<PAGE>
Annual Report
as of April 30, 1999
Evergreen
Long Term Bond Funds
[LOGO OF EVERGREEN APPEARS HERE]
<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 ......................................................... 6
Portfolio Manager Interview .............................................. 7
Evergreen Strategic Income Fund
Fund at a Glance ......................................................... 9
Portfolio Manager Interview .............................................. 10
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 ........................................... 29
Evergreen Strategic Income Fund .......................................... 34
Evergreen U.S. Government Fund ........................................... 40
Statements of Assets and Liabilities ....................................... 42
Statements of Operations ................................................... 43
Statements of Changes in Net Assets ........................................ 44
Combined Notes to Financial Statements ..................................... 47
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Evergreen Funds
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Evergreen Funds is one of the nation's fastest growing investment companies with
over $50 billion in assets under management.
With over 70 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to the Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
This annual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.
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Mutual Funds: ARE NOT FDIC INSURED May lose value . Are not bank guaranteed
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Evergreen Distributor,Inc.
Evergreen/SM/ is a Service Mark of Evergreen Investment Services,Inc.
<PAGE>
Letter to Shareholders
----------------------
June 1999
[PHOTO OF WILLIAM M. ENNIS APPEARS HERE]
William M. Ennis
President and CEO
Dear Evergreen Shareholders,
We are pleased to provide the Evergreen Long Term Bond Funds annual report,
which covers the twelve-month period ended April 30, 1999.
Shift in the Interest Rate Environment
Following the Russian financial crisis in August 1998, there was a "flight to
quality" worldwide. Investors fled from risk-related securities, interest rates
fell sharply and the prices of high grade and U.S. government securities rose.
During the final six months of the period the flight to quality was reversed as
a result of actions to lower interest rates by the governments of the major
industrialized nations. Investors returned to more risky fixed income
securities, such as lower quality corporate bonds, international bonds and
emerging market bonds.
Going forward, we anticipate a more stable interest rate environment than we've
seen during the last year, both domestically and internationally. The moderately
growing domestic economy and the solid, long-term fundamentals underlying the
market lead us to a cautiously optimistic outlook.
Year 2000 Preparation/1/
At Evergreen, we continue to prepare ourselves to provide uninterrupted service
and communication with all our shareholders throughout the end of 1999 and right
through the date change into the year 2000 and beyond. As of the end of May,
when this report was finalized, we have completed 75% of the testing of internal
systems and are rapidly moving through the remaining systems.
Through May, we successfully participated in industry-wide testing with the
Securities Industry Association. While Evergreen Funds is striving to identify
and correct every issue under our control related to the Year 2000, it would be
impossible to guarantee a problem-free transition to the new millennium. We are
confident that our efforts will enable shareholders to receive the same
Evergreen products and services after December 1999 that we deliver today.
As always, we encourage all shareholders to diversify their mutual fund
portfolios and we suggest you consult with your financial advisor for an
allocation strategy that helps you meet your investment goals and objectives.
Evergreen Funds offers a wide range of funds that includes multiple investment
styles to help you find one that is appropriate in your portfolio.
Thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/ William M. Ennis
William M. Ennis
President and CEO
Evergreen Investment Company
/1/ The information above constitutes Year 2000 readiness disclosure.
1
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E V E R G R E E N
Diversified Bond Fund
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Fund at a Glance as of April 30, 1999
After upgrading overall credit quality during the financial turmoil last summer
and early fall, we adjusted in the final six months of the fiscal year to obtain
more yield and take advantage of the momentum created by a growing economy.
Portfolio
Management
----------
[PHOTO OF GARY PZEGEO APPEARS HERE]
Gary Pzegeo,CFA
Tenure: January 1999
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CURRENT INVESTMENT STYLE
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[STYLE BOX APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 4/30/99.
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
Source: 1999 Morningstar, Inc.
/1/ Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost.
Historical performance shown for Classes 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
Classes A, B, and C are 0.25%, 1.00%, and 1.00%, respectively. 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 risks 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.
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PERFORMANCE AND RETURNS/1/
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Portfolio Inception Date: 9/11/35 Class A Class B Class C Class Y
Class Inception Date 1/20/98 9/11/35 4/7/98 2/11/98
................................................................................
Average Annual Returns*
................................................................................
1 year with sales charge (1.54%) (2.29%) 1.60% n/a
................................................................................
1 year w/o sales charge 3.35% 2.57% 2.57% 2.95%
................................................................................
3 years 7.10% 7.18% 8.03% 8.84%
................................................................................
5 years 6.40% 6.33% 6.63% 7.54%
................................................................................
10 years 7.48% 7.09% 7.07% 8.19%
................................................................................
Since Portfolio Inception 7.08% 6.93% 6.92% 7.21
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
................................................................................
30-day SEC Yield 5.59% 5.12% 5.12% 6.15%
................................................................................
12-month distributions per share $0.97 $0.85 $0.85 $0.91
................................................................................
* Adjusted for maximum applicable sales charge.
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LONG TERM GROWTH
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[LINE GRAPH APPEARS HERE]
EVERGREEN
DIVERSIFIED LEHMAN BROTHERS
BOND FUND, AGGREGATE BOND CONSUMER
DATE CLASS B SHARES INDEX PRICE INDEX
4/30/89 10,000 10,000 10,000
4/90 9,959 10,903 10,471
4/91 10,715 12,559 10,983
4/92 12,344 13,941 11,332
4/93 15,789 11,698
4/94 14,388 15,924 11,974
4/95 14,911 17,088 12,339
4/96 15,734 18,566 12,687
4/97 17,154 19,882 13,014
4/98 19,350 22,035 13,201
4/99 19,848 23,431 13,443
Comparison of a $10,000 investment in Evergreen Diversified Bond Fund, Class B
shares(1), 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 an unmanaged index and does not
include transaction costs associated with buying and selling securities nor any
management fees.
The Consumer Price Index 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
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E V E R G R E E N
Diversified Bond Fund
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Portfolio Manager Interview
How did the Fund perform?
For the 12-month period ended April 30, 1999, the Evergreen Diversified Bond
Fund's Class A shares had a total return of 3.35%, while Classes B and C shares
each had returns of 2.57% and Class Y shares had a total return of 2.95%. These
returns are before deduction of any applicable sales charges. During the same
period, the Lehman Aggregate Bond Index had a return of 6.27% and the average
return of BBB-rated bond funds was 4.25%, according to Lipper, Inc., an
independent monitor of mutual fund performance. As the market returned to normal
in the final six months of the period, the Fund's relative performance improved.
During the most recent six months, the Fund's A shares' performance (1.06%)
surpassed the Lehman Aggregate Bond Index (-.76%)and slightly under-performed
the Lipper Corporate Debt Funds BBB-rated (-.90%).
Portfolio
Characteristics
---------------
Total Net Assets $491,979,583
..................................................
Average Credit Quality A
..................................................
Average Maturity 12.4 years
..................................................
Average Duration 6.4 years
..................................................
What was the investment environment like during the 12-month period?
The most dramatic event during the 12-month period was the worldwide "flight to
quality," primarily benefiting U.S. Treasury securities, that began following
the Russian financial crisis in August 1998. Continuing through early October,
this period was marked by an investor flight from risk-related securities.
Interest rates fell sharply, and the prices of high grade and U.S. government
securities tended to rise.
As a result of actions by the U.S. Federal Reserve Board and by the governments
of other major industrialized nations, this flight to quality was reversed
during the final six months of the fiscal year. Investors again turned to
risk-related, fixed-income securities, including lower quality corporate bonds,
international bonds, emerging market bonds and mortgage-backed securities. There
almost was a "flight from quality."
Domestically, the change in the market was triggered by three successive actions
of the Federal Reserve to lower short-term interest rates in late 1998.
Together, these rate cuts restored confidence in the markets, sharply reducing
the fears of recession, and providing liquidity and encouraging consumers to
spend.
Internationally, the new European Central Bank lowered rates, as did the central
banks in the United Kingdom, Japan and Canada. As a result, the fragile markets
in Asia and Latin America started to show improvement.
At the bottom of the market, in August through October, we witnessed a crisis of
confidence in the financial markets. The markets seized up, no one was willing
to lend capital and the prices of most securities were depressed. The global
central banks recognized this and stepped in to fix it by lowering the price of
money.
Treasury securities, which had risen in price as rates declined during the
height of the crisis, have suffered more than most other fixed-income securities
in the final six months of the period, as rates rose again and prices declined.
3
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E V E R G R E E N
Diversified Bond Fund
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Portfolio Manager Interview
30-year U.S.Treasury
Bond Yields
-----------
April 30, 1998 5.95%
................................................
October 31, 1998 5.16%
................................................
April 30, 1999 5.66%
................................................
The spread--or difference in yields--between Treasuries and risk-related
securities, such as corporate bonds and mortgage securities, narrowed during the
final six months of the fiscal year as evidence of strong economic growth
encouraged investors to take credit risk. Gross Domestic Product rose by an
annualized rate of 6% during the final quarter of 1998 and by an estimated 4.1%
during the first quarter of 1998. As evidence of economic growth continued,
investors put their money in the most cyclically sensitive areas, where the
rebound would have the greatest impact.
What was your strategy in this changing environment?
After upgrading overall credit quality during the financial turmoil last summer
and early fall, we adjusted in the final six months of the fiscal year to obtain
more yield and take advantage of the momentum created by a growing economy.
In doing this, we increased the overall allocation to domestic corporate bonds
from 51.6% of net assets at the end of October 1998 to 60.5% at the end of April
1999, with the high yield bond portion of the portfolio expanding from 19% to
30% of net assets. In the high yield sector, we emphasized bonds from cyclical
or economically sensitive industries, including metals, mining, paper and other
commodities. We also invested in the cable and media industries to take
advantage of consolidation within those industries and potential price
appreciation opportunities.
Mortgage-backed obligations were increased from 3.5% to 7.3% and collateralized
mortgage obligations increased from 14.1% to 14.6% in the final six months of
the fiscal year. U.S. Treasury securities declined from 10.6% to 4.1% of net
assets during the same six-month period, while cash was reduced from 4.6% to
3.3% and foreign bonds remained at 9.1%.
Overall, average credit quality of the portfolio declined during the final six
months from A+ to A-. During the same period, the average weighted maturity of
the portfolio increased from 12.1 years to 12.4 years.
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PORTFOLIO CREDIT QUALITY
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(based on net assets)
[PIE CHART APPEARS HERE]
AAA -- 25.5%
BB -- 16.0%
BBB -- 15.1%
AA -- 14.8%
A -- 14.6%
B -- 13.5%
CC -- 0.5%
4
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E V E R G R E E N
Diversified Bond Fund
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Portfolio Manager Interview
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PORTFOLIO COMPOSITION
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(based on net assets)
[PIE CHART APPEARS HERE]
Corporate Bonds -- 56.2%
Collateralized Mortgage Obligations -- 14.6%
Mortgage-backed Securities -- 7.3%
Foreign Corporate Bonds -- 7.0%
Asset-backed Securities -- 4.3%
U.S. Government & Agency Obligations -- 4.1%
Short Term Investments/1/ and other Assets & Liabilities -- 3.3%
Foreign Government Obligations -- 2.4%
Municipal Bonds -- 0.8%
What is your outlook?
We anticipate a much more stable interest rate environment than we witnessed
during the last six months. We believe the economy will continue to grow
moderately, and we think the boom-or-bust fears of the past year may be behind
us. Internationally, we expect more stability, with either a halt to the
weakening of foreign markets or the start of a gradual recovery.
With this scenario, we believethe Federal Reserve Board is unlikely to lower
rates any further and may, in fact, look to reverse some of the monetary easing
instituted in response to last year's market instability. With labor costs under
control and no signs of any substantial increase in inflationary pressures, any
increase in rates would likely be moderate. The Federal Reserve Board is very
conscious of the negative effect any increase in interest rates would have on
foreign markets and does not want to rekindle global market disorder.
In this environment, we expect to continue the strategies we put in place during
the past six months, emphasizing corporate bonds, including high yield
securities, and corporate mortgage-backed securities for the yield advantage
they may provide in an expanding economy with stable interest rates.
/1/ Includes repurchase agreements and mutual funds shares. 5
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E V E R G R E E N
High Yield Bond Fund
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Fund at a Glance as of April 30, 1999
We managed the Fund conservatively, focusing on issuers' creditworthiness and
our outlook for the economy.
Portfolio
Management
----------
[PHOTO OF PRESCOTT B. CROCKER APPEARS HERE]
Prescott B.Crocker,CFA
Tenure: February 1997
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CURRENT INVESTMENT STYLE
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[STYLE BOX APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 4/30/99.
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
Source: 1999 Morningstar, Inc.
/1/ Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost.
Historical performance shown for Classes 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
Classes A, B, and C are 0.25%, 1.00%, and 1.00%, respectively. 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 risks due to
the increased possibility of default.
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PERFORMANCE AND RETURNS/1/
- --------------------------------------------------------------------------------
Portfolio Inception Date: 9/11/35 Class A Class B Class C Class Y
Class Inception Date 1/20/98 9/11/35 1/21/98 4/14/98
................................................................................
Average Annual Returns*
................................................................................
1 year with sales charge (6.79%) (7.27%) (3.69%) n/a
................................................................................
1 year w/o sales charge (2.05%) (2.79%) (2.79%) (1.81%)
................................................................................
3 years 6.51% 6.65% 7.49% 8.47%
................................................................................
5 years 4.37% 4.34% 4.61 5.60%
................................................................................
10 years 6.90% 6.55% 6.55% 7.65%
................................................................................
Since Portfolio Inception 8.48% 8.34% 8.32% 8.63%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
................................................................................
30-day SEC Yield 7.82% 7.45% 7.45% 8.46%
................................................................................
12-month distributions per share $0.37 $0.34 $0.34 $0.38
................................................................................
* Adjusted for maximum applicable sales charge.
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LONG TERM GROWTH
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[LINE GRAPH APPEARS HERE]
EVERGREEN HIGH LEHMAN BROTHERS MERRILL LNYCH CONSUMER
YIELD BOND FUND AGGREGATE BOND HIGH YIELD PRICE
DATE CLASS B/1/ INDEX MASTER INDEX INDEX
4/30/89 10,000 10,000 10,000 10,000
4/90 8,881 10,903 10,016 10,471
4/91 8,659 12,558 11,457 10,983
4/92 11,386 13,941 14,196 11,332
4/93 13,383 15,789 16,565 11,698
4/94 15,044 15,924 17,600 11,974
4/95 14,314 17,088 19,454 12,339
4/96 15,174 18,566 21,821 12,687
4/97 16,571 19,882 24,403 13,014
4/98 19,392 22,035 27,824 13,201
4/99 18,851 23,431 29,075 13,443
Comparison of a $10,000 investment in Evergreen High Yield Bond Fund, Class B
shares/1/, 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 and the Merrill Lynch High Yield Master
Index are unmanaged indices and do not include transaction costs associated with
buying and selling securities nor any management fees.
The Consumer Price Index is a commonly used measure of inflation and does not
represent an investment return.
It is not possible to invest directly in an index.
6
<PAGE>
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E V E R G R E E N
High Yield Bond Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How did the Fund perform over the past twelve-months?
The Evergreen High Yield Bond Fund's Class A shares returned -2.05% for the
twelve month period ended April 30, 1999. For the same period, Class B and Class
C shares returned -2.79% and Class Y shares returned -1.81%. These returns are
before deduction of any applicable sales charges. In comparison, the Merrill
Lynch High Yield Master Index returned 3.05% and the Lehman Brothers Aggregate
Bond Index returned 6.27% for the same period. Unlike a mutual fund, these
indices do not incur operating expenses, which would reduce their total returns.
We attribute the difference in performance between the Fund and the Lehman
Brothers Aggregate Bond Index to the Fund's exclusive investment in high yield
bonds versus Lehman's representation of a higher-rated selection of the bond
market. According to Lipper, Inc., an independent monitor of mutual fund
performance, the Lipper high current yield objective average is -0.06.
Portfolio
Characteristics
---------------
Total Net Assets $407,444,141
..................................................
Average Credit Quality B
..................................................
Average Maturity 7.8 years
..................................................
Average Duration 5.8 years
..................................................
What caused the difference in the Fund's return during the period?
The investment environment in the first half of the fiscal year was extremely
different from the one that existed over the last six months. The Fund's fiscal
period began with a continuation of favorable market conditions including solid
economic growth, low inflation and strong demand for high yield bonds. In the
summer of 1998, however, a series of events unfolded which caused a rapid and
chaotic deterioration in high yield bond prices. At that time, Russia devalued
its currency, the government of Malaysia imposed currency controls and the
largest U.S. hedge fund/1/ sought financial assistance to avoid insolvency.
These events triggered a massive "flight-to-quality"--a phenomenon in which
there is demand for only the highest quality investments. While U.S. Treasury
prices rose dramatically, there was increasing downward pressure on high yield
bond prices.
The investment environment changed dramatically in the second half of the Fund's
fiscal year. In the fourth quarter of 1998, international central bankers and
government officials helped rebuild investor confidence in the world's economies
and financial systems by coordinating interest rate cuts and implementing
programs to stimulate economic growth. The high yield bond market regained
stability as a result of these efforts. Prices rebounded further in the early
months of 1999, as reports confirmed continued economic growth, small
capitalization stocks recovered and commodity prices improved.
/1/ A hedge fund is private investment account that often engages in complex,
leveraged trading strategies. Hedge funds are not subject to the same
regulations as mutual funds.
7
<PAGE>
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E V E R G R E E N
High Yield Bond Fund
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Portfolio Manager Interview
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PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(based on net assets)
[PIE CHART APPEARS HERE]
Corporate Bonds -- 78.1%
Foreign Corporate Bonds -- 11.5%
Preferred Stocks -- 6.0%
Short Term Investments/1/ and other Assets and Liabilities (net) -- 2.3%
Common Stocks and Warrants -- 2.1%
What strategies did you use to manage the Fund?
We managed the Fund conservatively, focusing on issuers' creditworthiness and
our outlook for the economy. In the first half of the fiscal period, we reduced
"CCC-rated" holdings from 10% to as low as 5%, and also lowered the Fund's
position in companies dependent on raising capital in the stock market. This
helped protect the Fund as market conditions deteriorated and investors
penalized risk. We also emphasized stronger credits because of the rising number
of defaults among high yield bond issuers. According to Moody's Investors
Services, the default rate on the principal amount of issues outstanding of high
yield bonds rose from 2.8% to 4.0% for the 12-months ending April 30, 1999. This
rate had reached a low of 1.35% in March 1997.
In the second half of the Fund's fiscal period, we concentrated on industries,
which we believed had positive and/or improving trends. These included cable and
telecommunications, which have benefited from the stock market's recent
strength. The aggressive merger and acquisition activity in these industries has
resulted in ratings' upgrades and higher bond prices. We also increased the
Fund's holdings in steel, paper and energy, which have profited from recent
price increases as well as the economy's continued strength.
- --------------------------------------------------------------------------------
PORTFOLIO CREDIT QUALITY
- --------------------------------------------------------------------------------
(based on net assets)
[PIE CHART APPEARS HERE]
B -- 85.3%
BB -- 7.5%
CCC -- 6.2%
Non Rated -- 1.0%
What is your outlook for high yield bonds over the next six months?
Our outlook is positive, although it is tied to the direction of stock prices.
We believe the economy's strength and the "wealth effect" of the rising stock
market can enable many companies to raise the prices of their products,
providing them with the opportunity to achieve above average earnings growth. In
particular, we think the ability of small capitalization stocks and value stocks
to outperform the broader market should lend continued strength to high yield
bonds.
If there were to be a continuation of rising commodity prices, that would put
upward pressure on interest rates and be negative for government bond prices,
however, it may have a positive effect on high yield bond issuers, particularly
emerging market debt. The combination of rising stock and commodity prices
usually indicates stronger economic growth--a setting that typically enhances
the financial health of high yield bond issuers.
/1/ Includes repurchase agreements and mutual fund shares.
8
<PAGE>
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E V E R G R E E N
Strategic Income Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of April 30, 1999
Our outlook is positive. We are cautious on the direction of interest rates, but
are optimistic about opportunities in higher yielding bonds.
Portfolio
Management
----------
[PHOTO OF PRESCOTT B. CROCKER APPEARS HERE]
Prescott B. Crocker,CFA
Tenure: February 1997
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE
- --------------------------------------------------------------------------------
[STYLE BOX APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 4/30/99.
The Fixed-Income Style Box placementis based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
Source: 1999 Morningstar, Inc.
/1/ Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost.
Historical performance shown for Classes B, C, and Y prior to their inception is
based on the performance of Class A, the original class offered. These
historical returns for Classes B, C, and Y have not been adjusted to reflect the
effect of each Class' 12b-1 fees. These fees for Classes A, B, and C are 0.25%,
1.00%, and 1.00%, respectively. 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 to the Fund's shares.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/1/
- --------------------------------------------------------------------------------
Portfolio Inception Date: 4/14/87 Class A Class B Class C Class Y
Class Inception Date 4/14/87 2/1/93 2/1/93 1/13/97
................................................................................
Average Annual Returns*
................................................................................
1 year with sales charge (3.26%) (4.14%) (0.39%) n/a
................................................................................
1 year w/o sales charge 1.58% 0.56% 0.55% 1.83%
................................................................................
3 years 6.15% 6.17% 7.06% 7.19%
................................................................................
5 years 4.90% 4.82% 5.09% 5.50%
................................................................................
