EVERGREEN FIXED INCOME TRUST /DE/, N-30D, 2000-08-31

EVERGREEN FIXED INCOME TRUST /DE/
N-30D, 2000-08-31

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<PAGE>

Annual Report
as of June 30, 2000

Evergreen
Short and
Intermediate Term
Bond Funds

[LOGO OF EVERGREEN FUNDS]

[MUTUAL FUND SERVICE AWARD]
<PAGE>

Table of Contents

Letter to Shareholders...................................................... 1

Evergreen Capital Preservation and Income Fund

Fund at a Glance.......................................................... 2

Portfolio Manager Interview............................................... 3

Evergreen Intermediate Term Bond Fund

Fund at a Glance.......................................................... 5

Portfolio Manager Interview............................................... 6

Evergreen Short-Duration Income Fund
(formerly, Evergreen Short-Intermediate Bond Fund)

Fund at a Glance.......................................................... 8

Portfolio Manager Interview............................................... 9

Financial Highlights

Evergreen Capital Preservation and Income Fund............................ 12

Evergreen Intermediate Term Bond Fund..................................... 14

Evergreen Short-Duration Income Fund...................................... 16

Schedule of Investments

Evergreen Capital Preservation and Income Fund............................ 18

Evergreen Intermediate Term Bond Fund..................................... 20

Evergreen Short-Duration Income Fund...................................... 28

Combined Notes to Schedules of Investments.................................. 34

Statements of Assets and Liabilities........................................ 35

Statements of Operations.................................................... 36

Statements of Changes in Net Assets......................................... 37

Combined Notes to Financial Statements...................................... 39

Independent Auditors' Report................................................ 48

Additional Information...................................................... 49

Evergreen Funds

Evergreen Funds is one of the nation's fastest growing investment companies with
approximately $80 billion in assets under management.

With over 80 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.

The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to Evergreen Funds to provide a distinctive level of
service and excellence in investment management.

This annual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.

Mutual Funds: ARE NOT FDIC INSURED MAY LOSE VALUE NOT BANK GUARANTEED

Evergreen Distributor, Inc.
Evergreen Funds(SM) is a service mark of Evergreen Investment Services, Inc.
<PAGE>

Letter to Shareholders

August 2000

[PHOTO]

William M. Ennis
President and CEO

Dear Evergreen Shareholders,

We are pleased to provide the Evergreen Short and Intermediate Term Bond Funds
annual report, which covers the twelve-month period ended June 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 months as fixed income markets were hit by
rising interest rates and falling bond prices. Potential inflation threats,
including rising wage costs and higher energy prices, prompted the Federal
Reserve Board to take an aggressive stance with respect to its interest rate
policy, raising rates six times during the period. In addition, the U.S.
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, Inc.

1
<PAGE>

EVERGREEN

Capital Preservation and Income Fund

Fund at a Glance as of June 30, 2000

Portfolio
Management

[PHOTO]

Gary Pzegeo
Tenure: April 1997

-------------------------
CURRENT INVESTMENT STYLE1
-------------------------

[STYLEBOX]

Morningstar's Style Box is based on a portfolio date as of 6/30/00.

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: Morningstar, Inc.

2 Past performance is no guarantee of future results. The investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their 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 and C prior to their inception is
based on the performance of Class B, the original class offered. These
historical returns for Class A have not been adjusted to eliminate the effect of
the higher 12b-1 fees applicable to Class B. These fees are 0.21% for Class A
and 1.00% for Classes B and C. If these fees had been reflected, returns for
Class A would have been higher. The Fund incurs 12b-1 expenses for Class A based
on the rates of 0.25% on assets prior to 1/1/97 and 0.10% assessed on new assets
from 1/1/97. 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.

The Fund's investment objective is non-fundamental and may be changed without
the vote of the Fund's shareholders.

All data is as of June 30, 2000 and subject to change.

--------------------------------------------------------------------------------
PERFORMANCE AND RETURNS1
--------------------------------------------------------------------------------
Portfolio Inception Date: 7/1/1991 Class A Class B Class C
Class Inception Date 12/30/1994 7/1/1991 12/1/1993
Average Annual Returns*
1 year with sales charge 1.39% -1.06% 1.92%
1 year w/o sales charge 4.75% 3.90% 3.90%
5 years 4.86% 4.43% 4.78%
Since Portfolio Inception 4.46% 4.36% 4.37%
Maximum Sales Charge 3.25% 5.00% 2.00%
Front End CDSC CDSC
30-day SEC Yield 5.72% 5.12% 5.10%
12-month distributions per share $0.54 $0.46 $0.46

* Adjusted for maximum applicable sales charge.

--------------------------------------------------------------------------------
LONG TERM GROWTH
--------------------------------------------------------------------------------
[GRAPH]
Evergreen
Capital
Preservation
6-Month and Income
CPI Treasury Bill Fund Class B
7/1/91 10,000 10,000 10,000
6/30/92 10,294 10,451 10,644
6/30/93 10,602 10,810 10,961
6/30/94 10,866 11,182 11,102
6/30/95 11,197 11,807 11,643
6/30/96 11,505 12,469 12,292
6/30/97 11,769 13,143 13,036
6/30/98 11,968 13,856 13,613
6/30/99 12,203 14,536 14,137
6/30/00 12,578 15,315 14,686

Comparison of a $10,000 investment in Evergreen Capital Preservation and Income
Fund, Class B shares2, versus a similar investment in a 6-Month Treasury Bill
and the Consumer Price Index (CPI).

The 6-Month Treasury Bill is an unmanaged market index and 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.

4
<PAGE>

EVERGREEN

Capital Preservation and Income Fund
Portfolio Manager Interview

How did the Fund perform?

For the twelve-month period ended June 30, 2000, the Fund's Class B shares
produced a 3.90% return, compared to the 5.54% return for the 6-month Treasury
Bill Index. Fund performance is before deduction of any applicable sales
charges. We attribute the Fund's performance to its emphasis on seasoned
conventional adjustable rate mortgage securities (ARMS). Seasoned conventional
ARMS are older pools of mortgages. Because they have an established history,
investors can analyze various characteristics about the mortgages, particularly
their prepayment history. Prepayments occur when a mortgage-holder prepays a
mortgage before its maturity date. Often, this happens when interest rates are
low, enabling mortgage-holders to refinance their existing higher-rate mortgages
with lower interest rate debt. Investors believe an established prepayment
history contributes to a greater level of predictability of future prepayment
rates; and demand for individual pools of mortgages can vary, depending upon the
characteristics they exhibit. In contrast, newly issued mortgages lack
prepayment history. For many investors, the more generic nature of newly issued
mortgages, particularly as it relates to prepayments, translates into additional
risk that can cause the securities to underperform seasoned mortgage pools with
desirable characteristics.

Portfolio
Characteristics
---------------

Total Net Assets $36,702,433
Average Credit Quality AAA
Effective Maturity 4.8 years
Average Duration 1.3 years

What was the investment environment like for adjustable rate mortgage securities
(ARMS)?

The environment was positive. The economy grew at a rapid pace early in the
period, causing investors to push interest rates higher on expectations of
future tightening moves from the Federal Reserve Board. Later, however, the six
interest rate hikes implemented by the Federal Reserve Board since mid-1999
effectively cooled economic growth from the unusually rapid pace of the past
several quarters. Key segments of the economy, including the labor market,
retail sales, housing and the automobile industry all exhibited signs of
slowing. With the exception of energy costs, inflation remained well-contained.
As we moved further into the first half of 2000, investors became increasingly
optimistic that the more moderate rate of growth might prompt the Federal
Reserve Board to stop raising rates and implement a more stable policy in the
foreseeable future.

As an asset-class, ARMS performed well relative to other fixed-income sectors.
ARMS provided an attractive yield advantage over U.S. Treasuries and rising
interest rates pushed the coupons on ARMS higher early in the period. Market
sentiment also supported the high quality and income-orientation that ARMS
represent, as investors' focus shifted toward strategies favoring income rather
than duration management. Expressed in years, duration measures a portfolio's
interest rate sensitivity. Shortening duration reduces interest rate
sensitivity and enhances price stability. Lengthening duration increases a
portfolio's sensitivity to interest rate changes.

3
<PAGE>

EVERGREEN
Capital Preservation and Income Fund
Portfolio Manager Interview

How did the market's environment affect your investment strategy?

We focused on maximizing income rather than managing duration for most of the
period. Seasoned conventional ARMS played a major role in the Fund's management.
We began to increase our position in those securities in late 1999 and early
2000. They benefited the Fund by generating greater streams of income as
interest rates rose, and also by outperforming other types of ARMS because of
the favorable characteristics exhibited by their underlying mortgage pools.
Recently, however, we increased the Fund's interest rate sensitivity by raising
its exposure to both fixed-rate and hybrid mortgage-backed securities. The
coupons of hybrid mortgages are fixed for three or five years before they begin
to change annually. Both fixed-rate and hybrid mortgages provide a more
predictable cash flow for a longer period of time, enabling the Fund to
"lock-in" higher interest rates.

--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------------
(as a percentage of 6/30/2000 net assets)

[PIE CHART]

ARMS -- 77.0%
Collateralized Mortgage Obligations -- 9.0%
Fixed Rate Mortgage Securities -- 8.6%
U.S. Treasury Obligations -- 2.4%
Other Investments & Other Assets & Liabilities, net -- 3.0%

What is your outlook?

We think interest rates could stabilize, if not move a little lower. The economy
appears to be slowing, and while we are keeping an eye on energy, the other
components of inflation appear to be well under control. Higher interest rates
have taken a bite out of both consumer and business spending. We expect the
economy to slow to an annualized growth rate of 3.5% - 4%. adjusted for
inflation, from the 6% - 7% rate that we have seen recently. That level of
growth, combined with continued low inflation, could cause the Federal Reserve
Board to hold rates steady for awhile. We think we have seen the peak in "real"
interest rates -- the rate earned by the investor, adjusted for inflation.
Typically, as we saw recently, investors are more comfortable with
income-oriented strategies, in that kind of investment environment. With its
seasoned conventional mortgages, fixed-rate and hybrid mortgage holdings, we
believe the Fund is well-positioned to benefit from a more stable interest rate
climate.

