<PAGE>
Annual Report
as of April 30, 2000
Evergreen
Long Term Bond Funds
[LOGO OF EVERGREEN FUNDS(SM)]
<PAGE>
Table of Contents
Letter to Shareholders .................................................... 1
Evergreen Diversified Bond Fund
Fund at a Glance ........................................................ 2
Portfolio Manager Interview ............................................. 3
Evergreen High Yield Bond Fund
Fund at a Glance ........................................................ 5
Portfolio Manager Interview ............................................. 6
Evergreen Strategic Income Fund
Fund at a Glance ........................................................ 8
Portfolio Manager Interview ............................................. 9
Evergreen U.S. Government Fund
Fund at a Glance ........................................................ 12
Portfolio Manager Interview ............................................. 13
Financial Highlights
Evergreen Diversified Bond Fund ......................................... 16
Evergreen High Yield Bond Fund .......................................... 18
Evergreen Strategic Income Fund ......................................... 20
Evergreen U.S. Government Fund .......................................... 22
Schedules of Investments
Evergreen Diversified Bond Fund ......................................... 24
Evergreen High Yield Bond Fund .......................................... 28
Evergreen Strategic Income Fund ......................................... 32
Evergreen U.S. Government Fund .......................................... 36
Statements of Assets and Liabilities ...................................... 38
Statements of Operations .................................................. 39
Statements of Changes in Net Assets ....................................... 40
Combined Notes to Financial
Statements ................................................................ 42
Independent Auditors' Report .............................................. 52
Evergreen Funds
Evergreen Funds is one of the nation's fastest growing investment companies with
over $80 billion in assets under management.
With over 80 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to 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: NOT FDIC INSURED MAY LOSE VALUE NOT BANK GUARANTEED
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Evergreen Distributor,Inc.
Evergreen Funds(SM) is a service mark of Evergreen Investment Services,Inc.
<PAGE>
Letter to Shareholders
----------------------
June 2000
[PHOTO]
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, 2000.
U.S. Bond Markets Experience Volatility
The bond market environment has suffered a great deal of volatility and
unpredictability for the past twelve-month period. The Federal Reserve Board
increased interest rates five times during the period as a response to a
potential inflationary environment. In addition, the Treasury's announcement of
a plan to curtail new and existing supplies of long-term government bonds led
investors to seek longer-term issues in anticipation of possible shortages.
These factors are indicative of an abnormal investment environment where
longer-term bonds paid lower rates than short-term bonds, this is also known as
an "inverted yield curve." Amidst this volatile environment, we still believe
that bonds are relatively attractive over the long term.
We believe that sound investing is about taking steps to meet your long-term
financial needs and goals. We remind you to take advantage of your financial
advisor's expertise to develop and refine a financial plan that will enable you
to meet your objectives. Evergreen Funds offers a broad mix of stock, bond and
money market funds that could make it simple for you to choose the most
appropriate for your portfolio.
Website Enhancements
Please visit our enhanced website, evergreen-funds.com, for more information
about Evergreen Funds. The site offers an array of helpful information including
an investment education center, interactive calculators to assist your
investment planning and general information about Evergreen Funds.
Thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/ William M. Ennis
William M. Ennis
President and CEO
Evergreen Investment Company
1
<PAGE>
EVERGREEN
Diversified Bond Fund
Fund at a Glance as of April 30, 2000
Portfolio
Management
----------------------
[PHOTO]
Gary Pzegeo, CFA
Tenure: January 1999
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CURRENT INVESTMENT STYLE1
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[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 4/30/2000.
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
1 Source: 2000 Morningstar, Inc.
2 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may vary
based on differences in loads, fees and expenses paid by the shareholders
investing in each class. Performance includes the reinvestment of income
dividends and capital gain distributions.
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. These fees are 0.25% for
Class A and 1.00% for Classes B and C. Class Y does not pay a 12b-1 fee. If
these fees had not been reflected, returns would have been lower.
Funds that invest in high yield, lower-rated bonds may contain more risk due to
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. All data is as of April 30, 2000 and subject to change.
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PERFORMANCE AND RETURNS2
--------------------------------------------------------------------------------
Portfolio Inception Date: 9/11/1935 Class A Class B Class C Class Y
Class Inception Date 1/20/1998 9/11/1935 4/07/1998 2/11/1998
--------------------------------------------------------------------------------
Average Annual Returns*
--------------------------------------------------------------------------------
1 year with sales charge -5.75% -6.41% -3.65% n/a
--------------------------------------------------------------------------------
1 year w/o sales charge -1.06% -1.80% -1.80% -0.81%
--------------------------------------------------------------------------------
5 years 5.26% 5.19% 5.49% 6.39%
--------------------------------------------------------------------------------
10 years 7.30% 6.94% 6.92% 8.01%
--------------------------------------------------------------------------------
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front-End CDSC CDSC
--------------------------------------------------------------------------------
30-day SEC yield 6.69% 6.26% 6.25% 7.29%
--------------------------------------------------------------------------------
12-month distributions
per share $1.03 $0.92 $0.92 $1.06
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*Adjusted for maximum applicable sales charge.
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LONG TERM GROWTH
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[GRAPH]
Diversified Lehman Brothers
Bond Aggregate Consumer
Fund; B Bond Index Price Index - US
4/30/90 10,000 10,000 10,000
4/30/91 10,757 11,519 10,489
4/30/92 12,391 12,786 10,822
4/30/93 14,081 14,482 11,171
4/30/94 14,445 14,605 11,435
4/30/95 14,968 15,673 11,784
4/30/96 15,794 17,028 12,126
4/30/97 17,219 18,235 12,428
4/30/98 19,423 20,223 12,607
4/30/99 19,924 21,490 12,894
4/30/00 19,569 21,761 13,314
Comparison of a $10,000 investment in Evergreen Diversified Bond Fund, Class B
shares(2), versus a similar investment in the Lehman Brothers Aggregate Bond
Index (LBABI) and the Consumer Price Index (CPI).
The LBABI is an unmanaged market index, which does not include transaction costs
associated with buying and selling securities or any mutual fund expenses. The
CPI is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
2
<PAGE>
EVERGREEN
Diversified Bond Fund
Portfolio Manager Interview
How did the Fund perform?
For the twelve-month period ended April 30, 2000, the Evergreen Diversified Bond
Fund, Class B shares, had a total return of -1.80%. During the same period, the
Lehman Brothers Aggregate Bond Index returned 1.26%. Fund performance is before
deduction of any applicable sales charges.
Portfolio
Characteristics
---------------
Total Net Assets $367,477,640
Average Credit Quality AA-
Effective Maturity 11.6 Years
Average Duration 5.9 Years
What was the investment environment like during the twelve month period?
It was a soft environment for corporate bonds, as interest rates rose
progressively higher, driven by the U.S. Federal Reserve Board's efforts to slow
economic growth. During 1999, real gross domestic product, adjusted for
inflation, grew by 4.6%, compared to an average rate of 3.2% during the past 10
years. Concerned about the possibility that economic growth would become too
heated and inflation would become a problem, the Federal Reserve (the "Fed")
raised short-term rates five times during the 12 months. Longer-term rates rose
in anticipation of the Fed's actions. As interest rates rise, bond prices tend
to fall. Over the 12 months, the yield on 30-year BBB-rated corporate bonds rose
by 0.92%, according to Moody's, while the yield on a 30-year Treasury rose by
about 0.30%. When corporate yields rise by more than Treasury yields, the
difference--or spread--between the yields widens, and corporate bonds
underperform the Treasury securities. This spread-widening occurred during most
of the fiscal year, resulting in poor performance of the corporate bonds usually
emphasized by the Fund.
Two underlying reasons caused Treasuries to outperform corporates. First, with
the federal government's budget surplus, the government began paying down the
national debt at the very time that corporations borrowed more to raise money
for capital expenditures and stock buy-back programs. The supply/demand
relationships of both the government and corporate bond markets changed. Second,
some investors feared that the tightening monetary policies of the Federal
Reserve could result in a dramatic slowdown of the economy, which could
jeopardize the financial health of many corporations.
Treasuries also outperformed mortgage-backed securities, but not as dramatically
as they did corporate securities. With higher rates, fewer mortgages were
prepaid, which meant there was a smaller supply of new mortgage securities. The
government backing of most mortgage-backed securities also supported their
prices.
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PORTFOLIO COMPOSITION
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(as a percentage of 4/30/2000 net assets)
[GRAPH]
Corporate Bonds -- 41.2%
U.S. Treasury Obligations -- 14.6%
Collateralized Mortgage
Obligations -- 10.7%
Yankee Obligations -- 10.1%
Mortgage-Backed
Securities -- 9.4%
Repurchase Agreement -- 5.7%
Foreign Bonds -- 3.1%
Asset-Backed Securities -- 2.9%
Municipal Obligations -- 0.8%
Other Investments and
Other Assets and
Liabilities, net -- 1.5%
3
<PAGE>
EVERGREEN
Diversified Bond Fund
Portfolio Manager Interview
What were your principal strategies in managing the portfolio?
We were more defensive in a challenging environment, with a higher quality, more
liquid, less interest-rate-sensitive portfolio.
As we upgraded the overall credit quality of the Fund, we also increased the
Fund's liquidity, or ability to trade securities easily. This would give us the
ability to move quickly as conditions changed. Average credit quality at the end
of the fiscal year was AA-. We reduced the Fund's allocation to corporate
securities, while raising the allocation to Treasuries, particularly long-term
Treasuries. During the year, the Fund's allocation to Treasuries increased from
4% to 15% of net assets, while investment-grade corporate securities fell from
35% to 29% of net assets and below-investment-grade corporate securities
declined from 25% to 22% of net assets.
In an environment of rising interest rates, we kept a moderate interest rate
sensitivity--or vulnerability to price loss from rising interest rates. At the
end of the fiscal year on April 30, 2000, effective maturity was 11.6 years and
the Fund's duration was 5.9 years.
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PORTFOLIO QUALITY
--------------------------------------------------------------------------------
(as a percentage of 4/30/2000 portfolio assets)
[GRAPH]
AAA -- 34.8%
AA -- 11.2%
A -- 15.2%
BBB -- 12.8%
BB -- 13.3%
B -- 12.2%
CCC -- 0.5%
What is your outlook for fixed-income investing?
We believe the Federal Reserve will continue to raise short-term rates, at least
until it sees signs of a slowing economy. The higher rate environment should
continue to hold back the performance of the corporate bond market. At the same
time, the U.S. Treasury's debt-reduction program should limit increases of
Treasury yields. Together, volatility in the corporate bond market and a
reduction in Treasury debt should advance present trends, resulting in
outperformance by Treasuries relative to corporates.
The Federal Reserve's tightening monetary policy brings two principal risks.
First, higher short-term rates could result in a significant correction in the
equity market. Secondly, foreign investors may take money out of the U.S.,
weakening the dollar against foreign currencies and increasing inflationary
pressures. This would pressure the Federal Reserve to raise rates even further
to strengthen the value of the dollar and avoid inflation.
With this as an outlook, we intend to maintain our defensive stance, with a high
quality, liquid portfolio with moderate duration or interest-rate sensitivity.
4
<PAGE>
EVERGREEN
High Yield Bond Fund
Fund at a Glance as of April 30, 2000
Portfolio
Management
------------
[PHOTO]
Prescott B.Crocker,CFA
Tenure: February 1997
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CURRENT INVESTMENT STYLE1
--------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 4/30/2000.
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.
1Source: 2000 Morningstar, Inc.
2Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may vary
based on differences in loads, fees and expenses paid by the shareholders
investing in each class. Performance includes the reinvestment of income
dividends and capital gain distributions.
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. These fees are 0.25% for
Class A and 1.00% for Classes B and C. Class Y does not pay a 12b-1 fee. If
these fees had not been reflected, returns would have been lower.
Returns reflect expense limits previously in effect, without which returns would
have been lower.
Funds that invest in high yield, lower-rated bonds may contain more risk due to
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.
All data is as of April 30, 2000 and subject to change.
--------------------------------------------------------------------------------
PERFORMANCE AND RETURNS2
--------------------------------------------------------------------------------
Portfolio Inception Date: 9/11/1935 Class A Class B Class C Class Y
Class Inception Date 1/20/1998 9/11/1935 1/22/1998 4/14/1998
--------------------------------------------------------------------------------
Average Annual Returns*
--------------------------------------------------------------------------------
1 year with sales charge -4.33% -4.95% -2.20% n/a
--------------------------------------------------------------------------------
1 year w/o sales charge 0.38% -0.37% -0.37% 0.64%
--------------------------------------------------------------------------------
5 years 5.32% 5.31% 5.58% 6.58%
--------------------------------------------------------------------------------
10 years 8.11% 7.78% 7.78% 8.87%
--------------------------------------------------------------------------------
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front-End CDSC CDSC
--------------------------------------------------------------------------------
30-day SEC yield 9.59% 9.32% 9.31% 10.35%
--------------------------------------------------------------------------------
12-month distributions
per share $0.36 $0.33 $0.33 $0.37
--------------------------------------------------------------------------------
*Adjusted for maximum applicable sales charge.
--------------------------------------------------------------------------------
LONG TERM GROWTH
--------------------------------------------------------------------------------
[GRAPH]
High Yield Lehman Brothers Merrill Lynch Consumer Price
Bond B Aggregate Bond High Yield Master Index Index - US
4/30/90 10,000 10,000 10,000 10,000
4/30/91 9,752 11,519 11,436 10,489
4/30/92 12,821 12,786 14,168 10,822
4/30/93 15,070 14,482 16,532 11,171
4/30/94 16,940 14,605 17,797 11,435
4/30/95 16,116 15,673 19,778 11,784
4/30/96 17,085 17,028 22,183 12,126
4/30/97 18,659 18,235 24,751 12,428
4/30/98 21,830 20,223 28,221 12,607
4/30/99 21,216 21,490 29,077 12,894
4/30/00 21,137 21,761 28,337 13,314
Comparison of a $10,000 investment in Evergreen High Yield Bond Fund, Class B
shares2, 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 LBABI and MLHYMI are unmanaged market indices, which do not include
transaction costs associated with buying and selling securities or any mutual
fund expenses. The CPI is a commonly used measure of inflation and does not
represent an investment return. It is not possible to invest directly in an
index.
5
<PAGE>
EVERGREEN
High Yield Bond Fund
Portfolio Manager Interview
How did the Fund perform?
For the twelve-month period ended April 30, 2000, the Fund's Class B shares
returned -0.37%. For the same period, the Lehman Brothers Aggregate Bond Index
and the Merrill Lynch High Yield Master Index, returned 1.26% and -2.81%,
respectively. The median return of the high yield funds followed by Lipper, Inc.
stood at -2.21% for the same period, in comparison. Lipper, Inc. is an
independent monitor of mutual fund performance. Fund performance is before
deduction of any applicable sales charges.
Portfolio
Characteristics
---------------
Total Net Assets $329,129,119
---------------------------------------------------------
Average Credit Quality B
---------------------------------------------------------
Effective Maturity 8.7 Years
---------------------------------------------------------
Average Duration 4.5 Years
---------------------------------------------------------
What was the investment environment like for high yield bonds during the period?
The environment was extremely difficult. Interest rates rose pushing bond prices
lower as continued strength in the economy prompted concerns about future
inflation and additional interest rate hikes from the Federal Reserve Board. The
Federal Reserve Board did, in fact, raise interest rates five times during the
period. The greatest problem for the high yield bond market, however, was the
persistent outflow of funds from individual investors. Over the past year, these
outflows totaled approximately $8.5 billion, or slightly more than 1% of the
high yield bond universe. In contrast, however, new bond issuance, funded by
insurance companies, collateralized bond obligations and reinvested interest
payments amounted to approximately $86.3 billion.
High yield bonds underperformed U.S. Treasury securities during the period,
causing the yield relationship between the two sectors to change. U.S.
Treasuries, particularly those in the 30-year maturity range, benefited from a
unique supply/demand imbalance that pushed prices higher and yields lower. The
supply of U.S. Treasuries is expected to shrink in the foreseeable future as a
result of ongoing surpluses in the federal budget. In fact, in January 2000, the
Treasury announced plans to buy back as much as $30 billion longer-term
securities and reduce the size of future auctions. High yield bonds, however,
experienced continuous cash outflow and limited demand, which pushed prices
lower and yields higher in that sector. The situation resulted in the high yield
bond universe providing a yield advantage over U.S. Treasuries that was
extremely attractive based on historical standards. At the end of April 2000, a
typical "B"-rated bond provided 6.30% more in yield than its U.S. government
counterpart--double the yield of the U.S. Treasury security. This yield
relationship has occurred less than 15% of the time in the past 15 years. During
that time, the Chase U.S. Dollar Global High Yield Index* spread averaged only
5.05% in yield over U.S. Treasuries.
--------------------------------------------------------------------------------
PORTFOLIO QUALITY
--------------------------------------------------------------------------------
(as a percentage of 4/30/2000 portfolio assets)
[GRAPH]
BB -- 12.4%
B -- 69.6%
CCC -- 10.8%
Not Rated -- 7.2%
* The Chase Securities Inc. U.S. Dollar Global High Yield Index is designed to
mirror the investible universe of the U.S. dollar global high yield corporate
debt market, including domestic and international issues. International issues
are comprised of both developed and emerging market issues.
6
<PAGE>
EVERGREEN
High Yield Bond Fund
Portfolio Manager Interview
What strategies did you use to manage the Fund?
We maintained a rigorous focus on credit selection and industry weighting. We
emphasized the telecommunications and media industries, along with energy,
gaming and cyclical industrial corporations. The profits of cyclical companies
tend to be tied to the rise and fall of economic activity. As of April 30, 2000,
the Fund's largest industry holdings were as follows: telecommunication services
and equipment--27.3%; oil/energy--9.7%; paper and packaging--7.1% and
gaming--6.4%. The Fund's average quality rating was "B" and its average duration
was 4.5 years, also as of that date. Duration, which is expressed in years,
measures the Fund's sensitivity to changes in interest rates. The longer a
fund's duration, the greater its sensitivity to interest rate changes.
Conversely, the shorter a fund's duration, the less sensitive it is to changes
in interest rates.
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------------
(as a percentage of 4/30/2000 net assets)
[GRAPH]
Corporate Bonds -- 75.1%
Yankee Obligations -- 11.3%
Preferred Stocks -- 5.3%
Common Stocks and Warrants -- 3.5%
Foreign Corporate Bonds -- 0.7%
Other Investments and Other Assets and Liabilities, net -- 4.1%
What is your outlook for high yield bonds over the next six months?
We think high yield bonds currently offer substantial opportunity and are
optimistic about the returns they can provide over the longer term. With yields
approaching 13%, high yield bonds provide extremely attractive relative value
and total return potential. Near term, however, we are somewhat cautious because
of the potential for the rapid revaluation of equities to spill over into the
high yield bond sector, pushing prices lower. While unsettling, times like these
have provided significant opportunity to invest profitably in the market,
historically. We believe the Federal Reserve Board will be successful in
engineering a slowdown in the economy--as opposed to a crash landing--just as it
maneuvered the "soft landing" of 1994 and 1995. In our opinion, American
industry is simply too efficient and dynamic, and carries too few economic
excesses, to respond in a recessionary manner.
7
<PAGE>
EVERGREEN
Strategic Income Fund
Fund at a Glance as of April 30, 2000
Portfolio
Management
------------
[PHOTO]
Prescott B. Crocker,CFA
Tenure: February 1997
--------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE1
--------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 4/30/2000.
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
1 Source: 2000 Morningstar, Inc.
2 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may vary
based on differences in loads, fees and expenses paid by the shareholders
investing in each class. Performance includes the reinvestment of income
dividends and capital gain distributions.
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 are 0.25% for Class A and 1.00% for
Classes B and C. 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.
The advisor is waiving a portion of its advisory fee. Had the fee not been
waived, returns would have been lower.
U.S. government guarantees apply only to the underlying securities of the
Fund's portfolio and not to the Fund's shares.
Funds that invest in high yield, lower-rated bonds may contain more risk due to
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.
All data is as of April 30, 2000 and subject to change.