10 years 7.21% 7.15% 7.14% 7.52%
................................................................................
Since Portfolio Inception 6.93% 6.88% 6.88% 7.19%
................................................................................
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%
................................................................................
12-month distributions per share $0.52 $0.47 $0.47 $0.53
................................................................................
* Adjusted for maximum applicable sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
EVERGREEN STRATEGIC LEHMAN BROTHERS CONSUMER
INCOME FUND AGGREGATE PRICE
DATE CLASS A/1/ BOND INDEX INDEX
4/30/89 9,523 10,000 10,000
4/90 8,708 10,903 10,471
4/91 8,479 12,559 10,983
4/92 11,082 13,941 11,332
4/93 13,429 15,789 11,698
4/94 15,042 15,924 11,974
4/95 14,494 17,088 12,339
4/96 15,965 18,566 12,687
4/97 17,446 19,882 13,014
4/98 19,748 22,035 13,201
4/99 20,059 23,431 13,443
Comparison of a $10,000 investment in Evergreen Strategic Income Fund, Class A
shares/1/, 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 an unmanaged index and does not
include transaction costs associated with buying and selling securities nor any
management fees.
The Consumer Price Index is a commonly used measure of inflation, and does not
represent an investment return.
It is not possible to invest directly in an index.
9
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Strategic Income Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How did the Fund perform over the past twelve-months?
The Evergreen Strategic Income Fund's Class A shares returned 1.58% for the
twelve-month period ended April 30, 1999. For the same period, Class B and Class
C shares returned 0.56% and 0.55%, respectively, and Class Y shares returned
1.83%. These returns are before deduction of any applicable sales charges. In
comparison, the Lehman Aggregate Bond Index had a 6.27% return during the same
period. Unlike a mutual fund, these indices do not incur operating expenses,
which would reduce their total returns. The average return of the strategic
income funds followed by Lipper, Inc., an independent monitor of mutual fund
performance, was 1.05% for the same twelve-month period.
Portfolio
Characteristics
---------------
Total Net Assets $300,772,386
..................................................
Average Credit Quality A-
..................................................
Average Maturity 12.1 years
..................................................
Average Duration 6.2 years
..................................................
How was the Fund invested at the end of the fiscal period?
As of April 30, 1999, the Fund was invested as follows: High yield bonds--43%;
U.S. Treasury and agency securities--20%; and foreign bonds--36%. Foreign
government bonds represented approximately 20% of net assets and included the
governments of Canada, Hungary and Greece. Approximately 12% of the Fund's net
assets were invested in foreign high yield bonds, most of which included Latin
American and Eastern European sovereign country debt obligations, as well as
certain foreign corporate bonds. The Fund's foreign holdings included bonds
denominated in the Canadian and New Zealand dollar, as well as the euro, which
was partially currency-hedged.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(based on net assets)
[PIE CHART APPEARS HERE]
Corporate Bonds -- 38.8%
Foreign Government Obligations -- 23.1%
Mortgage-backed Securities -- 15.3%
Foreign Corporate Bonds -- 13.1%
U.S. Treasury Obligations -- 5.4%
Short Term Investments/1/ and other Assets and Liabilities -- 2.7%
Common Stock -- 0.7%
Asset-backed Securities -- 0.7%
Preferred Stock -- 0.2%
What was the investment environment like?
The environment was challenging in the first half of the Fund's fiscal year and
positive in the last six months, particularly in the high yield bond sector. The
reporting period began with a continuation of favorable market conditions, i.e.,
stable interest rates, a high degree of investor confidence and price
relationships that reflected historical market standards. In the summer of 1998,
however, a series of events unfolded that triggered a massive
"flight-to-quality"--a phenomenon in which investors seek only the highest
quality investments. These events included the Russian government devaluing the
country's currency and defaulting on its domestic debt, the Malaysian government
imposing currency controls and the largest hedge fund/2/ in the United States
seeking financial assistance to avoid insolvency. During this time, the prices
of U.S. Treasury securities and high quality foreign bonds rose considerably
while high yield bonds experienced rapid and chaotic price deterioration--
particularly issues of emerging market debt.
/1/ Includes repurchase agreements and mutual fund shares.
/2/ A hedge fund is a private investment account that often engages in complex,
leveraged trading strategies. Hedge funds are not subject to the same
regulations as mutual funds.
10
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
Strategic Income Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
The high yield bond market regained stability in the fourth quarter of 1998,
however. A combination of coordinated worldwide interest rate cuts and the
implementation of programs designed to stimulate economic growth helped rebuild
investor confidence. The market achieved further gains early in 1999 when
reports confirmed the acceleration of economic strength, small capitalization
stock prices recovered and commodity prices improved.
What happened in the other sectors?
U.S. Treasury prices rose dramatically during the "flight-to-quality" and then
declined sharply. The yield on the benchmark 30-year U.S. Treasury, which
typically falls when prices rise and moves higher when prices decline, was 5.95%
on April 30, 1998, fell to a low of 4.72% on October 6, 1998,and stood at 5.66%
on April 30, 1999. On a year-to-year basis, high quality European bonds
outperformed their U.S. counterparts. Europe's economy has been stagnant, which
has kept their interest rates low. In contrast, U.S. interest rates have stayed
higher than European interest rates because of continued domestic economic
strength.
- --------------------------------------------------------------------------------
PORTFOLIO CREDIT QUALITY
- --------------------------------------------------------------------------------
(based on netassets)
[PIE CHART APPEARS HERE]
B -- 29.7%
AAA -- 23.6%
BB -- 18.5%
A -- 10.2%
CCC -- 9.0%
AA -- 4.0%
BBB -- 4.0%
Not Rated -- 1.0%
What strategies did you use in managing the Fund?
We emphasized quality and flexibility in the first half of the reporting period
when investors penalized risk. Specifically, we increased the Fund's position in
U.S. Treasuries, maintained a focus on high quality foreign bonds and controlled
investment in high yield and emerging market bonds. In the second half of the
reporting period, we took advantage of the depressed prices and positive outlook
in the high yield sector to boost the Fund's total return potential. We
maximized the Fund's high yield bond position, shifting assets from U.S.
Treasury and agency securities. We emphasized domestic bonds in industries we
believed had positive and/or improving trends. These included cable and
telecommunications, steel, paper and energy. We also selected bonds with short
durations to minimize the Fund's sensitivity to interest rate changes.
We reduced the Fund's exposure to U.S. Treasury and agency securities during the
same period. The Fund's position in foreign bonds has remained relatively stable
over the past 12months.
What is your outlook for the Fund over the next 6 months?
Our outlook is positive. We are cautious on the direction of interest rates, but
are optimistic about opportunities in higher yielding bonds. We believe the
recent trend of rising commodity prices will continue, which is positive for
emerging market debt, but it also could put upward pressure on interest rates.
Higher interest rates would push the prices of high quality bonds--particularly
U.S. government bonds--lower. We also anticipate solid economic growth, based on
the combination of rising commodity prices with the stock market's recent
strength. Typically, a strong economy benefits high yield issuers. With that as
a background, we intend to maintain the Fund's current strategies, particularly
its emphasis on high yield bonds and bonds with modest durations in other
sectors.
11
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
U.S. Government Fund
- --------------------------------------------------------------------------------
Fund at a Glance as of April 30, 1999
The Fund's strong return can be attributed primarily to a favorable duration
strategy, and the fact that U.S. Treasuries posted extraordinary returns during
the majority of the period.
Portfolio
Management
----------
[PHOTO OF ROLLIN C. WILLIAMS APPEARS HERE]
Rollin C. Williams,CFA
Tenure: January 1993
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE
- --------------------------------------------------------------------------------
[STYLE BOX APPEARS HERE]
Morningstar's Style Box is based on a portfolio date as of 4/30/99.
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
Source: 1999 Morningstar, Inc.
/1/ Past performance is no guarantee of future results. The performance of each
class may vary based on differences in loads and fees paid by the shareholders
investing in each class. The investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than original cost.
Historical performance shown for Classes 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 Classes
A, B, and C are 0.25%, 1.00%, and 1.00%, respectively. Class Y does not pay a
12b-1 fee. If these fees had been reflected, returns for Class C would Quality
have been lower while returns for Class Y would have High Med Low been higher.
U.S. Government guarantees apply only to the underlying securities of the Fund's
portfolio and not to the Fund's shares.
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/1/
- --------------------------------------------------------------------------------
Portfolio Inception Date: 1/11/93 Class A Class B Class C Class Y
Class Inception Date 1/11/93 1/11/93 9/2/94 9/2/93
................................................................................
Average Annual Returns*
................................................................................
1 year with sales charge 0.41% (0.37%) 3.61% n/a
................................................................................
1 year w/o sales charge 5.39% 4.60% 4.60% 5.66%
................................................................................
3 years 5.44% 5.47% 6.36% 7.43%
................................................................................
5 years 6.04% 5.98% 6.34% 7.35%
................................................................................
Since Portfolio Inception 5.32% 5.42% 5.56% 6.38%
................................................................................
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
From End CDSC CDSC
................................................................................
30-day SEC yield 4.96% 4.45% 4.45% 5.47%
................................................................................
12- month dividends per share $0.57 $0.49 $0.49 $0.59
................................................................................
* Adjusted for maximum applicable sales charge.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
LEHMAN BROTHERS
EVERGREEN U.S. INTERMEDIATE TERM CONSUMER
GOVERNMENT FUND GOVERNMENT PRICE
CLASS A SHARES BOND INDEX INDEX
1/31/93 9,526 10,000 10,000
4/93 9,784 10,264 10,098
4/94 9,768 10,356 10,337
4/95 10,401 10,994 10,652
4/96 11,173 11,822 10,952
4/97 11,885 12,559 11,234
4/98 13,047 13,642 11,396
4/99 13,750 14,517 11,605
Comparison of a $10,000 investment in Evergreen U.S. Government Fund, Class A
shares/1/, 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
index and does not include transaction costs associated with buying and selling
securities nor any management fees.
The Consumer Price Index is a commonly used measure of inflation and does not
represent an investment return.
It is not possible to invest directly in an index.
12
<PAGE>
- --------------------------------------------------------------------------------
E V E R G R E E N
U.S. Government Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
How did the Fund perform during the past twelve months?
For the twelve month period ended April 30, 1999, the Evergreen U.S. Government
Fund's Class A shares posted a total return of 5.39%. Class B and C shares each
returned 4.60%and Class Y shares returned 5.66%. These returns are before
deduction of any applicable sales charges. The performance of the A and Y
shares outpaced the 5.12% average return of general U.S. government funds
tracked by Lipper, Inc., an independent mutual fund rating company. During the
same period, Lehman Brothers Intermediate Term Government Bond Index returned
6.36%.
The Fund's strong return can be attributed primarily to a favorable duration
strategy, and the fact that U.S. Treasuries posted extraordinary returns during
the majority of the period.
Portfolio
Characteristics
---------------
Total Net Assets $399,490,302
...................................................
Average Credit Quality AA+
...................................................
Average Maturity 9.7 years
...................................................
Average Duration 5.3 years
...................................................
What was the environment like for fixed income investors during the fiscal year?
Investors witnessed two markedly different periods during the fiscal year.
Interest rates fell steadily during the first six months, as the yield on the
bellwether 30-year Treasury Bond fell from 5.95% to 5.16%.
Underscoring this decline were two interest rate cuts by the Federal Reserve
Board undertaken to insulate the U.S. from the global turmoil. Rates proceeded
to climb during the remainder of the period, finishing at 5.66% on April
30,1999.
U.S. Treasury securities also experienced a roller-coaster ride. During the
first half of the fiscal period amid low inflation, a spreading global economic
crisis, and a flight to quality bonds, U.S. Treasuries proved to be the
overwhelming fixed income asset class of choice, enjoying strong performance as
global investors sought a safe haven from volatile global markets. Subsequently,
performance cooled down--especially in the early months of 1999--as rates crept
upward and long U.S. Treasuries under-performed significantly.
- --------------------------------------------------------------------------------
MATURITY BREAKDOWN
- --------------------------------------------------------------------------------
(based on netassets)
[PIE CHART APPEARS HERE]
5-10 years -- 46.8%
1-5 years -- 20.5%
10-20 years -- 17.1%
20+ years -- 8.7%
0-1 year -- 6.9%
Which particular investment strategies contributed to the period's strong
performance?
Our duration strategy, including a few timely duration adjustments, was a major
contributor to strong performance throughout the year. The Fund was rewarded for
maintaining a longer duration during the first half of the period when interest
rates declined steadily. In the early months of 1999, we became
13
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
U.S. Government Fund
- --------------------------------------------------------------------------------
Portfolio Manager Interview
concerned about the market's momentum and shortened the portfolio's duration,
but as concern dissipated we extended duration back to its long position.
Favorable sector weightings also had a positive impact on total return, allowing
the Fund to outpace over 70% of funds in its peer group. A weighting of nearly
50% in U.S. Treasuries fueled performance during the first part of the period.
In addition, we purchased several lower coupon mortgages in late 1998 to
maintain the yield component of the Fund. This decision fueled performance at
the end of the fiscal year when mortgages posted exceptionally strong returns
during the opening months of 1999.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(based on net assets)
[PIE CHART APPEARS HERE]
Mortgage-backed Securities -- 49.8%
U.S. Treasury Obligations -- 31.3%
Corporate Bonds -- 17.8%
Repurchase Agreements and Other Assets &
Liabilities (net) -- 1.1%
- --------------------------------------------------------------------------------
PORTFOLIO CREDIT QUALITY
- --------------------------------------------------------------------------------
(based on net assets)
[PIE CHART APPEARS HERE]
U.S. Treasury & Agency Obligations -- 80.6%
BBB -- 11.2%
A -- 7.5%
AAA -- 0.7%
What is your outlook going forward?
Looking to the remainder of 1999, the market's long-term fundamentals appear
extremely positive and we feel the risk of a potential short-term uptick in
rates is outweighed by lower rates over the long term. The portfolio duration
will continue to be changed throughout the period as we re-evaluate market
momentum and sentiment. In addition, we will continue to monitor the fixed
income markets for areas of relative value and hidden opportunity.
14
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Diversified Bond Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended April 30,
---------------------
1999 1998 (a)(#)
<S> <C> <C>
CLASS A SHARES
Net asset value, beginning of period $ 15.92 $ 16.08
======== ========
.........................................................................
Income from investment operations
.........................................................................
Net investment income 0.97 0.30
.........................................................................
Net realized and unrealized gains or losses on
securities (0.44) (0.16)++
-------- --------
.........................................................................
Total from investment operations 0.53 0.14
-------- --------
.........................................................................
Distributions to shareholders from
.........................................................................
Net investment income (0.97) (0.30)
.........................................................................
Tax basis return of capital 0 0
-------- --------
.........................................................................
Total distributions to shareholders (0.97) (0.30)
-------- --------
.........................................................................
Net asset value, end of period $ 15.48 $ 15.92
======== ========
.........................................................................
Total return* 3.35% 0.85%
.........................................................................
Ratios and supplemental data
.........................................................................
Net assets, end of period (thousands) $444,273 $501,547
.........................................................................
Ratios to average net assets
Expenses+++ 1.23% 1.08%+
.........................................................................
Net investment income 6.12% 6.68%+
.........................................................................
Portfolio turnover rate 141% 109%
.........................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended April 30, Year Ended August 31,
-------------------- --------------------------------------
1999 1998 (b)(#) 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 15.92 $ 15.42 $ 14.65 $ 15.09 $ 15.28 $ 17.06
======= ======= ======== ======== ======== ========
.........................................................................................
Income from investment
operations
.........................................................................................
Net investment income 0.86 0.61 0.91 0.95 1.06 1.06
.........................................................................................
Net realized and
unrealized gains or
losses on securities (0.45) 0.50 0.84 (0.35) 0.11 (1.62)
------- ------- -------- -------- -------- --------
.........................................................................................
Total from investment
operations 0.41 1.11 1.75 0.60 1.17 (0.56)
------- ------- -------- -------- -------- --------
.........................................................................................
Distributions to
shareholders from
.........................................................................................
Net investment income (0.85) (0.61) (0.98) (0.96) (1.28) (1.22)
.........................................................................................
Tax basis return of
capital 0 0 0 (0.08) (0.08) 0
------- ------- -------- -------- -------- --------
.........................................................................................
Total distributions to
shareholders (0.85) (0.61) (0.98) (1.04) (1.36) (1.22)
------- ------- -------- -------- -------- --------
.........................................................................................
Net asset value, end of
period $ 15.48 $ 15.92 $ 15.42 $ 14.65 $ 15.09 $ 15.28
======= ======= ======== ======== ======== ========
.........................................................................................
Total return* 2.57% 7.26% 12.25% 4.03% 8.13% (3.35%)
.........................................................................................
Ratios and supplemental
data
.........................................................................................
Net assets end of period
(thousands) $43,729 $70,113 $457,701 $559,792 $734,837 $814,245
.........................................................................................
Ratios to average net
assets
Expenses+++ 1.97% 1.93%+ 1.88% 1.84% 1.81% 1.75%
.........................................................................................
Net investment income 5.33% 5.74%+ 6.07% 6.42% 7.05% 6.48%
.........................................................................................
Portfolio turnover rate 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
period.
See Combined Notes to Financial Statements.
15
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
Diversified Bond Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------
1999 1998 (a)(#)
<S> <C> <C>
CLASS C SHARES
Net asset value, beginning of period $15.92 $16.06
====== ======
................................................................................
Income from investment operations
................................................................................
Net investment income 0.84 0.04
................................................................................
Net realized and unrealized gains or losses on securities (0.43) (0.14)++
------ ------
................................................................................
Total from investment operations 0.41 (0.10)
------ ------
................................................................................
Distributions to shareholders from
................................................................................
Net investment income (0.85) (0.04)
................................................................................
Tax basis return of capital 0 0
------ ------
................................................................................
Total distributions to shareholders (0.85) (0.04)
------ ------
................................................................................
Net asset value, end of period $15.48 $15.92
====== ======
................................................................................
Total return* 2.57% (0.60%)
................................................................................
Ratios and supplemental data
................................................................................
Net assets, end of period (thousands) $ 499 $ 23
................................................................................
Ratios to average net assets
Expenses+++ 1.98% 1.88%+
................................................................................
Net investment income 5.33% 6.11%+
................................................................................
Portfolio turnover rate 141% 109%
................................................................................
<CAPTION>
Year Ended April 30,
--------------------
1999 1998 (b)(#)
<S> <C> <C>
CLASS Y SHARES
Net asset value, beginning of period $15.92 $16.03
====== ======
................................................................................
Income from investment operations
................................................................................
Net investment income 0.90 0.24
................................................................................
Net realized and unrealized gains or losses on securities (0.43) (0.11)++
------ ------
................................................................................
Total from investment operations 0.47 0.13
------ ------
................................................................................
Distributions to shareholders from
................................................................................
Net investment income (0.91) (0.24)
................................................................................
Tax basis return of capital 0 0
------ ------
................................................................................
Total distributions to shareholders (0.91) (0.24)
------ ------
................................................................................
Net asset value, end of period $15.48 $15.92
====== ======
................................................................................
Total return 2.95% 0.80%
................................................................................
Ratios and supplemental data
................................................................................
Net assets, end of period (thousands) $3,478 $ 7
................................................................................
Ratios to average net assets
Expenses+++ 0.99% 0.83%+
................................................................................
Net investment income 6.55% 6.89%+
................................................................................
Portfolio turnover rate 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 pe-
riod.
See Combined Notes to Financial Statements.
16
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
High Yield Bond Fund
- --------------------------------------------------------------------------------
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------
1999 1998 (a)#
<S> <C> <C>
CLASS A SHARES
Net asset value, beginning of period $ 4.53 $ 4.52
======== ========
................................................................................
Income from investment operations
................................................................................
Net investment income 0.36 0.11
................................................................................
Net realized and unrealized gains or losses on
securities (0.46) 0.01
-------- --------
................................................................................
Total from investment operations (0.10) 0.12
-------- --------
................................................................................
Distributions to shareholders from
................................................................................
Net investment income (0.37) (0.11)
................................................................................
Tax basis return of capital 0 0
-------- --------
................................................................................
Total distributions to shareholders (0.37) (0.11)
-------- --------
................................................................................
Net asset value, end of period $ 4.06 $ 4.53
======== ========
................................................................................
Total return* (2.05%) 2.57%
................................................................................
Ratios and supplemental data
................................................................................
Net assets, end of period (millions) $353,488 $420,778
................................................................................
Ratios to average net assets
Expenses++ 1.21% 1.24%+
................................................................................
Net investment income 8.61% 8.48%+
................................................................................
Portfolio turnover rate 170% 155%
................................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended April 30, Year Ended July 31,
------------------- --------------------------------------
1999 1998 (b)# 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 4.53 $ 4.37 $ 4.10 $ 4.42 $ 4.68 $ 5.13
======= ======= ======== ======== ======== ========
...........................................................................................
Income from investment
operations
...........................................................................................
Net investment income 0.27 0.25 0.32 0.32 0.38 0.38
...........................................................................................
Net realized and
unrealized gains or
losses on securities (0.40) 0.16 0.28 (0.27) (0.15) (0.38)
------- ------- -------- -------- -------- --------
...........................................................................................
Total from investment
operations (0.13) 0.41 0.60 0.05 0.23 0
------- ------- -------- -------- -------- --------
...........................................................................................
Distributions to
shareholders from
...........................................................................................
Net investment income (0.34) (0.25) (0.33) (0.37) (0.39) (0.45)
...........................................................................................
