<PAGE>
Semiannual Report
as of October 31, 1999
EVERGREEN LONG TERM BOND FUNDS
[LOGO OF EVERGREEN FUND]
<PAGE>
Table of Contents
Letter to Shareholders .................................................. 1
Evergreen Diversified Bond Fund
Fund at a Glance ..................................................... 2
Portfolio Manager Interview .......................................... 3
Evergreen High Yield Bond Fund
Fund at a Glance ..................................................... 5
Portfolio Manager Interview .......................................... 6
Evergreen Strategic Income Fund
Fund at a Glance ..................................................... 8
Portfolio Manager Interview .......................................... 9
Evergreen U.S. Government Fund
Fund at a Glance ..................................................... 12
Portfolio Manager Interview .......................................... 13
Financial Highlights
Evergreen Diversified Bond Fund ...................................... 15
Evergreen High Yield Bond Fund ....................................... 17
Evergreen Strategic Income Fund ...................................... 19
Evergreen U.S. Government Fund ....................................... 21
Schedule of Investments
Evergreen Diversified Bond Fund ...................................... 23
Evergreen High Yield Bond Fund ....................................... 28
Evergreen Strategic Income Fund ...................................... 33
Evergreen U.S. Government Fund ....................................... 38
Statements of Assets and Liabilities .................................... 40
Statements of Operations ................................................ 41
Statements of Changes in Net Assets ..................................... 42
Combined Notes to Financial
Statements .............................................................. 44
Evergreen Funds
Evergreen Funds is one of the nation's fastest growing investment companies with
approximately $80 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 semiannual 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
----------------------
December 1999
[PHOTO]
William M. Ennis
President and CEO
Dear Shareholders,
We are pleased to provide the Evergreen Long Term Bond Funds semiannual report,
which covers the six-month period ended October 31, 1999.
Uncertainty over Interest Rates Influences the Markets
The last year has been a difficult environment for fixed-income investors. After
the Federal Reserve Board lowered interest rates three times in 1998 in an
attempt to insulate the U.S. economy from global economic turmoil, it reversed
course halfway through 1999 and raised interest rates twice during the fiscal
period because of concerns about an overheated U.S. economy. Amidst the
volatility, the yield on the bellwether 30-year Treasury bond rose from a low of
4.72% in October of 1998 to 6.16% by October 31, 1999, the end of the fiscal
period.
The Federal Reserve Bank's "tightening bias" leads many to anticipate further
interest rate increases in order to stem even the slightest inflationary
pressure. We believe that the economy is still fundamentally strong, and that
inflation will stay contained, producing only moderate upward pressure on
interest rates. We believe bonds are relatively attractive over the long term
compared to other asset classes, particularly because "real" interest rates are
high by historical standards.
Evergreen Funds is Ready for
the Year 2000/1/
We have been addressing the Year 2000 challenge since February of 1996 and have
committed the time, resources and people necessary to prepare for any
ramifications from the millennium bug. Today, we are confident that our
preparations will enable us to continue to deliver the high-quality Evergreen
products and services on which our shareholders rely. In addition, Evergreen
portfolio managers have placed great emphasis on monitoring portfolios for Y2K
readiness.
We believe that sound investing is about taking steps to meet your long-term
financial needs and goals. We remind you to take advantage of your financial
advisor's expertise to develop and refine a financial plan that will enable you
to meet your objectives. Evergreen Funds offers a broad mix of stock, bond and
money market funds that should make it simple for you to choose the most
appropriate for your portfolio.
We would like to thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/ William M. Ennis
William M. Ennis
President and CEO
Evergreen Investment Company, Inc.
/1/ The information above constitutes Year 2000 readiness disclosure.
1
<PAGE>
EVERGREEN
Diversified Bond Fund
Fund at a Glance as of October 31, 1999
Portfolio
Management
- ----------
[PHOTO]
Gary E. Pzegeo, CFA
Tenure: January 1999
CURRENT INVESTMENT STYLE/1/
[GRAPHIC]
Morningstar's Style Box is based on a portfolio date as of 10/31/1999.
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.
/2/Past performance is no guarantee of future results. The investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than original cost. The performance of each class may
vary based on differences in loads, fees and expenses paid by the shareholders
investing in each class.
Historical performance shown for Classes A, C, and Y prior to their inception is
based on the performance of Class B, the original class offered. These
historical returns for Classes A and Y have been adjusted to eliminate the
effect of the higher 12b-1 fees applicable to Class B. The 12b-1 fees for Class
A are 0.25%, 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 not been eliminated, returns would have been
lower.
Funds that invest in high yield, lower-rated bonds may contain more risk due to
the increased possibility of default.
Foreign investments may contain more risk due to the inherent risks associated
with changing political climates, foreign market instability and foreign
currency fluctuations.
PERFORMANCE AND RETURNS/2/
Portfolio Inception Date 9/11/1935 Class A Class B Class C Class Y
Class Inception Date 1/20/1998 9/11/1935 4/7/1998 2/11/1998
................................................................................
Average Annual Returns*
................................................................................
6 months with sales charge -7.11% -7.57% -3.80% n/a
................................................................................
6 months w/o sales charge -2.49% -2.85% -2.85% -2.36%
................................................................................
1 year with sales charge -6.17% -6.84% -3.15% n/a
................................................................................
1 year w/o sales charge -1.47% -2.21% -2.23% -1.23%
................................................................................
5 years 6.28% 6.22% 6.52% 7.43%
................................................................................
10 years 6.73% 6.36% 6.34% 7.43%
................................................................................
Since Portfolio Inception 6.98% 6.82% 6.81% 7.12%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
................................................................................
Front End CDSC CDSC
................................................................................
30-day SEC yield 6.13% 5.69% 5.69% 6.69%
................................................................................
6-month distributions
per share $0.50 $0.44 $0.44 $0.52
................................................................................
* Adjusted for maximum applicable sales charge.
LONG TERM GROWTH
[LINE GRAPH]
Evergreen
Lehman Brothers Diversified
CPI Aggregate Bond B
--- --------------- -----------
10/31/89 10,000 10,000 10,000
10/31/90 10,629 10,631 9,440
10/31/91 10,939 12,312 11,197
10/31/92 11,290 13,523 12,518
10/31/93 11,600 15,128 14,406
10/31/94 11,903 14,573 13,500
10/31/95 12,237 16,853 15,124
10/31/96 12,604 17,839 16,128
10/31/97 12,866 19,430 17,867
10/31/98 13,057 21,238 18,949
10/31/99 13,432 21,351 18,526
Comparison of a $10,000 investment in Evergreen Diversified Bond Fund, Class B
shares/2/, versus a similar investment in the Lehman Brothers Aggregate Bond
Index (LBABI) and the Consumer Price Index (CPI).
The Lehman Brothers Aggregate Bond Index is a broad-based, unmanaged,
fixed-income index of U.S. government, corporate and mortgage-backed securities.
It represents the price change and coupon income of several thousand securities
of various credit qualities and maturities.
The LBABI is an unmanaged index and does not include transaction costs
associated with buying and selling securities or any management fees. The CPI is
a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
2
<PAGE>
EVERGREEN
Diversified Bond Fund
Portfolio Manager Interview
How did Evergreen Diversified Bond Fund perform over the past six months?
Evergreen Diversified Bond Fund Class B shares returned -2.85% for the six-month
period ended October 31, 1999. Performance is before deduction of any applicable
sales charges. In comparison, the average return of the BBB-Rated Corporate Debt
funds followed by Lipper, Inc., an independent monitor of mutual fund
performance, was -1.66% for the same period. The Lehman Brothers Aggregate Bond
Index returned -0.15% for the same period. While we never like to see a negative
return, we attribute the Fund's performance to the global rise in interest
rates, which occurred during the entire fiscal period. Rising interest rates
push the prices of all fixed-income investments lower.
Portfolio
Characteristics
---------------
Total Net Assets $421,972,675
...................................................
Average Credit Quality A+
...................................................
Average Maturity 10.5 years
...................................................
Average Duration 5.4 years
...................................................
Why did interest rates rise?
Interest rates moved higher on investors' concerns that stronger-than-expected
economic growth would stimulate inflation. In early 1999, many investors
expected weak growth abroad to dampen the U.S. economy. However, international
economies experienced faster and more sustainable recoveries from the financial
crisis of 1998 than many investors had anticipated. Investors monitored
increases in commodities prices--particularly for oil and industrial metals,
such as copper and aluminum--and ongoing strength in the labor market. As of
October 1999, a relatively high 67% of the population was participating in the
labor force, and at 4.1%, the unemployment rate continued to reach new lows.
Investors, concerned that excessive economic growth would spark inflation,
watched particularly closely for signs of upward pressure on labor costs. As the
economy steamed ahead, investors pushed interest rates higher and bond prices
lower. The Federal Reserve Board confirmed these concerns, raising interest
rates twice during the period. The yield on the benchmark 30-year U.S. Treasury
bond rose from 5.66% on April 30, 1999 to 6.16% at the end of the fiscal period.
What else affected bond prices during that time?
Investors witnessed heavy corporate bond supply and reduced liquidity, in
addition to rising interest rates. Bond supply increased as issuers sold bonds
to prepare for Y2K and to buy back previously issued stock to bolster returns.
While supply increased, liquidity became dramatically restricted. Many Wall
Street firms had suffered heavy losses during the financial crisis of 1998, and
in response, reduced the capital allotted to trading desks. As a result, firms
that traditionally had been aggressive bidders of bonds, providing substantial
support to prices, became reluctant to increase their inventories. Bids from
these firms became cautious, eroding the prices of bonds. While the environment
deteriorated in the United States, growth prospects appeared brighter abroad.
International investors--long attracted to the United States--began to direct
their cash flows overseas. This reduced the supply of capital further, and
pushed bond prices lower. The supply/demand imbalance caused the yield
advantages provided by corporate bonds versus U.S. Treasuries to increase, as
investors demanded greater compensation for credit risk and decreased liquidity.
Yield advantages or "spreads" for high-quality bonds reached the highest levels
since 1990.
3
<PAGE>
EVERGREEN
Diversified Bond Fund
Portfolio Manager Interview
PORTFOLIO COMPOSITION
(based on 10/31/1999 net assets)
[PIE CHART]
Corporate Bonds -- 39.4%
Collateralized Mortgage Obligations -- 16.1%
Yankee Obligations -- 9.4%
U.S. Treasury Obligations -- 9.3%
Mortgage-backed Securities -- 8.8%
Foreign Bonds -- 8.1%
Repurchase Agreement -- 4.0%
Asset-backed Securities -- 2.9%
Other Investment and Other
Assets & Liabilities (net) -- 2.0%
How did you manage the Fund in this environment?
We positioned the Fund for a rising interest rate environment, but particularly
focused on selecting bonds with attractive relative value. We reduced high yield
holdings, which had reached performance targets earlier in the year, and took
advantage of the extremely attractive yield premiums provided by high-quality
domestic corporate bonds and international bonds, boosting the Fund's total
return potential. We expect yield relationships to begin a return to more
historical standards, which would cause these bonds to outperform other sectors.
The international holdings, which include Germany, Denmark, Canada, Argentina
and Sweden, enabled the Fund to benefit from the favorable growth prospects
abroad. We also sold bonds with 3 to 10-year maturities in anticipation of
higher rates, reinvesting proceeds in bonds with maturities from zero to three
years. This enhanced price stability when interest rates rose.
PORTFOLIO QUALITY
(based on 10/31/1999 portfolio assets)
[PIE CHART]
AAA -- 37.5%
AA -- 9.6%
A -- 14.5%
BBB -- 8.5%
BB -- 11.0%
B -- 12.3%
NR -- 6.6%
What is your outlook over the next six months?
With 1999 shaping up to be the second worst year for bonds since modern market
indices have been followed--1994 was worse--we are cautiously optimistic going
forward. We think long-term interest rates are at very attractive levels, in
light of the continued low level of inflation. While short-term interest rates
may rise a bit more as the Federal Reserve Board fine-tunes the economy, we
believe most of the rate hikes are over. In our opinion, the rise in interest
rates has been cyclical and the longer-term secular forces that have caused
interest rates to decline since 1981 are still very much in place. These include
the globalization of economies, increasing levels of productivity, and the
world's central banks actively fighting inflation.
We believe there is opportunity in the bond market, particularly in sectors that
have a risk premium, such as corporate and international bonds. Investors have
discounted a lot of bad news, which should cushion prices, and we think supply
will begin to subside. This should prompt yield relationships to return to
normal. We also think there is value abroad. The prospects for growth in
developed global markets are positive, which should benefit the performance of
their currencies. The Fund's larger and more diversified international position,
as well as its corporate holdings, secured at very attractive levels, should
perform well in such an environment.
4
<PAGE>
EVERGREEN
High Yield Bond Fund
Fund at a Glance as of October 31, 1999
Portfolio
Management
- ----------
[PHOTO]
Prescott B. Crocker, CFA
Tenure: February 1997
CURRENT INVESTMENT STYLE /1/
[GRAPHIC]
Morningstar's Style Box is based on a portfolio date as of 10/31/1999.
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.
/2/Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may vary
based on differences in loads, fees and expenses paid by the shareholders
investing in each class.
Historical performance shown for Classes A, C, and Y prior to their inception is
based on the performance of Class B, the original class offered. These
historical returns for Classes A and Y have been adjusted to eliminate the
effect of the higher 12b-1 fees applicable to Class B. The 12b-1 fees for Class
A are 0.25%, 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 not been eliminated, returns would have been
lower.
Funds that invest in high yield, lower rated bonds may contain more risk due to
the increased possibility of default.
The LBABI and the MLHYMI are unmanaged indices and do not include transaction
costs associated with buying and selling securities or any management fees. The
CPI is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
Performance and Returns/2/
Portfolio Inception Date 9/11/1935 Class A Class B Class C Class Y
Class Inception Date 1/20/1998 9/11/1935 1/21/1998 4/14/1998
................................................................................
Average Annual Returns*
................................................................................
6 months with sales charge -6.07% -6.52% -2.76% n/a
................................................................................
6 months w/o sales charge -1.44% -1.82% -1.82% -1.32%
- --------------------------------------------------------------------------------
1 year with sales charge 3.63% 2.98% 6.94% n/a
- --------------------------------------------------------------------------------
1 year w/o sales charge 8.74% 7.94% 7.94% 9.01%
- --------------------------------------------------------------------------------
3 years 4.18% 4.30% 5.13% 6.08%
- --------------------------------------------------------------------------------
5 years 5.64% 5.61% 5.88% 6.88%
- --------------------------------------------------------------------------------
10 years 7.17% 6.83% 6.83% 7.92%
- --------------------------------------------------------------------------------
Since Portfolio Inception 8.39% 8.24% 8.22% 8.53%
- --------------------------------------------------------------------------------
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
................................................................................
30-day SEC yield 8.22% 7.87% 7.87% 8.90%
................................................................................
6-month distributions
per share $0.18 $0.17 $0.17 $0.19
- --------------------------------------------------------------------------------
* Adjusted for maximum applicable sales charge.
LONG TERM GROWTH
[LINE GRAPH]
Lehman Brothers Evergreen High ML High Yield
CPI Aggregate Yield Bond B Master I
--- --------------- -------------- -------------
10/31/89 10,000 10,000 10,000 10,000
10/31/90 10,629 10,631 8,088 10,293
10/31/91 10,939 12,312 10,725 10,339
10/31/92 11,290 13,523 12,371 9,871
10/31/93 11,600 15,128 15,643 10,190
10/31/94 11,903 14,573 14,546 10,026
10/31/95 12,237 16,853 15,691 10,082
10/31/96 12,604 17,839 16,656 10,087
10/31/97 12,866 19,430 18,902 10,051
10/31/98 13,057 21,238 17,937 9,786
10/31/99 13,432 21,351 19,357 9,946
Comparison of a $10,000 investment in Evergreen High Yield Bond Fund, Class B
Shares/2/, versus a similar investment in the Lehman Brothers Aggregate Bond
Index (LBABI), the Merrill Lynch High Yield Master Index (MLHYMI) and the
Consumer Price Index (CPI).
The Lehman Brothers Aggregate Bond Index is a broad-based, unmanaged,
fixed-income index of U.S. government, corporate and mortgage-backed securities.
It represents the price change and coupon income of several thousand securities
of various credit qualities and maturities.
The Merrill Lynch High Yield Master Index is a broad-based measure of the
performance of the non-investment grade U.S. bond market. The index currently
captures close to $200 billion of the outstanding debt of domestic market
issuers rated below investment grade but not in default.
5
<PAGE>
EVERGREEN
High Yield Bond Fund
Portfolio Manager Interview
How did Evergreen High Yield Bond Fund perform over the past six months?
The Fund performed well when measured against its competitive universe. For the
six-month period ended October 31, 1999, Class B shares returned -1.82%.
Performance is before deduction of any applicable sales charges. In comparison,
the average return for the high yield bond funds followed by Lipper, Inc., an
independent monitor of mutual fund performance, was -3.53%. The Merrill Lynch
High Yield Master Index, the Fund's benchmark, returned -2.69% for the same
period. While we are disappointed to see negative returns, we attribute the
Fund's absolute performance to the extremely negative interest rate environment
in both global and domestic markets. We believe the Fund outperformed its
competitive group because it maximized its weighting in sectors that generated
the strongest performance in the high yield bond market, and had little to no
weighting in those sectors that most significantly underperformed.
Portfolio
Characteristics
---------------
Total Net Assets $354,735,544
...................................................
Average Credit Quality B
...................................................
Average Maturity 8.9 years
...................................................
Average Duration 4.6 years
...................................................
What caused bond prices to fall?
High yield bond prices fell because of rising interest rates, a rising default
rate, which prompted growing concerns about credit risk, and reduced market
liquidity. Higher interest rates pushed bond prices lower, as investors became
increasingly concerned that stronger-than-expected economic growth would renew
inflation. As we entered 1999, many investors expected fragile recoveries from
1998's international financial crisis to dampen U.S. economic growth. Instead,
the turnaround in many foreign economies was faster and more sustainable than
investors anticipated. Meanwhile, economic growth in the United States remained
vibrant. Investors, concerned about inflationary pressures, reacted negatively
to a particularly strong labor market and rising commodity prices. The Federal
Reserve Board echoed these concerns, raising interest rates two times during the
period.
Prices in the high yield bond market slumped even further on news of a rising
default rate and restricted market liquidity. Much of the default rate's
increase was due to the relaxed underwriting standards of 1997 and 1998. At that
time, a healthy economy, strong cash flows and the low level of interest rates
caused many investors to stretch for yield. Many investors relaxed their credit
standards to put heavy cash flows to work and secure what appeared to be
attractive yields. Further, underwriters attempted to meet strong investor
demand by bringing deals to market that would have not been accepted under more
normal circumstances.
Restricted market liquidity also put pressure on prices. Cash flows into high
yield bond funds slowed dramatically from recent years. On a year-to-date basis
as of October 31, 1999, cash flows into high yield bond mutual funds declined to
$5.9 billion from $19.3 billion for all of 1998, and were negative for much of
the period. Further, many Wall Street firms reduced the capital allotted to
their fixed-income trading desks in 1999, because of the heavy losses they
incurred during 1998's financial crisis. Traders were reluctant to add to bond
positions due to limited capital. As a result of their cautious bidding, price
support eroded further.
6
<PAGE>
EVERGREEN
High Yield Bond Fund
Portfolio Manager Interview
PORTFOLIO CREDIT QUALITY
(based on 10/31/1999 portfolio assets)
[PIE CHART]
BB -- 13.1%
B -- 75.2%
CCC -- 8.4%
CC -- 0.3%
Not Rated -- 3.0%
What strategies did you use in managing the Fund?
We used several strategies that helped protect the Fund from the market's
deteriorating conditions. Credit selection was key. We emphasized large, liquid
bond issues, maximizing the Fund's holdings in telecommunications and wireless
communications-- sectors that generated the strongest performance. At the same
time, the Fund had minimal to zero exposure to sectors that generated the
weakest performance, namely food retailing, cosmetics and specialty retailing.
We also reduced the Fund's "CCC"-rated position from 10% to 5%, early in the
period, a move that benefited performance as investors became increasingly
concerned about credit risk and reduced liquidity. Lastly, the Fund's holdings
in equity warrants boosted performance, when their underlying stock prices rose
along with the market. Warrants are options that give the holder a right to
purchase the issuer's common stock at a specified price during a specified
period of time.
PORTFOLIO COMPOSITION
(based on 10/31/1999 net assets)
Corporate Bonds -- 74.2%
Yankee Obligations -- 11.5%
Preferred Stocks -- 6.5%
Common Stocks and Warrants -- 4.7%
Other Investments and Other
Assets and Liabilities (net) -- 3.1%
What is your outlook for high yield bonds over the next six months?
We are optimistic about the opportunities available in high yield bonds. As we
write this report, heading into the final months of 1999, market conditions have
begun to improve and a rally has commenced. We continue to monitor tight labor
markets and stock market "exuberance". However, signs of a slower, but still
solid rate of growth have emerged and inflation remains minimal. Further, the
calendar for high yield bond issuance is light, which should relieve some of the
supply/demand imbalance. A background of steady economic growth and low
inflation should bode well for high yield bonds, prompting yield premiums to
return to more normal historical standards and causing high yield bonds to
outperform their higher-quality counterparts.
The events of the past fiscal period underscore the importance of understanding
and monitoring credit risk in the high yield bond market. Your Fund's management
team thoroughly analyzes and closely follows each portfolio holding.
Additionally, the Fund is limited in the percentage of assets that can be
invested in "CCC"-rated bonds and cannot invest in emerging market debt or
equities. Through responsible risk management and careful security selection,
your Fund's management team is dedicated to achieving superior investment
results.
7
<PAGE>
EVERGREEN
Strategic Income Fund
Fund at a Glance as of October 31, 1999
Portfolio
Management
- ----------
[PHOTO]
Prescott B. Crocker, CFA
Tenure: February 1997
CURRENT INVESTMENT STYLE /1/
[GRAPHIC]
Morningstar's Style Box is based on a portfolio date as of 10/31/1999.