The Evergeen Capital Preservation and Income Fund merged into the Evergreen
Select Adjustable Rate Fund on July 21, 2000.

4
<PAGE>

EVERGREEN
Intermediate Term Bond Fund
Fund at a Glance as of June 30, 2000

Portfolio
Management
------------------

[PHOTO]

David J. Bowers, CFA
Tenure: January 1999

--------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE 1
--------------------------------------------------------------------------------
[STYLE BOX]

Morningstar's Style Box is based on a portfolio date as of 6/30/00.

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: Morningstar, Inc.

Historical performance shown for Classes B, C, and Y prior to their inception is
based on the performance of Class A, the original class offered. These
historical returns for Classes B and C have not been adjusted to reflect the
effect of each class' 12b-1 fees. These fees 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.

Foreign investments may contain more risk due to the inherent risks associated
with changing political climates, foreign market instability and foreign
currency fluctuations.

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
the increased possibility of default.

The Fund's investment objective is non-fundamental and may be changed without
the vote of the Fund's shareholders.

All data is as of June 30, 2000 and subject to change.

--------------------------------------------------------------------------------
PERFORMANCE AND RETURNS 2
--------------------------------------------------------------------------------
Portfolio Inception Date: 2/13/1987 Class A Class B Class C Class Y
Class Inception Date 2/13/1987 2/1/1993 2/1/1993 1/26/1998
Average Annual Returns*
1 year with sales charge -0.68% -2.92% -0.04% n/a
1 year w/o sales charge 2.65% 1.88% 1.88% 2.91%
5 years 4.42% 3.98% 4.30% 5.24%
10 years 6.53% 6.27% 6.27% 6.95%
Maximum Sales Charge 3.25% 5.00% 2.00% n/a
Front End CDSC CDSC
30-day SEC Yield 6.20% 5.66% 5.66% 6.66%
12-month distributions per share $0.57 $0.51 $0.51 $0.59

* Adjusted for maximum applicable sales charge.

--------------------------------------------------------------------------------
LONG TERM GROWTH
--------------------------------------------------------------------------------

[GRAPH]

Evergreen
Intermediate Consumer Lehman Brothers
Term Bond Fund Price Intermediate
Class A Index Term Government

6/30/90 9,675 10,000 10,000
6/30/91 10,601 10,470 11,052
6/30/92 12,105 10,793 12,507
6/30/93 13,559 11,116 13,820
6/30/94 13,400 11,393 13,785
6/30/95 14,667 11,740 15,215
6/30/96 15,300 12,063 15,977
6/30/97 16,651 12,340 17,130
6/30/98 18,121 12,548 18,594
6/30/99 18,333 12,794 19,371
6/30/00 18,820 13,188 20,187

Comparison of a $10,000 investment in Evergreen Intermediate Term Bond Fund,
Class A shares2, versus a similar investment in the Lehman Brothers Intermediate
Term Government/Corporate Bond Index (LBIGCBI) and the Consumer Price Index
(CPI).

The LBIGCBI is an unmanaged market index and 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.

5
<PAGE>

EVERGREEN
Intermediate Term Bond Fund
Portfolio Manager Interview

How did the Fund perform?

For the twelve-month period ended June 30, 2000, the Fund's Class A shares
returned 2.65%. Fund performance is before deduction of any applicable sales
charges. The performance lagged the 3.42% average return of the Intermediate
Investment Grade Debt Funds followed by Lipper, Inc. for the same period.
Lipper, Inc. is an independent monitor of mutual fund performance. The Lehman
Brothers Intermediate Term Government/Corporate Bond Index returned 4.23% for
the same period. We attribute the Fund's under-performance to two areas in
particular. First, the bond market experienced an especially difficult period in
the third quarter of 1999. At that time, heavy corporate bond supply,
anticipations of Y2K and rising interest rates created particularly challenging
conditions for bond investors.

In addition, prior to May 2000, the Fund was prohibited from investing in bonds
having effective maturities longer than 10 years. In contrast, other funds in
the Lipper competitive group were able to invest in bonds with longer
maturities, provided that each fund's average maturity remained less than 10
years. Lipper Inc. is an independent monitor of mutual fund performance. After
careful review, the Fund's maturity limitation was lifted, enabling the Fund to
conform to the maturity guidelines of its competitive group. We believe this
allowance both reinforces the Fund's emphasis on capital preservation and
enhances total return potential. For example, during the past year, longer-term
bonds benefited from a unique supply and demand situation that pushed prices
considerably higher. We expect this situation to be ongoing. In contrast, rising
short-term interest rates drove the prices of bonds with short-to-intermediate
term maturities lower. The Fund was limited to this shorter maturity range for
most of the fiscal period, restricting total return potential. In our opinion,
the Fund's new flexibility enables it to take advantage of unique opportunities
that may occur within all maturity ranges, while still limiting overall interest
rate risk.

Portfolio
Characteristics
-----------------

Total Net Assets $159,101,839
Average Credit Quality AA+
Effective Maturity 8.4 years
Average Duration 5.1 years

What caused the bond market's challenging condition?

During the past twelve months, we experienced significant volatility in several
key areas of the bond market, most notably with regard to liquidity, risk
premiums and underlying risk-free rates.

The third quarter of 1999 was especially difficult, as heavy new bond supply and
extreme caution regarding Y2K pushed risk premiums higher and drained liquidity.
During this time, the Federal Reserve Board increased short-term rates twice,
each in 1/4 point increments. These actions reversed the liquidity injection the
Federal Reserve Board had engineered at the height of the financial market
crisis in the fall of 1998. High yield bonds, in particular, incurred heavy cash
outflows and greatly reduced liquidity. This sector, as well as investment grade
corporate bonds, suffered heavy losses. The environment was especially difficult
for the Fund, given our core philosophy of emphasizing these sectors.

Investors resumed their focus on the economy's strength in late 1999, when it
became clear that Y2K would present few significant problems. While this
sentiment led to declining risk premiums, it also brought the potential for a
tighter monetary policy back into focus, driving U.S. Treasury rates sharply
higher. In an effort to cool excessive growth and preempt a rise in inflation,
the Federal Reserve Board

6
<PAGE>

EVERGREEN
Intermediate Term Bond Fund
Portfolio Manager Interview

boosted interest rates another three times over a six-month timeframe by an
incremental 1.25%

This tighter money policy, combined with the announcement in January 2000 that
the U.S. Treasury would buy back as much as $30 billion longer-term securities
and reduce the size of future auctions caused a dramatic change in the yield
curve. Short-to-intermediate term rates rose, forcing bond prices lower. At the
same time, longer-term rates fell, pushing prices higher. The shift in rates
resulted in an inverted yield curve--an unusual situation where short-term rates
are higher than the long-term rates. Once again, risk premiums moved sharply
higher.

As the Fund's 2000 fiscal year came to a close, investors had adopted a more
optimistic interest rate outlook. Signs of a slower economy had caused investors
to believe the Fed might stop raising rates and implement a more stable monetary
policy.

--------------------------------------------------------------------------------
PORTFOLIO QUALITY
--------------------------------------------------------------------------------
(as a percentage of 6/30/2000 portfolio assets)

[GRAPH]

AAA--54.8%
AA--6.5%
A--16.3%
BBB--14.8%
BB--3.6%
B--3.8%
CCC--0.2%

What strategies did you use to manage the Fund in light of the changing
environment?

We emphasized quality and liquidity. We reduced holdings in high yield bonds and
lower-tier investment grade corporate bonds, shifting the Fund's assets to
mortgage-backed securities, higher-quality corporate bonds, and U.S. Treasuries
and agencies. High yield bonds comprised 7.6% of net assets on June 30, 2000
versus 18% one year ago. As a result of the restructuring, the Fund's average
quality was raised to "AA+" as of June 30, 2000 versus "A+" on June 30, 1999. We
also decreased the Fund's exposure to industries that were more sensitive to
changes in the economy's cycles such as banks and finance and basic materials
and consumer cyclicals, and raised our exposure to industries that were less
tied to the rise and fall of the economy, such as aerospace, cable, defense,
rails, supermarkets and utilities.

[GRAPH]

Corporate Bonds--36.1%
CMO and Mortgage-Backed Securities--25.9%
U.S. Treasury Obligations--12.7%
U.S. Government & Agency Obligations--12.2%
Yankee Obligations--5.9%
Asset-Backed Securities--4.2%
Other Investments and Other Assets and Liabilities, net--3.0%

What is your outlook over the next six months?

Despite some signs that the economy has begun to slow, we think interest rates
will continue to experience upward pressure in the months ahead. Many conditions
still exist that can fuel stronger growth. Consumers are fully employed and
while capital is somewhat more expensive, it continues to be available to fund
both consumer spending and business investment. We expect the Federal Reserve
Board to remain vigilant in its fight against inflation, particularly in light
of higher energy and wage costs. In this environment, we intend to continue to
favor higher quality, liquid securities and industries that are less sensitive
to the rise and fall of economic cycles.

7
<PAGE>

EVERGREEN
Short-Duration Income Fund
(formerly, Short-Intermediate Bond Fund)
Fund at a Glance as of June 30, 2000

Portfolio
Management
--------------

[PHOTO]

P. Michael Jones
Tenure: June 1999

--------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE1
--------------------------------------------------------------------------------

[STYLE BOX]

Morningstar's Style Box is based on a portfolio date as of 6/30/00.

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: Morningstar, Inc.

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. Returns reflect expense limits previously in
effect, without which returns would have been lower.

Foreign investments may contain more risk due to the inherent risks associated
with changing political climates, foreign market instability and foreign
currency fluctuations.

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
the increased possibility of default.

The Fund's investment objective is non-fundamental and may be changed without
the vote of the Fund's shareholders.

All data as of June 30, 2000 and subject to change.