Tax basis return of
capital 0 0 0 0 (0.10) 0
------- ------- -------- -------- -------- --------
...........................................................................................
Total distributions to
shareholders (0.34) (0.25) (0.33) (0.37) (0.49) (0.45)
------- ------- -------- -------- -------- --------
...........................................................................................
Net asset value, end of
period $ 4.06 $ 4.53 $ 4.37 $ 4.10 $ 4.42 $ 4.68
======= ======= ======== ======== ======== ========
...........................................................................................
Total return* (2.79%) 9.57% 15.32% 1.38% 5.66% (0.41%)
...........................................................................................
Ratios and supplemental
data
...........................................................................................
Net assets, end of
period (millions) $47,713 $96,535 $547,390 $593,681 $764,965 $766,283
...........................................................................................
Ratios to average net
assets
Expenses++ 1.95% 1.94%+ 1.96% 1.94% 2.03% 1.84%
...........................................................................................
Net investment income 7.85% 7.27%+ 7.63% 7.92% 8.64% 7.57%
...........................................................................................
Portfolio turnover rate 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 in-
cludes 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>
Year Ended April 30,
--------------------
1999 1998 (a)#
<S> <C> <C>
CLASS C SHARES
Net asset value, beginning of period $ 4.53 $ 4.52
====== ======
................................................................................
Income from investment operations
................................................................................
Net investment income 0.32 0.10
................................................................................
Net realized and unrealized gains or losses on securities (0.45) 0.01
------ ------
................................................................................
Total from investment operations (0.13) 0.11
------ ------
................................................................................
Distributions to shareholders from net investment income
................................................................................
Net investment income (0.34) (0.10)
................................................................................
Tax basis return of capital 0 0
------ ------
................................................................................
Total distributions to shareholders (0.34) (0.10)
------ ------
................................................................................
Net asset value, end of period $ 4.06 $ 4.53
====== ======
................................................................................
Total return* (2.79%) 2.35%
................................................................................
Ratios and supplemental data
................................................................................
Net assets, end of period (millions) $1,999 $1,155
................................................................................
Ratios to average net assets
Expenses+++ 1.94% 2.04%+
................................................................................
Net investment income 7.86% 7.51%+
................................................................................
Portfolio turnover rate 170% 155%
................................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------
1999 1998 (b)#
<S> <C> <C>
CLASS Y SHARES
Net asset value, beginning of period $ 4.53 $4.56
====== ======
................................................................................
Income from investment operations
................................................................................
Net investment income 0.36 0.02
................................................................................
Net realized and unrealized gains or losses on securities (0.45) (0.03)++
------ -----
................................................................................
Total from investment operations (0.09) (0.01)
------ -----
................................................................................
Distributions to shareholders from net investment income
................................................................................
Net investment income (0.38) (0.02)
................................................................................
Tax basis return of capital 0 0
------ -----
................................................................................
Total distributions to shareholders (0.38) (0.02)
------ -----
................................................................................
Net asset value, end of period $ 4.06 $4.53
====== ======
................................................................................
Total return (1.81%) (0.27%)
................................................................................
Ratios and supplemental data
................................................................................
Net assets, end of period (millions) $4,244 $ 20
................................................................................
Ratios to average net assets
Expenses+++ 0.91% 1.09%+
................................................................................
Net investment income 9.14% 8.21%+
................................................................................
Portfolio turnover rate 170% 155%
................................................................................
</TABLE>
(a) For the period from January 22, 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 in-
cludes 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>
Year Ended April 30, Year Ended July 31,
--------------------------- --------------------------
1999 1998 # 1997(a) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 7.21 $ 6.82 $ 6.77 $ 6.89 $ 7.35 $ 7.86
======== ======== ======= ======= ======= ========
.....................................................................................
Income from investment
operations
.....................................................................................
Net investment income 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 (0.41) 0.38 0.09 (0.09) (0.45) (0.44)
-------- -------- ------- ------- ------- --------
.....................................................................................
Total from investment
operations 0.10 0.88 0.46 0.45 0.19 0.17
-------- -------- ------- ------- ------- --------
.....................................................................................
Distributions to
shareholders from
.....................................................................................
Net investment income (0.52) (0.49) (0.41) (0.52) (0.63) (0.64)
.....................................................................................
Tax basis return of
capital 0 0 0 (0.05) (0.02) (0.04)
-------- -------- ------- ------- ------- --------
.....................................................................................
Total distributions to
shareholders (0.52) (0.49) (0.41) (0.57) (0.65) (0.68)
-------- -------- ------- ------- ------- --------
.....................................................................................
Net asset value, end of
period $ 6.79 $ 7.21 $ 6.82 $ 6.77 $ 6.89 $ 7.35
======== ======== ======= ======= ======= ========
.....................................................................................
Total return* 1.58% 13.20% 6.80% 6.84% 3.00% 1.86%
.....................................................................................
Ratios and supplemental
data
.....................................................................................
Net assets, end of
period (thousands) $162,192 $193,618 $58,725 $68,118 $85,970 $105,181
.....................................................................................
Ratios to average net
assets
Expenses++ 1.02% 1.27% 1.28%+ 1.30% 1.33% 1.32%
.....................................................................................
Net investment income 7.41% 6.80% 7.28%+ 8.05% 9.31% 7.79%
.....................................................................................
Portfolio turnover rate 222% 237% 86% 101% 95% 92%
.....................................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended April 30, Year Ended July 31,
---------------------------- ----------------------------
1999 1998 # 1997 (a) 1996 1995 1994 #
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 7.25 $ 6.85 $ 6.81 $ 6.92 $ 7.38 $ 7.89
======== ======== ======== ======== ======== ========
.....................................................................................
Income from investment
operations
.....................................................................................
Net investment income 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 (0.44) 0.39 0.07 (0.09) (0.47) (0.44)
-------- -------- -------- -------- -------- --------
.....................................................................................
Total from investment
operations 0.03 0.83 0.41 0.41 0.13 0.11
-------- -------- -------- -------- -------- --------
.....................................................................................
Distributions to
shareholders from
.....................................................................................
Net investment income (0.47) (0.43) (0.37) (0.47) (0.58) (0.58)
.....................................................................................
Tax basis return of
capital 0 0 0 (0.05) (0.01) (0.04)
-------- -------- -------- -------- -------- --------
.....................................................................................
Total distributions to
shareholders (0.47) (0.43) (0.37) (0.52) (0.59) (0.62)
-------- -------- -------- -------- -------- --------
.....................................................................................
Net asset value, end of
period $ 6.81 $ 7.25 $ 6.85 $ 6.81 $ 6.92 $ 7.38
======== ======== ======== ======== ======== ========
.....................................................................................
Total return* 0.56% 12.47% 6.06% 6.21% 2.12% 1.10%
.....................................................................................
Ratios and supplemental
data
.....................................................................................
Net assets, end of
period (thousands) $120,669 $113,136 $110,082 $123,389 $149,091 $162,866
.....................................................................................
Ratios to average net
assets
Expenses++ 1.76% 2.05% 2.04%+ 2.07% 2.06% 2.07%
.....................................................................................
Net investment income 6.68% 6.08% 6.52%+ 7.28% 8.58% 7.11%
.....................................................................................
Portfolio turnover rate 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 in-
cludes 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>
Year Ended April 30, Year Ended July 31,
-------------------------- -------------------------
1999 1998 # 1997 (a) 1996 1995 1994 #
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $ 7.24 $ 6.84 $ 6.80 $ 6.92 $ 7.37 $ 7.88
======= ======= ======= ======= ======= =======
....................................................................................
Income from investment
operations
....................................................................................
Net investment income 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 (0.42) 0.39 0.08 (0.09) (0.45) (0.44)
------- ------- ------- ------- ------- -------
....................................................................................
Total from investment
operations 0.03 0.83 0.41 0.40 0.14 0.11
------- ------- ------- ------- ------- -------
....................................................................................
Distributions to
shareholders from
....................................................................................
Net investment income (0.47) (0.43) (0.37) (0.47) (0.58) (0.58)
....................................................................................
Tax basis return of
capital 0 0 0 (0.05) (0.01) (0.04)
------- ------- ------- ------- ------- -------
....................................................................................
Total distributions to
shareholders (0.47) (0.43) (0.37) (0.52) (0.59) (0.62)
------- ------- ------- ------- ------- -------
....................................................................................
Net asset value, end of
period $ 6.80 $ 7.24 $ 6.84 $ 6.80 $ 6.92 $ 7.37
======= ======= ======= ======= ======= =======
....................................................................................
Total return* 0.55% 12.48% 6.07% 6.07% 2.27% 1.09%
....................................................................................
Ratios and supplemental
data
....................................................................................
Net assets, end of
period (thousands) $16,265 $19,639 $24,304 $31,816 $46,221 $59,228
....................................................................................
Ratios to average net
assets
Expenses++ 1.77% 2.05% 2.04%+ 2.07% 2.08% 2.07%
....................................................................................
Net investment income 6.65% 6.10% 6.52%+ 7.29% 8.56% 7.09%
....................................................................................
Portfolio turnover rate 222% 237% 86% 101% 95% 92%
....................................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended April 30,
------------------------
1999 1998 # 1997 (b)
<S> <C> <C> <C>
CLASS Y SHARES
Net asset value, beginning of period $ 7.04 $ 6.65 $ 7.03
====== ====== ======
..............................................................................
Income from investment operations
..............................................................................
Net investment income 0.51 0.46 0.00
..............................................................................
Net realized and unrealized gains or losses on
securities and foreign currency related
transactions (0.39) 0.41 (0.20)
------ ------ ------
..............................................................................
Total from investment operations 0.12 0.87 (0.20)
------ ------ ------
..............................................................................
Distributions to shareholders from
..............................................................................
Net investment income (0.53) (0.48) (0.18)
..............................................................................
Tax basis return of capital 0 0 0
------ ------ ------
..............................................................................
Total distributions to shareholders (0.53) (0.48) (0.18)
------ ------ ------
..............................................................................
Net asset value, end of period $ 6.63 $ 7.04 $ 6.65
====== ====== ======
..............................................................................
Total return 1.83% 13.46% (2.87%)
..............................................................................
Ratios and supplemental data
..............................................................................
Net assets, end of period (thousands) $1,647 $1,442 $ 0
..............................................................................
Ratios to average net assets
Expenses++ 0.75% 1.01% 0.00%+
..............................................................................
Net investment income 7.64% 6.83% 0.00%+
..............................................................................
Portfolio turnover rate 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>
Year Ended April 30, Year Ended June 30,
------------------------- -------------------
Year Ended
1999 1998 1997(a) 1996 1995(b) December 31, 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07 $ 10.05
======= ======= ======= ======= ======= =======
................................................................................................
Income from investment
operations
................................................................................................
Net investment income 0.56 0.61 0.52 0.63 0.33 0.66
................................................................................................
Net realized and
unrealized gains or
losses on securities (0.04) 0.29 (0.03) (0.23) 0.58 (0.98)
------- ------- ------- ------- ------- -------
................................................................................................
Total from investment
operations 0.52 0.90 0.49 0.40 0.91 (0.32)
------- ------- ------- ------- ------- -------
................................................................................................
Distributions to
shareholders from
................................................................................................
Net investment income (0.57) (0.61) (0.52) (0.63) (0.33) (0.66)
------- ------- ------- ------- ------- -------
................................................................................................
Total distributions to
shareholders (0.57) (0.61) (0.52) (0.63) (0.33) (0.66)
------- ------- ------- ------- ------- -------
................................................................................................
Net asset value, end of
period $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07
======= ======= ======= ======= ======= =======
................................................................................................
Total return* 5.39% 9.78% 5.30% 4.28% 10.17% (3.18%)
................................................................................................
Ratios and supplemental
data
................................................................................................
Net assets, end of
period (thousands) $48,091 $40,136 $17,913 $20,345 $22,445 $23,706
................................................................................................
Ratios to average net
assets
Expenses++ 0.95% 1.03% 0.98%+ 0.99% 1.04%+ 0.96%
................................................................................................
Net investment income 5.68% 6.25% 6.60%+ 6.61% 7.07%+ 6.97%
................................................................................................
Portfolio turnover rate 98% 21% 12% 23% 0% 19%
................................................................................................
</TABLE>
<TABLE>
<CAPTION>
Year Ended April 30, Year Ended June 30,
---------------------------- ------------------- Year Ended
1999 1998 1997 (a) 1996 1995 (b) December 31, 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07 $ 10.05
======== ======== ======== ======== ======== ========
....................................................................................................
Income from investment
operations
....................................................................................................
Net investment income 0.49 0.53 0.46 0.56 0.29 0.61
....................................................................................................
Net realized and
unrealized gains or
losses on securities (0.05) 0.29 (0.03) (0.23) 0.58 (0.98)
-------- -------- -------- -------- -------- --------
....................................................................................................
Total from investment
operations 0.44 0.82 0.43 0.33 0.87 (0.37)
-------- -------- -------- -------- -------- --------
....................................................................................................
Distributions to
shareholders from
....................................................................................................
Net investment income (0.49) (0.53) (0.46) (0.56) (0.29) (0.61)
-------- -------- -------- -------- -------- --------
....................................................................................................
Total distributions to
shareholders (0.49) (0.53) (0.46) (0.56) (0.29) (0.61)
-------- -------- -------- -------- -------- --------
....................................................................................................
Net asset value, end of
period $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07
======== ======== ======== ======== ======== ========
....................................................................................................
Total return* 4.60% 8.96% 4.65% 3.50% 9.76% (3.75%)
....................................................................................................
Ratios and supplemental
data
....................................................................................................
Net assets, end of
period (thousands) $122,919 $130,576 $142,371 $165,988 $192,490 $195,571
....................................................................................................
Ratios to average net
assets
Expenses++ 1.71% 1.78% 1.73%+ 1.74% 1.79%+ 1.54%
....................................................................................................
Net investment income 4.99% 5.56% 5.85%+ 5.85% 6.32%+ 6.42%
....................................................................................................
Portfolio turnover rate 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 April 30, Year Ended June 30,
---------------------------- ----------------------- Year Ended
1999 1998 1997 (a) 1996 1995 (b) December 31, 1994 (c)
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07 $ 9.39
======== ======== ======== ========== ========= =======
.............................................................................................................
Income from investment
operations
.............................................................................................................
Net investment income 0.49 0.53 0.46 0.56 0.29 0.20
.............................................................................................................
Net realized and
unrealized gains or
losses on securities (0.05) 0.29 (0.03) (0.23) 0.58 (0.32)
-------- -------- -------- ---------- --------- -------
.............................................................................................................
Total from investment
operations 0.44 0.82 0.43 0.33 0.87 (0.12)
-------- -------- -------- ---------- --------- -------
.............................................................................................................
Distributions to
shareholders from
.............................................................................................................
Net investment income (0.49) (0.53) (0.46) (0.56) (0.29) (0.20)
-------- -------- -------- ---------- --------- -------
.............................................................................................................
Total distributions to
shareholders (0.49) (0.53) (0.46) (0.56) (0.29) (0.20)
-------- -------- -------- ---------- --------- -------
.............................................................................................................
Net asset value, end of
period $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07
======== ======== ======== ========== ========= =======
.............................................................................................................
Total return* 4.60% 8.96% 4.65% 3.50% 9.76% (1.30%)
.............................................................................................................
Ratios and supplemental
data
.............................................................................................................
Net assets, end of
period (thousands) $ 5,605 $ 5,697 $ 455 $ 649 $ 350 $ 266
.............................................................................................................
Ratios to average net
assets
Expenses++ 1.70% 1.78% 1.73%+ 1.74% 1.79%+ 1.71%+
.............................................................................................................
Net investment income 4.97% 5.49% 5.85%+ 5.87% 6.36%+ 6.70%+
.............................................................................................................
Portfolio turnover rate 98% 21% 12% 23% 0% 19%
.............................................................................................................
Year Ended April 30, Year Ended June 30,
---------------------------- ----------------------- Year Ended
1999 1998 1997 (a) 1996 1995 (b) December 31, 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07 $ 10.05
======== ======== ======== ========== ========= =======
............................................................................................................
Income from investment
operations
............................................................................................................
Net investment income 0.59 0.63 0.54 0.66 0.34 0.69
............................................................................................................
Net realized and
unrealized gains or
losses on securities (0.05) 0.29 (0.03) (0.23) 0.58 (0.98)
-------- -------- -------- ---------- --------- -------
............................................................................................................
Total from investment
operations 0.54 0.92 0.51 0.43 0.92 (0.29)
-------- -------- -------- ---------- --------- -------
............................................................................................................
Distributions to
shareholders from
............................................................................................................
Net investment income (0.59) (0.63) (0.54) (0.66) (0.34) (0.69)
............................................................................................................
Total distributions to
shareholders (0.59) (0.63) (0.54) (0.66) (0.34) (0.69)
-------- -------- -------- ---------- --------- -------
............................................................................................................
Net asset value, end of
period $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07
======== ======== ======== ========== ========= =======
............................................................................................................
Total return 5.66% 10.05% 5.52% 4.54% 10.30% (2.94%)
............................................................................................................
Ratios and supplemental
data
............................................................................................................
Net assets, end of
period (thousands) $222,876 $155,836 $127,099 $ 121,569 $ 16,934 $15,595
............................................................................................................
Ratios to average net
assets
Expenses++ 0.71% 0.78% 0.73%+ 0.74% 0.79%+ 0.71%
............................................................................................................
Net investment income 5.96% 6.55% 6.85%+ 6.86% 7.31%+ 7.27%
............................................................................................................
Portfolio turnover rate 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
April 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - 4.3%
$ 2,100,000 Corestates Home Equity Loan Trust,
Ser. 1996-1, Cl. A4,
(Est. Maturity 2001),
7.00%, 6/15/12 (a)................................ $ 2,151,965
Merrill Lynch Mtge. Investors Inc.:
1,480,667 Ser. 1992-B, Cl. B,
(Est. Maturity 1999),
8.50%, 4/15/12 (a)................................ 1,488,529
3,034,063 Ser. 1991-G, Cl. B,
(Est. Maturity 2000),
9.15%, 10/15/11 (a)................................ 3,020,774
3,255,196 Ser. 1992-D, Cl. B,
(Est. Maturity 2000),
8.50%, 6/15/17 (a)................................. 3,456,822
3,300,000 Southern Pacific Secured Assets
Corp.,
Ser. 1996-3, Cl. A4,
(Est. Maturity 2002),
7.60%, 10/25/27 (a)............................... 3,419,524
405,000 Univ. Support Svcs., Inc.,
Ser. 1992-CD, Cl. D,
(Est. Maturity 1999),
9.00%, 5/9/99 (a)................................. 403,736
2,083,686 World Omni Automobile Lease,
Ser. 1997-A, Cl. A4,
(Est. Maturity 2000),
6.90%, 6/25/03 (a)................................ 2,111,670
5,000,000 Zale Funding Trust,
Ser. 94-1 Cl. A2,
(Est. Maturity 1999),
7.325%, 3/15/03 (a)............................... 5,015,625
------------
Total Asset-Backed Securities (cost $20,642,705)... 21,068,645
------------
COLLATERALIZED MORTGAGE
OBLIGATIONS - 14.6%
4,500,000 Bear Stearns Commercial Mtge.
