1933 Act Registration No. 333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14AE
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[ ] Pre-Effective [ ] Post-Effective
Amendment No. Amendment No.
EVERGREEN SELECT FIXED INCOME TRUST
(Evergreen Select Total Return Bond Fund and
Evergreen Select Income Plus 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.
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
Approximate date of proposed public offering: As soon as possible after
the effective date of this Registration Statement.
The Registrant has registered an indefinite amount of securities under
the Securities Act of 1933 pursuant to Section 24(f) under the Investment
Company Act of 1940 (File No. 333-36019; accordingly, no fee is payable
herewith. Pursuant to Rule 429, this Registration Statement relates to the
aforementioned registration on Form N-1A. A Rule 24f-2 Notice for the
Registrant's fiscal year ended September 30, 1999 was filed with the Commission
on December 29, 1999.
It is proposed that this filing will become effective on May 12, 2000
pursuant to Rule 488 of the Securities Act of 1933.
EVERGREEN SELECT FIXED INCOME TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1933
Location in Prospectus/
Item of Part A of Form N-14 Proxy Statement
- --------------------------- -----------------------
1. Beginning of Registration Cross Reference Sheet;
Statement and Outside Cover Page
Front Cover Page of
Prospectus
2. Beginning and Outside Table of Contents
Back Cover Page of
Prospectus
3. Fee Table, Synopsis and Summary; Risks
Risk Factors
4. Information About the Cover Page; Summary; Merger
Transaction Information; Information on
Shareholders' Rights; Voting
Information Concerning the
Meeting; Exhibit A (Agreement
and Plan of Reorganization)
5. Information about the Cover Page; Summary;
Registrant Risks; Merger Information;
Information on
Shareholders' Rights;
Additional Information
6. Information about the Cover Page; Summary;
Company Being Acquired Risks; Merger Information;
Information on
Shareholders' Rights;
Voting Information Concerning
the Meeting; Additional
Information
7. Voting Information Cover Page; Summary;
Information on Shareholders'
Rights; Voting Information
Concerning the Meeting;
Instructions for Voting and
Executing Proxy Cards
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
Location in Statement of
Item of Part B of Form N-14 Additional Information
- --------------------------- -----------------------
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. Additional Information Statement of Additional
About the Registrant Information of the
Evergreen Select Fixed Income
Funds, dated February 1, 2000
as it relates to Evergreen
Select Income Plus Fund
13. Additional Information Statement of Additional
about the Company Being Information of Evergreen
Acquired Select Fixed Income
Funds, dated February 1, 2000
as it relates to Evergreen
Select Total Return Bond Fund
14. Financial Statements Financial Statements
of Evergreen Select Income Plus
Fund dated September 30, 1999;
Financial Statements of
Evergreen Select Total Return
Bond Fund dated September 30,
1999
Location in Prospectus/
Item of Part C of Form N-14 Proxy Statement
- --------------------------- -----------------------
15. Indemnification Incorporated by Reference
to Part A Caption -
Information on Shareholders'
Rights - "Liability and
Indemnification of
Trustees"
16. Exhibits Item 16. Exhibits
17. Undertakings Item 17. Undertakings
<PAGE>
EVERGREEN SELECT FIXED INCOME TRUST
PART A
PROSPECTUS/PROXY STATEMENT
<PAGE>
4/12/00 DRAFT
[THIS IS THE FRONT COVER]
LOGO
EVERGREEN SELECT TOTAL RETURN BOND FUND
200 BERKELEY STREET
BOSTON, MA 02116
May 26, 2000
Dear Shareholder,
As a shareholder of Evergreen Select Total Return Bond Fund ("Select Total
Return Bond Fund"), you are invited to vote on a proposal to merge Select Total
Return Bond Fund into Evergreen Select Income Plus Fund ("Select Income Plus
Fund"), another mutual fund within the Evergreen Family of Funds. THE BOARD OF
TRUSTEES OF EVERGREEN SELECT FIXED INCOME TRUST HAS APPROVED THE MERGER AND
RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
If approved by shareholders, this is how the merger will work:
o Your Fund will transfer its assets and liabilities to Select Income Plus
Fund.
o Select Income Plus Fund will issue new shares that will be distributed to
you in an amount equal to the value of your Select Total Return Bond Fund
shares. You will receive Institutional or Institutional Service shares of
Select Income Plus Fund, depending on the class of shares of Select Total
Return Bond Fund you currently hold. Although the NUMBER of shares you hold
may change, the total VALUE of your investment will not change as a result
of the merger.
o You will not incur any sales loads or similar transaction charges as a
result of the merger.
The merger is intended to be tax free for federal income tax purposes. Details
about Select Income Plus Fund's investment objective, portfolio management team,
performance, etc. along with additional information about the proposed merger,
are contained in the attached prospectus/proxy statement. Please take the time
to familiarize yourself with this information. Votes on the proposal will be
cast at a special meeting of Select Total Return Bond Fund's shareholders to be
held on July 14, 2000. Although you are welcome to attend the meeting in person,
you do not need to do so in order to vote your shares. If you do not expect to
attend the meeting, please complete, date, sign and return the enclosed proxy
card in the enclosed postage paid envelope, or vote via one of the other methods
mentioned below. Instructions on how to vote are included at the end of the
prospectus/proxy statement.
If you have any questions about the proposal or the proxy card, please call
Shareholder Communications Corporation, our proxy solicitor, at 800-645-8640.
You may record your vote by telephone by calling 800-645-8640. You may also FAX
your completed and signed proxy card (both front and back sides) or vote on the
Internet by following the voting instructions as outlined on your proxy card. If
the Fund does not receive a sufficient number of votes in favor of the merger,
you may receive a telephone call from Shareholder Communications Corporation
requesting your vote. The expenses of the merger, including the costs of
soliciting proxies, will be paid by First Union National Bank.
Thank you for taking this matter seriously and participating in this important
process.
Sincerely,
[Signature]
William M. Ennis
PRESIDENT, Evergreen Funds
<PAGE>
EVERGREEN SELECT TOTAL RETURN BOND FUND
200 BERKELEY STREET
BOSTON, MASSACHUSETTS 02116
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 14, 2000
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of Evergreen Select Total Return Bond Fund ("Select Total Return
Bond Fund"), a series of Evergreen Select Fixed Income Trust, will be held at
the offices of the Evergreen Funds, 26th Floor, 200 Berkeley Street, Boston,
Massachusetts 02116 on July 14, 2000 at 2:00 p.m. for the following purposes:
1. To consider and act upon the Agreement and Plan of Reorganization (the
"Plan") dated as of April 30, 2000, providing for the acquisition of
all the assets of Select Total Return Bond Fund by Evergreen Select
Income Plus Fund ("Select Income Plus Fund"), a series of Evergreen
Select Fixed Income Trust, in exchange for shares of Select Income Plus
Fund and the assumption by Select Income Plus Fund of the identified
liabilities of Select Total Return Bond Fund. The Plan also provides
for distribution of these shares of Select Income Plus Fund to
shareholders of Select Total Return Bond Fund in liquidation and
subsequent termination of Select Total Return Bond Fund. A vote in
favor of the Plan is a vote in favor of the liquidation and dissolution
of Select Total Return Bond Fund.
2. To transact any other business which may properly come before the
Meeting or any adjournment or adjournments thereof.
On behalf of Select Total Return Bond Fund, the Trustees of Evergreen
Select Fixed Income Trust have fixed the close of business on April 28, 2000 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 WITHOUT DELAY AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, 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
William M. Ennis
PRESIDENT
May 26, 2000
<PAGE>
INFORMATION RELATING TO THE PROPOSED MERGER
OF
EVERGREEN SELECT TOTAL RETURN BOND FUND
INTO
EVERGREEN SELECT INCOME PLUS FUND
This prospectus/proxy statement contains the information you should know before
voting on the proposed merger ("Merger") of your Fund into Evergreen Select
Income Plus Fund ("Select Income Plus Fund"). If approved, the Merger will
result in your receiving shares of Select Income Plus Fund in exchange for your
shares of Evergreen Select Total Return Bond Fund ("Select Total Return Bond
Fund"). The investment objectives of both Funds are similar. The investment
objective of Select Total Return Bond is to seek to maximize total return
through a combination of current income and capital growth, by investing
primarily in investment grade fixed income securities with complementary
investments in high yield foreign and fixed income securities. The investment
objective of Select Income Plus Fund is to seek a high level of current income
and a potential for capital growth.
Please read this prospectus/proxy statement carefully and retain it for future
reference. Additional information concerning each Fund and the Merger is
contained in the documents described below, all of which have been filed with
the Securities and Exchange Commission ("SEC").
<TABLE>
<CAPTION>
MORE INFORMATION ABOUT THE FUNDS IS AVAILABLE
- ----------------------------------------------------------------- ---------------------------------------------------------------
SEE: HOW TO GET THESE DOCUMENTS:
- ----------------------------------------------------------------- ---------------------------------------------------------------
- ----------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
Prospectus for both Funds, dated February 1, 2000, WHICH The Funds make all of these documents available to you free
ACCOMPANIES THIS PROSPECTUS/PROXY STATEMENT. of charge if you:
o Call 800-645-8640, or
Statement of additional information for both Funds, dated o Write the Funds at 200 Berkeley Street, Boston,
February 1, 2000. Massachusetts 02116.
Annual Report for both Funds, dated September 30, 1999. You can also obtain any of these documents for a fee from the
SEC if you:
Semi-annual Report for both Funds, dated March 31, 1999. o Call the SEC at 800-SEC-0330,
Statement of additional information, dated May 26, 2000, Or for free if you:
which relates to this prospectus/proxy statement and the o Go to the SEC Website (http://www.sec.gov).
Merger.
To ask questions about this prospectus/proxy statement:
o Call 800-645-8640, or
o Write to the Funds at 200 Berkeley Street, Boston,
Massachusetts 02116.
- ----------------------------------------------------------------- ---------------------------------------------------------------
</TABLE>
INFORMATION RELATING TO THE FUNDS CONTAINED IN THE FUNDS' SEMI-ANNUAL REPORT,
ANNUAL REPORT, PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION, AS WELL AS
THE STATEMENT OF ADDITIONAL INFORMATION RELATING TO THIS PROSPECTUS/PROXY
STATEMENT, IS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS/PROXY STATEMENT.
THIS MEANS THAT SUCH INFORMATION IS LEGALLY CONSIDERED TO BE PART OF THIS
DOCUMENT.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT DETERMINED THAT THE
INFORMATION IN THIS PROSPECTUS/PROXY STATEMENT IS ACCURATE OR COMPLETE, NOR
HAS IT APPROVED OR DISAPPROVED THESE SECURITIES. ANYONE WHO TELLS YOU
OTHERWISE IS COMMITTING A
CRIME.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OF A
BANK, AND ARE NOT INSURED, ENDORSED OR GUARANTEED BY THE FDIC OR ANY
GOVERNMENT AGENCY AND INVOLVE INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF
YOUR ORIGINAL
INVESTMENT.
The address of both Funds is 200 Berkeley Street, Boston,
Massachusetts 02116 (Telephone: 800-343-2898).
PROSPECTUS/PROXY STATEMENT DATED MAY 26, 2000
TABLE OF CONTENTS
SUMMARY.......................................................................
What are the key features of the Merger?......................................
After the Merger, what class of shares of Foundation Fund will I own?.........
How do the Funds' investment objectives, principal investment strategies
and risks compare?.....................
How do the Funds' sales charges and expenses compare? Will I be able to buy,
sell and exchange shares the same way?.......................................
How do the Funds' performance records compare?...............................
Who will be the Investment Advisor and Portfolio Manager of my Fund after the
Merger? What will the advisory fee be after the Merger?.......................
What will be the primary federal tax consequences of the Merger?..............
RISKS.........................................................................
MERGER INFORMATION............................................................
Reasons for the Merger........................................................
Agreement and Plan of Reorganization..........................................
Federal Income Tax Consequences...............................................
Pro-forma Capitalization......................................................
Distribution of Shares........................................................
Purchase and Redemption Procedures............................................
Exchange Privileges...........................................................
Dividend Policy...............................................................
INFORMATION ON SHAREHOLDERS' RIGHTS...........................................
Form of Organization..........................................................
Capitalization................................................................
Shareholder Liability.........................................................
Shareholder Meetings and Voting Rights........................................
Liquidation...................................................................
Liability and Indemnification of Trustees.....................................
VOTING INFORMATION CONCERNING THE MEETING.....................................
Shareholder Information.......................................................
FINANCIAL STATEMENTS AND EXPERTS..............................................
LEGAL MATTERS.................................................................
ADDITIONAL INFORMATION........................................................
OTHER BUSINESS................................................................
INSTRUCTIONS FOR VOTING AND EXECUTING PROXY CARDS.............................
EXHIBIT A.....................................................................
EXHIBIT B.....................................................................
SUMMARY
This section summarizes the primary features and consequences of the Merger.
This summary is qualified in its entirety by reference to the additional
information contained elsewhere in this prospectus/proxy statement, each Fund's
prospectus and statement of additional information and in the Agreement and Plan
of Reorganization.
WHAT ARE THE KEY FEATURES OF THE MERGER?
The Agreement and Plan of Reorganization (the "Plan") sets forth the key
features of the Merger. For a complete description of the Merger, see the Plan,
attached as Exhibit A to this prospectus/proxy statement. The Plan generally
provides for the following:
o the transfer of all of the assets of Select Total Return Bond Fund in
exchange for shares of Select Income Plus Fund.
o the assumption by Select Income Plus Fund of the identified liabilities of
Select Total Return Bond Fund. (The identified liabilities consist only of
those liabilities reflected on Select Total Return Bond Fund's statement of
assets and liabilities determined immediately preceding the Merger.)
o the liquidation of Select Total Return Bond Fund following distribution of
shares of Select Income Plus Fund to Select Total Return Bond Fund's
shareholders.
The Merger is scheduled to take place on or about July 24, 2000.
AFTER THE MERGER, WHAT CLASS OF SHARES OF SELECT INCOME PLUS FUND WILL I OWN?
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ---------------------------------------------------------------
<S> <C>
IF YOU OWN THIS CLASS OF SHARES OF SELECT TOTAL RETURN BOND YOU WILL GET THIS CLASS OF SHARES OF SELECT INCOME PLUS FUND:
FUND:
- ----------------------------------------------------------------- ---------------------------------------------------------------
- ----------------------------------------------------------------- ---------------------------------------------------------------
Institutional Institutional
- ----------------------------------------------------------------- ---------------------------------------------------------------
- ----------------------------------------------------------------- ---------------------------------------------------------------
Institutional Service Institutional Service
- ----------------------------------------------------------------- ---------------------------------------------------------------
</TABLE>
The new shares you receive will have the same total value as your Select Total
Return Bond Fund shares as of the close of business on the day immediately prior
to the Merger.
The Trustees of Evergreen Select Fixed Income Trust, including the Trustees who
are not "interested persons" (the "Independent Trustees"), as such term is
defined in the Investment Company Act of 1940 (the "1940 Act"), have concluded
that the Merger would be in the best interest of Select Total Return Bond Fund's
shareholders, and that their interest will not be diluted as a result of the
Merger. Accordingly, the Trustees have submitted the Plan for the approval of
Select Total Return Bond Fund's shareholders. The Trustees of Evergreen Select
Fixed Income Trust have also approved the Plan on behalf of Select Income Plus
Fund.
HOW DO THE FUNDS' INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND
RISKS COMPARE?
The following table highlights the comparison between the Funds with respect to
their investment objectives and principal investment strategies set forth in
each Fund's prospectus and statement of additional information.
<TABLE>
<CAPTION>
- ------------------------- ------------------------------------------------- --------------------------------------------------
SELECT TOTAL RETURN BOND FUND SELECT INCOME PLUS FUND
- ------------------------- ------------------------------------------------- --------------------------------------------------
- ------------------------- ------------------------------------------------- --------------------------------------------------
<S> <C> <C>
INVESTMENT OBJECTIVE To seek to maximize total return through a To seek a high level of current income and a
combination of current income and capital potential for capital growth.
growth, by investing primarily in investment grade
fixed income securities with complementary investments
in high yield foreign and fixed income securities.
- ------------------------- ------------------------------------------------- --------------------------------------------------
- ------------------------- ------------------------------------------------- --------------------------------------------------
PRINCIPAL INVESTMENT o Pursues a controlled risk approach o Focuses on the maximization of
STRATEGIES which uses duration adjustment, sector portfolio yield to achieve its objective.
composition and security selection in an o Utilizes a proprietary credit analysis
effort to exceed the return of its and scoring system to identify undervalued
benchmark. and overlooked fixed income instruments
o Invests at least 65% of its total with potential for capital growth.
assets in investment grade debt o Invests at least 65% of its total
securities, including debt securities assets in investment grade debt securities,
issued or guaranteed by the U.S. Treasury including debt securities issued or
or by an agency or instrumentality of the guaranteed by the U.S. Treasury or by an
U.S. government. agency or instrumentality of the U.S.
o Invests up to 35% of its total assets government.
in mortgage and asset-backed securities, o Invests up to 35% of its total assets
foreign securities, including non-dollar in mortgage and asset-backed securities,
denominated bonds, and below-investment foreign securities and below-investment
grade corporate debt securities. grade securities. Below investment grade
o Seeks a portfolio duration range of 3 securities
are not currently intended to to 10 years and a
dollar-weighted average constitute a significant
portion of the maturity with a range of 4 to 10
years. Fund's total assets. o Seeks a portfolio duration not to exceed 6
3/4 years and a dollar-weighted average
maturity of not more than 10 years.
- ------------------------- ------------------------------------------------- --------------------------------------------------
</TABLE>
Each Fund may temporarily invest up to 100% of its assets 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.
The Funds have other investment policies, practices and restrictions which,
together with their related risks, are also set forth in each Fund's prospectus
and statement of additional information.
A portion of the securities held by Select Total Return Bond Fund may be
disposed of in connection with the Merger, which could result in additional
portfolio transaction costs to the Funds and capital gains to shareholders.
A principal risk of investing in both Funds is interest rate risk (when interest
rates rise, the value of debt securities held by the Funds tends to decline in
value). Both Funds are also subject to credit risk (the issuers of the
securities in which the Funds invest will be unable to repay principal and pay
interest on the securities held by a Fund either at all or on time). Both Funds
are subject to mortgage-backed securities risk (the value of these securities
changes as interest rates change and mortgages are repaid). Both Funds are
subject to foreign investment risk (risks such as currency risk, political
turmoil and/or economic instability in the countries in which the Funds invest
could adversely affect the value of the Funds' investment). For a detailed
comparison of the Funds' risks, see the section entitled "Risks" below.
HOW DO THE FUNDS' SALES CHARGES AND EXPENSES COMPARE? WILL I BE ABLE TO BUY,
SELL AND EXCHANGE SHARES THE SAME WAY?
Both Funds offer Institutional and Institutional Service shares. Neither class
of shares is subject to any sales charges. The procedures for buying, selling
and exchanging shares of the Funds are identical. For more information, see
"Purchase and Redemption Procedures" and "Exchange Privileges" below.
The following tables allow you to compare the expenses of the two Funds. The
table entitled "Select Income Plus Fund Pro Forma" also shows you what the
expenses are estimated to be assuming the Merger takes place.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
You pay no shareholder transaction fees.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------- -- -------------------------------------------------------
SELECT TOTAL RETURN BOND FUND (based on expenses for SELECT INCOME PLUS FUND (based on expenses for the
the fiscal year ended September 30, 1999, which have fiscal year ended September 30, 1999, which have been
been restated to reflect current contractual rates as restated to reflect current contractual rates as of
of January 3, 2000) January 3, 2000)
- --------------------------------------------------------- -- -------------------------------------------------------
- ------------ ----------- ------- --------- -------------- -- --------- ----------- ------- -------- -------------
MANAGEMENT 12B-1 OTHER TOTAL FUND MANAGEMENT 12B-1 OTHER TOTAL FUND
FEES FEES EXPENSES OPERATING FEES FEES EXPENSES OPERATING
EXPENSES(1) EXPENSES(3)
- ------------ ----------- ------- --------- -------------- -- --------- ----------- ------- -------- -------------
- ------------ ----------- ------- --------- -------------- -- --------- ----------- ------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL 0.32% 0.00% 0.21% 0.53% INSTITUTIONAL 0.42% 0.00% 0.16% 0.58%
- ------------ ----------- ------- --------- -------------- -- --------- ----------- ------- -------- -------------
- ------------ ----------- ------- --------- -------------- -- --------- ----------- ------- -------- -------------
INSTITUTIONAL 0.32% 0.25% 0.21% 0.78% INSTITUTIONAL 0.42% 0.25% 0.16% 0.83%
SERVICE SERVICE
- ------------ ----------- ------- --------- -------------- -- --------- ----------- ------- -------- -------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) From time to time, the Fund's investment advisor may, at its discretion,
reduce or waive its fees or reimburse the Fund for certain of its expenses in
order to reduce expense ratios. The Fund's investment advisor may cease these
waivers or reimbursements at any time. The Annual Fund Operating Expenses do not
reflect fee waivers and expense reimbursements. Including current fee waivers
and expense reimbursements, Total Fund Operating Expenses for the Institutional
shares were 0.50% and for the Institutional Service shares were 0.75% for the
fiscal year ended 9/30/1999.
(2) From time to time, the Fund's investment advisor may, at its discretion,
reduce or waive its fees or reimburse the Fund for certain of its expenses in
order to reduce expense ratios. The Fund's investment advisor may cease these
waivers or reimbursements at any time. The Annual Fund Operating Expenses do not
reflect fee waivers and expense reimbursements. Including current fee waivers
and expense reimbursements, Total Fund Operating Expenses for the Institutional
shares were 0.48% and for the Institutional Service shares were 0.73% for the
fiscal year ended 9/30/1999.
- ---------------------------------------------------------------------------
SELECT INCOME PLUS FUND
PRO FORMA
(basedon what the estimated combined expenses of Select Income Plus Fund would
have been for the 12 months ended September 30, 1999)(3)
- ---------------------------------------------------------------------------
- ------------ ------------ --------- -------------- ------------------------
MANAGEMENT 12B-1 OTHER TOTAL FUND
FEES FEES EXPENSES OPERATING EXPENSES(4)
- ------------ ------------ --------- -------------- ------------------------
- ------------ ------------ --------- -------------- ------------------------
INSTITUTIONAL 0.42% 0.00% 0.15% 0.57%
- ------------ ------------ --------- -------------- ------------------------
- ------------ ------------ --------- -------------- ------------------------
INSTITUTIONAL 0.42% 0.25% 0.15% 0.82%
SERVICE
- ------------ ------------ --------- -------------- ------------------------
(3) The expenses shown reflect contractual rate changes made on January 3, 2000.
At that time, the Fund's advisory fee was reduced in order to offset an increase
in the Fund's administrative services fee.
(4) 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 Annual Fund Operating Expenses do not
reflect fee waivers and expense reimbursements. The Fund's investment advisor
has agreed to voluntarily waive the management fee and/or reimburse expenses for
a period of two years beginning in July 2000 in order to limit Total Fund
Operating Expenses to 0.50% for Institutional shares and 0.75% for Institutional
Service shares.
The table below shows examples of 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 Select Total Return Bond
Fund versus Select Income Plus Fund and for Select Income Plus Fund pro forma,
assuming the Merger takes place, 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.
<TABLE>
<CAPTION>
EXAMPLE OF FUND EXPENSES
- --------------------------------------------------------- --- ------------------------------------------------------------
SELECT TOTAL RETURN BOND FUND SELECT INCOME PLUS FUND
- --------------------------------------------------------- --- ------------------------------------------------------------
- ------------------ ------------------ ------------------- --- ---------------- ---------------------- --------------------
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
SERVICE SERVICE
- ------------------ ------------------ ------------------- --- ---------------- ---------------------- --------------------
- ------------------ ------------------ ------------------- --- ---------------- ---------------------- --------------------
<S> <C> <C> <C> <C> <C>
AFTER 1 YEAR $54 $80 AFTER 1 YEAR $59 $85
- ------------------ ------------------ ------------------- --- ---------------- ---------------------- --------------------
- ------------------ ------------------ ------------------- --- ---------------- ---------------------- --------------------
AFTER 3 YEARS $170 $249 AFTER 3 YEARS $186 $265
- ------------------ ------------------ ------------------- --- ---------------- ---------------------- --------------------
- ------------------ ------------------ ------------------- --- ---------------- ---------------------- --------------------
AFTER 5 YEARS $296 $433 AFTER 5 YEARS $324 $460
- ------------------ ------------------ ------------------- --- ---------------- ---------------------- --------------------
- ------------------ ------------------ ------------------- --- ---------------- ---------------------- --------------------
AFTER 10 YEARS $665 $966 AFTER 10 YEARS $726 $1,025
- ------------------ ------------------ ------------------- --- ---------------- ---------------------- --------------------
</TABLE>
- --------------------------------------------------------------------------------
SELECT INCOME PLUS FUND
PRO FORMA
- --------------------------------------------------------------------------------
- ------------------- --------------------------------- --------------------------
INSTITUTIONAL INSTITUTIONAL SERVICE
- ------------------- --------------------------------- --------------------------
- ------------------- --------------------------------- --------------------------
AFTER 1 YEAR $58 $84
- ------------------- --------------------------------- --------------------------
- ------------------- --------------------------------- --------------------------
AFTER 3 YEARS $183 $262
- ------------------- --------------------------------- --------------------------
- ------------------- --------------------------------- --------------------------
AFTER 5 YEARS $318 $455
- ------------------- --------------------------------- --------------------------
- ------------------- --------------------------------- --------------------------
AFTER 10 YEARS $713 $1,014
- ------------------- --------------------------------- --------------------------
HOW DO THE FUNDS' PERFORMANCE RECORDS COMPARE?
The following charts show how each Fund has performed in the past. PAST
PERFORMANCE IS NOT AN INDICATION OF FUTURE RESULTS.
YEAR-BY-YEAR TOTAL RETURN (%)
The chart below shows the percentage gain or loss for the Institutional shares,
Select Total Return Bond Fund's oldest class of shares, in each calendar year
since its inception on April 20, 1998. It also shows the percentage gain or loss
for the Institutional shares, Select Income Plus Fund's oldest class of shares,
in each of the past ten calendar years. The chart should give you a general idea
of the risks of investing in each Fund by showing how each Fund's return has
varied from year-to-year. This chart includes the effects of Fund expenses.
<TABLE>
<CAPTION>
- -------------------------------------------------- ---- --------------------------------------------------------------------------
SELECT TOTAL RETURN BOND FUND (INSTITUTIONAL SELECT INCOME PLUS FUND (INSTITUTIONAL SHARES)**
SHARES)*
- -------------------------------------------------- ---- --------------------------------------------------------------------------
- --------- -- --- -- -- --- -- -- --- -- -- ------- ---- --- ----- ------- ----- ------- ------- ------ ------ ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
`89`90 `91`92`93 `94`95`96 `97`98`99 `89 `90 `91 `92 `93 `94 `95 `96 `97 `98 `99
- --------- -- --- -- -- --- -- -- --- -- -- ------- ---- --- ----- ------- ----- ------- ------- ------ ------ ------ ----- -------
- --------- -- --- -- -- --- -- -- --- -- -- ------- ---- --- ----- ------- ----- ------- ------- ------ ------ ------ ----- -------
20% 20% 15.26% 18.65%
- --------- -- --- -- -- --- -- -- --- -- -- ------- ---- --- ----- ------- ----- ------- ------- ------ ------ ------ ----- -------
- --------- -- --- -- -- --- -- -- --- -- -- ------- ---- --- ----- ------- ----- ------- ------- ------ ------ ------ ----- -------
15% 15% 11.07%
- --------- -- --- -- -- --- -- -- --- -- -- ------- ---- --- ----- ------- ----- ------- ------- ------ ------ ------ ----- -------
- --------- -- --- -- -- --- -- -- --- -- -- ------- ---- --- ----- ------- ----- ------- ------- ------ ------ ------ ----- -------
10% 10% 8.45% 5.12% 8.87% 7.92%
- --------- -- --- -- -- --- -- -- --- -- -- ------- ---- --- ----- ------- ----- ------- ------- ------ ------ ------ ----- -------
- --------- -- --- -- -- --- -- -- --- -- -- ------- ---- --- ----- ------- ----- ------- ------- ------ ------ ------ ----- -------
5% 5% 2.14%
- --------- -- --- -- -- --- -- -- --- -- -- ------- ---- --- ----- ------- ----- ------- ------- ------ ------ ------ ----- -------
- --------- -- --- -- -- --- -- -- --- -- -- ------- ---- --- ----- ------- ----- ------- ------- ------ ------ ------ ----- -------
0 0
- --------- -- --- -- -- --- -- -- --- -- -- ------- ---- --- ----- ------- ----- ------- ------- ------ ------ ------ ----- -------
- --------- -- --- -- -- --- -- -- --- -- -- ------- ---- --- ----- ------- ----- ------- ------- ------ ------ ------ ----- -------
- -5% -1.57% -5% -4.22% -2.06%
- --------- -- --- -- -- --- -- -- --- -- -- ------- ---- --- ----- ------- ----- ------- ------- ------ ------ ------ ----- -------
- --------- -- --- -- -- --- -- -- --- -- -- ------- ---- --- ----- ------- ----- ------- ------- ------ ------ ------ ----- -------
- -10% -10%
- --------- -- --- -- -- --- -- -- --- -- -- ------- ---- --- ----- ------- ----- ------- ------- ------ ------ ------ ----- -------
BEST QUARTER: 3RD QUARTER 1999 +0.63% BEST QUARTER: 2ND QUARTER 1995 +6.58%
WORST QUARTER: 4TH QUARTER 1999 -1.57% WORST QUARTER: 1ST QUARTER 1994 -3.46%
Year-to-date total return for March 31, 2000 is 0.08%. Year-to-date total return for March 31, 2000 is 1.10%.
</TABLE>
AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIOD ENDED 12/31/1999)
The next table lists each Fund's average annual total return by class over the
past one, five and ten years and since inception (through 12/31/1999). This
table is intended to provide you with some indication of the risks of investing
in each Fund by comparing each Fund's performance with an appropriate
broad-based index. Select Total Return Bond Fund's performance is compared with
the Lehman Brothers Aggregate Bond Index ("LBABI") which is a fixed income index
covering the U.S investment grade fixed-rate bond market, including U.S.
government and U.S. government agency securities, corporate securities, and
asset-backed securities. Select Income Plus Fund's performance is compared with
Lehman Brothers Government/ Corporate Bond Index ("LBGCBI"), which is a fixed
income index that includes fixed-rate U.S. government, U.S. government agency
and investment grade corporate securities. Each is an unmanaged index and does
not include transaction costs associated with buying and selling securities or
any mutual fund expenses. It is not possible to invest directly in an index.
<TABLE>
<CAPTION>
- -------------------------------------------------------------- -- ----------------------------------------------------------------
SELECT TOTAL RETURN BOND FUND* SELECT INCOME PLUS FUND**
- -------------------------------------------------------------- -- ----------------------------------------------------------------
- -------------- ----------- --------- ----- ------ ------------ -- ----------- ----------- --------- ------- --------- ------------
Inception 1 year 5 10 Performance Inception 1 year 5 year 10 year Performance
Date of year year Since Date of Since
Class 4/20/1998 Class 8/31/1988
- -------------- ----------- --------- ----- ------ ------------ -- ----------- ----------- --------- ------- --------- ------------
- -------------- ----------- --------- ----- ------ ------------ -- ----------- ----------- --------- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 4/20/1998 -1.57% NA N/A 0.89% Institutiona1 1/24/1997 -2.06% 6.86% 6.90% 7.28%
- -------------- ----------- --------- ----- ------ ------------ -- ----------- ----------- --------- ------- --------- ------------
- -------------- ----------- --------- ----- ------ ------------ -- ----------- ----------- --------- ------- --------- ------------
Institutional 8/3/1998 -1.82% NA N/A 0.68% InstitutionaL 3/2/1998 -2.30% 6.61% 6.65% 7.02%
Service Service
- -------------- ----------- --------- ----- ------ ------------ -- ----------- ----------- --------- ------- --------- ------------
- -------------- ----------- --------- ----- ------ ------------ -- ----------- ----------- --------- ------- --------- ------------
LBABI -0.82% NA N/A 3.31% LBGCBI -2.15% 7.61% 7.65% 8.29%
- -------------- ----------- --------- ----- ------ ------------ -- ----------- ----------- --------- ------- --------- ------------
</TABLE>
*Historical performance shown for the Institutional Service shares prior to
their inception is based on the performance of the Institutional shares and has
not been adjusted to reflect the effect of the 0.25% 12b-1 fee applicable to the
Institutional Service shares. The Institutional shares pay no 12b-1 fee. If
these fees had been reflected, returns would have been lower.
** Historical performance shown for Institutional Service shares from 11/24/1997
to their inception is based on the performance of Institutional shares and has
not been adjusted to reflect the effect of the 0.25% 12b-1 fee applicable to
Institutional Service shares. Institutional shares pay no 12b-1 fee. If these
fees had been reflected, returns would have been lower. Prior to 11/24/1997, the
returns for Institutional shares and Institutional Service shares are based on
the Fund's predecessor common trust fund's (CTF) performance, adjusted for
estimated mutual fund expenses. The CTF was not registered under the 1940 Act
and was not subject to certain investment restrictions. If the CTF had been
registered, its performance may have been adversely affected. Performance for
the CTF has been adjusted to include the effect of estimated mutual fund class
gross expense ratios at the time the CTF was converted to a mutual fund. If fee
waivers and expense reimbursements had been calculated into the mutual fund
class expense ratio, the total returns would be as follows: Institutional shares
- -- 5 year = 6.92%, 10 year = 6.99% and since 8/31/1988 = 7.37%; Institutional
Service shares -- 5 years = 6.68%, 10 year = 6.73% and since 8/31/1988 = 7.11%.
For a detailed discussion of the manner of calculating total return, please see
each Fund's statement of additional information. Generally, the calculations of
total return assume the reinvestment of all dividends and capital gain
distributions on the reinvestment date.
Important information about Select Income Plus Fund is also contained in
management's discussion of Select Income Plus Fund's performance, attached as
Exhibit B to this prospectus/proxy statement. This information also appears in
Select Income Plus Fund's most recent annual report.
WHO WILL BE THE INVESTMENT ADVISOR AND PORTFOLIO MANAGER OF MY FUND AFTER THE
MERGER? WHAT WILL THE ADVISORY FEE BE AFTER THE MERGER?
MANAGEMENT OF THE FUNDS
The overall management of Select Income Plus Fund and Select Total Return Bond
Fund is the responsibility of, and is supervised by, the Board of Trustees of
Evergreen Select Fixed Income Trust.
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT ADVISOR First Capital Group ("FCG"), is the investment advisor to Select Income Plus Fund.
Facts about FCG:
o Is a division of First Union National Bank
("FUNB"), which is a subsidiary of First Union
Corporation ("First Union"), the 6th largest
bank holding company in the United States based
on total assets as of March 31, 2000.
o Has been managing money for over 50 years.
o Manages over [$23] billion in assets for [22] of the Evergreen Funds.
o Manages with its affiliates the Evergreen family of mutual funds with assets of
approximately [$84.3] billion as of March 31, 2000.
o Is located at 401 South Tryon Street, Charlotte, North Carolina 28288.
ADVISORY FEES For its management and supervision of the daily
business affairs of Select Income Plus Fund, FCG is
entitled to receive an annual fee equal to 0.42% of
the Fund's average daily net assets.
</TABLE>
FCG MAY, AT ITS DISCRETION, REDUCE OR WAIVE ITS FEE OR REIMBURSE THE FUND FOR
CERTAIN OF ITS OTHER EXPENSES IN ORDER TO REDUCE THE EXPENSE RATIOS. UNLESS
OTHERWISE AGREED UPON, FCG MAY ALSO REDUCE OR CEASE THESE VOLUNTARY WAIVERS AND
REIMBURSEMENTS AT ANY TIME. IF THE MERGER TAKES PLACE, FCG HAS AGREED TO WAIVE
THE MANAGEMENT FEE AND/OR REIMBURSE EXPENSES FOR A PERIOD OF TWO YEARS BEGINNING
IN JULY 2000 IN ORDER TO LIMIT SELECT INCOME PLUS FUND'S TOTAL FUND OPERATING
EXPENSES TO 0.50% FOR INSTITUTIONAL SHARES AND 0.75% FOR INSTITUTIONAL SERVICE
SHARES.
PORTFOLIO MANAGEMENT J.P. Weaver, CFA, has managed Select Income Plus Fund
since November 1997. Since joining FCG in 1994,
Mr. Weaver has been a Vice President and Director of
Fixed Income Research.
Karen Bater, CFA, has managed the Select Income Plus
Fund since January 1999. Ms. Bater is a senior
portfolio manager and has been a Senior Vice President
since October 1999. She joined FCG in 1998 when
CoreStates Financial, where she was employed since
1986, was acquired by First Union.
Lisa Brown Premo has managed the Select Income Plus
Fund since January 1999. Ms. Brown Premo is a Vice
President and senior portfolio manager with FCG, and
has been with FUNB since 1986. Ms. Brown Premo was a
Managing Director with the Capital Markets division
from 1991 until October 1996 when she joined FCG as a
senior portfolio manager.
WHAT WILL BE THE PRIMARY FEDERAL TAX CONSEQUENCES OF THE MERGER?
Prior to or at the completion of the Merger, Select Total Return Bond Fund will
have received an opinion from Sullivan & Worcester LLP that the Merger has been
structured so that no gain or loss will be realized by the Fund or its
shareholders for federal income tax purposes as a result of receiving Select
Income Plus Fund shares in connection with the Merger. The holding period and
aggregate tax basis of shares of Select Income Plus Fund that are received by
Select Total Return Bond Fund's shareholders will be the same as the holding
period and aggregate tax basis of shares of the Fund previously held by such
shareholders, provided that shares of the Fund are held as capital assets. In
addition, the holding period and tax basis of the assets of Select Total Return
Bond Fund in the hands of Select Income Plus Fund as a result of the Merger will
be the same as in the hands of the Fund immediately prior to the Merger, and no
gain or loss will be recognized by Select Income Plus Fund upon the receipt of
the assets of the Fund in exchange for shares of Select Income Plus Fund and the
assumption by Select Income Plus Fund of Select Total Return Bond Fund's
identified liabilities.
RISKS
WHAT ARE THE PRIMARY RISKS OF INVESTING IN EACH FUND?
An investment in each Fund is subject to certain risks. There is no assurance
that investment performance of either Fund will be positive or that the Funds
will meet their investment objectives. The following tables and discussions
highlight the primary risks associated with an investment in each of the Funds.
- --------------------------------------------- ----------------------------------
SELECT TOTAL RETURN BOND FUND SELECT INCOME PLUS FUND
- --------------------------------------------- ----------------------------------
- --------------------------------------------------------------------------------
Both Funds are subject to INTEREST RATE
RISK. Both Funds invest a significant portion of their
assets in debt securities.
- --------------------------------------------------------------------------------
Interest rate risk is the tendency for the value of debt securities to fall when
interest rates go up. Since both Funds primarily invest in debt securities, if
interest rates rise, then the value of the Funds' securities may decline. The
longer the term of a bond or fixed income instrument, the more sensitive it will
be to fluctuations in value from interest rate changes. When interest rates go
down, interest earned by the Funds on their investments may also decline, which
could cause the Funds to reduce the dividends they pay.
- -------------------------------------------------- -----------------------------
SELECT TOTAL RETURN BOND FUND SELECT INCOME PLUS FUND
- -------------------------------------------------- -----------------------------
- --------------------------------------------------------------------------------
Both Funds are subject to CREDIT RISK.
Both Funds may invest a significant portion of their
assets in debt securities. Also, both Funds may invest up to
35% of their assets in below investment grade securities.
- --------------------------------------------------------------------------------
The value of a debt security is directly affected by the issuer's ability to
repay principal and pay interest on time. Since the Funds invest a significant
portion of their assets in debt securities, the value of and total return earned
on a shareholder's investment in a Fund may decline if an issuer fails to pay an
obligation on a timely basis.
Both Funds may also invest a portion of their assets in securities that are
below investment grade (i.e., securities rated below Baa by Moody's Investors
Services, Inc., below BBB by Standard & Poor's Ratings Services, or unrated
securities of comparable quality). Below investment grade securities, or junk
bonds, generally are considered to be subject to greater credit risk than higher
quality securities because the issuers of below investment grade securities
generally are viewed as having greater potential for default than issuers of
higher quality bonds. An issuer's ability to make principal and interest
payments on its below investment grade debt may be dramatically affected by
developments impacting its financial performance, including developments within
the markets or industries in which it operates and changes in general economic
conditions. Issuers of lower-rated securities are often highly leveraged and may
not have more traditional methods of financing available to them, so that their
ability to service their debt obligations during an economic downturn or during
sustained periods of rising interest rates may be impaired. Further, the risk of
loss due to default by such issuers is significantly greater because lower-rated
securities generally are unsecured and frequently are subordinated to the prior
payment of senior indebtedness. A Fund could also be required to sell the
security for an amount substantially below what the Fund paid for it. Even if
the issuer of the security did not actually default on its payments, the value
of the security could decline if the issuer came to be perceived as being more
likely to default. Below investment grade securities are not currently intended
to constitute a significant portion of Select Income Plus Fund's total assets.
- ----------------------------------------------- --------------------------------
SELECT TOTAL RETURN BOND FUND SELECT INCOME PLUS FUND
- ----------------------------------------------- --------------------------------
- --------------------------------------------------------------------------------
Both Funds are subject to MORTGAGE-BACKED SECURITIES RISK.
Both Funds may invest up to 35% of their assets in mortgage-backed securities.
- --------------------------------------------------------------------------------
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 TOTAL RETURN BOND FUND SELECT INCOME PLUS FUND
- -------------------------------------------------- -----------------------------
- --------------------------------------------------------------------------------
Both Funds are subject to FOREIGN INVESTMENT RISK.
Both Funds may invest up to 35% of their assets in foreign securities.
- --------------------------------------------------------------------------------
Investments in foreign securities require consideration of certain factors not
normally associated with investments in securities of U.S. issuers. Securities
markets of foreign countries generally are not subject to the same degree of
regulation as the U.S. markets and may be more volatile and less liquid. Lack of
liquidity may affect a Fund's ability to purchase or sell large blocks of
securities and thus obtain the best price. In addition, a Fund may incur costs
associated with currency hedging and the conversion of foreign currency into
U.S. dollars and may be adversely affected by restrictions on the conversion or
transfer of foreign currency. Other considerations include political and social
instability, expropriation, the lack of available information, higher
transaction costs (including brokerage charges), increased custodian charges
associated with holding foreign securities and different securities settlement
practices. When a Fund invests in foreign securities, they usually will be
denominated in foreign currencies, and a Fund temporarily may hold funds in
foreign currencies. Thus, the value of a Fund's shares will be affected by
changes in exchange rates.
ARE THERE ANY OTHER RISKS OF INVESTING IN EACH FUND?
Both Funds may invest in futures and options, which are forms of derivatives.
Such practices are used to hedge a Fund's portfolio to protect against changes
in interest rates, to adjust the portfolio's duration, to maintain a Fund's
exposure to its market, to manage cash or to attempt to increase income.
Although this is intended to increase returns, these practices may actually
reduce returns or increase volatility.
The portfolio turnover rate for Select Total Return Bond Fund has been higher
than that for Select Income Plus Fund due to the portfolio manager's active
portfolio management style. High portfolio turnover may cause a Fund to realize
capital gains which, if distributed by the Fund, may be taxable to shareholders
as ordinary income. High portfolio turnover may also result in correspondingly
greater brokerage commissions and other transaction costs, which will be borne
directly by the Fund and its shareholders.
MERGER INFORMATION
REASONS FOR THE MERGER
At a regular meeting held on March 23-24, 2000, all of the Trustees of Evergreen
Select Fixed Income Trust, including the Independent Trustees, considered and
approved the Merger; they determined that it was in the best interests of
shareholders of Select Total Return Bond Fund and that the interests of existing
shareholders of Select Total Return Bond Fund will not be diluted as a result of
the transactions contemplated by the Merger.
Before approving the Plan, the Trustees reviewed various factors about the Funds
and the proposed Merger. The Trustees considered among other things:
o the terms and conditions of the Merger;
o whether the Merger would result in the dilution of shareholders'
interests;
o expense ratios, fees and expenses of Select Income Plus Fund and Select
Total Return Bond Fund;
o the comparative performance records of each Fund;
o compatibility of the Funds' investment objectives and principal
investment strategies;
o the fact that FUNB will bear the expenses incurred by Select Total
Return Bond Fund and Select Income Plus Fund in connection with the
Merger;
o the fact that Select Income Plus Fund will assume the identified
liabilities of Select Total Return Bond Fund;
o the fact that the Merger is expected to be tax free for federal income
tax purposes; and
o alternatives available to shareholders of Select Total Return Bond
Fund, including the ability to redeem their shares.
During their consideration of the Merger, the Trustees met with Fund counsel and
counsel to the Independent Trustees regarding the legal issues involved.
In approving the Merger, the Trustees considered the fact that both Funds have
similar investment objectives, policies and strategies, as well as similar
portfolio characteristics. The Trustees evaluated the potential economies of
scale associated with larger mutual funds and concluded that operational
efficiencies may be achieved by combining Select Total Return Bond Fund with
Select Income Plus Fund. As of March 31, 2000, Select Income Plus Fund's total
assets were approximately $1.7 billion and Select Total Return Bond Fund's total
assets were approximately $142.8 million.
The Trustees also considered the relative performance of each Fund. The past
one-year performance for the period ended December 31, 1999 was higher for
Select Income Plus Fund than for Select Total Return Bond Fund.
The Trustees also considered the relative expenses of the Funds. Currently, the
gross expense ratio of Select Total Return Bond Fund is lower than that of
Select Income Plus Fund. If the Merger takes place, FCG has agreed to waive the
management fee and/or reimburse expenses for a period of two years beginning in
July 2000 in order to limit Select Income Plus Fund's total fund operating
expenses to 0.50% for Institutional shares and 0.75% for Institutional Service
shares. This advisory fee waiver and expense reimbursement as well as the
efficiencies achieved in operating a larger mutual fund would bring the expenses
of the combined fund more in line with the current expenses of Select Total
Return Bond Fund.
In addition, assuming that an alternative to the Merger would be for Select
Total Return Bond Fund to maintain its separate existence, it is believed that
the prospect of dividing resources of the Evergreen Fund family between two
similar funds could result in each Fund being disadvantaged due to an inability
to achieve optimum size, performance levels and greater economies of scale.
Accordingly, for the reasons noted above and recognizing that there can be no
assurance that any economies of scale or other benefits will be realized, the
Trustees believe that the proposed Merger would be in the best interests of each
Fund and its shareholders.
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 Select Income Plus Fund will acquire all of the assets of
Select Total Return Bond Fund in exchange for shares of Select Income Plus Fund
and the assumption by Select Income Plus Fund of the identified liabilities of
Select Total Return Bond Fund on or about July 24, 2000 or such other date as
may be agreed upon by the parties (the "Closing Date"). Prior to the Closing
Date, Select Total Return Bond Fund will endeavor to discharge all of its known
liabilities and obligations. Select Income Plus Fund will not assume any
liabilities or obligations of Select Total Return Bond Fund other than those
reflected in an unaudited statement of assets and liabilities of Select Total
Return Bond Fund prepared as of the close of regular trading on the New York
Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern Time, on the business day
immediately prior to the Closing Date (the "Valuation Time"). The number of full
and fractional shares of each class of Select Income Plus Fund to be received by
the shareholders of Select Total Return Bond Fund will be determined by
multiplying number of full and fractional shares of the corresponding class of
Select Total Return Bond Fund by a factor which shall be computed by dividing
the net asset value per share of the respective class of shares of Select Total
Return Bond Fund by the net asset value per share of the respective class of
shares of Select Income Plus Fund. Such computations will take place as of the
Valuation Time. 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 the Funds, will compute
the value of each Fund's respective portfolio of securities. The method of
valuation employed will be consistent with the procedures set forth in the
prospectus and statement of additional information of Select Income Plus Fund,
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, Select Total Return Bond Fund will have
declared a dividend and distribution which, together with all previous dividends
and distributions, shall have the effect of distributing to the 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), all of the Fund's net tax exempt income and all
of its net capital gains realized in all taxable periods ending on the Closing
Date (after the reductions for any capital loss carryforward).
As soon after the Closing Date as conveniently practicable, Select Total Return
Bond Fund 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
Select Income Plus Fund received by Select Total Return Bond Fund. Such
liquidation and distribution will be accomplished by the establishment of
accounts in the names of Select Total Return Bond Fund's shareholders on Select
Income Plus Fund's share records of its transfer agent. Each account will
represent the respective pro rata number of full and fractional shares of Select
Income Plus Fund due to the Fund's shareholders. All issued and outstanding
shares of Select Total Return Bond Fund, including those represented by
certificates, will be canceled. The shares of Select Income Plus Fund to be
issued will have no preemptive or conversion rights. After these distributions
and the winding up of its affairs, Select Total Return Bond Fund will be
terminated.
The consummation of the Merger is subject to the conditions set forth in the
Plan, including approval by Select Total Return Bond Fund'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 Select
Total Return Bond Fund's shareholders, the Plan may be terminated (a) by the
mutual agreement of Select Total Return Bond Fund and Select Income Plus Fund;
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.
Whether or not the Merger is consummated, FUNB will pay the expenses incurred by
Select Total Return Bond Fund and Select Income Plus Fund in connection with the
Merger (including the cost of any proxy-soliciting agent). No portion of the
expenses will be borne directly or indirectly by Select Total Return Bond Fund,
Select Income Plus Fund or their shareholders.
If Select Total Return Bond Fund's shareholders do not approve the Merger, the
Trustees will consider other possible courses of action which may be in the best
interests of shareholders.
FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify for federal income tax purposes as a tax free
reorganization under section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). As a condition to the closing of the Merger, Select Total
Return Bond Fund will receive an opinion from Sullivan & Worcester LLP 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
Merger:
(1) The transfer of all of the assets of Select Total Return Bond Fund
solely in exchange for shares of Select Income Plus Fund and the
assumption by Select Income Plus Fund of the identified liabilities,
followed by the distribution of Select Income Plus Fund's shares by
Select Total Return Bond Fund in dissolution and liquidation of Select
Total Return Bond Fund, will constitute a "reorganization" within the
meaning of section 368(a)(1)(C) of the Code, and Select Income Plus
Fund and Select Total Return Bond 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 Select Total Return Bond Fund on
the transfer of all of its assets to Select Income Plus Fund solely in
exchange for Select Income Plus Fund's shares and the assumption by
Select Income Plus Fund of the identified liabilities of Select Total
Return Bond Fund or upon the distribution of Select Income Plus Fund's
shares to Select Total Return Bond Fund's shareholders in exchange for
their shares of Select Total Return Bond Fund;
(3) The tax basis of the assets transferred will be the same to Select
Income Plus Fund as the tax basis of such assets to Select Total Return
Bond Fund immediately prior to the Merger, and the holding period of
such assets in the hands of Select Income Plus Fund will include the
period during which the assets were held by Select Total Return Bond
Fund;
(4) No gain or loss will be recognized by Select Income Plus Fund upon the
receipt of the assets from Select Total Return Bond Fund solely in
exchange for the shares of Select Income Plus Fund and the assumption
by Select Income Plus Fund of the identified liabilities of Select
Total Return Bond Fund;
(5) No gain or loss will be recognized by Select Total Return Bond Fund's
shareholders upon the issuance of the shares of Select Income Plus Fund
to them, provided they receive solely such shares (including fractional
shares) in exchange for their shares of Select Total Return Bond Fund;
and
(6) The aggregate tax basis of the shares of Select Income Plus Fund,
including any fractional shares, received by each of the shareholders
of Select Total Return Bond Fund pursuant to the Merger will be the
same as the aggregate tax basis of the shares of Select Total Return
Bond Fund held by such shareholder immediately prior to the Merger, and
the holding period of the shares of Select Income Plus Fund, including
fractional shares, received by each such shareholder will include the
period during which the shares of Select Total Return Bond Fund
exchanged therefor were held by such shareholder (provided that the
shares of Select Total Return Bond Fund were held as a capital asset on
the date of the Merger).
Opinions of counsel are not binding upon the Internal Revenue Service or the
courts. If the Merger is consummated but does not qualify as a tax free
reorganization under the Code, a shareholder of Select Total Return Bond Fund
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 Select
Income Plus Fund shares he or she received. Shareholders of Select Total Return
Bond Fund should consult their tax advisors regarding the effect, if any, of the
proposed Merger in light of their individual circumstances. Since the foregoing
discussion relates only to the federal income tax consequences of the Merger,
shareholders of Select Total Return Bond Fund should also consult their tax
advisors as to the state and local tax consequences, if any, of the Merger.
Any capital loss carryforwards of Select Total Return Bond Fund will be
available to Select Income Plus Fund to offset capital gains recognized after
the Merger subject to limitations imposed by the Code. These limitations provide
generally that the amount of loss carryforward may be used in any year following
the Closing Date in an amount equal to the value of all of the outstanding stock
of Select Total Return Bond Fund immediately prior to the Merger, multiplied by
a long-term tax-exempt bond rate determined monthly by the Internal Revenue
Service. 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
Merger on the sale of assets transferred by Select Total Return Bond Fund to
Select Income Plus Fund pursuant to the Merger, to the extent of the excess of
the value of any such asset on the Closing Date over its tax basis.
PRO-FORMA CAPITALIZATION
The following table sets forth the capitalizations of Select Total Return Bond
Fund and Select Income Plus Fund as of September 30, 1999 and the capitalization
of Select Income Plus Fund 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 17.10 and 17.10 Institutional and
Institutional Service shares, respectively, of Select Income Plus Fund issued
for each Institutional and Institutional Service share, respectively, of Select
Total Return Bond Fund.
<TABLE>
<CAPTION>
CAPITALIZATION OF SELECT TOTAL RETURN BOND FUND, SELECT INCOME PLUS FUND
AND SELECT INCOME PLUS FUND (PRO FORMA)
SELECT TOTAL RETURN BOND FUND SELECT INCOME PLUS FUND SELECT INCOME PLUS FUND
(AFTER MERGER)
Net Assets
<S> <C> <C> <C>
Institutional $144,319,976 $1,794,208,965 $1,938,528,941
Institutional Service 6,333,543 10,870,944 17,204,487
---------- ----------- ----------
Total Net Assets $150,653,519 $1,805,079,909 $1,955,733,428
========= ========== ==========
Net Asset Value Per Share
Institutional $92.57 $5.41 $5.41
Institutional Service $92.57 $5.41 $5.41
Shares Outstanding
Institutional 1,559,047 331,483,317 358,146,544
Institutional Service 68,419 2,008,467 3,178,614
--------- ----------- -----------
All Classes 1,627,466 333,491,784 361,325,159
========= =========== ===========
</TABLE>
The table set forth above should not be relied upon to reflect the number of
shares to be received in the Merger; 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 Merger.
DISTRIBUTION OF SHARES
Evergreen Distributor, Inc. ("EDI"), an affiliate of BISYS Fund Services, acts
as underwriter of shares of Select Income Plus Fund and Select Total Return Bond
Fund. EDI distributes each Fund's shares directly or through broker-dealers,
banks (including FUNB), or other financial intermediaries. Each Fund offers two
classes shares: Institutional and Institutional Service. Each class has a
separate distribution arrangement and bears its own distribution expenses. (See
"Shareholder Servicing-Related Expenses" below).
In the proposed Merger, Select Total Return Bond Fund shareholders will receive
shares of Select Income Plus Fund having the same class designation, and the
same arrangements with respect to the imposition of Rule 12b-1 service fees, as
the shares they currently hold. The Merger will be effected at net asset value.
Institutional and Institutional Service shares of Select Income Plus Fund and
Select Total Return Bond Fund have no initial or contingent deferred sales
charges. Institutional Service shares of both Funds are subject to an annual
service fee of up to 0.25% of the average daily net assets of the class for
personal services rendered to shareholders and/or the maintenance of accounts. A
more detailed description of the shareholder-servicing arrangements applicable
to Institutional Service shares can be found below and is contained in the
Select Income Plus Fund and Select Total Return Bond Fund prospectus and in the
Funds' statement of additional information.
SHAREHOLDER SERVICING-RELATED EXPENSES. Each Fund has adopted a Rule 12b-1 plan
with respect to its Institutional Service shares under which the class may pay
for shareholder servicing-related expenses at an annual rate which may not
exceed 0.75% of the average daily net assets attributable to the class. Payments
with respect to Institutional Service shares are currently limited to 0.25% of
average daily net assets attributable to the class. This amount may be increased
to the full plan rate for each Fund by the Trustees without shareholder
approval. Consistent with the requirements of Rule 12b-1 and the applicable
rules of the National Association of Securities Dealers, Inc., following the
Merger, Select Income Plus Fund may make shareholder servicing-related payments
with respect to Select Total Return Bond Fund shares sold prior to the Merger.
Additional information regarding the Rule 12b-1 plans adopted by each Fund with
respect to its Institutional Service shares is included in each Fund's
prospectus and statement of additional information.
No Rule 12b-1 plan has been adopted for the Institutional shares of either Fund.
PURCHASE AND REDEMPTION PROCEDURES
Information concerning applicable shareholder servicing-related fees is provided
above. Investments in the Funds are not insured. The minimum initial purchase
requirement for Institutional and Institutional Service shares for each Fund is
$1 million, which may be waived in certain situations. There is no minimum for
subsequent purchases of shares of either Fund. For more information, see "How To
Choose the Share Class That Best Suits You" in the Funds' prospectus. 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 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
each Fund's prospectus. 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
Holders of shares of a class of each Fund may exchange their shares for shares
of the same class of any other Evergreen Select fund. Each Fund limits exchanges
to five per calendar year and three per calendar quarter. An exchange which
represents an initial investment in another Evergreen Select fund must amount to
at least $1 million. The current exchange privileges, and the requirements and
limitations attendant thereto, are described in each Fund's prospectus and
statement of additional information.
DIVIDEND POLICY
Each Fund distributes its investment company taxable income monthly and its net
realized gains at least annually. Dividends and distributions are reinvested in
additional shares of the same class of the respective Fund, or paid in cash, as
a shareholder has elected. See each Fund's prospectus for further information
concerning dividends and distributions.
After the Merger, shareholders of Select Total Return Bond Fund who have elected
to have their dividends and/or distributions reinvested will have dividends
and/or distributions received from Select Income Plus Fund reinvested in shares
of Select Income Plus Fund. Shareholders of Select Total Return Bond Fund who
have elected to receive dividends and/or distributions in cash will receive
dividends and/or distributions from Select Income Plus Fund in cash after the
Merger, although they may, after the Merger, elect to have such dividends and/or
distributions reinvested in additional shares of Select Income Plus Fund.
Both Select Income Plus Fund and Select Total Return Bond Fund have qualified
and intend to continue to qualify to be treated as regulated investment
companies under the Code. To remain qualified as a regulated investment company,
a Fund must distribute 90% of its taxable and tax-exempt income. 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.
INFORMATION ON SHAREHOLDERS' RIGHTS
FORM OF ORGANIZATION
Evergreen Select Fixed Income Trust is an open-end management investment company
registered with the SEC under the 1940 Act, which continuously offers 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, a Board of
Trustees and by applicable Delaware and federal law. Select Income Plus Fund and
Select Total Return Bond Fund are series of Evergreen Select Fixed Income Trust.
CAPITALIZATION
The beneficial interests in Select Income Plus Fund and Select Total Return Bond
Fund are represented by an unlimited number of transferable shares of beneficial
interest, $.001 par value per share. Evergreen Select Fixed Income Trust's
Declaration of Trust permits the Trustees to allocate shares into an unlimited
number of series, and classes thereof, with rights determined by the 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 Fund. Shareholders of each Fund are entitled to receive
dividends and other amounts as determined by the 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 mergers, 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. Other than in a limited number of states, no similar statutory or
other authority limiting business trust shareholder 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.
SHAREHOLDER MEETINGS AND VOTING RIGHTS
Evergreen Select Fixed Income Trust on behalf of Select Income Plus Fund and
Select Total Return Bond Fund is not 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. In addition, Evergreen Select Fixed Income Trust 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. Evergreen Select Fixed Income Trust does not currently intend to
hold regular shareholder meetings. Cumulative voting is not permitted. Except
when a larger quorum is required by applicable law, with respect to both Funds,
25% of the outstanding shares entitled to vote constitutes a quorum for
consideration of a matter. For each Fund, a majority (greater than 50%) of the
votes cast and entitled to vote 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 Select Income Plus Fund and Select Total Return Bond Fund will be
entitled to one vote for each dollar of net asset value applicable to such
share.
LIQUIDATION
In the event of the liquidation of Select Income Plus Fund or Select Total
Return Bond Fund, the shareholders are entitled to receive, when and as declared
by the 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 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
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 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, its By-Laws and
Delaware law and is not a complete description of those documents or law.
Shareholders should refer to the provisions of such Declaration of Trust,
By-Laws and Delaware law directly for more complete information.
VOTING INFORMATION CONCERNING THE MEETING
This prospectus/proxy statement is being sent to shareholders of Select Total
Return Bond Fund in connection with a solicitation of proxies by the Trustees of
Evergreen Select Fixed Income Trust, to be used at the Special Meeting (the
"Meeting") of Shareholders to be held at 2:00 p.m., July 14, 2000, at the
offices of the Evergreen Funds, 200 Berkeley Street, 26th Floor, Boston,
Massachusetts 02116, 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 Select Total Return Bond Fund on or about May 26,
2000. Only shareholders of record as of the close of business on April 28, 2000
(the "Record Date") will be entitled to notice of, and to vote at, the Meeting
or any adjournment thereof.
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 Merger 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 and (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 not have the effect
of being counted as votes against the Plan, which must be approved by a majority
of the votes cast and entitled to vote. A proxy may be revoked at any time on or
before the Meeting by written notice to the Secretary of Evergreen Select Fixed
Income 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 Merger contemplated thereby.
Approval of the Merger will require the affirmative vote of a majority (greater
than 50%) of Select Total Return Bond Fund's shares voted and entitled to vote
at the Meeting, assuming a quorum (at least 25% of the Fund's outstanding shares
entitled to vote) is present.
In voting for the Merger, all classes of Select Total Return Bond Fund will vote
together as if they were a single class, and each share will be entitled to one
vote for each dollar of net asset value applicable to such share.
Proxy solicitations will be made primarily by mail, but proxy solicitations may
also be made by telephone, through the Internet or personal solicitations
conducted by officers and employees of FUNB, its affiliates or other
representatives of Select Total Return Bond Fund (who will not be paid for their
soliciting activities). In addition, proxy solicitations may be made by
Shareholder Communications Corporation, the Fund's proxy solicitor. If you wish
to participate in the Meeting, you may submit the proxy card included with this
prospectus/proxy statement, vote by telephone, fax or by the Internet or attend
in person. (See the back of this prospectus/proxy statement for voting
instructions.) Any proxy given by you is revocable.
If Select Total Return Bond Fund shareholders do not vote to approve the Merger,
the Trustees will consider other possible courses of action in the best
interests of shareholders. In the event that sufficient votes to approve the
Merger are not received before the Meeting, 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 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 Merger will not be entitled under
either Delaware law or the Declaration of Trust of Evergreen Select Fixed Income
Trust to demand payment for, or an appraisal of, his or her shares. However,
shareholders should be aware that the Merger as proposed is not expected to
result in recognition of gain or loss to shareholders for federal income tax
purposes and that, if the Merger is consummated, shareholders will be free to
redeem the shares of Select Income Plus Fund which they receive in the
transaction at their then-current net asset value. Shares of Select Total Return
Bond Fund may be redeemed at any time prior to the consummation of the Merger.