--------------------------------------------------------------------------------
PERFORMANCE AND RETURNS2
--------------------------------------------------------------------------------
Portfolio Inception Date: 1/28/1989 Class A Class B Class C Class Y
Class Inception Date 1/28/1989 1/25/1993 9/6/1994 1/4/1991
Average Annual Returns*
1 year with sales charge -0.05% -2.53% 0.39% n/a
1 year w/o sales charge 3.36% 2.33% 2.33% 3.57%
5 years 4.34% 3.77% 4.07% 5.18%
10 years 6.17% 5.85% 5.97% 6.67%
Maximum Sales Charge 3.25% 5.00% 2.00% n/a
Front End CDSC CDSC
30-day SEC Yield 6.14% 5.61% 5.61% 6.61%
12-month distributions per share $0.57 $0.49 $0.49 $0.59

* Adjusted for maximum applicable sales charge.

--------------------------------------------------------------------------------
LONG TERM GROWTH
--------------------------------------------------------------------------------

[GRAPH]

Evergreen
Short-Duration Consumer Lehman Brothers Intermediate
Income Fund Price Term Government/
Class A Index Corporate Bond Index

6/30/90 9,675 10,000 10,000
6/30/91 10,655 10,470 11,052
6/30/92 11,999 10,793 12,507
6/30/93 13,133 11,116 13,820
6/30/94 13,026 11,393 13,785
6/30/95 14,228 11,740 15,215
6/30/96 14,861 12,063 15,977
6/30/97 15,868 12,340 17,130
6/30/98 16,997 12,548 18,594
6/30/99 17,608 12,794 19,371
6/30/00 18,200 13,188 20,187

Comparison of a $10,000 investment in Evergreen Short- Duration Income Fund,
Class A shares2, versus a similar investment in the Lehman Brothers Intermediate
Term Government/Corporate Bond Index (LBIGCBI) and the Consumer Price Index
(CPI).

8
<PAGE>

EVERGREEN
Short-Duration Income Fund
(formerly, Short-Intermediate Bond Fund)
Portfolio Manager Interview

How did the Fund perform?

For the twelve-month period ended June 30, 2000, the Fund's Class A shares
returned 3.36% lagging the 4.23% produced by the Lehman Brothers Intermediate
Term Government/Corporate Bond Index. Fund performance is before deduction of
any applicable sales charges. Unlike a mutual fund, an index does not incur
expenses, which lowers returns. We attribute the slight under-performance to the
Fund's emphasis on mortgage-backed securities and corporate bonds. Historically
an attractive investment alternative because of their higher level of income,
mortgage-backed securities and corporate bonds--along with other sectors that
produce a higher level of income--under-performed U.S. Treasuries, during much
of the period. In June 2000, that situation reversed and mortgage-backed
securites and corporate bonds out-performed other fixed-income alternatives.

Portfolio
Characteristics
---------------

Total Net Assets $377,592,031
Average Credit Quality AA+
Effective Maturity 4.7 years
Average Duration 3.4 years

What was the investment environment like for the period?

The bond market was exceptionally volatile over the past twelve months. The
Federal Reserve Board raised interest rates six times, putting downward pressure
on bond prices. Short-term interest rates were impacted the most, with rates on
the 2-year U.S. Treasury rising from 5.52% on June 30, 1999 to 6.36% by June 30,
2000. In contrast, long-term rates fell, pushing prices higher, as 30-year U.S.
Treasuries benefited from a supply/demand imbalance. The actions resulted in a
yield curve inversion--a rare occurrence where short-term interest rates are
higher than their long-term counterparts.

The Federal Reserve Board raised interest rates to cool potentially excessive
economic growth and pending inflation. Rising stock prices had fueled the
economy's strength by enhancing the country's "wealth effect". As we entered
2000, the U.S. economy was growing at a 5% annualized pace. Despite rapid growth
and low unemployment, inflation remained well-contained. Some commodity and
energy prices rose, but with the exception of oil prices, costs were not passed
along to the consumer.

Midway through the first half of 2000, the stock market's meteoric rise ground
to a halt. The NASDAQ plunged nearly 1900 points, or 38% from its high in
mid-March. Technology stocks, in particular, experienced a sharp correction.
Investors pushed interest rates lower in anticipation of slower economic growth,
following the market's decline. While the effect was not immediate, signs of a
slower economy began to emerge as the second quarter of 2000 came to a close and
after twelve months of stricter monetary policy, the Federal Reserve Board left
rates unchanged at their June 2000 meeting. Interest rates continued moving
downward, on investors' beliefs that aggressive Federal Reserve Board
tightening, higher energy prices and disappointing equity markets had finally
combined to slow economic growth.

In addition to higher interest rates, bond prices experienced downward pressure
from Y2K concerns and heavy supply during the period. Stock market volatility
hit corporate bonds particularly hard--forcing prices lower as concerns about
turbulence in the stock market spilled over into corporate bonds. As a result,
bond sectors that produce a higher level of income--including mortgage-backed
securities, corporate bonds and even U.S. agency securities--under-performed
U.S. Treasuries. In our opinion, this created longer-term
9
<PAGE>

EVERGREEN
Short-Duration Income Fund
(formerly, Short-Intermediate Bond Fund)
Portfolio Manager Interview

investment opportunity. Yield relationships changed, causing the yield
advantages provided by income-producing sectors over U.S. Treasuries to increase
substantially. By the end of the Fund's fiscal year, the situation reversed; and
mortgage-backed securities, corporate bonds and U.S. agencies began to out-
perform U.S. Treasuries.

[GRAPH]

CMO and Mortgage-Backed Securities--47.6%
Asset-Backed Securities--21.1%
Corporate Bonds--20.8%
Yankee Obligations--6.0%
U.S. Treasury Obligations--2.5%
Other Investments and Other Assets and Liabilities, net--2.0%

What strategies did you use in managing the Fund?

We emphasized income and liquidity, while managing asset-allocation and interest
rate risk. Specifically, we adjusted the Fund's position in mortgage-backed
securities and corporate bonds in order to build positions when their yield
advantages relative to other sectors rose and reducing holdings when the
relative value of mortgage-backed securities and corporate bonds was less
attractive. We also reduced some of the Fund's less liquid securities.

We also managed the Fund's interest rate risk, adjusting duration and accurately
selecting securities based on our anticipated shifts in the yield curve.
Expressed in years, duration measures a fund's level of interest rate risk.
Shortening duration enhances price stability and reduces interest rate risk. In
contrast, lengthening duration increases a fund's sensitivity to changes in
interest rates.

--------------------------------------------------------------------------------
PORTFOLIO MATURITY BREAKDOWN
--------------------------------------------------------------------------------
(as a percentage of 6/30/2000 portfolio assets)

[GRAPH]

Less than 1 year--6.7%
1-5 years--57.0%
5-10 years--36.3%

[GRAPH]

Government/Agency--40.9%
AAA--28.8%
AA--4.4%
A--12.1%
BBB--8.3%
BB--1.7%
B--1.3%
Not Rated--2.5%

10
<PAGE>

EVERGREEN
Short-Duration Income Fund
(formerly, Short-Intermediate Bond Fund)

Portfolio Manager Interview

What is your outlook?

Despite the market consensus that the long expected slowdown has arrived, we
remain cautious. Many of the signs of slowing growth are tentative. Further,
signs of inflation are becoming more abundant. Surveys of corporate America show
that over 60% of the companies interviewed plan on raising prices within the
next six months, with the average price increase expected to approach 4%. In our
opinion, the Federal Reserve Board may need to raise interest rates further to
insure that these emerging price pressures do not spread throughout the economy.
Although we expect bond prices to continue to fluctuate, we are optimistic about
the market's long-term return potential. The Federal Reserve Board is vigilantly
fighting a resurgence of inflation. Just as it did in 1994, we believe the
Federal Reserve Board will be successful in engineering a soft landing that both
avoids recession and keeps inflation contained. Once a soft landing is achieved,
we think bonds should be poised for a significant rally. In this environment, we
intend to continue to emphasize mortgage-backed securities and corporate bonds.
The correction in the equity markets put substantial pressure on corporate
bonds, driving their yield advantages to extremely attractive levels. In our
opinion, their incremental income and potential for price appreciation bodes
well for future returns.

11
<PAGE>

EVERGREEN
Capital Preservation and Income Fund
Financial Highlights
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
Year Ended
Year Ended June 30, September 30,
------------------------- Period Ended -----------------
2000 1999 1998 June 30, 1997 (a) 1996 1995 (b)
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 9.65 $ 9.73 $ 9.80 $ 9.74 $ 9.68 $ 9.51
------- ------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.53 0.53 0.57 0.46 0.61# 0.46
Net realized and
unrealized gains or
losses on securities (0.08) (0.08) (0.07) 0.03 0.01 0.14
------- ------- ------- ------- ------- -------
Total from investment
operations 0.45 0.45 0.50 0.49 0.62 0.60
------- ------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.54) (0.53) (0.57) (0.43) (0.53) (0.43)
Tax basis return of
capital 0 0 0 0 (0.03) 0
------- ------- ------- ------- ------- -------
Total distributions to
shareholders (0.54) (0.53) (0.57) (0.43) (0.56) (0.43)
------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 9.56 $ 9.65 $ 9.73 $ 9.80 $ 9.74 $ 9.68
------- ------- ------- ------- ------- -------
Total return* 4.75% 4.80% 5.24% 5.12% 6.56% 6.36%
Ratios/supplemental data
Net assets, end of
period (thousands) $27,371 $18,149 $18,022 $15,751 $22,684 $19,293
Ratios to average net
assets
Expenses++ 0.85% 0.85% 0.87% 0.92%+ 0.91% 0.86%+
Net investment income 5.69% 5.53% 5.77% 6.24%+ 6.31% 6.37%+
Portfolio turnover rate 42% 41% 88% 52% 74% 67%
</TABLE>

<TABLE>
<CAPTION>
Year Ended
Year Ended June 30, September 30,
------------------------ Period Ended ----------------
2000 1999 1998 June 30, 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 9.65 $ 9.74 $ 9.81 $ 9.75 $ 9.68 $ 9.62
------ ------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.42# 0.46# 0.49 0.39 0.55# 0.52
Net realized and
unrealized gains or
losses on securities (0.05) (0.09) (0.07) 0.04 0.01 0.03
------ ------- ------- ------- ------- -------
Total from investment
operations 0.37 0.37 0.42 0.43 0.56 0.55
------ ------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.46) (0.46) (0.49) (0.37) (0.46) (0.49)
Tax basis return of
capital 0 0 0 0 (0.03) 0
------ ------- ------- ------- ------- -------
Total distributions to
shareholders (0.46) (0.46) (0.49) (0.37) (0.49) (0.49)
------ ------- ------- ------- ------- -------
Net asset value, end of
period $ 9.56 $ 9.65 $ 9.74 $ 9.81 $ 9.75 $ 9.68
------ ------- ------- ------- ------- -------
Total return* 3.90% 3.86% 4.42% 4.53% 5.90% 5.81%
Ratios/supplemental data
Net assets, end of
period (thousands) $5,372 $15,618 $26,056 $32,694 $44,096 $62,998
Ratios to average net
assets
Expenses++ 1.66% 1.65% 1.65% 1.67%+ 1.63% 1.53%
Net investment income 4.68% 4.72% 5.07% 5.52%+ 5.63% 5.46%
Portfolio turnover rate 42% 41% 88% 52% 74% 67%
</TABLE>
(a) For the nine months ended June 30, 1997. The Fund changed its fiscal year
end from September 30 to June 30, effective June 30, 1997.
(b) For the period from December 30, 1994 (commencement of class operations) to
September 30, 1995.
# Net investment income is based on average shares outstanding during the
period.
* Excluding applicable sales charges.
++ The ratio of expenses to average net assets excludes expense reductions and
includes fee waivers.
+ Annualized.

