<PAGE>
Annual Report
as of June 30, 1999
Evergreen
Short and Intermediate Term
Bond Funds
[LOGO OF EVERGREEN FUNDS/SM/ APPEARS HERE]
<PAGE>
Table of Contents
Letter to Shareholders .................................................... 1
Evergreen Capital Preservation and Income Fund
Fund at a Glance ..................................................... 2
Portfolio Manager Interview .......................................... 3
Evergreen Intermediate Term Bond Fund
Fund at a Glance ..................................................... 5
Portfolio Manager Interview .......................................... 6
Evergreen Short-Intermediate Bond Fund
Fund at a Glance ..................................................... 9
Portfolio Manager Interview .......................................... 10
Financial Highlights
Evergreen Capital Preservation and Income Fund ....................... 12
Evergreen Intermediate Term Bond Fund ................................ 14
Evergreen Short-Intermediate Bond Fund ............................... 16
Schedule of Investments
Evergreen Capital Preservation and Income Fund ....................... 18
Evergreen Intermediate Term Bond Fund ................................ 19
Evergreen Short-Intermediate Bond Fund ............................... 24
Statements of Assets and Liabilities ...................................... 27
Statements of Operations .................................................. 28
Statements of Changes in Net Assets ....................................... 29
Combined Notes to Financial Statements .................................... 31
Independent Auditors' Report .............................................. 40
Other Information ......................................................... 41
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Evergreen Funds
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Evergreen Funds is one of the nation's fastest growing investment companies with
over $70 billion in assets 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: ARE NOT FDIC INSURED May lose value * Are not bank guaranteed
Evergreen Distributor, Inc.
Evergreen(SM) is a Service Mark of Evergreen Investment Services, Inc.
<PAGE>
Letter to Shareholders
----------------------
August 1999
William M. Ennis
Managing Director
[PHOTO OF WILLIAM M. ENNIS APPEARS HERE]
Dear Evergreen Shareholders:
We are pleased to provide the Evergreen Short and Intermediate Bond Funds annual
report, which covers the twelve-month period ended June 30, 1999.
Shift in the Interest Rate Environment
Following the Russian financial crisis in August 1998, there was a "flight to
quality" worldwide. Investors fled from risk-related securities, interest rates
fell sharply and the prices of high grade and U.S. government securities rose.
During the final six months of the period the flight to quality was reversed as
a result of actions to lower interest rates by the governments of the major
industrialized nations. Investors returned to more risky fixed income
securities, such as lower quality corporate bonds, international bonds and
emerging market bonds.
Going forward, we anticipate the possibility of one or more interest-rate hikes
by the Federal Reserve in the last half of 1999. The moderately growing domestic
economy and the solid, long-term fundamentals underlying the market lead us to a
cautiously optimistic outlook.
Year 2000 Preparation/1/
At Evergreen, we continue to prepare ourselves to provide uninterrupted service
and communication with all our shareholders throughout the end of 1999 and right
through the date change into the year 2000 and beyond. As of the end of August,
when this report was finalized, we have completed the testing of internal
systems. In March, we successfully participated in industry-wide testing with
the Securities Industry Association. We are confident that our efforts will
enable shareholders to receive the same Evergreen products and services after
December 1999 that we deliver today.
As always, we encourage all shareholders to diversify their mutual fund
portfolios and we suggest you consult with your financial advisor for an
allocation strategy that helps you meet your investment goals and objectives.
Evergreen Funds offers a wide range of funds that includes multiple investment
styles to help you find one that is appropriate in your portfolio.
Thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/William Ennis
William M. Ennis
President and CEO
Evergreen Investment Company
/1/ This information constitutes Year 2000 readiness disclosure.
1
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EVERGREEN
Capital Preservation and Income Fund
Fund at a Glance as of June 30, 1999
In keeping with our strategy, we try to find those sectors that offer the best
relative value at any time.
Portfolio
Management
----------
[Photo of Gary E. Pzegeo Appears Here]
Gary E. Pzegeo
Tenure: April 1997
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CURRENT INVESTMENT STYLE/1/
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Morningstar's Style Box is based on a portfolio date as of 6/30/99.
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
/1/Source: 1999 Morningstar, Inc.
/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 Classes A and C prior
to their inception is based on the performance of Class B, the original class
offered. The historical returns for Class A have not been adjusted to eliminate
the effect of the higher 12b-1 fees applicable to Class B. If actual 12b-1 fees
applicable to Class A had been used, returns for Class A would have been higher.
The Fund incurs 12b-1 expenses for Class A based on rates of .25% on assets
prior to 1/1/97 and .10% assessed on new assets from 1/1/97. Classes B and C
each incur 12b-1 expenses of 1.00%.
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PERFORMANCE AND RETURNS/1/
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Portfolio Inception Date: 7/1/91 Class A Class B Class C
Class Inception Date 12/30/94 7/1/91 2/1/93
................................................................................
Average Annual Returns*
................................................................................
1 year with sales charge 1.36% -1.10% 2.87%
................................................................................
1 year w/o sales charge 4.80% 3.86% 3.86%
................................................................................
3 years 4.42% 3.86% 4.81%
................................................................................
5 years 4.95% 4.62% 5.00%
................................................................................
Since Portfolio Inception 4.42% 4.42% 4.42%
................................................................................
Maximum Sales Charge 3.25% 5.00% 1.00%
Front End CDSC CDSC
................................................................................
30-day SEC Yield 4.58% 3.90% 3.93%
................................................................................
12-month distributions per share $0.53 $0.46 $0.46
................................................................................
* Adjusted for maximum applicable sales charge.
[LINE GRAPH APPEARS HERE]
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LONG TERM GROWTH
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6-Month
CPI Treasury Bill Class B
----- ------------- -------
07/31/91 10,000 10,000 10,000
06/30/92 10,294 10,464 10,572
06/30/93 10,602 10,798 10,887
06/30/94 10,866 11,186 11,027
06/30/95 11,197 11,827 11,564
06/30/96 11,501 12,452 12,209
06/30/97 11,769 13,113 12,946
06/30/98 11,968 13,801 13,519
06/30/99 12,203 14,440 14,136
Comparison of a $10,000 investment in Evergreen Capital Preservation and Income
Fund, Class B shares, versus a similar investment in a 6-Month Treasury Bill and
the Consumer Price Index (CPI).
The 6-Month Treasury Bill is an unmanaged index and does not include transaction
costs associated with buying and selling securities, nor any management fees.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in an index.
2
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
Portfolio Manager Interview
How did the Fund perform?
The Fund did well in a challenging environment. For the 12 months ending June
30, 1999, Evergreen Capital Preservation and Income Fund Class B shares had a
total return of 3.86%. Performance is before deduction of any applicable sales
charges (compare the listed benchmark 6-month T-Bill) During the same 12-month
period, the average return of adjustable rate mortgage funds was 4.04%,
according to Lipper Inc., an independent monitor of mutual fund performance,
while the 6-month T-Bill returned 4.63%.
Portfolio
Characteristics
---------------
Total Net Assets $ 37,694,711
...............................................................................
Average Credit Quality AAA
...............................................................................
Effective Maturity 4.8 years
...............................................................................
Average Duration 1.2 years
...............................................................................
What was the investment environment like during the 12 months?
Particularly during the second six months, we started a nice rebound in the
market for adjustable rate mortgages, which the Fund emphasizes. This rebound
was from the lows of 1997 and 1998 when interest rates were extremely low and
adjustable rate mortgage prepayments tended to be extremely high. The fiscal
year didn't start out that way, however. The first six months were characterized
by declining interest rates and rising bond prices, especially for U.S.
Treasuries and particularly for securities with shorter maturities.
Fears of a potential global economic recession that could spread to developed
economies had begun because of concerns about the economic problems in Asia and
emerging markets. The resulting "flight to quality" created a rally in Treasury
bonds, but it did not spread to other parts of the bond market such as
adjustable rate mortgages. It was during this period that the central banks of
many developed economies--led by the U.S. Federal Reserve--intervened to lower
short-term rates and calm the financial markets.
The situation changed, however, during the second six months of the fiscal year.
We began to see signs of stabilization in many areas, including markets in Latin
America and Asia. In early 1999, it started to appear that conditions there
weren't as bad as they had appeared during 1998. Japan, which had been stuck in
a deep recession, began to show signs of an economic revitalization.
Domestically, the low interest rates created a very favorable environment for
the U.S. consumer and the economy continued to grow.
Given all these conditions, the U.S. Federal Reserve Board began to send out
very clear signals that it was considering ending its accommodative policies of
low, short-term interest rates. This change seemed to be justified by emerging
economic data, including a higher consumer price index and rising commodity
prices, led by energy prices. This data suggested we might be entering a period
of faster growth and higher inflation, which is generally bad for fixed-rate
bonds. While these conditions are not ideal for adjustable rate mortgages, they
certainly are better than for longer duration, fixed-rate securities.
Interest rates moved higher. Over the full 12 months, the yield on the one-year
Treasury bill--an indicator of shorter-term rates--went from 5.37% on June 30,
1998, to a low of 3.85% on October 16, 1998, and then back up to 5.06% on June
30, 1999.
3
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
Portfolio Manager Interview
What was your strategy as conditions changed?
In keeping with our strategy, we try to find those sectors that offer the best
relative value at any time. We started the fiscal year back on July 1, 1998,
with a healthy weighting in fixed-rate securities, 29% of net assets. As these
bonds rallied and other sectors suffered, we began to lower the weighting in
fixed-rate securities, particularly U.S. government bonds, and moved into other
sectors that offered greater relative value, including adjustable rate mortgages
(ARMS), fixed-rate commercial mortgages and asset-backed securities. We
maintained our focus on adjustable rate mortgages, which we thought offered
attractive value.
Asset Allocation
(as a percentage of portfolio assets)
June 30, 1998 December 31, 1998 June 30, 1999
ARMs 69% 72% 68%
Fixed-rate 29% 25% 30%
Cash 2% 3% 2%
The Fund concentrates on mainly U.S. government or government agency securities,
however, it can invest up to 20% of net assets in AAA-rated non-government
securities. At the close of the fiscal year, about 16% of net assets were
invested in AAA-rated non-government securities. Average maturity of the
portfolio on June 30, 1999 was 4.8 years, while average duration was 1.2 years.
What is your outlook?
The outlook is driven by the policies of the Federal Reserve, which has started
to tighten the money supply by raising short-term interest rates. We believe the
Federal Reserve could raise rates once or twice more during the last six months
of 1999. Federal Reserve Chairman Alan Greenspan has indicated he believes the
economy can grow at an annual rate of about 3% without generating inflation. The
economy most recently has been growing at a rate of about 4% a year.
An outlook of rising short-term rates creates a favorable environment for
adjustable rate mortgages. While this outlook is similar to the movement of
interest rates for the first six months of 1999, we would caution that after a
period of strong performance, adjustable rate mortgages don't necessarily offer
as much relative value as they did earlier. As interest rates rise, however,
ARMS have the benefit of the ability to reset their coupons to meet higher
rates. At some point during the next six months, higher interest rates could cut
into the rate of economic growth. At that point, we may want to increase our
allocation to the fixed-rate sector.
4
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Fund at a Glance as of June 30, 1999
Two significant steps we took during the past six months were to invest in
European mortgage-backed securities and to reduce substantially the emphasis on
U.S. mortgage-related securities.
Portfolio
Management
----------
David J. Bowers, CFA
Tenure: January 1999
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CURRENT INVESTMENT STYLE/1/
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[GRAPHIC APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 6/30/99.
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
Source: 1998 Morningstar, Inc.
/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 Classes B, C, and Y prior to their inception is
based on the performance of Class A, the original class offered. These
historical returns for Classes B and C have not been adjusted to reflect the
effect of each Class' 12b-1 fees. These fees for Class A are .25%, for Class B
are 1.00%, and for Class C are 1.00%. If these fees had been reflected, returns
for Classes B and C would have been lower. The historical returns for Class Y
have been adjusted to reflect the elimination of the .25% 12b-1 fee applicable
to Class A. Class Y does not pay a 12b-1 fee. If these fees had not been
eliminated, returns for Class Y would have been lower.
Foreign investments may contain more risk due to the inherent risks associated
with changing political climates, foreign market instability and foreign
currency fluctuations.
- --------
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PERFORMANCE AND RETURNS/1/
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Portfolio Inception Date: 2/13/87 Class A Class B Class C Class Y
Class Inception Date 2/13/87 2/1/93 2/1/93 1/26/98
Average Annual Returns*
1 year with sales charge -2.17% -4.46% -0.64% n/a
1 year w/o sales charge 1.17% 0.31% 0.31% 1.43%
3 years 5.06% 4.49% 5.39% 6.47%
5 years 5.78% 5.31% 5.63% 6.73%
10 years 6.75% 6.58% 6.58% 7.45%
Since Portfolio Inception 5.99% 5.85% 5.85% 6.71%
Maximum Sales Charge 3.25% 5.00% 1.00% n/a
Front End CDSC CDSC
30-day SEC Yield 5.94% 5.36% 5.39% 6.40%
12 month distributions per share $0.53 $0.47 $0.47 $0.56
* Adjusted for maximum applicable sales charge.
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LONG TERM GROWTH
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[LINE GRAPH APPEARS HERE]
CPI LBIGCBI/Corp Evergreen Interm Bd A
6/30/89 10,000 10,000 9,675
6/30/90 10,467 10,782 10,142
6/30/91 10,959 11,916 11,112
6/30/92 11,297 13,485 12,689
6/30/93 11,636 14,900 14,215
6/30/94 11,926 14,862 14,048
6/30/95 12,288 16,404 15,376
6/30/96 12,622 17,226 16,041
6/30/97 12,917 18,470 17,458
6/30/98 13,135 20,039 18,998
6/30/99 13,392 20,885 19,221
Comparison of a $10,000 investment in Evergreen Intermediate Term Bond Fund,
Class A shares, 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 index and does not include transaction costs
associated with buying and selling securities nor any management fees. The CPI
is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
5
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Portfolio Manager Interview
How did the Fund perform?
For the 12 months ended June 30, 1999, Evergreen Intermediate Term Bond Fund
Class B shares had a return of 0.31%. Performance is before deduction of any
applicable sales charges. During the same 12-month period, the average return of
intermediate term, investment grade bond funds was 2.00%, according to Lipper,
Inc., a monitor of mutual fund performance, while the Lehman Brothers
Intermediate Government/Corporate Bond Index had a return of 4.19%.
The 12-month period encompassed different conditions in the financial markets,
making it a challenging time for the Fund with its emphasis on current income
from corporate bonds. Nevertheless, the Fund maintained a generous income
stream, with Class A shares remaining consistently in the top quartile of funds
in the Lipper category in terms of current yield.
Portfolio
Characteristics
---------------
Total Net Assets $ 178,298,361
Average Credit Quality A+
Effective Maturity 7.7 years
Average Duration 5.4 years
What was the investment environment like during the
fiscal year?