Shareholders of Select Total Return Bond Fund may wish to consult their tax
advisors as to any differing consequences of redeeming Fund shares prior to the
Merger or exchanging such shares in the Merger.
Select Total Return Bond Fund does not hold annual shareholder meetings. If the
Merger is not approved, shareholders wishing to submit proposals to be
considered for inclusion in a proxy statement for a subsequent shareholder
meeting should send their written proposals to the Secretary of Evergreen Select
Fixed Income Trust at the address set forth on the cover of this
prospectus/proxy statement so that they will be received by the Fund in a
reasonable period of time prior to the meeting.
The votes of the shareholders of Select Income Plus Fund are not being solicited
by this prospectus/proxy statement and are not required to carry out the Merger.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES. Please
advise Select Total Return Bond Fund 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.
SHAREHOLDER INFORMATION
As of the Record Date, the following number of each class of shares of
beneficial interest of Select Total Return Bond Fund was outstanding:
CLASS OF SHARES NUMBER OF SHARES
Institutional
Institutional Service _____________
All Classes
As of the Record Date, the officers and Trustees of Evergreen Select Fixed
Income Trust beneficially owned as a group less than 1% of the outstanding
shares of Select Total Return Bond Fund and Select Income Plus Fund. To
Evergreen Select Fixed Income Trust's knowledge, the following persons owned
beneficially or of record more than 5% of Select Total Return Bond Fund's total
outstanding shares as of the Record Date:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
NAME AND ADDRESS CLASS NO. OF SHARES PERCENTAGE OF SHARES OF PERCENTAGE OF SHARES OF
CLASS BEFORE MERGER CLASS AFTER MERGER
- ---------------- ----- ------------- ------------------------ -----------------------
</TABLE>
To Evergreen Select Fixed Income Trust's knowledge, the following persons owned
beneficially or of record more than 5% of Select Income Plus Fund's total
outstanding shares as of the Record Date:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
NAME AND ADDRESS CLASS NO. OF SHARES PERCENTAGE OF SHARES OF PERCENTAGE OF SHARES OF
CLASS BEFORE MERGER CLASS AFTER MERGER
- ---------------- ----- ------------- ------------------------ -----------------------
</TABLE>
FINANCIAL STATEMENTS AND EXPERTS
The Annual Report of Select Income Plus Fund as of September 30, 1999, and the
financial statements and financial highlights for the periods indicated therein,
have been incorporated by reference herein and in the Registration Statement in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The Annual Report of Select Total Return Bond Fund as of September 30,1999, 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 KPMG LLP, independent certified public
accountants, incorporated by reference herein and upon the authority of said
firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Select Income Plus
Fund will be passed upon by Sullivan & Worcester LLP, Washington, D.C.
ADDITIONAL INFORMATION
Select Total Return Bond Fund and Select Income Plus Fund 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.
OTHER BUSINESS
The Trustees of Evergreen Select Fixed Income 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 EVERGREEN SELECT FIXED INCOME TRUST RECOMMEND APPROVAL OF THE
PLAN AND ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED
IN FAVOR OF APPROVAL OF THE PLAN.
May 26, 2000
<PAGE>
INSTRUCTIONS FOR VOTING AND 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:
REGISTRATION VALID SIGNATURE
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 ACOUNTS
(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
After completing your proxy card, return it in the enclosed postage paid
envelope.
OTHER WAYS TO VOTE YOUR PROXY
<TABLE>
<CAPTION>
VOTE BY TELEPHONE: VOTE BY INTERNET:
<S> <C>
1. Read the PROSPECTUS/PROXY STATEMENT and have your 1. Read the PROSPECTUS/PROXY STATEMENT and have your
PROXY CARD at hand. PROXY CARD at hand.
2. Call toll-free 800-645-8640. 2. Go to the website indicated on your PROXY CARD and
3. Enter the 12-digit CONTROL NUMBER found on your PROXY follow the voting instructions.
CARD.
4. Follow the simple recorded instructions.
VOTE BY FAX:
1. Read the PROSPECTUS/PROXY STATEMENT and have your PROXY CARD at
hand.
2. Fax BOTH FRONT AND BACK SIDES of your PROXY CARD by calling the
number indicated on your PROXY CARD and following the voting
instructions.
</TABLE>
The above methods of voting are generally available 24 hours a day. Do not mail
the proxy card if you are voting by telephone, fax or the internet.
If you have any questions about the proxy card, please call Shareholder
Communications Corporation, our proxy solicitor, at 800-645-8640.
<PAGE>
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this 30th day of April, 2000, 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 Income Plus Fund series (the "Acquiring Fund"), and the Trust,
with respect to its Evergreen Select Total Return 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 and
Institutional Service 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, the Trustees of the Trust 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:
A-5
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 paragraphs 2.2 and 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 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. The
Selling Fund reserves the right to sell any of such securities, but will not,
without the prior written approval of the Acquiring Fund, acquire any additional
securities other than securities of the type in which the Acquiring Fund is
permitted to invest.
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.
In addition, upon completion of the Reorganization, for purposes of
calculating the maximum amount of sales charges (including asset based sales
charges) permitted to be imposed by the Acquiring Fund under the National
Association of Securities Dealers, Inc. Conduct Rule 2830 ("Aggregate NASD
Cap"), the Acquiring Fund will add to its Aggregate NASD Cap immediately prior
to the Reorganization the Aggregate NASD Cap of the Selling Fund immediately
prior to the Reorganization, in each case calculated in accordance with such
Rule 2830.
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 dissolve as set forth in 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/Proxy
Statement on Form N-14 which has been distributed to shareholders of the Selling
Fund as described in paragraph 4.1(o).
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
prospectus and statement of additional information or 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 prospectus 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
Institutional and Institutional Service shares of the Selling Fund will receive
Institutional and Institutional Service shares, respectively, of the Acquiring
Fund.
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 of the Reorganization (the "Closing")
shall take place on or about July 24, 2000 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 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 Valuation Date shall be postponed until the
first business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.3 TRANSFER AGENT'S CERTIFICATE. Evergreen Service Company, as
transfer agent for the Selling Fund, 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 the Trust 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
Delaware business trust duly organized, validly existing, and in good standing
under the laws of the State of Delaware.
(b) The Selling 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
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 prospectus 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 the Trust'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.
(g) The financial statements of the Selling Fund at September
30, 1999 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, 1999 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) At the Closing Date, all federal and other tax returns and
reports of the Selling Fund required by law to have been filed by such dates
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid, or provision shall 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 3.3. 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) At the Closing Date, the Selling Fund will have 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, 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 Selling Fund has provided the Acquiring Fund with
information reasonably necessary for the preparation of a prospectus, which
included the proxy statement of the Selling Fund (the "Prospectus/Proxy
Statement"), all of which was 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 shareholders of the Selling
Fund to approve this Agreement and the transactions contemplated hereby. The
Prospectus/Proxy Statement included in the Registration Statement (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.
(c) The current prospectus 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, 1999 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, 1999 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 of this subparagraph (g), a
decline in the net asset value of the Acquiring Fund shall not constitute a
material adverse change.
(h) At the Closing Date, all federal and other tax returns and
reports of the Acquiring Fund required by law then to be filed by such dates
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid or provision shall 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) For each fiscal year of its operation, the Acquiring 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.
(j) All issued and outstanding Acquiring Fund Shares are, and
at the Closing Date will be, 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.
(k) 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.
(l) 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 will, at the Closing Date, 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.
(m) 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.
(n) The Prospectus/Proxy Statement 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 statements therein,
in light of the circumstances under which such statements were made, not
misleading.
(o) 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 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.
5.3 APPROVAL BY SHAREHOLDERS. The Trust will call a meeting of the
shareholders of the Selling Fund to act upon this Agreement and to take all
other action necessary to obtain approval of the transactions contemplated
herein.
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
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 KPMG LLP and
certified by the Trust's President and Treasurer.
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 a duly authorized officer of the
Trust, in form and substance reasonably satisfactory to the Selling Fund and
dated 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, to such counsel's knowledge,
has been declared effective by the Commission and 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 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 to the knowledge of such
counsel, result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree 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/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 opinion shall contain such 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/Proxy Statement
include and relate to only the text of such Prospectus/Proxy Statement and not
to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
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 a duly authorized
officer of the Trust, in form and substance satisfactory to the Acquiring Fund
and dated as of the Closing Date, to such effect 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 or Assistant Treasurer of the Trust.
7.3 The Acquiring Fund shall have received on the Closing Date an
opinion of Sullivan & Worcester LLP, counsel to 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
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 Selling 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 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 State of Delaware 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 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 Selling Fund is a
party or by which it or any of its properties may be bound or, to the knowledge
of such counsel, result in the acceleration of any obligation or the imposition
of any penalty, under any agreement, judgment, or decree 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/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, only insofar as they relate to the Acquired 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.
(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/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 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 7.3, references to the Prospectus/Proxy Statement
include and relate to only the text of such Prospectus/Proxy Statement and not
to any exhibits or attachments thereto or to any documents incorporated by
reference therein.
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 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 the Trust=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 or 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 for itself waive any of such conditions.
8.4 No stop orders suspending the effectiveness of the Registration
Statement 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 shareholders of the Selling Fund all of the Selling Fund's net investment
company taxable or tax-exempt income for all taxable periods ending on or prior
to 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
or prior to the Closing Date (after reduction for any capital loss
carryforward).
8.6 The parties shall have received a favorable opinion of Sullivan &
Worcester LLP 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 Shareholders in dissolution 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).
(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 KPMG LLP a letter
addressed to the Acquiring Fund, in form and substance satisfactory to the
Acquiring Fund, to the effect that:
(a) they are independent certified public accountants with
respect to the Selling Fund within the meaning of the 1933 Act and the
applicable 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/Proxy Statement has been
obtained from and is consistent with the accounting records of the Selling Fund;
and
(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 data utilized in the
calculations of the pro forma expense ratios appearing in the Registration
Statement and Prospectus/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 KPMG 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 practices of the Acquiring Fund.
8.8 The Selling Fund shall have received from KPMG LLP a letter
addressed to the Selling Fund, in form and substance satisfactory to the Selling
Fund, to the effect 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) 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/Proxy Statement has been obtained
from and is consistent with the accounting records of the Acquiring Fund; and
(c) 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 pro forma
expense ratios appearing in the Registration Statement and Prospectus/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, whether incurred before or after the date of this Agreement,
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/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
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, its Trustees or officers, to the
other party, but each shall bear the expenses incurred by it incidental to the
preparation and carrying out of this Agreement as provided in paragraph 9.1.
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 no such
amendment may have the effect of changing the provisions for determining the
number of the Acquiring Fund Shares to be issued to the Selling Fund
Shareholders under this Agreement to the 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 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. The execution and
delivery of this Agreement have been authorized by the Trustees of the Trust on
behalf of the Acquiring Fund and the Selling Fund and signed by authorized
officers of the Trust, 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.
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 INCOME PLUS FUND
By:
Name:
Title:
EVERGREEN SELECT FIXED INCOME TRUST ON BEHALF
OF EVERGREEN SELECT TOTAL RETURN BOND FUND
By:
Name:
Title:
<PAGE>
EXHIBIT B
EVERGREEN
Select Income Plus Fund
Fund at a Glance as of September 30, 1999
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 Bond Index
PERFORMANCE AND RETURNS/1/
Portfolio Inception Date: 8/31/1988 Class I Class IS
Class Inception Date 11/24/1997 3/2/1998
Average Annual Returns
1 year -2.13% -2.36%
3 years 5.93% 5.73%
5 years 7.02% 6.84%
10 years 7.23% 7.06%
Since Portfolio Inception 7.48% 7.31%
30-day SEC Yield 6.42% 6.19%
12-month income dividends per share $0.33 $0.32
12-month capital gain distributions per share $0.05 $0.05
LONG TERM GROWTH
Lehman Brothers Consumer Price Evergreen Select
Govt/Corp Index - US Income Plus; I
30-Sep-89 1,000,000 1,000,000 1,000,000
30-Sep-90 1,067,545 1,061,600 1,061,462
30-Sep-91 1,236,834 1,097,600 1,224,301
30-Sep-92 1,400,505 1,130,392 1,358,034
30-Sep-93 1,560,787 1,160,800 1,510,169
30-Sep-94 1,496,123 1,195,192 1,437,484
30-Sep-95 1,710,871 1,225,600 1,639,963
30-Sep-96 1,787,905 1,262,400 1,700,976
30-Sep-97 1,959,343 1,289,600 1,860,018
30-Sep-98 2,211,460 1,308,800 2,067,783
30-Sep-99 2,175,212 1,340,000 2,025,078
Comparison of a $1,000,000 investment in Evergreen Select Income Plus Fund Class
I shares/1/, versus a similar investment in the Lehman Brothers
Government/Corporate Bond Index (LBGCBI), and the Consumer Price Index (CPI).
The LBGCBI is an unmanaged market index which does not include transaction costs
associated with buying or 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.
/1/ Past performance is no guarantee of future results. The performance of each
class may vary based on differences in 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.
Historical performance shown for Class IS from 11/24/1997 to its inception is
based on the performance of Class I and has not been adjusted to reflect the
effect of the 0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1 fee.
If these fees had been reflected, returns would have been lower. Prior to
11/24/1997, the returns for Classes I and IS are based on the Fund's predecessor
common trust fund's (CTF) performance, adjusted for estimated mutual fund
expenses. The CTF was not registered under the 1940 Act and was not subject to
certain investment restrictions. If the CTF had been registered, it's
performance might have been adversely affected. Performance for the CTF 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: Class I--3 year = 5.97%, 5 year =
7.09%, 10 year = 7.31% and since 8/31/1988 = 7.57%; Class IS--3 year = 5.73%, 5
year = 6.84%, 10 year = 7.06% and since 8/31/1988 = 7.31%.
EVERGREEN
Select Income Plus Fund
Portfolio Manager Commentary
Portfolio Management
[PHOTO]
J.P. Weaver, CFA
Performance
For the twelve-month period ended September 30, 1999, the Evergreen Select
Income Plus Bond Fund Class I Shares posted a -2.13% total return, trailing the
1.62% return of its benchmark, the Lehman Brothers Government/Corporate Bond
Index. Most of the Fund's under-performance can be attributed to a slightly
longer duration stance during much of the period that penalized returns in light
of steadily increasing interest rates.
Portfolio
Characteristics
---------------
Total Net Assets $1,805,079,909
Average Credit Quality AA
Effective Maturity 10.1 years
Average Duration 5.7 years
Environment
Most fixed income investors experienced negative returns during the fiscal year,
as bond prices declined in response to sharply higher interest rates. As the
period progressed, powerful consumer spending levels and low unemployment rates
hinted at an inflationary flare-up which ultimately resulted in rising interest
rates.
In an effort to contain inflation before it infected the U.S. economy, the
Federal Reserve Board lowered the Fed Funds rate twice during the final three
months of 1998. Amid this backdrop, the yield on the bellwether 30-year Treasury
Bond rose from its low of 4.72% on October 5 to close at 6.05% on September 30.
PORTFOLIO QUALITY
(based on 9/30/1999 portfolio assets)
[PIE CHART]
AAA -- 54.7% A -- 19.0% BAA -- 14.8% AA -- 8.2% BA -- 3.3%
EVERGREEN
Select Income Plus Fund
Portfolio Manager Commentary
Strategy
The Fund's "income plus" strategy dictates we maintain a strong weighting in
yield-oriented issues such as corporate bonds and mortgage-backed securities. As
of September 30, over half of the Fund's assets were invested in these two
sectors.
Although this exposure to corporates and mortgages hurt performance in the
opening months and again in July, these areas performed well for the majority of
the fiscal year and had a positive impact on performance. Near the end of the
period, our analysis determined attractive valuations and opportunities within
the corporate bond market, so the portfolio was composed of 32.7% corporate
bonds/notes by the end of the period.
The portfolio's duration remained slightly longer than the benchmark for most of
the fiscal year, a stance which penalized performance as interest rates rose
steadily. Duration, however, was reduced from 6.0 years to 5.7 years during the
final half of the period.
PORTFOLIO COMPOSITION
(based on 9/30/1999 net assets)
[PIE CHART]
Corporate Notes/Bonds -- 32.7% Treasury Notes/Bonds -- 29.3% Government Agency
Notes/Bonds -- 18.1% Foreign Bonds -- 7.0% Asset-Backed Securities -- 5.2%
Other Assets and Liabilities, net -- 4.1% Mortgage-Backed Securities -- 3.4%
Preferred Stock -- 0.2%
Outlook
Interest rates have risen this year as economic growth has remained robust and
global economies have recovered. This has raised the prospects for a reversal of
the favorable trends we have experienced recently in core inflation. We believe
interest rates now better reflect the economy's underlying risks and, as such,
expect rates to remain in a fairly narrow band during the fourth quarter.
Investors remain chastened by last year's Long Term Capital Management hedge
fund and Russian default debacles, and securities dealers have sharply reduced
their risk appetites. This has negatively affected bond market liquidity. Still,
historically wide yield spreads should benefit investors in the fixed-income
spread sectors during the coming three to six months as liquidity slowly
improves.
<PAGE>
EVERGREEN SELECT FIXED INCOME TRUST
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of Assets of
EVERGREEN SELECT TOTAL RETURN BOND FUND
a Series of
EVERGREEN SELECT FIXED INCOME TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 343-2898
By and In Exchange For Shares of
EVERGREEN SELECT INCOME PLUS 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 Evergreen Select Total Return
Bond Fund ("Select Total Return Bond Fund"), a series of Evergreen Select Fixed
Income Trust, to Evergreen Select Income Plus Fund ("Select Income Plus Fund"),
also a series of Evergreen Select Fixed Income Trust, in exchange for
Institutional and Institutional Service shares (to be issued to holders of
Institutional and Institutional Service shares, respectively, of Select Total
Return Bond Fund,) of beneficial interest, $.001 par value per share, of Select
Income Plus Fund, 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 Select Income Plus Fund and
Select Total Return Bond Fund dated February 1, 2000;
(2) Annual Report of of Select Income Plus Fund and Select Total Return
Bond Fund for the year ended September 30, 1999; and
This Statement of Additional Information, which is not a prospectus,
supplements, and should be read in conjunction with, the Prospectus/Proxy
Statement of Select Total Return Bond Fund and Select Income Plus Fund dated May
26, 2000. A copy of the Prospectus/Proxy Statement may be obtained without
charge by calling or writing to Evergreen Select Fixed Income Trust at the
telephone numbers or addresses set forth above.
The date of this Statement of Additional Information is May 26, 2000.
<PAGE>
EVERGREEN SELECT FIXED INCOME TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 633-2700
STATEMENT OF ADDITIONAL INFORMATION
February 1, 2000
Evergreen Select Adjustable Rate Fund ("Adjustable Rate Fund")
Evergreen Select Core Bond Fund ("Core Bond Fund")
Evergreen Select Fixed Income Fund ("Fixed Income Fund")
Evergreen Select High Yield Bond Fund ("High Yield Fund")
Evergreen Select Income Plus Fund ("Income Plus Fund")
Evergreen Select Intermediate Term Municipal
Bond Fund ("Intermediate Bond Fund")
Evergreen Select International Bond Fund ("International Bond Fund")
Evergreen Select Limited Duration Fund ("Limited Duration Fund")
Evergreen Select Total Return Bond Fund ("Total Return Bond Fund")
(Each a "Fund"; together, the "Funds")
Each Fund is a series of Evergreen Select Fixed
Income Trust (the "Trust").
This statement of additional information ("SAI") pertains to all
classes of shares of the Funds listed above. It is not a prospectus but should
be read in conjunction with the prospectus dated February 1, 2000 for the Fund
in which you are interested. The Funds are offered through a prospectus offering
Institutional and Institutional Service shares of each Fund. The information in
Part 1 of this SAI is specific information about the Funds described in the
prospectus. The information in Part 2 of this SAI contains more general
information that may or may not apply to the Fund or Class of shares in which
you are interested. You may obtain the prospectus without charge by calling
(800) 343-2898.
Certain information may be incorporated by reference to the Funds'
Annual Report dated September 30, 1999. You may obtain a copy of the document
without charge by calling (800) 343-2898 or downloading it off our website at
www.evergreen-funds.com.
o:/esfit/n-1a/sai-2'1'2000.doc
<PAGE>
TABLE OF CONTENTS
PART 1
TRUST HISTORY...............................................................1-1
INVESTMENT POLICIES.........................................................1-1
OTHER SECURITIES AND PRACTICES..............................................1-3
PRINCIPAL HOLDERS OF FUND SHARES............................................1-3
EXPENSES....................................................................1-6
PERFORMANCE................................................................1-10
SERVICE PROVIDERS..........................................................1-11
FINANCIAL STATEMENTS.......................................................1-12
PART 2
ADDITIONAL INFORMATION ON SECURITIES AND INVESTMENT PRACTICES...............2-1
PURCHASE AND REDEMPTION OF SHARES..........................................2-17
SALES CHARGE WAIVERS AND REDUCTIONS........................................2-19
PRICING OF SHARES..........................................................2-22
PERFORMANCE CALCULATIONS...................................................2-23
PRINCIPAL UNDERWRITER......................................................2-25
DISTRIBUTION EXPENSES UNDER RULE 12b-1.....................................2-26
TAX INFORMATION............................................................2-28
BROKERAGE..................................................................2-31
ORGANIZATION...............................................................2-32
INVESTMENT ADVISORY AGREEMENT..............................................2-34
MANAGEMENT OF THE TRUST....................................................2-35
CORPORATE AND MUNICIPAL BOND RATINGS.......................................2-38
ADDITIONAL INFORMATION.....................................................2-49
<PAGE>
PART 1
TRUST HISTORY
The Evergreen Select Fixed Income Trust is an open-end management
investment company, which was organized as a Delaware business trust on
September 18, 1997. Each Fund is a diversified series of Evergreen Select Fixed
Income Trust. 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.
INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT RESTRICTIONS
Each Fund has adopted the fundamental investment restrictions set forth
below which may not be changed without the vote of a majority of the Fund's
outstanding shares, as defined in the Investment Company Act of 1940 (the "1940
Act"). Where necessary, an explanation beneath a fundamental policy describes
the Fund's practices with respect to that policy, as allowed by current law. If
the law governing a policy changes, the Fund's practices may change accordingly
without a shareholder vote. Unless otherwise stated, all references to the
assets of the Fund are in terms of current market value.
1. Diversification
Each Fund may not make any investment that is inconsistent with its
classification as a diversified investment company under the 1940 Act.
Further Explanation of Diversification Policy:
To remain classified as a diversified investment company under the 1940
Act, each Fund must conform with the following: With respect to 75% of its total
assets, a diversified investment company may not invest more than 5% of its
total assets, determined at market or other fair value at the time of purchase,
in the securities of any one issuer, or invest in more than 10% of the
outstanding voting securities of any one issuer, determined at the time of
purchase. These limitations do not apply to investments in securities issued or
guaranteed by the United States (U.S.) government or its agencies or
instrumentalities.
2. Concentration
Each Fund may not concentrate its investments in the securities of
issuers primarily engaged in any particular industry (other than securities that
are issued or guaranteed by the U.S. government or its agencies or
instrumentalities).
Further Explanation of Concentration Policy:
Each Fund not invest more than 25% of its total assets, taken at market
value, in the securities of issuers primarily engaged in any particular industry
(other than securities issued or guaranteed by the U.S. government or its
agencies or instrumentalities).
3. Issuing Senior Securities
Except as permitted under the 1940 Act, each Fund may not issue senior
securities.
4. Borrowing
Each Fund may not borrow money, except to the extent permitted by
applicable law.
Further Explanation of Borrowing Policy:
Each Fund may borrow from banks and enter into reverse repurchase
agreements in an amount up to 33 1/3% of its total assets, taken at market
value. Each Fund may also borrow up to an additional 5% of its total assets from
banks or others. A Fund may borrow only as a temporary measure for extraordinary
or emergency purposes such as the redemption of Fund shares. A Fund may purchase
additional securities so long as borrowings do not exceed 5% of its total
assets. Each Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities. Each Fund may purchase
securities on margin and engage in short sales to the extent permitted by
applicable law.
5. Underwriting
Each Fund may not underwrite securities of other issuers, except
insofar as a Fund may be deemed to be an underwriter in connection with the
disposition of its portfolio securities.
6. Real Estate
Each Fund may not purchase or sell real estate, except that, to the
extent permitted by applicable law, a Fund may invest in (a) securities that are
directly or indirectly secured by real estate, or (b) securities issued by
issuers that invest in real estate.
7. Commodities
Each Fund may not purchase or sell commodities or contracts on
commodities, except to the extent that a Fund may engage in financial futures
contracts and related options and currency contracts and related options and may
otherwise do so in accordance with applicable law and without registering as a
commodity pool operator under the Commodity Exchange Act.
8. Lending
Each Fund may not make loans to other persons, except that a Fund may
lend its portfolio securities in accordance with applicable law. The acquisition
of investment securities or other investment instruments shall not be deemed to
be the making of a loan.
Further Explanation of Lending Policy:
To generate income and offset expenses, a Fund may lend portfolio
securities to broker-dealers and other financial institutions in an amount up to
33 1/3% of its total assets, taken at market value. While securities are on
loan, the borrower will pay the Fund any income accruing on the security. The
Fund may invest any collateral it receives in additional portfolio securities,
such as U.S. Treasury notes, certificates of deposit, other high-grade,
short-term obligations or interest bearing cash equivalents. Gains or losses in
the market value of a security lent will affect the Fund and its shareholders.
When a Fund lends its securities, it will require the borrower to give
the Fund collateral in cash or government securities. The Fund will require
collateral in an amount equal to at least 100% of the current market value of
the securities lent, including accrued interest. The Fund has the right to call
a loan and obtain the securities lent any time on notice of not more than five
business days. The Fund may pay reasonable fees in connection with such loans.
9. Investment in Federally Tax Exempt Securities
Intermediate Bond Fund will, during periods of normal market
conditions, invest its assets in accordance with applicable guidelines issued by
the Securities and Exchange Commission or its staff concerning investment in
tax-exempt securities for funds with the words "tax-exempt," "tax free" or
"municipal" in their names.
OTHER SECURITIES AND PRACTICES
Listed below are securities and investment practices the Funds may use
in addition to those discussed in the prospectus. See Additional Information on
Securities and Investment Practices in Part 2 of this SAI for further
information on these particular investment practices. The information below
applies to all Funds unless otherwise noted.
<TABLE>
<CAPTION>
<S> <C>
Money Market Instruments Illiquid and Restricted Securities
U.S. Government Securities Investment in Other Investment Companies
When-Issued, Delayed-Delivery and Forward Municipal Bonds (Fixed Income Fund, Income Plus Fund,
Commitment Transactions Intermediate Bond Fund and Limited Duration Fund only)
Repurchase Agreements Virgin Islands, Guam and Puerto Rico
Reverse Repurchase Agreements (Intermediate Bond Fund only)
Dollar Roll Transactions Master Demand Notes
Convertible Securities
Swaps, Caps, Floors and Collars Brady Bonds
Options (excluding Core Bond Fund) Obligations of Foreign Branches of U.S. Banks
Futures Transactions (excluding Core Bond Fund) Obligations of U.S. Branches of Foreign Banks
Foreign Securities (excluding Adjustable Rate Fund, Payment-In-Kind Securities (PIKs)
Core Bond Fund, High Yield Fund, and Zero Coupon "Stripped" Bonds
Intermediate Bond Fund) Mortgage-Backed and Asset-Backed Securities
Foreign Currency (excluding Adjustable Rate Fund, Variable or Floating Rate Instruments
Core Bond Fund, High Yield Fund, and Intermediate
Bond Fund)
High Yield, High Risk Bonds (excluding
Adjustable Rate Fund, Core Bond Fund,
and Limited Duration Fund)
</TABLE>
PRINCIPAL HOLDERS OF FUND SHARES
As of December 31, 1999, the officers and Trustees of the Trust owned
as a group less than 1% of the outstanding shares of any class of each Fund.
Set forth below is information with respect to each person who, to each
Fund's knowledge, owned beneficially or of record more than 5% of the
outstanding shares of any class of each Fund as of December 31, 1999.
--------------------------------------------------------------------------
Adjustable Rate Fund
Institutional Class
--------------------------------------------------------------------------
----------------------------------------------------- --------------------
Ampex Retirement Master Trust
P.O. box 1992 75.519%
Boston, MA 02105-1992
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
First Union national Bank/EB/INT
Reinvest Account 23.502%
Attn: Trust Operations Funds Group
401 S. Tryon Street, 3rd Floor - CMG 1151
Charlotte, NC 20105-1992
----------------------------------------------------- --------------------
--------------------------------------------------------------------------
Adjustable Rate Fund
Institutional Service Class
--------------------------------------------------------------------------
----------------------------------------------------- --------------------
MLPF&S for the sole benefit of its Customers
Attn: Fund Administration #97P31 24.551%
4800 Deer Lake Drive E, 2nd Floor
Jacksonville, FL 32246-6484
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
Star Telephone Membership Corp
Milton R. Tew, Exec 16.548%
P.O. Box 348
3900 N. US 421 Hwy
Clinton, NC 28239-0348
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
Union Pacific RR-UTU Crew Consist
GO569 - Pool 090 2000 14.360%
Michael Errico, Manager - Payroll Account
1416 Dodge Street, MC7080
Omaha, NE 68179-0001
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
Union Pacific RR-UTU Crew Consist
GO577 - Pool 088 2000 7.871%
Michael Errico, Manager - Payroll Account
1416 Dodge Street, MC7080
Omaha, NE 68179-0001
----------------------------------------------------- --------------------
--------------------------------------------------------------------------
Core Bond Fund
Institutional Class
----------------------------------------------------- --------------------
First Union National Bank BK/EB/INT
Cash Account 81.543%
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor - CMG 1151
Charlotte, NC 28202-1911
----------------------------------------------------- --------------------
First Union National Bank BK/EB/INT
Trust Accounts 10.00%
Attn: Ginny Batten
11th Floor - CMG 1151
301 S. Tryon Street
Charlotte, NC 28202-1915
--------------------------------------------------------------------------
Core Bond Fund
Institutional Service Class
----------------------------------------------------- --------------------
First Union National Bank
Trust Accounts 24.431%
Attn: Ginny Batten CMG 1151-2
401 S. Tryon Street, 3rd Floor
Charlotte, NC 28202-1911
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
The Virginia United Methodist
Conference Church 21.821%
Fixed Income Account
P.O. Box 11367
Richmond, VA 23230-1367
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
SP Foundation
250 Pennsylvania Avenue 20.369%
Glen Ellyn, IL 60137
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
First Union National Bank
Trust Accounts 19.023%
Attn: Ginny Batten
11th Floor - CMG 1151
301 S. Tryon Street
Charlotte, NC 28202-1915
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
The Virginia United Methodist
Conference Agencies & 5.648%
Affiliated Organizations
P.O. Box 11367
Richmond, VA 23230-1367
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
SP Ministries
250 Pennsylvania Avenue 5.431%
Glen Ellyn, IL 60137
----------------------------------------------------- --------------------
--------------------------------------------------------------------------
Fixed Income Fund
Institutional Class
----------------------------------------------------- --------------------
First Union National Bank BK/EB/INT
Cash Account 81.906%
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor - CMG 1151
Charlotte, NC 28202-1911
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
First Union National Bank BK/EB/INT
Reinvest Account 17.703%
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor - CMG 1151
Charlotte, NC 28202-1911
--------------------------------------------------------------------------
Fixed Income Fund
Institutional Service Class
--------------------------------------------------------------------------
----------------------------------------------------- --------------------
Reliance Trust Co. for Trust Co. of S
FBO Wade H. Stephens Jr. Trust Under Will 7.177%
A/C 1715002411
PO Box 48449
Atlanta, GA 30362-1449
----------------------------------------------------- --------------------
--------------------------------------------------------------------------
High Yield Fund
Institutional Class
--------------------------------------------------------------------------
----------------------------------------------------- --------------------
First Tennessee Bank
FBO City of Memphis 32.325%
A/C# 010017000754
6802 Paragon Place #200
Richmond, VA 23230-1655
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
State Street Bank as Trustee
FBO Ascension Health 20.201%
A/C# DR2D
c/o Tattersall Advisory Group
6802 Paragon Place #200
Richmond, VA 23230-1655
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
Mac & Co.
FBO Bayer Corp. Master Trust 16.163%
A/C# BAYF8525572
c/o Tattersall Advisory Corp.
6802 Paragon Place #200
Richmond, VA 23230-1655
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
First Union National Bank
FBO Rockwood Casualty Insurance 5.392%
A/C# 5028491574
c/o Tattersall Advisory Corp.
6802 Paragon Place #200
Richmond, VA 23230-1655
----------------------------------------------------- --------------------
--------------------------------------------------------------------------
High Yield Fund
Institutional Service Class
--------------------------------------------------------------------------
----------------------------------------------------- --------------------
None
----------------------------------------------------- --------------------
--------------------------------------------------------------------------
Income Plus Fund
Institutional Class
--------------------------------------------------------------------------
First Union National Bank BK/EB/INT
Cash Account 94.538%
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor - CMG 1151
Charlotte, NC 28202-1911
----------------------------------------------------- --------------------
First Union National Bank BK/EB/INT
Reinvest Account 5.263%
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor - CMG 1151
Charlotte, NC 28202-1911
--------------------------------------------------------------------------
Income Plus Fund
Institutional Service Class
----------------------------------------------------- --------------------
None
----------------------------------------------------- --------------------
--------------------------------------------------------------------------
Intermediate Bond Fund
Institutional Class
----------------------------------------------------- --------------------
First Union National Bank BK/EB/INT
Cash Account 99.618%
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor - CMG 1151
Charlotte, NC 28202-1911
--------------------------------------------------------------------------
Intermediate Bond Fund
Institutional Service Class
--------------------------------------------------------------------------
----------------------------------------------------- --------------------
First Union National Bank
Trust Accounts 14.241%
Attn: Ginny Batten CMG-1151-2
401 S. Tryon Street, 3rd Floor
Charlotte, NC 28202-1915
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
First Clearing Corp.
FBO Stella Boczar 7.424%
A/C 16089470
201 S. College Street
Charlotte, NC 28202-1167
----------------------------------------------------- --------------------
--------------------------------------------------------------------------
International Bond Fund
Institutional Class
----------------------------------------------------- --------------------
First Union National Bank
Reinvest Account 71.471%
Attn: Trust Operations Fund Group
3rd Floor - CMG 1151
401 S. Tryon Street
Charlotte, NC 28202-1915
----------------------------------------------------- --------------------
Post & Co.
350302 15.745%
The Bank of New York
Mutual Fund/Reorg Dept
P.O. Box 1066 Wall Street Station
New York, NY 10258
----------------------------------------------------- --------------------
----------------------------------------------------- --------------------
First Union National Bank BK/EB/INT
Cash Account 12.784%
Attn: Trust Operations Fund Group
401 S Tryon Street, 3rd Floor - CMG 1151
Charlotte, NC 28202-1911
----------------------------------------------------- --------------------
International Bond Fund
Institutional Service Class
-------------------------------------------------- --------------------
First Union National Bank BK/EB/INT
Reinvest Accounts 28.855%
Attn: Trust Operations Fund Group
3rd Floor - CMG 1151
401 S. Tryon Street
Charlotte, NC 28202-1915
-------------------------------------------------- --------------------
First Union National Bank BK/EB/INT
Cash Account 26.838%
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor - CMG 1151
Charlotte, NC 28202-1911
-------------------------------------------------- --------------------
Fleet National Bank
FBO Alexander H. Macisaac 17.936%
IRA Rollover
A/C# 00033195620
PO Box 92800
Rochester, NY 14692-8900
-------------------------------------------------- --------------------
-------------------------------------------------- --------------------
Dean Witter Reynolds Inc.
Attn: IRA Receive Dept. 6.035%
FBO Lois R. Bransfield
PO Box 290
Church Street Station
New York, NY 10008-0290
-------------------------------------------------- --------------------
-----------------------------------------------------------------------
Limited Duration Fund
Institutional Class
-------------------------------------------------- --------------------
First Union National Bank BK/EB/INT
Cash Account 87.517%
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor - CMG 1151
Charlotte, NC 28202-1911
-------------------------------------------------- --------------------
-------------------------------------------------- --------------------
First Union National Bank BK/EB/INT
Reinvest Account 12.483%
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor - CMG 1151
Charlotte, NC 28202-1911
-------------------------------------------------- --------------------
-----------------------------------------------------------------------
Limited Duration Fund
Institutional Service Class
-------------------------------------------------- --------------------
First Clearing Coporation
A/C 6020-9716 33.450%
Northern Virginia Electric Co-Op
Attn: Wilbur Rollins
PO Box 2710, VA 20108-0875
-------------------------------------------------- --------------------
-------------------------------------------------- --------------------
First Union National Bank BK/EB/INT
Reinvest Account 32.978%
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor - CMG 1151
Charlotte, NC 28202-1911
-------------------------------------------------- --------------------
-------------------------------------------------- --------------------
First Union National Bank BK/EB/INT
Reinvest Account 14.126%
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor - CMG 1151
Charlotte, NC 28202-1911
-------------------------------------------------- --------------------
-------------------------------------------------- --------------------
State Street Bank & Trust Co.
Cust for the Rollover IRA of 5.553%
Frank L. Caiola
321 Evergreen Drive
North Wales, PA 19454-2701
-------------------------------------------------- --------------------
-----------------------------------------------------------------------
Total Return Bond Fund
Institutional Class
-------------------------------------------------- --------------------
First Union National Bank BK/EB/INT
Reinvest Account 78.942%
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor - CMG 1151
Charlotte, NC 28202-1911
-------------------------------------------------- --------------------
-------------------------------------------------- --------------------
First Union National Bank BK/EB/INT
Cash Account 21.058%
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor - CMG 1151
Charlotte, NC 28202-1911
-------------------------------------------------- --------------------
-----------------------------------------------------------------------
Total Return Bond Fund
Institutional Class
-------------------------------------------------- --------------------
First Union National Bank BK/EB/INT
Reinvest Accounts 78.942%
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG - 1151
Charlotte, NC 28202-1915
-------------------------------------------------- --------------------
-------------------------------------------------- --------------------
First Union National Bank BK/EB/INT
Cash Account 21.058%
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor, CMG-1151
Charlotte, NC 28202-1911
-------------------------------------------------- --------------------
-----------------------------------------------------------------------
Total Return Bond Fund
Institutional Service Class
-------------------------------------------------- --------------------
First Union National Bank
Trust Accounts 97.641%
Attn: Ginny Batten
CMG - 1151, 11th Floor
301 S. Tryon Street
Charlotte, NC 28202-1915
-------------------------------------------------- --------------------
EXPENSES
Advisory Fees
Each Fund has its own investment advisor. (For more information, see
Investment Advisory Agreements in Part 2 of this SAI.)
Tattersal Advisory Group, Inc. (TAG) is the investment advisor to Core
Bond Fund. TAG is entitled to receive from Core Bond Fund an annual fee equal to
0.32% of the Fund's average net assets.
First Capital Group (FCG), a division of First Union National Bank
(FUNB), is the investment advisor to Fixed Income Fund, Income Plus Fund,
Limited Duration Fund and Total Return Bond Fund. FCG is entitled to receive
from each of these Funds an annual fee based on a percentage of the Fund's
average net assets, as follows:
--------------------------------- ------------------
Fixed Income Fund 0.42%
--------------------------------- ------------------
--------------------------------- ------------------
Income Plus Fund 0.42%
--------------------------------- ------------------
--------------------------------- ------------------
Limited Duration Fund 0.22%
--------------------------------- ------------------
--------------------------------- ------------------
Total Return Bond Fund 0.32%
--------------------------------- ------------------
First Investment Advisors (First Investment), a division of FUNB, is
the investment advisor to Intermediate Bond Fund. First Investment is entitled
to receive from the Fund an annual fee equal to 0.52% of the average net assets
of the Fund.
Evergreen Investment Management Company (EIMC) is the investment
advisor to Adjustable Rate Fund. EIMC is entitled to receive from Adjustable
Rate Fund an annual fee equal to 0.21% of the average net assets of the Fund.
EIMC is also the investment advisor to High Yield Fund. EIMC is
entitled to receive from High Yield Fund an annual fee equal to 0.50% of the
average net assets of the Fund.
First International Advisers, Ltd. (First International), formerly
AnalyticoTSA International, Inc., is the investment advisor to International
Bond Fund. FIA is entitled to receive from International Bond Fund an annual fee
equal to 0.52% of the Fund's average net assets.
First International is also the sub-advisor to Total Return Bond Fund
and is paid by FCG, the investment advisor to the Fund, at a rate equal to 0.60%
of the average daily net assets of the portion of the Fund which First
International manages.
Advisory Fees Paid
Below are the advisory fees paid by each Fund for the fiscal periods
ended September 30, 1999 and 1998 and when applicable for fiscal period ended in
1997.
<TABLE>
<CAPTION>
----------------------------------------------- -------------------- ----------------------------------
Fiscal Period/Fund Advisory Fee Waiver
----------------------------------------------- -------------------- ----------------------------------
-------------------------------------------------------------------------------------------------------
Period Ended 1999
-------------------------------------------------------------------------------------------------------
----------------------------------------------- -------------------- ----------------------------------
<S> <C> <C>
Adjustable Rate Fund $109,172 $64,702
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
Core Bond Fund(1) $1,341,265 $318,098
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
Core Bond Fund(2) $418,525 $23,693
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
Fixed Income Fund $3,103,125 $620,625
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
High Yield Fund N/A N/A
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
Income Plus Fund $7,268,470 $1,453,694
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
Intermediate Bond Fund $4,398,704 $733,117
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
International Bond Fund $287,115 $122,058
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
Limited Duration Fund $416,391 $274,975
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
Total Return Bond Fund $580,306 53,477
----------------------------------------------- -------------------- ----------------------------------
-------------------------------------------------------------------------------------------------------
Period Ended 1998
-------------------------------------------------------------------------------------------------------
----------------------------------------------- -------------------- ----------------------------------
Adjustable Rate Fund(3) $61,312 $0
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
Adjustable Rate Fund(4) $137,489 $0
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
Core Bond Fund(5) $326,338 $16,111
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
Fixed Income Fund(5) $2,219,526 $504,930
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
Income Plus Fund(5) $5,151,727 $1,033,751
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
Intermediate Bond Fund(5) $3,831,537 $639,284
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
International Bond Fund(6) $60,189 $45,948
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
International Bond Fund(7) $221,000 $36,000
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
Limited Duration Fund(5) $154,868 $152,769
----------------------------------------------- -------------------- ----------------------------------
----------------------------------------------- -------------------- ----------------------------------
Total Return Bond Fund(8) $209,962 $135,770
----------------------------------------------- -------------------- ----------------------------------
</TABLE>
1. Six months ended September 30, 1999. The Fund changed its fiscal year
end from March 31 to September 30, effective September 30, 1999.
2. Fiscal year ended March 31, 1999.
3. 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.
4. Fiscal year ended February 28, 1998.
5. Fiscal year ended March 31, 1998.
6. Three months ended September 30, 1998. The Fund changed its fiscal year
end from June 30 to September 30, effective September 30, 1998.
7. Fiscal year ended June 30, 1998.
8. The Fund commenced investment operations on April 20, 1998.
--------------------------------------- --------------------- ------------
Fiscal Period/Fund Advisory Fee Waiver
--------------------------------------- --------------------- ------------
--------------------------------------------------------------------------
Period Ended 1997
--------------------------------------------------------------------------
--------------------------------------- --------------------- ------------
Adjustable Rate Fund(1) $101,412 $0
--------------------------------------- --------------------- ------------
--------------------------------------- --------------------- ------------
International Bond Fund(2) $207,000 $32,160
--------------------------------------- --------------------- ------------
1. Five months ended February 28, 1997. The Fund changed its fiscal year
end from September 30 to the last day of February, effective
February 28, 1997.
2. Predecessor fund information for the period ended June 30, 1997.
Portfolio Turnover
The Funds generally do not take portfolio turnover into account in
making investment decisions. This means the Funds could experience a high rate
of portfolio turnover (100% or more) in any given fiscal year, resulting in
greater brokerage and other transaction costs which are borne by the Funds and
their shareholders. It may also result in the Funds realizing greater net
short-term capital gains, distributions from which are taxable to shareholders
as ordinary income.
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, 1999. The
Institutional shares do not pay 12b-1 fees. For more information, see
Distribution Expenses Under Rule 12b-1 in Part 2 of this SAI.
- ---------------------------------------------- -------------------------------
Institutional Service Shares
Fund/Period
- ---------------------------------------------- -------------------------------
- ---------------------------------------------- -------------------------------
Service Fees
- ---------------------------------------------- -------------------------------
- ------------------------------------------------------------------------------
Period Ended 1999
- ------------------------------------------------------------------------------
- ---------------------------------------------- -------------------------------
Adjustable Rate Fund $33,833
- ---------------------------------------------- -------------------------------
- ---------------------------------------------- -------------------------------
Core Bond Fund(1) $4,191
- ---------------------------------------------- -------------------------------
- ---------------------------------------------- -------------------------------
Core Bond Fund(2) $4,201
- ---------------------------------------------- -------------------------------
- ---------------------------------------------- -------------------------------
Fixed Income Fund $29,172
- ---------------------------------------------- -------------------------------
- ---------------------------------------------- -------------------------------
Income Plus Fund $22,267
- ---------------------------------------------- -------------------------------
- ---------------------------------------------- -------------------------------
Intermediate Bond Fund $13,511
- ---------------------------------------------- -------------------------------
- ---------------------------------------------- -------------------------------
International Bond Fund $402
- ---------------------------------------------- -------------------------------
- ---------------------------------------------- -------------------------------
Limited Duration Fund $1,943
- ---------------------------------------------- -------------------------------
- ---------------------------------------------- -------------------------------
Total Return Bond Fund $15,342
- ---------------------------------------------- -------------------------------
1. Six months ended September 30, 1999. The Fund changed its fiscal year
end from March 31 to September 30, effective September 30, 1999.
2. Fiscal year ended March 31, 1999.
Trustee Compensation
Listed below is the Trustee compensation paid by the Trust individually
for the fiscal year ended September 30, 1999 and by the Trust and the eleven
other trusts in the Evergreen Fund complex for the calendar year ended December
31, 1999. The Trustees do not receive pension or retirement benefits from the
Funds. For more information, see Management of the Trust in Part 2 of this SAI.
<TABLE>
<CAPTION>
------------------------------- ------------------------------ -----------------------------
Total Compensation from
Trust and Fund Complex Paid
Aggregate Compensation from to Trustees for the
Trustee Trust for the fiscal period calendar year ended
ended 9/30/1999 12/31/1999*
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
<S> <C> <C>
Laurence B. Ashkin $4,919 $75,000
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
Charles A. Austin, III $4,900 $75,000
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
K. Dun Gifford $4,908 $75,000
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
James S. Howell** $6,335 $97,000
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
Leroy Keith Jr. $4,880 $75,000
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
Gerald M. McDonnell $4,948 $75,000
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
Thomas L. McVerry $5,662 $85,000
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
William Walt Pettit $4,880 $75,000
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
David M. Richardson $4,908 $75,000
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
Russell A. Salton, III $5,009 $77,000
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
Michael S. Scofield $6,270 $102,000
------------------------------- ------------------------------ -----------------------------
------------------------------- ------------------------------ -----------------------------
Richard J. Shima $4,908 $75,000
------------------------------- ------------------------------ -----------------------------
</TABLE>
*Certain Trustees have elected to defer all or part of their
total compensation for the fiscal period ended September 30,
1999. The amounts listed below will be payable in later years
to the respective Trustees:
Austin $11,250
Howell $77,600
McDonnell $75,000
McVerry $85,000
Pettit $75,000
Salton $77,000
Scofield $61,200
**Trustee Emeritus, retired 12/31/1999.
PERFORMANCE
Total Return
Below are the annual total returns for each class of shares of the
Funds as of September 30, 1999. For more information, see "Total Return" under
Performance Calculations in Part 2 of this SAI.
<TABLE>
<CAPTION>
- --------------------------- ----------------- ------------------ -------------------- --------------------
Ten Years or Since Class
Fund/Class One Year Five Years Inception Inception Date
- --------------------------- ----------------- ------------------ -------------------- --------------------
- ----------------------------------------------------------------------------------------------------------
Adjustable Rate Fund(1)
- ----------------------------------------------------------------------------------------------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
<S> <C> <C> <C> <C>
Institutional 4.98% 6.36% 5.50% 10/1/1991
- --------------------------- ----------------- ------------------ -------------------- --------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional Service 4.73% 6.31% 5.42% 5/23/1994
- --------------------------- ----------------- ------------------ -------------------- --------------------
- ----------------------------------------------------------------------------------------------------------
Core Bond Fund(2)
- ----------------------------------------------------------------------------------------------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional 0.07% 8.06% 7.41% 12/13/1990
- --------------------------- ----------------- ------------------ -------------------- --------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional Service -0.18% 7.97% 7.36% 10/2/1997
- --------------------------- ----------------- ------------------ -------------------- --------------------
- ----------------------------------------------------------------------------------------------------------
Fixed Income Fund(3)
- ----------------------------------------------------------------------------------------------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional 0.84% 6.51% 7.05% 11/24/1997
- --------------------------- ----------------- ------------------ -------------------- --------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional Service 0.59% 6.23% 6.78% 3/9/1998
- --------------------------- ----------------- ------------------ -------------------- --------------------
- ----------------------------------------------------------------------------------------------------------
Income Plus Fund(4)
- ----------------------------------------------------------------------------------------------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional -2.13% 7.02% 7.23% 11/24/1997
- --------------------------- ----------------- ------------------ -------------------- --------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional Service -2.36% 6.84% 7.06% 3/2/1998
- --------------------------- ----------------- ------------------ -------------------- --------------------
- ----------------------------------------------------------------------------------------------------------
Intermediate Bond Fund(5)
- ----------------------------------------------------------------------------------------------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional -3.00% 5.07% 5.78% 11/24/1997
- --------------------------- ----------------- ------------------ -------------------- --------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional Service -3.24% 4.82% 5.52% 3/2/1998
- --------------------------- ----------------- ------------------ -------------------- --------------------
- ----------------------------------------------------------------------------------------------------------
International Bond Fund(6)
- ----------------------------------------------------------------------------------------------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional 3.96% 7.34% 4.47% 12/15/1993
- --------------------------- ----------------- ------------------ -------------------- --------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional Service 3.74% 7.10% 4.23% 12/15/1993
- --------------------------- ----------------- ------------------ -------------------- --------------------
- ----------------------------------------------------------------------------------------------------------
Limited Duration Fund(7)
- ----------------------------------------------------------------------------------------------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional 3.07% 5.92% 5.71% 11/24/1997
- --------------------------- ----------------- ------------------ -------------------- --------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional Service 2.81% 5.68% 5.47% 7/28/1998
- --------------------------- ----------------- ------------------ -------------------- --------------------
- ----------------------------------------------------------------------------------------------------------
Total Return Bond Fund(1)
- ----------------------------------------------------------------------------------------------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional -0.87% N/A 1.35% 4/20/1998
- --------------------------- ----------------- ------------------ -------------------- --------------------
- --------------------------- ----------------- ------------------ -------------------- --------------------
Institutional Service -1.12% N/A 1.14% 8/3/1998
- --------------------------- ----------------- ------------------ -------------------- --------------------
</TABLE>
1. Historical performance shown for the Institutional Service shares
prior to their inception is based on the performance of the
Institutional shares and has not been adjusted to reflect the effect of
the 0.25% 12b-1 fee applicable to the Institutional Service shares.
Institutional shares pay no 12b-1 fee. If these fees had been
reflected, returns would have been lower.
2. Historical performance shown for Institutional shares is based on the
performance of the Institutional shares of the Fund's predecessor fund,
Tattersall Bond Fund. Historical performance shown for the
Institutional Service shares is based on (1) the performance of the
Institutional Service shares of the Fund's predecessor fund, Tattersall
Bond Fund, since 10/2/1997 and (2) the Institutional shares of
Tattersall Bond Fund from 12/13/1990 to 10/2/1997 which have not been
adjusted to reflect the 0.25% 12b-1 fee paid by the Institutional
Service shares. The Institutional shares do not pay a 12b-1 fee. If
these fees had been reflected, returns would have been lower.
3. Historical performance shown for the Institutional Service shares from
11/24/1997 to their inception is based on the performance of the
Institutional shares and has not been adjusted to reflect the effect of
the 0.25% 12b-1 fee applicable to the Institutional Service shares.
Institutional shares pay no 12b-1 fee. If these fees had been
reflected, returns would have been lower. Prior to 11/24/1997, the
returns for the Institutional shares and the Institutional Service
shares are based on the Fund's predecessor common trust fund's (CTF's)
performance, adjusted for estimated mutual fund expenses. The CTF was
not registered under the Investment Company Act of 1940 and was not
subject to certain investment restrictions. If the CTF had been
registered, its performance may have been adversely affected.
Performance for the CTF has been adjusted to include the effect of
estimated mutual fund class gross expense ratios at the time the CTF
was converted to a mutual fund. If fee waivers and expense
reimbursements had been calculated into the mutual fund class expense
ratio, the total return would be as follows: Institutional shares - 5
year = 6.62%, 10 year = 6.87% and since 3/31/1977 = 8.14%;
Institutional Service shares - 5 year = 6.35%, 10 year = 6.59% and
since 3/31/1977 = 7.87%.
4. Historical performance shown for the Institutional Service shares from
11/24/1997 to their inception is based on the performance of the
Institutional shares and has not been adjusted to reflect the effect of
the 0.25% 12b-1 fee applicable to the Institutional Service shares.
Institutional shares pay no 12b-1 fee. If these fees had been
reflected, returns would have been lower. Prior to 11/24/1997, the
returns for the Institutional shares and the Institutional Service
shares are based on the Fund's predecessor common trust fund's (CTF's)
performance, adjusted for estimated mutual fund expenses. The CTF was
not registered under the Investment Company Act of 1940 and was not
subject to certain investment restrictions. If the CTF had been
registered, its performance may have been adversely affected.
Performance for the CTF has been adjusted to include the effect of
estimated mutual fund class gross expense ratios at the time the CTF
was converted to a mutual fund. If fee waivers and expense
reimbursements had been calculated into the mutual fund class expense
ratio, the total return would be as follows: Institutional shares - 5
year = 6.92%, 10 year = 6.99% and since 8/31/1988 = 7.37%;
Institutional Service shares - 5 year = 6.68%, 10 year = 6.73% and
since 8/31/1988 = 7.11%.
5. Historical performance shown for the Institutional Service shares from
11/24/1997 to their inception is based on the performance of the
Institutional shares and has not been adjusted to reflect the effect of
the 0.25% 12b-1 fee applicable to the Institutional Service shares.
Institutional shares pay no 12b-1 fee. If these fees had been
reflected, returns would have been lower. Prior to 11/24/1997, the
returns for the Institutional shares and the Institutional Service
shares are based on the Fund's predecessor common trust fund's (CTF's)
performance, adjusted for estimated mutual fund expenses. The CTF was
not registered under the Investment Company Act of 1940 and was not
subject to certain investment restrictions. If the CTF had been
registered, its performance may have been adversely affected.
Performance for the CTF has been adjusted to include the effect of
estimated mutual fund class gross expense ratios at the time the CTF
was converted to a mutual fund. If fee waivers and expense
reimbursements had been calculated into the mutual fund class expense
ratio, the total return would be as follows: Institutional shares - 5
year = 5.10%, 10 year = 5.44% and since 1/31/1984 = 6.63%;
Institutional Service shares - 5 year = 4.85%, 10 year = 5.19% and
since 1/31/1984 = 6.37%.
6. Historical performance shown for the Institutional shares is based on
the performance of the Class Y shares of the Fund's predecessor fund,
CoreFund Global Bond Fund. Historical performance shown for the
Institutional Service shares is based on the performance of the Class A
shares of the Fund's predecessor fund, CoreFund Global Bond Fund, and
reflects the same 0.25% 12b-1 fee applicable to the Institutional
Service shares.
7. Historical performance shown for the Institutional Service shares from
11/24/1997 to their inception is based on the performance of the
Institutional shares and has not been adjusted to reflect the effect of
the 0.25% 12b-1 fee applicable to the Institutional Service shares.
Institutional shares pay no 12b-1 fee. If these fees had been
reflected, returns would have been lower. Prior to 11/24/1997, the
returns for the Institutional shares and the Institutional Service
shares are based on the Fund's predecessor common trust fund's (CTF's)
performance, adjusted for estimated mutual fund expenses. The CTF was
not registered under the Investment Company Act of 1940 and was not
subject to certain investment restrictions. If the CTF had been
registered, its performance may have been adversely affected.
Performance for the CTF has been adjusted to include the effect of
estimated mutual fund class gross expense ratios at the time the CTF
was converted to a mutual fund. If fee waivers and expense
reimbursements had been calculated into the mutual fund class expense
ratio, the total return would be as follows: Institutional shares -
since 4/30/1994 = 5.80%; Institutional Service shares - since 4/30/1994
= 5.57%.
Current Yield
Below are the current yields for each class of shares of the Funds as
of September 30, 1999. For more information, see "30-day Yield" under
Performance Calculation in Part 2 of this SAI.
================================================================================
30-Day SEC Yield
================================================================================
- ---------------------------------- ---------------------- ======================
Fund Institutional Institutional Service
- ---------------------------------- ---------------------- ======================
- ---------------------------------- ---------------------- ======================
Adjustable Rate Fund 5.72% 5.44%
- ---------------------------------- ---------------------- ======================
- ---------------------------------- ---------------------- ======================
Core Bond Fund 6.33% 6.07%
- ---------------------------------- ---------------------- ======================
- ---------------------------------- ---------------------- ======================
Fixed Income Fund 7.61% 7.34%
- ---------------------------------- ---------------------- ======================
- ---------------------------------- ---------------------- ======================
Income Plus Fund 6.42% 6.19%
- ---------------------------------- ---------------------- ======================
- ---------------------------------- ---------------------- ======================
Intermediate Bond Fund 5.08% 4.83%
- ---------------------------------- ---------------------- ======================
- ---------------------------------- ---------------------- ======================
International Bond Fund 3.83% 3.58%
- ---------------------------------- ---------------------- ======================
Limited Duration Fund 6.19% 5.94%
- ---------------------------------- ---------------------- ======================
Total Return Bond Fund 6.40% 6.14%
- ---------------------------------- ---------------------- ======================
Below are the tax equivalent yields for each class of shares of the
Intermediate Bond Fund for the thirty-day period ended September 30, 1999. The
maximum federal tax rate of 39.6% is assumed. For more information, see "Tax
Equivalent Yield" under Performance Calculations in Part 2 of this SAI.
============================================================================
30-day SEC Tax Equivalent Yield
============================================================================
- ------------------------------ ---------------------- ----------------------
Institutional Institutional Service
- ------------------------------ ---------------------- ----------------------
- ------------------------------ ---------------------- ----------------------
Intermediate Bond Fund 8.41% 8.00%
- ------------------------------ ---------------------- ----------------------
SERVICE PROVIDERS
Administrator
Evergreen Investment Services, Inc. ("EIS") serves as administrator to
each of the Funds 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 Funds an annual fee at a rate of 0.10% of the
Funds' average daily net assets.
Below are the administrative service fees paid for the last three
fiscal years for the Funds referenced:
- -------------------------------- ------------- --------------- ============
Fund 1999 1998 1997
- -------------------------------- ------------- --------------- ============
- -------------------------------- ------------- --------------- ============
Adjustable Rate Fund $4,875 N/A(1) N/A(1)
- -------------------------------- ------------- --------------- ============
- -------------------------------- ------------- --------------- ============
Core Bond Fund $82,328(2) $133,870(4) N/A
- -------------------------------- ------------- --------------- ============
- -------------------------------- ------------- --------------- ============
Core Bond Fund $98,726(3) N/A N/A
- -------------------------------- ------------- --------------- ============
- -------------------------------- ------------- --------------- ============
Fixed Income Fund $154,082 $125,951(4) N/A
- -------------------------------- ------------- --------------- ============
- -------------------------------- ------------- --------------- ============
Income Plus Fund $359,786 $293,363(4) N/A
- -------------------------------- ------------- --------------- ============
- -------------------------------- ------------- --------------- ============
Intermediate Bond Fund $182,850 $183,098 N/A
- -------------------------------- ------------- --------------- ============
- -------------------------------- ------------- --------------- ============
International Bond Fund $11,917 $1,735(5) $86,000(8)
- -------------------------------- ------------- --------------- ============
- -------------------------------- ------------- --------------- ============
International Bond Fund N/A $90,347(6) N/A
- -------------------------------- ------------- --------------- ============
- -------------------------------- ------------- --------------- ============
Limited Duration Fund $33,285 $14,591(4) N/A
- -------------------------------- ------------- --------------- ============
- -------------------------------- ------------- --------------- ============
Total Return Bond Fund $35,924 $14,250(7) N/A
- -------------------------------- ------------- --------------- ============
(1) For the years ended 1998 and 1997, the administration fee was paid
by the Adviser and was not a Fund expense.
(2) Six months ended September 30, 1999.
(3) Tattersall Bond Fund.
(4) Fund commenced operations on November 27, 1997.
(5) Three months ended September 30, 1998. The Fund changed its fiscal
year end from June 30 to September 30, effective September 30, 1998.
(6) Twelve months ended June 30, 1998. Paid to SEI Investments, the
Fund's previous administrator.
(7) Fund commenced operations on April 20, 1998.
(8) Twelve months ended June 30, 1997. Paid to SEI Investments, the Fund's
previous administrator.
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:
----------------------------- -------------------- ----------------------
Annual Fee Per Annual Fee Per
Fund Type Open Account* Closed Account**
----------------------------- -------------------- ----------------------
----------------------------- -------------------- ----------------------
Monthly Dividend Funds $22.75 $9.00
----------------------------- -------------------- ----------------------
----------------------------- -------------------- ----------------------
Quarterly Dividend Funds $21.75 $9.00
----------------------------- -------------------- ----------------------
----------------------------- -------------------- ----------------------
Semiannual Dividend Funds $20.75 $9.00
----------------------------- -------------------- ----------------------
----------------------------- -------------------- ----------------------
Annual Dividend Funds $220.75 $9.00
----------------------------- -------------------- ----------------------
----------------------------- -------------------- ----------------------
Money Market Funds $25.50 $9.00
----------------------------- -------------------- ----------------------
* For shareholder accounts only. The Fund pays ESC cost plus 15% for broker
accounts.
** Closed account are maintained on the system in order to facilitate
historical and tax information.
Distributor
Evergreen Distributor, Inc. (EDI) markets the Funds through broker-
dealers and other financial representatives. Its address is 90 Park Avenue,
New York, NY 10016.
Independent Auditors
KPMG LLP, 99 High Street, Boston, Massachusetts 02110, audits the
financial statements of the Funds.
Custodian
State Street Bank and Trust Company keeps custody of each Fund's
securities and cash and performs other related duties. The custodian's address
is 225 Franklin Street, Boston, Massachusetts 02110.
Legal Counsel
Sullivan & Worcester LLP provides legal advice to the Funds. Its
address is 1025 Connecticut Avenue, N.W., Washington, D.C. 20036.
FINANCIAL STATEMENTS
The audited financial statements and the independent auditors' report
thereon are hereby incorporated by reference to the Funds' Annual Reports, a
copy of which may be obtained without charge by writing to ESC, P.O. Box 2121,
Boston, Massachusetts 02106-2121, or by calling ESC toll-free at 1-800-343-2898.