See Combined Notes to Financial Statements.

12
<PAGE>

EVERGREEN
Capital Preservation Income Fund
Financial Highlights
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
Year Ended
Year Ended June 30, September 30,
---------------------- Period Ended --------------
2000 1999 1998 June 30, 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $ 9.65 $ 9.74 $ 9.80 $ 9.74 $ 9.67 $ 9.60
------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income 0.43# 0.46# 0.49 0.40 0.54# 0.52
Net realized and
unrealized gains or
losses on securities (0.06) (0.09) (0.06) 0.03 0.02 0.04
------ ------ ------ ------ ------ ------
Total from investment
operations 0.37 0.37 0.43 0.43 0.56 0.56
------ ------ ------ ------ ------ ------
Distributions to
shareholders from
Net investment income (0.46) (0.46) (0.49) (0.37) (0.46) (0.49)
Tax basis return of
capital 0 0 0 0 (0.03) 0
------ ------ ------ ------ ------ ------
Total distributions to
shareholders (0.46) (0.46) (0.49) (0.37) (0.49) (0.49)
------ ------ ------ ------ ------ ------
Net asset value, end of
period $ 9.56 $ 9.65 $ 9.74 $ 9.80 $ 9.74 $ 9.67
------ ------ ------ ------ ------ ------
Total return* 3.90% 3.86% 4.53% 4.53% 5.91% 5.93%
Ratios/supplemental data
Net assets, end of
period (thousands) $3,959 $3,928 $3,972 $4,105 $4,152 $2,755
Ratios to average net
assets
Expenses++ 1.65% 1.65% 1.65% 1.67%+ 1.64% 1.53%
Net investment income 4.83% 4.72% 5.05% 5.53%+ 5.60% 5.51%
Portfolio turnover rate 42% 41% 88% 52% 74% 67%
</TABLE>
(a) For the nine months ended June 30, 1997. The Fund changed its fiscal year
end from September 30 to June 30, effective June 30, 1997.
# 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 and
includes fee waivers.
+ Annualized.

See Combined Notes to Financial Statements.

13
<PAGE>

EVERGREEN
Intermediate Term Bond Fund
Financial Highlights
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
Year Ended June 30, Year Ended July 31,
--------------------------- Period Ended --------------------
2000 1999 1998 June 30, 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 8.66 $ 9.08 $ 8.93 $ 8.73 $ 8.88 $ 8.84
------- -------- -------- ------- --------- ---------
Income from investment
operations
Net investment income 0.53 0.53 0.57# 0.54 0.59 0.63
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.31) (0.42) 0.20 0.18 (0.16) 0.02
------- -------- -------- ------- --------- ---------
Total from investment
operations 0.22 0.11 0.77 0.72 0.43 0.65
------- -------- -------- ------- --------- ---------
Distributions to
shareholders from net
investment income (0.57) (0.53) (0.62) (0.52) (0.58) (0.61)
Net asset value, end of
period $ 8.31 $ 8.66 $ 9.08 $ 8.93 $ 8.73 $ 8.88
------- -------- -------- ------- --------- ---------
Total return* 2.65% 1.17% 8.82% 8.40% 4.95% 7.76%
Ratios/supplemental data
Net assets, end of
period (thousands) $90,509 $107,714 $123,723 $10,341 $ 12,958 $ 14,558
Ratios to average net
assets
Expenses++ 1.17% 1.10% 1.11% 1.12%+ 1.10% 1.00%
Net investment income 6.17% 5.90% 6.00% 6.43%+ 6.57% 7.13%
Portfolio turnover rate 169% 170% 331% 179% 231% 149%
<CAPTION>
Year Ended June 30, Year Ended July 31,
--------------------------- Period Ended --------------------
2000 1999 1998 June 30, 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 8.66 $ 9.09 $ 8.95 $ 8.74 $ 8.89 $ 8.85
------- -------- -------- ------- --------- ---------
Income from investment
operations
Net investment income 0.46 0.47 0.48# 0.47 0.52 0.56
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.30) (0.43) 0.21 0.20 (0.16) 0.02
------- -------- -------- ------- --------- ---------
Total from investment
operations 0.16 0.04 0.69 0.67 0.36 0.58
------- -------- -------- ------- --------- ---------
Distributions to
shareholders from net
investment income (0.51) (0.47) (0.55) (0.46) (0.51) (0.54)
Net asset value, end of
period $ 8.31 $ 8.66 $ 9.09 $ 8.95 $ 8.74 $ 8.89
------- -------- -------- ------- --------- ---------
Total return* 1.88% 0.31% 7.89% 7.81% 4.10% 6.87%
Ratios/supplemental data
Net assets, end of
period (thousands) $17,719 $ 11,100 $ 10,763 $11,368 $ 16,034 $ 17,985
Ratios to average net
assets
Expenses++ 1.92% 1.85% 1.86% 1.87%+ 1.85% 1.75%
Net investment income 5.40% 5.15% 5.28% 5.68%+ 5.82% 6.38%
Portfolio turnover rate 169% 170% 331% 179% 231% 149%
</TABLE>
(a) For the eleven months ended June 30, 1997. The Fund changed its fiscal
year end from July 31 to June 30, effective June 30, 1997.
# Net investment income is based on average shares outstanding during the
period.
* Excluding applicable sales charges.
++ The ratio of expenses to average net assets excludes expense reductions
and includes fee waivers.
+ Annualized.

See Combined Notes to Financial Statements.

14
<PAGE>

EVERGREEN
Intermediate Term Bond Fund
Financial Highlights
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
Year Ended June 30, Year Ended July 31,
---------------------- Period Ended ---------------------
2000 1999 1998 June 30, 1997 (a) 1996 1995
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $ 8.66 $ 9.09 $ 8.94 $ 8.74 $ 8.89 $ 8.85
------ ------ ------ ------ --------- ----------
Income from investment
operations
Net investment income 0.46 0.47# 0.49# 0.46 0.52 0.55
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.30) (0.43) 0.21 0.20 (0.16) 0.03
------ ------ ------ ------ --------- ----------
Total from investment
operations 0.16 0.04 0.70 0.66 0.36 0.58
------ ------ ------ ------ --------- ----------
Distributions to
shareholders from net
investment income (0.51) (0.47) (0.55) (0.46) (0.51) (0.54)
------ ------ ------ ------ --------- ----------
Net asset value, end of
period $ 8.31 $ 8.66 $ 9.09 $ 8.94 $ 8.74 $ 8.89
------ ------ ------ ------ --------- ----------
Total return* 1.88% 0.31% 8.01% 7.70% 4.10% 6.87%
Ratios/supplemental data
Net assets, end of
period (thousands) $4,680 $4,718 $5,439 $7,259 $ 9,084 $ 10,185
Ratios to average net
assets
Expenses++ 1.92% 1.85% 1.86% 1.87%+ 1.85% 1.75%
Net investment income 5.38% 5.15% 5.26% 5.68%+ 5.82% 6.37%
Portfolio turnover rate 169% 170% 331% 179% 231% 149%
</TABLE>

<TABLE>
<CAPTION>
Year Ended June 30,
-------------------- Period Ended
2000 1999 June 30, 1998 (b)
<S> <C> <C> <C>
CLASS Y SHARES
Net asset value, beginning of period $ 8.66 $ 9.08 $ 9.09
--------- --------- -------
Income from investment operations
Net investment income 0.54 0.56 0.24#
Net realized and unrealized gains or
losses on securities and foreign
currency related transactions (0.30) (0.42) (0.01)
--------- --------- -------
Total from investment operations 0.24 0.14 0.23
--------- --------- -------
Distributions to shareholders from
net investment income (0.59) (0.56) (0.24)
--------- --------- -------
Net asset value, end of period $ 8.31 $ 8.66 $ 9.08
--------- --------- -------
Total return 2.91% 1.43% 2.58%
Ratios/supplemental data
Net assets, end of period (thousands) $ 46,194 $ 54,766 $63,721
Ratios to average net assets
Expenses++ 0.92% 0.85% 0.86%+
Net investment income 6.40% 6.15% 6.23%+
Portfolio turnover rate 169% 170% 331%
</TABLE>
(a) For the eleven months ended June 30, 1997. The Fund changed its fiscal year
end from July 31 to June 30, effective June 30, 1997.
(b) For the period from January 26, 1998 (commencement of class operations) to
June 30, 1998.
# 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 and
includes fee waivers.
+ Annualized.

See Combined Notes to Financial Statements.