The 12-month period actually encompassed two distinctly different periods, with
very different trends affecting fixed-income investors. Generally, however, one
would say that the period was a time of volatility that proved difficult for
funds emphasizing corporate bonds and other securities that pay yield premiums
over government bonds.
The first six months were characterized principally by a flight to quality
prompted by fears that economic problems in Asia and emerging markets could lead
to a slowdown in global economic growth. During this period, investors
throughout the world preferred the highest quality bonds, U.S. Treasury bonds,
while tending to de-emphasize fixed income securities that carried credit risk.
With this as a backdrop, the U.S. Federal Reserve Board stepped in, lowering
short-term interest rates three successive times in the fall of 1998.
As 1999 began, we appeared to be returning to the situation that existed before
the recessionary fears of late 1998. Economic growth in the United States was
robust, with full employment and strong consumer spending. Internationally, the
outlook improved considerably. As evidence of this economic strength persisted,
the Federal Reserve Board began to give hints that it might raise short-term
rates to stave off inflation. The bond market anticipated a rate increase, and
interest rates tended to rise. In late June, the Federal Reserve did raise
short-term rates by one-quarter of one percent.
6
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Portfolio Manager Interview
During this period, while the stock market tended to do well, the corporate bond
market continued to disappoint investors for two principal reasons. First, a
significant supply of new corporate bonds affected supply/demand relationships,
keeping yields higher and prices lower. Second, the corporate bond market
continued to reflect uncertainty about the direction and strength of economic
trends, resulting in valuations inconsistent with the performance of the equity
market.
Over this general period, corporate bonds, including those emphasized by your
Fund, tended to underperform other, higher quality fixed income securities. As a
result, we believe significant investment value exists in corporate bonds, which
tend to be paying higher yields in relation to U.S. Treasury securities, than
one might expect in a healthy, growing economy.
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PORTFOLIO COMPOSITION*
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(as a percentage of net assets)
[PIE CHART APPEARS HERE]
Corporate Notes/Bonds -- 55.5%
CMO & Mortgage-Backed Securities -- 13.8%
Foreign Bonds -- 11.5%
U.S. Treasury/Agency -- 10.2%
Asset-Backed Securities -- 6.2%
Mutual Fund Shares -- 2.3%
Repurchase Agreements
Other Assets & Liabilities -- 0.5%
What strategies did you pursue in this environment?
We maintained the Fund's long-term strategy of emphasizing intermediate-term
corporate bonds, with the overwhelming majority rated investment grade or
higher. Consistent with our philosophy, we do not try to anticipate the
direction of interest rates by making explicit "bets" with the fund's duration
or average maturity. At the end of the period, on June 30, the Fund's duration
was 5.4 years, and effective maturity was 7.7 years.
In sector selection, we maintained a relatively defensive posture, emphasizing
domestic bonds, including securities issued in the telecommunications and
finance sectors. This has been a relatively successful tactic, particularly with
respect to bonds from the insurance and banking industries. The emphasis on
telecommunications industry bonds helped in 1998, but not in 1999, as an influx
of new supply of debt by companies such as AT&T, MCI Worldcom and Sprint held
back performance.
We maintained a consistent weighting in mortgages, concentrating on commercial
mortgage-backed securities, high quality asset-backed securities and
collaterialized mortgage obligations designed to minimize exposure to interest
rate volatility.
* Portfolio composition subject to change.
7
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Portfolio Manager Interview
Top 5 Sectors
-------------
(as a percentage of net assets, 6/30/99)
Corporate Bonds 55.3%
U.S. Treasury 9.0%
Yankee Bonds* 8.3%
Collateralized Mortgage Obligations 8.0%
Asset-Backed Securities 6.2%
At the end of the fiscal year, the Fund's high yield weighting remained at 18%
of net assets. We emphasized defensive sectors in high yield bonds, where we
believe we can gain additional yield without taking undue credit risk. The
preponderance of high yield securities were rated either BB or B, the two
highest ratings below investment grade. The Fund's average credit rating
remained relatively strong, at A+.
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CREDIT QUALITY ALLOCATION**
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(as a percentage of portfolio assets, 6/30/99)
[GRAPH APPEARS HERE]
U.S. Government/AAA -- 28%
A -- 22%
BBB -- 19%
BB or less -- 18%
AA -- 13%
What is your outlook?
We expect a more stable interest rate environment. We believe the U.S. Federal
Reserve Board, which increasingly is conscious of the international impact of
its decisions, may raise short-term rates further as it seeks to keep the
economy growing at a sustainable pace without serious inflationary pressures. In
general, we anticipate interest rates should be stable to slightly higher, with
economic growth continuing, although at a somewhat slower pace. The earnings
outlook for corporations remains positive, with full employment and strong
consumer spending. This is an environment that tends to favor corporate bonds
and other fixed income sectors with higher yields than those of government
bonds. We believe the Fund is well positioned to take advantage of this climate
of steady growth, stable interest rates, and greater certainty about the
direction of the global economy.
* Yankee Bonds are bonds issued in the United States by foreign corporations
and banks and denominated in the U.S. dollar.
** Portfolio composition subject to change.
8
<PAGE>
EVERGREEN
Short-Intermediate Bond Fund
Fund at a Glance as of June 30, 1999
The U.S. economy provided a very favorable backdrop for most fixed income
securities during the opening months of the fiscal year.
Portfolio
Management
----------
P. Michael Jones, CFA
Tenure: June 1999
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CURRENT INVESTMENT STYLE/1/
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[CHART APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 6/30/99.
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
Source: 1999 Morningstar, Inc.
/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 Classes B, C, and Y prior to their inception is
based on the performance of Class A, the original class offered. These
historical returns for Classes B, C, and Y have not been adjusted to reflect the
effect of each Class' 12b-1 fees. These fees for Class A are .25%, for Class B
are 1.00%, and for Class C are 1.00%. Class Y does not pay a 12b-1 fee. If these
fees had been reflected, returns for Classes B and C would have been lower,
while returns for Class Y would have been higher.
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PERFORMANCE AND RETURNS/1/
- --------------------------------------------------------------------------------
Portfolio Inception Date: 1/28/89 Class A Class B Class C Class Y
Class Inception Date 1/28/89 1/25/93 9/6/94 1/4/91
Average Annual Returns*
1 year with sales charge 0.25% -2.23% 1.69% n/a
1 year w/o sales charge 3.59% 2.66% 2.66% 3.69%
3 years 4.65% 3.94% 4.84% 5.91%
5 years 5.50% 4.95% 5.33% 6.32%
10 years 6.45% 6.24% 6.36% 6.92%
Since Portfolio Inception 6.79% 6.59% 6.71% 7.25%
Maximum Sales Charge 3.25% 5.00% 1.00% n/a
Front End CDSC CDSC
30-day SEC Yield 5.73% 5.02% 5.02% 6.03%
12-month distributions per share $0.57 $0.48 $0.48 $0.58
* Adjusted for maximum applicable sales charge.
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LONG TERM GROWTH
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
Date CPI LBIGCBI Class A
-------- ------- ------- -------
06/30/89 10,000 10,000 9,675
06/30/90 10,467 10,782 10,265
06/30/91 10,959 11,916 11,306
06/30/92 11,297 13,485 12,733
06/30/93 11,636 14,900 13,937
06/30/94 11,926 14,862 13,822
06/30/95 12,288 16,404 15,096
06/30/96 12,622 17,226 15,768
06/30/97 12,917 18,470 16,835
06/30/98 13,135 20,039 18,027
06/30/99 13,392 20,885 18,674
Comparison of a $10,000 investment in Evergreen Short-Intermediate Bond Fund,
Class A shares, 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 index and does not include transaction costs
associated with buying and selling securities nor any management fees. The CPI
is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
9
<PAGE>
EVERGREEN
Short-Intermediate Bond Fund
Portfolio Manager Interview
How did the Fund perform during the fiscal year?
For the 12 months ended June 30, 1999, the Evergreen Short-Intermediate Bond
Fund, Class A shares, returned 3.59%. The Fund's benchmark, the Lehman Brothers
Intermediate Government/Corporate Bond Index returned 4.19% for the same period.
The Fund's performance exceeded the 3.38% average return of 101 short
intermediate investment grade funds tracked by Lipper Inc., a leading mutual
fund rating company. During the past three-year and five-year periods, the Fund
also outperformed the average return of its peer group.
Portfolio
Characteristics
---------------
Total Net Assets $378,215,808
Average Credit Quality AA1
Effective Maturity 5.0 years
Average Duration 3.5 years
What was the investing environment like for bonds during the past twelve months?
The fiscal year was broken into two markedly different periods: the first three
months during which rates declined sharply, and the final nine months in which
rates increased steadily. The yield on the bellwether 30-year Treasury Bond
started the period at 5.63%, and fell as low as 4.70% before soaring to 5.96% by
June 30.
The U.S. economy remained in overdrive throughout the twelve months, while
interest rates trended upward as fears of excessive economic growth and
inflationary pressure penetrated the market. Then, in May, the Federal Reserve
Board shifted from neutral to a tightening stance regarding monetary policy,
finally raising the Federal Funds rate by 0.25% on the final day of the fiscal
year.
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PORTFOLIO MATURITY
- --------------------------------------------------------------------------------
(as a percentage of portfolio assets)
[GRAPH APPEARS HERE]
1 - 5 years -- 47.3%
5 - 10 Years -- 43.3%
0 - 1 year -- 9.4%
Which investment strategies most impacted performance?
As the yield on the 30-year Treasury Bond fell from 5.63% to 5.10% during the
first six months, our decision to maintain a duration 105% to 110% of our
benchmark helped performance. Then, as rates trended upward, we reversed this
long strategy and reduced duration from 3.79 years to 3.52 years during the
final half of the period. As interest rates rise a shorter duration adds to
performance as was the case for this six month period.
*Portfolio composition subject to change.
10
<PAGE>
EVERGREEN
Short-Intermediate Bond Fund
Portfolio Manager Interview
From a sector standpoint, we bulked up the portfolio's exposure to corporate and
mortgage-backed securities early in the period, because our research determined
these sectors to represent the greatest value. As both of these areas rebounded
from poor performances in late 1998, the portfolio's increased weighting had a
positive impact on total return.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION*
- --------------------------------------------------------------------------------
(as a percentage of portfolio assets)
[GRAPH APPEARS HERE]
Government/Agency -- 46.3%
AAA -- 20.8%
A -- 15.0%
BBB -- 12.0%
AA -- 3.9%
NR -- 2.0%
What do you foresee for the final half of 1999?
Going forward, the portfolio will likely maintain a neutral-to-shorter duration
stance in anticipation of rising interest rates in the near term. Historically,
interest rate hikes by the Federal Reserve Board are not a one-time event, but
rather are followed up by additional increases. We feel that a tight labor
market, strong consumer spending and emerging inflationary signs will prompt the
Fed to increase rates at least one more time in the near term.
* Portfolio composition subject to change.
11
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended June Year Ended
30, September 30,
---------------- Period Ended ------------------
1999 1998 June 30, 1997 (a) 1996 1995 (b)
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 9.73 $ 9.80 $ 9.74 $ 9.68 $ 9.51
------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.53 0.57 0.46 0.61++ 0.46
Net realized and
unrealized gains or
losses on securities (0.08) (0.07) 0.03 0.01 0.14
------- ------- ------- ------- -------
Total from investment
operations 0.45 0.50 0.49 0.62 0.60
------- ------- ------- ------- -------
Less distributions
From net investment
income (0.53) (0.57) (0.43) (0.53) (0.43)
Returns of capital 0 0 0 (0.03) 0
------- ------- ------- ------- -------
Total distributions (0.53) (0.57) (0.43) (0.56) (0.43)
------- ------- ------- ------- -------
Net asset value, end of
period $ 9.65 $ 9.73 $ 9.80 $ 9.74 $ 9.68
------- ------- ------- ------- -------
Total return* 4.80% 5.24% 5.12% 6.56% 6.36%
Ratios/supplemental data
Net assets, end of
period (thousands) $18,149 $18,022 $15,751 $22,684 $19,293
Ratios to average net
assets
Expenses# 0.85% 0.87% 0.92%+ 0.91% 0.86%+
Net investment income 5.53% 5.77% 6.24%+ 6.31% 6.37%+
Portfolio turnover rate 41% 88% 52% 74% 67%
</TABLE>
<TABLE>
<CAPTION>
Year Ended June Year Ended September
30, 30,
----------------- Period Ended --------------------------
1999 1998 June 30, 1997 (a) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 9.74 $ 9.81 $ 9.75 $ 9.68 $ 9.62 $ 9.91
------- ------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.46++ 0.49 0.39 0.55++ 0.52 0.47
Net realized and
unrealized gains or
losses on securities (0.09) (0.07) 0.04 0.01 0.03 (0.41)
------- ------- ------- ------- ------- -------
Total from investment
operations 0.37 0.42 0.43 0.56 0.55 0.06
------- ------- ------- ------- ------- -------
Less distributions
From net investment
income (0.46) (0.49) (0.37) (0.46) (0.49) (0.35)
Returns of capital 0 0 0 (0.03) 0 0
------- ------- ------- ------- ------- -------
Total distributions (0.46) (0.49) (0.37) (0.49) (0.49) (0.35)
------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 9.65 $ 9.74 $ 9.81 $ 9.75 $ 9.68 $ 9.62
------- ------- ------- ------- ------- -------
Total return* 3.86% 4.42% 4.53% 5.90% 5.81% 0.58%
Ratios/supplemental data
Net assets, end of
period (thousands) $15,618 $26,056 $32,694 $44,096 $62,998 $95,761
Ratios to average net
assets
Expenses# 1.65% 1.65% 1.67%+ 1.63% 1.53% 1.50%
Net investment income 4.72% 5.07% 5.52%+ 5.63% 5.46% 4.05%
Portfolio turnover rate 41% 88% 52% 74% 67% 34%
</TABLE>
(a) For the nine months ended June 30, 1997. The Fund changed its fiscal year
end from September 30 to June 30, effective June 30, 1997.
(b) For the period from December 30, 1994 (commencement of class operations) to
September 30, 1995.
* Excluding applicable sales charges.
+ Annualized.
++ Calculation based on average shares outstanding.
# The ratio of expenses to average net assets excludes fee credits and
includes fee waivers.
See Combined Notes to Financial Statements.