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.
/2/Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may vary
based on differences in loads, fees and expenses paid by the shareholders
investing in each class.
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 0.25%, 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.
Funds that invest in high yield, lower rated bonds may contain more risks due to
the increased possibility of default.
U.S. Government guarantees apply only to the underlying securities of the Fund's
portfolio and not the Fund's shares.
The LBABI is an unmanaged index and does not include transaction costs
associated with buying and selling securities or any management fees. The CPI is
a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
PERFORMANCE AND RETURNS/2/
Portfolio Inception Date 4/14/1987 Class A Class B Class C Class Y
Class Inception Date 4/14/1987 2/1/1993 2/1/1993 1/13/1997
................................................................................
Average Annual Returns*
................................................................................
6 months with sales charge -6.48% -6.84% -3.09% n/a
................................................................................
6 months w/o sales charge -1.79% -2.15% -2.16% -1.04%
................................................................................
1 year with sales charge -1.30% -2.24% 1.55% n/a
................................................................................
1 year w/o sales charge 3.57% 2.51% 2.50% 4.53%
................................................................................
3 years 3.17% 3.15% 4.00% 4.45%
................................................................................
5 years 4.95% 4.87% 5.16% 5.73%
................................................................................
10 years 7.00% 6.90% 6.88% 7.38%
................................................................................
Since Portfolio Inception 6.49% 6.42% 6.41% 6.80%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
................................................................................
30-day SEC yield 7.81% 7.44% 7.44% 8.45%
................................................................................
6-month distributions
per share $0.29 $0.26 $0.26 $0.29
................................................................................
* Adjusted for maximum applicable sales charge.
LONG TERM GROWTH
[LINE GRAPH]
Lehman Brothers Evergreen
CPI Aggregate Strat Inc A
--- --------------- -----------
10/31/89 10,000 10,000 9,529
10/31/90 10,629 10,631 7,341
10/31/91 10,939 12,312 9,922
10/31/92 11,290 13,523 11,593
10/31/93 11,600 15,128 15,365
10/31/94 11,903 14,573 14,702
10/31/95 12,237 16,853 15,594
10/31/96 12,604 17,839 17,049
10/31/97 12,866 19,430 18,693
10/31/98 13,057 21,238 18,994
10/31/99 13,432 21,351 19,667
Comparison of a $10,000 investment in Evergreen Strategic Income Fund, Class A
shares/2/, versus a similar investment in the Lehman Brothers Aggregate Bond
Index (LBABI) and the Consumer Price Index (CPI).
The Lehman Brothers Aggregate Bond Index is a broad-based, unmanaged,
fixed-income index of U.S. government, corporate and mortgage-backed securities.
It represents the price change and coupon income of several thousand securities
of various credit qualities and maturities.
8
<PAGE>
EVERGREEN
Strategic Income Fund
Portfolio Manager Interview
How did Evergreen Strategic Income Fund perform over the past
six-months?
The Fund turned in a strong performance relative to its competitive universe,
performing well in light of a difficult market environment. For the six-month
period ended October 31, 1999, Class A shares returned -1.79%. Performance is
before deduction of any applicable sales charges. In comparison, the average
return of the multi-sector income funds followed by Lipper, Inc., an independent
monitor of mutual fund performance, was -2.28%. The Lehman Brothers Aggregate
Bond Index returned -0.15% and the benchmark 10-year U.S. Treasury fell by
- -2.12% for the same period. While we never like to see negative returns, we
attribute the Fund's decline to the global rise in interest rates that occurred
during the entire fiscal period. Rising interest rates push the prices of
fixed-income securities lower. We believe the Fund outperformed its competitive
universe because of fewer credit challenges in the high yield bond sector.
Portfolio
Characteristics
---------------
Total Net Assets $282,603,675
...................................................
Average Credit Quality BBB+
...................................................
Average Maturity 11.2 years
...................................................
Average Duration 4.9 years
...................................................
How were the Fund's assets allocated, as of October 31, 1999?
The Fund's assets were allocated as follows: High yield bonds: 43%; Foreign
bonds: 32%; and U.S. Government securities: 25%. The Fund's foreign investments
included the governments of Poland and Greece, as well as Danish mortgage-backed
securities, which carry the full faith and guarantee of the Danish government;
and corporate bonds from Brazil, Canada, Mexico and the European Economic
Community. A portion of the Fund's holdings were denominated in the euro and the
Japanese yen.
PORTFOLIO COMPOSITION
(based on 10/31/1999 net assets)
[PIE CHART]
Corporate Bonds -- 36.8%
Foreign Corporate Bonds -- 21.9%
Mortgage-backed Securities -- 15.2%
Yankees Obligations -- 10.2%
U.S. Treasury Obligations -- 10.2%
Stock and Warrants -- 2.9%
Other Investments, and Other
Assets and Liabilities, net -- 2.8%
Why did interest rates rise?
Interest rates rose on investors' concerns that stronger-than-expected economic
growth would cause a resurgence in inflation. As 1999 began, many investors
expected the international recoveries from 1998's financial crisis would be
weak, draining economic growth in the United States. The recoveries were faster
and more sustainable than most investors anticipated, however, and U.S. economic
health remained vibrant. The U.S. labor market, in particular, was robust; and
as investors became increasingly concerned about rising labor costs and higher
commodity prices, they pushed bond prices lower and interest rates higher. The
Federal Reserve raised interest rates twice during the period. The yield on
9
<PAGE>
EVERGREEN
Strategic Income Fund
Portfolio Manager Interview
the benchmark 30-year U.S. Treasury rose from 5.66% on April 30, 1999 to 6.16%
on October 31, 1999.
What happened in the high yield and international sectors?
High yield bonds incurred a steeper price decline than their higher-rated
counterparts, because of restricted liquidity and a rising default rate. In the
foreign sector yields rose as prospects for economic growth improved and as
international capital markets sought to attract global cash flows. Foreign
currencies--particularly the euro--benefited from the brighter investment
outlook abroad.
Reduced market liquidity took a heavy toll on high yield bond prices. Cash flows
into high yield bond mutual funds declined from $19.3 billion in 1998 to $5.9
billion for the year-to-date period ending October 31, 1999, and were negative
for much of the fiscal period. Many Wall Street firms had suffered heavy losses
during the financial crisis of 1998 and as a result, curtailed the capital
available to their fixed-income trading desks. Traders, reluctant to commit
their limited capital, became cautious in bidding bonds, which put downward
pressure on prices.
A rising default rate also pushed prices lower in the high yield sector. Much of
the increase came from bonds issued in 1997 and 1998 when many investors relaxed
their credit requirements and many firms loosened their underwriting standards.
At that time, with a healthy economy, low interest rates and cash flows surging
into the high yield bond market, demand was extraordinarily strong. Many
investors sought to put cash flows to work, as well as to stretch for yield. On
the supply side, many companies took advantage of such favorable market
conditions and issued bonds. Underwriters also lowered their credit standards
because of the strong demand. Many of the companies that issued bonds during
this time may not have met investors' or underwriters' credit standards under
more normal market conditions.
The combination of higher U.S. interest rates and stronger foreign economic
growth pushed international interest rates higher. Unlike the environment in the
United States, stronger growth overseas was perceived as positive by investors
because many foreign economies had been experiencing sluggish growth. Prices for
emerging market debt rallied considerably. The brighter outlook also caused
several currencies--particularly the euro and the Japanese yen--to rise
substantially versus the U.S. dollar.
PORTFOLIO QUALITY
(based on 10/31/1999 portfolio assets)
[PIE CHART]
AAA -- 23.1%
AA -- 3.0%
A -- 5.3%
BB -- 11.7%
B -- 30.0%
CCC -- 3.6%
Not Rated -- 22.2%
Lower than CCC -- 1.1%
What strategies did you use in managing the Fund?
We emphasized the high yield and foreign sectors, minimizing the Fund's holdings
in U.S. government securities and maximizing holdings in emerging market debt.
In the high yield sector, we emphasized large, liquid bond issues, and maximized
the Fund's holdings in telecommunications and wireless communications--sectors
that generated the strongest performance. The Fund also had zero to minimal
exposure to sectors that generated the weakest performance, namely food
retailing, cosmetics and specialty. In the international portion, the Fund's
position in Brazil contributed solidly to returns, as the country benefited from
the recent rise in oil prices as well as a renewed confidence after the currency
was devalued earlier this year. The Fund also was actively involved in foreign
currency rallies, particularly the euro and the Japanese yen.
10
<PAGE>
EVERGREEN
Strategic Income Fund
Portfolio Manager Interview
What is your outlook for the next six months?
We are optimistic about opportunities available for the Fund, particularly in
the foreign sector. We expect European economic growth to accelerate as we head
into the new year. Also, growth prospects in Canada--which typically lag the
United States by six months--appear to be favorable. Substantial cash flows have
been moving into Canada, an event that can be seen by the rise in their stock
market. The Fund is positioned to benefit from the favorable outlook in both
Europe and Canada, through its investment in their respective currencies. Our
outlook for the domestic bond market is cautiously optimistic. We think
short-term interest rates could move higher as the Federal Reserve Board
fine-tunes the economy. However, we expect long-term interest rates to decline
on signs of slower, but still solid, economic growth and low inflation.
The events of the past fiscal period underscore the importance of having diverse
and flexible investment parameters. Although conditions may be temporarily
unsettled in one market sector, your Fund's global perspective provides
significant potential for opportunity. Your Fund's management team is dedicated
to achieving superior investment results. Through in-depth analysis and careful
security selection in a global market, we believe the Fund can deliver
substantial returns to the long-term investor.
11
<PAGE>
EVERGREEN
U.S. Government Fund
Fund at a glance as of October 31, 1999
Portfolio Management
- --------------------
[PHOTO]
Rollin C. Williams, CFA
Tenure: January 1993
CURRENT INVESTMENT STYLE/1/
[GRAPHIC]
Morningstar's Style Box is based on a portfolio date as of 10/31/1999.
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.
/2/Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may vary
based on differences in loads, fees and expenses paid by the shareholders
investing in each class.
Historical performance shown for Classes C and Y prior to their inception is
based on the performance of Class A, one of the original classes offered along
with Class B. These historical returns for Classes C and Y have not been
adjusted to reflect the effect of each Class' 12b-1 fees. These fees for Class A
are 0.25%, 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 Class C would have
been lower while returns for Class Y would have been higher.
U.S. government guarantees apply only to the underlying securities of the
Fund's portfolio and not to the Fund's shares.
The LBITGBI is an unmanaged index and does not include transaction costs
associated with buying and selling securities or any management fees. The CPI is
a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
Performance and Returns/2/
Portfolio Inception Date 1/11/1993 Class A Class B Class C Class Y
Class Inception Date 1/11/1993 1/11/1993 9/2/1994 9/2/1993
................................................................................
Average Annual Returns*
................................................................................
6 months with sales charge -5.56% -6.04% -2.19% n/a
................................................................................
6 months w/o sales charge -0.86% -1.23% -1.23% -0.73%
................................................................................
1 year with sales charge -5.58% -6.33% -2.59% n/a
................................................................................
1 year w/o sales charge -0.91% -1.65% -1.65% -0.66%
................................................................................
3 years 3.49% 3.51% 4.41% 5.46%
................................................................................
5 years 5.84% 5.78% 6.09% 7.16%
................................................................................
Since Portfolio Inception 4.79% 4.82% 4.95% 5.78%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
................................................................................
30-day SEC yield 5.58% 5.11% 5.11% 6.11%
................................................................................
6-month distributions per share $0.28 $0.24 $0.24 $0.29
................................................................................
* Adjusted for maximum applicable sales charge.
LONG TERM GROWTH
[LINE GRAPH]
Lehman Brothers Evergreen
CPI Interm Govt US Govt A
--- --------------- ---------
01/31/93 10,000 10,000 9,526
10/31/93 10,217 10,628 10,173
10/31/94 10,484 10,447 9,770
10/31/95 10,778 11,679 11,159
10/31/96 11,101 12,341 11,711
10/31/97 11,332 13,246 12,632
10/31/98 11,501 14,506 13,760
10/31/99 11,831 14,624 13,632
Comparison of a $10,000 investment in Evergreen U.S. Government Fund, Class A
shares/2/, versus a similar investment in the Lehman Brothers Intermediate Term
Government Bond Index (LBITGBI), and the Consumer Price Index (CPI).
The Lehman Brothers Intermediate Term Government Bond Index is an unmanaged
fixed income index of U.S. government securities with maturities of less than 10
years.
12
<PAGE>
EVERGREEN
U. S. Government Fund
Portfolio Manager Interview
How did Evergreen U.S. Government Fund perform over the past six
months?
The Fund performed well in light of the difficult interest rate environment,
outperforming its competitive universe. For the six-month period ended October
31, 1999, Class A shares returned -0.86%. Performance is before deduction of any
applicable sales charges. While we never like to see a negative return, we
attribute the results to the rising interest rate environment that occurred
during the entire fiscal period, pushing the prices of all fixed-income
investments lower. In comparison to the Fund, the average return of the U.S.
government funds followed by Lipper, Inc., an independent monitor of mutual fund
performance, was -1.11% for the same period. The Lehman Brothers Intermediate
Term Government Bond Index returned 0.74%, during that time. The index, unlike a
mutual fund, does not incur expenses, and represents bonds with a maturity range
that is shorter and more limited than the Fund's investment parameters. In our
opinion, the Fund's greater flexibility enables it to generate higher returns
over a longer-term horizon.
Portfolio
Characteristics
---------------
Total Net Assets $477,812,928
...................................................
Average Credit Quality AA+
...................................................
Average Maturity 7.99 years
...................................................
Average Duration 4.73 years
...................................................
Why did interest rates rise?
Interest rates rose on investors' concerns that the U.S. economy would overheat
and rekindle inflation. The yield on the benchmark 30-year U.S. Treasury bond
stood at 5.66% on April 30, 1999 and rose to 6.16% on October 31, 1999. At the
beginning of 1999, many investors expected world economic growth to be weak, as
nations recovered from 1998's international financial crisis. Further, many
investors believed that fragile foreign growth would derail the U.S. economy.
Recoveries occurred faster and were more sustainable than generally expected,
however, and domestic economic growth remained hearty. Investors monitored
reports of ongoing strength in the labor market and rising commodity prices; the
price of gold rose from a low of $254 per ounce to a high of $326 per ounce
during the period. As sentiment turned to concerns about future inflation,
investors pushed interest rates higher and bond prices lower. The Federal
Reserve Board shared these concerns and raised interest rates twice during the
period.
What strategies did you use to manage the Fund?
In July 1999, Evergreen U.S. Intermediate Government Fund merged with Evergreen
U.S. Government Fund because of the two funds' similar investment objectives.
The combined assets totaled approximately $478 million as of October 31, 1999.
Some of our strategies were geared toward blending the assets--for example,
consolidating positions. Overall, we maintained an emphasis on quality and
income, and fine-tuned duration. Duration measures a fund's sensitivity to
changes in interest rates, and is stated in years. As of October 31, 1999,
approximately 75% of net assets were invested in securities rated "AAA". Also as
of that date, 46% of net assets were invested in mortgage-backed securities and
collateralized mortgage obligation securities (CMOs). These securities carry a
"AAA" rating, and provide both an attractive stream of income and an attractive
yield premium compared to U.S. Treasuries with similar maturities.
13
<PAGE>
EVERGREEN
U. S. Government Fund
Portfolio Manager Interview
We adjusted the Fund's duration to reflect our short-to-intermediate term
interest rate outlook. Shortening duration decreases a fund's sensitivity to
changes in interest rates. Because shortening duration enhances price stability,
a fund's duration may be decreased to reflect expectations of higher interest
rates. In contrast, lengthening duration increases interest rate sensitivity.
Typically, a fund's duration is lengthened in anticipation of a decline in
interest rates to increase total return potential. As of October 31, 1999, the
Fund's duration was 4.73 years.
Maturity
Breakdown
---------
(based on 10/31/1999 portfolio assets)
0-1 years: 6.7%
...................................................
1-5 years: 15.9%
...................................................
5-10 years: 16.4%
...................................................
10-20 years: 11.2%
...................................................
20-30 years: 49.8%
...................................................
What is your outlook for the next six months?
We are cautiously optimistic. Looking ahead into 2000, we anticipate a slowdown
in economic growth, which should benefit bond investors. We believe many
companies will be working off inventories and there are signs of a slower
housing sector. Also, the consumer has begun to accumulate a greater debt
burden. That could lead to credit card problems, and with the approach of
elections and Chairman Greenspan's term expiring, investors could face some
uncertainty. In that environment, we think investors will demonstrate a
preference for quality.
We believe the Fund is well-positioned for such an environment, with its
emphasis on quality and income. We will continue to seek attractive relative
value. While maintaining that emphasis, we will fine-tune the Fund's sensitivity
in anticipation of interest rate changes.
14
<PAGE>
EVERGREEN
DIVERSIFIED BOND FUND
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended April 30,
October 31, 1999 ------------------------
(Unaudited) 1999 1998 (a)#
<S> <C> <C> <C>
CLASS A SHARES
Net asset value, beginning of
period $ 15.48 $ 15.92 $ 16.08
-------- ---------- ----------
Income from investment operations
Net investment income 0.49 0.97 0.30
Net realized and unrealized gains
or losses on securities (0.87) (0.44) (0.16)++
-------- ---------- ----------
Total from investment operations (0.38) 0.53 0.14
-------- ---------- ----------
Distributions to shareholders from
net investment income (0.50) (0.97) (0.30)
-------- ---------- ----------
Net asset value, end of period $ 14.60 $ 15.48 $ 15.92
-------- ---------- ----------
Total return* (2.49%) 3.35% 0.85%
Ratios and supplemental data
Net assets, end of period
(thousands) $381,659 $ 444,273 $ 501,547
Ratios to average net assets
Expenses+++ 1.21%+ 1.23% 1.08%+
Net investment income 6.44%+ 6.12% 6.68%+
Portfolio turnover rate 94% 141% 109%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended April 30, Year Ended August 31,
October 31, 1999 ------------------------ --------------------------------------
(Unaudited) 1999 1998 (b)# 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 15.48 $ 15.92 $ 15.42 $ 14.65 $ 15.09 $ 15.28 $ 17.06
------- ---------- ---------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.43 0.86 0.61 0.91 0.95 1.06 1.06
Net realized and
unrealized gains or
losses on securities (0.87) (0.45) 0.50 0.84 (0.35) 0.11 (1.62)
------- ---------- ---------- -------- -------- -------- --------
Total from investment
operations (0.44) 0.41 1.11 1.75 0.60 1.17 (0.56)
------- ---------- ---------- -------- -------- -------- --------
Distributions to
shareholders from
Net investment income (0.44) (0.85) (0.61) (0.98) (0.96) (1.28) (1.22)
Tax basis return of
capital 0 0 0 0 (0.08) (0.08) 0
------- ---------- ---------- -------- -------- -------- --------
Total distributions to
shareholders (0.44) (0.85) (0.61) (0.98) (1.04) (1.36) (1.22)
------- ---------- ---------- -------- -------- -------- --------
Net asset value, end of
period $ 14.60 $ 15.48 $ 15.92 $ 15.42 $ 14.65 $ 15.09 $ 15.28
------- ---------- ---------- -------- -------- -------- --------
Total return* (2.85%) 2.57% 7.26% 12.25% 4.03% 8.13% (3.35%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $38,124 $ 43,729 $ 70,113 $457,701 $559,792 $734,837 $814,245
Ratios to average net
assets
Expenses+++ 1.96%+ 1.97% 1.93%+ 1.88% 1.84% 1.81% 1.75%
Net investment income 5.69%+ 5.33% 5.74%+ 6.07% 6.42% 7.05% 6.48%
Portfolio turnover rate 94% 141% 109% 138% 246% 178% 200%
</TABLE>
(a) For the period from January 20, 1998 (commencement of class operations) to
April 30, 1998.
(b) For the eight months ended April 30, 1998. The Fund changed its fiscal
year end from August 31 to April 30, effective April 30, 1998.
* Excluding applicable sales charges.
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
gains or losses for the period due to the timing of sales and redemptions
of Fund shares and the amount of per share realized and unrealized gains or
losses at such time.
+++ The ratio of expenses to average net assets excludes fee credits but in-
cludes fee waivers.
# Net investment income is based on average shares outstanding during the pe-
riod.
See Combined Notes to Financial Statements.
15
<PAGE>
EVERGREEN
Diversified Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended April 30,
October 31, 1999 -------------------------
(Unaudited) 1999 1998 (a) #
<S> <C> <C> <C>
CLASS C SHARES
Net asset value, beginning of
period $15.48 $ 15.92 $ 16.06
------ ---------- ----------
Income from investment operations
Net investment income 0.43 0.84 0.04
Net realized and unrealized gains
or losses on securities (0.87) (0.43) (0.14)++
------ ---------- ----------
Total from investment operations (0.44) 0.41 (0.10)
------ ---------- ----------
Distributions to shareholders
from net investment income (0.44) (0.85) (0.04)
------ ---------- ----------
Net asset value, end of period $14.60 $ 15.48 $ 15.92
------ ---------- ----------
Total return* (2.85%) 2.57% (0.60%)
Ratios and supplemental data
Net assets, end of period
(thousands) $ 566 $ 499 $ 23
Ratios to average net assets
Expenses+++ 1.95%+ 1.98% 1.88%+
Net investment income 5.67%+ 5.33% 6.11%+
Portfolio turnover rate 94% 141% 109%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended April 30,
October 31, 1999 -------------------------
(Unaudited) 1999 1998 (b) #
<S> <C> <C> <C>
CLASS Y SHARES
Net asset value, beginning of
period $15.48 $ 15.92 $ 16.03
------ ---------- ----------
Income from investment operations
Net investment income 0.52 0.90 0.24
Net realized and unrealized gains
or losses on securities (0.88) (0.43) (0.11)++
------ ---------- ----------
Total from investment operations (0.36) 0.47 0.13
------ ---------- ----------
Distributions to shareholders
from net investment income (0.52) (0.91) (0.24)
------ ---------- ----------
Net asset value, end of period $14.60 $ 15.48 $ 15.92
------ ---------- ----------
Total return (2.36%) 2.95% 0.80%
Ratios and supplemental data
Net assets, end of period
(thousands) $1,624 $ 3,478 $ 7
Ratios to average net assets
Expenses+++ 0.96%+ 0.99% 0.83%+
Net investment income 6.65%+ 6.55% 6.89%+
Portfolio turnover rate 94% 141% 109%
</TABLE>
(a) For the period from April 7, 1998 (commencement of class operations) to
April 30, 1998.