--------------------------------------------------------------------------------
PERFORMANCE AND RETURNS2
--------------------------------------------------------------------------------
Portfolio Inception Date: 4/14/1987 Class A Class B Class C Class Y
Class Inception Date 4/14/1987 2/01/1993 2/01/1993 1/13/1997
--------------------------------------------------------------------------------
Average Annual Returns *
--------------------------------------------------------------------------------
1 year with sales charge -6.28% -6.80% -4.11% n/a
--------------------------------------------------------------------------------
1 year w/o sales charge -1.58% -2.29% -2.30% -0.61%
--------------------------------------------------------------------------------
5 years 5.35% 5.26% 5.56% 6.30%
--------------------------------------------------------------------------------
10 years 8.00% 7.96% 7.95% 8.49%
--------------------------------------------------------------------------------
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front-End CDSC CDSC
--------------------------------------------------------------------------------
30-day SEC yield 8.79% 8.47% 8.45% 9.49%
--------------------------------------------------------------------------------
12-month distributions
per share $0.57 $0.52 $0.52 $0.57
--------------------------------------------------------------------------------
*Adjusted for maximum applicable sales charge.
--------------------------------------------------------------------------------
LONG TERM GROWTH
--------------------------------------------------------------------------------
[GRAPH]
Strategic
Income Lehman Brothers Consumer Price
Fund A Aggregate Bond Index - US
4/30/90 9,525 10,000 10,000
4/30/91 9,275 11,519 10,489
4/30/92 12,122 12,786 10,822
4/30/93 14,688 14,482 11,171
4/30/94 16,452 14,605 11,435
4/30/95 15,853 15,673 11,784
4/30/96 17,462 17,028 12,126
4/30/97 19,082 18,235 12,428
4/30/98 21,599 20,223 12,607
4/30/99 21,941 21,490 12,894
4/30/00 21,592 21,761 13,314
Comparison of a $10,000 investment in Evergreen Strategic Income Fund, Class A
shares 2, versus a similar investment in the Lehman Brothers Aggregate Bond
Index (LBABI) and the Consumer Price Index (CPI).
The LBABI is an unmanaged market index, which does not include transaction costs
associated with buying and selling securities or any mutual fund expenses. The
CPI is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
8
<PAGE>
EVERGREEN
Strategic Income Fund
Portfolio Manager Interview
How did the Fund perform?
The Funds Class A shares returned -1.58% for the twelve-month period ended April
30, 2000, compared to the return of 1.26% by the Lehman Brothers Aggregate Bond
Index for the same period. Fund performance is before deduction of any
applicable sales charge. We attribute the performance to the rise in interest
rates and decline in bond prices that occurred during the period.
Portfolio
Characteristics
----------------
Total Net Assets $250,036,202
--------------------------------------------------------------------------------
Average Credit Quality BBB+
--------------------------------------------------------------------------------
Effective Maturity 11.1 Years
--------------------------------------------------------------------------------
Average Duration 5.1 Years
--------------------------------------------------------------------------------
How was the Fund invested?
As of April 30, 2000, the Funds assets were allocated as follows: high yield
bonds--44%; U.S. government securities--20% and foreign bonds--36%. The Funds
foreign investments included the governments of Canada, Germany and Mexico; and
corporate bonds from Mexico, Poland, Spain and the United Kingdom. Approximately
12% of the Funds net assets were invested in foreign currencies, also as of
April 30, 2000, equally distributed between the euro, the Canadian dollar and
the British pound.
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------------
(as a percentage of 4/30/2000 net assets)
[GRAPH]
Corporate Bonds -- 37.3%
Foreign Bonds -- 20.0%
Yankee Obligations -- 13.5%
Mortgage-Backed Securities -- 12.8%
U.S. Treasury Obligations -- 7.3%
Common Stocks and Warrants -- 3.3%
Asset-Backed Securities -- 0.7%
Other Investments and Other Assets and Liabilities, net -- 5.1%
What caused interest rates to rise?
World economies, particularly the U.S. economy, recovered from the financial
crisis of 1998 faster and more durably than many forecasters had expected. This
stronger-than-expected growth prompted concerns about future inflation, causing
the Federal Reserve Board to raise interest rates five times during the period.
Short-term rates rose considerably more than long-term rates, however, causing
the yield curve to invert. This was an unusual situation where short-term rates
became higher than long-term rates. As of April 30, 2000, for example, the yield
on the two-year U.S. Treasury note stood at 6.72% versus a 5.99% yield on the
30-year U.S. Treasury bond.
What caused short-term rates to be higher than long-term rates?
Toward the end of the fiscal period, the U.S. Treasury announced a decision to
buy up to $30 billion long-term U.S. Treasuries and reduce the size of future
auctions. The expectations of a continually lower supply of U.S. Treasuries gave
the securities a degree of "scarcity value", which drove their prices higher and
yields lower. On the other hand, short-term interest rates continued to rise,
causing prices to fall, as investors became increasingly concerned that the
economy's strength could stimulate future inflation.
9
<PAGE>
EVERGREEN
Strategic Income Fund
Portfolio Manager Interview
What was the environment like in the Fund's other investment sectors?
High yield bonds had a difficult year. The sector experienced persistent cash
outflows from individual investors, as they sought the loftier returns of the
stock market. Outflows totaled approximately $8.5 billion, or slightly more than
1% of the high yield bond universe, over the past year. In comparison, new bond
issuance, funded by insurance companies, collateralized bond obligations and
reinvested interest payments amounted to approximately $86.3 billion. In the
foreign markets, interest rates rose in a fashion similar to that of the United
States. Like the U.S., short-term rates in Europe remained higher than long-term
rates. Europe's economic cycle remains several years behind the U.S. economy,
however. The U.S. dollar strengthened against most currencies, in light of the
country's healthy economy and strong equity market versus the relatively slower
rate growth experienced in Europe.
Yield relationships changed between U.S. Treasuries and other domestic sectors.
Lack of demand for non-U.S. Treasuries caused prices to fall and yields to rise,
causing corporate bonds and mortgage-backed securities to provide yield
advantages over U.S. Treasuries that were extremely generous by historical
standards. This was particularly true for high yield bonds. At the end of April
2000, a typical "B"-rated bond provided 6.30% more in yield than its U.S.
government counterpart--double the yield of the U.S. Treasury security. This
yield relationship has occurred less than 15% of the time in the past 15 years.
During that time, the Chase U.S. Dollar Global High Yield Index* spread averaged
only 5.05% in additional yield over U.S. Treasuries.
--------------------------------------------------------------------------------
PORTFOLIO QUALITY
--------------------------------------------------------------------------------
(as a percentage of 4/30/2000 portfolio assets)
[GRAPH]
AAA -- 24.5%
AA -- 25.0%
BB -- 11.5%
B -- 28.3%
CCC -- 6.1%
Not Rated -- 4.6%
What strategies did you use to manage the Fund?
We focused on the Fund's high yield bond and currency positions, as well as
maintaining a short duration. Expressed in years, duration measures the Fund's
sensitivity to interest rate changes. A shorter duration reduces interest rate
sensitivity and enhances stability. The Fund's shorter duration helped protect
principal when interest rates were rising. Conversely, a longer duration
increases sensitivity to changes in interest rates. A longer duration benefits
performance when interest rates fall, and detracts from performance when
interest rates rise. In the high yield sector, we focused on careful credit and
industry selection. We emphasized domestic bonds in the telecommunications
industry, a sector that generated strong returns. We also actively managed the
Fund's currency holdings, building positions in currencies that exhibited
positive investment trends, including the euro, Canadian dollar and Australian
dollar and attempting to hedge against downside risk. In our opinion, these
currencies became undervalued during the period compared to the U.S. dollar.
* The Chase Securities Inc. U.S. Dollar Global High Yield Index is designed to
mirror the investible universe of the U.S. dollar global high yield corporate
debt market, including domestic and international issues. International issues
are comprised of both developed and emerging market issues.
10
<PAGE>
EVERGREEN
Strategic Income Fund
Portfolio Manager Interview
What is your outlook for the Fund over the next six months?
We think the shift in yield and currency relationships over the past twelve
months created extremely attractive value, laying the groundwork for longer-term
opportunity. This is particularly true for high yield bonds, foreign currencies
and domestic income-oriented securities. With yields close to 13%, high yield
bonds offer exceptionally attractive yield advantages compared to U.S.
Treasuries, based on historical standards. We expect the Fund to benefit from
the incremental yield they provide, as well as from the stronger relative
performance we think they can generate as yield relationships begin to return to
more historical levels. Further, high yield bonds could attract significant cash
flows from the equity markets because of their exceptional value, especially if
equities continue to sell off or rise at a more modest rate. These cash flows
could propel high yield bond prices higher.
Foreign currencies represent another area with great potential. In our opinion,
the U.S. dollar is overvalued approximately 30% against the euro and 20% versus
the Canadian dollar. This situation could easily reverse, however, causing the
U.S. dollar to slide. The most recent U.S. current account deficit amounts to a
sizeable 4% of the total output of the country's goods and services--a
reflection of the tremendous appetite consumers have for foreign goods. That
deficit has been funded by foreign investment in the U.S. stock market, the U.S.
dollar and federal funds market. With the recent volatility in the U.S. stock
market and concerns that stricter monetary policy could severely dampen economic
growth, foreign investors may choose to redirect their cash flows to currencies
with better relative value and brighter outlooks, such as the euro and Canadian
dollar. We think the Fund is well-positioned to benefit from these shifts in
sentiment. While these kinds of changes can be temporarily unsettling, they can
also create significant opportunities. We are pleased that the Funds broad
investment parameters enable us to take advantage of them.
11
<PAGE>
EVERGREEN
U.S. Government Fund
Fund at a Glance as of April 30, 2000
Portfolio
Management
--------------
[PHOTO]
Rollin C. Williams, CFA
Tenure: January 1993
--------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE 1
--------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 4/30/2000.
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
1 Source: 2000 Morningstar, Inc.
2 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost. The performance of each class may vary
based on differences in loads, fees and expenses paid by the shareholders
investing in each class. Performance includes the reinvestment of income
dividends and capital gain distributions.
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 are 0.25%
for Class A and 1.00% for Classes B and C. Class Y does not pay a 12b-1 fee. If
these fees had been reflected, returns for Class C would have been lower while
returns for Class Y would have been higher.
Returns reflect expense limits previously in effect, without which returns would
have been lower.
U.S. government guarantees apply only to the underlying securities of the Funds
portfolio and not to the Funds shares.
All data is as of April 30, 2000 and subject to change.
--------------------------------------------------------------------------------
PERFORMANCE AND RETURNS 2
--------------------------------------------------------------------------------
Portfolio Inception Date: 1/11/1993 Class A Class B Class C Class Y
Class Inception Date 1/11/1993 1/11/1993 9/02/1994 9/02/1993
Average Annual Returns *
1 year with sales charge -4.00% -4.72% -1.87% n/a
1 year w/o sales charge 0.79% 0.03% 0.03% 1.04%
5 years 4.88% 4.80% 5.12% 6.17%
Since Portfolio Inception 4.69% 4.66% 4.78% 5.63%
Maximum Sales Charge 4.75% 5.00% 2.00% n/a
Front-End CDSC CDSC
30-day SEC yield 5.79% 5.32% 5.32% 6.34%
12-month distributions
per share $ 0.55 $ 0.48 $ 0.48 $ 0.57
--------------------------------------------------------------------------------
*Adjusted for maximum applicable sales charge.
--------------------------------------------------------------------------------
LONG TERM GROWTH
--------------------------------------------------------------------------------
[GRAPH]
Class A CPI LBITGBI
--------------------------------------------------------------------------------
11-Jan-93 9,525 10,000 10,000
30-Apr-93 9,860 10,098 10,264
30-Apr-94 9,849 10,337 10,356
30-Apr-95 10,487 10,652 10,994
30-Apr-96 11,266 10,961 11,822
30-Apr-97 11,983 11,234 12,559
30-Apr-98 13,153 11,396 13,642
30-Apr-99 13,860 11,655 14,517
30-Apr-00 13,971 12,035 14,821
Comparison of a $10,000 investment in Evergreen U.S. Government Fund, Class A
shares(2), versus a similar investment in the Lehman Brothers Intermediate Term
Government Bond Index (LBITGBI) and the Consumer Price Index (CPI).
The LBITGBI is an unmanaged market index, which does not include transaction
costs associated with buying and selling securities or any mutual fund expenses.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in an index.
12
<PAGE>
EVERGREEN
U.S. Government Fund
Portfolio Manager Interview
How did the Fund perform?
The Funds Class A shares returned 0.79% for the twelve-month period ended April
30, 2000, versus 2.09% produced by the Lehman Brothers Intermediate Term
Government Bond Index for the same period. Unlike a mutual fund, the Index does
not incur expenses. We attribute the Funds lag in performance to its holdings in
mortgage-backed securities and corporate bonds, compared to the Index's strict
focus on intermediate term government bonds. During the last part of the fiscal
period, U.S. Treasuries outperformed income-oriented securities, such as
mortgage-backed securities and corporate bonds. We think this was a short-term
occurrence and believe the Funds more flexible investment parameters will enable
it to produce higher relative returns over the longer term.
Portfolio
Characteristics
---------------
Total Net Assets $409,944,906
--------------------------------------------------------------------------------
Average Credit Quality AA+
--------------------------------------------------------------------------------
Effective Maturity 8.3 Years
--------------------------------------------------------------------------------
Average Duration 4.8 Years
--------------------------------------------------------------------------------
13
<PAGE>
EVERGREEN
U.S. Government Fund
Portfolio Manager Interview
What was the investment environment like over the past year?
The environment was difficult for bond investors. Interest rates rose across all
maturities; however, short-term rates climbed higher than longer-term rates. For
example, the two-year U.S. Treasury note rose from a 5.06% yield on April 30,
1999 to 6.72% at the close of this fiscal period, a climb of 1.66%. In contrast,
the yield on the 30-year U.S. Treasury went from 5.66% to 5.99% over the same
twelve months, a rise of only 0.33%.
Several factors caused interest rates to rise. The economy demonstrated
surprising resilience coming out of the financial crisis of 1998, and exorbitant
strength as the year went on, prompting the Federal Reserve Board to raise
interest rates five times, during the period. Rising stock prices, continued
strength in the labor markets and higher commodity prices all contributed to
investor concerns that excessive economic growth could lead to higher inflation.
In the fall, investors concentrated on potential Y2K problems, giving the market
a cautious tone. A smooth transition into the millenium caused investors to
refocus on the economy's continued strength, however, sending interest rates
higher and prices lower. Toward the end of the period, U.S. Treasury prices
rose, particularly 30-year U.S. Treasury prices, as the government announced
plans to buy back up to $30 billion U.S. Treasuries in the 15 to 30-year
maturity range, as well as to cut back the size of future auctions.
--------------------------------------------------------------------------------
MATURITY BREAKDOWN
--------------------------------------------------------------------------------
(as a percentage of 4/30/2000 net assets)
[GRAPH]
0-1 years -- 10.0%
1-5 years -- 17.2%
5-10 years -- 46.4%
10-20 years -- 21.8%
20-30 years -- 4.6%
14
<PAGE>
EVERGREEN
U.S. Government Fund
Portfolio Manager Interview
What strategies did you use to manage the Fund?
Duration, which is expressed in years, measures the Fund's sensitivity to
changes in interest rates. A longer duration increases a Fund's sensitivity to
interest rate changes and shortening duration reduces its sensitivity to changes
in interest rates. We made duration adjustments by fine-tuning the Fund's
position in the 30-year U.S. Treasury, taking advantage of the price
fluctuations and supply/demand imbalance for that security that occurred in the
second half of the Fund's fiscal year. The timing of these moves made solid
contributions to total return. Typically, the Fund's corporate bond holdings
ranged between 15% to 20% of net assets. While corporate bonds underperformed
U.S. Treasuries during the period, these holdings provided the Fund with
additional yield.
In July, 1999, Evergreen U.S. Intermediate Government Fund was merged into
Evergreen U.S. Government Fund because of the two funds similar investment
objectives. As of April 30, 2000, the Fund had $410 million in assets and was
invested as follows: Mortgage-backed securities: 52.2%; U.S. government and
agency securities: 27.2%; Corporate bonds: 18.7%; and Cash and equivalents:
1.9%. Also as of that date, the Fund's duration stood at 4.8 years.
What is your outlook for bonds over the next six months?
We are cautious, in the near term. In our opinion, the Federal Reserve Board
will continue to raise interest rates because of ongoing strength in the
economy. With that as a backdrop, we intend to periodically adjust the Fund's
duration to reflect our interest rate outlook, monitor our corporate bond
position to take advantage of changing yield relationships and maintain the
Fund's emphasis on quality.
15
<PAGE>
EVERGREEN
Diversified Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended April 30,
---------------------------------
2000# 1999 1998 (a)(b)#
<S> <C> <C> <C>
CLASS A SHARES
Net asset value, beginning of period $ 15.48 $ 15.92 $ 16.08
-------- -------- --------
Income from investment operations
Net investment income 0.97 0.97 0.30
Net realized and unrealized gains or losses
on securities and foreign currency related
transactions (1.14) (0.44) (0.16)
-------- -------- --------
Total from investment operations (0.17) 0.53 0.14
-------- -------- --------
Distributions to shareholders from net
investment income (1.03) (0.97) (0.30)
-------- -------- --------
Net asset value, end of period $ 14.28 $ 15.48 $ 15.92
-------- -------- --------
Total return* (1.06%) 3.35% 0.85%
Ratios and supplemental data
Net assets, end of period (thousands) $344,296 $444,273 $501,547
Ratios to average net assets
Expenses++ 1.19% 1.23% 1.08%+
Net investment income 6.65% 6.12% 6.68%+
Portfolio turnover rate 175% 141% 109%
</TABLE>
<TABLE>
<CAPTION>
Year Ended April 30, Year Ended August 31,
---------------------------- ----------------------------
2000# 1999 1998 (c)# 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 15.48 $ 15.92 $ 15.42 $ 14.65 $ 15.09 $ 15.28
------- ------- ------- -------- -------- --------
Income from investment
operations
Net investment income 0.84 0.86 0.61 0.91 0.95 1.06
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (1.12) (0.45) 0.50 0.84 (0.35) 0.11
------- ------- ------- -------- -------- --------
Total from investment
operations (0.28) 0.41 1.11 1.75 0.60 1.17
------- ------- ------- -------- -------- --------
Distributions to
shareholders from
Net investment income (0.92) (0.85) (0.61) (0.98) (0.96) (1.28)
Tax return of capital 0 0 0 0 (0.08) (0.08)
------- ------- ------- -------- -------- --------
Total distributions to
shareholders (0.92) (0.85) (0.61) (0.98) (1.04) (1.36)
------- ------- ------- -------- -------- --------
Net asset value, end of
period $ 14.28 $ 15.48 $ 15.92 $ 15.42 $ 14.65 $ 15.09
------- ------- ------- -------- -------- --------
Total return* (1.80%) 2.57% 7.26% 12.25% 4.03% 8.13%
Ratios and supplemental
data
Net assets, end of
period (thousands) $21,694 $43,729 $70,113 $457,701 $559,792 $734,837
Ratios to average net
assets
Expenses++ 1.94% 1.97% 1.93%+ 1.88% 1.84% 1.81%
Net investment income 5.86% 5.33% 5.74%+ 6.07% 6.42% 7.05%
Portfolio turnover rate 175% 141% 109% 138% 246% 178%
</TABLE>
(a) For the period from January 20, 1998 (commencement of class operations) to
April 30, 1998.
(b) The per share net realized and unrealized gains or losses 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 in relation to fluctuat-
ing market values for the portfolio.
(c) 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.
# Net investment income per share is based on average shares outstanding dur-
ing the period.
* Excluding applicable sales charges.
++ The ratio of expenses to average net assets excludes expense reductions but
includes fee waivers.
+ Annualized.
See Combined Notes to Financial Statements.
16
<PAGE>
EVERGREEN
Diversified Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended April 30,
-----------------------------
2000# 1999 1998 (a)(b)#
<S> <C> <C> <C>
CLASS C SHARES
Net asset value, beginning of period $15.48 $15.92 $16.06
------ ------ ------
Income from investment operations
Net investment income 0.88 0.84 0.04
Net realized and unrealized gains or losses on
securities and foreign currency related
transactions (1.16) (0.43) (0.14)
------ ------ ------
Total from investment operations (0.28) 0.41 (0.10)
------ ------ ------
Distributions to shareholders from net
investment income (0.92) (0.85) (0.04)
------ ------ ------
Net asset value, end of period $14.28 $15.48 $15.92
------ ------ ------
Total return* (1.80%) 2.57% (0.60%)
Ratios and supplemental data
Net assets, end of period (thousands) $ 603 $ 499 $ 23
Ratios to average net assets
Expenses++ 1.93% 1.98% 1.88%+
Net investment income 5.92% 5.33% 6.11%+
Portfolio turnover rate 175% 141% 109%
<CAPTION>
Year Ended April 30,
-----------------------------
2000# 1999 1998 (b)(c)#
<S> <C> <C> <C>
CLASS Y SHARES
Net asset value, beginning of period $15.48 $15.92 $16.03
------ ------ ------
Income from investment operations
Net investment income 0.90 0.90 0.24
Net realized and unrealized gains or losses on
securities and foreign currency related
transactions (1.04) (0.43) (0.11)
------ ------ ------
Total from investment operations (0.14) 0.47 0.13
------ ------ ------
Distributions to shareholders from net
investment income (1.06) (0.91) (0.24)
------ ------ ------
Net asset value, end of period $14.28 $15.48 $15.92
------ ------ ------
Total return (0.81%) 2.95% 0.80%
Ratios and supplemental data
Net assets, end of period (thousands) $ 885 $3,478 $ 7
Ratios to average net assets
Expenses++ 0.95% 0.99% 0.83%+
Net investment income 6.89% 6.55% 6.89%+
Portfolio turnover rate 175% 141% 109%
</TABLE>
(a) For the period from April 7, 1998 (commencement of class operations) to
April 30, 1998.
