINNING OF PERIOD $ 99.67
--------
.............................................................................
INCOME FROM INVESTMENT OPERATIONS
.............................................................................
Net investment income 1.05
.............................................................................
Net gains on securities (both realized and unrealized) 0.04
--------
.............................................................................
<PAGE>
Total from investment operations 1.09
--------
.............................................................................
LESS DIVIDENDS (FROM NET INVESTMENT INCOME) (1.05)
--------
.............................................................................
NET ASSET VALUE, END OF PERIOD $ 99.71
--------
.............................................................................
TOTAL RETURN 1.10%
.............................................................................
RATIOS/SUPPLEMENTAL DATA
.............................................................................
NET ASSETS, END OF PERIOD (THOUSANDS) $ 24
.............................................................................
RATIOS TO AVERAGE NET ASSETS
Expenses 0.66%(a)
.............................................................................
Expenses, excluding indirectly paid expenses 0.66%(a)
.............................................................................
Expenses, excluding waivers and reimbursements 0.92%(a)
.............................................................................
Net investment income 6.51%(a)
.............................................................................
PORTFOLIO TURNOVER RATE 80%
.............................................................................
</TABLE>
(a) Annualized.
See Combined Notes to Financial Statements.
34
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Adjustable Rate Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ADJUSTABLE RATE MORTGAGE SECURITIES - 77.6%
FEDERAL HOME LOAN MORTGAGE CORP. ("FHLMC ") - 34.4%
$ 784,420 FHLMC Pool #605343,
7.607%, 3/1/19....................................... $ 822,661
1,129,260 FHLMC Pool #605386,
7.545%, 9/1/17....................................... 1,171,427
570,824 FHLMC Pool #606541,
7.411%, 3/1/21....................................... 588,308
606,085 FHLMC Pool #606679,
7.745%, 10/1/21...................................... 625,686
363,031 FHLMC Pool #607352,
7.569%, 4/1/22....................................... 377,327
2,257,299 FHLMC Pool #608034,
7.084%, 6/1/16....................................... 2,312,603
81,703 FHLMC Pool #785114,
7.466%, 7/1/19....................................... 84,447
1,675,168 FHLMC Pool #845063,
7.674%, 11/1/21...................................... 1,740,081
1,631,955 FHLMC Pool #845070,
7.593%, 1/1/22....................................... 1,699,273
861,760 FHLMC Pool #845082,
7.414%, 3/1/22....................................... 888,690
777,020 FHLMC Pool #846163,
<PAGE>
7.374%, 7/1/30....................................... 798,995
161,301 FHLMC Pool #865220,
7.991%, 4/1/20....................................... 165,006
-----------
11,274,504
-----------
FEDERAL NATIONAL MORTGAGE ASSOC. ("FNMA") - 43.2%
263,072 FNMA Pool #070033,
7.210%, 10/1/17...................................... 269,238
1,034,110 FNMA Pool #070119,
7.440%, 11/1/17...................................... 1,074,182
292,437 FNMA Pool #070179,
7.151%, 7/1/27....................................... 299,472
805,770 FNMA Pool #090678,
7.477%, 9/1/18....................................... 837,501
349,873 FNMA Pool #092086,
7.416%, 10/1/16...................................... 359,603
677,188 FNMA Pool #094564,
7.270%, 1/1/16....................................... 690,312
729,753 FNMA Pool #095405,
7.517%, 12/1/19...................................... 759,399
217,977 FNMA Pool #102905,
7.360%, 7/1/20....................................... 225,369
686,735 FNMA Pool #124015,
7.226%, 11/1/18...................................... 703,478
538,450 FNMA Pool #124204,
7.464%, 1/1/22....................................... 552,417
2,298,699 FNMA Pool #124289,
7.393%, 9/1/21....................................... 2,372,695
1,163,001 FNMA Pool #124945,
7.503%, 1/1/31....................................... 1,195,344
488,739 FNMA Pool #142963,
7.450%, 1/1/22....................................... 496,760
196,486 FNMA Pool #303247,
7.276%, 12/1/22...................................... 200,754
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ADJUSTABLE RATE MORTGAGE SECURITIES - CONTINUED
FEDERAL NATIONAL MORTGAGE ASSOC.
("FNMA") - CONTINUED
$ 1,331,981 FNMA Pool #313663,
7.291%, 5/1/22.................................... $ 1,369,023
687,030 FNMA Pool #313994,
7.475%, 12/1/23................................... 697,027
997,084 FNMA Pool #331526,
6.119%, 5/1/36.................................... 1,010,794
108,491 FNMA Pool #391290,
7.444%, 2/1/17.................................... 109,423
953,392 FNMA Pool #423207,
5.826%, 4/1/38.................................... 956,377
-----------
14,179,168
-----------
Total Adjustable Rate Mortgage Securities (cost
$25,609,219)...................................... 25,453,672
-----------
FIXED RATE MORTGAGE SECURITIES - 12.0%
FHLMC - 3.3%
849,702 FHLMC STRIPS CMO Series 20, Class F, IO
6.465%, 7/1/29.................................... 851,030
185,113 FHLMC Pool #B00475
10.500%, 4/1/04................................... 192,770
29,032 FHLMC Pool #277831
7.250%, 11/1/08................................... 29,373
-----------
1,073,173
-----------
FNMA - 4.7%
562,127 FNMA Pool #004534,
10.750%, 10/1/12.................................. 614,883
388,976 FNMA Pool #058442
11.000%, 1/1/18................................... 428,274
377,719 FNMA Pool #070472
10.500%, 3/1/01................................... 389,077
118,188 FNMA Pool #100051
9.500%, 4/15/05................................... 124,097
<PAGE>
-----------
1,556,331
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOC. ("GNMA") - 4.0%
1,285,067 GNMA Pool #268164,
10.250%, 11/15/29................................. 1,326,035
-----------
Total Fixed Rate Mortgage Securities
(cost $3,984,357)................................. 3,955,539
-----------
GOVERNMENT AGENCY NOTES - 0.8%
250,000 Federal Home Loan Bank,
5.500%, 08/13/01 (cost $249,297).................. 255,560
-----------
U.S. TREASURY NOTES - 6.3%
155,000 U.S. Treasury Notes,
6.250%, 8/31/02................................... 165,342
1,400,000 U.S. Treasury Notes,
5.750%, 11/30/02.................................. 1,472,842
400,000 U.S. Treasury Notes,
5.500%, 5/31/03................................... 419,624
-----------
Total U.S. Treasury Notes
(cost $1,982,192)................................. 2,057,808
-----------
</TABLE>
See Combined Notes to Financial Statements.
35
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Adjustable Rate Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENT - 2.7%
$ 896,000 Keystone Joint Repurchase Agreement (Investments in
repurchase agreements, in a joint trading account,
purchased 9/30/98)
5.600%, 10/1/98 (cost $896,000) maturity value,
$896,138 (a)....................................... $ 896,000
-----------
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS -
(COST $32,721,065)............................ 99.4% 32,618,579
OTHER ASSETS AND
LIABILITIES - NET............................. 0.6 199,973
----- -----------
NET ASSETS -................................... 100.0% $32,818,552
===== ===========
</TABLE>
(a) The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at September 30, 1998.
Note: The maturity date included in each security description is the
stated maturity date. The effective maturity of each security may
be shorter due to current and projected prepayment rates. Changes
<PAGE>
in interest rates may accelerate or slow prepayment of mortgage
obligations.
SUMMARY OF ABBREVIATIONS:
CMO Collateralized Mortgage Obligation
STRIPS Separate Trading of Registered Interest and Principal of Securities
IO Interest Only
See Combined Notes to Financial Statements.
36
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Core Bond Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - 1.6%
$ 514,822 Advanta Mortgage Loan Trust,
6.85%, 5/25/12....................................... $ 513,810
4,832,483 Delta Funding Home Equity
Loan Trust,
6.60%, 1/25/12....................................... 4,835,938
2,000,000 Jet Equipment Trust,
9.41%, 6/15/10(a).................................... 2,486,116
2,015,000 UCFC Loan Trust,
7.15%, 12/15/13...................................... 2,078,854
------------
Total Asset-Backed Securities (cost $9,803,444)...... 9,914,718
------------
CORPORATE BONDS - 19.6%
BANKS - 4.7%
1,000,000 Harris Bancorp,
9.375%, 6/1/01....................................... 1,100,984
4,000,000 NBD Bank N.A.,
Subordinated Note,
8.25%, 11/1/24....................................... 4,809,984
5,000,000 NCNB Texas National Bank
Dallas, Texas,
9.50%, 6/1/04........................................ 5,999,150
8,000,000 State Street Bank Corp.,
7.35%, 6/15/26....................................... 9,165,800
2,455,000 SunTrust Banks Inc.,
6.00%, 2/15/26....................................... 2,510,407
4,000,000 Westpac Banking,
9.125%, 8/15/01...................................... 4,385,976
------------
27,972,301
------------
FINANCE - 5.8%
6,500,000 Associates Corp. N.A.,
5.96%, 5/15/37....................................... 6,579,371
7,930,000 Chrysler Financial Corp. MTN,
6.16%, 7/28/99....................................... 7,969,230
1,300,000 Ford Motor Credit Co.,
<PAGE>
8.00%, 1/15/99....................................... 1,308,168
7,500,000 General Electric Capital Corp.,
6.29%, 12/15/07...................................... 7,750,425
3,150,000 General Motors Acceptance Corp.,
7.75%, 1/15/99....................................... 3,168,421
1,500,000 KFW International Finance,
8.85%, 6/15/99....................................... 1,538,433
1,700,000 Lincoln National Corp.,
7.00%, 3/15/18....................................... 1,760,593
1,600,000 Merrill Lynch & Co. Inc.,
8.40%, 11/1/19....................................... 1,828,202
2,250,000 WMC Finance USA Ltd.,
6.50%, 11/15/03...................................... 2,368,323
------------
34,271,166
------------
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES - 1.6%
5,338,000 Dow Chemical Co.,
8.55%, 10/15/09...................................... 6,467,873
3,000,000 Owens Corning,
7.50%, 5/1/05........................................ 3,182,685
------------
9,650,558
------------
INSURANCE - 0.7%
3,800,000 Allstate Corp.,
6.75%, 5/15/18....................................... 3,864,163
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - CONTINUED
MANUFACTURING - DISTRIBUTING - 1.1%
$ 2,100,000 Deere & Co.,
8.95%, 6/15/19..................................... $ 2,643,936
3,500,000 Ford Motor Co.,
9.00%, 9/15/01..................................... 3,879,449
------------
6,523,385
------------
OIL/ENERGY - 3.0%
14,160,000 Phillips Petroleum Co.,
7.125%, 3/15/28.................................... 14,917,702
3,000,000 Tenaska Washington
Partners LP
6.79%, 9/23/11 (a)................................. 3,142,500
------------
18,060,202
------------
PAPER & PACKAGING - 2.1%
5,520,000 Caliber Systems Inc.,
7.80%, 8/1/06...................................... 6,001,863
6,000,000 Westvaco Corp.,
7.75%, 2/15/23..................................... 6,754,260
------------
12,756,123
------------
UTILITIES - 0.6%
1,100,000 Alltel Corp.,
6.50%, 11/1/13..................................... 1,213,425
2,000,000 Carolina Power & Light Co.,
<PAGE>
8.625%, 9/15/21.................................... 2,598,606
------------
3,812,031
------------
Total Corporate Bonds (cost $110,346,023).......... 116,909,929
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.5%
2,801,488 Collateralized Mortgage
Obligation Trust 22,
7.95%, 5/1/17...................................... 2,832,598
47,937 Drexel Burnham Lambert CMO,
8.50%, 7/1/14...................................... 48,024
------------
Total Collateralized Mortgage Obligations
(cost $2,863,618)................................. 2,880,622
------------
MORTGAGE-BACKED SECURITIES - 39.3%
Federal Home Loan Mortgage Corp.:
7,873,374 6.44%, 9/1/27...................................... 8,121,952
17,757,713 6.50%, 4/1/28...................................... 18,094,044
17,399,678 7.00%, 4/1/28...................................... 17,876,081
1,446,882 7.50%, 5/1/09...................................... 1,492,097
1,863,315 7.667%, 8/1/26..................................... 1,973,381
761,028 8.00%, 10/1/25..................................... 786,812
Federal Home Loan Mortgage PC Guaranteed:
2,900,000 5.85%, 1/25/19..................................... 2,931,174
2,000,000 6.50%, 4/15/18..................................... 2,031,067
Federal National Mortgage Assoc.:
58,609,941 6.00%, 11/1/00 - 5/15/08........................... 62,469,093
5,038,078 6.16%, 8/1/37...................................... 5,155,117
5,174,664 6.46%, 9/1/27...................................... 5,271,860
</TABLE>
37
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Core Bond Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MORTGAGE-BACKED SECURITIES - CONTINUED
Federal National Mortgage Assoc. - continued
$11,109,438 6.50%, 10/1/00 - 10/1/27............................ $ 11,328,160
1,318,253 7.272%, 12/1/25..................................... 1,353,485
Federal National Mortgage Assoc. REMIC:
6,098,250 5.50%, 2/25/15...................................... 6,088,767
4,600,000 7.75%, 9/25/22...................................... 4,945,013
Government National Mortgage Assoc.:
2,844,497 6.00%, 3/15/11 - 4/15/11............................ 2,889,583
20,957,769 6.50%, 10/1/98 - 7/15/28............................ 21,464,133
40,816,250 7.00%, 10/1/98 - 7/15/28............................ 42,109,141
4,628,466 7.50%, 8/15/12 - 3/15/26............................ 4,801,138
11,390,685 8.00%, 6/15/24 - 8/15/27............................ 11,916,743
872,645 9.00%, 4/15/20 - 8/15/21............................ 931,277
355,552 9.50%, 2/15/21...................................... 384,219
<PAGE>
------------
Total Mortgage-Backed Securities
(cost $230,488,901)................................ 234,414,337
------------
U.S. AGENCY OBLIGATIONS - 3.8%
Farm Credit Systems
Financial Assistance Corp.:
8,300,000 8.80%, 6/10/05...................................... 10,136,018
6,000,000 9.375%, 7/21/03..................................... 7,169,820
5,000,000 Federal Farm Credit Bank,
8.65%, 10/1/99...................................... 5,186,295
------------
Total U.S. Agency Obligations
(cost $19,254,627)................................. 22,492,133
------------
U.S. TREASURY OBLIGATIONS - 13.3%
U.S. Treasury Bonds:
10,185,000 6.875%, 8/15/25..................................... 12,654,873
1,400,000 8.75%, 5/15/17...................................... 2,000,688
3,950,000 8.875%, 8/15/17..................................... 5,713,924
U.S. Treasury Notes:
5,093,800 3.625%, 7/15/02..................................... 5,117,679
35,000,000 5.875%, 1/31/99 - 11/15/05.......................... 36,896,900
15,000,000 6.50%, 10/15/06..................................... 17,043,765
------------
Total U.S. Treasury Obligations
(cost $77,298,446)................................. 79,427,829
------------
YANKEE OBLIGATIONS - 13.2% Bayerische Landesbank Girozen:
5,000,000 6.20%, 2/9/06....................................... 5,168,725
2,500,000 6.375%, 8/31/00..................................... 2,556,282
</TABLE>
(a) Securities that may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to Section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
(b) Repurchase agreement is collateralized by $12,348,000 U.S. Treasury Notes,
5.50% due 3/31/03 and $20,180,000 U.S. Treasury Notes, 5.375% due 6/30/03
with an aggregate value, including accrued interest of $34,102,106.
SUMMARY OF ABBREVIATIONS:
MTN Medium Term Note
CMO Collateralized Mortgage Obligation
REMIC Real Estate Mortgaged Investment Conduit
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
YANKEE OBLIGATIONS - CONTINUED
$ 7,000,000 BHP Finance USA Ltd.,
8.50%, 12/1/12...................................... $ 8,667,876
2,000,000 Export Development Corp.,
8.125%, 8/10/99..................................... 2,046,768
13,330,000 Hydro-Quebec,
8.00%, 2/1/13....................................... 15,777,921
3,500,000 Japan Finance Corp.
Municipal Enterprises,
6.85%, 4/15/06...................................... 3,865,060
<PAGE>
Korea Development Bank:
5,000,000 6.625%, 11/21/03.................................... 3,849,550
6,350,000 7.125%, 9/17/01..................................... 5,427,174
1,500,000 New Brunswick Province Canada,
7.625%, 2/15/13..................................... 1,788,285
8,020,000 Petro Canada Ltd.,
8.60%, 1/15/10...................................... 10,370,101
5,300,000 Philips Electers N V,
7.125%, 5/15/25..................................... 5,965,320
3,000,000 Placer Dome Inc.,
8.50%, 12/31/45..................................... 3,281,718
Svenska Handelsbanken:
3,500,000 8.125%, 8/15/07..................................... 4,073,100
5,000,000 8.35%, 7/15/04...................................... 5,720,445
------------
Total Yankee Obligations
(cost $71,425,023)................................. 78,558,325
------------
REPURCHASE AGREEMENT - 5.6%
33,433,304 Dresdner Bank AG,
5.00%, dated 9/30/98, due 10/1/98 cost $33,433,304
maturity value, $33,437,947 (b)..................... 33,433,304
------------
Shares
MUTUAL FUND SHARES - 1.9%
11,716,395 Valiant General Fund,
(cost $11,716,395) ................................ 11,716,395
------------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C> <C>
TOTAL INVESTMENTS -
(COST $566,629,781)................................. 98.8% 589,747,592
OTHER ASSETS AND
LIABILITIES - NET................................... 1.2 7,028,838
----- ------------
NET ASSETS -......................................... 100.0% $596,776,430
===== ============
</TABLE>
See Combined Notes to Financial Statements.
38
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Fixed Income Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - 12.6%
Amresco Residential Securities Mortgage Loan Trust:
<PAGE>
$ 6,203,713 Series 98-2, Class A1,
6.50%, 11/25/15..................................... $ 6,230,792
8,000,000 Series 98-2, Class A2,
6.245%, 4/25/22..................................... 8,093,960
Case Equipment Loan Trust:
500,000 Series 95-B, Class CTFS,
6.45%, 9/15/02...................................... 502,442
1,857,000 Series 97-B, Class A4,
6.41%, 9/15/04...................................... 1,912,181
200,000 Series 98-A, Class A4,
5.83%, 2/15/05...................................... 203,419
Contimortgage Home Equity Loan Trust:
4,999,962 Series 96-1, Class A5,
6.15%, 3/15/11...................................... 5,079,786
3,185,000 Series 97-2, Class A9,
7.09%, 4/15/28...................................... 3,365,323
1,640,000 Series 97-4, Class A3,
6.26%, 7/15/12...................................... 1,650,717
5,495,999 Empire Funding Home Loan Owner Trust,
Series 98-1, Class A4,
6.64%, 12/25/12..................................... 5,665,220
917,447 EQCC Home Equity Loan Trust,
Series 96-1, Class A2,
5.82%, 9/15/09...................................... 921,405
First Plus Home Loan Trust:
660,000 Series 97-2, Class A5,
6.82%, 4/10/23...................................... 677,665
2,455,000 Series 97-3, Class A5,
6.86%, 10/10/13..................................... 2,531,576
731,562 First Security Auto Grantor Trust,
Series 95-A, Class A,
6.25%, 1/15/01...................................... 733,102
346,112 Federal National Mortgage Assoc.,
Series 95-W5, Class A1,
6.23%, 12/25/25..................................... 345,400
615,811 GCC Home Equity Trust,
Series 90-1, Class A,
10.00%, 7/15/05..................................... 617,495
1,147,662 Heller Equipment Asset Receivables Trust,
Series 97-1, Class A2,
6.39%, 5/25/05...................................... 1,160,476
1,311,000 IMC Home Equity Loan Trust,
Series 97-2, Class A3,
6.94%, 11/20/11..................................... 1,326,502
2,329,038 Life Financial Home Loan Owner Trust,
Series 97-3, Class A2,
6.79%, 10/25/11..................................... 2,368,713
MBNA Master Credit Card Trust:
2,910,000 Series 96-J, Class A,
5.74%, 2/15/06...................................... 2,909,753
1,570,000 Series 98-A, Class A,
5.70%, 8/15/05...................................... 1,568,249
1,700,000 Metlife Capital Equipment Loan Trust,
Series 97-A, Class A,
6.85%, 5/20/08...................................... 1,799,961
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - CONTINUED
$ 532,018 Olympic Automobile Receivables Trust,
<PAGE>
Series 95-D, Class B,
6.10%, 4/15/02...................................... $ 535,921
Premier Auto Trust:
1,500,000 Series 95-3, Class CTFS,
6.25%, 8/6/01....................................... 1,511,573
2,265,000 Series 97-3, Class A5,
6.34%, 1/6/02....................................... 2,320,979
2,705,000 Series 98-2, Class A4,
5.82%, 12/6/02...................................... 2,763,631
3,468,184 Prudential Securities Secured Financing Corp.,
Series 94-4, Class A1,
8.12%, 2/15/25...................................... 3,699,252
2,840,000 Sears Credit Account Master Trust,
Series 95-3, Class A,
7.00%, 10/15/04..................................... 2,931,040
2,500,000 Southern Pacific Secured Assets Corp.,
Series 98-1, Class A6,
7.08%, 3/25/28...................................... 2,667,946
The Money Store Home Equity Trust:
993,370 Series 92-B, Class A,
6.90%, 7/15/07...................................... 1,003,914
2,367,000 Series 96-D, Class A9,
7.00%, 4/15/28...................................... 2,489,388
1,500,000 Series 97-D, Class AF7,
6.485%, 12/15/28.................................... 1,549,067
3,697,000 Toyota Auto Lease Trust,
Series 97-A, Class A2,
6.35%, 4/26/04...................................... 3,849,372
819,744 Union Acceptance Corp.,
Series 96-A, Class A,
5.40%, 4/7/03....................................... 821,068
1,408,491 Western Financial Grantor Trust,
Series 95-3, Class A2,
6.05%, 11/1/00...................................... 1,414,949
WFS Financial Owner Trust:
5,000,000 Series 97-D, Class A4,
6.25%, 3/20/03...................................... 5,114,500
3,200,000 Series 98-A, Class A4,
5.95%, 2/20/03...................................... 3,291,984
------------
Total Asset-Backed Securities
(cost $83,887,042)................................. 85,628,721
------------
CORPORATE BONDS - 23.8%
AUTOMOTIVE EQUIPMENT & MANUFACTURING - 0.8%
5,000,000 Johnson Controls, Inc.,
Sr. Notes,
6.30%, 2/1/08....................................... 5,283,135
------------
BANKS - 2.3%
85,000 Banc One Corp.,
Sr. Notes (Subord.),
7.60%, 5/1/07....................................... 95,311
682,000 Banca Commerziale Italiana,
8.25%, 7/15/07...................................... 790,487
BB & T Corp.,
Sr. Notes (Subord.):
6,850,000 6.375%, 6/30/05..................................... 7,112,650
1,000,000 7.05%, 5/23/03...................................... 1,067,547
</TABLE>
39
<PAGE>
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Fixed Income Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - CONTINUED
BANKS - CONTINUED
$ 1,545,000 Bear Stearns Co.,
Sr. Notes,
6.65%, 12/1/04.................................... $ 1,603,280
2,120,000 NationsBank Corp.,
Sr. Notes,
5.75%, 3/15/01.................................... 2,139,814
1,970,000 Security Pacific Corp.,
Sr. Notes (Subord.),
11.50%, 11/15/00.................................. 2,207,338
899,000 Societe Generale New York,
Sr. Notes (Subord.),
7.40%, 6/1/06..................................... 966,555
------------
15,982,982
------------
BUILDING PRODUCTS - 0.2%
1,545,000 CSR America, Inc.,
Sr. Notes,
6.875%, 7/21/05................................... 1,690,456
------------
CABLE/OTHER VIDEO DISTRIBUTION - 0.5%
1,288,000 Tele-Communications, Inc.,
Sr. Notes,
7.25%, 8/1/05..................................... 1,415,604
1,690,000 Time Warner, Inc.,
Sr. Notes,
8.11%, 8/15/06.................................... 1,954,767
------------
3,370,371
------------
DIVERSIFIED COMPANIES - 0.2%
1,355,000 Philip Morris Co., Inc.,
6.15%, 3/15/00.................................... 1,373,211
------------
FINANCE & INSURANCE - 15.3%
7,000,000 Associated P&C Holdings, Inc.,
Sr. Notes,
6.75%, 7/15/03 (a)................................ 7,176,540
Associates Corp. of North America:
Sr. Notes,
5,000,000 6.00%, 6/15/00.................................... 5,061,670
1,890,000 6.75%, 7/15/01.................................... 1,966,991
2,000,000 Chase Manhattan Corp.,
Sr. Notes (Subord.),
8.00%, 5/15/04.................................... 2,025,180
3,720,000 CIT Group Holdings, Inc.,
Sr. Notes,
6.375%, 8/1/02.................................... 3,853,760
<PAGE>
2,000,000 Commercial Credit Co.,
Sr. Notes,
6.75%, 5/15/00.................................... 2,046,152
1,600,000 Duke Capital Corp.,
Sr. Notes, Series A,
6.25%, 7/15/05.................................... 1,652,637
First Chicago Corp.:
3,000,000 MTN, Sr. Notes (Subord.),
9.20%, 12/17/01................................... 3,342,285
7,725,000 Sr. Notes (Subord.),
9.00%, 6/15/99.................................... 7,907,094
8,750,000 First Security Corp.,
MTN,
6.08%, 2/9/01..................................... 8,869,945
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - CONTINUED
FINANCE & INSURANCE - CONTINUED
$ 3,567,000 General Motors Acceptance Corp.,
Sr. Notes,
5.875%, 1/22/03..................................... $ 3,638,319
2,250,000 Horace Mann Educators Corp.,
Sr. Notes,
6.625%, 1/15/06..................................... 2,384,447
3,620,000 Household Finance Corp. MTN,
Sr. Notes,
6.00%, 5/8/00....................................... 3,646,433
Lehman Brothers Holdings:
5,000,000 Sr. Notes,
6.625%, 11/15/00.................................... 4,987,625
75,000 Sr. Notes, MTN,
6.71%, 10/12/99..................................... 74,926
Lehman Brothers, Inc.:
3,500,000 MTN, Sr. Notes (Subord.),
6.84%, 10/7/99...................................... 3,500,889
2,640,000 Sr. Notes (Subord.),
7.25%, 4/15/03...................................... 2,695,730
1,695,000 Loews Corp.,
Sr. Notes,
6.75%, 12/15/06..................................... 1,825,740
1,289,000 Macsaver Financial Services, Inc.,
Sr. Notes,
7.60%, 8/1/07....................................... 889,971
2,350,000 Merrill Lynch & Co.,
6.00%, 2/12/03...................................... 2,403,079
Metropolitan Life Insurance Co.:
Sr. Notes,
5,000,000 6.30%, 11/1/03 (a).................................. 5,071,015
5,000,000 7.00%, 11/1/05 (a).................................. 5,379,735
3,210,000 Morgan Stanley Dean Witter, MTN,
Sr. Notes,
5.89%, 3/20/00...................................... 3,232,425
1,020,000 NCNB Corp.,
Sr. Notes (Subord.),
9.125%, 10/15/01.................................... 1,131,568
1,665,000 Paine Webber Group, Inc.,
Sr. Notes,
6.50%, 11/1/05...................................... 1,701,603
2,405,000 Salomon Smith Barney, Inc.,
<PAGE>
Sr. Notes,
6.25%, 1/15/05...................................... 2,454,846
3,000,000 SFFED Corp.