Securities, Inc.,
Ser. 1999-C1, Cl. D,
(Est. Maturity 2009),
6.53%, 10/14/13 (a)............................... 4,065,469
1,000,000 Criimi Mae Commercial Mtge. Trust,
Ser. 1998-C1, Cl. A2,
(Est. Maturity 2008),
7.00%, 3/2/11 (a) (c)............................. 906,250
5,010,431 Criimi Mae Financial Corp.,
Ser. 1, Cl. A,
(Est. Maturity 2004),
7.00%, 1/1/33 (a)................................. 5,001,037
DLJ Commercial Mtge. Corp.:
5,000,000 Ser. 1999-CG1, Cl. B1,
(Est. Maturity 2009),
7.487%, 4/10/23 (a)................................ 4,957,000
2,000,000 Ser. 1999-CG1, Cl. A3,
(Est. Maturity 2009),
6.77%, 4/10/23 (a)................................. 1,993,200
1,000,000 FFCA Secured Lending Corp.,
Ser. 1997-1, Cl. B1,
(Est. Maturity 2009),
7.74%, 6/18/13 (a) (c)............................ 953,594
2,684,100 Financial Asset Securitization, Inc.,
Ser. 1997-NAM2, Cl. B2,
(Est. Maturity 2008),
7.881%, 7/25/27 (a)............................... 2,665,271
12,510,527 FNMA,
Ser. 1993-248, Cl. SA,
(Est. Maturity 2002),
4.455%, 8/25/23 (a)............................... 11,231,075
3,745,000 GE Capital Mtge. Svcs., Inc.,
Ser. 1994-27, Cl. A6,
(Est. Maturity 2010),
6.50%, 7/25/24 (a)................................ 3,531,984
9,652,312 Independent National Mtge. Corp.,
Ser. 1997-A, Cl. A,
(Est. Maturity 2003),
7.81%, 12/26/26 (a) (c)........................... 9,139,533
239,777 KS Mtge. Capital LP,
Ser. 1995-1, Cl. A1,
(Est. Maturity 1999),
7.254%, 4/20/02 (a) (c)........................... 239,765
5,000,000 Merrill Lynch Mtge. Investors, Inc.,
Ser. 1996-C1, Cl. B,
(Est. Maturity 2005),
7.42%, 3/25/26 (a)................................ 5,212,575
818,267 Mid State Trust,
Ser. 6, Cl. A3,
(Est. Maturity 2005),
7.54%, 7/1/35 (a)................................. 818,775
Morgan Stanley Capital I, Inc.:
1,800,000 Ser. 1998-HF2, Cl. B,
(Est. Maturity 2008),
6.924%, 11/15/30 (a).............................. 1,823,895
2,500,000 Ser. 1999-WF1, Cl. E,
(Est. Maturity 2009),
7.162%, 11/15/31 (a)............................... 2,432,513
3,300,000 Ser. 1997-C1, Cl. B,
(Est. Maturity 2007),
7.69%, 1/15/07 (a)................................. 3,504,485
2,700,000 Nationslink Funding Corp.,
Ser. 1998-2, Cl. B,
(Est. Maturity 2008),
6.795%, 7/20/08 (a)............................... 2,737,547
PNC Mtge. Securities Corp.:
2,457,974 Ser. 1997-4, Cl. 2PP3,
(Est. Maturity 2007),
7.25%, 7/25/27 (a)................................. 2,485,696
4,514,789 Ser. 1997-4, Cl. 2PP1,
(Est. Maturity 2002),
7.50%, 7/25/27 (a)................................. 4,571,797
2,927,077 Residental Funding Mtge. Secs I, Inc.,
Ser. 1999-S2, Cl. M1,
(Est. Maturity 2011),
6.50%, 1/25/29 (a)................................ 2,802,983
918,449 Resolution Trust Corp.,
Ser. 1995-1, Cl. A2C,
(Est. Maturity 1999),
7.50%, 10/25/28 (a)............................... 919,749
------------
Total Collateralized Mortgage Obligations (cost
$70,158,857)...................................... 71,994,193
------------
</TABLE>
23
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
DIVERSIFIED BOND FUND
- --------------------------------------------------------------------------------
Schedule of Investments(continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - 56.2%
Advertising & Related Services - 1.1%
$ 2,800,000 Hollinger Int'l. Publishing, Inc.,
Sr. Notes (Subord.),
9.25%, 2/1/06.................................... $ 2,926,000
2,300,000 K-III Communications Corp.,
Sr. Notes,
8.50%, 2/1/06 (c)................................ 2,374,750
------------
5,300,750
------------
Aerospace & Defense - 1.3%
900,000 BE Aerospace, Inc.,
Sr. Notes (Subord.),
9.50%, 11/1/08................................... 960,750
5,000,000 Northrop Grumman Corp.,
Deb.,
9.375%, 10/15/24................................. 5,568,800
------------
6,529,550
------------
Automotive Equipment & Manufacturing - 2.7%
3,500,000 Delphi Automotive Sys. Corp.,
Notes,
6.50%, 5/1/09.................................... 3,452,050
1,775,000 Dura Operating Corp.,
Sr. Notes (Subord.),
9.00%, 5/1/09 (c)................................ 1,806,062
1,700,000 Eagle Picher Industries., Inc.,
Sr. Notes (Subord.),
9.375%, 3/1/08................................... 1,674,500
2,000,000 Hayes Wheels Int'l., Inc.,
Sr. Notes (Subord.), Ser. B,
9.125%, 7/15/07 (c) (f).......................... 2,100,000
2,000,000 Mark IV Inds., Inc.,
Sr. Notes (Subord.),
7.50%, 9/1/07 (c)................................ 1,920,000
2,000,000 Walbro Corp.,
Ser. B, Sr. Notes,
10.125%, 12/15/07................................ 2,240,000
------------
13,192,612
------------
Banks - 3.3%
4,750,000 Amsouth Bancorp.,
Deb. (Subord.),
6.75%, 11/1/25................................... 4,875,542
9,000,000 Barnett Capital I,
Capital Securities,
8.06%, 12/1/26................................... 9,426,780
1,850,000 GS Escrow Corp.,
Sr. Notes,
6.75%, 8/1/01 (c)................................ 1,852,738
------------
16,155,060
------------
Building, Construction & Furnishings - 1.0%
2,100,000 MDC Holdings, Inc.,
Sr. Notes,
8.375%, 2/1/08................................... 2,089,500
Nortek, Inc.
1,350,000 Sr. Notes, Ser. B,
9.125%, 9/1/07 (c)............................... 1,414,125
500,000 Sr. Notes,
8.875%, 8/1/08 (c)............................... 520,000
1,000,000 Standard Pacific Corp.,
Sr. Notes,
8.50%, 4/1/09.................................... 1,010,000
------------
5,033,625
------------
Cable/Other Video Distribution - 3.3%
2,000,000 Adelphia Communications Corp.,
Ser. B, Sr. Notes,
9.875%, 3/1/07................................... 2,210,000
2,000,000 Century Communications Corp.,
Sr. Notes,
9.75%, 2/15/02................................... 2,100,000
2,000,000 Chancellor Media Corp.,
Sr. Notes,
8.00%, 11/1/08 (c)............................... 2,060,000
Comcast Corp.:
Sr. Deb. (Subord.):
1,000,000 9.50%, 1/15/08................................... 1,070,000
2,000,000 9.375%, 5/15/05.................................. 2,127,000
2,000,000 Lenfest Communications, Inc.,
Sr. Notes,
8.375%, 11/1/05.................................. 2,150,000
2,000,000 Price Communications Wireless, Inc.,
Ser. B, Sr. Notes,
9.125%, 12/15/06 (c)............................. 2,110,000
2,300,000 Sinclair Broadcast Group, Inc.,
Sr. Notes (Subord.),
10.00%, 9/30/05.................................. 2,357,500
------------
16,184,500
------------
Chemical & Agricultural Products - 0.9%
2,000,000 ISP Holdings, Inc.,
Sr. Notes, Ser. B,
9.75%, 2/15/02 (c)............................... 2,050,000
2,150,000 Scotts Co.,
Sr. Notes (Subord.),
8.625%, 1/15/09 (c).............................. 2,225,250
------------
4,275,250
------------
Consumer Products & Services - 1.3%
4,200,000 American Greetings Corp.,
Sr. Deb.,
6.10%, 8/1/28.................................... 4,094,622
2,000,000 Playtex Family Products Corp.,
Sr. Notes (Subord.),
9.00%, 12/15/03 (f).............................. 2,060,000
------------
6,154,622
------------
Energy - 0.3%
1,504,814 Oslo Seismic Svcs., Inc.,
1st Pfd. Mtge. Note,
8.28%, 6/1/11.................................... 1,617,205
------------
</TABLE>
24
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
DIVERSIFIED BOND FUND
- --------------------------------------------------------------------------------
Schedule of Investments(continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Engineering - 1.0%
CSC Holdings, Inc.:
$ 2,000,000 Sr. Notes,
7.25%, 7/15/08.................................... $ 2,029,200
3,000,000 Sr. Deb.,
7.625%, 7/15/18................................... 3,031,200
------------
5,060,400
------------
Environmental Services - 0.6%
3,000,000 Allied Waste North America, Inc.,
Ser. B,
7.375%, 1/1/04 (c)................................ 2,940,000
------------
Finance & Insurance - 15.0%
2,000,000 American Financial Group, Inc.,
Sr. Deb.,
7.125%, 4/15/09................................... 1,939,680
1,350,000 Americredit Corp.,
Sr. Notes,
9.875%, 4/15/06 (c)............................... 1,366,875
5,000,000 Commercial Credit Co.,
Notes,
10.00%, 5/15/09................................... 6,298,150
8,850,000 John Deere Capital Corp.,
Deb.,
8.625%, 8/1/19.................................... 9,728,097
4,000,000 John Hancock Mutual Life
Insurance Co.,
Notes,
7.375%, 2/15/24 (c)............................... 4,189,760
3,275,000 Massachusetts Mutual Life
Insurance Co.,
Notes,
7.625%, 11/15/23 (c).............................. 3,541,519
10,500,000 MBIA, Inc.,
Deb.,
9.375%, 2/15/11................................... 12,767,370
10,000,000 Nationwide CSN Trust,
Notes,
9.875%, 2/15/25 (c)............................... 11,331,500
6,300,000 Prudential Life Insurance Corp.,
Notes,
7.125%, 7/1/07 (c)................................ 6,519,114
2,000,000 Reliance Group Holdings, Inc.,
Sr. Deb. (Subord.),
9.75%, 11/15/03................................... 2,072,900
3,500,000 SB Treasury Co. LLC,
Bonds,
9.40%, 12/29/49 (c)............................... 3,521,875
10,000,000 SunLife Canada US Capital Trust I,
Capital Securities,
8.526%, 5/29/49 (c)............................... 10,413,700
------------
73,690,540
------------
Food & Beverage Products - 2.2%
Aurora Foods, Inc.:
2,000,000 Ser. B, Sr. Notes (Subord.),
9.875%, 2/15/07................................... 2,167,500
1,000,000 Ser. D, Sr. Notes (Subord.),
9.875%, 2/15/07................................... 1,083,750
1,750,000 Chiquita Brands Int'l., Inc.,
Sr. Notes,
9.625%, 1/15/04................................... 1,820,000
2,500,000 Great Atlantic & Pacific Tea, Inc.,
Sr. Notes,
7.70%, 1/15/04.................................... 2,494,150
3,000,000 Pepsi Bottling Group, Inc.,
Sr. Notes,
7.00%, 3/1/29 (c)................................. 2,989,365
------------
10,554,765
------------
Gaming - 1.9%
2,250,000 Boyd Gaming Corp.,
Sr. Notes (Subord.),
9.50%, 7/15/07.................................... 2,323,125
2,000,000 Circus Circus Enterprises, Inc.,
Sr. Notes (Subord.),
9.25%, 12/1/05.................................... 2,095,000
1,150,000 Isle Capri Casinos, Inc.,
Sr. Notes (Subord.),
8.75%, 4/15/09 (c)................................ 1,144,250
2,000,000 Mohegan Tribal Gaming Auth.,
Sr. Notes (Subord.),
8.75%, 1/1/09 (c)................................. 2,072,500
Station Casinos, Inc. Sr. Notes
(Subord.):
1,150,000 9.75%, 4/15/07.................................... 1,221,875
500,000 8.88%, 12/1/08 (c)................................ 517,500
------------
9,374,250
------------
Industrial Specialty Products & Services - 0.7%
2,050,000 Container Corp. of America,
Gtd. Sr. Note, Ser. A,
11.25%, 5/1/04.................................... 2,157,625
1,000,000 Owens Illinois, Inc.,
Sr. Note,
8.10%, 5/15/07.................................... 1,039,110
------------
3,196,735
------------
Iron & Steel - 1.1%
2,000,000 AK Steel Corp.,
Sr. Notes,
7.875%, 2/15/09 (c)............................... 2,007,500
2,000,000 National Steel Corp.,
1st Mtge. Notes, Ser. A,
9.875%, 3/1/09 (c)................................ 2,120,000
1,500,000 WHX Corp.,
Sr. Notes,
10.50%, 4/15/05................................... 1,503,750
------------
5,631,250
------------
Lease Rental Obligations - 1.4%
1,850,000 Budget Group, Inc.,
Sr. Notes,
9.125%, 4/1/06 (c)................................ 1,840,750
2,500,000 Railcar Leasing LLC,
Sr. Notes, Ser. A2,
7.125%, 1/15/13 (c)............................... 2,624,550
2,350,000 United Rentals, Inc.,
Sr. Notes (Subord.),
9.25%, 1/15/09 (c)................................ 2,385,250
------------
6,850,550
------------
</TABLE>
25
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
DIVERSIFIED BOND FUND
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Leisure & Tourism - 0.4%
$ 2,000,000 HMH Properties, Inc.,
Sr. Notes, Ser. C,
8.45%, 12/1/08.................................... $ 2,022,500
------------
Machinery - Diversified - 0.3%
1,500,000 Motors & Gears, Inc.,
Sr. Notes, Ser. D,
10.75%, 11/15/06 (c).............................. 1,545,000
------------
Metals & Mining - 0.3%
1,190,000 Golden Northwest Aluminum, Inc.,
1st Mtge. Notes,
12.00%, 12/15/06 (c).............................. 1,225,700
------------
Oil/Energy - 3.4%
3,000,000 CMS Panhandle Holding Co.,
Sr. Notes,
6.50%, 7/15/09 (c)................................ 2,959,914
7,000,000 Golden State Petroleum Trans.
Corp.,
1st Mtge. Notes,
8.04%, 2/1/19 (c)................................. 6,799,849
1,850,000 Gulf Canada Resources Ltd.,
Sr. Notes,
8.35%, 8/1/06..................................... 1,852,238
1,050,000 HS Resources, Inc.,
Sr. Notes (Subord.),
9.25%, 11/15/06 (c) (f)........................... 1,060,500
4,000,000 Transocean Offshore, Inc.,
Notes,
7.45%, 4/15/27.................................... 4,157,084
------------
16,829,585
------------
Paper & Packaging - 0.4%
1,500,000 Norampac, Inc.,
Sr. Notes,
9.50%, 2/1/08..................................... 1,582,500
575,000 Stone Container Corp.,
1st Mtge. Notes,
10.75%, 10/1/02................................... 600,875
------------
2,183,375
------------
Printing, Publishing, Broadcasting &
Entertainment - 2.0%
1,850,000 Ackerley Group, Inc.,
Ser. B,
9.00%, 1/15/09.................................... 1,910,125
1,850,000 Big Flower Press Holdings, Inc.,
Sr. Notes (Subord.),
8.625%, 12/1/08................................... 1,859,250
1,850,000 Carmike Cinemas, Inc.,
Sr. Notes (Subord.),
9.375%, 2/1/09 (c)................................ 1,863,875
1,850,000 Cinemark USA, Inc.,
Ser. B, Sr. Notes (Subord.),
9.625%, 8/1/08.................................... 1,924,000
2,250,000 Echostar DBS Corp.,
Sr. Notes,
9.375%, 2/1/09 (c)................................ 2,345,625
------------
9,902,875
------------
Real Estate - 0.6%
3,000,000 Glenborough Properties LP,
Sr. Notes, Ser. B,
7.625%, 3/15/05................................... 2,892,810
------------
Retailing & Wholesale - 1.7%
2,000,000 Ames Department Stores, Inc.,
Sr. Notes,
10.00%, 4/15/06 (c)............................... 1,980,000
2,000,000 Pathmark Stores, Inc.,
Sr. Notes (Subord.),
9.625%, 5/1/03.................................... 2,055,000
1,800,000 Sears Roebuck & Co.,
MTN,
10.00%, 2/3/12.................................... 2,299,428
2,250,000 Southland Corp.,
Sr. Deb. (Subord.),
5.00%, 12/15/03................................... 2,005,313
------------
8,339,741
------------
Telecommunication Services & Equipment - 5.6%
5,000,000 AT&T Corp.,
Notes,
6.50%, 3/15/29.................................... 4,776,550
10,250,000 Bellsouth Capital Funding Corp.,
Deb.,
7.12%, 7/15/27.................................... 10,398,830
1,875,000 Jordan Telecommunication
Products,
Ser. B, Sr. Notes,
9.875%, 8/1/07.................................... 1,893,750
1,500,000 LCI Int'l., Inc.,
Sr. Notes,
7.25%, 6/15/07.................................... 1,541,400
2,100,000 Metromedia Fiber Network, Inc.,
Sr. Notes,
10.00%, 11/15/08 (c).............................. 2,268,000
2,000,000 Qwest Communications Int'l. Inc.,
Sr. Notes,
7.50%, 11/1/08 (c)................................ 2,100,000
4,740,000 Sprint Capital Corp.,
Notes,
6.875%, 11/15/28.................................. 4,602,398
------------
27,580,928
------------
Textile & Apparel - 0.9%
2,425,000 Polymer Group, Inc.,
Ser. B, Sr. Notes (Subord.),
9.00%, 7/1/07 (c)................................. 2,491,688
2,000,000 Westpoint Stevens, Inc.,
Sr. Notes,
7.875%, 6/15/05 (f)............................... 2,055,000
------------
4,546,688
------------
Transportation - 1.5%
2,000,000 Continental Airlines Inc.,
Passthru Certificate,
Ser. 1999-1, Cl. B,
6.795%, 2/2/20.................................... 1,974,610
</TABLE>
26
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
DIVERSIFIED BOND FUND
- --------------------------------------------------------------------------------
Schedule of Investments(continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Transportation - continued
$ 5,250,000 Norfolk Southern Corp.,
Notes,
7.05%, 5/1/37..................................... $ 5,468,663
------------
7,443,273
------------
Total Corporate Bonds
(cost $274,097,535)............................... 276,254,139
------------
FOREIGN BONDS (NON U.S. DOLLARS) - 3.5%
Banks - 2.5%
Realkredit Danmark
63,935,000 5.00%, 10/1/29.................................... 8,515,337
DKK
28,250,000 6.00%, 10/1/29.................................... 3,975,367
------------
DKK 12,490,704
------------
Foreign Bonds - 1.0%
34,000,000 Nykredit,
DKK 6.00%, 10/1/29.................................... 4,784,512
------------
Total Foreign Bonds (Non U.S. Dollars)
(cost $18,205,912)................................ 17,275,216
------------
MORTGAGE-BACKED SECURITIES - 7.3%
FHA Charles River Mtge.:
4,975,357 10.25%, 8/1/34.................................... 5,246,017
6,691,894 9.125%, 8/1/34.................................... 7,055,933
FNMA:
13,354,474 6.50%, 12/31/99 - 10/1/28......................... 13,268,335
10,000,000 7.00%, 12/31/99................................... 10,131,300
------------
Total Mortgage-Backed Securities
(cost $35,929,482)................................ 35,701,585
------------
MUNICIPAL BONDS - 0.8%
3,894,953 Los Angeles, CA, Impt. Bond, Act 1915, Assessment
Dist. #1, MTN,
8.48%, 9/2/15 (c)
(cost $3,894,953)................................. 4,099,905
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 4.1%
Treasury Notes & Bonds - 4.1%
U. S. Treasury Notes:
4,065,000 4.75%, 2/15/04.................................... 3,984,960
1,945,000 6.125%, 8/15/07................................... 2,034,353
U.S. Treasury Bonds:
13,075,000 5.25%, 11/15/28 - 2/15/29......................... 12,206,956
2,180,000 5.50%, 8/15/28.................................... 2,077,475
------------
Total U.S. Government & Agency Obligations (cost
$20,571,947)...................................... 20,303,744
------------
YANKEE OBLIGATIONS - 5.9%
Banks - 0.5%
30,000,000 Skandinaviska Enskilda,
(Eff. Yield 7.14%),
0.00%, 5/26/33 (b)................................ 2,592,000
------------
Cable/Other Video Distribution - 0.7%
1,200,000 Imax Corp.,
Sr. Notes,
7.875%, 12/1/05................................... 1,194,000
2,000,000 Rogers Cablesystems Ltd.,
9.625%, 8/1/02.................................... 2,145,000
------------
3,339,000
------------
Metals & Mining - 0.6%
1,600,000 Bulong Operations Property Ltd.,
Sr. Notes,
12.50%, 12/15/08 (c).............................. 1,636,000
1,500,000 Great Central Mines Ltd.,
Sr. Notes,
8.875%, 4/1/08.................................... 1,477,500
------------
3,113,500
------------
Oil/Energy - 1.7%
3,000,000 Petroleum Geo-Svcs.,
Notes,
7.50%, 3/31/07.................................... 3,112,860
5,000,000 YPF Sociedad Anonima,
Sr. Notes,
7.25%, 3/15/03 (f)................................ 4,950,000
------------
8,062,860
------------
Government - 2.4%
3,000,000 Republic of Chile,
6.875%, 4/28/09................................... 2,956,500
7,500,000 United Mexican States,
Bonds,
11.50%, 5/15/26................................... 8,926,500
------------
11,883,000
------------
Total Yankee Obligations
(cost $29,310,761)................................ 28,990,360
------------
<CAPTION>
Shares
<C> <S> <C>
MUTUAL FUND SHARES - 0.8%
3,755,130 Navigator Prime Portfolio (g)
(cost $3,755,130)................................. 3,755,130
------------
<CAPTION>
Principal
Amount
<C> <S> <C>
REPURCHASE AGREEMENTS - 1.6%
$ 3,953,000 Evergreen Joint Repurchase
Agreement,
4.89%, 5/3/99 (Investments in Repurchase
Agreements, in a joint trading account, dated
4/30/99) (e)...................................... 3,953,000
4,122,476 State Street Repurchase
Agreement, dated 4/30/99
4.00%, 5/3/99 (d)................................. 4,122,476
------------
Total Repurchase Agreements
(cost $8,075,476)................................. 8,075,476
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $484,642,758)......................... 99.1% 487,518,393
Other Assets and
Liabilities - net........................... 0.9 4,461,190
----- ------------
Net Assets................................... 100.0% $491,979,583
===== ============
</TABLE>
27
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
DIVERSIFIED BOND FUND
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
April 30, 1999
(a) 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.
(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" 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.
(d) Repurchase agreement is collateralized by $3,195,000 U.S. Treasury Bonds,
11.675% due 11/15/03 with a value, including accrued interest of $4,209,413
(e) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at April 30, 1999.
(f) All or a portion of this security is currently on loan.
(g) Represents investment of cash collateral received for securities on loan.