12
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended June 30, Year Ended September 30,
--------------------- Period Ended -----------------------
1999 1998 June 30, 1997 (a) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $ 9.74 $ 9.80 $ 9.74 $ 9.67 $ 9.60 $ 9.90
--------- --------- ------ ------ ------ ------
Income from investment
operations
Net investment income 0.46++ 0.49 0.40 0.54++ 0.52 0.40
Net realized and
unrealized gains or
losses on securities (0.09) (0.06) 0.03 0.02 0.04 (0.35)
--------- --------- ------ ------ ------ ------
Total from investment
operations 0.37 0.43 0.43 0.56 0.56 0.05
--------- --------- ------ ------ ------ ------
Less distributions
From net investment
income (0.46) (0.49) (0.37) (0.46) (0.49) (0.35)
--------- --------- ------ ------ ------ ------
Returns of capital 0 0 0 (0.03) 0 0
Total distributions (0.46) (0.49) (0.37) (0.49) (0.49) (0.35)
--------- --------- ------ ------ ------ ------
Net asset value, end of
period $ 9.65 $ 9.74 $ 9.80 $ 9.74 $ 9.67 $ 9.60
--------- --------- ------ ------ ------ ------
Total return* 3.86% 4.53% 4.53% 5.91% 5.93% 0.48%
Ratios/supplemental data
Net assets, end of
period (thousands) $ 3,928 $ 3,972 $4,105 $4,152 $2,755 $2,874
Ratios to average net
assets
Expenses# 1.65% 1.65% 1.67%+ 1.64% 1.53% 1.50%
Net investment income 4.72% 5.05% 5.53%+ 5.60% 5.51% 4.08%
Portfolio turnover rate 41% 88% 52% 74% 67% 34%
</TABLE>
(a) For the nine months ended June 30, 1997. The Fund changed its fiscal year
end from September 30 to June 30, effective June 30, 1997.
* Excluding applicable sales charges.
+ Annualized.
++ Calculation based on average shares outstanding.
# The ratio of expenses to average net assets excludes fee credits and
includes fee waivers.
See Combined Notes to Financial Statements.
13
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended June 30, Year Ended July 31,
-------------------- Period Ended -------------------------
1999 1998 June 30, 1997 (a) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 9.08 $ 8.93 $ 8.73 $ 8.88 $ 8.84 $ 9.46
--------- --------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.53 0.57++ 0.54 0.59 0.63 0.57++
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.42) 0.20 0.18 (0.16) 0.02 (0.59)
--------- --------- ------- ------- ------- -------
Total from investment
operations 0.11 0.77 0.72 0.43 0.65 (0.02)
--------- --------- ------- ------- ------- -------
Less distributions
From net investment
income (0.53) (0.62) (0.52) (0.58) (0.61) (0.59)
Returns of capital 0 0 0 0 0 (0.01)
--------- --------- ------- ------- ------- -------
Total distributions (0.53) (0.62) (0.52) (0.58) (0.61) (0.60)
--------- --------- ------- ------- ------- -------
Net asset value, end of
period $ 8.66 $ 9.08 $ 8.93 $ 8.73 $ 8.88 $ 8.84
--------- --------- ------- ------- ------- -------
Total return* 1.17% 8.82% 8.40% 4.95% 7.76% (0.29%)
Ratios/supplemental data
Net assets, end of
period (thousands) $ 107,714 $ 123,723 $10,341 $12,958 $14,558 $16,036
Ratios to average net
assets
Expenses# 1.10% 1.11% 1.12%+ 1.10% 1.00% 1.00%
Net investment income 5.90% 6.00% 6.43%+ 6.57% 7.13% 6.81%
Portfolio turnover rate 170% 331% 179% 231% 149% 280%
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30, Year Ended July 31,
-------------------- Period Ended -------------------------
1999 1998 June 30, 1997 (a) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 9.09 $ 8.95 $ 8.74 $ 8.89 $ 8.85 $ 9.47
--------- --------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.47 0.48++ 0.47 0.52 0.56 0.49++
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.43) 0.21 0.20 (0.16) 0.02 (0.58)
--------- --------- ------- ------- ------- -------
Total from investment
operations 0.04 0.69 0.67 0.36 0.58 (0.09)
--------- --------- ------- ------- ------- -------
Less distributions
From net investment
income (0.47) (0.55) (0.46) (0.51) (0.54) (0.52)
Returns of capital 0 0 0 0 0 (0.01)
--------- --------- ------- ------- ------- -------
Total distributions (0.47) (0.55) (0.46) (0.51) (0.54) (0.53)
--------- --------- ------- ------- ------- -------
Net asset value, end of
period $ 8.66 $ 9.09 $ 8.95 $ 8.74 $ 8.89 $ 8.85
--------- --------- ------- ------- ------- -------
Total return* 0.31% 7.89% 7.81% 4.10% 6.87% (1.05%)
Ratios/supplemental data
Net assets, end of
period (thousands) $ 11,100 $ 10,763 $11,368 $16,034 $17,985 $17,819
Ratios to average net
assets
Expenses# 1.85% 1.86% 1.87%+ 1.85% 1.75% 1.75%
Net investment income 5.15% 5.28% 5.68%+ 5.82% 6.38% 5.48%
Portfolio turnover rate 170% 331% 179% 231% 149% 280%
</TABLE>
(a) For the eleven months ended June 30, 1997. The Fund changed its fiscal year
end from July 31 to June 30, effective June 30, 1997.
* Excluding applicable sales charges.
+ Annualized.
++ Calculation based on average shares outstanding.
# The ratio of expenses to average net assets excludes fee credits and
includes fee waivers.
See Combined Notes to Financial Statements.
14
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended June 30, Year Ended July 31,
--------------------- Period Ended ------------------------
1999 1998 June 30, 1997 (a) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $ 9.09 $ 8.94 $ 8.74 $ 8.89 $ 8.85 $ 9.46
--------- --------- ------ ------ ------- -------
Income from investment
operations
Net investment income 0.47++ 0.49++ 0.46 0.52 0.55 0.49++
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.43) 0.21 0.20 (0.16) 0.03 (0.57)
--------- --------- ------ ------ ------- -------
Total from investment
operations 0.04 0.70 0.66 0.36 0.58 (0.08)
--------- --------- ------ ------ ------- -------
Less distributions
From net investment
income (0.47) (0.55) (0.46) (0.51) (0.54) (0.52)
Returns of capital 0 0 0 0 0 (0.01)
Total distributions (0.47) (0.55) (0.46) (0.51) (0.54) (0.53)
--------- --------- ------ ------ ------- -------
Net asset value, end of
period $ 8.66 $ 9.09 $ 8.94 $ 8.74 $ 8.89 $ 8.85
--------- --------- ------ ------ ------- -------
Total return* 0.31% 8.01% 7.70% 4.10% 6.87% (0.95%)
Ratios/supplemental data
Net assets, end of
period (thousands) $ 4,718 $ 5,439 $7,259 $9,084 $10,185 $13,086
Ratios to average net
assets
Expenses# 1.85% 1.86% 1.87%+ 1.85% 1.75% 1.75%
Net investment income 5.15% 5.26% 5.68%+ 5.82% 6.37% 5.44%
Portfolio turnover rate 170% 331% 179% 231% 149% 280%
</TABLE>
<TABLE>
<CAPTION>
Year Ended Period Ended
June 30, 1999 June 30, 1998 (b)
<S> <C> <C>
CLASS Y SHARES
Net asset value, beginning of period $ 9.08 $ 9.09
------- -------
Income from investment operations
Net investment income 0.56 0.24++
Net realized and unrealized gains or losses
on securities and foreign currency related
transactions (0.42) (0.01)
------- -------
Total from investment operations 0.14 0.23
------- -------
Less distributions from net investment income (0.56) (0.24)
------- -------
Net asset value, end of period $ 8.66 $ 9.08
------- -------
Total return 1.43% 2.58%
Ratios/supplemental data
Net assets, end of period (thousands) $54,766 $63,721
Ratios to average net assets
Expenses# 0.85% 0.86%+
Net investment income 6.15% 6.23%+
Portfolio turnover rate 170% 331%
</TABLE>
(a) For the eleven months ended June 30, 1997. The Fund changed its fiscal year
end from July 31 to June 30, effective June 30, 1997.
(b) For the period from January 26, 1998 (commencement of class operations) to
June 30, 1998.
* Excluding applicable sales charges.
+ Annualized.
++ Calculation based on average shares outstanding.
# The ratio of expenses to average net assets excludes fee credits and
includes fee waivers.
See Combined Notes to Financial Statements.
15
<PAGE>
EVERGREEN
Short Intermediate Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------- Period Ended Year Ended
1999 1998 1997 1996 June 30, 1995 (a) December 31, 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 9.90 $ 9.83 $ 9.82 $ 10.02 $ 9.52 $ 10.42
------- ------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.57 0.61 0.63 0.63 0.32 0.65
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.22) 0.07 0.02 (0.19) 0.50 (0.91)
------- ------- ------- ------- ------- -------
Total from investment
operations 0.35 0.68 0.65 0.44 0.82 (0.26)
------- ------- ------- ------- ------- -------
Less distributions from
net investment income (0.57) (0.61) (0.64) (0.64) (0.32) (0.64)
------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 9.68 $ 9.90 $ 9.83 $ 9.82 $ 10.02 $ 9.52
------- ------- ------- ------- ------- -------
Total return* 3.59% 7.08% 6.77% 4.45% 8.77% (2.57%)
Ratios/supplemental data
Net assets, end of
period (thousands) $19,127 $16,848 $17,703 $18,630 $18,898 $19,127
Ratios to average net
assets
Expenses# 0.82% 0.80% 0.72% 0.79% 0.77%+ 0.75%
Net investment incom 5.78% 6.14% 6.37% 6.35% 6.58%+ 6.46%
Portfolio turnover rate 50% 68% 45% 76% 34% 48%
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------- Period Ended Year Ended
1999 1998 1997 1996 June 30, 1995 (a) December 31, 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 9.92 $ 9.85 $ 9.84 $ 10.04 $ 9.54 $ 10.44
------- ------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.49 0.52 0.54 0.55 0.28 0.58
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.23) 0.07 0.01 (0.19) 0.50 (0.92)
------- ------- ------- ------- ------- -------
Total from investment
operations 0.26 0.59 0.55 0.36 0.78 (0.34)
------- ------- ------- ------- ------- -------
Less distributions from
net investment income (0.48) (0.52) (0.54) (0.56) (0.28) (0.56)
------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 9.70 $ 9.92 $ 9.85 $ 9.84 $ 10.04 $ 9.54
------- ------- ------- ------- ------- -------
Total return* 2.66% 6.11% 5.78% 3.62% 8.31% (3.33%)
Ratios/supplemental data
Net assets, end of
period (thousands) $22,553 $22,689 $22,237 $21,006 $17,366 $17,625
Ratios to average net
assets
Expenses# 1.72% 1.70% 1.62% 1.69% 1.67%+ 1.50%
Net investment income 4.87% 5.23% 5.48% 5.45% 5.68%+ 5.75%
Portfolio turnover rate 50% 68% 45% 76% 34% 48%
</TABLE>
(a) For the six months ended June 30, 1995. The Fund changed fiscal year end
from December 31 to June 30, effective June 30, 1995.
* Excluding applicable sales charges.
+ Annualized.
# The ratio of expenses to average net assets excludes fee credits and
includes fee waivers.
See Combined Notes to Financial Statements.
16
<PAGE>
EVERGREEN
Short Intermediate Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------ Period Ended Period Ended
1999 1998 1997 1996 June 30, 1995 (a) December 31, 1994 (b)
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $ 9.92 $ 9.85 $ 9.84 $10.05 $ 9.55 $9.85
------ ------ ------ ------ ------ -----
Income from investment
operations
Net investment income 0.49 0.52 0.54 0.55 0.26 0.18
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.23) 0.07 0.01 (0.20) 0.50 (0.30)
------ ------ ------ ------ ------ -----
Total from investment
operations 0.26 0.59 0.55 0.35 0.76 (0.12)
------ ------ ------ ------ ------ -----
Less distributions from
net investment income (0.48) (0.52) (0.54) (0.56) (0.26) (0.18)
------ ------ ------ ------ ------ -----
Net asset value, end of
period $ 9.70 $ 9.92 $ 9.85 $ 9.84 $10.05 $9.55
------ ------ ------ ------ ------ -----
Total return* 2.66% 6.11% 5.77% 3.51% 8.23% (1.27%)
Ratios/supplemental data
Net assets, end of
period (thousands) $1,360 $1,143 $1,029 $1,155 $ 527 $ 512
Ratios to average net
assets
Expenses# 1.72% 1.70% 1.62% 1.69% 1.67%+ 1.65%+
Net investment income 4.87% 5.25% 5.47% 5.46% 5.69%+ 5.87%+
Portfolio turnover rate 50% 68% 45% 76% 34% 48%
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------- Period Ended Year Ended
1999 1998 1997 1996 June 30, 1995 (a) December 31, 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $ 9.90 $ 9.83 $ 9.82 $ 10.02 $ 9.52 $ 10.43
-------- -------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.58 0.62 0.64 0.64 0.33 0.65
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.22) 0.07 0.02 (0.19) 0.49 (0.91)
-------- -------- -------- -------- -------- --------
Total from investment
operations 0.36 0.69 0.66 0.45 0.82 (0.26)
-------- -------- -------- -------- -------- --------
Less distributions from
net investment income (0.58) (0.62) (0.65) (0.65) (0.32) (0.65)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 9.68 $ 9.90 $ 9.83 $ 9.82 $ 10.02 $ 9.52
-------- -------- -------- -------- -------- --------
Total return 3.69% 7.19% 6.88% 4.63% 8.80% (2.55%)
Ratios/supplemental data
Net assets, end of
period (thousands) $335,175 $348,358 $357,706 $352,095 $347,050 $345,025
Ratios to average net
assets
Expenses# 0.72% 0.70% 0.62% 0.69% 0.67%+ 0.65%
Net investment income 5.88% 6.25% 6.48% 6.45% 6.68%+ 6.56%
Portfolio turnover rate 50% 68% 45% 76% 34% 48%
</TABLE>
(a) For the six months ended June 30, 1995. The Fund changed its fiscal year
end from December 31 to June 30, effective June 30, 1995.
(b) For the period from September 6, 1994 (commencement of class operations) to
December 31, 1994.
* Excluding applicable sales charges.
+ Annualized.
# The ratio of expenses to average net assets excludes fee credits and
includes fee waivers.
See Combined Notes to Financial Statements.