(b) For the period from February 11, 1998 (commencement of class operations)
to April 30, 1998.
* Excluding applicable sales charges.
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
gains or losses for the period due to the timing of sales and redemptions
of Fund shares and the amount of per share realized and unrealized gains or
losses at such time.
+++ The ratio of expenses to average net assets excludes fee credits but in-
cludes fee waivers.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
16
<PAGE>
EVERGREEN
High Yield Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended April 30,
October 31, 1999 -------------------------
(Unaudited) 1999 1998 (a)#
<S> <C> <C> <C>
CLASS A SHARES
Net asset value, beginning of
period $ 4.06 $ 4.53 $ 4.52
======== ========== ==========
Income from investment operations
Net investment income 0.17 0.36 0.11
Net realized and unrealized gains
or losses on securities (0.23) (0.46) 0.01
-------- ---------- ----------
Total from investment operations (0.06) (0.10) 0.12
-------- ---------- ----------
Distributions to shareholders from
net investment income (0.18) (0.37) (0.11)
-------- ---------- ----------
Net asset value, end of period $ 3.82 $ 4.06 $ 4.53
======== ========== ==========
Total return* (1.44%) (2.05%) 2.57%
Ratios and supplemental data
Net assets, end of period
(millions) $305,826 $ 353,488 $ 420,778
Ratios to average net assets
Expenses++ 1.31%+ 1.21% 1.24%+
Net investment income 8.55%+ 8.61% 8.48%+
Portfolio turnover rate 56% 170% 155%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended April 30, Year Ended July 31,
October 31, 1999 ------------------------- --------------------------------------
(Unaudited) 1999 1998 (b)# 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 4.06 $ 4.53 $ 4.37 $ 4.10 $ 4.42 $ 4.68 $ 5.13
======= ========== ========== ======== ======== ======== ========
Income from investment
operations
Net investment income 0.15 0.27 0.25 0.32 0.32 0.38 0.38
Net realized and
unrealized gains or
losses on securities (0.22) (0.40) 0.16 0.28 (0.27) (0.15) (0.38)
------- ---------- ---------- -------- -------- -------- --------
Total from investment
operations (0.07) (0.13) 0.41 0.60 0.05 0.23 0
------- ---------- ---------- -------- -------- -------- --------
Distributions to
shareholders from
Net investment income (0.17) (0.34) (0.25) (0.33) (0.37) (0.39) (0.45)
Tax basis return of
capital 0 0 0 0 0 (0.10) 0
------- ---------- ---------- -------- -------- -------- --------
Total distributions to
shareholders (0.17) (0.34) (0.25) (0.33) (0.37) (0.49) (0.45)
------- ---------- ---------- -------- -------- -------- --------
Net asset value, end of
period $ 3.82 $ 4.06 $ 4.53 $ 4.37 $ 4.10 $ 4.42 $ 4.68
======= ========== ========== ======== ======== ======== ========
Total return* (1.82%) (2.79%) 9.57% 15.32% 1.38% 5.66% (0.41%)
Ratios and supplemental
data
Net assets, end of
period (millions) $43,520 $ 47,713 $ 96,535 $547,390 $593,681 $764,965 $766,283
Ratios to average net
assets
Expenses++ 2.06%+ 1.95% 1.94%+ 1.96% 1.94% 2.03% 1.84%
Net investment income 7.80%+ 7.85% 7.27%+ 7.63% 7.92% 8.64% 7.57%
Portfolio turnover rate 56% 170% 155% 138% 116% 82% 110%
</TABLE>
(a) For the period from January 20, 1998 (commencement of class operations) to
April 30, 1998.
(b) For the nine months ended April 30, 1998. The Fund changed its fiscal year
end from July 31 to April 30, effective April 30, 1998.
* Excluding applicable sales charges.
+ Annualized.
++ The ratio of expenses to average net assets excludes fee credits but
includes fee waivers.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
17
<PAGE>
EVERGREEN
High Yield Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended April 30,
October 31, 1999 --------------------
(Unaudited) 1999 1998 (a) #
<S> <C> <C> <C>
CLASS C SHARES
Net asset value, beginning of period $ 4.06 $ 4.53 $ 4.52
------ ------ ------
Income from investment operations
Net investment income 0.15 0.32 0.10
Net realized and unrealized gains or
losses on securities (0.22) (0.45) 0.01
------ ------ ------
Total from investment operations (0.07) (0.13) 0.11
------ ------ ------
Distributions to shareholders from net
investment income (0.17) (0.34) (0.10)
------ ------ ------
Net asset value, end of period $ 3.82 $ 4.06 $ 4.53
------ ------ ------
Total return* (1.82%) (2.79%) 2.35%
Ratios and supplemental data
Net assets, end of period (millions) $1,569 $1,999 $1,155
Ratios to average net assets
Expenses+++ 2.06%+ 1.94% 2.04%+
Net investment income 7.78%+ 7.86% 7.51%+
Portfolio turnover rate 56% 170% 155%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended April 30,
October 31, 1999 --------------------
(Unaudited) 1999 1998 (b) #
<S> <C> <C> <C>
CLASS Y SHARES
Net asset value, beginning of period $ 4.06 $ 4.53 $ 4.56
------ ------ ------
Income from investment operations
Net investment income 0.18 0.36 0.02
Net realized and unrealized gains or
losses on securities (0.23) (0.45) (0.03)++
------ ------ ------
Total from investment operations (0.05) (0.09) (0.01)
------ ------ ------
Distributions to shareholders from net
investment income (0.19) (0.38) (0.02)
------ ------ ------
Net asset value, end of period $ 3.82 $ 4.06 $ 4.53
------ ------ ------
Total return (1.32%) (1.81%) (0.27%)
Ratios and supplemental data
Net assets, end of period (millions) $3,821 $4,244 $ 20
Ratios to average net assets
Expenses+++ 1.06%+ 0.91% 1.09%+
Net investment income 8.82%+ 9.14% 8.21%+
Portfolio turnover rate 56% 170% 155%
</TABLE>
(a) For the period from January 21, 1998 (commencement of class operations) to
April 30, 1998.
(b) For the period from April 14, 1998 (commencement of class operations) to
April 30, 1998.
* Excluding applicable sales charges.
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
gains or losses for the period due to the timing of sales and redemptions of
Fund shares and the amount of per share realized and unrealized gains or
losses at such time.
+++ The ratio of expenses to average net assets excludes fee credits but
includes fee waivers.
# Net investment income is based on average shares outstanding during the
period.
See Combined Notes to Financial Statements.
18
<PAGE>
EVERGREEN
Strategic Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended April 30, Year Ended July 31,
October 31, 1999 ---------------------------- --------------------------
(Unaudited) 1999 1998 # 1997 (a) 1996 1995 1994 #
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 6.79 $ 7.21 $ 6.82 $ 6.77 $ 6.89 $ 7.35 $ 7.86
-------- -------- -------- ------- ------- ------- --------
Income from investment
operations
Net investment income 0.27 0.51 0.50 0.37 0.54 0.64 0.61
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.39) (0.41) 0.38 0.09 (0.09) (0.45) (0.44)
-------- -------- -------- ------- ------- ------- --------
Total from investment
operations (0.12) 0.10 0.88 0.46 0.45 0.19 0.17
-------- -------- -------- ------- ------- ------- --------
Distributions to
shareholders from
Net investment income (0.29) (0.52) (0.49) (0.41) (0.52) (0.63) (0.64)
Tax basis return of
capital 0 0 0 0 (0.05) (0.02) (0.04)
-------- -------- -------- ------- ------- ------- --------
Total distributions to
shareholders (0.29) (0.52) (0.49) (0.41) (0.57) (0.65) (0.68)
-------- -------- -------- ------- ------- ------- --------
Net asset value, end of
period $ 6.38 $ 6.79 $ 7.21 $ 6.82 $ 6.77 $ 6.89 $ 7.35
-------- -------- -------- ------- ------- ------- --------
Total return* (1.79%) 1.58% 13.20% 6.80% 6.84% 3.00% 1.86%
Ratios and supplemental
data
Net assets, end of
period (thousands) $148,066 $162,192 $193,618 $58,725 $68,118 $85,970 $105,181
Ratios to average net
assets
Expenses++ 0.71%+ 1.02% 1.27% 1.28%+ 1.30% 1.33% 1.32%
Net investment income 8.28%+ 7.41% 6.80% 7.28%+ 8.05% 9.31% 7.79%
Portfolio turnover rate 93% 222% 237% 86% 101% 95% 92%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended April 30, Year Ended July 31,
October 31, 1999 ---------------------------- ----------------------------
(Unaudited) 1999 1998 # 1997 (a) 1996 1995 1994 #
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 6.81 $ 7.25 $ 6.85 $ 6.81 $ 6.92 $ 7.38 $ 7.89
-------- -------- -------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.25 0.47 0.44 0.34 0.50 0.60 0.55
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.40) (0.44) 0.39 0.07 (0.09) (0.47) (0.44)
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations (0.15) 0.03 0.83 0.41 0.41 0.13 0.11
-------- -------- -------- -------- -------- -------- --------
Distributions to
shareholders from
Net investment income (0.26) (0.47) (0.43) (0.37) (0.47) (0.58) (0.58)
Tax basis return of
capital 0 0 0 0 (0.05) (0.01) (0.04)
-------- -------- -------- -------- -------- -------- --------
Total distributions to
shareholders (0.26) (0.47) (0.43) (0.37) (0.52) (0.59) (0.62)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 6.40 $ 6.81 $ 7.25 $ 6.85 $ 6.81 $ 6.92 $ 7.38
-------- -------- -------- -------- -------- -------- --------
Total return* (2.15%) 0.56% 12.47% 6.06% 6.21% 2.12% 1.10%
Ratios and supplemental
data
Net assets, end of
period (thousands) $118,372 $120,669 $113,136 $110,082 $123,389 $149,091 $162,866
Ratios to average net
assets
Expenses++ 1.46%+ 1.76% 2.05% 2.04%+ 2.07% 2.06% 2.07%
Net investment income 7.53%+ 6.68% 6.08% 6.52%+ 7.28% 8.58% 7.11%
Portfolio turnover rate 93% 222% 237% 86% 101% 95% 92%
</TABLE>
(a) For the nine months ended April 30, 1997. The Fund changed its fiscal year
end from July 31 to April 30, effective April 30, 1997.
* Excluding applicable sales charges.
+ Annualized.
++ The ratio of expenses to average net assets excludes fee credits but
includes fee waivers.
# Net investment income is based on average shares outstanding throughout the
period.
See Combined Notes to Financial Statements.
19
<PAGE>
EVERGREEN
Strategic Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended April 30, Year Ended July 31,
October 31, 1999 -------------------------- -------------------------
(Unaudited) 1999 1998 # 1997 (a) 1996 1995 1994 #
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $ 6.80 $ 7.24 $ 6.84 $ 6.80 $ 6.92 $ 7.37 $ 7.88
------- ------- ------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.25 0.45 0.44 0.33 0.49 0.59 0.55
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.40) (0.42) 0.39 0.08 (0.09) (0.45) (0.44)
------- ------- ------- ------- ------- ------- -------
Total from investment
operations (0.15) 0.03 0.83 0.41 0.40 0.14 0.11
------- ------- ------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.26) (0.47) (0.43) (0.37) (0.47) (0.58) (0.58)
Tax basis return of
capital 0 0 0 0 (0.05) (0.01) (0.04)
------- ------- ------- ------- ------- ------- -------
Total distributions to
shareholders (0.26) (0.47) (0.43) (0.37) (0.52) (0.59) (0.62)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 6.39 $ 6.80 $ 7.24 $ 6.84 $ 6.80 $ 6.92 $ 7.37
------- ------- ------- ------- ------- ------- -------
Total return* (2.16%) 0.55% 12.48% 6.07% 6.07% 2.27% 1.09%
Ratios and supplemental
data
Net assets, end of
period (thousands) $14,998 $16,265 $19,639 $24,304 $31,816 $46,221 $59,228
Ratios to average net
assets
Expenses++ 1.46%+ 1.77% 2.05% 2.04%+ 2.07% 2.08% 2.07%
Net investment income 7.55%+ 6.65% 6.10% 6.52%+ 7.29% 8.56% 7.09%
Portfolio turnover rate 93% 222% 237% 86% 101% 95% 92%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended April 30,
October 31, 1999 ------------------------
(Unaudited) 1999 1998 # 1997 (b)
<S> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value, beginning of period $ 6.63 $ 7.04 $ 6.65 $7.03
------ ------ ------ -----
Income from investment operations
Net investment income 0.28 0.51 0.46 0
Net realized and unrealized gains or
losses on securities and foreign
currency related transactions (0.35) (0.39) 0.41 (0.20)
------ ------ ------ -----
Total from investment operations (0.07) 0.12 0.87 (0.20)
------ ------ ------ -----
Distributions to shareholders from
Net investment income (0.29) (0.53) (0.48) (0.18)
Tax basis return of capital 0 0 0 0
------ ------ ------ -----
Total distributions to shareholders (0.29) (0.53) (0.48) (0.18)
------ ------ ------ -----
Net asset value, end of period $ 6.27 $ 6.63 $ 7.04 $6.65
------ ------ ------ -----
Total return (1.04%) 1.83% 13.46% (2.87%)
Ratios and supplemental data
Net assets, end of period
(thousands) $1,167 $1,647 $1,442 $ 0
Ratios to average net assets
Expenses++ 0.46%+ 0.75% 1.01% 0.00%+
Net investment income 8.53%+ 7.64% 6.83% 0.00%+
Portfolio turnover rate 93% 222% 237% 86%
</TABLE>
(a) For the nine months ended April 30, 1997. The Fund changed its fiscal year
end from July 31 to April 30, effective April 30, 1997.
(b) For the period from January 13, 1997 (commencement of class operations) to
April 30, 1997.
* Excluding applicable sales charges.
+ Annualized.
++ The ratio of expenses to average net assets excludes fee credits but in-
cludes fee waivers.
# Net investment income is based on average shares outstanding throughout the
period.
See Combined Notes to Financial Statements.
20
<PAGE>
EVERGREEN
U.S. Government Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended April 30, Year Ended June 30,
October 31, 1999 -------------------------- ------------------- Year Ended
(Unaudited) 1999 1998 1997 (a) 1996 1995 (b) December 31, 1994
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07 $ 10.05
======= ======= ======= ======= ======= ======= =======
Income from investment
operations
Net investment income 0.28 0.56 0.61 0.52 0.63 0.33 0.66
Net realized and
unrealized gains or
losses on securities (0.36) (0.04) 0.29 (0.03) (0.23) 0.58 (0.98)
------- ------- ------- ------- ------- ------- -------
Total from investment
operations (0.08) 0.52 0.90 0.49 0.40 0.91 (0.32)
------- ------- ------- ------- ------- ------- -------
Distributions to
shareholders from net
investment income (0.28) (0.57) (0.61) (0.52) (0.63) (0.33) (0.66)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 9.27 $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07
======= ======= ======= ======= ======= ======= =======
Total return* (0.86%) 5.39% 9.78% 5.30% 4.28% 10.17% (3.18%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $99,959 $48,091 $40,136 $17,913 $20,345 $22,445 $23,706
Ratios to average net
assets
Expenses++ 0.95%+ 0.95% 1.03% 0.98%+ 0.99% 1.04%+ 0.96%
Net investment income 5.81%+ 5.68% 6.25% 6.60%+ 6.61% 7.07%+ 6.97%
Portfolio turnover rate 35% 98% 21% 12% 23% 0% 19%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended April 30, Year Ended June 30,
October 31, 1999 ---------------------------- ------------------- Year Ended
(Unaudited) 1999 1998 1997 (a) 1996 1995 (b) December 31, 1994
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07 $ 10.05
======== ======== ======== ======== ======== ======== ========
Income from investment
operations
Net investment income 0.24 0.49 0.53 0.46 0.56 0.29 0.61
Net realized and
unrealized gains or
losses on securities (0.36) (0.05) 0.29 (0.03) (0.23) 0.58 (0.98)
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations (0.12) 0.44 0.82 0.43 0.33 0.87 (0.37)
-------- -------- -------- -------- -------- -------- --------
Distributions to
shareholders from net
investment income (0.24) (0.49) (0.53) (0.46) (0.56) (0.29) (0.61)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 9.27 $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07
======== ======== ======== ======== ======== ======== ========
Total return* (1.23%) 4.60% 8.96% 4.65% 3.50% 9.76% (3.75%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $108,707 $122,919 $130,576 $142,371 $165,988 $192,490 $195,571
Ratios to average net
assets
Expenses++ 1.70%+ 1.71% 1.78% 1.73%+ 1.74% 1.79%+ 1.54%
Net investment income 5.05%+ 4.99% 5.56% 5.85%+ 5.85% 6.32%+ 6.42%
Portfolio turnover rate 35% 98% 21% 12% 23% 0% 19%
</TABLE>
(a) For the ten months ended April 30, 1997. The Fund changed its fiscal year
end from June 30 to April 30, effective April 30, 1997.
(b) 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.
* Excluding applicable sales charges.
+ Annualized.
++ The ratio of expenses to average net assets excludes fee credits but in-
cludes fee waivers.
See Combined Notes to Financial Statements.
21
<PAGE>
EVERGREEN
U.S. Government Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
Six Months Ended Year Ended April 30, June 30,
October 31, 1999 ------------------------ --------------- Year Ended
(Unaudited) 1999 1998 1997 (a) 1996 1995 (b) December 31, 1994 (c)
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $ 9.63 $ 9.68 $ 9.39 $9.42 $9.65 $9.07 $9.39
====== ====== ====== ===== ===== ===== =====
Income from investment
operations
Net investment income 0.24 0.49 0.53 0.46 0.56 0.29 0.20
Net realized and
unrealized gains or
losses on securities (0.36) (0.05) 0.29 (0.03) (0.23) 0.58 (0.32)
------ ------ ------ ----- ----- ----- -----
Total from investment
operations (0.12) 0.44 0.82 0.43 0.33 0.87 (0.12)
------ ------ ------ ----- ----- ----- -----
Distributions to
shareholders from net
investment income (0.24) (0.49) (0.53) (0.46) (0.56) (0.29) (0.20)
------ ------ ------ ----- ----- ----- -----
Net asset value, end of
period $ 9.27 $ 9.63 $ 9.68 $9.39 $9.42 $9.65 $9.07
====== ====== ====== ===== ===== ===== =====
Total return* (1.23%) 4.60% 8.96% 4.65% 3.50% 9.76% (1.30%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $5,323 $5,605 $5,697 $ 455 $ 649 $ 350 $ 266
Ratios to average net
assets
Expenses++ 1.70%+ 1.70% 1.78% 1.73%+ 1.74% 1.79%+ 1.71%+
Net investment income 5.05%+ 4.97% 5.49% 5.85%+ 5.87% 6.36%+ 6.70%+
Portfolio turnover rate 35% 98% 21% 12% 23% 0% 19%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended April 30, Year Ended June 30,
October 31, 1999 ---------------------------- ------------------- Year Ended
(Unaudited) 1999 1998 1997 (a) 1996 1995 (b) December 31, 1994
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07 $ 10.05
======== ======== ======== ======== ======== ======= =======
Income from investment
operations
Net investment income 0.29 0.59 0.63 0.54 0.66 0.34 0.69
Net realized and
unrealized gains or
losses on securities (0.36) (0.05) 0.29 (0.03) (0.23) 0.58 (0.98)
-------- -------- -------- -------- -------- ------- -------
Total from investment
operations (0.07) 0.54 0.92 0.51 0.43 0.92 (0.29)
-------- -------- -------- -------- -------- ------- -------
Distributions to
shareholders from net
investment income (0.29) (0.59) (0.63) (0.54) (0.66) (0.34) (0.69)
-------- -------- -------- -------- -------- ------- -------
Net asset value, end of
period $ 9.27 $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07
======== ======== ======== ======== ======== ======= =======
Total return (0.73%) 5.66% 10.05% 5.52% 4.54% 10.30% (2.94%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $263,823 $222,876 $155,836 $127,099 $121,569 $16,934 $15,595
Ratios to average net
assets
Expenses++ 0.70%+ 0.71% 0.78% 0.73%+ 0.74% 0.79%+ 0.71%
Net investment income 6.06%+ 5.96% 6.55% 6.85%+ 6.86% 7.31%+ 7.27%
Portfolio turnover rate 35% 98% 21% 12% 23% 0% 19%
</TABLE>
(a) For the ten months ended April 30, 1997. The Fund changed its fiscal year
end from June 30 to April 30, effective April 30, 1997.
(b) 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.
(c) For the period from September 2, 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 but in-
cludes fee waivers.
See Combined Notes to Financial Statements.