<PAGE>
EVERGREEN FUNDS
Statement of Additional Information ("SAI")
PART 2
ADDITIONAL INFORMATION ON SECURITIES
AND INVESTMENT PRACTICES
The prospectus describes the Fund's investment objective and the
securities in which it primarily invests. The following describes other
securities the Fund may purchase and investment strategies it may use. Some of
the information below will not apply to the Fund or the Class 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.
Money Market Instruments
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 investment advisor, market conditions warrant a temporary
defensive investment strategy. Evergreen Equity Income Fund may also invest in
debt securities and high grade preferred stocks for defensive purposes when its
investment advisor determines a temporary defensive strategy is warranted.
U.S. Government Securities
The Fund may invest in securities issued or guaranteed by U.S.
Government agencies or instrumentalities.
These securities are backed by (1) the discretionary authority of the
U.S. Government to purchase certain obligations of agencies or instrumentalities
or (2) the credit of the agency or instrumentality issuing the obligations.
Some government agencies and instrumentalities may not receive
financial support from the U.S. Government. Examples of such agencies are:
(i) Farm Credit System, including the National Bank for Cooperatives,
Farm Credit Banks and Banks for Cooperatives;
(ii) Farmers Home Administration;
(iii) Federal Home Loan Banks;
(iv) Federal Home Loan Mortgage Corporation;
(v) Federal National Mortgage Association; and Student Loan Marketing
Association.
Securities Issued by the Government National Mortgage Association ("GNMA").
The Fund may invest in securities issued by the GNMA, a corporation wholly-owned
by the U.S. Government. GNMA securities or "certificates" represent ownership in
a pool of underlying mortgages. The timely payment of principal and interest due
on these securities is guaranteed.
Unlike conventional bonds, the principal on GNMA certificates is not
paid at maturity but over the life of the security in scheduled monthly
payments. While mortgages pooled in a GNMA certificate may have maturities of up
to 30 years, the certificate itself will have a shorter average maturity and
less principal volatility than a comparable 30-year bond.
The market value and interest yield of GNMA certificates can vary due
not only to market fluctuations, but also to early prepayments of mortgages
within the pool. Since prepayment rates vary widely, it is impossible to
accurately predict the average maturity of a GNMA pool. In addition to the
guaranteed principal payments, GNMA certificates may also make unscheduled
principal payments resulting from prepayments on the underlying mortgages.
Although GNMA certificates may offer yields higher than those available
from other types of U.S. Government securities, they may be less effective as a
means of locking in attractive long-term rates because of the prepayment
feature. For instance, when interest rates decline, prepayments are likely to
increase as the holders of the underlying mortgages seek refinancing. As a
result, the value of a GNMA certificate is not likely to rise as much as the
value of a comparable debt security would in response to same decline. In
addition, these prepayments can cause the price of a GNMA certificate originally
purchased at a premium to decline in price compared to its par value, which may
result in a loss.
When-Issued, Delayed-Delivery and Forward Commitment Transactions
The Fund may purchase securities on a when-issued or delayed delivery
basis and may purchase or sell securities on a forward commitment basis.
Settlement of such transactions normally occurs within a month or more after the
purchase or sale commitment is made.
The Fund may purchase securities under such conditions only with the
intention of actually acquiring them, but may enter into a separate agreement to
sell the securities before the settlement date. Since the value of securities
purchased may fluctuate prior to settlement, the Fund may be required to pay
more at settlement than the security is worth. In addition, the purchaser is not
entitled to any of the interest earned prior to settlement.
Upon making a commitment to purchase a security on a when-issued,
delayed delivery or forward commitment basis the Fund will hold liquid assets
worth at least the equivalent of the amount due. The liquid assets will be
monitored on a daily basis and adjusted as necessary to maintain the necessary
value.
Purchases made under such conditions may involve the risk that yields
secured at the time of commitment may be lower than otherwise available by the
time settlement takes place, causing an unrealized loss to the Fund. In
addition, when the Fund engages in such purchases, it relies on the other party
to consummate the sale. If the other party fails to perform its obligations, the
Fund may miss the opportunity to obtain a security at a favorable price or
yield.
Repurchase Agreements
The Fund may enter into repurchase agreements with entities that are
registered as U.S. Government securities dealers, including member banks of the
Federal Reserve System having at least $1 billion in assets, primary dealers in
U.S. government securities or other financial institutions believed by the
investment advisor to be creditworthy. In a repurchase agreement the Fund
obtains a security and simultaneously commits to return the security to the
seller at a set price (including principal and interest) within a period of time
usually not exceeding seven days. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the underlying security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is in
effect secured by the value of the underlying security.
The Fund's custodian or a third party will take possession of the
securities subject to repurchase agreements, and these securities will be marked
to market daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by the Fund
might be delayed pending court action. The Fund's investment advisor believes
that under the regular procedures normally in effect for custody of the Fund's
portfolio securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or disposition
of such securities. The Fund will only enter into repurchase agreements with
banks and other recognized financial institutions, such as broker-dealers, which
are deemed by the investment advisor to be creditworthy pursuant to guidelines
established by the Board of Trustees.
Reverse Repurchase Agreements
As described herein, the Fund may also enter into reverse repurchase
agreements. These transactions are similar to borrowing cash. In a reverse
repurchase agreement, the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in return
for a percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable the Fund to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.
Dollar Roll Transactions
The Fund may enter into dollar rolls in which the Fund sells securities
and simultaneously contracts to repurchase substantially similar securities on a
specified future date. In the case of dollar rolls involving mortgage-related
securities, the mortgage-related securities that are purchased typically will be
of the same type and will have the same or similar interest rate and maturity as
those sold, but will be supported by different pools of mortgages. The Fund
forgoes principal and interest paid during the roll period on the securities
sold in a dollar roll, but it is compensated by the difference between the
current sales price and the price for the future purchase as well as by any
interest earned on the proceeds of the securities sold. The Fund could also be
compensated through receipt of fee income.
Dollar rolls may be viewed as a borrowing by the Fund, secured by the security
which is the subject of the agreement. In addition to the general risks involved
in leveraging, dollar rolls are subject to the same risks as repurchase and
reverse repurchase agreements.
Securities Lending
The Fund may lend portfolio securities to brokers, dealers and other
financial institutions to earn additional income for the Fund. These
transactions must be fully collateralized at all times with cash or short-term
debt obligations, but involve some risk to the Fund if the other party should
default on its obligation and the Fund is delayed or prevented from exercising
its rights in respect of the collateral. Any investment of collateral by the
Fund would be made in accordance with the Fund's investment objective and
policies described in the prospectus.
Convertible Securities
The Fund may invest in convertible securities. Convertible securities
include fixed-income securities that may be exchanged or converted into a
predetermined number of shares of the issuer's underlying common stock at the
option of the holder during a specified period. Convertible securities may take
the form of convertible preferred stock, convertible bonds or debentures, bonds
with warrants attached or bonds with a combination of the features of several of
these securities. The investment characteristics of each convertible security
vary widely, which allow convertible securities to be employed for a variety of
investment strategies.
The Fund will exchange or convert convertible securities into shares of
underlying common stock when, in the opinion of its investment advisor, the
investment characteristics of the underlying common shares will assist the Fund
in achieving its investment objective. The Fund may also elect to hold or trade
convertible securities. In selecting convertible securities, the investment
advisor evaluates the investment characteristics of the convertible security as
a fixed-income instrument, and the investment potential of the underlying equity
security for capital appreciation. In evaluating these matters with respect to a
particular convertible security, the investment advisor considers numerous
factors, including the economic and political outlook, the value of the security
relative to other investment alternatives, trends in the determinants of the
issuer's profits, and the issuer's management capability and practices.
Warrants
The Fund may invest in warrants. Warrants are options to purchase
common stock at a specific price (usually at a premium above the market value of
the optioned common stock at issuance) valid for a specific period of time.
Warrants may have a life ranging from less than one year to twenty years, or
they may be perpetual. However, most warrants have expiration dates after which
they are worthless. In addition, a warrant is worthless if the market price of
the common stock does not exceed the warrant's exercise price during the life of
the warrant. Warrants have no voting rights, pay no dividends, and have no
rights with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the market price of the warrant may tend to
be greater than the percentage increase or decrease in the market price of the
optioned common stock.
Swaps, Caps, Floors and Collars
The Fund may enter into interest rate, currency and index swaps and the
purchase or sale of related caps, floors and collars. The Fund expects to enter
into these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Fund would use these transactions as hedges and not as speculative
investments and would not sell interest rate caps or floors where it does not
own securities or other instruments providing the income stream the Fund may be
obligated to pay. Interest rate swaps involve the exchange by the Fund with
another party of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. The Fund will not enter into any
swap, cap, floor or collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the counterparty, combined with any
credit enhancements, is rated at least A by Standard & Poor's Ratings Services
("S&P") or Moody's Investors Service, Inc. ("Moody's") or has an equivalent
rating from another nationally recognized securities rating organization or is
determined to be of equivalent credit quality by the Fund's investment advisor.
If there is a default by the counterparty, the Fund may have contractual
remedies pursuant to the agreements related to the transaction. As a result, the
swap market has become relatively liquid. Caps, floors and collars are more
recent innovations for which standardized documentation has not yet been fully
developed and, accordingly, they are less liquid than swaps.
Indexed Securities
The Fund may invest in indexed securities, the values of which are
linked to currencies, interest rates, commodities, indices or other financial
indicators ("reference instruments"). Most indexed securities have maturities of
three years or less.
Indexed securities differ from other types of debt securities in which
the Fund may invest in several respects. First, the interest rate or, unlike
other debt securities, the principal amount payable at maturity of an indexed
security may vary based on changes in one or more specified reference
instruments, such as an interest rate compared with a fixed interest rate or the
currency exchange rates between two currencies (neither of which need be the
currency in which the instrument is denominated). The reference instrument need
not be related to the terms of the indexed security. For example, the principal
amount of a U.S. dollar denominated indexed security may vary based on the
exchange rate of two foreign currencies. An indexed security may be positively
or negatively indexed; that is, its value may increase or decrease if the value
of the reference instrument increases. Further, the change in the principal
amount payable or the interest rate of an indexed security may be a multiple of
the percentage change (positive or negative) in the value of the underlying
reference instrument(s).
Investment in indexed securities involves certain risks. In addition to
the credit risk of the security's issuer and the normal risks of price changes
in response to changes in interest rates, the principal amount of indexed
securities may decrease as a result of changes in the value of reference
instruments. Further, in the case of certain indexed securities in which the
interest rate is linked to a reference instrument, the interest rate may be
reduced to zero, and any further declines in the value of the security may then
reduce the principal amount payable on maturity. Finally, indexed securities may
be more volatile than the reference instruments underlying indexed securities.
To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, the Fund may also engage in
proxy hedging. Proxy hedging is often used when the currency to which the Fund
is exposed is difficult to hedge or to hedge against the dollar. Proxy hedging
entails entering into a forward contract to sell a currency whose changes in
value are generally considered to be linked to a currency or currencies in which
some or all of the Fund's securities are or are expected to be denominated, and
to buy U.S. dollars. The amount of the contract would not exceed the value of
the Fund's securities denominated in linked currencies. For example, if the
Fund's investment advisor considers that the Austrian schilling is linked to the
German deutschmark (the "D-mark"), the Fund holds securities denominated in
schillings and the investment advisor believes that the value of schillings will
decline against the U.S. dollar, the investment advisor may enter into a
contract to sell D-marks and buy dollars.
Options
An option is a right to buy or sell a security for a specified price
within a limited time period. The option buyer pays the option seller (known as
the "writer") for the right to buy, which is a "call" option, or the right to
sell, which is a "put" option. Unless the option is terminated, the option
seller must then buy or sell the security at the agreed-upon price when asked to
do so by the option buyer.
The Fund may buy or sell put and call options on securities it holds or
intends to acquire, and may purchase put and call options for the purpose of
offsetting previously written put and call options of the same series. The Fund
may also buy and sell options on financial futures contracts. The Fund will use
options as a hedge against decreases or increases in the value of securities it
holds or intends to acquire.
The Fund may write only covered options. With regard to a call option,
this means that the Fund will own, for the life of the option, the securities
subject to the call option. The Fund will cover put options by holding, in a
segregated account, liquid assets having a value equal to or greater than the
price of securities subject to the put option. If the Fund is unable to effect a
closing purchase transaction with respect to the covered options it has sold, it
will not be able to sell the underlying securities or dispose of assets held in
a segregated account until the options expire or are exercised, resulting in a
potential loss of value to the Fund.
Futures Transactions
The Fund may enter into financial futures contracts and write options
on such contracts. The Fund intends to enter into such contracts and related
options for hedging purposes. The Fund will enter into futures on securities or
index-based futures contracts in order to hedge against changes in interest or
exchange rates or securities prices. A futures contract on securities is an
agreement to buy or sell securities at a specified price during a designated
month. A futures contract on a securities index does not involve the actual
delivery of securities, but merely requires the payment of a cash settlement
based on changes in the securities index. The Fund does not make payment or
deliver securities upon entering into a futures contract. Instead, it puts down
a margin deposit, which is adjusted to reflect changes in the value of the
contract and which continues until the contract is terminated.
The Fund may sell or purchase futures contracts. When a futures
contract is sold by the Fund, the value of the contract will tend to rise when
the value of the underlying securities declines and to fall when the value of
such securities increases. Thus, the Fund sells futures contracts in order to
offset a possible decline in the value of its securities. If a futures contract
is purchased by the Fund, the value of the contract will tend to rise when the
value of the underlying securities increases and to fall when the value of such
securities declines. The Fund intends to purchase futures contracts in order to
establish what is believed by the investment advisor to be a favorable price or
rate of return for securities the Fund intends to purchase.
The Fund also intends to purchase put and call options on futures
contracts for hedging purposes. A put option purchased by the Fund would give it
the right to assume a position as the seller of a futures contract. A call
option purchased by the Fund would give it the right to assume a position as the
purchaser of a futures contract. The purchase of an option on a futures contract
requires the Fund to pay a premium. In exchange for the premium, the Fund
becomes entitled to exercise the benefits, if any, provided by the futures
contract, but is not required to take any action under the contract. If the
option cannot be exercised profitably before it expires, the Fund's loss will be
limited to the amount of the premium and any transaction costs.
The Fund may enter into closing purchase and sale transactions in order
to terminate a futures contract and may sell put and call options for the
purpose of closing out its options positions. The Fund's ability to enter into
closing transactions depends on the development and maintenance of a liquid
secondary market. There is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. As a result, there
can be no assurance that the Fund will be able to enter into an offsetting
transaction with respect to a particular contract at a particular time. If the
Fund is not able to enter into an offsetting transaction, the Fund will continue
to be required to maintain the margin deposits on the contract and to complete
the contract according to its terms, in which case it would continue to bear
market risk on the transaction.
Although futures and options transactions are intended to enable the
Fund to manage market, interest rate or exchange rate risk, unanticipated
changes in interest rates or market prices could result in poorer performance
than if it had not entered into these transactions. Even if the investment
advisor correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of the Fund's futures position did not
correspond to changes in the value of its investments. This lack of correlation
between the Fund's futures and securities positions may be caused by differences
between the futures and securities markets or by differences between the
securities underlying the Fund's futures position and the securities held by or
to be purchased for the Fund. The Fund's investment advisor will attempt to
minimize these risks through careful selection and monitoring of the Fund's
futures and options positions.
The Fund does not intend to use futures transactions for speculation or
leverage. The Fund has the ability to write options on futures, but currently
intends to write such options only to close out options purchased by the Fund.
The Fund will not change these policies without supplementing the information in
the prospectus and SAI.
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the aggregate,
the value of the open positions (marked to market) exceeds the current market
value of its securities portfolio plus or minus the unrealized gain or loss on
those open positions, adjusted for the correlation of volatility between the
hedged securities and the futures contracts. If this limitation is exceeded at
any time, the Fund will take prompt action to close out a sufficient number of
open contracts to bring its open futures and options positions within this
limitation.
"Margin" in Futures Transactions. Unlike the purchase or sale of a security, the
Fund does not pay or receive money upon the purchase or sale of a futures
contract. Rather the Fund is required to deposit an amount of "initial margin"
in cash or U.S. Treasury bills with its custodian (or the broker, if legally
permitted). The nature of initial margin in futures transactions is different
from that of margin in securities transactions in that futures contract initial
margin does not involve the borrowing of funds by the Fund to finance the
transactions. Initial margin is in the nature of a performance bond or good
faith deposit on the contract which is returned to the Fund upon termination of
the futures contract, assuming all contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund pays
or receives cash, called "variation margin," equal to the daily change in value
of the futures contract. This process is known as "marking to market". Variation
margin does not represent a borrowing or loan by the Fund but is instead
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing its daily net asset value the Fund
will mark-to-market its open futures positions. The Fund is also required to
deposit and maintain margin when it writes call options on futures contracts.
Foreign Securities
The Fund may invest in foreign securities or U.S. securities traded in
foreign markets. In addition to securities issued by foreign companies,
permissible investments may also consist of obligations of foreign branches of
U.S. banks and of foreign banks, including European certificates of deposit,
European time deposits, Canadian time deposits and Yankee certificates of
deposit. The Fund may also invest in Canadian commercial paper and Europaper.
These instruments may subject the Fund to investment risks that differ in some
respects from those related to investments in obligations of U.S. issuers. Such
risks include the possibility of adverse political and economic developments;
imposition of withholding taxes on interest or other income; seizure,
nationalization, or expropriation of foreign deposits; establishment of exchange
controls or taxation at the source; greater fluctuations in value due to changes
in exchange rates, or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on such
obligations. Such investments may also entail higher custodial fees and sales
commissions than domestic investments. Foreign issuers of securities or
obligations are often subject to accounting treatment and engage in business
practices different from those respecting domestic issuers of similar securities
or obligations. Foreign branches of U.S. banks and foreign banks may be subject
to less stringent reserve requirements than those applicable to domestic
branches of U.S. banks.
The Fund may also invest in the stocks of companies located in emerging
markets. These countries generally have economic structures that are less
diverse and mature, and political systems that are less stable than those of
developed countries. Emerging markets may be more volatile than the markets of
more mature economies, and the securities of companies located in emerging
markets are often subject to rapid and large price fluctuations; however, these
markets may also provide higher long-term rates of return.
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.
Premium Securities
The Fund may at times invest in premium securities which are securities
bearing coupon rates higher than prevailing market rates. Such "premium"
securities are typically purchased at prices greater than the principal amount
payable on maturity. Although the Fund generally amortizes the amount of any
such premium into income, the Fund may recognize a capital loss if such premium
securities are called or sold prior to maturity and the call or sale price is
less than the purchase price. Additionally, the Fund may recognize a capital
loss if it holds such securities to maturity.
High Yield, High Risk Bonds
The Fund may invest a portion of its assets in lower rated bonds. Bonds
rated below BBB by S&P or Fitch IBCA, Inc. ("Fitch") or below Baa by Moody's,
commonly known as "junk bonds," offer high yields, but also high risk. While
investment in junk bonds provides opportunities to maximize return over time,
they are considered predominantly speculative with respect to the ability of the
issuer to meet principal and interest payments.
Investors should be aware of the following risks:
(1) The lower ratings of junk bonds reflect a greater possibility that
adverse changes in the financial condition of the issuer or in general economic
conditions, or both, or an unanticipated rise in interest rates may impair the
ability of the issuer to make payments of interest and principal, especially if
the issuer is highly leveraged. Such issuer's ability to meet its debt
obligations may also be adversely affected by the issuer's inability to meet
specific forecasts or the unavailability of additional financing. Also, an
economic downturn or an increase in interest rates may increase the potential
for default by the issuers of these securities.
(2) The value of junk bonds may be more susceptible to real or
perceived adverse economic or political events than is the case for higher
quality bonds.
(3) The value of junk bonds, like those of other fixed income
securities, fluctuates in response to changes in interest rates, generally
rising when interest rates decline and falling when interest rates rise. For
example, if interest rates increase after a fixed income security is purchased,
the security, if sold prior to maturity, may return less than its cost. The
prices of junk bonds, however, are generally less sensitive to interest rate
changes than the prices of higher-rated bonds, but are more sensitive to news
about an issuer or the economy which is, or investors perceive as, negative.
(4) The secondary market for junk bonds may be less liquid at certain
times than the secondary market for higher quality bonds, which may adversely
effect (a) the bond's market price, (b) the Fund's ability to sell the bond, and
(c) 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% (10% for money market funds) 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
determining the liquidity of Rule 144A securities, the Trustees will consider:
(1) the frequency of trades and quotes for the security; (2) the number of
dealers willing to purchase or sell the security and the number of other
potential buyers; (3) dealer undertakings to make a market in the security; and
(4) the nature of the security and the nature of the marketplace trades.
Investment in Other Investment Companies
The Fund may purchase the shares of other investment companies to the
extent permitted under the 1940 Act. Currently, the Fund may not (1) own more
than 3% of the outstanding voting stocks of another investment company, (2)
invest more than 5% of its assets in any single investment company, and (3)
invest more than 10% of its assets in investment companies. However, the Fund
may invest all of its investable assets in securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and limitations as the Fund. Investing in other investment
companies may expose a Fund to duplicate expenses and lower its value.
Short Sales
A short sale is the sale of a security the Fund has borrowed. The Fund
expects to profit from a short sale by selling the borrowed security for more
than the cost of buying it to repay the lender. After a short sale is completed,
the value of the security sold short may rise. If that happens, the cost of
buying it to repay the lender may exceed the amount originally received for the
sale by the Fund.
The Fund may engage in short sales, but it may not make short sales of
securities or maintain a short position unless, at all times when a short
position is open, it owns an equal amount of such securities or of securities
which, without payment of any further consideration, are convertible into or
exchangeable for securities of the same issue as, and equal in amount to, the
securities sold short. The Fund may effect a short sale in connection with an
underwriting in which the Fund is a participant.
Municipal Bonds
The Fund may invest in municipal bonds of any state, territory or
possession of the United States ("U.S."), including the District of Columbia.
The Fund may also invest in municipal bonds of any political subdivision, agency
or instrumentality (e.g., counties, cities, towns, villages, districts,
authorities) of the U.S. or its possessions. Municipal bonds are debt
instruments issued by or for a state or local government to support its general
financial needs or to pay for special projects such as airports, bridges,
highways, public transit, schools, hospitals, housing and water and sewer works.
Municipal bonds may also may be issued to refinance public debt.
Municipal bonds are mainly divided between "general obligation" and
"revenue" bonds. General obligation bonds are backed by the full faith and
credit of governmental issuers with the power to tax. They are repaid from the
issuer's general revenues. Payment, however, may be dependent upon legislative
approval and may be subject to limitations on the issuer's taxing power.
Enforcement of payments due under general obligation bonds varies according to
the law applicable to the issuer. In contrast, revenue bonds are supported only
by the revenues generated by the project or facility.
The Fund may also invest in industrial development bonds. Such bonds
are usually revenue bonds issued to pay for facilities with a public purpose
operated by private corporations. The credit quality of industrial development
bonds is usually directly related to the credit standing of the owner or user of
the facilities. To qualify as a municipal bond, the interest paid on an
industrial development bond must qualify as fully exempt from federal income
tax. However, the interest paid on an industrial development bond may be subject
to the federal alternative minimum tax.
The yields on municipal bonds depend on such factors as market
conditions, the financial condition of the issuer and the issue's size, maturity
date and rating. Municipal bonds are rated by S&P, Moody's and Fitch. Such
ratings, however, are opinions, not absolute standards of quality. Municipal
bonds with the same maturity, interest rates and rating may have different
yields, while municipal bonds with the same maturity and interest rate, but
different ratings, may have the same yield. Once purchased by the Fund, a
municipal bond may cease to be rated or receive a new rating below the minimum
required for purchase by the Fund. Neither event would require the Fund to sell
the bond, but the Fund's investment advisor would consider such events in
determining whether the Fund should continue to hold it.
The ability of the Fund to achieve its investment objective depends
upon the continuing ability of issuers of municipal bonds to pay interest and
principal when due. Municipal bonds are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors. Such
laws extend the time for payment of principal and/or interest, and may otherwise
restrict the Fund's ability to enforce its rights in the event of default. Since
there is generally less information available on the financial condition of
municipal bond issuers compared to other domestic issuers of securities, the
Fund's investment advisor may lack sufficient knowledge of an issue's
weaknesses. Other influences, such as litigation, may also materially affect the
ability of an issuer to pay principal and interest when due. In addition, the
market for municipal bonds is often thin and can be temporarily affected by
large purchases and sales, including those by the Fund.
From time to time, Congress has considered restricting or eliminating
the federal income tax exemption for interest on municipal bonds. Such actions
could materially affect the availability of municipal bonds and the value of
those already owned by the Fund. If such legislation were passed, the Trust's
Board of Trustees may recommend changes in the Fund's investment objectives and
policies or dissolution of the Fund.
U.S. Virgin Islands, Guam and Puerto Rico
The Fund may invest in obligations of the governments of the U.S.
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 U.S. 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 U.S. 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 high quality commercial paper, i.e., rated A-1 by S&P, Prime-1
by Moody's or F-1 by Fitch.
Brady Bonds
The Fund may also invest in Brady Bonds. Brady Bonds are created
through the exchange of existing commercial bank loans to foreign entities for
new obligations in connection with debt restructurings under a plan introduced
by former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan").
Brady Bonds have been issued only recently, and, accordingly, do not have a long
payment history. They may be collateralized or uncollateralized and issued in
various currencies (although most are U.S. dollar-denominated) and they are
actively traded in the over-the-counter secondary market.
U.S. dollar-denominated, collateralized Brady Bonds, which may be
fixed-rate par bonds or floating rate discount bonds, are generally
collateralized in full as to principal due at maturity by U.S. Treasury zero
coupon obligations that have the same maturity as the Brady Bonds. Interest
payments on these Brady Bonds generally are collateralized by cash or securities
in an amount that, in the case of fixed rate bonds, is equal to at least one
year of rolling interest payments based on the applicable interest rate at that
time and is adjusted at regular intervals thereafter. Certain Brady Bonds are
entitled to "value recovery payments" in certain circumstances, which in effect
constitute supplemental interest payments, but generally are not collateralized.
Brady Bonds are often viewed as having up to four valuation components: (1)
collateralized repayment of principal at final maturity, (2) collateralized
interest payments, (3) uncollateralized interest payments, and (4) any
uncollateralized repayment of principal at maturity (these uncollateralized
amounts constitute the "residual risk"). In the event of a default with respect
to collateralized Brady Bonds as a result of which the payment obligations of
the issuer are accelerated, the U.S. Treasury zero coupon obligations held as
collateral for the payment of principal will not be distributed to investors,
nor will such obligations be sold and the proceeds distributed. The collateral
will be held by the collateral agent to the scheduled maturity of the defaulted
Brady Bonds, which will continue to be outstanding, at which time the face
amount of the collateral will equal the principal payments that would have then
been due on the Brady Bonds in the normal course. In addition, in light of the
residual risk of Brady Bonds and, among other factors, the history of defaults
with respect to commercial bank loans by public and private entities of
countries issuing Brady Bonds, investments in Brady Bonds are to be viewed as
speculative.
Obligations of Foreign Branches of United States Banks
The Fund may invest in obligations of foreign branches of U.S. banks.
These may be general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and by
government regulation. Payment of interest and principal upon these obligations
may also be affected by governmental action in the country of domicile of the
branch (generally referred to as sovereign risk). In addition, evidences of
ownership of such securities may be held outside the U.S. and the Fund may be
subject to the risks associated with the holding of such property overseas.
Examples of governmental actions would be the imposition of currency controls,
interest limitations, withholding taxes, seizure of assets or the declaration of
a moratorium. Various provisions of federal law governing domestic branches do
not apply to foreign branches of domestic banks.
Obligations of United States Branches of Foreign Banks
The Fund may invest in obligations of U.S. branches of foreign banks.
These may be general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and by federal
and state regulation as well as by governmental action in the country in which
the foreign bank has its head office. In addition, there may be less publicly
available information about a U.S. branch of a foreign bank than about a
domestic bank.
Payment-in-kind Securities
The Fund may invest in payment-in-kind ("PIK") securities. PIKs pay
interest in either cash or additional securities, at the issuer's option, for a
specified period. The issuer's option to pay in additional securities typically
ranges from one to six years, compared to an average maturity for all PIK
securities of eleven years. Call protection and sinking fund features are
comparable to those offered on traditional debt issues.
PIKs, like zero coupon bonds, are designed to give an issuer
flexibility in managing cash flow. Several PIKs are senior debt. In other cases,
where PIKs are subordinated, most senior lenders view them as equity
equivalents.
An advantage of PIKs for the issuer -- as with zero coupon securities
- -- is that interest payments are automatically compounded (reinvested) at the
stated coupon rate, which is not the case with cash-paying securities. However,
PIKs are gaining popularity over zeros since interest payments in additional
securities can be monetized and are more tangible than accretion of a discount.
As a group, PIK bonds trade flat (i.e., without accrued interest).
Their price is expected to reflect an amount representing accredit interest
since the last payment. PIKs generally trade at higher yields than comparable
cash-paying securities of the same issuer. Their premium yield is the result of
the lesser desirability of non-cash interest, the more limited audience for
non-cash paying securities, and the fact that many PIKs have been issued to
equity investors who do not normally own or hold such securities.
Calculating the true yield on a PIK security requires a discounted cash
flow analysis if the security (ex interest) is trading at a premium or a
discount because the realizable value of additional payments is equal to the
current market value of the underlying security, not par.
Regardless of whether PIK securities are senior or deeply subordinated,
issuers are highly motivated to retire them because they are usually their most
costly form of capital.
Zero Coupon "Stripped" Bonds
The Fund may invest in zero coupon "stripped" bonds. These represent
ownership in serially maturing interest payments or principal payments on
specific underlying notes and bonds, including coupons relating to such notes
and bonds. The interest and principal payments are direct obligations of the
issuer. Interest 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 interest 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
interest zero coupon bonds representing an interest in the same underlying issue
of securities, a special basis allocation rule (requiring the aggregate basis to
be allocated among the items sold and retained based on their relative fair
market value at the time of sale) may apply to determine the gain or loss on a
sale of any such zero coupon bonds.
Mortgage-Backed or Asset-Backed Securities
The Fund may invest in mortgage-backed securities and asset-backed
securities. Two principal types of mortgage-backed securities are collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs"). CMOs are securities collateralized by mortgages, mortgage
pass-throughs, mortgage pay-through bonds (bonds representing an interest in a
pool of mortgages where the cash flow generated from the mortgage collateral
pool is dedicated to bond repayment), and mortgage-backed bonds (general
obligations of the issuers payable out of the issuers' general funds and
additionally secured by a first lien on a pool of single family detached
properties). Many CMOs are issued with a number of classes or series which have
different maturities and are retired in sequence.
Investors purchasing CMOs in the shortest maturities receive or are
credited with their pro rata portion of the scheduled payments of interest and
principal on the underlying mortgages plus all unscheduled prepayments of
principal up to a predetermined portion of the total CMO obligation. Until that
portion of such CMO obligation is repaid, investors in the longer maturities
receive interest only. Accordingly, the CMOs in the longer maturity series are
less likely than other mortgage pass-throughs to be prepaid prior to their
stated maturity. Although some of the mortgages underlying CMOs may be supported
by various types of insurance, and some CMOs may be backed by GNMA certificates
or other mortgage pass-throughs issued or guaranteed by U.S. government agencies
or instrumentalities, the CMOs themselves are not generally guaranteed.
REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities.
In addition to mortgage-backed securities, the Fund may invest in
securities secured by other assets including company receivables, truck and auto
loans, leases, and credit card receivables. These issues may be traded
over-the-counter and typically have a short-intermediate maturity structure
depending on the pay down characteristics of the underlying financial assets
which are passed through to the security holder.
Credit card receivables are generally unsecured and the debtors are
entitled to the protection of a number of state and federal consumer credit
laws, many of which give such debtors the right to set off certain amounts owed
on the credit cards, thereby reducing the balance due. Most issuers of
asset-backed securities backed by automobile receivables permit the servicers of
such receivables to retain possession of the underlying obligations. If the
servicers 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 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 related asset-backed securities backed by
automobile receivables may not have a proper security interest in all of the
obligations backing such receivables. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on these securities.
In general, issues of asset-backed securities are structured to include
additional collateral and/or additional credit support to protect against the
risk that a portion of the collateral supporting the asset-backed securities may
default and/or may suffer from these defects. In evaluating the strength of
particular issues of asset-backed securities, the investment advisor considers
the financial strength of the guarantor or other provider of credit support, the
type and extent of credit enhancement provided as well as the documentation and
structure of the issue itself and the credit support.
Variable or Floating Rate Instruments
The Fund may invest in variable or floating rate instruments which may
involve a demand feature and may include variable amount master demand notes
which may or may not be backed by bank letters of credit. Variable or floating
rate instruments bear interest at a rate which varies with changes in market
rates. The holder of an instrument with a demand feature may tender the
instrument back to the issuer at par prior to maturity. A variable amount master
demand note is issued pursuant to a written agreement between the issuer and the
holder, its amount may be increased by the holder or decreased by the holder or
issuer, it is payable on demand, and the rate of interest varies based upon an
agreed formula. The quality of the underlying credit must, in the opinion of the
investment advisor, be equivalent to the long-term bond or commercial paper
ratings applicable to permitted investments for the Fund. The investment advisor
will monitor, on an ongoing basis, the earning power, cash flow, and liquidity
ratios of the issuers of such instruments and will similarly monitor the ability
of an issuer of a demand instrument to pay principal and interest on demand.
Real Estate Investment Trusts
The Fund may invest in investments related to real estate including
real estate investment trusts ("REITs"). Risks associated with investments in
securities of companies in the real estate industry include: decline in the
value of real estate; risks related to general and local economic conditions,
overbuilding and increased competition; increases in property taxes and
operating expenses; changes in zoning laws; casualty or condemnation losses;
variations in rental income; changes in neighborhood values; the appeal of
properties to tenants; and increases in interest rates. In addition, equity
REITs may be affected by changes in the values of the underlying property owned
by the trusts, while mortgage real estate investment trusts may be affected by
the quality of credit extended. REITs are dependent upon management skills, may
not be diversified and are subject to the risks of financing projects. Such
REITs are also subject to heavy cash flow dependency, defaults by borrowers,
self liquidation and the possibility of failing to qualify for tax-free
pass-through of income under the Code and to maintain exemption from the 1940
Act. In the event an issuer of debt securities collateralized by real estate
defaults, it is conceivable that the REITs could end up holding the underlying
real estate.
Limited Partnerships
The Fund may invest in limited and master limited partnerships. A
limited partnership is a partnership consisting of one or more general partners,
jointly and severally responsible as ordinary partners, and by whom the business
is conducted, and one or more limited partners who contribute cash as capital to
the partnership and who generally are not liable for the debts of the
partnership beyond the amounts contributed. Limited partners are not involved in
the day-to-day management of the partnership. They receive income, capital gains
and other tax benefits associated with the partnership project in accordance
with terms established in the partnership agreement. Typical limited
partnerships are in real estate, oil and gas and equipment leasing, but they
also finance movies, research and development, and other projects.
For an organization classified as a partnership under the Internal
Revenue Code of 1986, as amended (the "Code"), each item of income, gain, loss,
deduction, and credit is not taxed at the partnership level but flows through to
the holder of the partnership unit. This allows the partnership to avoid double
taxation and to pass through income to the holder of the partnership unit at
lower individual rates.
A master limited partnership is a publicly traded limited partnership.
The partnership units are registered with the Securities and Exchange Commission
("SEC") and are freely exchanged on a securities exchange or in the
over-the-counter market.
PURCHASE AND REDEMPTION OF SHARES
You may buy shares of the Fund through Evergreen Distributor, Inc.
("EDI"), broker-dealers that have entered into special agreements with EDI or
certain other financial institutions. With certain exceptions, the Fund may
offer up to four 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. Each Fund offers different classes of shares. Refer to the
prospectus to determine which classes of shares are offered by each Fund.
Class A Shares
With certain exceptions, when you purchase Class A shares you will pay
a maximum sales charge of 4.75%. The prospectus contains a complete table of
applicable sales charges and a discussion of sales charge reductions or waivers
that may apply to purchases. If you purchase Class A shares in the amount of $1
million or more, without an initial sales charge, the Fund will charge a CDSC of
1.00% if you redeem during the month of your purchase or the 12-month period
following the month of your purchase (see "Contingent Deferred Sales Charge"
below).
No front-end sales charges are imposed on Class A shares purchased by
(a) institutional investors, which may include bank trust departments and
registered investment advisors; (b) investment advisors, consultants or
financial planners who place trades for their own accounts or the accounts of
their clients and who charge such clients a management, consulting, advisory or
other fee; (c) clients of investment advisors or financial planners who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisors or financial planners on the books of the
broker-dealer through whom shares are purchased; (d) institutional clients of
broker-dealers, including retirement and deferred compensation plans and the
trusts used to fund these plans, which place trades through an omnibus account
maintained with the Fund by the broker-dealer; (e) shareholders of record on
October 12, 1990 in any series of Evergreen Investment Trust in existence on
that date, and the members of their immediate families; (f) current and retired
employees of First Union National Bank ("FUNB") and its affiliates, EDI and any
broker-dealer with whom EDI has entered into an agreement to sell shares of the
Fund, and members of the immediate families of such employees; and (g) upon the
initial purchase of an Evergreen Fund by investors reinvesting the proceeds from
a redemption within the preceding 30 days of shares of other mutual funds,
provided such shares were initially purchased with a front-end sales charge or
subject to a CDSC. These provisions are generally intended to provide additional
job-related incentives to persons who serve the funds or work for companies
associated with the Funds and selected dealers and agents of the Funds. Since
these persons are in a position to have a basic understanding of the nature of
an investment company as well as a general familiarity with the Fund, sales to
these persons, as compared to sales in the normal channels of distribution,
require substantially less sales effort. Similarily, these provisions extend the
privilege of purchasing shares at net asset value to certain classes of
institutional investors who, because of their investment sophistication, can be
expected to require significantly less than normal sales effort on the part of
the Funds and the Distributor. In addition, the provisions allow the Funds to be
competitive in the mutual fund industry, where similar allowances are common.
Class B Shares
The Fund offers Class B shares at net asset value without an initial
sales charge. With certain exceptions, however, the Fund will charge a CDSC on
shares you redeem within 72 months after the month of your purchase, in
accordance with the following schedule:
REDEMPTION TIME CDSC RATE
Month of purchase and the first 12-month
period following the month of purchase.................. 5.00%
Second 12-month period following the month of purchase.. 4.00%
Third 12-month period following the month of purchase... 3.00%
Fourth 12-month period following the month of purchase.. 3.00%
Fifth 12-month period following the month of purchase... 2.00%
Sixth 12-month period following the month of purchase... 1.00%
Thereafter.............................................. 0.00%
Class B shares that have been outstanding for seven years after the
month of purchase will automatically convert to Class A shares without
imposition of a front-end sales charge or exchange fee. Conversion of Class B
shares represented by stock certificates will require the return of the stock
certificate to ESC.
Class C Shares
Class C shares are available only through broker-dealers who have
entered into special distribution agreements with EDI. 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 2.00% on shares you redeem
within 24 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..................... 2.00%
Second 12-month period following the month of purchase..... 1.00%
Thereafter................................................. 0.00%
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 an
investment advisor of an Evergreen Fund or the advisor's 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
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 and Institutional Service 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., paid to EDI or its predecessor.
SALES CHARGE WAIVERS AND REDUCTIONS
The following information is not applicable to Institutional and
Institutional Service shares.
If you making a large purchase, there are several ways you can combine
multiple purchases of Class A shares in Evergreen Funds and take advantage of
lower sales charges. These are described below.
Combined Purchases
You can reduce your sales charge by combining purchases of Class A
shares of multiple Evergreen Funds. For example, if you invested $75,000 in each
of two different Evergreen Funds, you would pay a sales charge based on a
$150,000 purchase (i.e., 3.75% of the offering price, rather than 4.75%).
Rights of Accumulation
You can reduce your sales charge by adding the value of Class A shares
of Evergreen Funds you already own to the amount of your next Class A
investment. For example, if you hold Class A shares valued at $99,999 and
purchase an additional $5,000, the sales charge for the $5,000 purchase would be
at the next lower sales charge of 3.75%, rather than 4.75%.
Your account, and therefore your rights of accumulation, can be linked
to immediate family members which includes father and mother, brothers and
sisters, and sons and daughters. The same rule applies with respect to
individual retirement plans. Please note, however, that retirement plans
involving employees stand alone and do not pass on rights of accumulation.
Letter of Intent
You can, by completing the "Letter of Intent" section of the
application, purchase Class A shares over a 13-month period and receive the same
sales charge as if you had invested all the money at once. All purchases of
Class A shares of an Evergreen Fund during the period will qualify as Letter of
Intent purchases.
Waiver of Initial Sales Charges
The Fund may sell its shares at net asset value without an initial
sales charge to:
1. purchasers of shares in the amount of $1 million or more;
2. a corporate or certain other qualified retirement plan or a
non-qualified deferred compensation plan or a Title 1
tax-sheltered annuity or TSA plan sponsored by an organization
having 100 or more eligible employees (a "Qualifying Plan") or
a TSA plan sponsored by a public educational entity having
5,000 or more eligible employees (an "Educational TSA Plan");
3. institutional investors, which may include bank trust
departments and registered investment advisors;
4. investment advisors, consultants or financial planners who
place trades for their own accounts or the accounts of their
clients and who charge such clients a management, consulting,
advisory or other fee;
5. clients of investment advisors or financial planners who
place trades for their own accounts if the accounts are linked
to a master account of such investment advisors or financial
planners on the books of the broker-dealer through whom shares
are purchased;
6. institutional clients of broker-dealers, including
retirement and deferred compensation plans and the trusts used
to fund these plans, which place trades through an omnibus
account maintained with the Fund by the broker-dealer;
7. employees of FUNB, its affiliates, EDI, 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;
8. certain Directors, Trustees, officers and employees of the
Evergreen Funds, EDI or their affiliates and to the immediate
families of such persons; or
9. a bank or trust company acting as trustee for a single
account in the name of such bank or trust company if the
initial investment in any of the Evergreen Funds 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 at 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 a Systematic Income Plan of
up to 1.0% per month of your initial account balance;
8. a withdrawal consisting of loan proceeds to a retirement
plan participant;
9. a financial hardship withdrawal made by a retirement plan
participant;
10. a withdrawal consisting of returns of excess contributions
or excess deferral amounts made to a retirement plan; or
11. a redemption by an individual participant in a Qualifying
Plan that purchased Class C shares (this waiver is not
available in the event a Qualifying Plan, as a whole, redeems
substantially all of its assets).
Exchanges
Investors may exchange shares of the Fund for shares of the same class
of any other Evergreen Fund which offers the same class of shares. Shares of any
class of the Evergreen Select Funds may be exchanged for the same class of
shares of any other Evergreen Select Fund. See "By Exchange" under "How to Buy
Shares" in the prospectus. Before you make an exchange, you should read the
prospectus of the Evergreen Fund into which you want to exchange. The Trust's
Board of Trustees reserves the right to discontinue, alter or limit the exchange
privilege at any time.
Automatic Reinvestment
As described in the prospectus, a shareholder may elect to receive
dividends and capital gains distributions in cash instead of shares. However,
ESC will automatically reinvest all dividends and distributions in additional
shares when it learns that the postal or other delivery service is unable to
deliver checks or transaction confirmations to the shareholder's address of
record. When a check is returned, the Fund will hold the check amount in a
no-interest account in the shareholder's name until the shareholder updates his
or her address or automatic reinvestment begins. Uncashed or returned redemption
checks will also be handled in the manner described above.
PRICING OF SHARES
Calculation of Net Asset Value
The Fund calculates its net asset value ("NAV") once daily (or twice
daily, for Money Market Funds) on Monday through Friday, as described in the
prospectus. The Fund will not compute its NAV on the days the New York Stock
Exchange is closed: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
The NAV of the Fund is calculated by dividing the value of the Fund's
net assets attributable to that class by all of the shares issued for that
class.
Valuation of Portfolio Securities
Current values for the Fund's portfolio securities are determined as
follows:
(1) Securities that are traded on an established securities
exchange or the over-the-counter National Market System
("NMS") are valued on the basis of the last sales price on the
exchange where primarily traded or on the NMS prior to the
time of the valuation, provided that a sale has occurred.
(2) Securities traded on an established securities exchange or
in the over-the-counter market for which there has been no
sale and other securities traded in the over-the-counter
market are valued at the mean of the bid and asked prices at
the time of valuation.
(3) Short-term investments maturing in more than 60 days, for
which market quotations are readily available, are valued at
current market value.
(4) Short-term investments maturing in sixty days or less are
valued at amortized cost, which approximates market.
(5) Securities, including restricted securities, for which
market quotations are not readily available; listed securities
or those on NMS if, in the investment advisor's opinion, the
last sales price does not reflect an accurate current market
value; and other assets are valued at prices deemed in good
faith to be fair under procedures established by the Board of
Trustees.
(6) Municipal bonds are valued by an independent pricing
service at fair value using a variety of factors which may
include yield, liquidity, interest rate risk, credit quality,
coupon, maturity and type of issue.
Foreign securities are generally valued on the basis of valuations provided by a
pricing service, approved by the Trust's Board of Trustees, which uses
information with respect to transactions in such securities, quotations from
broker-dealers, market transactions in comparable securities, and various
relationships between securities and yield to maturity in determining value.
PERFORMANCE CALCULATIONS
Total Return
Total return quotations for a class of shares of the Fund as they may
appear from time to time in advertisements are calculated by finding the average
annual compounded rates of return over one, five and ten year periods, or the
time periods for which such class of shares has been effective, whichever is
relevant, on a hypothetical $1,000 investment that would equate the initial
amount invested in the class to the ending redeemable value. To the initial
investment all dividends and distributions are added, and all recurring fees
charged to all shareholder accounts are deducted. The ending redeemable value
assumes a complete redemption at the end of the relevant periods.
The following is the formula used to calculate average annual total
return:
[OBJECT OMITTED]
P = initial payment of $1,000 T = average annual 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,
according to the following formula:
[OBJECT OMITTED] [OBJECT OMITTED]
Where:
a = Dividends and interest earned during the period b = Expenses
accrued for the period (net of reimbursements) c = The average daily
number of shares outstanding during the period
that were entitled to receive dividends
d = The maximum offering price per share on the last day of the period
7-Day Current and Effective Yield
If the Fund invests primarily in money market instruments, it may quote
its 7-day current yield or effective yield in advertisements or in reports or
other communications to shareholders.
The current yield is calculated by determining the net change,
excluding capital changes and income other than investment income, in the value
of a hypothetical, pre-existing account having a balance of one share at the
beginning of the 7-day base period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then multiplying the base period return by (365/7).
The effective yield is based on a compounding of the current yield,
according to the following formula:
[OBJECT OMITTED]
Tax Equivalent Yield
If the Fund invests primarily in municipal bonds, it may quote in
advertisements or in reports or other communications to shareholders a tax
equivalent yield, which is what an investor would generally need to earn from a
fully taxable investment in order to realize, after income taxes, a benefit
equal to the tax free yield provided by the Fund. Tax equivalent yield is
calculated using the following formula:
[OBJECT OMITTED]
The quotient is then added to that portion, if any, of the Fund's yield
that is not tax exempt. Depending on the Fund's objective, the income tax rate
used in the formula above may be federal or a combination of federal and state.
PRINCIPAL UNDERWRITER
EDI 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 EDI with respect to each class of the
Fund. EDI is a subsidiary of The BISYS Group, Inc.
EDI, as agent, has agreed to use its best efforts to find purchasers
for the shares. EDI 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 EDI 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 EDI 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.
EDI has agreed that it will, in all respects, duly conform with all
state and federal laws applicable to the sale of the shares. EDI 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 EDI or any other person for whose acts EDI 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 EDI's judgment, it could benefit the sales of
shares, EDI may provide to selected broker-dealers promotional materials and
selling aids, including, but not limited to, personal computers, related
software, and data files.
DISTRIBUTION EXPENSES UNDER RULE 12b-1
The Fund bears some of the costs of selling its Class A, Class B, Class
C and Institutional Service shares, as applicable, including certain
advertising, marketing and shareholder service expenses, pursuant to Rule 12b-1
of the 1940 Act. These 12b-1 fees are indirectly paid by the shareholder, as
shown by the Fund's expense table in the prospectus.
Under the Distribution Plans (each a "Plan," together, the "Plans")
that the Fund has adopted for its Class A, Class B, Class C and Institutional
Service shares, as applicable, the Fund may incur expenses for 12b-1 fees up to
a maximum annual percentage of the average daily net assets attributable to a
class, as follows:
------------------------------- ---------------
Class A 0.75%*
------------------------------- ---------------
------------------------------- ---------------
Class B 1.00%
------------------------------- ---------------
------------------------------- ---------------
Class C 1.00%
------------------------------- ---------------
------------------------------- ---------------
Institutional Service 0.75%*
------------------------------- ---------------
* Currently limited to 0.25% or less to be used exclusively as
a shareholder service fee. 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 EDI pursuant to
Distribution Agreements (each an "Agreement," together, the "Agreements") that
the Fund has entered into with respect to its Class A, Class B, Class C and
Institutional Service shares, as applicable. The compensation is based on a
maximum annual percentage of the average daily net assets attributable to a
class, as follows:
----------------------------- -------------
Class A 0.25%*
----------------------------- -------------
----------------------------- -------------
Class B 1.00%
----------------------------- -------------
----------------------------- -------------
Class C 1.00%
----------------------------- -------------
----------------------------- -------------
Institutional Service 0.25%*
----------------------------- -------------
*May be lower. See the expense table in the prospectus of the
Fund in which you are interested.
The Agreements provide that EDI will use the distribution fees received
from the Fund for the following purposes:
(1) to compensate broker-dealers or other persons for distributing
Fund shares;
(2) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative,
accounting and other services with respect to the Fund's
shareholders; and
(3) to otherwise promote the sale of Fund shares.
The Agreements also provide that EDI 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. EDI may assign
its rights to receive compensation under the Plans to secure such financings.
FUNB or its affiliates may finance payments made by EDI 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 EDI under the Agreements may be paid by the Fund's
Distributor to the acquired fund's distributor or its predecessor.
Since EDI's compensation under the Agreements is not directly tied to
the expenses incurred by EDI, 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 EDI. Distribution expenses incurred by EDI in one
fiscal year that exceed the compensation paid to EDI 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 annually on 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 EDI to
compensate broker-dealers in connection with the sale of such shares.
Service fees are accrued daily and paid at least annually on Class A,
Class B, Class C, and Institutional Service shares and are charged as class
expenses, as accrued.
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 SEC make payments for
distribution services to EDI; 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 Service 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 EDI with respect to that class or classes, and (ii) the Fund
would not be obligated to pay EDI for any amounts expended under the
Distribution Agreement not previously recovered by the EDI from distribution
services fees in respect of shares of such class or classes through deferred
sales charges.
All material amendments to any Plan or Agreement must be approved by a
vote of the Trustees of the Trust or the holders of the Fund's outstanding
voting securities, voting separately by class, and in either case, by a majority
of the Independent Trustees, cast in person at a meeting called for the purpose
of voting on such approval; and any Plan or Distribution Agreement may not be
amended in order to increase materially the costs that a particular class of
shares of the Fund may bear pursuant to the Plan or Distribution Agreement
without the approval of a majority of the holders of the outstanding voting
shares of the class affected. Any Plan or Distribution Agreement may be
terminated (i) by the Fund without penalty at any time by a majority vote of the
holders of the outstanding voting securities of the Fund, voting separately by
class or by a majority vote of the Independent Trustees, or (ii) by EDI. 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
EDI. 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 Code, as
amended. (Such qualification does not involve supervision of management or
investment practices or policies by the Internal Revenue Service.) In order to
qualify as a RIC, the Fund must, among other things, (i) derive at least 90% of
its gross income from dividends, interest, payments with respect to proceeds
from securities loans, gains from the sale or other disposition of securities or
foreign currencies and other income (including gains from options, futures or
forward contracts) derived with respect to its business of investing in such
securities; and (ii) diversify its holdings so that, at the end of each quarter
of its taxable year, (a) at least 50% of the market value of the Fund's total
assets is represented by cash, U.S. government securities and other securities
limited in respect of any one issuer, to an amount not greater than 5% of the
Fund's total assets and 10% of the outstanding voting securities of such issuer,
and (b) not more than 25% of the value of its total assets is invested in the
securities of any one issuer (other than U.S. government securities and
securities of other regulated investment companies). By so qualifying, the Fund
is not subject to federal income tax if it timely distributes its investment
company taxable income and any net realized capital gains. A 4% nondeductible
excise tax will be imposed on the Fund to the extent it does not meet certain
distribution requirements by the end of each calendar year. The Fund anticipates
meeting such distribution requirements.
Taxes on Distributions
Unless the Fund is a municipal bond fund, distributions will be taxable
to shareholders whether made in shares or in cash. Shareholders electing to
receive distributions in the form of additional shares will have a cost basis
for federal income tax purposes in each share so received equal to the net asset
value of a share of the Fund on the reinvestment date.
To calculate ordinary income for federal income tax purposes,
shareholders must generally include dividends paid by the Fund from its
investment company taxable income (net taxable investment income plus net
realized short-term capital gains, if any). The Fund will include dividends it
receives from domestic corporations when the Fund calculates its gross
investment income. Unless the Fund is a municipal bond fund or U.S. Treasury or
U.S. Government 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 or U.S.
Government money market fund, none of its income will consist of corporate
dividends; therefore, none of its distributions will qualify for the 70%
dividends-received deduction for corporations.
From time to time, the Fund will distribute the excess of its net
long-term capital gains over its short-term capital loss to shareholders (i.e.,
capital gain dividends). For federal tax purposes, shareholders must include
such capital gain dividends when calculating their net long-term capital gains.
Capital gain dividends are taxable as net long-term capital gains to a
shareholder, no matter how long the shareholder has held the shares.
Distributions by the Fund reduce its NAV. A distribution that reduces
the Fund's NAV below a shareholder's cost basis is taxable as described above,
although from an investment standpoint, it is a return of capital. In
particular, if a shareholder buys Fund shares just before the Fund makes a
distribution, when the Fund makes the distribution the shareholder will receive
what is in effect a return of capital. Nevertheless, the shareholder may incur
taxes on the distribution. Therefore, shareholders should carefully consider the
tax consequences of buying Fund shares just before a distribution.
All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her federal income tax return. Each shareholder
should consult a tax advisor to determine the state and local tax implications
of Fund distributions.
If more than 50% of the value of the Fund's total assets at the end of
a fiscal year is represented by securities of foreign corporations and the Fund
elects to make foreign tax credits available to its shareholders, a shareholder
will be required to include in his gross income both cash dividends and the
amount the Fund advises him is his pro rata portion of income taxes withheld by
foreign governments from interest and dividends paid on the Fund's investments.
The shareholder may be entitled, however, to take the amount of such foreign
taxes withheld as a credit against his U.S. income tax, or to treat the foreign
tax withheld as an itemized deduction from his gross income, if that should be
to his advantage. In substance, this policy enables the shareholder to benefit
from the same foreign tax credit or deduction that he would have received if he
had been the individual owner of foreign securities and had paid foreign income
tax on the income therefrom. As in the case of individuals receiving income
directly from foreign sources, the credit or deduction is subject to a number of
limitations.
Special Tax Information for Shareholders of Municipal Bond Funds
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, as amended.) of a facility financed with an issue of tax-exempt
obligations or a "related person" to such a user should consult his tax advisor
concerning his qualification to receive exempt interest dividends should the
Fund hold obligations financing such facility.
Under regulations to be promulgated, to the extent attributable to
interest paid on certain private activity bonds, the Fund's exempt interest
dividends, while otherwise tax-exempt, will be treated as a tax preference item
for alternative minimum tax purposes. Corporate shareholders should also be
aware that the receipt of exempt interest dividends could subject them to
alternative minimum tax under the provisions of Section 56(g) of the Code
(relating to "adjusted current earnings").
Interest on indebtedness incurred or continued by shareholders to
purchase or carry shares of the Fund will not be deductible for federal income
tax purposes to the extent of the portion of the interest expense relating to
exempt interest dividends. Such portion is determined by multiplying the total
amount of interest paid or accrued on the indebtedness by a fraction, the
numerator of which is the exempt interest dividends received by a shareholder in
his taxable year and the denominator of which is the sum of the exempt interest
dividends and the taxable distributions out of the Fund's investment income and
long-term capital gains received by the shareholder.
Taxes on The Sale or Exchange of Fund Shares
Upon a sale or exchange of Fund shares, a shareholder will realize a
taxable gain or loss depending on his or her basis in the shares. A shareholder
must treat such gains or losses as a capital gain or loss if the shareholder
held the shares as capital assets. Capital gain on assets held for more than 12
months is generally subject to a maximum federal income tax rate of 20% for an
individual. Generally, the Code will not allow a shareholder to realize a loss
on shares he or she has sold or exchanged and replaced within a 61-day period
beginning 30 days before and ending 30 days after he or she sold or exchanged
the shares. The Code will not allow a shareholder to realize a loss on the sale
of Fund shares held by the shareholder for six months or less to the extent the
shareholder received exempt interest dividends on such shares. Moreover, the
Code will treat a shareholder's loss on shares held for six months or less as a
long-term capital loss to the extent the shareholder received distributions of
net capital gains on such shares.
Shareholders who fail to furnish their taxpayer identification numbers
to the Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends or
capital gain distributions to these shareholders, whether taken in cash or
reinvested in additional shares, and any redemption proceeds will be reduced by
the amounts required to be withheld. Investors may wish to consult their own tax
advisors about the applicability of the backup withholding provisions.
Other Tax Considerations
The foregoing discussion relates solely to U.S. federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
domestic corporations, partnerships, trusts and estates). It does not reflect
the special tax consequences to certain taxpayers (e.g., banks, insurance
companies, tax exempt organizations and foreign persons). Shareholders are
encouraged to consult their own tax advisors regarding specific questions
relating to federal, state and local tax consequences of investing in shares of
the Fund. Each shareholder who is not a U.S. person should consult his or her
tax advisor regarding the U.S. and foreign tax consequences of ownership of
shares of the Fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30% (or at a lower rate under a
tax treaty) on amounts treated as income from U.S. sources under the Code.
BROKERAGE
Brokerage Commissions
If the Fund invests in equity securities, it expects to buy and sell
them through brokerage transactions for which commissions are payable. Purchases
from underwriters will include the underwriting commission or concession, and
purchases from dealers serving as market makers will include a dealer's mark-up
or reflect a dealer's mark-down. Where transactions are made in the
over-the-counter market, the Fund will deal with primary market makers unless
more favorable prices are otherwise obtainable.
If the Fund invests in fixed income securities, it expects to buy and
sell them directly from the issuer or an underwriter or market maker for the
securities. Generally, the Fund will not pay brokerage commissions for such
purchases. When the Fund buys a security from an underwriter, the purchase price
will usually include an underwriting commission or concession. The purchase
price for securities bought from dealers serving as market makers will similarly
include the dealer's mark up or reflect a dealer's mark down. When the Fund
executes transactions in the over-the-counter market, it will deal with primary
market makers unless more favorable prices are otherwise obtainable.
Selection of Brokers
When buying and selling portfolio securities, the advisor seeks brokers
who can provide the most benefit to the Fund. When selecting a broker, the
investment advisor will primarily look for the best price at the lowest
commission, but in the context of the broker's:
1. ability to provide the best net financial result to the Fund;
2. efficiency in handling trades;
3. ability to trade large blocks of securities;
4. readiness to handle difficult trades;
5. financial strength and stability; and
6. provision of "research services," defined as (a) reports and
analyses concerning issuers, industries, securities and
economic factors and (b) other information useful in making
investment decisions.
The Fund may pay higher brokerage commissions to a broker providing it
with research services, as defined in item 6, above. Pursuant to Section 28(e)
of the Securities Exchange Act of 1934, this practice is permitted if the
commission is reasonable in relation to the brokerage and research services
provided. Research services provided by a broker to the investment advisor do
not replace, but supplement, the services the investment advisor is required to
deliver to the Fund. It is impracticable for the investment advisor to allocate
the cost, value and specific application of such research services among its
clients because research services intended for one client may indirectly benefit
another.
When selecting a broker for portfolio trades, the investment advisor
may also consider the amount of Fund shares a broker has sold, subject to the
other requirements described above.
If the Fund is advised by Evergreen Asset Management Company ("EAMC"),
Lieber & Company, an affiliate of EAMC and a member of the New York and American
Stock Exchanges, will, to the extent practicable, effect substantially all of
the portfolio transactions effected on those exchanges for the Fund.
Simultaneous Transactions
The investment advisor makes investment decisions for the Fund
independently of decisions made for its other clients. When a security is
suitable for the investment objective of more than one client, it may be prudent
for the investment advisor to engage in a simultaneous transaction, that is, buy
or sell the same security for more than one client. The investment advisor
strives for an equitable result in such transactions by using an allocation
formula. The high volume involved in some simultaneous transactions can result
in greater value to the Fund, but the ideal price or trading volume may not
always be achieved for the Fund.
ORGANIZATION
The foregoing is qualified in its entirety by reference to the Trust's
Declaration of Trust.
Description of Shares
The Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest of series and classes of shares. Each share of
the Fund represents an equal proportionate interest with each other share of
that series and/or class. Upon liquidation, shares are entitled to a pro rata
share of the Trust based on the relative net assets of each series and/or class.
Shareholders have no preemptive or conversion rights. Shares are redeemable and
transferable.
Voting Rights
Under the terms of the Declaration of Trust, the Trust is not required
to hold annual meetings. At meetings called for the initial election of Trustees
or to consider other matters, each share is entitled to one vote for each dollar
of "NAV"applicable to such share. Shares generally vote together as one class on
all matters. Classes of shares of the Fund have equal voting rights. No
amendment may be made to the Declaration of Trust that adversely affects any
class of shares without the approval of a majority of the votes applicable to
the shares of that class. Shares have non-cumulative voting rights, which means
that the holders of more than 50% of the votes applicable to shares voting for
the election of Trustees can elect 100% of the Trustees to be elected at a
meeting and, in such event, the holders of the remaining shares voting will not
be able to elect any Trustees.
After the initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law (for such reasons as electing or removing Trustees, changing fundamental
policies, and approving advisory agreements or 12b-1 plans), unless and until
such time as less than a majority of the Trustees holding office have been
elected by shareholders, at which time, the Trustees then in office will call a
shareholders' meeting for the election of Trustees.
Limitation of Trustees' Liability
The Declaration of Trust provides that a Trustee will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.
Banking Laws
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered, open-end investment companies such as the Trust. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment advisor, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. FUNB and
its affiliates are subject to, and in compliance with, the aforementioned laws
and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in FUNB and its affiliates being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of
the Fund by its customers. If FUNB and its affiliates were prevented from
continuing to provide for services called for under the investment advisory
agreement, it is expected that the Trustees would identify, and call upon the
Fund's shareholders to approve a new investment advisor. If this were to occur,
it is not anticipated that the shareholders of the Fund would suffer any adverse
financial consequences.
INVESTMENT ADVISORY AGREEMENT
On behalf of the Fund, the Trust has entered into an investment
advisory agreement with the Fund's investment advisor (the "Advisory
Agreement"). Under the Advisory Agreement, and subject to the supervision of the
Trust's Board of Trustees, the investment advisor furnishes to the Fund (unless
the Fund is Evergreen Masters Fund) 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 Evergreen Masters Fund, the Advisory Agreement is
similar to the above except that the investment advisor selects sub-advisors
(hereinafter referred to as "Managers") for the Fund and monitors each Manager's
investment program and results. The investment advisor has primary
responsibility under the multi-manager strategy to oversee the Managers,
including making recommendations to the Trust regarding the hiring, termination
and replacement of Managers.