Sr. Debs.,
11.20%, 9/1/04 (a).................................. 3,603,750
5,000,000 Swiss Bank Corp. New York,
Sr. Notes (Subord.),
6.75%, 7/15/05...................................... 5,336,705
5,000,000 Traveler's Group, Inc.,
Sr. Notes,
6.125%, 6/15/00..................................... 5,076,530
1,000,000 U.S. Life Corp.,
Sr. Notes,
6.375%, 6/15/00..................................... 1,018,984
------------
103,956,574
------------
</TABLE>
40
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Fixed Income Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - CONTINUED
FOOD & BEVERAGE PRODUCTS - 0.3%
$ 1,800,000 Nabisco, Inc.,
Sr. Notes,
6.00%, 2/15/01.................................... $ 1,819,530
------------
HEALTHCARE PRODUCTS & SERVICES - 1.0%
7,175,000 Columbia/HCA Healthcare Corp.,
MTN,
6.875%, 7/15/01................................... 7,060,760
------------
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES - 0.2%
1,000,000 Harcourt General, Inc.,
Sr. Notes,
8.25%, 6/1/02..................................... 1,067,462
------------
OFFICE EQUIPMENT & SUPPLIES - 0.6%
4,143,631 Xerox Rental Equipment Trust,
6.20%, 12/26/05 (a)............................... 4,196,980
------------
OIL/ENERGY - 0.9%
423,000 Commonwealth Edison Co.,
MTN,
9.05%, 10/15/99................................... 436,902
3,675,000 Pacific Gas,
Sr. Notes,
7.10%, 6/1/05..................................... 4,036,480
1,410,000 USX Corp.,
<PAGE>
Sr. Debs.,
9.625%, 8/15/03................................... 1,652,381
------------
6,125,763
------------
REAL ESTATE - 0.2%
1,250,000 EOP Operating LP,
Sr. Notes,
6.376%, 2/15/12................................... 1,277,703
------------
RETAILING & WHOLESALE - 0.3%
1,585,000 Gap Inc.,
Sr. Notes,
6.90%, 9/15/07.................................... 1,749,074
------------
TELECOMMUNICATION SERVICES & EQUIPMENT - 0.3%
2,000,000 MCI Worldcom Inc.,
Sr. Notes,
6.125%, 8/15/01................................... 2,054,534
------------
TRANSPORTATION - 0.5%
2,968,597 Continental Airlines, Inc.,
Series 971B,
7.461%, 4/1/13.................................... 3,289,725
------------
UTILITIES - 0.2%
1,200,000 Pennsylvania Power & Light Co.,
7.75%, 5/1/02..................................... 1,296,463
------------
Total Corporate Bonds
(cost $156,269,582)............................... 161,594,723
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 12.5%
5,350,000 Carco Auto Loan Master Trust,
Series 97-1, Class A,
6.689%, 8/15/04................................... 5,525,595
1,089,284 Citicorp Mortgage Securities, Inc.,
7.25%, 2/25/27.................................... 1,095,302
5,000,000 CS First Boston Mortgage Securities Corp.,
Series 1998-C1, Class A1B,
6.48%, 5/17/08.................................... 5,240,875
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS - CONTINUED
CWMBS, Inc.:
$ 775,916 Series 97-A1, Class A1,
7.00%, 3/25/27...................................... $ 782,864
1,720,000 Series 97-A3, Class A10,
7.25%, 5/25/27...................................... 1,736,134
2,250,000 DLJ Mortgage Acceptance Corp.,
Series 93-MF7, Class A2,
7.95%, 6/18/03...................................... 2,480,321
Federal Home Loan Mortgage Corp.:
4,160,314 Series 1342, Class F,
7.40%, 10/15/05..................................... 4,189,332
1,675,000 Series 1519, Class F,
6.75%, 3/15/07...................................... 1,729,920
8,048,668 Series 1991, Class PA,
6.00%, 3/15/14...................................... 8,096,759
<PAGE>
5,183,532 Series B-02, Class 1,
5.75%, 10/15/16..................................... 5,200,767
Federal Home Loan Mortgage Corp. PC Gtd.:
4,640,444 Series 12, Class A,
9.25%, 11/15/19..................................... 4,889,644
1,151,584 Series 1608, Class FN,
6.325%, 11/15/23.................................... 1,151,228
1,051,577 Series 1935, Class FL,
6.325%, 2/15/27..................................... 1,053,566
Federal National Mortgage Assoc.:
756,496 Series 91-61, Class G,
7.00%, 9/25/20...................................... 759,715
690,634 Series 97-16, Class F,
6.488%, 11/18/18.................................... 691,770
5,750,000 Series 98-W8, Class A4,
6.02%, 9/25/28...................................... 5,789,675
GE Capital Mortgage Services, Inc.:
4,667,980 Series 94-10, Class A14,
6.50%, 3/25/24...................................... 4,654,233
1,019,706 Series 97-3, Class A4,
7.50%, 4/25/27...................................... 1,023,393
5,000,000 Iroquois Trust,
Series 97-3, Class A,
6.68%, 11/10/03 (a) ................................ 5,168,875
3,000,000 Nationslink Funding Corp.,
Series 98-1, Class D,
6.803%, 1/20/08..................................... 3,101,730
Potomac Gurnee Finance Corp.:
2,438,861 Series 1, Class A,
6.887%, 12/21/26 (a) ............................... 2,658,321
2,000,000 Series 1, Class B,
7.003%, 12/21/26 (a) ............................... 2,183,390
4,788,537 Prudential Home Mortgage Securities,
Series 93-39, Class A8,
6.50%, 10/25/08..................................... 4,847,317
3,488,871 Saxon Mortgage Securities Corp.,
Series 93-8A, Class 1A2,
7.375%, 9/25/23..................................... 3,529,264
7,000,000 Structured Asset Securities Corp.,
Series 96-CFL, Class C,
6.525%, 2/25/28..................................... 7,163,485
------------
Total Collateralized Mortgage Obligations
(cost $82,980,870).................................. 84,743,475
------------
</TABLE>
41
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Fixed Income Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
<PAGE>
MORTGAGE-BACKED SECURITIES - 2.3%
Federal Home Loan Mortgage Corp.:
$ 1,383,640 Pool #G40281,
6.50%, 7/1/04...................................... $ 1,406,747
2,744,657 Pool #G50352,
7.00%, 1/1/00...................................... 2,765,270
345,891 Pool #L73490,
6.00%, 12/1/00..................................... 348,128
154,138 Pool #L90152,
8.00%, 2/1/00...................................... 159,562
113,239 Pool #L90164,
8.00%, 4/1/00...................................... 117,224
Federal National Mortgage Assoc.:
6,227,030 Pool #100131,
11.00%, 2/15/25.................................... 7,213,625
1,119,512 Pool #303460,
6.50%, 8/1/10...................................... 1,144,679
822,317 Pool #327118,
6.50%, 10/1/10..................................... 840,062
100,680 Pool #61688,
6.13%, 6/1/17...................................... 101,735
Government National Mortgage Assoc.:
607,761 Pool #247052,
9.20%, 4/15/18..................................... 661,438
280,320 Pool #255658,
9.20%, 8/15/18..................................... 305,078
580,753 Pool #256980,
9.20%, 9/15/18..................................... 632,045
------------
Total Mortgage-Backed Securities (cost
$15,336,920)...................................... 15,695,593
------------
U.S. TREASURY NOTES - 27.2%
U.S. Treasury Notes:
4,000,000 5.375%, 2/15/01.................................... 4,091,252
18,487,000 5.625%, 10/31/99-5/15/08........................... 19,319,477
8,930,000 5.75%, 4/30/03..................................... 9,454,646
3,493,000 5.875%, 7/31/99.................................... 3,527,934
3,700,000 6.00%, 10/15/99.................................... 3,753,191
34,470,000 6.125%, 8/15/07.................................... 38,606,434
5,180,000 6.25%, 2/15/03-2/15/07............................. 5,813,871
21,500,000 6.50%, 10/15/06.................................... 24,429,397
21,700,000 6.625%, 4/30/02-5/15/07............................ 24,993,522
7,220,000 7.00%, 7/15/06..................................... 8,415,820
5,695,000 7.25%, 5/15/04-8/15/04............................. 6,524,448
4,150,000 7.75%, 12/31/99.................................... 4,308,223
12,000,000 7.875%, 11/15/04................................... 14,231,256
3,480,000 8.00%, 5/15/01..................................... 3,786,679
13,355,000 8.875%, 2/15/99.................................... 13,563,685
------------
Total U.S. Treasury Notes (cost $171,060,215)...... 184,819,835
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 11.7%
47,877 Federal Farm Credit Bank, Consolidated Systems,
6.38%, 2/25/02..................................... 47,944
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS - CONTINUED
<PAGE>
Federal Housing Administration:
$ 7,218,327 Insured,
7.43%, 9/1/23....................................... $ 7,398,786
10,008,741 Putable Project Loans,
7.43%, 1/1/24....................................... 11,139,078
Federal Home Loan Bank:
6,500,000 Series 1T03,
6.025%, 5/12/03..................................... 6,526,000
5,000,000 Series CK08,
5.905%, 3/27/08..................................... 5,344,085
3,720,000 Series GJ08,
5.89%, 6/30/08...................................... 3,975,315
1,810,000 Series H400,
6.10%, 10/12/00..................................... 1,834,067
5,000,000 Series IQ08,
6.07%, 8/28/08...................................... 5,190,790
4,000,000 Series KP07,
6.54%, 12/12/07..................................... 4,176,400
3,700,000 Series NR05,
6.23%, 5/18/05...................................... 3,729,970
5,000,000 Series YU03,
6.043%, 4/28/03..................................... 5,024,000
10,000,000 Sr. Notes, Series AT04,
7.70%, 9/20/04...................................... 11,514,180
2,000,000 Sr. Notes, Series TT00,
5.37%, 11/3/00...................................... 2,000,558
Federal Home Loan Mortgage Corp.:
2,250,000 Sr. Debs.,
6.51%, 1/8/07....................................... 2,481,964
3,000,000 7.55%, 4/26/06...................................... 3,036,321
1,825,000 Sr. Notes,
6.97%, 6/16/05...................................... 1,893,289
Federal National Mortgage Assoc.:
550,000 Sr. Notes,
8.70%, 6/10/99...................................... 564,207
2,000,000 Sr. Notes, MTN,
6.17%, 12/30/03..................................... 2,006,868
1,000,000 6.44%, 6/21/05...................................... 1,087,538
------------
Total U.S. Government & Agency Obligations
(cost $74,471,177)................................. 78,971,360
------------
YANKEE OBLIGATIONS - 6.6%
1,625,000 Amoco Argentina Oil Co., MTN,
6.75%, 2/1/07....................................... 1,796,715
1,510,000 Barrick Gold Corp.,
7.50%, 5/1/07....................................... 1,678,037
1,420,000 BCH Cayman Islands Ltd.,
7.70%, 7/15/06...................................... 1,536,031
1,500,000 FBG Finance Ltd,
Sr. Notes,
6.75%, 11/15/05 (a) ................................ 1,535,490
Hydro Quebec, MTN:
10,000,000 7.45%, 12/11/98..................................... 10,037,650
1,000,000 7.52%, 7/17/03...................................... 1,097,904
5,000,000 7.25%, 5/15/06...................................... 3,816,585
</TABLE>
42
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Fixed Income Fund
<PAGE>
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
See Combined Notes to Financial Statements.
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
YANKEE OBLIGATIONS - CONTINUED Korea Development Bank:
$ 5,000,000 7.375%, 9/17/04..................................... $ 3,827,735
14,865,000 National Bank of Canada,
Sr. Notes (Subord.), Series B,
8.125%, 8/15/04..................................... 17,019,667
2,500,000 Ras Laffan Liquefied Natural Gas,
7.628%, 9/15/06 (a) ................................ 2,040,153
------------
Total Yankee Obligations (cost $45,175,588)......... 44,385,967
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENT - 3.0%
$20,509,163 Dresdner Bank AG,
5.00%, dated 9/30/98, due 10/1/98 cost $20,509,163
maturity value, $20,512,011 (b)...................... $ 20,509,163
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS -
(COST $649,690,557)......................... 99.7% 676,348,837
OTHER ASSETS AND
LIABILITIES - NET........................... 0.3 2,366,491
----- ------------
NET ASSETS - ................................ 100.0% $678,715,328
===== ============
</TABLE>
(a) Securities that may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to Section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
(b) Repurchase agreement is collateralized by $19,160,000 U.S. Treasury Notes,
5.625% due 12/31/99 and $1,210,000 U.S. Treasury Notes, 5.375% due 6/30/03
with an aggregate value, including accrued interest, of $20,924,074.
SUMMARY OF ABBREVIATIONS:
MTN Medium Term Note
43
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
<PAGE>
Select Income Plus Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - 3.2%
$1,855,000 BankBoston Recreational Vehicle Asset-Backed
Trust, Series 1997-1, Class A8,
6.54%, 5/15/09.................................. $ 1,916,636
1,815,000 Case Equipment Loan Trust, Series 1997-B, Class
A4, 6.41%, 9/15/04.............................. 1,868,933
2,078,011 Corestates Home Equity Trust,
Series 1993-2, Class A,
5.10%, 3/15/09.................................. 2,069,024
4,996,363 Empire Funding Home Loan Owner Trust,
Series 1998-1, Class A4,
6.64%, 12/25/12................................. 5,150,200
First Plus Home Loan Trust:
2,200,000 6.82%, 4/10/23.................................. 2,258,883
2,755,000 6.86%, 10/10/13................................. 2,840,933
6,862,653 Harley-Davidson Eaglemark
Motorcycle Trust,
Series 1997-3, Class A1,
5.98%, 12/15/01................................. 6,920,676
4,500,000 Harley-Davidson Eaglemark
Ownership Trust,
Series 1996-3, Class A2,
6.35%, 10/15/02 (a)............................. 4,519,688
1,214,963 Heller Equipment Asset
Receivables Trust,
Series 1997-1, Class A2,
6.39%, 5/25/05.................................. 1,228,528
4,000,000 HUBCO Inc.,
Capital Trust II, Special Purpose,
7.65%, 6/15/28 (a).............................. 4,140,760
MBNA Master Credit Card Trust:
1,480,000 5.74%, 2/15/06.................................. 1,479,874
1,490,000 5.70%, 8/15/05.................................. 1,488,339
1,800,000 Metlife Capital Equipment Loan Trust,
Series 1997-A, Class A,
6.85%, 5/20/08.................................. 1,905,841
1,735,000 The Money Store Home Equity Trust,
Series 1997-D, Class AF7,
6.485%, 12/15/28................................ 1,791,754
2,135,000 The Money Store Residential Trust,
Series 1997-I, Class A3,
6.68%, 8/15/12.................................. 2,214,671
2,156,409 Xerox Rental Equipment Trust,
Series 1996-A,
6.20%, 12/26/05 (a)............................. 2,184,173
-----------
Total Asset-Backed
Securities
(cost $43,054,162).............................. 43,978,913
-----------
CORPORATE BONDS - 29.7%
BANKS - 4.3%
<PAGE>
973,000 Banca Commerziale Italiana,
8.25%, 7/15/07................................... 1,127,777
1,540,000 BankBoston, N.A.,
7.00%, 9/15/07................................... 1,656,635
4,906,000 Bankers Trust New York Corp.,
7.25%, 10/15/11.................................. 5,062,766
5,000,000 Banq Paribas, New York,
6.95%, 7/22/13................................... 4,886,100
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - CONTINUED
BANKS - CONTINUED
$7,500,000 Comerica, Inc.,
7.125%, 12/1/13................................... $ 7,648,523
5,000,000 Fleet Financial Group Inc.,
7.625%, 12/1/99................................... 5,122,320
1,150,000 FNBC Inc.,
Pass-Thru Certificates,
Series 1993-A,
8.08%, 1/5/18..................................... 1,367,933
144,000 Irving Bank Corp.,
8.50%, 6/1/02..................................... 144,148
1,685,000 KeyCorp,
7.50%, 6/15/06.................................... 1,874,667
7,000,000 Mellon Capital I,
Series A,
7.72%, 12/1/26.................................... 7,313,740
1,600,000 Midlantic Corp.,
9.25%, 9/1/99..................................... 1,651,107
5,000,000 NCNB Texas National Bank of Dallas,
9.50%, 6/1/04..................................... 5,999,150
11,000,000 PNC Inc., Institutional Capital Trust B, Special
Purpose,
8.315%, 5/15/27 (a)............................... 12,302,631
3,000,000 SFFED Corp.,
11.20%, 9/1/04 (a)................................ 3,603,750
-----------
59,761,247
-----------
ELECTRICAL EQUIPMENT & SERVICES - 0.4%
5,000,000 Texas Instruments Inc.,
6.125%, 2/1/06.................................... 5,274,240
-----------
ENVIRONMENTAL SERVICES - 0.3%
4,000,000 United States Filter Corp.,
6.50%, 5/15/03.................................... 4,031,240
-----------
FINANCE & INSURANCE - 8.7%
5,000,000 Associates Corp., N.A.,
8.55%, 7/15/09.................................... 6,076,305
10,500,000 Continental Corp.,
8.375%, 8/15/12................................... 12,424,513
3,000,000 ERP Operating Limited Partnership,
6.63%, 4/13/15.................................... 3,039,444
1,490,000 Fleet Financial Group Inc.,
6.875%, 1/15/28................................... 1,505,246
1,322,061 GE Capital Mortgage Services Inc.,
7.50%, 4/25/27.................................... 1,326,841
5,000,000 Geico Corp.,
<PAGE>
7.50%, 4/15/05.................................... 5,602,945
26,500,000 General Electric Capital Corp.,
6.29%, 12/15/01................................... 27,384,835
1,000,000 General Motors Acceptance Corp.,
9.625%, 5/15/00................................... 1,065,609
2,250,000 Goldman Sachs Group, L.P.,
6.375%, 6/15/00 (a)............................... 2,272,880
Lehman Brothers Holdings Inc.:
5,000,000 6.00%, 2/26/01.................................... 4,914,660
1,250,000 7.38%, 5/15/04.................................... 1,268,718
10,000,000 Liberty Mutual Insurance Co.,
8.20%, 5/4/07 (a)................................. 11,603,630
1,655,000 Mellon Capital II,
Series B,
7.995%, 1/15/27................................... 1,764,561
</TABLE>
44
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Income Plus Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - CONTINUED
FINANCE & INSURANCE - CONTINUED $ 3,000,000 Merrill Lynch & Co.,
Inc.,
8.40%, 11/1/19.................................... $ 3,427,878
3,125,000 Morgan Stanley Dean Witter Inc.,
5.89%, 3/20/00.................................... 3,146,831
5,000,000 Paine Webber Group Inc.,
6.50%, 11/1/05.................................... 5,109,920
10,000,000 Travelers Capital II,
7.75%, 12/1/36.................................... 10,548,120
5,000,000 United States West Capital Funding Inc.,
6.375%, 7/15/08................................... 5,261,605
750,000 Wesco Financial Corp.,
8.875%, 11/1/99................................... 776,977
10,000,000 Western Investment Real Estate Trust,
7.30%, 9/15/10.................................... 10,579,700
------------
119,101,218
------------
FOOD & BEVERAGE PRODUCTS - 0.5%
7,000,000 Coca Cola Enterprises Inc.,
7.875%, 2/1/02.................................... 7,602,063
------------
GAMING - 0.3%
4,000,000 Circus Circus Enterprises Inc.,
7.625%, 7/15/13................................... 3,733,280
------------
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES - 4.3%
3,000,000 Baxter International, Inc.,
9.25%, 12/15/99................................... 3,138,888
<PAGE>
1,132,000 Belo (A.H.) Corp.,
6.875%, 6/1/02.................................... 1,184,303
4,500,000 Freeport McMoran Resource Partners,
7.00%, 2/15/08.................................... 4,347,081
10,000,000 Jet Equipment Trust,
Series A10,
9.41%, 6/15/10 (a)................................ 12,430,580
Loews Corp.:
1,810,000 6.75%, 12/15/06................................... 1,949,611
10,000,000 7.00%, 10/15/23................................... 10,273,520
5,000,000 Owens-Corning Inc.,
7.50%, 5/1/05..................................... 5,304,475
1,390,000 Philip Morris Companies Inc.,
6.15%, 3/15/00.................................... 1,408,682
1,385,000 Tele-Communications, Inc.,
7.25%, 8/1/05..................................... 1,522,213
Time Warner, Inc.:
4,000,000 6.88%, 6/15/18.................................... 4,132,760
1,915,000 8.11%, 8/15/06.................................... 2,215,017
9,277,592 Topaz Ltd.,
Series 1997-1,
6.92%, 3/10/07 (a)................................ 9,954,021
1,124,000 Weyerhaeuser Co.,
6.95%, 8/1/17..................................... 1,140,408
------------
59,001,559
------------
LEISURE & TOURISM - 0.8%
10,500,000 Brunswick Corp.,
6.75%, 12/15/06................................... 11,157,898
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - CONTINUED
MACHINERY - DIVERSIFIED - 0.5%
$ 5,000,000 Deere & Co.,
8.95%, 6/15/19.................................... $ 6,295,085
-----------
OIL/ENERGY - 2.4%
6,500,000 Atlantic Richfield Co.,
9.00%, 4/1/21..................................... 8,782,085
1,656,000 Lasmo (USA) Inc.,
Special Purpose,
6.75%, 12/15/07................................... 1,637,329
2,500,000 Suburban Propane Partners, L.P.,
7.54%, 6/30/11.................................... 2,660,250
6,000,000 Transocean Offshore Inc.,
7.45%, 4/15/27.................................... 6,969,630
12,000,000 Union Pacific Resources Group Inc.,
7.50%, 10/15/26................................... 13,644,972
-----------
33,694,266
-----------
PAPER & PACKAGING - 0.7%
8,000,000 Westvaco Corp.,
7.75%, 2/15/23.................................... 9,005,680
-----------
RETAILING & WHOLESALE - 0.7%
500,000 Dayton Hudson Corp.,
<PAGE>
9.75%, 11/1/98.................................... 501,426
1,685,000 Gap Inc.,
6.90%, 9/15/07.................................... 1,859,426
9,870,000 Macsaver Financial Services Inc.,
7.60%, 8/1/07..................................... 6,814,593
-----------
9,175,445
-----------
TELECOMMUNICATION SERVICES & EQUIPMENT - 2.0% 3,279,916 Bellsouth
Savings & Employee Stock Option Trust,
Debentures, Series A,
9.125%, 7/1/03.................................... 3,640,281
GTE Corp.:
7,500,000 6.36%, 4/15/06.................................... 7,956,502
5,000,000 9.38%, 12/1/00.................................... 5,439,495
10,500,000 LCI International Inc.,
7.25%, 6/15/07.................................... 10,956,299
-----------
27,992,577
-----------
TRANSPORTATION - 1.6%
2,000,000 Consolidated Rail Corp.,
9.75%, 6/1/00..................................... 2,133,394
1,472,300 Continental Airlines Inc.,
Pass-Thru Certificates,
Series 1997-CI,
7.42%, 4/1/07..................................... 1,576,841
10,000,000 Norfolk Southern Corp.,
7.70%, 5/15/17.................................... 11,391,190
2,925,731 Southwest Airlines Co.,
7.67%, 1/2/14..................................... 3,345,529
3,819,000 Union Pacific Corp.,
6.125%, 1/15/04................................... 3,849,674
-----------
22,296,628
-----------
UTILITIES - ELECTRIC - 2.2%
3,000,000 Carolina Power & Light Co.,
8.625%, 9/15/21................................... 3,897,909
</TABLE>
45
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Income Plus Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - CONTINUED
UTILITIES - ELECTRIC - CONTINUED Pennsylvania Power & Light
Resources Inc.:
$ 8,500,000 7.38%, 3/1/14..................................... $ 9,540,204
15,000,000 7.75%, 5/1/02..................................... 16,205,790
1,000,000 Virginia Electric & Power Co.,
<PAGE>
9.30%, 6/9/99..................................... 1,026,780
------------
30,670,683
------------
Total Corporate Bonds
(cost $381,271,892).............................. 408,793,109
------------
MORTGAGE-BACKED SECURITIES - 3.1%
Federal Home Loan Mortgage Corp.:
1,380,981 5.60%, 2/15/13.................................... 1,380,828
3,500,000 5.85%, 1/25/19.................................... 3,537,623
1,132,712 6.00%, 8/1/99..................................... 1,136,892
5,000,000 6.24%, 10/6/04.................................... 5,382,600
5,776,529 6.50%, 4/15/18.................................... 5,866,259
2,899,578 6.50%, 11/1/99.................................... 2,918,774
2,000,000 6.52%, 8/25/00.................................... 2,066,798
2,000,000 6.75%, 5/30/06.................................... 2,226,086
6,579,892 7.50%, 5/1/09 - 10/1/10........................... 6,788,852
2,169,205 8.00%, 7/1/25..................................... 2,242,698
7,724,000 Federal National Mortgage Assoc.,
7.75%, 9/25/22.................................... 8,303,321
------------
Total Mortgage-Backed Securities
(cost $40,311,945)............................... 41,850,731
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 2.9%
1,510,000 Carco Auto Loan Master Trust,
Series 1997-1, Class A,
6.689%, 8/15/04................................... 1,559,560
1,256,623 Citicorp Mortgage Securities Inc.,
Series 1997-1, Class A2,
7.25%, 2/25/27.................................... 1,263,566
2,334,573 Collateralized Mortgage
Obligation Trust,
Series 22, Class Y,
7.95%, 5/1/17..................................... 2,360,498
62,918 Drexel Burnham Lambert,
Collateralized Mortgage
Obligation Trust,
Series H, Class 3,
8.50%, 7/1/14..................................... 63,031
2,285,000 Federal Home Loan Mortgage Corp.,
Series 1519, Class F,
6.75%, 3/15/07.................................... 2,359,920
5,000,000 Paine Webber Mortgage Acceptance Corp.,
Series 1996-M1, Class E,
7.655%, 1/2/12.................................... 5,343,945
Potomac Gurnee Finance Corp.:
16,584,251 6.89%, 12/21/26................................... 18,076,585
5,250,000 7.22%, 12/21/26................................... 5,635,429
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS - CONTINUED
Residential Asset Securitization Trust:
$ 894,400 7.00%, 3/25/27..................................... $ 902,409
1,765,000 7.25%, 5/25/27..................................... 1,781,556
------------
Total Collateralized Mortgage Obligations (cost
$37,054,321)...................................... 39,346,499
<PAGE>
------------
MUNICIPAL BONDS - TAXABLE - 1.1% Baltimore, MD, General Obligation:
370,000 7.45%, 10/15/09.................................... 430,628
395,000 7.50%, 10/15/10.................................... 460,159
420,000 7.60%, 10/15/11.................................... 489,775
450,000 7.70%, 10/15/12.................................... 526,059
Mississippi State, General Obligation:
3,095,000 7.00%, 9/1/10...................................... 3,416,787
3,195,000 7.05%, 9/1/12...................................... 3,511,657
6,000,000 Virginia State Housing Development Authority,
7.50%, 5/1/11...................................... 6,779,940
------------
Total Municipal Bonds - Taxable
(cost $13,806,365)................................ 15,615,005
------------
FEDERAL AGENCY BONDS - 18.1% Federal Farm Credit Bank:
2,000,000 5.75%, 2/9/05...................................... 2,099,972
5,000,000 5.80%, 10/10/00.................................... 5,113,705
7,000,000 6.37%, 10/30/07.................................... 7,702,730
2,000,000 7.60%, 7/24/06..................................... 2,339,606
Federal Home Loan Bank:
2,000,000 5.50%, 1/21/03..................................... 2,062,816
10,000,000 5.62%, 1/27/03..................................... 10,359,010
10,000,000 5.75%, 4/30/01..................................... 10,268,020
5,000,000 5.89%, 6/30/08..................................... 5,343,165
5,000,000 6.19%, 5/6/08...................................... 5,452,185
5,000,000 6.50%, 11/29/05.................................... 5,458,430
1,000,000 9.25%, 11/25/98.................................... 1,006,201
1,400,000 9.30%, 1/25/99..................................... 1,418,848
1,177,499 Federal Housing Administration,
Putable Project Loans,
7.43%, 1/1/24...................................... 1,310,480
Federal National Mortgage Association
5,000,000 5.50%, 2/2/01...................................... 5,092,855
5,000,000 5.78%, 10/10/00.................................... 5,106,045
5,000,000 6.00%, 11/4/02..................................... 5,245,260
10,000,000 6.21%, 11/7/07..................................... 10,896,980
2,000,000 6.29%, 2/11/02..................................... 2,100,348
5,000,000 6.38%, 1/16/02..................................... 5,262,200
10,000,000 6.48%, 6/28/04 - 8/27/07........................... 10,966,950
5,280,774 6.50%, 8/1/10 - 9/1/10 ............................ 5,396,977
5,000,000 6.63%, 6/20/05..................................... 5,491,720
10,000,000 6.71%, 5/21/03..................................... 10,819,240
5,000,000 6.82%, 8/23/05..................................... 5,547,570
2,982,056 7.00%, 11/1/26..................................... 3,071,727
1,842,661 7.50%, 6/1/11...................................... 1,902,197
14,580,069 7.50%, 6/1/02 - 8/1/25 ............................ 14,947,107
</TABLE>
46
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Income Plus Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
<PAGE>
Principal
Amount Value
<C> <S> <C>
FEDERAL AGENCY BONDS - CONTINUED
Federal National Mortgage
Association - continued
$ 1,000,000 8.35%, 11/10/99................................... $ 1,038,086
2,500,000 8.70%, 6/10/99.................................... 2,564,578
1,620,000 Federal National Mortgage Association, REMIC,
6.50%, 3/25/19.................................... 1,654,656
Financial Assistance Corp.:
17,500,000 8.80%, 6/10/05.................................... 21,371,123
5,000,000 9.38%, 7/21/03.................................... 5,974,850
Government National Mortgage Association:
3,964,102 6.00%, 4/15/11.................................... 4,026,932
11,365,804 6.50%, 2/15/09 - 5/15/28.......................... 11,642,646
5,252,651 7.00%, 2/15/11 - 6/15/26.......................... 5,432,133
5,970,922 7.50%, 12/15/25 - 6/15/27......................... 6,197,282
1,398,633 8.00%, 12/15/26................................... 1,464,705
637,824 8.50%, 7/15/21.................................... 675,097
3,484,674 9.00%, 1/15/20 - 10/15/21......................... 3,731,903
1,700,285 9.50%, 12/15/20................................... 1,843,551
North Carolina, Housing Finance Agency
1,780,000 6.72%, 3/1/03 - 9/1/03............................ 1,880,747
Private Export Funding Corp.:
5,000,000 6.90%, 1/31/03.................................... 5,428,905
10,000,000 7.30%, 1/31/02.................................... 10,818,700
2,000,000 7.90%, 3/31/00.................................... 2,091,048
5,000,000 9.45%, 12/31/99................................... 5,280,515
3,500,000 Tennessee Valley Authority,
8.375%, 10/1/99................................... 3,620,113
------------
248,519,914
------------
Total Federal Agency Bonds
(cost $235,082,405).............................. 248,519,914
------------
U.S. TREASURY OBLIGATIONS - 25.6%
U.S. Treasury Bonds:
25,000,000 7.50%, 11/15/16................................... 31,882,825
15,000,000 7.875%, 2/15/21................................... 20,278,140
25,000,000 8.00%, 11/15/21................................... 34,375,025
15,000,000 8.75%, 5/15/20.................................... 21,909,390
15,000,000 9.00%, 11/15/18................................... 22,153,140
25,000,000 9.25%, 2/15/16.................................... 36,859,400
15,000,000 11.25%, 2/15/15................................... 25,542,195
U.S. Treasury Notes:
5,000,000 5.625%, 11/30/00.................................. 5,128,130
10,000,000 5.625%, 5/15/08................................... 10,940,630
5,000,000 5.75%, 8/15/03.................................... 5,307,815
15,000,000 5.875%, 2/15/04................................... 16,101,570
10,000,000 6.125%, 8/15/07................................... 11,200,010
5,000,000 6.25%, 2/28/02.................................... 5,295,315
25,000,000 6.50%, 5/15/05.................................... 28,070,325
5,000,000 6.75%, 4/30/00.................................... 5,170,315
5,000,000 7.25%, 5/15/04.................................... 5,710,940
5,000,000 7.50%, 11/15/01................................... 5,450,005
25,000,000 7.75%, 11/30/99 - 1/31/00......................... 26,003,150
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<PAGE>
<C> <S> <C>
U.S. TREASURY OBLIGATIONS - CONTINUED
U.S. Treasury Notes - continued
$25,000,000 7.875%, 11/15/04.................................. $ 29,648,450
5,000,000 8.00%, 5/15/01.................................... 5,440,630
------------
Total U.S. Treasury Obligations
(cost $319,267,822).............................. 352,467,400
------------
YANKEE OBLIGATIONS - 10.6%
BANKS - 2.4%
2,000,000 Banco Santiago, S.A,
7.00%, 7/18/07.................................... 1,934,928
Korea Development Bank:
8,000,000 7.25%, 5/15/06.................................... 6,106,536
8,000,000 7.375%, 9/17/04................................... 6,124,376
2,982,000 Skandinaviska Enskilda Banken,
6.875%, 2/15/09................................... 3,314,767
Svenska Handelsbanken:
3,000,000 8.125%, 8/15/07................................... 3,491,229
5,000,000 8.35%, 7/15/04.................................... 5,720,445
5,000,000 Westpac Banking Co.
9.125%, 8/15/01................................... 5,482,470
------------
32,174,751
------------
FINANCE & INSURANCE - 1.3%
10,000,000 Abbey National PLC,
6.69%, 10/17/05................................... 10,591,880
5,000,000 Ford Capital B.V.,
9.875%, 5/15/02................................... 5,730,450
1,885,000 Santander Finance Issuances,
6.375%, 2/15/11................................... 1,824,064
------------
18,146,394
------------
GOVERNMENT AGENCY NOTES & BONDS - 3.0%
10,000,000 Hydro-Quebec Inc.,
8.00%, 2/1/13..................................... 11,836,400
10,000,000 Manitoba (Province of), Canada,
8.00%, 4/15/02.................................... 10,956,000
7,500,000 Ontario Hydro Corp.,
7.45%, 3/31/13.................................... 8,829,000
8,200,000 Quebec Province, Canada,
8.80%, 4/15/03.................................... 9,367,188
------------
40,988,588
------------
INDUSTRIAL SPECIALTY PRODUCTS & SERVICES - 3.9%
1,785,000 Barrick Gold Corp.,
7.50%, 5/1/07..................................... 1,983,640
5,000,000 Celulosa Arauco Y Constitucion,
7.20%, 9/15/09.................................... 4,212,440
6,000,000 FBG Finance Ltd.,
6.75%, 11/15/05 (a)............................... 6,141,960
16,500,000 Fletcher Challenge Capital Canada Inc.,
7.875%, 3/24/17................................... 16,879,764
2,590,000 Legrand, S.A.,
8.50%, 2/15/25.................................... 3,317,803
15,000,000 Petro-Canada Ltd.,
8.60%, 1/15/10.................................... 19,395,450
1,665,000 Royal Caribbean Cruises Ltd.,
7.50%, 10/15/27................................... 1,651,324
<PAGE>
------------
53,582,381
------------
Total Yankee Obligations
(cost $134,541,589).............................. 144,892,114
------------
</TABLE>
47
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Income Plus Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENT - 4.7%
$64,813,015 Dresdner Bank, AG,
5.00%, dated 9/30/98,
due 10/1/98
cost, $64,813,015 maturity
value $64,822,017(b).............................. $ 64,813,015
--------------
<CAPTION>
Shares
<C> <S> <C>
MUTUAL FUND SHARES
211,435 Valiant General Fund (cost $211,435)............. 211,435
--------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS -
(COST $1,269,414,951)..................... 99.0% 1,360,488,135
OTHER ASSETS AND
LIABILITIES - NET......................... 1.0 14,280,421
----- --------------
NET ASSETS - .............................. 100.0% $1,374,768,556
===== ==============
</TABLE>
(a) Securities that may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to Section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
(b) Repurchase agreement is collateralized by $62,835,000 U.S. Treasury Notes,
5.37% due 6/30/03 with a value, including accrued interest, of $66,114,198.
SUMMARY OF ABBREVIATIONS:
REMIC Real Estate Mortgage Investment Conduit
See Combined Notes to Financial Statements.