22
<PAGE>
EVERGREEN
Diversified Bond Fund
Schedule of Investments
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - 2.9%
$ 2,100,000 Corestates Home Equity Loan Trust,
Ser. 1996-1, Class A4,
(Est. Maturity 2001),
7.00%, 6/15/2012 (a).............................. $ 2,104,862
Merrill Lynch Mtge. Investors, Inc.:
2,964,346 Ser. 1991-G, Class B,
(Est. Maturity 2000),
9.15%, 10/15/2011 (a).............................. 2,969,874
567,633 Ser. 1992-B, Class B,
(Est. Maturity 2002),
8.50%, 4/15/2012 (a)............................... 568,532
3,023,756 Ser. 1992-D, Class B,
(Est. Maturity 2000),
8.50%, 6/15/2017 (a)............................... 3,058,544
3,300,000 Southern Pacific Secd. Assets Corp.,
Ser. 1996-3, Class A4,
(Est. Maturity 2002),
7.60%, 10/25/2027 (a)............................. 3,335,261
330,000 Univ. Support Svcs., Inc.,
Ser. 1992-CD, Class D,
(Est. Maturity 2000),
9.00%, 11/1/2007 (a).............................. 329,505
------------
Total Asset-Backed Securities
(cost $12,150,452)................................ 12,366,578
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 16.1%
4,250,000 Bear Stearns Commercial Mtge. Securities, Inc.,
Ser. 1999-2, Class A2,
(Est. Maturity 2009)
7.08%, 6/15/2009 (a).............................. 4,240,799
4,000,000 Criimi Mae Commercial Mtge. Trust, Ser. 1998-C1,
Class A2,
(Est. Maturity 2008)
7.00%, 3/2/2011 (a) (c)........................... 3,465,000
4,296,354 Criimi Mae Financial Corp.,
Ser. 1, Class A,
(Est. Maturity 2004)
7.00%, 1/1/2033 (a)............................... 4,086,907
DLJ Commercial Mtge. Corp.:
2,000,000 Ser. 1999-CG1, Class A3,
(Est. Maturity 2009)
6.77%, 2/10/2009 (a)............................... 1,883,450
5,000,000 Ser. 1999-CG, Class B1,
(Est. Maturity 2009)
7.487%, 2/10/2009 (a).............................. 4,702,775
1,000,000 FFCA Secd. Lending Corp.,
Ser. 1997-1, Class B1,
(Est. Maturity 2009)
7.74%, 6/18/2013 (a) (c).......................... 943,906
2,671,063 Financial Asset Securitization, Inc.,
Ser. 1997-NAM2, Class B2,
(Est. Maturity 2008)
7.883%, 7/25/2027 (a)............................. 2,685,080
12,510,527 FNMA,
Ser. 1993-248, Class SA,
(Est. Maturity 2002)
3.906%, 8/25/2023 (a)............................. 10,320,717
3,745,000 GE Capital Mtge. Svcs., Inc.,
Ser. 1994-27, Class A6,
(Est. Maturity 2010)
6.50%, 7/25/2024 (a).............................. 3,349,659
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS - continued
$ 9,516,021 Independent National Mtge. Corp.,
Ser. 1997-A, Class A,
(Est. Maturity 2003)
7.81%, 12/26/2026 (a) (c)........................ $ 8,579,288
Merrill Lynch Mtge. Investors, Inc.,
5,000,000 Ser. 1996-C1, Class B,
(Est. Maturity 2005)
7.42%, 3/25/2026 (a)............................. 4,974,675
767,744 Mid State Trust,
Ser. 6, Class A3,
(Est. Maturity 2005)
7.54%, 7/1/2035 (a).............................. 731,142
Morgan Stanley Capital I, Inc.:
3,300,000 Ser. 1997-C1, Class B,
(Est. Maturity 2007)
7.69%, 1/15/2007 (a).............................. 3,326,317
1,800,000 Ser. 1998-HF2, Class B,
(Est. Maturity 2008)
6.923%, 11/15/2030 (a)............................ 2,282,968
2,300,000 Ser. 1999-1, Class A2,
(Est. Maturity 2009)
7.11%, 7/15/2009.................................. 1,763,775
1,471,958 Oslo Seismic Svcs., Inc.,
1St Pfd. Mtge. Notes,
(Est. Maturity 2006)
8.28%, 6/1/2011.................................. 1,515,970
PNC Mtge. Securities Corp.,:
3,838,864 Ser. 1997-4, Class 2PP1,
(Est. Maturity 2002)
7.50%, 7/25/2027 (a).............................. 3,853,894
2,440,842 Ser. 1997-4, Class 2PP3,
(Est. Maturity 2007)
7.25%, 7/25/2027 (a).............................. 2,359,964
2,912,213 Residental Funding Mtge.
Secs I, Inc., Ser. 1999-S2, Class M1,
(Est. Maturity 2011)
6.50%, 1/25/2029 (a)............................. 2,659,331
141,372 Resolution Trust Corp.,
Ser. 1995-1, Class A2C,
(Est. Maturity 1999),
7.50%, 10/25/2028 (a)............................ 140,979
------------
Total Collateralized Mortgage Obligations
(cost $68,689,558)............................... 67,866,596
------------
CORPORATE BONDS - 39.4%
Advertising & Related Services - 1.4%
1,700,000 Hollinger Int'l. Publishing, Inc.,
Sr. Notes (Subord.),
9.25%, 2/1/2006.................................. 1,674,500
2,300,000 K-III Communications Corp.,
Sr. Notes,
8.50%, 2/1/2006 (c).............................. 2,242,500
1,850,000 TV Guide Inc.,
Sr. Notes (Subord.), Ser. B,
8.125%, 3/1/2009................................. 1,822,250
------------
5,739,250
------------
Automotive Equipment & Manufacturing - 1.2%
1,700,000 Eagle Picher Industries, Inc.,
Sr. Notes (Subord.),
9.375%, 3/1/2008................................. 1,453,500
</TABLE>
23
<PAGE>
EVERGREEN
Diversified Bond Fund
Schedule of Investments(continued)
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Automotive Equipment & Manufacturing - continued
$ 2,000,000 Hayes Wheels Int'l., Inc.,
Sr. Notes (Subord.), Ser. B,
9.125%, 7/15/2007 (c) ......................... $ 1,920,000
2,000,000 Mark IV Inds., Inc.,
Sr. Notes (Subord.),
7.50%, 9/1/2007 (c)............................ 1,857,514
------------
5,231,014
------------
Banks - 3.6%
4,750,000 Amsouth Bancorp.,
Deb. (Subord.),
6.75%, 11/1/2025............................... 4,650,749
9,000,000 Barnett Capital I,
Capital Securities,
8.06%, 12/1/2026............................... 8,645,301
1,850,000 GS Escrow Corp.,
Sr. Notes,
6.75%, 8/1/2001 (c)............................ 1,802,949
------------
15,098,999
------------
Building, Construction &
Furnishings - 1.4%
1,850,000 American Standard, Inc., Shelf 2,
7.375%, 2/1/2008 (f)........................... 1,660,375
2,100,000 MDC Holdings, Inc.,
Sr. Notes,
8.375%, 2/1/2008............................... 1,890,000
500,000 Nortek, Inc.,
Sr. Notes, Ser. B,
8.875%, 8/1/2008............................... 471,250
2,000,000 Standard Pacific Corp.,
Sr. Notes (Subord.),
8.50%, 4/1/2009 (f)............................ 1,810,000
------------
5,831,625
------------
Cable/Other Video Distribution - 1.4%
1,325,000 Adelphia Communications Corp.,
Sr. Notes, Ser. B,
9.875%, 3/1/2007............................... 1,354,812
Comcast Cable Communications:
2,000,000 6.20%, 11/15/2008............................... 1,035,000
1,000,000 9.50%, 1/15/2008................................ 1,844,866
1,550,000 Sinclair Broadcast Group, Inc.,
Sr. Notes (Subord.),
10.00%, 9/30/2005.............................. 1,538,375
------------
5,773,053
------------
Chemical & Agricultural Products - 0.9%
1,600,000 Lyondell Chemical Co.,
Sr. Notes (Subord.),
10.875%, 5/1/2009 (f).......................... 1,600,000
1,000,000 Rohm & Haas Co.,
7.40%, 7/15/2009 (c)........................... 1,014,107
1,400,000 Scotts Co.,
Sr. Notes (Subord.),
8.625%, 1/15/2009 (c).......................... 1,330,000
------------
3,944,107
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Communication Systems &
Services - 0.4%
$ 1,575,000 Bresnan Communications Group,
8.00%, 2/1/2009.................................... $ 1,576,969
------------
Consumer Products & Services - 0.3%
1,275,000 Playtex Family Products Corp.,
Sr. Notes (Subord.),
9.00%, 12/15/2003 (f).............................. 1,246,313
------------
Finance & Insurance - 12.1%
2,500,000 AMBAC Financial Group, Inc.,
Deb.,
9.375%, 8/1/2011................................... 2,930,830
5,000,000 Commercial Credit Co.,
Notes,
10.00%, 5/15/2009.................................. 5,914,730
8,850,000 John Deere Capital Corp.,
Deb.,
8.625%, 8/1/2019................................... 9,054,763
4,000,000 John Hancock Mutual Life Insurance Co., Notes,
7.375%, 2/15/2024 (c) ............................. 3,823,292
3,275,000 Massachusetts Mutual Life Insurance Co.,
Notes,
7.625%, 11/15/2023 (c) ............................ 3,237,203
10,000,000 Nationwide CSN Trust,
Notes,
9.875%, 2/15/2025 (c).............................. 10,623,680
6,300,000 Prudential Life Insurance Corp.,
Notes,
7.125%, 7/1/2007 (c)............................... 6,164,191
10,000,000 SunLife Canada US Capital Trust I,
Capital Securities,
8.526%, 5/29/2049 (c).............................. 9,446,660
------------
51,195,349
------------
Food & Beverage Products - 1.0%
1,450,000 Aurora Foods, Inc.,
Sr. Notes (Subord.), Ser. B,
9.875%, 2/15/2007.................................. 1,486,250
3,000,000 Pepsi Bottling Group, Inc.,
Guaranteed Sr. Notes,
7.00%, 3/1/2029.................................... 2,782,440
------------
4,268,690
------------
Gaming - 1.3%
1,525,000 Boyd Gaming Corp.,
Sr. Notes (Subord.),
9.50%, 7/15/2007................................... 1,484,969
1,150,000 Isle of Capri Casinos, Inc.,
Sr. Notes (Subord.),
8.75%, 4/15/2009................................... 1,043,625
1,200,000 Mohegan Tribal Gaming Auth.,
8.125%, 1/1/2006................................... 1,164,000
Station Casinos, Inc.
Sr. Notes (Subord.),:
500,000 8.875%, 12/1/2008 (c) .............................. 485,000
1,150,000 9.75%, 4/15/2007.................................... 1,167,250
------------
5,344,844
------------
</TABLE>
24
<PAGE>
EVERGREEN
Diversified Bond Fund
Schedule of Investments (continued)
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Iron & Steel - 1.0%
$ 1,275,000 AK Steel Corp.,
Sr. Notes,
7.875%, 2/15/2009................................ $ 1,173,000
1,550,000 National Steel Corp.,
Mtge. Notes, Ser. D,
9.875%, 3/1/2009................................. 1,534,500
1,500,000 WHX Corp.,
Sr. Notes,
10.50%, 4/15/2005 (c) ........................... 1,432,500
------------
4,140,000
------------
Lease Rental Obligations - 1.3%
1,850,000 Budget Group, Inc.,
Sr. Notes,
9.125%, 4/1/2006 (c)(f).......................... 1,609,500
2,500,000 Railcar Leasing LLC,
Sr. Notes, Ser. A2,
7.125%, 1/15/2013 (c)............................ 2,525,112
1,675,000 United Rentals Inc.,
Guaranteed, Ser. B,
9.25%, 1/15/2009................................. 1,549,375
------------
5,683,987
------------
Leisure & Tourism - 0.6%
2,000,000 HMH Properties, Inc.,
Sr. Notes, Ser. C,
8.45%, 12/1/2008................................. 1,800,000
750,000 Outboard Marine Corp.,
Ser. B,
10.75%, 6/1/2008................................. 543,750
------------
2,343,750
------------
Manufacturing - Distributing - 0.4%
1,850,000 Holley Performance Products Inc.,
Sr. Notes,
12.25%, 9/15/2007 (c)............................ 1,748,250
------------
Oil / Energy - 1.2%
1,850,000 Cross Timbers Oil Co.,
Sr. Notes (Subord.), Ser. B,
8.75%, 11/1/2009................................. 1,769,062
1,400,000 Ocean Energy, Inc.,
Sr. Notes (Subord.), Ser. B,
8.375%, 7/1/2008................................. 1,344,000
1,100,000 Triton Energy Ltd. Corp.,
Sr. Notes,
8.75%, 4/15/2002................................. 1,094,500
850,000 Western Gas Resources, Inc.,
Sr. Notes (Subord.),
10.00%, 6/15/2009................................ 875,500
------------
5,083,062
------------
Printing, Publishing, Broadcasting &
Entertainment - 1.6%
1,675,000 Ackerley Group, Inc.,
Sr. Notes (Subord.), Ser. B,
9.00%, 1/15/2009................................. 1,620,562
1,125,000 Big Flower Press Holdings, Inc.,
Sr. Notes (Subord.),
8.625%, 12/1/2008................................ 1,133,438
1,850,000 Carmike Cinemas, Inc.,
Sr. Notes (Subord.), Ser. B,
9.375%, 2/1/2009 (f)............................. 1,734,375
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Printing, Publishing, Broadcasting &
Entertainment - continued
1,100,000 Cinemark USA, Inc.,
Sr. Notes (Subord.), Ser. B,
9.625%, 8/1/2008.................................. $ 984,500
$ 1,275,000 Echostar DBS Corp.,
Sr. Notes,
9.375%, 2/1/2009.................................. 1,270,219
------------
6,743,094
------------
Retailing & Wholesale - 0.6%
1,425,000 Ames Department Stores, Inc.,
Sr. Notes,
10.00%, 4/15/2006................................. 1,396,500
1,275,000 Michaels Stores, Inc.,
Sr. Notes,
10.875%, 6/15/2006................................ 1,351,500
------------
2,748,000
------------
Telecommunication Services & Equipment - 5.0%
5,000,000 AT&T Corp.,
Notes,
6.50%, 3/15/2029.................................. 4,443,070
3,250,000 Bellsouth Capital Funding Corp.,
Deb.,
7.12%, 7/15/2097.................................. 2,958,306
1,000,000 Crown Castle Int'l. Corp.,
Sr. Notes,
9.00%, 5/15/2011 (f).............................. 955,000
1,250,000 Global Crossings Holdings Ltd.,
Sr. Notes,
9.625%, 5/15/2008................................. 1,275,000
1,875,000 Jordan Telecommunication Products, Sr. Notes, Ser.
B,
9.875%, 8/1/2007.................................. 1,771,875
1,500,000 LCI Int'l.,
Sr. Notes,
7.25%, 6/15/2007.................................. 1,471,303
2,350,000 McLeod USA, Inc.,
Sr. Disc. Notes, Step Bond,
(Eff. Yield 8.11%) (b),
0.00%, 3/1/2007................................... 1,868,250
1,425,000 Metromedia Fiber Network, Inc.,
Sr. Notes, Ser. B,
10.00%, 11/15/2008................................ 1,407,188
1,850,000 Nextel Communications Inc.,
Sr. Disc. Notes,
9.75%, 8/15/2004.................................. 1,896,250
1,450,000 Price Communications Wireless, Inc., Sr. Notes,
Ser.B,
9.125%, 12/15/2006 (c)............................ 1,479,000
1,350,000 Williams Communications Group, Inc., Sr. Notes,
10.875%, 10/1/2009................................ 1,390,500
------------
20,915,742
------------
Textile & Apparel - 0.6%
1,325,000 Polymer Group, Inc.,
Sr. Notes (Subord.), Ser. B,
9.00%, 7/1/2007 (c)............................... 1,278,625
1,450,000 Westpoint Stevens, Inc.,
Sr. Notes,
7.875%, 6/15/2005................................. 1,363,000
------------
2,641,625
------------
</TABLE>
25
<PAGE>
EVERGREEN
Diversified Bond Fund
Schedule of Investments (continued)
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Transportation - 1.0%
$ 2,600,000 Burlington Northern Santa Fe Corp., Notes,
6.125%, 3/15/2009 (f)............................. $ 2,397,889
2,000,000 Continental Airlines Inc.,
Passthru Certificate,
Ser. 1999-1, Cl. B,
6.795%, 2/2/2020.................................. 1,871,830
------------
4,269,719
------------
Utilities - 1.1%
850,000 AES Corp.,
Sr. Notes (Subord.),
8.50%, 11/1/2007.................................. 777,750
500,000 Calpine Corp.,
Sr. Notes,
7.625%, 4/15/2006................................. 474,375
2,250,000 Edison Mission Hldgs. Co.,
Sr. Secd. Bond, Ser. A,
8.137%, 10/1/2019................................. 2,149,587
1,400,000 El Paso Energy Corp.,
Sr. Notes,
6.75%, 5/15/2009.................................. 1,332,531
------------
4,734,243
------------
Total Corporate Bonds
(cost $175,014,631)............................... 166,301,685
------------
FOREIGN BONDS (NON U.S. DOLLARS) - 8.1%
Banks - 1.7%
25,798,000 Nykredit,
DKK 6.00%, 10/1/2029.................................. 3,360,631
28,038,000 Realkredit Danmark
DKK 6.00% 10/1/2029................................... 3,634,574
------------
6,995,205
------------
Government - 6.4%
15,000,000 Canada (Government of),
CAD Ser. J34,
11.25%, 12/15/2002................................ 11,702,629
2,000,000 Canada, Quebec (Province of),
CAD 7.50%, 9/15/2029.................................. 2,004,960
4,800,000 Germany (Federal Republic of)
EUR 3.25%, 2/17/2004.................................. 4,782,803
55,020,000 Kingdom of Denmark,
DKK Debs.,
8.00%, 5/15/2003.................................. 8,544,695
------------
27,035,087
------------
Total Foreign Bonds (Non U.S. Dollars) (cost
$34,919,974)...................................... 34,030,292
------------
MORTGAGE-BACKED SECURITIES - 8.8%
8,000,000 FHLMC,
4.75%, 12/14/2001................................. 7,785,368
FNMA
3,244,664 6.50%, 10/1/2028................................... 3,113,839
9,782,622 6.50%, 5/1/2029.................................... 9,383,589
9,223,065 7.00%, 7/1/2028.................................... 9,087,025
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MORTGAGE-BACKED SECURITIES - continued
FNMA - continued
$ 7,965,427 7.00%, 7/1/2029 - 8/1/2029....................... $ 7,828,103
------------
Total Mortgage-Backed Securities
(cost $37,944,256).............................. 37,197,924
------------
MUNICIPAL BONDS - 0.7%
2,801,144 Los Angeles, CA, Impt. Bond,
Act 1915,
Assessment Dist. #1, MTN
8.48%, 9/2/2015 (c) (cost $2,801,144)........... 2,844,621
------------
U.S. TREASURY OBLIGATIONS - 9.3%
32,540,000 U.S. Treasury Bond, STRIPS
(Eff. Yield 8.71%),
0.00%, 11/15/2021 (b)........................... 7,862,445
4,850,000 U.S. Treasury Bonds,
5.25%, 2/15/2029................................ 4,196,768
U.S. Treasury Notes:
7,650,000 5.25%, 5/15/2004................................. 7,432,457
19,900,000 5.50%, 12/31/2000................................ 19,862,687
------------
39,354,357
Total U.S. Treasury Obligations
(cost $39,516,181).............................. 39,354,357
------------
YANKEE OBLIGATIONS - 9.4%
Banks - 0.5%
30,000,000 Skandinaviska Enskilda,
(Eff. Yield 7.14%) (b)
0.00%, 5/26/2033................................ 2,292,000
------------
Cable/Other Video Distribution - 0.3%
1,200,000 Imax Corp.,
Sr. Notes,
7.875%, 12/1/2005............................... 1,122,000
------------
Government - 3.1%
12,000,000 Argentian Republic,
(Eff. Yield 10.49%) (b)
0.00%, 10/15/2003............................... 7,980,000
United Mexican States:
2,500,000 10.38%, 2/17/2009................................ 2,531,375
2,500,000 11.50%, 5/15/2026................................ 2,765,750
------------
13,277,125
------------
Metals & Mining - 0.6%
1,600,000 Bulong Operation Property Ltd.,
Sr. Notes,
12.50%, 12/15/2008 (c).......................... 1,544,000
1,000,000 Great Central Mines Ltd.,
Sr. Notes,
8.875%, 4/1/2008................................ 887,500
------------
2,431,500
------------
Oil/Energy - 3.7%
7,000,000 Golden State Petroleum Trans. Corp.,
1st Mtge. Notes,
8.04%, 2/1/2019 (c)............................. 6,507,172
1,300,000 Gulf Canada Resources Ltd.,
Sr. Notes,
8.35%, 8/1/2006................................. 1,261,000
</TABLE>
26
<PAGE>
EVERGREEN
Diversified Bond Fund
Schedule of Investments(continued)
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
YANKEE OBLIGATIONS - continued
Oil/Energy - continued
$3,000,000 Petroleum Geo-Svcs.,
Notes,
7.50%, 3/31/2007.................................... $ 2,988,615
5,000,000 YPF Sociedad Anonima,
Sr. Notes,
7.25%, 3/15/2003.................................... 4,847,785
------------
15,604,572
------------
Paper & Packaging - 0.4%
1,500,000 Norampac, Inc.,
Sr. Notes,
9.50%, 2/1/2008 (c)................................. 1,537,500
------------
Utilities - 0.8%
3,500,000 TXU Eastern Funding Co.,
6.75%, 5/15/2009 (f)................................ 3,251,259
------------
Total Yankee Obligations
(cost $41,867,706).................................. 39,515,956
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
MUTUAL FUND SHARES - 2.1%
8,861,950 Navigator Prime Portfolio
(cost $8,861,950) (d)............................... $ 8,861,950
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENT - 4.0%
$16,909,000 Evergreen Joint Repurchase Agreement,
Dated 10/29/1999, 5.25%,
maturing, 11/01/1999,
maturity value $16,916,398
cost ($16,909,000) (e)............................ 16,909,000
------------
Total Investments -
(cost $438,674,852)....................... 100.8% 425,248,959
Other Assets
and Liabilities - net..................... (0.8) (3,276,284)
----- ------------
Net Assets................................. 100.0% $421,972,675
===== ============
</TABLE>
(a) The estimated maturity of a Collateralized Mortgage Obligation
("CMO"), an adjustable rate mortgage security or an asset-backed se-
curity is based on current and projected prepayment rates. Changes in
interest rates can cause the estimated maturity to differ from the
listed date.