The Fund pays for all charges and expenses, other than those
specifically referred to as being borne by the investment advisor, including,
but not limited to, (1) custodian charges and expenses; (2) bookkeeping and
auditors' charges and expenses; (3) transfer agent charges and expenses; (4)
fees and expenses of Independent Trustees; (5) brokerage commissions, brokers'
fees and expenses; (6) issue and transfer taxes; (7) applicable costs and
expenses under the Distribution Plan (as described above) (8) taxes and trust
fees payable to governmental agencies; (9) the cost of share certificates; (10)
fees and expenses of the registration and qualification of the Fund and its
shares with the SEC or under state or other securities laws; (11) expenses of
preparing, printing and mailing prospectuses, SAIs, notices, reports and proxy
materials to shareholders of the Fund; (12) expenses of shareholders' and
Trustees' meetings; (13) charges and expenses of legal counsel for the Fund and
for the Independent Trustees on matters relating to the Fund; (14) charges and
expenses of filing annual and other reports with the SEC and other authorities;
and (15) all extraordinary charges and expenses of the Fund. For information on
advisory fees paid by the Fund, see "Expenses" in Part 1 of this SAI.
The Advisory Agreement continues in effect for two years from its
effective date and, thereafter, from year to year only if approved at least
annually by the Board of Trustees of the Trust or by a vote of a majority of the
Fund's outstanding shares. In either case, the terms of the Advisory Agreement
and continuance thereof must be approved by the vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such approval. The Advisory Agreement may be terminated, without
penalty, on 60 days' written notice by the Trust's Board of Trustees or by a
vote of a majority of outstanding shares. The Advisory Agreement will terminate
automatically upon its "assignment" as that term is defined in the 1940 Act.
Managers (Evergreen Masters Fund only)
Evergreen Masters Fund's investment program is based upon the
investment advisor's multi-manager concept. The investment advisor allocates the
Fund's portfolio assets on an equal basis among a number of investment
management organizations - currently four in number - each of which employs a
different investment style, and periodically rebalances the Fund's portfolio
among the Managers so as to maintain an approximate equal allocation of the
portfolio among them throughout all market cycles. Each Manager provides these
services under a Portfolio Management Agreement. Each Manager has discretion,
subject to oversight by the Trustees and the investment advisor, to purchase and
sell portfolio assets consistent with the Fund's investment objectives, policies
and restrictions and specific investment strategies developed by the investment
advisor. The Fund's current Managers are EAMC, MFS Institutional Advisors, Inc.,
OppenheimerFunds, Inc. and Putnam Investment Management, Inc.
The Trust and FUNB have received an order from the SEC that permits the
investment advisor to employ a "manager of managers" strategy in connection with
its management of the Fund. The exemptive order permits the investment advisor,
subject to certain conditions, and without shareholder approval, to: (a) select
new Managers who are unaffiliated with the investment advisor with the approval
of the Trust's Board of Trustees; (b) change the material terms of the Portfolio
Management Agreements with the Managers; and (c) continue the employment of a
Manager after an event which would otherwise cause the automatic termination of
a Portfolio Management Agreement. Shareholders would be notified of any Manager
changes. Shareholders have the right to terminate arrangements with a Manager by
vote of a majority of the outstanding shares of the Fund. The order also permits
the Fund to disclose the Managers' fees only in the aggregate.
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, Michael S. Scofield, and K. Dun Gifford and Russell Salton, each of
whom is an Independent Trustee. The Executive Committee recommends Trustees to
fill vacancies, prepares the agenda for Board Meetings and acts on routine
matters between scheduled Board meetings.
Set forth below are the Trustees and officers of the Trust and their
principal occupations and affiliations over the last five years. Unless
otherwise indicated, the address for each Trustee and officer is 200 Berkeley
Street, Boston, Massachusetts 02116. Each Trustee is also a Trustee of each of
the other Trusts in the Evergreen Fund complex.
<TABLE>
<CAPTION>
Name Position with Trust Principal Occupations for Last Five Years
<S> <C> <C>
Laurence B. Ashkin Trustee Real estate developer and construction consultant; and
(DOB: 2/2/28) President of Centrum Equities (real estate development) and
Centrum Properties, Inc.(real estate development).
Charles A. Austin III Trustee Investment Counselor to Appleton Partners, Inc.(investment
(DOB: 10/23/34) advice); 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.
Arnold H. Dreyfuss Trustee Chairman, Eskimo Pie Corporation; Trustee, Mentor Funds,
(DOB: 9/2/28) Mentor Variable Investment Portfolios, Mentor Institutional
Trust, and Cash Resource Trust; Director, America's
Utility Fund, Inc.; Formerly, Chairman and Chief
Executive Officer, Hamilton Beach/Proctor-Silex, Inc.
K. Dun Gifford Trustee Trustee, Treasurer and Chairman of the Finance Committee,
(DOB: 10/12/38) 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 (leather
goods purveyor); former Managing Partner, Roscommon
Capital Corp.; former Chief Executive Officer, Gifford
Gifts of Fine Foods; former Chairman, Gifford, Drescher
& Associates (environmental consulting).
Leroy Keith, Jr. Trustee Chairman of the Board and Chief Executive Officer, Carson
(DOB: 2/14/39) Products Company (manufacturing); Director of Phoenix Total
Return Fund and Equifax, Inc. (worldwide information
management); 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 and Marketing Management with Nucor-Yamoto, Inc.
(DOB: 7/14/39) (steel producer).
Thomas L. McVerry Trustee Former Vice President and Director of Rexham Corporation
(DOB: 8/2/39) (manufacturing); and Director of Carolina Cooperative
Credit Union.
Louis W. Moelchert, Jr. (DOB: Trustee President, Private Advisors, LLC; Vice President for
12/20/41) Investments, University of Richmond; Director, America's
Utility Fund, Inc.; Trustee, The Common Fund, Mentor
Variable Investment Portfolios, Mentor Funds, Mentor In
stitutional Trust, and Cash Resource Trust.
William Walt Pettit Trustee Partner in the law firm of William Walt Pettit, P.A.
(DOB: 8/26/55)
David M. Richardson Trustee President, Richardson & Runden & Company (executive search
(DOB: 9/14/41) and advisory services); former Vice Chairman, 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.
(communications), and J&M Cumming Paper Co.
Russell A. Salton, III MD Trustee Medical Director, U.S. Health Care/Aetna Health Services;
(DOB: 6/2/47) former Managed Health Care Consultant; and former
President, Primary Physician Care.
Michael S. Scofield Chairman of the Board Attorney, Law Offices of Michael S. Scofield.
(DOB: 2/20/43) of Trustees
Richard J. Shima Trustee Independent Consultant; former Chairman, Environmental
(DOB: 8/11/39) Warranty, Inc. (insurance agency); former Executive
Consultant, Drake Beam Morin, Inc. (executive
outplacement); Director of CTG Resources, Inc. (natural
gas), Hartford Hospital, Old State House Association, and
Enhance Financial Services, Inc.; former Director Middlesex
Mutual Assurance Company; former Chairman, Board of
Trustees, Hartford Graduate Center; Trustee, Greater
Hartford YMCA.
Richard K. Wagoner, CFA Trustee Former Chief Investment Officer, Executive Vice President
(DOB: 12/12/37) and Head of Capital Management Group, First Union
Corporation; former consultant to the Board of Trustees
of the Evergreen Funds; former member, New York Stock
Exchange; member, North Carolina Securities Traders
Association; member, Financial Analysts Society.
Anthony J. Fischer* President and Vice President/Client Services, BISYS Fund Services.
(DOB: 2/10/59) Treasurer
Nimish S. Bhatt** Vice President and Vice President, Tax, BISYS Fund Services; former Assistant
(DOB: 6/6/63) Assistant Treasurer Vice President, EAMC/First Union National Bank; former
Senior Tax Consulting/Acting Manager, Investment Companies
Group, PricewaterhouseCoopers LLP, New York.
Bryan Haft** Vice President Team Leader, Fund Administration, BISYS Fund Services.
(DOB: 1/23/65)
Senior Vice President and Assistant General Counsel, First
Michael H. Koonce Secretary Union Corporation; former Senior Vice President and General
(DOB: 4/20/60) Counsel, Colonial Management Associates, Inc.
* Address: BISYS Fund Services, 90 Park Avenue, New York, New York 10016
** Address: BISYS, 3435 Stelzer Road, Columbus, Ohio 43219-8001
</TABLE>
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.
<TABLE>
<CAPTION>
COMPARISON OF LONG-TERM BOND RATINGS
----------------- ---------------- --------------- =================================================
<S> <C> <C> <C>
MOODY'S S&P FITCH Credit Quality
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
Aaa AAA AAA Excellent Quality (lowest risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
Aa AA AA Almost Excellent Quality (very low risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
A A A Good Quality (low risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
Baa BBB BBB Satisfactory Quality (some risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
Ba BB BB Questionable Quality (definite risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
B B B Low Quality (high risk)
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
Caa/Ca/C CCC/CC/C CCC/CC/C In or Near Default
----------------- ---------------- --------------- =================================================
----------------- ---------------- --------------- =================================================
D DDD/DD/D In Default
----------------- ---------------- --------------- =================================================
</TABLE>
CORPORATE BONDS
LONG-TERM RATINGS
Moody's Corporate Long-Term Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than the Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium-grade obligations, (i.e.
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to Caa. The modifier 1 indicates that the company ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range raking and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
S&P Corporate Long-Term Bond Ratings
AAA An obligation rated AAA has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA An obligation rated AA differs from the highest-rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC and C: As described below, obligations rated BB, B, CCC, CC, and
C are regarded as having significant speculative characteristics. BB indicates
the least degree of speculation and C the highest. While such obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.
BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions, which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet it financial
commitment on the obligation.
CCC An obligation rated CCC is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment.
C The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.
D The D rating, unlike other ratings, is not prospective; rather, it is used
only where a default has actually occurred--and not where a default is only
expected. S&P changes ratings to D either:
- - On the day an interest and/or principal payment is due and is not paid.
An exception is made if there is a grace period and S&P believes that a
payment will be made, in which case the rating can be
maintained; or
- - Upon voluntary bankruptcy filing or similar action. An exception is
made if S&P expects that debt service payments will continue to be made
on a specific issue. In the absence of a payment default or bankruptcy
filing, a technical default (i.e., covenant violation) is not
sufficient for assigning a D rating.
Plus (+) or minus (-) The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
Fitch Corporate Long-Term Bond Ratings
Investment Grade
AAA Highest credit quality. AAA ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA Very high credit quality. AA ratings denote a very low expectation of credit
risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.
A High credit quality. A ratings denote a lower expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. BBB ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Speculative Grade
BB Speculative. BB ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time;
however, business or financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are not investment
grade.
B Highly speculative. B ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitment is solely reliant upon sustained, favorable
business or economic developments. A CC rating indicates that default of some
kind appears probable. C ratings signal imminent default.
DDD, DD, D Default. Securities are not meeting current obligations and are
extremely speculative. DDD designates the highest potential for recovery of
amounts outstanding on any securities involved. For U.S. corporates, for
example, DD indicates expected recovery of 50%-90% of such outstandings, and D
the lowest recovery potential, i.e. below 50%.
+ or - may be appended to a rating to denote relative status within major rating
categories. Such suffixes are not added to the AAA rating category or to
categories below CCC.
CORPORATE SHORT-TERM RATINGS
Moody's Corporate Short-Term Issuer Ratings
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics.
- -- Leading market positions in well-established industries.
- -- High rates of return on funds employed.
- -- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
- -- Broad margins in earnings coverage of fixed financial changes and high
internal cash generation.
- -- Well-established access to a range of financial markets and assured sources
of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
Not Prime Issuers rated Not Prime do not fall within any of the Prime rating
categories.
S&P Corporate Short-Term Obligation Ratings
A-1 A short-term obligation rated A-1 is rated in the highest category by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category certain obligations are designated with a plus sign
(+). This indicates that the obligor's capacity to meet its financial commitment
on these obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B A short-term obligation rated B is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
C A short-term obligation rated C is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
D The D rating, unlike other ratings, is not prospective; rather, it is used
only where a default has actually occurred--and not where a default is only
expected. S&P changes ratings to D either:
- - On the day an interest and/or principal payment is due and is not paid.
An exception is made if there is a grace period and S&P believes that a
payment will be made, in which case the rating can be maintained; or
- - Upon voluntary bankruptcy filing or similar action, An exception is
made if S&P expects that debt service payments will continue to be made
on a specific issue. In the absence of a payment default or bankruptcy
filing, a technical default (i.e., covenant violation) is not
sufficient for assigning a D rating.
Fitch Corporate Short-Term Obligation Ratings
F1 Highest credit quality. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.
F2 Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
higher ratings.
F3 Fair credit quality. The capacity for timely payment of financial commitments
is adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.
B Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D Default. Denotes actual or imminent payment default.
MUNICIPAL BONDS
LONG-TERM RATINGS
Moody's Municipal Long-Term Bond Ratings
Aaa Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than the Aaa securities.
A Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa Bonds rated Baa are considered as medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds rated Ba are judged to have speculative elements; their future cannot
be considered as well-assured. Often the protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa Bonds rated Caa are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal or interest.
Ca Bonds rated Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
C Bonds rated C are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range raking and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
S&P Municipal Long-Term Bond Ratings
AAA An obligation rated AAA has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA An obligation rated AA differs from the highest-rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC and C: As described below, obligations rated BB, B, CCC,
CC, and C are regarded as having significant speculative characteristics. BB
indicates the least degree of speculation and C the highest. While such
obligations will likely have some quality and protective characteristics, these
may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions, which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet it financial
commitment on the obligation.
CCC An obligation rated CCC is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment.
C The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.
D An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.
Plus (+) or minus (-) The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
Fitch Municipal Long-Term Bond Ratings
Investment Grade
AAA Highest credit quality. AAA ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA Very high credit quality. AA ratings denote a very low expectation of credit
risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.
A High credit quality. A ratings denote a lower expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB Good credit quality. BBB ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Speculative Grade
BB Speculative. BB ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time;
however, business or financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are not investment
grade.
B Highly speculative. B ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A CC rating indicates that default of some
kind appears probable. C ratings signal imminent default.
DDD, DD, D Default. Securities are not meeting current obligations and are
extremely speculative. DDD designates the highest potential for recovery of
amounts outstanding on any securities involved. DD designates lower recovery
potential and D the lowest.
+ or - may be appended to a rating to denote relative status within major rating
categories. Such suffixes are not added to the AAA rating category or to
categories below CCC.
SHORT-TERM MUNICIPAL RATINGS
Moody's Municipal Short-Term Issuer Ratings
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidence by many of the following characteristics.
- -- Leading market positions in well-established industries.
- -- High rates of return on funds employed.
- -- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
- -- Broad margins in earnings coverage of fixed financial changes and high
internal cash generation.
- -- Well-established access to a range of financial markets and assured sources
of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
Not Prime Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Moody's Municipal Short-Term Loan Ratings
MIG 1 This designation denotes best quality. There is strong protection by
established cash flows, superior liquidity support, or demonstrated broad-based
access to the market for refinancing.
MIG 2 This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
MIG 3 This designation denotes favorable quality. Liquidity and cash-flow
protection may be narrow and market access for refinancing is likely to be less
well established.
SG This designation denotes speculative quality. Debt instruments in this
category may lack margins of protection.
S&P Commercial Paper Ratings
A-1 This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is satisfactory.
However, the relative degree of safety is not as high as for issues designated
A-1.
A-3 Issues carrying this designation have an adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B Issues rated B are regarded as having only speculative capacity for timely
payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes such payments
will be made during such grace period.
S&P Municipal Short-Term Obligation Ratings
SP-1 Strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3 Speculative capacity to pay principal and interest.
Fitch Municipal Short-Term Obligation Ratings
F1 Highest credit quality. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.
F2 Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
higher ratings.
F3 Fair credit quality. The capacity for timely payment of financial commitments
is adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.
B Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D Default. Denotes actual or imminent payment default.
ADDITIONAL INFORMATION
Except as otherwise stated in its prospectus or required by law, the
Fund reserves the right to change the terms of the offer stated in its
prospectus without shareholder approval, including the right to impose or change
fees for services provided.
No dealer, salesman or other person is authorized to give any
information or to make any representation not contained in the Fund's
prospectus, SAI or in supplemental sales literature issued by the Fund or EDI,
and no person is entitled to rely on any information or representation not
contained therein.
The Fund's prospectus and SAI omit certain information contained in the
Trust's registration statement, which you may obtain for a fee from the SEC in
Washington, D.C.
<PAGE>
September 30, 1999
[GRAPHIC]
Evergreen Select
Fixed Income Funds
Annual Report
[LOGO OF EVERGREEN FUNDS]
<PAGE>
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 Term Municipal 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 ........................................................ 21
Portfolio Manager Commentary ............................................ 22
Evergreen Select Total Return Bond Fund
Fund at a Glance ........................................................ 24
Portfolio Manager Commentary ............................................ 25
Financial Highlights
Evergreen Select Adjustable Rate Fund ................................... 28
Evergreen Select Core Bond Fund ......................................... 29
Evergreen Select Fixed Income Fund ...................................... 30
Evergreen Select Income Plus Fund ....................................... 31
Evergreen Select Intermediate Term
Municipal Bond Fund ................................................... 32
Evergreen Select International
Bond Fund ............................................................. 33
Evergreen Select Limited Duration Fund .................................. 34
Evergreen Select
Total Return Bond Fund ................................................ 35
Schedule of Investments
Evergreen Select Adjustable Rate Fund ................................... 36
Evergreen Select Core Bond Fund ......................................... 38
Evergreen Select Fixed Income Fund ...................................... 42
Evergreen Select Income Plus Fund ....................................... 46
Evergreen Select Intermediate Term Municipal Bond Fund .................. 51
Evergreen Select International Bond Fund ................................ 57
Evergreen Select Limited Duration Fund .................................. 59
Evergreen Select
Total Return Bond Fund ................................................ 63
Statements of Assets and Liabilities ...................................... 67
Statements of Operations .................................................. 69
Statements of Changes in Net Assets ....................................... 72
Combined Notes to Financial Statements .................................... 77
Independent Auditors' Report .............................................. 89
Additional Information (Unaudited) ........................................ 90
EVERGREEN FUNDS
Evergreen Funds is one of the nation's fastest growing investment companies with
approximately $70 billion in asssets under management.
With over 80 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: NOT FDIC INSURED May lose value . not bank guaranteed
Evergreen Distributor, Inc.
Evergreen(SM) is a Service Mark of Evergreen Investment Services, Inc.
<PAGE>
Letter to Shareholders
----------------------
November 1999
Dear Evergreen Shareholders,
We are pleased to provide the Evergreen Select Fixed Income Funds annual report,
which covers the twelve-month period ended September 30, 1999.
[PHOTO]
William M. Ennis
[PHOTO]
David C. Francis
Uncertainty over Interest Rates Influences the Markets
It has been a difficult environment over the last twelve months for fixed-income
investors. After the Federal Reserve Board lowered interest rates three times in
1998 in an attempt to insulate the U.S. economy from global economic turmoil, it
reversed course halfway through 1999 and raised interest rates twice during the
fiscal period because of concerns about an overheated U.S. economy. Amidst the
volatility, the yield on the bellwether 30-year Treasury bond rose from a low of
4.72% in October of 1998 to 6.05% by September 30, 1999, the end of the fiscal
period.
The Federal Reserve Bank's "tightening bias" leads many to anticipate further
interest rate increases in order to stem even the slightest inflationary
pressure. We believe that the economy is still fundamentally strong, and that
inflation will stay contained, producing only moderate upward pressure on
interest rates. We believe bonds are relatively attractive over the long term
compared to other asset classes, particularly because "real" interest rates are
high by historical standards.
Evergreen Funds is Ready for the Year 2000/1/
We have been addressing the Year 2000 challenge since February of 1996 and have
committed the time, resources and people necessary to prepare for any
ramifications from the millennium bug. Today, we are confident that our
preparations will enable us to continue to deliver the high-quality Evergreen
products and services on which our shareholders rely. In addition, Evergreen
portfolio managers have placed great emphasis on monitoring portfolios for Y2K
readiness.
We believe that sound investing is about taking steps to meet your long-term
financial needs and goals. We remind you to take advantage of your financial
advisor's expertise to develop and refine a financial plan that will enable you
to meet your objectives. Evergreen Funds offers a broad mix of stock, bond and
money market funds that should make it simple for you to choose the most
appropriate for your portfolio.
We would like to thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/ WILLIAM M. ENNIS
William M. Ennis
President and CEO
Evergreen Investment Company, Inc.
/s/ DAVID C. FRANCIS
David C. Francis, C.F.A.
Managing Director
Chief Investment Officer
First Union National Bank
First Capital Group
/1/The information above constitutes Year 2000 readiness disclosure.
1
<PAGE>
EVERGREEN
Select Adjustable Rate Fund
Fund at a Glance as of September 30, 1999
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/1/
Portfolio Inception Date: 10/1/1991 Class I Class IS
Class Inception Date 10/1/1991 5/23/1994
Average Annual Returns
1 year 4.98% 4.73%
3 years 6.02% 5.76%
5 years 6.36% 6.31%
Since Portfolio Inception 5.50% 5.42%
30-day SEC Yield 5.72% 5.44%
12-month income dividends per share $0.59 $0.56
LONG TERM GROWTH
[CHART]
Consumer Price Evergreen Select
Index - US 6 Month T-Bill Adj Rate I
31-Oct-91 1,000,000 1,000,000 1,000,000
30-Sep-92 1,028,384 1,036,120 1,045,304
30-Sep-93 1,056,048 1,068,073 1,103,112
30-Sep-94 1,087,337 1,107,585 1,118,836
30-Sep-95 1,115,001 1,170,600 1,195,658
30-Sep-96 1,148,480 1,232,957 1,277,701
30-Sep-97 1,173,225 1,297,626 1,374,335
30-Sep-98 1,190,693 1,365,342 1,450,406
30-Sep-99 1,219,077 1,428,629 1,522,677
Comparison of a $1,000,000 investment in Evergreen Select Adjustable Rate Fund,
Class I shares/1/, versus a similar investment in the 6-month Treasury Bill (6
mo. T-Bill), and the Consumer Price Index (CPI).
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.
/1/ 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. Historical performance shown for Class IS prior to its
inception is based on the performance of Class I and has not been adjusted to
reflect the effect of the 0.25% 12b-1 fee applicable to Class IS. Class I pays
no 12b-1 fee. If these fees had been reflected, returns would have been lower.
2
<PAGE>
EVERGREEN
Select Adjustable Rate Fund
Portfolio Manager Commentary
Portfolio Management
[PHOTO]
Gary Pzegeo
Performance
For the twelve-month period ended September 30, 1999, the Evergreen Select
Adjustable Rate Fund produced strong performance. The Fund's Class I Shares
returned 4.98% outperforming the 3.49% average return generated by the Fund's
benchmark, the 6-month T-Bill for the period ended September 30, 1999. The
return on the Fund's Class I shares was higher than the returns on 92% of the
funds in the Lipper Adjustable Rate Mortgage category, and the return on the
Fund's Class IS Shares was higher than the returns on 83% of the funds listed in
the Lipper Adjustable Rate Mortgage category. Select Adjustable Rate Fund also
ranked Number 3 out of 25 funds for Class I Shares in the Morningstar Short-Term
Government Fund category for the twelve-month period ended September 30, 1999.
Lipper, Inc. and Morningstar, Inc. are independent monitors of mutual fund
performance.
We attribute the Fund's strong performance to maintaining a high quality
portfolio composed of Treasury and agency securities and to our strategy of
preserving income by emphasizing seasoned, conventional, one-year constant
maturity Treasury ARMs. As interest rates rose during the twelve months, the
one-year ARMs in the portfolio provided a steady stream of income to the Fund.
Portfolio
Characteristics
---------------
Total Net Assets $56,232,431
Average Credit Quality AAA
Effective Maturity 4.8 years
Average Duration 1.1 years
Environment
The investment environment changed significantly during the twelve months. At
the beginning of the period, interest rates were relatively low, as U.S.
fixed-income markets continued to be affected by the economic and financial
crises that had occurred in Asia, Latin America and Russia. Concerns that
turmoil overseas would significantly slow the U.S. economy prompted the Federal
Reserve Board to make three 0.25% interest-rate cuts between September and
November 1998. The Federal Reserve's action of lowering interest rates made it
attractive for property owners to refinance or prepay their mortgages, and this
resulted in lower than anticipated returns for mortgage-backed securities, such
as adjustable-rate mortgages.
As the year progressed, however, concerns about a slowdown in the U.S. economy
dissipated. Economic growth remained strong throughout the period, giving way to
concerns about accelerating inflation. While inflation remained at a relatively
low level, the Federal Reserve Board took a pre-emptive stance against inflation
and raised interest rates 0.25% in June and August 1999. Higher interest rates
were positive for the Fund, because as rates rose, mortgage refinancing and
prepayment activity declined. In addition, as interest rates reset on the ARMs
in the portfolio, they did so at higher rates, producing added income for the
Fund.
3
<PAGE>
EVERGREEN
Select Adjustable Rate Fund
Portfolio Manager Commentary
PORTFOLIO COMPOSITION
(based on 9/30/1999 net assets)
[PIE CHART]
. ARMS -- 73.3%
. U.S. Treasuries/Government Agency Notes/Bonds -- 13.2%
. Fixed-rate Mortgage-Backed Securities -- 7.0%
. Repurchase Agreements -- 6.3%
. Other Assets and Liabilities, net -- 0.2%
Strategy
During the twelve-month period, we kept the asset allocation in the Fund
relatively steady. In September 1998, ARMs accounted for about 76% of assets,
and in September 1999 they composed about 73% of the Fund. Most of that decline
came from one-year, conventional, constant maturity Treasury ARMs. Rising
interest rates affected the ARMs market in a couple of ways. First, they slowed
the market. As a result, home buying decelerated and fewer mortgages were
securitized by banks. This caused a decline in the supply of ARMs. At the same
time, there was constant prepayment activity. Prepayment activity slows when
interest rates rise, but it still goes on at a fairly steady pace. Even though
prepayments have dropped quite a bit from late 1998, they are still running at a
rate that is gradually reducing the Fund's existing holdings.
The fixed-rate position in the portfolio increased slightly as we invested new
money and the cash we received from ARMs prepayments. As yields rose, fixed-rate
securities became more attractively priced. At the end of the period, fixed-rate
securities, which included Treasury, government agency and mortgage-backed
securities, accounted for 20.2% of Fund assets.
We also increased the Fund's allocation to hybrid mortgages by about 2.5%. A
relatively large portion of new mortgages are hybrids. As a result, there was
ample supply and prices were attractive. With a hybrid mortgage, the interest
rate is fixed for a number of years before converting to an adjustable-rate
mortgage. For example with a 3/1 hybrid mortgage, the interest rate would be
fixed for three years, and at the end of that period the mortgage would convert
to a one year adjustable-rate mortgage. Hybrid mortgages benefit the Fund,
because they provide a predictable and attractive amount of income for a certain
period of time.
Outlook
Weakness in the housing and consumer sectors of the economy may indicate a
deceleration in economic growth. If this is the case, we believe the Fed may not
have to raise rates much further to keep the economy on a sustainable low
inflation pace of growth. Going forward, we believe the fixed-income markets
will most likely trade in a range of about 6.00% to 6.50% for the 30-year
Treasury bond and that range should continue to slow the economy. When rates are
at the lower end of the range, we intend to seek constant maturity Treasury ARMs
for the portfolio. As rates move to the higher end of the range, we anticipate
increasing the Fund's fixed-rate and hybrid positions.
4
<PAGE>
EVERGREEN
Select Core Bond Fund
Fund at a Glance as of September 30, 1999
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
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
Lehman Brothers Government/Corporate Bond Index
PERFORMANCE AND RETURNS/1/
Portfolio Inception Date: 12/13/1990 Class I Class IS
Class Inception Date 12/13/1990 10/2/1997
Average Annual Returns
Six month 0.00% -0.17%
1 year 0.07% -0.18%
3 years 7.05% 6.91%
5 years 8.06% 7.97%
Since Portfolio Inception 7.41% 7.36%
30-day SEC Yield 6.33% 6.07%
6-month income dividends per share $0.30 $0.28
6-month capital gain distributions per share $0.01 $0.01
LONG TERM GROWTH
[CHART]
Lehman Brothers
Consumer Price LB Evergreen Select Government Corporate
Index - US Aggregate Core Bond I Bond Index
31-Dec-90 1,000,000 1,000,000 1,000,000 1,000,000
30-Sep-91 1,025,419 1,104,000 1,081,859 1,102,429
30-Sep-92 1,056,054 1,242,600 1,203,679 1,248,314
30-Sep-93 1,084,463 1,366,600 1,308,760 1,391,178
30-Sep-94 1,116,593 1,322,500 1,271,883 1,333,541
30-Sep-95 1,145,001 1,508,400 1,450,640 1,524,953
30-Sep-96 1,179,381 1,582,400 1,527,135 1,593,615
30-Sep-97 1,204,792 1,736,500 1,681,276 1,746,424
30-Sep-98 1,222,730 1,935,900 1,874,752 1,971,143
30-Sep-99 1,251,878 1,928,800 1,876,829 1,938,834
Comparison of a $1,000,000 investment in Evergreen Select Core Bond Fund, Class
I shares(1), versus a similar investment in the Lehman Brothers Aggregate Bond
Index (LBABI), the Lehman Brothers Government/Corporate Bond Index (LBGCBI) and
the Consumer Price Index (CPI).
The LBABI and LBGCBI are unmanaged market indices which do 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.
/1/ Past performance is no guarantee of future results. The performance of each
class may vary based on differences in 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.
Historical performance shown for Class I Shares is based on the performance of
the Class I Shares of the Fund's predecessor fund, Tattersall Bond Fund.
Historical performance shown for Class IS Shares is based on (1) the performance
of the Class IS Shares of the Fund's predecessor fund, Tattersall Bond Fund,
since 10/2/1997 and (2) the Class I Shares of Tattersall Bond Fund from
12/13/1990 to 10/2/1997 which have not been adjusted to reflect the 0.25% 12b-1
fee paid by Class IS. Class I Shares do not pay a 12b-1. If these fees had been
reflected, returns would have been lower.
5
<PAGE>
EVERGREEN
Select Core Bond Fund
Portfolio Manager Commentary
Portfolio Management
[PHOTO OF FRED TATTERSALL]
Fred Tattersall
Team Leader
Performance
Evergreen Select Core Bond Fund's Class I shares returned 0.07% for the
twelve-month period ended September 30, 1999. The Lehman Brothers Aggregate Bond
Index lost -0.37% and the Lehman Brothers Government Corporate Bond Index lost
1.75% during the same period.
Portfolio
Characteristics
---------------
Total Net Assets $1,048,524,629
Average Credit Quality AAA
Effective Maturity 9.0 years
Average Duration 5.0 years
Changing Conditions Produce Challenge and Opportunity
The past twelve months were difficult for bond investors, as interest rates rose
across the yield curve between 0.50% and 1.50%. As the fiscal year began, the
global financial markets were beginning to recover from a turbulent summer,
during which Russia effectively defaulted on its debt and the largest hedge fund
in the United States bordered on bankruptcy. The situation prompted global
investors to seek the safety, quality and liquidity of the U.S. Treasury market.
This unusually strong demand for Treasury securities drove yields to decade lows
and pushed up bond prices. To enhance liquidity and stimulate sagging world
economies, the Federal Reserve Board and world central bankers lowered interest
rates during the fourth quarter of 1998.
Entering 1999, many investors believed that weak global demand would dampen the
U.S. economy in the coming year. Growth remained robust, however, and
international economies recovered faster and more heartily than many investors
anticipated. Concerned that inflation pressures of an overheated economy would
prompt the Federal Reserve to become restrictive, investors drove up interest
rates. The Federal Reserve followed through in the summer by raising short-term
rates in a preemptive move against the threat of rising inflation.
These volatile market conditions created sector opportunities for bond
investors, however. In the aftermath of the "flight-to-quality" trades, the
yield advantage provided by mortgage-backed securities and corporate bonds
versus Treasuries rose to extremely attractive levels. By the end of the first
quarter of 1999, much of this attractiveness had been realized, as economies and
financial markets showed signs of improvement. During the last half of the
fiscal year, yield advantages of sectors increased again to Treasuries in
reaction to heavy new issue supply and Y2K-induced liquidity fears. During
September, investors began to believe that both these concerns were only
temporary and bid up the prices of mortgage-backed securities and corporate
bonds relative to Treasuries. As the fiscal year ended, sectors still remained
attractive relative to historical standards.
PORTFOLIO COMPOSITION
(based on 9/30/1999 net assets)
[CHART]
Mortgage-Backed Securities -- 45.2%
Corporate Notes/Bonds -- 34.0%
Other Assets and Liabilities, net -- 8.0%
Treasury Notes/Bonds -- 7.0%
Asset-Backed -- 4.5%
Government Agency Notes/Bonds -- 1.1%
Foreign Bonds -- 0.2%
6
<PAGE>
EVERGREEN
Select Core Bond Fund
Portfolio Manager Commentary
Strategy
Sector allocation had the greatest effect on the Fund's performance, during the
period. In the first half of the fiscal year, the Fund was positioned for a
rebound in investment grade corporate bonds by being overweighted in the sector
relative to the Lehman Brothers Aggregate Bond Index. During the second half,
our overweighted position in mortgages relative to the Index contributed to the
Fund's outperformance.
As of September 30, 1999, approximately 45% of the Fund's net assets were
invested in mortgage-backed securities, up from 39% one year ago, and 38% at the
end of March. Also as of September 30, 1999, the Fund held a 36% position in
corporate bonds. As a result, the Fund's holdings in U.S. Treasuries were
reduced to 8% at the end of this fiscal period from 13% a year ago and 16% six
months ago. In the mortgage sector, we focused on "AAA"-rated, commercial,
mortgage-backed securities, which provided yields that were approximately 1.50%
higher than those of comparable U.S. Treasuries. We also selected corporate
bonds with long durations, which increased the Fund's potential for
outperformance. We believe that high quality, well known names represented
better risk-adjusted value than lower quality credits.
PORTFOLIO QUALITY
(based on 9/30/1999 portfolio assets)
[CHART]
AAA -- 66.0%
A -- 17.0%
BAA -- 10.0%
AA -- 7.0%
Outlook
We are optimistic about bonds, heading forward. The economy appears to be
healthy, and we believe inflation will stay well-contained, rising approximately
2% on an annualized basis. In this environment, we anticipate only modest upward
pressure on interest rates, keeping the yield on the 30-year U.S. Treasury
within a range of 5% to 6%.
We also believe that bonds are attractive relative to other asset classes and
have the potential to generate solid total returns in the months ahead. The
current level of yields on mortgage-backed securities and corporate bonds
presents the opportunity for price appreciation in addition to the ability to
earn a generous income stream. Further, "real" interest rates, the rates earned
by investors in excess of inflation, are high. The combination certainly
enhances the value of bonds and should improve their potential for
outperformance.
7
<PAGE>
EVERGREEN
Select Fixed Income Fund
Fund at a Glance as of September 30, 1999
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/1/
Portfolio Inception Date: 3/31/1977 Class I Class IS
Class Inception Date 11/24/1997 3/9/1998
Average Annual Returns
1 year 0.84% 0.59%
3 years 5.77% 5.49%
5 years 6.51% 6.23%
10 years 7.05% 6.78%
Since Portfolio Inception 8.13% 7.86%
30-day SEC Yield 7.61% 7.34%
12-month income dividends per share $0.35 $0.33
LONG TERM GROWTH
[CHART]
Lehman Brothers Consumer Price Evergreen Select
Interm Govt/Corp Index - US Fixed Income; I
30-Sep-89 1,000,000 1,000,000 1,000,000
30-Sep-90 1,083,924 1,061,600 1,092,845
30-Sep-91 1,234,088 1,097,600 1,236,482
30-Sep-92 1,391,081 1,130,392 1,376,500
30-Sep-93 1,505,441 1,160,800 1,485,208
30-Sep-94 1,480,519 1,195,192 1,449,091
30-Sep-95 1,647,633 1,225,600 1,600,891
30-Sep-96 1,732,187 1,262,400 1,681,793
30-Sep-97 1,874,164 1,289,600 1,808,854
30-Sep-98 2,069,551 1,308,800 1,975,928
30-Sep-99 2,082,628 1,340,000 1,992,973
Comparison of a $1,000,000 investment in Evergreen Select Fixed Income Fund,
Class I shares(1), versus a similar investment in the Lehman Brothers
Intermediate Government/Corporate Bond Index (LBIGCBI), and the Consumer Price
Index (CPI).
The LBIGCBI is an unmanaged market index which 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.
1Past performance is no guarantee of future results. The performance of each
class may vary based on differences in 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.
Historical performance shown for Class IS from 11/24/1997 to its inception is
based on the performance of Class I and has not been adjusted to reflect the
effect of the 0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1 fee.
If these fees had been reflected, returns would have been lower. Prior to
11/24/1997, the returns for Classes I and IS are based on the Fund's predecessor
common trust fund's (CTF) performance, adjusted for estimated mutual fund
expenses. The CTF was not registered under the 1940 Act and was not subject to
certain investment restrictions. If the CTF had been registered, it's
performance might have been adversely affected. Performance for the CTF 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: Class I--3 year = 5.81%, 5 year =
6.58%, 10 year = 7.14% and since 3/31/1977 = 8.23%; Class IS--3 year = 5.53%, 5
year = 6.30%, 10 year = 6.86% and since 3/31/1977 = 7.96%.
8
<PAGE>
EVERGREEN
Select Fixed Income Fund
Portfolio Manager Commentary
Portfolio Management Team
[PHOTO OF ROLLIN C. WILLIAMS] [PHOTO OF L. ROBERT CHESHIRE]
Rollin C. Williams, CFA L. Robert Cheshire
[PHOTO OF THOMAS L.ELLIS]
Thomas L.Ellis
Performance
For the twelve-month period ended September 30, 1999, the Evergreen Select Fixed
Income Fund Class I Shares posted a 0.84% total return, outpacing the 0.63%
return of its benchmark, the Lehman Brothers Intermediate Government/Corporate
Bond Index. Strong performance can be attributed to the portfolio's
neutral-to-short duration stance as well as to favorable sector weightings
throughout the period.
Portfolio
Characteristics
---------------
Total Net Assets $602,517,442
Average Credit Quality AA
Effective Maturity 4.6 years
Average Duration 3.4 years
Environment
Fixed-income investors experienced a bumpy ride during the past twelve months.
During the first half of the fiscal year, the Federal Reserve Board lowered
interest rates three times in an effort to insulate the U.S. economy from global
economic turmoil. The Federal Reserve Board then reversed course in the face of
low unemployment and increasingly strong consumer spending levels which hinted
at an inflationary flare-up, and increased interest rates twice in just over
three months: on June 30 and again on August 24. Amid this backdrop, interest
rates climbed steadily higher as the yield on the bellwether 30-year Treasury
Bond rose from its low of 4.72% on October 5 to close at 6.05% on September 30.
PORTFOLIO QUALITY
(based on 9/30/1999 portfolio assets)
U.S. Government
Agency -- 24.3%
U.S. Government -- 23.3%
A -- 18.8%
AAA -- 13.4%
BAA -- 11.0%
AA -- 8.1%
BA -- 1.1%
9
<PAGE>
EVERGREEN
Select Fixed Income Fund
Portfolio Manager Commentary
Strategy
The portfolio's duration strategy had an extremely positive impact on
performance and was a primary factor in outperforming the benchmark. We reduced
duration steadily during the period and average duration--starting at 3.7 years,
was reduced to 3.6 years by March 31 and closed at 3.4 years on September 30,
1999. This strategy of reducing duration and maintaining a neutral-to-short
stance positively impacted performance as rates edged higher throughout
virtually the entire period.
Strategic over-weightings in the "spread" sectors--corporates and
mortgages--also positively impacted total return, especially in the final half
of the period. The portfolio's increased weighting of mortgages, from 13.6% to
30.8% during the final three months of the period, had a particularly positive
impact on performance in the waning months as this sector outpaced government
securities and, to a lesser extent, corporate bonds.
PORTFOLIO COMPOSITION
(based on 9/30/1999 portfolio assets)
[CHART]
Mortgage-Backed Securities -- 22.0%
Corporate Notes/Bonds -- 19.2%
Commercial Paper(1) -- 19.0%
Treasury Notes/Bonds -- 18.3%
Asset-Backed Securities -- 7.7%
Government Agency Notes/Bonds -- 7.5%
Foreign Bonds -- 3.6%
Repurchase Agreements -- 2.3%
Municipal Bonds -- 0.4%
1Represents collateral received for securities on loan.
Outlook
Going forward, the portfolio will likely maintain a neutral-to-shorter duration
stance in anticipation of rising interest rates in the near term. We feel that
the historically low unemployment rate and strong consumer spending will
continue to nudge inflation higher and likely prompt the Fed to increase rates
at least one more time in the near term. Looking further down the road, however,
favorable market fundamentals such as globalization of economies and low
worldwide inflation bode well for a strong investing backdrop and a low interest
rate environment over the long term.
10
<PAGE>
EVERGREEN
Select Income Plus Fund
Fund at a Glance as of September 30, 1999
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 Bond Index
PERFORMANCE AND RETURNS/1/
Portfolio Inception Date: 8/31/1988 Class I Class IS
Class Inception Date 11/24/1997 3/2/1998
Average Annual Returns
1 year -2.13% -2.36%
3 years 5.93% 5.73%
5 years 7.02% 6.84%
10 years 7.23% 7.06%
Since Portfolio Inception 7.48% 7.31%
30-day SEC Yield 6.42% 6.19%
12-month income dividends per share $0.33 $0.32
12-month capital gain distributions per share $0.05 $0.05
LONG TERM GROWTH
Lehman Brothers Consumer Price Evergreen Select
Govt/Corp Index - US Income Plus; I
30-Sep-89 1,000,000 1,000,000 1,000,000
30-Sep-90 1,067,545 1,061,600 1,061,462
30-Sep-91 1,236,834 1,097,600 1,224,301
30-Sep-92 1,400,505 1,130,392 1,358,034
30-Sep-93 1,560,787 1,160,800 1,510,169
30-Sep-94 1,496,123 1,195,192 1,437,484
30-Sep-95 1,710,871 1,225,600 1,639,963
30-Sep-96 1,787,905 1,262,400 1,700,976
30-Sep-97 1,959,343 1,289,600 1,860,018
30-Sep-98 2,211,460 1,308,800 2,067,783
30-Sep-99 2,175,212 1,340,000 2,025,078
Comparison of a $1,000,000 investment in Evergreen Select Income Plus Fund Class
I shares/1/, versus a similar investment in the Lehman Brothers
Government/Corporate Bond Index (LBGCBI), and the Consumer Price Index (CPI).
The LBGCBI is an unmanaged market index which does not include transaction costs
associated with buying or 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.
/1/ Past performance is no guarantee of future results. The performance of each
class may vary based on differences in 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.
Historical performance shown for Class IS from 11/24/1997 to its inception is
based on the performance of Class I and has not been adjusted to reflect the
effect of the 0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1 fee.
If these fees had been reflected, returns would have been lower. Prior to
11/24/1997, the returns for Classes I and IS are based on the Fund's predecessor
common trust fund's (CTF) performance, adjusted for estimated mutual fund
expenses. The CTF was not registered under the 1940 Act and was not subject to
certain investment restrictions. If the CTF had been registered, it's
performance might have been adversely affected. Performance for the CTF 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: Class I--3 year = 5.97%, 5 year =
7.09%, 10 year = 7.31% and since 8/31/1988 = 7.57%; Class IS--3 year = 5.73%, 5
year = 6.84%, 10 year = 7.06% and since 8/31/1988 = 7.31%.
11
<PAGE>
EVERGREEN
Select Income Plus Fund
Portfolio Manager Commentary
Portfolio Management
[PHOTO]
J.P. Weaver, CFA
Performance
For the twelve-month period ended September 30, 1999, the Evergreen Select
Income Plus Bond Fund Class I Shares posted a -2.13% total return, trailing the
1.62% return of its benchmark, the Lehman Brothers Government/Corporate Bond
Index. Most of the Fund's under-performance can be attributed to a slightly
longer duration stance during much of the period that penalized returns in light
of steadily increasing interest rates.
Portfolio
Characteristics
---------------
Total Net Assets $1,805,079,909
Average Credit Quality AA
Effective Maturity 10.1 years
Average Duration 5.7 years
Environment
Most fixed income investors experienced negative returns during the fiscal year,
as bond prices declined in response to sharply higher interest rates. As the
period progressed, powerful consumer spending levels and low unemployment rates
hinted at an inflationary flare-up which ultimately resulted in rising interest
rates.
In an effort to contain inflation before it infected the U.S. economy, the
Federal Reserve Board lowered the Fed Funds rate twice during the final three
months of 1998. Amid this backdrop, the yield on the bellwether 30-year Treasury
Bond rose from its low of 4.72% on October 5 to close at 6.05% on September 30.
PORTFOLIO QUALITY
(based on 9/30/1999 portfolio assets)
[PIE CHART]
AAA -- 54.7%
A -- 19.0%
BAA -- 14.8%
AA -- 8.2%
BA -- 3.3%
12
<PAGE>
EVERGREEN
Select Income Plus Fund
Portfolio Manager Commentary
Strategy
The Fund's "income plus" strategy dictates we maintain a strong weighting in
yield-oriented issues such as corporate bonds and mortgage-backed securities. As
of September 30, over half of the Fund's assets were invested in these two
sectors.
Although this exposure to corporates and mortgages hurt performance in the
opening months and again in July, these areas performed well for the majority of
the fiscal year and had a positive impact on performance. Near the end of the
period, our analysis determined attractive valuations and opportunities within
the corporate bond market, so the portfolio was composed of 32.7% corporate
bonds/notes by the end of the period.
The portfolio's duration remained slightly longer than the benchmark for most of
the fiscal year, a stance which penalized performance as interest rates rose
steadily. Duration, however, was reduced from 6.0 years to 5.7 years during the
final half of the period.
PORTFOLIO COMPOSITION
(based on 9/30/1999 net assets)
[PIE CHART]
Corporate Notes/Bonds -- 32.7%
Treasury Notes/Bonds -- 29.3%
Government Agency Notes/Bonds -- 18.1%
Foreign Bonds -- 7.0%
Asset-Backed Securities -- 5.2%
Other Assets and Liabilities, net -- 4.1%
Mortgage-Backed Securities -- 3.4%
Preferred Stock -- 0.2%
Outlook
Interest rates have risen this year as economic growth has remained robust and
global economies have recovered. This has raised the prospects for a reversal of
the favorable trends we have experienced recently in core inflation. We believe
interest rates now better reflect the economy's underlying risks and, as such,
expect rates to remain in a fairly narrow band during the fourth quarter.
Investors remain chastened by last year's Long Term Capital Management hedge
fund and Russian default debacles, and securities dealers have sharply reduced
their risk appetites. This has negatively affected bond market liquidity. Still,
historically wide yield spreads should benefit investors in the fixed-income
spread sectors during the coming three to six months as liquidity slowly
improves.
13
<PAGE>
EVERGREEN
Select Intermediate Term Municipal Bond Fund
Fund at a Glance as of September 30, 1999
PORTFOLIO PROFILE
Philosophy
The Evergreen Select Intermediate Term Municipal 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.
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 Bond Index
PERFORMANCE AND RETURNS/2/
Portfolio Inception Date: 1/31/1984 Class I Class IS
ClassInception Date 11/24/1997 3/2/1998
Average Annual Returns
1 year -3.00% -3.24%
3 years 4.31% 4.07%
5 years 5.07% 4.82%
10 years 5.78% 5.52%
Since Portfolio Inception 6.72% 6.46%
30-day SEC Yield 5.08% 4.83%
Tax Equivalent Yield* 8.41% 8.00%
12-month income dividends per share $2.97 $2.81
12-month capital gain distributions per share $0.89 $0.89
* Assumes maximum 39.6% federal tax rate. Results for investors subject to lower
tax rates would not be as advantageous.
LONG TERM GROWTH
Consumer Price Lehman Brothers Evergreen Select
Index - US Munis 7-Yr Int. Muni; I Shares
30-Sep-89 1,000,000 1,000,000 1,000,000
30-Sep-90 1,061,600 1,071,618 1,062,143
30-Sep-91 1,097,600 1,202,796 1,167,148
30-Sep-92 1,130,392 1,320,670 1,261,788
30-Sep-93 1,160,800 1,465,081 1,388,185
30-Sep-94 1,195,192 1,455,638 1,376,765
30-Sep-95 1,225,600 1,605,259 1,488,236
30-Sep-96 1,262,400 1,676,430 1,556,829
30-Sep-97 1,289,600 1,809,875 1,679,183
30-Sep-98 1,308,800 1,952,233 1,824,050
30-Sep-99 1,340,000 1,964,212 1,769,129
Comparison of a $1,000,000 investment in Evergreen Select Intermediate Term
Municipal Bond Fund, Class I shares2, versus a similar investment in the
Lehman Brothers Municipal Bond 7-Year Index (LBMB7YI**), and the Consumer Price
Index (CPI).
The LBMB7YI is an unmanaged market index which 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.
**The Lehman Brothers Municipal Bond 7-Year Index inception date was 1/31/1990.
The Lehman Brothers Municipal Bond 10-Year Index was used for the period
8/31/1988 - 1/31/1990.
/1/ Some portion of the Fund's income may be subject to the Federal Alternative
Minimum Tax.
/2/ Past performance is no guarantee of future results. The performance of each
class may vary based on differences in 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.
Historical performance shown for Class IS from 11/24/1997 to its inception is
based on the performance of Class I and has not been adjusted to reflect the
effect of the 0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1 fee.
If these fees had been reflected, returns would have been lower. Prior to
11/24/1997, the returns for Classes I and IS are based on the Fund's predecessor
common trust fund's (CTF) performance, adjusted for estimated mutual fund
expenses. The CTF was not registered under the 1940 Act and was not subject to
certain investment restrictions. If the CTF had been registered, it's
performance might have been adversely affected. Performance for the CTF 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: Class I--3 year = 4.35%, 5 year =
5.14%, 10 year = 5.87% and since 1/31/1984 = 6.81%; Class IS--3 year = 4.11%, 5
year = 4.89%, 10 year = 5.61% and since 1/31/1984 = 6.55%.
14
<PAGE>
EVERGREEN
Select Intermediate Term Municipal Bond Fund
Portfolio Manager Commentary
Portfolio Management
[PHOTO]
Richard K.Marrone
Performance
For the twelve-month period ended September 30, 1999, the Evergreen Select
Intermediate Term Municipal Bond Fund Class I Shares posted a -3.00% total
return. This performance trailed the 0.57% return of its benchmark, the Lehman
Brothers Municipal Bond 7-year index.
Portfolio
Characteristics
---------------
Total Net Assets $710,336,097
Average Credit Quality AA
Effective Maturity 8.8 years
Average Duration 6.9 years
Environment
The past twelve months marked a difficult period for most fixed income
investors. In the first six months of the period, interest rates rose roughly
1.25% despite the fact that the Federal Reserve Board lowered the Fed Funds rate
on three separate occasions early in the period in an effort to insulate the
U.S. economy from global economic turmoil. Consequently, rising rates pushed
bond prices lower.
The Fed then reversed course and shifted focus to a sizzling U.S. economy, low
unemployment and strong consumer spending, raising interest rates twice in a
pre-emptive measure against inflation. Overall interest rates rose markedly
during the fiscal year as the yield on the bellwether 30-year Treasury Bond rose
from its low of 4.72% on October 5, 1998 to close at 6.05% on September 30.
PORTFOLIO QUALITY
(based on 9/30/1999 portfolio assets)
[PIE CHART]
AAA -- 35.8%
BBB -- 24.0%
A -- 18.6%
AA -- 11.7%
Not Rated -- 7.4%
BB -- 2.5%
15
<PAGE>
EVERGREEN
Select Intermediate Term Municipal Bond Fund
Portfolio Manager Commentary
Strategy
The Fund's income-oriented investment strategy seeks to maximize shareholders'
total return while reducing the portfolio's risk profile. Consistent with this
strategy, early in the fiscal period we significantly scaled back the
portfolio's weighting of zero-coupon bonds, a type of security with relatively
high volatility.
Conversely, we have invested new assets as well as cash reserves in securities
that enjoy strong yields. Our yield curve analysis indicates that the greatest
value currently lies in bonds with intermediate-range maturities; as a result,
we have strengthened this area with selective purchases. From a quality
standpoint AA and AAA-rated bonds seem to be most attractively priced, as
spreads between high and low-quality municipal bonds remain narrow. Although we
acknowledge the attractive valuations among higher-rated issues, we have
selectively added some lower-rated issues in order to bolster the Fund's yield.
PORTFOLIO COMPOSITION
(based on 9/30/1999 net assets)
[PIE CHART]
Hospitals/Nursing Homes/Health Care -- 24.3%
Housing -- 12.8%
Airlines -- 10.7%
General Obligation Notes/Bonds -- 10.3%
Industrial Development -- 10.2%
Escrow -- 6.3%
Education -- 4.6%
Sales Tax -- 4.3%
Transportation -- 3.9%
Mutual Funds Shares and Cash -- 3.5%
Public Facilities -- 3.2%
Other Revenue Bonds -- 2.3%
Utility -- 2.0%
Rental Bonds/Municipal Leases -- 1.6%
Outlook
Looking ahead, we anticipate interest rates to remain in their current range,
possibly trending modestly higher as the Federal Reserve Board addresses
inflationary pressure within the U.S. Economic data suggest that inflation may
be on the rise, and we feel the Fed is likely to act--by raising interest
rates--before inflationary pressures inflict any harmful effects on the U.S.
economy. Along with our team of municipal credit analysts we will continue to
maximize our shareholders' total return utilizing an income-oriented approach
that also seeks to reduce price volatility.
16
<PAGE>
EVERGREEN
Select International Bond Fund
Fund at a Glance as of September 30, 1999
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
amount 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 in below investment
grade bonds from those 19 countries, or in emerging market bonds. The team
actively uses currency hedging for more efficient risk control.
Benchmark
J.P. Morgan Global Government
Index excluding U.S.
PERFORMANCE AND RETURNS/1/
Portfolio Inception Date: 12/15/1993 Class I Class IS
Class Inception Date 12/15/1993 12/15/1993
Average Annual Returns
1 year 3.96% 3.74%
3 years 5.24% 5.04%
5 years 7.34% 7.10%
Since Portfolio Inception 4.47% 4.23%
30-day SEC Yield 3.83% 3.58%
12-month income dividends per share $0.38 $0.36
LONG TERM GROWTH
[CHART]
JPM Global Consumer Price Evergreen Select
Govt ex US Index - US Interntl Bond I
31-Dec-93 1,000,000 1,000,000 1,000,000
30-Sep-94 1,042,539 1,024,692 898,582
30-Sep-95 1,236,520 1,050,762 1,011,150
30-Sep-96 1,302,665 1,082,312 1,098,597
30-Sep-97 1,299,667 1,105,632 1,158,707
30-Sep-98 1,448,111 1,122,093 1,231,824
30-Sep-99 1,457,235 1,148,842 1,280,550
Comparison of a $1,000,000 investment in Evergreen Select International Bond
Fund, Class I shares/1/, versus a similar investment in the J.P. Morgan Global
Government Index--excluding U.S. (JPMG6XUS), and the Consumer Price Index (CPI).
The JPMG6XUS is an unmanaged market index which 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.
/1/ Past performance is no guarantee of future results. The performance of each
class may vary based on differences in 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.
Historical performance shown for Class I Shares prior to its inception is based
on the performance of the Class Y Shares of the Fund's predecessor fund,
CoreFund Global Bond Fund. Historical performance shown for Class IS prior to
its inception is based on the performance of the Class A Shares of the Fund's
predecessor fund, and reflects the same 0.25% 12b-1 applicable to Class IS.
*Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Spain,
Sweden, Switzerland, United Kingdom.
17
<PAGE>
EVERGREEN
Select International Bond Fund
Portfolio Manager Commentary
Portfolio Management
[PHOTO OF GEORGE MCNEIL]
George McNeil
First International Advisors,Ltd.
Performance
Evergreen Select International Bond Fund's Class I shares produced a return of
3.96% for the twelve-month period ended September 30, 1999. The Fund
outperformed its benchmark, the J.P. Morgan Global (excluding U.S.) Government
Index, which returned 0.27% for the same period.
Portfolio
Characteristics
---------------
Total Net Assets $55,496,719
Average Credit Quality AA
Effective Maturity 6.5 years
Average Duration 5.6 years
Environment
While the Fund's fiscal year began with bond prices moving higher,
stronger-than-expected economic growth pushed global interest rates higher over
most of the past twelve months. Central bankers around the world lowered
interest rates in the final quarter of 1998 to stabilize economies and financial
markets after a turbulent summer. Bond prices rose as investors expected weak
economic recoveries in 1999.
The U.S. economy remained strong, however, and many international economies
improved faster and more heartily than many investors anticipated. Market
sentiment shifted to the possibility of excessive, rather than fragile, economic
growth, especially in the United States. Investors began to watch for signs of
inflation and expected a more restrictive monetary policy. The trend toward
higher U.S. interest rates forced many foreign interest rates upward as well, as
the world's economies strengthened and countries sought to attract global cash
flows.
PORTFOLIO QUALITY
(based on 9/30/1999 portfolio assets)
[CHART]
U.S. Government -- 48.7%
AAA -- 26.8%
AA -- 13.6%
A -- 5.1%
BAA -- 4.2%
BA -- 1.3%
B -- 0.3%
18
<PAGE>
EVERGREEN
Select International Bond Fund
Portfolio Manager Commentary
Strategy
We emphasized quality throughout the fiscal year, and actively managed both the
Fund's duration and currency exposure. As of September 30, 1999, approximately
87% of the Fund's net assets were invested in "AAA"-rated or "AA"-rated
securities, resulting in an average portfolio quality of "AA". Also as of that
date, approximately 67% of the Fund was invested in European countries with
stable political climates and large, liquid financial markets, and 23% of net
assets were in Japanese holdings. The remaining 10% of net assets were invested
as follows: Australia, United States, Lithuania, Hong Kong, Poland, Slovakia,
Mexico, Kazakhstan and Supranationals. Supranational bonds are issues of
supranational institutions, such as the World Bank, that can be issued in any
country and in any currency denomination. We established holdings in Japanese
bonds in February, fine-tuning the position's size and duration throughout the
period.
Currency transactions made a positive contribution to the Fund's performance.
Our primary positions were in the euro, the U.S. dollar and the Japanese yen. We
actively managed these holdings depending on relative value and our expectations
for potential price appreciation. In the fourth quarter of 1998, we emphasized
European currencies, taking advantage of their strength prior to the euro being
launched on January 1, 1999. We then shifted the Fund's focus to the U.S. dollar
to benefit from the strength of the U.S. economy in the first half of 1999. By
the end of June 1999, we began to reduce U.S. dollar holdings, reinvesting
assets in the euro and the Japanese yen. This strategy benefited total return,
as the euro and the yen appreciated against the U.S. dollar by 12.04% and 3.5%,
respectively, during the third quarter of 1999. As of September 30, 1999, the
Fund's currency exposure was as follows: 46% euro, 28% Japanese yen, 16% other
European currencies, and 10% U.S. dollar and dollar block currencies.
We also actively managed duration, the Fund's sensitivity to changes in interest
rates. We lengthened duration in the first part of the fiscal year, which
increased the Fund's potential for total return when interest rates fell. We
then shortened duration in January--enhancing price stability as interest rates
rose--and kept a defensive stance for the rest of the fiscal period.
PORTFOLIO COMPOSITION
(based on 9/30/1999 net assets)
[CHART]
Foreign Bonds -- 50.6%
Corporate Notes/Bonds -- 45.5%
Other Assets and Liabilities, net -- 3.9%
GEOGRAPHICAL ALLOCATION
(based on 9/30/1999 portfolio assets)
Japan 22.5%
Netherlands 15.0%
United Kingdom 10.0%
Germany 8.6%
Sweden 6.1%
Denmark 5.5%
Belgium 4.7%
Spain 4.4%
Italy 3.7%
France 3.3%
Norway 3.1%
Austria 2.6%
Supranational 2.5%
Australia 2.4%
Other Countries 5.6%
19
<PAGE>
EVERGREEN
Select International Bond Fund
Portfolio Manager Commentary
Outlook
Our outlook is cautiously optimistic. With the current level of interest rates,
continued low inflation and our expectations for economic fundamentals, we
believe some international bonds are beginning to have attractive relative
value, particularly European bonds with longer maturities. We believe it is
still too early to aggressively lengthen the portfolio, but think it is prudent
to move from a "defensive" to a "neutral" stance.
We are monitoring several factors. "Real" interest rates--the rate earned by
investors after inflation is removed--are in the range of 4 1/2% to 5%, which is
high by historical standards. Economic growth also continues to strengthen, with
signs of sustainable growth coming from France and Spain, in particular. An
outlook for stronger economies, combined with a tightening bias from the United
Kingdom central bank and the European central bank, bodes well for the credit
markets. Further, we expect inflation to remain low because of double-digit
unemployment and the euro appreciating from its lows.
We are less optimistic about the investment environments in the United States
and Japan. The mature economic expansion and low unemployment in the United
States could signal higher interest rates to cool an overheating economy and
contain inflationary pressures. Further, the high trade deficit continues to put
downward pressure on the U.S. dollar. In Japan, the economy began to show signs
of sustainable growth, although it was still reliant on government spending.
Japan's economy remains in a restructuring phase, however, and investors are
facing a heavy calendar for bond issuance in the fourth quarter of 1999.
Additionally, we believe Japan's economic growth will be limited by recent
strength in the yen.
20
<PAGE>
EVERGREEN
Select Limited Duration Fund
Fund at a Glance as of September 30, 1999
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/1/
Portfolio Inception Date: 4/30/1994 Class I Class IS
Class Inception Date 11/24/1997 7/28/1998
Average Annual Returns
1 year 3.07% 2.81%
3 years 5.60% 5.39%
5 years 6.92% 5.68%
Since Portfolio Inception 5.71% 5.47%
30-day SEC Yield 6.19% 5.94%
12-month income dividends per share $0.60 $0.58
12-month capital gain distributions per share $0.02 $0.02
LONG TERM GROWTH
[GRAPH]
Consumer Price ML 1-3YR Evergreen Select
Index - US Treasury Limited Duration; I
30-Apr-94 1,000,000 1,000,000 1,000,000
30-Sep-94 1,013,569 1,014,291 1,014,669
30-Sep-95 1,039,356 1,098,251 1,093,194
30-Sep-96 1,070,564 1,160,151 1,154,714
30-Sep-97 1,093,630 1,240,083 1,234,016
30-Sep-98 1,109,913 1,338,370 1,323,275
30-Sep-99 1,136,371 1,382,083 1,364,052
Comparison of a $1,000,000 investment in Evergreen Select Limited Duration Fund,
Class I shares/1/, versus a similar investment in the Merrill Lynch 1-3 Year
Treasury Bond Index (ML1-3YTBI), and the Consumer Price Index (CPI).
The ML1-3YTBI is an unmanaged market index which 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.
/1/ Past performance is no guarantee of future results. The performance of each
class may vary based on differences in 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.
Historical performance shown for Class IS from 11/24/1997 to its inception is
based on the performance of Class I and has not been adjusted to reflect the
effect of the 0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1 fee.