15
<PAGE>

EVERGREEN (formerly,
Short-Duration Income Fund Evergreen
Financial Highlights Short-
(For a share outstanding throughout each period) Intermediate
Bond Fund)

<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value, beginning of
period $ 9.68 $ 9.90 $ 9.83 $ 9.82 $ 10.02
------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.56# 0.57 0.61 0.63 0.63
Net realized and unrealized
gains or losses on securities,
futures contracts and foreign
currency related transactions (0.24) (0.22) 0.07 0.02 (0.19)
------- ------- ------- ------- -------
Total from investment operations 0.32 0.35 0.68 0.65 0.44
------- ------- ------- ------- -------
Distributions to shareholders
from net investment income (0.57) (0.57) (0.61) (0.64) (0.64)
------- ------- ------- ------- -------
Net asset value, end of period $ 9.43 $ 9.68 $ 9.90 $ 9.83 $ 9.82
------- ------- ------- ------- -------
Total return* 3.36% 3.59% 7.08% 6.77% 4.45%
Ratios/supplemental data
Net assets, end of period
(thousands) $86,498 $19,127 $16,848 $17,703 $18,630
Ratios to average net assets
Expenses++ 0.92% 0.82% 0.80% 0.72% 0.79%
Net investment income 5.91% 5.78% 6.14% 6.37% 6.35%
Portfolio turnover rate 124% 50% 68% 45% 76%
</TABLE>

<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value, beginning of
period $ 9.70 $ 9.92 $ 9.85 $ 9.84 $ 10.04
------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.49# 0.49 0.52 0.54 0.55
Net realized and unrealized
gains or losses on securities,
futures contracts and foreign
currency related transactions (0.27) (0.23) 0.07 0.01 (0.19)
------- ------- ------- ------- -------
Total from investment operations 0.22 0.26 0.59 0.55 0.36
------- ------- ------- ------- -------
Distributions to shareholders
from net investment income (0.49) (0.48) (0.52) (0.54) (0.56)
------- ------- ------- ------- -------
Net asset value, end of period $ 9.43 $ 9.70 $ 9.92 $ 9.85 $ 9.84
------- ------- ------- ------- -------
Total return* 2.33% 2.66% 6.11% 5.78% 3.62%
Ratios/supplemental data
Net assets, end of period
(thousands) $15,485 $22,553 $22,689 $22,237 $21,006
Ratios to average net assets
Expenses++ 1.67% 1.72% 1.70% 1.62% 1.69%
Net investment income 5.12% 4.87% 5.23% 5.48% 5.45%
Portfolio turnover rate 124% 50% 68% 45% 76%
</TABLE>
# 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 and
includes fee waivers.

See Combined Notes to Financial Statements.

16
<PAGE>

EVERGREEN (formerly,
Short-Duration Income Fund Evergreen
Financial Highlights Short-
(For a share outstanding throughout each period) Intermediate
Bond Fund)

<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value, beginning
of period $ 9.70 $ 9.92 $ 9.85 $ 9.84 $ 10.05
-------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.49# 0.49 0.52 0.54 0.55
Net realized and unrealized
gains or losses on
securities, futures
contracts and foreign
currency related
transactions (0.27) (0.23) 0.07 0.01 (0.20)
-------- -------- -------- -------- --------
Total from investment
operations 0.22 0.26 0.59 0.55 0.35
-------- -------- -------- -------- --------
Distributions to
shareholders from net
investment income (0.49) (0.48) (0.52) (0.54) (0.56)
-------- -------- -------- -------- --------
Net asset value, end of
period $ 9.43 $ 9.70 $ 9.92 $ 9.85 $ 9.84
-------- -------- -------- -------- --------
Total return* 2.33% 2.66% 6.11% 5.77% 3.51%
Ratios/supplemental data
Net assets, end of period
(thousands) $ 30,330 $ 1,360 $ 1,143 $ 1,029 $ 1,155
Ratios to average net
assets
Expenses++ 1.70% 1.72% 1.70% 1.62% 1.69%
Net investment income 5.18% 4.87% 5.25% 5.47% 5.46%
Portfolio turnover rate 124% 50% 68% 45% 76%

<CAPTION>
Year Ended June 30,
------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value, beginning
of period $ 9.68 $ 9.90 $ 9.83 $ 9.82 $ 10.02
-------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.59 0.58 0.62 0.64 0.64
Net realized and unrealized
gains or losses on
securities, futures
contracts and foreign
currency related
transactions (0.25) (0.22) 0.07 0.02 (0.19)
-------- -------- -------- -------- --------
Total from investment
operations 0.34 0.36 0.69 0.66 0.45
-------- -------- -------- -------- --------
Distributions to
shareholders from net
investment income (0.59) (0.58) (0.62) (0.65) (0.65)
-------- -------- -------- -------- --------
Net asset value, end of
period $ 9.43 $ 9.68 $ 9.90 $ 9.83 $ 9.82
-------- -------- -------- -------- --------
Total return 3.57% 3.69% 7.19% 6.88% 4.63%
Ratios/supplemental data
Net assets, end of period
(thousands) $245,279 $335,175 $348,358 $357,706 $352,095
Ratios to average net
assets
Expenses++ 0.67% 0.72% 0.70% 0.62% 0.69%
Net investment income 6.11% 5.88% 6.25% 6.48% 6.45%
Portfolio turnover rate 124% 50% 68% 45% 76%
</TABLE>
# 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 and
includes fee waivers.

See Combined Notes to Financial Statements.

17
<PAGE>

EVERGREEN
Capital Preservation and Income Fund
Schedule of Investments
June 30, 2000

<TABLE>
<CAPTION>
Credit Principal
Rating/\ Amount Value
<S> <C> <C> <C>
ADJUSTABLE RATE MORTGAGE SECURITIES -
77.0% (S)
FHLMC:
5.73%, 08/01/2029........................ AAA $ 1,222,797 $ 1,192,059
6.11%, 07/01/2029........................ AAA 484,891 473,346
6.59%, 06/01/2016........................ AAA 1,405,397 1,419,887
6.74%, 02/01/2028........................ AAA 276,561 281,509
7.14%, 09/01/2017........................ AAA 691,019 710,022
7.15%, 03/01/2019........................ AAA 777,911 816,806
7.22%, 09/01/2028........................ AAA 963,655 955,710
7.28%, 03/01/2022........................ AAA 590,520 601,288
7.29%, 05/01/2019-05/01/2020............. AAA 67,033 67,513
7.33%, 02/01/2021........................ AAA 350,423 350,949
7.36%, 03/01/2021........................ AAA 513,276 519,440
7.37%, 10/01/2021........................ AAA 355,123 361,171
7.40%, 04/01/2020........................ AAA 314,995 315,716
7.45%, 07/01/2030........................ AAA 573,883 583,926
7.46%, 01/01/2022........................ AAA 873,991 894,913
7.47%, 11/01/2021........................ AAA 548,024 562,480
7.52%, 04/01/2022........................ AAA 770,097 788,691
8.14%, 05/01/2026........................ AAA 1,068,063 1,092,178
FNMA:
5.79%, 04/01/2038........................ AAA 928,613 942,031
5.94%, 11/01/2028........................ AAA 1,195,802 1,161,985
6.09%, 05/01/2036........................ AAA 768,112 789,132
6.26%, 03/01/2027........................ AAA 482,045 482,368
6.39%, 11/01/2039........................ AAA 499,077 491,400
6.53%, 03/01/2015........................ AAA 198,484 199,309
6.625%, 08/01/2015....................... AAA 295,749 296,225
6.875%, 06/01/2018....................... AAA 208,017 212,697
6.89%, 10/01/2017........................ AAA 212,753 216,376
7.12%, 07/01/2019........................ AAA 133,828 134,936
7.15%, 11/01/2018........................ AAA 514,688 523,536
7.16%, 11/01/2017........................ AAA 168,895 174,278
7.21%, 03/01/2019........................ AAA 141,365 143,508
7.23%, 12/01/2022........................ AAA 179,319 182,737
7.43%, 07/01/2027........................ AAA 280,460 284,843
7.44%, 02/01/2017........................ AAA 69,261 69,158
7.45%, 01/01/2022........................ AAA 125,663 127,038
7.51%, 09/01/2021........................ AAA 1,941,481 1,988,129
7.54%, 12/01/2022........................ AAA 1,000,840 1,021,393
7.58%, 01/01/2022........................ AAA 409,609 419,977
7.61%, 01/01/2031........................ AAA 668,494 686,710
7.62%, 06/01/2019-12/01/2019............. AAA 758,204 773,983
7.71%, 09/01/2018........................ AAA 883,828 911,722
7.76%, 01/01/2028........................ AAA 249,015 255,527
7.77%, 08/01/2027........................ AAA 774,985 800,669
</TABLE>

18
<PAGE>

EVERGREEN
Capital Preservation and Income Fund
Schedule of Investments(continued)
June 30, 2000

<TABLE>
<CAPTION>
Credit Principal
Rating/\ Amount Value
<S> <C> <C> <C>
ADJUSTABLE RATE MORTGAGE SECURITIES - continued
FNMA - continued
7.89%, 07/01/2020............................. AAA $ 267,446 $ 275,218
8.07%, 12/01/2023............................. AAA 977,543 995,649
8.28%, 10/01/2016............................. AAA 216,588 220,649
10.40%, 04/25/2019............................ AAA 539,054 568,688
GNMA:
6.375%, 06/20/2022............................ AAA 80,467 80,128
7.125%, 12/20/2022-10/20/2027................. AAA 853,373 855,442
-----------
Total Adjustable Rate Mortgage Securities
(cost $28,419,174).......................... 28,273,045
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 9.0% (S)
Carco Auto Loan Master Trust, 144A, 6.69%,
08/15/2004.................................... AAA 555,325 553,606
CoreStates Home Equity Trust, 144A, 6.65%,
05/51/2009.................................... AAA 805,666 798,548
Delta Funding Home Equity Loan Trust, 144A,
7.74%, 04/25/2029............................. AAA 500,000 492,287
Mellon Residential Funding Corp., 144A, 6.11%,
01/25/2029.................................... AAA 1,000,000 950,669
Nomura Depositor Trust, 144A, 6.93%,
01/15/2003.................................... AAA 490,225 488,532
-----------
Total Collateralized Mortgage Obligations
(cost $3,361,326)........................... 3,283,642
-----------
FIXED RATE MORTGAGE SECURITIES - 8.6%
FHLMC:
6.25%, 07/15/2004............................. AAA 500,000 486,579
10.50%, 04/01/2004-10/01/2005................. AAA 138,138 141,168
FNMA:
8.50%, 04/01/2026-10/01/2026.................. AAA 471,295 481,938
9.50%, 04/15/2005............................. AAA 98,455 98,306
11.00%, 01/01/2016-01/01/2018................. AAA 315,243 339,392
12.50%, 07/15/2015............................ AAA 289,495 324,275
GNMA, 10.25%, 11/15/2029....................... AAA 1,274,749 1,286,196
-----------
Total Fixed Rate Mortgage Securities (cost
$3,232,415)................................. 3,157,854
-----------
U.S. TREASURY OBLIGATIONS - 2.4%
U.S. Treasury Notes:
4.75%, 02/15/2004............................. AAA 600,000 570,468
5.50%, 05/31/2003............................. AAA 325,000 317,789
-----------
Total U.S. Treasury Obligations (cost
$910,092)................................... 888,257
-----------
SHORT-TERM INVESTMENTS - 2.8%
REPURCHASE AGREEMENTS - 2.8%
State Street Bank & Trust Co.
6.45%, dated 6/30/2000, maturing 7/3/2000,
maturity value $1,032,555 (cost $1,032,000)
(1)........................................... 1,032,000 1,032,000
-----------
Total Investments - (cost $36,955,007) - 99.8%...................... 36,634,798
Other Assets and Liabilities - 0.2%................................. 67,635
-----------
Net Assets - 100.0%................................................. $36,702,433
===========
</TABLE>

See Combined Notes to Schedules of Investments.