Summary of Abbreviations
DKK Danish Krone
FFCA Federal Farm Credit Association
FHA Federal Housing Authority
FNMA Federal National Mortgage Association
MTN Medium Term Notes
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward foreign currency exchange contracts to buy:
<TABLE>
<CAPTION>
U.S. $ Value at In Exchange Unrealized
Exchange Date Contracts to Receive April 30, 1999 for U.S. $ (Depreciation)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
07/20/99 4,650,000 Euro Dollars 4,938,277 4,985,498 $(47,221)
========
Forward foreign currency exchange contracts to sell:
<CAPTION>
U.S. $ Value at In Exchange Unrealized
Exchange Date Contracts to Deliver April 30, 1999 for U.S. $ Appreciation
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
06/30/99 4,500,000 Euro Dollars 4,773,133 4,866,300 $ 93,167
07/20/99 16,415,700 Euro Dollars 17,433,392 17,675,113 241,721
--------
$334,888
========
</TABLE>
See Combined Notes to Financial Statements.
28
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
Schedule of Investments
April 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - 78.1%
Aerospace & Defense - 1.5%
$ 2,000,000 BE Aerospace, Inc.,
Sr. Notes (Subord.),
9.50%, 11/1/08................................ $ 2,135,000
4,000,000 Transdigm, Inc.,
Sr. Notes, (Subord.),
10.375%, 12/1/08 (d).......................... 4,040,000
------------
6,175,000
------------
Automotive Equipment & Manufacturing - 6.7%
2,250,000 Dura Operating Corp.,
Sr. Notes (Subord.),
9.00%, 5/1/09 (d)............................. 2,289,375
3,750,000 Eagle Picher Industries, Inc.,
Sr. Notes (Subord.),
9.375%, 3/1/08................................ 3,693,750
Exide Corp.:
5,833,000 Sr. Notes (Subord.),
2.90%, 12/15/05 (d)........................... 3,353,975
2,000,000 Sr. Notes,
10.00%, 4/15/05 (i)........................... 2,010,000
4,000,000 Hayes Lemmerz Int'l., Inc.,
Sr. Notes (Subord.),
8.25%, 12/15/08 (d)........................... 4,030,000
4,000,000 Oxford Automotive, Inc.,
Sr. Notes (Subord.),
10.125%, 6/15/07 (d).......................... 4,140,000
7,000,000 Walbro Corp.,
Ser. B, Sr. Notes,
10.125%, 12/15/07............................. 7,840,000
------------
27,357,100
------------
Building, Construction & Furnishings - 1.1%
2,500,000 Del Webb Corp.,
Sr. Debs. (Subord.),
9.375%, 5/1/09 (i)............................ 2,493,750
2,000,000 K. Hovnanian Enterprises, Inc.,
Sr. Notes,
9.125%, 5/1/09................................ 2,010,000
------------
4,503,750
------------
Cable/Other Video Distribution - 9.0%
4,300,000 Acme Television LLC,
Ser. B, Sr. Disc. Notes,
Step Bond, (Eff. Yield 10.47%),
0.00%, 9/30/04 (c)............................ 3,719,500
750,000 Adelphia Communications Corp.,
Ser. B, Sr. Notes,
10.50%, 7/15/04............................... 830,625
5,000,000 Frontiervision,
Sr. Notes (Subord.),
11.00%, 10/15/06.............................. 5,612,500
5,250,000 Galaxy Telecom LP,
Sr. Notes (Subord.),
12.375%, 10/1/05.............................. 5,840,625
5,000,000 Pegasus Communications Corp.,
Ser. B, Sr. Notes,
9.625%, 10/15/05.............................. 5,187,500
1,060,937 Price Communications Cellular Holdings,
Sr. Notes, PIK,
11.25%, 8/15/08............................... 1,079,503
5,000,000 Price Communications Wireless, Inc.,
Ser. B, Sr. Notes,
9.125%, 12/15/06.............................. 5,275,000
2,850,000 Telewest Communications Plc,
Sr. Notes (Disc.), Step Bond,
(Eff. Yield 8.49%),
0.00%, 4/15/09 (c)(d)......................... 1,945,125
10,500,000 United International Holdings, Inc.,
Ser. B, Sr. Disc. Notes, Step Bond,
(Eff. Yield 9.29%),
0.00%, 2/15/08 (c)............................ 7,035,000
------------
36,525,378
------------
Chemical & Agricultural Products - 0.9%
Texas Petrochemical Corp.:
2,150,000 Ser. B, Sr. Notes (Subord.)
11.13%, 7/1/06 ............................... 1,870,500
1,850,000 Sr. Notes (Subord.)
11.13%, 7/1/06................................ 1,628,000
------------
3,498,500
------------
Consumer Products & Services - 2.2%
4,000,000 Affinity Group, Inc.,
Sr. Notes,
11.00%, 4/1/07................................ 4,020,000
5,000,000 Unicco Service Co.,
Ser. B, Sr. Notes (Subord.),
9.875%, 10/15/07.............................. 5,000,000
------------
9,020,000
------------
Environmental Services - 0.5%
1,925,000 Allied Waste North America, Inc.,
Sr. Notes,
7.875%, 1/1/09................................ 1,886,500
------------
Finance & Insurance - 2.6%
2,000,000 Americredit Corp.,
Sr. Notes,
9.875%, 4/15/06 (d)........................... 2,025,000
5,000,000 Contifinancial Corp.,
Sr. Notes,
8.375%, 8/15/03 (i)........................... 3,837,500
4,500,000 Ono Fin. Plc,
Notes,
13.00%, 5/1/09 (d)............................ 4,612,500
------------
10,475,000
------------
Food & Beverage Products - 4.2%
4,350,000 AFC Enterprises, Inc.,
Sr. Notes (Subord.),
10.25%, 5/15/07............................... 4,632,750
</TABLE>
29
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Food & Beverage Products - continued
$ 5,000,000 Aurora Foods, Inc.,
Ser. D, Sr. Notes (Subord.),
9.875%, 2/15/07 (i)............................ $ 5,418,750
1,600,000 FRD Acquisition Co.,
Ser. B, Sr. Notes,
12.50%, 7/15/04................................ 1,648,000
5,000,000 Sun World Int'l., Inc.,
Ser. B, 1st Mtge. Notes,
11.25%, 4/15/04................................ 5,281,250
------------
16,980,750
------------
Gaming - 3.4%
3,000,000 Ameristar Casinos, Inc.,
Ser. B, Sr. Notes (Subord.),
10.50%, 8/1/04................................. 3,045,000
4,000,000 Boyd Gaming Corp.,
Sr. Notes (Subord.),
9.50%, 7/15/07 (i)............................. 4,130,000
2,325,000 Isle of Capri Casinos, Inc.,
Sr. Notes (Subord.),
8.75%, 4/15/09 (d)............................. 2,313,375
Station Casinos, Inc.,
Sr. Notes (Subord.):
2,000,000 9.75%, 4/15/07................................. 2,125,000
2,000,000 8.88%, 12/1/08................................. 2,070,000
------------
13,683,375
------------
Healthcare Products & Services - 1.2%
2,000,000 Fisher Scientific Int'l., Inc.,
Sr. Notes (Subord.),
9.00%, 2/1/08 (i).............................. 2,020,000
1,000,000 Tenet Healthcare Corp.,
Sr. Notes (Subord.),
6.00%, 12/1/05................................. 806,250
2,000,000 Triad Hospitals Holdings,
Sr. Notes (Subord.),
11.00%, 5/15/09 (d)............................ 2,000,000
------------
4,826,250
------------
Industrial Specialty Products & Services - 0.8%
3,200,000 Simmons Co.,
Sr. Notes (Subord.),
10.25%, 3/15/09 (d)............................ 3,360,000
------------
Information Services & Technology - 2.5%
2,500,000 PSInet, Inc.,
Ser. B, Sr. Notes,
10.00%, 2/15/05 (i)............................ 2,618,750
3,000,000 Unisys Corp.,
Ser. B, Sr. Notes (Subord.),
12.00%, 4/15/03................................ 3,315,000
4,000,000 Verio, Inc.,
Sr. Notes,
10.375%, 4/1/05 (i)............................ 4,260,000
------------
10,193,750
------------
Iron & Steel - 1.0%
4,000,000 WHX Corp.,
Sr. Notes,
10.50%, 4/15/05................................ 4,010,000
------------
Lease Rental Obligations - 3.0%
4,000,000 Budget Group, Inc.,
Sr. Notes,
9.125%, 4/1/06 (d)............................. 3,980,000
4,000,000 Nationsrent, Inc.,
Sr. Notes (Subord.),
10.375%, 12/15/08.............................. 4,170,000
4,000,000 United Rentals, Inc.,
Sr. Notes (Subord.),
9.25%, 1/15/09 (d)............................. 4,060,000
------------
12,210,000
------------
Leisure & Tourism - 1.2%
5,000,000 Premier Cruise Ltd.,
Sr. Notes,
11.00%, 3/15/08 (d)............................ 1,250,000
2,000,000 Premier Parks, Inc.,
Sr. Notes (Disc.), Step Bond,
(Eff. Yield 8.43%),
0.00%, 4/1/08 (c).............................. 1,420,000
2,150,000 Six Flags Theme Parks, Inc.,
Ser. A, Sr. Notes (Subord.),
Step Bond,
(Eff. Yield 10.70%),
12.25%, 6/15/05 (c)............................ 2,386,500
------------
5,056,500
------------
Metals & Mining - 2.0%
5,000,000 Acme Metals, Inc.,
Sr. Notes,
10.875%, 12/15/07 (f).......................... 637,500
3,000,000 Golden Northwest Aluminum, Inc.,
1st Mtge. Notes,
12.00%, 12/15/06 (d)........................... 3,090,000
3,400,000 Kaiser Aluminum & Chemical Corp.,
Sr. Notes (Subord.),
12.75%, 2/1/03 (i)............................. 3,383,000
5,000,000 NSM Steel, Inc.,
Sr. Mtge. Notes,
12.00%, 2/1/06 (d)............................. 1,000,000
------------
8,110,500
------------
Machinery - Diversified - 1.0%
4,000,000 Tokhiem Corp.,
Sr. Notes (Subord.),
11.375%, 8/1/08................................ 4,070,000
------------
Oil/Energy - 4.5%
5,000,000 Benton Oil & Gas Co.,
Sr. Notes,
9.375%, 11/1/07................................ 3,350,000
4,000,000 Chiles Offshore LLC,
Sr. Notes,
10.00%, 5/1/08................................. 3,020,000
4,750,000 Energy Corp. of America,
Ser. A, Sr. Notes (Subord.),
9.50%, 5/15/07................................. 4,465,000
4,850,000 Giant Industries, Inc.,
Sr. Notes (Subord.),
9.00%, 9/1/07.................................. 4,510,500
</TABLE>
30
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Oil/Energy - continued
$ 2,000,000 Houston Exploration Co.,
Ser. B, Sr. Notes (Subord.),
8.625%, 1/1/08................................ $ 1,975,000
2,350,000 Petsec Energy, Inc.,
Ser. B, Sr. Notes (Subord.),
9.50%, 6/15/07................................ 1,216,125
------------
18,536,625
------------
Paper & Packaging - 4.9%
2,850,000 Crown Paper Co.,
Sr. Notes (Subord.),
11.00%, 9/1/05 (i)............................ 2,408,250
3,100,000 Packaging Corp. America,
Sr. Notes (Subord.),
9.625%, 4/1/09 (d)............................ 3,231,750
Riverwood Int'l. Corp.:
5,000,000 Sr. Notes
10.25%, 4/1/06................................ 5,150,000
4,000,000 Sr. Notes (Subord.)
10.88%, 4/1/08................................ 3,960,000
5,175,000 Stone Container Corp.,
1st Mtge. Notes,
10.75%, 10/1/02............................... 5,407,875
------------
20,157,875
------------
Printing, Publishing, Broadcasting &
Entertainment - 4.3%
5,000,000 American Lawyer Media, Inc.,
Ser. B, Sr. Notes (Subord.),
9.75%, 12/15/07............................... 5,200,000
5,000,000 Cinemark USA, Inc.,
Ser. B, Sr. Notes (Subord.),
9.625%, 8/1/08................................ 5,200,000
7,000,000 Echostar DBS Corp.,
Sr. Notes,
9.375%, 2/1/09 (d)............................ 7,297,500
------------
17,697,500
------------
Retailing & Wholesale - 1.8%
4,000,000 Ames Department Stores, Inc.,
Sr. Notes,
10.00%, 4/15/06 (d)........................... 3,960,000
3,200,000 Michaels Stores, Inc.,
Sr. Notes,
10.875%, 6/15/06 (i).......................... 3,424,000
------------
7,384,000
------------
Telecommunication Services & Equipment - 14.0%
6,000,000 Intercel, Inc.,
Sr. Notes (Disc.), Step Bond,
(Eff. Yield 10.10%),
0.00%, 2/1/06 (c)............................. 4,942,500
5,000,000 Intermedia Capital Partners,
Sr. Notes,
11.25%, 8/1/06................................ 5,637,500
6,625,000 Intermedia Communications, Inc.,
Ser. B, Sr. Notes (Disc.),
Step Bond,
(Eff. Yield 8.72%),
0.00%, 7/15/07 (c) (i)........................ 5,001,875
5,000,000 Jordan Telecommunication
Products,
Ser. B, Sr. Notes,
9.875%, 8/1/07................................ 5,050,000
4,000,000 Level 3 Communications, Inc.,
Sr. Notes,
9.125%, 5/1/08 (i)............................ 4,090,000
4,186,000 McLeod USA, Inc.,
Sr. Disc. Notes, Step Bond,
(Eff. Yield 8.11%),
0.00%, 3/1/07 (c) (i)......................... 3,359,265
4,000,000 Metromedia Fiber Network, Inc.,
Sr. Notes,
10.00%, 11/15/08 (d).......................... 4,320,000
5,000,000 MJD Communications, Inc.,
Sr. Notes (Subord.),
9.50%, 5/1/08................................. 5,062,500
7,000,000 Nextel Communications, Inc.,
Sr. Notes (Disc.), Step Bond,
(Eff. Yield 9.52%),
0.00%, 2/15/08 (c)............................ 5,250,000
2,000,000 Orbcomm Global LP,
Sr. Notes, Ser. B,
14.00%, 8/15/04 (i)........................... 2,085,000
5,725,000 RCN Corp.,
Ser. B, Sr. Notes
(Disc.), Step Bond,
(Eff. Yield 9.53%),
0.00%, 10/15/07 (c)........................... 3,964,563
5,000,000 Rural Cellular Corp.,
Ser. B, Sr. Notes (Subord.),
9.625%, 5/15/08............................... 5,200,000
1,000,000 Telewest Communications PLC,
Sr. Notes,
11.25%, 11/1/08 (d)........................... 1,162,500
2,750,000 Triton PCS, Inc.,
Step Bond,
(Eff. Yield 10.26%),
0.00%, 5/1/08 (c)............................. 1,732,500
------------
56,858,203
------------
Textile & Apparel - 1.5%
2,660,000 Delta Mills, Inc.,
Ser. B, Sr. Notes,
9.625%, 9/1/07................................ 2,660,000
Polymer Group, Inc., Ser. B,
Sr. Notes (Subord.):
1,750,000 8.75%, 3/1/08................................. 1,758,750
1,500,000 9.00%, 7/1/07................................. 1,541,250
------------
5,960,000
------------
Transportation - 2.3%
5,000,000 American Commercial Lines LLC,
Ser. B, Sr. Notes,
10.25%, 6/30/08............................... 5,175,000
4,250,000 Pegasus Shipping Hellas Ltd.,
1st Preferred Mtge. Notes, Ser. A,
11.875%, 11/15/04............................. 2,975,000
</TABLE>
31
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Transportation - continued
$ 3,000,000 Trans World Airlines, Inc.,
Sr. Notes,
11.375%, 3/1/06............................... $ 1,440,000
------------
9,590,000
------------
Total Corporate Bonds
(cost $331,633,718)........................... 318,126,556
------------
FOREIGN BONDS (NON U.S. DOLLARS) - 1.6%
Communication Systems & Services - 0.6%
2,500,000 NTL Communications Corp.,
GBP Sr. Notes, Step Bond,
(Eff. Yield 8.92%),
9.75%, 4/15/09 (c)............................ 2,453,268
------------
Telecommunication Services & Equipment - 1.0%
9,500,000 Microcell Telecommunications, Inc.,
CAD Ser. B, Sr. Disc. Notes, Step Bond,
(Eff. Yield 10.23%),
0.00%, 10/15/07 (c)........................... 4,243,433
------------
Total Foreign Bonds (Non U.S. Dollars)
(cost $7,125,991)............................. 6,696,701
------------
YANKEE OBLIGATIONS - 9.9%
Cable/Other Video
Distribution - 1.0%
$ 4,000,000 Imax Corp.,
Sr. Notes,
7.875%, 12/1/05 (i)........................... 3,980,000
------------
Communication Systems & Services - 2.2%
9,500,000 Clearnet Communications, Inc.,
Sr. Disc. Notes, Step Bond,
(Eff. Yield 9.72%),
0.00%, 12/15/05 (c) (i)....................... 8,941,875
------------
Finance & Insurance - 0.5%
2,000,000 Applied Int'l. Fin. Co. BV,
7.869%, 6/28/99............................... 1,920,000
------------
Metals & Mining - 2.2%
4,000,000 Bulong Operations Property Ltd.,
Sr. Notes,
12.50%, 12/15/08 (d).......................... 4,090,000
5,000,000 Great Central Mines Ltd.,
Sr. Notes,
8.875%, 4/1/08................................ 4,925,000
------------
9,015,000
------------
Paper & Packaging - 1.0%
4,100,000 Norampac, Inc.,
Sr. Notes,
9.50%, 2/1/08................................. 4,325,500
------------
Telecommunication Services & Equipment - 2.2%
5,000,000 Metronet Communications Corp.,
Sr. Notes, Step Bond,
(Eff. Yield 8.22%),
0.00%, 6/15/08 (c)............................ 3,875,000
5,000,000 Star Choice Communications,
Sr. Secd. Notes,
13.00%, 12/15/05.............................. 5,125,000
------------
9,000,000
------------
Transportation - 0.8%
3,000,000 Hermes Europe Railtel BV,
Sr. Notes,
10.375%, 1/15/09.............................. 3,195,000
------------
Total Yankee Obligations
(cost $39,481,319)............................ 40,377,375
------------
</TABLE>
<TABLE>
<CAPTION>
Shares
<C> <S> <C>
COMMON STOCKS & WARRANTS - 2.1%
Aerospace & Defense - 0.0% (g)
76,000 CHC Helicopter Corp.,
Warrants (a).................................. 228,000
------------
Automotive Equipment & Manufacturing - 0.0% (g)
9,500 Chatwins Group, Inc.,
Warrants (a)(h)............................... 9,500
------------
Cable/Other Video Distribution - 0.4%
25,800 Price Communications
Cellular, Warrants (a) (d).................... 1,591,034
115,800 Star Choice Communications, Warrants (a)....... 245,403
------------
1,836,437
------------
Finance & Insurance - 0.7%
589,300 Ampex Corp.,
Cl. A, Common Stock (a)....................... 2,688,681
------------
Food & Beverage Products - 0.0% (g)
131,250 Specialty Foods Acquisition Corp.,
Common Stock (a).............................. 6,563
------------
Gaming - 0.6%
10,775,000 Gold River Hotel and Casino Corp.,
Common Stock (a)(b)(h)........................ 107,750
254,790 Isle of Capri Casinos, Inc.,
Common Stock (a) (i).......................... 1,711,870
50,424 Isle of Capri Casinos, Inc.,
Warrants (a)(h)............................... 504
100,463 JCC Holding Co.,
Cl. A Common Stock............................ 627,894
------------
2,448,018
------------
Telecommunication Services & Equipment - 0.4%
4,000 Econophone, Inc.,
Warrants (a) (d).............................. 60,000
750 Metronet Communications Corp.,
Cl. B, Warrants (a) (d)....................... 56,678
</TABLE>
32
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
April 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS & WARRANTS - continued
Telecommunication Services & Equipment -
continued
33,296 Nextel Communications, Inc.,
Common Stock, Cl. A (a) (d) (i)............... $ 1,362,014
------------
1,478,692
------------
Total Common Stocks & Warrants
(cost $14,352,859)............................ 8,695,891
------------
PREFERRED STOCKS - 6.0%
Cable/Other Video Distribution - 0.8%
28,500 Adelphia Communications Corp.,
Ser. B, Preferred Stock (d)................... 3,291,750
------------
Engineering - 1.8%
63,997 CSC Holdings, Inc.,
Ser. M (a).................................... 7,455,651
------------
Finance & Insurance - 2.9%
1,510 Ampex Corp.,
Convertible Preferred Stock (a) (b) (h)....... 2,265,000
7,671 Ampex Corp.,
Redeemable Preferred Stock (a) (b) (h)........ 7,871,673
12,800 Sinclair Capital Corp.,
Preferred Stock (d), (i)...................... 1,433,600
------------
11,570,273
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
Printing, Publishing, Broadcasting &
Entertainment - 0.5%
20,000 Primedia, Inc.,
Ser. F, Preferred Stock (a).................. 2,020,000
------------
Total Preferred Stocks
(cost $20,650,938)........................... 24,337,674
------------
MUTUAL FUND SHARES - 6.8%
27,500,396 Navigator Prime Portfolio (j)
(cost $27,500,396)........................... 27,500,396
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
<C> <S> <C>
REPURCHASE AGREEMENT - 2.5%
$10,120,000 Evergreen Joint Repurchase Agreement, 4.89%, 5/3/99
(Investments in repurchase agreements, in a joint
trading account, dated 4/30/99)
(cost $10,120,000) (e)............................ 10,120,000
------------
Total Investments -
(cost $450,865,221)........................ 107.0% 435,854,593
Other Assets and
Liabilities - net.......................... (7.0) (28,410,452)
----- ------------
Net Assets.................................. 100.0% $407,444,141
===== ============
</TABLE>
(a) Non-income producing security.