48
<PAGE>
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Intermediate Tax Exempt Bond Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - 98.4%
ALABAMA - 1.1%
$ 3,790,000 Alabama Special Care Facilities Finance Authority
RB, Hospital Charity Obligation Group, Series D,
4.95%, 11/1/14..................................... $ 3,970,631
Alabama State Docks Department, Facilities RB:
1,505,000 5.50%, 10/1/03, (MBIA)............................. 1,618,447
1,000,000 6.00%, 10/1/05, (MBIA)............................. 1,124,350
1,175,000 6.00%, 10/1/07, (MBIA)............................. 1,344,506
------------
8,057,934
------------
ARIZONA - 0.5%
3,660,000 Phoenix AZ, SFHRB, Series A,
6.60%, 12/1/29..................................... 4,046,935
------------
CALIFORNIA - 8.7%
10,000,000 California Pollution Control Financing Authority
RB, San Diego Gas & Electric, Series A,
5.90%, 6/1/14...................................... 11,403,400
California State GO:
4,000,000 8.00%, 5/1/03, (AMBAC-TCRS)........................ 4,726,640
1,000,000 9.25%, 3/1/02...................................... 1,178,620
1,700,000 Delta County CA, SFHRB, Series A,
6.70%, 6/1/24, (MBIA).............................. 1,897,421
Foothill/Eastern Corridor Agency, Toll Road RB,
Series A:
4,000,000 6.50%, 1/1/32...................................... 4,471,080
10,255,000 (Eff. Yield 5.75%)
0.00%, 1/1/24 (a).................................. 2,811,921
2,000,000 Huntington Park CA, SFHRB, Series A, ETM,
8.00%, 12/1/19..................................... 2,858,240
Long Beach CA, Harbor RB Series A:
8,435,000 6.00%, 5/15/16..................................... 9,738,714
2,600,000 6.00%, 5/15/19, (FGIC)............................. 3,012,932
4,210,000 Palmdale CA, SFHRB, Series A, ETM,
8.00%, 9/1/11...................................... 5,691,246
San Joaquin Hills CA, Toll Road RB ETM,
23,500,000 (Eff. Yield 5.60%) (a)
0.00%, 1/1/22...................................... 7,676,510
7,050,000 Series A, (Eff. Yield 4.10%) (a),
0.00%, 1/15/02..................................... 6,188,278
3,500,000 Valley Health Systems California, Hospital RB,
Series A,
6.50%, 5/15/25..................................... 3,805,060
------------
65,460,062
------------
COLORADO - 9.0%
<PAGE>
Arapahoe County CO, Capital Improvement Highway RB 15,000,000
Prefunded 8/31/05 @ 66.217
(Eff. Yield 4.21%) (a)
0.00%, 8/31/11..................................... 7,491,600
4,000,000 Prerefunded 8/31/05 @ 103
(Eff. Yield 4.21%) (a)
0.00%, 8/31/15..................................... 4,808,720
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - CONTINUED
COLORADO - CONTINUED
Arapahoe County CO, Capital Improvement Highway
RB - continued:
$32,000,000 Series C, Prerefunded
8/31/05 @ 48.6181
(Eff. Yield 4.21%) (a)
0.00%, 8/31/15..................................... $ 11,734,080
Colorado Housing Finance Authority, SFHRB:
1,000,000 Senior Series A 2
6.60%, 5/1/28...................................... 1,117,210
500,000 Senior Series A 3
6.50%, 11/1/29..................................... 561,830
2,250,000 Senior Series C 2
6.875%, 11/1/28.................................... 2,546,258
1,000,000 Senior Series C 3
6.75%, 5/1/17...................................... 1,124,510
1,385,000 Colorado Student Obligation Bond Authority, Student
Loan RB, Series B
6.55%, 12/1/02..................................... 1,464,236
Dawson Ridge CO, Metropolitan District GO ETM,
8,325,000 Series A, (Eff. Yield 5.42%)
0.00%, 10/1/22 (a)................................. 2,383,031
74,685,000 Series B, (Eff. Yield 5.58%)
0.00%, 10/1/22 (a)................................. 21,378,581
2,000,000 Denver CO, City & County GO
6.50%, 8/1/04...................................... 2,171,140
El Paso County CO, GO, School District Number 11:
2,500,000 7.10%, 12/1/16..................................... 3,271,175
2,000,000 7.125%, 12/1/19.................................... 2,671,880
3,485,000 Larimer County CO, GO School District Number R1
8.50%, 12/15/08, (MBIA)............................ 4,716,634
------------
67,440,885
------------
CONNECTICUT - 1.1%
Connecticut State Development Authority, Mortgage
RB, Church Homes Inc. Health Care Project:
485,000 4.45%, 4/1/99...................................... 487,037
340,000 4.65%, 4/1/00...................................... 343,587
425,000 4.90%, 4/1/02...................................... 436,127
925,000 5.00%, 4/1/03...................................... 956,219
1,220,000 5.40%, 4/1/07...................................... 1,298,641
2,035,000 5.70%, 4/1/12...................................... 2,119,229
2,550,000 5.80%, 4/1/21...................................... 2,657,941
------------
8,298,781
------------
DELAWARE - 0.4%
3,000,000 Delaware State, Solid Waste Systems RB, Series A
6.75%, 7/1/03...................................... 3,190,890
<PAGE>
------------
</TABLE>
49
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Intermediate Tax Exempt Bond Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - CONTINUED
FLORIDA - 3.8%
$ 535,000 Escambia County FL, Health Facilities Authority RB
Azalea Trace Inc., Prerefunded 1/1/99 @ 102,
9.25%, 1/1/06...................................... $ 553,532
Halifax Hospital Medical Center Health Care
Facilities Revenue, Series A:
1,080,000 4.60%, 4/1/08, (ACA)............................... 1,097,971
1,200,000 4.75%, 4/1/09, (ACA)............................... 1,221,864
675,000 4.80%, 4/1/10, (ACA)............................... 685,692
4,500,000 Orange County FL, Health Facilities Authority RB,
Orlando Regional Healthcare, Series A,
6.25%, 10/1/16, (MBIA)............................. 5,341,005
Palm Beach County FL, Health Facilities Authority RB, Abbey DelRay
South Project:
675,000 4.25%, 10/1/98..................................... 675,007
675,000 4.35%, 10/1/99..................................... 678,787
700,000 4.50%, 10/1/00..................................... 705,999
750,000 4.65%, 10/1/01..................................... 760,695
805,000 4.80%, 10/1/02..................................... 822,332
775,000 5.00%, 10/1/03..................................... 799,536
850,000 5.00%, 10/1/04..................................... 878,007
930,000 5.10%, 10/1/05..................................... 962,029
500,000 5.30%, 10/1/07..................................... 518,175
Palm Beach County FL, Health Facilities Authority
RB, Waterford Project:
675,000 4.25%, 10/1/98..................................... 675,007
475,000 4.35%, 10/1/99..................................... 477,665
675,000 4.50%, 10/1/00..................................... 680,785
725,000 4.65%, 10/1/01..................................... 735,338
400,000 4.80%, 10/1/02..................................... 408,612
320,000 5.00%, 10/1/03..................................... 330,131
440,000 5.00%, 10/1/04..................................... 454,498
460,000 5.10%, 10/1/05..................................... 475,842
485,000 5.20%, 10/1/06..................................... 501,912
345,000 5.30%, 10/1/07..................................... 357,541
5,000,000 Pinellas County FL, Housing Finance Authority,
SFHRB,
5.95%, 3/1/30...................................... 5,413,150
2,025,000 Tampa FL, Health Systems RB, Catholic Health East,
Series A 3,
5.50%, 11/15/06, (MBIA)............................ 2,216,201
------------
28,427,313
------------
<PAGE>
GEORGIA - 2.8%
Fulton County GA, Development Authority Special RB,
Delta Airlines Inc. Project:
11,695,000 5.30%, 5/1/13...................................... 11,835,925
7,350,000 5.45%, 5/1/23...................................... 7,380,355
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - CONTINUED
GEORGIA - CONTINUED
Savannah GA, Water & Sewage RB, ETM, (Securities):
$ 1,000,000 6.30%, 12/1/01..................................... $ 1,078,360
1,000,000 6.35%, 12/1/02..................................... 1,099,920
------------
21,394,560
------------
HAWAII - 0.4%
2,500,000 Hawaii State Department of Budget & Finance,
Special Purpose RB, The Queens Health Systems
Group, Series A,
6.05%, 7/1/16...................................... 2,789,950
------------
IDAHO - 0.3%
2,000,000 Idaho Student Loan Fund Marketing Association,
Student Loan RB
6.25%, 10/1/98..................................... 2,000,120
------------
ILLINOIS - 5.2%
Illinois Development Finance Authority RB,
Community Rehabilitation Providers, Series A:
2,540,000 5.70%, 7/1/07...................................... 2,764,053
3,490,000 5.80%, 7/1/08...................................... 3,822,702
5,490,000 Illinois Educational Facilities Authority RB Sarah
Bush Lincoln Health Center,
5.50%, 2/15/16..................................... 5,673,805
Illinois Health & Educational Facilities Authority
RB:
4,945,000 Mercy Hospital Center ETM
10.00%, 1/1/15..................................... 7,156,108
5,000,000 Northwestern Memorial Hospital
6.75%, 8/15/11..................................... 5,453,850
12,500,000 Illinois State Sales Tax RB, Series Q,
6.00%, 6/15/12, (MBIA-IBC)......................... 14,457,375
------------
39,327,893
------------
INDIANA - 2.3%
7,000,000 Indiana Health Facility Financing Authority,
Hospital RB, Charity Obligation Group, Series D
5.00%, 11/1/26 .................................... 7,332,850
1,565,000 Indiana State Housing,
SFHRB, Series B 1,
7.55%, 7/1/10...................................... 1,644,032
3,900,000 Indianapolis IN, Airport Authority RB, Special
Facility United Air Lines Project, Series A,
6.50%, 11/15/31.................................... 4,254,900
3,000,000 Indianapolis IN, Local Public Improvement Bond Bank
RB,
6.75%, 2/1/14...................................... 3,641,760
550,000 Lafayette IN,
PCRB, Anheuser-Busch Inc. Project,
<PAGE>
6.50%, 6/1/04...................................... 552,899
------------
17,426,441
------------
</TABLE>
50
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Intermediate Tax Exempt Bond Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - CONTINUED
IOWA - 0.3%
$ 2,500,000 Iowa Student Loan Liquidity Corp. RB, Series A,
6.45%, 3/1/02...................................... $ 2,659,400
------------
KANSAS - 1.6%
2,900,000 Kansas State Department of Transportation Highway RB Prerefunded
3/1/02 @ 102
6.50%, 3/1/07...................................... 3,206,646
4,700,000 Kansas State Development Finance Authority RB,
University of Kansas Athletic Facilities, Series
A,
4.80%, 6/1/13...................................... 4,703,290
1,540,000 Newton KS, Hospital RB Newton Healthcare Corp.,
Series A
5.70%, 11/15/18.................................... 1,581,611
2,000,000 Sedgwick & Shawnee County KS, SFHRB, Series A,
5.50%, 6/1/29...................................... 2,282,960
------------
11,774,507
------------
KENTUCKY - 1.2%
Kentucky Economic Development Finance Authority,
Hospital Systems RB Appalachian Regional
Healthcenter:
5,000,000 5.85%, 10/1/17..................................... 5,230,200
3,500,000 5.875%, 10/1/22.................................... 3,651,760
------------
8,881,960
------------
LOUISIANA - 0.6%
East Baton Rouge LA, Sales & Use Tax RB, Series ST:
1,760,000 8.00%, 2/1/02, (FGIC).............................. 1,984,136
1,920,000 8.00%, 2/1/03, (FGIC).............................. 2,226,950
------------
4,211,086
------------
MASSACHUSETTS - 0.9%
1,750,000 Massachusetts State Health & Educational Facilities
Authority RB, Milford Whitinsville Regional,
Series C,
5.75%, 7/15/13..................................... 1,857,695
<PAGE>
2,000,000 Massachusetts State Housing Finance Agency RB,
Residential Development
6.35%, 5/15/03..................................... 2,157,140
2,500,000 New England Education Loan Marketing Corp., Student
Loan RB,
6.50%, 9/1/02...................................... 2,710,400
------------
6,725,235
------------
MICHIGAN - 5.8%
2,040,000 Avondale MI, School District GO,
8.25%, 5/1/02...................................... 2,342,083
3,700,000 Brighton MI, Area School District Capital
Appreciation, Series II,
(Eff. Yield 4.90%) (a),
0.00%, 5/1/11, (AMBAC)............................. 2,108,075
1,730,000 Dexter MI, Community Schools, GO
6.25%, 5/1/08, (FGIC).............................. 2,013,357
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - CONTINUED
MICHIGAN - CONTINUED
$ 2,500,000 Michigan Higher Education Facilities Authority RB,
Thomas M Cooley,
(LOC: First of America Bank) 5.00%, 5/1/11 ........ $ 2,588,950
Michigan State Trunk Line, Series A:
2,760,000 5.25%, 11/1/12..................................... 2,986,127
2,500,000 5.25%, 11/1/10..................................... 2,717,025
6,070,000 Royal Oak MI, Hospital Finance Authority RB,
William Beaumont Hospital,
6.25%, 1/1/10...................................... 7,069,486
Wayne Charter County MI, Airport RB, Detroit Metro,
Series B:
4,395,000 5.25%, 12/1/05, (MBIA)............................. 4,714,429
10,225,000 5.25%, 12/1/10, (MBIA)............................. 10,926,946
6,000,000 5.25%, 12/1/13, (MBIA)............................. 6,311,340
------------
43,777,818
------------
MINNESOTA - 0.9%
2,935,000 Bass Brook MN, PCRB, Minnesota Power & Light Co.
Project,
6.00%, 7/1/22...................................... 3,096,542
Minnesota State Housing Finance Agency, SFHRB,
Series C:
500,000 6.80%, 7/1/11...................................... 527,190
1,335,000 7.10%, 7/1/11...................................... 1,416,302
2,000,000 Rochester MN, Health Care Facilities RB, Mayo
Medical Center, Series C,
6.85%, 11/15/98.................................... 2,008,760
------------
7,048,794
------------
MISSISSIPPI - 3.3%
10,750,000 Mississippi Business Finance Corp. Solid Waste
Disposal RB, Mississippi Phosphates Corp. Project
5.80%, 3/1/22...................................... 10,983,598
4,855,000 Mississippi Gulf Coast, Regional Wasterwater
Authority RB, ETM,
7.00%, 7/1/12...................................... 5,957,522
<PAGE>
7,295,000 Mississippi Home Corp., SFHRB, Series H
5.50%, 12/1/29..................................... 8,040,111
------------
24,981,231
------------
MISSOURI - 1.2%
3,000,000 Missouri State Office Building, Special Obligation
6.00%, 12/1/02..................................... 3,200,700
2,500,000 Missouri State, SFHRB,
6.40%, 9/1/29...................................... 2,771,675
2,600,000 University City MO, IDA MFHRB Oak Forest Apartment
Project
(LOC: Sumitomo Bank LTD)
7.375%, 3/1/21 .................................... 2,910,362
------------
8,882,737
------------
</TABLE>
51
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Intermediate Tax Exempt Bond Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - CONTINUED
NEW JERSEY - 2.8%
$ 2,000,000 Howell Township NJ, GO Partially Prerefunded 1/1/02
@ 102,
6.40%, 1/1/03, (FGIC).............................. $ 2,190,620
New Jersey Economic Development Authority RB
Franciscan Oaks Project:
3,620,000 5.60%, 10/1/12..................................... 3,687,332
4,185,000 5.70%, 10/1/17..................................... 4,223,669
900,000 Keswick Pines Project
5.60%, 1/1/12...................................... 912,240
The Evergreens:
3,380,000 5.875%, 10/1/12.................................... 3,471,902
680,000 6.00%, 10/1/17..................................... 720,229
3,325,000 6.00%, 10/1/22..................................... 3,509,471
1,650,000 New Jersey State Housing & Mortgage Finance Agency
RB,
Series One
6.45%, 11/1/07..................................... 1,777,034
160,000 New Jersey Wastewater Treatment Trust RB,
6.80%, 6/15/02..................................... 168,693
210,000 Salem County NJ, Industrial PCRB, BF Goodrich Co
Project,
10.75%, 12/1/00.................................... 211,121
------------
20,872,311
------------
NEW MEXICO - 0.6% 3,425,000 Santa Fe NM, Utility RB, Series A,
<PAGE>
8.00%, 6/1/06, (AMBAC)............................. 4,314,130
------------
NEW YORK - 15.9%
Metropolitan Transportation Authority of New York
RB, Series A:
4,325,000 5.70%, 7/1/17 (MBIA)............................... 4,730,815
7,000,000 6.10%, 7/1/26, (FSA)............................... 8,114,820
8,000,000 New York City Municipal Water Finance Authority,
Water & Sewer Systems RB Series B
6.25%, 6/15/20..................................... 9,288,480
New York NY, GO:
Series A:
10,535,000 5.875%, 8/1/03..................................... 11,399,923
2,500,000 6.25%, 8/1/10...................................... 2,819,575
3,000,000 6.25%, 8/1/11...................................... 3,375,000
14,490,000 Series B,
7.50%, 2/1/06...................................... 16,214,745
5,795,000 Series C,
6.50%, 2/1/08...................................... 6,742,193
2,500,000 Series C, ETM,
6.90%, 2/1/99, (FGIC).............................. 2,527,650
1,755,000 Series D,
6.50%, 2/15/06..................................... 1,993,118
3,245,000 Series D, Prefunded
2/15/05 @ 101
6.50%, 2/15/06..................................... 3,742,329
6,000,000 Series I,
6.50%, 3/15/05..................................... 6,802,380
5,515,000 Series K,
8.00%, 4/1/05...................................... 6,749,477
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - CONTINUED
NEW YORK - CONTINUED
$13,000,000 New York State Dormitory Authority RB, Series A,
5.50%, 5/15/13..................................... $ 14,307,800
5,710,000 New York State Thruway Authority, Service Contract
RB, Series A,
6.00%, 1/1/05, (MBIA).............................. 6,349,177
New York State Urban Development Corp. RB:
6,045,000 5.75%, 7/1/09...................................... 6,750,996
3,570,000 6.40%, 1/1/04, (AMBAC-TCRS)........................ 3,985,298
3,000,000 Port Authority of NY & NJ, Special Obligation,
6.75%, 10/1/11..................................... 3,334,770
------------
119,228,546
------------
NORTH CAROLINA - 2.1%
North Carolina Medical Care Commission, Hospital
RB, Transylvania Community Hospital Inc.:
115,000 4.30%, 10/1/98..................................... 115,002
130,000 4.45%, 10/1/99..................................... 131,034
135,000 4.60%, 10/1/00..................................... 136,804
140,000 4.70%, 10/1/01..................................... 142,786
155,000 4.80%, 10/1/02..................................... 159,199
155,000 4.90%, 10/1/03..................................... 160,273
155,000 5.00%, 10/1/04..................................... 161,268
175,000 5.00%, 10/1/05..................................... 182,233
185,000 5.05%, 10/1/06..................................... 193,164
190,000 5.15%, 10/1/07..................................... 199,633
<PAGE>
9,440,000 North Carolina State Medical Care Commission,
Health Care Facilities RB, Deerfield Episcopal,
5.30%, 11/1/04..................................... 9,756,523
4,430,000 North Carolina, Eastern Municipal Power Systems RB,
Series A,
5.70%, 1/1/15, (MBIA).............................. 4,823,960
------------
16,161,879
------------
OHIO - 1.9%
Franklin County OH, Health Care Facilities RB,
Friendship Village of Dublin Project:
505,000 5.00%, 11/1/05..................................... 522,367
380,000 5.05%, 11/1/06..................................... 392,434
225,000 5.10%, 11/1/07..................................... 232,108
100,000 5.15%, 11/1/08..................................... 103,047
1,250,000 5.50%, 11/1/16..................................... 1,264,612
1,750,000 5.625%, 11/1/22.................................... 1,770,370
5,735,000 Hamilton County OH, Sales Tax RB, Hamilton County
Football Project, Series B,
5.375%, 12/1/09, (MBIA)............................ 6,318,422
Miami County OH, Hospital Facilities RB, Upper Valley Medical
Center, Series A:
1,500,000 6.25%, 5/15/16..................................... 1,614,450
2,250,000 6.375%, 5/15/26.................................... 2,433,082
------------
14,650,892
------------
</TABLE>
52
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Intermediate Tax Exempt Bond Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - CONTINUED
OKLAHOMA - 0.7%
$ 5,000,000 Tulsa County OK, Industrial Authority, Health Care
RB, St. Francis Hospital,
5.15%, 12/15/18.................................... $ 5,255,650
------------
PENNSYLVANIA - 3.1%
1,500,000 Beaver Falls PA, Municipal Authority Special
Obligation, Prerefunded 10/1/04 @ 102,
9.125%, 8/1/05..................................... 1,954,230
Dauphin County PA, General Authority RB, Office &
Parking, Forum Place, Series A:
7,865,000 5.50%, 1/15/08..................................... 7,995,874
3,950,000 5.75%, 1/15/10..................................... 4,055,307
2,200,000 Delaware County PA, Hospital RB, Riddle Memorial
Hospital,
6.50%, 1/1/22...................................... 2,421,760
260,000 Delaware River Port Authority of PA & NJ, Delaware
<PAGE>
River Bridges RB,
6.50%, 1/15/11..................................... 295,747
4,000,000 Montgomery County PA, Higher Education & Health
Authority RB, Beaver College,
5.80%, 4/1/16...................................... 4,337,800
1,795,000 West View PA, Municipal Authority Special
Obligation, ETM,
(COLL: U.S. Government Securities)
9.20%, 5/15/03..................................... 2,123,252
------------
23,183,970
------------
SOUTH CAROLINA - 1.2%
3,000,000 Piedmont SC, Municipal Power Agency, Electric RB,
6.25%, 1/1/21, (FGIC).............................. 3,599,850
5,000,000 Richland County SC, Hospital Facilities RB,
Sunhealth Orangeburg,
8.125%, 10/1/11,
(LOC: Sumitomo Bank LTD)........................... 5,100,650
------------
8,700,500
------------
SOUTH DAKOTA - 0.8%
5,000,000 Heartland Consumer Power District RB, ETM,
7.00%, 1/1/16...................................... 6,103,800
------------
TEXAS - 7.9%
9,915,000 Alliance Airport Authority,
Special Facilities RB, American Airlines Inc.
Project,
7.00%, 12/1/11..................................... 11,895,720
Austin TX, Utility Systems RB:
420,000 8.00%, 11/15/99, (BIG)............................. 440,933
330,000 ETM,
8.00%, 11/15/99, (BIG)............................. 346,632
6,055,000 Lufkin TX, Health Facilities Development Corp. RB,
Memorial Health Systems of East Texas,
6.875%, 2/15/26.................................... 6,730,435
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - CONTINUED
TEXAS - CONTINUED
North Central TX, Health Facility Development Corp.
RB, Texas Health Resources Systems, Series B:
$ 3,910,000 5.75%, 2/15/09, (MBIA)............................. $ 4,352,573
4,595,000 5.75%, 2/15/12, (MBIA)............................. 5,083,219
North Texas Health Facilities Development Corp, RB,
United Regional Health Care Systems Inc. Project:
2,245,000 5.25%, 9/1/06, (MBIA).............................. 2,405,473
2,000,000 5.25%, 9/1/08, (MBIA).............................. 2,150,380
1,300,000 Retama TX, Development Corp. Special Facilities RB,
Retama Racetrack, ETM,
8.75%, 12/15/05.................................... 1,674,764
10,000,000 San Antonio TX, Electric & Gas RB,
5.80%, 2/1/06...................................... 10,995,900
Texas State Department Housing & Community Affairs:
2,650,000 MFHRB,
5.55%, 1/1/05...................................... 2,775,000
3,000,000 SFHRB, Series E
5.00%, 3/1/16, (MBIA).............................. 3,103,950
<PAGE>
5,455,000 Texas State Turnpike Authority RB, Prerefunded 7/1/02 @ 102,
12.625%, 1/1/20.................................... 7,208,182
------------
59,163,161
------------
VIRGINIA - 1.3%
2,900,000 Bedford County VA, IDA RB, Georgia Pacific Corp.
Project,
4.60%, 8/1/04...................................... 2,951,823
5,985,000 Riverside VA, Regional Jail Authority RB,
5.875%, 7/1/14, (MBIA)............................. 6,588,348
------------
9,540,171
------------
WASHINGTON - 3.0%
17,000,000 Washington State GO,
Series B & AT 7,
6.40%, 6/1/17...................................... 20,636,130
2,000,000 Washington State Public Power Supply RB, Nuclear
Project, Series A,
6.50%, 7/1/02...................................... 2,165,360
------------
22,801,490
------------
WISCONSIN - 1.0%
6,865,000 Wisconsin State Health & Educational Facilities RB,
Medical College Inc.,
5.95%, 12/1/15..................................... 7,408,296
------------
PUERTO RICO - 2.4%
22,630,000 Commonwealth of Puerto Rico GO, (Eff. Yield 4.04%)
(a),
0.00%, 7/1/04...................................... 18,059,871
------------
</TABLE>
53
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Intermediate Tax Exempt Bond Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - CONTINUED
U.S. VIRGIN ISLANDS - 2.3%
Virgin Islands Public Finance Authority RB, Senior
Lien:
$ 7,070,000 Series A,
5.20%, 10/1/09..................................... $ 7,405,683
Series C:
3,000,000 5.50%, 10/1/07..................................... 3,226,950
3,855,000 5.50%, 10/1/08..................................... 4,143,470
2,000,000 Virgin Islands Water & Power Authority RB, Series B
7.60%, 1/1/12...................................... 2,286,660
<PAGE>
------------
17,062,763
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
MUTUAL FUND SHARES - 0.6%
4,632,000 Federated Municipal Obligation Fund
(cost $4,632,000)................................... $ 4,632,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS -
(COST $699,113,382)......................... 99.0% 743,943,962
OTHER ASSETS AND LIABILITIES - NET........... 1.0 7,665,890
----- ------------
NET ASSETS - ................................ 100.0% $751,609,852
===== ============
</TABLE>
(a)Effective yield (calculated at date of purchase) is the annual yield at which
the bond accrues until its maturity date.
Note: Securities that have been Escrowed to Maturity (ETM) or prerefunded have
been fully collateralized with U.S. Government Securities, cash or both.
SUMMARY OF ABBREVIATIONS:
ACA American Capital Access
AMBAC American Municipal Bond Assurance Corp.
BIG Bond Investors Guaranty
ETM Escrowed to Maturity
FGIC Financial Guaranty Insurance Corp.
FSA Financial Security Assurance Corp.
GO General Obligation
IBC Insured Bond Certification
IDA Industrial Development Authority
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corp.
MFHRB Multi Family Housing Revenue Bond
PCRB Pollution Control Revenue Bond
RAN Revenue Anticipation Note
RB Revenue Bond
REFCORP Resolution Trust Funding Corp.
SFHRB Single Family Housing Revenue Bond
TCRS Transferable Custody Receipts
The Fund had the following insurance concentration at September 30, 1998:
<TABLE>
<CAPTION>
PERCENTAGE
OF NET
ASSETS
----------
<S> <C>
MBIA...................................................... 12.8%
</TABLE>
See Combined Notes to Financial Statements.
54
<PAGE>
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select International Bond Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - 1.4%
UNITED STATES - 1.4%
$ 500,000 Rothmans Holdings,
6.50%, 5/6/03........................................ $ 515,909
200,000 Samsung Electronics America Inc.,
9.75%, 5/1/03........................................ 156,000
-----------
Total Corporate Bonds
(cost $685,990)..................................... 671,909
-----------
YANKEE OBLIGATIONS - 8.5%
CHINA - 0.7%
400,000 Hutchison Whampoa Finance,
6.95%, 8/1/07........................................ 340,115
-----------
COLOMBIA - 0.3%
200,000 Republic of Colombia,
7.25%, 2/23/04....................................... 152,062
-----------
KAZAKHSTAN - 0.2%
200,000 Republic of Kazakhstan,
8.38%, 10/2/02....................................... 109,500
-----------
KOREA - 0.8%
200,000 Korea Development Bank,
7.13%, 9/17/01....................................... 171,750
200,000 Korea Republic,
8.75%, 4/15/03....................................... 183,014
-----------
354,764
-----------
LITHUANIA - 1.0%
525,000 Republic of Lithuania,
7.13%, 7/22/02....................................... 474,386
-----------
SLOVAKIA - 0.4%
200,000 Republic of Slovakia,
9.50%, 5/28/03....................................... 165,250
-----------
THAILAND - 0.4%
200,000 Kingdom of Thailand,
7.75%, 4/15/07....................................... 158,985
-----------
UNITED KINGDOM - 4.7%
500,000 Abbey National Plc,
6.69%, 10/17/05...................................... 529,554
500,000 British Telecom Plc,
7.00%, 5/23/07....................................... 553,999
500,000 ICI Finance Nederland,
<PAGE>
6.75%, 8/7/02........................................ 527,337
545,000 Rolls Royce Capital,
7.13%, 7/29/03....................................... 593,248
-----------
2,204,138
-----------
Total Yankee Obligations
(cost $4,126,625)................................... 3,959,200
-----------
FOREIGN BONDS (NON U.S. DOLLARS) - 88.8%
AUSTRALIA - 2.5%
1,600,000 New South Wales Treasury,
AUD 12.00%, 12/1/01...................................... 1,159,050
-----------
AUSTRIA - 3.4%
2,400,000 Oest Kontrollbank,
DEM 5.75%, 9/12/07....................................... 1,586,275
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
FOREIGN BONDS (NON U.S. DOLLARS) - CONTINUED
CANADA - 9.0%
$ 3,900,000 Canadian Government,
CAD 4.75%, 9/15/99....................................... $ 2,550,998
2,400,000 JP Morgan & Co Inc,
CAD 6.88%, 3/17/04....................................... 1,652,189
-----------
4,203,187
-----------
DENMARK - 2.0%
5,800,000 City of Copenhagen,
DKK 6.25%, 3/15/01....................................... 946,506
-----------
FRANCE - 13.1%
10,600,000 Credit Local De France,
FRF 5.38%, 1/13/04....................................... 2,020,383
10,000,000 Diageo,
FRF 6.25%, 11/25/02...................................... 1,954,371
10,250,000 OAT,
FRF 6.00%, 10/25/25...................................... 2,141,752
-----------
6,116,506
-----------
GERMANY - 21.6%
8,590,000 Bundesrepublic,
DEM 6.25%, 1/4/24........................................ 6,183,859
3,000,000 Kreditanst Fuer Wied,
DEM 5.50%, 3/12/07....................................... 1,953,651
3,400,000 Siemens Co Ordinat,
NLG 5.50%, 3/12/07....................................... 1,944,076
-----------
10,081,586
-----------
JAPAN - 3.4%
950,000 Chubu Electric Power,
GBP 6.75%, 8/10/99....................................... 1,609,184
-----------
MEXICO - 0.4%
125,000 United Mexican States,
GBP 8.75%, 5/30/02....................................... 175,076
<PAGE>
-----------
NETHERLANDS - 10.7%
1,700,000 Bank Voor Ned Gemeenten,
NLG 6.25%, 9/15/00....................................... 943,404
9,800,000 Depfa Finance NV,
FRF 6.38%, 11/18/08...................................... 2,041,553
3,150,000 DSL Finance NV,
DEM 5.00%, 7/23/04....................................... 1,997,784
-----------
4,982,741
-----------
NEW ZEALAND - 2.8%
2,320,000 New Zealand,
NZD 8.00%, 11/15/06...................................... 1,333,395
-----------
NORWAY - 3.9%
13,000,000 Eksportfinans AS,
SEK 6.88%, 2/9/04........................................ 1,822,213
-----------
SLOVAKIA - 0.7%
550,000 Vodohospodarska Vystavba,
DEM 8.00%, 7/9/01........................................ 307,943
-----------
SUPERNATIONAL - 2.1%
1,860,000 World Bank,
NZD 7.25%, 5/27/03....................................... 976,982
-----------
</TABLE>
55
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select International Bond Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
FOREIGN BONDS (NON U.S. DOLLARS) - CONTINUED
SWEDEN - 8.2%
$ 8,000,000 Kingdom of Sweden,
SEK 5.00%, 1/15/04...................................... $ 1,043,302
11,500,000 Kingdom of Sweden,
SEK 8.00%, 8/15/07...................................... 1,815,628
550,000 Swedish Export Credit Corp,
GBP 7.63%, 12/27/01..................................... 965,444
-----------
3,824,374
-----------
UNITED KINGDOM - 5.0%
1,175,000 Gallaher Group Plc,
DEM 5.88%, 8/6/08....................................... 711,530
950,000 Halifax Building,
GBP 8.38%, 12/15/99..................................... 1,641,273
-----------
2,352,803
-----------
<PAGE>
Total Foreign Bonds (Non U.S. Dollars) (cost
$38,752,313)....................................... 41,477,821
-----------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS -
(COST $43,564,928)........................... 98.7% 46,108,930
OTHER ASSETS AND
LIABILITIES - NET............................ 1.3 627,131
----- -----------
NET ASSETS -.................................. 100.0% $46,736,061
===== ===========
</TABLE>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
U.S. $ VALUE AT IN EXCHANGE UNREALIZED
EXCHANGE DATE CONTRACTS TO DELIVER SEPTEMBER 30, 1998 FOR U.S. $ DEPRECIATION
- - --------------------------------------------------------------------------------------------
Forward Foreign Currency Exchange Contracts to Sell:
<S> <C> <C> <C> <C> <C>
12/23/98 6,400,000 Canadian Dollar 4,194,933 4,191,773 $ (3,160)
10/14/98 3,300,000 German Deutsche Mark 1,977,565 1,811,197 (166,368)
12/23/98 11,270,000 German Deutsche Mark 6,777,093 6,740,431 (36,662)
10/14/98 6,126,000 Danish Krone 964,854 947,124 (17,730)
10/13/98 12,250,000 French Franc 2,189,073 2,058,823 (130,250)
10/14/98 22,120,000 French Franc 3,953,049 3,621,777 (331,272)
12/24/98 11,000,000 French Franc 1,972,698 1,943,119 (29,579)
10/13/98 2,200,000 British Pound Sterling 3,737,587 3,575,000 (162,587)
10/23/98 600,000 British Pound Sterling 1,018,788 1,007,406 (11,382)
12/9/98 1,850,000 Dutch Guilder 986,115 937,896 (48,219)
10/14/98 14,260,000 Swedish Krone 1,820,239 1,792,132 (28,107)
11/24/98 8,440,000 Swedish Krone 1,078,604 1,069,282 (9,322)
11/24/98 14,260,000 Swedish Krone 1,942,509 1,920,404 (22,105)
---------
$(996,743)
=========
</TABLE>
SUMMARY OF ABBREVIATIONS:
AUD Australian Dollar
CAD Canadian Dollar
DEM German Deutsche Mark
DKK Danish Krone
FRF French Franc
GBP British Pound Sterling
NLG Dutch Guilder
NZD New Zealand Dollar
SEK Swedish Krone
See Combined Notes to Financial Statements.