(b) Effective yield (calculated at the date of purchase) is the yield at
which the bond accretes on an annual basis until maturity date.
(c) Securities that may be resold to "qualified institutional buyers" un-
der Rule 144A or securities offered pursuant to Section 4(2) of the
Securities Act of 1933, as amended. These securities have been deter-
mined to be liquid under guidelines established by the Board of
Trustees.
(d) Represents investment of cash collateral received for securities on
loan (see Note 7).
(e) The repurchase agreement is fully collateralized by U.S. Government
and/or agency obligations based on market prices at October 31, 1999.
(f) All or a portion of this security is currently on loan (see Note 7).
Summary of Abbreviations:
CAD Canadian Dollar
DKK Danish Krone
EUR Euro Dollar
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage Association
MTN Medium Term Notes
STRIPS Separately Traded Registered Interest and Principal Securities
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward foreign currency exchange contracts to sell:
<TABLE>
<CAPTION>
Unrealized
Exchange U.S. $ Value at In Exchange Appreciation
Date Contracts to Deliver October 31, 1999 for U.S. $ (Depreciation)
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
02/01/2000 11,000,000 CAD 7,493,224 7,533,989 40,765
12/14/1999 3,425,000 EUR 3,614,963 3,612,142 (2,821)
01/31/2000 3,000,000 EUR 3,177,259 3,194,910 17,651
------
55,595
======
</TABLE>
See Combined Notes to Financial Statements.
27
<PAGE>
EVERGREEN
High Yield Bond Fund
Schedule of Investments
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - 74.2%
Automotive Equipment & Manufacturing - 2.8%
$ 3,750,000 Eagle Picher Industries, Inc.,
Sr. Notes (Subord.),
9.375%, 3/1/2008 (i)............................. $ 3,206,250
5,833,000 Exide Corp.,
Sr. Notes (Subord.),
2.90%, 12/15/2005 (d)............................ 3,033,160
4,000,000 Oxford Automotive, Inc.,
Sr. Notes, Ser. D,
10.125%, 6/15/2007............................... 3,620,000
------------
9,859,410
------------
Building, Construction &
Furnishings - 0.6%
2,500,000 Del Webb Corp.,
Sr. Debs. (Subord.),
9.375%, 5/1/2009 (i)............................. 2,112,500
------------
Cable/Other Video
Distribution - 3.8%
750,000 Adelphia Communications Corp.,
Sr. Notes, Ser. B,
10.50%, 7/15/2004................................ 787,500
5,000,000 Pegasus Communications Corp.,
Sr. Notes, Ser. B,
9.625%, 10/15/2005 (i)........................... 4,875,000
2,850,000 Telewest Communications Plc,
Sr. Notes (Disc.), Step Bond,
(Eff. Yield 8.49%) (c),
0.00%, 4/15/2009 (d)............................. 1,767,000
10,500,000 United Int'l Holdings, Inc.,
Sr. Disc. Notes, Step Bond, Ser. B, (Eff. Yield
9.29%) (c),
0.00%, 2/15/2008................................. 6,011,250
------------
13,440,750
------------
Chemical & Agricultural
Products - 1.5%
5,250,000 Lyondell Chemical Co.,
Sr. Secd. Notes, Ser. A,
9.625%, 5/1/2007 (i)............................. 5,223,750
------------
Consumer Products &
Services - 2.4%
4,000,000 Affinity Group Hldg., Inc.,
Sr. Notes,
11.00%, 4/1/2007................................. 3,905,000
5,000,000 Unicco Service Co.,
Sr. Notes (Subord.), Ser. B,
9.875%, 10/15/2007............................... 4,525,000
------------
8,430,000
------------
Finance & Insurance - 0.3%
5,000,000 Contifinancial Corp.,
Sr. Notes,
8.375%, 8/15/2003................................ 1,012,500
------------
Food & Beverage Products - 4.1%
4,350,000 AFC Enterprises, Inc.,
Sr. Notes (Subord.),
10.25%, 5/15/2007................................ 4,328,250
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Food & Beverage Products - continued
$ 5,000,000 Aurora Foods, Inc.,
Sr. Notes (Subord.), Ser. D,
9.875%, 2/15/2007................................. $ 5,125,000
5,000,000 Sun World Int'l., Inc.,
1st Mtge. Notes, Ser. B,
11.25%, 4/15/2004................................. 5,043,750
------------
14,497,000
------------
Forest Products - 0.3%
1,000,000 Tembec Inds., Inc.,
8.625%, 6/30/2009................................. 990,000
------------
Gaming - 4.0%
2,000,000 Agrosy Gaming Co.,
Sr. Notes (Subord.),
10.75%, 6/1/2009.................................. 2,067,500
4,000,000 Ameristar Casinos, Inc.,
Sr. Notes (Subord.), Ser. B,
10.50%, 8/1/2004.................................. 4,000,000
4,000,000 Boyd Gaming Corp.,
Sr. Notes (Subord.),
9.50%, 7/15/2007 (i).............................. 3,895,000
2,325,000 Hollywood Park, Inc.,
Sr. Notes (Subord.), Ser. B,
9.25%, 2/15/2007 (i).............................. 2,261,062
2,325,000 Isle of Capri Casinos, Inc.,
Sr. Notes (Subord.),
8.75%, 4/15/2009.................................. 2,109,938
------------
14,333,500
------------
Healthcare Products &
Services - 1.5%
4,000,000 Lifepoint Hospitals Holdings, Inc., Sr. Notes
(Subord.), 10.75%, 5/15/2009 (d).................. 3,950,000
1,500,000 Unilab Fin. Corp.,
Sr. Notes (Subord.), 12.75%, 10/1/2009 (d)........ 1,509,375
------------
5,459,375
------------
Information Services &
Technology - 0.6%
2,200,000 PSInet, Inc.,
Sr. Notes,
11.00%, 8/1/2009 (d).............................. 2,271,500
------------
Iron & Steel - 1.1%
4,000,000 WHX Corp.,
Sr. Notes,
10.50%, 4/15/2005 (i)............................. 3,820,000
------------
Lease Rental Obligations - 2.0%
4,000,000 Budget Group, Inc.,
Sr. Notes,
9.125%, 4/1/2006 (i).............................. 3,480,000
4,000,000 United Rentals, Inc.,
Ser. B,
9.25%, 1/15/2009 (i).............................. 3,700,000
------------
7,180,000
------------
</TABLE>
28
<PAGE>
EVERGREEN
High Yield Bond Fund
Schedule of Investments(continued)
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Leisure & Tourism - 1.8%
$ 3,000,000 Outboard Marine Corp.,
Ser. B,
10.75%, 6/1/2008 (i)............................. $ 2,175,000
5,000,000 Premier Cruise Ltd.,
Sr. Notes,
11.00%, 3/15/2008 (d)(f)......................... 725,000
5,500,000 Premier Parks, Inc.,
Sr. Notes (Disc.), Step Bond, (Eff. Yield
8.43%) (c),
0.00%, 4/1/2008.................................. 3,643,750
------------
6,543,750
------------
Manufacturing - Distributing - 2.1%
4,000,000 Holley Performance Products, Inc.,
Sr. Notes,
12.25%, 9/15/2007 (d)............................ 3,780,000
4,000,000 Transdigm, Inc.,
Sr. Notes (Subord.),
10.375%, 12/1/2008............................... 3,690,000
------------
7,470,000
------------
Metals & Mining - 1.5%
5,000,000 Acme Metals, Inc.,
Sr. Notes,
10.875%, 12/15/2007 (f).......................... 925,000
4,000,000 Kaiser Aluminum & Chemical Corp.,
Sr. Notes (Subord.),
12.75%, 2/1/2003 (i)............................. 3,900,000
5,000,000 NSM Steel, Inc.,
Sr. Mtge. Notes,
12.00%, 2/1/2006 (d)(f).......................... 325,000
------------
5,150,000
------------
Oil/Energy - 6.2%
4,000,000 Benton Oil & Gas Co.,
Sr. Notes,
9.375%, 11/1/2007................................ 2,600,000
4,750,000 Energy Corp. of America,
Sr. Notes (Subord.), Ser. A,
9.50%, 5/15/2007 (i)............................. 2,398,750
4,850,000 Giant Industries, Inc.,
Sr. Notes (Subord.),
9.00%, 9/1/2007.................................. 4,413,500
2,000,000 Houston Exploration Co.,
Sr. Notes (Subord.), Ser. B,
8.625%, 1/1/2008................................. 1,920,000
4,000,000 Nationsrent, Inc.,
Sr. Notes,
10.375%, 12/15/2008 (i).......................... 3,870,000
2,300,000 Nuevo Energy Co.,
Sr. Notes (Subord.),
9.50%, 6/1/2008 (d).............................. 2,265,500
2,350,000 Petsec Energy, Inc.,
Sr. Notes (Subord.), Ser. B,
9.50%, 6/15/2007................................. 1,139,750
2,000,000 Triton Energy Corp.,
Sr. Notes,
9.25%, 4/15/2005................................. 1,980,000
1,500,000 Western Gas Resources, Inc.,
Sr. Notes (Subord.),
10.00%, 6/15/2009 (d)............................ 1,545,000
------------
22,132,500
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Paper & Packaging - 2.8%
$ 3,100,000 Packaging Corp. America,
Sr. Notes (Subord.),
9.625%, 4/1/2009 (d)............................. $ 3,131,000
2,000,000 Repap New Brunswick, Inc.,
Sr. Secd. Notes,
11.50%, 6/1/2004 (d)............................. 2,010,000
5,000,000 Riverwood Int'l. Corp.,
Sr. Notes,
10.25%, 4/1/2006 (i)............................. 4,975,000
------------
10,116,000
------------
Printing, Publishing, Broadcasting &
Entertainment - 5.6%
4,300,000 Acme Television LLC,
Sr. Disc. Notes, Step Bond, Ser. B, (Eff. Yield
10.47%) (c),
0.00%, 9/30/2004................................. 3,773,250
5,000,000 American Lawyer Media, Inc.,
Sr. Notes (Subord.), Ser. B,
9.75%, 12/15/2007................................ 4,675,000
5,000,000 Cinemark USA, Inc.,
Sr. Notes (Subord.), Ser. B,
9.625%, 8/1/2008 (i)............................. 4,475,000
7,000,000 Echostar DBS Corp.,
Sr. Notes,
9.375%, 2/1/2009................................. 6,973,750
------------
19,897,000
------------
Retailing & Wholesale - 2.1%
4,000,000 Ames Department Stores, Inc.,
Sr. Notes,
10.00%, 4/15/2006 (i)............................ 3,920,000
3,200,000 Michaels Stores, Inc.,
Sr. Notes,
10.875%, 6/15/2006............................... 3,392,000
------------
7,312,000
------------
Telecommunication Services & Equipment - 22.7%
4,390,000 21st Century Telecom Group, Inc.,
Sr. Disc. Notes, Step Bond, (Eff. Yield
18.53%), (c)
0.00%, 2/15/2008................................. 1,975,500
3,000,000 Amsc Acquisition Co., Inc.,
Sr. Secd. Notes, Ser. B,
12.25%, 4/1/2008................................. 1,695,000
2,000,000 Crown Castle Int'l. Corp.,
Sr. Notes,
9.00%, 5/15/2011 (i)............................. 1,910,000
6,000,000 Intercel, Inc.,
Sr. Notes (Disc.), Step Bond, (Eff. Yield
10.10%) (c),
0.00%, 2/1/2006.................................. 5,235,000
8,625,000 Intermedia Communications, Inc.,
Sr. Disc. Notes, Step Bond, Ser. B , (Eff. Yield
8.72%) (c),
0.00%, 7/15/2007 (i)............................. 6,015,937
5,000,000 Jordan Telecommunication Products,
Sr. Notes, Ser. B,
9.875%, 8/1/2007................................. 4,725,000
7,000,000 Level 3 Communications, Inc.,
Sr. Notes,
9.125%, 5/1/2008 (i)............................. 6,562,500
</TABLE>
29
<PAGE>
EVERGREEN
High Yield Bond Fund
Schedule of Investments(continued)
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Telecommunication Services & Equipment - continued
$ 6,186,000 McLeod USA, Inc.,
Sr. Disc. Notes, Step Bond, (Eff. Yield 8.11%)
(c),
0.00%, 3/1/2007 (i)............................... $ 4,917,870
4,000,000 Metromedia Fiber Network, Inc.,
Sr. Notes, Ser. B,
10.00%, 11/15/2008................................ 3,950,000
5,700,000 Microcell Telecommunications, Inc.,
Sr. Disc. Notes, Step Bond, (Eff. Yield 11.86%)
(c),
0.00%, 6/1/2009 (i)............................... 3,462,750
Nextel Communications, Inc.:
7,000,000 Sr. Disc. Notes, Step Bond, (Eff. Yield 9.52%) (c),
0.00%, 2/15/2008 (i)............................... 5,005,000
2,000,000 Sr. Disc. Notes,
9.75%, 8/15/2004................................... 2,050,000
5,500,000 Nextlink Communications, Inc.,
Sr. Disc. Notes, Step Bond,
(Eff. Yield 12.03%) (c),
0.00%, 6/1/2009 (i)............................... 3,245,000
2,000,000 Orbcomm Global LP,
Sr. Notes, Ser. B,
14.00%, 8/15/2004 (i)............................. 1,650,000
5,000,000 Price Communications Wireless, Inc.,
Sr. Notes (Subord.),
11.75%, 7/15/2007................................. 5,487,500
5,000,000 RCN Corp.,
Sr. Disc. Notes, Step Bond, (Eff. Yield 9.53%)
(c),
0.00%, 10/15/2007................................. 3,487,500
5,000,000 Rural Cellular Corp.,
Sr. Notes (Subord.), Ser. B,
9.625%, 5/15/2008................................. 5,150,000
2,425,000 Tritel PCS, Inc.,
Sr. Disc. Notes, Step Bond, (Eff. Yield 12.75%)
(c),
0.00%, 5/15/2009 (d).............................. 1,467,125
3,325,000 Triton PCS, Inc.,
Step Bond,
(Eff. Yield 10.26%) (c),
0.00%, 5/1/2008................................... 2,294,250
6,500,000 Williams Communications Group, Inc.,
Sr. Notes,
10.875%, 10/1/2009 (i)............................ 6,695,000
4,000,000 Winstar Communications, Inc.,
Sr. Notes (Subord.),
10.00%, 3/15/2008................................. 3,450,000
------------
80,430,932
------------
Textile & Apparel - 1.5%
2,660,000 Delta Mills, Inc.,
Sr. Notes, Ser. B,
9.625%, 9/1/2007.................................. 2,008,300
3,200,000 Simmons Co.,
Sr. Notes (Subord.), Ser. B,
10.25%, 3/15/2009 (i)............................. 3,160,000
------------
5,168,300
------------
Transportation - 1.3%
$ 5,000,000 American Commercial Lines LLC,
Sr. Notes, Ser. B,
10.25%, 6/30/2008 (i)............................. 4,725,000
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Water & Sewer - 1.6%
Allied Waste North America, Inc.:
$ 1,925,000 Sr. Notes, Ser. B,
7.625%, 1/1/2006 (i).............................. $ 1,669,938
4,600,000 Sr. Notes (Subord.),
10.00%, 8/1/2009 (d).............................. 3,915,750
------------
5,585,688
------------
Total Corporate Bonds
(cost $296,521,318).............................. 263,161,455
------------
FOREIGN BONDS (NON U.S. DOLLARS) - 0.7%
Telecommunication Services & Equipment - 0.7%
2,500,000 NTL Communications Co.,
GBP 9.75%, 4/15/2009
(cost $2,621,033)................................. 2,331,289
------------
YANKEE OBLIGATIONS - 11.5%
Cable/Other Video Distribution - 1.0%
4,000,000 Imax Corp.,
Sr. Notes,
7.875%, 12/1/2005 (i)............................ 3,740,000
------------
Finance & Insurance - 1.2%
4,500,000 Ono Finance, PLC,
Note,
13.00%, 5/1/2009 (d)............................. 4,432,500
------------
Metals & Mining - 1.9%
4,000,000 Bulong Operation Property Ltd.,
Sr. Notes,
12.50%, 12/15/2008............................... 3,860,000
3,250,000 Great Central Mines Ltd.,
Sr. Notes,
8.875%, 4/1/2008................................. 2,884,375
------------
6,744,375
------------
Paper & Packaging - 1.2%
4,100,000 Norampac, Inc.,
Sr. Notes,
9.50%, 2/1/2008 (i).............................. 4,202,500
------------
Telecommunication Services & Equipment - 6.2%
3,000,000 Alestra SA de RL de CV,
Sr. Notes,
12.125%, 5/15/2006 (d)........................... 2,917,500
9,500,000 Clearnet Communications, Inc.,
Sr. Disc. Notes, Step Bond,
(Eff. Yield 9.72%) (c),
0.00%, 12/15/2005................................ 9,036,875
4,000,000 Hermes Europe Railtel BV,
Sr. Notes,
10.375%, 1/15/2009............................... 3,800,000
5,000,000 Star Choice Communications,
Sr. Secd. Notes,
13.00%, 12/15/2005............................... 5,000,000
1,000,000 Telewest Communication PLC,
Sr. Notes,
11.25%, 11/1/2008................................ 1,077,500
------------
21,831,875
------------
Total Yankee Obligations
(cost $41,984,710)............................... 40,951,250
------------
</TABLE>
30
<PAGE>
EVERGREEN
High Yield Bond Fund
Schedule of Investments (continued)
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 4.5%
Electronic Equipment &
Services - 0.4%
642,071 Ampex Corp., Class A (a)(b)........................ $ 1,565,048
------------
Food & Beverage Products - 0.0%(g)
131,250 Specialty Foods Acquisition Corp., (a)............. 2,625
------------
Gaming - 1.1%
254,790 Isle of Capri Casinos, Inc., (a)(i)................ 3,025,631
100,463 JCC Holding Co., Class A........................... 891,609
------------
3,917,240
------------
Telecommunication Services & Equipment - 3.0%
2,570 AT & T Canada, Inc.,
Class B Deposit Receipts.......................... 82,883
33,912 Destia Communications, Inc., (a)................... 474,768
33,296 Nextel Communications, Inc., Class A (a)(d)(i)..... 2,869,699
326,906 Price Communications Corp. ........................ 7,110,205
------------
10,537,555
------------
Total Common Stocks
(cost $15,962,839)................................ 16,022,468
------------
PREFERRED STOCKS - 6.5%
Cable/Other Video
Distribution - 0.9%
28,500 Adelphia Communications Corp.,
Ser. B (d)........................................ 3,142,125
------------
Electronic Equipment & Services - 2.7%
Ampex Corp.,
1,510 Convertible Preferred
Stock (a)(h)....................................... 2,265,000
7,137 Redeemable Preferred
Stock (a)(h)....................................... 7,448,815
------------
9,713,815
------------
Engineering - 2.0%
67,605 CSC Holdings, Inc.,
Ser. M (a)........................................ 7,284,439
------------
Finance & Insurance - 0.4%
12,800 Sinclair Capital Corp., (d)........................ 1,283,200
------------
Printing, Publishing, Broadcasting &
Entertainment - 0.5%
20,000 Primedia, Inc.,
Ser. F (a)........................................ 1,830,000
------------
Total Preferred Stocks
(cost $20,141,718)................................ 23,253,579
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
WARRANTS - 0.2%
Aerospace & Defense - 0.0%(g)
76,000 CHC Helicopter Corp.,
Warrants,
expiring, 12/15/2000 (a)........................... $ 76,000
------------
Automotive Equipment & Manufacturing - 0.0%(g)
9,500 Chatwins Group, Inc.,
Warrants,
expiring, 5/3/2003 (a)............................. 0
------------
Communication Systems & Services - 0.0%(g)
3,000 American Mobile Satellite Corp.,
Warrants,
expiring, 4/1/2008 (a)(d).......................... 54,375
------------
Finance & Insurance - 0.0%(g)
4,500 Ono Finance, PLC,
Warrants,
expiring, 5/31/2009 (a)............................ 27,000
------------
Gaming - 0.1%
50,424 Isle of Capri Casinos, Inc.,
Warrants,
expiring, 3/5/2001 (a)(b).......................... 239,514
------------
Telecommunication Services & Equipment - 0.1%
115,800 Star Choice Communications,
Warrants, expiring, 12/15/2005 (a)................. 259,624
------------
Total Warrants
(cost $472,466).................................... 656,513
------------
MUTUAL FUND SHARES - 13.1%
46,457,304 Navigator Prime Portfolio,
(cost $46,457,304) (j)............................. 46,457,304
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENT - 1.1%
$ 3,861,000 Evergreen Joint Repurchase Agreement,
Dated 10/29/1999, 5.25%,
maturing 11/1/1999,
maturity value $3,862,689
(cost $3,861,000) (e).............................. 3,861,000
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $428,022,388)....................... 111.8% 396,694,858
Other Assets and Liabilities - net......... (11.8) (41,959,314)
------ ------------
Net Assets................................. 100.0% $354,735,544
====== ============
</TABLE>
31
<PAGE>
EVERGREEN
High Yield Bond Fund
Schedule of Investments(continued)
October 31, 1999 (Unaudited)
(a) Non-income producing.
(b) All or a portion of these securities are illiquid securities, and are val-
ued using market quotations where readily available. In the absence of mar-
ket quotations, the securities are valued based upon their fair value de-
termined under procedures approved by the Board of Trustees. The Fund may
make investments in an amount up to 15% of the value of the Fund's net as-
sets in such securities.