(b) All or a portion of these securities are either (1) restricted secu-
rities (i.e., securities which may not be publicly sold without reg-
istration under the Federal Securities Act of 1933) or (2) illiquid
securities, and are valued using market quotations where readily
available. In the absence of market quotations, the securities are
valued based upon their fair value determined under procedures ap-
proved by the Board of Trustees. The Fund may make investments in an
amount up to 15% of the value of the Fund's net assets in such secu-
rities. At April 30, 1999, the market value of these securities was
$10,244,423 (2.51% of the Fund's net assets).
(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" 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.
(e) The repurchase agreement is fully collateralized by U.S. Government
and/or agency obligations based on market prices at April 30, 1999.
(f) This obligation has filed Chapter 11 bankruptcy and has discontinued
accrual of interest income.
(g) Less than 1/10th of one percent of net assets.
(h) The securities are valued based upon their fair value determined un-
der procedures approved by the Board of Trustees.
(i) All or a portion of this security is on loan.
(j) Represents investment of cash collateral received for securities on
loan.
Summary of Abbreviations
CAD Canadian Dollar
GBP Pounds Sterling
PIK Paid in Kind Security
See Combined Notes to Financial Statements.
33
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
Schedule of Investments
April 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - 0.7%
$ 1,850,000 PNC Student Loan Trust,
Ser. 97-2, Cl. A7,
6.728%, 1/25/07 (cost $1,850,000)................ $ 1,952,250
------------
CORPORATE BONDS - 38.8%
Automotive Equipment & Manufacturing - 3.2%
2,000,000 Advance Stores, Inc.,
Sr. Notes (Subord.),
10.25%, 4/15/08.................................. 2,020,000
1,150,000 Dura Operating Corp.,
Sr. Notes (Subord.),
9.00%, 5/1/09 (d)................................ 1,170,125
Exide Corp.:
1,000,000 Sr. Notes,
10.00%, 4/15/05 (g).............................. 1,005,000
1,000,000 Sr. Notes (Subord.),
2.90%, 12/15/05 (d).............................. 575,000
Oxford Automotive, Inc.,
Sr. Notes (Subord.):
1,000,000 10.125%, 6/15/07 (d)............................. 1,031,250
1,000,000 10.125%, 6/15/07................................. 1,035,000
2,500,000 Walbro Corp.,
Ser. B, Sr. Notes,
10.125%, 12/15/07................................ 2,800,000
------------
9,636,375
------------
Building, Construction & Furnishings - 0.7%
2,000,000 Del Webb Corp.,
Sr. Debs. (Subord.),
9.375%, 5/1/09 (g)............................... 1,995,000
------------
Cable/Other Video Distribution - 3.6%
1,150,000 Acme Television LLC,
Ser. B, Sr. Disc. Notes,
Step Bond,
(Eff. Yield 10.39%),
0.00%, 9/30/04 (c)............................... 994,750
250,000 Adelphia Communications Corp.,
Ser. B, Sr. Notes,
10.50%, 7/15/04.................................. 276,875
1,500,000 Galaxy Telecom LP,
Sr. Notes (Subord.),
12.375%, 10/1/05................................. 1,668,750
2,000,000 Lenfest Communications, Inc.,
Sr. Notes,
8.375%, 11/1/05.................................. 2,150,000
1,000,000 Pegasus Communications Corp.,
Ser. B, Sr. Notes,
9.625%, 10/15/05................................. 1,037,500
3,182,813 Price Communications Cellular
Holding,
Sr. Notes, PIK,
11.25%, 8/15/08.................................. 3,238,512
500,000 Price Communications Wireless, Inc.,
Ser. B, Sr. Notes,
9.125%, 12/15/06................................. 527,500
1,000,000 Sinclair Broadcast Group, Inc.,
Sr. Notes (Subord.),
10.00%, 9/30/05.................................. 1,025,000
------------
10,918,887
------------
Chemical & Agricultural Products - 0.5%
1,650,000 Texas Petrochemical Corp.,
Ser. B, Sr. Notes (Subord.),
11.125%, 7/1/06.................................. 1,452,000
------------
Consumer Products & Services - 0.3%
1,000,000 MTS, Inc.,
Sr. Notes (Subord.),
9.375%, 5/1/05................................... 915,000
------------
Environmental Services - 0.7%
2,000,000 Allied Waste North America, Inc.,
Sr. Notes,
7.875%, 1/1/09................................... 1,960,000
------------
Finance & Insurance - 3.7%
1,500,000 Americo Life, Inc.,
Sr. Notes (Subord.),
9.25%, 6/1/05.................................... 1,533,750
1,000,000 Americredit Corp.,
Sr. Notes,
9.875%, 4/15/06 (d).............................. 1,012,500
2,000,000 Contifinancial Corp.,
Sr. Notes,
8.375%, 8/15/03.................................. 1,535,000
2,000,000 IBJ Preferred Capital Co. LLC,
8.79%, 12/29/49 (d).............................. 1,785,702
2,000,000 Ono Fin. Plc,
Notes,
13.00%, 5/1/09 (d)............................... 2,050,000
1,250,000 Reliance Group Holdings, Inc.,
Sr. Notes,
9.00%, 11/15/00.................................. 1,284,350
2,000,000 SB Treasury Co. LLC,
Bonds,
9.40%, 12/29/49 (d).............................. 2,012,500
------------
11,213,802
------------
Food & Beverage Products - 1.1%
825,000 AFC Enterprises, Inc.,
Sr. Notes (Subord.),
10.25%, 5/15/07.................................. 878,625
500,000 Chiquita Brands Int'l., Inc.,
Sr. Notes,
9.625%, 1/15/04 (g).............................. 520,000
750,000 FRD Acquisition Co.,
Ser. B, Sr. Notes,
12.50%, 7/15/04.................................. 772,500
1,000,000 Sun World Int'l., Inc.,
Ser. B, 1st Mtge. Notes,
11.25%, 4/15/04.................................. 1,056,250
------------
3,227,375
------------
Gaming - 1.6%
2,000,000 Boyd Gaming Corp.,
Sr. Notes (Subord.),
9.50%, 7/15/07................................... 2,065,000
</TABLE>
34
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Gaming - continued
$1,225,000 Isle of Capri Casinos, Inc.,
Sr. Notes (Subord.),
8.75%, 4/15/09 (d)............................... $ 1,218,875
1,500,000 Mohegan Tribal Gaming Auth.,
Sr. Notes (Subord.),
8.75%, 1/1/09 (d)................................ 1,554,375
------------
4,838,250
------------
Healthcare Products & Services - 0.3%
1,000,000 Biovail Corp. Int'l.,
Sr. Notes,
10.875%, 11/15/05 (g)............................ 1,028,750
------------
Information Services & Technology - 1.6%
1,500,000 PSInet, Inc.,
Ser. B, Sr. Notes,
10.00%, 2/15/05.................................. 1,571,250
1,000,000 Unisys Corp.,
Sr. Notes,
11.75%, 10/15/04................................. 1,132,500
2,000,000 Verio, Inc.,
Sr. Notes,
10.375%, 4/1/05.................................. 2,130,000
------------
4,833,750
------------
Iron & Steel - 0.5%
1,500,000 National Steel Corp.,
1st Mtge. Notes, Ser. A,
9.875%, 3/1/09 (d)............................... 1,590,000
------------
Lease Rental Obligations - 1.3%
2,000,000 Budget Group, Inc.,
Sr. Notes,
9.125%, 4/1/06 (d)............................... 1,990,000
2,000,000 United Rentals, Inc.,
Sr. Notes (Subord.),
9.25%, 1/15/09 (d)............................... 2,030,000
------------
4,020,000
------------
Leisure & Tourism - 0.4%
1,000,000 Premier Cruise Ltd.,
Sr. Notes,
11.00%, 3/15/08 (d).............................. 250,000
1,000,000 Prime Hospitality Corp.,
Ser. B, Sr. Notes (Subord.),
9.75%, 4/1/07 (g)................................ 1,032,500
------------
1,282,500
------------
Metals & Mining - 1.4%
2,000,000 Acme Metals, Inc.,
Sr. Notes,
10.875%, 12/15/07 (e)............................ 255,000
1,000,000 Bethlehem Steel Corp.,
Sr. Notes,
10.375%, 9/1/03.................................. 1,080,000
2,500,000 Kaiser Aluminum & Chemical Corp.,
Sr. Notes (Subord.),
12.75%, 2/1/03 (g)............................... 2,487,500
2,000,000 NSM Steel, Inc.,
Sr. Mtge. Notes,
12.00%, 2/1/06 (d)............................... 400,000
------------
4,222,500
------------
Oil/Energy - 1.4%
1,500,000 Benton Oil & Gas Co.,
Sr. Notes,
9.375%, 11/1/07.................................. 1,005,000
1,000,000 Energy Corp. of America,
Ser. A, Sr. Notes (Subord.),
9.50%, 5/15/07................................... 940,000
1,000,000 Houston Exploration Co.,
Ser. B, Sr. Notes (Subord.),
8.625%, 1/1/08................................... 987,500
2,500,000 Petsec Energy, Inc.,
Ser. B, Sr. Notes (Subord.),
9.50%, 6/15/07................................... 1,293,750
------------
4,226,250
------------
Paper & Packaging - 1.8%
1,425,000 Crown Paper Co.,
Sr. Notes (Subord.),
11.00%, 9/1/05................................... 1,204,125
2,000,000 Riverwood Int'l. Corp.,
Sr. Notes (Subord.),
10.875%, 4/1/08.................................. 1,980,000
2,000,000 Stone Container Fin. Co.,
Sr. Notes,
11.50%, 8/15/06 (d).............................. 2,142,500
------------
5,326,625
------------
Printing, Publishing, Broadcasting & Entertainment -
3.8%
600,000 Ackerley Group, Inc.,
Ser. B, Sr. Notes (Subord.),
9.00%, 1/15/09 (g)............................... 619,500
1,500,000 American Lawyer Media, Inc.,
Ser. B, Sr. Notes (Subord.),
9.75%, 12/15/07.................................. 1,560,000
1,000,000 Big Flower Press Holdings, Inc.,
Sr. Notes (Subord.),
8.875%, 7/1/07................................... 1,020,000
500,000 Cinemark USA, Inc.,
Ser. B, Sr. Notes (Subord.),
9.625%, 8/1/08................................... 520,000
2,000,000 Echostar DBS Corp.,
Sr. Notes,
9.375%, 2/1/09 (d)............................... 2,085,000
2,000,000 Loews Cineplex Entertainment Corp.,
Sr. Notes (Subord.),
8.875%, 8/1/08................................... 2,005,000
2,000,000 Pegasus Communications Corp.,
Sr. Notes,
9.75%, 12/1/06 (g)............................... 2,065,000
564,000 SFX Broadcasting, Inc.,
Ser. B, Sr. Notes (Subord.),
10.75%, 5/15/06.................................. 631,680
1,000,000 SFX Entertainment, Inc.,
Sr. Notes (Subord.),
9.125%, 12/1/08.................................. 1,030,000
------------
11,536,180
------------
</TABLE>
35
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Retailing & Wholesale - 1.0%
$ 2,000,000 Ames Department Stores, Inc.,
Sr. Notes,
10.00%, 4/15/06 (d)................................ $ 1,980,000
1,000,000 Pathmark Stores, Inc.,
Sr. Notes (Subord.),
9.625%, 5/1/03..................................... 1,027,500
------------
3,007,500
------------
Telecommunication Services & Equipment - 5.3%
2,000,000 Global Crossings Holdings Ltd.,
Sr. Notes,
9.625%, 5/15/08.................................... 2,225,000
500,000 Intermedia Capital Partners,
Sr. Notes,
11.25%, 8/1/06..................................... 563,750
2,000,000 Intermedia Communications, Inc.,
Ser. B, Sr. Notes (Disc.),
Step Bond,
(Eff. Yield 8.64%),
0.00%, 7/15/07 (c)................................. 1,510,000
2,000,000 Jordan Telecommunication
Products,
Ser. B, Sr. Notes,
9.875%, 8/1/07..................................... 2,020,000
850,000 McLeod USA, Inc.,
Sr. Notes (Disc.), Step Bond,
(Eff. Yield 8.09%),
0.00%, 3/1/07 (c) (g).............................. 682,125
Nextel Communications, Inc.:
2,000,000 Sr. Notes (Disc.), Step Bond,
(Eff. Yield 9.56%)
0.00%, 2/15/08 (c)................................. 1,500,000
2,400,000 Sr. Notes,
9.75%, 8/15/04 (g)................................. 2,496,000
1,850,000 RCN Corp.,
Ser. B, Sr. Disc. Notes, Step Bond,
(Eff. Yield 9.75%),
0.00%, 10/15/07 (c)................................ 1,281,125
2,500,000 Rural Cellular Corp.,
Ser. B, Sr. Notes (Subord.),
9.625%, 5/15/08.................................... 2,600,000
1,500,000 Triton PCS, Inc.,
Step Bond,
(Eff. Yield 10.26%),
0.00%, 5/1/08 (c).................................. 945,000
------------
15,823,000
------------
Textile & Apparel - 0.2%
750,000 Delta Mills, Inc.,
Ser. B, Sr. Notes,
9.625%, 9/1/07..................................... 750,000
------------
Transportation - 3.2%
2,000,000 American Commercial Lines LLC,
Ser. B, Sr. Notes,
10.25%, 6/30/08.................................... 2,070,000
1,750,000 Pegasus Shipping Hellas Ltd.,
1st Preferred Mtge. Notes, Ser. A,
11.875%, 11/15/04.................................. 1,225,000
852,000 Piedmont Aviation, Inc,
Ser. A,
9.90%, 1/15/01..................................... 876,035
1,389,000 Piedmont Aviation, Inc.,
Ser. F,
10.15%, 3/28/03................................... 1,462,992
2,050,000 Sea Containers Ltd.,
Ser. B, Sr. Notes,
7.875%, 2/15/08.................................. 2,014,125
2,000,000 Trans World Airlines, Inc.,
Sr. Notes,
11.375%, 3/1/06.................................. 960,000
896,000 U.S. Air, Inc.,
Ser. 88-B,
9.90%, 1/15/01................................... 921,276
------------
9,529,428
------------
Utilities - 1.2%
1,000,000 Cleveland Elec. Illuminating Co.,
Ser. B, 1st Mtge. Notes,
9.50%, 5/15/05................................... 1,082,960
2,218,808 Tucson Elec.,
Ser. B,
10.211%, 1/1/09.................................. 2,374,125
------------
3,457,085
------------
Total Corporate Bonds
(cost $121,484,288).............................. 116,790,257
------------
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.6%
1,930,463 Independent National Mtge. Corp.,
Ser. 1997-A, Cl. A,
(Est. Maturity 2003),
7.81%, 12/26/26 (d) (i)
(cost $1,930,309)................................. 1,827,907
------------
FOREIGN BONDS (NON U.S. DOLLARS) - 23.1%
Banks - 3.8%
400,000 European Investment Bank,
GBP Bonds,
7.625%, 12/7/06.................................. 735,208
76,220,000 Realkredit Danmark,
DKK Debs.,
6.00%, 10/1/29................................... 10,725,750
------------
11,460,958
------------
Communication Systems & Services - 1.3%
3,500,000 NTL, Inc.,
GBP Sr. Notes,
10.75%, 4/1/08................................... 3,800,553
------------
Government Agency Notes & Bonds - 15.6%
2,818,000,000 Greece, (Republic of), Deb.,
GRD 8.80%, 6/19/07................................... 10,711,508
800,000,000 Hungary (Government of), Deb.,
HUF 13.00%, 7/24/03.................................. 3,462,999
Italy (Republic of), Deb.:
3,406,027 6.75%, 2/1/07....................................
EUR 4,283,930
570,683 9.50%, 2/1/06....................................
EUR 809,654
</TABLE>
36
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
FOREIGN BONDS (NON-U.S. DOLLARS) - continued
Government Agency Notes &
Bonds - continued
12,850,000 Ontario (Province of),
NZD 6.25%, 12/3/08..................................... $ 7,020,949
16,500,000 Poland (Government of), Deb.,
PLN 12.00%, 10/12/03................................... 4,378,020
Quebec (Province of):
6,000,000 Deb.,
CAD 9.375%, 1/16/23.................................... 5,918,113
13,200,000 Ser. OA,
CAD 7.75%, 3/30/06..................................... 10,254,828
155,301 Spain (Government of), Deb.,
EUR 5.00%, 1/31/01..................................... 170,376
------------
47,010,377
------------
Machinery - Diversified - 0.7%
2,000,000 Tokheim Corp.,
EUR 11.375%, 8/1/08.................................... 2,151,676
------------
Telecommunication Services & Equipment - 0.9%
3,000,000 ICO Global Communications,
EUR 15.25%, 8/1/05..................................... 1,964,904
1,500,000 Microcell Telecommunications, Inc.,
CAD Ser. B, Sr. Disc. Notes, Step Bond, (Eff. Yield
10.68%),
0.00%, 10/15/07 (c)................................ 670,016
------------
2,634,920
------------
Transportation - 0.8%
2,000,000 Hermes Europe Railtel, BV
EUR 10.375%, 1/15/06................................... 2,291,121
------------
Total Foreign Bonds (Non-U.S. Dollars)
(cost $71,313,531)................................. 69,349,605
------------
MORTGAGE-BACKED SECURITIES - 14.7%
FHLMC
$ 1,914,703 7.00%, 5/1/11 - 12/1/11............................ 1,957,154
1,913,154 7.282%, 5/1/99..................................... 1,973,840
FNMA
7,823,643 6.00%, 8/1/28...................................... 7,581,579
26,884,461 6.50%, 8/1/28 - 9/1/28............................. 26,707,830
1,348,149 6.92%, 5/1/99...................................... 1,383,956
111,070 7.00%, 11/1/27..................................... 112,527
1,338,303 7.13%, 5/1/99...................................... 1,368,991
------------
37,154,883
------------
GNMA
3,074,990 6.50%, 7/15/09..................................... 3,112,597
------------
Total Mortgage-Backed Securities
(cost $44,195,392)................................. 44,198,474
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 5.4%
5,000,000 U.S. Treasury Bonds,
5.25%, 11/15/28.................................... 4,626,550
U.S. Treasury Notes:
5,000,000 4.88%, 3/31/01..................................... 4,981,250
6,500,000 5.63%, 5/15/08..................................... 6,597,500
------------
Total U.S. Government & Agency Obligations (cost
$16,478,535)....................................... 16,205,300
------------
YANKEE OBLIGATIONS - 13.1%
Finance & Insurance - 1.5%
1,750,000 Applied Int'l. Fin. Co. BV,
7.869%, 6/28/99.................................... 1,680,000
3,000,000 CEI Citicorp Holdings,
11.25%, 2/14/07.................................... 2,213,407
800,000 PTC Int'l Fin. BV,
Sr. Disc. Notes (Subord.), Step Bond,
(Eff. Yield 10.14%),
0.00%, 7/1/07 (c).................................. 588,000
------------
4,481,407
------------
Government Agency Notes &
Bonds - 7.5%
Argentina (Republic of):
4,000,000 9.75%, 9/19/27..................................... 3,473,000
2,000,000 11.75%, 4/4/09..................................... 2,055,000
Brazil (Fed Republic Of):
4,000,000 10.13%, 5/15/27.................................... 3,174,600
1,000,000 11.63%, 4/15/04.................................... 970,000
4,000,000 Jamaica (Government of),
10.875%, 6/9/05.................................... 3,668,840
United Mexican States,
2,000,000 11.38%, 9/15/16.................................... 2,286,900
6,000,000 11.50%, 5/15/26.................................... 7,141,200
------------
22,769,540
------------
Metals & Mining - 1.3%
2,000,000 Bulong Operations Property Ltd.,
Sr. Notes,
12.50%, 12/15/08 (d)............................... 2,045,000
2,000,000 Great Central Mines Ltd.,
Sr. Notes,
8.875%, 4/1/08..................................... 1,970,000
------------
4,015,000
------------
Oil/Energy - 0.7%
2,000,000 Petroleos Mexicanos,
9.375%, 12/2/08.................................... 2,060,000
------------
Paper & Packaging - 0.7%
2,000,000 Grupo Industrial Durango S.A.,
Notes,
12.625%, 8/1/03 (g)................................ 2,000,000
------------
Printing, Publishing, Broadcasting &
Entertainment - 0.7%
4,000,000 TV Bandeirantes,
Sr. Notes,
12.875%, 5/15/06 (d)............................... 2,060,000
------------
Telecommunication Services & Equipment - 0.7%
2,500,000 Metronet Communications Corp.,
Sr. Notes, Step Bond,
(Eff. Yield 7.73%),
0.00%, 6/15/08 (c)................................. 1,937,500
------------
Total Yankee Obligations
(cost $40,839,291)................................. 39,323,447
------------
</TABLE>
37
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
Schedule of Investments (continued)
April 30, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS AND WARRANTS - 0.7%
Finance & Insurance - 0.2%
154,000 Ampex Corp.,
Cl. A, Common Stock (a)............................. $ 702,625
------------
Gaming - 0.3%
Isle of Capri Casinos, Inc.