(b) The per share net realized and unrealized gain/loss 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 in relation to fluctuating
market values for the portfolio.
(c) For the period from February 11, 1998 (commencement of class operations) to
April 30, 1998.
# Net investment income per share is based on average shares outstanding dur-
ing the period.
* Excluding applicable sales charges.
++ The ratio of expenses to average net assets excludes expense reductions but
includes fee waivers.
+ Annualized.
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,
------------------------------
2000 1999 1998 (a)#
<S> <C> <C> <C>
CLASS A SHARES
Net asset value, beginning of period $ 4.06 $ 4.53 $ 4.52
-------- -------- --------
Income from investment operations
Net investment income 0.34 0.36 0.11
Net realized and unrealized gains or losses
on securities and foreign currency related
transactions (0.32) (0.46) 0.01
-------- -------- --------
Total from investment operations 0.02 (0.10) 0.12
-------- -------- --------
Distributions to shareholders from
Net investment income (0.33) (0.37) (0.11)
Tax return of capital (0.03) 0 0
-------- -------- --------
Total distributions to shareholders (0.36) (0.37) (0.11)
-------- -------- --------
Net asset value, end of period $ 3.72 $ 4.06 $ 4.53
-------- -------- --------
Total return* 0.38% (2.05%) 2.57%
Ratios and supplemental data
Net assets, end of period (thousands) $291,575 $353,488 $420,778
Ratios to average net assets
Expenses++ 1.27% 1.21% 1.24%+
Net investment income 8.57% 8.61% 8.48%+
Portfolio turnover rate 107% 170% 155%
</TABLE>
<TABLE>
<CAPTION>
Year Ended April 30, Year Ended July 31,
---------------------------- ----------------------------
2000# 1999 1998 (b)# 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 4.06 $ 4.53 $ 4.37 $ 4.10 $ 4.42 $ 4.68
------- ------- ------- -------- -------- --------
Income from investment
operations
Net investment income 0.31 0.27 0.25 0.32 0.32 0.38
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.32) (0.40) 0.16 0.28 (0.27) (0.15)
------- ------- ------- -------- -------- --------
Total from investment
operations (0.01) (0.13) 0.41 0.60 0.05 0.23
------- ------- ------- -------- -------- --------
Distributions to
shareholders from
Net investment income (0.30) (0.34) (0.25) (0.33) (0.37) (0.39)
Tax return of capital (0.03) 0 0 0 0 (0.10)
------- ------- ------- -------- -------- --------
Total distributions to
shareholders (0.33) (0.34) (0.25) (0.33) (0.37) (0.49)
------- ------- ------- -------- -------- --------
Net asset value, end of
period $ 3.72 $ 4.06 $ 4.53 $ 4.37 $ 4.10 $ 4.42
------- ------- ------- -------- -------- --------
Total return* (0.37%) (2.79%) 9.57% 15.32% 1.38% 5.66%
Ratios and supplemental
data
Net assets, end of
period (thousands) $28,229 $47,713 $96,535 $547,390 $593,681 $764,965
Ratios to average net
assets
Expenses++ 2.02% 1.95% 1.94%+ 1.96% 1.94% 2.03%
Net investment income 7.79% 7.85% 7.27%+ 7.63% 7.92% 8.64%
Portfolio turnover rate 107% 170% 155% 138% 116% 82%
</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.
# Net investment income per share is based on average shares outstanding dur-
ing the period.
* Excluding applicable sales charges.
++ The ratio of expenses to average net assets excludes expense reductions but
includes fee waivers.
+ Annualized.
See Combined Notes to Financial Statements.
18
<PAGE>
EVERGREEN
High Yield Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended April 30,
---------------------------
2000 1999 1998 (a)#
<S> <C> <C> <C>
CLASS C SHARES
Net asset value, beginning of period $ 4.06 $ 4.53 $ 4.52
------ ------ ------
Income from investment operations
Net investment income 0.32 0.32 0.10
Net realized and unrealized gains or losses on
securities and foreign currency related
transactions (0.33) (0.45) 0.01
------ ------ ------
Total from investment operations (0.01) (0.13) 0.11
------ ------ ------
Distributions to shareholders from
Net investment income (0.30) (0.34) (0.10)
Tax return of capital (0.03) 0 0
------ ------ ------
Total distributions to shareholders (0.33) (0.34) (0.10)
------ ------ ------
Net asset value, end of period $ 3.72 $ 4.06 $ 4.53
------ ------ ------
Total return* (0.37%) (2.79%) 2.35%
Ratios and supplemental data
Net assets, end of period (thousands) $3,172 $1,999 $1,155
Ratios to average net assets
Expenses++ 2.00% 1.94% 2.04%+
Net investment income 7.80% 7.86% 7.51%+
Portfolio turnover rate 107% 170% 155%
</TABLE>
<TABLE>
<CAPTION>
Year Ended April 30,
----------------------------
2000 1999 1998 (b)(c)
<S> <C> <C> <C>
CLASS Y SHARES
Net asset value, beginning of period $ 4.06 $ 4.53 $4.56
------ ------ -----
Income from investment operations
Net investment income 0.35 0.36 0.02
Net realized and unrealized gains or losses on
securities and foreign currency related
transactions (0.32) (0.45) (0.03)
------ ------ -----
Total from investment operations 0.03 (0.09) (0.01)
------ ------ -----
Distributions to shareholders from
Net investment income (0.34) (0.38) (0.02)
Tax return of capital (0.03) 0 0
------ ------ -----
Total distributions to shareholders (0.37) (0.38) (0.02)
------ ------ -----
Net asset value, end of period $ 3.72 $ 4.06 $4.53
------ ------ -----
Total return 0.64% (1.81%) (0.27%)
Ratios and supplemental data
Net assets, end of period (thousands) $6,153 $4,244 $ 20
Ratios to average net assets
Expenses++ 1.01% 0.91% 1.09%+
Net investment income 8.87% 9.14% 8.21%+
Portfolio turnover rate 107% 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.
(c) The per share net realized and unrealized gains or losses 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 in relation to fluctuat-
ing market values for the portfolio.
# Net investment income is based on average shares outstanding during the pe-
riod.
* Excluding applicable sales charges.
++ The ratio of expenses to average net assets excludes expense reductions but
includes fee waivers.
+ Annualized.
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 July
Year Ended April 30, 31,
--------------------------------------- ------------------
2000 1999 1998 # 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 6.79 $ 7.21 $ 6.82 $ 6.77 $ 6.89 $ 7.35
-------- -------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.53 0.51 0.50 0.37 0.54 0.64
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.63) (0.41) 0.38 0.09 (0.09) (0.45)
-------- -------- -------- -------- -------- --------
Total from investment
operations (0.10) 0.10 0.88 0.46 0.45 0.19
-------- -------- -------- -------- -------- --------
Distributions to
shareholders from
Net investment income (0.49) (0.52) (0.49) (0.41) (0.52) (0.63)
Tax return of capital (0.08) 0 0 0 (0.05) (0.02)
-------- -------- -------- -------- -------- --------
Total distributions to
shareholders (0.57) (0.52) (0.49) (0.41) (0.57) (0.65)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 6.12 $ 6.79 $ 7.21 $ 6.82 $ 6.77 $ 6.89
-------- -------- -------- -------- -------- --------
Total return* (1.58%) 1.58% 13.20% 6.80% 6.84% 3.00%
Ratios and supplemental
data
Net assets, end of
period (thousands) $129,885 $162,192 $193,618 $ 58,725 $ 68,118 $ 85,970
Ratios to average net
assets Expenses++ 0.72% 1.02% 1.27% 1.28%+ 1.30% 1.33%
Net investment income 8.36% 7.41% 6.80% 7.28%+ 8.05% 9.31%
Portfolio turnover rate 187% 222% 237% 86% 101% 95%
<CAPTION>
Year Ended July
Year Ended April 30, 31,
--------------------------------------- ------------------
2000 1999 1998 # 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 6.81 $ 7.25 $ 6.85 $ 6.81 $ 6.92 $ 7.38
-------- -------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.49 0.47 0.44 0.34 0.50 0.60
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.64) (0.44) 0.39 0.07 (0.09) (0.47)
-------- -------- -------- -------- -------- --------
Total from investment
operations (0.15) 0.03 0.83 0.41 0.41 0.13
-------- -------- -------- -------- -------- --------
Distributions to
shareholders from
Net investment income (0.44) (0.47) (0.43) (0.37) (0.47) (0.58)
Tax return of capital (0.08) 0 0 0 (0.05) (0.01)
-------- -------- -------- -------- -------- --------
Total distributions to
shareholders (0.52) (0.47) (0.43) (0.37) (0.52) (0.59)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 6.14 $ 6.81 $ 7.25 $ 6.85 $ 6.81 $ 6.92
-------- -------- -------- -------- -------- --------
Total return* (2.29%) 0.56% 12.47% 6.06% 6.21% 2.12%
Ratios and supplemental
data
Net assets, end of
period (thousands) $104,110 $120,669 $113,136 $110,082 $123,389 $149,091
Ratios to average net
assets
Expenses++ 1.47% 1.76% 2.05% 2.04%+ 2.07% 2.06%
Net investment income 7.60% 6.68% 6.08% 6.52%+ 7.28% 8.58%
Portfolio turnover rate 187% 222% 237% 86% 101% 95%
</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.
# Net investment income per share is based on average shares outstanding
throughout the period.
* Excluding applicable sales charges.
++ The ratio of expenses to average net assets excludes expense reductions but
includes fee waivers.
+ Annualized.
See Combined Notes to Financial Statements.
20
<PAGE>
EVERGREEN
Strategic Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
Year Ended April 30, July 31,
------------------------------------ ----------------
2000 1999 1998 # 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $ 6.80 $ 7.24 $ 6.84 $ 6.80 $ 6.92 $ 7.37
------- ------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.49 0.45 0.44 0.33 0.49 0.59
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.64) (0.42) 0.39 0.08 (0.09) (0.45)
------- ------- ------- ------- ------- -------
Total from investment
operations (0.15) 0.03 0.83 0.41 0.40 0.14
------- ------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.44) (0.47) (0.43) (0.37) (0.47) (0.58)
Tax return of capital (0.08) 0 0 0 (0.05) (0.01)
------- ------- ------- ------- ------- -------
Total distributions to
shareholders (0.52) (0.47) (0.43) (0.37) (0.52) (0.59)
------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 6.13 $ 6.80 $ 7.24 $ 6.84 $ 6.80 $ 6.92
------- ------- ------- ------- ------- -------
Total return* (2.30%) 0.55% 12.48% 6.07% 6.07% 2.27%
Ratios and supplemental
data
Net assets, end of
period (thousands) $14,655 $16,265 $19,639 $24,304 $31,816 $46,221
Ratios to average net
assets
Expenses++ 1.47% 1.77% 2.05% 2.04%+ 2.07% 2.08%
Net investment income 7.61% 6.65% 6.10% 6.52%+ 7.29% 8.56%
Portfolio turnover rate 187% 222% 237% 86% 101% 95%
</TABLE>
<TABLE>
<CAPTION>
Year Ended April 30,
------------------------------------
2000 1999 1998 # 1997 (b)(c)
<S> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value, beginning of period $ 6.63 $ 7.04 $ 6.65 $ 7.03
------ ------ ------ ------
Income from investment operations
Net investment income 0.55 0.51 0.46 0.00
Net realized and unrealized gains or
losses on securities and foreign
currency related transactions (0.59) (0.39) 0.41 (0.20)
------ ------ ------ ------
Total from investment operations (0.04) 0.12 0.87 (0.20)
------ ------ ------ ------
Distributions to shareholders from
Net investment income (0.49) (0.53) (0.48) (0.18)
Tax return of capital (0.08) 0 0 0
------ ------ ------ ------
Total distributions to shareholders (0.57) (0.53) (0.48) (0.18)
------ ------ ------ ------
Net asset value, end of period $ 6.02 $ 6.63 $ 7.04 $ 6.65
------ ------ ------ ------
Total return (0.61%) 1.83% 13.46% (2.87%)
Ratios and supplemental data
Net assets, end of period (thousands) $1,386 $1,647 $1,442 $ 0
Ratios to average net assets
Expenses++ 0.47% 0.75% 1.01% 0.00%+
Net investment income 8.63% 7.64% 6.83% 0.00%+
Portfolio turnover rate 187% 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.
(c) The per share net realized and unrealized gains or losses 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 in relation to fluctuat-
ing market values for the portfolio.
# Net investment income per share is based on average shares outstanding
throughout the period.
* Excluding applicable sales charges.
++ The ratio of expenses to average net assets excludes expense reductions but
includes fee waivers.
+ Annualized.
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 June
Year Ended April 30, 30,
------------------------------------- ------------------
2000 1999 1998 1997 (a) 1996 1995 (b)
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07
------- -------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.55 0.56 0.61 0.52 0.63 0.33
Net realized and
unrealized gains or
losses on securities (0.48) (0.04) 0.29 (0.03) (0.23) 0.58
------- -------- -------- -------- -------- --------
Total from investment
operations 0.07 0.52 0.90 0.49 0.40 0.91
------- -------- -------- -------- -------- --------
Distributions to
shareholders from net
investment income (0.55) (0.57) (0.61) (0.52) (0.63) (0.33)
------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 9.15 $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65
------- -------- -------- -------- -------- --------
Total return* 0.79% 5.39% 9.78% 5.30% 4.28% 10.17%
Ratios and supplemental
data
Net assets, end of
period (thousands) $91,123 $ 48,091 $ 40,136 $ 17,913 $ 20,345 $ 22,445
Ratios to average net
assets
Expenses++ 0.97% 0.95% 1.03% 0.98%+ 0.99% 1.04%+
Net investment income 5.89% 5.68% 6.25% 6.60%+ 6.61% 7.07%+
Portfolio turnover rate 58% 98% 21% 12% 23% 0%
<CAPTION>
Year Ended June
Year Ended April 30, 30,
------------------------------------- ------------------
2000 1999 1998 1997 (a) 1996 1995 (b)
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07
------- -------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.48 0.49 0.53 0.46 0.56 0.29
Net realized and
unrealized gains or
losses on securities (0.48) (0.05) 0.29 (0.03) (0.23) 0.58
------- -------- -------- -------- -------- --------
Total from investment
operations 0 0.44 0.82 0.43 0.33 0.87
------- -------- -------- -------- -------- --------
Distributions to
shareholders from net
investment income (0.48) (0.49) (0.53) (0.46) (0.56) (0.29)
------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 9.15 $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65
------- -------- -------- -------- -------- --------
Total return* 0.03% 4.60% 8.96% 4.65% 3.50% 9.76%
Ratios and supplemental
data
Net assets, end of
period (thousands) $82,665 $122,919 $130,576 $142,371 $165,988 $192,490
Ratios to average net
assets
Expenses++ 1.71% 1.71% 1.78% 1.73%+ 1.74% 1.79%+
Net investment income 5.11% 4.99% 5.56% 5.85%+ 5.85% 6.32%+
Portfolio turnover rate 58% 98% 21% 12% 23% 0%
</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.
++ The ratio of expenses to average net assets excludes expense reductions but
includes fee waivers.
+ Annualized.
See Combined Notes to Financial Statements.
22
<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,
-------------------------------------- -----------------------
2000 1999 1998 1997 (a) 1996 1995 (b)
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07
-------- -------- -------- -------- ---------- ---------
Income from investment
operations
Net investment income 0.48 0.49 0.53 0.46 0.56 0.29
Net realized and
unrealized gains or
losses on securities (0.48) (0.05) 0.29 (0.03) (0.23) 0.58
-------- -------- -------- -------- ---------- ---------
Total from investment
operations 0 0.44 0.82 0.43 0.33 0.87
-------- -------- -------- -------- ---------- ---------
Distributions to
shareholders from net
investment income (0.48) (0.49) (0.53) (0.46) (0.56) (0.29)
-------- -------- -------- -------- ---------- ---------
Net asset value, end of
period $ 9.15 $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65
-------- -------- -------- -------- ---------- ---------
Total return* 0.03% 4.60% 8.96% 4.65% 3.50% 9.76%
Ratios and supplemental
data
Net assets, end of
period (thousands) $ 4,740 $ 5,605 $ 5,697 $ 455 $ 649 $ 350
Ratios to average net
assets
Expenses++ 1.71% 1.70% 1.78% 1.73%+ 1.74% 1.79%+
Net investment income 5.12% 4.97% 5.49% 5.85%+ 5.87% 6.36%+
Portfolio turnover rate 58% 98% 21% 12% 23% 0%
<CAPTION>
Year Ended April 30, Year Ended June 30,
-------------------------------------- -----------------------
2000 1999 1998 1997 (a) 1996 1995 (b)
<S> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07
-------- -------- -------- -------- ---------- ---------
Income from investment
operations
Net investment income 0.57 0.59 0.63 0.54 0.66 0.34
Net realized and
unrealized gains or
losses on securities (0.48) (0.05) 0.29 (0.03) (0.23) 0.58
-------- -------- -------- -------- ---------- ---------
Total from investment
operations 0.09 0.54 0.92 0.51 0.43 0.92
-------- -------- -------- -------- ---------- ---------
Distributions to
shareholders from net
investment income (0.57) (0.59) (0.63) (0.54) (0.66) (0.34)
-------- -------- -------- -------- ---------- ---------
Net asset value, end of
period $ 9.15 $ 9.63 $ 9.68 $ 9.39 $ 9.42 $ 9.65
-------- -------- -------- -------- ---------- ---------
Total return 1.04% 5.66% 10.05% 5.52% 4.54% 10.30%
Ratios and supplemental
data
Net assets, end of
period (thousands) $231,417 $222,876 $155,836 $127,099 $ 121,569 $ 16,934
Ratios to average net
assets
Expenses++ 0.71% 0.71% 0.78% 0.73%+ 0.74% 0.79%+
Net investment income 6.12% 5.96% 6.55% 6.85%+ 6.86% 7.31%+
Portfolio turnover rate 58% 98% 21% 12% 23% 0%
</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
++ The ratio of expenses to average net assets excludes expense reductions but
includes fee waivers.
+ Annualized.
See Combined Notes to Financial Statements.
23
<PAGE>
EVERGREEN
Diversified Bond Fund
Schedule of Investments
April 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - 2.9%(a)
$ 2,100,000 Corestates Home Equity Loan Trust,
Ser. 1996-1, Class A4,
7.00%, 6/15/2012.................................. $ 2,072,416
Merrill Lynch Mtge. Investors, Inc.:
2,816,874 8.50%, 6/15/2017.................................. 2,817,114
2,242,887 9.15%, 10/15/2011................................. 2,238,749
730,219 Mid State Trust, Ser. 6, Class A3,
7.54%, 7/1/2035................................... 691,879
2,500,000 Railcar Leasing LLC, Ser. 1, Class A2,
7.125%, 1/15/2013 (c)............................. 2,437,912
255,000 University Support Svcs., Inc.,
Ser. 1992-CD, Class D,
9.00%, 11/1/2007.................................. 254,618
------------
Total Asset-Backed Securities
(cost $10,834,563)................................ 10,512,688
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 10.7%(a)
2,300,000 Bear Stearns Comml. Mtge.