If these fees had been reflected, returns would have been lower. Prior to
11/24/1997, the returns for Classes I and IS are based on the Fund's predecessor
common trust fund's (CTF) performance, adjusted for estimated mutual fund
expenses. The CTF was not registered under the 1940 Act and was not subject to
certain investment restrictions. If the CTF had been registered, it's
performance might have been adversely affected. Performance for the CTF 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: Class I--3 year = 5.71%, 5 year =
6.10% and since 4/30/1994 = 5.90%; Class IS--3 year = 5.50%, 5 year = 5.86% and
since 4/30/1994 = 5.66%.
21
<PAGE>
EVERGREEN
Select Limited Duration Fund
Portfolio Manager Commentary
Portfolio Management
[PHOTO] [PHOTO]
Sam Paddison David Fowley
Performance
For the twelve-month period ended September 30, 1999, the Evergreen Select
Limited Duration Bond Fund I Shares posted a 3.07% total return, versus a 3.22%
return on its benchmark, the Merrill Lynch 1-3 Year Treasury Index. The return
of 3.07% ranked in the top 25% of short U.S. government funds tracked by Lipper
Inc., an independent mutual fund rating company.
Portfolio
Characteristics
---------------
Total Net Assets $313,785,740
Average Credit Quality AA
Effective Maturity 1.9 years
Average Duration 1.6 years
Environment
U.S. Treasury yields increased significantly over the last year. The 2-Year
Treasury's yield widened 8 basis points during the quarter, making it 133 basis
points wider for the year, yielding 5.60% at quarter end. Bond yields continued
to rise as fears of inflation resurfaced with investors. The Federal Reserve
lowered its target rate by 25 basis points on October 15, 1998, and again on
November 17. The Federal Reserve reversed out earlier rate cuts by raising rates
by 25 basis points on June 30, 1999, and again on August 24, bringing the target
rate back to 5.25%. The Federal Reserve appears to be in a holding pattern, with
a tightening bias, while investors are trying to figure out the consequences, if
any, of Y2K.
PORTFOLIO COMPOSITION
(based on 9/30/1999 net assets)
[PIE CHART]
Corporate Notes/Bonds -- 51.2%
Mortgage-Backed
Securities -- 19.2%
Asset-Backed Securities -- 18.6%
Other Assets and
Liabilities, net -- 11.0%
22
<PAGE>
EVERGREEN
Select Limited Duration Fund
Portfolio Manager Commentary
Strategy
The Fund increased its exposure to corporate, mortgage-backed and asset-backed
securities during the period, eliminated its position in U.S. Treasuries and
reduced its exposure to Federal Agencies. Corporate spreads ended the year
relatively unchanged from their November highs, resulting in corporate bonds
outperforming comparable Treasuries by a relatively wide margin. The patient
investor can find bonds at "fire-sale" prices as brokers and investors clean
their books in anticipation of Y2K and do some year-end window dressing.
Short-term, mortgage-backed and asset-backed securities were the two highest
performing sectors over the year. The Fund maintained below-average duration
ranging from 95% to 100% of its benchmark, the Merrill Lynch 1-3 Year Treasury
Bond Index.
PORTFOLIO QUALITY
(based on 9/30/1999 portfolio assets)
[PIE CHART]
BAA -- 33.1%
AAA -- 28.7%
A -- 16.7%
AA -- 13.6%
BA -- 7.9%
Outlook
We plan to maintain an above-average weighting in spread sectors (corporate,
asset-backed and mortgage-backed securities), because we feel the sectors are
still undervalued based on break-even analysis. We plan to stay short of the
benchmark until the technical and fundamental factors convince us otherwise. We
believe the bond yields are currently trading in a range between 6.00% and
6.25%, but longer term, we feel bond yields will fall as the Federal Reserve
continues to keep inflation under control.
23
<PAGE>
EVERGREEN
Select Total Return Bond Fund
Fund at a Glance as of September 30, 1999
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 between the three portfolio managers that revolve around several
factors, including underlying market fundamentals.
Benchmark
Lehman Brothers Aggregate Bond Index
PERFORMANCE AND RETURNS/1/
Portfolio Inception Date: 4/20/1998 Class I Class IS
Class Inception Date 4/20/1998 8/3/1998
Average Annual Returns
1 year -0.87% -1.12%
Since Portfolio Inception 1.35% 1.14%
30-day SEC Yield 6.40% 6.14%
12-month income dividends per share $6.30 $6.06
LONG TERM GROWTH
[LINE GRAPH]
Lehman Brothers Consumer Price Evergreen Select
Aggregate Index - US Total Return I
30-Apr-98 1,000,000 1,000,000 1,000,000
31-May-98 1,010,152 1,001,846 1,008,803
30-Jun-98 1,018,744 1,003,077 1,016,286
31-Jul-98 1,020,870 1,004,308 1,019,179
31-Aug-98 1,037,513 1,005,538 1,015,517
30-Sep-98 1,061,794 1,006,769 1,031,008
31-Oct-98 1,056,160 1,009,231 1,019,643
30-Nov-98 1,062,180 1,009,231 1,031,078
31-Dec-98 1,065,366 1,008,615 1,033,766
31-Jan-99 1,072,929 1,011,077 1,041,034
28-Feb-99 1,054,152 1,012,308 1,021,826
31-Mar-99 1,059,949 1,015,385 1,026,710
30-Apr-99 1,063,340 1,022,769 1,033,137
31-May-99 1,053,983 1,022,769 1,021,180
30-Jun-99 1,050,610 1,022,769 1,015,583
31-Jul-99 1,046,197 1,025,846 1,016,342
31-Aug-99 1,045,674 1,028,308 1,013,407
30-Sep-99 1,057,916 1,030,769 1,021,998
Comparison of a $1,000,000 investment in Evergreen Select Total Return Bond
Fund, Class I shares/1/, versus a similar investment in the Lehman Brothers
Aggregate Bond Index (LBABI), and the Consumer Price Index (CPI).
The LBABI is an unmanaged market index which 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.
/1/ Past performance is no guarantee of future results. The performance of each
class may vary based on differences in 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
Historical performance shown for Class IS prior to its inception is based on the
performance of Class I and has not been adjusted to reflect the effect of the
0.25% 12b-1 fee applicable to Class IS. Class I pays no 12b-1 fee. If these fees
had been reflected, returns would have been lower.
24
<PAGE>
EVERGREEN
Select Total Return Bond Fund
Portfolio Manager Commentary
Portfolio Management Team
[PHOTO] [PHOTO]
Rollin C. Williams, CFA Richard M. Cryan
[PHOTO]
Anthony Norris
First International Advisers, Ltd.
Performance
Evergreen Select Total Return Bond Fund's Class I shares declined to -0.87% for
the twelve month period ended September 30, 1999. The Fund modestly lagged its
benchmark, the Lehman Brothers Aggregate Index, which fell to -0.37% for the
same period.
Portfolio
Characteristics
---------------
Total Net Assets $150,653,519
Average Credit Quality AA
Effective Maturity 8.7 years
Average Duration 5.5 years
Environment
Interest rates fell going into the fourth quarter of 1998, but beginning early
in the quarter, trended higher for the rest of the fiscal year on
stronger-than-expected economic growth. Central bankers around the world
initiated a series of interest rate cuts late in 1998, seeking to restore
stability to global economies and financial markets after a turbulent summer.
Many investors anticipated weak recoveries in 1999, believing that fragile
international economies would dampen U.S. economic growth.
The U.S. economy remained robust, however; and foreign economies generally
experienced faster and more sustainable growth than many investors had
anticipated. Market sentiment reversed course, focusing on the possibility that
the economy could overheat instead of falter. Investors pushed interest rates
higher, monitoring signs of inflation and preparing for a tighter domestic
monetary policy. With stronger worldwide growth and the pursuit of international
cash flows, the trend toward higher interest rates became global. Investor
expectations of a more restrictive monetary policy became reality in mid-1999,
when the Federal Reserve Board and other central bankers began to raise interest
rates.
While the year was difficult for bond investors, opportunities also emerged from
the market's changing conditions. Demand for U.S. Treasuries surged at the end
of the last fiscal year, as investors sparked a
25
<PAGE>
EVERGREEN
Select Total Return Bond Fund
Portfolio Manager Commentary
"flight-to-quality" in response to increasingly shaky world economies and
financial markets. Seeking only securities of the highest quality and liquidity,
investors drove the yield advantages of riskier credits versus Treasuries to
levels that were high by historical standards--with yield advantage increasing
with risk. The rising yield advantages gave corporate bonds, mortgage-backed
securities and international bonds attractive relative value.
PORTFOLIO COMPOSITION
(based on 9/30/1999 net assets)
[PIE CHART]
Treasury Notes/Bonds -- 31.5%
Corporate Notes/Bonds -- 26.0%
Foreign Bonds -- 20.1%
Mortgage-Backed Securities -- 18.8%
Other Assets and Liabilities, net -- 3.6%
Strategy
We emphasized total return and income by actively managing the Fund's
asset-allocation. We also fine-tuned the Fund's holdings within each market
sector, including actively managing duration.
The investment grade portion of the Fund maintained a long duration relative to
the Fund's benchmark for the first part of the fiscal period. This added to
total return when interest rates fell. We adjusted duration throughout the
period, depending upon our outlook for interest rates. As of September 30, 1999,
the duration of the Fund's investment grade investments stood at 5.50 years,
approximately 110% of its benchmark. We also fine-tuned the Fund's investment
grade corporate bond position, increasing holdings when yield advantages reached
attractive levels in the fourth quarter of 1998 and later reducing the position
when yield advantages declined.
Asset-allocation, currency exposure and duration management drove performance in
the Fund's international sector. The Fund's international holdings rose from 7%
at the beginning of the fiscal year, to 11% on March 31, 1999 and 20.1% on
September 30, 1999.
We emphasized quality throughout the period, primarily investing in bonds rated
"AAA" and "AA" in European countries with stable governments and large, liquid
financial markets. The Fund also held a sizable position in Japan. We increased
the Fund's exposure to the international sector in July 1999, when foreign
interest rates became attractive and the outlook for Europe's investment climate
and currency performance improved.
The Fund experienced three major currency shifts. We emphasized European
currencies in the fourth quarter of 1998, taking advantage of their strength
just prior to the January 1, 1999 launch of the euro. We then focused on the
U.S. dollar to benefit from the strength in the U.S. economy through mid-year
1999. By the end of June, we began to reduce U.S. dollar holdings, reinvesting
assets in the euro and the Japanese yen. The international portion of the Fund
also actively managed duration, maintaining a long duration in the fourth
quarter of 1998, shortening and keeping a defensive duration stance throughout
much of the period, and becoming neutral as the fiscal year came to a close.
We increased high yield bond holdings from 17% at the beginning of the fiscal
year to 25% in May 1999, taking advantage of the attractive yield advantage
provided by high yield bonds, particularly at the end of 1998. We reduced the
Fund's holdings in "BB"-rated credits, increasing our position in bonds rated
"B" because of the attractive pick-up in yield advantages. This strategy
benefited performance when lower-rated bonds outperformed higher-rated bonds. We
reduced the Fund's overall allocation to high yield bonds to 16% in July,
reinvesting assets in international
26
<PAGE>
EVERGREEN
Select Total Return Bond Fund
Portfolio Manager Commentary
bonds. At that time, we became more cautious about the near-term outlook for
high yield bonds, which later underperformed because of a rising default rate,
heavy new supply and less demand.
PORTFOLIO QUALITY
(based on 9/30/1999 portfolio assets)
[PIE CHART]
U.S. Government -- 33.1%
U.S. Government Agency -- 19.8%
Not Rated -- 16.1%
Not Available -- 10.0%
A -- 9.5%
AAA -- 5.1%
BAA -- 4.4%
AA -- 2.0%
Outlook
We think bonds offer attractive relative value over the longer term, although
domestically, we could be in for choppy conditions over the next few months.
Investors are waiting to see if the Federal Reserve Board will tighten monetary
policy again before the end of the year--and the market hates uncertainty.
Additionally, many issuers have brought bonds to market prior to Y2K, increasing
supply. In contrast, most dealers are reluctant to build inventory, particularly
in light of Y2K. The combination of heavy supply and limited demand has given
little support to bond prices. The near-term outlook for Europe appears
brighter, with increasing signs of sustainable growth and a bias toward higher
interest rates--a situation that bodes well for the Fund's currency position.
Longer term, we believe bonds offer attractive relative value. "Real" interest
rates--the rate earned by the investor in excess of inflation--are high by
historical standards. Further, we think yield advantages represent attractive
value. The combination of "real" interest rates and generous yield advantages
set the stage for solid price appreciation longer term.
27
<PAGE>
EVERGREEN
Select Adjustable Rate Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
September 30, February 28, September 30,
----------------- ----------------- ----------------
1999 1998 (a) 1998 1997 (b) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS I
Net asset value,
beginning of period $ 9.68 $ 9.75 $ 9.71 $ 9.68 $ 9.65 $ 9.61
------- ------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.59 0.35 0.64 0.28 0.64# 0.63
Net realized and
unrealized gains or
losses on securities (0.12) (0.07) 0.04 0++ 0 0.01
------- ------- ------- ------- ------- -------
Total from investment
operations 0.47 0.28 0.68 0.28 0.64 0.64
------- ------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.59) (0.35) (0.64) (0.25) (0.61) (0.60)
------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 9.56 $ 9.68 $ 9.75 $ 9.71 $ 9.68 $ 9.65
------- ------- ------- ------- ------- -------
Total return 4.98% 2.88% 7.15% 2.97% 6.86% 6.87%
Ratios and supplemental
data
Net assets, end of
period (thousands) $36,033 $23,174 $25,981 $70,264 $65,974 $23,616
Ratios to average net
assets
Expenses* 0.30% 0.33%+ 0.30% 0.30%+ 0.30% 0.30%
Net investment income 6.11% 6.12%+ 6.63% 6.79%+ 6.84% 6.61%
Portfolio turnover rate 14% 46% 107% 44% 85% 56%
<CAPTION>
Year Ended Year Ended Year Ended
September 30, February 28, September 30,
----------------- ----------------- ----------------
1999 1998 (a) 1998 1997 (b) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS IS
Net asset value,
beginning of period $ 9.68 $ 9.76 $ 9.72 $ 9.68 $ 9.65 $ 9.61
------- ------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.55 0.33 0.59 0.28 0.65# 0.64
Net realized and
unrealized gains or
losses on securities (0.11) (0.08) 0.06 0++ (0.03) (0.02)
------- ------- ------- ------- ------- -------
Total from investment
operations 0.44 0.25 0.65 0.28 0.62 0.62
------- ------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.56) (0.33) (0.61) (0.24) (0.59) (0.58)
------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 9.56 $ 9.68 $ 9.76 $ 9.72 $ 9.68 $ 9.65
------- ------- ------- ------- ------- -------
Total return 4.73% 2.63% 6.89% 2.97% 6.60% 6.60%
Ratios and supplemental
data
Net assets, end of
period (thousands) $20,199 $ 9,645 $10,320 $ 3,564 $14,361 $ 2,871
Ratios to average net
assets
Expenses* 0.55% 0.57%+ 0.55% 0.55%+ 0.55% 0.55%
Net investment income 5.86% 5.82%+ 6.15% 6.39%+ 6.64% 6.70%
Portfolio turnover rate 14% 46% 107% 44% 85% 56%
</TABLE>
(a) For the seven months ended September 30, 1998. The Fund changed its fiscal
year end from the last day of February to September 30, effective September
30, 1998.
(b) For the five months ended February 28, 1997. The Fund changed its fiscal
year end from September 30 to the last day of February, effective February
28, 1997.
# Net investment income is based on weighted average shares throughout the
period.
+ Annualized.
++ Amount represents less than $0.01 per share.
* Ratio of expenses to average net assets excludes fees credits, but includes
fee waivers.
See Combined Notes to Financial Statements.
28
<PAGE>
EVERGREEN
Select Core Bond Fund
Financial Highlights
(For a share oustanding throughout each period)
<TABLE>
<CAPTION>
Period Ended Years Ended March 31, (b)
September 30, --------------------------------------------
1999** (b) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS I
Net asset value,
beginning of period $ 10.39 $ 10.53 $ 9.98 $ 10.11 $ 9.70 $ 9.88
--------- -------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.30 0.59 0.56 0.66 0.68 0.60
Net realized and
unrealized gains or
losses on securities (0.30) 0.09 0.61 (0.12) 0.40 (0.18)
--------- -------- ------- ------- ------- -------
Total from investment
operations 0 0.68 1.17 0.54 1.08 0.42
--------- -------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.30) (0.61) (0.62) (0.67) (0.67) (0.60)
Net realized gains (0.01) (0.21) 0 0 0 0
--------- -------- ------- ------- ------- -------
Total distributions to
shareholders (0.31) (0.82) (0.62) (0.67) (0.67) (0.60)
--------- -------- ------- ------- ------- -------
Net asset value, end of
period $ 10.08 $ 10.39 $ 10.53 $ 9.98 $ 10.11 $ 9.70
--------- -------- ------- ------- ------- -------
Total return 0.00% 0.07% 12.06% 5.52% 11.23% 4.56%
Ratios and supplemental
data
Net assets, end of
period (thousands) 1,042,781 $109,028 $96,252 $76,499 $74,774 $72,029
Ratios to average net
assets
Expenses* 0.40%+ 0.50% 0.50% 0.50% 0.53% 0.53%
Net investment income 5.70%+ 5.73% 6.06% 6.48% 6.54% 6.28%
Portfolio turnover rate 225% 221% 235% 207% 268% 381%
</TABLE>
<TABLE>
<CAPTION>
Period Ended Year Ended March 31 (b)
September 30, -----------------------
1999** 1999 1998 (a)
<S> <C> <C> <C>
CLASS IS
Net asset value, beginning of
period $10.40 $ 10.54 $ 10.40
------ ----------- -----------
Income from investment operations
Net investment income 0.28 0.59 0.36
Net realized and unrealized gains
or losses on securities (0.31) 0.07 0.08
------ ----------- -----------
Total from investment operations (0.03) 0.66 0.44
------ ----------- -----------
Distributions to shareholders from
Net investment income (0.28) (0.59) (0.30)
Net realized gains (0.01) (0.21) --
------ ----------- -----------
Total Distributions (0.29) (0.80) (0.30)
------ ----------- -----------
Net asset value, end of period $10.08 $ 10.40 $ 10.54
------ ----------- -----------
Total return (0.17%) (0.01%) 8.55%
Ratios and supplemental data
Net assets, end of period
(thousands) $5,744 $ 2,721 $ 3,069
Ratios to average net assets
Expenses* 0.61%+ 0.65% 0.65%+
Net investment income 5.49%+ 5.59% 5.96%+
Portfolio turnover rate 225% 221% 235%
</TABLE>
(a) For the period from October 2, 1997 (commencement of class operations) to
March 31, 1998. through March 31, 1998.
(b) On June 4, 1999, Evergreen Select Core Bond Fund acquired the net assets of
the Tattersall Bond Fund. The Tattersall Bond Fund was the accounting and
performance survivor in this transaction. The above financial highlights
for the the periods ended prior to March 31, 1999 are those of the
Tattersall Bond Fund, which have been restated to give effect for this
transaction.
+ Annualized.
* Ratio of expenses to average net assets excludes fees credits, but includes
fee waivers.
** For the six month period ended September 30, 1999. The Fund changed its fis-
cal year end from the last day of March to September 30, effective September
30, 1999.
See Combined Notes to Financial Statements.
29
<PAGE>
EVERGREEN
Select Fixed Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------
1999 1998 (a)
<S> <C> <C>
CLASS I
Net asset value, beginning of period $ 6.12 $ 5.96
------------ ------------
Income from investment operations
Net investment income 0.35 0.31
Net realized and unrealized gains or losses on
securities (0.30) 0.16
------------ ------------
Total from investment operations 0.05 0.47
------------ ------------
Distributions to shareholders from
Net investment income (0.35) (0.31)
------------ ------------
Net asset value, end of period $ 5.82 $ 6.12
------------ ------------
Total return 0.84% 8.06%
Ratios and supplemental data
Net assets, end of period (thousands) $ 590,927 $ 668,907
Ratios to average net assets
Expenses* 0.49% 0.52%+
Net investment income 5.86% 5.99%+
Portfolio turnover rate 63% 46%
<CAPTION>
Year Ended September 30,
----------------------------
1999 1998 (b)
<S> <C> <C>
CLASS IS
Net asset value, beginning of period $ 6.12 $ 5.97
------------ ------------
Income from investment operations
Net investment income 0.33 0.20
Net realized and unrealized gains or losses on
securities (0.30) 0.15
------------ ------------
Total from investment operations 0.03 0.35
------------ ------------
Distributions to shareholders from
Net investment income (0.33) (0.20)
------------ ------------
Net asset value, end of period $ 5.82 $ 6.12
------------ ------------
Total return 0.59% 5.94%
Ratios and supplemental data
Net assets, end of period (thousands) $ 11,590 $ 9,808
Ratios to average net assets
Expenses* 0.74% 0.77%+
Net investment income 5.65% 5.65%+
Portfolio turnover rate 63% 46%
</TABLE>
(a) For the period from November 24, 1997 (commencement of class operations) to
September 30, 1998.
(b) For the period from March 9, 1998 (commencement of class operations) to
September 30, 1998.
+ Annualized
* Ratio of expenses to average net assets excludes fees credits, but includes
fee waivers.
See Combined Notes to Financial Statements.
30
<PAGE>
EVERGREEN
Select Income Plus Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------
1999 1998 (a)
<S> <C> <C>
CLASS I
Net asset value, beginning of period $ 5.92 $ 5.72
------------ ------------
Income from investment operations
Net investment income 0.33 0.30
Net realized and unrealized gains or losses on
securities (0.46) 0.20
------------ ------------
Total from investment operations (0.13) 0.50
------------ ------------
Distributions to shareholders from
Net investment income (0.33) (0.30)
Net realized gains (0.05) 0
------------ ------------
Total distributions to shareholders (0.38) (0.30)
------------ ------------
Net asset value, end of period $ 5.41 $ 5.92
------------ ------------
Total return (2.13%) 8.99%
Ratios and supplemental data
Net assets, end of period (thousands) $ 1,794,209 $ 1,367,240
Ratios to average net assets
Expenses* 0.48% 0.51%+
Net investment income 5.95% 6.09%+
Portfolio turnover rate 70% 37%
<CAPTION>
Year Ended September 30,
-----------------------------
1999 1998 (b)
<S> <C> <C>
CLASS IS
Net asset value, beginning of period $ 5.92 $ 5.71
------------ ------------
Income from investment operations
Net investment income 0.32 0.19
Net realized and unrealized gains or losses on
securities (0.46) 0.21
------------ ------------
Total from investment operations (0.14) 0.40
------------ ------------
Distributions to shareholders from
Net investment income (0.32) (0.19)
Net realized gains (0.05) 0
------------ ------------
Total distributions to shareholders (0.37) (0.19)
------------ ------------
Net asset value, end of period $ 5.41 $ 5.92
------------ ------------
Total return (2.36%) 7.21%
Ratios and supplemental data
Net assets, end of period (thousands) $ 10,871 $ 7,528
Ratios to average net assets
Expenses* 0.73% 0.75%+
Net investment income 5.74% 5.80%+
Portfolio turnover rate 70% 37%
</TABLE>
(a) For the period from November 24, 1997 (commencement of class operations) to
September 30, 1998.
(b) For the period from March 2, 1998 (commencement of class operations) to
September 30, 1998.
+ Annualized
* Ratio of expenses to average net assets excludes fees credits, but includes
fee waivers.
See Combined Notes to Financial Statements.
31
<PAGE>
EVERGREEN
Select Intermediate Term Municipal Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------
1999 1998 (a)
<S> <C> <C>
CLASS I
Net asset value, beginning of period $ 67.11 $ 64.84
------------ ------------
Income from investment operations
Net investment income 2.97 2.57
Net realized and unrealized gains or losses on
securities (4.89) 2.27
------------ ------------
Total from investment operations (1.92) 4.84
------------ ------------
Distributions to shareholders from
Net investment income (2.97) (2.57)
Net realized gains (0.89) 0
------------ ------------
Total distributions to shareholders (3.86) (2.57)
------------ ------------
Net asset value, end of period $ 61.33 $ 67.11
------------ ------------
Total return (3.00%) 7.61%
Ratios and supplemental data
Net assets, end of period (thousands) $ 704,474 $ 746,874
Ratios to average net assets
Expenses* 0.57% 0.62%+
Net investment income 4.59% 4.59%+
Portfolio turnover rate 97% 47%
<CAPTION>
Year Ended September 30,
-----------------------------
1999 1998 (b)
<S> <C> <C>
CLASS IS
Net asset value, beginning of period $ 67.11 $ 65.91
------------ ------------
Income from investment operations
Net investment income 2.81 1.66
Net realized and unrealized gains or losses on
securities (4.89) 1.20
------------ ------------
Total from investment operations (2.08) 2.86
------------ ------------
Distributions to shareholders from
Net investment income (2.81) (1.66)
Net realized gains (0.89) 0
------------ ------------
Total distributions to shareholders (3.70) (1.66)
------------ ------------
Net asset value, end of period $ 61.33 $ 67.11
------------ ------------
Total return (3.24%) 4.41%
Ratios and supplemental data
Net assets, end of period (thousands) $ 5,863 $ 4,736
Ratios to average net assets
Expenses* 0.83% 0.89%+
Net investment income 4.41% 4.35%+
Portfolio turnover rate 97% 47%
</TABLE>
(a) For the period from November 24, 1997 (commencement of class operations) to
September 30, 1998.
(b) For the period from March 2, 1998 (commencement of class operations) to
September 30, 1998.
+ Annualized
* Ratio of expenses to average net assets excludes fees credits, but includes
fee waivers.
See Combined Notes to Financial Statements.
32
<PAGE>
EVERGREEN
Select International Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended September 30, Year Ended June 30, 1999
------------------------------ --------------------------------------
1999 1998 (a) (b) 1998 (b) 1997 (b) 1996 (b) 1995 (b)
<S> <C> <C> <C> <C> <C> <C>
CLASS I
Net asset value,
beginning of period $ 9.52 $ 9.32 $ 9.54 $ 9.70 $ 9.62 $ 9.06
------------ ------------ ------- ------- ------- -------
Income from investment
operations
Net investment income 0.40 0.11# 0.47 0.49 0.47 0.62
Net realized and
unrealized gains or
losses on securities (0.03) 0.22 (0.06) 0.09 0.30 0.24
------------ ------------ ------- ------- ------- -------
Total from investment
operations 0.37 0.33 0.41 0.58 0.77 0.86
------------ ------------ ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.38) (0.13) (0.63) (0.74) (0.69) (0.30)
------------ ------------ ------- ------- ------- -------
Net asset value, end of
period $ 9.51 $ 9.52 $ 9.32 $ 9.54 $ 9.70 $ 9.62
------------ ------------ ------- ------- ------- -------
Total return 3.96% 3.56% 4.42% 6.18% 8.00% 9.70%
Ratios and supplemental
data
Net assets, end of
period (thousands) $ 55,258 $ 46,607 $36,722 $34,590 $32,998 $26,898
Ratios to average net
assets
Expenses* 0.69% 0.76%+ 0.81% 0.85% 0.71% 0.64%
Net investment income 4.18% 4.89%+ 4.90% 5.14% 5.81% 6.84%
Portfolio turnover rate 158% 3% 46% 90% 67% 133%
<CAPTION>
Year Ended September 30, Year Ended June 30,
------------------------------ --------------------------------------
1999 1998 (a) (b) 1998 (b) 1997 (b) 1996 (b) 1995 (b)
<S> <C> <C> <C> <C> <C> <C>
CLASS IS
Net asset value,
beginning of period $ 9.51 $ 9.30 $ 9.52 $ 9.68 $ 9.61 $ 9.04
------------ ------------ ------- ------- ------- -------
Income from investment
operations
Net investment income 0.38 0.11# 0.40 0.42 0.61 0.61
Net realized and
unrealized gains or
losses on securities (0.03) 0.23 (0.01) 0.14 0.12 0.24
------------ ------------ ------- ------- ------- -------
Total from investment
operations 0.35 0.34 0.39 0.56 0.73 0.85
------------ ------------ ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.36) (0.13) (0.61) (0.72) (0.66) (0.28)
------------ ------------ ------- ------- ------- -------
Net asset value, end of
period $ 9.50 $ 9.51 $ 9.30 $ 9.52 $ 9.68 $ 9.61
------------ ------------ ------- ------- ------- -------
Total return 3.74% 3.61% 4.16% 5.92% 7.74% 9.57%
Ratios and supplemental
data
Net assets, end of
period (thousands) $ 238 $ 129 $ 198 $ 182 $ 152 $ 170
Ratios to average net
assets
Expenses* 0.95% 1.00%+ 1.06% 1.10% 0.96% 0.89%
Net investment income 3.85% 4.65%+ 4.65% 4.89% 5.56% 6.59%
Portfolio turnover rate 158% 3% 46% 90% 67% 133%
</TABLE>
(a) For the three months ended September 30, 1998. The Fund changed its fiscal
year end from June 30 to September 30, effective September 30, 1998.
(b) On August 28, 1998, CoreFund Global Bond Fund exchanged substantially all
of its net assets for shares of Evergreen Select International Bond Fund.
CoreFund Global Bond Fund is the accounting survivor and as such its basis
of accounting for assets and liabilities and its operating results for the
periods prior to August 28, 1998 have been carried forward in these finan-
cial highlights.
# Net investment income is based on weighted average shares throughout the pe-
riod.
+ Annualized.
* Ratio of expenses to average net assets excludes fees credits, but includes
fee waivers.
See Combined Notes to Financial Statements.
33
<PAGE>
EVERGREEN
Select Limited Duration Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------
1999 1998 (a)
<S> <C> <C>
CLASS I
Net asset value, beginning of period $ 10.52 $ 10.42
------------ -----------
Income from investment operations
Net investment income 0.60 0.53#
Net realized and unrealized gains or losses on
securities (0.29) 0.10
------------ -----------
Total from investment operations 0.31 0.63
------------ -----------
Distributions to shareholders from
Net investment income (0.60) (0.53)
Net realized gains (0.02) 0
------------ -----------
Total distributions to shareholders (0.62) (0.53)
------------ -----------
Net asset value, end of period $ 10.21 $ 10.52
------------ -----------
Total return 3.07% 6.21%
Ratios and supplemental data
Net assets, end of period (thousands) $ 312,157 $ 70,810
Ratios to average net assets
Expenses* 0.31% 0.30%+
Net investment income 5.88% 5.97%+
Portfolio turnover rate 147% 78%
<CAPTION>
Year Ended September 30,
---------------------------
1999 1998 (b)
<S> <C> <C>
CLASS IS
Net asset value, beginning of period $ 10.52 $ 10.41
------------ -----------
Income from investment operations
Net investment income 0.58 0.11#
Net realized and unrealized gains or losses on
securities (0.29) 0.11
------------ -----------
Total from investment operations 0.29 0.22
------------ -----------
Distributions to shareholders from
Net investment income (0.58) (0.11)
Net realized gains (0.02) 0
------------ -----------
Total distributions to shareholders (0.60) (0.11)
------------ -----------
Net asset value, end of period $ 10.21 $ 10.52
------------ -----------
Total return 2.81% 2.12%
Ratios and supplemental data
Net assets, end of period (thousands) $ 1,629 $ 614
Ratios to average net assets
Expenses* 0.56% 0.55%+
Net investment income 5.67% 5.84%+
Portfolio turnover rate 147% 78%
</TABLE>
(a) For the period from November 24, 1997 (commencement of class operations) to
September 30, 1998.
(b) For the period from July 28, 1998 (commencement of class operations) to
September 30, 1998.
# Net investment income is based on weighted average shares throughout the
period.
+ Annualized.
* Ratio of expenses to average net assets excludes fees credits, but includes
fee waivers.
See Combined Notes to Financial Statements.
34
<PAGE>
EVERGREEN
Select Total Return Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------
1999 1998 (a)
<S> <C> <C>
CLASS I
Net asset value, beginning of period $ 99.71 $ 100.00
------------ ------------
Income from investment operations
Net investment income 6.29 3.08
Net realized and unrealized gains or losses on
securities (7.13) (0.29)
------------ ------------
Total from investment operations (0.84) 2.79
------------ ------------
Distributions to shareholders from
Net investment income (6.30) (3.08)
------------ ------------
Net asset value, end of period $ 92.57 $ 99.71
------------ ------------
Total return (0.87%) 2.83%
Ratios and supplemental data
Net assets, end of period (thousands) $ 144,320 $ 135,998
Ratios to average net assets
Expenses* 0.50% 0.41%+
Net investment income 6.57% 6.88%+
Portfolio turnover rate 136% 80%
<CAPTION>
Year Ended September 30,
-----------------------------
1999 1998 (b)
<S> <C> <C>
CLASS IS
Net asset value, beginning of period $ 99.71 $ 99.67
------------ ------------
Income from investment operations
Net investment income 6.05 1.05
Net realized and unrealized gains or losses on
securities (7.13) 0.04
------------ ------------
Total from investment operations (1.08) 1.09
------------ ------------
Distributions to shareholders from
Net investment income (6.06) (1.05)
------------ ------------
Net asset value, end of period $ 92.57 $ 99.71
------------ ------------
Total return (1.12%) 1.10%
Ratios and supplemental data
Net assets, end of period (thousands) $ 6,334 $ 24
Ratios to average net assets
Expenses* 0.75% 0.66%+
Net investment income 6.35% 6.51%+
Portfolio turnover rate 136% 80%
</TABLE>
(a) For the period from April 20, 1998 (commencement of class operations) to
September 30, 1998.
(b) For the period from August 3, 1998 (commencement of class operations) to
September 30, 1998.
+ Annualized
* Ratio of expenses to average net assets excludes fees credits, but includes
fee waivers.
See Combined Notes to Financial Statements.
35
<PAGE>
EVERGREEN
Select Adjustable Rate Fund
Schedule of Investments
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ADJUSTABLE RATE MORTGAGE SECURITIES - 73.3%
FHLMC - 25.6%
$2,118,123 6.664%, 1/1/2022..................................... $ 2,188,285
586,898 6.722%, 3/1/2021..................................... 601,847
611,340 6.768%, 7/1/2030..................................... 627,289
1,441,685 6.772%, 3/1/2022..................................... 1,464,212
938,570 6.921%, 3/1/2019..................................... 981,392
307,012 6.943%, 7/1/2019..................................... 315,743
2,111,921 6.95%, 6/1/2016...................................... 2,147,570
1,048,411 6.994%, 11/1/2021.................................... 1,074,621
3,399,577 7.072%, 4/1/2022..................................... 3,522,267
674,017 7.073%, 10/1/2021.................................... 685,287
600,366 7.328%, 9/1/2017..................................... 612,001
157,466 7.397%, 4/1/2020..................................... 159,015
-----------
14,379,529
-----------
FNMA - 44.2%
2,458,204 5.482%, 7/1/2029..................................... 2,408,646
752,748 5.779%, 4/1/2038..................................... 752,043
865,900 5.94%, 11/1/2028..................................... 854,808
692,284 6.087%, 5/1/2036..................................... 692,284
231,587 6.45%, 1/1/2022...................................... 232,203
220,801 6.504%, 7/1/2027..................................... 225,769
2,081,965 6.556%, 5/1/2022..................................... 2,124,916
598,451 6.64%, 1/1/2016...................................... 612,664
200,942 6.646%, 10/1/2017.................................... 204,836
507,066 6.656%, 11/1/2018.................................... 517,527
156,816 6.703%, 7/1/2020..................................... 161,594
6,469,402 6.725%, 9/1/2021..................................... 6,662,449
83,334 6.726%, 2/1/2017..................................... 83,633
137,905 6.728%, 12/1/2022.................................... 140,685
1,087,744 6.773%, 2/1/2027..................................... 1,124,455
375,507 6.795%, 1/1/2022..................................... 387,827
339,788 6.798%, 10/1/2016.................................... 348,177
2,418,416 6.805%, 12/1/2023.................................... 2,448,114
1,980,273 6.845%, 1/1/2031..................................... 2,029,463
597,731 6.852%, 12/1/2019.................................... 613,421
682,740 6.90%, 9/1/2018...................................... 710,159
1,447,982 6.928%, 11/1/2017.................................... 1,492,327
-----------
24,828,000
-----------
GNMA - 3.5%
1,996,643 6.00%, 8/20/2029..................................... 1,989,682
-----------
Total Adjustable Rate Mortgage Securities (cost
$41,388,029)........................................ 41,197,211
-----------
FIXED RATE MORTGAGES - 7.4%
FHLMC - 0.6%
250,000 6.25%, 7/15/2004..................................... 248,545
14,844 7.25%, 11/1/2008..................................... 14,846
94,788 10.50%, 4/1/2004..................................... 97,805
-----------
361,196
-----------
FNMA - 4.5%
67,953 9.50%, 4/15/2005..................................... 68,292
162,927 10.50%, 3/1/2001..................................... 166,608
422,055 10.75%, 10/1/2012.................................... 456,857
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
FIXED RATE MORTGAGES - continued
FNMA - continued
$ 283,612 11.00%, 1/1/2018..................................... $ 311,127
536,326 9.00%, 11/1/2006..................................... 555,345
346,510 9.00%, 6/1/2007...................................... 358,420
596,322 9.50%, 5/1/2007...................................... 616,692
-----------
2,533,341
-----------
GNMA - 2.3%
1,279,403 10.25%, 11/15/2029................................... 1,293,975
-----------
Total Fixed Rate Mortgages
(cost $4,255,419)................................... 4,188,512
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.8%
FHLMC - 0.8%
455,262 FHLMC STRIPS CMO, Ser. 20,
Class F, IO,
5.856%, 7/1/2029 (cost $457,538)..................... 451,848
-----------
U.S. AGENCY OBLIGATIONS - 2.2%
FHLMC - 2.2%
498,861 9.00%, 6/1/2006...................................... 511,617
530,532 9.75%, 3/1/2016...................................... 555,743
167,797 10.50%, 10/1/2005.................................... 171,428
-----------
Total U.S. Agency Obligations
(cost $1,241,008)................................... 1,238,788
-----------
U.S. TREASURY OBLIGATIONS - 9.8%
U.S. Treasury Notes:
400,000 4.50%, 1/31/2001..................................... 394,564
600,000 4.75%, 2/15/2004..................................... 575,532
1,000,000 5.25%, 5/15/2004..................................... 977,340
2,600,000 5.50%, 8/31/2001 - 5/31/2003......................... 2,588,718
1,000,000 5.75%, 11/30/2002.................................... 999,370
-----------
Total U.S. Treasury Obligations
(cost $5,576,208)................................... 5,535,524
-----------
REPURCHASE AGREEMENT - 6.3%
3,514,000 Evergreen Joint Repurchase Agreement, 5.30%, dated
9/30/1999, due 10/1/1999 (cost $3,514,000
maturity value, $3,514,173) (a)..................... 3,514,000
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments - (cost $56,432,202)........ 99.8% 56,125,883
Other Assets and
Liabilities - net............................. 0.2 106,548
----- -----------
Net Assets .................................... 100.0% $56,232,431
===== ===========
</TABLE>
36
<PAGE>
EVERGREEN
Select Adjustable Rate Fund
Schedule of Investments(continued)
September 30, 1999
(a) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at September 30, 1999.
Note: The maturity date included in each security description is the stated ma-
turity date. The effective maturity of each security may be shorter due
to current and projected prepayment rates. Changes in interest rates may
accelerate or slow prepayment of mortgage obligations.
Summary of Abbreviations:
CMO Collateralized Mortgage Obligations
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA General National Mortgage Association
IO Interest Only
STRIPS Separate Trading of Registered Interest and Principal of Securities
See Combined Notes to Financial Statements.
37
<PAGE>
EVERGREEN
Select Core Bond Fund
Schedule of Investments
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Automotive Equipment & Manufacturing - continued
$ 725,000 6.80%, 4/17/2001.................................... $ 731,046
235,000 Notes,
8.80%, 3/1/2021..................................... 269,156
9,000,000 Sr. Notes,
5.50%, 1/14/2002.................................... 8,789,202
------------
55,646,356
------------
Banks - 4.2%
610,000 Bank of New York, Inc.,
Notes (Subord.),
6.50%, 12/1/2003................................... 601,522
8,350,000 BankAmerica Corp.,
7.75%, 7/15/2002................................... 8,604,926
2,450,000 Firststar Bank (Milwaukee)
Natl., 6.25%, 12/1/2002............................ 2,427,499
Natl. City Corp.:
5,635,000 Debs. (Subord.),
6.875%, 5/15/2019................................... 5,140,489
900,000 Notes (Subord.),
7.20%, 5/15/2005.................................... 902,885
9,750,000 PNC Funding Corp.,
Notes (Subord.),
6.125%, 2/15/2009.................................. 8,905,396
340,000 SunTrust Banks, Inc.,
Notes (Subord.),
6.125%, 2/15/2004.................................. 330,684
675,000 Wachovia Corp.,
Notes (Subord.),
6.15%, 3/15/2009................................... 629,921
16,000,000 Washington Mutual Inc.,
7.50%, 8/15/2006................................... 16,079,536
------------
43,622,858
------------
Brokers - 0.6%
900,000 Bear Stearns Co., Inc.,
Sr. Notes,
6.25%, 7/15/2005................................... 857,688
895,000 Donaldson Lufkin & Jenrette Securities, Inc.,
6.50%, 6/1/2008.................................... 838,070
5,000,000 Morgan Stanley Group Inc.,
5.625%, 1/20/2004.................................. 4,775,915
------------
6,471,673
------------
Building, Construction & Furnishings - 2.2%
10,000,000 Caterpillar Fin. Svcs., Inc.,
6.50%, 2/1/2002.................................... 10,022,880
13,275,000 Masco Corp.,
7.75%, 8/1/2029.................................... 13,238,520
------------
23,261,400
------------
Chemical & Agricultural Products - 0.7%
6,700,000 Rohm & Haas Co.,
7.85%, 7/15/2029 (a)............................... 6,826,650
------------
Diversified Companies - 0.7%
7,000,000 Tyco Int'l. Group S.A.,
6.875%, 9/5/2002................................... 7,017,878
------------
ASSET-BACKED SECURITIES - 4.5%
CIT Receivables Owner Trust:
$ 135,150 Ser. 1995-B, Cl. A1,
6.50%, 4/15/2011................................... $ 135,671
334,245 Ser. 1996-A, Cl. A1,
5.40%, 12/15/2011.................................. 332,462
925,000 Contimortgage Home Equity
Loan Trust,
Ser. 1998-2, Cl. A4,
6.15%, 1/15/2014.................................. 912,989
10,175,000 Distribution Fin. Svcs.
Receivables Trust,
Ser. 1999, Cl. A3,
6.43%, 7/1/2011................................... 10,180,545
9,466,299 Federal Express Corp.,
Ser. 1998, Cl. A1,
6.72%, 1/15/2022.................................. 8,854,160
276,215 Fleetwood 94 Trust,
Ser. 1994, Cl. A,
4.70%, 7/15/2009.................................. 273,200
256,084 Fleetwood Credit Corp. Grantor Trust, Ser. 1996-A,
Cl. A,
6.75%, 10/17/2011................................. 256,880
891,481 Green Tree Receivables Equipment & Consumer Trust,
Ser. 1998-A, Cl. A1C,
6.18%, 6/15/2019.................................. 884,728
SLMA Student Loan Trust:
1,538,639 Ser. 1997-2, Cl. A1,
5.40%, 10/25/2005.................................. 1,533,400
1,331,577 Ser. 1997-3, Cl. 1FR,
5.46%, 4/25/2006................................... 1,326,057
22,826,903 Ser. 1998-1, Cl. A1,
5.50%, 1/25/2007................................... 22,779,994
------------
Total Asset-Backed Securities
(cost $47,652,897)................................ 47,470,086
------------
CORPORATE BONDS & NOTES - 34.0%
Aerospace & Defense - 1.6%
350,000 Boeing Co.,
Debs.,
6.625%, 2/15/2038................................. 308,748
Raytheon Co.:
12,500,000 5.70%, 11/1/2003................................... 11,953,625
4,425,000 7.20%, 8/15/2027................................... 4,112,064
------------
16,374,437
------------
Automotive Equipment & Manufacturing - 5.3%
425,000 Dana Corp.,
Notes,
7.00%, 3/15/2028.................................. 381,784
13,750,000 Delphi Automotive Sys. Corp., 6.125%, 5/1/2004..... 13,245,293
Ford Motor Co.:
10,255,000 5.80%, 1/12/2009................................... 9,331,947
15,130,000 6.375%, 2/1/2029................................... 13,051,713
335,000 Debs.,
8.90%, 1/15/2032................................... 386,390
GMAC:
10,365,000 MTN,
5.85%, 1/14/2009................................... 9,459,825
</TABLE>
38
<PAGE>
EVERGREEN
Select Core Bond Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Finance & Insurance - 4.7%
$20,000,000 American General Fin. Corp., MTN,
6.67%, 6/28/2002................................... $ 20,026,700
Associates Corp. of North America:
700,000 Notes,
5.75%, 10/15/2003................................... 673,579
10,000,000 Sr. Note,
6.50%, 7/15/2002.................................... 9,988,670
800,000 Beneficial Corp.,
6.33%, 10/9/2001................................... 797,920
100,000 Commercial Credit Group, Inc.,
8.70%, 6/15/2009................................... 110,889
Household Fin. Corp.,
Notes:
10,500,000 6.50%, 11/15/2008................................... 9,896,092
5,200,000 7.20%, 7/15/2006.................................... 5,198,440
1,315,000 Int'l. Lease Fin. Corp., MTN,
6.42%, 9/11/2000................................... 1,318,931
915,000 Mellon Finl. Co.,
7.625%, 11/15/1999................................. 916,903
450,000 Norwest Fin., Inc. MTN,
6.05%, 11/19/1999.................................. 450,335
------------
49,378,459
------------
Food & Beverage Products - 0.9%
5,215,000 Coca-Cola Enterprises, Inc.,
Debs.,
6.75%, 1/15/2038................................... 4,610,686
4,600,000 Pepsi Bottling Group Inc.,
7.00%, 3/1/2029.................................... 4,250,726
790,000 Philip Morris Co., Inc.,
6.15%, 3/15/2000................................... 791,770
------------
9,653,182
------------
Metals & Mining - 0.1%
775,000 Aluminum Co. of America,
Bonds, Ser. B,
6.50%, 6/15/2018................................... 684,503
------------
Oil/Energy - 2.3%
7,000,000 Anadarko Petroleum Corp.,
Debs.,
7.20%, 3/15/2029................................... 6,457,388
800,000 Enron Corp.,
Sr. Notes,
7.375%, 5/15/2019.................................. 760,411
Phillips Petroleum Co.,
Debs.,
13,560,000 7.125%, 3/15/2028................................... 12,154,248
460,000 Sr. Notes,
7.00%, 3/30/2029.................................... 424,580
4,850,000 Williams Cos., Inc.,
7.625%, 7/15/2019.................................. 4,677,801
------------
24,474,428
------------
Paper & Packaging - 0.1%
1,000,000 Georgia Pacific Corp.,
8.125%, 6/15/2023.................................. 959,759
325,000 Int'l. Paper Co.,
Notes,
6.50%, 11/15/2007.................................. 313,031
------------
1,272,790
------------
CORPORATE BONDS - continued
Real Estate - 4.4%
$ 6,485,000 Avalon Properties, Inc.,
Notes,
6.625%, 1/15/2005................................. $ 6,218,317
425,000 BRE Properties, Inc.,
Notes,
7.125%, 2/15/2013................................. 384,118
3,470,000 Duke Reality L.P.,
Puttable Reset Securities,
7.05%, 3/1/2006................................... 3,342,557
10,000,000 EOP Operating L.P.,
Notes,
6.80%, 1/15/2009.................................. 9,261,600
ERP Operating L.P.:
Notes:
875,000 6.55%, 11/15/2001.................................. 867,007
20,450,000 6.63%, 4/13/2005................................... 19,250,342
450,000 Prologis Trust,
Notes,
7.00%, 10/1/2003.................................. 441,256
7,000,000 Spieker Properties L.P.,
7.25%, 5/1/2009................................... 6,650,812
------------
46,416,009
------------
Retailing & Wholesale - 1.4%
2,690,000 Dayton Hudson Corp.,
5.95%, 6/15/2000.................................. 2,693,107
May Dept. Stores Co.:
Debs.:
650,000 6.70%, 9/15/2028................................... 588,532
275,000 7.45%, 9/15/2011................................... 284,246
7,700,000 Safeway Inc.,
7.50%, 9/15/2009.................................. 7,713,229
Sears Roebuck Acceptance Corp.:
MTN:
1,500,000 5.63%, 2/7/2001.................................... 1,478,628
750,000 6.86%, 7/3/2001.................................... 750,104
750,000 6.99%, 9/30/2002................................... 748,097
------------
14,255,943
------------
Telecommunication Services & Equipment - 3.9%
1,100,000 Alltel Corp.,
Debs.,
6.50%, 11/1/2013.................................. 991,935
AT&T Corp.:
Notes:
615,000 6.00%, 3/15/2009................................... 572,426
16,540,000 6.50%, 3/15/2029................................... 14,639,554
5,445,000 Bellsouth Telecommunications, Inc.,
Debs.,
6.375%, 6/1/2028.................................. 4,783,596
600,000 Pacific Bell,
Notes,
6.625%, 11/1/2009................................. 585,037
82,000 Southwestern Bell Telephone Co., 6.625%,
7/15/2007......................................... 80,743
Sprint Capital Corp.,
Notes:
9,500,000 6.125%, 11/15/2008................................. 8,828,350
640,000 6.375%, 5/1/2009................................... 604,736
</TABLE>
39
<PAGE>
EVERGREEN
Select Core Bond Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Telecommunication Services & Equipment -
continued
$10,000,000 Worldcom, Inc.,
6.25%, 8/15/2003........................ $ 9,830,290
--------------
40,916,667
--------------
Transportation - 0.6%
Burlington Northern Santa Fe Corp.:
615,000 Debs.,
6.70%, 8/1/2028.......................... 542,804
400,000 Notes,
6.75%, 3/15/2029......................... 355,020
5,000,000 Santa Fe Pacific Corp.,
8.625%, 11/1/2004....................... 5,342,460
420,000 United Parcel Service America, Inc.,
Debs.,
8.375%, 4/1/2030........................ 467,918
--------------
6,708,202
--------------
Utilities - 0.3%
1,000,000 Carolina Power & Light Co.,
1st Mtge Note,
6.75%, 10/1/2002........................ 1,000,941
2,160,000 U.S. West Capital Funding, Inc., 6.25%,
7/15/2005............................... 2,055,203
--------------
3,056,144
--------------
Total Corporate Bonds & Notes
(cost $360,481,656)..................... 356,037,579
--------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 10.4%
7,210,000 Citicorp Mtge. Sec., Inc.,
6.49%, 9/25/2014........................ 6,995,935
FHLMC PC Gtd.:
12,850,000 6.25%, 4/15/2012......................... 12,383,738
7,045,000 8.50%, 6/15/2007......................... 7,343,165
825,000 6.75%, 2/15/2007......................... 826,872
1,228,387 8.00%, 4/15/2022......................... 1,259,626
925,000 7.00%, 1/15/2008......................... 929,870
FHLMC:
17,725,000 6.00%, 3/15/2028......................... 16,143,310
14,140,000 6.25%, 1/15/2012......................... 13,637,818
14,575,000 6.279%, 6/15/2009........................ 13,829,416
11,025,000 6.50%, 10/15/2024........................ 10,684,272
FNMA:
15,892,600 6.00%, 12/25/2010 - 6/25/2020............ 15,306,381
7,000,000 6.50%, 2/25/2021......................... 6,927,305
FNMA REMIC Trust:
648,858 7.50%, 5/25/2021......................... 660,359
2,338,559 8.00%, 4/25/2007 - 7/25/2022............. 2,409,968
--------------
Total Collateralized Mortgage Obligations
(cost $109,377,406)..................... 109,338,035
--------------
MORTGAGE-BACKED SECURITIES - 34.8%
$ 5,469,969 Bear Stearns Commercial Mtge.
Sec., Inc.,
7.00%, 5/20/2030................................ $ 5,483,644
24,565,000 Chase Commercial Mtge.
Sec. Corp.,
6.56%, 5/18/2008................................ 23,968,439
12,750,000 GMAC Commercial Mtge.
Sec., Inc.,
6.175%, 5/15/2033............................... 11,880,259
960,000 GS Mtge. Secs. Corp.,
6.62%, 10/18/2030............................... 931,666
LB Commercial Conduit Mtge. Trust:
5,460,000 6.21%, 10/15/2008................................ 5,150,063
9,452,603 6.41%, 8/15/2007................................. 9,257,738
Morgan Stanley Capital I Inc.:
9,373,789 6.25%, 7/15/2007................................. 9,130,023
14,830,160 6.12%, 3/15/2031................................. 14,353,593
FHLMC
186,543 6.00%, 5/1/2011.................................. 180,646
6,420,000 6.00%, 7/15/2028................................. 5,912,435
714,705 7.00%, 6/1/2008.................................. 719,436
165,303 7.50%, 4/1/2023.................................. 166,892
28,492 7.671%, 12/1/2020................................ 28,770
FNMA
10,428,485 5.81%, 1/1/2009.................................. 9,665,954
65,495,580 6.00%, 7/1/2006 - 12/1/2099...................... 62,499,726
4,803,555 6.08%, 4/1/2005.................................. 4,668,438
5,207,027 6.153%, 12/1/2008................................ 4,930,346
4,088,651 6.318%, 4/1/2009................................. 3,903,814
26,720,139 6.50%, 7/1/2014 - 8/1/2014....................... 26,233,031
540,405 6.70%, 11/1/2007................................. 537,587
1,446,311 6.81%, 8/1/2004.................................. 1,448,210
611,281 7.00%, 7/1/2005.................................. 620,542
87,570 7.919%, 6/1/2019................................. 88,627
587,733 8.66%, 1/1/2005.................................. 629,244
GNMA
19,500,000 5.50%, 10/25/2029................................ 19,268,535
51,403,838 6.00%, 2/15/2014 - 7/15/2014..................... 49,416,051
13,667,450 6.50%, 11/15/2023 - 8/15/2027.................... 13,197,173
39,918,768 7.00%, 1/15/2029 - 8/15/2029..................... 39,220,988
41,046,997 7.50%, 9/15/2010 - 9/15/2029..................... 41,240,573
137,378 8.00%, 7/15/2016 - 6/15/2017..................... 142,451
501,946 8.85%, 5/15/2018 - 7/15/2018..................... 526,843
--------------
Total Mortgage-Backed Securities (cost
$365,896,941)................................... 365,401,737
--------------
</TABLE>
40
<PAGE>
EVERGREEN
Select Core Bond Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
U.S. AGENCY OBLIGATIONS - 1.1%
$11,500,000 FHLB,
5.25%, 4/25/2002
(cost $11,312,146)............................... $ 11,264,009
--------------
U.S. TREASURY OBLIGATIONS - 7.0%
U.S. Treasury Bonds:
520,000 8.125%, 8/15/2021................................. 621,075
37,375,000 8.875%, 8/15/2017................................. 46,835,547
U.S. Treasury Notes:
9,041,030 3.375%, 1/15/2007................................. 8,637,014
16,457,000 7.00%, 7/15/2006.................................. 17,285,001
--------------
Total U.S. Treasury Obligations
(cost $73,858,120)............................... 73,378,637
--------------
YANKEE OBLIGATIONS - 0.2%
Government - 0.2%
2,015,000 Quebec Province, Canada,
5.75%, 2/15/2009
(cost $1,908,875)................................ 1,840,059
--------------
<CAPTION>
Shares Value
<C> <S> <C>
MUTUAL FUND SHARES - 2.4%
37,400 Blackrock 1999 Term Trust, Inc.................... 374,000
261,300 Blackrock 2001 Term Trust, Inc.................... 2,351,700
316,400 Blackrock North American Government, Inc.......... 3,183,775
147,700 Blackrock Strategic Term
Trust, Inc....................................... 1,310,837
43,100 Dreyfus Strategic Government
Income Fund...................................... 352,881
7,400 Excelsior Income Shares, Inc...................... 112,388
25,500 First Commonwealth Fund, Inc...................... 258,188
232,200 Hyperion 1999 Term Trust, Inc. ................... 1,654,425
MUTUAL FUND SHARES - continued
458,800 Hyperion 2002 Term Trust, Inc. .................. $ 3,756,425
50,700 Hyperion 2005 Investment
Grade Opportunities Trust....................... 408,769
304,300 Hyperion Total Return Fund, Inc. ................ 2,339,306
16,400 Income Opportunities Fund 1999................... 160,925
47,300 Kemper Intermediate
Government Trust................................ 298,581
96,300 Kleinwort Benson Australian
Income Fund, Inc................................ 607,894
593,700 MFS Government Markets
Income Trust.................................... 3,636,412
526,400 MFS Intermediate Income Trust.................... 3,322,900
27,000 Morgan Stanley Dean Witter Government Income
Trust........................................... 222,750
55,700 TCW/DW Term Trust 2000........................... 522,188
118,100 Templeton Global Income
Fund, Inc. ..................................... 782,412
--------------
Total Mutual Fund Shares
(cost $25,191,972).............................. 25,656,756
--------------
REPURCHASE AGREEMENT - 8.8%
$91,932,000 State Street Bank
Repurchase Agreement
5.22%, dated 9/30/1999,
due 10/1/1999 cost $91,932,000 maturity value
$91,945,830 (b)................................. 91,932,000
--------------
Total Investments -
(cost $1,087,612,013)................... 103.2% 1,082,318,898
Other Assets and Liabilities - net....... (3.2) (33,794,269)
----- --------------
Net Assets............................... 100.0% $1,048,524,629
===== ==============
</TABLE>
(a) Securities that may be resold to "qualified institutional buyers" un-
der Rule 144A or securities offered pursuant to Section 4(2) of the
Securities Act of 1933, as amended. These securities have been deter-
mined to be liquid under guidelines established by the Board of
Trustees.
(b) Repurchase agreement is collateralized by the following:
$21,866,000 FFCB, 9/10/2001; value including accrued interest -
$22,307,245
$35,000,000 FNMA, 12/10/2002; value including accrued interest -
$35,717,672
$35,000,000 FHLMC, 11/16/2000; value including accrued interest -
$35,708,575
Summary of Abbreviations:
CMO Collateralized Mortgage Obligation
FFCB Federal Farm Credit Bank
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA General National Mortgage Association
MTN Medium Term Note
REMIC Real Estate Mortgaged Investment Conduit
SLMA Student Loan Marketing Association
See Combined Notes to Financial Statements.
41
<PAGE>
EVERGREEN
Select Fixed Income Fund
Schedule of Investments
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - 10.2%
$ 2,000,000 American Airlines Pass Through Trust, Ser. 1999-1
Cl. C, 7.155%, 10/15/2004........................ $ 2,000,000
Amresco Residential Securities Mtge. Loan Trust:
1,905,684 Ser. 1998-2, Cl. A1,
6.50%, 12/25/2015................................. 1,900,892
8,000,000 Ser. 1998-2, Cl. A2, 6.245%, 4/25/2022............ 7,970,680
3,895,197 Carco Auto Loan Master Trust, Ser. 1997-1, Cl. A,
6.689%, 8/15/2004................................ 3,898,294
Case Equipment Receivable Trust:
1,857,000 Ser. 1997-B, Cl. A4, 6.41%, 9/15/2004............. 1,859,275
200,000 Ser. 1998-A, Cl. A4, 5.86%, 2/15/2005............. 198,577
Contimortgage Home Equity Loan Trust:
4,705,658 Ser. 1996-1, Cl. A5, 6.15%, 3/15/2011............. 4,697,682
3,185,000 Ser. 1997-2, Cl. A9, 7.09%, 4/15/2028............. 3,175,493
827,489 Ser. 1997-4, Cl. A3, 6.26%, 7/15/2012............. 826,757
5,000,000 Distribution Fin. Svcs. Receivables Trust, Ser.
1999-3, Cl. A4, 6.65%, 11/3/2015.................. 5,010,375
5,495,999 Empire Funding Home Loan Owner Trust, Ser. 1998-1,
Cl. A4, 6.64%, 12/25/2012......................... 5,373,576
104,998 EQCC Home Equity Loan Trust,
Ser. 1996-1, Cl. A2,
5.82%, 9/15/2009.................................. 105,047
First Plus Home Loan Trust:
559,729 Ser. 1997-2, Cl. A5, 6.82%, 4/10/2023............. 560,006
2,455,000 Ser. 1997-3, Cl. A5, 6.86%, 10/10/2013............ 2,465,520
622,600 Heller Equipment Asset Receivables Trust, Ser.
1997-1, Cl. A2,
6.39%, 5/25/2005................................. 623,468
598,927 IMC Home Equity Loan Trust,
Ser. 1997-2, Cl. A3,
6.94%, 11/20/2011................................ 599,702
2,329,038 Life Finl. Home Loan Owner Trust,
Ser. 1997-3, Cl. A2,
6.79%, 10/25/2011................................ 2,319,174
1,700,000 Metlife Capital Equipment Loan Trust, Ser. 1997-A,
Cl. A, 6.85%, 5/20/2008.......................... 1,706,502
270,591 Olympic Automobile Receivables Trust, Ser. 1995-D,
Cl. B, 6.10%, 4/15/2002.......................... 270,861
2,366,667 Sears Credit Account Master Trust,
Ser. 1995-3, Cl. A,
7.00%, 10/15/2004................................ 2,386,322
2,500,000 Southern Pacific Secd. Assets Corp., Ser. 1998-1,
Cl. A6, 7.08%, 3/25/2028......................... 2,464,362
631,774 The Money Store Home Equity Trust, Ser. 1992-B,
Cl. A, 6.90%, 7/15/2007.......................... 630,716
ASSET-BACKED SECURITIES - continued
$ 451,491 Union Acceptance Corp.,
Ser. 1996-A, Cl. A,
5.40%, 4/7/2003.................................. $ 449,755
WFS Finl. Owner Trust:
5,000,000 Ser. 1997-D, Cl. A4, 6.25%, 3/20/2003............. 5,004,625
3,200,000 Ser. 1998-A, Cl. A4, 5.95%, 2/20/2003............. 3,179,600
1,599,090 Xerox Rental Equipment Trust
Ser. 1996-A,
6.20%, 12/26/2005 (a)............................. 1,596,092
-------------
Total Asset-Backed Securities
(cost $61,563,823)............................... 61,273,353
-------------
CORPORATE BONDS & NOTES - 25.5%
Automotive Equipment & Manufacturing - 1.4%
3,567,000 GMAC, Sr. Notes,
5.875%, 1/22/2003................................ 3,470,552
5,000,000 Johnson Controls, Inc., Sr. Notes, 6.30%,
2/1/2008......................................... 4,716,320
-------------
8,186,872
-------------
Banks - 4.4%
85,000 Banc One Corp., Sr. Notes (Subord.), 7.60%,
5/1/2007......................................... 86,623
BB & T Corp., Sr. Notes (Subord.):
6,850,000 6.375%, 6/30/2005................................. 6,477,387
1,000,000 7.05%, 5/23/2003.................................. 1,010,434
5,000,000 Citigroup, Inc., Sr. Notes, 6.125%, 6/15/2000..... 5,001,220
3,000,000 First Chicago Corp., MTN, Sr. Notes (Subord.),
9.20%, 12/17/2001................................ 3,168,432
2,120,000 NationsBank Corp., Sr. Notes, 5.75%, 3/15/2001.... 2,101,613
1,020,000 NCNB Corp., Sr. Notes (Subord.), 9.125%,
10/15/2001....................................... 1,068,806
1,970,000 Security Pacific Corp., Sr. Notes (Subord.),
11.50%, 11/15/2000............................... 2,072,375
899,000 Societe Generale (New York), Sr. Notes (Subord.),
7.40%, 6/1/2006.................................. 889,194
5,000,000 Swiss Bank Corp. (New York), Sr. Notes (Subord.),
6.75%, 7/15/2005................................. 4,877,505
-------------
26,753,589
-------------
Brokers - 3.7%
1,545,000 Bear Stearns Co., Sr. Notes, 6.65%, 12/1/2004..... 1,510,873
Lehman Brothers Holdings, Inc., Sr. Notes
(Subord.):
3,500,000 6.84%, 10/7/1999.................................. 3,500,220
2,640,000 7.25%, 4/15/2003.................................. 2,649,998
Sr. Notes:
5,000,000 6.625%, 11/15/2000................................ 5,008,495
75,000 6.71%, 10/12/1999................................. 75,015
2,350,000 Merrill Lynch & Co., Inc., 6.00%, 2/12/2003....... 2,299,414
3,210,000 Morgan Stanley Dean Witter, Sr. Notes,
5.89%, 3/20/2000................................. 3,213,293
</TABLE>
42
<PAGE>
EVERGREEN
Select Fixed Income Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Brokers - continued
$ 1,665,000 Paine Webber Group, Inc., Sr. Notes, 6.50%,
11/1/2005........................................ $ 1,587,909
2,405,000 Salomon Smith Barney, Inc.,
Sr. Notes,
6.25%, 1/15/2005................................. 2,323,725
-------------
22,168,942
-------------
Building, Construction & Furnishings - 0.8%
5,000,000 Case Corp., Ser. B,
6.25%, 12/1/2003................................. 4,869,840
-------------
Building Products - 0.2%
1,545,000 CSR America, Inc., Sr. Notes, 6.875%, 7/21/2005... 1,499,135
-------------
Cable/Other Video Distribution - 0.2%
1,288,000 Tele-Communications, Inc., Sr. Notes, 7.25%,
8/1/2005......................................... 1,309,081
-------------
Finance & Insurance - 7.4%
7,000,000 Associated P&C Holdings, Inc.