19
<PAGE>

EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments
June 30, 2000

<TABLE>
<CAPTION>
Credit Principal
Rating/\ Amount Value
<S> <C> <C> <C>
ASSET-BACKED SECURITIES - 4.2% (S)
American Express Credit Account, Ser. 1999-1,
Class B, 5.85%, 11/15/2006.................. A $ 2,000,000 $ 1,903,210
California Infrastructure PG & E, Ser. 1997-
1, Class A4, 6.16%, 06/25/2003.............. AAA 835,195 830,438
Contimortgage Home Equity Loan Trust, Ser.
1998-1, Class A6, 6.58%, 12/15/2018......... AAA 2,500,000 2,430,413
CoreStates Home Equity Loan Trust, Ser. 1996-
1, Class A4, 7.00%, 06/15/2012.............. AAA 1,000,000 992,835
CoreStates Home Equity Trust, Ser. 1994-1,
Class A, 6.65%, 05/15/2009.................. AAA 532,649 527,943
------------
Total Asset-Backed Securities (cost
$6,894,769)............................... 6,684,839
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 6.4% (S)
Bear Stearns Comml. Mtge. Securities, Inc.,
Ser. 2000-WF1, Class A2, 7.78%, 02/15/2010.. NA 700,000 714,641
Chase Comml. Mtge. Securities Corp., Ser.
1999-2, Class B, 7.34%, 11/15/2009.......... AA 500,000 486,250
Criimi Mae Finl. Corp., Ser. 1, Class A,
7.00%, 01/01/2033........................... AAA 673,667 635,879
DLJ Mtge. Acceptance Corp., Ser. 1994-3,
Class A1, 6.50%, 04/25/2024................. AA 2,722,197 2,538,054
FNMA:
Ser. 1993-248, Class SA, 3.36%, 08/25/2023.. NR 1,000,000 834,656
Ser. 1997-M6, Class C, 6.85%, 05/17/2020.... NR 650,000 632,458
Manufacturers Hanover Mtge. Corp., Ser. A,
Class A, 11.50%, 04/25/2015................. BBB+ 64,008 67,340
Morgan Stanley Capital I, Inc., Ser. 1997-C1,
Class B, 7.69%, 02/15/2020.................. AA 700,000 703,104
Morgan Stanley Dean Witter, Ser. 2000, Class
B, 7.78%, 01/15/2010........................ NA 750,000 750,562
PNC Mtge. Securities Corp.:
Ser. 1999-5, Class CB3, 6.89%, 07/25/2029... NA 649,482 578,242
Ser. 1999-8, Class CB3, 7.35%, 09/25/2029... NR 694,225 634,240
Prudential Home Mortgage Securities Co., Ser.
1992-38, Class A8, 6.95%,11/25/2022......... AAA 179,000 161,955
Residential Asset Securization Trust, Ser.
2000-A2, Class NB1, 8.00%, 04/25/2030....... AAA 331,515 333,247
Residential Funding Mtge. Securities I, Inc.,
Ser. 1999-S2, Class M1, 6.50%, 01/25/2029... NA 1,158,144 1,040,413
------------
Total Collateralized Mortgage Obligations
(cost $10,120,100)........................ 10,111,041
------------
CORPORATE BONDS - 36.1%
CONSUMER DISCRETIONARY - 6.3%
Auto Components - 0.1%
Hayes Wheels Intl., Inc., Ser. B, 9.125%,
07/15/2007.................................. B 250,000 225,000
------------
</TABLE>

20
<PAGE>

EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments(continued)
June 30, 2000

<TABLE>
<CAPTION>
Credit Principal
Rating/\ Amount Value
<S> <C> <C> <C>
CORPORATE BONDS - continued
CONSUMER DISCRETIONARY - continued
Food Products - 0.1%
Sun World Intl., Inc., Ser. B, 11.25%,
04/15/2004................................. B $ 150,000 $ 143,438
------------
Hotels, Restaurants & Leisure - 0.6%
Boyd Gaming Corp., 9.50%, 07/15/2007........ B+ 150,000 144,750
Harrahs Operating Co., Inc., 7.875%,
12/15/2005................................. BB+ 150,000 141,375
Horseshoe Gaming Holdings, Ser. B, 8.625%,
05/15/2009................................. B+ 150,000 142,125
Isle of Capri Casinos, Inc., 8.75%,
04/15/2009................................. B 150,000 139,500
Mohegan Tribal Gaming Auth., 8.125%,
01/01/2006................................. BB 150,000 143,250
Prime Hospitality Corp., Ser. B, 9.75%,
04/01/2007................................. B+ 150,000 145,500
Station Casinos, Inc., 9.75%, 04/15/2007.... B+ 150,000 150,750
------------
1,007,250
------------
Household Durables - 1.1%
Black & Decker Holdings, Inc., 6.55%,
07/01/2007 144A............................ BBB 1,500,000 1,396,137
MDC Holdings, Inc., 8.375%, 02/01/2008...... BB 150,000 133,500
Standard Pacific Corp., 8.50%, 04/01/2009
#.......................................... BB 150,000 135,750
------------
1,665,387
------------
Leisure Equipment & Products - 0.7%
CSC Holdings, Inc., Ser. B, 8.125%,
07/15/2009................................. BB+ 1,000,000 974,694
Outboard Marine Corp., Ser. B, 10.75%,
06/01/2008 #............................... B 150,000 75,750
------------
1,050,444
------------
Media - 0.8%
Ackerley Group, Inc., Ser. B, 9.00%,
01/15/2009................................. B 150,000 138,375
American Lawyer Media, Inc., Ser. B, 9.75%,
12/15/2007................................. B 150,000 137,625
Echostar DBS Corp., 9.375%, 02/01/2009...... B 150,000 144,750
Hollinger Intl. Publishing, Inc., 9.25%,
02/01/2006................................. BB- 150,000 148,688
Infinity Broadcasting, Inc., 8.875%,
06/15/2007................................. BBB 150,000 151,500
K-III Communications Corp., Ser. B, 8.50%,
02/01/2006................................. BB- 150,000 142,500
Lamar Media Corp., 9.625%, 12/01/2006....... B 150,000 151,500
Sinclair Broadcast Group, Inc., 10.00%,
09/30/2005................................. B 150,000 144,000
TV Guide, Inc., 8.125%, 03/01/2009.......... B+ 150,000 150,375
------------
1,309,313
------------
Multi-line Retail - 0.1%
Ames Dept. Stores, Inc., 10.00%, 04/15/2006
#.......................................... B+ 150,000 91,500
------------
Specialty Retail - 1.1%
Federated Department Stores, Inc., 8.50%,
06/01/2010................................. BBB+ 1,500,000 1,530,031
Jo-Ann Stores, Inc., 10.375%, 05/01/2007.... B 150,000 135,000
Michaels Stores, Inc., 10.875%, 06/15/2006.. BB- 150,000 156,000
------------
1,821,031
------------
</TABLE>

21
<PAGE>

EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments(continued)
June 30, 2000

<TABLE>
<CAPTION>
Credit Principal
Rating/\ Amount Value
<S> <C> <C> <C>
CORPORATE BONDS - continued
CONSUMER DISCRETIONARY - continued
Real Estate - 1.7%
EOP Operating, Ltd., 6.375%, 02/15/2003..... BBB+ $ 850,000 $ 816,640
Prudential Properties, 7.125%, 07/01/2007
144A....................................... A+ 2,000,000 1,874,232
------------
2,690,872
------------
CONSUMER STAPLES - 2.9%
Food & Drug Retailing - 2.0%
CVS Corp., 5.50%, 02/15/2004................ A 3,000,000 2,830,386
Kroger Co., 6.00%, 04/01/2003............... BBB- 414,005 400,097
------------
3,230,483
------------
Food Products - 0.8%
General Mills, Inc., Ser. B, 9.00%,
12/20/2002................................. A+ 1,164,000 1,204,986
------------
Household Products - 0.1%
Playtex Family Products Corp., 9.00%,
12/15/2003 #............................... B 150,000 145,875
------------
ENERGY - 1.8%
Energy Equipment & Services - 0.4%
Oslo Seismic Svcs., Inc., 8.28%,
06/01/2011................................. BBB 658,178 659,495
------------
Oil & Gas - 1.4%
Cross Timbers Oil Co., Ser. B, 9.25%,
04/01/2007................................. B 150,000 146,625
Deeptech Intl., 12.00%, 12/15/2000.......... NR 500,000 500,127
Giant Inds., Inc., 9.00%, 09/01/2007........ B+ 150,000 136,875
Nuevo Energy Co., Ser. B, 9.50%,
06/01/2008................................. B+ 200,000 198,500
Ocean Energy, Inc., Ser. B, 8.375%,
07/01/2008 #............................... BB- 150,000 146,250
Triton Energy, Ltd., 8.75%, 04/15/2002 #.... BB- 150,000 148,875
Union Pacific Resources Group, Inc., 7.30%,
04/15/2009................................. BBB- 1,000,000 966,616
------------
2,243,868
------------
FINANCIALS - 10.0%
Banks - 6.0%
Chase Manhattan Corp., 9.375%, 07/01/2001... A 1,250,000 1,274,343
Harris BankCorp., 9.375%, 06/01/2001........ A+ 800,000 814,117
Mellon Finl. Co., 5.75%, 11/15/2003......... A+ 2,000,000 1,900,900
NationsBank Corp., 6.50%, 08/15/2003........ A 2,000,000 1,949,486
Potomac Capital Investment Corp., Ser. D,
6.62%, 12/05/2005 144A..................... BBB+ 2,000,000 1,853,074
Suntrust Banks, Inc., 6.00%, 01/15/2028..... A+ 2,000,000 1,808,780
------------
9,600,700
------------
Diversified Financials - 4.0%
Budget Group, Inc., 9.125%, 04/01/2006 #.... B+ 150,000 96,750
Donaldson Lufkin & Jenrette, 5.875%,
04/01/2002................................. A- 1,000,000 973,159
Ford Motor Credit Co., 7.375%, 10/28/2009... A 950,000 921,519
Household Fin. Corp., 8.00%, 05/09/2005..... A 1,000,000 1,008,915
</TABLE>