Securities, Inc., Ser. 2000-WF1,
Class A2,
7.78%, 2/15/2010.................................. 2,317,521
2,000,000 Comml. Mtge. Acceptance Corp.,
Ser. 1997-ML1, Class B,
6.64%, 12/15/2007................................. 1,882,070
3,000,000 Criimi Mae Comml. Mtge. Trust,
Ser. 1998-C1, Class A2,
7.00%, 3/2/2011................................... 2,572,125
4,251,383 Criimi Mae Finl. Corp., Ser. 1, Class A,
7.00%, 1/1/2033................................... 3,962,422
1,000,000 FFCA Secured Lending Corp.,
Ser. 1997-1, Class B1,
7.74%, 6/18/2013.................................. 972,665
2,657,252 Financial Asset Securitization, Inc.,
Ser. 1997-NAM2, Class B2,
7.88%, 7/25/2027.................................. 2,632,463
3,745,000 GE Capital Mtge. Svcs., Inc.,
Ser. 1994-27, Class A6,
6.50%, 7/25/2024.................................. 3,255,210
3,200,000 GMAC Comml. Mtge. Securities, Inc.,
Ser. 2000-C1, Class A2,
7.72%, 12/15/2009................................. 3,199,224
3,300,000 Morgan Stanley Capital I, Inc.,
Ser. 1997-C1, Class B,
7.69%, 1/15/2007.................................. 3,269,367
4,250,000 Morgan Stanley Dean Witter,
Ser. 2000, Class B,
7.57%, 1/15/2010.................................. 4,218,975
PNC Mtge. Securities Corp.:
1,518,882 6.89%, 7/25/2029.................................. 1,359,400
2,426,616 7.25%, 7/25/2027.................................. 2,295,348
1,622,276 7.35%, 9/25/2029.................................. 1,492,747
3,484,656 Residential Asset Securization Trust,
Ser. 2000-A2, Class NB1,
8.00%, 4/25/2030.................................. 3,478,889
2,895,193 Residential Funding Mtge. Securities I,
Inc., Ser. 1999-S2, Class M1,
6.50%, 1/25/2029.................................. 2,563,187
------------
Total Collateralized Mortgage
Obligations
(cost $40,777,354)................................ 39,471,613
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - 41.2%
Advertising & Related Services - 0.8%
$ 1,000,000 Infinity Broadcasting, Inc.,
8.875%, 6/15/2007................................ $ 1,020,000
2,000,000 K - III Communications Corp.,
8.50%, 2/1/2006.................................. 1,905,000
------------
2,925,000
------------
Aerospace & Defense - 0.5%
2,000,000 Lockheed Martin Corp.,
7.95%, 12/1/2005................................. 1,972,516
------------
Automotive Equipment & Manufacturing - 3.0%
1,550,000 Eagle-Picher Inds.,
9.375%, 3/1/2008 (b)............................. 1,317,500
1,000,000 Federal Mogul Corp.,
7.50%, 1/15/2009................................. 756,247
4,000,000 Ford Motor Co.,
8.90%, 1/15/2032................................. 4,333,348
2,000,000 Hayes Wheels Intl., Inc.,
9.125%, 7/15/2007 (c)............................ 1,840,000
1,000,000 Lear Corp.,
9.50%, 7/15/2006................................. 985,000
1,850,000 Mark IV Inds., Inc.,
7.50%, 9/1/2007 (c).............................. 1,679,474
------------
10,911,569
------------
Banks - 1.5%
5,750,000 Barnett Capital I,
8.06%, 12/1/2026................................. 5,469,251
------------
Building, Construction &
Furnishings - 1.5%
1,850,000 American Standard, Inc.,
7.375%, 2/1/2008................................. 1,706,625
1,800,000 MDC Holdings, Inc.,
8.375%, 2/1/2008................................. 1,548,000
500,000 Nortek, Inc., Ser. B,
8.875%, 8/1/2008................................. 453,750
2,000,000 Standard Pacific Corp.,
8.50%, 4/1/2009 (b).............................. 1,720,000
------------
5,428,375
------------
Cable/Other Video
Distribution - 0.8%
1,000,000 Charter Communications,
8.625%, 4/1/2009................................. 878,750
2,000,000 CSC Holdings, Inc., Ser. B,
8.125%, 7/15/2009................................ 1,897,356
------------
2,776,106
------------
Capital Goods - 0.5%
2,000,000 HSBC Capital Funding, LP,
9.55%, 12/31/2049................................ 2,036,476
------------
Chemical & Agricultural
Products - 1.0%
2,000,000 CK Witco Corp.,
8.50%, 3/15/2005................................. 1,991,298
850,000 Huntsman ICI Chemicals LLC,
10.125%, 7/1/2009................................ 854,250
1,000,000 Scotts Co.,
8.625%, 1/15/2009................................ 945,000
------------
3,790,548
------------
</TABLE>
24
<PAGE>
EVERGREEN
Diversified Bond Fund
Schedule of Investments (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Communication Systems & Services - 0.3%
$ 1,325,000 Century Communications Corp., 8.875%, 1/15/2007..... $ 1,232,250
------------
Consumer Products & Services - 0.3%
1,000,000 Playtex Family Products Corp.,
9.00%, 12/15/2003 (b).............................. 980,000
------------
Electrical Equipment & Services - 0.3%
1,350,000 AES Corp.,
8.50%, 11/1/2007................................... 1,225,125
------------
Environmental Services - 0.4%
1,436,281 Oslo Seismic Svcs., Inc.,
8.28%, 6/1/2011.................................... 1,415,893
------------
Finance & Insurance - 8.3%
2,500,000 AMBAC Finl. Group, Inc.,
9.375%, 8/1/2011................................... 2,711,920
5,000,000 Comml. Credit Co.,
10.00%, 5/15/2009.................................. 5,675,330
1,850,000 GS Escrow Corp.,
6.75%, 8/1/2001 (c)................................ 1,785,997
8,850,000 John Deere Capital Corp.,
8.625%, 8/1/2019.................................... 9,000,804
1,800,000 Limestone Electron Trust,
8.625%, 3/15/2003.................................. 1,803,134
2,500,000 Regl. Diversified Funding, Ltd.,
9.25%, 3/15/2030................................... 2,480,453
7,500,000 Sun Life Canada Capital Trust,
Capital Securities,
8.53%, 5/6/2049 (c)................................ 6,899,782
------------
30,357,420
------------
Food & Beverage Products - 0.2%
1,450,000 Aurora Foods, Inc., Ser. B,
9.875%, 2/15/2007 (b).............................. 819,250
------------
Gaming - 1.7%
1,000,000 Boyd Gaming Corp.,
9.50%, 7/15/2007 (b)............................... 950,000
1,000,000 Harrahs Operating Co., Inc.,
7.875%, 12/15/2005................................. 935,000
1,050,000 Hollywood Park, Inc.,
9.25%, 2/15/2007................................... 1,050,000
1,000,000 Isle of Capri Casinos, Inc.,
8.75%, 4/15/2009................................... 907,500
1,000,000 Mohegan Tribal Gaming Auth.,
8.125%, 1/1/2006................................... 945,000
Station Casinos, Inc.
500,000 8.875%, 12/1/2008.................................. 482,500
1,000,000 9.75%, 4/15/2007................................... 1,005,000
------------
6,275,000
------------
Iron & Steel - 0.8%
1,550,000 National Steel Corp., Ser. D,
9.875%, 3/1/2009................................... 1,569,375
1,500,000 WHX Corp.,
10.50%, 4/15/2005.................................. 1,398,750
------------
2,968,125
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Lease Rental Obligations - 0.5%
$ 1,000,000 Budget Group, Inc.,
9.125%, 4/1/2006 (b).............................. $ 815,000
1,000,000 United Rentals, Inc., Ser. B,
9.25%, 1/15/2009.................................. 907,500
------------
1,722,500
------------
Leisure & Tourism - 0.5%
1,000,000 Outboard Marine Corp., Ser. B,
10.75%, 6/1/2008.................................. 745,000
1,000,000 Prime Hospitality Corp., Ser. B,
9.75%, 4/1/2007................................... 965,000
------------
1,710,000
------------
Manufacturing - Distributing - 0.7%
1,000,000 Holley Performance Products, Inc.,
Ser. B,
12.25%, 9/15/2007................................. 815,000
375,000 Owens Illinois, Inc.,
7.35%, 5/15/2008.................................. 332,516
1,500,000 Sun World Intl., Inc., Ser. B,
11.25%, 4/15/2004................................. 1,432,500
------------
2,580,016
------------
Oil/Energy - 3.5%
1,000,000 Cross Timbers Oil Co., Ser. B,
9.25%, 4/1/2007................................... 977,500
2,250,000 Edison Mission Holdings Co., Ser. A,
8.14%, 10/1/2019 (c).............................. 2,148,147
1,400,000 El Paso Energy Corp.,
6.75%, 5/15/2009.................................. 1,276,437
1,300,000 Giant Inds., Inc.,
9.00%, 9/1/2007................................... 1,163,500
1,500,000 Nuevo Energy Co., Ser. B,
9.50%, 6/1/2008................................... 1,481,250
1,000,000 Ocean Energy, Inc., Ser. B,
8.375%, 7/1/2008 (b).............................. 965,000
1,250,000 P&L Coal Holdings Corp., Ser. B,
9.625%, 5/15/2008................................. 1,128,125
1,300,000 Triton Energy, Ltd.,
8.75%, 4/15/2002.................................. 1,293,500
850,000 Western Gas Resources, Inc.,
10.00%, 6/15/2009................................. 862,750
1,500,000 Williams Gas Pipelines Co.,
7.375%, 11/15/2006................................ 1,443,731
------------
12,739,940
------------
Paper & Packaging - 0.3%
1,000,000 Packaging Corp. of America,
9.625%, 4/1/2009.................................. 1,012,500
------------
Printing, Publishing, Broadcasting &
Entertainment - 1.9%
1,000,000 Ackerley Group, Inc., Ser. B,
9.00%, 1/15/2009.................................. 925,000
1,500,000 American Lawyer Media, Inc., Ser. B,
9.75%, 12/15/2007................................. 1,417,500
650,000 Chancellor Media Corp.,
8.00%, 11/1/2008.................................. 649,187
1,000,000 Echostar DBS Corp.,
9.375%, 2/1/2009.................................. 975,000
</TABLE>
25
<PAGE>
EVERGREEN
Diversified Bond Fund
Schedule of Investments (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Printing, Publishing, Broadcasting &
Entertainment - continued
$ 1,000,000 Hollinger Intl. Publishing, Inc.,
9.25%, 2/1/2006................................... $ 970,000
1,000,000 Sinclair Broadcast Group, Inc.,
10.00%, 9/30/2005................................. 958,750
1,250,000 TV Guide, Inc.,
8.125%, 3/1/2009.................................. 1,243,750
------------
7,139,187
------------
Real Estate - 1.6%
6,300,000 Prudential Properties,
7.125%, 7/1/2007 (c).............................. 5,853,267
------------
Retailing & Wholesale - 0.9%
1,050,000 Ames Dept. Stores, Inc.,
10.00%, 4/15/2006................................. 976,500
1,050,000 Jo-Ann Stores, Inc.,
10.375%, 5/1/2007................................. 950,250
1,275,000 Michaels Stores, Inc.,
10.875%, 6/15/2006................................ 1,294,125
------------
3,220,875
------------
Telecommunication Services &
Equipment - 2.8%
1,000,000 Crown Castle Intl. Corp.,
9.00%, 5/15/2011 (b).............................. 935,000
1,000,000 Hyperion Telecommunications, Inc.,
Ser. B,
12.25%, 9/1/2004.................................. 1,042,500
1,000,000 Intermedia Communications, Inc.,
Ser. B,
8.60%, 6/1/2008................................... 915,000
1,050,000 Metromedia Fiber Network, Inc.,
Ser. B,
10.00%, 11/15/2008................................ 1,002,750
1,000,000 Nextel Communications, Inc.,
9.375%, 11/15/2009................................ 960,000
Price Communications Wireless, Inc.:
1,000,000 9.125%, 12/15/2006................................ 992,500
1,000,000 11.75%, 7/15/2007................................. 1,085,000
1,500,000 Qwest Communications International,
Inc.,
7.50%, 11/1/2008.................................. 1,436,710
1,000,000 Voicestream Wireless Co.,
10.375%, 11/15/2009............................... 1,020,000
1,000,000 Williams Communications Group, Inc.,
10.875%, 10/1/2009................................ 1,010,000
------------
10,399,460
------------
Transportation - 2.2%
1,994,416 Continental Airlines, Inc., Passthru
Certificate Ser. 1999 Class B,
6.80%, 2/2/2020................................... 1,832,300
7,000,000 Golden State Petroleum Trans. Corp.,
8.04%, 2/1/2019 (c)............................... 6,270,866
------------
8,103,166
------------
Utilities - Electric - 3.3%
1,050,000 Azurix Corp.,
10.375%, 2/15/2007................................ 1,063,125
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Utilities - Electric - continued
$ 500,000 Calpine Corp.,
7.625%, 4/15/2006................................. $ 472,500
10,000,000 Nationwide CSN Trust,
9.875%, 2/15/2025 (c)............................. 10,676,610
------------
12,212,235
------------
Water & Sewer - 1.1%
4,660,000 Republic Services, Inc.,
7.125%, 5/15/2009................................. 3,947,845
------------
Total Corporate Bonds
(cost $160,566,387)............................... 151,223,895
------------
FOREIGN BONDS (NON U.S. DOLLARS) - 3.1%
Banks - 1.7%
25,615,000 Nykredit,
DKK 6.00%, 10/1/2029.................................. 2,940,282
27,845,000 Realkredit Danmark,
DKK 6.00%, 10/1/2029.................................. 3,200,677
------------
6,140,959
------------
Government - 1.4%
8,200,000 Canada,
CAD 5.50%, 6/1/2009................................... 5,279,695
------------
Total Foreign Bonds (Non U.S. Dollars)
(cost $12,831,279)................................ 11,420,654
------------
MORTGAGE-BACKED SECURITIES - 9.4%
FHLMC - 0.8%
$ 2,910,607 5.69%, 8/1/2029.................................... 2,827,677
------------
FNMA - 8.6%
5,635,527 3.73%, 8/25/2023................................... 4,762,552
2,418,827 6.26%, 3/1/2027.................................... 2,431,965
5,070,356 6.50%, 10/1/2028 - 5/1/2029........................ 4,737,243
10,688,944 7.00%, 7/1/2028 - 8/1/2029......................... 10,258,776
4,999,601 7.50%, 3/1/2030 - 4/1/2030......................... 4,894,659
4,685,752 8.00%, 8/1/2029 - 11/1/2029........................ 4,682,753
------------
31,767,948
------------
Total Mortgage-Backed Securities (cost
$34,628,367)...................................... 34,595,625
------------
MUNICIPAL OBLIGATIONS - 0.8%
2,763,188 Los Angeles, CA. Impt. Bond Act,
1915, Assessment Dist. 1,
MTN,
8.48%, 9/2/2015
(cost $2,763,188)................................. 2,781,508
------------
U.S. TREASURY OBLIGATIONS - 14.6%
U.S. Treasury Bonds:
15,250,000 6.125%, 8/15/2029................................. 15,292,898
18,600,000 6.50%, 11/15/2026................................. 19,303,322
U.S. Treasury Notes:
9,400,000 5.875%, 11/15/2004................................ 9,156,192
7,330,000 6.00%, 8/15/2009.................................. 7,155,912
2,500,000 6.50%, 2/15/2010.................................. 2,550,783
------------
Total U.S. Treasury Obligations
(cost $51,825,197)................................ 53,459,107
------------
</TABLE>
26
<PAGE>
EVERGREEN
Diversified Bond Fund
Schedule of Investments (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
YANKEE OBLIGATIONS - 10.1%
Banks - 0.6%
$30,000,000 Skandinaviska Enskilda,
0.00%, 5/26/2033 (b)(f)........................... $ 2,391,000
------------
Cable/Other Video Distribution - 0.3%
1,200,000 Imax Corp.,
7.875%, 12/1/2005.................................. 1,098,000
------------
Forest Products - 0.3%
1,000,000 Tembec Inds., Inc,
8.625%, 6/30/2009................................. 990,000
------------
Government - 3.8%
7,000,000 Argentina,
0.00%, 10/15/2003 (f)............................. 4,926,250
2,000,000 Philippines,
9.875%, 3/16/2010................................. 1,902,500
United Mexican States
1,500,000 9.875%, 2/1/2010................................... 1,548,375
2,500,000 10.375%, 2/17/2009................................. 2,635,625
2,500,000 11.50%, 5/15/2026.................................. 2,951,500
------------
13,964,250
------------
Metals & Mining - 0.3%
1,600,000 Bulong Operation Property Ltd.,
12.50%, 12/15/2008................................ 952,000
------------
Oil/Energy - 2.0%
1,300,000 Gulf Canada Resources, Ltd.,
8.35%, 8/1/2006................................... 1,280,500
1,300,000 Petroleum GEO Svcs.,
7.50%, 3/31/2007.................................. 1,243,243
5,000,000 YPF Sociedad Anonima,
7.25%, 3/15/2003.................................. 4,826,050
------------
7,349,793
------------
Paper & Packaging - 0.5%
1,000,000 Domtar, Inc.,
8.75%, 8/1/2006................................... 1,035,000
1,000,000 Norampac, Inc.,
9.50%, 2/1/2008 (b)(c)............................ 1,010,000
------------
2,045,000
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
YANKEE OBLIGATIONS - continued
Telecommunication Services &
Equipment - 2.3%
$ 1,000,000 Global Crossing, Ltd.,
9.125%, 11/15/2006................................. $ 975,000
1,150,000 Rogers Cantel, Inc.,
9.75%, 6/1/2016.................................... 1,242,000
2,500,000 Telecom De Puerto Rico, Inc.,
6.65%, 5/15/2006................................... 2,376,020
800,000 Telewest Communications, PLC,
9.625%, 10/1/2006.................................. 772,000
3,500,000 TXU Eastern Funding Co.,
6.75%, 5/15/2009................................... 3,133,064
------------
8,498,084
------------
Total Yankee Obligations
(cost $39,380,495)................................. 37,288,127
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
MUTUAL FUND SHARES - 2.2%
8,187,470 Navigator Prime Portfolio,
(cost $8,187,470) (d).............................. 8,187,470
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENT - 5.7%
$21,028,000 Evergreen Joint Repurchase
Agreement, dated, 4/28/2000,
5.80%, maturing 5/1/2000, maturity
value $21,038,164
(cost $21,028,000) (e)........................... 21,028,000
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $382,822,300)......................... 100.7% 369,968,687
Other Assets and
Liabilities - net........................... (0.7) (2,491,047)
----- ------------
Net Assets................................... 100.0% $367,477,640
===== ============
</TABLE>
(a) The average maturity may be shorter than the stated maturity due to
scheduled interim principal payments.
(b) All or a portion of this security is currently on loan.
(c) Securities that may be resold to "qualified institutional buyers" under
Rule 144A 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) Represents investment of cash collateral received for securities on loan.
(e) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at April
30, 2000.
(f) Security issued in zero coupon form with no periodic interest payments but
is acquired at a discount that results in a current yield to maturity. An
effective interest rate is applied to recognize interest income daily for
the bond. This rate is based on total expected income to be earned over the
life of the bond from amortization of discount at acquisition.
Summary of Abbreviations:
CAD Canadian Dollar
DKK Danish Kroner
FFCA Federal Farm Credit Association
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
MTN Medium Term Note
See Combined Notes to Financial Statements.