Sr. Notes,
6.75%, 7/15/2003 (a)............................. 6,781,572
Associates Corp. of North America, Sr. Notes:
5,000,000 6.00%, 6/15/2000.................................. 5,000,265
1,890,000 6.75%, 7/15/2001.................................. 1,902,122
3,720,000 CIT Group Holdings, Inc., Sr. Notes, 6.375%,
8/1/2002......................................... 3,684,969
2,000,000 Commercial Credit Co., Sr. Notes, 6.75%,
5/15/2000........................................ 2,014,582
8,750,000 First Security Corp., MTN, 6.08%, 2/9/2001........ 8,695,873
2,250,000 Horace Mann Educators Corp.,
Sr. Notes,
6.625%, 1/15/2006................................ 2,138,834
3,620,000 Household Fin. Corp., MTN,
Sr. Notes,
6.00%, 5/8/2000.................................. 3,620,228
1,695,000 Loews Corp., Sr. Notes, 6.75%, 12/15/2006......... 1,639,609
5,000,000 Metropolitan Life Insurance Co.
Sr. Notes,
7.00%, 11/1/2005 (a)............................. 4,932,355
3,000,000 SFFED Corp. Sr. Debs., 11.20%, 9/1/2004 (a)....... 3,389,649
1,000,000 U.S. Life Corp., Sr. Notes, 6.375%, 6/15/2000..... 1,004,112
-------------
44,804,170
-------------
Food & Beverage Products - 0.5%
1,800,000 Nabisco, Inc., Sr. Notes, 6.00%, 2/15/2001........ 1,783,023
1,355,000 Philip Morris Co., Inc., 6.15%, 3/15/2000......... 1,358,035
-------------
3,141,058
-------------
Healthcare Products & Services - 1.2%
7,175,000 Columbia/HCA Healthcare
Corp., MTN,
6.875%, 7/15/2001................................ 6,994,915
-------------
CORPORATE BONDS - continued
Industrial Specialty Products & Services - 0.2%
$ 1,000,000 Harcourt General, Inc., Sr. Notes,
8.25%, 6/1/2002.................................. $ 1,017,017
-------------
Oil/Energy - 0.3%
1,600,000 Duke Capital Corp., Sr. Notes, Ser. A, 6.25%,
7/15/2005........................................ 1,528,162
-------------
Printing, Publishing, Broadcasting &
Entertainment - 0.3%
1,690,000 Time Warner, Inc., Sr. Notes, 8.11%, 8/15/2006.... 1,753,939
-------------
Real Estate - 0.2%
1,250,000 EOP Operating L.P., Sr. Notes, 6.376%, 2/15/2002.. 1,231,456
-------------
Retailing & Wholesale - 0.3%
1,585,000 Gap, Inc., Sr. Notes,
6.90%, 9/15/2007................................. 1,577,433
-------------
Telecommunication Services & Equipment - 0.3%
2,000,000 MCI Worldcom, Inc., Sr. Notes, 6.125%, 8/15/2001.. 1,987,198
-------------
Transportation - 2.3%
2,872,346 Continental Airlines, Inc., Ser. 971B, 7.461%,
4/1/2013......................................... 2,830,683
4,900,093 U.S. Airways,
7.35%, 1/30/2018................................. 4,691,912
6,000,000 Union Pacific Corp., 9.625%, 12/15/2002........... 6,471,384
-------------
13,993,979
-------------
Utilities - 1.8%
423,000 Cmnwlth. Edison Co., MTN, 9.05%, 10/15/1999....... 423,336
5,000,000 LG & E Capital Corp., 5.75%, 11/1/2001 (a)........ 4,885,075
2,000,000 Natl. Rural Utilities Cooperative Fin., 6.75%,
9/1/2001......................................... 2,010,878
3,675,000 PG & E Gas Transmission Northwest, Sr. Note,
7.10%, 6/1/2005.................................. 3,706,278
-------------
11,025,567
-------------
Total Corporate Bonds & Notes
(cost $155,844,105).............................. 153,842,353
-------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 16.2%
3,250,000 Blackrock Capital Fin. LP, Ser. 1997, Cl. C1,
7.15%, 10/25/2026 (a)............................ 3,215,550
3,000,000 Continental Airlines, Inc., Ser. 1999-2, Cl. C2,
7.434%, 9/15/2004................................ 2,974,425
CS First Boston Mtge. Securities Corp.:
5,000,000 Ser. 1998-C1, Cl. A1B, 6.48%, 5/17/2008........... 4,773,325
15,000,000 Ser. 1998-Fl2A, Cl. D, 6.78%, 10/15/2001.......... 14,772,000
</TABLE>
43
<PAGE>
EVERGREEN
Select Fixed Income Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS - continued
$ 176,259 CWMBS, Inc., Ser. 1997-A1, Cl. A1, 7.00%,
3/25/2027........................................ $ 176,392
3,486,357 Deutsche Mtge. & Asset Receivables Corp., Ser.
1998-1, Cl. A1, 6.22%, 9/15/2007................. 3,370,766
DLJ Commercial Mtge. Corp.:
6,700,000 Ser. 1998, Cl. B1, 6.255%, 12/8/2000 (a).......... 6,679,197
3,350,000 Ser. 1998, Cl. B2, 6.575%, 12/8/2000.............. 3,343,350
FHLMC
1,675,000 Ser. 1519, Cl. F,
6.75%, 3/15/2007.................................. 1,684,556
1,788,503 Ser. B-02, Cl. 1,
5.75%, 10/15/2016................................. 1,785,560
FHLMC PC Gtd.:
3,018,752 Ser. 12, Cl. A,
9.25%, 11/15/2019................................. 3,149,720
153,285 Ser. 1608, Cl. FN,
6.14%, 11/15/2023................................. 153,497
626,873 Ser. 1935, Cl. FL,
6.14%, 2/15/2027.................................. 635,868
5,750,000 FNMA, Ser. 1998-W8, Cl. A4,
6.02%, 9/25/2028................................. 5,567,466
2,658,166 Iroquois Trust, Ser. 1997-3, Cl. A, 6.68%,
11/10/2003 (a)................................... 2,659,242
3,000,000 Nationslink Funding Corp.,
Ser. 1998-1, Cl. D,
6.803%, 1/20/2008................................ 2,790,000
Potomac Gtd. Fin. Corp.:
2,400,421 Ser. 1, Cl. A, 6.887%, 12/21/2026 (a)............. 2,370,140
2,000,000 Ser. 1, Cl. B, 7.00%, 12/21/2026 (a).............. 1,979,830
3,503,925 Prudential Home Mtge. Securities, Ser. 1993-39,
Cl. A8, 6.50%, 10/25/2008........................ 3,478,259
Prudential Securities Secd. Fin. Corp.:
2,601,219 Ser. 1994-4, Cl. A1,
8.12%, 2/15/2025.................................. 2,648,418
3,912,685 Ser. 1998-C1, Cl. 1A1,
6.105%, 11/15/2002................................ 3,886,724
2,384,689 RMF Commercial Mtge. Pass-Through Certificates,
Ser. 1997-1, Cl. A1,
6.38%, 1/15/2019 (a)............................. 2,372,348
1,002,392 Saxon Mtge. Securities Corp.,
Ser. 1993-8A, Cl. 1A2, 7.375%, 9/25/2023......... 1,005,304
Structured Asset Securities Corp.:
7,000,000 Ser. 1996-CFL, Cl. C, 6.525%, 2/25/2028........... 6,983,025
3,319,494 Ser. 1997-C1, Cl. A,
6.28%, 8/25/2000.................................. 3,321,768
11,974,593 Ser. 1998-C2, Cl. E,
5.98%, 2/25/2001 (a).............................. 11,816,708
-------------
Total Collateralized Mortgage Obligations
(cost $98,277,370)............................... 97,593,438
-------------
MORTGAGE-BACKED SECURITIES - 13.1%
FHLMC
$ 232,545 6.00%, 12/1/2000.................................. $ 231,897
976,869 6.50%, 7/1/2004................................... 970,920
155,026 7.00%, 1/1/2000................................... 155,487
109,428 8.00%, 2/1/2000 - 4/1/2000........................ 111,582
FNMA
73,806 5.75%, 6/1/2017................................... 72,633
8,105,350 5.886%, 2/1/2031.................................. 7,929,626
2,933,269 6.00%, 11/1/2008.................................. 2,874,017
15,000,000 6.50%, 12/1/2099.................................. 14,718,750
24,000,000 7.00%, 12/1/2099.................................. 23,778,720
4,268,755 11.00%, 2/15/2025................................. 4,778,107
GNMA
10,000,000 7.50%, 12/15/2099................................. 10,031,200
5,856,444 8.05%, 6/15/2019 - 10/15/2020..................... 6,053,108
5,651,705 8.30%, 9/15/2019 - 1/15/2021...................... 5,854,876
1,199,855 9.20%, 4/15/2018 - 9/15/2018...................... 1,283,917
-------------
Total Mortgage-Backed Securities
(cost $79,208,670)............................... 78,844,840
-------------
U.S. TREASURY NOTES - 24.3%
15,000,000 5.625%, 5/15/2008+................................ 14,568,750
10,160,000 5.75%, 4/30/2003+................................. 10,147,300
37,470,000 6.125%, 8/15/2007+................................ 37,528,566
21,500,000 6.50%, 10/15/2006+................................ 21,983,750
29,500,000 6.625%, 5/15/2007+................................ 30,440,312
12,220,000 7.00%, 7/15/2006+................................. 12,834,825
17,695,000 7.875%, 11/15/2004+............................... 19,182,495
-------------
Total U. S. Treasury Notes (cost $147,688,581).... 146,685,998
-------------
U.S. AGENCY OBLIGATIONS - 9.9%
FHLB - 6.8%
2,000,000 5.45%, 10/19/2005................................. 1,895,934
3,050,930 5.467%, 2/19/2004................................. 2,990,826
5,000,000 5.72%, 8/25/2003.................................. 4,892,815
3,720,000 5.89%, 6/30/2008.................................. 3,530,712
5,000,000 5.905%, 3/27/2008................................. 4,759,330
778,953 6.043%, 4/28/2003................................. 780,900
5,000,000 6.07%, 8/28/2008.................................. 4,720,155
1,810,000 6.10%, 10/12/2000................................. 1,810,005
1,306,785 6.23%, 5/18/2005.................................. 1,311,751
4,000,000 6.54%, 12/12/2007................................. 3,887,084
10,000,000 7.70%, 9/20/2004.................................. 10,560,190
-------------
41,139,702
-------------
</TABLE>
44
<PAGE>
EVERGREEN
Select Fixed Income Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
U.S. AGENCY OBLIGATIONS - continued
FHLMC - 0.7%
$ 2,250,000 6.51%, 1/8/2007................................... $ 2,242,445
1,825,000 6.97%, 6/16/2005.................................. 1,814,785
-------------
4,057,230
-------------
FNMA - 2.4%
6,441,000 5.125%, 2/13/2004................................. 6,134,602
4,000,000 5.52%, 4/17/2002.................................. 3,929,036
4,495,000 6.95%, 11/13/2006................................. 4,462,267
-------------
14,525,905
-------------
Total U.S. Agency Obligations
(cost $61,405,368)............................... 59,722,837
-------------
YANKEE OBLIGATIONS - 4.9%
Banks - 4.2%
Korea Dev. Bank:
5,000,000 7.25%, 5/15/2006.................................. 4,712,145
5,000,000 7.375%, 9/17/2004................................. 4,872,000
14,865,000 Natl. Bank of Canada, Sr. Notes (Subord.), Ser. B,
8.125%, 8/15/2004................................ 15,589,520
-------------
25,173,665
-------------
Finance & Insurance - 0.2%
1,500,000 FBG Fin. Ltd., Sr. Notes,
6.75%, 11/15/2005 (a)............................ 1,457,550
-------------
Oil/Energy - 0.3%
1,625,000 Amoco Argentina Oil Co., MTN, 6.75%, 2/1/2007..... 1,621,736
-------------
Utilities - 0.2%
1,000,000 Hydro Quebec, MTN, 7.52%, 7/17/2003............... 1,027,302
-------------
Total Yankee Obligations (cost $29,627,201)....... 29,280,253
-------------
MUNICIPALS - 0.5%
3,000,000 Virginia Electric & Power Co., MTN, 6.30%,
6/21/2001........................................ 2,994,225
-------------
Total Municipals
(cost $3,000,000)................................ 2,994,225
-------------
COMMERCIAL PAPER - 25.2%
Aerospace & Defense - 4.2%
$25,000,000 TRW, Inc.,
5.54%, 10/29/1999*............................... $ 24,892,278
-------------
Banks - 0.4%
2,572,000 Natl. Cooperative Bank,
5.60%, 10/29/1999*............................... 2,560,798
-------------
Building, Construction & Furnishings - 4.1%
25,000,000 Conseco, Inc.,
5.60%, 10/29/1999*............................... 24,891,111
-------------
Chemical & Agricultural Products - 4.2%
25,000,000 Air Products & Chemicals, Inc.,
5.55%, 10/29/1999*............................... 24,892,083
-------------
Paper & Packaging - 4.1%
25,000,000 Georgia Pacific Corp., 5.60%, 10/29/1999*......... 24,891,111
-------------
Retailing & Wholesale - 4.1%
25,000,000 J.C. Penney Funding Corp., 5.60%, 10/29/1999*..... 24,891,111
-------------
Telecommunication Services & Equipment - 4.1%
25,000,000 AT&T Capital Corp., 5.75%, 10/29/1999*............ 24,888,194
-------------
Total Commercial Paper (cost $151,906,686)........ 151,906,686
-------------
REPURCHASE AGREEMENT - 3.1%
18,750,303 Societe Generale Repurchase Agreement 5.30%, dated
9/30/1999, due 10/1/1999 cost $18,750,303
maturity value $18,753,063 (b)................... 18,750,303
-------------
Total Investments -
(cost $807,272,107) ...................... 132.9% 800,894,286
Other Assets and Liabilities - net......... (32.9) (198,376,844)
----- -------------
Net Assets................................. 100.0% $ 602,517,442
===== =============
</TABLE>
(a) Securities that may be resold to "qualified institutional buyers" un-
der Rule 144A or securities offered pursuant to Section 4(2) of the
Securities Act of 1933, as amended. These securities have been deter-
mined to be liquid under guidelines established by the Board of
Trustees.
(b) Repurchase agreement is collateralized by $100,000 U.S. Treasury
Note, 6.25%, due 02/15/2008 with a value including accrued inter-
est, - $99,833 and $19,031,000 U.S. Treasury STRIPS, 3.625%, due
01/15/2008 with a value, including accrued interest, - $18,710,271.
+ A portion of these securities are on loan (see note 7).
* Represents collateral received for securities on loan.
Summary of Abbreviations:
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA General National Mortgage Association
MTN Medium Term Note
STRIPS Separate Trading of Registered Interest and Principal of Securi-
ties
See Combined Notes to Financial Statements.
45
<PAGE>
EVERGREEN
Select Income Plus Fund
Schedule of Investments
September 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 0.2%
Finance & Insurance - 0.2%
4,000 First Republic Preferred Capital Corp., Preferred,
Ser. A
(cost $4,000,000) (a)............................. $ 4,000,000
------------
ASSET-BACKED SECURITIES - 5.2%
$ 7,325,000 BankBoston Receivable
Asset-Backed Trust,
Ser. 1997-1, Cl. A8,
6.54%, 5/15/2009.................................. 7,324,231
3,542,081 Carco Auto Loan Master Trust,
Ser. 1997-1, Cl. A,
6.689%, 8/15/2004................................. 3,544,897
7,575,000 Case Equipment Receivable Trust, Ser. 1997-B, Cl.
A4,
6.41%, 9/15/2004.................................. 7,584,279
2,980,000 Contimortgage Home Equity Loan Trust,
Ser. 1997-2,Cl. A9,
7.09%, 4/15/2028.................................. 2,971,105
1,412,945 Continental Airlines, Inc.,
Ser. 1997-CI,
7.42%, 4/1/2007................................... 1,407,286
1,078,953 Corestates Home Equity Trust,
Ser. 1993-2, Cl. A,
5.10%, 3/15/2009.................................. 1,073,046
4,996,363 Empire Funding Home Loan Owner Trust,
Ser. 1998-1, Cl. A4,
6.64%, 12/25/2012................................. 4,885,069
40,625 FA Title I American Savings & Loan, 9.50%, 5/2/2002
(d)............................................... 40,625
1,865,763 First Plus Home Loan Trust,
Ser. 1997-2, Cl. A5,
6.82%, 4/10/2023.................................. 1,866,687
243,617 Harley-Davidson Eaglemark Motorcycle Trust,
Ser. 1997-3, Cl. A1,
5.98%, 12/15/2001................................. 243,221
2,058,377 Harley-Davidson Eaglemark Ownership Trust,
Ser. 1996-3, Cl. A2,
6.35%, 10/15/2002................................. 2,060,146
2,807,847 Heller Equipment Asset
Receivables Trust,
Ser. 1997-1, Cl. A2,
6.39%, 5/25/2005.................................. 2,811,764
10,000,000 Jet Equipment Trust,
Ser. A10,
9.41%, 6/15/2010.................................. 10,957,260
MBNA Master Credit Card Trust:
6,300,000 5.33%, 2/15/2006................................... 6,293,732
6,155,000 5.29%, 2/15/2005................................... 6,144,444
5,000,000 Paine Webber Mtge. Acceptance Corp.,
Ser. 1996-M1, Cl. E,
7.655%, 1/2/2012.................................. 4,917,187
Potomac Gtd. Fin. Corp.:
16,322,861 6.89%, 12/21/2026.................................. 16,116,948
5,250,000 7.22%, 12/21/2026.................................. 5,110,744
ASSET-BACKED SECURITIES - continued
$ 104,969 Sears Mtge. Securities Corp.,
Ser. 1998, Cl. PA 19,
10.36%, 7/25/2018 (d).............................. $ 104,969
2,862,898 Southwest Airlines Co.,
Ser. 1996-A Cl. A1,
7.67%, 1/2/2014.................................... 2,924,694
5,000,000 US Airways Pass Through Trust,
Ser. 1999-1, Cl. A,
8.36%, 7/20/2020................................... 4,968,675
832,202 Xerox Rental Equipment Trust,
Ser. 1996-A,
6.20%, 12/25/2005.................................. 830,641
------------
Total Asset-Backed Securities
(cost $94,015,813)................................. 94,181,650
------------
CORPORATE BONDS & NOTES - 32.7%
Aerospace & Defense - 0.9%
6,000,000 Raytheon Co., Deb.,
6.00%, 12/15/2010.................................. 5,382,306
10,480,000 United Technologies Corp.,
Notes,
7.00%, 9/15/2006................................... 10,510,182
------------
15,892,488
------------
Banks - 4.1%
5,000,000 Banq Paribas, New York,
Notes (Subord.),
6.95%, 7/22/2013................................... 4,614,960
7,500,000 Comerica, Inc.,
Notes (Subord.),
7.125%, 12/1/2013.................................. 7,366,942
6,200,000 Fleet Finl. Group Inc.,
Notes,
6.375%, 5/15/2008.................................. 5,827,988
8,540,000 Fleet Finl. Group Inc.,
Deb. (Subord.),
6.875%, 1/15/2028.................................. 7,595,553
1,150,000 FNBC Inc.,
Pass-Thru Certificates,
Ser. 1993-A,
8.08%, 1/5/2018.................................... 1,195,701
4,000,000 HUBCO Capital Trust II,
Ser. B,
7.65%, 6/15/2028................................... 3,674,320
59,000 Irving Bank Corp.,
Deb.,
8.50%, 6/1/2002.................................... 59,076
7,925,000 KeyCorp,
Notes (Subord.),
7.50%, 6/15/2006................................... 7,980,713
7,000,000 Mellon Capital I,
Ser. A,
7.72%, 12/1/2026................................... 6,597,752
10,000,000 NationsBank Corp.,
Sr. Notes,
5.75%, 3/15/2001................................... 9,913,270
5,000,000 NCNB TX Natl. Bank of Dallas,
9.50%, 6/1/2004.................................... 5,541,135
11,000,000 PNC Inc., Institutional Capital
Trust B,
Spl. Purpose,
8.315%, 5/15/2027 (a).............................. 10,723,691
</TABLE>
46
<PAGE>
EVERGREEN
Select Income Plus Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Banks - continued
$ 3,000,000 SFFED Corp.,
Sr. Deb.,
11.20%, 9/1/2004 (a)............................... $ 3,389,649
------------
74,480,750
------------
Brokers - 2.5%
6,315,000 Donaldson Lufkin & Jenrette Securities, Inc.,
6.50%, 6/1/2008.................................... 5,913,309
Lehman Brothers Holdings Inc.:
5,000,000 6.00%, 2/26/2001.................................... 4,959,415
12,000,000 7.50%, 9/1/2006..................................... 11,949,492
4,600,000 Merrill Lynch & Co., Inc.,
8.40%, 11/1/2019................................... 4,874,372
12,250,000 Morgan Stanley Dean Witter,
5.25%, 2/8/2001.................................... 12,096,630
5,000,000 Paine Webber Group Inc.,
Sr. Notes,
6.50%, 11/1/2005................................... 4,768,495
3,558 Salomon Brothers Mtge. Securities
IV, Inc.,
10.25%, 4/1/2016 (d)............................... 3,558
------------
44,565,271
------------
Building, Construction & Furnishings - 1.1%
10,000,000 Masco Corp.,
Sr. Notes,
7.75%, 8/1/2029.................................... 9,972,520
10,000,000 Owens-Corning Inc.,
Notes,
7.50%, 5/1/2005.................................... 9,764,430
------------
19,736,950
------------
Building Products - 0.3%
5,000,000 Cemex S.A.
Notes,
9.625%, 10/1/2009.................................. 4,964,100
------------
Cable/Other Video
Distribution - 0.4%
6,910,000 Comcast Cable Communications I,
Sr. Notes,
6.20%, 11/15/2008.................................. 6,345,453
------------
Chemical & Agricultural
Products - 0.5%
4,000,000 Freeport McMoran Resource Partners,
Sr. Notes,
7.00%, 2/15/2008................................... 3,775,188
5,000,000 Millenium America Inc.,
Sr. Notes,
7.00%, 11/15/2006.................................. 4,596,090
------------
8,371,278
------------
Commercial Services - 0.3%
5,000,000 Federal Express Corp.,
9.65%, 6/15/2012................................... 5,873,370
------------
CORPORATE BONDS - continued
Communication Systems & Services - 0.5%
$10,000,000 Metromedia Fiber Network, Inc.,
Sr. Notes,
10.00%, 11/15/2008................................. $ 9,700,000
------------
Consumer Products &
Services - 0.5%
8,750,000 Procter & Gamble Co.,
Notes,
6.875%, 9/15/2009.................................. 8,786,383
------------
Electrical Equipment &
Services - 0.6%
7,000,000 Central VT Pub. Svcs. Corp.,
8.125%, 8/1/2004................................... 6,910,638
5,000,000 Texas Instruments, Inc.,
Notes,
6.125%, 2/1/2006................................... 4,704,965
------------
11,615,603
------------
Finance & Insurance - 5.0%
8,365,000 Associates Corp. of North America,
Sr. Notes,
5.80%, 4/20/2004................................... 8,042,939
5,000,000 Capital One Finl. Corp.,
Sr. Notes,
7.25%, 5/1/2006.................................... 4,778,655
10,000,000 Citigroup Capital II,
7.75%, 12/1/2036................................... 9,475,050
3,000,000 ERP Operating L.P.,
6.63%, 4/13/2015................................... 2,824,011
Ford Motor Credit Co.:
5,000,000 6.70%, 7/16/2004.................................... 4,973,775
3,500,000 8.00%, 6/15/2002.................................... 3,625,828
10,000,000 Heller Finl. Inc.,
Notes,
6.00%, 3/19/2004................................... 9,591,420
20,000,000 Household Fin. Corp.,
Notes,
7.20%, 7/15/2006................................... 19,994,000
10,000,000 Loews Corp.,
Sr. Notes,
7.00%, 10/15/2023.................................. 8,735,840
6,100,000 Macsaver Finl. Svcs. Inc.,
Deb.,
7.60%, 8/1/2007.................................... 4,178,500
6,265,000 Mellon Capital II,
Ser. B,
7.995%, 1/15/2027.................................. 6,057,259
8,097,438 Topaz Ltd.,
Ser. 1997-1,
6.92%, 3/10/2007 (a)............................... 8,126,184
750,000 Wesco Finl. Corp.,
Notes,
8.875%, 11/1/1999.................................. 751,825
------------
91,155,286
------------
</TABLE>
47
<PAGE>
EVERGREEN
Select Income Plus Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Food & Beverage Products - 0.8%
$ 7,000,000 Coca Cola Enterprises, Inc.,
Notes,
7.875%, 2/1/2002.................................. $ 7,226,751
6,805,000 Philip Morris Co., Inc.,
(Eff. Yield 6.15%),
0.00%, 3/15/2000 (c).............................. 6,820,243
------------
14,046,994
------------
Forest Products - 0.3%
5,391,000 Weyerhaeuser Co.,
6.95%, 8/1/2017................................... 5,093,681
------------
Gaming - 0.2%
4,000,000 Circus Circus Enterprises Inc., 7.625%, 7/15/2013.. 3,390,000
------------
Machinery - Diversified - 1.0%
12,165,000 Caterpillar Inc.,
Sr. Deb.,
7.25%, 9/15/2009.................................. 12,234,024
5,000,000 Deere & Co.,
8.95%, 6/15/2019.................................. 5,744,435
------------
17,978,459
------------
Oil/Energy - 2.3%
6,500,000 Atlantic Richfield Co.,
Deb.,
9.00%, 4/1/2021................................... 7,610,395
15,000,000 Occidental Petroleum Corp.,
Sr. Notes,
8.45%, 2/15/2029.................................. 15,731,235
2,500,000 Suburban Propane Partners, L.P.,
Sr. Notes,
7.54%, 6/30/2011.................................. 2,580,250
10,000,000 Texaco Capital, Inc.,
Notes,
5.50%, 1/15/2009.................................. 9,018,050
6,000,000 Transocean Offshore Inc.,
Notes,
7.45%, 4/15/2027.................................. 6,026,118
------------
40,966,048
------------
Paper & Packaging - 1.2%
10,000,000 Fort James Corp.,
Sr. Notes,
6.625%, 9/15/2004................................. 9,863,180
5,000,000 Georgia Pacific Corp.,
Deb.,
7.70%, 6/15/2015.................................. 4,934,665
8,000,000 Westvaco Corp.,
7.75%, 2/15/2023.................................. 7,963,488
------------
22,761,333
------------
Printing, Publishing, Broadcasting &
Entertainment - 1.0%
1,132,000 Belo (A.H.) Corp.,
Sr. Notes,
6.875%, 6/1/2002.................................. 1,123,455
Time Warner, Inc.:
4,000,000 6.88%, 6/15/2018................................... 3,694,480
CORPORATE BONDS - continued
Printing, Publishing, Broadcasting &
Entertainment - continued
$ 8,355,000 8.11%, 8/15/2006................................... $ 8,671,103
5,000,000 8.18%, 8/15/2007................................... 5,249,355
------------
18,738,393
------------
Retailing & Wholesale - 1.6%
3,500,000 Dayton Hudson Corp.,
Notes,
5.875%, 11/1/2008................................. 3,216,007
6,000,000 Dillards Inc.,
Notes,
6.08%, 8/1/2000................................... 5,965,362
12,000,000 Kroger Co.,
6.00%, 1/1/2000................................... 11,974,800
8,000,000 Wal Mart Stores Inc.,
Notes,
6.875%, 8/10/2009................................. 8,027,848
------------
29,184,017
------------
Telecommunication Services & Equipment - 4.2%
5,000,000 Airtouch Communications, Inc.,
Notes,
7.00%, 10/1/2003.................................. 5,021,950
6,935,000 AT&T Corp.,
Notes,
6.50%, 3/15/2029.................................. 6,138,168
2,727,412 Bellsouth Savings & Employee Stock Option Trust,
Ser. A,
9.125%, 7/1/2003.................................. 2,881,399
GTE Corp.:
5,000,000 9.38%, 12/1/2000................................... 5,171,110
7,500,000 6.36%, 4/15/2006................................... 7,292,520
10,500,000 Qwest Communications Int'l., Inc.,
Sr. Notes,
7.50%, 11/1/2008.................................. 10,421,250
10,000,000 Sprint Capital Corp.,
Notes,
6.90%, 5/1/2019................................... 9,312,960
5,000,000 Sprint Spectrum, L.P.,
Sr. Notes,
11.00%, 8/15/2006 5,625,000
6,375,000 Tele-Communications, Inc.,
7.25%, 8/1/2005................................... 6,479,340
Worldcom, Inc.:
12,510,000 6.40%, 8/15/2005................................... 12,224,159
5,000,000 6.95%, 8/15/2028................................... 4,665,980
------------
75,233,836
------------
Transportation - 1.6%
4,000,000 AMERCO,
Sr. Notes,
7.20%, 4/1/2002................................... 3,935,988
10,000,000 CSX Corp.,
8.10%, 9/15/2022.................................. 10,180,790
U.S. West Capital Funding, Inc.:
10,000,000 6.25%, 7/15/2005................................... 9,514,830
5,000,000 6.38%, 7/15/2008................................... 4,666,995
------------
28,298,603
------------
</TABLE>
48
<PAGE>
EVERGREEN
Select Income Plus Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Utilities - Electric - 1.8%
$ 3,000,000 Carolina Power & Light Co.,
8.625%, 9/15/2021................................. $ 3,303,240
10,000,000 Cmnwlth. Edison Co.,
Notes,
7.625%, 1/15/2007................................. 10,195,860
10,000,000 Duke Capital Corp.,
Sr. Notes,
7.25%, 10/1/2004.................................. 10,037,490
8,500,000 Niagara Mohawk Power Corp.,
Sr. Notes, Ser. G,
7.75%, 10/1/2008.................................. 8,629,829
------------
32,166,419
------------
Total Corporate Bonds & Notes
(cost $604,357,336)............................... 589,344,715
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 1.4%
FHLMC:
3,500,000 5.85%, 1/25/2019................................... 3,440,623
4,559,153 6.50%, 4/15/2018................................... 4,577,914
5,770,000 6.75%, 3/15/2007................................... 5,802,918
FNMA:
4,120,000 6.50%, 3/25/2019................................... 4,067,944
7,724,000 7.75%, 9/25/2022................................... 7,788,635
------------
Total Collateralized Mortgage Obligations (cost
$25,267,532)...................................... 25,678,034
------------
MORTGAGE-BACKED SECURITIES - 2.0%
FHLMC:
1,790,265 5.50%, 4/1/2006.................................... 1,708,163
5,000,000 6.24%, 10/6/2004................................... 4,962,705
1,209,298 6.50%, 11/1/1999................................... 1,211,378
2,000,000 6.75%, 5/30/2006................................... 2,023,742
8,250,000 7.00%, 9/15/2007................................... 8,195,426
4,555,123 7.50%, 5/1/2009 - 10/1/2010........................ 4,636,341
2,804,299 8.00%, 7/1/2025.................................... 2,874,463
38,568 11.88%, 6/15/2013.................................. 40,565
9,895,005 GNMA,
6.50%, 4/20/2029.................................. 9,442,506
------------
Total Mortgage-Backed Securities (cost
$35,682,597)...................................... 35,095,289
------------
U.S. AGENCY OBLIGATIONS - 18.1%
FFCB:
2,000,000 5.75%, 2/9/2005.................................... 1,930,220
7,000,000 6.37%, 10/30/2007.................................. 6,891,283
2,000,000 7.60%, 7/24/2006................................... 2,085,402
1,091,332 FHA
Puttable Project Loan 64,
7.43%, 1/1/2024................................... 1,112,433
FHLB:
10,000,000 5.38%, 3/2/2001.................................... 9,918,030
2,000,000 5.50%, 1/21/2003................................... 1,955,860
10,000,000 5.62%, 1/27/2003................................... 9,811,440
10,000,000 5.75%, 4/30/2001................................... 9,961,120
5,000,000 5.82%, 7/13/2005................................... 4,840,180
5,000,000 6.50%, 11/29/2005.................................. 4,998,505
U.S. AGENCY OBLIGATIONS - continued
Finl. Assistance Corp.:
$17,500,000 8.80%, 6/10/2005.................................... $ 19,419,838
5,000,000 9.38%, 7/21/2003.................................... 5,499,430
FNMA:
37,170,000 5.13%, 2/13/2004.................................... 35,401,823
2,000,000 6.29%, 2/11/2002.................................... 2,005,614
5,000,000 6.38%, 1/16/2002.................................... 5,028,810
15,099,000 6.38%, 6/15/2009.................................... 14,781,423
8,873,876 6.50%, 8/1/2010 - 9/1/2010.......................... 8,764,931
11,653,838 7.00%, 11/1/2026.................................... 11,525,529
16,691,099 7.50%, 6/1/2002 - 5/1/2027.......................... 16,810,211
GNMA:
26,332,216 6.00%, 4/15/2011 - 1/20/2029........................ 24,515,847
42,708,200 6.50%, 2/15/2009 - 5/15/2028........................ 41,047,752
20,593,202 7.00%, 2/15/2011 - 5/15/2027........................ 20,332,671
26,551,295 7.50%, 9/15/2025 - 6/15/2027........................ 26,695,071
9,041,205 8.00%, 6/15/2026 - 12/15/2026....................... 9,260,093
5,930,988 8.25%, 7/15/2008 - 5/15/2020........................ 6,174,281
373,269 8.50%, 7/15/2021.................................... 388,799
6,197,378 9.00%, 5/15/2016 - 10/15/2021....................... 6,537,916
1,381,200 9.50%, 8/15/2018 - 12/15/2020....................... 1,484,333
37,790 11.50%, 5/15/2013 - 6/15/2013....................... 42,652
Private Export Funding Corp.:
10,000,000 7.30%, 1/31/2002.................................... 10,251,540
2,000,000 7.90%, 3/31/2000.................................... 2,022,398
5,000,000 6.90%, 1/31/2003.................................... 5,096,140
------------
Total U.S. Agency Obligations
(cost $328,847,764)................................ 326,591,575
------------
U.S. TREASURY OBLIGATIONS - 29.3%
U.S. Treasury Bonds:
75,000,000 5.50%, 8/15/2028.................................... 67,148,475
22,301,000 6.50%, 11/15/2026................................... 22,663,391
25,000,000 7.50%, 11/15/2016................................... 27,687,500
10,000,000 8.00%, 11/15/2021................................... 11,818,750
44,454,000 8.13%, 8/15/2019 - 8/15/2021........................ 53,034,747
15,000,000 8.75%, 5/15/2020.................................... 18,876,570
8,500,000 8.88%, 2/15/2019.................................... 10,741,875
15,000,000 9.00%, 11/15/2018................................... 19,139,070
15,000,000 11.25%, 2/15/2015................................... 22,007,820
U.S. Treasury Notes:
1,500,000 5.50%, 5/15/2009.................................... 1,450,782
9,700,000 5.63%, 11/30/2000................................... 9,718,187
97,338,000 5.75%, 10/31/2002 - 8/15/2003....................... 97,184,708
5,000,000 6.25%, 2/28/2002.................................... 5,062,500
95,000,000 7.00%, 7/15/2006.................................... 99,779,735
10,000,000 7.25%, 5/15/2004.................................... 10,550,000
10,000,000 7.50%, 11/15/2001................................... 10,365,630
25,000,000 7.88%, 11/15/2004................................... 27,101,575
14,340,000 8.00%, 5/15/2001.................................... 14,859,825
------------
Total U.S. Treasury Obligations
(cost $530,322,932)................................ 529,191,140
------------
</TABLE>
49
<PAGE>
EVERGREEN
Select Income Plus Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
YANKEE OBLIGATIONS - 7.0%
Banks - 1.7%
$ 2,000,000 Banco Santiago, S.A.,
7.00%, 7/18/2007................................ $ 1,764,846
Korea Development Bank
8,000,000 7.25%, 5/15/2006................................. 7,539,432
8,000,000 7.38%, 9/17/2004................................. 7,795,200
2,982,000 Skandinaviska Enskilda Banken, 6.875%,
2/15/2009....................................... 2,803,942
5,000,000 Svenska Handelsbanken,
8.35%, 7/15/2004................................ 5,196,075
5,000,000 Westpac Banking Co.,
9.125%, 8/15/2001............................... 5,224,825
--------------
30,324,320
--------------
Finance & Insurance - 0.9%
6,000,000 FBG Fin. Ltd.,
6.75%, 11/15/2005............................... 5,830,200
5,000,000 Ford Capital B.V.,
9.875%, 5/15/2002............................... 5,385,785
5,000,000 Santander Fin. Issuances,
6.375%, 2/15/2011............................... 4,478,315
--------------
15,694,300
--------------
Government - 1.8%
10,000,000 Manitoba (Province of), Canada, 8.00%,
4/15/2002....................................... 10,371,600
7,500,000 Ontario Hydro Corp.,
7.45%, 3/31/2013................................ 7,738,425
Quebec Province, Canada
8,200,000 8.80%, 4/15/2003................................. 8,746,366
5,250,000 5.75%, 2/15/2009................................. 4,794,195
--------------
31,650,586
--------------
Leisure & Tourism - 0.4%
8,060,000 Royal Caribbean Cruises Ltd.,
7.50%, 10/15/2027............................... 7,296,468
--------------
YANKEE OBLIGATIONS - continued
Metals & Mining - 0.4%
$ 7,854,000 Barrick Gold Corp.,
7.50%, 5/1/2007................................. $ 7,858,579
--------------
Oil/Energy - 0.9%
15,000,000 Petro-Canada Ltd.,
8.60%, 1/15/2010................................ 17,102,400
--------------
Paper & Packaging - 0.3%
5,000,000 Celulosa Arauco Y Constitucion, 7.20%,
9/15/2009....................................... 4,472,655
--------------
Utilities - Electric - 0.6%
11,500,000 Fletcher Challenge Capital Canada Inc.,
7.875%, 3/24/2017............................... 11,246,218
--------------
Total Yankee Obligations
(cost $124,430,913)............................. 125,645,526
--------------
MUTUAL FUND SHARES - 0.0%
222,012 Valiant General Money Market
Fund
(cost $222,012)................................. 222,012
--------------
REPURCHASE AGREEMENT - 0.4%
$ 7,101,954 Societe Generale Repurchase Agreement,
5.30%, dated 9/30/1999, due 10/1/1999 cost
$7,101,954 maturity value $7,103,000 (b)........ 7,101,954
--------------
Total Investments -
(cost $1,754,248,853)..................... 96.3% 1,737,051,895
Other Assets and
Liabilities - net......................... 3.7 68,028,014
----- --------------
Net Assets................................. 100.0% $1,805,079,909
===== ==============
</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 $7,208,000 U.S. Treasury STRIPS,
due 1/15/2008 with a value, including accrued interest, of $7,228,254 and
$30,000 U.S. Treasury Notes, due 2/15/2003 with a value, including accrued
interest of $30,549.
(c) Effective yield (calculated at date of purchase) is the annual yield at
which the bond accrues until its maturity date.
(d) No market quotation available. Valued at fair value as determined in good
faith under procedures established by the Fund's Board of Trustees.
Summary of Abbreviations:
FFCB Federal Farm Credit Bank
FHA Federal Housing Authority
FHLB Federal Home Loan Banks
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA General National Mortgage Association
STRIPS Separate Trading of Registered Interest and Principal of Securi-
ties
See Combined Notes to Financial Statements.
50
<PAGE>
EVERGREEN
Select Intermediate Term Municipal Bond Fund
Schedule of Investments
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - 96.5%
Alabama - 0.5%
$ 3,640,000 Alabama Spl. Care Facs. Fin.
Auth. RB, Hosp. Charity Obl.
Group, Ser. D,
4.95%, 11/1/2014, (COLL: U.S. Government
Securities)....................................... $ 3,577,792
------------
Alaska - 0.5%
3,750,000 Alaska IDA RB, Ser. A,
5.70%, 4/1/2011, (MBIA)........................... 3,780,075
------------
Arizona - 0.5%
3,660,000 Phoenix, AZ SFHRB, Ser. A,
6.60%, 12/1/2029, (COLL: GNMA/FNMA)............... 3,910,051
------------
Arkansas - 0.5%
3,000,000 Arkansas Student Loan Auth.
RB, Ser. B,
7.25%, 6/1/2009................................... 3,298,350
------------
California - 5.8%
7,150,000 California Statewide CDA
5.20%, 12/1/2029.................................. 6,926,992
10,000,000 California Student Loan RB,
Ser. D,
6.50%, 6/1/2005................................... 10,450,300
1,700,000 Delta Cnty, CA SFHRB, Ser. A,
6.70%, 6/1/2024, (MBIA)........................... 1,833,144
4,000,000 Foothill/Eastern Corridor
Agcy., CA Toll Road RB, Sr.
Lien, Ser. A,
6.50%, 1/1/2032................................... 4,453,400
Foothill/Eastern Trans. Corridor:
3,885,000 5.00%, 1/15/2005................................... 3,938,768
5,815,000 5.00%, 1/15/2006................................... 5,867,684
4,210,000 Palmdale, CA SFHRB, Ser. A
8.00%, 9/1/2011, (COLL: FHA)...................... 5,264,352
San Franciso Bay Area Transit
Auth. RB,
Bridge Toll Notes:
1,500,000 5.25%, 8/1/2004, (ACA)............................. 1,536,525
1,000,000 5.50%, 8/1/2005, (ACA)............................. 1,032,620
------------
41,303,785
------------
Colorado - 6.2%
4,000,000 Arapahoe Cnty., CO Capital
Impt. Hwy. RB, Prerefunded,
6.90%, 8/31/2015, (COLL: U.S.
Government Securities)............................ 4,556,560
Colorado HFA, SFHRB:
3,500,000 Sr. Ser. A2,
6.60%, 5/1/2028.................................... 3,614,835
1,000,000 Sr. Ser. A3,
6.05%, 10/1/2016................................... 1,044,870
2,250,000 Sr. Ser. C2,
6.875%, 11/1/2028.................................. 2,405,452
1,000,000 Sr. Ser. C3,
6.75%, 5/1/2017.................................... 1,066,120
2,000,000 Sr. Ser. D3,
6.125%, 11/1/2023.................................. 2,043,500
MUNICIPAL OBLIGATIONS - continued
Colorado - continued
$ 1,105,000 Colorado Student Obl. Bond
Auth., Student Loan RB, Ser. B,
6.55%, 12/1/2002.................................. $ 1,131,255
Denver CO City & Cnty. Spl. Facs. RB:
3,025,000 Ser A,
6.00%, 1/1/2011, (MBIA)............................ 3,155,529
1,000,000 Ser. B,
6.50%, 12/1/2002, (MBIA)........................... 1,053,940
3,485,000 Larimer Cnty. CO GO, Sch.
Dist. No. R1,
8.50%, 12/15/2008, (MBIA)......................... 4,368,587
19,000,000 United Airlines Proj., Ser. A,
6.875%, 10/1/2032, (MBIA)......................... 19,515,660
------------
43,956,308
------------
Connecticut - 1.0%
Connecticut Dev. Auth., Mtge. RB, Church Homes Inc.
Hlth. Care Proj.:
340,000 4.65%, 4/1/2000.................................... 340,133
425,000 4.90%, 4/1/2002.................................... 424,503
925,000 5.00%, 4/1/2003.................................... 922,447
1,220,000 5.40%, 4/1/2007.................................... 1,209,849
2,035,000 5.70%, 4/1/2012.................................... 1,917,011
2,550,000 5.80%, 4/1/2021.................................... 2,355,868
------------
7,169,811
------------
Delaware - 0.4%
3,000,000 Delaware Solid Wst. Sys. RB,
Ser. A,
6.75%, 7/1/2003................................... 3,108,990
------------
Florida - 2.2%
6,475,000 Florida Division Bond Fin.
Dept. RB
5.75%, 7/1/2010, (AMBAC).......................... 6,712,309
1,080,000 Halifax, FL Hosp. Med. Ctr. Hlth. Care Facs. RB,
Ser. A,
4.60%, 4/1/2008, (ACA)............................ 1,007,867
Palm Beach Cnty., FL Hlth. Facs. Auth. RB:
Abbey DelRay South Proj.:
675,000 4.35%, 10/1/1999................................... 675,000
700,000 4.50%, 10/1/2000................................... 700,014
750,000 4.65%, 10/1/2001................................... 747,900
805,000 4.80%, 10/1/2002................................... 802,199
775,000 5.00%, 10/1/2003................................... 773,969
850,000 5.00%, 10/1/2004................................... 844,917
930,000 5.10%, 10/1/2005................................... 921,667
500,000 5.30%, 10/1/2007................................... 494,010
Waterford Proj.:
475,000 4.35%, 10/1/1999................................... 475,000
675,000 4.50%, 10/1/2000................................... 675,013
725,000 4.65%, 10/1/2001................................... 722,970
------------
15,552,835
------------
</TABLE>
51
<PAGE>
EVERGREEN
Select Intermediate Term Municipal Bond Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Georgia - 1.7%
$ 1,500,000 Coffee Cnty., GA Hosp. Auth. RAN,
6.75%, 12/1/2026.................................. $ 1,509,165
11,695,000 Fulton Cnty., GA Dev. Auth. Spl. RB, Delta Airlines
Inc. Proj.,
5.30%, 5/1/2013................................... 10,930,732
------------
12,439,897
------------
Hawaii - 0.4%
2,500,000 Hawaii Dept. of Budget & Fin., Spl. Purpose RB, The
Queens Hlth. Sys. Group, Ser. A,
6.05%, 7/1/2016................................... 2,526,775
------------
Illinois - 7.0%
3,500,000 Chicago, IL O'Hare Int'l. Arpt., Spl. Fac. RB,
United Airlines Proj., Ser. B
5.20%, 4/1/2011................................... 3,253,250
1,770,000 Chicago, IL SFHRB, Ser. A,
4.70%, 10/1/2017, (COLL: GNMA/FNMA)............... 1,766,159
Illinois Dev. Fin. Auth. PCRB Cmmnwlth. Ed.:
4,000,000 5.30%, 1/15/2004................................... 4,112,360
400,000 Ser. A,
7.60%, 3/1/2014.................................... 412,536
Illinois Dev. Fin. Auth. RB:
Community Rehabilitation Providers,
Ser. A:
2,540,000 5.70%, 7/1/2007.................................... 2,545,741
3,490,000 5.80%, 7/1/2008.................................... 3,529,716
Lockport Sch. Dist.:
2,510,000 5.00%, 7/1/2006.................................... 2,388,114
Illinois Edl. Facs. Auth. RB
Mercy Hosp.:
4,820,000 10.00%, 1/1/2015................................... 6,473,163
10,705,000 Ser. A,
5.50%, 7/1/2009.................................... 10,303,884
1,580,000 Illinois Hsg. Dev. Auth. RB, Ser. D-2, 5.00%,
8/1/2019.......................................... 1,567,329
12,500,000 Illinois Sales Tax RB, Ser. Q,
6.00%, 6/15/2012, (MBIA-IBC)...................... 13,229,250
------------
49,581,502
------------
Indiana - 3.8%
Indiana Hlth. Facs. Fin. Auth., Hosp. RB
Charity Obl. Group, Ser. D:
6,875,000 5.00%, 11/1/2026, (MBIA)........................... 6,752,831
1,000,000 5.50%, 11/15/2008.................................. 1,021,510
1,070,000 5.50%, 11/15/2009.................................. 1,086,532
4,215,000 5.75%, 11/15/2014.................................. 4,218,330
1,075,000 Indiana Hsg., SFHRB,
Ser. B1,
7.55%, 7/1/2010, (COLL: GNMA)..................... 1,107,658
8,615,000 Indianapolis, IN, Arpt. Auth.
RB, Spl. Facs. United Air
Lines Proj., Ser. A,
6.50%, 11/15/2031................................. 8,676,253
MUNICIPAL OBLIGATIONS - continued
Indiana - continued
$ 4,000,000 Wabash, IN, Solid Wst.
Disposal RB, JSC Proj,
7.50%, 6/1/2026,
(Gtd. by JSC, Inc.)................................ $ 4,315,520
------------
27,178,634
------------
Kansas - 1.5%
5,000,000 Burlington, KS Env. Impt. RB
4.50%, 3/1/2000.................................... 4,964,400
Sedgwick & Shawnee Cnty., KS
SFHRB:
1,810,000 Ser. A,
6.70%, 6/1/2029, (COLL: GNMA)....................... 1,908,229
3,635,000 Ser. A1,
5.15%, 12/1/2013, (COLL: GNMA)...................... 3,593,343
------------
10,465,972
------------
Louisiana - 1.0%
East Baton Rouge, LA, Sales &
Use Tax RB, Ser. ST:
1,760,000 8.00%, 2/1/2002, (FGIC)............................. 1,898,107
1,920,000 8.00%, 2/1/2003, (FGIC)............................. 2,122,080
Jefferson Parish, LA Sinking
Fund Mtge. RB
Ser. B1:
750,000 5.00%, 12/1/2012, (COLL: GNMA)...................... 726,045
2,000,000 6.75%, 6/1/2030, (COLL: GNMA)....................... 2,142,600
------------
6,888,832
------------
Maryland - 1.6%
2,670,000 Frederick Cnty., MD, Spl.
Obl., Spl. Tax, Urbana
Community Dev. Auth.,
6.25%, 7/1/2010.................................... 2,572,679
10,000,000 Northeast, MD, Wst. Disposal
Resources RB, Baltimore Resco
Retrofit Proj.,
5.00%, 1/1/2012, (COLL: FNMA)...................... 8,810,800
------------
11,383,479
------------
Massachusetts - 2.2%
6,095,000 Massachusetts HFA RB Hsg. Proj.,
5.95%, 10/1/2008, (AMBAC).......................... 6,314,298
2,000,000 Residential Dev.,
6.35%, 5/15/2003, (COLL: FNMA)..................... 2,087,700
8,165,000 Massachusetts Hlth. & Edl.
Facs. Auth. RB, Caritas
Christi Obl. Group A,
5.70%, 7/1/2015.................................... 7,609,780
------------
16,011,778
------------
Michigan - 1.7%
5,715,000 Dickinson Cnty., MI Hlth. Care RB
5.50%, 11/1/2013................................... 5,220,081
335,000 Kalamazoo, MI Hosp. Fin. Auth.
RB, Ser. A,
6.25%, 7/1/2004, (FGIC)............................ 335,670
3,000,000 Michigan Bldg. Auth. RB,
Refunding Facs. Program, Ser. 1,
4.625%, 10/15/2021................................. 2,868,060
</TABLE>
52
<PAGE>
EVERGREEN
Select Intermediate Term Municipal Bond Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Michigan - continued
$ 4,300,000 Michigan Strategic Fund, RB,
United Wst. Sys. Proj.,
5.20%, 4/1/2010................................... $ 4,004,676
------------
12,428,487
------------
Minnesota - 0.2%
Minnesota HFA, SFHRB
Ser. C:
495,000 6.80%, 7/1/2011.................................... 510,162
685,000 7.10%, 7/1/2011, (FHA)............................. 708,865
------------
1,219,027
------------
Mississippi - 3.5%
10,750,000 Mississippi Business Fin.
Corp. Solid Wst. Disposal RB,
Phosphates Corp. Proj.,
5.80%, 3/1/2022................................... 9,980,945
4,855,000 Mississippi Gulf Coast, Reg'l.
Waste Wtr. Auth. RB
7.00%, 7/1/2012, (COLL: U.S. Government
Securities)....................................... 5,542,322
Mississippi Home Corp. SFHRB:
2,000,000 Class 6, Ser. A,
5.25%, 6/1/2031, (COLL: GNMA/FNMA)................. 2,078,640
7,230,000 Ser. H,
6.70%, 12/1/2029, (COLL: GNMA/FNMA)................ 7,511,681
------------
25,113,588
------------
Missouri - 1.6%
5,230,000 Missouri Hsg. Dev. Commission
Mtge., SFHRB, Ser. E1,
6.45%, 9/1/2029, (COLL: GNMA/FNMA)................ 5,578,736
3,000,000 Missouri Office Bldg., Spl.
Obl.
6.00%, 12/1/2002.................................. 3,106,860
2,395,000 Missouri SFHRB, Ser. B2,
6.40%, 9/1/2029, (COLL: GNMA/FNMA)................ 2,552,615
------------
11,238,211
------------
Nevada - 0.0%
315,000 Nevada Hsg. Division SFHRB,
Ser. A1
7.55%, 10/1/2010.................................. 322,380
------------
New Hampshire - 1.8%
13,000,000 New Hampshire Business PCRB,
Refunding United Illumination Proj.,
4.55%, 7/1/2027................................... 12,687,220
------------
New Jersey - 6.4%
1,000,000 Cherry Hill Township NJ,
5.80%, 6/1/2004................................... 1,050,820
2,000,000 Howell Township, NJ GO
6.40%, 1/1/2003, (COLL: U.S. Government
Securities) (FGIC)................................ 2,120,320
MUNICIPAL OBLIGATIONS - continued
New Jersey - continued
New Jersey EDA, RB:
$16,525,000 Continental Airlines, Inc. Proj.,
6.625%, 9/15/2012, (FHA)........................... $ 17,396,859
Franciscan Oaks Proj.:
3,620,000 5.60%, 10/1/2012................................... 3,455,688
5,685,000 5.70%, 10/1/2017................................... 5,223,435
900,000 Keswick Pines Proj.,
5.60%, 1/1/2012.................................... 855,585
The Evergreens:
3,380,000 5.875%, 10/1/2012.................................. 3,348,228
680,000 6.00%, 10/1/2017................................... 663,932
3,325,000 6.00%, 10/1/2022................................... 3,204,668
New Jersey Hsg. & Mtge. Fin.
Agcy. RB:
3,650,000 Home Buyer AA,
5.10%, 10/1/2006, (MBIA)........................... 3,637,261
1,650,000 Ser. 1,
6.45%, 11/1/2007................................... 1,728,458
1,000,000 New Jersey Hwy. Auth. RB
6.25%, 1/1/2014.................................... 1,048,060
500,000 New Jersey Turnpike Auth.
Turnpike RB, Ser. C,
6.30%, 1/1/2004.................................... 516,120
160,000 New Jersey Waste Wtr.
Treatment Trust RB
6.80%, 6/15/2002................................... 163,986
1,000,000 Rutgers St. Univ. RB, Ser. R,
6.40%, 5/1/2008.................................... 1,062,660
------------
45,476,080
------------
New York - 12.5%
7,000,000 Metropolitan Trans. Auth. of
NY RB, Ser. A,
6.10%, 7/1/2026, (FSA)............................. 7,680,260
8,000,000 New York City Muni. Wtr. Fin.
Auth., Wtr. & Swr. Sys. RB,
Ser. B,
6.25%, 6/15/2020................................... 8,769,120
13,000,000 New York Dormitory Auth. RB,
Ser. A,
5.50%, 5/15/2013................................... 13,061,100
1,000,000 New York Env. Facs. RB, 7.05%, 6/15/2004............ 1,065,810
1,000,000 New York Local Govt. Assist
RB, Ser. A,
7.125%, 4/1/2011................................... 1,062,620
2,250,000 New York Muni. Bond Bank RB,
Ser. A,
6.875%, 3/15/2006.................................. 2,372,670
6,045,000 New York Urban Dev. Corp. RB
5.75%, 7/1/2009.................................... 6,353,960
New York, NY GO:
14,490,000 Ser. 1992-B,
7.50%, 2/1/2006..................................... 15,599,209
Ser. A:
10,535,000 5.875%, 8/1/2003................................... 11,009,180
2,500,000 6.25%, 8/1/2010.................................... 2,654,800
3,000,000 6.25%, 8/1/2011.................................... 3,166,260
</TABLE>
53
<PAGE>
EVERGREEN
Select Intermediate Term Municipal Bond Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
New York - continued
$ 5,795,000 Ser. C,
6.50%, 2/1/2008..................................... $ 6,319,332
6,000,000 Ser. I,
6.50%, 3/15/2005.................................... 6,472,620
3,000,000 Port Auth. of NY & NJ, Spl. Obl.
6.75%, 10/1/2011................................... 3,210,060
------------
88,797,001
------------
North Carolina - 2.9%
Cumberland Cnty., NC Hosp.
Fac. RB
Cumberland Cnty. Hosp. Sys., Inc.:
3,435,000 5.25%, 10/1/2010.................................... 3,342,736
3,295,000 5.25%, 10/1/2011.................................... 3,170,119
12,930,000 North Carolina Eastern Muni.
Pwr. Sys. RB, Ser. A,
5.70%, 1/1/2015, (MBIA)............................ 12,889,659
North Carolina Med. Care
Commission, Hosp. RB,
Transylvania Cmmnty. Hosp. Inc.:
130,000 4.45%, 10/1/1999.................................... 130,000
135,000 4.60%, 10/1/2000.................................... 135,265
140,000 4.70%, 10/1/2001.................................... 139,873
155,000 4.80%, 10/1/2002.................................... 154,460
155,000 4.90%, 10/1/2003.................................... 154,239
155,000 5.00%, 10/1/2004.................................... 154,073
175,000 5.00%, 10/1/2005.................................... 172,541
185,000 5.05%, 10/1/2006.................................... 181,402
190,000 5.15%, 10/1/2007.................................... 185,898
------------
20,810,265
------------
Ohio - 0.6%
Franklin Cnty., OH Hlth. Care
Facs. RB,
Friendship Village of Dublin Proj.:
505,000 5.00%, 11/1/2005.................................... 497,465
380,000 5.05%, 11/1/2006.................................... 372,324
225,000 5.10%, 11/1/2007.................................... 219,236
100,000 5.15%, 11/1/2008.................................... 96,803
1,250,000 5.50%, 11/1/2016.................................... 1,169,512
1,750,000 5.625%, 11/1/2022................................... 1,613,745
------------
3,969,085
------------
Oklahoma - 2.4%
Oklahoma Dev. Fin. Auth. RB,
Refunding Hillcrest Healthcare Sys.:
4,425,000 5.75%, 8/15/2013.................................... 4,293,533
3,805,000 5.75%, 8/15/2014.................................... 3,672,434
4,120,000 Oklahoma HFA, SFHRB, Mtge.
Homeownership Loan,
6.40%, 9/1/2030.................................... 4,288,467
5,000,000 Tulsa Cnty., OK IDA, Hlth.
Care RB, St. Francis Hosp.,
5.15%, 12/15/2018.................................. 5,075,100
------------
17,329,534
------------
MUNICIPAL OBLIGATIONS - continued
Pennsylvania - 3.6%
$ 1,500,000 Beaver Falls, PA Muni. Auth.
Spl. Obl.
9.125%, 8/1/2005, (COLL: State
& Local Government)................................ $ 1,828,950
Dauphin Cnty., PA General
Auth. RB,
Office & Parking, Forum Place,
Ser. A:
7,865,000 5.50%, 1/15/2008.................................... 7,585,399
3,950,000 5.75%, 1/15/2010.................................... 3,812,896
245,000 Delaware River Port Auth. of
PA & NJ, Delaware River
Bridges RB,
6.50%, 1/15/2011................................... 264,345
4,000,000 Montgomery Cnty., PA Higher
Ed. & Hlth. Auth. RB, Beaver
College,
5.80%, 4/1/2016.................................... 4,000,000
445,000 Northampton Cnty., PA IDA RB,
Commercial Development
Strawbridge Proj.
7.20%, 12/15/2001.................................. 461,087
730,000 Pennsylvania Higher Ed. RB,
Ser. O,
5.00%, 6/15/2009................................... 727,722
95,000 Philadelphia, PA Hosp. &
Higher Ed. Facs. Auth. RB
6.75%, 8/15/2001................................... 95,662
1,795,000 West View, PA, Muni. Auth.
Spl. Obl.
9.20%, 5/15/2003, (COLL: U.S.
Government Securities)............................. 1,936,644
5,000,000 Westmoreland Cnty., PA IDA RB,
Valley Landfill Proj.,
0.00%, 5/1/2018
(Eff. Yield 5.10%) (a)............................. 4,588,700
------------
25,301,405
------------
South Dakota - 0.8%
5,000,000 Heartland Consumer Pwr. Dist.
RB
7.00%, 1/1/2016, (COLL: U.S.
Government Securities)............................. 5,691,650
------------
Tennessee - 2.2%
Shelby Cnty., TN Hlth. Edl. &
Hsg. RB
St. Judes Childrens Research:
1,000,000 4.65%, 7/1/2004..................................... 999,680
1,000,000 5.00%, 7/1/2009..................................... 984,770
13,500,000 6.00%, 7/1/2014..................................... 13,877,055
------------
15,861,505
------------
Texas - 11.6%
9,915,000 Alliance Arpt. Auth., Spl.
Facs. RB, American Airlines
Inc. Proj.,
7.00%, 12/1/2011................................... 10,928,610
750,000 Austin, TX Utility Sys. RB
8.00%, 11/15/1999, (COLL: U.S.
Government Securities)............................. 753,896
</TABLE>
54
<PAGE>
EVERGREEN
Select Intermediate Term Municipal Bond Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Texas - continued
Harris Cnty., TX Hlth. Facs.
Dev. RB
Christus Hlth., Ser. A:
$ 8,145,000 5.25%, 7/1/2007..................................... $ 8,294,868
4,000,000 5.50%, 7/1/2009..................................... 4,102,840
2,000,000 5.50%, 7/1/2010..................................... 2,038,860
10,790,000 5.625%, 7/1/2011.................................... 11,020,367
2,035,000 Laredo, TX Independent School
Dist. RB
6.20%, 8/1/2010.................................... 2,196,477
North Central TX Hlth. Facs.