22
<PAGE>

EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments(continued)
June 30, 2000

<TABLE>
<CAPTION>
Credit Principal
Rating/\ Amount Value
<S> <C> <C> <C>
CORPORATE BONDS - continued
FINANCIALS - continued
Diversified Financials - continued
Limestone Electron Trust, 8.625%, 03/15/2003
144A....................................... BBB- $ 500,000 $ 504,355
Nationsrent, Inc., 10.375%, 12/15/2008 #.... B 150,000 96,750
Natl. Rural Util. Corp., 5.00%, 10/01/2002.. AA 500,000 477,010
Paine Webber Group, Inc., Ser. C, 6.73%,
04/03/2008................................. BBB+ 2,350,000 2,149,564
United Rentals, Inc., Ser. B, 9.25%,
01/15/2009................................. BB- 150,000 136,125
------------
6,364,147
------------
HEALTH CARE - 0.8%
Health Care Equipment & Supplies - 0.7%
Baxter Intl., Inc., 7.25%, 02/15/2008....... A 1,164,000 1,136,333
------------
Health Care Providers & Services - 0.1%
Tenet Healthcare Corp., Ser. B, 8.125%,
12/01/2008................................. BB- 150,000 138,000
------------
INDUSTRIALS - 3.5%
Aerospace & Defense - 0.6%
Lockheed Martin Corp., 7.95%, 12/01/2005.... BBB- 1,000,000 1,007,792
------------
Airlines - 0.6%
Continental Airlines, Inc., Passthru Cert.,
Ser. 1999, Class B, 6.795%, 02/02/2020..... AA- 997,208 912,809
------------
Building Products - 0.1%
American Standard, Inc., 7.375%, 02/01/2008
#.......................................... BB- 150,000 136,500
------------
Commercial Services & Supplies - 0.7%
Century Communications Corp., 8.875%,
01/15/2007................................. BB- 250,000 231,250
Republic Services, Inc., 6.625%,
05/15/2004................................. BBB 1,000,000 931,022
------------
1,162,272
------------
Electronic Equipment & Instruments - 0.0%
Comptronix Corp., 6.75%, 03/01/2002 [_] .... NA 558,273 23,336
------------
Industrial Conglomerates - 0.9%
Honeywell Intl., Inc., 7.50%, 03/01/2010 #.. A 1,000,000 1,003,707
Mark IV Inds., Inc., 7.50%, 09/01/2007
144A....................................... BB- 250,000 191,538
Nortek, Inc., Ser. B, 8.875%, 08/01/2008.... B+ 150,000 136,500
------------
1,331,745
------------
Machinery - 0.1%
Eagle-Picher Inds., 9.375%, 03/01/2008...... B- 125,000 106,875
Holley Performance Products, Inc., Ser. B,
12.25%, 09/15/2007......................... B+ 150,000 108,750
------------
215,625
------------
Metals & Mining - 0.5%
Wheeling Pittsburgh Corp., 9.375%,
11/15/2003................................. AAA 750,000 775,968
------------
</TABLE>

23
<PAGE>

EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments(continued)
June 30, 2000

<TABLE>
<CAPTION>
Credit Principal
Rating/\ Amount Value
<S> <C> <C> <C>
CORPORATE BONDS - continued
MATERIALS - 1.4%
Chemicals - 1.0%
Dow Chemical Co., 8.625%, 04/01/2006........ A $ 1,164,000 $ 1,236,592
Lyondell Chemical Co., Ser. A, 9.625%,
05/01/2007................................. BB 150,000 148,125
Scotts Co., 8.625%, 01/15/2009 144A......... B+ 150,000 144,750
------------
1,529,467
------------
Containers & Packaging - 0.1%
Owens Illinois, Inc., 7.35%, 05/15/2008..... BB+ 75,000 65,415
Packaging Corp. of America, 9.625%,
04/01/2009................................. B+ 150,000 149,625
------------
215,040
------------
Metals & Mining - 0.3%
P&L Coal Holdings Corp., Ser. B, 9.625%,
05/15/2008................................. B 250,000 233,125
WHX Corp., 10.50%, 04/15/2005............... B- 250,000 196,250
------------
429,375
------------
TELECOMMUNICATION SERVICES - 3.7%
Diversified Telecommunication Services - 3.4%
GTE Corp., 6.36%, 04/15/2006................ A+ 1,800,000 1,698,476
Hyperion Telecommunications, Inc., Ser. B,
12.25%, 09/01/2004......................... BB- 150,000 152,250
Intermedia Communications, Inc., Ser. B,
8.60%, 06/01/2008.......................... B 150,000 139,500
MCI Worldcom, Inc., 6.125%, 04/15/2002...... A- 1,000,000 976,933
Nextel Communications, Inc., 9.375%,
11/15/2009................................. B 150,000 144,000
Nextlink Communications, Inc., 12.50%,
04/15/2006................................. B 150,000 157,500
Qwest Communications Intl., Inc., Ser. B,
7.50%, 11/01/2008.......................... BB+ 1,000,000 971,100
Time Warner, Inc., 9.625%, 05/01/2002....... BBB 1,000,000 1,036,977
Williams Communications Group, Inc.,
10.875%, 10/01/2009........................ BB- 150,000 147,375
------------
5,424,111
------------
Wireless Telecommunications Services - 0.3%
Price Communications Wireless, Inc.:
11.75%, 07/15/2007......................... B- 150,000 162,000
Ser. B, 9.125%, 12/15/2006................. B+ 150,000 152,250
Voicestream Wireless Corp., 10.375%,
11/15/2009................................. B- 150,000 156,000
------------
470,250
------------
UTILITIES - 5.7%
Electric Utilities - 3.4%
AES Corp., 8.50%, 11/01/2007................ B+ 250,000 229,375
Calpine Corp., 7.75%, 04/15/2009............ BB+ 150,000 142,125
Commonwealth Edison Co., 8.00%, 05/15/2008.. AAA 3,000,000 3,070,176
</TABLE>

24
<PAGE>

EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments(continued)
June 30, 2000

<TABLE>
<CAPTION>
Credit Principal
Rating/\ Amount Value
<S> <C> <C> <C>
CORPORATE BONDS - continued
UTILITIES - continued
Electric Utilities - continued
El Paso Energy Corp., 6.75%, 05/15/2009.... BBB $ 600,000 $ 559,956
LSP Energy, L.P., Ser. A, 7.16%,
01/15/2014................................ BBB- 1,500,000 1,433,347
------------
5,434,979
------------
Gas Utilities - 2.2%
Enron Corp., 6.725%, 11/17/2008............ BBB+ 2,000,000 1,846,366
Western Gas Resources, Inc., 10.00%,
06/15/2009................................ BB- 150,000 155,625
Williams Gas Pipelines Co., 7.375%,
11/15/2006 144A........................... BBB 1,500,000 1,473,473
------------
3,475,464
------------
Water Utilities - 0.1%
Azurix Corp., 10.375%, 02/15/2007 144A..... BB 150,000 145,500
------------
Total Corporate Bonds (cost
$61,107,409)............................ 57,418,355
------------
FOREIGN BONDS - CORPORATE (PRINCIPAL AMOUNT
DENOMINATED IN CURRENCY INDICATED) - 0.0%
FINANCIALS - 0.0%
Banks - 0.0%
Nykredit, 6.00%, 10/01/2029, DKK........... NA 35,000 4,102
------------
Diversified Financials - 0.0%
Realkredit Danmark, 6.00%, 10/01/2029,
DKK....................................... NA 30,000 3,516
------------
Total Foreign Bonds - Corporate (cost
$9,131)................................. 7,618
------------
MORTGAGE-BACKED SECURITIES - 19.5%
FHLMC, Ser. 1567, Class A, 5.17%,
07/15/2023................................ AAA $ 148,394 127,015
FNMA:
6.50%, 10/01/2028-05/01/2029.............. AAA 8,682,828 8,195,304
7.00%, 07/01/2028......................... AAA 1,284,813 1,243,018
7.50%, 12/01/2029-04/01/2030.............. AAA 11,170,205 11,018,452
8.00%, 11/01/2029......................... AAA 389,394 391,364
8.00%, TBA,............................... AAA 10,000,000 10,040,600
------------
Total Mortgage-Backed Securities (cost
$31,389,498)............................ 31,015,753
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 12.2%
FHLB, 4.875%, 01/22/2002................... AAA 4,000,000 3,883,332
FHLMC:
5.54%, 10/27/2008......................... AAA 2,000,000 1,773,844
6.875%, 01/15/2005........................ AAA 9,000,000 8,953,155
FNMA:
7.00%, 08/01/2029......................... AAA 1,907,812 1,842,488
7.125%, 06/15/2010........................ AAA 3,000,000 3,008,172
------------
Total U.S. Government & Agency
Obligations (cost $19,694,040).......... 19,460,991
------------
</TABLE>