27
<PAGE>
EVERGREEN
High Yield Bond Fund
Schedule of Investments
April 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - 75.1%
Automotive Equipment &
Manufacturing - 2.4%
$ 4,000,000 Advance Stores Co., Inc.,
Ser. B,
10.25%, 4/15/2008................................. $ 3,200,000
3,750,000 Eagle-Picher Inds.,
9.375%, 3/1/2008 (a)............................. 3,187,500
1,500,000 Oxford Automotive, Inc.,
Ser. D,
10.125%, 6/15/2007................................ 1,402,500
------------
7,790,000
------------
Building, Construction &
Furnishings - 0.6%
2,500,000 Del Webb Corp.,
9.375%, 5/1/2009 (a).............................. 2,012,500
------------
Business Equipment &
Services - 0.8%
3,000,000 Merrill Corp.,
12.00%, 5/1/2009 (b).............................. 2,775,000
------------
Cable/Other Video
Distribution - 3.7%
4,300,000 Acme Television, LLC,
Sr. Disc. Notes, Ser. B, Step Bond,
0.00%, 9/30/2004 (c).............................. 3,999,000
Adelphia Communications Corp.:
Sr. Disc. Notes:
1,000,000 0.00%, 3/15/2003 (d).............................. 740,000
Ser. B
2,000,000 0.00%, 1/15/2008 (a)(d)........................... 845,000
5,000,000 Pegasus Communications Corp., Ser. B
9.625%, 10/15/2005 (a)............................ 4,887,500
2,850,000 Telewest Communications, PLC,
Sr. Disc. Notes, Step Bond,
0.00%, 4/15/2009 (c).............................. 1,631,625
------------
12,103,125
------------
Communication Systems &
Services - 2.5%
7,500,000 UnitedGlobalCom, Inc.,
Sr. Secd. Disc. Notes, Ser. B,
Step Bond,
0.00%, 2/15/2008 (a)(c)........................... 4,912,500
3,500,000 XM Satellite Radio, Inc.,
14.00%, 3/15/2010................................. 3,167,500
------------
8,080,000
------------
Environmental Services - 1.2%
Allied Waste, Inc., Ser. B:
1,925,000 7.625%, 1/1/2006................................... 1,434,125
3,500,000 10.00%, 8/1/2009 (a) .............................. 2,388,750
------------
3,822,875
------------
Finance & Insurance - 1.2%
4,000,000 Labranche & Co., Inc.,
9.50%, 8/15/2004.................................. 3,800,000
------------
Food & Beverage Products - 1.3%
4,350,000 AFC Enterprises, Inc.,
10.25%, 5/15/2007................................. 4,263,000
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Gaming - 5.8%
$ 4,000,000 Ameristar Casinos, Inc.,
Ser. B,
10.50%, 8/1/2004................................... $ 4,000,000
4,000,000 Argosy Gaming Co.,
10.75%, 6/1/2009 (a)............................... 4,180,000
3,000,000 Boyd Gaming Corp.,
9.50%, 7/15/2007................................... 2,850,000
1,000,000 Coast Hotels & Casinos, Inc.,
9.50%, 4/1/2009.................................... 945,000
4,000,000 Isle of Capri Casinos, Inc.,
8.75%, 4/15/2009................................... 3,630,000
5,500,000 Premier Parks, Inc.,
Sr. Disc. Notes, Step Bond,
0.00%, 4/1/2008 (c)................................ 3,650,625
------------
19,255,625
------------
Healthcare Products &
Services - 2.4%
4,000,000 Lifepoint Hosps. Holdings, Inc.,
Ser. B,
10.75%, 5/15/2009.................................. 4,140,000
3,500,000 Triad Hosps. Holdings, Inc., Ser. B,
11.00%, 5/15/2009.................................. 3,657,500
------------
7,797,500
------------
Iron & Steel - 0.9%
5,000,000 NSM Steel, Inc.,
12.00%, 2/1/2006 (b)(e) ........................... 225,000
3,000,000 WHX Corp.,
10.50%, 4/15/2005.................................. 2,797,500
------------
3,022,500
------------
Lease Rental Obligations - 3.0%
4,000,000 Budget Group, Inc.,
9.125%, 4/1/2006 (a) .............................. 3,260,000
4,000,000 Nationsrent, Inc.,
10.375%, 12/15/2008 (a) ........................... 2,900,000
4,000,000 United Rentals, Inc., Ser. B
9.25%, 1/15/2009 (a) .............................. 3,630,000
------------
9,790,000
------------
Leisure & Tourism - 1.1%
5,100,000 Outboard Marine Corp., Ser. B,
10.75%, 6/1/2008................................... 3,799,500
------------
Manufacturing - Distributing - 3.4%
4,000,000 Holley Performance Products, Inc.,
Ser. B,
12.25%, 9/15/2007.................................. 3,260,000
5,000,000 Sun World Intl., Inc., Ser. B,
11.25%, 4/15/2004.................................. 4,775,000
4,000,000 Transdigm, Inc.,
10.375%, 12/1/2008................................. 3,180,000
------------
11,215,000
------------
Metals & Mining - 1.4%
5,000,000 Acme Metals, Inc.,
10.875%, 12/15/2007 (e) ........................... 775,000
4,000,000 Kaiser Aluminum & Chemical Corp.,
12.75%, 2/1/2003 (a) .............................. 3,800,000
------------
4,575,000
------------
</TABLE>
28
<PAGE>
EVERGREEN
High Yield Bond Fund
Schedule of Investments (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Oil/Energy - 9.7%
$ 4,000,000 Benton Oil & Gas Co.,
9.375%, 11/1/2007................................. $ 2,350,000
4,000,000 Chesapeake Energy Corp., Ser. B
9.625%, 5/1/2005 (a) ............................. 3,860,000
2,000,000 Cross Timbers Oil Co., Ser. B
9.25%, 4/1/2007 (a)............................... 1,955,000
4,750,000 Energy Corp. of America, Ser. A,
9.50%, 5/15/2007.................................. 3,206,250
4,850,000 Giant Inds., Inc.,
9.00%, 9/1/2007 (a)............................... 4,340,750
4,000,000 HS Resources, Inc.,
9.25%, 11/15/2006................................. 3,930,000
4,000,000 Nuevo Energy Co., Ser. B
9.50%, 6/1/2008 (a)............................... 3,950,000
1,250,000 Ocean Energy, Inc., Ser. B
8.875%, 7/15/2007 (a)............................. 1,240,625
2,350,000 Petsec Energy, Inc., Ser. B
9.50%, 6/15/2007 (e).............................. 1,180,875
2,500,000 Pioneer Natural Resources Co.,
9.625%, 4/1/2010 (a).............................. 2,562,625
2,000,000 Vintage Petroleum, Inc.,
9.00%, 12/15/2005................................. 1,980,000
1,500,000 Western Gas Resources, Inc.,
10.00%, 6/15/2009................................. 1,522,500
------------
32,078,625
------------
Paper & Packaging - 5.8%
4,000,000 American Tissue, Inc., Ser. B,
12.50%, 7/15/2006................................. 4,120,000
4,000,000 Four M Corp., Ser. B,
12.00%, 6/1/2006.................................. 3,900,000
4,100,000 Packaging Corp. of America,
9.625%, 4/1/2009 (a).............................. 4,151,250
2,000,000 Repap New Brunswick, Inc.,
11.50%, 6/1/2004 (a).............................. 2,070,000
5,000,000 Riverwood Intl. Corp.,
10.25%, 4/1/2006 (a).............................. 4,962,500
------------
19,203,750
------------
Printing, Publishing, Broadcasting &
Entertainment - 3.6%
5,000,000 American Lawyer Media, Inc.,
Ser. B,
9.75%, 12/15/2007................................. 4,725,000
3,500,000 Echostar DBS Corp.,
9.375%, 2/1/2009 (a).............................. 3,412,500
6,500,000 Spectrasite Holdings, Inc.,
Sr. Disc. Notes, Step Bond,
0.00%, 4/15/2009 (c).............................. 3,607,500
------------
11,745,000
------------
Retailing & Wholesale - 3.4%
4,000,000 Affinity Group Holding, Inc.,
11.00%, 4/1/2007.................................. 3,380,000
5,000,000 Ames Dept. Stores, Inc.,
10.00%, 4/15/2006 (a)............................. 4,650,000
3,000,000 Michaels Stores, Inc.,
10.875%, 6/15/2006................................ 3,045,000
------------
11,075,000
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Telecommunication Services &
Equipment - 18.8%
$ 4,500,000 AMSC Acquisition Co., Inc.,
Ser. B,
12.25%, 4/1/2008................................... $ 3,307,500
5,175,000 Crown Castle Intl. Corp.,
Sr. Disc. Notes, Step Bond,
0.00%, 5/15/2011 (a)(c)............................ 3,130,875
6,000,000 Intercel, Inc.,
Sr. Disc. Notes, Step Bond,
0.00%, 2/1/2006 (c)................................ 5,430,000
Intermedia Communications, Inc.:
3,825,000 Sr. Disc. Notes, Ser. B, Step Bond,
0.00%, 7/15/2007 (c)............................... 2,945,250
3,700,000 Ser. B
8.60%, 6/1/2008.................................... 3,385,500
5,000,000 Level 3 Communications, Inc.,
9.125%, 5/1/2008 (a)............................... 4,375,000
3,000,000 Metromedia Fiber Network, Inc.,
Ser. B,
10.00%, 11/15/2008................................. 2,865,000
5,700,000 Microcell Telecommunications, Inc.,
Sr. Disc. Notes, Step Bond,
0.00%, 6/1/2009 (c)................................ 3,676,500
5,000,000 Nextel Communications, Inc.,
9.375%, 11/15/2009 (a)............................. 4,800,000
5,500,000 Nextlink Communications, Inc.,
Sr. Disc. Notes, Step Bond,
0.00%, 6/1/2009 (a)(c)............................. 3,245,000
5,000,000 Price Communications Wireless, Inc.,
11.75%, 7/15/2007 (a).............................. 5,425,000
4,000,000 PSINet, Inc.,
11.50%, 11/1/2008.................................. 3,580,000
5,000,000 RCN Corp.,
Sr. Disc. Notes, Step Bond,
0.00%, 10/15/2007 (c).............................. 3,212,500
4,000,000 Rural Cellular Corp.,
Ser. B,
9.625%, 5/15/2008.................................. 3,880,000
8,275,000 Tritel PCS, Inc.,
Sr. Disc. Notes, Step Bond,
0.00%, 5/15/2009 (a)(c)............................ 5,502,875
7,020,068 Winstar Communications, Inc.,
Sr. Disc. Notes, Step Bond,
0.00%, 4/15/2005 (b)(c)............................ 3,176,581
------------
61,937,581
------------
Textile & Apparel - 0.8%
3,200,000 Simmons Co.,
Ser. B
10.25%, 3/15/2009 (a).............................. 2,720,000
------------
Transportation - 1.3%
5,000,000 American Commercial Lines, LLC,
Ser. B
10.25%, 6/30/2008 (a).............................. 4,175,000
------------
Total Corporate Bonds
(cost $274,766,965)................................ 247,036,581
------------
</TABLE>
29
<PAGE>
EVERGREEN
High Yield Bond Fund
Schedule of Investments (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
FOREIGN BONDS (NON U.S. DOLLARS) - 0.7%
Telecommunication Services &
Equipment - 0.7%
2,500,000 NTL Communications Corp.,
GBP Sr. Disc. Notes, Step Bond,
0.00%, 4/15/2009 (c)
(cost $2,736,644).................................. $ 2,179,731
------------
YANKEE OBLIGATIONS - 11.3%
Cable/Other Video
Distribution - 1.1%
$ 1,000,000 Telewest Communications, PLC,
11.25%, 11/1/2008.................................. 1,030,000
5,250,000 United Pan Europe Commerce NV,
Sr. Disc. Notes, Step Bond,
0.00%, 2/1/2010 (b)(c)............................. 2,546,250
------------
3,576,250
------------
Finance & Insurance - 1.4%
4,500,000 Ono Finance, PLC,
13.00%, 5/1/2009................................... 4,612,500
------------
Metals & Mining - 0.7%
4,000,000 Bulong Operation Property Ltd.,
12.50%, 12/15/2008................................. 2,380,000
------------
Paper & Packaging - 1.3%
4,100,000 Norampac, Inc.,
9.50%, 2/1/2008 (a)................................ 4,141,000
------------
Telecommunication Services &
Equipment - 6.8%
4,000,000 Alestra SA de RL de CV,
12.125%, 5/15/2006 (a)............................. 3,910,000
6,000,000 Clearnet Communications, Inc.,
Sr. Disc. Notes, Step Bond,
0.00%, 12/15/2005 (a)(b)(c)........................ 6,120,000
4,000,000 Global Crossing, Ltd.,
9.125%, 11/15/2006 (b)............................. 3,900,000
4,000,000 Hermes Europe Railtel BV,
10.375%, 1/15/2009................................. 3,460,000
5,000,000 Star Choice Communications,
13.00%, 12/15/2005................................. 5,100,000
------------
22,490,000
------------
Total Yankee Obligations
(cost $39,362,131)................................. 37,199,750
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 3.4%
Electronic Equipment &
Services - 0.2%
265,018 Ampex Corp., Class A (f)............................ 745,363
------------
Food & Beverage Products - 0.0% (g)
131,250 Specialty Foods Acquis. Corp., (b)(f)............... 2,625
------------
Gaming - 0.6%
10,775,000 Gold River Hotel & Casino Corp.,
Class B (f)(h) ....
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Gaming - continued
141,514 Isle of Capri Casinos, Inc., (a)(f)................ $ 1,963,507
100,463 JCC Holding Co., Class A (a)(f).................... 150,694
------------
2,114,201
------------
Industrial Specialty Products &
Services - 0.1%
306,638 Reunion Inds., Inc., (f)........................... 459,957
------------
Leisure & Tourism - 0.4%
370,294 Premier Cruise Line, Ltd., (f)..................... 1,203,456
------------
Telecommunication Services &
Equipment - 2.1%
2,570 AT&T Canada, Inc.,
Class B Deposit Receipts (a)(f)................... 109,546
48,250 Canadian Satellite
Communication, Inc................................ 597,871
17,296 Nextel Communications, Inc.,
Class A (a)(f).................................... 1,892,831
179,353 Price Communications Corp., (f).................... 3,631,898
15,090 Viatel, Inc., (f).................................. 577,193
------------
6,809,339
------------
Total Common Stocks
(cost $16,709,754)................................ 11,334,941
------------
CONVERTIBLE PREFERRED STOCKS - 1.3%
Electronic Equipment &
Services - 0.3%
750 Ampex Corp., (f)(h)................................ 1,125,000
------------
Telecommunication Services &
Equipment - 1.0%
16,000 Global Crossing, Ltd., (b)......................... 3,284,000
------------
Total Convertible Preferred Stocks
(cost $4,612,900)................................. 4,409,000
------------
PREFERRED STOCKS - 4.0%
Communication Systems &
Services - 0.9%
28,500 Adelphia Communications Corp.,
Ser. B............................................ 3,099,375
------------
Electronic Equipment &
Services - 2.2%
6,679 Ampex Corp., (f)(h)................................ 7,125,892
------------
Finance & Insurance - 0.4%
12,800 Sinclair Capital................................... 1,225,600
------------
Printing, Publishing, Broadcasting &
Entertainment - 0.5%
4 CSC Holdings, Inc., Ser. M (f)..................... 382
20,000 Primedia, Inc., Ser. F............................. 1,805,000
------------
1,805,382
------------
Total Preferred Stocks
(cost $12,699,423)................................ $ 13,256,249
------------
</TABLE>
30
<PAGE>
EVERGREEN
High Yield Bond Fund
Schedule of Investments (continued)
April 30, 2000
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
WARRANTS - 0.1%
Communication Systems &
Services - 0.1%
4,500 Motient Corp.,
expiring 4/1/2008 (f).............................. $ 180,000
------------
Finance & Insurance - 0.0% (g)
4,500 Ono Finance, PLC,
expiring 5/31/2009 (b)(f).......................... 67,500
------------
Transportation - 0.0% (g)
76,000 CHC Helicopter Corp.,
expiring 12/15/2000 (f)............................ 76,000
------------
Total Warrants
(cost $315,000).................................... 323,500
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
MUTUAL FUND SHARES - 23.0%
75,616,185 Navigator Prime Portfolio,
(cost $75,616,185) (i)............................ $ 75,616,185
------------
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENT - 2.6%
$ 8,587,000 Evergreen Joint Repurchase
Agreement, 5.80%, dated
4/28/2000, due 5/1/2000, maturity
value $8,591,150
(cost $8,587,000) (j)............................. 8,587,000
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $435,406,002)......................... 121.5% 399,942,937
Other Assets and
Liabilities - net........................... (21.5) (70,813,818)
----- ------------
Net Assets................................... 100.0% $329,129,119
===== ============
</TABLE>
(a) All or a portion of this security is on loan.
(b) Securities that may be resold to "qualified institutional buyers" under
Rule 144A of the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees.
(c) Security initially issued in zero coupon form which converts to coupon form
at a specified rate and date. An effective interest rate is applied to rec-
ognize interest income daily for the bond. This rate is based on total ex-
pected interest to be earned over the life of the bond which consists of
the aggregate coupon-interest payments and discount at acquisition. The
rate shown is the stated rate at the current period end.
(d) Security issued in zero coupon form with no periodic interest payments but
is acquired at a discount that results in a current yield to maturity. An
effective interest rate is applied to recognize interest income daily for
the bond. This rate is based on total expected income to be earned over the
life of the bond from amortization of discount at acquisition.
(e) This obligation has filed Chapter 11 bankruptcy and has discontinued ac-
crual of interest income.
(f) Non-income producing.
(g) Less than one-tenth of one percent of net assets.
(h) The securities are valued based upon their fair value determined under pro-
cedures approved by the Board of Trustees.
(i) Represents investment of cash collateral received for securities on loan.
(j) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices plus accrued interest at April
30, 2000.
Summary of Abbreviations:
GBP Great British Pound
See Combined Notes to Financial Statements.
31
<PAGE>
EVERGREEN
Strategic Income Fund
Schedule of Investments
April 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - 0.7% (h)
$1,850,000 PNC Student Loan Trust I,
Ser. 1997-2, Class A7,
6.728%, 1/25/2007
(cost $1,850,000).................................. $ 1,802,927
------------
CORPORATE BONDS - 37.3%
Automotive Equipment &
Manufacturing - 1.4%
2,000,000 Advance Stores Co., Inc., Ser. B,
10.25%, 4/15/2008.................................. 1,600,000
2,000,000 Oxford Automotive, Inc., Ser. D,
10.125%, 6/15/2007................................. 1,870,000
------------
3,470,000
------------
Building, Construction &
Furnishings - 0.7%
2,000,000 Del Webb Corp.,
9.375%, 5/1/2009 (f)............................... 1,610,000
------------
Business Equipment &
Services - 0.7%
2,000,000 Merrill Corp.,
12.00%, 5/1/2009................................... 1,850,000
------------
Cable/Other Video
Distribution - 1.1%
1,150,000 Acme Television, LLC, Sr. Disc. Notes,
Ser. B, Step Bond,
0.00%, 9/30/2004 (c)............................... 1,069,500
4,000,000 Adelphia Communications Corp.,
Sr. Disc. Notes,
0.00%, 1/15/2008 (j)............................... 1,690,000
------------
2,759,500
------------
Chemical & Agricultural
Products - 1.6%
2,000,000 Huntsman ICI Chemicals LLC,
10.125%, 7/1/2009.................................. 2,010,000
2,000,000 Lyondell Chemical Co., Ser. A,
9.625%, 5/1/2007................................... 1,977,500
------------
3,987,500
------------
Communication Systems &
Services - 1.4%
3,000,000 UnitedGlobalCom, Inc., Sr. Secd. Disc.