56
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Limited Duration Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
September 30, 1998
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - 14.5%
$ 143,507 Aames Mortgage Trust,
Series 1996, Class A1B,
7.275%, 5/15/20...................................... $ 145,284
850,000 Chase Credit Card Master Trust,
Series 1997-2, Class A,
6.30%, 4/15/03....................................... 871,467
247,900 Chevy Chase Auto Receivables,
Series 1995-1, Class A,
6.00%, 12/15/01...................................... 248,809
163,087 CIT RV Owner Trust,
Series 1995-B, Class A,
6.50%, 4/15/11....................................... 165,287
500,000 Contimortgage Home Equity
Loan Trust, Series 1997-4, Class A3,
6.26%, 7/15/12....................................... 503,268
210,000 Contimortgage Home Equity
Loan Trust, Series 1996-4, Class A5,
6.60%, 10/15/11...................................... 212,765
EQCC Home Equity Loan Trust:
136,546 Series 1996-2, Class A2,
6.70%, 9/15/08....................................... 138,035
76,755 Series 1996-4, Class A3,
6.26%, 11/15/06...................................... 77,043
750,000 Series 1997-1, Class A3,
6.84%, 9/15/11....................................... 768,626
500,000 Firstplus Home Loan Owner Trust, Series 1997-3, Class
A3,
6.57%, 10/10/10...................................... 504,558
531,325 Heller Equipment Asset Receivables, Series 1997-1,
Class A2,
6.39%, 5/25/05....................................... 537,257
Navistar Financial Owner Trust:
228,603 Series 1996-B, Class A3,
6.33%, 4/21/03....................................... 228,603
165,639 Series 1997-A, Class A2,
6.35%, 1/15/00....................................... 166,347
662,344 Olympic Automobile Receivables,
Series 1995-D, Class B,
6.10%, 4/15/02....................................... 667,203
525,000 Premier Auto Trust,
Series 1996-2, Class A4,
6.575%, 10/6/00...................................... 531,103
540,828 Student Loan Marketing Assoc., Series 1997-1, Class
A1,
5.003%, 10/25/05..................................... 538,272
129,276 The Money Store,
Home Equity Loan Trust,
Series 1993-B, Class A1,
5.40%, 8/15/05....................................... 129,234
750,000 Toyota Auto Lease Trust,
Series 1997-A, Class A2,
6.35%, 4/26/04....................................... 780,911
Union Acceptance Corp.:
123,228 Series 1995-A, Class A,
7.725%, 3/10/01...................................... 124,283
367,091 Series 1995-D, Class B,
6.025%, 1/7/03....................................... 369,266
<PAGE>
307,596 Series 1996-A, Class A,
5.40%, 4/7/03........................................ 308,093
1,800,000 Series 1996-D, Class A2,
6.17%, 10/9/02....................................... 1,822,275
115,217 Series 1997-A, Class A1,
6.13%, 7/10/01....................................... 115,513
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - CONTINUED
$ 430,000 Vanderbilt Mortgage and Finance Inc., Series 1997-B,
Class 1A2,
6.775%, 1/7/08....................................... $ 439,221
-----------
Total Asset-Backed Securities
(cost $10,284,747).................................. 10,392,723
-----------
CORPORATE BONDS - 38.9%
BANKS - 3.6%
1,000,000 Banc One, MTN,
7.00%, 3/25/02....................................... 1,049,882
500,000 Citicorp, FRN,
5.887%, 11/23/99..................................... 501,712
1,000,000 Wachovia Corp.,
6.375%, 4/15/03...................................... 1,045,328
-----------
2,596,922
-----------
CHEMICAL & AGRICULTURAL PRODUCTS - 1.5%
1,000,000 Hoechst Celanese Corp.,
6.125%, 2/1/04....................................... 1,048,741
-----------
COMMUNICATION SYSTEMS & SERVICES - 0.7%
500,000 TCI Communications,
6.375%, 9/15/99...................................... 505,711
-----------
CONSUMER PRODUCTS & SERVICES - 1.5%
1,000,000 Honeywell, Inc.,
6.75%, 3/15/02....................................... 1,056,029
-----------
FINANCE & INSURANCE - 24.2% Associates Corp., N.A.:
1,250,000 6.00%, 6/15/00....................................... 1,265,418
525,000 6.25%, 3/15/99....................................... 526,464
1,000,000 Caterpillar Financial Services, MTN,
6.75%, 6/15/01....................................... 1,039,546
510,000 Chrysler Financial Corp.,
6.375%, 1/28/00...................................... 516,770
1,000,000 CIT Group Holdings, Inc. MTN,
6.15%, 12/15/02...................................... 1,028,210
500,000 Fleet Mortgage Group, Inc.,
6.50%, 9/15/99....................................... 504,851
1,000,000 Ford Motor Credit Co.,
6.55%, 9/10/02....................................... 1,042,819
General Motors Acceptance Corp., MTN:
700,000 5.593%, 12/9/99...................................... 700,479
500,000 5.95%, 4/20/01....................................... 507,815
750,000 Goldman Sachs Group LP,
6.60%, 7/15/02 (a)................................... 764,415
1,000,000 Ikon Capital, Inc., MTN,
6.73%, 6/15/01....................................... 1,004,501
<PAGE>
International Lease Finance Corp.:
1,000,000 6.00%, 6/15/03....................................... 1,028,024
1,000,000 7.00%, 5/15/00....................................... 1,025,335
850,000 Lehman Brothers Holdings Inc.,
6.50%, 7/18/00....................................... 846,574
255,000 Mellon Financial Corp.,
7.625%, 11/15/99..................................... 261,149
750,000 Morgan Stanley Dean Witter, MTN,
5.89%, 3/20/00....................................... 755,240
Morgan Stanley Group, Inc., FRN:
500,000 5.663%, 12/10/98..................................... 500,901
1,250,000 5.739%, 2/26/99...................................... 1,252,070
</TABLE>
57
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Limited Duration Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - CONTINUED
FINANCE & INSURANCE - CONTINUED
$ 395,000 NationsBank Corp.,
5.375%, 4/15/00....................................... $ 394,673
Salomon, Inc.:
750,000 6.50%, 3/1/00......................................... 759,073
1,000,000 7.30%, 5/15/02........................................ 1,055,559
500,000 Transamerica Finance Corp.,
6.75%, 6/1/00......................................... 510,644
-----------
17,290,530
-----------
FOOD & BEVERAGE PRODUCTS - 3.6%
1,000,000 Coca-Cola Enterprises, Inc.,
6.375%, 8/1/01........................................ 1,031,080
1,500,000 Pepsico, Inc., MTN,
6.375%, 12/31/99...................................... 1,526,328
-----------
2,557,408
-----------
PAPER & PACKAGING - 1.4%
1,000,000 International Paper Co.,
7.00%, 6/1/01......................................... 1,041,057
-----------
RETAILING & WHOLESALE - 2.4% Sears Roebuck Acceptance Corp., MTN:
650,000 6.38%, 2/16/99........................................ 652,194
1,000,000 6.56%, 11/20/03....................................... 1,050,494
-----------
1,702,688
-----------
Total Corporate Bonds
(cost $27,347,432)................................... 27,799,086
-----------
<PAGE>
COLLATERALIZED MORTGAGE OBLIGATIONS - 1.2%
857,564 Prudential Home Mortgage
Securities Co., Series
1992-45, Class A4,
6.50%, 1/25/00 (cost $853,276)........................ 861,779
-----------
U.S. AGENCY OBLIGATIONS - 8.4%
750,000 Federal Home Loan Bank, FRN,
5.52%, 6/17/99........................................ 750,232
Federal Home Loan Mortgage Corp.:
476,272 6.00%, 1/1/01......................................... 478,258
847,135 6.00%, 9/1/01......................................... 853,209
1,499,152 7.00%, 12/1/99........................................ 1,515,178
235,948 8.00%, 1/1/99......................................... 237,647
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
U.S. AGENCY OBLIGATIONS - CONTINUED
$ 753,619 Federal National Mortgage Assoc.,
6.50%, 9/1/05......................................... $ 768,450
500,000 Federal National Mortgage Assoc., MTN,
5.546%, 10/20/98...................................... 499,985
864,319 Government National Mortgage Assoc.,
6.50%, 12/15/08....................................... 885,996
-----------
Total U.S. Agency Obligations
(cost $5,922,332).................................... 5,988,955
-----------
U.S. TREASURY NOTES - 25.2%
U.S. Treasury Notes:
2,000,000 5.25%, 8/15/03........................................ 2,090,002
4,000,000 5.375%, 2/15/01....................................... 4,091,252
1,000,000 6.00%, 8/15/00........................................ 1,028,751
1,000,000 6.375%, 1/15/99....................................... 1,005,626
1,000,000 6.375%, 5/15/99....................................... 1,010,626
5,000,000 6.375%, 5/15/00....................................... 5,148,440
3,500,000 7.50%, 10/31/99....................................... 3,606,095
-----------
Total U. S. Treasury Notes
(cost $17,643,796)................................... 17,980,792
-----------
YANKEE OBLIGATIONS - 3.0%
1,000,000 WMC Finance USA Limited,
6.50%, 11/15/03 ...................................... 1,052,588
1,000,000 Hanson PLC,
7.375%, 1/15/03....................................... 1,077,191
-----------
Total Yankee Obligations
(cost $2,051,214).................................... 2,129,779
-----------
FUNDING AGREEMENTS - 2.8%
2,000,000 Allstate Insurance,
5.698%, 10/1/98 (cost $2,000,000)..................... 2,000,000
-----------
REPURCHASE AGREEMENT - 5.1%
3,614,223 Dresdner Bank AG, 5.00% dated 9/30/98, due 10/1/98
cost, $3,614,223, maturity value $3,614,725 (b)...... 3,614,223
-----------
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
<S> <C> <C>
TOTAL INVESTMENTS -
(COST $69,717,020)................................... 99.1% 70,767,337
OTHER ASSETS AND
LIABILITIES - NET.................................... 0.9 657,095
----- -----------
NET ASSETS - ......................................... 100.0% $71,424,432
===== ===========
</TABLE>
(a) Securities that may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to Section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
(b) Repurchase agreement is collateralized by $3,615,605 U.S. Treasury Notes,
5.395%, due 6/30/03 with a value, including accrued interest, of $3,687,917.
SUMMARY OF ABBREVIATIONS:
FRN Floating Rate Note
MTN Medium Term Note
See Combined Notes to Financial Statements.
58
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Total Return Bond Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
FOREIGN BONDS - 5.4%
BANKS - 0.6%
$ 750,000 Kreditanst Fur Wie,
DEM 5.50%, 3/12/07........................................ $ 488,413
560,000 International Bank of Reconstruction & Development
NZD 7.25%, 5/27/03........................................ 291,987
----------
780,400
----------
FINANCE - 0.9%
1,000,000 DSL Finance NV,
DEM 5.00%, 7/23/04........................................ 634,217
2,500,000 Eksportfinans AS,
SEK 6.875%, 2/9/04........................................ 346,092
200,000 GMAC International Finance BV,
GBP 7.125%, 2/10/00....................................... 340,258
----------
1,320,567
----------
MANUFACTURING - DISTRIBUTING - 0.3%
840,000 Siemens Co Ordinat,
NLG 5.50%, 3/12/07........................................ 481,695
----------
UTILITIES - WATER - 0.1%
180,000 Vodohospodarska Vystavba,
<PAGE>
DEM 8.00%, 7/9/01......................................... 100,615
----------
GOVERNMENT - 3.5%
4,000,000 Denmark Kingdom,
DKK 6.00%, 11/15/02....................................... 667,538
1,000,000 Dutch Government
NLG 5.75%, 9/15/02........................................ 569,730
French Government:
3,500,000 5.25%, 4/25/08........................................ 682,149
FRF
2,500,000 5.50%, 4/25/29........................................ 484,392
FRF
German Federal Republic:
1,250,000 5.25%, 1/4/08......................................... 822,630
DEM
720,000 5.625%, 1/4/28........................................ 479,657
DEM
Kingdom of Sweden:
2,200,000 5.00%, 1/15/04........................................ 286,907
SEK
2,500,000 6.50%, 10/25/06....................................... 357,078
SEK
70,000 Mexican United States,
GBP 8.75%, 5/30/02........................................ 98,701
500,000 New Zealand,
NZD 8.00%, 4/15/04........................................ 277,586
----------
4,726,368
----------
Total Foreign Bonds
(cost $7,098,303).................................... 7,409,645
----------
MORTGAGE-BACKED SECURITIES - 21.8%
FEDERAL HOME LOAN MORTGAGE CORP. - 18.4%
6,213,797 7.00%, 6/1/27-5/1/28.................................. 6,390,828
11,829,568 7.50%, 10/1/11-7/1/28................................. 12,209,562
3,743,061 8.00%, 4/1/27-5/1/27.................................. 3,869,352
2,538,690 8.50%, 1/1/28......................................... 2,646,508
----------
25,116,250
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MORTGAGE-BACKED SECURITIES - CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.4%
$ 1,508,863 6.00%, 5/15/28.................................. $ 1,517,313
3,002,095 6.50%, 5/15/28.................................. 3,071,443
-------------
4,588,756
-------------
Total Mortgage-Backed Securities (cost
$29,447,311)................................... 29,705,006
-------------
U.S. TREASURY OBLIGATIONS - 29.3%
U.S. Treasury Bonds:
7,560,000 5.50%, 8/15/28.................................. 8,171,891
3,000,000 7.625%, 2/15/07................................. 3,290,628
2,000,000 7.875%, 2/15/21................................. 2,703,752
3,000,000 9.00%, 11/15/18................................. 4,430,628
U.S. Treasury Notes:
<PAGE>
3,000,000 5.50%, 2/28/03.................................. 3,139,689
2,700,000 5.625%, 11/30/00................................ 2,769,190
3,000,000 5.625%, 2/15/06................................. 3,238,128
2,175,000 5.875%, 10/31/98................................ 2,177,721
2,200,000 6.50%, 8/15/05.................................. 2,479,814
4,000,000 6.625%, 3/31/02................................. 4,288,752
2,850,000 7.50%, 11/15/01................................. 3,106,503
-------------
39,796,696
-------------
Total U.S. Treasury Obligations
(cost $37,701,787)............................. 39,796,696
-------------
YANKEE OBLIGATIONS - 1.4%
FINANCE - 0.5%
100,000 Hutchison Whampoa Finance Ltd.,
6.95%, 8/1/07................................... 87,325
500,000 ICI Finance Ned,
6.75%, 8/7/02................................... 527,336
-------------
614,661
-------------
OTHER - 0.2%
500,000 Mastellone Hermanos S A,
11.75%, 4/1/08 (a).............................. 320,000
-------------
PUBLISHING, BROADCASTING & ENTERTAINMENT - 0.4%
1,000,000 Radio E Televisao Bandeirantes,
12.875%, 5/15/06 (a)............................ 556,320
-------------
GOVERNMENT - 0.3%
100,000 Kingdom of Thailand,
7.75%, 4/15/07.................................. 79,493
100,000 Korea Republic,
8.75%, 4/15/03.................................. 91,507
100,000 Republic of Kazakhstan,
8.375%, 10/2/02................................. 68,758
100,000 Republic of Lithuania,
7.125%, 7/22/02................................. 90,359
100,000 Republic of Slovakia,
9.50%, 5/28/03.................................. 80,500
-------------
410,617
-------------
Total Yankee Obligations -
(cost $2,568,865).............................. 1,901,598
-------------
</TABLE>
59
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Total Return Bond Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<PAGE>
<C> <S> <C>
CORPORATE BONDS & NOTES - 39.0%
AUTOMOTIVE EQUIPMENT & MANUFACTURING - 0.3%
$ 500,000 Walbro Corp.,
10.125%, 12/15/07................................... $ 455,000
------------
BANKS - 3.2%
2,000,000 Bankers Trust New York Corp.,
7.25%, 10/15/11..................................... 2,063,908
2,000,000 Keycorp,
8.00%, 7/1/04....................................... 2,255,580
------------
4,319,488
------------
BROKERS - 1.5%
2,000,000 Paine Webber Group Inc.,
6.50%, 11/1/05...................................... 2,043,968
------------
CHEMICAL & AGRICULTURAL PRODUCTS - 0.2%
250,000 Polymer Group Inc.,
9.00%, 7/1/07....................................... 238,750
------------
COMMUNICATION SYSTEMS & SERVICES - 4.5%
500,000 Adelphia Communications Corp.,
9.875%, 3/1/07...................................... 540,000
2,000,000 Cable & Wireless Communication,
6.75%, 3/6/08....................................... 2,091,314
1,000,000 Century Communications Corp.,
(Eff. Yield 9.03%) (c)
0.00% 1/15/08....................................... 475,000
500,000 Lenfest Communications, Inc.,
8.375%, 11/1/05..................................... 528,750
1,000,000 Microcell Telecommunications,
(Eff. Yield 9.75%) (c)
0.00% 6/1/06........................................ 715,000
500,000 Price Communications Wireless,
9.125%, 12/15/06 (a)................................ 490,000
500,000 Rogers Cablesystems Ltd.,
9.625%, 8/1/02...................................... 530,000
500,000 Rural Cellular Corp.,
9.625%, 5/15/08..................................... 456,875
400,000 Winstar Communications Inc.,
(Eff. Yield 10.50%) (c)
0.00%, 10/15/05..................................... 270,000
------------
6,096,939
------------
ENERGY - 0.9% P&L Coal Holdings Corp.:
1,000,000 8.875%, 5/15/08 (a)................................. 1,020,000
250,000 9.625%, 5/15/08 (a)................................. 245,625
------------
1,265,625
------------
FINANCE & INSURANCE - 0.4%
500,000 Reliance Group Holdings Inc.,
9.75%, 11/15/03..................................... 517,500
------------
FINANCE - 5.0%
500,000 CB Richards Ellis Services Inc.,
8.875%, 6/1/06...................................... 491,250
2,000,000 Chrysler Financial Corp.,
6.16%, 7/28/99...................................... 2,009,894
2,000,000 Household Finance Corp.,
<PAGE>
8.00%, 8/1/04....................................... 2,243,656
2,000,000 Lincoln National Corp.,
7.00%, 3/15/18...................................... 2,071,286
------------
6,816,086
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS & NOTES - CONTINUED
FOOD & BEVERAGE PRODUCTS - 1.5%
$ 500,000 Aurora Foods Inc.,
8.75%, 7/1/08....................................... $ 517,500
500,000 Chiquita Brands International Inc.,
9.625%, 1/15/04..................................... 511,250
500,000 Perkins Family Restaurant,
10.125%, 12/15/07................................... 501,250
500,000 R A B Enterprises Inc.,
10.50%, 5/1/05 (a).................................. 467,500
------------
1,997,500
------------
GAMING - 0.2%
250,000 Grand Casino Inc.,
10.125%, 12/1/03.................................... 263,750
------------
HEALTHCARE PRODUCTS & SERVICES - 0.9%
500,000 Genesis Health,
9.75%, 6/15/05...................................... 495,000
500,000 Insight Health Services Corp.,
9.625%, 6/15/08 (a)................................. 452,500
250,000 Oxford Health Plans Inc.,
11.00%, 5/15/05 (a)................................. 212,500
------------
1,160,000
------------
INFORMATION SERVICES & TECHNOLOGY - 0.2%
250,000 Unisys Corp.,
12.00%, 4/15/03..................................... 278,750
------------
IRON & STEEL - 0.3%
500,000 WHX Corp.,
10.50%, 4/15/05..................................... 458,750
------------
METALS & MINING - 1.6%
2,000,000 Barrick Gold Corp Inc.,
7.50%, 5/1/07....................................... 2,222,566
------------
MANUFACTURING - DISTRIBUTING - 2.9%
750,000 Exide Corp.,
2.90%, 12/15/05 (a)................................. 375,938
500,000 International Knife and Saw,
11.375%, 11/15/06................................... 515,000
500,000 NSM Steel Inc.,
12.00%, 2/1/06 (a).................................. 248,750
750,000 Outboard Marine Corp.,
10.75%, 6/1/08 (a).................................. 724,687
2,000,000 Sony Corp.,
6.125%, 3/4/03...................................... 2,070,292
------------
3,934,667
<PAGE>
------------
OIL/ENERGY - 2.5%
500,000 HS Resources Inc.,
9.25%, 11/15/06..................................... 476,250
950,000 Parker Drilling Co.,
9.75%, 11/15/06..................................... 883,500
2,000,000 Petroleum Geo Services,
6.625%, 3/30/08..................................... 2,034,446
------------
3,394,196
------------
PAPER & PACKAGING - 1.5%
2,000,000 UPM-Kymmene Corp.,
6.875%, 11/26/07 (a)................................ 2,071,762
------------
</TABLE>
60
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Total Return Bond Fund
- - ----------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued)
September 30, 1998
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS & NOTES - CONTINUED
PUBLISHING, BROADCASTING & ENTERTAINMENT - 0.4%
$ 500,000 American Lawyer Media Inc.,
9.75%, 12/15/07..................................... $ 501,250
------------
REAL ESTATE - 0.7%
500,000 HMH Property Inc.,
7.875%, 8/1/08...................................... 493,750
500,000 MDC Holdings Inc.,
8.375%, 2/1/08...................................... 480,000
------------
973,750
------------
RETAILING & WHOLESALE - 4.8%
500,000 FRD Acquisition Co.,
12.50%, 7/15/04..................................... 500,000
500,000 Jitney Jungle Stores America Inc.,
10.375%, 9/15/07.................................... 505,000
2,000,000 Kroger Co.,
6.375%, 3/1/08...................................... 2,000,862
500,000 MTS Inc.,
9.375%, 5/1/05 (a).................................. 452,500
500,000 Pamida Inc.,
11.75%, 3/15/03..................................... 460,000
2,000,000 Sears Roebuck & Co.,
9.375%, 11/1/11..................................... 2,668,182
------------
6,586,544
------------
TELECOMMUNICATION SERVICES & EQUIPMENT - 1.2%
600,000 Acme Television LLC,
<PAGE>
(Eff. Yield 8.93%)
0.00%, 9/30/04...................................... 471,000
250,000 Comcast Corp.,
9.50%, 1/15/08...................................... 280,062
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS & NOTES - CONTINUED
TELECOMMUNICATION SERVICES &
EQUIPMENT - CONTINUED
$ 500,000 ICO Global Commerce,
15.00%, 8/1/05...................................... $ 397,500
500,000 Paging Network Inc.,
10.00%, 10/15/08.................................... 498,750
------------
1,647,312
------------
TEXTILE & APPAREL - 0.4%
500,000 Delta Mills Inc.,
9.625%, 9/1/07...................................... 467,500
------------
TRANSPORTATION - 3.9%
500,000 Cenargo International Ltd.,
9.75%, 6/15/08...................................... 411,250
2,000,000 Federal Express Corp.,
9.875%, 4/1/02...................................... 2,294,818
1,882,790 Southwest Airlines Co.,
8.70%, 7/1/11....................................... 2,258,285
500,000 TBS Shipping International Ltd.,
10.00%, 5/1/05 (a).................................. 372,500
------------
5,336,853
------------
Total Corporate Bonds & Notes
(cost $53,618,313)................................. 53,048,506
------------
REPURCHASE AGREEMENTS - 3.6%
4,896,481 Dresdner Bank AG 5.00% dated 9/30/98, due 10/1/98, cost,
$4,896,481,
maturity value $4,897,161 (b)...................... 4,896,481
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS -
(COST $135,331,060)........................ 100.5% 136,757,932
OTHER ASSETS AND LIABILITIES - NET.......... (0.5) (735,876)
----- ------------
NET ASSETS -................................ 100.0% $136,022,056
===== ============
</TABLE>
(a) Securities that may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to Section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
(b) Repurchase agreements collateralized by $4,870,000 US Treasury Notes, 5.625%
due 12/31/99 with a value, including accrued interest, $4,994,782.
(c) Effective yield (calculated at date of purchase) is the annual yield at
which the bond accrues until its maturity date.
<PAGE>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
U.S. $ VALUE AT IN EXCHANGE UNREALIZED
EXCHANGE DATE CONTRACTS TO DELIVER SEPTEMBER 30, 1998 FOR U.S. $ DEPRECIATION
- - ------------------------------------------------------------------------------------
Forward Foreign Currency Exchange Contracts to Sell:
<S> <C> <C> <C> <C> <C>
11/13/98 300,000 French Francs 53,694 50,519 $ (3,175)
11/13/98 700,000 German Deutsche Marks 420,131 395,525 (24,606)
11/13/98 600,000 Danish Krone 94,541 88,843 (5,698)
11/13/98 300,000 Swedish Krone 38,327 37,008 (1,319)
--------
$(34,798)
========
</TABLE>
SUMMARY OF ABBREVIATIONS:
DEM German Deutsche Marks
DKK Danish Krone
FRF French Franc
GBP British Pound Sterling
NLG Netherland Guilder
NZD New Zealand Dollar
SEK Swedish Krona
See Combined Notes to Financial Statements.
61
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Fixed Income Funds
- - ----------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 1998
<TABLE>
<CAPTION>
ADJUSTABLE CORE FIXED INCOME INTERMEDIATE INTERNATIONAL LIMITED TOTAL RETURN
RATE BOND INCOME PLUS TAX EXEMPT BOND DURATION BOND
FUND FUND FUND FUND BOND FUND FUND FUND FUND
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments at
market value
(identified
cost -
$32,721,065,
$566,629,781,
$649,690,557,
$1,269,414,951,
$699,113,382,
$43,564,928,
$69,717,020 and
$135,331,060
respectively).... $32,618,579 $589,747,592 $676,348,837 $1,360,488,135 $743,943,962 $46,108,930 $70,767,337 $136,757,932
Cash.............. 2,699 0 0 3,439 423 290,906 0 0
Foreign currency
(cost $0, $0,
$0, $0, $0,
$120,191, $0 and
$30,185
respectively).... 0 0 0 0 0 117,577 0 30,531
Interest
receivable....... 289,561 7,306,695 8,100,318 21,789,595 11,018,786 1,356,610 911,363 2,109,052
Receivable for
investments
sold............. 242,865 2,460,514 53,668 0 0 0 0 444,023
Receivable for
Fund shares
<PAGE>
sold............. 0 332,761 523,054 2,171,445 131,000 0 0 0
Receivable from
investment
adviser.......... 0 0 0 0 0 0 5,790 0
Prepaid expenses
and other
assets........... 0 20,900 44,130 246,683 25,286 35,976 30,005 45,833
- - ------------------------------------------------------------------------------------------------------------------------------
Total assets.... 33,153,704 599,868,462 685,070,007 1,384,699,297 755,119,457 47,909,999 71,714,495 139,387,371
- - ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Dividends
payable.......... 24,486 2,433,853 2,285,266 5,816,049 2,765,892 127,722 116,705 158,799
Payable for
investments
purchased........ 299,190 0 43,171 0 0 0 0 3,067,850
Payable for Fund
shares
redeemed......... 0 293,359 3,571,744 3,187,617 138,162 0 116,849 0
Unrealized
depreciation on
forward foreign
currency
contracts........ 0 0 0 0 0 996,743 0 34,798
Due to
custodian........ 0 15,999 322 0 0 0 0 0
Distribution fee
payable.......... 988 85 2,428 2,782 827 117 383 5
Due to related
parties.......... 8,343 165,611 208,820 475,791 300,387 5,498 2,053 25,754
Accrued expenses
and other
liabilities...... 2,145 183,125 242,928 448,502 304,337 43,858 54,073 78,109
- - ------------------------------------------------------------------------------------------------------------------------------
Total
liabilities.... 335,152 3,092,032 6,354,679 9,930,741 3,509,605 1,173,938 290,063 3,365,315
- - ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS........ $32,818,552 $596,776,430 $678,715,328 $1,374,768,556 $751,609,852 $46,736,061 $71,424,432 $136,022,056
- - ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
REPRESENTED BY
Paid-in capital... $33,537,970 $561,891,384 $653,937,008 $1,272,861,362 $697,084,509 $48,146,440 $70,251,242 $136,338,755
Undistributed net
investment
income........... 2,876 (199,613) (288,591) (242,819) 10,524 (103,870) 5,023 4,751
Accumulated net
realized gains
or losses on
investments and
foreign currency
related
transactions..... (619,808) 11,966,848 (1,591,369) 11,076,829 9,684,239 (2,897,681) 117,850 (1,719,312)
Net unrealized
appreciation
(depreciation)
on investments
and foreign
currency related
transactions..... (102,486) 23,117,811 26,658,280 91,073,184 44,830,580 1,591,172 1,050,317 1,397,862
- - ------------------------------------------------------------------------------------------------------------------------------
TOTAL NET
ASSETS......... $32,818,552 $596,776,430 $678,715,328 $1,374,768,556 $751,609,852 $46,736,061 $71,424,432 $136,022,056
- - ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST
OF
Institutional
Shares........... $23,173,962 $125,069,522 $668,906,868 $1,367,240,083 $746,873,697 $46,606,596 $70,810,095 $135,998,399
Institutional
Service Shares... 9,644,590 285,979 9,808,460 7,528,473 4,736,155 129,465 614,337 23,657
Institutional
Charitable
Shares........... 0 471,420,929 0 0 0 0 0 0
- - ------------------------------------------------------------------------------------------------------------------------------
$32,818,552 $596,776,430 $678,715,328 $1,374,768,556 $751,609,852 $46,736,061 $71,424,432 $136,022,056
- - ------------------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING
Institutional
Shares........... 2,395,201 11,345,900 109,255,445 231,012,949 11,129,384 4,893,330 6,731,896 1,363,876
Institutional
Service Shares... 996,046 25,943 1,602,027 1,272,214 70,574 13,607 58,402 237
Institutional
Charitable
Shares........... 0 42,765,453 0 0 0 0 0 0
- - ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE
PER SHARE
Institutional
Shares........... $9.68 $11.02 $6.12 $5.92 $67.11 $9.52 $10.52 $99.71
- - ------------------------------------------------------------------------------------------------------------------------------
Institutional
Service Shares... $9.68 $11.02 $6.12 $5.92 $67.11 $9.51 $10.52 $99.71
<PAGE>
- - ------------------------------------------------------------------------------------------------------------------------------
Institutional
Charitable
Shares........... -- $11.02 -- -- -- -- -- --
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
62
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Fixed Income Funds
- - ----------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
Period Ended September 30, 1998
<TABLE>
<CAPTION>
ADJUSTABLE CORE FIXED INCOME INTERMEDIATE INTERNATIONAL LIMITED TOTAL RETURN
RATE BOND INCOME PLUS TAX EXEMPT BOND DURATION BOND
FUND* FUND** FUND** FUND** BOND FUND** FUND*** FUND** FUND****
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest............ $1,314,020 $29,830,414 $28,882,276 $ 68,024,173 $33,259,276 $ 574,578 $3,235,267 $ 3,826,787
- - ---------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fee...... 61,312 1,862,392 2,219,526 5,151,727 3,831,537 60,189 154,868 209,962
Distribution Plan
expenses........... 14,710 285 8,535 6,981 3,458 92 268 13
Administrative
services fees...... 0 133,870 125,951 293,363 183,098 1,735 14,591 14,250
Transfer agent
fees............... 0 64,475 1,404 731 2,541 234 784 33
Trustees' fees and
expenses........... 1,642 10,575 9,068 18,181 14,071 194 972 588
Registration and
filing fees........ 0 232,757 282,924 407,366 296,508 1,082 80,633 75,675
Custodian fees...... 139,675 116,572 319,995 196,048 2,424 15,747 17,932
Professional fees... 3,974 27,566 25,929 36,740 27,961 24,137 21,636 27,110
Shareholder reports
expense............ 0 17,363 22,652 44,682 32,056 1,353 16,231 4,921
Organizational
fees............... 0 0 0 0 0 38,864 0 0
Other............... 0 10,034 9,979 23,995 30,105 0 2,506 900
- - ---------------------------------------------------------------------------------------------------------------------------
Total expenses..... 81,638 2,498,992 2,822,540 6,303,761 4,617,383 130,304 308,236 351,384
Less: Indirectly
paid expenses...... 0 (15,383) (768) (13,722) (1,847) 0 (448) (182)
Fee waivers....... 0 (526,182) (504,930) (1,033,751) (639,284) (45,948) (152,769) (135,770)
- - ---------------------------------------------------------------------------------------------------------------------------
Net expenses....... 81,638 1,957,427 2,316,842 5,256,288 3,976,252 84,356 155,019 215,432
- - ---------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT
INCOME............. 1,232,382 27,872,987 26,565,434 62,767,885 29,283,024 490,222 3,080,248 3,611,355
- - ---------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON
SECURITIES AND
FOREIGN CURRENCY
RELATED
TRANSACTIONS
Net realized gain (loss) on:
Securities.......... (78,229) 11,761,342 (496,271) 10,936,797 9,684,239 (227,959) 184,337 (1,717,936)
Foreign currency
related
transactions....... 0 0 0 0 0 (360,771) 0 0
Net change in
unrealized
appreciation
(depreciation) on
securities and
foreign currency
related
transactions....... (188,602) 5,569,632 18,257,417 34,820,095 16,064,710 1,578,308 616,411 1,397,862
- - ---------------------------------------------------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on
securities and
foreign currency
related
transactions....... (266,831) 17,330,974 17,761,146 45,756,892 25,748,949 989,578 800,748 (320,074)
- - ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET
<PAGE>
ASSETS RESULTING
FROM OPERATIONS.... $ 965,551 $45,203,961 $44,326,580 $108,524,777 $55,031,973 $1,479,800 $3,880,996 $ 3,291,281
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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.