Dev. Corp. RB,
TX Hlth. Resources Sys., Ser. B:
3,910,000 5.75%, 2/15/2009, (MBIA)............................ 4,064,758
4,595,000 5.75%, 2/15/2012, (MBIA)............................ 4,680,927
4,120,000 5.75%, 2/15/2013.................................... 4,164,578
2,000,000 United Reg'l. Hlth. Care Sys.
Inc. Proj.,
5.25%, 9/1/2008, (MBIA)............................ 2,019,760
10,000,000 Redeemable River Auth. TX PCRB
5.20%, 7/1/2011.................................... 9,819,900
1,300,000 Retama, TX Dev. Corp. Spl.
Facs. RB, Retama Racetrack
8.75%, 12/15/2018, (COLL: U.S.
Treaury STRIPs).................................... 1,568,606
Texas Dept. Hsg. & Cmmnty.
Affairs:
2,460,000 MFHRB,
5.55%, 1/1/2005..................................... 2,503,444
2,435,000 SFHRB, Ser. E,
5.00%, 9/1/2016, (MBIA)............................. 2,238,982
5,000,000 Texas GO, Vets Hsg. Assistance
Program, Ser. B,
5.25%, 12/1/2030................................... 4,993,500
5,455,000 Texas Turnpike Auth. RB
12.625%, 1/1/2020, (COLL: U.S.
Government Securities)............................. 6,700,267
------------
82,090,640
------------
Utah - 0.2%
Utah HFA SFHRB:
495,000 Ser. D-1, Class I,
5.65%, 7/1/2016..................................... 493,362
610,000 Ser. G1,
7.35%, 7/1/2018..................................... 638,298
------------
1,131,660
------------
Virginia - 1.6%
2,000,000 Chesapeake, VA Redev. & Hsg.
Auth., Ser. A,
6.20%, 4/1/2028.................................... 1,945,320
2,000,000 Metro Washington DC Arpt.
Auth. RB, Ser. A,
7.25%, 10/1/2010................................... 2,096,320
1,100,000 Newport News Virginia, Ser. A,
6.50%, 11/1/2006................................... 1,147,124
5,985,000 Riverside, VA, Reg'l. Jail
Auth. RB
5.875%, 7/1/2014, (MBIA)........................... 6,124,510
------------
11,313,274
------------
MUNICIPAL OBLIGATIONS - continued
Washington - 2.0%
$12,000,000 Washington GO, Ser. B & AT 7,
6.40%, 6/1/2017.................................... $ 13,123,800
1,100,000 Washington Pub. Pwr. Supply
RB, Ser. A,
5.00%, 7/1/2011.................................... 1,057,364
------------
14,181,164
------------
Wisconsin - 1.8%
Wisconsin Hlth. & Edl. Facs.
Auth. RB:
6,865,000 Med. College Inc.,
5.95%, 12/1/2015................................... 6,970,378
5,300,000 Mercy Hosp. of Janesville, Inc.,
6.50%, 8/15/2011................................... 5,498,326
------------
12,468,704
------------
U. S. Virgin Islands - 2.3%
Virgin Islands Pub. Fin. Auth.
RB, Sr. Lien:
7,070,000 Ser. A,
5.20%, 10/1/2009.................................... 6,898,906
3,000,000 Ser. C:
5.50%, 10/1/2007.................................... 3,027,030
3,855,000 5.50%,
10/1/2008........................................... 3,874,005
2,000,000 Virgin Islands Wtr. & Pwr.
Auth. RB, Ser. B,
7.60%, 1/1/2012.................................... 2,217,160
------------
16,017,101
------------
Total Municipal Obligations
(cost $692,837,315)................................ 685,582,847
------------
MUTUAL FUND SHARES - 3.4%
23,977,000 Federated Municipal
Obligation Fund
(cost $23,977,000) ................................ 23,977,000
------------
Total Investments -
(cost $716,814,315)........................... 99.9% 709,559,847
Other Assets and
Liabilities - net............................. 0.1 776,250
----- ------------
Net Assets..................................... 100.0% $710,336,097
===== ============
</TABLE>
55
<PAGE>
EVERGREEN
Select Intermediate Term Municipal Bond Fund
Schedule of Investments(continued)
September 30, 1999
The Fund invests primarily in debt securities issued by municipalities.
The ability of the issuers of debt securities to meet their obligations
may be affected by economic developments in a specific industry or munic-
ipality. In order to reduce risk associated with such economic develop-
ments, at September 30, 1999, 31.2% of the securities, as a percentage of
net assets, are backed by bond insurance of various financial institu-
tions and financial guaranty assurance agencies. At September 30, 1999,
the Fund had securities backed by bond insurance of the following finan-
cial institutions representing more than 5% of net assets:
MBIA 12.6%
(a) Effective yield (calculated at date of purchase) is the annual yield at
which the bond accrues until its maturity date.
Summary of Abbreviations:
ACA American Capital Access
AMBAC American Municipal Bond Assurance Corporation
CDA Community Development Authority
COLL Collateral
EDA Economic Development Authority
FGIC Financial Guaranty Insurance Corporation
FHA Federal Housing Authority
FNMA Federal National Mortgage Association
FSA Financial Security Assurance Corporation
GNMA Government National Mortgage Association
GO General Obligation
HFA Housing Finance Authority
IBC Insured Bond Certification
IDA Industrial Development Authority
JSC Jefferson Smurfit Corp.
MBIA Municipal Bond Investors Assurance Corporation
MFHRB Multi Family Housing Revenue Bond
PCRB Pollution Control Revenue Bond
RAN Revenue Anticipation Note
RB Revenue Bond
SFHRB Single Family Housing Revenue Bond
STRIPS Separate Trading of Registered Interest and Principal of Securi-
ties
See Combined Notes to Financial Statements.
56
<PAGE>
EVERGREEN
Select International Bond Fund
Schedule of Investments
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS & NOTES - 1.1%
United States - 1.1%
647,000 Household Fin. Corp.,
EUR 5.13%, 6/24/2009
(cost $623,022)..................................... $ 637,374
------------
FOREIGN BONDS (NON U.S. DOLLARS) - 88.9%
Australia - 2.3%
1,600,000 New South Wales Treasury Corp.,
AUD 12.00%, 12/1/2001................................... 1,275,585
------------
Austria - 2.4%
2,400,000 Oester Kontrollbank,
DEM 5.75%, 9/12/2007.................................... 1,331,315
------------
Belgium - 4.5%
2,680,000 Kingdom of Belgium,
EUR 3.75%, 3/28/2009.................................... 2,515,443
------------
Denmark - 5.3%
Kingdom of Denmark,
5,800,000 5.00%, 8/15/2005.................................... 825,087
DKK
13,500,000 7.00%, 11/15/2007................................... 2,115,423
DKK ------------
2,940,510
------------
France - 3.2%
10,600,000 Credit Local De France,
FRF 5.38%, 1/13/2004.................................... 1,772,171
------------
Germany - 8.2%
1,950,000 Bayer Hypo Vereinsbank,
EUR 4.75%, 9/19/2007.................................... 1,992,938
100,000 Federal Republic of Germany,
EUR 6.00%, 7/4/2007..................................... 112,289
Kreditanstalt Fuer Wiederaufbau,
1,300,000 5.25%, 1/4/2010..................................... 1,359,956
EUR
1,003,875 5.50%, 3/12/2007.................................... 1,091,838
EUR ------------
4,557,021
------------
Italy - 3.5%
1,800,000 Republic of Italy,
EUR 5.75%, 7/10/2007.................................... 1,966,427
------------
Japan - 21.6%
Japan, Government of,
976,000,000 1.40%, 6/22/2009.................................... 8,781,075
JPY
260,000,000 1.50%, 1/20/2005.................................... 2,497,210
JPY
75,000,000 2.60%, 3/20/2019.................................... 713,245
JPY ------------
11,991,530
------------
FOREIGN BONDS (NON U.S. DOLLARS) - continued
Mexico - 0.4%
125,000 United Mexican States,
GBP 8.75%, 5/30/2002..................................... $ 204,398
------------
Netherlands - 14.4%
1,700,000 Bank Voor Ned Gemeenten,
NLG 6.25%, 9/15/2000..................................... 841,358
9,800,000 Depfa Fin. NV,
FRF 6.38%, 11/18/2008.................................... 1,680,807
3,150,000 DSL Fin. NV,
DEM 5.00%, 7/23/2004..................................... 1,738,252
7,000,000 Helaba Fin. BV,
SEK 3.88%, 3/3/2004...................................... 788,045
Netherlands, Government of,
900,000 3.75%, 7/15/2009..................................... 849,622
EUR
748,737 6.50%, 4/15/2003..................................... 850,868
EUR
1,160,000 Siemens Financier,
EUR 5.50%, 3/12/2007..................................... 1,243,722
------------
7,992,674
------------
Norway - 3.0%
13,000,000 Eksportfinans AS,
SEK 6.88%, 2/9/2004...................................... 1,665,260
------------
Slovakia - 0.6%
550,000 Vodohospodarska Vystavba,
DEM 8.00%, 7/9/2001...................................... 306,717
------------
Spain - 4.2%
Kingdom of Spain,
830,000 4.50%, 7/30/2004..................................... 875,687
EUR
1,380,000 5.15%, 7/30/2009..................................... 1,449,005
EUR ------------
2,324,692
------------
Supernational - 2.4%
Int'l. Bank of Reconstruction & Dev.,
760,000 5.38%, 11/6/2003..................................... 370,330
NZD
1,860,000 7.25%, 5/27/2003..................................... 967,079
NZD ------------
1,337,409
------------
Sweden - 5.9%
Kingdom of Sweden,
16,400,000 5.00%, 1/15/2004..................................... 1,976,265
SEK
3,100,000 5.00%, 1/28/2009..................................... 356,718
SEK
550,000 Swedish Export Credit Corp,
GBP 7.63%, 12/27/2001.................................... 917,189
------------
3,250,172
------------
</TABLE>
57
<PAGE>
EVERGREEN
Select International Bond Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS & NOTES - continued
United Kingdom - 7.0%
10,000,000 Diageo PLC,
FRF 6.25%, 11/25/2002..................................... $ 1,701,518
1,175,000 Gallaher Group PLC,
DEM 5.88%, 8/6/2008....................................... 608,595
950,000 Halifax Bldg. PLC,
GBP 8.38%, 12/15/1999..................................... 1,567,977
-----------
3,878,090
-----------
Total Foreign Bonds (Non U.S. Dollars)
(cost $50,852,918)................................... 49,309,414
-----------
YANKEE OBLIGATIONS - 6.1%
Cayman Island - 0.7%
$ 400,000 Hutchison Whampoa Fin.,
6.95%, 8/1/2007...................................... 379,190
-----------
Kazakhstan - 0.3%
200,000 Republic of Kazakhstan,
8.38%, 10/2/2002..................................... 181,200
-----------
Korea - 0.9%
200,000 Export-Import Bank of Korea,
7.13%, 9/20/2001..................................... 197,289
300,000 SK Telecom Ltd.,
7.75%, 4/29/2004..................................... 291,491
-----------
488,780
-----------
YANKEE OBLIGATIONS - continued
Lithuania - 0.9%
$ 525,000 Republic of Lithuania,
7.13%, 7/22/2002...................................... $ 490,087
-----------
Poland - 0.6%
350,000 TPSA Finance BV,
7.13%, 12/10/2003..................................... 344,940
-----------
United Kingdom - 2.7%
500,000 Abbey Natl. PLC,
6.69%, 10/17/2005..................................... 492,458
500,000 British Telecom,
7.00%, 5/23/2007...................................... 505,228
500,000 Rothmans Holdings,
6.50%, 5/6/2003....................................... 480,680
-----------
1,478,366
-----------
Total Yankee Obligations
(cost $3,442,807)..................................... 3,362,563
-----------
Total Investments -
(cost $54,918,747)............................. 96.1% 53,309,351
Other Assets and
Liabilities - net.............................. 3.9 2,187,368
----- -----------
Net Assets...................................... 100.0% $55,496,719
===== ===========
</TABLE>
Summary of Abbreviations:
AUD Australian Dollar
DEM German Deutsche Mark
DKK Danish Krone
EUR Euro Dollar
FRF French Franc
GBP Pound Sterling
JPY Japanese Yen
NLG Dutch Guilder
NZD New Zealand Dollar
SEK Swedish Krone
See Combined Notes to Financial Statements.
58
<PAGE>
EVERGREEN
Select Limited Duration Fund
Schedule of Investments
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - 18.6%
$ 4,774 Aames Mtge. Trust,
Ser. 1996-B, Cl. A1B,
7.275%, 5/15/2020................................... $ 4,766
578,669 Advanta Mtge. Loan Trust,
Ser. 1993-3, Cl. A1,
4.90%, 1/25/2010.................................... 571,653
2,150,000 BankBoston Receivable
Asset-Backed Trust,
Ser. 1997-1, Cl. A7,
6.48%, 7/15/2008.................................... 2,150,183
Case Equipment Receivable Trust:
447,117 Ser. 1996-1, Cl. A4,
6.28%, 6/15/2000..................................... 447,459
363,637 Ser. 1996-B, Cl. A3,
6.65%, 9/15/2003..................................... 364,486
940,000 Ser. 1997-B, Cl. A4,
6.41%, 9/15/2004..................................... 941,152
1,000,000 Ser. 1998-A, Cl. A4,
5.83%, 2/15/2005..................................... 992,885
2,000,000 Ser. 1998-B, Cl. A3,
5.81%, 5/15/2003..................................... 1,994,970
850,000 Chase Credit Card Master Trust,
Ser. 1997-2, Cl. A,
6.30%, 4/15/2003.................................... 852,223
111,806 CIT Receivables Owner Trust,
Ser. 1995-B, Cl. A,
6.50%, 4/15/2011.................................... 112,237
Contimortgage Home Equity Loan Trust:
80,787 Ser. 1996-4, Cl. A5,
6.60%, 10/15/2011.................................... 80,706
530,000 Ser. 1997-2, Cl. A9,
7.09%, 4/15/2028..................................... 528,418
2,371,462 Ser. 1997-4, Cl. A3,
6.26%, 7/15/2012..................................... 2,369,364
3,000,000 Copelco Capital Funding Corp.,
Ser. 1997-4, Cl. A3,
6.47%, 4/20/2005.................................... 3,008,895
2,000,000 Daimler Benz Vehicle Owner Trust,
Ser. 1998-A, Cl. A4,
5.22%, 12/22/2003................................... 1,950,370
2,500,000 Discover Card Master Trust,
Ser. 1994-3, Cl. A,
5.37%, 4/16/2002.................................... 2,501,588
EQCC Home Equity Loan Trust:
13,797 Ser. 1996-2, Cl. A2,
6.70%, 9/15/2008..................................... 13,813
399,913 Ser. 1997-1, Cl. A3,
6.84%, 9/15/2011..................................... 401,579
133,988 Fifth Third Bank Auto Grantor Trust,
Ser. 1996-A, Cl. A,
6.20%, 12/15/2001................................... 134,134
1,038,930 First Plus Home Loan Trust,
Ser. 1997-3, Cl. A3,
6.57%, 10/10/2010................................... 1,038,385
485,284 First Security Auto Grantor Trust,
Ser. 1997-A, Cl. A,
6.30%, 8/15/2003.................................... 485,689
3,600,000 GE Capital Mtge. Svcs., Inc.,
Ser. 1998-1, Cl. A4,
6.44%, 10/25/2016................................... 3,585,402
ASSET-BACKED SECURITIES - continued
$ 1,412,379 Heller Equipment Asset Receivables Trust,
6.39%, 5/25/2005................................... $ 1,414,349
157,612 IMC Home Equity Loan Trust,
Ser. 1997-2, Cl. A3,
6.94%, 11/20/2011.................................. 157,816
MBNA Master Credit Card Trust:
101,357 Ser. 1196-B, Cl. A3,
6.33%, 4/21/2003.................................... 101,576
12,170,000 Ser. 1995-C, Cl. A,
6.45%, 2/15/2008.................................... 12,080,489
760,000 Ser. 1996-J, Cl. A,
5.14%, 2/15/2006.................................... 759,244
2,750,000 Ser. 1998-A, Cl. A,
5.29%, 8/15/2005.................................... 2,745,284
336,877 Olympic Automobile
Receivables Trust,
Ser. 1995-D, Cl. B,
6.10%, 4/15/2002................................... 337,212
Premier Auto Trust:
160,053 Ser. 1996-2, Cl. A4,
6.58%, 10/6/2000.................................... 160,293
1,020,000 Ser. 1997-3, Cl. A5,
6.34%, 1/6/2002..................................... 1,022,014
2,280,000 Ser. 1998-2, Cl. A4,
5.82%, 12/6/2002.................................... 2,262,706
1,000,000 Ser. 1998-3, Cl. A3,
5.88%, 12/8/2001.................................... 998,805
138,676 Prudential Securities Fin.
Asset Funding,
Ser. 1993-8, Cl. A,
5.78%, 11/15/2014.................................. 136,235
391,077 SLMA,
Ser. 1997-1, Cl. A1,
5.32%, 10/6/1999................................... 389,597
1,350 The Money Store, Home Equity
Loan Trust,
Ser. 1993-B, Cl. A1,
5.40%, 8/15/2005................................... 1,350
4,670,000 Toyota Auto Lease Trust,
Ser. 1997-A, Cl. A2,
6.35%, 4/26/2004................................... 4,665,213
Union Acceptance Corp.:
198,999 Ser. 1995-D, Cl. B,
6.03%, 1/7/2003..................................... 198,976
474,362 Ser. 1996-A, Cl. A,
5.40%, 4/7/2003..................................... 472,538
2,476,908 Ser. 1996-D, Cl. A2,
6.17%, 10/9/2002.................................... 2,478,257
2,551,791 Vanderbilt Mtge. & Fin. Inc.,
Ser. 1997-B, Cl. 1A2,
6.78%, 1/7/2008.................................... 2,559,919
1,000,000 WFS Finl. Owner Trust,
Ser. 1998-A, Cl. A4,
5.95%, 2/20/2003................................... 993,625
------------
Total Asset-Backed Securities
(cost $58,664,902)................................. 58,465,855
------------
</TABLE>
59
<PAGE>
EVERGREEN
Select Limited Duration Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS & NOTES - 51.2%
Aerospace & Defense - 1.5%
$4,850,000 Raytheon Co., Notes,
5.95%, 3/15/2001.................................... $ 4,815,575
------------
Automotive Equipment &
Manufacturing - 0.3%
1,000,000 Navistar Int'l. Corp.,
Sr. Notes, Ser. B,
7.00%, 2/1/2003..................................... 972,500
------------
Banks - 3.8%
1,000,000 Banc One Corp.,
Sr. Notes, MTN,
7.00%, 3/25/2002.................................... 1,008,001
MBNA Corp.:
1,975,000 MTN,
6.88%, 10/1/1999..................................... 1,975,000
2,000,000 Sr. Notes, MTN,
6.50%, 9/15/2000..................................... 1,993,786
NationsBank Corp.,
Sr. Notes:
395,000 5.375%, 4/15/2000.................................... 394,175
4,510,000 5.75%, 3/15/2001..................................... 4,470,884
2,000,000 Transamerica Fin. Corp.,
Sr. Notes, MTN,
5.56%, 10/22/1999................................... 2,000,786
------------
11,842,632
------------
Brokers - 10.0%
4,530,000 Bear Stearns Co., Inc.,
6.25%, 12/1/2000.................................... 4,524,519
Lehman Brothers Holdings, Inc.,
MTN:
2,000,000 6.125%, 2/1/2001..................................... 1,983,932
1,000,000 6.33%, 8/1/2000...................................... 1,000,561
850,000 6.50%, 7/18/2000..................................... 851,798
Merrill Lynch & Co., Inc.,
Notes:
10,000,000 5.73%, 2/26/2002..................................... 9,856,340
6,000,000 6.00%, 1/15/2001..................................... 5,976,420
Morgan Stanley Dean Witter,
Sr. Notes:
4,700,000 5.25%, 2/8/2001...................................... 4,641,156
750,000 5.89%, 3/20/2000..................................... 750,769
750,000 Salomon, Inc.: Notes,
6.50%, 3/1/2000..................................... 752,394
1,000,000 Sr. Notes,
7.30%, 5/15/2002.................................... 1,019,912
------------
31,357,801
------------
Building, Construction &
Furnishings - 2.2%
2,000,000 Case Corp., Ser. B,
6.25%, 12/1/2003.................................... 1,947,936
5,000,000 Cemex, SA, MTN,
8.50%, 8/31/2000.................................... 5,061,000
------------
7,008,936
------------
Consumer Products &
Services - 0.3%
1,000,000 Honeywell, Inc., Notes,
6.75%, 3/15/2002.................................... 1,005,346
------------
CORPORATE BONDS & NOTES - continued
Diversified Companies - 0.2%
$ 625,000 Nabisco, Inc., Notes,
6.00%, 2/15/2001.................................... $ 619,105
------------
Electronic Equipment &
Services - 0.8%
2,550,000 Analog Devices Inc.,
6.625%, 3/1/2000.................................... 2,554,840
------------
Finance & Insurance - 11.1%
Associates Corp. of North America,
Sr. Notes:
2,770,000 5.80%, 4/20/2004..................................... 2,663,352
1,250,000 6.00%, 6/15/2000..................................... 1,250,066
1,000,000 Caterpillar Finl. Svcs., MTN,
6.75%, 6/15/2001.................................... 1,007,744
510,000 Chrysler Finl. Co. LLC, Notes,
6.375%, 1/28/2000................................... 511,242
5,430,000 CIT Group Holdings, Inc.,
6.375%, 8/1/2002.................................... 5,378,866
Ford Motor Credit Co.,
Notes:
2,000,000 5.75%, 1/25/2001..................................... 1,984,270
1,000,000 6.55%, 9/10/2002..................................... 996,244
250,000 7.75%, 10/1/1999..................................... 250,000
2,500,000 Freemont General Corp., Sr. Note, 7.70%, 3/17/2004... 2,462,593
GMAC:
MTN:
700,000 5.10%, 12/9/1999..................................... 699,264
500,000 5.95%, 4/20/2001..................................... 497,717
2,000,000 Notes,
5.625%, 2/15/2001.................................... 1,984,124
1,000,000 Ikon Capital, Inc., MTN,
6.73%, 6/15/2001.................................... 979,843
Int'l. Lease Fin. Corp.,
Notes:
750,000 6.125%, 11/1/1999.................................... 750,199
1,500,000 7.00%, 5/15/2000..................................... 1,508,964
3,500,000 McKesson Corp.,
6.60%, 3/1/2000..................................... 3,510,892
Mellon Finl. Co.,
Sr. Notes:
1,000,000 6.30%, 6/1/2000...................................... 1,001,507
255,000 7.625%, 11/15/1999................................... 255,530
6,600,000 PHH Corp., MTN,
5.49%, 3/1/2000..................................... 6,593,598
500,000 Transamerica Fin. Corp., Sub. Notes, 6.75%,
6/1/2000............................................ 502,430
------------
34,788,445
------------
Food & Beverage Products - 1.7%
1,000,000 Coca-Cola Enterprises, Inc., Notes, 6.375%,
8/1/2001............................................ 1,000,164
3,000,000 Heinz HJ Co.,
6.75%, 10/15/1999................................... 3,001,035
1,500,000 Pepsico, Inc., MTN,
6.375%, 12/31/1999.................................. 1,500,543
------------
5,501,742
------------
Healthcare Products & Services - 0.8%
2,500,000 Tenet Healthcare Corp., Sr. Notes, 8.625%,
12/1/2003........................................... 2,482,340
------------
</TABLE>
60
<PAGE>
EVERGREEN
Select Limited Duration Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Industrial Development/Pollution/Resource
Recovery - 4.4%
WMX Technologies, Inc.:
$ 4,000,000 6.25%, 10/15/2000.................................. $ 3,922,304
10,000,000 7.125%, 6/15/2001.................................. 9,802,820
------------
13,725,124
------------
Industrial Specialty Products & Services - 0.8%
2,500,000 EOP Operating L.P.,
6.50%, 1/15/2004.................................. 2,408,015
------------
Information Services & Technology - 3.3%
Comdisco, Inc.:
7,500,000 MTN,
6.02%, 6/26/2000................................... 7,467,465
2,790,000 Notes,
6.50%, 6/15/2000................................... 2,789,018
------------
10,256,483
------------
Lease Rental Obligations - 0.6%
2,000,000 Amerco, Sr. Notes,
7.20%, 4/1/2002................................... 1,967,994
------------
Oil/Energy - 0.2%
590,000 Coastal Corp., Sr. Notes,
8.125%, 9/15/2002................................. 608,632
------------
Paper & Packaging - 0.3%
1,000,000 Int'l. Paper Co., Notes,
7.00%, 6/1/2001................................... 1,005,736
------------
Real Estate - 1.1%
3,500,000 Homeside Lending, Inc., MTN,
6.875%, 5/15/2000................................. 3,517,923
------------
Retailing & Wholesale - 1.8%
5,605,000 Dayton Hudson Corp.,
5.95%, 6/15/2000.................................. 5,611,474
------------
Telecommunication Services & Equipment - 3.9%
4,720,000 AT&T Corp.,
5.625%, 3/15/2004................................. 4,529,727
3,750,000 Cox Communications, Inc., Notes, 6.375%,
6/15/2000......................................... 3,760,313
340,000 TCI Communications, Sr. Notes, 8.65%, 9/15/2004.... 366,884
Worldcom, Inc.,
Sr. Notes:
2,505,000 6.125%, 8/15/2001.................................. 2,488,965
1,000,000 6.25%, 8/15/2003................................... 983,029
------------
12,128,918
------------
Transportation - 2.0%
2,500,000 Burlington Northern Santa Fe Corp., 7.00%,
8/1/2002.......................................... 2,527,775
1,000,000 Continental Airlines, Inc., Sr. Notes,
9.50%, 12/15/2001.................................. 1,017,500
2,800,000 U.S. West Capital Funding, Inc., 6.125%,
7/15/2002......................................... 2,743,975
------------
6,289,250
------------
CORPORATE BONDS - continued
U.S. Government Agencies - 0.1%
$ 90,000 FFCB,
8.60%, 5/30/2006.................................. $ 93,484
100,000 Israel, U.S. Government Guaranteed Notes,
5.75%, 3/15/2000.................................. 100,106
------------
193,590
------------
Total Corporate Bonds & Notes
(cost $161,574,178)............................... 160,662,401
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 3.1%
7,500,000 Credit Suisse First Boston Mtge. Securities Corp.,
6.58%, 10/15/2001................................. 7,386,000
2,293,656 Deutsche Mtge. & Asset Receivable Corp.,
6.22%, 9/15/2007.................................. 2,217,609
------------
Total Collateralized Mortgage Obligations
(cost $9,644,080)................................. 9,603,609
------------
MORTGAGE-BACKED SECURITIES - 16.1%
FHLB:
200,000 4.218%, 8/27/2003.................................. 184,487
10,000,000 5.25%, 4/25/2002................................... 9,794,790
15,000,000 5.875%, 8/15/2001.................................. 14,951,730
FHLMC:
6,500,000 5.75%, 6/15/2001................................... 6,475,697
2,765,586 6.00%, 1/1/2001 - 12/15/2009....................... 2,722,870
9,266,123 6.50%, 7/1/2004 - 5/15/2013........................ 9,164,928
644,945 7.00%, 12/1/1999................................... 646,699
1,939 9.00%, 5/1/2001.................................... 1,991
FNMA:
1,888,428 5.50%, 1/1/2014.................................... 1,781,675
1,096,849 6.50%, 9/1/2005 - 8/1/2010......................... 1,088,448
500,000 8.25%, 12/18/2000.................................. 513,357
GNMA:
910,459 6.50%, 12/15/2008 - 10/15/2010..................... 898,609
23,273 7.50%, 7/20/2002................................... 23,507
4,600 8.00%, 8/15/2007................................... 4,767
18,199 8.25%, 7/15/2002................................... 18,611
300,742 8.50%, 6/20/2005 - 9/20/2005....................... 309,334
11,343 8.75%, 8/15/2001 - 9/15/2001....................... 11,617
1,128,542 9.00%, 10/20/2002 - 8/15/2022...................... 1,185,001
35,149 9.50%, 7/15/2002................................... 36,705
14,404 9.75%, 5/15/2001 - 5/20/2005....................... 14,888
30,594 10.00%, 10/15/2000 - 3/20/2004..................... 31,944
2,098 10.25%, 2/15/2001.................................. 2,180
638,980 14.00%, 2/15/2012 - 6/15/2012...................... 750,725
------------
Total Mortgage-Backed Securities
(cost $50,811,231)................................ 50,614,560
------------
</TABLE>
61
<PAGE>
EVERGREEN
Select Limited Duration Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
YANKEE OBLIGATIONS - 0.7%
Finance - 0.4%
$ 1,000,000 Hanson Overseas B.V., Sr. Notes, 7.375%,
1/15/2003......................................... $ 1,012,900
------------
Metals & Mining - 0.3%
1,000,000 WMC Fin. USA Ltd., Notes,
6.50%, 11/15/2003................................. 972,851
------------
Total Yankee Obligations
(cost $2,051,783)................................. 1,985,751
------------
COMMERCIAL PAPER - 9.8%
Oil/Energy - 0.7%
2,100,000 Pennzoil Quaker,
5.90%, 10/1/1999.................................. 2,100,000
------------
COMMERCIAL PAPER - continued
Retailing & Wholesale - 6.7%
$10,000,000 J.C. Penney Funding Corp.,
6.32%, 1/10/2000................................... $ 9,822,689
11,385,000 Rite Aid Corporation,
5.70%, 10/4/1999................................... 11,379,592
------------
21,202,281
------------
Telecommunication Services & Equipment - 2.4%
7,500,000 AT&T Capital Corp.,
5.65%, 10/14/1999.................................. 7,484,698
------------
Total Commercial Paper
(cost $30,786,979)................................. 30,786,979
------------
Total Investments -
(cost $313,533,153)......................... 99.5% 312,119,155
Other Assets and
Liabilities - net........................... 0.5 1,666,585
----- ------------
Net Assets - ................................ 100.0% $313,785,740
===== ============
</TABLE>
Summary of Abbreviations:
FFCB Federal Farm Credit Bank
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA General National Mortgage Association
MTN Medium Term Note
SLMA Student Loan Marketing Association
See Combined Notes to Financial Statements.
62
<PAGE>
EVERGREEN
Select Total Return Bond Fund
Schedule of Investments
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS & NOTES - 26.0%
Advertising & Related Services - 0.6%
$ 250,000 American Standard Inc.,
7.375%, 2/1/2008.................................. $ 227,500
250,000 Holley Performance Prods Inc., Sr. Notes,
12.25%, 9/15/2007 (a)............................. 242,500
500,000 Isle Capri Casinos Inc.,
Sr. Notes (Subord.),
8.75%, 4/15/2009.................................. 458,750
------------
928,750
------------
Automotive Equipment & Manufacturing - 1.1%
500,000 Eagle Picher Inds., Inc.,
Sr. Notes (Subord.),
9.375%, 3/1/2008.................................. 440,000
250,000 Federal Mogul Corp., Notes,
7.50%, 1/15/2009.................................. 225,559
500,000 Hayes Wheels Intl., Inc.,
Sr. Notes (Subord.), Ser. B,
9.125%, 7/15/2007................................. 468,750
500,000 Mark IV Inds., Inc.,
Sr. Notes (Subord.),
7.50%, 9/1/2007................................... 458,750
------------
1,593,059
------------
Banks - 1.4%
2,000,000 Keycorp, Notes (Subord.),
8.00%, 7/1/2004................................... 2,067,870
------------
Cable/Other Video Distribution - 0.3%
300,000 Charter Communications Holdings, Sr. Notes,
8.625%, 4/1/2009 (a).............................. 285,000
250,000 Metromedia Fiber Network, Inc., Sr. Notes,
10.00%, 11/15/2008................................ 242,500
------------
527,500
------------
Chemical & Agricultural Products - 1.0%
500,000 Huntsman ICI Chemicals, Inc., Sr. Notes (Subord.),
10.125%, 7/1/2009 (a)............................. 491,250
500,000 Polymer Group, Inc.,
Sr. Notes (Subord.), Ser. B,
9.00%, 7/1/2007................................... 473,750
500,000 Scotts Co.,
Sr. Notes (Subord.),
8.625%, 1/15/2009 (a)............................. 477,500
------------
1,442,500
------------
Diversified Companies - 0.7%
500,000 Bulong Operation Property Ltd., Sr. Notes,
12.50%, 12/15/2008................................ 507,500
500,000 Lyondell Chemical Co.,
Sr. Notes (Subord. & Exchangeable),
10.875%, 5/1/2009................................. 505,000
------------
1,012,500
------------
Electrical Equipment & Services - 1.3%
2,000,000 Sony Corp., Notes,
6.125%, 3/4/2003.................................. 1,978,738
------------
CORPORATE BOND & NOTES - continued
Energy - 0.8%
$ 500,000 AES Corp.,
Sr. Notes (Subord. & Exchangeable),
8.50%, 11/1/2007..................................... $ 458,750
500,000 Triton Energy Ltd.,
Sr. Notes,
8.75%, 4/15/2002..................................... 491,250
250,000 Western Gas Resources, Inc.,
Sr. Notes (Subord.),
10.00%, 6/15/2009 (a)................................ 256,875
------------
1,206,875
------------
Environmental Services - 0.1%
250,000 Allied Waste North America, Inc., Sr. Notes,
7.625%, 1/1/2006..................................... 225,313
------------
Finance & Insurance - 1.7%
465,000 Household Fin. Corp.,
5.125%, 6/24/2009.................................... 458,082
2,000,000 Lincoln Natl. Corp., Note,
7.00%, 3/15/2018..................................... 1,906,356
250,000 Standard Pacific Corp. New,
Sr. Notes (Subord.),
8.50%, 4/1/2009...................................... 233,750
------------
2,598,188
------------
Food & Beverage Products - 0.5%
250,000 Aurora Foods, Inc.,
Sr. Notes (Subord.),
9.875%, 2/15/2007.................................... 251,875
500,000 Chiquita Brands Intl., Inc.,
Sr. Notes,
9.625%, 1/15/2004.................................... 487,500
------------
739,375
------------
Gaming - 0.8%
250,000 Boyd Gaming Corp.,
Sr. Notes (Subord.),
9.50%, 7/15/2007..................................... 242,500
500,000 Mohegan Tribal Gaming Auth.,
Sr. Notes (Subord.),
8.75%, 1/1/2009...................................... 490,000
500,000 Station Casinos, Inc.,
Sr. Notes (Subord.),
9.75%, 4/15/2007..................................... 506,875
------------
1,239,375
------------
Household Products & Services - 0.2%
250,000 Playtex Family Prods. Corp.,
Sr. Notes (Subord.),
9.00%, 12/15/2003.................................... 249,375
------------
Iron & Steel - 0.6%
500,000 Alaska Steel Corp., Sr. Notes,
7.875%, 2/15/2009.................................... 460,000
250,000 Natl. Steel Corp., Mtge. Ser. D,
9.875%, 3/1/2009..................................... 247,500
250,000 WHX Corp., Sr. Notes,
10.50%, 4/15/2005.................................... 234,375
------------
941,875
------------
</TABLE>
63
<PAGE>
EVERGREEN
Select Total Return Bond Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BOND & NOTES - continued
Lease Rental Obligations - 0.8%
$ 500,000 Budget Group, Inc.,
Sr. Notes,
9.125%, 4/1/2006................................... $ 448,750
500,000 Nationsrent, Inc.,
Sr. Notes (Subord.),
10.375%, 12/15/2008................................ 492,500
250,000 United Rentals, Inc.,
Sr. Notes,
9.25%, 1/15/2009................................... 240,625
------------
1,181,875
------------
Leisure & Tourism - 0.5%
500,000 Carmike Cinemas Inc.,
Sr. Notes (Subord.),
9.375%, 2/1/2009................................... 465,000
250,000 Hollywood Park, Inc.,
Sr. Notes, Ser. B,
9.25%, 2/15/2007................................... 242,500
------------
707,500
------------
Oil/Energy - 0.6%
500,000 Calpine Corp.,
Sr. Notes,
7.625%, 4/15/2006.................................. 476,250
250,000 Cross Timbers Oil Co.,
Sr. Notes (Subord.),
8.75%, 11/1/2009................................... 241,875
250,000 Ocean Energy Inc.,
Sr. Notes (Subord.),
8.375%, 7/1/2008................................... 242,500
------------
960,625
------------
Paper & Packaging - 1.3%
2,000,000 UPM-Kymmene Corp.,
6.875%, 11/26/2007 (a)............................. 1,904,412
------------
Printing, Publishing, Broadcasting & Entertainment -
2.8%
250,000 Ackerley Group, Inc.,
Sr. Notes (Subord.),
9.00%, 1/15/2009................................... 238,750
500,000 Big Flower Press Holdings, Inc.,
Sr. Notes (Subord.),
8.625%, 12/1/2008.................................. 487,500
500,000 Cinemark USA, Inc.,
Sr. Notes (Subord.),
9.625%, 8/1/2008................................... 430,000
250,000 Hollinger Intl.,
Sr. Notes (Subord.),
9.25%, 2/1/2006.................................... 249,375
400,000 K III Communications Corp.,
Sr. Notes,
8.50%, 2/1/2006.................................... 388,000
250,000 Sinclair Broadcast Group, Inc.,
Sr. Notes (Subord.),
10.00%, 9/30/2005.................................. 248,750
250,000 TV Guide Inc.,
Sr. Notes (Subord.),
8.125%, 3/1/2009................................... 236,875
1,820,000 Viacom, Inc.,
Sr. Notes,
7.75%, 6/1/2005.................................... 1,854,787
------------
4,134,037
------------
CORPORATE BOND & NOTES - continued
Real Estate - 0.8%
$ 250,000 Crown Castle Intl. Corp.,
Sr. Notes,
9.00%, 5/15/2011.................................... $ 235,625
500,000 HMH Property, Inc.,
Sr. Notes,
7.875%, 8/1/2008.................................... 446,250
500,000 MDC Holdings, Inc.,
Sr. Notes,
8.375%, 2/1/2008.................................... 452,500
------------
1,134,375
------------
Retailing & Wholesale - 3.1%
250,000 Ames Dept. Stores Inc.,
Sr. Notes,
10.00%, 4/15/2006................................... 242,500
2,000,000 Kroger Co.,
Sr. Notes,
6.375%, 3/1/2008.................................... 1,853,636
250,000 Michaels Stores Inc.,
Sr. Notes,
10.875%, 6/15/2006.................................. 263,750
2,000,000 Sears Roebuck & Co.,
9.375%, 11/1/2011................................... 2,305,854
------------
4,665,740
------------
Telecommunication Services & Equipment - 3.1%
250,000 Adelphia Communications Corp.,
Sr. Notes,
9.875%, 3/1/2007.................................... 255,000
250,000 Bresnan Communications Group,
Sr. Notes,
8.00%, 2/1/2009..................................... 245,625
250,000 Comcast Corp.,
9.50%, 1/15/2008.................................... 260,313
250,000 Echostar DBS Corp.,
Sr. Notes,
9.375%, 2/1/2009.................................... 248,750
250,000 Global Crossings Holdings Ltd.,
Sr. Notes,
9.625%, 5/15/2008................................... 258,750
500,000 Intermedia Communications, Inc.,
Sr. Notes (Disc.),
Ser. B (Eff. Yield 9.79%),
0.00%, 7/15/2007 (c)................................ 332,500
500,000 Jordan Telecommunication Products, Inc.,
Sr. Notes,
9.875%, 8/1/2007.................................... 480,000
1,500,000 MCI Worldcom, Inc.,
Sr. Notes,
7.75%, 4/1/2007..................................... 1,559,890
500,000 McLeod USA, Inc.,
Sr. Notes (Disc.) (Eff. Yield 9.12%),
0.00%, 3/1/2007 (c)................................. 396,250
250,000 Nextel Communications Inc.,
9.75%, 8/15/2004.................................... 253,438
500,000 Price Communications Wireless, Inc.,
Sr. Notes (Secd.),
9.125%, 12/15/2006 (a).............................. 511,250
------------
4,801,766
------------
</TABLE>
64
<PAGE>
EVERGREEN
Select Total Return Bond Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BOND & NOTES - continued
Textile & Apparel - 0.3%
$ 500,000 Westpoint Stevens, Inc.,
Sr. Notes,
7.875%, 6/15/2005.................................. $ 468,750
------------
Transportation - 1.6%
500,000 Sea Containers Ltd.,
Sr. Notes,
7.875%, 2/15/2008.................................. 445,000
1,812,885 Southwest Airlines Co., Ser. A3,
8.70%, 7/1/2011.................................... 1,954,716
------------
2,399,716
------------
Total Corporate Bonds & Notes
(cost $41,010,783)................................. 39,110,089
------------
FOREIGN BONDS - (NON-US DOLLARS) - 16.2%
Banks - 2.1%
600,000 Bayerische Hypo Vereinsbank,
EUR 4.75%, 9/19/2007.................................... 615,066
500,000 HSBC Holdings PLC,
EUR 5.50%, 7/15/2009.................................... 507,525
985,000 IBRD World Bank,
NZD 7.25%, 5/27/2003.................................... 512,136
Kreditanstalt Fuer Wiederaufbau:
530,000 5.25%, 1/4/2010..................................... 553,630
EUR
383,468 5.50%, 3/12/2007.................................... 417,069
EUR
1,075,000 Oester Kontrollbank,
DEM 5.75%, 9/12/2007.................................... 596,318
------------
3,201,744
------------
Finance - 1.1%
1,000,000 DSL Fin. NV,
DEM 5.00%, 7/23/2004.................................... 551,826
2,500,000 Eksportfinans AS,
SEK 6.875%, 2/9/2004.................................... 320,243
540,000 Siemens Financier,
EUR 5.50%, 3/12/2007.................................... 578,974
60,000 Swedish Export Credit Corp.,
GBP 7.625%, 12/27/2001.................................. 100,057
------------
1,551,100
------------
Food & Beverage Products - 0.2%
2,000,000 Sara Lee Corp.,
FRF Notes,
4.625%, 3/12/2002................................... 329,401
------------
Utilities - Water - 0.1%
180,000 Vodohospodarska Vystavba,
DEM 8.00%, 7/9/2001..................................... 100,380
------------
Government - 12.7%
1,140,000 Federal Republic of Germany,
EUR 6.00%, 7/4/2007..................................... 1,280,096
France, Government of:
640,000 4.50%, 7/12/2002.................................... 688,890
EUR
914,694 5.25%, 4/25/2008.................................... 977,858
EUR
Japan, Government of:
285,000,000 1.40%, 6/22/2009.................................... 2,564,146
JPY
FOREIGN BONDS - (NON-US DOLLARS) - continued
Government - continued
320,000,000 1.50%, 1/20/2005.................................... $ 3,073,490
JPY
120,000,000 2.60%, 3/20/2019.................................... 1,141,191
JPY
3,800,000 Kingdom of Belgium,
EUR 3.75%, 3/28/2009.................................... 3,566,672
Kingdom of Denmark:
2,100,000 5.00%, 8/15/2005.................................... 298,738
DKK
4,300,000 7.00%, 11/15/2007................................... 673,802
DKK
Kingdom of Spain:
280,000 4.50%, 7/30/2004.................................... 295,412
EUR
2,000,000 5.15%, 7/30/2009.................................... 2,100,008
EUR
12,200,000 Kingdom of Sweden:
SEK 5.00%, 1/15/2004.................................... 1,470,148
4,900,000 5.00%, 1/28/2009.................................... 563,844
SEK
70,000 Mexican U.S.,
GBP 8.75%, 5/30/2002.................................... 114,462
417,477 Netherlands, Government of,
EUR 6.50%, 4/15/2003.................................... 475,655
------------
19,284,412
------------
Total Foreign Bonds - (Non-US Dollars)
(cost $24,614,062)................................. 24,467,037
------------
MORTGAGE-BACKED SECURITIES - 18.8%
FHLMC:
$ 4,402,584 6.00%, 2/1/2029..................................... 4,112,233
4,392,342 6.50%, 3/1/2029..................................... 4,220,514
4,774,849 7.00%, 6/1/2027 - 5/1/2028.......................... 4,705,470
7,415,041 7.50%, 10/1/2011 - 7/1/2028......................... 7,484,613
2,228,954 8.00%, 4/1/2027 - 5/1/2027.......................... 2,284,789
1,485,597 8.50%, 1/1/2028..................................... 1,541,738
GNMA:
1,487,874 6.00%, 5/15/2028.................................... 1,382,295
2,699,486 6.50%, 5/15/2028.................................... 2,583,624
------------
Total Mortgage-Backed Securities
(cost $29,203,593)................................. 28,315,276
------------
U.S. AGENCY OBLIGATIONS - 0.5%
425,000 FHLB,
6.875%, 6/7/2002
(cost $716,792).................................... 700,633
------------
U.S. TREASURY OBLIGATIONS - 31.5%
U.S. Treasury Bonds:
5,710,000 6.125%, 8/15/2029................................... 5,763,531
5,000,000 7.625%, 2/15/2007................................... 5,195,315
3,590,000 7.875%, 2/15/2021................................... 4,177,862
3,800,000 8.125%, 5/15/2021................................... 4,533,875
2,475,000 9.00%, 11/15/2018................................... 3,157,947
6,500,000 10.375%, 11/15/2012................................. 8,157,500
U.S. Treasury Notes:
3,000,000 5.50%, 2/28/2003.................................... 2,973,750
4,240,000 5.625%, 11/30/2000.................................. 4,247,950
</TABLE>
65
<PAGE>
EVERGREEN
Select Total Return Bond Fund
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
U.S. TREASURY OBLIGATIONS - continued
$6,250,000 6.625%, 3/31/2002................................... $ 6,382,812
2,850,000 7.50%, 11/15/2001................................... 2,954,205
------------
Total U.S. Treasury Obligations
(cost $49,136,195)................................. 47,544,747
------------
YANKEE OBLIGATIONS - 3.9%
Building Products - 1.8%
2,540,000 Hanson PLC,
7.375%, 1/15/2003.................................. 2,572,766
------------
Finance & Insurance - 0.4%
100,000 Hutchison Whampoa Fin., C.I. Ltd., Notes, Ser. A
6.95%, 8/1/2007 (a)................................ 95,357
500,000 ICI Fin. Nederlands,
6.75%, 8/7/2002.................................... 494,652
------------
590,009
------------
Food & Beverage Products - 0.3%
400,000 Diageo PLC,
6.625%, 6/24/2004.................................. 398,880
------------
Oil/Energy - 0.3%
500,000 Gulf Canada Resources Ltd.,
Sr. Notes,
8.35%, 8/1/2006.................................... 488,750
------------
Paper & Packaging - 0.3%
500,000 Norampac, Inc.,
Sr. Notes,
9.50%, 2/1/2008.................................... 507,500
------------
Printing, Publishing, Broadcasting & Entertainment -
0.5%
500,000 Imax Corp.,
Sr. Notes,
7.875%, 12/1/2005.................................. 465,000
500,000 Radio E Televisao Bandeirantes,
Notes,
12.875%, 5/15/2006 (a)............................. 225,000
------------
690,000
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
YANKEE OBLIGATIONS - continued
Telecommunication Services & Equipment - 0.2%
$ 200,000 SK Telecom Ltd.,
7.75%, 4/29/2004................................... $ 194,328
100,000 TPSA Fin. BV,
7.125%, 12/10/2003 (a)............................. 98,554
------------
292,882
------------
Government - 0.1%
100,000 Republic of Kazakhstan,
8.375%, 10/2/2002.................................. 90,600
100,000 Republic of Lithuania,
7.125%, 7/22/2002.................................. 93,350
------------
183,950
------------
Total Yankee Obligations
(cost $6,679,547).................................. 5,724,737
------------
REPURCHASE AGREEMENT - 2.0%
3,067,105 Societe Generale Repurchase Agreement 5.30%, dated
9/30/1999,
due 10/1/1999 cost $3,067,105
maturity value $3,067,557 (b)...................... 3,067,105
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $154,428,077)............................ 98.9% 148,929,624
Other Assets and
Liabilities - net.............................. 1.1 1,723,895
----- ------------
Net Assets -.................................... 100.0% $150,653,519
===== ============
</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 $10,000 U.S. Treasury Notes
6.25%, due 2/15/03; value including accrued interest - $9,983 and U.S.
Treasury STRIPS, 3.625%, due 01/15/2003 with a value, including accrued in-
terest - $3,060,537.
(c) Effective yield (calculated at date of purchase) is the annual yield at
which the bond accrues until its maturity date.
Summary of Abbreviations:
DEM Deutsche Mark
DKK Danish Krone
EUR Euro Dollar
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FRF French Franc
GBP Pound Sterling
GNMA General National Mortgage Association
JPY Japanese Yen
NZD New Zealand Dollar
SEK Swedish Krone
STRIPS Separate Trading of Registered Interest and Principal of Securi-
ties
See Combined Notes to Financial Statements.
66
<PAGE>
EVERGREEN
Select Fixed Income Funds
Statements of Assets and Liabilities
September 30, 1999
<TABLE>
<CAPTION>
Adjustable Rate Fixed Income Income Plus
Fund Core Bond Fund Fund Fund
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Identified cost of
securities............ $56,432,202 $1,087,612,013 $807,272,107 $1,754,248,853
Net unrealized losses
on securities......... (306,319) (5,293,115) (6,377,821) (17,196,958)
--------------------------------------------------------------------------------------
Market value of
securities............ 56,125,883 1,082,318,898 800,894,286 1,737,051,895
Cash................... 358 580 0 0
Foreign currency, at
value (cost $0, $0, $0
and $0,
respectively)......... 0 0 0 0
Receivable for
securities sold....... 249,354 31,208,066 0 62,964,200
Receivable for Fund
shares sold........... 0 0 1,525 0
Interest and dividend
receivable............ 425,562 9,844,831 7,833,514 26,005,937
Receivable for closed
forward foreign
currency exchange
contracts............. 0 0 0 0
Prepaid expenses and
other assets.......... 0 42,295 18,105 146,033
--------------------------------------------------------------------------------------
Total assets........... 56,801,157 1,123,414,670 808,747,430 1,826,168,065
--------------------------------------------------------------------------------------
Liabilities
Distributions payable.. 271,903 5,343,134 3,083,031 9,276,837
Payable for securities
purchased............. 0 69,113,354 50,422,438 10,980,450
Payable for Fund shares
redeemed.............. 272,823 0 0 800
Payable for securities
on loan............... 0 0 151,905,405 0
Due to custodian bank.. 0 0 534,282 0
Deferred mortgage
dollar roll income.... 0 0 26,691 0
Advisory fee payable... 14,005 256,840 198,051 596,596
Distribution Plan
expenses payable...... 2,141 754 1,916 2,302
Due to other related
parties............... 0 23,615 10,190 33,539
Accrued expenses and
other liabilities..... 7,854 152,344 47,984 197,632
--------------------------------------------------------------------------------------
Total liabilities...... 568,726 74,890,041 206,229,988 21,088,156
--------------------------------------------------------------------------------------
Net assets.............. $56,232,431 $1,048,524,629 $602,517,442 $1,805,079,909
--------------------------------------------------------------------------------------
Net assets represented
by
Paid-in capital........ $57,364,260 $1,071,849,415 $609,330,063 $1,833,309,601
Undistributed
(overdistributed) net
investment income..... 924 (225,304) (631,290) (509,450)
Accumulated net
realized gains or
losses on securities
and foreign currency
related transactions.. (826,434) (17,806,367) 196,490 (10,523,284)
Net unrealized losses
on securities and
foreign currency
related transactions.. (306,319) (5,293,115) (6,377,821) (17,196,958)
--------------------------------------------------------------------------------------
Total net assets........ $56,232,431 $1,048,524,629 $602,517,442 $1,805,079,909
--------------------------------------------------------------------------------------
Net assets consists of
Class I................ $36,032,963 $1,042,780,552 $590,927,188 $1,794,208,965
Class IS............... 20,199,468 5,744,077 11,590,254 10,870,944
--------------------------------------------------------------------------------------
Total net assets........ $56,232,431 $1,048,524,629 $602,517,442 $1,805,079,909
--------------------------------------------------------------------------------------
Shares outstanding
Class I................ 3,768,749 103,482,282 101,554,906 331,483,317
Class IS............... 2,112,716 570,018 1,991,825 2,008,467
--------------------------------------------------------------------------------------
Net asset value per
share
Class I................ $ 9.56 $ 10.08 $ 5.82 $ 5.41
--------------------------------------------------------------------------------------
Class IS............... $ 9.56 $ 10.08 $ 5.82 $ 5.41
--------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
67
<PAGE>
EVERGREEN
Select Fixed Income Funds
Statements of Assets and Liabilities
September 30, 1999
<TABLE>
<CAPTION>
Intermediate International Limited Total Return
Bond Bond Duration Bond
Fund Fund Fund Fund
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Identified cost of
securities............ $716,814,315 $54,918,747 $313,533,153 $154,428,077
Net unrealized losses
on securities......... (7,254,468) (1,609,396) (1,413,998) (5,498,453)
--------------------------------------------------------------------------------
Market value of
securities............ 709,559,847 53,309,351 312,119,155 148,929,624
Cash................... 987 588,294 128 0
Foreign currency, at
value (cost $0,
290,866, $0 and 0,
respectively)......... 0 293,443 0 0
Receivable for
securities sold....... 0 0 10,575 254,444
Receivable for Fund
shares sold........... 0 0 0 0
Interest and dividend
receivable............ 11,514,638 1,168,798 3,335,973 2,290,914
Receivable for closed
forward foreign
currency exchange
contracts............. 0 161,150 0 45,321
Prepaid expenses and
other assets.......... 18,723 4,141 5,297 5,627
--------------------------------------------------------------------------------
Total assets........... 721,094,195 55,525,177 315,471,128 151,525,930
--------------------------------------------------------------------------------
Liabilities
Distributions payable.. 2,864,065 0 1,528,957 783,714
Payable for securities
purchased............. 7,495,586 0 0 0
Payable for Fund shares
redeemed.............. 0 0 0 0
Payable for Securities
on Loan............... 0 0 0 0
Due to custodian bank.. 0 0 0 519
Deferred Mortgage
Dollar Roll income.... 0 0 0 0
Advisory fee payable... 295,048 17,406 49,776 46,989
Distribution Plan
expenses payable...... 1,318 23 313 650
Due to other related
parties............... 14,051 5,319 6,177 1,920
Accrued expenses and
other liabilities..... 88,030 5,710 100,165 38,619
--------------------------------------------------------------------------------
Total liabilities...... 10,758,098 28,458 1,685,388 872,411
--------------------------------------------------------------------------------
Net assets.............. $710,336,097 $55,496,719 $313,785,740 $150,653,519
--------------------------------------------------------------------------------
Net assets represented
by
Paid-in capital........ $721,029,475 $56,884,028 $315,294,910 $161,675,467
Undistributed
(overdistributed) net
investment income..... 12,256 324,141 5,793 (30,350)
Accumulated net
realized losses on
securities and foreign
currency related
transactions.......... (3,451,166) (110,507) (100,965) (5,495,840)
Net unrealized losses
on securities and
foreign currency
related transactions.. (7,254,468) (1,600,943) (1,413,998) (5,495,758)
--------------------------------------------------------------------------------
Total net assets........ $710,336,097 $55,496,719 $313,785,740 $150,653,519
--------------------------------------------------------------------------------
Net assets consists of
Class I................ $704,473,534 $55,258,280 $312,156,908 $144,319,976
Class IS............... 5,862,563 238,439 1,628,832 6,333,543
--------------------------------------------------------------------------------
Total net assets........ $710,336,097 $55,496,719 $313,785,740 $150,653,519
--------------------------------------------------------------------------------
Shares outstanding
Class I................ 11,487,435 5,807,719 30,566,099 1,559,047
Class IS............... 95,597 25,094 159,494 68,419
--------------------------------------------------------------------------------
Net asset value per
share
Class I................ $ 61.33 $ 9.51 $ 10.21 $ 92.57
--------------------------------------------------------------------------------
Class IS............... $ 61.33 $ 9.50 $ 10.21 $ 92.57
--------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
68
<PAGE>
EVERGREEN
Select Fixed Income Funds
Statements of Operations
Year Ended September 30, 1999
<TABLE>
<CAPTION>
Adjustable Rate Core Bond Fixed Income Income Plus
Fund Fund (a) Fund Fund
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income
Dividend............... $ 0 $ 423,866 $ 0 $ 35,000
Interest............... 2,332,541 20,065,534 39,376,081 93,308,730
-----------------------------------------------------------------------------------
Total investment
income................. 2,332,541 20,489,400 39,376,081 93,343,730
-----------------------------------------------------------------------------------
Expenses
Advisory fee........... 109,172 1,341,265 3,103,125 7,268,470
Distribution Plan
expenses.............. 33,833 4,191 29,172 22,267
Transfer agent fee..... 2,867 13,353 33,225 39,458
Administrative services
fees.................. 4,875 82,328 154,082 359,786
Trustees' fees and
expenses.............. 212 5,471 17,102 36,832
Custodian fee.......... 8,134 122,541 237,554 505,235
Registration and filing
fees.................. 20,626 25,016 25,446 91,167
Printing and postage
expenses.............. 6,279 12,085 20,066 43,884
Professional fees...... 20,051 41,420 28,716 32,340
Other.................. 2,349 48,724 21,069 27,459
-----------------------------------------------------------------------------------
Total expenses......... 208,398 1,696,394 3,669,557 8,426,898
Less: Fee credits...... (419) (38,585) (31,897) (75,249)
Fee waivers.......... (64,702) (318,098) (620,625) (1,453,694)
-----------------------------------------------------------------------------------
Net expenses........... 143,277 1,339,711 3,017,035 6,897,955
-----------------------------------------------------------------------------------
Net investment income.. 2,189,264 19,149,689 36,359,046 86,445,775
-----------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions
Net realized gains or
losses on:
Securities............. (206,625) (17,915,146) 1,416,510 (9,539,387)
Foreign currency
related transactions.. 0 0 0 0
-----------------------------------------------------------------------------------
Net realized gains or
losses on securities
and foreign currency
related transactions.. (206,625) (17,915,146) 1,416,510 (9,539,387)
-----------------------------------------------------------------------------------
Net change in
unrealized gains or
losses on securities
and foreign currency
related transactions.. (203,833) 10,559,806 (33,036,101) (95,323,463)
-----------------------------------------------------------------------------------
Net realized and
unrealized losses on
securities and foreign
currency related
transactions.......... (410,458) (7,355,340) (31,619,591) (104,862,850)
-----------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ $1,778,806 $ 11,794,349 $ 4,739,455 $ (18,417,075)
-----------------------------------------------------------------------------------
</TABLE>
(a) For the six months ended September 30, 1999.
See Combined Notes to Financial Statements.
69
<PAGE>
EVERGREEN
Select Fixed Income Funds
Statements of Operations
Year Ended September 30, 1999
<TABLE>
<CAPTION>
Intermediate International Limited Total Return
Bond Bond Duration Bond
Fund Fund Fund Fund
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income
Dividend............... 0 0 0 0
Interest............... $ 37,852,704 $ 2,309,334 $ 8,534,531 $ 10,236,516
-------------------------------------------------------------------------------
Total investment
income................. 37,852,704 2,309,334 8,534,531 10,236,516
-------------------------------------------------------------------------------
Expenses
Advisory fee........... 4,398,704 287,115 416,391 580,306
Distribution Plan
expenses.............. 13,511 402 1,943 15,342
Transfer agent fee..... 9,919 1,414 52,676 728
Administrative services
fees.................. 182,850 11,917 33,285 35,924
Trustees' fees and
expenses.............. 15,731 958 2,905 2,814
Custodian fee.......... 236,416 53,938 49,586 46,676
Registration and filing
fees.................. 44,255 57,827 75,375 66,433
Printing and postage
expenses.............. 22,340 893 5,009 2,267
Professional fees...... 24,983 36,748 25,087 24,325
Other.................. 7,115 3,280 37,062 12,212
-------------------------------------------------------------------------------
Total expenses......... 4,955,824 454,492 699,319 787,027
Less: Fee credits...... (42,834) (20,999) (7,417) (7,694)
Fee waivers............ (733,117) (122,058) (274,975) (53,477)
-------------------------------------------------------------------------------
Net expenses........... 4,179,873 311,435 416,927 725,856
-------------------------------------------------------------------------------
Net investment income.. 33,672,831 1,997,899 8,117,604 9,510,660
-------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions
Net realized gains or
losses on:
Securities............. (3,177,212) 2,561,983 (98,199) (4,139,220)
Foreign currency
related transactions.. 0 567,365 0 346,065
-------------------------------------------------------------------------------
Net realized gains or
losses on securities
and foreign currency
related transactions.. (3,177,212) 3,129,348 (98,199) (3,793,155)
-------------------------------------------------------------------------------
Net change in
unrealized losses on
securities and foreign
currency related
transactions.......... (52,389,950) (3,192,115) (2,114,578) (6,893,620)
-------------------------------------------------------------------------------
Net realized and
unrealized losses on
securities and foreign
currency related
transactions.......... (55,567,162) (62,767) (2,212,777) (10,686,775)
-------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ $(21,894,331) $ 1,935,132 $ 5,904,827 $ (1,176,115)
-------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
70
<PAGE>
EVERGREEN
Select Fixed Income Funds
Statement of Operations
Year Ended March 31, 1999
<TABLE>
<CAPTION>
Core
Bond Fund (a)
-------------------------------------------------------------------------------
<S> <C>
Investment income
Interest........................................................ $ 6,473,084
Dividend........................................................ 483,139
-------------------------------------------------------------------------------
Total investment income.......................................... 6,956,223
-------------------------------------------------------------------------------
Expenses
Advisory fee.................................................... 418,525
Distribution Plan expenses...................................... 4,201
Administrative services fees.................................... 98,726
Trustees' fees and expenses..................................... 8,220
Custodian fee................................................... 18,459
Registration and filing fees.................................... 6,234
Postage and Supplies............................................ 3,799
Printing and postage expenses................................... 7,441
Professional fees............................................... 15,245
Pricing Costs................................................... 15,146
Insurance Expense............................................... 3,269
Other........................................................... 4,317
-------------------------------------------------------------------------------
Total expenses.................................................. 603,582
Less: Fee credits............................................... (18,717)
Fee waived ................................................... (23,693)
-------------------------------------------------------------------------------
Net expenses.................................................... 561,172
-------------------------------------------------------------------------------
Net investment income........................................... 6,395,051
-------------------------------------------------------------------------------
Net realized and unrealized gains or losses on securities
Securities...................................................... 1,960,347
Net change in unrealized gains and losses on securities......... (1,449,745)
-------------------------------------------------------------------------------
Net realized and unrealized gains on securities................. 510,602
-------------------------------------------------------------------------------
Net increase in net assets resulting from operations............ $ 6,905,653
-------------------------------------------------------------------------------
</TABLE>
(a) The above Statement of Operations is for the Tattersall Bond Fund, the ac-
counting survivor in the June 4, 1999 merger with Core Bond Fund. The Fund
changed its year end and, accordingly presents this statement of operation
to comply with financial reporting requirements.
See Combined Notes to Financial Statements.