Notes, Ser. B, Step Bond,
0.00%, 2/15/2008 (c)............................... 1,965,000
1,750,000 XM Satellite Radio, Inc.,
14.00%, 3/15/2010.................................. 1,583,750
------------
3,548,750
------------
Environmental Services - 1.1%
Allied Waste, Inc.:
2,000,000 7.625%, 1/1/2006................................... 1,490,000
1,750,000 10.00%, 8/1/2009 (f)............................... 1,194,375
------------
2,684,375
------------
Finance & Insurance - 0.6%
1,500,000 Americo Life, Inc.,
9.25%, 6/1/2005.................................... 1,464,375
------------
Food & Beverage Products - 0.3%
825,000 AFC Enterprises, Inc.,
10.25%, 5/15/2007.................................. 808,500
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Gaming - 2.9%
$2,000,000 Ameristar Casinos, Inc., Ser. B,
10.50%, 8/1/2004.................................... $ 2,000,000
2,000,000 Boyd Gaming Corp.,
9.50%, 7/15/2007 (f)................................ 1,900,000
1,500,000 Hollywood Casino Corp.,
13.00%, 8/1/2006.................................... 1,590,000
2,000,000 Isle of Capri Casinos, Inc.,
8.75%, 4/15/2009.................................... 1,815,000
------------
7,305,000
------------
Healthcare Products &
Services - 1.2%
1,470,000 Lifepoint Hosps. Holdings, Inc., Ser. B,
10.75%, 5/15/2009................................... 1,521,450
1,500,000 Triad Hosps. Holdings, Inc., Ser. B,
11.00%, 5/15/2009................................... 1,567,500
------------
3,088,950
------------
Iron & Steel - 0.0%
2,000,000 NSM Steel, Inc.,
12.00%, 2/1/2006 (d)(e)............................. 90,000
------------
Lease Rental Obligations - 1.4%
2,000,000 Budget Group, Inc.,
9.125%, 4/1/2006 (f)................................ 1,630,000
2,000,000 United Rentals, Inc., Ser. B,
9.25%, 1/15/2009 (f)................................ 1,815,000
------------
3,445,000
------------
Leisure & Tourism - 1.0%
2,000,000 Outboard Marine Corp., Ser. B,
10.75%, 6/1/2008.................................... 1,490,000
1,000,000 Prime Hospitality Corp., Ser. B,
9.75%, 4/1/2007 (f)................................. 965,000
------------
2,455,000
------------
Manufacturing - Distributing - 1.0%
2,000,000 Holley Performance Products, Inc.,
Ser. B,
12.25%, 9/15/2007................................... 1,630,000
1,000,000 Sun World Intl., Inc., Ser. B,
11.25%, 4/15/2004................................... 955,000
------------
2,585,000
------------
Metals & Mining - 0.1%
2,000,000 Acme Metals, Inc.,
10.875%, 12/15/2007 (e)............................. 310,000
------------
Oil/Energy - 3.4%
2,000,000 Benton Oil & Gas Co.,
9.375%, 11/1/2007................................... 1,175,000
1,000,000 Energy Corp. of America, Ser. A,
9.50%, 5/15/2007.................................... 675,000
2,000,000 HS Resources, Inc.,
9.25%, 11/15/2006................................... 1,965,000
2,000,000 Nuevo Energy Co., Ser. B,
9.50%, 6/1/2008..................................... 1,975,000
500,000 Ocean Energy, Inc., Ser. B,
8.875%, 7/15/2007 (f)............................... 496,250
2,500,000 Petsec Energy, Inc., Ser. B,
9.50%, 6/15/2007 (e)................................ 1,256,250
</TABLE>
32
<PAGE>
EVERGREEN
Strategic Income Fund
Schedule of Investments (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Oil/Energy - continued
$1,000,000 Vintage Petroleum, Inc.,
9.00%, 12/15/2005.................................. $ 990,000
------------
8,532,500
------------
Paper & Packaging - 3.2%
1,990,000 Four M Corp., Ser. B,
12.00%, 6/1/2006................................... 1,940,250
2,000,000 Repap New Brunswick, Inc.,
11.50%, 6/1/2004................................... 2,070,000
2,000,000 Riverwood Intl. Corp.,
10.875%, 4/1/2008 (f).............................. 1,930,000
2,000,000 Stone Container Fin. Co.,
11.50%, 8/15/2006.................................. 2,075,000
------------
8,015,250
------------
Printing, Publishing, Broadcasting &
Entertainment - 2.2%
1,600,000 American Lawyer Media, Inc., Ser. B,
9.75%, 12/15/2007.................................. 1,512,000
2,000,000 Pegasus Communications Corp.,
9.75%, 12/1/2006 (f)............................... 1,970,000
1,000,000 SFX Entertainment, Inc.,
9.125%, 12/1/2008.................................. 1,005,000
1,000,000 Sinclair Broadcast Group, Inc.,
10.00%, 9/30/2005 (f).............................. 958,750
------------
5,445,750
------------
Retailing & Wholesale - 0.7%
2,000,000 Ames Dept. Stores, Inc.,
10.00%, 4/15/2006 (f).............................. 1,860,000
------------
Telecommunication Services &
Equipment - 8.0%
2,255,000 AMSC Acquisition Co., Inc., Ser. B,
12.25%, 4/1/2008................................... 1,657,425
2,000,000 Crown Castle Intl. Corp.,
Sr. Disc. Notes, Step Bond,
0.00%, 5/15/2011 (c)............................... 1,210,000
Intermedia Communications, Inc., Ser. B:
1,225,000 8.60%, 6/1/2008..................................... 1,120,875
900,000 Sr. Disc. Notes, Step Bond,
0.00%, 7/15/2007 (c)................................ 693,000
2,000,000 Level 3 Communications, Inc.,
9.125%, 5/1/2008................................... 1,750,000
1,500,000 Microcell Telecommunications, Inc.,
Sr. Disc. Notes, Step Bond,
0.00%, 6/1/2009 (c)................................ 967,500
2,000,000 Nextel Communications, Inc.,
9.375%, 11/15/2009................................. 1,920,000
2,700,000 Nextlink Communications, Inc.,
Sr. Disc. Notes, Step Bond,
0.00%, 6/1/2009 (c) (f)............................ 1,593,000
1,500,000 Price Communications Wireless, Inc.,
11.75%, 7/15/2007.................................. 1,627,500
2,000,000 PSINet, Inc.,
11.50%, 11/1/2008.................................. 1,790,000
2,000,000 RCN Corp., Sr. Disc. Notes, Step Bond,
0.00%, 10/15/2007 (c).............................. 1,285,000
4,125,000 Tritel PCS, Inc., Sr. Disc. Notes, Step Bond,
0.00%, 5/15/2009 (c)............................... 2,743,125
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Telecommunication Services &
Equipment - continued
$3,334,657 Winstar Communications, Inc.,
Sr. Disc. Notes, Step Bond,
0.00%, 4/15/2005 (c) (d)............................ $ 1,508,932
------------
19,866,357
------------
Transportation - 1.9%
2,000,000 American Commercial Lines, LLC,
Ser. B,
10.25%, 6/30/2008................................... 1,670,000
Piedmont Aviation, Inc.:
852,000 9.90%, 1/15/2001..................................... 853,715
1,389,000 10.15%, 3/28/2003.................................... 1,340,149
896,000 USAir, Inc., Ser. 88-B,
9.90%, 1/15/2001.................................... 889,481
------------
4,753,345
------------
Utilities - 1.4%
1,000,000 Cleveland Elec. Illuminating Co., Ser. B,
9.50%, 5/15/2005.................................... 1,013,408
2,218,808 Tucson Elec. Pwr. Co., Ser. B,
10.211%, 1/1/2009................................... 2,396,313
------------
3,409,721
------------
Total Corporate Bonds
(cost $102,699,182)................................. 93,344,873
------------
FOREIGN BONDS (NON U.S. DOLLARS) - 20.0%
Banks - 2.2%
400,000 European Investment Bank,
GBP 7.625%, 12/7/2006.................................... 657,719
42,348,000 Realkredit Danmark,
DKK 6.00%, 10/1/2029..................................... 4,867,741
------------
5,525,460
------------
Communication Systems &
Services - 0.7%
2,000,000 Level 3 Communications, Inc.,
LUF 10.75%, 3/15/2008.................................... 1,758,248
------------
Finance & Insurance - 1.9%
3,000,000 CEI Citicorp Holdings,
ARS 11.25%, 2/14/2007.................................... 2,911,994
2,000,000 PTC Intl. Fin. BV,
EUR 11.25%, 12/1/2009.................................... 1,943,656
------------
4,855,650
------------
Government - 10.8%
6,650,000 Canada, Ser. J34,
CAD 11.25%, 12/15/2002................................... 5,017,474
20,500,000 Canada, Quebec, Ser. OA,
CAD 7.75%, 3/30/2006..................................... 14,590,452
5,400,000 Germany,
EUR 4.50%, 3/15/2002..................................... 4,900,549
18,000,000 South Africa,
ZAR 13.00%, 8/31/2010.................................... 2,446,528
155,301 Spain,
EUR 5.00%, 1/31/2001..................................... 141,749
------------
27,096,752
------------
</TABLE>
33
<PAGE>
EVERGREEN
Strategic Income Fund
Schedule of Investments (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
FOREIGN BONDS (NON U.S. DOLLARS) - continued
Telecommunication Services &
Equipment - 2.4%
1,500,000 Jazztel, PLC,
EUR 13.25%, 12/15/2009................................ $ 1,360,241
1,300,000 Metromedia Fiber NV,
EUR 10.00%, 12/15/2009................................ 1,162,271
3,500,000 NTL, Inc.,
GBP 10.75%, 4/1/2008.................................. 3,582,933
------------
6,105,445
------------
Transportation - 0.7%
2,000,000 Hermes Europe Railtel,
EUR 10.375%, 1/15/2006................................ 1,616,122
------------
Utilities - Water - 1.3%
2,000,000 Azurix Corp.,
GBP 10.375%, 2/15/2007................................ 3,113,902
------------
Total Foreign Bonds (Non U.S. Dollars)
(cost $53,863,728)................................ 50,071,579
------------
MORTGAGE-BACKED SECURITIES - 12.8%(h)
FHLMC - 2.5%
$1,532,221 7.00%, 5/1/2011-12/1/2011......................... 1,499,600
1,563,179 7.22%, 4/1/2022................................... 1,613,732
3,029,844 8.50%, 5/1/2029................................... 3,081,987
------------
6,195,319
------------
FNMA - 10.3%
24,805,891 6.50%, 8/1/2028-9/1/2028.......................... 23,181,849
103,718 7.00%, 11/1/2027.................................. 99,339
1,089,348 7.34%, 9/1/2021................................... 1,119,781
1,510,193 8.00%, 11/1/2029.................................. 1,509,227
------------
25,910,196
------------
Total Mortgage-Backed Securities
(cost $33,765,932)................................ 32,105,515
------------
U.S. TREASURY OBLIGATIONS - 7.3%
U.S. Treasury Bonds:
1,610,000 5.25%, 2/15/2029.................................. 1,415,291
1,885,000 6.125%, 8/15/2029................................. 1,890,303
U.S. Treasury Notes:
10,680,000 5.50%, 12/31/2000................................. 10,609,918
3,750,000 5.625%, 5/15/2008................................. 3,564,844
850,000 6.00%, 8/15/2009.................................. 829,812
------------
Total U.S. Treasury Obligations
(cost $18,486,648)................................ 18,310,168
------------
YANKEE OBLIGATIONS - 13.5%
Cable/Other Video Distribution - 0.5%
2,600,000 United Pan Europe Commerce NV,
Sr. Disc. Notes, Step Bond,
0.00%, 8/1/2005 (c)............................... 1,261,000
------------
Finance & Insurance - 1.0%
2,000,000 Ono Finance, PLC,
13.00%, 5/1/2009.................................. 2,050,000
800,000 PTC Intl. Fin. BV, Step Bond,
0.00%, 7/1/2002 (c)............................... 570,000
------------
2,620,000
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
YANKEE OBLIGATIONS - continued
Government - 7.2%
Brazil:
$1,232,250 5.88%, 4/6/2015..................................... $ 1,097,565
3,090,839 8.00%, 4/15/2014.................................... 2,213,968
1,500,000 12.25%, 3/6/2030.................................... 1,363,200
2,800,000 14.50%, 10/15/2009.................................. 2,957,640
4,000,000 Columbia,
11.75%, 2/25/2020................................... 3,407,600
1,000,000 Philippines,
9.875%, 3/16/2010................................... 951,250
United Mexican States:
2,000,000 11.375%, 9/15/2016.................................. 2,259,200
3,100,000 11.50%, 5/15/2026................................... 3,659,860
------------
17,910,283
------------
Metals & Mining - 0.5%
2,000,000 Bulong Operation Property Ltd.,
12.50%, 12/15/2008 (d).............................. 1,190,000
------------
Oil/Energy - 0.8%
1,850,000 Petroleos Mexicanos,
9.50%, 9/15/2027.................................... 1,933,250
------------
Paper & Packaging - 0.8%
2,000,000 Grupo Indl. Durango SA de CV,
12.625%, 8/1/2003 (f)............................... 2,015,000
------------
Telecommunication Services & Equipment - 2.7%
1,000,000 Alestra SA de RL de CV,
12.125%, 5/15/2006.................................. 977,500
2,000,000 Global Crossing, Ltd.,
9.125%, 11/15/2006 (d).............................. 1,950,000
2,500,000 Globo Communicacoes Participacion,
10.625%, 12/5/2008.................................. 2,068,750
2,000,000 Hermes Europe Railtel BV,
10.375%, 1/15/2009.................................. 1,730,000
------------
6,726,250
------------
Total Yankee Obligations
(cost $35,412,909).................................. 33,655,783
------------
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 2.3%
Gaming - 0.3%
48,486 Isle of Capri Casinos, Inc. (a)...................... 672,743
29,167 JCC Holding Co., Class A (a)......................... 43,751
------------
716,494
------------
Leisure & Tourism - 0.1%
74,059 Premier Cruise Line, Ltd., (a)....................... 240,692
------------
Electronic Equipment &
Instruments - 0.0%
8,252 Ampex Corp., Class A (a)(k).......................... 23,209
------------
</TABLE>
34
<PAGE>
EVERGREEN
Strategic Income Fund
Schedule of Investments (continued)
April 30, 2000
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Wireless Telecommunications
Services - 1.9%
15,098 Nextel Communications, Inc.,
Class A (a)(f)...................................... $ 1,652,287
152,000 Price Communications Corp. (a)....................... 3,078,000
------------
4,730,287
------------
Total Common Stocks
(cost $6,351,276)................................... 5,710,682
------------
CONVERTIBLE PREFERRED STOCKS - 0.7%
Telecommunication Services &
Equipment - 0.7%
8,000 Global Crossing, Ltd.
(cost $2,000,000) (d)............................... 1,642,000
------------
PREFERRED STOCKS - 0.3%
Electronic Equipment &
Instruments - 0.3%
588 Ampex Corp.
(cost $560,482) (a) (k)............................. 627,343
------------
WARRANTS - 0.0% (i)
Communication Systems &
Services - 0.0% (i)
2,255 Motient Corp., expiring 4/1/2008 (a)................. 90,200
------------
Finance & Insurance - 0.0% (i)
2,000 Ono Finance, PLC,
expiring 5/31/2009 (a).............................. 30,000
------------
Total Warrants
(cost $112,750)..................................... 120,200
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
9
MUTUAL FUND SHARES - 5.7%
14,199,600 Navigator Prime Portfolio,
(cost $14,199,600) (g)............................ $ 14,199,600
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENT - 6.2%
$15,392,000 Evergreen Joint Repurchase
Agreement, dated 4/28/2000,
5.80%, maturing 5/1/2000,
maturity value $15,399,434
(Cost $15,392,000) (b)........................... 15,392,000
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $284,694,507)........................ 106.8% 266,982,670
Other Assets and
Liabilities - net.......................... (6.8) (16,946,468)
----- ------------
Net Assets.................................. 100.0% $250,036,202
===== ============
</TABLE>
(a) Non-income producing.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at April
30, 2000.
(c) Security initially issued in zero coupon form which converts to coupon form
at a specified rate and date. An effective interest rate is applied to rec-
ognize interest income daily for the bond. This rate is based on total ex-
pected interest to be earned over the life of the bond which consists of
the aggregate coupon-interest payments and discount at acquisition. The
rate shown is the stated rate at the current period end.
(d) Securities that may be resold to "qualified institutional buyers" under
Rule 144A of the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees.
(e) This obligation has filed Charpter 11 bankruptcy and has discontinued ac-
crual of interest income.
(f) All or a portion of this security is on loan.
(g) Represents investment of cash collateral received for securities on loan.
(h) The average maturity may be shorter than the stated maturity due to sched-
uled interim principal payments.
(i) Less than one-half of one percent of net assets.
(j) Security issued in zero coupon form with no periodic interest payments but
is acquired at a discount that results in a current yield to maturity. An
effective interest rate is applied to recognize interest income daily for
the bond. This rate is based on total expected income to be earned over the
life of the bond from amortization of discount at acquisition.
(k) The securities are valued based upon their fair value determined under pro-
cedures approved by the Board of Trustees.
Summary of Abbreviations:
ARS Argentine Peso
CAD Canadian Dollar
DKK Danish Kroner
EUR Eurodollar
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GBP Great British Pound
LUF Luxemborg Francs
ZAR South African Rand
See Combined Notes to Financial Statements.
35
<PAGE>
EVERGREEN
U.S. Government Fund
Schedule of Investments
April 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - 18.7%
Banks - 2.7%
$ 5,000,000 Fleet National Bank, Providence, RI,
5.75%, 1/15/2009................................... $ 4,341,635
7,000,000 Society National Bank, Cleveland OH,
6.75%, 6/15/2003................................... 6,778,331
------------
11,119,966
------------
Cable/Other Video
Distribution - 2.2%
8,000,000 Comcast Cable Communications,
6.20%, 11/15/2008.................................. 7,010,512
2,000,000 Time Warner Entertainment Co., LP,
7.25%, 9/1/2008.................................... 1,907,294
------------
8,917,806
------------
Diversified Companies - 0.7%
3,000,000 Williams Holdings Delaware, Inc.,
6.125%, 12/1/2003.................................. 2,825,787
------------
Finance - 1.5%
6,000,000 Ford Motor Credit Co.,
6.50%, 2/28/2002................................... 5,897,814
------------
Food & Beverage
Products - 0.8%
3,500,000 Pepsi Bottling Holdings, Inc.,
5.375%, 2/17/2004 (a).............................. 3,260,562
------------
Machinery - Diversified - 0.7%
3,000,000 Case Corp.,
Ser. B,
6.25%, 12/1/2003 (a)............................... 2,811,075
------------
Retailing & Wholesale - 5.0%
7,000,000 Dayton Hudson Corp.,
5.95%, 6/15/2000................................... 6,989,360
4,000,000 Kroger Co.,
6.00%, 7/1/2000.................................... 3,988,232
10,000,000 Wal-Mart Stores, Inc.,
6.875%, 8/10/2009.................................. 9,666,600
------------
20,644,192
------------
Telecommunication Services &
Equipment - 3.3%
4,500,000 GTE Corp.,
6.94%, 4/15/2028................................... 3,997,899
10,000,000 Worldcom, Inc.,
6.40%, 8/15/2005................................... 9,505,260
------------
13,503,159
------------
Transportation - 1.8%
3,863,481 Continental Airlines,
Passthru Certificates, Ser. 1999-1,
Class C,
6.954%, 2/2/2011................................... 3,669,322
4,250,000 Union Pacific Corp.,
6.625%, 2/1/2008................................... 3,866,246
------------
7,535,568
------------
Total Corporate Bonds
(cost $81,898,155)................................. 76,515,929
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MORTGAGE-BACKED SECURITIES - 52.2%
FAMC - 0.2%
$ 993,000 7.37%, 8/1/2006................................. $ 981,743
------------
FHLMC - 25.0%
9,704,116 6.00%, 2/1/2029................................. 8,800,566
37,705,137 6.50%, 9/1/2008 - 2/1/2029...................... 35,623,323
24,063,038 7.00%, 2/1/2028 - 7/1/2028...................... 23,068,793
8,500,000 7.36%, 6/5/2007................................. 8,293,238
18,596,658 7.50%, 5/1/2027 - 8/1/2028...................... 18,250,241
1,811,183 8.00%, 7/1/2017 - 4/1/2022...................... 1,819,804
1,569,988 8.50%, 2/1/2017 - 10/1/2017..................... 1,599,757
2,933,408 9.00%, 1/1/2017 - 4/1/2021...................... 3,031,585
496,486 9.50%, 9/1/2020................................. 524,463
608,129 10.00%, 12/1/2019 - 8/1/2021.................... 644,788
932,877 10.50%, 12/1/2019............................... 998,888
------------
102,655,446
------------
FNMA - 11.0%
2,189,214 6.00%, 2/1/2008 - 5/1/2011...................... 2,099,081
3,873,753 6.37%, 3/1/2006................................. 3,709,298
3,500,000 6.40%, 12/1/2007................................ 3,276,692
2,966,949 6.50%, 1/1/2024................................. 2,770,196
19,453,259 7.00%, 4/1/2011 - 11/1/2026..................... 18,796,186
9,303,249 7.50%, 7/1/2023 - 5/1/2027...................... 9,119,485
3,930,008 8.00%, 8/1/2025................................. 3,935,942
679,324 9.50%, 6/1/2022................................. 713,969
544,294 11.00%, 1/1/2016................................ 591,435
------------
45,012,284
------------
GNMA - 16.0%
15,197,613 6.00%, 2/20/2028 - 2/20/2029.................... 13,784,419
13,217,456 6.50%, 10/15/2025 - 5/20/2028................... 12,408,046
14,255,998 7.00%, 12/15/2022 - 3/15/2028................... 13,736,966
6,430,921 7.50%, 2/15/2022 - 8/15/2023.................... 6,329,736
9,907,086 8.00%, 9/15/2009 - 9/15/2026.................... 9,970,081
4,447,878 8.50%, 12/15/2021 - 7/15/2024................... 4,541,202
2,248,089 9.00%, 1/15/2020 - 9/15/2021.................... 2,328,725
1,698,917 9.50%, 1/15/2019 - 2/15/2021.................... 1,783,333
451,207 10.00%, 12/15/2018.............................. 482,932
------------
65,365,440
------------
Total Mortgage-Backed Securities
(cost $223,443,572)............................ 214,014,913
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 4.4%
FNMA:
2,262,000 5.125%, 2/13/2004............................... 2,104,377
10,000,000 5.75%, 4/15/2003................................ 9,614,650
4,480,000 6.16%, 4/3/2001................................. 4,453,877
2,000,000 7.50%, 2/11/2002................................ 2,013,448
------------
Total U.S. Government & Agency Obligations
(cost $18,548,843)............................. 18,186,352
------------
</TABLE>
36
<PAGE>
EVERGREEN
U.S. Government Fund
Schedule of Investments (continued)
April 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
U.S. TREASURY OBLIGATIONS - 22.8%
U.S. Treasury Bonds:
$15,100,000 8.50%, 2/15/2020.................................... $ 18,813,664
11,340,000 8.75%, 8/15/2020.................................... 14,490,400
18,310,000 8.875%, 8/15/2017 - 2/15/2019....................... 23,235,084
3,400,000 9.25%, 2/15/2016.................................... 4,379,625
U.S. Treasury Notes:
21,285,000 6.125%, 9/30/2000................................... 21,271,697
9,750,000 6.625%, 5/15/2007................................... 9,820,083
1,300,000 7.00%, 7/15/2006.................................... 1,330,469
------------
Total U.S. Treasury Obligations
(cost $94,513,396)................................. 93,341,022
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C> <C>
REPURCHASE AGREEMENT - 1.0%
$ 4,152,772 Societe Generale 5.70%,
dated 04/28/2000, due 05/01/2000,
maturity value $4,154,745
(cost $4,152,772) (b)............................. $ 4,152,772
------------
Total Investments -
(cost $422,556,738)........................ 99.1% 406,210,988
Other Assets and
Liabilities - net.......................... 0.9 3,733,918
----- ------------
Net Assets.................................. 100.0% $409,944,906
===== ============
</TABLE>
(a) Securities that may be resold to "qualified institutional buyers" under
Rule 144A , as amended. These securities have been determined to be liquid
under guidelines established by the Board of Trustees.