** Fund commenced operations on November 24, 1997.
*** Three months ended September 30, 1998. The Fund changed its fiscal year end
from June 30 to September 30, effective September 30, 1998.
**** Fund commenced operations on April 20, 1998.
See Combined Notes to Financial Statements.
63
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Fixed Income Funds
- - ----------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
ADJUSTABLE INTERNATIONAL
RATE BOND
FUND FUND
----------------- -------------
Year Ended Year Ended
February 28, 1998 June 30, 1998
- - ----------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest...................................... $3,163,703 $2,066,080
- - ----------------------------------------------------------------------------
EXPENSES
Management fee................................ 137,489 220,826
Distribution Plan expenses.................... 17,676 1,344
Professional fees............................. 500 3,306
Trustees' fees and expenses................... 405 566
Custodian fees................................ 0 11,965
Registration and filing fees.................. 0 3,552
Administrative services fees.................. 0 90,347
Shareholder reports expense................... 0 11,143
Transfer agent fees........................... 0 10,840
Other......................................... 0 9,555
- - ----------------------------------------------------------------------------
Total expenses............................... 156,070 363,444
Less: Fee waivers............................. 0 (68,548)
- - ----------------------------------------------------------------------------
Net Expenses................................. 156,070 294,896
- - ----------------------------------------------------------------------------
NET INVESTMENT INCOME......................... 3,007,633 1,771,184
- - ----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
SECURITIES AND FOREIGN CURRENCY RELATED
TRANSACTIONS Net realized gain (loss) on:
Securities................................... 297,743 (1,082,597)
Foreign currency related transactions........ 0 840,135
Net change in unrealized appreciation
(depreciation) on securities and foreign
<PAGE>
currency related transactions................ (69,974) 38,713
- - ----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
securities and foreign currency related
transactions................................. 227,769 (203,749)
- - ----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... 3,235,402 1,567,435
- - ----------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
64
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Fixed Income Funds
- - ----------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Period Ended September 30, 1998
<TABLE>
<CAPTION>
ADJUSTABLE CORE FIXED INCOME INTERMEDIATE INTERNATIONAL LIMITED
RATE BOND INCOME PLUS TAX EXEMPT BOND DURATION
FUND* FUND** FUND** FUND** BOND FUND** FUND*** FUND**
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment
income.......... $ 1,232,382 $ 27,872,987 $ 26,565,434 $ 62,767,885 $ 29,283,024 $ 490,222 $ 3,080,248
Net realized gain
(loss) on:
Securities...... (78,229) 11,761,342 (496,271) 10,936,797 9,684,239 (227,959) 184,337
Foreign currency
related
transactions... 0 0 0 0 0 (360,771) 0
Net change in
unrealized
appreciation
(depreciation)
on securities
and foreign
currency related
transactions.... (188,602) 5,569,632 18,257,417 34,820,095 16,064,710 1,578,308 616,411
- - --------------------------------------------------------------------------------------------------------------------
Net increase in
net assets
resulting from
operations..... 965,551 45,203,961 44,326,580 108,524,777 55,031,973 1,479,800 3,880,996
- - --------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS
FROM NET
INVESTMENT
INCOME
Institutional
Shares.......... (887,998) (5,164,728) (26,373,150) (62,598,276) (29,222,895) (638,833) (3,073,999)
Institutional
Service Shares.. (344,384) (6,574) (192,964) (169,001) (60,129) (1,692) (6,249)
Institutional
Charitable
Shares.......... 0 (22,701,686) 0 0 0 0 0
- - --------------------------------------------------------------------------------------------------------------------
Total
distributions
to
shareholders... (1,232,382) (27,872,988) (26,566,114) (62,767,277) (29,283,024) (640,525) (3,080,248)
- - --------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE
TRANSACTIONS
Proceeds from
shares sold..... 12,620,392 763,461,851 584,709,292 1,335,192,430 815,300,441 8,607,670 76,083,563
Proceeds from
reinvestment of
distributions... 913,798 4,186,376 2,361,028 1,853,405 120,031 512,803 1,650,900
Payment for
shares
<PAGE>
redeemed........ (16,749,211) (188,202,770) (98,155,046) (170,985,567) (89,559,569) (144,292) (40,029,773)
Shares issued in
connection with
the acquisition
of:
CoreFund Bond
Fund........... 0 0 0 162,950,788 0 0 0
CoreFund Short
Term Income
Fund........... 0 0 0 0 0 0 32,918,994
CoreFund Short
Intermediate
Bond Fund...... 0 0 172,039,588 0 0 0 0
- - --------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
net
assets resulting
from capital
share
transactions... (3,215,021) 579,445,457 660,954,862 1,329,011,056 725,860,903 8,976,181 70,623,684
- - --------------------------------------------------------------------------------------------------------------------
Total increase
(decrease) in
net assets.... (3,481,852) 596,776,430 678,715,328 1,374,768,556 751,609,852 9,815,456 71,424,432
NET ASSETS
Beginning of
period.......... 36,300,404 0 0 0 0 36,920,605 0
- - --------------------------------------------------------------------------------------------------------------------
End of period.... $ 32,818,552 $ 596,776,430 $678,715,328 $1,374,768,556 $751,609,852 $46,736,061 $71,424,432
- - --------------------------------------------------------------------------------------------------------------------
Undistributed net
investment
income ......... $ 2,876 $ (199,613) $ (288,591) $ (242,819) $ 10,524 $ (103,870) $ 5,023
- - --------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL RETURN
BOND
FUND****
- - --------------------------------------------------------------------------------------------------------------------
<S> <C>
OPERATIONS
Net investment
income.......... $ 3,611,355
Net realized gain (loss) on:
Securities...... (1,717,936)
Foreign currency
related
transactions... 0
Net change in
unrealized
appreciation
(depreciation)
on securities
and foreign
currency related
transactions.... 1,397,862
- - --------------------------------------------------------------------------------------------------------------------
Net increase in
net assets
resulting from
operations..... 3,291,281
- - --------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS
FROM NET
INVESTMENT
INCOME
Institutional
Shares.......... (3,611,031)
Institutional
Service Shares.. (324)
Institutional
Charitable
Shares.......... 0
- - --------------------------------------------------------------------------------------------------------------------
Total
distributions
to
shareholders... (3,611,355)
- - --------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE
TRANSACTIONS
Proceeds from
shares sold..... 134,638,661
Proceeds from
reinvestment of
distributions... 3,130,119
Payment for
shares
<PAGE>
redeemed........ (1,426,650)
Shares issued in
connection with
the acquisition
of:
CoreFund Bond
Fund........... 0
CoreFund Short
Term Income
Fund........... 0
CoreFund Short
Intermediate
Bond Fund...... 0
- - --------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in
net
assets resulting
from capital
share
transactions... 136,342,130
- - --------------------------------------------------------------------------------------------------------------------
Total increase
(decrease) in
net assets.... 136,022,056
NET ASSETS
Beginning of
period.......... 0
- - --------------------------------------------------------------------------------------------------------------------
End of period.... $136,022,056
- - --------------------------------------------------------------------------------------------------------------------
Undistributed net
investment
income ......... $ 4,751
- - --------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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.
** Funds commenced operations on November 24, 1997.
*** Three months ended September 30, 1998. The Fund changed its fiscal year end
from June 30 to September 30, effective September 30,1998.
**** Fund commenced operations on April 20, 1998.
See Combined Notes to Financial Statements.
65
<PAGE>
- - ----------------------------------------------------------------------------
Evergreen
Select Fixed Income Fund
- - ----------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
ADJUSTABLE RATE FUND INTERNATIONAL BOND FUND
--------------------------- ------------------------
Year Five Months
Ended Ended Year Ended
February 28, February 28,* June 30,
------------ ------------- ------------------------
1998 1997 1998 1997
- - -------------------------------------------------------------------------------
(000's)
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income.. $ 3,007,633 $ 2,283,405 $ 1,771,184 $ 1,774
Net realized gain
(loss) on:
Securities............. 297,743 27,179 (1,082,597) 423
Foreign currency
related transactions.. 0 0 840,135
<PAGE>
Net change in
unrealized
appreciation
(depreciation) on
securities and foreign
currency related
transactions.......... (69,974) 38,889 38,713 (149)
- - -------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations............ 3,235,402 2,349,473 1,567,435 2,048
- - -------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM NET
INVESTMENT INCOME
Institutional Shares... (2,543,452) (1,889,020) (2,380,391) (2,621)
Institutional Service
Shares................ (437,527) (214,330) (14,784) (13)
- - -------------------------------------------------------------------------------
Total distributions to
shareholders.......... (2,980,979) (2,103,350) (2,395,175) (2,634)
- - -------------------------------------------------------------------------------
CAPITAL SHARE
TRANSACTIONS
Proceeds from shares
sold.................. 17,099,051 18,545,059 1,569,153 138
Proceeds from
reinvestment of
distributions......... 2,868,485 2,386,262 2,047,650 2,685
Payment for shares
redeemed.............. (57,749,240) (27,684,051) (640,270) (615)
- - -------------------------------------------------------------------------------
Net increase in net
assets resulting from
capital share
transactions.......... (37,781,704) (6,752,730) 2,976,533 2,208
- - -------------------------------------------------------------------------------
Total increase in net
assets............... (37,527,281) (6,506,607) 2,148,793 1,622
NET ASSETS
Beginning of period.... 73,827,685 80,334,292 34,771,812 33,150
- - -------------------------------------------------------------------------------
END OF PERIOD.......... $ 36,300,404 $ 73,827,685 $ 36,920,605 $ 34,772
- - -------------------------------------------------------------------------------
Undistributed net
investment income ..... $ (10,097) $ (250) $ 0 $ 0
- - -------------------------------------------------------------------------------
</TABLE>
* The Fund changed its fiscal year end from September 30 to the last day of
February, effective February 28, 1997.
See Combined Notes to Financial Statements.
66
<PAGE>
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Evergreen Select Fixed Income Funds consist of Evergreen Select Adjustable
<PAGE>
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 Tax
Exempt Bond Fund ("Intermediate Bond Fund"), Evergreen Select International Bond
Fund ("International Bond Fund"), Evergreen Select Limited Duration Fund
("Limited Duration Fund"), and Evergreen Select Total Return Bond Fund ("Total
Return Bond Fund") (collectively, the "Funds"). Each Fund is a diversified
series of Evergreen Select Fixed Income Trust (the "Trust"), a Delaware business
trust organized on September 18, 1997. The Trust is an open end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act").
The Funds offer an Institutional Class of shares ("Class I") and an
Institutional Service Class of shares ("Class IS"). Additionally, certain Funds
offer an Institutional Charitable Class of shares ("Class IC"). Each class of
shares is sold without a front-end sales charge or contingent deferred sales
charge. Class IS shares pay an ongoing service fee. Class I and Class IS shares
are available to institutional investors through broker-dealers, banks and other
financial intermediaries. Class IC shares are available only to those investors
that qualify as a non-profit organization under the Internal Revenue Code. Such
organizations would include charitable trusts, non-profit hospitals, private
foundations, private schools and colleges, public charities, religious entities
and charitable remainder trusts.
2. REORGANIZATION OF COREFUND GLOBAL BOND FUND
Effective on the close of business August 28, 1998, the International Bond Fund
acquired all of the assets and certain liabilities of the CoreFund Global Bond
Fund (the "CoreFund") through a tax-free exchange of shares. Shareholders of
Class A and Class Y shares of the CoreFund became owners of that number of full
and fractional shares of Class IS and Class I, respectively, of the
International Bond Fund having an aggregate net asset value equal to the
aggregate net asset value of their shares of the CoreFund immediately prior to
the close of business on August 28, 1998. The financial statements of the
International Bond Fund reflect the historical financial results of the CoreFund
prior to the reorganization. Additionally, the fiscal year end of the CoreFund
for financial reporting and tax purposes was changed to coincide with that of
the Trust.
3. COREFUND ACQUISITIONS
Effective July 27, 1998, the Funds noted below acquired substantially all the
assets and assumed certain liabilities of the following management investment
companies through tax-free exchanges. The value of net assets acquired, number
of shares issued, unrealized appreciation acquired and the aggregate net assets
of each Fund immediately after the acquisition are as follows:
<TABLE>
<CAPTION>
Value of Net Number of Unrealized Net Assets
Acquiring Fund Acquired Fund Assets Acquired Shares Issued Appreciation After Acquisition
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fixed Income Fund CoreFund Short Intermediate Bond Fund $172,039,588 28,782,616 $1,206,249 $ 672,078,330
Income Plus Fund CoreFund Bond Fund $162,950,788 28,298,931 $3,357,731 $1,341,154,434
Limited Duration Fund CoreFund Short Term Income Fund $ 32,918,994 3,162,720 $ 82,968 $ 86,669,648
</TABLE>
4. CONVERSION INFORMATION
On November 24, 1997, the Fixed Income Fund, Income Plus Fund, Intermediate Bond
Fund and Limited Duration Fund commenced operations of their respective Class I
shares, and the Core Bond Fund commenced operations of its Class IC shares, as a
result of a conversion of common trust funds managed by First Union National
Bank ("FUNB"), a subsidiary of First Union Corporation ("First Union").
<TABLE>
<CAPTION>
<PAGE>
Core Bond Fixed Income Income Plus Intermediate Limited
Fund Fund Fund Bond Fund Duration
Fund
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares issued........... 37,986,480 78,155,087 201,873,263 11,507,322 4,756,439
Net assets.............. $405,676,074 $465,572,501 $1,153,786,915 $746,085,404 $49,567,895
Net asset value per
share.................. 10.68 5.96 5.72 64.84 10.42
Unrealized appreciation
of investments......... 17,548,179 7,194,614 52,895,358 28,765,870 350,938
</TABLE>
The foregoing amounts are reflected as proceeds received from shares sold in the
statements of changes in net assets.
67
<PAGE>
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS (continued)
5. IN-KIND TRANSACTION
On January 21, 1998, the Evergreen Intermediate Term Bond Fund II, Class Y,
executed a redemption in kind transaction of $107,122,275. This transaction
resulted in the liquidation of substantially all of the net assets of this
Fund's Class Y shares. In turn, on January 22, 1998, the assets from this
transaction were transferred to the Core Bond Fund in exchange for 9,937,532
Class I shares. These amounts are reflected in proceeds from shares sold in the
statement of changes in net assets. In exchange for these shares, investment
securities, excluding cash and cash equivalents, with a cost and market value of
$105,937,662, were contributed to the Fund. Additionally, Core Bond Fund
received cash and other assets of $1,184,613 to complete the transaction.
6. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles, which
require management to make estimates and assumptions that affect amounts
reported herein. Actual results could differ from these estimates.
A. VALUATION OF SECURITIES
U.S. government obligations held by the Funds are valued at the mean between the
over-the-counter bid and asked prices. Corporate bonds, other fixed-income
securities, and mortgage and other asset-backed securities are valued at prices
provided by an independent pricing service. In determining a price for normal
institutional-size transactions, the pricing service uses methods based on
market transactions for comparable securities and analysis of various
relationships between similar securities, which are generally recognized by
institutional traders. Securities for which valuations are not readily available
from an independent pricing service (including restricted securities) are valued
at fair value as determined in good faith according to procedures established by
the Board of Trustees.
Short-term investments with remaining maturities of 60 days or less are carried
at amortized cost, which approximates market value.
B. REPURCHASE AGREEMENTS
Each Fund may invest in repurchase agreements. Securities pledged as collateral
<PAGE>
for repurchase agreements are held by the custodian on the Fund's behalf. Each
Fund monitors the adequacy of the collateral daily and will require the seller
to provide additional collateral in the event the market value of the securities
pledged falls below the carrying value of the repurchase agreement, including
accrued interest. Each Fund will only enter into repurchase agreements with
banks and other financial institutions which are deemed by the investment
advisor to be creditworthy pursuant to guidelines established by the Board of
Trustees.
Pursuant to an exemptive order issued by the Securities and Exchange Commission,
Adjustable Rate Fund along with certain other funds managed by Evergreen
Investment Management Company (formerly Keystone Investment Management Company)
("EIMCO"), a subsidiary of First Union, may transfer uninvested cash balances
into a joint trading account. These balances are invested in one or more
repurchase agreements that are fully collateralized by U.S. Treasury and/or
federal agency obligations.
C. REVERSE REPURCHASE AGREEMENTS
To obtain short-term financing, the Funds may enter into reverse repurchase
agreements with qualified third-party broker-dealers. Interest on the value of
reverse repurchase agreements is based upon competitive market rates at the time
of issuance. At the time the Fund enters into a reverse repurchase agreement, it
will establish and maintain a segregated account with the custodian containing
qualifying assets having a value not less than the repurchase price, including
accrued interest. If the counterparty to the transaction is rendered insolvent,
the ultimate realization of the securities to be repurchased by the Fund may be
delayed or limited.
D. FOREIGN CURRENCY
The books and records of the Funds are maintained in United States (U.S.) dol-
lars. Foreign currency amounts are translated into U.S. dollars as follows:
market value of investments, other assets and liabilities at the daily rate of
exchange; purchases and sales of investments, income and expenses at the rate
of exchange prevailing on the respective dates of such transactions. Net
unrealized foreign exchange gain (loss) resulting from
68
<PAGE>
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
changes in foreign currency exchange rates is a component of net unrealized
appreciation (depreciation) on investments and foreign currency related
transactions. Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investment securities transactions, foreign
currency related transactions and the difference between the amounts of interest
and dividends recorded on the books of the Fund and the amount actually received
and is included in realized gain (loss) on foreign currency related
transactions. The portion of foreign currency gains and losses related to
fluctuations in exchange rates between the initial purchase trade date and
subsequent sale trade date is included in realized gain (loss) on foreign
currency related transactions.
E. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Funds may enter into forward foreign currency exchange contracts ("forward
contracts") to settle portfolio purchases and sales of securities denominated in
a foreign currency and to hedge certain foreign currency assets or liabilities.
Forward contracts are recorded at the forward rate and marked-to-market daily.
Realized gains and losses arising from such transactions are included in
<PAGE>
net realized gains or losses on foreign currency related transactions. The Fund
bears the risk of an unfavorable change in the foreign currency exchange rate
underlying the forward contract and is subject to the credit risk that the other
party will not fulfill their obligations under the contract. Forward contracts
involve elements of market risk in excess of the amount reflected in the
statements of assets and liabilities.
F. SECURITIES LENDING
In order to generate income and to offset expenses, the Funds may lend portfolio
securities to brokers, dealers and other financial organizations. The Funds'
investment adviser will monitor the creditworthiness of such borrowers. Loans of
securities may not exceed 30% of a Fund's total assets and will be
collateralized by cash, letters of credit or U.S. Government securities that are
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities, including accrued interest. While such
securities are on loan, the borrower will pay a Fund any income accruing
thereon, and the Fund may invest the cash collateral in portfolio securities,
thereby increasing its return. A Fund will have the right to call any such loan
and obtain the securities loaned at any time on five days' notice. Any gain or
loss in the market price of the loaned securities, which occurs during the term
of the loan, would affect a Fund and its investors. A Fund may pay reasonable
fees in connection with such loans.
G. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts and amortization of premiums.
H. FEDERAL TAXES
The Funds have qualified and intend to continue to qualify as regulated
investment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Funds will not incur any federal income tax liability since
they are expected to distribute all of their net investment company taxable
income, net tax-exempt income and net capital gains, if any, to their
shareholders. The Funds also intend to avoid any excise tax liability by making
the required distributions under the Code. Accordingly, no provision for federal
taxes is required. To the extent that realized capital gains can be offset by
capital loss carryforwards, it is each Fund's policy not to distribute such
gains.
I. DISTRIBUTIONS
Distributions from net investment income for the Funds are declared daily and
paid monthly, with the exception of International Bond Fund which declares and
pays dividends quarterly. Distributions from net realized capital gains, if any,
are paid at least annually. Distributions to shareholders are recorded at the
close of business on the ex-dividend date.
Income and Capital gains distributions to shareholders are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles.
69
<PAGE>
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS (continued)
J. CLASS ALLOCATIONS
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the rela-
<PAGE>
tive net assets of each class. Currently, class specific expenses are limited to
expenses incurred under the Distribution Plans for Class IS.
7. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with a par
value of $0.001 authorized. Shares of beneficial interest of the Funds are
currently divided into Class I, Class IS and Class IC. Transactions in shares of
the Funds were as follows:
Adjustable Rate Fund
<TABLE>
<CAPTION>
Seven Months Five Months
Ended Year Ended Ended
September 30, 1998* February 28,1998 February 28, 1997**
------------------------ ------------------------- ---------------------
Shares Amount Shares Amount Shares Amount
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS I
Shares sold............. 694,346 $ 6,750,376 756,542 $ 7,370,775 1,030,429 $ 10,000,000
Shares issued in
reinvestment of
distributions.......... 76,201 739,024 254,776 2,481,417 221,061 2,145,897
Shares redeemed......... (1,040,259) (10,108,386) (5,579,904) (54,382,797) (830,759) (8,073,653)
- - ----------------------------------------------------------------------------------------------------
Net increase
(decrease)............. (269,712) $ (2,618,986) (4,568,586) $(44,530,605) 420,731 $ 4,072,244
- - ----------------------------------------------------------------------------------------------------
CLASS IS
Shares sold............. 603,561 $ 5,870,016 996,337 $ 9,728,276 879,121 $ 8,545,059
Shares issued in
reinvestment of
distributions.......... 18,011 174,774 39,661 387,068 24,800 240,365
Shares redeemed......... (683,194) (6,640,825) (344,863) (3,366,443) (2,020,244) (19,610,398)
- - ----------------------------------------------------------------------------------------------------
Net increase
(decrease)............. (61,622) $ (596,035) 691,135 $ 6,748,901 (1,116,323) $(10,824,974)
- - ----------------------------------------------------------------------------------------------------
</TABLE>
* The Fund changed its fiscal year end from the last day of February to
September 30, effective September 30, 1998.
**The Fund changed its fiscal year end from September 30 to the last day of
February, effective February 28, 1997.
Core Bond Fund
<TABLE>
<CAPTION>
December 19, 1997
(Commencement of Class
Operations) to
September 30, 1998
----------------------
Shares Amount
- - ---------------------------------------------------------------------------
<S> <C> <C>
CLASS I
Shares sold........................................ 25,320,737 $ 272,870,840
Shares issued in reinvestment of distributions..... 380,632 4,107,609
Shares redeemed.................................... (14,355,469) (154,715,985)
- - ---------------------------------------------------------------------------
Net increase....................................... 11,345,900 $ 122,262,464
- - ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
March 9, 1998
(Commencement of Class
Operations) to
<PAGE>
September 30, 1998
--------------------
Shares Amount
- - ----------------------------------------------------------------------------
<S> <C> <C>
CLASS IS
Shares sold........................................... 28,459 $ 298,107
Shares issued in reinvestment of distributions........ 466 5,043
Shares redeemed....................................... (2,982) (32,567)
- - ----------------------------------------------------------------------------
Net increase.......................................... 25,943 $ 270,583
- - ----------------------------------------------------------------------------
</TABLE>
70
<PAGE>
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS (continued)
Core Bond Fund
<TABLE>
<CAPTION>
November 24, 1997
(Commencement of Class
Operations) to
September 30, 1998
--------------------
Shares Amount
- - ----------------------------------------------------------------------------
<S> <C> <C>
CLASS IC
Shares sold........................................... 45,858,535 $490,292,904
Shares issued in reinvestment of distributions........ 6,818 73,724
Shares redeemed....................................... (3,099,900) (33,454,218)
- - ----------------------------------------------------------------------------
Net increase.......................................... 42,765,453 $456,912,410
- - ----------------------------------------------------------------------------
</TABLE>
Fixed Income Fund
<TABLE>
<CAPTION>
November 24, 1997
(Commencement of Class
Operations) to
September 30, 1998
---------------------
Shares Amount
- - --------------------------------------------------------------------------
<S> <C> <C>
CLASS I
Shares sold........................................ 96,306,245 $574,168,788
Shares issued in acquisition of CoreFund Short
Intermediate Bond Fund............................ 28,361,801 169,524,345
Shares issued in reinvestment of distributions..... 367,945 2,225,816
Shares redeemed.................................... (15,780,546) (94,528,967)
- - --------------------------------------------------------------------------
Net increase....................................... 109,255,445 $651,389,982
<PAGE>
- - --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
March 9, 1998
(Commencement of Class
Operations) to
September 30, 1998
--------------------
Shares Amount
- - --------------------------------------------------------------------------
<S> <C> <C>
CLASS IS
Shares sold......................................... 1,763,400 $ 10,540,504
Shares issued in acquisition of CoreFund Short
Intermediate Bond Fund............................. 420,815 2,515,243
Shares issued in reinvestment of distributions...... 22,476 135,212
Shares redeemed..................................... (604,664) (3,626,079)
- - --------------------------------------------------------------------------
Net increase........................................ 1,602,027 $ 9,564,880
- - --------------------------------------------------------------------------
</TABLE>
Income Plus Fund
<TABLE>
<CAPTION>
November 24, 1997
(Commencement of Class
Operations) to
September 30, 1998
-----------------------
Shares Amount
- - --------------------------------------------------------------------------
<S> <C> <C>
CLASS I
Shares sold...................................... 231,167,025 $1,322,240,227
Shares issued in acquisition of CoreFund Bond
Fund............................................ 28,015,168 161,316,824
Shares issued in reinvestment of distributions... 300,191 1,753,774
Shares redeemed.................................. (28,469,435) (163,795,977)
- - --------------------------------------------------------------------------
Net increase..................................... 231,012,949 $1,321,514,848
- - --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
March 2, 1998
(Commencement of Class
Operations) to
September 30, 1998
-------------------
Shares Amount
- - ---------------------------------------------------------------------------
<S> <C> <C>
CLASS IS
Shares sold........................................... 2,219,376 $12,952,203
Shares issued in acquisition of CoreFund Bond Fund.... 283,763 1,633,964
Shares issued in reinvestment of distributions........ 17,172 99,631
Shares redeemed....................................... (1,248,097) (7,189,590)
- - ---------------------------------------------------------------------------
Net increase.......................................... 1,272,214 $ 7,496,208
<PAGE>
- - ---------------------------------------------------------------------------
</TABLE>
71
<PAGE>
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS(continued)
Intermediate Tax Exempt Bond Fund
<TABLE>
<CAPTION>
November 24, 1997
(Commencement of Class
Operations) to
September 30, 1998
--------------------
Shares Amount
- - ----------------------------------------------------------------------------
<S> <C> <C>
CLASS I
Shares sold........................................... 12,457,190 $808,447,293
Shares issued in reinvestment of distributions........ 1,174 77,276
Shares redeemed....................................... (1,328,980) (87,315,146)
- - ----------------------------------------------------------------------------
Net increase.......................................... 11,129,384 $721,209,423
- - ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
March 2, 1998
(Commencement of Class
Operations) to
September 30, 1998
--------------------
Shares Amount
- - ----------------------------------------------------------------------------
<S> <C> <C>
CLASS IS
Shares sold........................................... 104,141 $ 6,853,148
Shares issued in reinvestment of distributions........ 647 42,755
Shares redeemed....................................... (34,214) (2,244,423)
- - ----------------------------------------------------------------------------
Net increase.......................................... 70,574 $ 4,651,480
- - ----------------------------------------------------------------------------
</TABLE>
International Bond Fund
<TABLE>
<CAPTION>
Three Months
Ended Year Ended Year Ended
September 30, 1998 June 30, 1998 June 30, 1997 (000's)
------------------- ------------------- -------------------
Shares Amount Shares Amount Shares Amount
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS I
<PAGE>
Shares sold............. 906,343 $8,607,462 157,657 $1,499,070 11 $ 107
Shares issued in
reinvestment of
distributions.......... 53,689 511,122 216,504 2,032,922 276 2,670
Shares redeemed......... (7,356) (70,319) (60,566) (577,276) (62) (602)
- - --------------------------------------------------------------------------------------
Net increase............ 952,676 $9,048,265 313,595 $2,954,716 225 $ 2,175
- - --------------------------------------------------------------------------------------
CLASS IS
Shares sold............. 22 $ 208 7,353 $ 70,083 3 $ 31
Shares issued in
reinvestment of
distributions.......... 177 1,681 1,571 14,728 1 15
Shares redeemed......... (7,900) (73,973) (6,711) (62,994) (1) (13)
- - --------------------------------------------------------------------------------------
Net increase
(decrease)............. (7,701) $ (72,084) 2,213 $ 21,817 3 $ 33
- - --------------------------------------------------------------------------------------
</TABLE>
Limited Duration Fund
<TABLE>
<CAPTION>
November 24, 1997
(Commencement of Class
Operations) to
September 30, 1998
--------------------
Shares Amount
- - --------------------------------------------------------------------------
<S> <C> <C>
CLASS I
Shares sold......................................... 7,297,523 $ 76,033,178
Shares issued in acquisition of CoreFund Short Term
Income Fund........................................ 3,109,745 32,367,615
Shares issued in reinvestment of distributions...... 157,603 1,644,655
Shares redeemed..................................... (3,832,975) (40,029,735)
- - --------------------------------------------------------------------------
Net increase........................................ 6,731,896 $ 70,015,713
- - --------------------------------------------------------------------------
<CAPTION>
July 28, 1998
(Commencement of Class
Operations) through
September 30, 1998
--------------------
Shares Amount
- - --------------------------------------------------------------------------
<S> <C> <C>
CLASS IS
Shares sold......................................... 4,835 $ 50,385
Shares issued in acquisition of CoreFund Short Term
Income Fund........................................ 52,975 551,379
Shares issued in reinvestment of distributions...... 596 6,245
Shares redeemed..................................... (4) (38)
- - --------------------------------------------------------------------------
Net increase........................................ 58,402 $ 607,971
- - --------------------------------------------------------------------------
</TABLE>
72
<PAGE>
<PAGE>
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS (continued)
Total Return Bond Fund
<TABLE>
<CAPTION>
April 20, 1998
(Commencement of Class
Operations) to
September 30, 1998
---------------------
Shares Amount
- - ----------------------------------------------------------------------------
<S> <C> <C>
CLASS I
Shares sold.......................................... 1,346,358 $ 134,570,252
Shares issued in reinvestment of distributions....... 31,423 3,130,119
Shares redeemed...................................... (13,905) (1,381,981)
- - ----------------------------------------------------------------------------
Net increase......................................... 1,363,876 $ 136,318,390
- - ----------------------------------------------------------------------------
<CAPTION>
August 3, 1998
(Commencement of Class
Operations) to
September 30, 1998
---------------------
Shares Amount
- - ----------------------------------------------------------------------------
<S> <C> <C>
CLASS IS
Shares sold.......................................... 689 $ 68,409
Shares issued in reinvestment of distributions....... 0 0
Shares redeemed...................................... (452) (44,669)
- - ----------------------------------------------------------------------------
Net increase......................................... 237 $ 23,740
- - ----------------------------------------------------------------------------
</TABLE>
8. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the period ended September 30, 1998:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
--------------------------- -----------------------
Government Non-Government Government Non-Government
----------------------------------------------------
<S> <C> <C> <C> <C>
Adjustable Rate Fund.... $ 16,324,897 $ 0 $ 15,353,426 $ 0
Core Bond Fund.......... 452,648,618 128,416,776 322,257,170 64,552,939
Fixed Income Fund....... 200,424.161 61,903,267 161,816,158 71,121,433
Income Plus Fund........ 404,061,589 134,491,186 265,388,031 162,632,219
Intermediate Bond Fund.. 0 343,961,060 0 343,718,606
International Bond
Fund................... 1,979,075 9,804,339 0 1,309,067
<PAGE>
Limited Duration Fund... 0 43,647,376 28,476,380 26,999,078
Total Return Bond Fund.. 134,920,063 91,221,124 60,227,273 31,444,637
</TABLE>
The Adjustable Rate Fund had an average daily balance of reverse repurchase
agreements outstanding during the seven months ended September 30, 1998 of
$48,633 at a weighted average interest rate of 5.55%. The maximum amount of
borrowing outstanding during the seven months ended September 30, 1998 was
$1,440,888 (including accrued interest). As of September 30, 1998, the Fund had
no outstanding reverse repurchase agreements.