17
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ADJUSTABLE RATE MORTGAGE SECURITIES - 67.5%
Federal Home Loan Mortgage Corp.: - 22.7%
$ 1,085,330 6.72%, 1/1/22.................................. $ 1,121,281
647,378 6.90%, 3/1/21.................................. 661,841
726,028 6.93%, 7/1/30.................................. 747,467
1,669,576 6.96%, 6/1/16.................................. 1,709,496
554,956 7.07%, 10/1/21................................. 580,451
891,651 7.11%, 11/1/21................................. 914,499
837,079 7.14%, 3/1/19.................................. 866,900
607,511 7.15%, 4/1/22.................................. 632,571
322,727 7.40%, 4/1/20.................................. 327,920
875,173 7.50%, 9/1/17.................................. 904,028
30,079 7.54%, 5/1/19.................................. 30,855
42,782 9.46%, 5/1/20.................................. 43,938
------------
8,541,247
------------
Federal National Mortgage
Assn.: - 44.8%
1,077,228 5.80%, 4/1/38.................................. 1,084,971
1,414,308 5.95%, 11/1/28................................. 1,411,437
997,322 6.10%, 5/1/36.................................. 1,004,802
178,870 6.45%, 1/1/22.................................. 181,301
528,254 6.58%, 3/1/19-7/1/27........................... 542,233
706,252 6.60%, 12/1/19................................. 725,233
1,644,136 6.64%, 6/1/19-5/1/22........................... 1,700,108
554,403 6.74%, 1/1/16.................................. 569,738
467,279 6.79%, 1/1/22.................................. 484,293
1,782,859 6.80%, 10/1/16-12/1/23......................... 1,832,646
2,620,095 6.85%, 9/1/21-12/1/22.......................... 2,693,869
861,060 6.86%, 10/1/17-11/1/18......................... 884,728
383,065 6.875%, 8/1/15................................. 386,953
85,795 6.89%, 2/1/17.................................. 85,849
1,529,347 6.92%, 1/1/31.................................. 1,578,577
144,224 6.99%, 7/1/19.................................. 145,148
1,080,990 7.06%, 9/1/18.................................. 1,135,213
211,353 7.16%, 11/1/17................................. 218,090
233,010 7.50%, 6/1/18.................................. 242,768
------------
16,907,957
------------
Total Adjustable Rate Mortgage Securities
(cost $25,491,992)............................ 25,449,204
------------
FIXED RATE MORTGAGES - 6.2%
Federal Home Loan Mortgage
Corp.: - 1.1%
398,899 10.50%, 4/1/04--10/1/05........................ 410,712
------------
Federal National Mortgage
Assn.: - 1.6%
169,971 9.50%, 4/15/05................................. 175,017
398,826 11.00%, 1/1/16-1/1/18.......................... 434,385
------------
609,402
------------
Government National Mortgage Assn. - 3.5%
1,280,875 10.25%, 11/15/29............................... 1,297,859
------------
Total Fixed Rate Mortgages
(cost $2,386,758)............................. 2,317,973
------------
ASSET-BACKED SECURITIES - 11.0%
1,090,000 Carco Auto Loan Master Trust, Ser. 1997-1,
Class A,
6.69%, 8/15/04................................ 1,094,022
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - (continued)
$ 1,083,661 CoreStates Home Equity Trust, Ser. 1994-1, Class A,
6.65%, 5/15/09.................................... $ 1,082,686
500,000 Delta Funding Home Equity Loan Trust, Ser. 1997-1,
Class A5, 7.74%, 4/25/29.......................... 512,377
1,303,321 Merrill Lynch Mortgage Investors, Inc., Ser. 1992-
B, Class B,
8.50%, 4/15/12.................................... 1,307,388
163,133 The Money Store Home Equity Trust, Ser.1997-B Class
A4,
6.64%, 1/15/17.................................... 163,274
------------
Total Asset-Backed Securities
(cost $4,174,004)................................. 4,159,747
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 6.4%
441 Federal Home Loan Mortgage Corp., Ser. 11 Class C,
9.50%, 4/15/19.................................... 439
640,514 Federal Home Loan Mortgage Corp., Ser. 20, Class F,
6.03%, 7/1/29..................................... 639,914
1,000,000 Mellon Residential Funding Corp. Ser.1999-TBC1.
Class A3,
6.11%, 1/25/29.................................... 991,875
788,349 Nomura Depositor Trust,
Ser. 1998-ST1, Class A1,
5.18%, 2/15/34 (a)................................ 779,677
------------
Total Collateralized Mortgage Obligations
(cost $2,433,776)................................. 2,411,905
------------
U.S. AGENCY OBLIGATIONS - 1.3% (cost $499,805)
500,000 Federal National Mortgage Assn. 5.625%, 5/14/04.... 484,530
------------
U.S. TREASURY OBLIGATIONS - 5.3%
U.S. Treasury Notes:
600,000 4.50%, 1/31/01..................................... 591,186
600,000 4.75%, 2/15/04..................................... 577,122
825,000 5.50%, 5/31/03..................................... 818,680
------------
Total U.S. Treasury Obligations
(cost $2,010,732)................................. 1,986,988
------------
REPURCHASE AGREEMENT - 1.3% (cost $502,000)
502,000 Evergreen Joint Repurchase Agreement (5.00% dated
6/30/1999 due 7/1/1999, maturity value $502,070)
(b)............................................... 502,000
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $37,499,067)........................... 99.0% 37,312,347
Other Assets and
Liabilities - net............................ 1.0 382,364
----- -----------
Net Assets.................................... 100.0% $37,694,711
===== ===========
</TABLE>
(a) Securities that may be sold 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) The repurchase agreements are fully collateralized by U.S. Treasury
and/or federal agency obligations based on market prices plus accrued
interest at June 30, 1999.
18
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - 6.2% (b)
$ 2,000,000 American Express Credit Account, Ser. 1999-1 Class
B (Est. Maturity 2004), 5.85%, 11/15/06........... $ 1,935,530
1,000,000 California Infrastructure PG&E, Series 1997-1
Certificate, Class A4 (Est. Maturity 2000),
6.16%, 6/25/03.................................... 1,003,900
2,500,000 Contimortgage Home Equity Loan Trust, Ser. 1998-1
Class A6 (Est. Maturity 2003),
6.58%, 12/15/18................................... 2,431,875
CoreStates Home Equity Trust:
716,440 Ser. 1994-1 Class A (Est. Maturity 2000),
6.65%, 5/15/09.................................... 715,796
1,000,000 Ser. 1996-1 Class A4 (Est. Mat. 2002),
7.00%, 6/15/12.................................... 1,012,185
1,000,000 Southern Pacific Secured Assets Corp., Ser. 1996-3
Class A4 (Est. Maturity 2002),
7.60%, 10/25/27................................... 1,024,125
3,000,000 WFS Owner Trust,
(Est. Maturity 2001),
6.30%, 3/20/05.................................... 2,988,750
------------
Total Asset-Backed Securities
(cost $11,251,734)................................ 11,112,161
------------
CORPORATE BONDS - 55.3%
Aerospace & Defense - 5.3%
500,000 BE Aerospace, Inc., Sr. Sub Notes, 9.50%, 11/1/08.. 505,000
3,675,000 Boeing, Inc., Deb.,
8.10%, 11/15/06................................... 3,957,093
3,000,000 Lockheed Martin Corp., Notes, 7.25%, 5/15/06....... 3,002,040
2,000,000 Raytheon Co., Notes, 6.75%, 8/15/07................ 1,979,640
------------
9,443,773
------------
Automotive Equipment & Manufacturing - 1.0%
750,000 Delphi Automotive Sys. Corp.,
Notes,
6.50%, 5/1/09..................................... 707,250
200,000 Eagle Picher Inds., Inc.,
Sr. Sub. Notes,
9.375%, 3/1/08.................................... 190,000
750,000 Hayes Lemmerz Int'l., Inc.,
Sr. Sub. Notes,
8.25%, 12/15/08 (a)............................... 712,500
250,000 Mark IV Inds., Inc.,
Sr. Sub. Notes,
7.50%, 9/1/07..................................... 230,625
------------
1,840,375
------------
Banks - 7.5%
1,000,000 Amsouth Bancorp.,
Sub. Deb., Puttable 2005,
6.75%, 11/1/25 ................................... 986,380
2,500,000 Bank One Texas N.A., Sub. Notes, 6.25%, 2/15/08
(f)............................................... 2,373,525
1,250,000 Chase Manhattan Corp., Sub. Notes, 9.375%, 7/1/01.. 1,322,200
2,000,000 Fleet Fin'l. Group, Inc., Notes, 6.50%, 3/15/08
(f)............................................... 1,922,160
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Banks - continued
$ 800,000 Harris BanCorp.,
Sub. Notes,
9.375%, 6/1/01.................................. $ 841,424
2,000,000 Mellon Fin'l., Co., Sr. Notes, 5.75%, 11/15/03... 1,926,940
2,000,000 NationsBank Corp., Sub. Notes, 8.125%, 6/15/02... 2,098,020
2,000,000 Suntrust Banks, Inc., Sr. Bond, 6.00%, 1/15/28... 1,888,920
------------
13,359,569
------------
Building, Construction & Furnishings - 0.8%
450,000 MDC Holdings, Inc., Sr. Notes, 8.375%, 2/1/08.... 432,000
500,000 Nortek Inc., Sr. Notes, 8.875%, 8/1/08 (a)....... 492,500
500,000 Standard Pacific Corp.,
Sr. Sub. Notes,
8.50%, 4/1/09................................... 477,500
------------
1,402,000
------------
Business Equipment &
Services - 0.5%
1,000,000 Lucent Technologies, Inc., Notes, 5.50%, 11/15/08
(f)............................................. 919,930
------------
Cable/Other Video
Distribution - 5.1%
500,000 Adelphia Communications Corp., Sr. Notes, Ser. B,
9.875%, 3/1/07.................................. 522,500
750,000 Century Communications Corp., Sr. Notes,
9.75%, 2/15/02.................................. 766,875
500,000 Charter Communications Holdings, Sr. Notes,
8.625%, 4/1/09 (a).............................. 478,750
2,000,000 Comcast Cable Communications I, Sr. Notes,
6.20%, 11/15/08................................. 1,866,600
1,000,000 Comcast Corp., Sr. Sub. Deb.: 9.375%, 5/15/05.... 1,059,440
250,000 9.50%, 1/15/08.................................. 262,500
2,000,000 CSC Holdings, Inc., Sr. Notes, 7.25%, 7/15/08.... 1,905,400
250,000 Metromedia Fiber Network, Inc., Sr. Notes,
10.00%, 11/15/08................................ 256,875
Time Warner, Inc.:
925,000 Deb., 8.11%, 8/15/06............................ 969,548
1,000,000 Notes, 9.625%, 5/1/02........................... 1,072,910
------------
9,161,398
------------
Chemical & Agricultural
Products - 1.6%
1,164,000 Dow Chemical Co., Deb., 8.625%, 4/1/06........... 1,259,413
350,000 Huntsman ICI Chemicals, Inc., Sr. Sub. Notes,
10.125%, 7/1/09 (a)............................. 353,063
300,000 Int'l. Specialty Products Holdings, Inc.,
Sr. Notes, Ser. B, 9.00%, 10/15/03.............. 300,000
</TABLE>
19
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments(continued)
June 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Chemical & Agricultural
Products - continued
$ 400,000 Lyondell Chemical Co.,
Sr. Sub. Notes,
10.875%, 5/1/09 (a)............................... $ 412,000
500,000 Scotts Co., Sr. Sub. Notes, 8.625%, 1/15/09 (a).... 492,500
------------
2,816,976
------------
Communication Systems &
Services - 6.1%
500,000 Ackerley Group, Inc.,
Sr. Sub. Notes, Ser. B,
9.00%, 1/15/09.................................... 490,000
2,600,000 Bell Telephone Co. of PA, Deb.,
8.35%, 12/15/30................................... 2,940,834
500,000 Bresnan Communications Group, Sr. Notes,
8.00%, 2/1/09 (a)................................. 501,250
500,000 Chancellor Media Corp., Sr. Notes,
8.00%, 11/1/08.................................... 490,000
500,000 Crown Castle Int'l. Corp., Sr. Notes,
9.00%, 5/15/11.................................... 492,500
350,000 Intermedia Communications, Inc., Sr. Disc. Notes,
Ser. B,
11.25%, 7/15/07................................... 253,750
500,000 Jordan Telecommunication Prod.,
Sr. Notes, Ser. B,
9.875%, 8/1/07.................................... 495,000
400,000 K III Communications Corp.,
Sr. Notes,
8.50%, 2/1/06..................................... 410,500
1,000,000 LCI Int'l., Inc., Sr. Notes,
7.25%, 6/15/07.................................... 981,910
1,000,000 MCI Communications Corp., Puttable and Callable @
100, 4/15/02 (Eff. Yield 6.23%) (c),
6.125%, 4/15/12................................... 993,360
500,000 Mcleod USA, Inc., Sr. Disc. Notes,
10.50%, 3/1/07.................................... 385,000
500,000 Price Communications Wireless, Inc., Sr. Secd.