(b) The repurchase agreement is fully collaterized by $4,235,985 U.S. Treasury
Notes, 3.625% and 4.25%, 04/15/28 and 11/15/03 respectively; value includ-
ing accrued interest-$4,241,854.
Summary of Abbreviations:
FAMC Federal Agricultural Mortgage Corporation
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
See Combined Notes to Financial Statements.
37
<PAGE>
EVERGREEN
Long Term Bond Funds
Statements of Assets and Liabilities
April 30, 2000
<TABLE>
<CAPTION>
Diversified High Yield Strategic U.S. Government
Bond Fund Fund Income Fund Fund
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Identified cost of
securities............ $382,822,300 $435,406,002 $284,694,507 $422,556,738
Net unrealized losses
on securities......... (12,853,613) (35,463,065) (17,711,837) (16,345,750)
-----------------------------------------------------------------------------------
Market value of
securities............ 369,968,687 399,942,937 266,982,670 406,210,988
Cash................... 334 1,563 565 0
Receivable for
securities sold....... 3,541,353 4,690,345 1,517,715 1,603
Receivable for Fund
shares sold........... 25,906 395,141 580,165 297,720
Dividends and interest
receivable............ 6,620,259 8,006,717 5,238,655 4,406,099
Unrealized gains on
forward foreign
currency exchange
contracts............. 376,766 0 0 0
Prepaid expenses and
other assets.......... 189,611 183,784 63,134 198,815
-----------------------------------------------------------------------------------
Total assets.......... 380,722,916 413,220,487 274,382,904 411,115,225
-----------------------------------------------------------------------------------
Liabilities
Distributions payable.. 800,044 1,064,503 625,688 491,806
Payable for securities
purchased............. 3,577,497 6,565,590 8,772,053 0
Payable for Fund shares
redeemed.............. 470,729 721,508 470,094 600,643
Payable for closed
forward foreign
currency exchange
contracts............. 42,660 0 161,783 0
Payable for securities
on loan............... 8,187,470 75,616,185 14,199,600 0
Advisory fee payable... 11,900 12,643 39,000 14,097
Distribution Plan
expenses payable...... 8,865 8,514 12,368 9,053
Due to other related
parties............... 3,005 2,691 2,045 3,356
Accrued expenses and
other liabilities..... 143,106 99,734 64,071 51,364
-----------------------------------------------------------------------------------
Total liabilities..... 13,245,276 84,091,368 24,346,702 1,170,319
-----------------------------------------------------------------------------------
Net assets.............. $367,477,640 $329,129,119 $250,036,202 $409,944,906
-----------------------------------------------------------------------------------
Net assets represented
by
Paid-in capital........ $477,090,463 $557,579,923 $359,381,289 $456,503,860
Overdistributed net
investment income..... (1,016,291) (1,094,467) (4,168,259) (130,293)
Accumulated net
realized losses on
securities and foreign
currency related
transactions.......... (96,116,239) (191,893,272) (87,433,147) (30,082,911)
Net unrealized losses
on securities and
foreign currency
related transactions.. (12,480,293) (35,463,065) (17,743,681) (16,345,750)
-----------------------------------------------------------------------------------
Total net assets........ $367,477,640 $329,129,119 $250,036,202 $409,944,906
-----------------------------------------------------------------------------------
Net assets consists of
Class A................ $344,295,809 $291,575,036 $129,885,506 $ 91,122,996
Class B................ 21,693,651 28,228,674 104,109,570 82,665,290
Class C................ 602,592 3,172,421 14,655,531 4,740,070
Class Y................ 885,588 6,152,988 1,385,595 231,416,550
-----------------------------------------------------------------------------------
Total net assets........ $367,477,640 $329,129,119 $250,036,202 $409,944,906
-----------------------------------------------------------------------------------
Shares outstanding
Class A................ 24,112,274 78,316,259 21,212,330 9,962,711
Class B................ 1,519,261 7,581,017 16,951,841 9,038,258
Class C................ 42,199 852,134 2,389,832 518,257
Class Y................ 62,020 1,652,616 230,101 25,302,130
-----------------------------------------------------------------------------------
Net asset value per
share
Class A................ $ 14.28 $ 3.72 $ 6.12 $ 9.15
-----------------------------------------------------------------------------------
Class A--Offering price
(based on sales charge
of 4.75%)............. $ 14.99 $ 3.91 $ 6.43 $ 9.61
-----------------------------------------------------------------------------------
Class B................ $ 14.28 $ 3.72 $ 6.14 $ 9.15
-----------------------------------------------------------------------------------
Class C................ $ 14.28 $ 3.72 $ 6.13 $ 9.15
Class Y................ $ 14.28 $ 3.72 $ 6.02 $ 9.15
-----------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
38
<PAGE>
EVERGREEN
Long Term Bond Funds
Statements of Operations
Year Ended April 30, 2000
<TABLE>
<CAPTION>
Diversified High Yield Strategic U.S. Government
Bond Fund Fund Income Fund Fund
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income
Interest............... $ 33,022,858 $ 35,192,353 $ 25,569,046 $ 29,852,045
Dividends.............. 0 809,078 52,889 0
-----------------------------------------------------------------------------------
Total investment
income................. 33,022,858 36,001,431 25,621,935 29,852,045
-----------------------------------------------------------------------------------
Expenses
Advisory fee........... 2,308,312 2,195,662 1,712,814 2,074,200
Distribution Plan
expenses.............. 1,313,883 1,223,623 1,697,136 1,313,775
Administrative services
fees.................. 168,956 146,865 103,011 208,118
Transfer agent fee..... 996,753 1,080,754 641,268 538,366
Trustees' fees and
expenses.............. 8,440 7,313 5,715 8,798
Printing and postage
expenses.............. 61,743 22,702 19,352 66,195
Custodian fee.......... 136,141 112,991 182,333 121,850
Registration and filing
fees.................. 109,832 107,672 76,277 44,515
Professional fees...... 30,756 25,076 21,524 34,023
Interest expense....... 63,367 0 11,485 0
Other.................. 75,133 28,902 19,009 23,362
-----------------------------------------------------------------------------------
Total expenses........ 5,273,316 4,951,560 4,489,924 4,433,202
Less: Expense
reductions........... (30,921) (37,507) (29,982) (14,764)
Fee waivers......... 0 0 (1,474,921) 0
-----------------------------------------------------------------------------------
Net expenses.......... 5,242,395 4,914,053 2,985,021 4,418,438
-----------------------------------------------------------------------------------
Net investment income.. 27,780,463 31,087,378 22,636,914 25,433,607
-----------------------------------------------------------------------------------
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions
Net realized gains or
losses on:
Securities............ (19,988,388) (8,973,391) (20,089,890) (4,097,300)
Foreign currency
related transactions. 1,166,885 3,410 (847,899) 0
-----------------------------------------------------------------------------------
Net realized losses on
securities and foreign
currency related
transactions.......... (18,821,503) (8,969,981) (20,937,789) (4,097,300)
-----------------------------------------------------------------------------------
Net change in
unrealized gains or
losses on securities
and foreign currency
related transactions.. (15,642,492) (20,452,438) (6,814,154) (17,043,503)
-----------------------------------------------------------------------------------
Net realized and
unrealized losses on
securities and foreign
currency related
transactions.......... (34,463,995) (29,422,419) (27,751,943) (21,140,803)
-----------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ $ (6,683,532) $ 1,664,959 $ (5,115,029) $ 4,292,804
--------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
39
<PAGE>
EVERGREEN
Long Term Bond Funds
Statements of Changes in Net Assets
Year Ended April 30, 2000
<TABLE>
<CAPTION>
Diversified High Yield Strategic U.S. Government
Bond Fund Fund Income Fund Fund
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income.. $ 27,780,463 $ 31,087,378 $ 22,636,914 $ 25,433,607
Net realized gains or
losses on securities
and foreign currency
related transactions.. (18,821,503) (8,969,981) (20,937,789) (4,097,300)
Net change in
unrealized losses on
securities and foreign
currency related
transactions.......... (15,642,492) (20,452,438) (6,814,154) (17,043,503)
--------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations............ (6,683,532) 1,664,959 (5,115,029) 4,292,804
--------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income
Class A............... (26,704,956) (26,602,486) (11,195,138) (5,006,277)
Class B............... (2,149,481) (3,139,015) (8,052,987) (5,358,379)
Class C............... (39,330) (157,367) (1,043,128) (265,314)
Class Y............... (137,130) (415,631) (104,875) (14,786,473)
Tax return of capital
Class A............... 0 (2,226,050) (1,869,096) 0
Class B............... 0 (262,668) (1,344,495) 0
Class C............... 0 (13,168) (174,156) 0
Class Y............... 0 (34,779) (17,509) 0
--------------------------------------------------------------------------------------
Total distributions to
shareholders.......... (29,030,897) (32,851,164) (23,801,384) (25,416,443)
--------------------------------------------------------------------------------------
Capital share
transactions
Proceeds from shares
sold.................. 17,572,233 132,551,100 76,866,055 103,805,468
Net asset value of
shares issued in
reinvestment of
distributions......... 16,881,832 17,577,277 14,889,465 18,664,226
Payment for shares
redeemed.............. (123,241,579) (197,257,194) (113,575,291) (225,076,407)
Net asset value of
shares issued in
acquisition of
Evergreen Intermediate
Term Government
Securities Fund....... 0 0 0 134,184,956
--------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from capital
share transactions.... (88,787,514) (47,128,817) (21,819,771) 31,578,243
--------------------------------------------------------------------------------------
Total increase
(decrease) in net
assets............... (124,501,943) (78,315,022) (50,736,184) 10,454,604
Net assets
Beginning of period.... 491,979,583 407,444,141 300,772,386 399,490,302
--------------------------------------------------------------------------------------
End of period.......... $ 367,477,640 $ 329,129,119 $ 250,036,202 $ 409,944,906
--------------------------------------------------------------------------------------
Overdistributed net
investment income...... $ (1,016,291) $ (1,094,467) $ (4,168,259) $ (130,293)
--------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
40
<PAGE>
EVERGREEN
Long Term Bond Funds
Statements of Changes in Net Assets
Year Ended April 30, 1999
<TABLE>
<CAPTION>
Strategic
Diversified High Yield Income U.S. Government
Bond 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.
41
<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 18, 1997. The Trust is an open-
end management investment company registered under the Investment Company Act
of 1940, as amended (the "1940 Act").
The Funds offer Class A, Class B, Class C and Class Y shares. Class A shares
are sold with a maximum front-end sales charge of 4.75%. Class B and Class C
shares are sold without a front-end sales charge, but pay a higher ongoing dis-
tribution fee than Class A. Class B shares are sold subject to a contingent de-
ferred sales charge that is payable upon redemption and decreases depending on
how long the shares have been held. Class B shares purchased after January 1,
1997 will automatically convert to Class A shares after seven years. Class B
shares purchased prior to January 1, 1997 follow the conversion rights at the
time the shares were initially purchased. Class C shares are sold subject to a
2.00% contingent deferred sales charge payable on shares redeemed within one
year after the month of purchase and a 1.00% contingent deferred sales charge
if such shares are redeemed within two years after the month of purchase. Class
C shares purchased prior to February 1, 2000 follow the contingent deferred
sales charge schedule at the time the shares were initially purchased. Class Y
shares are sold at net asset value and are not subject to contingent deferred
sales charges or distribution fees. Class Y shares are sold only to investment
advisory clients of First Union Corporation ("First Union") and its affiliates,
certain institutional investors or Class Y shareholders of record of certain
other funds managed by First Union and its affiliates as of December 30, 1994.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Funds in the preparation of their financial statements. The poli-
cies are in conformity with generally accepted accounting principles, which re-
quire management to make estimates and assumptions that affect amounts reported
herein. Actual results could differ from these estimates.
A. Valuation of Securities
Corporate bonds, U.S. government obligations, mortgage and other asset-backed
securities and other fixed- income securities are valued at prices provided by
an independent pricing service. In determining a price for normal institution-
al-size transactions, the pricing service uses methods based on market transac-
tions for comparable securities and analysis of various relationships between
similar securities which are generally recognized by institutional traders. Se-
curities for which valuations are not available from an independent pricing
service may be valued by brokers which use prices provided by market makers or
estimates of market value obtained from yield data relating to investments or
securities with similar characteristics. Otherwise, securities for which valua-
tions are not available from an independent pricing service (including re-
stricted securities) are valued at fair value as determined in good faith ac-
cording to procedures established by the Board of Trustees.
Securities traded on a national securities exchange or included on the Nasdaq
National Market System ("NMS") and other securities traded in the over-the-
counter market are valued at the last reported sales price on the exchange
where the security is primarily traded. Securities traded on an exchange or NMS
and other securities traded in the over-the-counter market for which there has
been no sale are valued at the mean between the last reported bid and asked
price. Securities for which market quotations are not readily available, in-
cluding restricted securities, are valued at fair value as determined in good
faith according to procedures approved by the Board of Trustees.
Mutual fund shares held in a Fund's portfolio are valued at the net asset value
of each mutual fund.
Short-term investments with remaining maturities of 60 days or less are carried
at amortized cost, which approximates market value.
42
<PAGE>
Combined Notes to Financial Statements (continued)
B. Repurchase Agreements
Each Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held in a segregated account by the custodian on
the Fund's behalf. Each Fund monitors the adequacy of the collateral daily and
will require the seller to provide additional collateral in the event the mar-
ket value of the securities pledged falls below the carrying value of the re-
purchase agreement, including accrued interest. Each Fund will only enter into
repurchase agreements with banks and other financial institutions, which are
deemed by the investment advisor to be creditworthy pursuant to guidelines es-
tablished by the Board of Trustees.
Pursuant to an exemptive order issued by the Securities and Exchange Commis-
sion, the Funds 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 may enter into reverse repurchase
agreements with qualified third-party broker-dealers. Interest on the value of
reverse repurchase agreements is based upon competitive market rates at the
time of issuance. At the time the Fund enters into a reverse repurchase agree-
ment, it will establish and maintain a segregated account with the custodian
containing qualifying assets having a value not less than the repurchase price,
including accrued interest. If the counterparty to the transaction is rendered
insolvent, the ultimate realization of the securities to be repurchased by the
Fund may be delayed or limited.
D. Foreign Currency
The books and records of the Funds are maintained in United States (U.S.) dol-
lars. Foreign currency amounts are translated into U.S. dollars as follows:
market value of investments, other assets and liabilities at the daily rate of
exchange; purchases and sales of investments and income and expenses at the
rate of exchange prevailing on the respective dates of such transactions. Net
unrealized foreign exchange gains or losses resulting from changes in foreign
currency exchange rates is a component of net unrealized gains or losses on se-
curities and foreign currency related transactions. Net realized foreign cur-
rency gain or loss on foreign currency related transactions includes foreign
currency gains and losses between trade date and settlement date on investment
securities transactions, foreign currency related transactions and the differ-
ence between 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 Statements 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
43
<PAGE>
Combined Notes to Financial Statements (continued)
in the foreign currency exchange rate underlying the forward contract and is
subject to the credit risk that the other party will not fulfill their obliga-
tions under the contract. Forward contracts involve elements of market risk in
excess of the amount reflected in the Statements 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 qualified financial organizations.
The Funds' investment advisors will monitor the creditworthiness of such bor-
rowers. 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 bor-
rower 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 se-
curities 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 obtain the securities loaned at any time on five days' notice. Any gain or
loss in the market price of the loaned securities, which occurs during the term
of the loan, would affect a Fund and its investors. A Fund may pay fees in con-
nection 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 and capital
gains realized on some foreign securities may be subject 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 foreign currency gains or losses. During the year ended April 30, 2000 the
primary differences for the High Yield Fund were due to the expiration of capi-
tal loss carryovers which amounted to $122,349,861.
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.
44
<PAGE>
Combined Notes to Financial Statements (continued)
3. INVESTMENT ADVISORY AGREEMENTS AND OTHER AFFILIATED TRANSACTIONS
Evergreen Investment Management Company ("EIMC"), an indirect wholly owned sub-
sidiary of First Union National Bank ("FUNB"), is the investment advisor for
Diversified Bond Fund, High Yield Fund and Strategic Income Fund. In return for
providing investment management and administrative services to the Funds, EIMC
is paid a management fee that is calculated and paid daily. 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 0.41% and
declining to 0.16% per annum as net assets increase, to the average daily net
assets of each Fund. Prior to January 3, 2000 the management fee was computed
daily at an annual rate of 2.00% of each Fund's gross investment income plus an
amount determined by applying percentage rates starting at 0.50% and declining
to 0.25% per annum as net assets increased, to the average daily net assets of
each Fund.
FUNB, a subsidiary of First Union, serves as the investment advisor to the U.S.
Government Fund and is paid a management fee that is calculated and paid daily
at an annual rate of 0.42% of the Fund's average daily net assets. Prior to
January 3, 2000, the management fee was computed daily at an annual rate of
0.50% of the Fund's average daily net assets.
During the year ended April 30, 2000, the amount of investment advisory fees
waived by the investment advisor for the Strategic Income Fund was $1,474,921
and the impact on the Fund's expense ratio represented as a percentage of its
average net assets was 0.52%.
Evergreen Investment Services ("EIS"), an indirect, wholly owned subsidiary of
FUNB, is the administrator to the Funds. As administrator, EIS provides the
Funds with facilities, equipment and personnel. Prior to March 15, 2000, The
BISYS Group, Inc. ("BISYS") served as the sub-administrator to the Funds and
provided the officers of the Funds. Officers of the Funds and affiliated Trust-
ees receive no compensation directly from the Funds.
For its services, Diversified Bond Fund, High Yield Fund and Strategic Income
Fund pay the administrator a fee at an annual rate of 0.10% of each Fund's av-
erage daily net assets. Prior to January 3, 2000, the administration fee was
paid by the investment advisor and was not a fund expense. However, the Funds
reimbursed EIMC for providing certain administration and accounting expenses.
The sub-administration fee was also paid by the investment advisor until the
sub-administration agreement with BISYS was terminated on March 15, 2000.
For its services, the U.S. Government Fund pays the administrator a fee at the
annual rate of 0.10% of the Fund's average daily net assets. Prior to January
3, 2000, the administrator for the U.S. Government Fund were entitled to an an-
nual fee based on the combined average daily net assets of all of the funds ad-
ministered by EIS for which First Union or its investment advisory subsidiaries
are also the investment advisors. The administration fee was calculated by ap-
plying percentage rates, which started at 0.05% and declined to 0.01% per annum
as net assets increased, to the average daily net assets of the Fund. Prior to
March 15, 2000 the sub-administration fee was calculated by applying percentage
rates, which started at 0.01% and declined to 0.004% per annum as net assets
increased, to the average daily net assets of the Fund.
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
45
<PAGE>
Combined Notes to Financial Statements (continued)
Plan expenses". Under the Distribution Plans, Class A incurs distributions fees
equal to 0.25% of the average daily net assets of the class, all of which is
used to pay for shareholder service fees. Class B and Class C incur distribu-
tion fees equal to 1.00% of the average daily net assets of each class. Of this
amount, 0.25% is used to pay for shareholder service fees and 0.75% is used to
pay for distribution-related costs. Distribution Plan expenses are calculated
and paid daily.