For the fiscal years ended February 28, 1998 and June 30, 1998, Adjustable Rate
Fund and International Bond Fund, respectively, had the following cost of
purchases and proceeds from sales of investment securities (excluding short-term
securities):
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
-------------------------- ----------------------
Government Non-Government Government Non-Government
------------------------------------------------
<S> <C> <C> <C> <C>
Adjustable Rate Fund.... $48,809,646 -- $84,187,289 --
International Bond
Fund................... -- $20,192,000 -- $11,888,000
</TABLE>
The Income Plus Fund and Fixed Income Fund each loaned securities during the
period ended September 30, 1998 to certain brokers who paid each Fund a
negotiated lenders' fee. These fees are included in interest income. During the
period ended September 30, 1998, the Funds earned $62,279 and $21,485,
respectively, in income from securities lending. At September 30, 1998, the
Funds had no securities on loan.
73
<PAGE>
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS (continued)
On September 30, 1998, the tax cost and composition of gross unrealized gains
and losses on investment securities based on the aggregate cost of investments
for federal tax purposes was as follows:
<TABLE>
<CAPTION>
Gross Gross
Tax Unrealized Unrealized Net Unrealized
Cost Gains Losses Gains (Losses)
--------------------------------------------------
<S> <C> <C> <C> <C>
Adjustable Rate Fund.... $ 32,726,464 $ 112,923 $ (220,808) $ (107,885)
Core Bond Fund.......... 566,629,781 24,557,062 (1,439,251) 23,117,811
Fixed Income Fund....... 649,781,409 30,084,129 (3,516,701) 26,567,428
Income Plus Fund........ 1,269,414,951 99,173,752 (8,100,568) 91,073,184
Intermediate Bond Fund.. 699,113,382 44,976,863 (146,283) 44,830,580
International Bond
Fund................... 43,565,383 3,699,341 (1,155,794) 2,543,547
Limited Duration Fund... 69,717,020 1,099,922 (49,605) 1,050,317
Total Return Bond Fund.. 135,331,060 3,775,920 (2,349,048) 1,426,872
<PAGE>
</TABLE>
As of September 30, 1998, the following funds had capital loss carryovers for
federal income tax purposes as follows:
<TABLE>
<CAPTION>
Expiration
---------------------------------------------------------------------
2000 2001 2002 2003 2004 2005 2006
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Adjustable Rate Fund.... $198,000 $281,000 -- $ 43,000 -- -- $ 81,000
Fixed Income Fund....... 157,000 $1,229,000
International Bond
Fund................... -- -- $844,000 -- $729,000 $402,000 $923,000
</TABLE>
Fixed Income Fund's capital loss carryforward was created as a result of the
July 27, 1998 acquisition of substantially all the assets and assumption of
certain liabilities of CoreFund Short Intermediate Fund. In accordance with
income tax regulations, certain Fixed Income Fund gains may not be used to
offset this capital loss carryforward. In addition to capital loss carryovers,
capital losses incurred after October 31 within a Fund's fiscal year end are
deemed to arise on the first business day of the Fund's following fiscal year.
For the fiscal year ended September 30, 1998, Fixed Income Fund and Total Return
Bond Fund have incurred and elected to defer $114,532 and $1,719,312 of capital
loss, respectively.
9. DISTRIBUTION PLAN
Evergreen Distributor, Inc. ("EDI"), a wholly owned subsidiary of The BISYS
Group Inc. ("BISYS"), serves as principal underwriter to the Funds.
Each Fund has adopted a Distribution Plan for Class IS shares, as allowed by
Rule 12b-1 of the 1940 Act. Distribution plans permit a fund to reimburse its
principal underwriter for costs related to selling shares of the fund and for
various other services. These costs, which consist primarily of commissions and
service fees to broker-dealers who sell shares of the fund, are paid by the fund
through expenses called "Distribution Plan expenses". Class IS currently pays a
service fee equal to 0.25% of the average daily net assets of the class.
Distribution Plan expenses are calculated daily and paid monthly. Prior to July
1, 1998, SEI Financial Services ("SFS"), a wholly owned subsidiary of SEI, was
the International Bond Fund's distributor.
Each of the Distribution Plans may be terminated at any time by vote of the
Independent Trustees or by vote of a majority of the outstanding voting shares
of the respective class.
10. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND OTHER AFFILIATED
TRANSACTIONS
EIMCO is the investment adviser for the Adjustable Rate Fund. In return for
providing management and administrative services to the Fund, the Fund pays
EIMCO a management fee that is calculated daily and paid monthly. The management
fee is computed at an annual rate of 0.30% of the average daily net assets of
the Fund.
First International Advisors, Inc. ("First International") (formerly Analytic
TSA International), a subsidiary of First Union, is the investment adviser to
the International Bond Fund. First International is paid a management fee that
is calculated daily and paid monthly. The management fee is computed at an an-
nual rate of 0.60% of
<PAGE>
74
<PAGE>
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS (continued)
the average daily net assets of the Fund. First International waived advisory
fees of $45,948. Prior to July 1, 1998, the International Bond Fund had an
investment advisory agreement with CoreState Investment Advisers, Inc. ("CSIA").
Under this agreement CSIA was paid a fee of 0.60% based on the annual average
daily net assets of the Fund. Prior to July 1, 1998, First International
provided sub-investment advisory services to the Fund. CSIA was responsible for
the supervision, and payment of fees to First International. During the fiscal
year ended June 30, 1998, CSIA waived fees of $35,984.
FUNB is the investment adviser for Core Bond Fund, Fixed Income Fund, Income
Plus Fund, Intermediate Bond Fund, Limited Duration Fund, and Total Return Bond
Fund. In return for providing investment management and administrative services
to the Funds, each Fund pays FUNB a management fee that is calculated daily and
paid monthly based on a percentage of the Fund's respective average daily net
assets:
<TABLE>
<CAPTION>
Annual
Advisory Fee
--------
<S> <C>
Core Bond Fund....................... 0.40%
Fixed Income Fund.................... 0.50%
Income Plus Fund..................... 0.50%
Intermediate Bond Fund............... 0.60%
Limited Duration Fund................ 0.30%
Total Return Bond Fund............... 0.40%
</TABLE>
FUNB has voluntarily agreed to reduce the investment advisory fee on each Fund
by 0.10% and to reimburse a portion of each Fund's annual operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary expenses).
For the period ended September 30, 1998, FUNB voluntarily waived the following
amounts:
<TABLE>
<CAPTION>
Advisory Fees
Waived
-------------
<S> <C>
Core Bond Fund...................... $ 526,182
Fixed Income Fund................... 504,930
Income Plus Fund.................... 1,033,751
Intermediate Bond Fund.............. 639,284
Limited Duration Fund............... 152,769
Total Return Bond Fund.............. 135,770
</TABLE>
First International and EIMCO serve as sub-investment advisers to the Total
Return Bond Fund. These services are being provided at no additional cost to the
Fund. FUNB is responsible for the Supervision and payment of fees to First
International and EIMCO.
<PAGE>
Evergreen Investment Services, Inc. ("EIS"), a subsidiary of First Union, is the
administrator and BISYS Fund Services is sub-administrator to the Funds. As
administrator, EIS provides the Funds with facilities, equipment and personnel.
As sub-administrator to the Funds, BISYS Fund Services provides the officers of
the Funds. The administrator and sub-administrator for each Fund, other than
Adjustable Rate Fund, are entitled to an annual fee based on the average daily
net assets of the funds administered by EIS for which First Union or its
investment advisory subsidiaries are also the investment advisers. The
administration fee is calculated by applying percentage rates, which start at
0.05% and decline to 0.01% per annum as net assets increase, to the average
daily net assets of the Fund. The sub-administration fee is calculated by
applying percentage rates, which start at 0.01% and decline to 0.004% per annum
as net assets increase, to the average daily net assets of the Fund.
Prior to July 1, 1998, SEI Fund Resources ("SFR") acted as the International
Bond Fund's administrator. Under the terms of the agreement SFR was entitled to
receive an annual fee of 0.25% of the average daily net assets of the Fund. For
the year ended June 30, 1998, SFR waived fees of $32,564.
75
<PAGE>
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS (continued)
During the period ended September 30, 1998, the Funds, other than Adjustable
Rate Fund, paid or accrued to EIS and BISYS the following amounts for certain
administrative services:
<TABLE>
<CAPTION>
EIS BISYS
-------- ------
<S> <C> <C>
Core Bond Fund................... $108,456 25,414
Fixed Income Fund................ 101,741 24,210
Income Plus Fund................. 237,098 56,265
Intermediate Bond Fund........... 148,193 34,905
International Bond Fund.......... 1,093 642
Limited Duration Fund............ 11,778 2,813
Total Return Bond Fund........... 5,827 8,423
</TABLE>
Evergreen Service Company ("ESC"), a wholly-owned subsidiary of First Union,
serves as the transfer and dividend disbursing agent for the Funds. The Funds
have entered into an expense offset arrangement with ESC, relating to certain
cash balances held at First Union for the benefit of the Funds. Prior to August
28, 1998, Boston Financial Data Services ("BFDS") was the transfer and dividend
disbursing agent for the International Bond Fund.
Prior to the reorganization of International Bond Fund on July 1, 1998,
Corestates Bank (now First Union) served as Custodian to the Fund. Under the
Custodian Agreement, CoreStates Bank held the Fund's securities and cash items,
made receipts and disbursements of money on behalf of the Fund, collected and
received all income and other payments and distributions on account of the
Fund's securities and performed other related services.
Officers of the Funds and affiliated Trustees receive no compensation directly
from the Funds.
11. EXPENSE OFFSET ARRANGEMENT
<PAGE>
The Funds have entered into an expense offset arrangement with their custodian.
The uninvested cash deposited with the custodian under this expense offset
arrangement could have been invested in income-producing assets.
12. DEFERRED TRUSTEES' FEES
Each Independent Trustee of the Funds may defer any or all compensation related
to performance of their duties as Trustees. The Trustees' deferred balances are
allocated to deferral accounts, which are included in the accrued expenses for
the Fund. The investment performance of the deferral accounts are based on the
investment performance of certain Evergreen Funds. Any gains earned or losses
incurred in the deferral accounts are reported in each Fund's Trustees' fees and
expenses. Trustees will be paid either in one lump sum or in quarterly
installments for up to ten years at their election, not earlier than either the
year in which the Trustee ceases to be a member of the Board of Trustees or
January 1, 2000.
76
<PAGE>
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Trustees and Shareholders
Evergreen Select Fixed Income Trust
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Evergreen Select Adjustable Rate Fund, a series
of the Evergreen Select Fixed Income Trust, as of September 30, 1998, and the
related statements of operations for the seven months then ended and the year
ended February 28, 1998, the statements of changes in net assets for the seven
months ended September 30, 1998, the year ended February 28, 1998 and the five
months ended February 28, 1997, and the financial highlights for the six years
or periods ended September 30, 1998. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
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 and financial highlights. Our procedures included confirmation of
securities owned as of September 30, 1998 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
Evergreen Select Adjustable Rate Fund as of September 30, 1998, the results of
its operations, changes in its net assets and financial highlights for each of
the years or periods specified in the first paragraph above in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
<PAGE>
November 6, 1998
77
<PAGE>
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
Evergreen Select Core Bond Fund, Evergreen Select Fixed Income Fund,
Evergreen Select Income Plus Fund, Evergreen Select Intermediate Tax Exempt
Bond Fund,
Evergreen Select International Bond Fund, Evergreen Select Limited Duration
Fund
and Evergreen Select Total Return Bond Fund
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Evergreen Select Core Bond Fund,
Evergreen Select Fixed Income Fund, Evergreen Select Income Plus Fund, Evergreen
Select Intermediate Tax Exempt Bond Fund, Evergreen Select International Bond
Fund, Evergreen Select Limited Duration Fund and Evergreen Select Total Return
Bond Fund (the "Funds") at September 30, 1998, the results of operations,
changes in net assets and financial highlights of Evergreen Select International
Bond Fund for the three months in the period then ended, and the results of
operations, changes in net assets and financial highlights of Evergreen Select
Total Return Bond Fund, Evergreen Select Core Bond Fund, Evergreen Select Fixed
Income Fund, Evergreen Select Income Plus Fund, Evergreen Select Intermediate
Tax Exempt Bond Fund and Evergreen Select Limited Duration Fund for each of the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 1998 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above. The statement of operations of Evergreen
Select International Bond Fund for the year ended June 30, 1998, the statement
of changes in net assets for each of the two years in the period ended June 30,
1998, and the financial highlights for each of the four years in the period
ended June 30, 1998 and for the period December 15, 1993 (commencement of
operations) through June 30, 1994 were audited by other independent accountants
whose report dated August 25, 1998 expressed an unqualified opinion on those
statements.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
November 23, 1998
78
<PAGE>
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED)
YEAR 2000
Like other investment companies, the Funds could be adversely affected if the
computer systems used by the Funds' investment advisers and the Funds' other
service providers are not able to perform their intended functions effectively
after 1999 because of the inability of computer software to distinguish the year
2000 from the year 1900. The Funds' investment advisers are taking steps to
address this potential year 2000 problem with respect to the computer systems
that they use and to obtain satisfactory assurances that comparable steps are
being taken by the Funds' other major service providers. At this time, however,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on the Funds from this problem.
FEDERAL TAX STATUS OF DIVIDENDS
For the fiscal period ended 9/30/98, 99.16% of the dividends from net investment
income of the Select Intermediate Tax Exempt Fund are exempt from federal income
tax, other than alternative minimum tax.
79
<PAGE>
Evergreen Select Funds
Money Market Growth and Income/
Money Market Fund Balanced
Treasury Money Market Fund Equity Income Fund
100% Treasury Money Market Fund Balanced Fund
Municipal Money Market Fund
Growth
Municipal Fixed Small Company Growth Fund
Income Small Company Value Fund
Intermediate Tax Exempt Bond Fund Strategic Growth Fund
Common Stock Fund
Taxable Fixed Large Cap Blend Fund
Income Strategic Value Fund
International Bond Fund Diversified Value Fund
Total Return Bond Fund Social Principles Fund
Income Plus Fund
Core Bond Fund
Fixed Income Fund
Adjustable Rate Fund
Limited Duration Fund
543698 RVO 11/98
BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 19
HUDSON, MA
[LOGO OF EVERGREEN FUNDS(SM) APPEARS HERE]
200 Berkeley Street
Boston, MA 02116
A-80
<PAGE>
<PAGE>
Evergreen Select Core Bond Fund
Pro Forma Combining Financial Statements
Schedule of Investments (Unaudited)
September 30, 1998
<TABLE>
<CAPTION>
Core Bond Fund Tattersall Fund
----------------------- --------------------------
Principal Principal
Coupon Maturity Date Amount Value Amount Value
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSET-BACKED SECURITIES - 2.8%
Student Loan Marketing Assoc. - 0.7%
SLMA 5.08% 10/25/05 $2,138,652 $ 2,122,612
SLMA 5.82% 4/25/06 2,611,941 2,592,351
SLMA 5.25% 1/1/07 428,277 428,277
------------------------------------
5,143,240
-----------
Other - 2.1%
Advanta Mortgage Loan Trust 6.85% 5/25/12 $ 514,822 $ 513,810
Bankamerica 8.00% 10/10/26 650,000 705,510
CIT Receivables 5.40% 12/15/11 499,321 502,127
CIT Receivables 6.50% 4/15/11 197,138 200,771
Delta Funding Home Equity Loan Trust 6.60% 1/25/12 4,832,483 4,835,937
Fleetwood 4.70% 7/15/09 397,429 395,812
Fleetwood 6.75% 10/15/11 378,938 391,845
Greentree Financial 7.24% 6/15/28 775,000 812,293
Greentree Financial 6.18% 6/15/19 1,337,868 1,353,922
GT 7.62% 4/15/28 700,000 753,151
Jet Equipment Trust 9.41% 6/15/10 2,000,000 2,486,116
UCFC Loan Trust 7.15% 12/15/13 2,015,000 2,078,854
---------------------------------------------------
9,914,717 5,115,431
---------------------------------------------------
Total Asset-Backed Securities (cost $19,918,939) 9,914,717 10,258,671
----------
CORPORATE BONDS & NOTES - 20.2% Automotive Equipment & Manufacturing - 0.7%
Dana Corporation 7.00% 3/15/28 425,000 429,246
Ford Motor Co. 6.63% 2/15/28 300,000 303,759
Ford Motor Co. 8.90% 1/15/32 335,000 428,706
Ford Motor Co. 6.63% 10/1/28 900,000 912,519
GMAC 6.80% 4/17/01 1,400,000 1,456,209
General Motors 8.80% 3/1/21 235,000 295,797
TRW Inc. 6.25% 1/15/10 425,000 451,180
TRW Inc. 9.35% 6/4/20 350,000 453,968
------------------------
4,731,384
----------
Banks - 4.6%
Bank Of New York 6.50% 12/1/03 610,000 638,566
Firstar Bank, Milwaukee 6.25% 12/1/02 2,450,000 2,556,820
Harris Bancorp 9.38% 6/1/01 1,000,000 1,100,984
NBD Bank N.A., Subordinated Note 8.25% 11/1/24 4,000,000 4,809,984
NCNB Texas National Bank, Dallas Texas 9.50% 6/1/04 5,000,000 5,999,150
National City Bank 7.20% 5/15/05 900,000 975,384
Norwest Financial 6.05% 11/19/99 450,000 455,076
State Street Boston Corp. 7.35% 6/15/26 8,000,000 9,165,800
SunTrust Bank 6.13% 2/15/04 340,000 352,230
SunTrust Banks Inc. 6.00% 2/15/26 2,455,000 2,510,407
Westpac Banking 9.13% 8/15/01 4,000,000 4,385,976
---------------------------------------------------
27,972,301 4,978,076
---------- ---------
Brokers - 0.1%
Morgan Stanley Dean Witter 6.09% 9/9/01 500,000 510,885
------------------------
Diversified Companies - 0.1%
Textron Inc. 6.63% 11/15/07 510,000 548,444
------------------------
Finance - 4.6%
Associates Corp. North America 5.75% 10/15/03 700,000 709,303
Associates Corp. North America 5.96% 5/15/37 6,500,000 6,579,372
Beneficial Corp. 6.33% 10/9/01 800,000 824,472
Chrysler Financial Corp. MTN 6.16% 7/28/99 7,930,000 7,969,230
Finova Capital Corp. 6.25% 8/15/00 385,000 390,425
Ford Motor Credit Co. 8.00% 1/15/99 1,300,000 1,308,167
General Electric Capital Corp. 6.29% 12/15/07 7,500,000 7,750,425
GMAC 7.75% 1/15/99 3,150,000 3,168,421
KFW International Finance 8.85% 6/15/99 1,500,000 1,538,433
Mellon Financial 7.63% 11/15/99 915,000 938,616
Merrill Lynch & Co. Inc. 8.40% 11/1/19 1,600,000 1,828,202
---------------------------------------------------
30,142,250 2,862,816
---------- ----------
Food & Beverages - 0.1%
Coca-Cola Enterprises 6.75% 1/15/38 440,000 448,052
Coca Cola Enterprises 6.75% 9/15/28 325,000 335,693
-----------------------
783,745
----------
Industrial Specialty Products & Services - 1.4%
Dow Chemical Co. 8.55% 10/15/09 5,338,000 6,467,873
Owens Corning 7.50% 5/1/05 3,000,000 3,182,685
------------------------
9,650,558
----------
Information Services & Technology - 0.1%
IBM Corp. 6.50% 1/15/28 950,000 992,418
-----------------------
<PAGE>
<CAPTION>
Pro Forma
Combined
------------------------
Principal
Amount Value
- - ----------------------------------------------------------------------------
<S> <C> <C>
ASSET-BACKED SECURITIES - 2.8%
Student Loan Marketing Assoc. - 0.7%
SLMA $ 2,138,652 $ 2,122,612
SLMA 2,611,941 2,592,351
SLMA 428,277 428,277
-------------------------
5,143,240
-----------
Other - 2.1%
Advanta Mortgage Loan Trust 514,822 513,810
Bankamerica 650,000 705,510
CIT Receivables 499,321 502,127
CIT Receivables 197,138 200,771
Delta Funding Home Equity Loan Trust 4,832,483 4,835,937
Fleetwood 397,429 395,812
Fleetwood 378,938 391,845
Greentree Financial 775,000 812,293
Greentree Financial 1,337,868 1,353,922
GT 700,000 753,151
Jet Equipment Trust 2,000,000 2,486,116
UCFC Loan Trust 2,015,000 2,078,854
-------------------------
15,030,148
-------------------------
Total Asset-Backed Securities (cost $19,918,939) 20,173,388
-----------
CORPORATE BONDS & NOTES - 20.2% Automotive Equipment & Manufacturing - 0.7%
Dana Corporation 425,000 429,246
Ford Motor Co. 300,000 303,759
Ford Motor Co. 335,000 428,706
Ford Motor Co. 900,000 912,519
GMAC 1,400,000 1,456,209
General Motors 235,000 295,797
TRW Inc. 425,000 451,180
TRW Inc. 350,000 453,968
-------------------------
4,731,384
-----------
Banks - 4.6%
Bank Of New York 610,000 638,566
Firstar Bank, Milwaukee 2,450,000 2,556,820
Harris Bancorp 1,000,000 1,100,984
NBD Bank N.A., Subordinated Note 4,000,000 4,809,984
NCNB Texas National Bank, Dallas Texas 5,000,000 5,999,150
National City Bank 900,000 975,384
Norwest Financial 450,000 455,076
State Street Boston Corp. 8,000,000 9,165,800
SunTrust Bank 340,000 352,230
SunTrust Banks Inc. 2,455,000 2,510,407
Westpac Banking 4,000,000 4,385,976
-------------------------
32,950,377
-----------
Brokers - 0.1%
Morgan Stanley Dean Witter 500,000 510,885
-------------------------
Diversified Companies - 0.1%
Textron Inc. 510,000 548,444
-------------------------
Finance - 4.6%
Associates Corp. North America 700,000 709,303
Associates Corp. North America 6,500,000 6,579,372
Beneficial Corp. 800,000 824,472
Chrysler Financial Corp. MTN 7,930,000 7,969,230
Finova Capital Corp. 385,000 390,425
Ford Motor Credit Co. 1,300,000 1,308,167
General Electric Capital Corp. 7,500,000 7,750,425
GMAC 3,150,000 3,168,421
KFW International Finance 1,500,000 1,538,433
Mellon Financial 915,000 938,616
Merrill Lynch & Co. Inc. 1,600,000 1,828,202
-------------------------
33,005,066
-----------
Food & Beverages - 0.1%
Coca-Cola Enterprises 440,000 448,052
Coca Cola Enterprises 325,000 335,693
-------------------------
783,745
-----------
Industrial Specialty Products & Services - 1.4%
Dow Chemical Co. 5,338,000 6,467,873
Owens Corning 3,000,000 3,182,685
-------------------------
9,650,558
-----------
Information Services & Technology - 0.1%
IBM Corp. 950,000 992,418
-------------------------
</TABLE>
Page 1
<PAGE>
<PAGE>
Evergreen Select Core Bond Fund
Pro Forma Combining Financial Statements
Schedule of Investments (Unaudited)
September 30, 1998
<TABLE>
<CAPTION>
Core Bond Fund Tattersall Fund
-------------------------- --------------------------
Principal Principal
Coupon Maturity Date Amount Value Amount Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CORPORATE BONDS & NOTES (continued)
Insurance - 0.8%
Allmerica Financial Corp. 7.63% 10/15/25 $ 390,000 $ 415,892
Allstate Corp. 6.75% 5/15/18 $ 3,800,000 $ 3,864,163
Lincoln National Corp. 7.00% 3/15/18 1,700,000 1,760,593
----------- ----------- --------- ----------
5,624,756 415,892
Leasing - 0.2% ----------- ----------
International Lease Finance Corp. 6.42% 9/11/00 1,315,000 1,348,953
--------- ----------
Manufacturing - Distributing - 0.9%
Deere & Co. 8.95% 6/15/19 2,100,000 2,643,936
Ford Motor Co. 9.00% 9/15/01 3,500,000 3,879,449
----------- -----------
6,523,385
-----------
Metals & Mining - 0.1%
ALCOA Inc. 6.50% 6/15/18 775,000 794,693
--------- ----------
Oil/Energy - 2.1%
Phillips Petroleum Co. 7.13% 3/15/28 14,160,000 14,917,702
Phillips Petroleum Co. 6.65% 7/15/18 375,000 384,581
----------- ----------- --------- ----------
14,917,702 384,581
----------- ----------
Paper & Packaging - 1.8%
Caliber Systems Inc. 7.80% 8/1/06 5,520,000 6,001,862
Union Camp Inc. 6.50% 11/15/07 325,000 339,541
Westvaco Corp. 7.75% 2/15/23 6,000,000 6,754,260
----------- -----------
12,756,122 339,541
----------- ----------
Real Estate - 0.6%
Avalon Properties Inc. 6.63% 1/15/05 485,000 483,623
BRE Properties Inc. 7.13% 2/15/13 425,000 427,486
Duke Realty LP 7.05% 3/1/06 470,000 478,394
Duke Realty LP 6.75% 5/30/08 510,000 507,460
Equity Residential Inc. 6.55% 11/15/01 875,000 887,398
Equity Residential Inc. 6.63% 4/13/05 450,000 449,240
JDN Realty Corp. 6.95% 8/1/07 375,000 395,456
Price Development Co. 7.29% 3/11/08 485,000 484,370
4,113,427
----------
Retailing & Wholesale - 0.6%
Dayton Hudson Corp. 6.75% 1/1/28 370,000 376,242
May Department Stores Inc. 7.45% 9/15/11 275,000 314,168
May Department Stores Inc. 6.70% 9/15/28 650,000 670,969
Sears Roebuck Acceptance Corp. 5.63% 2/7/01 1,500,000 1,518,074
Sears Roebuck Inc. 6.86% 7/3/01 750,000 782,288
Sears Roebuck Inc. 6.99% 9/30/02 750,000 798,383
----------
4,460,124
----------
Telecommunication Services & Equipment - 0.3%
Bellsouth Telecommunications Inc. 6.38% 6/1/28 1,075,000 1,128,965
Pacific Bell Inc. 6.63% 11/1/09 600,000 667,074
---------- ----------
1,796,039
----------
Transportation - 0.1%
United Parcel Service Inc. 8.38% 4/1/30 420,000 534,790
---------- ----------
Utilities - 1.0%
Alltel Corp. 6.50% 11/1/13 1,100,000 1,213,425
Carolina Power & Light Co. 8.63% 9/15/21 2,000,000 2,598,606
Tenaska Washington Partners LP [a] 6.79% 9/23/11 3,000,000 3,142,500
----------- -----------
6,954,531
----------- -----------
Total Corporate Bonds & Notes (cost $136,609,875) 114,541,605 29,595,808
----------- ----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 2.0%
Collateralized Mortgage Obligation Trust 22 7.95% 5/1/17 2,801,488 2,832,598
Drexel Burnham Lambert CMO 8.50% 7/1/14 47,937 48,024
Federal National Mortgage Association REMIC 5.50% 2/25/15 6,098,250 6,088,767
Federal National Mortgage Association REMIC 7.75% 9/25/22 4,600,000 4,945,013
----------- -----------
Total Collateralized Mortgage Obligations (cost $13,494,035) 13,914,402
-----------
MORTGAGE-BACKED SECURITIES - 30.3%
Federal Home Loan Mortgage Corp. - 8.2%
FHLMC 6.44% 10/1/98 7,873,374 8,121,952
FHLMC 6.50% 10/1/08 - 4/1/28 17,757,713 18,094,044 1,425,000 1,510,352
FHLMC 6.75% 2/1/07 825,000 883,781
FHLMC 7.00% 3/15/07 - 4/1/28 17,399,678 17,876,081 2,525,194 2,694,414
FHLMC 7.50% 5/1/09 1,446,882 1,492,097
FHLMC 7.67% 10/1/98 1,863,315 1,973,381
FHLMC 8.00% 10/1/25 761,028 786,812
FHLMC, PC Guaranteed 5.85% 1/25/19 2,900,000 2,931,174
FHLMC, PC Guaranteed 6.50% 4/15/18 2,000,000 2,031,067
---------- ----------
53,306,608 5,088,547
---------- -----------
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
Combined
-----------------------
Principal
Amount Value
------------ -----------
<S> <C> <C>
CORPORATE BONDS & NOTES (continued)
Insurance - 0.8%
Allmerica Financial Corp. $ 390,000 $ 415,892
Allstate Corp. 3,800,000 3,864,163
Lincoln National Corp. 1,700,000 1,760,593
---------- -----------
6,040,648
-----------
Leasing - 0.2%
International Lease Finance Corp. 1,315,000 1,348,953
---------- -----------
Manufacturing - Distributing - 0.9%
Deere & Co. 2,100,000 2,643,936
Ford Motor Co. 3,500,000 3,879,449
---------- -----------
6,523,385
-----------
Metals & Mining - 0.1%
ALCOA Inc. 775,000 794,693
---------- -----------
Oil/Energy - 2.1%
Phillips Petroleum Co. 14,160,000 14,917,702
Phillips Petroleum Co. 375,000 384,581
---------- -----------
15,302,283
-----------
Paper & Packaging - 1.8%
Caliber Systems Inc. 5,520,000 6,001,862
Union Camp Inc. 325,000 339,541
Westvaco Corp. 6,000,000 6,754,260
---------- -----------
13,095,663
-----------
Real Estate - 0.6%
Avalon Properties Inc. 485,000 483,623
BRE Properties Inc. 425,000 427,486
Duke Realty LP 470,000 478,394
Duke Realty LP 510,000 507,460
Equity Residential Inc. 875,000 887,398
Equity Residential Inc. 450,000 449,240
JDN Realty Corp. 375,000 395,456
Price Development Co. 485,000 484,370
---------- -----------
4,113,427
-----------
Retailing & Wholesale - 0.6%
Dayton Hudson Corp. 370,000 376,242
May Department Stores Inc. 275,000 314,168
May Department Stores Inc. 650,000 670,969
Sears Roebuck Acceptance Corp. 1,500,000 1,518,074
Sears Roebuck Inc. 750,000 782,288
Sears Roebuck Inc. 750,000 798,383
---------- -----------
4,460,124
-----------
Telecommunication Services & Equipment - 0.3%
Bellsouth Telecommunications Inc. 1,075,000 1,128,965
Pacific Bell Inc. 600,000 667,074
---------- -----------
1,796,039
-----------
Transportation - 0.1%
United Parcel Service Inc. 420,000 534,790
---------- -----------
Utilities - 1.0%
Alltel Corp. 1,100,000 1,213,425
Carolina Power & Light Co. 2,000,000 2,598,606
Tenaska Washington Partners LP [a] 3,000,000 3,142,500
---------- -----------
6,954,531
-----------
Total Corporate Bonds & Notes (cost $136,609,875) 144,137,413
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 2.0%
Collateralized Mortgage Obligation Trust 22 2,801,488 2,832,598
Drexel Burnham Lambert CMO 47,937 48,024
Federal National Mortgage Association REMIC 6,098,250 6,088,767
Federal National Mortgage Association REMIC 4,600,000 4,945,013
---------- -----------
Total Collateralized Mortgage Obligations (cost $ 13,494,035) 13,914,402
-----------
MORTGAGE-BACKED SECURITIES - 30.3%
Federal Home Loan Mortgage Corp. - 8.2%
FHLMC 7,873,374 8,121,952
FHLMC 19,182,713 19,604,396
FHLMC 825,000 883,781
FHLMC 19,924,872 20,570,495
FHLMC 1,446,882 1,492,097
FHLMC 1,863,315 1,973,381
FHLMC 761,028 786,812
FHLMC, PC Guaranteed 2,900,000 2,931,174
FHLMC, PC Guaranteed 2,000,000 2,031,067
---------- -----------
58,395,155
-----------
<PAGE>
</TABLE>
<PAGE>
Evergreen Select Core Bond Fund
Pro Forma Combining Financial Statements
Schedule of Investments (Unaudited)
September 30, 1998
<TABLE>
<CAPTION>
Core Bond Fund Tattersall Fund
--------------------------- -------------------------
Principal Principal
Coupon Maturity Date Amount Value Amount Value
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MORTGAGE-BACKED SECURITIES (continued)
Federal National Mortgage Assoc. - 8.0%
FNMA 6.00% 11/1/00 - 11/1/28 $10,909,940 $ 10,969,073 $7,585,628 $ 7,603,479
FNMA 6.16% 10/1/98 5,038,078 5,155,117
FNMA 6.19% 9/1/08 1,275,000 1,338,152
FNMA 6.45% 8/1/13 750,000 778,125
FNMA 6.46% 9/1/27 5,174,664 5,271,860
FNMA 6.50% 10/1/98 - 10/2/28 11,109,438 11,328,160 4,210,000 4,403,236