104,514 Common Stock (a).................................... 702,203
19,582 Warrants (a) (f).................................... 196
29,167 JCC Holdings Co., Cl. A
Common Stock........................................ 182,294
------------
884,693
------------
Telecommunication Services & Equipment - 0.2%
15,098 Nextel Communications, Inc., Cl. A
Common Stock, (a) (d)............................... 617,603
------------
Total Common Stocks and Warrants
(cost $4,505,618)................................... 2,204,921
------------
PREFERRED STOCK - 0.2%
Finance & Insurance - 0.2%
674 Ampex Corp., Redeemable Pfd.
Stock (a) (f)
(cost $642,457)..................................... 691,632
------------
MUTUAL FUND SHARES - 4.5%
13,505,818 Navigator Prime Portfolio (h)
(cost $13,505,818).................................. $ 13,505,818
------------
<CAPTION>
Principal
Amount
<C> <S> <C>
REPURCHASE AGREEMENT - 1.0%
$3,019,000 Evergreen Joint Repurchase
Agreement, 4.89%, 5/3/99 (Investments in repurchase
agreements, in joint trading account, dated
4/30/99)
(cost, $3,019,000) (b).............................. 3,019,000
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $319,764,239).......................... 102.8% 309,068,611
Other Assets and
Liabilities - net............................ (2.8) (8,296,225)
----- ------------
Net Assets.................................... 100.0% $300,772,386
===== ============
</TABLE>
38
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
Schedule of Investments(continued)
April 30, 1999
(a) Non-income producing security.
(b) The repurchase agreements are fully collateralized by U.S. Government
and/or agency obligations based on market prices at April 30, 1999.
(c) Effective yield (calculated at the date of purchase) is the yield at
which the board accretes on an annual basis until maturity date.
(d) 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.
(e) This obligation has filed Chapter 11 bankruptcy and has discontinued
accrual of interest income.
(f) The securities are valued based upon fair value determined under pro-
cedures approved by the Board of Trustees.
(g) All or a portion of this security is on loan.
(h) Represents investment of cash collateral received for securities on
loan.
(i) 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
the interest rates can cause the estimated maturity to differ from
the listed date.
Summary of Abbreviations:
CAD Canadian Dollar
DKK Danish Krone
EUR Euro Dollar
FHLMC Federal Home Loan Mortgage Corp
FNMA Federal National Mortgage Assoc.
GBP Pound Sterling
GNMA Government National Mortgage Assoc.
GRD Greek Drachma
HUF Hungarian Forint
NZD New Zealand Dollar
PIK Paid in Kind Security
PLN Polish Zloty
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward foreign currency exchange contracts to sell:
<TABLE>
<CAPTION>
Net Unrealized
U.S. $ Value at In Exchange Appreciation
Exchange Date Contracts to Deliver April 30, 1999 for U.S. $ (Depreciation)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
06/24/99 9,500,000 New Zealand Dollars 5,324,189 5,101,500 $(222,689)
07/23/99 11,000,000 Euro Dollars 11,684,092 11,744,700 60,608
---------
$ 162,081
=========
</TABLE>
See Combined Notes to Financial Statements.
39
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
U.S. GOVERNMENT FUND
- --------------------------------------------------------------------------------
Schedule of Investments
April 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - 17.8%
Banks - 3.0%
$ 5,000,000 Fleet National Bank, Providence, RI,
Sub. Notes,
5.75%, 1/15/09.................................. $ 4,737,900
7,000,000 Society National Bank, Cleveland, OH,
Sub. Notes,
6.75%, 6/15/03.................................. 7,125,741
------------
11,863,641
------------
Cable/Other Video Distribution - 2.5%
8,000,000 Comcast Cable Communications, Sr. Notes,
6.20%, 11/15/08................................. 7,818,688
2,000,000 Time Warner Entertainment Co., L.P.,
Sr. Debs.,
7.25%, 9/1/08................................... 2,127,244
------------
9,945,932
------------
Diversified Companies - 0.7%
3,000,000 Williams Holdings Delaware, Inc., Notes,
6.125%, 12/1/03................................. 2,966,907
------------
Finance - 1.5%
6,000,000 Ford Motor Credit Co.,
Sr. Notes,
6.50%, 2/28/02.................................. 6,111,366
------------
Food & Beverage Products - 0.9%
3,500,000 Pepsi Bottling Holdings, Inc.,
5.375%, 2/17/04(a) .............................. 3,429,051
------------
Machinery - Diversified - 0.7%
3,000,000 Case Corp.,
6.25%, 12/1/03 (a) ............................. 2,941,104
------------
Retailing & Wholesale - 2.8%
7,000,000 Dayton Hudson Corp., Puttable Reset Sec.,
5.95%, 6/15/00.................................. 7,030,170
4,000,000 Kroger Co.,
Notes,
6.00%, 7/1/00................................... 4,014,736
------------
11,044,906
------------
Telecommunication Services & Equipment - 3.6%
4,500,000 GTE Corp.,
Debs.,
6.94%, 4/15/28.................................. 4,511,421
10,000,000 Worldcom, Inc.,
Sr. Notes,
6.40%, 8/15/05.................................. 10,056,140
------------
14,567,561
------------
Transportation - 2.1%
4,000,000 Continental Airlines, Passthru Certificates
Ser. 1999 Class C,
6.954%, 2/2/11.................................. 3,986,820
4,250,000 Union Pacific Corp.,
Notes,
6.625%, 2/1/08.................................. 4,261,301
------------
8,248,121
------------
Total Corporate Bonds
(cost $72,053,651)............................. 71,118,589
------------
MORTGAGE-BACKED SECURITIES - 49.8%
Federal Home Loan Mortgage
Corp. - 23.2%
$10,165,390 6.00%, 2/1/29..................................... $ 9,883,199
30,078,806 6.50%, 4/1/26-2/1/29.............................. 29,984,303
27,507,392 7.00%, 2/1/28-7/1/28.............................. 27,993,758
14,650,937 7.50%, 5/1/27-8/1/28.............................. 15,082,253
2,511,942 8.00%, 7/1/17-4/1/22.............................. 2,628,947
1,988,284 8.50%, 2/1/17-10/1/17............................. 2,105,375
1,828,727 9.00%, 11/1/19-4/1/21............................. 1,968,153
698,096 9.50%, 9/1/20..................................... 751,458
923,743 10.00%, 12/1/19-8/1/21............................ 1,003,160
1,195,351 10.50%, 12/1/19................................... 1,314,815
-------------
92,715,421
-------------
Federal National Mortgage Assn. - 10.6%
10,000,000 5.75%, 4/15/03.................................... 10,059,540
2,926,330 6.00%, 2/25/05.................................... 2,926,110
3,503,670 6.50%, 1/1/24..................................... 3,488,092
11,201,965 7.00%, 8/1/25-11/1/26............................. 11,369,857
7,100,603 7.50%, 7/1/23-5/1/27.............................. 7,309,675
5,171,723 8.00%, 8/1/25..................................... 5,387,746
906,411 9.50%, 6/1/22..................................... 968,418
705,740 11.00%, 1/1/16.................................... 782,058
-------------
42,291,496
-------------
Government National Mortgage Assn. - 16.0%
8,357,098 6.00%, 2/20/28-11/15/28........................... 8,104,986
5,772,194 6.50%, 10/15/25-5/20/28........................... 5,744,917
14,852,493 7.00%, 12/15/22-5/15/26........................... 15,111,041
7,778,538 7.50%, 2/15/22-8/15/23............................ 8,031,784
12,475,435 8.00%, 9/15/09-9/15/26............................ 13,040,866
6,731,225 8.50%, 12/15/21-7/15/24........................... 7,131,471
2,955,025 9.00%, 1/15/20-6/15/21............................ 3,157,423
2,606,534 9.50%, 1/15/19-2/15/21............................ 2,812,138
673,109 10.00%, 12/15/18.................................. 737,559
-------------
63,872,185
-------------
Total Mortgage-Backed Securities
(cost $197,251,100)............................. 198,879,102
-------------
U.S. TREASURY OBLIGATIONS - 31.3%
U.S. Treasury Bonds:
26,000,000 5.25%, 2/15/29.................................... 24,423,750
15,100,000 8.50%, 2/15/20.................................... 19,686,625
6,840,000 8.75%, 8/15/20.................................... 9,144,225
12,310,000 8.88%, 8/15/17.................................... 16,341,525
6,000,000 8.88%, 2/15/19.................................... 8,041,878
5,600,000 9.25%, 2/15/16.................................... 7,577,500
U.S. Treasury Notes:
6,100,000 5.75%, 9/30/99.................................... 6,126,688
32,000,000 6.25%, 6/30/02.................................... 32,960,000
750,000 8.00%, 5/15/01.................................... 791,719
-------------
Total U.S. Treasury Obligations
(cost $124,411,392).............................. 125,093,910
-------------
</TABLE>
40
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
U.S. GOVERNMENT FUND
- --------------------------------------------------------------------------------
Schedule of Investments(continued)
April 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENT - 0.0%
$ 43,707 Dresdner Bank 4.87%, dated 04/30/1999, due
05/03/1999, maturity value $43,725 (b)
(cost $43,707)................................... $ 43,707
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments - (cost $393,759,850)..... 98.9% 395,135,308
Other Assets and Liabilities - net........... 1.1 4,354,994
----- ------------
Net Assets................................... 100.0% $399,490,302
===== ============
</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 collateralized by $45,000 U.S. Treasury
Note, 6.250%, 10/31/01; value including accrued interest $46,308.
See Combined Notes to Financial Statements.
41
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
LONG TERM BOND FUNDS
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
April 30, 1999
<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............. $484,642,758 $450,865,220 $319,764,239 $393,759,850
Net unrealized gains or
losses on securities... 2,875,635 (15,010,627) (10,695,628) 1,375,458
- ------------------------------------------------------------------------------------
Market value of
securities............. 487,518,393 435,854,593 309,068,611 395,135,308
Cash.................... 0 0 10,761 0
Receivable for
securities sold........ 29,766,783 5,212,222 941,138 29,891
Receivable for Fund
shares sold............ 1,222,041 216,888 2,399,004 1,518,779
Dividends and interest
receivable............. 8,144,708 8,099,986 6,739,854 4,289,720
Unrealized gains on
forward foreign
currency exchange
contracts.............. 334,888 0 60,608 0
Prepaid expenses and
other assets........... 196,765 179,025 74,724 106,524
- ------------------------------------------------------------------------------------
Total assets.......... 527,183,578 449,562,714 319,294,700 401,080,222
- ------------------------------------------------------------------------------------
Liabilities
Distributions payable... 1,208,112 1,479,528 642,723 496,130
Payable for securities
purchased.............. 29,127,848 12,232,500 2,945,000 0
Payable for Fund shares
redeemed............... 658,376 552,432 668,532 776,400
Payable for closed
forward foreign
currency exchange
contracts.............. 0 0 294,397 0
Payable for securities
on loan................ 3,755,130 27,500,396 13,505,818 0
Unrealized losses on
forward foreign
currency exchange
contracts.............. 47,221 0 222,689 0
Advisory fee payable.... 223,785 179,839 16,384 163,142
Distribution Plan
expenses payable....... 104,065 86,301 77,127 49,810
Due to other related
parties................ 0 0 0 6,330
Accrued expenses and
other liabilities...... 79,458 87,577 149,644 98,108
- ------------------------------------------------------------------------------------
Total liabilities..... 35,203,995 42,118,573 18,522,314 1,589,920
- ------------------------------------------------------------------------------------
Net assets............... $491,979,583 $407,444,141 $300,772,386 $399,490,302
- ------------------------------------------------------------------------------------
Net assets represented
by
Paid-in capital......... $565,877,977 $730,181,266 $387,473,803 $424,247,912
Undistributed
(overdistributed) net
investment income...... 2,675,445 (1,570,499) (771,049) (147,457)
Accumulated net
realized losses on
securities and foreign
currency related
transactions........... (79,736,038) (306,155,999) (75,000,841) (25,985,611)
Net unrealized gains or
losses on securities
and foreign currency
related transactions... 3,162,199 (15,010,627) (10,929,527) 1,375,458
- ------------------------------------------------------------------------------------
Total net assets......... $491,979,583 $407,444,141 $300,772,386 $399,490,302
- ------------------------------------------------------------------------------------
Net assets consists of
Class A................. $444,273,270 $353,488,232 $162,191,570 $ 48,090,691
Class B................. 43,729,267 47,712,932 120,668,920 122,918,604
Class C................. 499,013 1,998,608 16,265,293 5,605,367
Class Y................. 3,478,033 4,244,369 1,646,603 222,875,640
- ------------------------------------------------------------------------------------
Total net assets...... $491,979,583 $407,444,141 $300,772,386 $399,490,302
- ------------------------------------------------------------------------------------
Shares outstanding
Class A................. 28,705,264 87,108,024 23,891,108 4,996,330
Class B................. 2,825,239 11,757,090 17,716,643 12,770,305
Class C................. 32,239 492,445 2,392,348 582,356
Class Y................. 224,719 1,045,932 248,428 23,155,808
- ------------------------------------------------------------------------------------
Net asset value per
share
Class A................. $ 15.48 $ 4.06 $ 6.79 $ 9.63
- ------------------------------------------------------------------------------------
Class A--Offering price
(based on sales charge
of 4.75%).............. $ 16.25 $ 4.26 $ 7.13 $ 10.11
- ------------------------------------------------------------------------------------
Class B................. $ 15.48 $ 4.06 $ 6.81 $ 9.63
- ------------------------------------------------------------------------------------
Class C................. $ 15.48 $ 4.06 $ 6.80 $ 9.63
- ------------------------------------------------------------------------------------
Class Y................. $ 15.48 $ 4.06 $ 6.63 $ 9.63
- ------------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
42
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
LONG TERM BOND FUNDS
- --------------------------------------------------------------------------------
Statements of Operations
Year Ended April 30, 1999
<TABLE>
<CAPTION>
Diversified Strategic
Bond High Yield Income U.S. Government
Fund Fund Fund Fund
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income
Interest................ $ 39,183,204 $ 42,588,134 $ 25,262,615 $24,454,524
Dividends............... 57,031 712,189 0 0
- -------------------------------------------------------------------------------------
Total investment
income................ 39,240,235 43,300,323 25,262,615 24,454,524
- -------------------------------------------------------------------------------------
Expenses
Advisory fee............ 2,871,113 2,688,068 1,852,515 1,817,699
Distribution Plan
expenses............... 1,814,095 1,626,894 1,691,813 1,445,556
Transfer agent fee...... 1,589,292 1,477,372 807,819 348,101
Administrative services
fees................... 84,426 67,111 49,227 95,957
Trustees' fees and
expenses............... 15,101 9,582 5,696 7,823
Custodian fee........... 228,507 152,207 194,257 120,350
Professional fees....... 30,802 27,643 26,474 22,191
Other................... 403,499 335,670 167,958 191,440
- -------------------------------------------------------------------------------------
Total expenses......... 7,036,835 6,384,547 4,795,759 4,049,117
Less: Fee credits....... (23,880) (35,499) (34,869) (15,189)
Fee waivers....... 0 (538,084) (798,523) 0
- -------------------------------------------------------------------------------------
Net expenses........... 7,012,955 5,810,964 3,962,367 4,033,928
- -------------------------------------------------------------------------------------
Net investment income... 32,227,280 37,489,359 21,300,248 20,420,596
=====================================================================================
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions
Net realized gains or
losses on:
Securities............. (678,182) (32,989,229) 1,545,558 (3,174,666)
Foreign currency
related transactions.. (2,078,623) (3,450) (4,296,269) 0
- -------------------------------------------------------------------------------------
Net realized 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 realized and
unrealized losses on
securities and foreign
currency related
transactions........... (14,156,531) (50,412,758) (18,688,920) (3,245,609)
- -------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations........ $ 18,070,749 $(12,923,399) $ 2,611,328 $17,174,987
=====================================================================================
</TABLE>
See Combined Notes to Financial Statements.
43
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
LONG TERM BOND FUNDS
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
Year Ended April 30, 1999
<TABLE>
<CAPTION>
Diversified Strategic
Bond High Yield Income U.S. 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 of CoreFund
Government Income
Fund................... 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.
44
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
LONG TERM BOND FUNDS
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
Year ended April 30, 1998
<TABLE>
<CAPTION>
Diversified Strategic
Bond High Yield Income U.S. Government
Fund (a) Fund (b) Fund Fund
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income... $ 20,588,791 $ 30,356,602 $ 14,251,249 $ 19,431,162
Net realized gains or
losses on securities
and foreign currency
related transactions... 10,936,866 16,551,569 5,635,717 (764,906)
Net change in unrealized
gains on securities and
foreign currency
related transactions... 3,546,444 3,464,809 5,413,523 9,555,419
- ---------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations............ 35,072,101 50,372,980 25,300,489 28,221,675
- ---------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class A................ (9,491,102) (9,975,169) (5,750,571) (2,040,357)
Class B................ (11,097,556) (20,369,058) (7,053,895) (7,875,544)
Class C................ (35) (12,343) (1,374,051) (261,054)
Class Y................ (98) (32) (62,982) (9,254,414)
- ---------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (20,588,791) (30,356,602) (14,241,499) (19,431,369)
- ---------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold................... 19,555,848 55,707,745 52,265,456 63,710,601
Payment for shares
redeemed............... (104,305,708) (121,704,035) (89,713,499) (83,317,244)
Net asset value of
shares issued in
reinvestment of
distributions.......... 11,421,930 17,078,485 8,043,638 13,377,697
Net asset value of
shares issued in
acquisition of:
Evergreen Quality Bond
Fund.................. 172,832,659 0 0 0
Blanchard Flexible
Income Fund........... 0 0 139,705,470 0
Keystone World Bond
Fund.................. 0 0 13,364,630 0
Keystone Government
Securities Fund....... 0 0 0 41,845,369
- ---------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
share transactions.... 99,504,729 (48,917,805) 123,665,695 35,616,423
- ---------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............... 113,988,039 (28,901,427) 134,724,685 44,406,729
Net assets
Beginning of period..... 457,700,855 547,390,001 193,110,351 287,838,548
- ---------------------------------------------------------------------------------------
End of period........... $ 571,688,894 $ 518,488,574 $327,835,036 $332,245,277
=======================================================================================
Undistributed
(overdistributed) net
investment income...... $ 397,123 $ (1,461,940) $ (1,604,423) $ 0
=======================================================================================
</TABLE>
(a) 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.
(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.
See Combined Notes to Financial Statements.
45
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN
LONG TERM BOND FUNDS
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Periods indicated
<TABLE>
<CAPTION>
Diversified
Bond High Yield
Fund Fund
------------- -------------
Year Ended
August 31, Year Ended
1997 July 31, 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income........................... $ 31,196,362 $ 43,434,059
Net realized gain on investments, closed
futures contracts and foreign currency related
transactions................................... 15,553,471 3,963,269
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency related transactions.................. 13,350,772 33,119,281
- --------------------------------------------------------------------------------
Net increase in net assets resulting from
operations.................................... 60,100,605 80,516,609
- --------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income........................... (32,942,625) (44,757,060)
- --------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold....................... 33,102,013 136,045,881
Payment for shares redeemed..................... (180,458,236) (243,407,877)
Proceeds from reinvestment of distributions..... 18,107,160 25,311,702
- --------------------------------------------------------------------------------
Net decrease in net assets resulting from
capital share transactions.................... (129,249,063) (82,050,294)
- --------------------------------------------------------------------------------
Total decrease in net assets.................. (102,091,083) (46,290,745)
Net assets
Beginning of period............................. 559,791,938 593,680,746
- --------------------------------------------------------------------------------
End of period................................... $ 457,700,855 $ 547,390,001
================================================================================
Undistributed net investment income (accumulated
distributions in excess of net investment
income)........................................ $ 2,801,682 $ (1,468,219)
================================================================================
</TABLE>
See Combined Notes to Financial Statements.
46
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements
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 17, 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 for which there has been no sale and other securities traded in
the over-the-counter market are valued at the mean between the last reported
bid and asked price.
Securities for which market quotations are not readily available, including 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
47
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (continued)
deemed by the investment advisor to be creditworthy pursuant to guidelines es-
tablished by the Board of Trustees.
Pursuant to an exemptive order issued by the Securities and Exchange Commis-
sion, 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
48
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (continued)
other party will not fulfill their obligations under the contract. Forward con-
tracts involve elements of market risk in excess of the amount reflected in the
statement of assets and liabilities.
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 advisor 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. The significant differences between financial statement
amounts available for distributions and distributions made in accordance with
income tax regulations are primarily due to differing treatment for net real-
ized gain or loss on foreign currency related transactions, corporate reorgani-
zations and the expiration of capital loss carryovers.
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.
49
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements(continued)
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 computed and paid monthly at an annual rate of 0.50% of the Fund's av-
erage daily net assets.
During the year ended April 30, 1999, the amount of investment advisory fees
waived by the investment advisors and the impact on each Fund's expense ratio
represented as a percentage of its average net assets were as follows:
<TABLE>
<CAPTION>
Fees % of Average
Waived Net Assets
<S> <C> <C>
--------------------
Diversified Bond Fund...................... $0 0.00%
High Yield Fund............................ 538,084 0.12%
Strategic Income Fund...................... 798,523 0.27%
U.S. Government Fund....................... 0 0.00%
</TABLE>
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 asset value of the Fund. The sub-
administration fee is calculated by applying percentage rates, which start at
0.01% and decline to 0.004% per annum as net assets increase, to the average
daily net asset value of the Fund. During the year ended April 30, 1999, the
U.S. Government Fund paid or accrued for administrative and sub-administrative
services $76,538 and $19,419, respectively.