Notes, Ser. B,
9.125%, 12/15/06.................................. 520,000
2,000,000 Sprint Capital Corp.,
6.375%, 5/1/09 (f)................................ 1,897,200
------------
10,851,304
------------
Consumer Products &
Services - 1.5%
500,000 Budget Group, Inc., Sr. Notes,
9.125%, 4/1/06 (a)................................ 467,500
1,164,000 General Mills, Inc., Series B, MTN,
9.00%, 12/20/02................................... 1,248,169
400,000 Nationsrent, Inc., Sr. Sub. Notes,
10.375%, 12/15/08................................. 398,000
500,000 United Rentals, Inc., Sr. Sub. Notes,
9.25%, 1/15/09.................................... 496,250
------------
2,609,919
------------
Environmental Services - 0.6%
1,000,000 Republic Services, Inc., Notes,
6.625%, 5/15/04................................... 988,610
------------
Finance & Insurance - 6.9%
1,500,000 Bear Stearns, Inc., Sr. Notes,
6.75%, 12/15/07................................... 1,455,000
1,000,000 Beneficial Corp., Series I, MTN,
6.25%, 2/18/13.................................... 985,670
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Finance & Insurance - continued
$ 1,100,000 CIT Group, Inc., Class A,
5.625%, 10/15/03.................................. $ 1,059,498
2,250,000 Donaldson Lufkin & Jenrette,
Sr. Notes,
5.875%, 4/1/02.................................... 2,210,647
2,500,000 Farm Credit Systems Financial Assistance Corp.,
Bonds,
Series A-05,
8.80%, 6/10/05.................................... 2,802,725
1,000,000 Ford Motor Credit Co.,
5.80%, 1/12/09 (f)................................ 913,820
850,000 General Motors Acceptance Corp.,
8.50%, 1/1/03 (f)................................. 902,020
2,000,000 Prudential Insurance Co., Notes,
7.125%, 7/1/07 (a)................................ 2,008,740
------------
12,338,120
------------
Food & Beverage Products - 1.1%
250,000 Aurora Foods, Inc.,
Sr. Sub. Notes, Ser. B,
9.875%, 2/15/07................................... 258,750
750,000 Chiquita Brands Int'l, Inc., Sr. Notes, 9.625%,
1/15/04........................................... 748,125
1,000,000 Coca Cola Enterprises, Inc.,
5.75%, 11/1/08 (f)................................ 922,610
------------
1,929,485
------------
Gaming - 1.4%
250,000 Boyd Gaming Corp., Sr. Sub. Notes,
9.50%, 7/15/07.................................... 247,500
500,000 Circus Circus Enterprises, Inc., Deb.,
9.25%, 12/1/05.................................... 507,500
300,000 Isle Capri Casinos, Inc.,
8.75%, 4/15/09 (a)................................ 282,000
500,000 Majestic Star Casino LLC,
Sr. Secd. Notes,
10.875%, 7/1/06 (a)............................... 496,250
400,000 Mohegan Tribal Gaming Auth.,
Sr. Sub. Notes,
8.75%, 1/1/09..................................... 395,000
500,000 Station Casinos Inc., Sr. Sub. Notes,
9.75%, 4/15/07.................................... 510,000
------------
2,438,250
------------
Healthcare Products &
Services - 0.8%
1,164,000 Baxter Int'l, Inc., Notes,
7.25%, 2/15/08.................................... 1,168,295
250,000 Playtex Family Prods. Corp.,
Sr. Sub. Notes,
9.00%, 12/15/03................................... 253,750
------------
1,422,045
------------
Iron & Steel - 1.3%
500,000 AK Steel Corp.,
7.875%, 2/15/09 (a)............................... 482,500
500,000 National Steel Corp., Ser. D,
9.875%, 3/1/09.................................... 511,250
750,000 Wheeling Pittsburgh Corp.,
Sr. Notes,
9.375%, 11/15/03.................................. 798,750
500,000 WHX Corp., Sr. Notes,
10.50%, 4/15/05................................... 473,750
------------
2,266,250
------------
Oil/Energy - 1.6%
2,000,000 Transocean Offshore, Inc., Notes,
7.45%, 4/15/27.................................... 2,026,452
</TABLE>
20
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments(continued)
June 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Oil/Energy - continued
$ 500,000 Triton Energy Ltd., Sr. Notes, 8.75%, 4/15/02...... $ 495,000
250,000 Western Gas Resources, Inc.,
Sr. Sub. Notes,
10.00%, 6/15/09 (a)............................... 256,250
------------
2,777,702
------------
Paper & Packaging - 0.4%
500,000 Container Corp. of America,
Gtd. Sr. Notes, Series A,
11.25%, 5/1/04.................................... 518,750
200,000 Stone Container Corp.,
Sr. Sub. Notes,
11.50%, 8/15/99................................... 202,000
------------
720,750
------------
Printing, Publishing, Broadcasting
& Entertainment - 1.2%
500,000 Big Flower Press Holdings, Inc.,
Sr. Sub. Notes,
8.625%, 12/1/08................................... 462,500
500,000 Carmike Cinemas, Inc.,
Sr. Sub. Notes,
9.375%, 2/1/09 (a)................................ 486,250
500,000 Cinemark USA, Inc.,
Sr. Sub. Notes, Ser. B,
9.625%, 8/1/08.................................... 495,000
450,000 Hollinger Int'l.,
Sr. Sub. Notes,
9.25%, 2/1/06..................................... 459,000
200,000 Sinclair Broadcast Group, Inc.,
Sr. Sub. Notes,
10.00%, 9/30/05................................... 204,000
------------
2,106,750
------------
Real Estate - 1.4%
250,000 Bulong Operations Properties Ltd., Sr. Notes ,
12.50%, 12/15/08 (a).............................. 254,688
850,000 EOP Operating, Ltd., Sr. Notes, 6.375%, 2/15/03
(a)............................................... 830,756
1,000,000 Glenborough Properties. LP,
Sr. Notes,
7.625%, 3/15/05................................... 909,760
500,000 HMH Pptys., Inc.,
Sr. Notes, Ser. C,
8.45%, 12/1/08.................................... 477,500
------------
2,472,704
------------
Retailing & Wholesale - 2.2%
425,000 Ames Department Stores, Inc.,
Sr. Notes,
10.00%, 4/15/06 (a)............................... 415,437
3,000,000 CVS Corp., Notes,
5.50%, 2/15/04.................................... 2,887,335
250,000 Pathmark Stores, Inc.,
Sr. Sub. Notes,
9.625%, 5/1/03.................................... 255,625
500,000 Southland Corp.,
Sr. Sub. Deb.,
5.00%, 12/15/03................................... 432,500
------------
3,990,897
------------
Textile & Apparel - 0.5%
500,000 Polymer Group, Inc.,
Sr. Sub. Notes, Ser. B,
9.00%, 7/1/07..................................... 478,750
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Textile & Apparel - continued
$ 500,000 Westpoint Stevens, Inc.,
Sr. Notes,
7.875%, 6/15/05................................... $ 488,750
------------
967,500
------------
Transportation - 2.3%
780,000 Burlington Northern Santa Fe, Notes, 6.125%,
3/15/09........................................... 729,651
1,000,000 Continental Airlines, Inc.,
Passthru Certificates,
Ser. 1999-1 Class B,
6.795%, 2/2/20.................................... 958,885
2,000,000 CSX Corp., Notes, 6.25%, 10/15/08.................. 1,869,660
500,000 Sea Containers Ltd., Sr. Notes, Ser. B,
7.875%, 2/15/08 (a)............................... 487,500
------------
4,045,696
------------
Utilities - 4.2%
500,000 AES Corp., Sr. Sub. Notes, 8.50%, 11/1/07.......... 473,750
3,000,000 Commonwealth Edison Co.,
1st Mtge., Ser. 83,
8.00%, 5/15/08.................................... 3,262,050
250,000 Echostar DBS Corp., Sr. Notes, 9.375%, 2/1/09 (a).. 255,000
600,000 El Paso Energy Corp., Sr. Notes, 6.75%, 5/15/09.... 576,180
1,000,000 Long Island Lighting Co., Deb., 7.30%, 7/15/99..... 1,000,590
1,500,000 LSP Energy LP, Sr. Secd. Notes, Ser. A,
7.164%, 6/30/13 (a)............................... 1,468,983
500,000 National Rural Util. Coop. Fin., Notes, 5.00%,
10/1/02........................................... 481,335
------------
7,517,888
------------
Total Corporate Bonds
(cost $101,449,221)............................... 98,387,891
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 8.0% (b)
750,000 Bear Stearns Commercial Mtge. Securities, Inc.,
Series 1999- WF2
Class A2 (Est. Mat. 2009), 7.08%, 6/15/09......... 757,500
500,000 Chase Commercial Mtge.
Securities Corp.,
Series 1997-1 Class B
(Est. Maturity 2007),
7.37%, 6/19/29.................................... 518,048
782,861 Criimi Mae Finl. Corp., Series 1 Class A (Est.
Maturity 2004), 7.00%, 1/1/33..................... 782,861
DLJ Commercial Mtge. Corp.:
3,000,000 Series 1999-CG1 Class A3,
(Est. Mat. 2009), 6.77%, 4/10/23.................. 2,880,937
2,000,000 Series 1999-CG2 Class A2 (Est. Mat. 2009),
7.45%, 6/10/09.................................... 2,047,500
1,000,000 FNMA, Series 1993-248, Class SA, (Est. Maturity
2004), 4.086%, 8/25/23 (d)........................ 853,240
</TABLE>
21
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments(continued)
June 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS - continued
$ 1,920,377 Independent National Mtge. Corp., Series 1997-A,
Class A (Est. Maturity 2003), 7.81%, 12/26/26
(a)............................................... $ 1,742,743
Morgan Stanley Capital I, Inc.:
700,000 Series 1997- C1 Class B
(Est. Maturity 2006),
7.69%, 2/15/20.................................... 724,209
650,000 Series 1998-HF2 Class B
(Est. Mat. 2008),
6.71%, 11/15/30................................... 652,740
432,573 PNC Mtge. Securities Corp.,
Series 1997-4 Class 2PP1
(Est. Maturity 2000),
7.50%, 7/25/27.................................... 436,122
1,171,130 Residential Funding Mtge.
Securities I, Inc.,
Series 1999-S2 Class M1
(Est. Mat. 2011),
6.50%, 1/25/29.................................... 1,091,452
Resolution Trust Corp.:
759,879 Series 1992-3 Class A2,
(Est. Maturity 1999), 6.68%, 9/25/19.............. 757,641
613,925 Series 1992-3 Class A3,
(Est. Maturity 1999), 6.83%, 5/25/21.............. 612,123
460,751 Series 1995-1 Class A2C
(Est. Maturity 1999),
7.50%, 10/25/28................................... 461,081
------------
Total Collateralized Mortgage Obligations
(cost $14,481,663)................................ 14,318,197
------------
MORTGAGE-BACKED SECURITIES - 5.8% (cost $10,715,404)
FNMA:
9,287,638 6.50%, 10/1/28 - 5/1/29........................... 8,966,374
1,469,486 7.00%, 7/1/28..................................... 1,458,465
------------
10,424,839
------------
U. S. GOVERNMENT AGENCY OBLIGATIONS - 1.2%
1,000,000 FHLB,
5.80%, 9/2/08..................................... 952,810
750,000 FHLMC,
6.70%, 1/5/07..................................... 756,795
500,000 FNMA,
5.625%, 5/14/04................................... 484,530
------------
Total U. S. Agency Obligations (cost $2,268,237)... 2,194,135
------------
U. S. TREASURY OBLIGATIONS - 9.0%
11,210,000 U.S. Treasury Notes,
4.75%, 11/15/08................................... 10,293,919
9,650,000 U.S. Treasury STRIPs,
(Eff. Yield 9.30%) (c),
0.00%, 5/15/08.................................... 5,659,918
------------
Total U. S. Treasury Obligations
(cost $16,160,953)................................ 15,953,837
------------
YANKEE OBLIGATIONS - 8.3%
675,000 Bayerische Landesbank Girozen, New York, Sr. Notes,
Series D, 6.20%, 2/9/06........................... 650,592
250,000 Great Central Mines Ltd., Sr. Notes, 8.875%,
4/1/08............................................ 236,875
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
YANKEE OBLIGATIONS - continued
$ 500,000 Gulf Canada Resources Ltd.,
Sr. Notes,
8.35%, 8/1/06..................................... $ 486,855
250,000 Imax Corp., Sr. Notes, 7.875%, 12/1/05............. 235,000
2,000,000 Manitoba Province, Canada, Notes, 8.00%, 4/15/02... 2,088,700
2,000,000 Nippon Telegraph and Telephone Corp., Notes,
6.00%, 3/25/08.................................... 1,909,780
691,909 Oslo Seismic Services, Inc.,
1st Pfd. Mtge. Notes,
8.28%, 6/1/11..................................... 717,648
1,000,000 Petroleum GEO Svcs., Notes, 7.50%, 3/31/07......... 997,760
500,000 Rogers Cablesystems Ltd., Notes, 9.625%, 8/1/02.... 523,750
1,000,000 Svenska Handelsbanken,
Sub. Notes,
8.35%, 7/15/04.................................... 1,068,630
1,500,000 TXU Eastern Funding Co., 6.75%, 5/15/09............ 1,425,244
700,000 Westpac Banking Corp.,
Sub. Deb.,
9.125%, 8/15/01................................... 736,526
2,000,000 Yorkshire Power Fin. Ltd., Gtd.
Sr. Notes,
6.496%, 2/25/08................................... 1,898,480
2,000,000 YPF Sociedad Anonima,
Sr. Notes,
7.25%, 3/15/03.................................... 1,933,420
------------
Total Yankee Obligations
(cost $15,126,440)................................ 14,909,260
------------
FOREIGN BONDS - (NON-US DOLLAR DENOMINATED) - 3.4%
35,995,000 Nykredit,
DKK 6.00%, 10/1/29.................................... 4,758,774
Realkredit Danmark, Debs.:
88,000 5.00%, 10/1/29.................................... 10,908
DKK
9,500,000 6.00%, 10/1/29.................................... 1,255,304
DKK
------------
Total Foreign Bonds -
(Non-US Dollar Denominated)
(cost $6,416,344)................................. 6,024,986
------------
<CAPTION>
Shares
<C> <S> <C>
MUTUAL FUND SHARES (cost $4,120,580) - 2.3%
4,120,580 Navigator Prime Portfolio (g)...................... 4,120,580
------------
<CAPTION>
Principal
Amount
<C> <S> <C>
REPURCHASE AGREEMENT - 3.9% (cost $7,010,000)
$7,010,000 Evergreen Joint Repurchase Agreement (5.00% dated
6/30/1999 due 7/1/1999,
maturity value $7,010,974) (e).................... 7,010,000
------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Total Investments -
(cost $189,000,576).. 103.4% 184,455,886
Other Assets and
Liabilities - net.... (3.4) (6,157,525)
------ ------------
Net Assets............ 100.0% $178,298,361
====== ============
</TABLE>
22
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments(continued)
June 30, 1999
(a) Securities that may be sold 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) The estimated maturity of a Collateralized Mortgage Obligation or
Asset-Backed Security is based on current and projected prepayment
rates. Changes in interest rates can cause the estimated maturity to
differ from the listed dates.
(c) Effective yield (calculated at the time of purchase) is the yield at
which the bond accretes on an annual basis until maturity date.
(d) Inverse floater, resets monthly.
(e) The repurchase agreements are fully collateralized by U.S. Treasury
and/or federal agency obligations based on market prices plus accrued
interest at June 30, 1999.
(f) All or a portion of this security is currently on loan.
(g) Represents investment of cash collateral received for securities on
loan.
Summary of Abbreviations
DKK Danish Krone
EUR Euro Dollar
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
MTN Medium Term Note
STRIPs Separate Trading of Registered Interest and Principal Securities
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward Foreign Currency Exchange Contracts to Sell:
<TABLE>
<CAPTION>
Exchange U.S. Value at In Exchange Unrealized
Date Contracts to Deliver June 30, 1999 for U.S. $ Appreciation
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7/20/99 6,103,000 EUR $6,300,391 $6,543,331 $242,940
</TABLE>
See Combined Notes to Financial Statements.
23
<PAGE>
EVERGREEN
Short-Intermediate Bond Fund
Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - 12.1%
$2,444,799 Advanta Home Equity Loan Trust, Ser. 1992-4 Class
A1, 7.20%, 11/25/08............................... $ 2,462,952
Amresco Residential Securities Mtge. Loan Trust:
1,297,020 Ser. 1998-2 Class A1, 6.50%, 12/25/15.............. 1,296,261
3,450,000 Ser. 1998-2 Class A2, 6.25%, 4/25/22............... 3,452,053
431,094 Associates Manufactured Housing, Ser. 1997-1 Class
A3, 6.60%, 6/15/28................................ 432,570
4,000,000 Carco Auto Loan Master Trust, Ser. 1997-1 Class A,
6.69%, 8/15/04.................................... 4,009,660
1,999,985 Contimortgage Home Equity Loan Trust, Ser. 1996-1
Class A5, 6.15%, 3/15/11.......................... 2,002,175
5,495,999 Empire Funding Home Loan Owner Trust, Ser. 1998-1
Class A4, 6.64%, 12/25/12......................... 5,425,458
266,536 EQCC Home Equity Loan Trust, Ser. 1996-1 Class A2,
5.82%, 9/15/09.................................... 266,961
3,482,570 Fleetwood Credit Corp. Grantor Trust, Ser. 1993-B
Class A, 4.95%, 8/15/08........................... 3,461,622
4,121,744 Iroquois Trust, Indexed Amortization Note, Ser.