FNMA 6.70% 11/1/07 545,801 589,397
FNMA 6.78% 4/1/04 813,176 864,508
FNMA 6.81% 8/1/04 1,460,651 1,561,755
FNMA 6.87% 4/1/06 557,395 603,032
FNMA 7.00% 7/1/05 - 9/1/07 1,386,825 1,455,637
FNMA 7.13% 5/1/04 1,186,519 1,283,851
FNMA 7.27% 10/1/98 1,318,253 1,353,484
FNMA 7.50% 5/25/07 - 5/25/21 1,232,077 1,334,961
FNMA 8.00% 7/25/22 776,666 857,727
FNMA 8.66% 1/1/05 597,119 682,022
------------------------- ------------------------
34,077,694 23,355,882
----------- -----------
Government National Mortgage Assoc. - 13.6%
GNMA 6.00% 3/15/11 - 4/15/11 2,844,497 2,889,583
GNMA 6.50% 10/1/98 - 7/15/28 20,957,769 21,464,133
GNMA 7.00% 10/1/98 - 10/15/28 40,816,251 42,109,142 6,502,039 6,670,605
GNMA 7.50% 8/15/12 - 12/15/27 4,628,466 4,801,138 5,157,767 5,351,393
GNMA 8.00% 6/15/24 - 8/15/27 11,390,685 11,916,743
GNMA 8.85% 5/15/18 - 7/15/18 580,594 623,192
GNMA 9.00% 4/15/20 - 8/15/21 872,645 931,277
GNMA 9.50% 2/15/21 355,552 384,219
------------------------- ------------------------
84,496,235 12,645,190
----------- -----------
Other - 0.5%
Contimortgage 6.19% 1/15/14 925,000 936,849
CSFB 6.26% 12/17/07 811,923 837,296
GSMS 6.31% 4/13/31 1,195,371 1,231,606
Lehman Brothers Mtge. Trust 8.00% 3/20/99 184,074 184,074
-----------
3,189,825
-----------------------------------------------------
Total Mortgage-Backed Securities (cost $212,578,677) 171,880,537 44,279,444
----------- -----------
U.S. AGENCY OBLIGATIONS - 10.4%
Farm Credit Systems Financial Assist Corp. 8.80% 6/10/05 8,300,000 10,136,018
Farm Credit Systems Financial Assist Corp. 9.38% 7/21/03 6,000,000 7,169,820
Federal Farm Credit Bank 8.65% 10/1/99 5,000,000 5,186,295
Federal National Mortgage Association 6.00% 5/15/08 47,700,000 51,500,021
-----------------------------------------------------
Total U.S. Agency Obligations (cost $69,737,928) 73,992,154
-----------
U.S. TREASURY OBLIGATIONS - 13.5%
U.S. Treasury Bonds
United States Treasury Bonds 6.88% 8/15/25 10,185,000 12,654,873
United States Treasury Bonds 8.75% 5/15/17 1,400,000 2,000,688
United States Treasury Bonds 8.13% 8/15/21 6,855,000 9,505,966
United States Treasury Bonds 8.88% 8/15/17 3,950,000 5,713,924
U.S. Treasury Notes
United States Treasury Notes 3.38% 1/15/07 1,704,766 1,679,194
United States Treasury Notes 3.63% 7/15/02 5,093,800 5,117,680
United States Treasury Notes 5.88% 1/31/99 15,000,000 15,065,640
United States Treasury Notes 5.88% 11/15/05 20,000,000 21,831,260
United States Treasury Notes 6.50% 5/31/01 3,155,000 3,321,142
United States Treasury Notes 6.50% 10/15/06 15,000,000 17,043,764
United States Treasury Notes 7.00% 7/15/06 2,260,000 2,632,900
-----------------------------------------------------
Total U.S. Treasury Obligations (cost $93,564,472) 79,427,829 17,139,202
----------- -----------
YANKEE OBLIGATIONS - 11.3%
Banks - 3.7%
Bayerische Landesbank Girozen 6.20% 2/9/06 5,000,000 5,168,724
Bayerische Landesbank Girozen 6.38% 8/31/00 2,500,000 2,556,283
Korea Development Bank 6.63% 11/21/03 5,000,000 3,849,550
Korea Development Bank 7.13% 9/17/01 6,350,000 5,427,174
Svenska Handelsbanken 8.13% 8/15/07 3,500,000 4,073,101
Svenska Handelsbanken 8.35% 7/15/04 5,000,000 5,720,444
-------------------------
26,795,276
-----------
Electronic Equipment & Services - 0.8%
Philips Electronics NV 7.13% 5/15/25 5,300,000 5,965,320
-------------------------
Finance - 1.5%
BHP Finance USA Ltd. 8.50% 12/1/12 7,000,000 8,667,876
WMC Finance USA Ltd. 6.50% 11/15/03 2,250,000 2,368,323
-------------------------
11,036,199
-----------
<PAGE>
Metals & Mining - 0.5%
Placer Dome Inc. 8.50% 12/31/45 3,000,000 3,281,718
-------------------------
<CAPTION>
Pro Forma
Combined
----------------------------
Principal
Amount Value
----------------------------
<S> <C> <C>
MORTGAGE-BACKED SECURITIES (continued)
Federal National Mortgage Assoc. - 8.0%
FNMA $ 18,495,568 $ 18,572,552
FNMA 5,038,078 5,155,117
FNMA 1,275,000 1,338,152
FNMA 750,000 778,125
FNMA 5,174,664 5,271,860
FNMA 15,319,438 15,731,396
FNMA 545,801 589,397
FNMA 813,176 864,508
FNMA 1,460,651 1,561,755
FNMA 557,395 603,032
FNMA 1,386,825 1,455,637
FNMA 1,186,519 1,283,851
FNMA 1,318,253 1,353,484
FNMA 1,232,077 1,334,961
FNMA 776,666 857,727
FNMA 597,119 682,022
----------------------------
57,433,576
-------------
Government National Mortgage Assoc. - 13.6%
GNMA 2,844,497 2,889,583
GNMA 20,957,769 21,464,133
GNMA 47,318,290 48,779,747
GNMA 9,786,233 10,152,531
GNMA 11,390,685 11,916,743
GNMA 580,594 623,192
GNMA 872,645 931,277
GNMA 355,552 384,219
----------------------------
97,141,425
------------
Other - 0.5%
Contimortgage 925,000 936,849
CSFB 811,923 837,296
GSMS 1,195,371 1,231,606
Lehman Brothers Mtge. Trust 184,074 184,074
------------
3,189,825
----------------------------
Total Mortgage-Backed Securities (cost $212,578,677) 216,159,981
------------
U.S. AGENCY OBLIGATIONS - 10.4%
Farm Credit Systems Financial Assist Corp. 8,300,000 10,136,018
Farm Credit Systems Financial Assist Corp. 6,000,000 7,169,820
Federal Farm Credit Bank 5,000,000 5,186,295
Federal National Mortgage Association 47,700,000 51,500,021
----------------------------
Total U.S. Agency Obligations (cost $69,737,928) 73,992,154
------------
U.S. TREASURY OBLIGATIONS - 13.5%
U.S. Treasury Bonds
United States Treasury Bonds 10,185,000 12,654,873
United States Treasury Bonds 1,400,000 2,000,688
United States Treasury Bonds 6,855,000 9,505,966
United States Treasury Bonds 3,950,000 5,713,924
U.S. Treasury Notes
United States Treasury Notes 1,704,766 1,679,194
United States Treasury Notes 5,093,800 5,117,680
United States Treasury Notes 15,000,000 15,065,640
United States Treasury Notes 20,000,000 21,831,260
United States Treasury Notes 3,155,000 3,321,142
United States Treasury Notes 15,000,000 17,043,764
United States Treasury Notes 2,260,000 2,632,900
----------------------------
Total U.S. Treasury Obligations (cost $93,564,472) 96,567,031
------------
YANKEE OBLIGATIONS - 11.3%
Banks - 3.7%
Bayerische Landesbank Girozen 5,000,000 5,168,724
Bayerische Landesbank Girozen 2,500,000 2,556,283
Korea Development Bank 5,000,000 3,849,550
Korea Development Bank 6,350,000 5,427,174
Svenska Handelsbanken 3,500,000 4,073,101
Svenska Handelsbanken 5,000,000 5,720,444
----------------------------
26,795,276
------------
Electronic Equipment & Services - 0.8%
Philips Electronics NV 5,300,000 5,965,320
----------------------------
Finance - 1.5%
BHP Finance USA Ltd. 7,000,000 8,667,876
WMC Finance USA Ltd. 2,250,000 2,368,323
----------------------------
11,036,199
------------
Metals & Mining - 0.5%
Placer Dome Inc. 3,000,000 3,281,718
----------------------------
<PAGE>
</TABLE>
Page 3
<PAGE>
Evergreen Select Core Bond Fund
Pro Forma Combining Financial Statements
Schedule of Investments (Unaudited)
September 30, 1998
<TABLE>
<CAPTION>
Core Bond Fund Tattersall Fund
---------------------- ------------------------
Principal Principal
Coupon Maturity Date Amount Value Amount Value
- ------------------------------------------------------------------------------------------------------------------------------
YANKEE OBLIGATIONS (continued)
<S> <C> <C> <C> <C> <C> <C>
Oil/Energy - 1.5%
Petro Canada Ltd. 8.60% 1/15/10 $ 8,020,000 $ 10,370,101
--------------------------
Utilities - 2.2%
Hydro-Quebec 8.00% 2/1/13 13,330,000 15,777,920
--------------------------
Government - 1.1%
Export Development Corp. 8.13% 8/10/99 2,000,000 2,046,768
Japan Finance Corp. Municipal Enterprises 6.85% 4/15/06 3,500,000 3,865,061
New Brunswick Province Canada 7.63% 2/15/13 1,500,000 1,788,285
--------------------------
7,700,114
------------------------------------------------------
Total Yankee Obligations (cost $73,673,337) 80,926,648
------------
REPURCHASE AGREEMENTS - 6.3%
Dresdner Bank AG [b] 5.00% 10/1/98 33,433,304 33,433,304
Star Bank Repo [c] 5.15% 10/1/98 11,785,000 11,785,000
------------------------------------------------------
Total Repurchase Agreements (cost $45,218,304) 33,433,304 11,785,000
------------ -------------
MUTUAL FUND SHARES - 2.9%
Open End Mutual Funds Shares Shares
------------- -----------
Valiant General Fund 11,716,395 11,716,396
Closed End Mutual Funds
Blackrock 1999 Term Trust 37,400 364,650
Blackrock 2001 Term Trust 226,400 2,037,600
Blackrock Investment Quality 53,900 485,100
Blackrock North American Government 63,200 639,900
Blackrock Strategic Term 125,300 1,151,193
Dean Witter Government Income Trust 12,000 108,000
Excelsior Income Shares 7,400 125,800
First Commonwealth Fund 15,500 165,656
Hyperion 1999 Term Trust 232,200 1,683,450
Hyperion 2002 Term Trust 201,000 1,695,938
Hyperion 2005 Investment Grade 4,100 36,131
Income Opportunities 1999 16,400 157,850
MFS Government Markets Inc. Trust 41,700 281,475
------------------------------------------------------
Total Mutual Fund Shares (cost $19,791,588) 11,716,396 8,932,743
------------- -------------
Total Market Value of Investments
(cost $684,587,155) 99.7% 589,747,592 121,990,868
Other Assets less liabilities (net) 0.3% 7,028,838 (4,686,564)
---------- ------------- -------------
Net Assets 100.00% $ 596,776,430 $ 117,304,304
---------- ------------- -------------
<CAPTION>
Pro Forma
Combined
----------------------------
Principal
Amount Value
- - --------------------------------------------------------------------------------
YANKEE OBLIGATIONS (continued)
<S> <C> <C>
Oil/Energy - 1.5%
Petro Canada Ltd. $ 8,020,000 $ 10,370,101
----------------------------
Utilities - 2.2%
Hydro-Quebec 13,330,000 15,777,920
----------------------------
Government - 1.1%
Export Development Corp. 2,000,000 2,046,768
Japan Finance Corp. Municipal Enterprises 3,500,000 3,865,061
New Brunswick Province Canada 1,500,000 1,788,285
----------------------------
7,700,114
----------------------------
Total Yankee Obligations (cost $73,673,337) 80,926,648
-------------
REPURCHASE AGREEMENTS - 6.3%
Dresdner Bank AG [b] 33,433,304 33,433,304
Star Bank Repo [c] 11,785,000 11,785,000
----------------------------
Total Repurchase Agreements (cost $45,218,304) 45,218,304
-------------
MUTUAL FUND SHARES - 2.9%
Open End Mutual Funds Shares
--------------
Valiant General Fund 11,716,395 11,716,396
Closed End Mutual Funds
Blackrock 1999 Term Trust 37,400 364,650
Blackrock 2001 Term Trust 226,400 2,037,600
<PAGE>
Blackrock Investment Quality 53,900 485,100
Blackrock North American Government 63,200 639,900
Blackrock Strategic Term 125,300 1,151,193
Dean Witter Government Income Trust 12,000 108,000
Excelsior Income Shares 7,400 125,800
First Commonwealth Fund 15,500 165,656
Hyperion 1999 Term Trust 232,200 1,683,450
Hyperion 2002 Term Trust 201,000 1,695,938
Hyperion 2005 Investment Grade 4,100 36,131
Income Opportunities 1999 16,400 157,850
MFS Government Markets Inc. Trust 41,700 281,475
----------------------------
Total Mutual Fund Shares (cost $19,791,588) 20,649,139
--------------
Total Market Value of Investments
(cost $684,587,155) 711,738,460
Other Assets less liabilities (net) 2,342,274
--------------
Net Assets $ 714,080,734
--------------
</TABLE>
[a] Securities that may be resold to "qualified institutional buyers" under
Rule 144a or securities offered pursuant to Section 4(2) of the Securities
Act of 1933, as amended. These securities have been determined to be liquid
under guidelines established by the Board of Trustees.
[b] Repurchase agreement is collateralized by $12,348,000 U.S. Treasury Notes,
5.50% due 3/31/03 and $20,180,000 U.S. Treasury Notes, 5.375% due 6/30/03
with an aggregate value, including accrued interest of $34,102,106.
[c] Joint repurchase agreement is fully collateralized by $12,560,000 GNMA II,
Pool #8375, 6.875%, due 2/20/24; $12,360,000 GNMA II, Pool #8932, 6.875%,
due 3/20/22; and $5,510,000 GNMA II, Pool #8395, 6.875%, due 3/20/24. The
aggregate market value of the collateral at September 30, 1998 was
$30,730,289. The Fund's pro-rata interest in the collateral at September
30, 1998 was $13,245,427.
Summary of Abbreviations:
CMO Collateralized Mortgage Obligation
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
MTN Medium Term Note
REMIC Real Estate Mortgage Investment Conduit
See Notes to Pro Forma Combining Financial Statements
Page 4
<PAGE>
Evergreen Select Core Bond Fund
Pro Forma Combining Financial Statements
Statement of Assets and Liabilities (Unaudited)
September 30, 1998
<TABLE>
<CAPTION>
Core Bond Tattersall Pro Forma
Fund Fund Adjustments Combined
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Indentified cost of securities $ 533,196,477 $ 106,172,374 $ 0 $ 639,368,851
Investments in repurchase agreements 33,433,304 11,785,000 $ 45,218,304
--------------------------------------------------------------
Total identified cost of securities 566,629,781 117,957,374 0 684,587,155
Net unrealized gain or loss on securities 23,117,811 4,033,494 0 27,151,305
--------------------------------------------------------------
Market value of securities 589,747,592 121,990,868 0 711,738,460
Cash 0 39,332 0 39,332
Interest and dividends receivable 7,306,695 1,063,048 0 8,369,743
Receivable for securities sold 2,460,514 5,657,871 0 8,118,385
Receivable for Fund shares sold 332,761 1,125,000 0 1,457,761
Prepaid expenses and other assets 20,900 13,565 0 34,465
--------------------------------------------------------------
Total Assets 599,868,462 129,889,684 0 729,758,146
Liabilities:
Distributions payable 2,433,853 49,998 0 2,483,851
Payable for securities purchased 0 12,398,526 0 12,398,526
Payable for Fund shares redeemed 293,359 102,375 0 395,734
Advisory fees payable 0 24,465 0 24,465
Distribution Plan expense payable 85 1,051 0 1,136
Due to custodian 15,999 0 0 15,999
Due to other related parties 165,611 8,165 0 173,776
Accrued expenses and other liabilities 183,125 800 0 183,925
--------------------------------------------------------------
Total Liabilities 3,092,032 12,585,380 0 15,677,412
Net Assets $ 596,776,430 $ 117,304,304 $ 0 $ 714,080,734
==============================================================
Net assets are comprised of:
Paid-in capital $ 561,891,384 $ 111,185,140 0 $ 673,076,524
Undistributed (overdistributed) net investment income (199,613) 8,115 0 (191,498)
Accumulated net realized gain or loss on securities 11,966,848 2,077,555 0 14,044,403
Net unrealized gain or loss on securities 23,117,811 4,033,494 0 27,151,305
--------------------------------------------------------------
Net Assets $ 596,776,430 $ 117,304,304 $ 0 $ 714,080,734
==============================================================
Class I Shares/Institutional Shares
Net Assets $ 125,069,522 $ 114,444,529 $ 239,514,051
Shares of Beneficial Interest Outstanding 11,345,900 10,211,169 176,055a 21,733,124
Net Asset Value $ 11.02 $ 11.21 -- $ 11.02
Class IS Shares/Service Group Shares
Net Assets $ 285,979 $ 2,859,775 $ 3,145,754
<PAGE>
Shares of Beneficial Interest Outstanding 25,943 255,186 4,400a 285,529
Net Asset Value $ 11.02 $ 11.21 $ 11.02
Class IC Shares
Net Assets $ 471,420,929 -- $ 471,420,929
Shares of Beneficial Interest Outstanding 42,765,453 -- 42,765,453
Net Asset Value $ 11.02 -- $ 11.02
</TABLE>
a Reflects the impact of converting shares of the target fund into the survivor
fund.
See Notes to Pro Forma Combined Financial Statements
<PAGE>
Evergreen Select Core Bond Fund
Pro Forma Combining Financial Statements
Statement of Operations (Unaudited)
September 30, 1998
<TABLE>
<CAPTION>
Core Bond Tattersall Pro Forma
Fund * Fund Adjustments Combined
------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest income $ 29,830,414 $ 5,994,958 $ 5,292,493 # $ 41,117,865
Dividend income 0 407,257 0 407,257
------------------------------------------------------------
Total investment income 29,830,414 6,402,215 5,292,493 41,525,122
------------------------------------------------------------
Expenses:+
Advisory fee $ 1,862,392 $ 376,937 $ 616,994 a $ 2,856,323
Administrative services fees 133,870 87,399 (19,689)b 201,580
Distribution Plan expenses 285 4,823 2,756 c 7,864
Transfer agent fee 64,475 0 48,764 d 113,239
Custodian fee 124,292 22,582 40,435 d 187,309
Printing and postage expenses 17,363 8,631 0 25,994
Registration and filing fees 232,757 6,677 0 239,434
Professional fees 27,566 15,557 (10,667)e 32,456
Trustees' fees and expenses 10,575 6,526 0 17,101
Other 10,034 5,251 (138)e 15,147
------------------------------------------------------------
Total Expenses 2,483,609 534,383 678,455 3,696,447
Less: Fee waivers and/or reimbursements (526,182) (26,977) (160,922)f (714,081)
------------------------------------------------------------
Net expenses 1,957,427 507,406 517,533 2,982,366
------------------------------------------------------------
Net investment income 27,872,987 5,894,809 4,774,960 38,542,756
Net realized and unrealized gains or losses on securities
Net realized gain or loss on securities 11,761,342 3,311,594 0 15,072,936
Net change in unrealized gain or loss on securities 5,569,632 1,885,350 0 7,454,982
------------------------------------------------------------
Net realized and unrealized gain or loss on securities 17,330,974 5,196,944 0 22,527,918
------------------------------------------------------------
Net increase in net assets resulting from operations $ 45,203,961 $ 11,091,753 4,774,960 $ 61,070,674
============================================================
</TABLE>
* For the period from November 24, 1997 (commencement of operations) to
September 30, 1998.
# Reflects annualization of interest income earned by Core Bond Fund. Proforma
combined interest income is for the twelve month period ended September 30,
1998.
+ Proforma operating expenses include the actual expenses of each Fund adjusted
to reflect the expected expenses of the combined entity for the twelve month
period ended September 30, 1998.
a Reflects an increase based on the surviving fund's advisory fee rate. b
Reflects a decrease based on the surviving fund's administrative fee schedule. c
Reflects an increase due to higher 12b-1 fees of the surviving fund. d Reflects
an increase based on the surviving fund's service contract. e Reflects expected
cost savings when the funds are combined. f Reflects an expense limit of 0.42%
for Class I and Class IC and 0.67% on
Class IS
See Notes to Pro Forma Combined Financial Statements
<PAGE>
Evergreen Select Core Bond Fund
Notes to Pro Forma Combining Financial Statements (Unaudited)
September 30, 1998
1. Basis of Combination - The Pro Forma Combining Statement of Assets and
Liabilities, including the Pro Forma Schedule of Investments and the
related Pro Forma Combining Statement of Operations ("Pro Forma
Statements"), reflect the accounts of Evergreen Select Core Bond Fund
("Core Bond Fund") and The Tattersall Bond Fund ("Tattersall Fund") at
September 30, 1998 and for the respective periods then ended.
The Pro Forma Statements give effect to the proposed Agreement and Plan of
Reorganization (the "Reorganization") to be submitted to shareholders of
Tattersall Fund. The Reorganization provides for the acquisition of the
assets and identified liabilities of Tattersall Fund by Core Bond Fund, in
exchange for shares of Core Bond Fund. After the reorganization, Tattersall
Fund Institutional and Service Group shareholders will receive
Institutional ("Class I") and Institutional Service ("Class IS") shares of
Core Bond Fund, respectively, in liquidation and subsequent termination
thereof. As a result of the Reorganization, the shareholders of Tattersall
Fund will become the owners of that number of full and fractional Class I
and Class IS shares of Core Bond Fund having an aggregate net asset value
equal to the aggregate net asset value of their shares of Tattersall Fund
<PAGE>
as of the close of business immediately prior to the date that Tattersall
Fund net assets are exchanged for Class I and Class IS shares of Core Bond
Fund.
The Pro Forma Statements reflect the expenses of each Fund in carrying out
its obligations under the Reorganization as though the merger occurred at
the beginning of the respective periods presented.
The information contained herein is based on the experience of each Fund
for the respective periods then ended and is designed to permit
shareholders of the combining funds to evaluate the financial effect of the
proposed Reorganization. The expenses of Tattersall Fund in connection with
the Reorganization (including the cost of any proxy soliciting agents) will
be borne by First Union National Bank of North Carolina. It is not
anticipated that the securities of the combined portfolio will be sold in
significant amounts in order to comply with the policies and investment
practices of Core Bond Fund Pro Forma.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of each Fund incorporated by reference in the
Statement of Additional Information.
2. Shares of Beneficial Interest - The Pro Forma net asset values per share
assume the issuance of Class I and Class IS shares of Core Bond Fund which
would have been issued at September 30, 1998 in connection with the
proposed Reorganization. Shareholders of Tattersall Fund would receive
Class I and Class IS shares of Core Bond Fund based on conversion ratios
determined on September 30, 1998. The conversion ratios are calculated by
dividing the net asset value of Tattersall Fund Institutional shares and
Service Group shares, respectively, by the net asset value per share of the
Class I and Class IS shares of Core Bond Fund, respectively.
3. Pro Forma Operations - The combined gross investment income is equal to the
sum of each Fund's gross investment income, annualized for the twelve month
period ended September 30, 1998. Pro Forma operating expenses include the
actual expenses of each Fund adjusted to reflect the expected expenses of
the combined entity. The combined pro forma expenses were calculated by
assuming the pro forma period was the twelve month period ended September
30, 1998, and the combined net assets at September 30, 1998 were the
average net assets for the twelve month period. The adjustments reflect
those amounts needed to adjust the combined expenses to these rates.
<PAGE>
EVERGREEN SELECT FIXED INCOME TRUST
PART C
OTHER INFORMATION
Item 15. Indemnification.
The response to this item is incorporated by reference to "Liability
and Indemnification of Trustees" under the caption "Comparative Information on
Shareholders' Rights" in Part A of this Registration Statement.
Item 16. Exhibits:
1. Declaration of Trust. Incorporated by reference to Evergreen Select Fixed
Income Trust's Registration Statement on Form N-1A filed on September 19, 1997 -
Registration No. 333- 36019 ("Form N-1A Registration Statement")
2. Bylaws. Incorporated by reference to the Form N-1A Registration Statement.
3. Not applicable.
4. Agreement and Plan of Reorganization. Exhibit A to Prospectus contained in
Part A of this Registration Statement.
5. Declaration of Evergreen Select Fixed Income Trust Articles II., III.6(c),
IV.(3), IV.(8), V., VI., VII., and VIII and By-Laws Articles II., III. and VIII.
6(a). Investment Advisory Agreement between Evergreen Investment Management
(formerly known as the First Capital Group of First Union National Bank) and
Evergreen Select Fixed Income Trust. Incorporated by reference to the Form N-1A
Registration Statement.
6(b). Form of Interim Investment Advisory Agreement. Exhibit
B to Prospectus contained in Part A of this Registration
Statement.
7(a). Principal Underwriting Agreement between Evergreen Distributor, Inc. and
Evergreen Select Fixed Income Trust. Incorporated by reference to the Form N-1A
Registration Statement.
A-81
<PAGE>
7(b). Form of Dealer Agreement for Institutional Service and Institutional
shares used by Evergreen Distributor, Inc. Incorporated by reference to the Form
N-1A Registration Statement.
8. Deferred Compensation Plan. Incorporated by reference to the Form N-1A
Registration Statement.
9. Custodian Agreement between State Street Bank and Trust Company and Evergreen
Select Fixed Income Trust. Incorporated by reference to Form N-1A Registration
Statement.
10. Rule 12b-1 Distribution Plan for Institutional Service
Shares. Incorporated by reference to the Form N-1A Registration
Statement.
11. Opinion and consent of Sullivan & Worcester LLP. Previously filed.
12. Tax opinion and consent of Piper & Marbury L.L.P. Filed herewith.
13. Not applicable.
14(a). Consent of Tait, Weller & Baker. Previously filed.
14(b). Consent of PricewaterhouseCoopers LLP.
Previously filed.
16. Powers of Attorney. Incorporated by reference to Evergreen Select Fixed
Income Trust's Registration Statement on Form N-14 filed on June 10, 1998 -
(Registration No. 333-56507).
17(a). Form of Proxy Card. Previously filed.
17(b). Prospectus for Evergreen Core Bond Fund dated February
1, 1999. Filed herewith.
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus that is
a part of this Registration Statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933,
the reoffering prospectus will contain the information called for by
A-82
<PAGE>
the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
(3) Not applicable.
A-83
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement
has been signed on behalf of the Registrant, in the City of Columbus and State
of Ohio, on the 11th day of May, 1999.
EVERGREEN SELECT FIXED INCOME TRUST
By: /s/ William J. Tomko
-----------------------
Name: William J. Tomko
Title: President
As required by the Securities Act of 1933, the following persons have
signed this Registration Statement in the capacities indicated on the 11th day
of May, 1999.
Signatures Title
- ---------- -----
/s/William J. Tomko President and
- ------------------- Treasurer
William J. Tomko
/s/Laurence B. Ashkin* Trustee
- ---------------------
Laurence B. Ashkin
/s/Charles A. Austin III* Trustee
- -------------------------
Charles A. Austin III
/s/K. Dun Gifford* Trustee
- -----------------
K. Dun Gifford
/s/James S. Howell* Trustee
- ------------------
James S. Howell
/s/Leroy Keith, Jr.* Trustee
- -------------------
Leroy Keith, Jr.
/s/Gerald M. McDonnell* Trustee
A-84
<PAGE>
- ----------------------
Gerald M. McDonnell
/s/Thomas L. McVerry* Trustee
- --------------------
Thomas L. McVerry
/s/William Walt Pettit* Trustee
- ---------------------
William Walt Pettit
/s/David M. Richardson* Trustee
- ----------------------
David M. Richardson
/s/Russell A. Salton III* Trustee
- -------------------------
Russell A. Salton III
/s/Michael S. Scofield* Trustee
- ----------------------
Michael S. Scofield
/s/Richard J. Shima* Trustee
- -------------------
Richard J. Shima
* By: /s/William J. Tomko
-------------------
Attorney-in-Fact
William J. Tomko, by signing his 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 included as Exhibit 16 to this
Registration Statement.
A-85
<PAGE>
PIPER & MARBURY WASHINGTON
L.L.P. NEW YORK
CHARLES CENTER SOUTH PHILADELPHIA
36 SOUTH CHARLES STREET EASTON
BALTIMORE, MARYLAND 21201-3018
410-539-2530
FAX: 410-539-0489
May 12, 1999
Williamsburg Investment Trust
c/o Countrywide Fund Services, Inc.
312 Walnut Street
Cincinnati, OH 45202
Evergreen Select Fixed Income Trust
200 Berkley Street
Boston, MA 02116
Re: Reorganization of The Tattersall Bond Fund with and into the
Evergreen Select Core Bond Fund
Ladies and Gentlemen:
We have acted as counsel to Williamsburg Investment Trust, a
Massachusetts business trust ("Williamsburg"), in connection with the
transactions contemplated by the Agreement and Plan of Reorganization dated as
of April 30, 1999 (the "Agreement"), by and between Williamsburg, with respect
to The Tattersall Bond Fund, its separately designated series (the "Acquired
Fund"), and Evergreen Select Fixed Income Trust, a Delaware business trust (the
"Trust"), with respect to the Evergreen Select Core Bond Fund, its separately
designated series (the "Acquiring Fund"), providing, among other things, for the
transfer of all of the assets of the Acquired Fund in exchange solely for shares
of beneficial interest of the Acquiring Fund ("Acquiring Fund Shares"), the
assumption by the Acquiring Fund of the identified liabilities of the Acquired
Fund, and the distribution, after the closing of the transactions contemplated
by the Agreement, of the Acquiring Fund Shares to the shareholders of the
Acquired Fund in liquidation of the Acquired Fund as provided in the Agreement.
We are delivering this opinion letter to you pursuant to Section 8.6 of the
Agreement. Except as otherwise stated herein, each capitalized term used in this
opinion letter has the meaning set forth in the Agreement.
<PAGE>
In our capacity as counsel to Williamsburg and for purposes of this
opinion, we have examined the following:
(i) the Agreement;
(ii) the Prospectus/Proxy Statement dated May 10, 1999, included in the
Registration Statement in the form first filed with the Securities and Exchange
Commission (the "Commission") pursuant to Rule 485(b) under the 1933 Act (the
"Prospectus/Proxy Statement");
(iii) certificates of officers of Williamsburg and the Trust as to
certain factual matters (the "Certificates"); and
(iv) such other documents and matters as we have deemed necessary and
appropriate to render the opinions set forth in this letter.
In reaching the opinions set forth below, we have assumed the
following:
(a) accuracy as of the date hereof of such facts, information,
covenants, statements and representations, as well as an absence of any change
in the foregoing that is material to such opinions;
(b) the genuineness of all signatures, the legal capacity of all
natural persons, the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified or photostatic copies and the authenticity of the originals of such
documents; and
(c) the transactions related to the asset transfer contemplated by the
Agreement will be consummated at the Closing Date in accordance with the
Agreement and as described in the Prospectus/Proxy Statement.
Our opinions set forth herein are expressly conditioned on the accuracy
as of the date hereof of the statements and representations contained in the
Certificates.
In rendering our opinions, we have considered the applicable provisions
of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations promulgated thereunder by the Treasury Department (the
"Regulations"), pertinent judicial authorities, rulings of the U.S. Internal
Revenue Service and such other authorities as we
<PAGE>
have considered relevant. It should be noted that the Code, the Regulations, and
such judicial decisions, administrative interpretations and other authorities
are subject to change at any time and, in some circumstances, with retroactive
effect. A material change in any of the authorities upon which our opinions are
based could affect our conclusions stated herein. In addition, there can be no
assurance that the Internal Revenue Service would not take a position contrary
to that which is stated in this opinion letter.