During the year ended April 30, 1999, the Diversified Bond Fund, High Yield
Fund and Strategic Income Fund reimbursed EIMC for certain administration and
accounting expenses of $84,426, $67,111 and $49,227, 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". Each class, except
Class Y, currently pays a service fee equal to 0.25% of the average daily net
assets of the class. Class B and Class C also pay distribution fees equal to
0.75% of the average daily net assets of the class. Distribution Plan expenses
are calculated daily and paid at least quarterly.
50
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (continued)
During the year ended April 30, 1999, amounts paid or accrued to EDI pursuant
to each Fund's Class A, Class B and Class C Distribution Plans were as follows:
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
------------------------------
Diversified Bond Fund........... $1,178,170 $ 633,312 $ 2,613
High Yield Fund................. 907,463 706,231 13,200
Strategic Income Fund........... 428,399 1,091,369 172,045
U.S. Government Fund............ 109,595 1,279,280 56,681
</TABLE>
With respect to Class B and Class C shares, the principal underwriter may pay
distribution fees greater than the allowable annual amounts each Fund is per-
mitted to pay under the Distribution Plans.
Each of the Distribution Plans may be terminated at any time by vote of the In-
dependent Trustees or by vote of a majority of the outstanding voting shares of
the respective class.
5. ACQUISITIONS
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.
Effective on the close of business on February 28, 1998, Strategic Income Fund
acquired all of the assets and assumed certain liabilities of Blanchard Flexi-
ble Income Fund, in an exchange for Class A shares of Strategic Income Fund.
Effective on the close of business on January 23, 1998, Diversified Bond Fund
acquired substantially all the assets and assumed certain liabilities of Ever-
green Quality Bond Fund, in an exchange for Class A and Class B shares of Di-
versified Bond Fund.
Effective on the close of business on August 1, 1997 Strategic Income Fund ac-
quired substantially all the assets and assumed certain liabilities of Keystone
World Bond Fund in exchange for Class A, Class B and Class C shares of Strate-
gic Income Fund. Also, the U.S. Government Fund acquired substantially all the
assets and assumed certain liabilities of Keystone Government Securities Fund
in exchange for Class A, Class B and Class C shares of the 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 CoreFund Government Income Fund $ 25,935,637 2,618,772 $ 441,185 $333,331,520
Strategic Income Fund Blanchard Flexible Income Fund 139,705,470 19,367,062 4,998,009 339,328,623
Diversified Bond Fund Evergreen Quality Bond Fund 172,832,659 10,842,627 3,406,186 610,931,062
Strategic Income Fund Keystone World Bond Fund 13,364,630 1,876,466 646,958 209,347,784
U.S. Government Fund Keystone Government Securities Fund 41,845,369 4,348,526 776,840 330,218,346
</TABLE>
51
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (continued)
6. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with $0.001
par value authorized. Shares of beneficial interest of the Funds are currently
divided into Class A, Class B, Class C and Class Y. Transactions in shares of
the Funds were as follows:
Diversified Bond Fund
<TABLE>
<CAPTION>
Year Ended April 30,
---------------------------------------------------- Year Ended
1999 1998 August 31, 1997
------------------------ -------------------------- --------------------------
Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A *
Shares sold............. 810,400 $ 12,761,419 136,952 $ 2,185,530 0 0
Automatic conversion of
Class B shares to Class
A shares............... 1,403,087 22,326,396 24,126,331 387,832,940 0 0
Shares redeemed......... (6,059,378) (95,987,811) (2,951,611) (47,145,413) 0 0
Shares issued in
reinvestment of
distributions.......... 1,050,314 16,640,863 362,116 5,781,141 0 0
Shares issued in
acquisition of
Evergreen Quality Bond
Fund................... 0 0 9,827,053 156,644,304 0 0
- -----------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. (2,795,577) (44,259,133) 31,500,841 505,298,502 0 0
===========================================================================================================
Class B **
Shares sold............. 1,481,322 23,510,009 1,090,412 17,341,006 2,182,629 $ 33,102,013
Automatic conversion of
Class B shares to Class
A shares............... (1,403,103) (22,326,396) (24,126,331) (387,832,940) 0 0
Shares redeemed......... (1,768,907) (28,085,274) (3,620,580) (57,160,295) (11,912,272) (180,458,236)
Shares issued in
reinvestment of
distributions.......... 112,383 1,783,925 357,152 5,640,678 1,195,855 18,107,160
Shares issued in
acquisition of
Evergreen Quality Bond
Fund................... 0 0 1,015,574 16,188,355 0 0
- -----------------------------------------------------------------------------------------------------------
Net decrease............ (1,578,305) (25,117,736) (25,283,773) (405,823,196) (8,533,788) (129,249,063)
===========================================================================================================
Class C ***
Shares sold............. 138,285 2,182,664 1,432 22,837 0 0
Shares redeemed......... (107,994) (1,704,992) 0 0 0 0
Shares issued in
reinvestment of
distributions.......... 515 8,103 1 13 0 0
- -----------------------------------------------------------------------------------------------------------
Net increase............ 30,806 485,775 1,433 22,850 0 0
===========================================================================================================
Class Y ****
Shares sold............. 224,176 3,501,809 407 6,475 0 0
Shares issued in
reinvestment of
distributions.......... 130 2,048 6 98 0 0
- -----------------------------------------------------------------------------------------------------------
Net increase............ 224,306 3,503,857 413 6,573 0 0
===========================================================================================================
Net increase (decrease)
in net assets resulting
from capital share
transactions........... $(65,387,237) $ 99,504,729 $(129,249,063)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* For the period from January 20, 1998 (commencement of class operations) to
April 30, 1998
** For the nine months ended April 30, 1998. The Fund changed its fiscal year
end from August 31 to April 30, effective April 30, 1998
*** For the period from April 7, 1998 (commencement of class operations) to
April 30, 1998
**** For the period from February 11, 1998 (commencement of class operations) to
April 30, 1998
52
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
High Yield Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended April 30,
------------------------------------------------------- Year Ended
1999 1998 July 31, 1997
-------------------------- --------------------------- --------------------------
Shares Amount Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A *
Shares sold............. 10,094,180 $ 41,192,593 1,781,307 $ 8,100,467 0 0
Automatic conversion of
Class B shares to Class
A shares............... 6,527,645 26,263,616 96,655,555 436,706,228 0 0
Shares redeemed......... (26,735,454) (111,365,821) (7,005,782) (31,868,872) 0 0
Shares issued in
reinvestment of
distributions.......... 4,394,074 18,091,076 1,396,499 6,343,412 0 0
- --------------------------------------------------------------------------------------------------------------
Net increase
(decrease)............. (5,719,555) (25,818,536) 92,827,579 419,281,235 0 0
- --------------------------------------------------------------------------------------------------------------
Class B **
Shares sold............. 5,817,765 24,157,421 10,409,185 46,341,356 32,280,201 $ 136,045,881
Automatic conversion of
Class B shares to Class
A shares............... (6,527,509) (26,263,616) (96,655,555) (436,706,228) 0 0
Shares redeemed......... (9,466,402) (40,138,947) (20,273,137) (89,733,998) (57,681,924) (243,407,877)
Shares issued in
reinvestment of
distributions.......... 634,514 2,622,487 2,427,463 10,723,559 5,995,434 25,311,702
- --------------------------------------------------------------------------------------------------------------
Net decrease............ (9,541,632) (39,622,655) (104,092,044) (469,375,311) (19,406,289) (82,050,294)
- --------------------------------------------------------------------------------------------------------------
Class C ***
Shares sold............. 557,106 2,273,186 273,398 1,240,926 0 0
Shares redeemed......... (334,216) (1,416,061) (21,094) (96,165) 0 0
Shares issued in
reinvestment of
distributions.......... 14,724 60,244 2,527 11,482 0 0
- --------------------------------------------------------------------------------------------------------------
Net increase............ 237,614 917,369 254,831 1,156,243 0 0
- --------------------------------------------------------------------------------------------------------------
Class Y ****
Shares sold............. 2,455,775 10,680,805 5,506 24,996 0 0
Shares redeemed......... (1,489,709) (5,961,177) (1,101) (5,000) 0 0
Shares issued in
reinvestment of
distributions.......... 75,454 302,298 7 32 0 0
- --------------------------------------------------------------------------------------------------------------
Net increase............ 1,041,520 5,021,926 4,412 20,028 0 0
- --------------------------------------------------------------------------------------------------------------
Net decrease in net
assets resulting from
capital share
transactions........... $ (59,501,896) $ (48,917,805) $ (82,050,294)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* For the period from January 20, 1998 (commencement of class operations)
through April 30, 1998.
** 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
*** For the period from January 22, 1998 (commencement of class operations)
through April 30, 1998.
**** For the period from April 14, 1998 (commencement of class operations)
through April 30, 1998.
53
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Strategic Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------------------------------
1999 1998
------------------------ ------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold................ 4,490,832 $ 31,196,519 1,976,718 $ 14,098,759
Automatic conversion of
Class B shares to Class A
shares.................... 106,795 731,977 0 0
Shares redeemed............ (8,900,411) (61,611,376) (4,673,022) (33,390,153)
Shares issued in
reinvestment of
distributions............. 1,347,956 9,273,511 483,710 3,454,392
Shares issued in
acquisition of:
Blanchard Flexible Income
Fund..................... 0 0 19,367,062 139,705,470
Keystone World Bond Fund.. 0 0 1,077,718 7,661,303
- -------------------------------------------------------------------------------
Net increase (decrease).... (2,954,828) (20,409,369) 18,232,186 131,529,771
- -------------------------------------------------------------------------------
Class B
Shares sold................ 6,845,207 47,103,443 4,345,019 30,951,849
Automatic conversion of
Class B shares to Class A
shares.................... (106,478) (731,977) 0 0
Shares redeemed............ (5,266,886) (36,464,325) (5,964,560) (42,581,723)
Shares issued in
reinvestment of
distributions............. 630,620 4,349,322 515,938 3,680,766
Shares issued in
acquisition of Keystone
World Bond Fund........... 0 0 645,853 4,612,694
- -------------------------------------------------------------------------------
Net increase (decrease).... 2,102,463 14,256,463 (457,750) (3,336,414)
- -------------------------------------------------------------------------------
Class C
Shares sold................ 840,483 5,711,444 261,961 1,864,408
Shares redeemed............ (1,266,465) (8,731,548) (1,375,841) (9,783,791)
Shares issued in
reinvestment of
distributions............. 104,610 722,285 122,073 868,861
Shares issued in
acquisition of Keystone
World Bond Fund........... 0 0 152,895 1,090,633
- -------------------------------------------------------------------------------
Net decrease............... (321,372) (2,297,819) (838,912) (5,959,889)
- -------------------------------------------------------------------------------
Class Y
Shares sold................ 258,852 1,877,692 761,672 5,350,440
Shares redeemed............ (225,476) (1,499,725) (562,382) (3,957,832)
Shares issued in
reinvestment of
distributions............. 10,086 67,771 5,675 39,619
- -------------------------------------------------------------------------------
Net increase............... 43,462 445,738 204,965 1,432,227
- -------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
capital share
transactions.............. $ (8,004,987) $123,665,695
- -------------------------------------------------------------------------------
</TABLE>
54
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
U.S. Government Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------------------------------
1999 1998
------------------------ ------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............... 5,406,579 $ 52,883,440 1,510,987 $ 14,617,089
Shares redeemed........... (4,877,937) (47,734,643) (1,642,684) (15,825,689)
Shares issued in
reinvestment of
distributions............ 168,051 1,647,529 133,072 1,282,497
Shares issued in
acquisition of:
CoreFund Government
Income Fund............. 151,299 1,515,281 0 0
Keystone Government
Securities Fund......... 0 0 2,239,125 21,547,304
- -------------------------------------------------------------------------------
Net increase.............. 847,992 8,311,607 2,240,500 21,621,201
- -------------------------------------------------------------------------------
Class B
Shares sold............... 2,842,599 27,942,652 716,498 6,914,840
Shares redeemed........... (3,936,185) (38,555,032) (4,306,873) (41,415,996)
Shares issued in
reinvestment of
distributions............ 368,042 3,607,463 414,856 3,988,496
Shares issued in
acquisition of Keystone
Government Securities
Fund..................... 0 0 1,507,183 14,503,355
- -------------------------------------------------------------------------------
Net decrease.............. (725,544) (7,004,917) (1,668,336) (16,009,305)
- -------------------------------------------------------------------------------
Class C
Shares sold............... 393,743 3,869,388 94,591 908,119
Shares redeemed........... (417,897) (4,094,589) (173,356) (1,672,822)
Shares issued in
reinvestment of
distributions............ 17,708 173,559 16,871 162,793
Shares issued in
acquisition of Keystone
Government Securities
Fund..................... 0 0 602,218 5,794,710
- -------------------------------------------------------------------------------
Net increase (decrease)... (6,446) (51,642) 540,324 5,192,800
- -------------------------------------------------------------------------------
Class Y
Shares sold............... 9,295,417 91,002,779 4,285,039 41,270,553
Shares redeemed........... (5,686,585) (55,568,104) (2,541,523) (24,402,737)
Shares issued in
reinvestment of
distributions............ 972,869 9,528,012 825,744 7,943,911
Shares issued in
acquisition of CoreFund
Government Income Fund... 2,467,473 24,420,356 0 0
- -------------------------------------------------------------------------------
Net increase.............. 7,049,174 69,383,043 2,569,260 24,811,727
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from capital
share transactions....... $ 70,638,091 $ 35,616,423
- -------------------------------------------------------------------------------
</TABLE>
55
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (continued)
7. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the year ended April 30, 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........... $235,324,286 $508,325,516 $309,220,915 $518,643,350
High Yield
Fund........... 109,456,652 603,473,486 110,014,103 626,159,544
Strategic Income
Fund........... 251,877,387 397,793,928 307,739,655 352,016,431
U.S. Government
Fund........... 437,529,693 18,764,689 348,829,362 4,337,820
</TABLE>
During the year ended April 30, 1999, the Diversified Bond Fund entered into
reverse repurchase agreements. The average daily balance, weighted average in-
terest 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................. $4,030,292 4.54% $9,876,542
</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 year ended April 30, 1999 to certain brokers who paid the
Fund a negotiated lenders' fee. These fees are included in interest income. At
April 30, 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................... $ 3,670,069 $ 3,755,130
High Yield Fund......................... 26,800,176 27,500,396
Strategic Income Fund................... 13,201,251 13,505,818
</TABLE>
During the year ended April 30, 1999, the Diversified Bond Fund, High Yield
Fund and Strategic Income Fund earned $47,065, $21,926 and $3,765, respective-
ly, in income from securities lending.
On April 30, 1999, the composition of unrealized appreciation and depreciation
on securities based on the aggregate cost of securities for federal income tax
purposes were as follows:
<TABLE>
<CAPTION>
Net
Gross Gross Unrealized
Unrealized Unrealized Appreciation
Tax Cost Appreciation Depreciation (Depreciation)
----------------------------------------------------
<S> <C> <C> <C> <C>
Diversified
Bond Fund..... $484,848,090 $ 9,071,303 $ (6,401,000) $ 2,670,303
High Yield
Fund.......... 451,121,939 17,235,306 (32,502,652) (15,267,346)
Strategic
Income Fund... 319,802,753 7,126,123 (17,860,265) (10,734,142)
U.S. Government
Fund.......... 393,759,850 4,612,334 (3,236,876) 1,375,458
</TABLE>
As of 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>
56
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (continued)
In addition to the capital loss carryovers, capital and currency losses in-
curred after October 31, within a Fund's fiscal year, are deemed to arise on
the first business day of the Fund's following fiscal year. For the year ended
April 30, 1999, the Funds have incurred and elected to defer post-October
losses as follows:
<TABLE>
<CAPTION>
Capital Currency
Losses Losses
<S> <C> <C>
--------------------
Diversified Bond Fund...................... $ 3,435,151 $ 0
High Yield Fund............................ 11,989,310 64,035
Strategic Income Fund...................... 3,282,587 116,434
U.S. Government Fund....................... 1,463,897 0
</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.................. $23,880 0.00%
High Yield Fund........................ 35,499 0.00%
Strategic Income Fund.................. 34,869 0.01%
U.S. Government Fund................... 15,189 0.00%
</TABLE>
9. DEFERRED TRUSTEES' FEES
Each Independent Trustee of each Fund may defer any or all compensation related
to performance of their duties as Trustees. The Trustees' deferred balances are
allocated to deferral accounts, which are included in the accrued expenses for
the Fund. The investment performance of the deferral accounts are based on the
investment performance of certain Evergreen Funds. Any gains earned or losses
incurred in the deferral accounts are 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 bear interest at 0.50% per annum
above the Federal Funds rate. A commitment fee of 0.065% per annum will be in-
curred on the unused portion of the committed facility, which was allocated to
all funds. For its assistance in arranging this financing agreement, the Capi-
tal Market Group of First Union was paid a one-time arrangement fee of $27,500.
State Street serves as administrative agent for the Banks, and as administra-
tive agent is entitled to a fee of $20,000 per annum which is allocated to all
of the funds.
This agreement was amended and renewed on December 22, 1998. The amended fi-
nancing agreement became effective on December 22, 1998 among all of the Ever-
green Funds, State Street and The Bank of New York ("BONY"). Under this agree-
ment, State Street and BONY provide an unsecured credit facility in the aggre-
gate amount of $150 million ($125 million committed and $25 million uncommit-
ted). The remaining terms and conditions of the agreement are unaffected.
57
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Combined Notes to Financial Statements (continued)
During the year ended April 30, 1999, the Diversified Bond Fund had average
borrowings outstanding of $8,094,775 at a rate of 5.28% and paid interest of
$8,436, which represent 0.00% of the Fund's average daily net assets on an
annualized basis.
High Yield Fund, Strategic Income Fund and U.S. Government Fund did not borrow
under these agreements during the year ended April 30, 1999.
58
<PAGE>
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Independent Auditors' Report
Board of Trustees and Shareholders
Evergreen Fixed Income Trust:
We have audited the accompanying statements of assets and liabilities, includ-
ing the schedules of investments of Evergreen Diversified Bond Fund, Evergreen
High Yield Bond Fund, Evergreen Strategic Income Fund and Evergreen U.S. Gov-
ernment Fund, portfolios of Evergreen Fixed Income Trust, as of April 30, 1999,
and the related statements of operations for the year then ended, statements of
changes in net assets for each of the years or periods in the two-year period
then ended, and the statements of changes for the year ended August 31, 1997
for Evergreen Diversified Bond Fund and for the year ended July 31, 1997 for
Evergreen High Yield Bond Fund and financial highlights for each of the years
or periods as described on pages 15 to 22. These financial statements and fi-
nancial highlights are the responsibility of the Funds' management. Our respon-
sibility is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements and financial high-
lights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
April 30, 1999 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Ever-
green Diversified Bond Fund, Evergreen High Yield Bond Fund, Evergreen Strate-
gic Income Fund and Evergreen U.S. Government Fund as of April 30, 1999, the
results of their operations, changes in their net assets and financial high-
lights for each of the years or periods described above in conformity with gen-
erally accepted accounting principles.
[SIGNATURE OF KPMG LLP APPEARS HERE]
Boston, Massachusetts
June 18, 1999
59
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OTHER INFORMATION
YEAR 2000 (unaudited)
Like other investment companies, the Funds could be adversely affected if the
computer systems used by the Funds' investment advisors and the Funds' other
service providers are not able to perform their intended functions effectively
after 1999 because of the inability of computer software to distinguish the
year 2000 from the year 1900. The Funds' investment advisors are taking steps
to address this potential year 2000 problem with respect to the computer sys-
tems that they use and to obtain satisfactory assurances that comparable steps
are being taken by the Funds' other major service providers. At this time, how-
ever, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the Funds from this problem.
60
<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
California Municipal Bond Fund
Connecticut Municipal Bond Fund
Florida Municipal Bond Fund
Florida High Income Municipal Bond Fund
Georgia Municipal Bond Fund
Maryland Municipal Bond Fund
Massachusetts Municipal Bond Fund
Missouri Municipal Bond Fund
New Jersey Municipal Bond Fund
New York 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 Government Securities Fund
Intermediate Term Bond Fund
U.S. Government Fund
Diversified Bond Fund
Strategic Income Fund
High Yield Bond Fund
Balanced
American Retirement Fund
Balanced Fund
Tax Strategic Foundation Fund
Foundation Fund
Growth & Income
Utility Fund
Income and Growth Fund
Equity Income Fund
Value Fund
Blue Chip Fund
Growth and Income Fund
Small Cap Value Fund
Domestic Growth
Tax Strategic Equity Fund
Strategic Growth Fund
Stock Selector Fund
Evergreen Fund
Masters Fund
Omega Fund
Small Company Growth Fund
Aggressive Growth Fund
Micro Cap Fund
Global International
Global Leaders Fund
International Growth Fund
Global Opportunities Fund
Precious Metals Fund
Emerging Markets Growth Fund
Latin America Fund
Express Line
800.346.3858
Investor Services
800.343.2898
www.evergreen-funds.com
26997 549426 06/99
[LOGO OF EVERGREEN APPEARS HERE]
200 Berkeley Street
Boston,MA 02116
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