1997-3 Class A, 6.68%, 11/10/03 (a)............... 4,127,082
5,557,703 Life Fin'l. Home Loan Owner Trust, Ser. 1997-3
Class A2, 6.79%, 10/25/11......................... 5,542,836
2,499,954 Prudential Securities Secured Financing Corp.,
Ser. 1994-4 Class A1, 8.12%, 2/15/25.............. 2,548,741
2,500,000 Southern Pacific Secd. Assets Corp., Ser. 1998-1
Class A6, 7.08%, 3/25/28.......................... 2,497,363
Western Fin'l. Grantor Trust:
1,161,942 Ser. 1995-5 Class A2, 5.875%, 3/1/02............... 1,164,295
479,379 Ser. 1995-4 Class A2, 6.20%, 2/1/02................ 480,781
4,500,000 WFS Financial Owner Trust, Ser. 1997-D Class A4,
6.25%, 3/20/03.................................... 4,528,912
1,972,337 Xerox Rental Equipment Trust, Ser. 1996-A,
6.20%, 12/31/99 (a)............................... 1,967,098
------------
Total Asset-Backed Securities (cost $45,610,987)... 45,666,820
------------
CORPORATE BONDS - 21.8%
Banks - 3.7%
3,350,000 Amsouth BanCorp., Sub. Deb., 6.75%, 11/1/25........ 3,342,094
2,000,000 Bank One First Chicago NBD Corp., MTN, Ser. E,
9.20%, 12/17/01................................... 2,122,584
3,000,000 BB&T Corp., Sub. Notes, 6.375%, 6/30/05............ 2,931,789
5,000,000 First Security Corp., MTN, 6.40%, 2/10/03.......... 4,921,325
500,000 Security Pacific Corp., Notes, 10.45%, 5/8/01...... 530,456
------------
13,848,248
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Finance & Insurance - 9.3%
$ 2,000,000 American Express Credit Corp., Step Bond (Eff.
Yield 5.57%) (b), 6.25%, 8/10/00 ................. $ 1,993,394
3,000,000 Associated P&C Holdings, Inc., Gtd. Sr. Notes,
6.75%, 7/15/03 (a)................................ 2,908,707
3,000,000 Bear Stearns Co., Inc., Sr. Notes, 7.625%,
4/15/00........................................... 3,032,367
1,500,000 Duke Capital Corp., Sr. Notes, Ser. A, 6.25%,
7/15/05........................................... 1,462,602
1,000,000 Horace Mann Educators Corp.,
Sr. Notes,
6.625%, 1/15/06................................... 953,918
Lehman Brothers Holdings, Inc.:
2,500,000 MTN, 6.84%, 10/7/99................................ 2,506,537
5,000,000 Sr. Notes, 6.625%, 11/15/00........................ 5,014,015
5,000,000 8.875%, 3/1/02..................................... 5,230,930
5,000,000 Metropolitan Life Insurance Co., Surplus Notes,
7.00%, 11/1/05 (a)................................ 5,023,580
7,000,000 Salomon, Inc., Sr. Notes, 7.20%, 2/1/04............ 7,111,650
------------
35,237,700
------------
Industrial Specialty Products & Services - 4.3%
7,500,000 Columbia/HCA Healthcare Corp., Notes,
6.875%, 7/15/01................................... 7,303,770
4,375,000 Johnson Controls, Inc., Notes, 6.30%, 2/1/08....... 4,172,871
5,000,000 US Airways, Inc., Ser. 1998-1 Class B, 7.35%,
1/30/18........................................... 4,888,175
------------
16,364,816
------------
Machinery - Diversified - 1.3%
5,000,000 Case Corp., Notes, Ser. B, 6.25%, 12/1/03.......... 4,881,595
------------
Telecommunication Services & Equipment - 0.5%
2,000,000 Worldcom, Inc., Sr. Notes, 6.125%, 8/15/01......... 1,991,218
------------
Transportation - 0.7%
2,393,622 Continental Airlines, Inc., 7.46%, 4/1/13.......... 2,419,413
------------
Utilities - Electric - 2.0%
5,000,000 LG&E Capital Corp., MTN, 5.75%, 11/1/01 (a)........ 4,893,415
2,700,000 Virginia Elec. & Pwr. Co., MTN, 6.30%, 6/21/01..... 2,697,000
------------
7,590,415
------------
Total Corporate Bonds (cost $82,867,979)........... 82,333,405
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 12.8%
3,250,000 Blackrock Capital Fin., LP, 7.15%, 10/25/26........ 3,212,300
3,150,000 Chase Commercial Mtge. Securities Corp.,
Ser. 1996-2 Class C, 6.90%, 11/19/28.............. 3,096,119
590,569 CMC Securities Corp.,
Ser. 1993-D Class D3,
10.00%, 7/25/23................................... 603,909
</TABLE>
24
<PAGE>
EVERGREEN
Short-Intermediate Bond Fund
Schedule of Investments(continued)
June 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS - continued
$ 5,000,000 Credit Suisse First Boston Mtge. Securities Corp.,
Ser. 1998-C1 Class A1B,
6.48%, 5/17/08.................................... $ 4,820,925
2,795,438 Deutsche Mtge. & Asset Receiving Corp.,
6.22%, 9/15/07.................................... 2,727,188
FHLMC:
2,557,886 Ser. 1546 Class D, 5.75%, 10/15/16................. 2,554,215
2,880,914 Ser. 1991 Class PA, 6.00%, 3/15/14................. 2,882,081
3,000,000 FNMA, REMIC,
Ser. 1998-W8 Class A4,
6.02%, 9/25/28.................................... 2,914,845
4,000,000 Kidder Peabody Acceptance Corp., Ser. 1994-C1 Class
A, 6.65%, 2/1/06.................................. 4,034,540
3,000,000 Nationslink Funding Corp., Comml. Mtge.
Certificates,
Ser. 1998-C1 Class A1A1,
6.80%, 1/20/08.................................... 2,834,100
2,000,000 Painewebber Mtge. Acceptance Corp., Ser. 1996-M1
Class E, 7.66%, 1/2/12 (a)........................ 1,987,735
Potomac Gurnee Fin. Corp.:
2,410,284 Ser. 1 Class A, 6.89%, 12/21/26 (a)................ 2,397,883
2,500,000 Ser. 1 Class B 7.00%, 12/21/26 (a)................. 2,495,462
3,788,820 Prudential Home Mtge. Securities, Ser. 1993-39
Class A8, 6.50%, 10/25/08......................... 3,766,447
4,169,625 Prudential Securities Secd.
Financing Corp.,
Ser. 1998-C1 Class A1A1,
6.11%, 11/15/02................................... 4,155,302
2,423,077 RMF Commercial Mtge., Ser. 1997-1 Class A,
6.38%, 1/15/19 (a)................................ 2,421,539
1,369,505 Saxon Mtge. Securities Corp.,
Ser. 1993-8A Class 1A2, 7.375%, 9/25/23........... 1,378,866
------------
Total Collateralized Mortgage Obligations
(cost $48,872,907)................................ 48,283,456
------------
MORTGAGE-BACKED SECURITIES - 21.7%
6,727,375 FHA Insured,
7.43%, 9/1/23..................................... 6,693,738
4,063,089 FHA-Puttable Proj. Loans:
7.43%, 11/1/22.................................... 4,133,279
4,524,724 Merrill Lynch 199,
8.43%, 2/1/20..................................... 4,648,815
2,808,952 Reilly 18,
6.00%, 4/1/15 (c)................................. 2,780,862
1,526,877 Reilly 55,
7.43%, 3/1/24..................................... 1,561,285
18,717,655 Reilly 64,
7.43%, 1/1/24..................................... 19,128,975
FHLB:
3,000,000 5.45%, 10/19/05.................................... 2,875,875
3,200,000 5.467%, 2/19/04.................................... 3,140,160
FHLMC:
2,750,000 6.00%, 5/15/16..................................... 2,725,534
167,088 10.50%, 9/1/15..................................... 183,444
2,000,000 Deb.,
6.97%, 6/16/05..................................... 2,002,308
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MORTGAGE-BACKED SECURITIES - continued
FNMA:
$ 7,698,000 5.125%, 2/13/04.................................... $ 7,383,483
4,664,377 11.00%, 2/15/25.................................... 5,203,967
18,384 14.00%, 6/1/11..................................... 20,815
2,740,276 6.00%, 11/1/08..................................... 2,688,184
2,100,000 REMIC Trust, Ser. 1992 Class G44H, 8.00%,
11/25/06.......................................... 2,148,876
8,229,018 Ser. 1995-W1 Class A6, 8.10%, 4/25/25.............. 8,341,986
GNMA:
6,163,171 8.05%, 6/15/19-10/15/20............................ 6,414,482
------------
Total Mortgage-Backed Securities (cost
$82,308,714)...................................... 82,076,068
------------
U. S. AGENCY OBLIGATIONS - 5.5%
FHLB:
646,312 6.043%, 4/28/03.................................... 647,152
4,105,000 6.07%, 8/28/08..................................... 3,923,793
3,300,000 Consolidated Bond, 6.54%, 12/12/07................. 3,242,732
FNMA, MTN:
4,000,000 5.52%, 4/17/02..................................... 3,932,380
9,035,000 6.92%, 3/19/07..................................... 9,235,514
------------
Total U. S. Agency Obligations (cost $22,207,755).. 20,981,571
------------
U. S. TREASURY OBLIGATIONS - 18.2%
U.S. Treasury Notes:
10,000,000 5.625%, 5/15/08.................................... 9,796,880
3,500,000 5.75%, 4/30/03..................................... 3,504,375
24,525,000 6.125%, 8/15/07.................................... 24,800,906
8,000,000 6.25%, 2/15/07..................................... 8,152,504
2,500,000 6.50%, 10/15/06.................................... 2,580,470
14,000,000 6.625%, 5/15/07.................................... 14,586,250
4,980,000 7.00%, 7/15/06..................................... 5,277,246
------------
Total U. S. Treasury Obligations
(cost $70,134,355)................................ 68,698,631
------------
MUNICIPAL - 0.7% (Cost $2,885,285)
2,900,000 Virginia Hsg. Dev. Auth. Cmnwlth. Mtge. RB, Taxable
Subser. A-4, 7.00%, 1/1/14........................ 2,860,705
------------
YANKEE OBLIGATIONS - 5.8%
$ 5,000,000 Boral Ltd. Australia Co., MTN 7.90%, 11/19/99 (a).. $ 5,034,540
Korea Dev. Bank, Bond:
5,000,000 7.25%, 5/15/06..................................... 4,804,195
6,000,000 7.375%, 9/17/04.................................... 5,899,170
6,000,000 National Bank of Canada, Yankee Notes, Ser. B,
8.125%, 8/15/04................................... 6,318,966
------------
Total Yankee Obligations (cost $22,450,580)........ 22,056,871
------------
REPURCHASE AGREEMENT - 0.8% (cost $3,101,272)
3,101,272 Dresdner Bank AG, 4.75%, dated 6/30/1999, due
7/1/1999, maturity value $3,101,681 (d)........... 3,101,272
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments - (cost $380,439,834).............. 99.4% 376,058,799
Other Assets and
Liabilities - net................................... 0.6 2,157,009
----- ------------
Net Assets .......................................... 100.0% $378,215,808
===== ============
</TABLE>
25
<PAGE>
EVERGREEN
Short-Intermediate Bond Fund
Schedule of Investments (continued)
June 30, 1999
(a) Securities that may be sold to qualified institutional buyers under
Rule 144A or securities offered pursuant to Section 4(2) of the Secu-
rities Act of 1933, as amended. These securities have been determined
to be liquid under guidelines established by the Board of Trustees.
(b) Effective yield (calculated at the time of purchase) is the yield at
which the bond accretes on an annual basis until maturity date.
(c) The security is valued based upon fair value determined under proce-
dures approved by the Board of Trustees.
(d) The repurchase agreement is fully collateralized by $2,880,000 U.S.
Treasury Notes, 7.50%, 2/15/2005; value including accrued interest
$3,167,567.
Summary of Abbreviations
FHA Federal Housing Authority
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
MTN Medium Term Note
REMIC Real Estate Mortgage Investment Conduit
STRIPs Separately Traded Registered Interest and Principal Securities
See Combined Notes to Financial Statements.