(c) Effective yield (calculated at the date of purchase) is the yield at which
the bond accretes on an annual basis until maturity date.
(d) Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to Section 4(2) of the Securities
Act of 1933, as amended. These securities have been determined to be liquid
under guidelines established by the Board of Trustees.
(e) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at October 31, 1999.
(f) This obligation has filed Chapter 11 bankruptcy and has discontinued ac-
crual of interest income.
(g) Less than 1/10th of one percent of net assets.
(h) Security has been fair valued in accord with procedures established by the
Board of Trustees.
(i) All or a portion of this security is currently on loan. (See Note 7)
(j) Represents investment of cash collateral received for securities on loan.
(See Note 7)
Summary of Abbreviations:
GBP Pounds Sterling
See Combined Notes to Financial Statements.
32
<PAGE>
EVERGREEN
Strategic Income Fund
Schedule of Investments
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - 0.7%
$ 1,850,000 PNC Student Loan Trust,
Ser. 97-2, Class A7,
6.728%, 1/25/2007
(cost $1,850,000)................................. $ 1,838,724
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.6%
1,903,204 Independent National Mtge. Corp.,
Ser. 1997-A, Class A,
(Est. Maturity 2003) (d),
7.81%, 12/26/2026
(cost $1,903,053) (h)............................. 1,715,858
------------
CORPORATE BONDS - 36.8%
Automotive Equipment & Manufacturing - 0.8%
1,000,000 Exide Corp.,
Sr. Notes (Subord.),
2.90%, 12/15/2005 (d)............................. 520,000
2,000,000 Oxford Automotive, Inc.,
Sr. Notes, Ser. D,
10.125%, 6/15/2007................................ 1,810,000
------------
2,330,000
------------
Building, Construction & Furnishings - 0.6%
2,000,000 Del Webb Corp.,
Sr. Debs. (Subord.),
9.375%, 5/1/2009 (f).............................. 1,690,000
------------
Cable/Other Video Distribution - 1.5%
250,000 Adelphia Communications Corp.,
Sr. Notes, Ser. B,
10.50%, 7/15/2004................................. 262,500
2,000,000 Lenfest Communications, Inc.,
Sr. Notes,
8.375%, 11/1/2005................................. 2,060,000
1,000,000 Pegasus Communications Corp.,
Sr. Notes, Ser. B,
9.625%, 10/15/2005................................ 975,000
1,000,000 Sinclair Broadcast Group, Inc.,
Sr. Notes (Subord.),
10.00%, 9/30/2005................................. 992,500
------------
4,290,000
------------
Chemical & Agricultural Products - 1.6%
2,000,000 Huntsman ICI Chemicals, Inc.,
Sr. Notes (Subord.),
10.125%, 7/1/2009 (d)............................. 2,000,000
2,500,000 Lyondell Chemical Co.,
Sr. Secd. Notes, Ser. A,
9.625%, 5/1/2007.................................. 2,487,500
------------
4,487,500
------------
Consumer Products & Services - 0.2%
1,000,000 MTS, Inc.,
Sr. Notes (Subord.),
9.375%, 5/1/2005.................................. 700,000
------------
Finance & Insurance - 0.7%
1,500,000 Americo Life, Inc.,
Sr. Notes (Subord.),
9.25%, 6/1/2005................................... 1,477,500
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Finance & Insurance - continued
$ 2,000,000 Contifinancial Corp.,
Sr. Notes,
8.375%, 8/15/2003.................................. $ 405,000
------------
1,882,500
------------
Food & Beverage Products - 0.6%
825,000 AFC Enterprises, Inc.,
Sr. Notes (Subord.),
10.25%, 5/15/2007.................................. 820,875
1,000,000 Sun World Int'l., Inc.,
1st Mtge. Notes, Ser. B,
11.25%, 4/15/2004.................................. 1,008,750
------------
1,829,625
------------
Forest Products - 0.2%
500,000 Tembec Inds., Inc.,
8.625%, 6/30/2009.................................. 495,000
------------
Gaming - 2.8%
2,000,000 Ameristar Casinos, Inc.,
Sr. Notes (Subord.), Ser. B,
10.50%, 8/1/2004................................... 2,000,000
2,000,000 Boyd Gaming Corp.,
Sr. Notes (Subord.),
9.50%, 7/15/2007................................... 1,947,500
1,500,000 Hollywood Casino Shreveport,
1st Mtge. Note,
13.00%, 8/1/2006 (d)............................... 1,560,000
1,000,000 Hollywood Park, Inc.,
Sr. Notes (Subord.), Ser. B,
9.25%, 2/15/2007................................... 972,500
1,500,000 Isle of Capri Casinos, Inc.,
Sr. Notes (Subord.),
8.75%, 4/15/2009................................... 1,361,250
------------
7,841,250
------------
Healthcare Products & Services - 0.5%
1,470,000 Lifepoint Hospitals Holdings, Inc.,
Sr. Notes (Subord.),
10.75%, 5/15/2009 (d).............................. 1,451,625
------------
Information Services & Technology - 0.8%
1,100,000 PSInet, Inc.,
Sr. Notes,
11.00%, 8/1/2009 (d)............................... 1,135,750
1,000,000 Unisys Corp.,
Sr. Notes,
11.75%, 10/15/2004................................. 1,110,000
------------
2,245,750
------------
Iron & Steel - 0.5%
1,500,000 National Steel Corp.,
Mtge. Notes, Ser. D,
9.875%, 3/1/2009 (f)............................... 1,485,000
------------
Lease Rental Obligations - 1.3%
2,000,000 Budget Group, Inc.,
Sr. Notes,
9.125%, 4/1/2006 (f)............................... 1,740,000
2,000,000 United Rentals, Inc.,
Ser. B,
9.25%, 1/15/2009................................... 1,850,000
------------
3,590,000
------------
</TABLE>
33
<PAGE>
EVERGREEN
Strategic Income Fund
Schedule of Investments(continued)
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Leisure & Tourism - 0.7%
$ 1,300,000 Outboard Marine Corp.,
Ser. B,
10.75%, 6/1/2008 (f).............................. $ 942,500
1,000,000 Premier Cruise Ltd.,
Sr. Notes,
11.00%, 3/15/2008 (d) (e)......................... 145,000
1,000,000 Prime Hospitality Corp.,
Sr. Notes (Subord.), Ser. B,
9.75%, 4/1/2007................................... 915,000
------------
2,002,500
------------
Manufacturing - Distributing - 0.7%
2,000,000 Holley Performance Products, Inc.,
Sr. Notes,
12.25%, 9/15/2007 (d)............................. 1,890,000
------------
Metals & Mining - 0.5%
2,000,000 Acme Metals, Inc.,
Sr. Notes,
10.875%, 12/15/2007 (e)........................... 370,000
1,000,000 Bethlehem Steel Corp.,
Sr. Notes,
10.375%, 9/1/2003 (f)............................. 1,012,500
2,000,000 NSM Steel, Inc.,
Sr. Mtge. Notes,
12.00%, 2/1/2006 (d)(e)........................... 130,000
------------
1,512,500
------------
Oil/Energy - 1.9%
1,000,000 Benton Oil & Gas Co.,
Sr. Notes,
9.375%, 11/1/2007................................. 650,000
1,000,000 Energy Corp. of America,
Sr. Notes (Subord.), Ser. A,
9.50%, 5/15/2007.................................. 505,000
1,000,000 Houston Exploration Co.,
Sr. Notes (Subord.), Ser. B,
8.625%, 1/1/2008.................................. 960,000
1,175,000 Nuevo Energy Co.,
Sr. Notes (Subord.)
9.50%, 6/1/2008 (d),.............................. 1,157,375
2,500,000 Petsec Energy, Inc.,
Sr. Notes (Subord.), Ser. B,
9.50%, 6/15/2007.................................. 1,212,500
950,000 Triton Energy, Ltd./Corp.,
Sr. Notes,
9.25%, 4/15/2005.................................. 940,500
------------
5,425,375
------------
Paper & Packaging - 1.5%
2,000,000 Repap New Brunswick, Inc.,
Sr. Secd. Notes,
11.50%, 6/1/2004 (d).............................. 2,010,000
2,000,000 Stone Container Fin. Co.,
Sr. Notes,
11.50%, 8/15/2006 (d)............................. 2,110,000
------------
4,120,000
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Printing, Publishing, Broadcasting &
Entertainment - 4.2%
$ 600,000 Ackerley Group, Inc.,
Sr. Notes (Subord.), Ser. B,
9.00%, 1/15/2009 (f)............................ $ 580,500
1,150,000 Acme Television LLC,
Sr. Disc. Notes, Step Bond, Ser. B,
(Eff. Yield 10.39%) (c),
0.00%, 9/30/2004................................ 1,009,125
1,500,000 American Lawyer Media, Inc.,
Sr. Notes (Subord.), Ser. B,
9.75%, 12/15/2007............................... 1,402,500
1,000,000 Big Flower Press Holdings, Inc.,
Sr. Notes (Subord.),
8.625%, 12/1/2008............................... 1,007,500
500,000 Cinemark USA, Inc.,
Sr. Notes (Subord.), Ser. B,
9.625%, 8/1/2008................................ 447,500
2,000,000 Echostar DBS Corp.,
Sr. Notes,
9.375%, 2/1/2009................................ 1,992,500
2,000,000 Loews Ciniplex Entertainment Corp.,
Sr. Notes (Subord.),
8.875%, 8/1/2008................................ 1,820,000
2,000,000 Pegasus Communications Corp.,
Sr. Notes,
9.75%, 12/1/2006................................ 1,950,000
564,000 SFX Broadcasting, Inc.,
Sr. Notes (Subord.), Ser. B,
10.75%, 5/15/2006 (f)........................... 624,630
1,000,000 SFX Entertainment, Inc.,
Sr. Notes (Subord.),
9.125%, 12/1/2008............................... 915,000
------------
11,749,255
------------
Retailing & Wholesale - 1.4%
2,000,000 Advance Stores, Inc.,
Sr. Notes (Subord.),
10.25%, 4/15/2008............................... 1,850,000
2,000,000 Ames Department Stores, Inc.,
Sr. Notes,
10.00%, 4/15/2006 (f)........................... 1,960,000
------------
3,810,000
------------
Telecommunication Services & Equipment - 9.4%
2,200,000 21st Century Telecom Group, Inc.,
Sr. Disc. Notes, Step Bond,
(Eff. Yield 16.07%) (c),
12.25%, 2/15/2008............................... 990,000
1,000,000 Hyperion Telecommunications, Inc.,
Sr. Disc. Notes, Step Bond,
(Eff. Yield 11.22%) (c),
0.00%, 4/15/2003................................ 862,500
2,000,000 Intermedia Communications, Inc.,
Sr. Disc. Notes, Step Bond, Ser. B,
(Eff. Yield 9.93%) (c),
0.00%, 7/15/2007................................ 1,395,000
2,000,000 Jordan Telecommunication Products,
Sr. Notes, Ser. B,
9.875%, 8/1/2007................................ 1,890,000
</TABLE>
34
<PAGE>
EVERGREEN
Strategic Income Fund
Schedule of Investments(continued)
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Telecommunication Services & Equipment - continued
$ 2,500,000 Level 3 Communications, Inc.,
Sr. Notes,
9.125%, 5/1/2008................................... $ 2,343,750
850,000 McLeod USA, Inc.,
Sr. Disc. Notes, Step Bond,
(Eff. Yield 8.09%) (c),
0.00%, 3/1/2007.................................... 675,750
1,500,000 Microcell Telecommunications, Inc.,
Sr. Disc. Notes, Step Bond,
(Eff. Yield 10.68%) (c),
0.00%, 6/1/2009.................................... 911,250
Nextel Communications, Inc.
Sr. Disc. Notes, Step Bond
2,400,000 (Eff. Yield 7.29%) (c)
0.00%, 8/15/2004,................................... 2,460,000
2,000,000 (Eff. Yield 9.56%) (c)(d),
0.00%, 2/15/2008.................................... 1,430,000
2,700,000 Nextlink Communications, Inc.,
Sr. Disc. Notes, Step Bond,
(Eff. Yield 10.78%) (c),
0.00%, 6/1/2009.................................... 1,593,000
1,500,000 Price Communications Wireless, Inc.,
Sr. Notes (Subord.),
11.75%, 7/15/2007.................................. 1,646,250
2,500,000 RCN Corp.,
Sr. Disc. Notes, Step Bond,
(Eff. Yield 10.58%) (c),
0.00%, 10/15/2007.................................. 1,743,750
2,500,000 Rural Cellular Corp.,
Sr. Notes (Subord.), Ser. B,
9.625%, 5/15/2008.................................. 2,575,000
1,125,000 Tritel PCS, Inc.,
Sr. Disc. Notes, Step Bond,
(Eff. Yield 11.42%), (c)
0.00%, 5/15/2009 (d)............................... 680,625
1,775,000 Triton PCS, Inc.,
Step Bond, (Eff. Yield 10.26%) (c),
0.00%, 5/1/2008.................................... 1,224,750
2,500,000 Williams Communications Group, Inc.,
Sr. Notes,
10.875%, 10/1/2009................................. 2,575,000
1,900,000 Winstar Communications, Inc.,
Sr. Notes (Subord.),
10.00%, 3/15/2008.................................. 1,638,750
------------
26,635,375
------------
Textile & Apparel - 0.2%
750,000 Delta Mills, Inc.,
Sr. Notes, Ser. B,
9.625%, 9/1/2007................................... 566,250
------------
Transportation - 2.4%
2,000,000 American Commercial Lines LLC,
Sr. Notes, Ser. B,
10.25%, 6/30/2008.................................. 1,890,000
Piedmont Aviation, Inc.:
852,000 9.90%, 1/15/2001.................................... 890,836
1,389,000 10.15%, 3/28/2003................................... 1,425,725
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Transportation - continued
$ 2,050,000 Sea Containers Ltd.,
Sr. Notes, Ser. B,
7.875%, 2/15/2008................................ $ 1,773,250
896,000 USAir, Inc.,
Ser. 88-B,
9.90%, 1/15/2001................................. 908,030
------------
6,887,841
------------
Utilities - 1.2%
1,000,000 Cleveland Elec. Illuminating Co.,
1st Mtge. Notes, Ser. B,
9.50%, 5/15/2005................................. 1,047,446
2,218,808 Tucson Elec.,
Ser. B,
10.211%, 1/1/2009................................ 2,374,125
------------
3,421,571
------------
Water & Sewer - 0.6%
2,000,000 Allied Waste North America, Inc.,
Sr. Notes, Ser. B,
7.625%, 1/1/2006................................. 1,735,000
------------
Total Corporate Bonds
(cost $114,223,599).............................. 104,073,917
------------
FOREIGN BONDS (NON U.S. DOLLARS) - 21.9%
Banks - 3.4%
400,000 European Investment Bank,
GBP Bonds,
7.625%, 12/7/2006................................ 689,618
63,678,000 Realkredit Danmark,
DKK Bonds,
7.00%, 10/1/2029................................. 8,816,018
------------
9,505,636
------------
Finance & Insurance - 0.8%
3,000,000 CEI Citicorp Holdings,
ARS 11.25%, 2/14/2007................................ 2,341,100
------------
Government - 15.7%
6,650,000 Canada (Government of),
CAD Ser. J34,
11.25%, 12/15/2002............................... 5,188,166
Canada, Quebec (Province of):
6,000,000 Debs.,
CAD 9.38%, 1/16/2023.................................. 5,232,217
13,200,000 Debs.,
CAD 7.75%, 3/30/2006.................................. 9,609,212
1,418,000,000 Greece, (Republic of),
GRD Debs.,
8.80%, 6/19/2007................................. 4,929,384
Italy (Republic of):
3,406,027 Debs.,
EUR 6.75%, 2/1/2007................................... 3,887,153
6,450,000 Debs.,
EUR 9.00%, 10/1/2003.................................. 7,753,927
570,683 Debs.,
EUR 9.50%, 2/1/2006................................... 736,955
Poland (Government of),
30,000,000 12.00%,
PLN 10/12/2001 - 10/12/2003........................... 6,745,468
</TABLE>
35
<PAGE>
EVERGREEN
Strategic Income Fund
Schedule of Investments(continued)
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
FOREIGN BONDS (NON U.S. DOLLARS) - continued
Government - continued
155,301 Spain (Government of),
EUR Debs.,
5.00%, 1/31/2001.................................. $ 165,640
------------
44,248,122
------------
Telecommunication Services & Equipment - 1.3%
3,500,000 NTL, Inc.,
GBP Sr. Notes,
10.75%, 4/1/2008.................................. 3,738,278
------------
Transportation - 0.7%
2,000,000 Hermes Europe Railtel,
EUR Bonds,
10.375%, 1/15/2006................................ 2,114,218
------------
Total Foreign Bonds (Non U.S. Dollars)
(cost $66,076,467)................................ 61,947,354
------------
MORTGAGE-BACKED SECURITIES - 13.9%
FHLMC:
$ 1,723,748 6.95%, 4/1/2022.................................... 1,747,035
1,680,750 7.00%, 5/1/2011 - 12/1/2011........................ 1,683,625
FNMA:
7,559,481 6.00%, 8/1/2028.................................... 7,054,885
25,704,988 6.50%, 8/1/2028 - 9/1/2028......................... 24,668,563
1,190,958 6.73%, 9/1/2021.................................... 1,207,774
106,324 7.00%, 11/1/2027................................... 104,558
2,793,101 GNMA,
6.50%, 7/15/2009.................................. 2,754,444
------------
Total Mortgage-Backed Securities
(cost $40,506,700)................................ 39,220,884
------------
U.S. TREASURY OBLIGATIONS - 10.2%
7,545,000 U.S. Treasury Bonds,
5.25%, 2/15/2029.................................. 6,528,787
U.S. Treasury Notes:
17,900,000 5.50%, 12/31/2000.................................. 17,866,437
3,750,000 5.63%, 5/15/2008................................... 3,618,750
850,000 6.00%, 8/15/2009................................... 849,204
------------
Total U.S. Treasury Obligations
(cost $29,064,300)................................ 28,863,178
------------
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCK - 2.7%
Electronic Equipment & Services - 0.1%
143,220 Ampex Corp., Class A (a)........................... 349,099
------------
Gaming - 0.5%
104,514 Isle of Capri Casinos, Inc. (f).................... 1,241,104
29,167 JCC Holding Co., Class A........................... 258,857
------------
1,499,961
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCK - continued
Telecommunication Services & Equipment - 2.1%
15,098 Nextel Communications, Inc.,
Class A (a) (f)................................... $ 1,301,259
207,611 Price Communications Corp.......................... 4,515,539
------------
5,816,798
------------
Total Common Stock
(cost $7,040,180)................................. 7,665,858
------------
WARRANTS - 0.0% (i)
Finance & Insurance - 0.0% (i)
2,000 Ono Finance, PLC,
expiring, 5/31/2009 (a)........................... 12,000
------------
Gaming - 0.0% (i)
19,582 Isle of Capri Casinos, Inc.,
expiring, 3/5/2001 (a)............................ 93,014
------------
Total Warrants
(cost $84,760).................................... 105,014
------------
PREFERRED STOCK - 0.2%
Electronic Equipment & Services - 0.2%
628 Ampex Corp.,
Redeemable Preferred Stock (a) (cost $598,610).... 655,437
------------
<CAPTION>
Principal
Amount Value
<C> <S> <C>
YANKEE OBLIGATIONS - 10.2%
Finance & Insurance - 0.9%
$ 2,000,000 Ono Finance, PLC,
Notes,
13.00%, 5/1/2009 (d).............................. 1,970,000
800,000 PTC Int'l Fin. BV,
Sr. Disc. Notes (Subord.), Step Bond, (Eff. Yield
10.14%) (c),
0.00%, 7/1/2002................................... 548,000
------------
2,518,000
------------
Government - 5.1%
422,400 Argentina (Republic of),
6.812%, 3/31/2000................................. 377,140
Brazil (Fed. Rep. of)
4,112,500 5.88%, 4/15/2006................................... 3,358,267
4,852,837 8.00%, 4/15/2014................................... 3,236,357
1,000,000 11.63%, 4/15/2004.................................. 943,500
United Mexican States
2,000,000 11.38%, 9/15/2016.................................. 2,120,000
4,000,000 11.50%, 5/15/2026.................................. 4,425,200
------------
14,460,464
------------
Metals & Mining - 1.1%
2,000,000 Bulong Operation Property Ltd.,
Sr. Notes,
12.50%, 12/15/2008................................ 1,930,000
1,340,000 Great Central Mines Ltd.,
Sr. Notes,
8.875%, 4/1/2008.................................. 1,189,250
------------
3,119,250
------------
</TABLE>
36
<PAGE>
EVERGREEN
Strategic Income Fund
Schedule of Investments(continued)
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
YANKEE OBLIGATIONS - continued
Oil/Energy - 0.7%
$ 2,000,000 Petroleos Mexicanos,
9.375%, 12/2/2008 (d)............................. $ 2,035,000
------------
Paper & Packaging - 0.7%
2,000,000 Grupo Int'l. Durango S.A.,
Notes,
12.625%, 8/1/2003 (f)............................. 1,945,000
------------
Printing, Publishing, Broadcasting &
Entertainment - 0.7%
4,000,000 TV Bandeirantes,
Sr. Notes,
12.875%, 5/15/2006 (d)............................ 1,830,000
------------
Telecommunication Services & Equipment - 1.0%
1,000,000 Alestra SA de RL de CV,
Sr. Notes,
12.125%, 5/15/2006 (d)............................ 972,500
2,000,000 Hermes Europe Railtel BV,
Sr. Notes,
10.375%, 1/15/2009................................ 1,900,000
------------
2,872,500
------------
Total Yankee Obligations
(cost $30,926,075)................................ 28,780,214
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
MUTUAL FUND SHARES - 2.7%
7,478,802 Navigator Prime Portfolio,
(cost $7,478,802) (g)............................. $ 7,478,802
------------
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENT - 1.1%
$ 3,134,000 Evergreen Joint Repurchase Agreement, Dated
10/29/1999, 5.25%, maturing 11/1/1999, maturity
value $3,135,371
(cost $3,134,000) (b)............................ 3,134,000
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $302,886,546)........................ 101.0% 285,479,240
Other Assets and
Liabilities - net.......................... (1.0) (2,875,565)
----- ------------
Net Assets.................................. 100.0% $282,603,675
===== ============
</TABLE>
(a) Non-income producing.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at October 31, 1999.