During the year ended April 30, 2000, 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............. $961,855 $ 345,756 $ 6,272
High Yield Fund................... 794,211 408,756 20,656
Strategic Income Fund............. 372,477 1,172,715 151,944
U.S. Government Fund.............. 213,068 1,048,826 51,881
</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 30, 1999, U.S. Government Fund ac-
quired substantially all of the assets and assumed certain liabilities of Ever-
green Intermediate Term Government Securities Fund, in an exchange for Class A,
Class B, Class C and Class Y shares of U.S. Government Fund.
Effective on the close of business on July 24, 1998, U.S. Government Fund ac-
quired all of the assets and assumed certain liabilities of CoreFund Government
Income Fund, in an exchange for Class A and Class Y shares of U.S. Government
Fund.
These acquisitions were accomplished by a tax-free exchange of the respective
shares of each Fund. The value of net assets acquired, number of shares issued,
unrealized appreciation acquired and the aggregate net assets of each Fund im-
mediately after the acquisition were as follows:
<TABLE>
<CAPTION>
Value of Net Number of Unrealized Net Assets
Acquiring Fund Acquired Fund Assets Acquired Shares Issued Appreciation After Acquisition
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Government Fund.... Evergreen Intermediate Term $134,184,956 14,425,715 $677,705 $500,286,037
Government Securities Fund
U.S. Government Fund.... CoreFund Government Income Fund 25,935,637 2,618,772 441,185 333,331,520
</TABLE>
46
<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,
---------------------------------------------------
2000 1999
------------------------- ------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold.............. 549,532 $ 8,100,401 810,400 $ 12,761,419
Automatic conversion of
Class B shares to Class
A shares................ 866,976 12,366,860 1,403,087 22,326,396
Shares issued in
reinvestment of
distributions........... 1,063,502 15,546,816 1,050,314 16,640,863
Shares redeemed.......... (7,073,000) (103,768,769) (6,059,378) (95,987,811)
-------------------------------------------------------------------------------
Net decrease............. (4,592,990) (67,754,692) (2,795,577) (44,259,133)
-------------------------------------------------------------------------------
Class B
Shares sold.............. 513,362 7,559,619 1,481,322 23,510,009
Shares issued in
reinvestment of
distributions........... 81,671 1,197,159 112,383 1,783,925
Automatic conversion of
Class B shares to Class
A shares................ (866,975) (12,366,860) (1,403,103) (22,326,396)
Shares redeemed.......... (1,034,036) (15,183,970) (1,768,907) (28,085,274)
-------------------------------------------------------------------------------
Net decrease............. (1,305,978) (18,794,052) (1,578,305) (25,117,736)
-------------------------------------------------------------------------------
Class C
Shares sold.............. 61,770 916,131 138,285 2,182,664
Shares issued in
reinvestment of
distributions........... 1,927 28,090 515 8,103
Shares redeemed.......... (53,737) (791,536) (107,994) (1,704,992)
-------------------------------------------------------------------------------
Net increase............. 9,960 152,685 30,806 485,775
-------------------------------------------------------------------------------
Class Y
Shares sold.............. 66,439 996,082 224,176 3,501,809
Shares issued in
reinvestment of
distributions........... 7,501 109,767 130 2,048
Shares redeemed.......... (236,639) (3,497,304) 0 0
-------------------------------------------------------------------------------
Net increase (decrease).. (162,699) (2,391,455) 224,306 3,503,857
-------------------------------------------------------------------------------
Net decrease............. $ (88,787,514) $(65,387,237)
-------------------------------------------------------------------------------
</TABLE>
High Yield Fund
<TABLE>
<CAPTION>
Year Ended April 30,
------------------------------------------------------
2000 1999
-------------------------- --------------------------
Shares Amount Shares Amount
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............. 29,820,036 $ 115,164,997 10,094,180 $ 41,192,593
Automatic conversion of
Class B shares to Class
A shares............... 3,064,229 11,866,516 6,527,645 26,263,616
Shares issued in
reinvestment of
distributions.......... 4,103,775 15,918,638 4,394,074 18,091,076
Shares redeemed......... (45,779,805) (177,617,130) (26,735,454) (111,365,821)
---------------------------------------------------------------------------------
Net decrease............ (8,791,765) (34,666,979) (5,719,555) (25,818,536)
---------------------------------------------------------------------------------
Class B
Shares sold............. 2,867,524 11,186,409 5,817,765 24,157,421
Shares issued in
reinvestment of
distributions.......... 383,572 1,492,352 634,514 2,622,487
Automatic conversion of
Class B shares to Class
A shares............... (3,064,229) (11,866,516) (6,527,509) (26,263,616)
Shares redeemed......... (4,362,940) (16,997,576) (9,466,402) (40,138,947)
---------------------------------------------------------------------------------
Net decrease............ (4,176,073) (16,185,331) (9,541,632) (39,622,655)
---------------------------------------------------------------------------------
Class C
Shares sold............. 626,615 2,419,537 557,106 2,273,186
Shares issued in
reinvestment of
distributions.......... 20,837 80,489 14,724 60,244
Shares redeemed......... (287,763) (1,128,148) (334,216) (1,416,061)
---------------------------------------------------------------------------------
Net increase............ 359,689 1,371,878 237,614 917,369
---------------------------------------------------------------------------------
Class Y
Shares sold............. 969,321 3,780,157 2,455,775 10,680,805
Shares issued in
reinvestment of
distributions.......... 22,359 85,798 75,454 302,298
Shares redeemed......... (384,996) (1,514,340) (1,489,709) (5,961,177)
---------------------------------------------------------------------------------
Net increase............ 606,684 2,351,615 1,041,520 5,021,926
---------------------------------------------------------------------------------
Net decrease............ $ (47,128,817) $ (59,501,896)
---------------------------------------------------------------------------------
</TABLE>
47
<PAGE>
Combined Notes to Financial Statements (continued)
Strategic Income Fund
<TABLE>
<CAPTION>
Year Ended April 30,
---------------------------------------------------
2000 1999
------------------------- ------------------------
Shares Amount Shares Amount
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold.............. 6,057,821 $ 39,422,267 4,490,832 $ 31,196,519
Automatic conversion of
Class B shares to Class
A shares................ 114,637 732,259 106,795 731,977
Shares issued in
reinvestment of
distributions........... 1,364,065 8,756,623 1,347,956 9,273,511
Shares redeemed.......... (10,215,301) (65,915,704) (8,900,411) (61,611,376)
-------------------------------------------------------------------------------
Net decrease............. (2,678,778) (17,004,555) (2,954,828) (20,409,369)
-------------------------------------------------------------------------------
Class B
Shares sold.............. 4,350,494 28,377,800 6,845,207 47,103,443
Shares issued in
reinvestment of
distributions........... 845,525 5,442,688 630,620 4,349,322
Automatic conversion of
Class B shares to Class
A shares................ (114,637) (732,259) (106,478) (731,977)
Shares redeemed.......... (5,846,184) (37,742,494) (5,266,886) (36,464,325)
-------------------------------------------------------------------------------
Net increase (decrease).. (764,802) (4,654,265) 2,102,463 14,256,463
-------------------------------------------------------------------------------
Class C
Shares sold.............. 1,293,973 8,382,673 840,483 5,711,444
Shares issued in
reinvestment of
distributions........... 100,060 643,931 104,610 722,285
Shares redeemed.......... (1,396,549) (9,068,924) (1,266,465) (8,731,548)
-------------------------------------------------------------------------------
Net decrease............. (2,516) (42,320) (321,372) (2,297,819)
-------------------------------------------------------------------------------
Class Y
Shares sold.............. 105,659 683,315 258,852 1,877,692
Shares issued in
reinvestment of
distributions........... 7,348 46,223 10,086 67,771
Shares redeemed.......... (131,334) (848,169) (225,476) (1,499,725)
-------------------------------------------------------------------------------
Net increase (decrease).. (18,327) (118,631) 43,462 445,738
-------------------------------------------------------------------------------
Net decrease............. $(21,819,771) $ (8,004,987)
--------------------------------------------------------------------------------
</TABLE>
U.S. Government Fund
<TABLE>
<CAPTION>
Year Ended April 30,
----------------------------------------------------
2000 1999
-------------------------- ------------------------
Shares Amount Shares Amount
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold.............. 5,100,621 $ 47,565,903 5,406,579 $ 52,883,440
Automatic conversion of
Class B shares to Class
A shares................ 747,325 6,758,335 0 0
Shares issued in
reinvestment of
distributions........... 380,352 3,503,443 168,051 1,647,529
Shares redeemed.......... (8,168,619) (75,869,321) (4,877,937) (47,734,643)
Shares issued in
acquisition of:
Evergreen Intermediate
Term Government
Securities Fund........ 6,906,702 64,243,013 0 0
CoreFund Government
Income Fund............ 0 0 151,299 1,515,281
--------------------------------------------------------------------------------
Net increase............. 4,966,381 46,201,373 847,992 8,311,607
--------------------------------------------------------------------------------
Class B
Shares sold.............. 1,474,891 13,698,769 2,842,599 27,942,652
Shares issued in
reinvestment of
distributions........... 334,355 3,092,153 368,042 3,607,463
Automatic conversion of
Class B shares to Class
A shares................ (747,325) (6,758,335) 0 0
Shares redeemed.......... (5,058,499) (46,774,988) (3,936,185) (38,555,032)
Shares issued in
acquisition of Evergreen
Intermediate Term
Government
Securities Fund......... 264,531 2,460,670 0 0
--------------------------------------------------------------------------------
Net decrease............. (3,732,047) (34,281,731) (725,544) (7,004,917)
--------------------------------------------------------------------------------
Class C
Shares sold.............. 143,207 1,337,987 393,743 3,869,388
Shares issued in
reinvestment of
distributions........... 16,034 148,313 17,708 173,559
Shares redeemed.......... (252,817) (2,347,750) (417,897) (4,094,589)
Shares issued in
acquisition of Evergreen
Intermediate Term
Government
Securities Fund......... 29,477 274,194 0 0
--------------------------------------------------------------------------------
Net decrease............. (64,099) (587,256) (6,446) (51,642)
--------------------------------------------------------------------------------
Class Y
Shares sold.............. 4,436,632 41,202,809 9,295,417 91,002,779
Shares issued in
reinvestment of
distributions........... 1,291,143 11,920,317 972,869 9,528,012
Shares redeemed.......... (10,806,458) (100,084,348) (5,686,585) (55,568,104)
Shares issued in
acquisition of:
Evergreen Intermediate
Term Government
Securities Fund........ 7,225,005 67,207,079 0 0
CoreFund Government
Income Fund............ 0 0 2,467,473 24,420,356
--------------------------------------------------------------------------------
Net increase............. 2,146,322 20,245,857 7,049,174 69,383,043
--------------------------------------------------------------------------------
Net increase............. $ 31,578,243 $ 70,638,091
--------------------------------------------------------------------------------
</TABLE>
48
<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, 2000:
<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........... $107,871,379 $611,358,791 $ 59,699,273 $760,015,785
High Yield
Fund........... 13,998,563 368,249,591 13,398,016 428,646,689
Strategic Income
Fund........... 163,967,148 344,040,789 184,343,605 349,644,442
U.S. Government
Fund........... 234,049,816 12,950,649 346,695,355 3,126,368
</TABLE>
At April 30, 2000 Diversified Bond Fund had forward foreign currency exchange
contracts outstanding as follows:
Forward Foreign Currency Exchange Contracts to Sell:
<TABLE>
<CAPTION>
U.S. Value at In Exchange Unrealized
Exchange Date Contracts to Deliver April 30, 2000 for U.S. $ Gain
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6/14/2000 6,500,000 Eurodollar $5,928,234 6,305,000 $376,766
</TABLE>
During the year ended April 30, 2000, the Diversified Bond Fund and Strategic
Income Fund entered into reverse repurchase agreements. The average daily bal-
ance, weighted average interest rate, interest expense as a percentage of aver-
age net assets and maximum amount outstanding were as follows:
<TABLE>
<CAPTION>
Average Daily Weighted Maximum
Balance Average Interest % of Average Amount
Outstanding Interest Rate Expense Net Assets Outstanding*
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Diversified Bond
Fund........... $1,983,963 3.14% $63,367 0.02% $17,022,902
Strategic Income
Fund........... 207,755 5.32% 11,485 0.00% 5,047,888
</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, 2000 to certain brokers who paid the
Fund a negotiated lenders' fee. These fees are included in interest income. At
April 30, 2000, the value of securities on loan and the value of collateral
(including accrued interest) amounted to the following:
<TABLE>
<CAPTION>
Value of
Securities Value of
on Loan Collateral
-----------------------
<S> <C> <C>
Diversified Bond Fund....................... $ 8,030,252 $ 8,187,470
High Yield Fund............................. 73,470,499 75,616,185
Strategic Income Fund....................... 13,860,761 14,199,600
</TABLE>
During the year ended April 30, 2000, the Diversified Bond Fund, High Yield
Fund and Strategic Income Fund earned $29,967, $133,202 and $30,620, respec-
tively, in income from securities lending.
On April 30, 2000, the composition of unrealized appreciation and depreciation
on securities based on the aggregate cost of securities for federal income tax
purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross Net Unrealized
Unrealized Unrealized Appreciation
Tax Cost Appreciation Depreciation (Depreciation)
----------------------------------------------------
<S> <C> <C> <C> <C>
Diversified
Bond Fund..... $382,874,678 $ 3,259,586 $(16,165,577) $(12,905,991)
High Yield
Fund.......... 435,571,888 10,110,557 (45,739,508) (35,628,951)
Strategic
Income Fund... 284,776,224 4,209,853 (22,003,407) (17,793,554)
U.S. Government
Fund.......... 422,556,738 762,561 (17,108,311) (16,345,750)
</TABLE>
As of April 30, 2000, the Funds had capital loss carryovers for federal income
tax purposes as follows:
<TABLE>
<CAPTION>
Expiring April 30,
----------------------------------------------------------------------------------------------
2001 2002 2003 2004 2005 2006 2007 2008
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Diversified Bond Fund... $19,435,525 $ 6,153,282 $ 28,735,992 $20,011,986 $ 0 $ 0 $ 1,471,104 $12,464,442
High Yield Fund......... 0 44,605,085 105,957,085 0 0 0 20,997,940 16,899,022
Strategic Income Fund... 23,288,767 3,223,064 7,390,184 35,072,322 0 0 0 12,246,758
U.S. Government Fund.... 1,978,402 6,521,597 3,703,113 2,973,341 3,819,759 3,370,412 2,155,090 4,853,705
</TABLE>
49
<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, 2000, 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..................... $7,414,765 $ 180,854
High Yield Fund........................... 3,268,254 0
Strategic Income Fund..................... 6,130,335 3,527,468
U.S. Government Fund...................... 707,492 0
</TABLE>
8. EXPENSE REDUCTIONS
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 expense reductions re-
ceived by each Fund and the impact of the total expense reductions on each
Fund's annualized expense ratio represented as a percentage of its average
daily net assets were as follows:
<TABLE>
<CAPTION>
Total Expense % of Average
Reductions Net Assets
--------------------------
<S> <C> <C>
Diversified Bond Fund................ $30,921 0.01%
High Yield Fund...................... 37,507 0.01%
Strategic Income Fund................ 29,982 0.01%
U.S. Government Fund................. 14,764 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. At the election of the Trustees, the deferral account will be paid
either in one lump sum or in quarterly installments for up to ten years.
10. FINANCING AGREEMENTS
Certain Evergreen Funds, State Street Bank and Trust Company ("State Street")
and The Bank of New York ("BONY") entered into an amended financing agreement
on December 22, 1998. Under this agreement, State Street and BONY provided an
unsecured credit facility in the aggregate amount of $150 million ($125 million
committed and $25 million uncommitted). The credit facility was allocated, un-
der the terms of the financing agreement, between State Street and BONY. The
credit facility was accessed by the Funds for temporary or emergency purposes
only and was subject to each Fund's borrowing restrictions. Borrowings under
this facility bore interest at 0.50% per annum above the Federal Funds rate. A
commitment fee of 0.065% per annum was incurred on the unused portion of the
committed facility, which was allocated to all funds. State Street served as
administrative agent and was entitled to a fee of $20,000 per annum which was
allocated to all of the funds. This agreement was terminated on July 27, 1999.
On July 27, 1999, certain Evergreen Funds and a group of banks (the "Lenders")
entered into a credit agreement. Under this agreement, the Lenders provide an
unsecured revolving credit commitment in the aggregate amount of $1.050 bil-
lion. The credit facility is allocated, under the terms of the financing agree-
ment among the Lenders. The credit facility is accessed by the Funds for tempo-
rary or emergency purposes to fund the redemption of their shares or for gen-
eral working capital purposes as permitted by each Fund's borrowing restric-
tions. Borrowings under this facility bear interest at 0.75% per annum above
the Federal Funds rate (1.50% per annum above the Federal Funds rate during the
period from and including December 1, 1999 through and including January 31,
2000). A commitment fee of 0.10% per annum is incurred on the average daily un-
used portion of the revolving credit commitment. The commitment fee is allo-
cated to all funds. For
50
<PAGE>
Combined Notes to Financial Statements (continued)
its assistance in arranging this financing agreement, First Union Capital Mar-
kets Corp. was paid a one-time arrangement fee of $250,000. State Street serves
as paying agent for the funds and as paying agent is entitled to a fee of
$20,000 per annum which is allocated to all the funds.
The Funds did not borrow under these agreements during the year ended April 30,
2000.
51
<PAGE>
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 the Evergreen Diversified Bond Fund, Ever-
green High Yield Bond Fund, Evergreen Strategic Income Fund and Evergreen U.S.
Government Fund, portfolios of Evergreen Fixed Income Trust, as of April 30,
2000, and the related statements of operations for the year then ended, state-
ments of changes in net assets for the two year period then ended and the fi-
nancial highlights for each of the years or periods in the five-year period
ended April 30, 2000. These financial statements and financial highlights are
the responsibility of the Funds' management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally ac-
cepted in the United States of America. Those standards require that we plan
and perform our audit to obtain reasonable assurance about whether the finan-
cial statements and financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of April 30, 2000 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reason-
able basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Ever-
green Diversified Bond Fund, Evergreen High Yield Bond Fund, Evergreen Strate-
gic Income Fund and Evergreen U.S. Government Fund as of April 30, 2000, the
results of their operations, changes in their net assets and financial high-
lights for each of the years or periods described above conformity with ac-
counting principles generally accepted in the United States of America.
/s/ KPMG LLP
Boston, Massachusetts
June 9, 2000
52
<PAGE>
Evergreen Funds
Money Market
Treasury Money Market Fund
Money Market Fund
Municipal Money Market Fund
Florida Municipal Money Market Fund
New Jersey Municipal Money Market Fund
Pennsylvania Municipal Money Market Fund
Tax Advantaged
Short Intermediate Municipal Bond Fund
High Grade Municipal Bond Fund
Municipal Bond Fund
Connecticut Municipal Bond Fund
Florida Municipal Bond Fund
Florida High Income Municipal Bond Fund
Georgia Municipal Bond Fund
Maryland Municipal Bond Fund
New Jersey Municipal Bond Fund
North Carolina Municipal Bond Fund
Pennsylvania Municipal Bond Fund
South Carolina Municipal Bond Fund
Virginia Municipal Bond Fund
Tax-Free High Income Fund
Income
Intermediate Term Bond Fund
U.S. Government Fund
Diversified Bond Fund
Strategic Income Fund
High Yield Bond Fund
Quality Income Fund
Short-Duration Income Fund
Balanced
Balanced Fund
Tax Strategic Foundation Fund
Foundation Fund
Growth & Income
Utility Fund
Income and Growth Fund
Value Fund
Blue Chip Fund
Growth and Income Fund
Small Cap Value Fund
Select Equity Index Fund
Domestic Growth
Tax Strategic Equity Fund
Strategic Growth Fund
Stock Selector Fund
Evergreen Fund
Masters Fund
Omega Fund
Small Company Growth Fund
Aggressive Growth Fund
Growth Fund
Capital Growth Fund
Select Special Equity Fund
Global International
Global Leaders Fund
International Growth Fund
Global Opportunities Fund
Precious Metals Fund
Emerging Markets Growth Fund
Latin America Fund
Perpetual Global Fund
Perpetual International Fund
Express Line
800.346.3858
Investor Services
800.343.2898
www.evergreen-funds.com
61645 541075 6/2000
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