26
<PAGE>
EVERGREEN
Short and Intermediate Term Bond Funds
Statements of Assets and Liabilities
June 30, 1999
<TABLE>
<CAPTION>
Capital Preservation Intermediate Bond Short Intermediate
Fund Fund Fund
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Identified cost of
securities............. $37,499,067 $189,000,576 $380,439,834
Net unrealized gains or
losses on securities... (186,720) (4,544,690) (4,381,035)
- ------------------------------------------------------------------------------------
Market value of
securities............. 37,312,347 184,455,886 376,058,799
Cash.................... 988 976 0
Receivable for
securities sold........ 291,689 0 423,289
Receivable for Fund
shares sold............ 788 617,447 507,001
Interest receivable..... 273,722 2,500,248 5,371,617
Unrealized gains on
forward foreign
currency exchange
contracts.............. 0 242,940 0
Prepaid expenses and
other assets........... 5,704 3,369 114,415
- ------------------------------------------------------------------------------------
Total assets.......... 37,885,238 187,820,866 382,475,121
- ------------------------------------------------------------------------------------
Liabilities
Distributions payable... 58,274 315,789 824,560
Payable for securities
purchased.............. 0 4,637,477 0
Payable for Fund shares
redeemed............... 91,609 250,146 3,063,641
Payable for securities
on loan................ 0 4,120,580 0
Advisory fee payable.... 8,823 91,060 157,035
Distribution Plan
expenses payable....... 21,006 54,195 8,925
Due to other related
parties................ 0 0 7,912
Accrued expenses and
other liabilities...... 10,815 53,258 197,240
- ------------------------------------------------------------------------------------
Total liabilities..... 190,527 9,522,505 4,259,313
- ------------------------------------------------------------------------------------
Net assets............... $37,694,711 $178,298,361 $378,215,808
- ------------------------------------------------------------------------------------
Net assets represented by
Paid-in capital......... $44,893,965 $198,306,946 $402,203,175
Undistributed
(overdistributed) net
investment income...... (59,566) 959,253 (460,508)
Accumulated net
realized losses on
securities and foreign
currency related
transactions........... (6,952,968) (16,664,461) (19,145,824)
Net unrealized gains or
losses on securities
and foreign currency
related transactions... (186,720) (4,303,377) (4,381,035)
- ------------------------------------------------------------------------------------
Total net assets......... $37,694,711 $178,298,361 $378,215,808
- ------------------------------------------------------------------------------------
Net assets consists of
Class A................. $18,148,805 $107,713,976 $ 19,127,186
Class B................. 15,618,016 11,100,248 22,553,329
Class C................. 3,927,890 4,718,490 1,360,369
Class Y................. 0 54,765,647 335,174,924
- ------------------------------------------------------------------------------------
Total net assets......... $37,694,711 $178,298,361 $378,215,808
- ------------------------------------------------------------------------------------
Shares outstanding
Class A................. 1,881,529 12,436,793 1,975,630
Class B................. 1,619,108 1,281,661 2,324,621
Class C................. 407,215 544,805 140,222
Class Y................. 0 6,323,383 34,618,693
- ------------------------------------------------------------------------------------
Net asset value per share
Class A................. $ 9.65 $ 8.66 $ 9.68
- ------------------------------------------------------------------------------------
Class A--Offering price
(based on sales charge
of 3.25%).............. $ 9.97 $ 8.95 $ 10.01
- ------------------------------------------------------------------------------------
Class B................. $ 9.65 $ 8.66 $ 9.70
- ------------------------------------------------------------------------------------
Class C................. $ 9.65 $ 8.66 $ 9.70
- ------------------------------------------------------------------------------------
Class Y................. 0 $ 8.66 $ 9.68
- ------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
27
<PAGE>
EVERGREEN
Short and Intermediate Term Bond Funds
Statements of Operations
Year Ended June 30, 1999
<TABLE>
<CAPTION>
Capital Preservation Intermediate Bond Short Intermediate
Fund Fund Fund
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income
Interest................ $2,743,522 $13,594,176 $26,202,792
- -------------------------------------------------------------------------------------
Expenses
Advisory fee............ 270,118 1,196,312 1,986,762
Distribution Plan
expenses............... 286,987 461,574 272,045
Administrative services
fees................... 6,400 30,344 103,519
Transfer agent fee...... 70,750 416,727 505,452
Trustees' fees and
expenses............... 482 5,986 8,013
Printing and postage
expenses............... 10,344 25,825 29,129
Custodian fee........... 12,107 91,559 95,266
Registration and filing
fees................... 33,921 146,598 106,686
Professional fees....... 22,484 20,707 18,140
Other................... 2,119 4,509 9,029
- -------------------------------------------------------------------------------------
Total expenses......... 715,712 2,400,141 3,134,041
Less: Fee credits...... (1,720) (11,652) (20,012)
Fee waivers.......... (147,381) (293,547) 0
- -------------------------------------------------------------------------------------
Net expenses........... 566,611 2,094,942 3,114,029
- -------------------------------------------------------------------------------------
Net investment income... 2,176,911 11,499,234 23,088,763
- -------------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions
Net realized gains or
losses on:
Securities............. (156,057) (1,386,233) (2,451,611)
Foreign currency
related transactions.. 0 480,542 0
- -------------------------------------------------------------------------------------
Net realized gains or
losses on securities
and foreign currency
related transactions... (156,057) (905,691) (2,451,611)
- -------------------------------------------------------------------------------------
Net change in unrealized
gains or losses on
securities and foreign
currency related
transactions........... (253,950) (7,880,924) (6,391,909)
- -------------------------------------------------------------------------------------
Net realized and
unrealized losses on
securities and foreign
currency related
transactions........... (410,007) (8,786,615) (8,843,520)
- -------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations............. $1,766,904 $ 2,712,619 $14,245,243
- -------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
28
<PAGE>
EVERGREEN
Short and Intermediate Term Bond Funds
Statements of Changes in Net Assets
Year Ended June 30, 1999
<TABLE>
<CAPTION>
Capital Preservation Intermediate Bond Short Intermediate
Fund Fund Fund
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income... $ 2,176,911 $ 11,499,234 $ 23,088,763
Net realized gains or
losses on securities
and foreign currency
related transactions... (156,057) (905,691) (2,451,611)
Net change in
unrealized gains or
losses on securities
and foreign currency
related transactions... (253,950) (7,880,924) (6,391,909)
- ------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations............ 1,766,904 2,712,619 14,245,243
- ------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class A................ (992,050) (7,002,863) (1,112,528)
Class B................ (989,694) (581,636) (1,161,465)
Class C................ (195,983) (269,865) (69,077)
Class Y................ 0 (3,653,526) (20,759,994)
- ------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (2,177,727) (11,507,890) (23,103,064)
- ------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold................... 19,176,521 38,089,130 156,664,560
Net asset value of
shares issued in
reinvestment of
distributions.......... 1,552,138 7,492,305 13,089,270
Payment for shares
redeemed............... (30,673,318) (62,133,153) (171,695,268)
- ------------------------------------------------------------------------------------
Net decrease in net
assets resulting from
capital share
transactions.......... (9,944,659) (16,551,718) (1,941,438)
- ------------------------------------------------------------------------------------
Total decrease in net
assets............... (10,355,482) (25,346,989) (10,799,259)
Net assets
Beginning of period..... 48,050,193 203,645,350 389,015,067
- ------------------------------------------------------------------------------------
End of period........... $ 37,694,711 $178,298,361 $ 378,215,808
- ------------------------------------------------------------------------------------
Undistributed
(overdistributed) net
investment income...... $ (59,566) $ 959,253 $ (460,508)
- ------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
29
<PAGE>
EVERGREEN
Short and Intermediate Term Bond Funds
Statements of Changes in Net Assets
Year Ended June 30, 1998
<TABLE>
<CAPTION>
Capital Preservation Intermediate Bond Short Intermediate
Fund Fund Fund
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income... $ 2,568,924 $ 5,462,136 $ 24,446,841
Net realized gains or
losses on securities
and foreign currency
related transactions... 162,335 93,422 (1,189,957)
Net change in unrealized
gains or losses on
securities and foreign
currency related
transactions........... (474,778) 518,784 3,858,427
- -------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations............ 2,256,481 6,074,342 27,115,311
- -------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class A................ (887,540) (2,960,648) (1,003,205)
Class B................ (1,474,326) (654,821) (1,108,182)
Class C................ (207,058) (410,056) (53,200)
Class Y................ 0 (1,652,096) (22,216,773)
- -------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (2,568,924) (5,677,621) (24,381,360)
- -------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold................... 19,443,143 24,366,074 140,518,437
Net asset value of
shares issued in
reinvestment of
distributions.......... 1,756,964 3,396,992 13,099,071
Payment for shares
redeemed............... (25,657,158) (36,461,819) (166,012,044)
Net asset value of
shares issued in
acquisition of:
Blanchard Short-Term
Flexible Income Fund.. 0 116,766,103 0
Evergreen Intermediate
Term Bond Fund II..... 0 66,213,695 0
- -------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
share transactions.... (4,457,051) 174,281,045 (12,394,536)
- -------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............... (4,769,494) 174,677,766 (9,660,585)
Net assets
Beginning of period..... 52,819,687 28,967,584 398,675,652
- -------------------------------------------------------------------------------------
End of period........... $ 48,050,193 $203,645,350 $ 389,015,067
- -------------------------------------------------------------------------------------
Overdistributed net
investment income...... $ (81,569) $ (381,370) $ (199,106)
- -------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
30
<PAGE>
Combined Notes to Financial Statements
1. ORGANIZATION
The Evergreen Short and Intermediate Bond Funds consist of Evergreen Capital
Preservation and Income Fund ("Capital Preservation Fund"), Evergreen Interme-
diate Term Bond Fund ("Intermediate Bond Fund") and Evergreen Short Intermedi-
ate Bond Fund ("Short Intermediate Fund"), (collectively, the "Funds"). Each
Fund is a diversified series of Evergreen Fixed Income Trust (the "Trust"), a
Delaware business trust organized on September 18, 1997. The Trust is an open-
end management investment company registered under the Investment Company Act
of 1940, as amended (the "1940 Act").
The Funds offer Class A, Class B, Class C and/or Class Y shares. Class A shares
are sold with a maximum front-end sales charge of 3.25%. Class B and Class C
shares are sold without a front-end sales charge, but pay a higher ongoing dis-
tribution fee than Class A. Class B shares are sold subject to a contingent de-
ferred sales charge that is payable upon redemption and decreases depending on
how long the shares have been held. Class B shares purchased after January 1,
1997 will automatically convert to Class A shares after seven years. Class B
shares purchased prior to January 1, 1997 retain their existing conversion
rights. Class C shares are sold subject to a contingent deferred sales charge
payable on shares redeemed within one year after the month of purchase. Class Y
shares are sold at net asset value and are not subject to contingent deferred
sales charges or distribution fees. Class Y shares are sold only to investment
advisory clients of First Union Corporation ("First Union") and its affiliates,
certain institutional investors or Class Y shareholders of record of certain
other funds managed by First Union and its affiliates as of December 30, 1994.
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 and other fixed-income securities are valued at prices provided by
an independent pricing service. In determining a price for normal institution-
al-size transactions, the pricing service uses methods based on market transac-
tions for comparable securities and analysis of various relationships between
similar securities which are generally recognized by institutional traders. Se-
curities for which valuations are not available from an independent 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 valua-
tions are not readily available from an independent pricing service (including
restricted securities) are valued at fair value as determined in good faith ac-
cording to procedures established by the Board of Trustees.
Short-term investments with remaining maturities of 60 days or less are carried
at amortized cost, which approximates market value.
B. Repurchase Agreements
Each Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held in a segregated account by the custodian on
the Fund's behalf. Each Fund monitors the adequacy of the collateral daily and
will require the seller to provide additional collateral in the event the mar-
ket value of the securities pledged falls below the carrying value of the re-
purchase agreement, including accrued interest. Each Fund will only enter into
repurchase agreements with banks and other financial institutions, which are
deemed by the investment advisor to be creditworthy pursuant to guidelines es-
tablished by the Board of Trustees.
Pursuant to an exemptive order issued by the Securities and Exchange Commis-
sion, the Capital Preservation Fund and Intermediate Bond Fund, along with cer-
tain other funds managed by Evergreen Investment
31
<PAGE>
Combined Notes to Financial Statements(continued)
Management Company ("EIMC"), (formerly Keystone Investment Management Company),
may transfer uninvested cash balances into a joint trading account. These bal-
ances are invested in one or more repurchase agreements that are fully collat-
eralized by U.S. Treasury and/or federal agency obligations.
C. Reverse Repurchase Agreements
To obtain short-term financing, the Capital Preservation Fund and Intermediate
Bond Fund may enter into reverse repurchase agreements with qualified third-
party broker-dealers. Interest on the value of reverse repurchase agreements is
based upon competitive market rates at the time of issuance. At the time the
Fund enters into a reverse repurchase agreement, it will establish and maintain
a segregated account with the custodian containing qualifying assets having a
value not less than the repurchase price, including accrued interest. If the
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. 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. The
Funds' 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
collateralized by cash, letters of credit or U.S. Government securities that
are maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities, including accrued interest. The Fund
monitors the adequacy of the collateral daily and will require 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 accruing thereon, and the
Fund may invest any cash collateral received in portfolio securities, thereby
increasing its return. A Fund will have the right to call any such loan and ob-
tain 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 connec-
tion with such loans.
32
<PAGE>
Combined Notes to Financial Statements(continued)
G. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts.
H. Federal Taxes
The Funds qualify as regulated investment companies under the Internal Revenue
Code of 1986, as amended (the "Code"). As such, the Funds will not incur any
federal income tax liability since they are expected to distribute all of their
net investment company taxable income and net capital gains, if any, to their
shareholders. The Funds also intend to avoid any excise tax liability by making
the required distributions under the Code. Accordingly, no provision for fed-
eral taxes is required. To the extent that realized capital gains can be offset
by capital loss carryforwards, it is each Fund's policy not to distribute such
gains.
I. Distributions
Distributions from net investment income for the Funds are declared daily and
paid monthly. Distributions from net realized capital gains, if any, are paid
at least annually. Distributions to shareholders are recorded at the close of
business on the ex-dividend date.
Income and capital gains distributions to shareholders are determined in accor-
dance with income tax regulations, which may differ from generally accepted ac-
counting principles. The differences between financial statement amounts avail-
able for distributions and distributions made in accordance with income tax
regulations are primarily due to differing treatment for mortgage paydown gains
or losses and certain repurchases of securities sold at a loss.
Certain distributions paid during previous years have been reclassified to con-
form to current year presentation.
J. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the rela-
tive net assets of each class. Currently, class specific expenses are limited
to expenses incurred under the Distribution Plans for each class.
3. INVESTMENT ADVISORY AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
EIMC, a subsidiary of First Union, is the investment advisor for the Capital
Preservation Fund and Intermediate Bond Fund. In return for providing invest-
ment management and administrative services to the Capital Preservation Fund
and Intermediate Bond Fund, the Funds pays EIMC a management fee that is calcu-
lated daily and paid monthly. The management fee is computed at an annual rate
of 2.00% of each Fund's gross investment income plus an amount determined by
applying percentage rates, starting at 0.50% and declining to 0.25% per annum
as net assets increase, to the average daily net assets of each Fund.
First Union National Bank, a subsidiary of First Union, serves as the invest-
ment advisor to the Short Intermediate Fund and is paid a management fee that
is calculated daily and paid monthly at an annual rate of 0.50% of the Fund's
average daily net assets.
During the year ended June 30, 1999, the amount of investment advisory fees
waived by each Fund and the impact on each Fund's expense ratio represented as
a percentage of its average daily net assets were as follows:
<TABLE>
<CAPTION>
Fees % of Average
Waived Net Assets
<S> <C> <C>
-------------
Capital Preservation Fund..................... $147,381 0.34%
Intermediate Bond Fund........................ 293,547 0.15%
</TABLE>
33
<PAGE>
Combined Notes to Financial Statements(continued)
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.
For the Short Intermediate Fund, the administrator and sub-administrator is en-
titled to an annual fee based on the average daily net assets of the funds ad-
ministered by EIS for which First Union or its investment advisory subsidiaries
are also the investment advisors. The administration fee is calculated by ap-
plying percentage rates, which start at 0.05% and decline to 0.01% per annum as
net assets increase, to the average daily net assets of the Fund. The sub-ad-
ministration fee is calculated by applying percentage rates, which start at
0.01% and decline to 0.004% per annum as net assets increase, to the average
daily net assets of the Fund.
During the year ended June 30, 1999, the Short Intermediate Fund paid or ac-
crued $82,285 and $21,234 for administrative and sub-administrative services,
respectively.
During the year ended June 30, 1999, the Capital Preservation Fund and Interme-
diate Bond Fund reimbursed EIMC for certain administration and accounting ex-
penses as follows:
<TABLE>
<S> <C>
Capital Preservation Fund.................................... $ 6,400
Intermediate Bond Fund....................................... 30,344
</TABLE>
For the Capital Preservation Fund and Intermediate Bond Fund, the sub-adminis-
tration fee is paid by the investment advisor and is not a fund expense.
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 each class of shares, except Class Y. 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". Each class, except
Class Y, currently pays a service fee equal to 0.25% of the average daily net
assets of the class. Class B and Class C also pay distribution fees equal to
0.75% of the average daily net assets of the class. Distribution Plan expenses
are calculated daily and paid at least quarterly.
During the year ended June 30, 1999, amounts paid or accrued to EDI pursuant to
each Fund's Class A, Class B and Class C Distribution Plans were as follows:
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
-------------------------
Capital Preservation Fund................ $ 36,258 $209,176 $41,553
Intermediate Bond Fund................... 296,312 112,885 52,377
Short Intermediate Fund.................. 19,253 238,613 14,179
</TABLE>
With respect to Class B and Class C shares, the principal underwriter may pay
distribution fees greater than the allowable annual amounts each Fund is per-
mitted to pay under the Distribution Plans.
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
The Intermediate Bond Fund was organized for the purpose of combining the as-
sets of the Keystone Intermediate Term Bond Fund and Evergreen Intermediate
Term Bond Fund II (formerly, the Evergreen Intermediate Term Bond Fund).