(c) Effective yield (calculated at the date of purchase) is the yield at which
the bond accretes on an annual basis until maturity date.
(d) Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to Section 4(2) of the Securities
Act of 1933, as amended. These securities have been determined to be liq-
uid under guide-lines established by the Board of Trustees.
(e) This obligation has filed Chapter 11 bankruptcy and has discontinued ac-
crual of interest income.
(f) All or a portion of this security currently is on loan (See Note 7).
(g) Represents investment of cash collateral received for securities on loan
(See Note 7).
(h) The estimated maturity of a Collateralized Mortgage Obligation ("CMO"), an
adjustable rate mortgage security or an 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 date.
(i) Less than one tenth of one percent of net assets.
Summary of Abbreviations:
ARS Argentine Peso
CAD Canadian Dollar
DKK Danish Krone
EUR Euro Dollar
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage Association
GBP Pound Sterling
GNMA Government National Mortgage Association
GRD Greek Drachma
PLN Polish Zloty
See Combined Notes to Financial Statements.
37
<PAGE>
EVERGREEN
U.S. Government Fund
Schedule of Investments
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - 16.5%
Banks - 2.4%
$ 5,000,000 Fleet National Bank, Providence, RI,
Subord. Notes,
5.75%, 1/15/2009................................ $ 4,501,850
7,000,000 Society National Bank, Cleveland OH, Subord.
Notes,
6.75%, 6/15/2003................................ 6,972,735
------------
11,474,585
------------
Cable/Other Video Distribution - 2.0%
8,000,000 Comcast Cable Communications, Sr. Notes,
6.20%, 11/15/2008............................... 7,379,464
2,000,000 Time Warner Entertainment Co., LP, Sr. Debs.,
7.25%, 9/1/2008................................. 1,999,980
------------
9,379,444
------------
Diversified Companies - 0.6%
3,000,000 Williams Holdings Delaware, Inc., Notes,
6.125%, 12/1/2003............................... 2,892,378
------------
Finance - 1.2%
6,000,000 Ford Motor Credit Co.,
Sr. Notes,
6.50%, 2/28/2002................................ 5,982,918
------------
Food & Beverage Products - 0.7%
3,500,000 Pepsi Bottling Holdings, Inc.,
5.375%, 2/17/2004 (a)........................... 3,319,344
------------
Machinery - Diversified - 0.6%
3,000,000 Case Corp. Notes, Ser. B
6.25%, 12/1/2003 (a)............................ 2,913,891
------------
Retailing & Wholesale - 4.4%
7,000,000 Dayton Hudson Corp.,
Puttable Reset Sec.,
5.95%, 6/15/2000................................ 7,005,908
4,000,000 Kroger Co. Notes,
Puttable Reset Sec.,
6.00%, 7/1/2000................................. 3,990,000
10,000,000 Wal-Mart Stores, Inc. Notes,
6.875%, 8/10/2009............................... 10,056,360
------------
21,052,268
------------
Telecommunication Services & Equipment - 2.9%
4,500,000 GTE Corp. Debs.,
6.94%, 4/15/2028................................ 4,248,405
10,000,000 Worldcom, Inc. Sr. Notes,
6.40%, 8/15/2005................................ 9,726,770
------------
13,975,175
------------
Transportation - 1.7%
3,998,350 Continental Airlines, Passthru Certificates, Ser.
1999-1,
Class C,
6.954%, 2/2/2011................................ 3,861,586
4,250,000 Union Pacific Corp., Notes,
6.625%, 2/1/2008................................ 4,042,634
------------
7,904,220
------------
Total Corporate Bonds
(cost $82,022,451).............................. 78,894,223
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MORTGAGE-BACKED SECURITIES - 54.0%
Federal Agricultural Mortgage Corp. - 0.2%
$ 993,000 MTN, 7.37%, 8/1/2006................................ $ 1,006,224
------------
Federal Home Loan Bank - 1.3%
5,000,000 5.50%, 4/14/2000.................................... 4,995,115
1,300,000 8.60%, 1/25/2000.................................... 1,308,507
------------
6,303,622
------------
Federal Home Loan Mortgage
Corp. - 23.2%
9,940,446 6.00%, 2/1/2029..................................... 9,286,365
39,726,397 6.50%, 9/1/2008 - 2/1/2029.......................... 38,515,647
25,182,032 7.00%, 2/1/2028 - 7/1/2028.......................... 24,772,912
8,500,000 7.36%, 6/5/2007..................................... 8,516,039
19,754,255 7.50%, 5/1/2027 - 8/1/2028.......................... 19,857,349
2,045,285 8.00%, 7/1/2017 - 4/1/2022.......................... 2,099,237
1,684,269 8.50%, 2/1/2017 - 10/1/2017......................... 1,757,199
1,491,386 9.00%, 11/1/2019 - 4/1/2021......................... 1,572,660
566,020 9.50%, 9/1/2020..................................... 608,483
701,763 10.00%, 12/1/2019 - 8/1/2021........................ 762,383
941,142 10.50%, 12/1/2019................................... 1,015,892
1,750,822 Gold, 9.00%, 1/1/2017............................... 1,847,117
------------
110,611,283
------------
Federal National Mortgage Assn. - 14.3%
2,262,000 5.13%, 2/13/2004.................................... 2,150,655
10,000,000 5.75%, 4/15/2003.................................... 9,820,850
2,993,207 6.00%, 2/25/2005 - 5/1/2011......................... 2,937,549
3,898,004 6.37%, 3/1/2006..................................... 3,830,023
3,500,000 6.40%, 12/1/2007.................................... 3,363,332
3,145,308 6.50%, 1/1/2024..................................... 3,017,005
20,966,449 7.00%, 4/1/2011 - 11/1/2026......................... 20,770,312
11,899,355 7.50%, 2/11/2002 - 5/1/2027......................... 11,986,047
4,230,961 8.00%, 8/1/2025..................................... 4,316,342
758,235 9.50%, 6/1/2022..................................... 807,276
625,400 11.00%, 1/1/2016.................................... 690,404
4,480,000 MTN, 6.16%, 4/3/2001................................ 4,483,777
------------
68,173,572
------------
Government National Mortgage Assn. - 15.0%
15,483,084 6.00%, 2/20/2028 - 2/20/2029........................ 14,365,262
13,853,863 6.50%, 10/15/2025 - 5/20/2028....................... 13,278,117
15,080,259 7.00%, 12/15/2022 - 3/15/2028....................... 14,818,169
7,070,469 7.50%, 2/15/2022 - 8/15/2023........................ 7,099,032
11,136,472 8.00%, 9/15/2009 - 9/15/2026........................ 11,417,125
5,241,324 8.50%, 12/15/2021 - 7/15/2024....................... 5,468,698
2,511,180 9.00%, 1/15/2020 - 9/15/2021........................ 2,645,599
1,965,556 9.50%, 1/15/2019 - 2/15/2021........................ 2,110,551
540,420 10.00%, 12/15/2018.................................. 589,914
------------
71,792,467
------------
Total Mortgage-Backed Securities
(cost $262,410,643)................................ 257,887,168
------------
</TABLE>
38
<PAGE>
EVERGREEN
U.S. Government Fund
Schedule of Investments(continued)
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
U.S. TREASURY OBLIGATIONS - 28.4%
U.S. Treasury Bonds:
$ 7,995,000 6.13%, 8/15/2029.................................... $ 7,965,019
15,100,000 8.50%, 2/15/2020.................................... 18,459,750
11,340,000 8.75%, 8/15/2020.................................... 14,210,437
18,310,000 8.88%, 8/15/2017 - 2/15/2019........................ 22,897,884
5,600,000 9.25%, 2/15/2016.................................... 7,127,753
U.S. Treasury Notes:
14,550,000 5.38%, 1/31/2000.................................... 14,563,648
21,715,000 6.25%, 4/30/2001 - 6/30/2002........................ 21,899,985
9,750,000 6.63%, 5/15/2007.................................... 10,008,989
2,300,000 7.00%, 7/15/2006.................................... 2,402,782
12,900,000 7.50%, 11/15/2001 - 5/15/2002....................... 13,351,097
2,500,000 7.88%, 11/15/2004................................... 2,692,970
------------
Total U.S. Treasury Obligations
(cost $138,383,739)................................ 135,580,314
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENT - 0.1%
$805,953 Societe Generale 5.22%, Dated 10/29/1999, due
11/01/1999, maturity value $806,304 (b)
(cost $805,953).................................... $ 805,953
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $483,622,786)......................... 99.0% 473,167,658
Other Assets and
Liabilities - net........................... 1.0 4,645,270
----- ------------
Net Assets................................... 100.0% $477,812,928
===== ============
</TABLE>
(a) Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to Section 4(2) of the Securities
Act of 1933, as amended. These securities have been determined to be liquid
under guidelines established by the Board of Trustees.
(b) The repurchase agreement is fully collaterized by $816,000 U.S. Treasury
Notes, 3.375% -- 4.00%, 10/31/2000 -- 01/15/2007 respectively; value in-
cluding accrued interest $807,985.
Summary of Abbreviations:
MTN Medium Term Note
See Combined Notes to Financial Statements.
39
<PAGE>
EVERGREEN
Long Term Bond Funds
Statements of Assets and Liabilities
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Diversified Strategic
Bond High Yield Income U.S. Government
Fund Fund Fund Fund
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Identified cost of
securities............ $438,674,852 $428,022,388 $302,886,546 $483,622,786
Net unrealized losses
on securities......... (13,425,893) (31,327,530) (17,407,306) (10,455,128)
- -----------------------------------------------------------------------------------
Market value of
securities............ 425,248,959 396,694,858 285,479,240 473,167,658
Cash................... 724 0 572 0
Receivable for
securities sold....... 1,005,040 2,298,499 2,859,005 30,456
Receivable for Fund
shares sold........... 119,516 443,052 453,445 510,238
Dividends and interest
receivable............ 7,125,336 7,245,486 5,387,263 5,832,483
Receivable for closed
forward foreign
currency exchange
contracts............. 2,118 0 0 0
Unrealized gains on
forward foreign
currency exchange
contracts............. 55,595 0 0 0
Prepaid expenses and
other assets.......... 197,089 154,370 78,395 124,419
- -----------------------------------------------------------------------------------
Total assets.......... 433,754,377 406,836,265 294,257,920 479,665,254
- -----------------------------------------------------------------------------------
Liabilities
Distributions payable.. 937,173 1,277,404 761,510 664,456
Payable for securities
purchased............. 995,650 3,339,667 2,068,083 0
Payable for Fund shares
redeemed.............. 388,432 575,734 902,709 907,127
Payable for closed
forward foreign
currency exchange
contracts............. 0 0 153,231 0
Payable for securities
on loan............... 8,861,950 46,457,304 7,478,802 0
Advisory fee payable... 200,951 206,581 94,908 203,722
Distribution Plan
expenses payable...... 150,216 75,716 93,779 64,973
Due to other related
parties............... 0 0 0 10,417
Foreign taxes payable.. 0 0 11,054 0
Accrued expenses and
other liabilities..... 247,330 168,315 90,169 1,631
- -----------------------------------------------------------------------------------
Total liabilities...... 11,781,702 52,100,721 11,654,245 1,852,326
- -----------------------------------------------------------------------------------
Net assets.............. $421,972,675 $354,735,544 $282,603,675 $477,812,928
===================================================================================
Net assets represented by
Paid-in capital........ $522,695,797 $700,571,695 $387,711,614 $517,830,543
Undistributed
(overdistributed) net
investment income..... 2,405,702 (2,627,429) (1,483,287) (187,069)
Accumulated net
realized losses on
securities and foreign
currency related
transactions.......... (89,758,779) (311,881,192) (86,212,906) (29,375,418)
Net unrealized losses
on securities and
foreign currency
related transactions.. (13,370,045) (31,327,530) (17,411,746) (10,455,128)
- -----------------------------------------------------------------------------------
Total net assets........ $421,972,675 $354,735,544 $282,603,675 $477,812,928
===================================================================================
Net assets consists of
Class A................ $381,658,505 $305,826,079 $148,066,029 $ 99,959,458
Class B................ 38,124,233 43,519,669 118,372,471 108,707,473
Class C................ 566,212 1,569,225 14,998,482 5,323,027
Class Y................ 1,623,725 3,820,571 1,166,693 263,822,970
- -----------------------------------------------------------------------------------
Total net assets........ $421,972,675 $354,735,544 $282,603,675 $477,812,928
===================================================================================
Shares outstanding
Class A................ 26,135,230 80,090,114 23,208,301 10,778,650
Class B................ 2,610,627 11,397,198 18,497,765 11,721,964
Class C................ 38,773 410,934 2,347,400 573,981
Class Y................ 111,188 1,000,548 186,159 28,448,134
- -----------------------------------------------------------------------------------
Net asset value per share
Class A................ $ 14.60 $ 3.82 $ 6.38 $ 9.27
- -----------------------------------------------------------------------------------
Class A - Offering
price (based on sales
charge of 4.75%)...... $ 15.33 $ 4.01 $ 6.70 $ 9.73
===================================================================================
Class B................ $ 14.60 $ 3.82 $ 6.40 $ 9.27
===================================================================================
Class C................ $ 14.60 $ 3.82 $ 6.39 $ 9.27
===================================================================================
Class Y................ $ 14.60 $ 3.82 $ 6.27 $ 9.27
===================================================================================
</TABLE>
See Combined Notes to Financial Statements.
40
<PAGE>
EVERGREEN
Long Term Bond Funds
Statements of Operations
Six Months Ended October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Diversified High Yield Strategic U.S. Government
Bond Fund Fund Income Fund Fund
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income
Interest............... $ 17,251,650 $ 18,352,491 $ 13,317,623 $ 14,640,968
Dividends.............. 0 351,650 0 0
- -----------------------------------------------------------------------------------
Total investment
income................. 17,251,650 18,704,141 13,317,623 14,640,968
- -----------------------------------------------------------------------------------
Expenses
Advisory fee........... 1,271,906 1,186,349 932,620 1,087,195
Distribution Plan
expenses.............. 714,708 648,554 886,157 699,856
Administrative services
fees.................. 23,932 23,179 14,908 51,146
Transfer agent fee..... 638,029 605,411 317,059 176,327
Trustees' fees and
expenses.............. 5,038 3,818 2,989 4,806
Printing and postage
expenses.............. 42,850 31,010 25,719 37,754
Custodian fee.......... 86,387 65,323 100,054 61,119
Registration and filing
fees.................. 36,583 46,976 23,463 39,809
Professional fees...... 15,897 10,281 8,092 15,073
Other.................. 41,715 37,404 9,476 35,016
- -----------------------------------------------------------------------------------
Total expenses......... 2,877,045 2,658,305 2,320,537 2,208,101
Less: Fee credits...... (19,789) (15,319) (12,571) (7,917)
Fee waivers.......... 0 0 (754,663) 0
- -----------------------------------------------------------------------------------
Net expenses........... 2,857,256 2,642,986 1,553,303 2,200,184
- -----------------------------------------------------------------------------------
Net investment income.. 14,394,394 16,061,155 11,764,320 12,440,784
- -----------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions
Net realized gains or
losses on:
Securities............. (10,551,407) (5,728,603) (10,724,465) (3,389,807)
Foreign currency
related transactions.. 528,666 3,410 (487,600) 0
- -----------------------------------------------------------------------------------
Net realized losses on
securities and foreign
currency related
transactions.......... (10,022,741) (5,725,193) (11,212,065) (3,389,807)
- -----------------------------------------------------------------------------------
Net change in
unrealized gains or
losses on securities
and foreign currency
related transactions.. (16,532,244) (16,316,903) (6,482,219) (11,152,881)
- -----------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions.. (26,554,985) (22,042,096) (17,694,284) (14,542,688)
- -----------------------------------------------------------------------------------
Net decrease in net
assets resulting from
operations............ $(12,160,591) $ (5,980,941) $ (5,929,964) $ (2,101,904)
- -----------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
41
<PAGE>
EVERGREEN
Long Term Bond Funds
Statements of Changes in Net Assets
Six Months Ended October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Diversified High Yield Strategic U.S. Government
Bond Fund Fund Income Fund Fund
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income.. $ 14,394,394 $ 16,061,155 $ 11,764,320 $ 12,440,784
Net realized losses on
securities and foreign
currency related
transactions.......... (10,022,741) (5,725,193) (11,212,065) (3,389,807)
Net change in
unrealized gains or
losses on securities
and foreign currency
related transactions.. (16,532,244) (16,316,903) (6,482,219) (11,152,881)
- -----------------------------------------------------------------------------------
Net decrease in net
assets resulting from
operations............ (12,160,591) (5,980,941) (5,929,964) (2,101,904)
- -----------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class A................ (13,388,235) (14,947,807) (6,893,592) (2,188,508)
Class B................ (1,172,872) (1,920,436) (4,888,015) (2,926,364)
Class C................ (15,974) (71,962) (636,175) (138,131)
Class Y................ (87,056) (177,880) (58,776) (7,227,393)
- -----------------------------------------------------------------------------------
Total distributions to
shareholders.......... (14,664,137) (17,118,085) (12,476,558) (12,480,396)
- -----------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold.................. 10,625,006 28,877,097 51,910,482 68,342,155
Net asset value of
shares issued in
reinvestment of
distributions......... 8,552,727 9,242,548 7,948,878 9,237,577
Payment for shares
redeemed.............. (62,359,913) (67,729,216) (59,621,549) (118,859,762)
Net asset value of
shares issued in
acquisition........... 0 0 0 134,184,956
- -----------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
share transactions.... (43,182,180) (29,609,571) 237,811 92,904,926
- -----------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............... (70,006,908) (52,708,597) (18,168,711) 78,322,626
Net assets
Beginning of period.... 491,979,583 407,444,141 300,772,386 399,490,302
- -----------------------------------------------------------------------------------
End of period.......... $421,972,675 $354,735,544 $282,603,675 $ 477,812,928
- -----------------------------------------------------------------------------------
Undistributed
(overdistributed) net
investment income...... $ 2,405,702 $ (2,627,429) $ (1,483,287) $ (187,069)
- -----------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
42
<PAGE>
EVERGREEN
Long Term Bond Funds
Statements of Changes in Net Assets
Year Ended April 30, 1999
<TABLE>
<CAPTION>
U.S.
Diversified Bond High Yield Strategic Income Government
Fund Fund Fund Fund
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income.. $ 32,227,280 $ 37,489,359 $ 21,300,248 $ 20,420,596
Net realized gains or
losses on securities
and foreign currency
related transactions.. (2,756,805) (32,992,679) (2,750,711) (3,174,666)
Net change in
unrealized losses on
securities and foreign
currency related
transactions.......... (11,399,726) (17,420,079) (15,938,209) (70,943)
- --------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ 18,070,749 (12,923,399) 2,611,328 17,174,987
- --------------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class A................ (28,965,373) (32,234,535) (12,896,911) (2,526,898)
Class B................ (3,394,507) (5,689,291) (7,428,231) (6,471,126)
Class C................ (14,128) (108,780) (1,164,628) (286,185)
Class Y................ (18,815) (586,532) (179,221) (11,283,844)
- --------------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (32,392,823) (38,619,138) (21,668,991) (20,568,053)
- --------------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold.................. 41,955,901 78,304,005 85,889,098 175,698,259
Payment for shares
redeemed.............. (125,778,077) (158,882,006) (108,306,974) (145,952,368)
Net asset value of
shares issued in
reinvestment of
distributions......... 18,434,939 21,076,105 14,412,889 14,956,563
Net asset value of
shares issued in
acquisition........... 0 0 0 25,935,637
- --------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
share transactions.... (65,387,237) (59,501,896) (8,004,987) 70,638,091
- --------------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets................ (79,709,311) (111,044,433) (27,062,650) 67,245,025
Net assets
Beginning of period.... 571,688,894 518,488,574 327,835,036 332,245,277
- --------------------------------------------------------------------------------------------
End of period.......... $ 491,979,583 $ 407,444,141 $ 300,772,386 $ 399,490,302
- --------------------------------------------------------------------------------------------
Undistributed
(overdistributed) net
investment income...... $ 2,675,445 $ (1,570,499) $ (771,049) $ (147,457)
- --------------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
43
<PAGE>
Combined Notes to Financial Statements (Unaudited)
1. ORGANIZATION
The Evergreen Long Term Bond Funds consist of Evergreen Diversified Bond Fund
("Diversified Bond Fund"), Evergreen High Yield Bond Fund ("High Yield Fund"),
Evergreen Strategic Income Fund ("Strategic Income Fund") and Evergreen U.S.
Government Fund ("U.S. Government 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 Class Y shares. Class A shares
are sold with a maximum front-end sales charge of 4.75%. 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.
Securities traded on a national securities exchange or included on the Nasdaq
National Market System ("NMS") are valued at the last reported sales price on
the exchange where the security is primarily traded. Securities traded on an
exchange or NMS and other securities traded in the over-the-counter market for
which there has been no sale are valued at the mean between the last reported
bid and asked price.
Securities for which market quotations are not readily available, including re-
stricted securities, are valued at fair value as determined in good faith ac-
cording to procedures approved 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.
44
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Pursuant to an exemptive order issued by the Securities and Exchange Commis-
sion, each Fund, except for U.S. Government Fund, along with certain other
funds managed by Evergreen Investment Management Company ("EIMC"), a subsidiary
of First Union, may transfer uninvested cash balances into a joint trading ac-
count. These balances are invested in one or more repurchase agreements that
are fully collateralized by U.S. Treasury and/or federal agency obligations.