71
<PAGE>
EVERGREEN
Select Fixed Income Funds
Statements of Changes in Net Assets
Period Ended September 30, 1999
<TABLE>
<CAPTION>
Adjustable Rate Core Bond Fixed Income Income Plus
Fund Fund (a) Fund Fund
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income.. $ 2,189,264 $ 19,149,689 $ 36,359,046 $ 86,445,775
Net realized gains or
losses on securities
and foreign currency
related transactions.. (206,625) (17,915,146) 1,416,510 (9,539,387)
Net change in
unrealized gains or
losses on securities
and foreign currency
related transactions.. (203,833) 10,559,806 (33,036,101) (95,323,463)
--------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ 1,778,806 11,794,349 4,739,455 (18,417,075)
--------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class I................ (1,397,318) (18,838,531) (35,671,468) (85,924,615)
Class IS............... (793,896) (117,748) (658,927) (510,896)
Net realized gains
Class I................ 0 (144,394) 0 (12,260,419)
Class IS............... 0 (3,606) 0 (77,202)
--------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (2,191,214) (19,104,279) (36,330,395) (98,773,132)
--------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold.................. 32,420,775 83,677,773 147,719,575 233,942,078
Net asset value of
shares issued in
reinvestment of
distributions......... 1,817,776 3,931,283 7,882,569 17,855,318
Payment for shares
redeemed.............. (10,412,264) (48,148,961) (200,209,090) (314,597,134)
Net asset value of
shares issued in
acquisition of:
Common Trust Funds..... 0 312,235,534 0 610,301,298
Investment Companies... 0 592,389,300 0 0
--------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
share transactions.... 23,826,287 944,084,929 (44,606,946) 547,501,560
--------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............... 23,413,879 936,774,999 (76,197,886) 430,311,353
Net assets
Beginning of period.... 32,818,552 111,749,630 678,715,328 1,374,768,556
--------------------------------------------------------------------------------------
End of period.......... $56,232,431 $1,048,524,629 $602,517,442 $1,805,079,909
--------------------------------------------------------------------------------------
Undistributed
(overdistributed) net
investment income...... $ 924 $ (225,304) $ (631,290) $ (509,450)
--------------------------------------------------------------------------------------
</TABLE>
(a) For the six months ended September 30, 1999.
See Combined Notes to Financial Statements.
72
<PAGE>
EVERGREEN
Select Fixed Income Funds
Statements of Changes in Net Assets
Year Ended September 30, 1999
<TABLE>
<CAPTION>
Intermediate International Limited Total Return
Bond Bond Duration Bond
Fund Fund Fund Fund
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income.. $ 33,672,831 $ 1,997,899 $ 8,117,604 $ 9,510,660
Net realized gains or
losses on securities
and foreign currency
related transactions.. (3,177,212) 3,129,348 (98,199) (3,793,155)
Net change in
unrealized losses on
securities and foreign
currency related
transactions.......... (52,389,950) (3,192,115) (2,114,578) (6,893,620)
---------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ (21,894,331) 1,935,132 5,904,827 (1,176,115)
---------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class I................ (33,430,318) (1,906,784) (8,066,740) (9,139,842)
Class IS............... (236,269) (5,278) (43,790) (389,292)
Net realized gains
Class I................ (9,895,453) 0 (125,867) 0
Class IS............... (67,252) 0 (1,052) 0
---------------------------------------------------------------------------------
Total distributions to
shareholders.......... (43,629,292) (1,912,062) (8,237,449) (9,529,134)
---------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold.................. 81,766,341 14,680,094 65,588,737 20,634,659
Net asset value of
shares issued in
reinvestment of
distributions......... 8,732,727 1,496,453 2,540,973 6,980,846
Payment for shares
redeemed.............. (106,674,508) (7,438,959) (65,752,963) (2,278,793)
Net asset value of
share issued in
acquisition of:
Common Trust Funds..... 40,425,308 0 242,317,183 0
---------------------------------------------------------------------------------
Net increase in net
assets resulting from
capital share
transactions.......... 24,249,868 8,737,588 244,693,930 25,336,712
---------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............... (41,273,755) 8,760,658 242,361,308 14,631,463
Net assets
Beginning of period.... 751,609,852 46,736,061 71,424,432 136,022,056
---------------------------------------------------------------------------------
End of period.......... $ 710,336,097 $55,496,719 $313,785,740 $150,653,519
---------------------------------------------------------------------------------
Undistributed
(overdistributed) net
investment income...... $ 12,256 $ 324,141 $ 5,793 $ (30,350)
---------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
73
<PAGE>
EVERGREEN
Select Fixed Income Funds
Statements of Changes in Net Assets
Period Ended September 30, 1998
<TABLE>
<CAPTION>
Adjustable Rate Core Bond Fixed Income Income Plus
Fund (a) Fund (c) Fund (b) Fund (b)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income.. $ 1,232,382 $ 6,395,051 $ 26,565,434 $ 62,767,885
Net realized gains or
losses on securities
and foreign currency
related transactions.. (78,229) 1,960,347 (496,271) 10,936,797
Net change in
unrealized gains or
losses on securities
and foreign currency
related transactions.. (188,602) (1,449,745) 18,257,417 34,820,095
------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations............ 965,551 6,905,653 44,326,580 108,524,777
------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class I................ (887,998) (6,248,934) (26,373,150) (62,598,276)
Class IS............... (344,384) (154,241) (192,964) (169,001)
Net realized gains
Class I................ 0 (2,212,023) 0 0
Class IS............... 0 (55,284) 0 0
------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (1,232,382) (8,670,482) (26,566,114) (62,767,277)
------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold.................. 12,620,392 18,357,060 584,709,292 1,335,192,430
Net asset value of
shares issued in
reinvestment of
distributions......... 913,798 8,385,840 2,361,028 1,853,405
Payment for shares
redeemed.............. (16,749,211) (12,547,141) (98,155,046) (170,985,567)
Net asset value of
shares issued in
acquisition of:
Investment Companies... 0 0 172,039,588 162,950,788
------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
share transactions.... (3,215,021) 14,195,759 660,954,862 1,329,011,056
------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............... (3,481,852) 12,430,930 678,715,328 1,374,768,556
Net assets
Beginning of period.... 36,300,404 99,318,700 0 0
------------------------------------------------------------------------------------
End of period.......... $32,818,552 $111,749,630 $678,715,328 $1,374,768,556
------------------------------------------------------------------------------------
Undistributed
(overdistributed) net
investment income...... $ 2,876 $ 0 $ (288,591) $ (242,819)
------------------------------------------------------------------------------------
</TABLE>
(a) For the seven months ended September 30, 1998. The Fund changed its fiscal
year end from the last day of February to September 30, effective September
30, 1998.
(b) For the period from November 24, 1997 (commencement of operations) to Sep-
tember 30, 1998.
(c) For the year ended March 31, 1999. The above statement of changes in net
assets is for the Tattersall Bond Fund, the accounting survivor in the June
4, 1999 merger with Select Core Bond Fund.
See Combined Notes to Financial Statements.
74
<PAGE>
EVERGREEN
Select Fixed Income Funds
Statements of Changes in Net Assets
Period Ended September 30, 1998
<TABLE>
<CAPTION>
Intermediate International Total Return
Bond Bond Limited Duration Bond
Fund (a) Fund (b) Fund (a) Fund (c)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income.. $ 29,283,024 $ 490,222 $ 3,080,248 $ 3,611,355
Net realized gains or
losses on securities
and foreign currency
related transactions.. 9,684,239 (588,730) 184,337 (1,717,936)
Net change in
unrealized gains on
securities and foreign
currency related
transactions.......... 16,064,710 1,578,308 616,411 1,397,862
-----------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations............ 55,031,973 1,479,800 3,880,996 3,291,281
-----------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class I................ (29,222,895) (638,833) (3,073,999) (3,611,031)
Class IS............... (60,129) (1,692) (6,249) (324)
-----------------------------------------------------------------------------------
Total distributions to
shareholders.......... (29,283,024) (640,525) (3,080,248) (3,611,355)
-----------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold.................. 815,300,441 8,607,670 76,083,563 134,638,661
Net asset value of
shares issued in
reinvestment of
distributions......... 120,031 512,803 1,650,900 3,130,119
Payment for shares
redeemed.............. (89,559,569) (144,292) (40,029,773) (1,426,650)
Net asset value of
shares issued in
acquisition of
Investment Companies.. 0 0 32,918,994 0
-----------------------------------------------------------------------------------
Net increase in net
assets resulting from
capital share
transactions.......... 725,860,903 8,976,181 70,623,684 136,342,130
-----------------------------------------------------------------------------------
Total increase in net
assets............... 751,609,852 9,815,456 71,424,432 136,022,056
Net assets
Beginning of period.... 0 36,920,605 0 0
-----------------------------------------------------------------------------------
End of period.......... $751,609,852 $46,736,061 $ 71,424,432 $136,022,056
-----------------------------------------------------------------------------------
Undistributed
(overdistributed) net
investment income...... $ 10,524 $ (103,870) $ 5,023 $ 4,751
-----------------------------------------------------------------------------------
</TABLE>
(a) For the period from November 24, 1997 (commencement of operations) to Sep-
tember 30, 1998.
(b) For the three months ended September 30, 1998. The Fund changed its fiscal
year end from June 30 to September 30, effective September 30, 1998.
(c) For the period from April 20, 1998 (commencement of operations) to Septem-
ber 30, 1998.
See Combined Notes to Financial Statements.
75
<PAGE>
EVERGREEN
Select Fixed Income Funds
Statements of Changes in Net Assets
For the periods indicated
<TABLE>
<CAPTION>
Core Bond Fund
Adjustable Rate Fund Year Ended International Bond Fund
Year Ended March 31, Year Ended
February 28, 1998 1998 (a) June 30, 1998
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income.. $ 3,007,633 $ 5,273,886 $ 1,771,184
Net realized gains or
losses on securities
and foreign currency
related transactions.. 297,743 1,826,210 (242,462)
Net change in
unrealized gains or
losses on securities
and foreign currency
related transactions.. (69,974) 2,574,722 38,713
------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations............ 3,235,402 9,674,818 1,567,435
------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class I................ (2,543,452) (5,189,396) (2,380,391)
Class IS............... (437,527) (99,842) (14,784)
------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (2,980,979) (5,289,238) (2,395,175)
------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold.................. 17,099,051 19,913,441 1,569,153
Net asset value of
shares issued in
reinvestment of
distributions......... 2,868,485 5,149,079 2,047,650
Payment for shares
redeemed.............. (57,749,240) (6,628,894) (640,270)
------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
share transactions.... (37,781,704) 18,433,626 2,976,533
------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............... (37,527,281) 22,819,206 2,148,793
Net assets
Beginning of period.... 73,827,685 76,499,494 34,771,812
------------------------------------------------------------------------------------
End of period.......... $ 36,300,404 $99,318,700 $36,920,605
------------------------------------------------------------------------------------
Undistributed
(overdistributed) net
investment income...... $ (10,097) 0 0
------------------------------------------------------------------------------------
</TABLE>
(a) The Statement of Changes for the year ended March 31, 1998 is for the
Tattersall Bond Fund, the accounting survivor in the June 4, 1999 merger
with Select Core Bond Fund.
See Combined Notes to Financial Statements.
76
<PAGE>
Combined Notes to Financial Statements
1. ORGANIZATION
The Evergreen Select Fixed Income Funds consist of Evergreen Select Adjustable
Rate Fund ("Adjustable Rate Fund"), Evergreen Select Core Bond Fund ("Core Bond
Fund"), Evergreen Select Fixed Income Fund ("Fixed Income Fund"), Evergreen Se-
lect Income Plus Fund ("Income Plus Fund"), Evergreen Select Intermediate Term
Municipal Bond Fund (formerly 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 Ever-
green Select Fixed Income Trust (the "Trust"), a Delaware business trust orga-
nized 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 Institu-
tional Service Class of shares ("Class IS"). Each Class of shares is sold with-
out a front-end sales charge or contingent deferred sales charge. Class IS
shares pay an ongoing service fee.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Funds in the preparation of their financial statements. The poli-
cies are in conformity with generally accepted accounting principles, which re-
quire management to make estimates and assumptions that affect amounts reported
herein. Actual results could differ from these estimates.
A. Valuation of Securities
Corporate bonds, U.S. government obligations, mortgage and other asset-backed
securities, municipal bonds and other fixed-income 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 rela-
tionships between similar securities, which are generally recognized by insti-
tutional traders. Securities for which valuations are not available from an in-
dependent pricing service may be valued by brokers which use prices provided by
market makers or estimates of market value obtained from yield data relating to
investments or securities with similar characteristics. Otherwise, securities
for which valuations are not readily available from an independent pricing
service (including restricted securities) are valued at fair value as deter-
mined in good faith according to procedures established by the Board of Trust-
ees.
Securities traded on a national securities exchange or included on the Nasdaq
National Market System ("NMS") and other securities traded in the over-the-
counter market are valued at the last reported sales price on the exchange
where primarily traded. Securities traded on an exchange or NMS for which there
has been no sale and other securities traded in the over-the-counter market are
valued at the mean between the last reported bid and asked price. Securities,
for which market quotations are not readily available, including restricted se-
curities, are valued at fair value as determined in good faith according to
procedures approved by the Board of Trustees.
Mutual fund shares, held for short-term investments, are valued at the net as-
set value of each mutual fund. 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
for repurchase agreements are held in a segregated account by the custodian on
the Fund's behalf. Collateral for certain tri-party repurchase agreements is
held at the counterparty's custodian in a segregated account for the benefit of
the Fund and the counterparty. Each Fund monitors the adequacy of the collat-
eral daily and will require the seller to provide additional collateral in the
event the market value of the securities pledged falls below the carrying
77
<PAGE>
Combined Notes to Financial Statements (continued)
value of the repurchase agreement, including accrued interest. Each Fund will
only enter into repurchase agreements with banks and other financial institu-
tions, 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 Commis-
sion, the Adjustable Rate Fund, along with certain other funds managed by Ever-
green Investment Management Company ("EIMC"), a subsidiary of First Union Na-
tional Bank ("FUNB"), may transfer uninvested cash balances into a joint trad-
ing account. These balances are invested in one or more repurchase agreements
that are fully collateralized by U.S. Treasury and/or federal agency obliga-
tions.
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 agree-
ment, 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 and income and expenses at the
rate of exchange prevailing on the respective dates of such transactions. Net
unrealized foreign exchange gain (loss) resulting from changes in foreign cur-
rency exchange rates is a component of net unrealized gains or losses on secu-
rities and foreign currency related transactions. Net realized foreign currency
gain or loss on foreign currency related transactions includes foreign currency
gains and losses between trade date and settlement date on investment securi-
ties transactions, foreign currency related transactions and the difference be-
tween the amounts of interest and dividends recorded on the books of the Fund
and the amount actually received. The portion of foreign currency gains or
losses related to fluctuations in exchange rates between the initial purchase
trade date and subsequent sale trade date is included in realized gain or loss
on securities.
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 liabili-
ties. Forward contracts are recorded at the forward rate and marked-to-market
daily. Realized gains and losses arising from such transactions are included in
net realized gain or loss 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 con-
tracts involve elements of market risk in excess of the amount reflected in the
statement of assets and liabilities.
F. When-issued and Delayed Delivery Transactions
The Funds record when-issued or delayed delivery transactions on the trade date
and will segregate with the custodian qualifying assets having a value suffi-
cient to make payment for the securities purchased. Securities purchased on a
when-issued or delayed delivery basis are marked-to-market daily and the Fund
begins earning interest on the settlement date. Losses may arise due to changes
in the market value of the underlying securities or if the counterparty does
not perform under the contract.
G. Securities Lending
In order to generate income and to offset expenses, the Funds may lend portfo-
lio securities to brokers, dealers and other financial organizations. A Fund's
investment adviser will monitor the creditworthiness of such borrowers. Loans
of securities may not exceed 33 1/3% of a Fund's total assets and will be col-
lateralized by cash, letters of credit or U.S. Government securities that are
maintained at all times in an amount equal to at least
78
<PAGE>
Combined Notes to Financial Statements (continued)
100% of the current market value of the loaned securities, including accrued
interest. The Fund monitors the adequacy of the collateral daily and will re-
quire the borrower to provide additional collateral in the event the value of
the collateral falls below 100% of the market value of the securities on loan.
While such securities are on loan, the borrower will pay a Fund any income ac-
cruing thereon, and the Fund may invest any cash collateral received in portfo-
lio 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 fees in connection with such loans.
H. Dollar Rolls Transactions
The Funds may engage in dollar roll transactions with respect to mortgage-
backed securities issued by GNMA, FNMA and FHLMC. In a dollar roll transaction,
a Fund sells a mortgage-backed security to a financial institution, such as a
bank or broker/dealer and simultaneously agrees to repurchase a substantially
similar (i.e. same type, coupon and maturity) security from the institution at
a later date at an agreed upon price. The mortgage-backed securities that are
repurchased will bear the same interest rate as those sold, but generally will
be collateralized by different pools of mortgages with different prepayment
histories.
I. 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. Foreign income and capital gains re-
alized on some foreign securities may be subject to foreign taxes, which are
accrued as applicable.
J. Federal Taxes
The Funds have qualified and intend to continue to qualify as regulated invest-
ment 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 in-
come, net tax-exempt income and net capital gains, if any, to their sharehold-
ers. The Funds also intend to avoid any excise tax liability by making the re-
quired 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.
K. Distributions
Distributions from net investment income for each Fund, except International
Bond Fund, are declared daily and paid monthly. Distributions from net invest-
ment income for the International Bond Fund are declared and paid quarterly.
Distributions from net realized capital gains, if any, are paid at least annu-
ally. 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 accor-
dance with income tax regulations, which may differ from generally accepted ac-
counting principles. The significant differences between financial statement
amounts available for distributions and distributions made in accordance with
income tax regulations are primarily due to differing treatment for mortgage
paydown gains or losses, net realized foreign currency gains or losses and cer-
tain realized loss on securities that have been subsequently repurchased.
L. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the rela-
tive net assets of each class. Currently, class specific expenses are limited
to expenses incurred under the Distribution Plans for Class IS.
M. Organization Expenses
Organization expenses for International Bond Fund are amortized to operations
over a five year period on a straight-line basis. In the event any of the ini-
tial shares of the Fund are redeemed by any holder during the five-year amorti-
zation period, redemption proceeds will be reduced by any unamortized organiza-
tion ex-
79
<PAGE>
Combined Notes to Financial Statements (continued)
penses in the same proportion as the number of initial shares being redeemed
bears to the number of initial shares outstanding at the time of the redemp-
tion. Organization expenses for International Bond Fund have been fully amor-
tized as of September 30, 1999.
3. INVESTMENT ADVISORY AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
EIMC is the investment advisor for Adjustable Rate Fund. In return for provid-
ing investment advisory and administrative services to the Fund, the Fund pays
EIMC an advisory fee that is calculated daily and paid monthly. The advisory
fee is computed at an annual rate of 0.30% of the average daily net assets of
the Fund for the year ended September 30, 1999.
Effective June 4, 1999, Tattersall Advisory Group ("TAG"), a subsidiary of
FUNB, became the investment advisor of Core Bond Fund. In return for its serv-
ices, the Fund pays TAG an advisory fee that is calculated daily and paid
monthly at an annual rate of 0.40% of the Fund's average daily net assets.
Prior to June 4, 1999, FUNB was the investment advisor to the Fund and earned
the same investment advisory fee. For the six months ended September 30, 1999,
TAG, and FUNB voluntarily waived $318,098 of their advisory fee, representing
0.09% (annualized) of the Funds average daily net assets. For the year ended
March 31, 1999, TAG voluntarily waived $23,693 of their advisory fee, repre-
senting 0.04% of the Funds average daily net assets.
FUNB, a subsidiary of First Union, serves as the investment advisor to Fixed
Income Fund, Income Plus Fund, Intermediate Bond Fund, Limited Duration Fund
and Total Return Bond Fund. In return for providing investment advisory serv-
ices to the Funds, each Fund pays FUNB an advisory fee that is calculated daily
and paid monthly based on the following percentages of each Fund's average
daily net assets:
<TABLE>
<CAPTION>
Annual
Advisory Fee
------------
<S> <C>
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>
First International Advisors, Ltd. ("First International"), a subsidiary of
First Union Corporation ("First Union"), is the investment advisor for the In-
ternational Bond Fund. First International is paid an advisory fee that is cal-
culated daily and paid monthly. The advisory fee is computed at an annual rate
of 0.60% of the average daily net assets of the Fund.
During the year ended September 30, 1999, the amount of investment advisory
fees waived by each investment advisor and the impact on each Fund's expense
ratio represented as a percentage of its average net assets were as follows:
<TABLE>
<CAPTION>
Fees % of Average
Waived daily net assets
------------------------
<S> <C> <C>
Adjustable Rate Fund................ $ 64,702 .18%
Fixed Income Fund................... 620,625 .10%
Income Plus Fund.................... 1,453,694 .10%
Intermediate Bond Fund.............. 733,117 .10%
International Bond Fund............. 122,058 .26%
Limited Duration Fund............... 274,975 .20%
Total Return Bond Fund.............. 53,477 .04%
</TABLE>
First International and EIMC serve as sub-investment advisors to the Total Re-
turn 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 In-
ternational and EIMC.
Evergreen Investment Services ("EIS"), a subsidiary of First Union, serves as
the administrator and The BISYS Group, Inc. ("BISYS") serves as the sub-admin-
istrator to the Funds. As administrator, EIS provides the Funds with facili-
ties, equipment and personnel. As sub-administrator to the Funds, BISYS pro-
vides the officers of the Funds. Officers of the Funds and affiliated Trustees
receive no compensation directly from 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
80
<PAGE>
Combined Notes to Financial Statements (continued)
its investment advisory subsidiaries are also the investment advisors. The ad-
ministration fee is calculated by applying percentage rates, which start at
0.05% and decline to 0.01% per annum as net assets increase, to the average
daily net assets of each Fund. The sub-administration fee is calculated by ap-
plying 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 each Fund.
During the year ended September 30, 1999, the Funds, other than Adjustable Rate
Fund, paid or accrued the following amounts for administrative and sub-adminis-
trative services:
<TABLE>
<CAPTION>
Administration Sub-administration
Fee Fee
-----------------------------
<S> <C> <C>
Core Bond Fund................ $ 82,328 $ 0
Fixed Income Fund............. 122,160 31,922
Income Plus Fund.............. 285,349 74,437
Intermediate Bond Fund........ 145,164 37,686
International Bond Fund....... 9,459 2,458
Limited Duration Fund......... 26,289 6,996
Total Return Bond Fund........ 28,473 7,451
</TABLE>
During the year ended September 30, 1999, the Adjustable Rate Fund reimbursed
EIMC $4,875 for providing certain administration and accounting expenses.
Evergreen Service Company ("ESC"), an indirectly, wholly owned subsidiary of
First Union, serves as the transfer and dividend disbursing agent for the
Funds.
4. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI"), a wholly owned subsidiary of BISYS, serves
as principal underwriter to the Funds.
Each Fund has adopted Distribution Plans, as allowed by Rule 12b-1 of the 1940
Act, for Class IS shares. Distribution plans permit a Fund to compensate 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 "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 at least quarterly.
Each of the Distribution Plans may be terminated at any time by vote of the In-
dependent Trustees or by vote of a majority of the outstanding voting shares of
the respective class.
5. ACQUISITIONS
On June 25, 1999 several of the Funds acquired the net assets of various common
trust funds managed by FUNB. These acquisitions were accomplished through tax-
able or tax-free exchanges of Class I shares of each Fund. The value of total
shares issued, net assets acquired and unrealized appreciation (depreciation)
of each Fund were as follows:
<TABLE>
<CAPTION>
Total Total Unrealized
Shares Net Assets Appreciation
Acquiring Fund Common Trust Fund Acquired Issued Acquired (Depreciation)
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Core Bond Fund CoreFund Charitable Fixed Income Trust 10,632,584 $106,874,434 $ (2,608,935)
CoreFund Bond Fund 20,219,688 203,240,383 --
Signet Premium Income Fund 210,985 2,120,717 (32,764)
---------- ----------- ------------
31,063,257 312,235,534 (2,641,699)
Income Plus Fund CoreFund Fixed Income Fund 45,904,652 248,651,717 (5,968,898)
CoreFund Bond Trust 66,765,388 361,649,581 (6,978,079)
---------- ----------- ------------
112,670,040 610,301,298 (12,946,977)
Intermediate Bond Fund CoreFund Delaware Municipal Bond Fund 644,587 40,425,308 304,901
---------- ----------- ------------
Limited Duration Fund CoreFund Intermediate Bond Trust 10,728,927 109,605,697 (334,385)
CoreFund Intermediate Fund 4,178,636 42,688,717 (21,833)
CoreFund Intermediate Bond Fund 8,812,023 90,022,769 --
---------- ----------- ------------
23,719,586 242,317,183 (356,218)
</TABLE>
81
<PAGE>
Combined Notes to Financial Statements (continued)
On June 4, 1999, Core Bond Fund acquired all of the net assets and certain lia-
bilities of the Tattersall Bond Fund ("Tattersall") an open-end, management in-
vestment company registered under the 1940 Act, through a tax-free exchange of
Class I and Class IS shares. The acquired net assets consisted primarily of
portfolio securities with unrealized depreciation of $1,251,269. The aggregate
net assets of Tattersall and Core Bond Fund immediately before the acquisition
were $109,122,148 and $592,389,300, respectively. The aggregate net assets of
Core Bond Fund after the acquisition were $701,511,448. Since TAG was expected
to be the investment adviser to Core Bond Fund, after the acquisition, and that
Core Bond Fund would be managed in accordance with Tattersall's investment ob-
jective and policies, it was determined that Tattersall was the accounting and
performance survivor of this reorganization and as such its basis of accounting
for assets and liabilities and its operating results for prior periods are car-
ried forward. Tattersall changed its fiscal year from March 31 to September 30,
effective September 30, 1999.
On July 27, 1998, Fixed Income Fund acquired substantially all the assets and
assumed certain liabilities of CoreFund Short Intermediate Fund in exchange for
Class I and Class IS shares of Fixed Income Fund.
On July 27, 1998, Income Plus Fund acquired substantially all the assets and
assumed certain liabilities of CoreFund Bond Fund in exchange for Class I and
Class IS shares of Income Plus Fund.
On July 27, 1998, Limited Duration Fund acquired substantially all the assets
and assumed certain liabilities of CoreFund Short Term Income Fund, in an ex-
change for Class I and Class IS shares of Limited Duration Fund.
These acquisitions were accomplished by a tax-free exchange of the respective
shares of each Fund. The value of net assets acquired, number of shares issued,
unrealized appreciation acquired and the aggregate net assets of each Fund im-
mediately after the acquisition were as follows:
<TABLE>
<CAPTION>
Net Assets
Value of Net Number of Unrealized After
Acquiring Fund Acquired Fund Assets Acquired Shares Issued Appreciation 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>
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 Interna-
tional 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 re-
organization. Additionally, the fiscal year end of the CoreFund for financial
reporting and tax purposes was changed to coincide with that of the Trust.
82
<PAGE>
Combined Notes to Financial Statements (continued)
6. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with $0.001
par value authorized. Shares of beneficial interest of the Funds are currently
divided into Class I and Class IS. Transactions in shares of the Funds were as
follows:
Adjustable Rate Fund
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------------ Year Ended February 28,
1999 1998 (a) 1998
---------------------- ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class I
Shares sold............. 1,602,911 $15,347,739 694,346 $ 6,750,376 756,542 $ 7,370,775
Shares issued in
reinvestment of
distributions.......... 125,051 1,199,107 76,201 739,024 254,776 2,481,417
Shares redeemed......... (354,414) (3,423,816) (1,040,259) (10,108,386) (5,579,904) (54,382,797)
---------------------------------------------------------------------------------------------------
Net increase
(decrease)............. 1,373,548 13,123,030 (269,712) (2,618,986) (4,568,586) (44,530,605)
---------------------------------------------------------------------------------------------------
Class IS
Shares sold............. 1,780,289 17,073,036 603,561 5,870,016 996,337 9,728,276
Shares issued in
reinvestment of
distributions.......... 64,525 618,669 18,011 174,774 39,661 387,068
Shares redeemed......... (728,144) (6,988,448) (683,194) (6,640,825) (344,863) (3,366,443)
---------------------------------------------------------------------------------------------------
Net increase
(decrease)............. 1,116,670 10,703,257 (61,622) (596,035) 691,135 6,748,901
---------------------------------------------------------------------------------------------------
Net increase
(decrease)............. $23,826,287 $ (3,215,021) $(37,781,704)
---------------------------------------------------------------------------------------------------
</TABLE>
(a)For the seven months ended September 30, 1998.
Core Bond Fund
<TABLE>
<CAPTION>
Year Ended September Year Ended March 31,
30, ------------------------------------------------
1999 (b) 1999 (c) 1998 (c)
------------------------ ------------------------ ----------------------
Shares Amount Shares Amount Shares Amount
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class I
Shares sold............. 7,983,350 $ 81,433,457 1,686,530 $ 17,978,857 1,486,107 $15,597,164
Shares issued in
reinvestment of
distributions.......... 378,980 3,856,401 768,493 8,176,315 485,057 5,049,237
Shares redeemed......... (4,611,016) (46,750,534) (1,092,498) (11,649,216) (499,442) (5,227,155)
Shares issued in
acquisition of:
Common Trust Funds .... 31,063,256 312,235,534 0 0 0 0
Investment Companies... 58,366,376 590,194,768 0 0 0 0
---------------------------------------------------------------------------------------------------
Net increase
(decrease)............. 93,180,946 940,969,626 1,362,525 14,505,956 1,471,722 15,419,246
---------------------------------------------------------------------------------------------------
Class IS
Shares sold............. 223,070 2,244,316 35,245 378,203 413,428 4,316,277
Shares issued in
reinvestment of
distributions.......... 7,336 74,882 19,694 209,525 9,483 99,842
Shares redeemed......... (138,270) (1,398,427) (84,097) (897,925) (131,813) (1,401,739)
Shares issued in
acquisition of:
Investment Companies... 222,949 2,194,532 0 0 0 0
---------------------------------------------------------------------------------------------------
Net increase
(decrease)............. 315,085 3,115,303 (29,158) (310,197) 291,098 3,014,380
---------------------------------------------------------------------------------------------------
Net increase
(decrease)............. $944,084,929 $ 14,195,759 $18,433,626
---------------------------------------------------------------------------------------------------
</TABLE>
(b) For the six months ended September 30, 1999.
(c) The above capital share activity is that of Tattersall Bond Fund, the ac-
counting survivor in the June 4, 1999 merger with Core Bond Fund. The num-
ber of shares for each transaction type have been restated to give effect
for this transaction.
83
<PAGE>
Combined Notes to Financial Statements (continued)
Fixed Income Fund
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------------------------------
1999 1998 (a)
-------------------------- -------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold............. 22,718,254 $ 134,684,835 96,306,245 $574,168,788
Shares issued in
reinvestment of
distributions.......... 1,260,239 7,507,425 367,945 2,225,816
Shares redeemed......... (31,679,032) (189,162,288) (15,780,546) (94,528,967)
Shares issued in
acquisition of
Investment Companies... 0 0 28,361,801 169,524,345
------------------------------------------------------------------------------
Net increase
(decrease)............. (7,700,539) (46,970,028) 109,255,445 651,389,982
------------------------------------------------------------------------------
Class IS
Shares sold............. 2,187,052 13,034,740 1,763,400 10,540,504
Shares issued in
reinvestment of
distributions.......... 63,140 375,144 22,476 135,212
Shares redeemed......... (1,860,394) (11,046,802) (604,664) (3,626,079)
Shares issued in
acquisition of
Investment Companies... 0 0 420,815 2,515,243
------------------------------------------------------------------------------
Net increase............ 389,798 2,363,082 1,602,027 9,564,880
------------------------------------------------------------------------------
Net increase
(decrease)............. $ (44,606,946) $660,954,862
------------------------------------------------------------------------------
</TABLE>
Income Plus Fund
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------------------
1999 1998 (b)
-------------------------- ---------------------------
Shares Amount Shares Amount
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold............. 38,979,040 $ 218,566,129 231,167,025 $1,322,240,227
Shares issued in
reinvestment of
distributions.......... 3,076,886 17,501,272 300,191 1,753,774
Shares redeemed......... (54,255,598) (302,962,132) (28,469,435) (163,795,977)
Shares issued in
acquisition of:
Common Trust Funds..... 112,670,040 610,301,298 0 0
Investment Companies... 0 0 28,015,168 161,316,824
--------------------------------------------------------------------------------
Net increase............ 100,470,368 543,406,567 231,012,949 1,321,514,848
--------------------------------------------------------------------------------
Class IS
Shares sold............. 2,754,186 15,375,949 2,219,376 12,952,203
Shares issued in
reinvestment of
distributions.......... 62,835 354,046 17,172 99,631
Shares redeemed......... (2,080,768) (11,635,002) (1,248,097) (7,189,590)
Shares issued in
acquisition of
Investment Companies... 0 0 283,763 1,633,964
--------------------------------------------------------------------------------
Net increase............ 736,253 4,094,993 1,272,214 7,496,208
--------------------------------------------------------------------------------
Net increase............ $ 547,501,560 $1,329,011,056
--------------------------------------------------------------------------------
</TABLE>
Intermediate Bond Fund
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------
1999 1998 (b)
------------------------ ------------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold............... 1,116,432 $ 71,950,904 12,457,190 $808,447,293
Shares issued in
reinvestment of
distributions............ 131,074 8,571,865 1,174 77,276
Shares redeemed........... (1,534,043) (98,321,050) (1,328,980) (87,315,146)
Shares issued in
acquisition of Common
Trust Funds.............. 644,588 40,425,308 0 0
-----------------------------------------------------------------------------
Net increase.............. 358,051 22,627,027 11,129,384 721,209,423
-----------------------------------------------------------------------------
Class IS
Shares sold............... 151,491 9,815,437 104,141 6,853,148
Shares issued in
reinvestment of
distributions............ 2,481 160,862 647 42,755
Shares redeemed........... (128,949) (8,353,458) (34,214) (2,244,423)
-----------------------------------------------------------------------------
Net increase.............. 25,023 1,622,841 70,574 4,651,480
-----------------------------------------------------------------------------
Net increase.............. $ 24,249,868 $725,860,903
-----------------------------------------------------------------------------
</TABLE>
(a) For the period from November 24, 1997 and March 9, 1998 (Commencement of
Class Operations), respectively, for Class I and Class IS.
(b) For the period from November 24, 1997 and March 2, 1998 (Commencement of
Class Operations), respectively, for Class I and Class IS.
84
<PAGE>
Combined Notes to Financial Statements (continued)
International Bond Fund
<TABLE>
<CAPTION>
Period Ended September 30, Year Ended June
------------------------------------------- 30,
1999 1998 (C) 1998
---------------------- ------------------- -------------------
Shares Amount Shares Amount Shares Amount
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class I
Shares sold............. 1,537,729 $14,497,718 906,343 $8,607,462 157,657 $1,499,070
Shares issued in
reinvestment of
distributions.......... 157,821 1,491,568 53,689 511,122 216,504 2,032,922
Shares redeemed......... (781,161) (7,361,053) (7,356) (70,319) (60,566) (577,276)
-----------------------------------------------------------------------------------------
Net increase............ 914,389 8,628,233 952,676 9,048,265 313,595 2,954,716
-----------------------------------------------------------------------------------------
Class IS
Shares sold............. 19,285 182,376 22 208 7,353 70,083
Shares issued in
reinvestment of
distributions.......... 517 4,885 177 1,681 1,571 14,728
Shares redeemed......... (8,315) (77,906) (7,900) (73,973) (6,711) (62,994)
-----------------------------------------------------------------------------------------
Net increase
(decrease)............. 11,487 109,355 (7,701) (72,084) 2,213 21,817
-----------------------------------------------------------------------------------------
Net increase............ $ 8,737,588 $8,976,181 $2,976,533
-----------------------------------------------------------------------------------------
</TABLE>
(CFor)the three months ended September 30, 1998.
Limited Duration Fund
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------
1999 1998 (a)
------------------------ ------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold............... 6,242,085 $ 64,355,655 7,297,523 $ 76,033,178
Shares issued in
reinvestment of
distributions............ 242,535 2,506,847 157,603 1,644,655
Shares redeemed........... (6,370,003) (65,521,557) (3,832,975) (40,029,735)
Shares issued in
acquisition of:
Common Trust Funds....... 23,719,586 242,317,183 0 0
Investment Companies..... 0 0 3,109,745 32,367,615
------------------------------------------------------------------------------
Net increase.............. 23,834,203 243,658,128 6,731,896 70,015,713
------------------------------------------------------------------------------
Class IS
Shares sold............... 120,212 1,233,082 4,835 50,385
Shares issued in
reinvestment of
distributions............ 3,301 34,126 596 6,245
Shares redeemed........... (22,421) (231,406) (4) (38)
Shares issued in
acquisition of Investment
Companies................ 0 0 52,975 551,379
------------------------------------------------------------------------------
Net increase.............. 101,092 1,035,802 58,402 607,971
------------------------------------------------------------------------------
Net increase.............. $244,693,930 $ 70,623,684
------------------------------------------------------------------------------
</TABLE>
Total Return Bond Fund
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------------------
1999 1998 (b)
-------------------- -----------------------
Shares Amount Shares Amount
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares sold.................... 142,731 $13,614,331 1,346,358 $134,570,252
Shares issued in reinvestment
of distributions.............. 69,113 6,624,642 31,423 3,130,119
Shares redeemed................ (16,673) (1,589,530) (13,905) (1,381,981)
-----------------------------------------------------------------------------
Net increase................... 195,171 18,649,443 1,363,876 136,318,390
-----------------------------------------------------------------------------
Class IS
Shares sold.................... 71,687 7,020,328 689 68,409
Shares issued in reinvestment
of distributions.............. 3,718 356,204 0 0
Shares redeemed................ (7,223) (689,263) (452) (44,669)
-----------------------------------------------------------------------------
Net increase................... 68,182 6,687,269 237 23,740
-----------------------------------------------------------------------------
Net increase................... $25,336,712 $136,342,130
-----------------------------------------------------------------------------
</TABLE>
(a) For the period from November 24, 1997 and July 28, 1998 (Commencement of
Class Operations), respectively, for Class I and Class IS.
(b) For the period from April 20, 1998 and August 3, 1998 (Commencement of
Class Operations), respectively, for Class I and Class IS.
85
<PAGE>
Combined Notes to Financial Statements (continued)
7. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the year ended September 30, 1999:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
---------------------------------- ----------------------------------
U.S. Government Non-U.S. Government U.S. Government Non-U.S. Government
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Adjustable Rate Fund.... $ 35,453,185 $ 0 $ 5,096,332 $ 0
Core Bond Fund (1)...... 1,293,091,277 523,325,041 1,158,622,067 191,049,007
Fixed Income Fund....... 294,751,656 120,422,920 272,348,781 113,076,452
Income Plus Fund........ 957,337,338 597,526,861 591,035,849 390,947,208
Intermediate Bond Fund.. 0 686,498,652 0 684,533,413
International Bond
Fund................... 0 82,348,371 0 73,307,928
Limited Duration Fund... 183,032,998 240,738,255 154,894,794 46,090,277
Total Return Bond Fund.. 114,311,915 106,988,781 93,462,285 99,458,707
</TABLE>
------
(1) For the six months ended September 30, 1999
The Fixed Income Fund loaned securities during the year ended September 30,
1999 to certain brokers who paid the Fund a negotiated lenders' fee. These fees
are included in interest income. At September 30, 1999, the value of securities
on loan and the value of collateral amounted to $146,685,998 and $151,906,686
respectively. During the year ended September 30, 1999, the Fixed Income Fund
earned $812,210 in income from securities lending.
On September 30, 1999, the composition of unrealized appreciation and deprecia-
tion on securities based on the aggregate cost of securities for federal income
tax purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Unrealized Unrealized Appreciation
Tax Cost Appreciation Depreciation (Depreciation)
----------------------------------------
<S> <C> <C> <C> <C>
Adjustable Rate Fund.... $ 56,447,352 $ 62,762 $ (384,231) $ (321,469)
Core Bond Fund.......... 1,088,015,717 3,590,713 (9,287,532) (5,696,819)
Fixed Income Fund....... 807,067,519 3,405,430 (9,578,663) (6,173,233)
Income Plus Fund........ 1,754,816,259 20,630,190 (38,394,554) (17,764,364)
Intermediate Bond Fund.. 716,814,315 8,297,328 (15,551,796) (7,254,468)
International Bond
Fund................... 54,918,747 460,462 (2,069,858) (1,609,396)
Limited Duration Fund... 313,533,153 284,177 (1,698,175) (1,413,998)
Total Return Bond Fund.. 154,428,077 474,750 (5,973,203) (5,498,453)
</TABLE>
As of September 30, 1999, the Funds had capital loss carryovers for federal in-
come tax purposes as follows:
<TABLE>
<CAPTION>
Capital Loss Expiration
Carryover 2000 2001 2003 2006 2007
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Adjustable Rate Fund.... $ (634,495) $(198,013) $(280,866) $(43,378) $ (80,791) $ (31,447)
Core Bond Fund.......... (336,338) 0 0 0 (336,338) 0
Fixed Income Fund....... (10,509) 0 0 (10,509) 0 0
International Bond
Fund................... (271,657) 0 0 0 (271,657) 0
Limited Duration Fund... (975) 0 0 0 0 (975)
Total Return Bond Fund.. (3,056,179) 0 0 0 0 (3,056,179)
</TABLE>
Core Bond Fund's capital loss carryforward was created as a result of the June
4, 1999 acquisition of substantially all of the assets and assumption of cer-
tain liabilities of the Tattersall Bond Fund in exchange for Core Bond Fund
shares. In accordance with income tax regulations, certain Core Bond Fund gains
may not be used to offset this capital loss carryforward.
86
<PAGE>
Combined Notes to Financial Statements (continued)
In addition to capital loss carryovers, net capital losses incurred after Octo-
ber 31, 1998 through the end of the fiscal year may be deemed to have occurred
on the first day of the following fiscal year for tax purposes. The Funds have
incurred and have elected to defer such post-October losses as follows:
<TABLE>
<CAPTION>
Amount
----------
<S> <C>
Adjustable Rate Fund................................ (169,177)
Core Bond Fund...................................... (17,066,325)
Income Plus Fund.................................... (9,955,878)
Intermediate Bond Fund.............................. (3,451,166)
Limited Duration Fund............................... (99,990)
Total Return Bond Fund.............................. (2,484,982)
</TABLE>
9. EXPENSE OFFSET ARRANGEMENTS
The Funds have entered into expense offset arrangements with ESC and their cus-
todian whereby credits realized as a result of uninvested cash balances were
used to reduce a portion of each Fund's related expenses. The assets deposited
with ESC and the custodian under these expense offset arrangements could have
been invested in income-producing assets. The amount of fee credits received by
each Fund and the impact on each Fund's expense ratio represented as a percent-
age of its average net assets were as follows:
<TABLE>
<CAPTION>
Total
Fee Credits % of Average
Received Net Assets
-----------------------
<S> <C> <C>
Adjustable Rate Fund................... $ 419 .00%
Core Bond Fund......................... $38,585 .00%
Fixed Income Fund...................... $31,897 .01%
Income Plus Fund....................... $75,249 .01%
Intermediate Bond Fund................. $42,834 .01%
International Bond Fund................ $20,999 .04%
Limited Duration Fund.................. $ 7,417 .01%
Total Return Bond Fund................. $ 7,694 .01%
</TABLE>
10. DEFERRED TRUSTEES' FEES
Each Independent Trustee of each Fund may defer any or all compensation related
to performance of their duties as Trustees. The Trustees' deferred balances are
allocated to deferral accounts, which are included in the accrued expenses for
the Fund. The investment performance of the deferral accounts are based on the
investment performance of certain Evergreen Funds. Any gains earned or losses
incurred in the deferral accounts are reported in the Fund's Trustees' fees and
expenses. Trustees will be paid either in one lump sum or in quarterly install-
ments 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.
11. FINANCING AGREEMENTS
Certain Evergreen Funds and State Street Bank and Trust Company ("State
Street") and a group of banks (collectively, the "Banks") entered into a fi-
nancing agreement dated December 22, 1997, as amended on November 20, 1998. Un-
der this agreement, the Banks provided an unsecured credit facility in the ag-
gregate amount of $400 million ($275 million committed and $125 million uncom-
mitted). The credit facility was allocated, under the terms of the financing
agreement, among the Banks. The credit facility was accessed by the Funds for
temporary or emergency purposes only and was subject to each Fund's borrowing
restrictions. Borrowings under this facility bore interest at 0.50% per annum
above the Federal Funds rate. A commitment fee of 0.065% per annum will be in-
curred on the unused portion of the committed facility, which was allocated to
all funds. For its assistance in arranging this financing agreement, the Capi-
tal Market Group of First Union was paid a one-time arrangement fee of $27,500.
State Street served as administrative agent for the Banks, and as administra-
tive agent was entitled to a fee of $20,000 per annum which was allocated to
all of the funds.
This agreement was amended and renewed on December 22, 1998. The amended fi-
nancing agreement became effective on December 22, 1998 among all of the Ever-
green Funds, State Street and The Bank of New York ("BONY"). Under this agree-
ment, State Street and BONY provided an unsecured credit facility in the
87
<PAGE>
Combined Notes to Financial Statements (continued)
aggregate amount of $150 million ($125 million committed and $25 million uncom-
mitted). The remaining terms and conditions of the agreement were unaffected.
This agreement was terminated on July 27, 1999.
On July 27, 1999, all of the Evergreen Funds and a group of banks (the "Lend-
ers") entered into credit agreement. Under this agreement, the Lenders provide
an unsecured revolving credit commitment in the aggregate amount of $1.050 bil-
lion. The credit facility is allocated, under the terms of the financing agree-
ment, among the Lenders. The credit facility is accessed by the Funds for tem-
porary or emergency purposes to fund the redemption of their shares or as gen-
eral working capital as permitted by each Fund's borrowing restrictions.
Borrowings under this facility bear interest at 0.75% per annum above the Fed-
eral Funds rate (1.50% per annum above the Federal Funds rate during the period
from and including December 1, 1999 through and including January 31, 2000). A
commitment fee of 0.10% per annum is incurred on the average daily unused por-
tion of the revolving credit commitment. The commitment fee is allocated to all
funds. For its assistance in arranging this financing agreement, First Union
Capital Markets Corp. was paid a one-time arrangement fee of $250,000. State
Street serves as paying agent for the funds, and as paying agent is entitled to
a fee of $20,000 per annum which is allocated to all of the funds.
During the year ended September 30, 1999, the Funds had no borrowings under
these agreements.
12. CHANGE IN INDEPENDENT AUDITORS
Based on the recommendation of the Audit Committee of the funds, the Board of
Trustees has determined not to retain PricewaterhouseCoopers LLP as the inde-
pendent auditor of Core Bond Fund, Fixed Income Fund, Income Plus Fund, Inter-
mediate Bond Fund, International Bond Fund, Limited Duration Fund and Total Re-
turn Bond Fund and voted to appoint KPMG LLP for the fund's fiscal year ended
September 30, 1999. During the previous fiscal year, PricewaterhouseCoopers LLP
audit report contained no adverse opinion or disclaimer of opinion; nor were
its reports qualified or modified as to uncertainty, audit scope, or accounting
principle. Further in connection with its audit for the most recent fiscal year
and through June 18, 1999, there were no disagreements between the funds and
PricewaterhouseCoopers LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which if not re-
solved to the satisfaction of PricewaterhouseCoopers LLP would have caused it
to make reference to the disagreements in its report on the financial state-
ments for such year.
88
<PAGE>
Independent Auditors' Report
Board of Trustees and Shareholders
Evergreen Select Fixed Income Trust
We have audited the accompanying statements of assets and liabilities, includ-
ing the schedules of investments of the 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
(formally, Evergreen Select Intermediate Tax Exempt Bond Fund), Evergreen Se-
lect International Bond Fund, Evergreen Select Limited Duration Fund, and Ever-
green Select Total Return Bond Fund, portfolios of the Evergreen Select Fixed
Income Trust, as of September 30, 1999, and the related statements of opera-
tions, the statements of changes in net assets and financial highlights for
each of the years or periods then ended. We also audited the statement of
changes in net assets for Evergreen Select Adjustable Rate Fund for each of the
years or periods in the two year period ended September 30, 1998, and financial
highlights for each of the years or periods in the four year period then ended.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these fi-
nancial statements and financial highlights based on our audits. For the Ever-
green Select Core Bond Fund, Evergreen Select Fixed Income Fund, Evergreen Se-
lect Income Plus Fund, Evergreen Select Intermediate Term Municipal Bond Fund,
Evergreen Select International Bond Fund, Evergreen Select Limited Duration
Fund, and Evergreen Select Total Return Bond Fund, the statements of changes in
net assets for the year or period ended September 30, 1998, and prior, and the
financial highlights for each of the years or periods ended September 30, 1998
and prior, were audited by other auditors whose report dated November 23, 1998
and April 30, 1999 expressed an unqualified opinion on those financial state-
ments and financial highlights.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform our audits to obtain
reasonable assurance about whether the financial statements and financial high-
lights 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 Sep-
tember 30, 1999 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
portfolios of the Evergreen Select Fixed Income Trust as of September 30, 1999,
the results of their operations, changes in their net assets and financial
highlights for each of the years or periods described above in conformity with
generally accepted accounting principles.
/s/ KPMG LLP
Boston, Massachusetts
November 5, 1999
89
<PAGE>
Additional Information (Unaudited)
FEDERAL TAX STATUS OF DIVIDENDS
Pursuant to section 852 of the Internal Revenue Code, the Funds have designated
the following amounts as long-term 20% capital gains for the fiscal year ended
September 30, 1999:
<TABLE>
<CAPTION>
Aggregate Per Share
--------------------
<S> <C> <C>
Core Bond Fund............................. 10,796,853 0.193
Income Plus Fund........................... 10,151,945 0.044
Intermediate Bond Fund..................... 8,238,041 0.739
Limited Duration Fund...................... 51,965 0.007
</TABLE>
For the fiscal year ended September 30, 1999, the percentage representing the
portion of dividends exempt from federal income taxes, other than alternative
minimum tax for Intermediate Bond Fund is 99.85%.
YEAR 2000
Like other investment companies, the Funds could be adversely affected if the
computer systems used by the Funds' investment advisors 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 advisors are taking steps
to address this potential year 2000 problem with respect to the computer sys-
tems that they use and to obtain satisfactory assurances that comparable steps
are being taken by the Funds' other major service providers. At this time, how-
ever, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the Funds from this problem.
90
<PAGE>
Evergreen Select Funds*
Money Market
Money Market Fund
Treasury Money Market Fund
100% Treasury Money Market Fund
Municipal Money Market Fund
U.S. Government Money Market Fund
Municipal Fixed
Income
Intermediate Term Municipal Bond Fund
Taxable Fixed
Income
International Bond Fund
Total Return Bond Fund
Income Plus Fund
Core Bond Fund
Fixed Income Fund
Fixed Income II
Adjustable Rate Fund
Limited Duration Fund
Growth and Income/
Balanced
Balanced Fund
Growth
Special Equity Fund
Small Cap Growth Fund
Small Company Value Fund
Strategic Growth Fund
Core Equity Fund
Equity Index Fund
Large Cap Blend Fund
Strategic Value Fund
Diversified Value Fund
Social Principles
Secular Growth Fund
* Minimum investment in an Evergreen
Select Fund is $1,000,000.
28575 543698 11/99
[LOGO OF EVERGREEN FUNDS] BULK RATE
U.S. POSTAGE
PAID
200 Berkeley Street PERMIT NO. 19
Boston, MA 02116 HUDSON, MA
<PAGE>
EVERGREEN SELECT FIXED INCOME TRUST
PART C
OTHER INFORMATION
Item 15. Indemnification.
The response to this item is incorporated by reference to the sub- caption
"Liability and Indemnification of Trustees" under the caption "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 ByLaws Articles II.,
III., and VIII.
6(a).Investment Advisory Agreement between First Union National Bank and
Evergreen Select Fixed Income Trust. Incorporated by reference to
Registrant's Post-Effective Amendment No. 3 filed on June 30, 1998
("Registrant's PEA No. 3").
7(a).Distribution Agreement between Evergreen Distributor, Inc. and Evergreen
Select Fixed Income Trust. Incorporated by reference to Registrant's
PEA No. 3.
8. Form of Deferred Compensation Plan. Incorporated by reference to
Registrant's Pre-Effective Amendment No. 1 filed on November 17, 1997.
9. Agreement between State Street Bank and Trust Company and Evergreen Select
Fixed Income Trust. Incorporated by reference to Registrant's PEA
No. 3.
10. Rule 12b-1 Distribution Plan. Incorporated by reference to Registrant's
PEA No. 3.
11. Opinion and Consent of Sullivan & Worcester LLP. Filed herewith.
12. Tax Opinion and Consent of Sullivan & Worcester LLP. To be filed by
Amendment.
13. Not applicable.
14. Consent of KPMG LLP. Filed herewith.
15. Not applicable
16. Not applicable.
17. Powers of Attorney. Filed herewith.
18. Form of Proxy Card. Filed herewith.
19. 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
the applicable registration form for reofferings by person 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 apart 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment
Company Act the Trust has duly caused this Registration Statement to be signed
on its behalf by the undersigned, duly authorized, in the City of Boston, and
Commonwealth of Massachusetts, on the 12th day of April, 2000.
EVERGREEN SELECT FIXED INCOME TRUST
By: /s/ William M. Ennis
----------------------
Name: William M. Ennis*
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 12th day of April, 2000.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/William M. Ennis /s/ Laurence B. Ashkin /s/ Charles A. Austin, III
- ---------------------------- ----------------------------- --------------------------------
William M. Ennis* Laurence B. Ashkin* Charles A. Austin III*
President Trustee Trustee
/s/ K. Dun Gifford /s/ Arnold H. Dreyfuss /s/ William Walt Pettit
- ---------------------------- ---------------------------- --------------------------------
K. Dun Gifford* Arnold H. Dreyfuss* William Walt Pettit*
Trustee Trustee Trustee
/s/ Leroy Keith, Jr. /s/ Thomas L. McVerry /s/ Michael S. Scofield
- ---------------------------- ----------------------------- --------------------------------
Leroy Keith, Jr. * Thomas L. McVerry* Michael S. Scofield*
Trustee Trustee Trustee
/s/ Gerald M. McDonnell /s/ Russell A. Salton, III MD /s/ Louis W. Moelchert, Jr.
- ---------------------------- ------------------------------ -------------------------------
Gerald M. McDonell* Russell A. Salton, III MD* Louis W. Moelchert, Jr.*
Trustee Trustee Trustee
/s/ David M. Richardson /s/ Richard K. Wagoner /s/ Carol Kosel
- ---------------------------- ------------------------------ -------------------------------
David M. Richardson* Richard K. Wagoner* Carol Kosel*
Trustee Trustee Treasurer (Principal Financial and
Accounting Officer)
/s/ Richard J. Shima
- ----------------------------
Richard J. Shima*
Trustee
*By: /s/ Beth K. Werths
- ----------------------------
Beth K. Werths
Attorney-in-Fact
</TABLE>
*Beth K. Werths, by signing her name hereto, does hereby sign this
document on behalf of each of the applicable above-named individuals pursuant to
powers of attorney duly executed by such persons.
INDEX TO EXHIBITS
EXHIBIT NO. EXHIBIT
11 Opinion and Consent of Sullivan & Worcester LLP
14 Consent of KPMG LLP
17 Pwers of Attorney
18 Form of Proxy
SULLIVAN & WORCESTER LLP
1025 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20036
TELEPHONE: 202-775-8190
FACSIMILE: 202-293-2275
767 THIRD AVENUE ONE POST OFFICE SQUARE
NEW YORK, NEW YORK 10017 BOSTON, MASSACHUSETTS 02109
TELEPHONE: 212-486-8200 TELEPHONE: 617-338-2800
FACSIMILE: 212-758-2151 FACSIMILE: 617-338-2880
April 11, 2000
Evergreen Select Fixed Income Trust
200 Berkeley Street
Boston, Massachusetts 02116
Ladies and Gentlemen:
We have been requested by the Evergreen Select Fixed Income Trust, a
Delaware business trust with transferable shares (the "Trust") established under
an Agreement and Declaration of Trust dated September 18, 1997, as amended (the
"Declaration"), for our opinion with respect to certain matters relating to
Evergreen Select Income Plus Fund (the "Acquiring Fund"), a series of the Trust.
We understand that the Trust is about to file a Registration Statement on Form
N-14 for the purpose of registering shares of the Trust under the Securities Act
of 1933, as amended (the "1933 Act"), in connection with the proposed
acquisition by the Acquiring Fund of all of the assets of Evergreen Select Total
Return Bond Fund (the "Acquired Fund"), a series of the Trust, in exchange
solely for shares of the Acquiring Fund and the assumption by the Acquiring Fund
of the identified liabilities of the Acquired Fund pursuant to an Agreement and
Plan of Reorganization, the form of which is included in the Form N-14
Registration Statement (the "Plan").
We have, as counsel, participated in various business and other
proceedings relating to the Trust. We have examined copies, either certified or
otherwise proved to be genuine to our satisfaction, of the Trust's Declaration
and By-Laws, and other documents relating to its organization, operation, and
proposed operation, including the proposed Plan and we have made such other
investigations as, in our judgment, are necessary or appropriate to enable us to
render the opinion expressed below.
<PAGE>
Evergreen Fixed Income Trust
April 11, 2000
Page 2
We are admitted to the Bars of The Commonwealth of Massachusetts and
the District of Columbia and generally do not purport to be familiar with the
laws of the State of Delaware. To the extent that the conclusions based on the
laws of the State of Delaware are involved in the opinion set forth herein
below, we have relied, in rendering such opinions, upon our examination of
Chapter 38 of Title 12 of the Delaware Code Annotated, as amended, entitled
"Treatment of Delaware Business Trusts" (the "Delaware business trust law") and
on our knowledge of interpretation of analogous common law of The Commonwealth
of Massachusetts.
Based upon the foregoing, and assuming the approval by shareholders of
the Acquired Fund of certain matters scheduled for their consideration at a
meeting presently anticipated to be held on July 14, 2000, it is our opinion
that the shares of the Acquiring Fund currently being registered, when issued in
accordance with the Plan and the Trust's Declaration and By-Laws, will be
legally issued, fully paid and non-assessable by the Trust, subject to
compliance with the 1933 Act, the Investment Company Act of 1940, as amended and
applicable state laws regulating the offer and sale of securities.
We hereby consent to the filing of this opinion with and as a part of
the Registration Statement on Form N-14 and to the reference to our firm under
the caption "Legal Matters" in the Prospectus/Proxy Statement filed as part of
the Registration Statement. In giving such consent, we do not thereby admit that
we come within the category of persons whose consent is required under Section 7
of the 1933 Act or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ SULLIVAN & WORCESTER LLP
---------------------------
SULLIVAN & WORCESTER LLP
F:\RNH\SALEM33\SELECTIN\N14SWOP.C
CONSENT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
Evergreen Select Fixed Income Trust
We consent to the use of our report, dated November 5, 1999, for Evergreen
Select Income Plus Fund and Evergreen Select Total Return Bond Fund each a
portfolio of Evergreen Select Fixed Income Trust, incorporated herein by
reference and to the references to our firm under the caption "FINANCIAL
STATEMENTS AND EXPERTS" in the Prospectus/Proxy Statement.
/s/ KPMG LLP
Boston, Massachusetts
April 10, 2000
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter a
Trustee and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
December 17, 1999.
Signature Title
/s/Richard Wagoner Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter a
Trustee and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
December 17, 1999.
Signature Title
/s/Arnold H. Dreyfuss Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter the
Treasurer and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
15, 2000.
Signature Title
/s/Carol A. Kosel Treasurer
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter the
President and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of March
15, 2000.
Signature Title
/s/William M. Ennis President
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter a
Trustee and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
December 17, 1999.
Signature Title
/s/Leroy Keith, Jr. Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Charles A. Austin III Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/K. Dun Gifford Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Laurence B. Ashkin Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/William W. Pettit Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Gerald M. McDonnell Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Thomas L. McVerry Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/David M. Richardson Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Richard J. Shima Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Michael S. Scofield Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey, David M. Leahy and William J. Tomko, and each of them
singly, my true and lawful attorneys, with full power to them and each of them
to sign for me and in my name in the capacity indicated below any and all
registration statements, including, but not limited to, Forms N-8A, N-8B-1, S-5,
N-14 and N-1A, as amended from time to time, and any and all amendments thereto
to be filed with the Securities and Exchange Commission for the purpose of
registering from time to time all investment companies of which I am now or
hereafter a Trustee and for which Evergreen Investment Management Company,
Evergreen Asset Management Corp., First Union National Bank, or any other
investment advisory affiliate of First Union National Bank, serves as Adviser or
Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and on my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
September 25, 1998.
Signature Title
/s/Russell A. Salton, III M.D. Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Sally E. Ganem,
Catherine E. Foley, Beth K. Werths, Michael H. Koonce, T. Hal Clarke, John A.
Dudley, Robert N. Hickey and David M. Leahy, and each of them singly, my true
and lawful attorneys, with full power to them and each of them to sign for me
and in my name in the capacity indicated below any and all registration
statements, including, but not limited to, Forms N-8A, N-8B-1, S-5, N-14 and
N-1A, as amended from time to time, and any and all amendments thereto to be
filed with the Securities and Exchange Commission for the purpose of registering
from time to time all investment companies of which I am now or hereafter a
Trustee and for which Evergreen Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank, or any other investment advisory
affiliate of First Union National Bank, serves as Advisor or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and on my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
December 17, 1999.
Signature Title
/s/Louis W. Moelchert, Jr. Trustee
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE TODAY!
Please detach at perforation before mailing.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
EVERGREEN SELECT TOTAL RETURN BOND FUND,
a series of Evergreen Select Fixed Income Trust
PROXY FOR THE MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 14, 2000
The undersigned, revoking all Proxies heretofore given, hereby appoints
Maureen E. Towle, Sally E. Ganem, Catherine E. Foley and Beth K. Werths or any
of them as Proxies of the undersigned, with full power of substitution, to vote
on behalf of the undersigned all shares of Evergreen Select Total Return Bond
Fund, a series of Evergreen Select Fixed Income Trust, ("Select Total Return
Bond Fund") that the undersigned is entitled to vote at the special meeting of
shareholders of Select Total Return Bond Fund to be held at 2:00 p.m. on July
14, 2000 at the offices of the Evergreen Funds, 200 Berkeley Street, 26th Floor,
Boston, Massachusetts 02116 and at any adjournments thereof, as fully as the
undersigned would be entitled to vote if personally present.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ON THIS PROXY. If joint
owners, EITHER may sign this Proxy. When signing as attorney, executor,
administrator, trustee, guardian, or custodian for a minor, please give your
full title. When signing on behalf of a corporation or as a partner for a
partnership, please give the full corporate or partnership name and your title,
if any.
Date , 2000
----------------------------------------
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Signature(s) and Title(s), if applicable
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF EVERGREEN
SELECT FIXED INCOME TRUST. THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH
RESPECT TO THE ACTION TO BE TAKEN ON THE FOLLOWING PROPOSALS. THE SHARES
REPRESENTED HEREBY WILL BE VOTED AS INDICATED OR FOR THE PROPOSALS IF NO CHOICE
IS INDICATED. THE BOARD OF TRUSTEES OF EVERGREEN SELECT FIXED INCOME TRUST
RECOMMENDS A VOTE FOR THE PROPOSALS. PLEASE MARK YOUR VOTE BELOW IN BLUE OR
BLACK INK. DO NOT USE RED INK. EXAMPLE: X
1. To approve an Agreement and Plan of Reorganization whereby Evergreen
Select Income Plus Fund, also a series of Evergreen Select Fixed Income Trust,
will (i) acquire all of the assets of Select Total Return Bond Fund in exchange
for shares of Evergreen Select Income Plus Fund; and (ii) assume the identified
liabilities of Select Total Return Bond Fund, as substantially described in the
accompanying Prospectus/Proxy Statement.
---- FOR ---- AGAINST ---- ABSTAIN
2. To consider and vote upon such other matters as may properly come before
said meeting or any adjournments thereof.
---- FOR ---- AGAINST ---- ABSTAIN