34
<PAGE>
Combined Notes to Financial Statements(continued)
On January 21, 1998, prior to the combination of assets into Intermediate Bond
Fund, Evergreen Intermediate Term Bond Fund II transferred substantially all of
its net assets related to its Class Y shares to Evergreen Select Core Bond
Fund, an institutional fund, through a redemption-in-kind in the amount of ap-
proximately $108,000,000.
Effective on the close of business on January 23, 1998, Intermediate Bond Fund
acquired all the remaining assets and assumed certain liabilities of Evergreen
Intermediate Term Bond Fund II in exchange for Class A, Class B, Class C and
Class Y shares of the Intermediate Bond Fund. Also, the Intermediate Bond Fund
acquired all the assets and assumed certain liabilities of Keystone Intermedi-
ate Term Bond Fund in exchange for Class A, Class B and Class C shares of In-
termediate Bond Fund.
Effective on the close of business on February 28, 1998, Intermediate Bond Fund
acquired all of the assets and assumed certain liabilities of Blanchard Short-
Term Flexible Income Fund, in an exchange for Class A shares of Intermediate
Bond Fund.
These acquisitions were accomplished by a tax-free exchange of the respective
shares of each Fund. The value of assets acquired, number of shares issued,
unrealized appreciation acquired and the aggregate net assets of each Fund im-
mediately after the acquisition are as follows:
<TABLE>
<CAPTION>
Value of Net Number of Unrealized Net Assets
Acquiring Fund Acquired Fund Assets Acquired Shares Issued Appreciation After Acquisition
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Intermediate Bond
Fund............... Evergreen Intermediate Term Bond Fund II $ 66,213,695 7,287,484 $ 616,992 $ 93,235,040
Intermediate Bond
Fund............... Blanchard Short-Term Flexible Income Fund 116,766,103 12,856,531 2,511,574 211,601,433
</TABLE>
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 A, Class B, Class C and/or Class Y. Transactions in shares
of the Funds were as follows:
Capital Preservation Fund
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------------------ ------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............... 1,254,468 $ 12,119,775 1,684,678 $ 16,480,670
Shares issued in
reinvestment of
distributions............ 73,376 709,511 62,340 609,698
Shares redeemed........... (1,297,623) (12,552,673) (1,502,907) (14,712,976)
- ------------------------------------------------------------------------------
Net increase.............. 30,221 276,613 244,111 2,377,392
- ------------------------------------------------------------------------------
Class B
Shares sold............... 501,298 4,841,798 212,637 2,082,936
Shares issued in
reinvestment of
distributions............ 69,855 676,249 99,464 974,126
Shares redeemed........... (1,626,086) (15,731,870) (998,736) (9,785,685)
- ------------------------------------------------------------------------------
Net decrease.............. (1,054,933) (10,213,823) (686,635) (6,728,623)
- ------------------------------------------------------------------------------
Class C
Shares sold............... 229,112 2,214,948 89,775 879,537
Shares issued in
reinvestment of
distributions............ 17,206 166,378 17,696 173,140
Shares redeemed........... (247,073) (2,388,775) (118,346) (1,158,497)
- ------------------------------------------------------------------------------
Net decrease.............. (755) $ (7,449) (10,875) $ (105,820)
- ------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
Combined Notes to Financial Statements(continued)
Intermediate Bond Fund
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------------------ ------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............... 2,341,785 $ 21,107,529 955,523 $ 8,660,565
Shares issued in
acquisition of:
Evergreen Intermediate
Term Bond Fund II........ 0 0 349,314 3,173,762
Blanchard Short-Term
Flexible Income Fund..... 0 0 12,856,531 116,766,103
Shares issued in
reinvestment of
distributions............ 656,382 5,911,817 263,979 2,392,256
Shares redeemed........... (4,185,680) (37,633,504) (1,958,558) (17,753,140)
- --------------------------------------------------------------------------------
Net increase (decrease)... (1,187,513) $(10,614,158) 12,466,789 $113,239,546
- --------------------------------------------------------------------------------
Class B
Shares sold............... 487,096 $ 4,402,183 150,439 $ 1,368,742
Shares issued in
acquisition of Evergreen
Intermediate Term Bond
Fund II.................. 0 0 129,724 1,180,255
Shares issued in
reinvestment of
distributions............ 36,260 326,694 36,150 328,759
Shares redeemed........... (425,314) (3,846,878) (403,520) (3,667,231)
- --------------------------------------------------------------------------------
Net increase (decrease)... 98,042 $ 881,999 (87,207) $ (789,475)
- --------------------------------------------------------------------------------
Class C
Shares sold............... 110,653 $ 1,004,240 243,096 $ 2,208,772
Shares issued in
acquisition of Evergreen
Intermediate Term Bond
Fund II.................. 0 0 5,677 51,630
Shares issued in
reinvestment of
distributions............ 20,784 187,535 30,163 274,457
Shares redeemed........... (184,849) (1,673,579) (492,378) (4,464,809)
- --------------------------------------------------------------------------------
Net decrease.............. (53,412) $ (481,804) (213,442) $ (1,929,950)
- --------------------------------------------------------------------------------
<CAPTION>
January 26,1998
(Commencement of
Year Ended Class Operations) to
June 30, 1999 June 30, 1998
------------------------ ------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class Y
Shares sold............... 1,284,724 $ 11,575,178 1,335,378 $ 12,127,995
Shares issued in
acquisition of Evergreen
Intermediate Term Bond
Fund II.................. 0 0 6,802,769 61,808,048
Shares issued in
reinvestment of
distributions............ 118,332 1,066,259 44,309 401,520
Shares redeemed........... (2,096,933) (18,979,192) (1,165,196) (10,576,639)
- --------------------------------------------------------------------------------
Net increase (decrease)... (693,877) $ (6,337,755) 7,017,260 $ 63,760,924
- --------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
Combined Notes to Financial Statements(continued)
Short Intermediate Fund
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
-------------------------- --------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............. 1,565,164 $ 15,513,691 500,922 $ 4,955,344
Shares issued in
reinvestment of
distributions.......... 85,182 844,657 76,079 752,038
Shares redeemed......... (1,377,037) (13,580,265) (674,862) (6,681,274)
- --------------------------------------------------------------------------------
Net increase
(decrease)............. 273,309 $ 2,778,083 (97,861) $ (973,892)
- --------------------------------------------------------------------------------
Class B
Shares sold............. 1,844,479 $ 18,346,490 1,023,010 $ 10,138,464
Shares issued in
reinvestment of
distributions.......... 83,118 826,279 78,547 778,080
Shares redeemed......... (1,890,855) (18,756,863) (1,071,136) (10,623,170)
- --------------------------------------------------------------------------------
Net increase............ 36,742 $ 415,906 30,421 $ 293,374
- --------------------------------------------------------------------------------
Class C
Shares sold............. 65,400 $ 652,800 64,686 $ 642,818
Shares issued in
reinvestment of
distributions.......... 6,017 59,815 4,490 44,480
Shares redeemed......... (46,468) (460,730) (58,395) (579,321)
- --------------------------------------------------------------------------------
Net increase............ 24,949 $ 251,885 10,781 $ 107,977
- --------------------------------------------------------------------------------
Class Y
Shares sold............. 12,293,584 $ 122,151,579 12,608,737 $ 124,781,811
Shares issued in
reinvestment of
distributions.......... 1,145,478 11,358,519 1,165,985 11,524,473
Shares redeemed......... (14,015,864) (138,897,410) (14,971,442) (148,128,279)
- --------------------------------------------------------------------------------
Net decrease............ (576,802) $ (5,387,312) (1,196,720) $ (11,821,995)
- --------------------------------------------------------------------------------
</TABLE>
7. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the year ended June 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>
Capital Preservation
Fund................... $ 15,398,737 $ 1,627,469 $ 22,115,467 $ 4,933,889
Intermediate Bond Fund.. 156,553,374 161,978,984 156,578,260 184,149,304
Short Intermediate
Fund................... 143,335,404 52,167,556 113,305,257 76,183,400
</TABLE>
During the year ended June 30, 1999, the following Funds entered into reverse
repurchase agreements as follows:
<TABLE>
<CAPTION>
Average Weighted
Daily Average Maximum
Balance Interest Amount
Outstanding Rate Outstanding*
----------- -------- ------------
<S> <C> <C> <C>
Capital Preservation Fund..................... $ 402,895 5.52% $ 500,380
Intermediate Bond Fund........................ 1,016,524 5.48% 5,302,459
</TABLE>
- -------
* The Maximum Amount Outstanding under reverse repurchase agreements includes
accrued interest.
At June 30, 1999, there were no reverse repurchase agreements outstanding.
The Intermediate Bond Fund loaned securities during the year ended June 30,
1999 to certain brokers who paid the Fund a negotiated lenders' fee. These fees
are included in interest income. At June 30, 1999, the value of securities on
loan and the value of collateral amounted to $4,041,106 and $4,120,580, respec-
tively. During the year ended June 30, 1999, the Intermediate Bond Fund earned
$8,758 in income from securities lending.
37
<PAGE>
Combined Notes to Financial Statements(continued)
On June 30, 1999, the composition of unrealized appreciation and depreciation
on securities based on the aggregate cost of securities for federal income tax
purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Net Unrealized
Tax Cost Appreciation Depreciation Depreciation
<S> <C> <C> <C> <C>
---------------------------------------------------
Capital
Preservation
Fund........... $ 37,510,779 $ 77,528 $ (275,960) $ (198,432)
Intermediate
Bond Fund...... 185,192,183 1,089,377 (5,946,254) (4,856,877)
Short
Intermediate
Fund........... 380,507,963 2,301,212 (6,750,376) (4,449,164)
</TABLE>
As of June 30, 1999, the Funds had capital loss carryovers for federal income
tax purposes as follows:
<TABLE>
<CAPTION>
Capital Expiration
Loss -----------------------------------------------------------------------------------
Carryover 2000 2001 2002 2003 2004 2005 2006 2007
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Preservation
Fund.................. $ 6,812,000 0 $5,685,000 $ 197,000 $642,000 $ 254,000 0 0 $ 34,000
Intermediate Bond
Fund.................. 14,296,000 $417,000 2,688,000 8,725,000 907,000 358,000 $1,201,000 0 0
Short Intermediate
Fund.................. 18,087,000 0 0 6,021,000 0 4,049,000 4,374,000 $1,743,000 1,901,000
</TABLE>
The capital loss carryovers include $2,185,000 and $11,560,000 that were ac-
quired through fund mergers by Capital Preservation Fund and Intermediate Bond
Fund, respectively. The Funds' ability to offset future realized gains against
these capital loss carryovers is limited in accordance with Federal Tax regula-
tions.
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 federal income tax purposes.
Capital Preservation Fund, Intermediate Bond Fund and Short Intermediate Fund
incurred and have elected to defer $128,917, $1,813,498 and $991,090 of such
post-October losses, respectively.
8. 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 % of Average
Credits Received Net Assets
------------------------------
<S> <C> <C>
Capital Preservation Fund............. $ 1,720 0.00%
Intermediate Bond Fund................ 11,652 0.01%
Short Intermediate Fund............... 20,012 0.01%
</TABLE>
9. 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 recorded 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.
10. FINANCING AGREEMENTS
Certain Evergreen Funds, State Street Bank and Trust Company ("State Street")
and a group of banks (collectively, the "Banks") entered into a financing
agreement dated December 22, 1997, as amended on November 20, 1998. Under this
agreement, the Banks provided an unsecured credit facility in the aggregate
amount of $400 million ($275 million committed and $125 million uncommitted).
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
38
<PAGE>
Combined Notes to Financial Statements (continued)
under this facility bear interest at 0.50% per annum above the Federal Funds
rate. A commitment fee of 0.065% per annum will be incurred on the unused por-
tion of the committed facility, which was allocated to all funds. For its as-
sistance in arranging this financing agreement, the Capital Market Group of
First Union was paid a one-time arrangement fee of $27,500. State Street serves
as administrative agent for the Banks, and as administrative agent is entitled
to a fee of $20,000 per annum which is allocated to all of the funds.
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 provide an unsecured credit facility in the aggre-
gate amount of $150 million ($125 million committed and $25 million uncommit-
ted). The remaining terms and conditions of the agreement are unaffected.
During the year ended June 30, 1999, the Funds had no borrowings under these
agreements.
39
<PAGE>
Independent Auditors' Report
The Trustees and Shareholders
Evergreen Fixed Income Trust
We have audited the accompanying statements of assets and liabilities, includ-
ing the schedules of investments of Evergreen Capital Preservation and Income
Fund, Evergreen Intermediate Term Bond Fund and Evergreen Short Intermediate
Bond Fund, portfolios of Evergreen Fixed Income Trust, as of June 30, 1999, and
the related statements of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period then ended
and financial highlights for each of the years or periods described on pages 12
to 17. These financial statements and financial highlights are the responsibil-
ity of the Trust's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit 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 June
30, 1999 by correspondence with the custodian and brokers. An audit also in-
cludes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presenta-
tion. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Ever-
green Capital Preservation and Income Fund, Evergreen Intermediate Term Bond
Fund and Evergreen Short Intermediate Bond Fund as of June 30, 1999, the re-
sults 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.
[KPMG SIGNATURE APPEARS HERE]
Boston, Massachusetts
August 6, 1999
40
<PAGE>
Other Information
YEAR 2000 (UNAUDITED)
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.
41
<PAGE>
Evergreen Funds
Money Market
Treasury Money Market Fund
Money Market Fund
Municipal Money Market Fund
Florida Municipal Money Market Fund
New Jersey Municipal Money Market Fund
Pennsylvania Municipal Money Market Fund
Tax Advantaged
Short Intermediate Municipal Fund
High Grade Municipal Bond Fund
Municipal Bond Fund
Connecticut Municipal Bond Fund
Florida Municipal Bond Fund
Florida High Income Municipal Bond Fund
Georgia Municipal Bond Fund
Maryland Municipal Bond Fund
New Jersey Municipal Bond Fund
North Carolina Municipal Bond Fund
Pennsylvania Municipal Bond Fund
South Carolina Municipal Bond Fund
Virginia Municipal Bond Fund
Income
Capital Preservation and Income Fund
Short-Intermediate Bond Fund
Intermediate Term Bond Fund
U.S. Government Fund
Diversified Bond Fund
Strategic Income Fund
High Yield Bond Fund
Balanced
Balanced Fund
Tax Strategic Foundation Fund
Foundation Fund
Growth & Income
Utility Fund
Income and Growth Fund
Equity Income Fund
Value Fund
Blue Chip Fund
Growth and Income Fund
Small Cap Value Fund
Domestic Growth
Tax Strategic Equity Fund
Strategic Growth Fund
Stock Selector Fund
Evergreen Fund
Masters Fund
Omega Fund
Small Company Growth Fund
Aggressive Growth Fund
Global International
Global Leaders Fund
International Growth Fund
Global Opportunities Fund
Precious Metals Fund
Emerging Markets Growth Fund
Latin America Fund
Express Line
800.346.3858
Investor Services
800.343.2898
www.evergreen-funds.com
53732 541496 08/99
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