C. Reverse Repurchase Agreements
To obtain short-term financing, each Fund, except for U.S. Government 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 segre-
gated 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. Futures Contracts
In order to gain exposure to or protect against changes in security values, the
Funds may buy and sell futures contracts.
The initial margin deposited with a broker when entering into a futures trans-
action is subsequently adjusted by daily payments or receipts ("variation mar-
gin") as the value of the contract changes. Such changes are recorded as
unrealized gains or losses. Realized gains or losses are recognized on closing
the contract.
Risks of entering into futures contracts include (i) the possibility of an il-
liquid market for the contract, (ii) the possibility that a change in the value
of the contract may not correlate with changes in the value of the underlying
instrument or index, and (iii) the credit risk that the other party will not
fulfill their obligations under the contract. Futures contracts also involve
elements of market risk in excess of the amount reflected in the statement of
assets and liabilities.
F. Forward Foreign Currency Exchange Contracts
Each Fund, except for U.S. Government Fund, may enter into forward foreign cur-
rency exchange contracts ("forward contracts") to settle portfolio purchases
and sales of securities denominated in a foreign currency and to hedge certain
foreign currency assets or liabilities. Forward contracts are recorded at the
forward rate and marked-to-market daily. Realized gains and losses arising from
such transactions are included in 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 un-
der the contract. Forward contracts involve elements of market risk in excess
of the amount reflected in the statement of assets and liabilities.
45
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
G. Securities Lending
In order to generate income and to offset expenses, the Funds may lend portfo-
lio securities to brokers, dealers and other financial organizations. The
Funds' investment advisors 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.
H. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts and amortization of premiums. Dividend income is recorded on the
ex-dividend date or in the case of some foreign securities, on the date there-
after when the Fund is made aware of the dividend. Foreign income may be sub-
ject to foreign withholding taxes, which are accrued as applicable.
I. Federal Taxes
The Funds have qualified and intend to continue to qualify as regulated invest-
ment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Funds will not incur any federal income tax liability since
they are expected to distribute all of their net investment company taxable in-
come and net capital gains, if any, to their shareholders. The Funds also in-
tend to avoid any excise tax liability by making the required distributions un-
der the Code. Accordingly, no provision for federal taxes is required. To the
extent that realized capital gains can be offset by capital loss carryforwards,
it is each Fund's policy not to distribute such gains.
J. 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.
K. 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 AGREEMENTS AND OTHER AFFILIATED TRANSACTIONS
EIMC is the investment advisor for Diversified Bond Fund, High Yield Fund and
Strategic Income Fund. In return for providing investment management and admin-
istrative services to the Funds, the Funds pay EIMC a management fee that is
calculated 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 an-
num as net assets increase, to the average daily net assets of each Fund.
First Union National Bank ("FUNB"), a subsidiary of First Union, serves as the
investment advisor to the U.S. Government 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.
46
<PAGE>
Combined Notes to Financial Statements(Unaudited) (continued)
During the six months ended October 31, 1999, the amount of investment advisory
fees waived by the investment advisor for the Strategic Income Fund was
$754,663 and the impact on the Fund's expense ratio represented as a percentage
of its average net asset was 0.51%.
Evergreen Investment Services ("EIS"), a subsidiary of First Union, serves as
the administrator and The BISYS Group, Inc. ("BISYS") serves as the sub-admin-
istrator to the Funds. As administrator, EIS provides the Funds with facili-
ties, equipment and personnel. As sub-administrator to the Funds, BISYS pro-
vides the officers of the Funds. Officers of the Funds and affiliated Trustees
receive no compensation directly from the Funds.
The administrator and sub-administrator for the U.S. Government Fund are enti-
tled to an annual fee based on the average daily net assets of the funds admin-
istered 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 six months ended October 31, 1999,
the U.S. Government Fund paid or accrued for administrative and sub-administra-
tive services $41,500 and $9,646, respectively.
During the six months ended October 31, 1999, the Diversified Bond Fund, High
Yield Fund and Strategic Income Fund reimbursed EIMC for certain administration
and accounting expenses of $23,932, $23,179 and $14,908, respectively.
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". Under the Distribu-
tion Plans, Class A incurs distributions fees equal to 0.25% of the average
daily net asset of the class, all of which is used to pay for shareholder serv-
ice fees. Class B and Class C incur distribution fees equal to 1.00% of the av-
erage daily net assets of each class. Of this amount 0.25% of the distribution
fees incurred is used to pay for shareholder service fees and 0.75% is used to
pay for distribution related costs. Distribution Plan expenses are calculated
daily and paid at least quarterly.
During the six months ended October 31, 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>
-------------------------
Diversified Bond Fund................ $510,213 $201,732 $ 2,763
High Yield Fund...................... 410,423 229,500 8,631
Strategic Income Fund................ 196,625 610,280 79,252
U.S. Government Fund................. 94,141 578,417 27,298
</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.
47
<PAGE>
Combined Notes to Financial Statements(Unaudited) (continued)
5. ACQUISITIONS
Effective on the close of business on July 30, 1999, U.S. Government Fund ac-
quired all of the assets and assumed certain liabilities of Evergreen Interme-
diate Term Government Securities Fund, in an exchange for Class A, Class B,
Class C, and Class Y shares of U.S. Government Fund.
Effective on the close of business on July 24, 1998, U.S. Government Fund ac-
quired all of the assets and assumed certain liabilities of CoreFund Government
Income Fund, in an exchange for Class A and Class Y shares of U.S. Government
Fund.
These acquisitions were accomplished by a tax-free exchange of the respective
shares of each Fund. The value of net assets acquired, number of shares issued,
unrealized appreciation acquired and the aggregate net assets of each Fund im-
mediately after the acquisition were as follows:
<TABLE>
<CAPTION>
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>
U.S. Government Fund.... Evergreen Intermediate Term Government
Securities Fund $134,184,956 $14,425,715 $677,705 $500,286,037
U.S. Government Fund.... CoreFund Government Income Fund 25,935,637 2,618,772 441,185 333,331,520
</TABLE>
48
<PAGE>
Combined Notes to Financial Statements(Unaudited) (continued)
6. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with $0.001
par value authorized. Shares of beneficial interest of the Funds are currently
divided into Class A, Class B, Class C and Class Y. Transactions in shares of
the Funds were as follows:
Diversified Bond Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
October 31, 1999 April 30, 1999
------------------------ ------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............... 301,132 $ 4,500,969 810,400 $ 12,761,419
Automatic conversion of
Class B shares to Class A
shares................... 0 0 1,403,087 22,326,396
Shares issued in
reinvestment of
distributions............ 526,309 7,815,671 1,050,314 16,640,863
Shares redeemed........... (3,397,475) (50,710,715) (6,059,378) (95,987,811)
- -------------------------------------------------------------------------------
Net decrease.............. (2,570,034) $(38,394,075) (2,795,577) $(44,259,133)
- -------------------------------------------------------------------------------
Class B
Shares sold............... 312,324 $ 4,658,610 1,481,322 $ 23,510,009
Automatic conversion of
Class B shares to Class A
shares................... 0 0 (1,403,103) (22,326,396)
Shares issued in
reinvestment of
distributions............ 44,619 663,185 112,383 1,783,925
Shares redeemed........... (571,555) (8,527,818) (1,768,907) (28,085,274)
- -------------------------------------------------------------------------------
Net decrease.............. (214,612) $ (3,206,023) (1,578,305) $(25,117,736)
- -------------------------------------------------------------------------------
Class C
Shares sold............... 37,027 $ 556,260 138,285 $ 2,182,664
Shares reinvestment of
distributions............ 774 11,502 515 8,103
Shares redeemed........... (31,267) (467,080) (107,994) (1,704,992)
- -------------------------------------------------------------------------------
Net increase.............. 6,534 $ 100,682 30,806 $ 485,775
- -------------------------------------------------------------------------------
Class Y
Shares sold............... 60,425 $ 909,167 224,176 $ 3,501,809
Shares reinvestment of
distributions............ 4,210 62,369 130 2,048
Shares redeemed........... (178,166) (2,654,300) 0 0
- -------------------------------------------------------------------------------
Net increase (decrease)... (113,531) $ (1,682,764) 224,306 $ 3,503,857
- -------------------------------------------------------------------------------
</TABLE>
High Yield Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
October 31, 1999 April 30, 1999
------------------------- --------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............. 5,708,962 $ 22,288,806 10,094,180 $ 41,192,593
Automatic conversion of
Class B shares to Class
A shares............... 0 0 6,527,645 26,263,616
Shares issued in
reinvestment of
distributions.......... 2,128,825 8,333,185 4,394,074 18,091,076
Shares redeemed......... (14,855,697) (58,307,653) (26,735,454) (111,365,821)
- --------------------------------------------------------------------------------
Net decrease............ (7,017,910) $(27,685,662) (5,719,555) $ (25,818,536)
- --------------------------------------------------------------------------------
Class B
Shares sold............. 1,361,323 $ 5,365,186 5,817,765 $ 24,157,421
Automatic conversion of
Class B shares to Class
A shares............... 0 0 (6,527,509) (26,263,616)
Shares issued in
reinvestment of
distributions.......... 222,116 870,796 634,514 2,622,487
Shares redeemed......... (1,943,331) (7,645,934) (9,466,402) (40,138,947)
- --------------------------------------------------------------------------------
Net decrease............ (359,892) $ (1,409,952) (9,541,632) $ (39,622,655)
- --------------------------------------------------------------------------------
Class C
Shares sold............. 56,726 $ 222,732 557,106 $ 2,273,186
Shares issued in
reinvestment of
distributions.......... 8,561 33,532 14,724 60,244
Shares redeemed......... (146,798) (582,503) (334,216) (1,416,061)
- --------------------------------------------------------------------------------
Net increase
(decrease)............. (81,511) $ (326,239) 237,614 $ 917,369
- --------------------------------------------------------------------------------
Class Y
Shares sold............. 253,352 $ 1,000,373 2,455,775 $ 10,680,805
Shares reinvestment of
distributions.......... 1,291 5,035 75,454 302,298
Shares redeemed......... (300,027) (1,193,126) (1,489,709) (5,961,177)
- --------------------------------------------------------------------------------
Net increase
(decrease)............. (45,384) $ (187,718) 1,041,520 $ 5,021,926
- --------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
Combined Notes to Financial Statements(Unaudited) (continued)
Strategic Income Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
October 31, 1999 April 30, 1999
------------------------ ------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............... 4,021,631 $ 26,415,046 4,490,832 $ 31,196,519
Automatic conversion of
Class B shares to Class A
shares................... 0 0 106,795 731,977
Shares issued in
reinvestment of
distributions............ 719,510 4,682,352 1,347,956 9,273,511
Shares redeemed........... (5,423,948) (35,410,967) (8,900,411) (61,611,376)
- -------------------------------------------------------------------------------
Net decrease.............. (682,807) $ (4,313,569) (2,954,828) $(20,409,369)
- -------------------------------------------------------------------------------
Class B
Shares sold............... 3,059,804 $ 20,145,970 6,845,207 $ 47,103,443
Automatic conversion of
Class B shares to Class A
shares................... 0 0 (106,478) (731,977)
Shares issued in
reinvestment of
distributions............ 442,566 2,888,363 630,620 4,349,322
Shares redeemed........... (2,721,248) (17,809,937) (5,266,886) (36,464,325)
- -------------------------------------------------------------------------------
Net increase.............. 781,122 $ 5,224,396 2,102,463 $ 14,256,463
- -------------------------------------------------------------------------------
Class C
Shares sold............... 776,970 $ 5,126,969 840,483 $ 5,711,444
Shares issued in
reinvestment of
distributions............ 54,556 356,180 104,610 722,285
Shares redeemed........... (876,474) (5,756,392) (1,266,465) (8,731,548)
- -------------------------------------------------------------------------------
Net decrease.............. (44,948) $ (273,243) (321,372) $ (2,297,819)
- -------------------------------------------------------------------------------
Class Y
Shares sold............... 32,797 $ 222,497 258,852 $ 1,877,692
Shares reinvestment of
distributions............ 3,443 21,983 10,086 67,771
Shares redeemed........... (98,509) (644,253) (225,476) (1,499,725)
- -------------------------------------------------------------------------------
Net increase (decrease)... (62,269) $ (399,773) 43,462 $ 445,738
- -------------------------------------------------------------------------------
</TABLE>
U.S. Government Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
October 31, 1999 April 30, 1999
------------------------ ------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold................ 4,139,193 $ 38,745,576 5,406,579 $ 52,883,440
Shares issued in
reinvestment of
distributions............. 162,866 1,515,773 168,051 1,647,529
Shares redeemed............ (5,426,441) (50,732,140) (4,877,937) (47,734,643)
Shares issued in
acquisition of:
Evergreen Intermediate
Term Government
Securities Fund.......... 6,906,702 64,243,013 0 0
CoreFund Government Income
Fund..................... 0 0 151,299 1,515,281
- -------------------------------------------------------------------------------
Net increase............... 5,782,320 $ 53,772,222 847,992 $ 8,311,607
- -------------------------------------------------------------------------------
Class B
Shares sold................ 874,122 $ 8,152,642 2,842,599 $ 27,942,652
Shares issued in
reinvestment of
distributions............. 184,787 1,725,073 368,042 3,607,463
Shares redeemed............ (2,371,781) (22,134,268) (3,936,185) (38,555,032)
Shares issued in
acquisition of Evergreen
Intermediate Term
Government
Securities Fund........... 264,531 2,460,670 0 0
- -------------------------------------------------------------------------------
Net decrease............... (1,048,341) $ (9,795,883) (725,544) $ (7,004,917)
- -------------------------------------------------------------------------------
Class C
Shares sold................ 95,218 $ 894,047 393,743 $ 3,869,388
Shares issued in
reinvestment of
distributions............. 8,810 82,293 17,708 173,559
Shares redeemed............ (141,880) (1,330,312) (417,897) (4,094,589)
Shares issued in
acquisition of Evergreen
Intermediate Term
Government
Securities Fund........... 29,477 274,194 0 0
- -------------------------------------------------------------------------------
Net decrease............... (8,375) $ (79,778) (6,446) $ (51,642)
- -------------------------------------------------------------------------------
Class Y
Shares sold................ 2,196,424 $ 20,549,890 9,295,417 $ 91,002,779
Shares reinvestment of
distributions............. 634,102 5,914,438 972,869 9,528,012
Shares redeemed............ (4,763,205) (44,663,042) (5,686,585) (55,568,104)
Shares issued in
acquisition of:
Evergreen Intermediate
Term Government
Securities Fund.......... 7,225,005 67,207,079 0 0
CoreFund Government Income
Fund..................... 0 0 2,467,473 24,420,356
- -------------------------------------------------------------------------------
Net increase............... 5,292,326 $ 49,008,365 7,049,174 $ 69,383,043
- -------------------------------------------------------------------------------
</TABLE>
50
<PAGE>
Combined Notes to Financial Statements(Unaudited) (continued)
7. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the six months ended October 31,
1999:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
------------------------- -------------------------
U.S. Non-U.S. U.S. Non-U.S.
Government Government Government Government
---------------------------------------------------
<S> <C> <C> <C> <C>
Diversified
Bond Fund..... $233,369,001 $177,535,481 $186,378,034 $274,377,549
High Yield
Fund.......... 13,998,563 193,945,959 13,398,016 227,405,164
Strategic
Income Fund... 84,091,148 181,661,424 72,261,605 194,710,135
U.S. Government
Fund.......... 144,463,712 2,989,849 186,519,835 0
</TABLE>
During the six months ended October 31, 1999, the Diversified Bond Fund entered
into reverse repurchase agreements. The average daily balance, weighted average
interest rate and maximum amount outstanding were as follows:
<TABLE>
<CAPTION>
Average Daily Weighted Maximum
Balance Average Amount
Outstanding Interest Rate Outstanding*
----------------------------------------
<S> <C> <C> <C>
Diversified Bond
Fund................. 3,919,188 5.15% $17,022,902
</TABLE>
-------
* The Maximum Amount Outstanding under reverse repurchase agreements
includes accrued interest.
The Diversified Bond Fund, High Yield Fund and Strategic Income Fund loaned se-
curities during the six months ended October 31, 1999 to certain brokers who
paid the Fund a negotiated lenders' fee. These fees are included in interest
income. At October 31, 1999, the value of securities on loan and the value of
collateral (including accrued interest) amounted to the following:
<TABLE>
<CAPTION>
Value of
Securities Value of
on Loan Collateral
-------------------------
<S> <C> <C>
Diversified Bond Fund................... $ 8,634,757 $ 8,861,950
High Yield Fund......................... 45,193,538 46,457,304
Strategic Income Fund................... 7,316,243 7,478,802
</TABLE>
During the six months ended October 31, 1999, the Diversified Bond Fund, High
Yield Fund and Strategic Income Fund earned $10,509, $47,019 and $11,955, re-
spectively, in income from securities lending.
On April 30, 1999, the Funds had capital loss carryovers for federal income tax
purposes as follows:
<TABLE>
<CAPTION>
Expiring April 30,
Capital Loss -----------------------------------------------------------------------------------------------
Carryover 2000 2001 2002 2003 2004 2005 2006 2007
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Diversified Bond
Fund........... $ 75,808,000 $ -- $19,436,000 $ 6,153,000 $ 28,736,000 $20,012,000 $ -- $ -- $ 1,471,000
High Yield
Fund........... 293,910,000 122,350,000 -- 44,605,000 105,957,000 -- -- -- 20,998,000
Strategic Income
Fund........... 71,841,000 2,867,000 23,289,000 3,223,000 7,390,000 35,072,000 -- -- --
U.S. Government
Fund........... 24,521,000 -- 1,978,000 6,522,000 3,703,000 2,973,000 3,820,000 3,370,000 2,155,000
</TABLE>
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 daily net assets were as follows:
<TABLE>
<CAPTION>
Total
Fee Credits % of Average
Received Net Assets
-------------------------
<S> <C> <C>
Diversified Bond Fund.................. $19,789 0.00%
High Yield Fund........................ 15,319 0.00%
Strategic Income Fund.................. 12,571 0.01%
U.S. Government Fund................... 7,917 0.00%
</TABLE>
51
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
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 reported in the Fund's Trustees' fees and
expenses. Trustees will be paid either in one lump sum or in quarterly install-
ments for up to ten years at their election, not earlier than either the year
in which the Trustee ceases to be a member of the Board of Trustees or January
1, 2000.
10. FINANCING AGREEMENTS
Certain Evergreen Funds and State Street Bank and Trust Company ("State
Street") and a group of banks (collectively, the "Banks") entered into a fi-
nancing agreement dated December 22, 1997, as amended on November 20, 1998. Un-
der this agreement, the Banks provided an unsecured credit facility in the ag-
gregate amount of $400 million ($275 million committed and $125 million uncom-
mitted). The credit facility was allocated, under the terms of the financing
agreement, among the Banks. The credit facility was accessed by the Funds for
temporary or emergency purposes only and was subject to each Fund's borrowing
restrictions. Borrowings under this facility bore interest at 0.50% per annum
above the Federal Funds rate. A commitment fee of 0.065% per annum was incurred
on the unused portion of the committed facility, which was allocated to all
funds. For its assistance in arranging this financing agreement, the Capital
Market Group of First Union was paid a one-time arrangement fee of $27,500.
State Street serves as administrative agent for the Banks, and as administra-
tive agent was entitled to a fee of $20,000 per annum which was allocated to
all of the funds.
This agreement was amended and renewed on December 22, 1998. The amended fi-
nancing agreement became effective on December 22, 1998 among all of the Ever-
green Funds, State Street and The Bank of New York ("BONY"). Under this agree-
ment, State Street and BONY provided an unsecured credit facility in the aggre-
gate amount of $150 million ($125 million committed and $25 million uncommit-
ted). The remaining terms and conditions of the agreement were unaffected. This
agreement was terminated on July 27, 1999.
On July 27, 1999, all of the Evergreen Funds and a group of banks (the "lend-
ers") entered into a credit agreement. Under this agreement, the Lenders pro-
vide an unsecured revolving credit commitment in the aggregate amount of $1.050
billion. The credit facility is allocated, under the terms of the financing
agreement, among the Lenders. The credit facility is accessed by the Funds for
temporary of emergency purposes to fund the redemption of their shares or a
general working capital as permitted by each Fund's borrowing restrictions.
Borrowings under this facility bear interest at 0.75% per annum above the Fed-
eral Funds rate (1.50% per annum above the Federal Funds rate during the period
from and including December 1, 1999 through and including January 31, 2000). A
commitment fee of 0.10% per annum is incurred on the average daily unused por-
tion of the revolving credit commitment. The commitment fee is allocated to all
funds. For its assistance in arranging this financing agreement, First Union
Capital Markets Corp. was paid a one-time arrangement fee of $250,000. State
Street serves as paying agent for the funds and as paying agent is entitled to
a fee of $20,000 per annum which is allocated to all the funds.
The Funds did not borrow under these agreements during the six months ended Oc-
tober 31,1999.
11. YEAR 2000
The Funds' investment advisors and other service providers have given represen-
tations of readiness and are continuing to take steps to address any year 2000-
related computer problems. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact on the Funds
from this problem.
52
<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
Municipal Income 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
Quality Income Fund
Short-Duration Income Fund
High Income Fund
Balanced
American Retirement Fund
Balanced Fund
Tax Strategic Foundation Fund
Foundation Fund
Capital Balanced Fund
Capital Income and Growth 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
Select Equity Index 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
Growth Fund
Capital Growth Fund
Select Special Equity Fund
Global International
Global Leaders Fund
International Growth Fund
Global Opportunities Fund
Precious Metals Fund
Emerging Markets Growth Fund
Latin America Fund
Perpetual Global Fund
Perpetual International Fund
Express Line
800.346.3858
Investor Services
800.343.2898
www.evergreen-funds.com
68805 541075 12/99
-------------
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