Based upon and subject to the foregoing, we are of the opinion that,
for United States federal income tax purposes:
1. The transfer of all of the Acquired Fund assets in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the identified
liabilities of the Acquired Fund followed by the distribution of the Acquiring
Fund Shares to the Acquired Fund shareholders in liquidation and termination of
the Acquired Fund, as provided in the Agreement, will constitute a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Code and the
Acquiring Fund and the Acquired Fund will each be a "party to a reorganization"
within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund in exchange for the Acquiring Fund
Shares and the assumption by the Acquiring Fund of the identified liabilities of
the Acquired Fund.
3. No gain or loss will be recognized by the Acquired Fund upon the
transfer of the Acquired Fund assets to the Acquiring Fund in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the identified
liabilities of the Acquired Fund or upon the distribution of the Acquiring Fund
Shares to Acquired Fund shareholders in exchange for their shares of the
Acquired Fund.
4. No gain or loss will be recognized by the Acquired Fund shareholders
upon the exchange of their Acquired Fund shares for the Acquiring Fund Shares in
liquidation of the Acquired Fund.
5. The aggregate tax basis for the Acquiring Fund Shares received by
each Acquired Fund shareholder pursuant to the Reorganization will be the same
as the aggregate tax basis of the Acquired Fund shares held by such shareholder
immediately prior to the Reorganization, and the holding period of the Acquiring
Fund Shares to be received by each Acquired Fund shareholder will include the
period during which the Acquired Fund shares exchanged therefor were held by
such shareholder (provided the Acquired Fund shares were held as capital assets
on the date of the Reorganization).
<PAGE>
6. The tax basis of the Acquired Fund assets acquired by the Acquiring
Fund will be the same as the tax basis of such assets to the Acquired Fund
immediately prior to the Reorganization, and the holding period of the assets of
the Acquired Fund in the hands of the Acquiring Fund will include the period
during which those assets were held by the Acquired Fund.
We hereby consent to the filing of this opinion letter as an exhibit to
the Registration Statement and to the reference to our firm and the opinions set
forth herein in the Registration Statement and the Prospectus/Proxy Statement
which is a part thereof. In giving our consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of the
1933 Act or the rules and regulations of the Commission thereunder.
Very truly yours,
/s/Piper & Marbury L.L.P.
<PAGE>
[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 [LOGO OF EVERGREEN FUNDS/SM/ APPEARS HERE]
Institutional Service
Prospectus, February 1, 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>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
FUND SUMMARIES:
Evergreen Select Adjustable Rate Fund ..................................... 4
Evergreen Select Core Bond ................................................ 6
Evergreen Select Fixed Income Fund ........................................ 8
Evergreen Select Income Plus Fund ......................................... 10
Evergreen Select Intermediate Term
Municipal Bond Fund (Formerly known
as Evergreen Select Intermediate Tax
Exempt Bond Fund) ......................................................... 12
Evergreen Select International Bond Fund .................................. 14
Evergreen Select Limited Duration Fund .................................... 16
Evergreen Select Total Return Bond Fund ................................... 18
GENERAL INFORMATION:
The Funds' Investment Advisors ............................................ 20
The Funds' Portfolio Managers ............................................. 20
Calculating the Share Price ............................................... 21
How to Choose an Evergreen Fund ........................................... 22
How to Choose the Share Class
That Best Suits You ....................................................... 22
How to Buy Shares ......................................................... 23
How to Redeem Shares ...................................................... 24
Other Services ............................................................ 25
The Tax Consequences of
Investing in the Funds .................................................... 25
Fees and Expenses of the Funds ............................................ 26
Financial Highlights ...................................................... 27
Other Fund Practices ...................................................... 35
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?
<PAGE>
- --------------------------------------------------------------------------------
OVERVIEW
- --------------------------------------------------------------------------------
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 value of the investment
reaches or exceeds its estimated fair value, 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 portfolio
manager 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.
................................................................................
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, then the value of and total return earned on 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. an
investment will not perform 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
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
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
<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
10/1/91. 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%
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 12/31/98). 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 12/31/98)
Inception Performance
Date Since
of Class 1 year 5 year 10 year 10/1/91
- ----------------------------------------------------------------------
Institutional 10/1/91 4.81% 5.70% N/A 5.51%
- ----------------------------------------------------------------------
Institutional
Service* 5/23/94 4.55% 5.40% N/A 5.30%
- ----------------------------------------------------------------------
6-month Treasury
Bill Index 4.55% 5.10% 5.38% 4.61%**
- ----------------------------------------------------------------------
* 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 10/1/91, and does not include 12b-1
fees. If such fees were reflected, returns would be lower.
** Performance since 5/23/94 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+
- ----------------------------------------------------------------------------
Institutional .30% .00% .03% .33%
- ----------------------------------------------------------------------------
Institutional
Service .30% .25% .02% .57%
- ----------------------------------------------------------------------------
+Actual for the fiscal year ended 9/30/98.
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
- ---------------------------------------------------------------
After 5 years $185 $318
- ---------------------------------------------------------------
After 10 years $418 $714
- ---------------------------------------------------------------
SELECT FIXED INCOME FUNDS 3
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
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:
. Evergreen Investment
Management
Portfolio Managers:
. Robert Cheshire
. Bruce J. Besecker
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 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 currently expects to maintain a dollar-weighted average maturity of seven
to nine 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."
4 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 for the past 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 13.33
1990 7.85
1991 17.32
1992 6.73
1993 12.07
1994 -4.26
1995 16.52
1996 2.93
1997 8.40
1998 8.36
Best Quarter: 2nd Quarter 1989 7.54%*
Worst Quarter: 1st Quarter 1994 -3.28%*
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 12/31/98). 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 12/31/98)*
Inception Performance
Date Since
of Class 1 year 5 year 10 year 2/28/86
- -------------------------------------------------------------------------------
Institutional 12/19/97 8.36% 6.16% 8.75% 8.11%
- -------------------------------------------------------------------------------
Institutional
Service 3/9/98 8.12% 5.91% 8.48% 7.84%
- -------------------------------------------------------------------------------
Lehman Brothers
Aggregate Bond Index 8.69% 7.27% 9.26% 8.83%**
- -------------------------------------------------------------------------------
*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 11/21/97. 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=6.27%, 10 year=8.86%
and since 2/28/86=8.21%; Institutional Service - 5 year=6.00%, 10 year=8.58% and
since 2/28/86=7.94%. The mutual fund has three classes of shares, Institutional,
Institutional Service and Charitable. The Institutional share performance
information for the period from 11/24/97 through 12/19/97 (class inception date)
is based upon the historical performance of the Charitable shares, the original
shares offered. The Institutional Service share performance information for the
period from 11/24/97 through 3/9/98 (class inception date) is based upon the
historical performance of the Charitable shares and therefore does not reflect
12b-1 fees. Performance for the Institutional Service shares for this period
would be lower had the 12b-1 fees been included.
**Performance since 12/31/97 is 8.68%, and since 3/2/98 is 7.39%,
[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% .13% .53%
- --------------------------------------------------------------------------------
Institutional
Service .40% .25% .13% .78%
- --------------------------------------------------------------------------------
+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 operating expenses for the Institutional shares would be
.42% and Institutional Service shares would be .67%.
++Estimated for the fiscal year ending 9/30/99.
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 $54 $80
- --------------------------------------------------------------------------------
After 3 years $170 $249
- --------------------------------------------------------------------------------
After 5 years $296 $433
- --------------------------------------------------------------------------------
After 10 years $665 $966
- --------------------------------------------------------------------------------
SELECT FIXED INCOME FUNDS 5
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
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>
- --------------------------------------------------------------------------------
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 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%*
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 12/31/98). 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 12/31/98)*
Inception Performance
Date Since
of Class 1 year 5 year 10 year 3/31/71
- --------------------------------------------------------------------------------
Institutional 3/31/71 8.06% 5.88% 7.88% 8.40%
- --------------------------------------------------------------------------------
Institutional
Service 3/2/98 7.82% 5.63% 7.62% 8.14%
- --------------------------------------------------------------------------------
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 11/21/97. 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 3/31/71=8.50%; Institutional Service - 5 year=5.71%, 10 year=7.72% and
since 3/31/71=8.24%. The Institutional Service share performance information for
the period from 11/24/97 through 3/2/98 (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 12/31/72. Performance is since that date.
Performance since 3/2/98 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++
- --------------------------------------------------------------------------------
Institutional .50% .00% .09% .59%
- --------------------------------------------------------------------------------
Institutional
Service .50% .25% .09% .84%
- --------------------------------------------------------------------------------
+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 operating expenses for the Institutional shares would be
.49% and Institutional Service shares would be .74%.
++Estimated for the fiscal year ending 9/30/99.
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 $ 60 $ 86
- ---------------------------------------------------------------------
After 3 years $ 189 $ 268
- ---------------------------------------------------------------------
After 5 years $ 329 $ 466
- ---------------------------------------------------------------------
After 10 years $ 737 $1,037
- ---------------------------------------------------------------------
SELECT FIXED INCOME FUNDS 7
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
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%*
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 12/31/98). 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 12/31/98)*
Inception Performance
Date Since
of Class 1 year 5 year 10 year 8/31/88
- --------------------------------------------------------------------------------
Institutional 8/31/88 7.92% 6.40% 8.37% 8.23%
- --------------------------------------------------------------------------------
Institutional
Service 3/2/98 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 11/21/97. 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 8/31/88=8.33%; Institutional Service - 5 year=6.24%, 10 year=8.21% and
since 8/31/88=8.07%. The Institutional Service share performance information for
the period from 11/24/97 through 3/2/98 (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 3/2/98 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% .08% .58%
- --------------------------------------------------------------------------------
Institutional
Service .50% .25% .08% .83%
- --------------------------------------------------------------------------------
+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 operating expenses for the Institutional shares would be
.48% and Institutional Service shares would be .73%.
++Estimated for the fiscal year ending 9/30/99.
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 $59 $85
- ----------------------------------------------------------
After 3 years $186 $265
- ----------------------------------------------------------
After 5 years $324 $460
- ----------------------------------------------------------
After 10 years $725 $1,025
- ----------------------------------------------------------
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%*
The next table lists the Fund's average year-by-year return by class over the
past one, five and ten years or since inception (through 12/31/98). 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 12/31/98)*
Inception Performance
Date Since
of Class 1 year 5 year 10 year 1/31/84
Institutional 1/31/84 5.86% 5.36% 6.65% 7.34%
Institutional
Service 3/2/98 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 11/21/97. 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 1/31/84=7.40%; Institutional Service - 5 year=5.20%, 10 year=6.49% and
since 1/31/84=7.18%. The Institutional Service share performance information for
the period from 11/24/97 through 3/2/98 (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 1/31/90. Performance is since that date.
Performance since 3/2/98 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%
+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 operating expenses for the Institutional shares would be
.59% and Institutional Service shares would be .84%.
++Estimated for the fiscal year ending 9/30/99.
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 $70 $96
After 3 years $221 $300
After 5 years $384 $520
After 10 years $965 $1,155
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
12/15/93. 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%
The next table lists the Fund's average year-by-year return by class over one
and five years and since inception (through 12/31/98). 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 12/31/98)
Inception Performance
Date 1 year 5 year 10 year Since
of Class 12/15/93
Institutional 12/15/93 8.97% 4.85% N/A 4.93%
Institutional
Service 12/15/93 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% .32% .92%
Institutional
Service .60% .25% .32% 1.17%
+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 operating expenses for the Institutional shares would be
.65% and Institutional Service shares would be .90%.
++Estimated for the fiscal year ending 9/30/99.
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 $94 $119
After 3 years $293 $372
After 5 years $509 $644
After 10 years $1,130 $1,420
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
4/30/94. 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%*
The next table lists the Fund's average year-by-year return by class over the
past year and since inception (through 12/31/98). 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 12/31/98)*
Inception Performance
Date Since
of Class 1 year 5 year 10 year 4/30/94
-------- ------ ------ ------- -------
Institutional 4/30/94 6.27% N/A N/A 6.13%
Institutional
Service 7/28/98 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 11/21/97. 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 4/30/94=6.34%;
Institutional Service - since 4/30/94=6.11%. The Institutional Service share
performance information for the period from 11/24/97 through 7/28/98 (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 7/28/98 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%
+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 operating expenses for the Institutional shares would be
.30% and Institutional Service shares would be .55%.
++Estimated for the fiscal year ending 9/30/99.
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 4/20/98 is 3.13%. Past performance
is not an indication of future results.
[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%
*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 operating expenses for the Institutional shares would be
.50% and Institutional Service shares would be .75%.
**Estimated for the fiscal year ending 9/30/99.
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 $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.
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 Core Bond Fund
. 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.
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
Since joining First Fidelity Bank in 1990, which was acquired by FUNB in 1995,
Robert Cheshire has been a Vice President and senior portfolio manager. Mr.
Cheshire has been a portfolio manager of the Fund since November 1997. He is
head of the Newark Taxable Fixed Income Unit and manages the Evergreen
Intermediate Term Government Securities Fund.
Bruce J. Besecker, CFA, has been a portfolio manager of the Fund since November
1997. Mr. Besecker has been investing in the fixed income market since 1979,
with over 7 years experience in managing or co-managing fixed income mutual
funds. The $1.5 billion his group manages in Philadelphia includes one mutual
fund and over 40 individual account relationships. Since joining EIM in 1987,
Mr. Besecker has served as a Vice President, senior fixed income portfolio
manager and unit leader.
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 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 4:00 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, and 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.
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, 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 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 the 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. The 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 for advertising and marketing and as a
"service fee" to the broker-dealer for additional shareholder services.
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>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
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 have been derived from financial
information audited by KPMG Peat Marwick LLP, the Fund's independent auditors.
The International Bond Fund was formerly Global Bond Fund, a portfolio of
CoreFunds, Inc. The International
- --------------------------------------------------------------------------------
SELECT ADJUSTABLE RATE FUND
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
Year Ended September
30,
---------------------------
Seven Months Five Months
Ended Year Ended Ended
September 30, 1998 (e) February 28, 1998 February 28, 1997 (a) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.75 $ 9.71 $ 9.68 $ 9.65 $ 9.61 $ 9.93
------- ------- ------- ------- ------- -------
......................................................................................................................
Income from investment
operations
......................................................................................................................
Net investment income 0.35 0.64 0.28 0.64(b) 0.63 0.63
......................................................................................................................
Net gains or losses on
securities (both
realized and
unrealized) (0.07) 0.04 0(d) 0 0.01 (0.49)
------- ------- ------- ------- ------- -------
......................................................................................................................
Total from investment
operations 0.28 0.68 0.28 0.64 0.64 0.14
------- ------- ------- ------- ------- -------
......................................................................................................................
Less dividends (from net
investment income) (0.35) (0.64) (0.25) (0.61) (0.60) (0.46)
------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 9.68 $ 9.75 $ 9.71 $ 9.68 $ 9.65 $ 9.61
------- ------- ------- ------- ------- -------
......................................................................................................................
Total return 2.88% 7.15% 2.97% 6.86% 6.87% 1.43%
......................................................................................................................
Ratios/supplemental data
......................................................................................................................
Net assets, end of
period (thousands) $23,174 $25,981 $70,264 $65,974 $23,616 $25,200
......................................................................................................................
Ratios to average net
assets
Total expenses 0.33%(c) 0.30% 0.30%(c) 0.30% 0.30% 0.30%
......................................................................................................................
Net investment income 6.12%(c) 6.63% 6.79%(c) 6.84% 6.61% 5.15%
......................................................................................................................
Portfolio turnover rate 46% 107% 44% 85% 56% 63%
......................................................................................................................
</TABLE>
- --------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES
<TABLE>
<CAPTION>
May 23, 1994
Year Ended (Date of Initial
Seven Months Five Months September 30, Public Offering)
Ended Year Ended Ended ----------------- to
September 30, 1998 (e) February 28, 1998 February 28, 1997 (a) 1996 1995 September 30, 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.76 $ 9.72 $ 9.68 $ 9.65 $ 9.61 $9.73
------ ------- ------ ------- ------ -----
.............................................................................................................................
Income from investment
operations
.............................................................................................................................
Net investment income 0.33 0.59 0.28 0.65(b) 0.64 0.17
.............................................................................................................................
Net gains or losses on
securities (both
realized and
unrealized) (0.08) 0.06 0(d) (0.03) (0.02) (0.13)
------ ------- ------ ------- ------ -----
.............................................................................................................................
Total from investment
operations 0.25 0.65 0.28 0.62 0.62 0.04
------ ------- ------ ------- ------ -----
.............................................................................................................................
Less dividends (from net
investment income) (0.33) (0.61) (0.24) (0.59) (0.58) (0.16)
------ ------- ------ ------- ------ -----
.............................................................................................................................
Net asset value, end of
period $ 9.68 $ 9.76 $ 9.72 $ 9.68 $ 9.65 $9.61
------ ------- ------ ------- ------ -----
.............................................................................................................................
Total return 2.63% 6.89% 2.97% 6.60% 6.60% 0.35%
.............................................................................................................................
Ratios/supplemental data
.............................................................................................................................
Net assets, end of
period (thousands) $9,645 $10,320 $3,564 $14,361 $2,871 $ 1
.............................................................................................................................
Ratios to average net
assets
Total expenses 0.57%(c) 0.55% 0.55%(c) 0.55% 0.55% 0.43%(c)
.............................................................................................................................
Net investment income 5.82%(c) 6.15% 6.39%(c) 6.64% 6.70% 5.03%(c)
.............................................................................................................................
Portfolio turnover rate 46% 107% 44% 85% 56% 63%
.............................................................................................................................
</TABLE>
(a)The Fund changed its fiscal year end from September 30 to the last day of
February, effective February 28, 1997.
(b)Per share calculations based on weighted average shares outstanding.
(c)Annualized.
(d)Amount represents less than $0.01 per share.
(e)The Fund changed its fiscal year end from the last day of February to
September 30, effective September 30 1998.
SELECT FIXED INCOME FUNDS
25
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
Bond Fund information for the periods ended June 30, 1994 to June 30, 1998 has
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 have been derived from financial statements audited
by PricewaterhouseCoopers LLP, the Funds' independent accountants. 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>
December 19, 1997
(Commencement of
Class Operations) to
September 30, 1998
- -----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 10.68
--------
............................................................................
Income from investment operations
............................................................................
Net investment income 0.51
............................................................................
Net gains on securities (both realized and unrealized) 0.34
--------
............................................................................
Total from investment operations 0.85
--------
............................................................................
Less dividends (from net investment income) (0.51)
--------
............................................................................
Net asset value, end of period $ 11.02
--------
............................................................................
Total return 8.12%
............................................................................
Ratios/supplemental data
............................................................................
Net assets, end of period (thousands) $125,070
............................................................................
Ratios to average net assets
Total expenses 0.42%(a)
............................................................................
Net investment income 5.99%(a)
............................................................................
Portfolio turnover rate 77%
............................................................................
- -----------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES
<CAPTION>
March 9, 1998
(Commencement of
Class Operations) to
September 30, 1998
- -----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 10.66
--------
.............................................................................
Income from investment operations
.............................................................................
Net investment income 0.35
.............................................................................
Net gains on securities (both realized and unrealized) 0.36
--------
.............................................................................
Total from investment operations 0.71
--------
.............................................................................
Less dividends (from net investment income) (0.35)
--------
.............................................................................
Net asset value, end of period $ 11.02
--------
.............................................................................
Total return 6.74%
.............................................................................
Ratios/supplemental data
.............................................................................
Net assets, end of period (thousands) $ 286
.............................................................................
Ratios to average net assets
Total expenses 0.68%(a)
.............................................................................
Net investment income 5.76%(a)
.............................................................................
Portfolio turnover rate 77%
.............................................................................
</TABLE>
(a)Annualized.
SELECT FIXED INCOME FUNDS
26
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SELECT FIXED INCOME FUND
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
November 24, 1997
(Commencement of
Class Operations) to
September 30, 1998
- ----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 5.96
--------
............................................................................
Income from investment operations
............................................................................
Net investment income 0.31
............................................................................
Net gains on securities (both realized and unrealized) 0.16
--------
............................................................................
Total from investment operations 0.47
--------
............................................................................
Less dividends (from net investment income) (0.31)
--------
............................................................................
Net asset value, end of period $ 6.12
--------
............................................................................
Total return 8.06%
............................................................................
Ratios/supplemental data
............................................................................
Net assets, end of period (thousands) $668,907
............................................................................
Ratios to average net assets
Total expenses 0.52%(a)
............................................................................
Net investment income 5.99%(a)
............................................................................
Portfolio turnover rate 46%
............................................................................
- ----------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES
<CAPTION>
March 9, 1998
(Commencement of
Class Operations) to
September 30, 1998
- ----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 5.97
--------
............................................................................
Income from investment operations
............................................................................
Net investment income 0.20
............................................................................
Net gains on securities (both realized and unrealized) 0.15
--------
............................................................................
Total from investment operations 0.35
--------
............................................................................
Less dividends (from net investment income) (0.20)
--------
............................................................................
Net asset value, end of period $ 6.12
--------
............................................................................
Total return 5.94%
............................................................................
Ratios/supplemental data
............................................................................
Net assets, end of period (thousands) $ 9,808
............................................................................
Ratios to average net assets
Total expenses 0.77%(a)
............................................................................
Net investment income 5.65%(a)
............................................................................
Portfolio turnover rate 46%
............................................................................
</TABLE>
(a) Annualized.
SELECT FIXED INCOME FUNDS
27
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SELECT INCOME PLUS FUND
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
November 24, 1997
(Commencement of
Class Operations) to
September 30, 1998
- ----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 5.72
----------
............................................................................
Income from investment operations
............................................................................
Net investment income 0.30
............................................................................
Net gains on securities (both realized and unrealized) 0.20
----------
............................................................................
Total from investment operations 0.50
----------
............................................................................
Less dividends (from net investment income) (0.30)
----------
............................................................................
Net asset value, end of period $ 5.92
----------
............................................................................
Total return 8.99%
............................................................................
Ratios/supplemental data
............................................................................
Net assets, end of period (thousands) $1,367,240
............................................................................
Ratios to average net assets
Total expenses 0.51%(a)
............................................................................
Net investment income 6.09%(a)
............................................................................
Portfolio turnover rate 37%
............................................................................
- ----------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES
<CAPTION>
March 2, 1998
(Commencement of
Class Operations) to
September 30, 1998
- ----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 5.71
----------
............................................................................
Income from investment operations
............................................................................
Net investment income 0.19
............................................................................
Net gains on securities (both realized and unrealized) 0.21
----------
............................................................................
Total from investment operations 0.40
----------
............................................................................
Less dividends (from net investment income) (0.19)
----------
............................................................................
Net asset value, end of period $ 5.92
----------
............................................................................
Total return 7.21%
............................................................................
Ratios/supplemental data
............................................................................
Net assets, end of period (thousands) $ 7,528
............................................................................
Ratios to average net assets
Total expenses 0.75%(a)
............................................................................
Net investment income 5.80%(a)
............................................................................
Portfolio turnover rate 37%
............................................................................
</TABLE>
(a) Annualized.
SELECT FIXED INCOME FUNDS
28
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SELECT INTERMEDIATE TERM MUNICIPAL BOND FUND
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
November 24, 1997
(Commencement of
Class Operations) to
September 30, 1998
- -----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 64.84
--------
.............................................................................
Income from investment operations
.............................................................................
Net investment income 2.57
.............................................................................
Net gains on securities (both realized and unrealized) 2.27
--------
.............................................................................
Total from investment operations 4.84
--------
.............................................................................
Less dividends (from net investment income) (2.57)
--------
.............................................................................
Net asset value, end of period $ 67.11
--------
.............................................................................
Total return 7.61%
.............................................................................
Ratios/supplemental data
.............................................................................
Net assets, end of period (thousands) $746,874
.............................................................................
Ratios to average net assets
Total expenses 0.62%(a)
.............................................................................
Net investment income 4.59%(a)
.............................................................................
Portfolio turnover rate 47%
.............................................................................
- -----------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES
<CAPTION>
March 2, 1998
(Commencement of
Class Operations) to
September 30, 1998
- -----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 65.91
--------
............................................................................
Income from investment operations
............................................................................
Net investment income 1.66
............................................................................
Net gains on securities (both realized and unrealized) 1.20
--------
............................................................................
Total from investment operations 2.86
--------
............................................................................
Less dividends (from net investment income) (1.66)
--------
............................................................................
Net asset value, end of period $ 67.11
--------
............................................................................
Total return 4.41%
............................................................................
Ratios/supplemental data
............................................................................
Net assets, end of period (thousands) $ 4,736
............................................................................
Ratios to average net assets
Total expenses 0.89%(a)
............................................................................
Net investment income 4.35%(a)
............................................................................
Portfolio turnover rate 47%
............................................................................
</TABLE>
(a) Annualized.
SELECT FIXED INCOME FUNDS
29
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SELECT INTERNATIONAL BOND FUND
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
December 15, 1993
Three Months Year Ended June 30, (Commencement of
Ended ---------------------------------- Operations) to
September 30, 1998** 1998* 1997* 1996* 1995* June 30, 1994*
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.32 $ 9.54 $ 9.70 $ 9.62 $ 9.06 $ 10.00
------- ------- ------- ------- ------- -------
.....................................................................................................
Income from investment
operations
.....................................................................................................
Net investment income 0.11(b) 0.47 0.49 0.47 0.62 0.25
.....................................................................................................
Net gains or losses on
securities (both
realized and
unrealized) 0.22 (0.06) 0.09 0.30 0.24 (1.15)
------- ------- ------- ------- ------- -------
.....................................................................................................
Total from investment
operations 0.33 0.41 0.58 0.77 0.86 (0.90)
------- ------- ------- ------- ------- -------
.....................................................................................................
Less dividends (from net
investment income) (0.13) (0.63) (0.74) (0.69) (0.30) (0.04)
------- ------- ------- ------- ------- -------
.....................................................................................................
Net asset value, end of
period $ 9.52 $ 9.32 $ 9.54 $ 9.70 $ 9.62 $ 9.06
------- ------- ------- ------- ------- -------
.....................................................................................................
Total return 3.56% 4.42% 6.18% 8.00% 9.70% (9.00)%
.....................................................................................................
Ratios/supplemental data
.....................................................................................................
Net assets, end of
period (thousands) $46,607 $36,723 $34,590 $32,998 $26,898 $24,957
.....................................................................................................
Ratios to average net
assets
Total expenses 0.76%(a) 0.81% 0.85% 0.71% 0.64% 0.73%(a)
.....................................................................................................
Net investment income 4.89%(a) 4.90% 5.14% 5.81% 6.84% 5.04%(a)
.....................................................................................................
Portfolio turnover rate 3% 46% 90% 67% 133% 161%
.....................................................................................................
- -----------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES
<CAPTION>
December 15, 1993
Three Months Year Ended June 30, (Commencement of
Ended ---------------------------------- Operations) to
September 30, 1998** 1998* 1997* 1996* 1995* June 30, 1994*
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.30 $ 9.52 $ 9.68 $ 9.61 $ 9.04 $ 10.00
------- ------- ------- ------- ------- -------
.....................................................................................................
Net gains or losses on
securities (both
realized and
unrealized) 0.23 (0.01) 0.14 0.12 0.24 (1.11)
------- ------- ------- ------- ------- -------
.....................................................................................................
Income from investment
operations
Total from investment
operations 0.34 0.39 0.56 0.73 0.85 (0.92)
------- ------- ------- ------- ------- -------
.....................................................................................................
Net investment income 0.11(b) 0.40 0.42 0.61 0.61 0.19
.....................................................................................................
Less dividends (from net
investment income) (0.13) (0.61) (0.72) (0.66) (0.28) (0.04)
------- ------- ------- ------- ------- -------
.....................................................................................................
Net asset value, end of
period $ 9.51 $ 9.30 $ 9.52 $ 9.68 $ 9.61 $ 9.04
------- ------- ------- ------- ------- -------
.....................................................................................................
Total return(c) 3.61% 4.16% 5.92% 7.74% 9.57% (9.22)%
.....................................................................................................
Ratios/supplemental data
.....................................................................................................
Net assets, end of
period (thousands) $ 129 $ 198 $ 182 $ 152 $ 170 $ 167
.....................................................................................................
Ratios to average net
assets
Total expenses 1.00%(a) 1.06% 1.10% 0.96% 0.89% 0.98%(a)
.....................................................................................................
Net investment income 4.65%(a) 4.65% 4.89% 5.56% 6.59% 4.79%(a)
.....................................................................................................
Portfolio turnover rate 3% 46% 90% 67% 133% 161%
.....................................................................................................
</TABLE>
(a) Annualized.
(b) Calculation based on average shares outstanding.
(c) Total return does not reflect the sales load charged on the Institutional
Service Shares from December 15, 1993 through June 30, 1998.
* On August 28, 1998, CoreFund Global Bond Fund exchanged substantially all of
its net assets to Evergreen Select International Bond Fund. As CoreFund
Global Bond Fund is the accounting survivor, 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.
** The Fund changed its fiscal year end from June 30 to September 30.
SELECT FIXED INCOME FUNDS
30
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SELECT LIMITED DURATION FUND
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
November 24, 1997
(Commencement of
Class Operations) to
September 30, 1998
- ----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 10.42
-------
............................................................................
Income from investment operations
............................................................................
Net investment income 0.53(b)
............................................................................
Net gains on securities (both realized and unrealized) 0.10
-------
............................................................................
Total from investment operations 0.63
-------
............................................................................
Less dividends (from net investment income) (0.53)
-------
............................................................................
Net asset value, end of period $ 10.52
-------
............................................................................
Total return 6.21%
............................................................................
Ratios/supplemental data
............................................................................
Net assets, end of period (thousands) $70,810
............................................................................
Ratios to average net assets
Total expenses 0.30%(a)
............................................................................
Net investment income 5.97%(a)
............................................................................
Portfolio turnover rate 78%
............................................................................
- ----------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES
<CAPTION>
July 28, 1998
(Commencement of
Class Operations) to
September 30, 1998
- ----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 10.41
-------
............................................................................
Income from investment operations
............................................................................
Net investment income 0.11(b)
............................................................................
Net gains on securities (both realized and unrealized) 0.11
-------
............................................................................
Total from investment operations 0.22
-------
............................................................................
Less dividends (from net investment income) (0.11)
-------
............................................................................
Net asset value, end of period $ 10.52
-------
............................................................................
Total return 2.12%
............................................................................
Ratios/supplemental data
............................................................................
Net assets, end of period (thousands) $ 614
............................................................................
Ratios to average net assets
Total expenses 0.55%(a)
............................................................................
Net investment income 5.84%(a)
............................................................................
Portfolio turnover rate 78%
............................................................................
</TABLE>
(a) Annualized.
(b) Calculation based on average shares outstanding.
SELECT FIXED INCOME FUNDS
31
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SELECT TOTAL RETURN BOND FUND
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
April 20, 1998
(Commencement of
Class Operations) to
September 30, 1998
- ----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 100.00
--------
............................................................................
Income from investment operations
............................................................................
Net investment income 3.08
............................................................................
Net gains on securities (both realized and unrealized) (0.29)
--------
............................................................................
Total from investment operations 2.79
--------
............................................................................
Less dividends (from net investment income) (3.08)
--------
............................................................................
Net asset value, end of period $ 99.71
--------
............................................................................
Total return 2.83%
............................................................................
Ratios/supplemental data
............................................................................
Net assets, end of period (thousands) $135,998
............................................................................
Ratios to average net assets
............................................................................
Total expenses 0.41%(a)
............................................................................
Net investment income 6.88%(a)
............................................................................
Portfolio turnover rate 80%
............................................................................
- ----------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES
<CAPTION>
August 3, 1998
(Commencement of
Class Operations) to
September 30, 1998
- ----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 99.67
--------
............................................................................
Income from investment operations
............................................................................
Net investment income 1.05
............................................................................
Net gains on securities (both realized and unrealized) 0.04
--------
............................................................................
Total from investment operations 1.09
--------
............................................................................
Less dividends (from net investment income) (1.05)
--------
............................................................................
Net asset value, end of period $ 99.71
--------
............................................................................
Total return 1.10%
............................................................................
Ratios/supplemental data
............................................................................
Net assets, end of period (thousands) $ 24
............................................................................
Ratios to average net assets
Total expenses 0.66%(a)
............................................................................
Net investment income 6.51%(a)
............................................................................
Portfolio turnover rate 80%
............................................................................
</TABLE>
(a)Annualized.
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. 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.
Evergreen Events -- You will receive a periodic newsletter published
exclusively for Evergreen shareholders.
<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 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.
125 W. 55th Street
New York, New York 10019
(811-08365)
48842 541908 RV1
- --------------------------------------------------------------------------------
-------------
BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 19
Hudson, MA
[LOGO OF EVERGREEN FUNDS/SM/ APPEARS HERE] -------------
201 South College St.
Charlotte, NC 28288
<PAGE>