25
<PAGE>

EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments(continued)
June 30, 2000

<TABLE>
<CAPTION>
Credit Principal
Rating/\ Amount Value
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS - 12.7%
U.S. Treasury Bonds, 6.125%, 08/15/2029...... AAA $12,600,000 $ 12,737,819
U.S. Treasury Notes:
5.875%, 11/15/2004.......................... AAA 4,850,000 4,778,768
6.50%, 02/15/2010........................... AAA 2,575,000 2,663,516
------------
Total U.S. Treasury Obligations (cost
$19,779,054).............................. 20,180,103
------------
YANKEE OBLIGATIONS - CORPORATE - 4.6%
CONSUMER DISCRETIONARY - 0.2%
Media - 0.2%
Imax Corp., 7.875%, 12/01/2005............... BB- 150,000 136,500
Telewest Communications, Plc, 9.625%,
10/01/2006.................................. B+ 125,000 117,500
------------
254,000
------------
ENERGY - 1.6%
Energy Equipment & Services - 0.2%
Petroleum GEO Svcs., 7.50%, 03/31/2007....... BBB 450,000 432,315
------------
Oil & Gas - 1.4%
Gulf Canada Resources, Ltd., 8.35%,
08/01/2006.................................. BBB- 250,000 248,750
YPF Sociedad Anonima, 7.25%, 03/15/2003...... BBB- 2,000,000 1,945,000
------------
2,193,750
------------
FINANCIALS - 0.4%
Banks - 0.4%
Westpac Banking Corp., 9.125%, 08/15/2001.... A+ 700,000 713,364
------------
INDUSTRIALS - 0.4%
Banks - 0.4%
Bayerische Landesbank Girozen, New York, Ser.
D, 6.20%, 02/09/2006........................ AAA 675,000 635,301
------------
MATERIALS - 0.4%
Metals & Mining - 0.1%
Bulong Operation Property Ltd., 12.50%,
12/15/2008.................................. B 250,000 120,625
------------
Paper & Forest Products - 0.3%
Domtar, Inc., 8.75%, 08/01/2006.............. BBB- 150,000 155,625
Norampac, Inc., 9.50%, 02/01/2008 #.......... BB 150,000 145,500
Tembec Inds., Inc, 8.625%, 06/30/2009........ BB+ 150,000 144,750
------------
445,875
------------
TELECOMMUNICATION SERVICES - 0.8%
Diversified Telecommunication Services - 0.8%
Deutsche Telekom Intl., 8.00%, 06/15/2010.... AA- 1,200,000 1,209,703
------------
</TABLE>

26
<PAGE>

EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments (continued)
June 30, 2000

<TABLE>
<CAPTION>
Credit Principal
Rating/\ Amount Value
<S> <C> <C> <C>
YANKEE OBLIGATIONS - CORPORATE - continued
UTILITIES - 0.8%
Electric Utilities - 0.8%
TXU Eastern Funding Co., 6.75%,
05/15/2009................................ BBB+ $ 1,500,000 $ 1,347,192
------------
Total Yankee Obligations - Corporate
(cost $7,750,879)....................... 7,352,125
------------
YANKEE OBLIGATIONS - GOVERNMENT - 1.3%
Manitoba Province, Canada, Ser. CQ, 8.00%,
04/15/2002 (cost $1,995,779).............. AA- 2,000,000 2,027,228
------------
SHORT-TERM INVESTMENTS - 9.2%
REPURCHASE AGREEMENTS - 7.9%
State Street Bank & Trust Co.
6.45%, dated 6/30/2000, maturing 7/3/2000,
maturity value $12,549,742 (cost
$12,543,000) (2).......................... 12,543,000 12,543,000
------------
<CAPTION>
Shares Value
<S> <C> <C> <C>
MUTUAL FUND SHARES - 1.3%
Navigator Prime Portfolio (cost $2,139,670)
##........................................ 2,139,670 2,139,670
------------
Total Short-Term Investments (cost
$14,682,670)............................ 14,682,670
------------
Total Investments - (cost $173,423,329) - 106.2%................. 168,940,723
Other Assets and Liabilities - (6.2%)............................ (9,838,884)
------------
Net Assets - 100.0%.............................................. $159,101,839
============
</TABLE>

See Combined Notes to Schedules of Investments.

27
<PAGE>

EVERGREEN (formerly,
Short-Duration Income Fund Evergreen
Schedule of Investments Short-
June 30, 2000 Intermediate
Bond Fund)

<TABLE>
<CAPTION>
Credit Principal
Rating/\ Amount Value
<S> <C> <C> <C>
ASSET-BACKED SECURITIES - 21.1% (S)
Advanta Home Equity Loan Trust:
Ser. 1992-4, Class A1, 7.20%, 11/25/2008.... AAA $ 1,661,651 $ 1,630,520
Ser. 1993-2, Class A2, 6.15%, 10/25/2009.... AAA 387,516 376,641
Advanta Mtge. Loan Trust:
Ser. 1993-3, Class A3, 4.75%, 11/25/2009.... AAA 98,451 97,592
Ser. 1993-4, Class A2, 5.55%, 03/25/2010.... AAA 211,584 184,746
AFG Receivables Trust:
Ser. 1997-A, Class A, 6.35%, 10/15/2002..... AAA 534,154 531,609
Ser. 1997-B, Class A, 6.20%, 02/15/2003..... AAA 253,351 251,521
Ser. 1997-B, Class C, 7.00%, 02/15/2003..... BBB 281,501 280,385
American Express Credit Account Master Trust,
Ser. 1999-2, Class A, 5.95%,12/15/2006...... AAA 3,700,000 3,548,244
Amresco Residential Securities Mtge. Loan
Trust, Ser. 1998-2, Class A2, 6.25%,
05/25/2022.................................. AAA 2,969,563 2,947,069
BankBoston Home Equity Loan Trust, Ser. 1998-
2, Class A3, 6.01%, 06/25/2013.............. AAA 4,000,000 3,885,180
Capital One Master Trust, Ser. 1998-4, Class
A, 5.43%, 01/15/2007........................ AAA 2,000,000 1,896,370
Contimortgage Home Equity Loan Trust, Ser.
1996-1, Class A5, 6.15%, 03/15/2011......... AAA 685,701 683,311
Continental Airlines, Inc., Ser. 1997, Class
1B, 7.46%, 10/01/2014....................... A+ 2,358,960 2,271,431
Credit Suisse First Boston Mtge. Secs. Corp.,
Ser. 1996-2, Class A6, 7.18%, 02/25/2018.... AAA 4,000,000 3,912,000
Empire Funding Home Loan Owner Trust, Ser.
1998-1, Class A4, 6.64%, 12/25/2012......... AAA 5,495,999 5,382,644
EQCC Home Equity Loan Trust, Ser. 1998-2,
Class A6F, 6.16%, 04/15/2008................ AAA 6,858,000 6,609,500
Equifax Credit Corp. Home Equity Loan Trust,
Ser. 1994-1, Class B, 5.75%, 03/15/2009..... AAA 257,941 249,369
Fifth Third Bank Auto Grantor Trust, Ser.
1996, Class A, 6.20%, 09/15/2001............ AAA 28,917 28,901
First USA Credit Card Master Trust, Ser.
1998-9, Class A, 5.28%, 09/18/2006.......... AAA 5,000,000 4,712,225
Fleetwood Credit Grantor Trust, Ser. 1993-B,
Class A, 4.95%, 08/15/2008.................. AAA 2,511,461 2,417,570
Franklin Auto Trust, Ser. 1999-1, Class A2,
6.05%, 12/15/2006........................... AAA 2,880,000 2,828,837
Fund America Invs. Corp., Ser. 1999-A, Class
A5, 7.51%, 06/25/2023....................... AAA 5,594,588 5,631,288
GE Capital Mtge. Funding Corp., Ser. 1999-
HE3, Class A3, 7.11%, 07/25/2014............ AAA 3,100,000 3,068,209
Green Tree Fin. Corp., Ser. 1999-A, Class A5,
6.13%, 02/15/2019........................... AAA 3,100,000 2,957,447
HFC Home Equity Loan Trust, Ser. 1999-1,
Class A2, 6.95%, 10/20/2023................. AAA 3,460,000 3,428,047
</TABLE>

28
<PAGE>

EVERGREEN (formerly,
Short-Duration Income Fund Evergreen
Schedule of Investments (continued) Short-
June 30, 2000 Intermediate
Bond Fund)

<TABLE>
<CAPTION>
Credit Principal
Rating/\ Amount Value
<S> <C> <C> <C>
ASSET-BACKED SECURITIES - continued
J.C. Penney Master Credit Card Trust, Ser. E,
Class A, 5.50%, 06/15/2007................... AAA $ 3,575,000 $ 3,397,233
Key Auto Fin. Trust, Ser. 1999-1, Class A4,
5.83%, 01/15/2007............................ AAA 5,000,000 4,882,425
Life Fin. Home Loan Owner Trust, Ser. 1997-3,
Class A2, 6.79%, 10/25/2011.................. AAA 2,347,227 2,334,188
Merrill Lynch Mtge. Invs., Inc., Ser. 1992D,
Class A5, 7.95%, 07/15/2017.................. AAA 969,177 966,575
Prudential Securities Secd. Financing Corp.,
Ser. 1994-4, Class A1, 8.12%, 02/15/2025..... AAA 1,796,842 1,814,190
Southern Pacific Secd. Assets Corp., Ser.
1998-1, Class A6, 7.08%, 03/25/2028.......... AAA 2,500,000 2,361,238
Union Acceptance Corp.:
Ser. 1996B, Class A, 6.45%, 07/09/2003....... AAA 262,199 261,346
Ser. 1997A, Class A3, 6.48%, 05/10/2004...... AAA 430,000 424,567
Ser. 1997B, Class A2, 6.70%, 06/08/2003...... AAA 1,224,647 1,220,550
Ser. 1998D, Class A3, 5.75%, 06/09/2003...... AAA 2,265,682 2,251,601
-----------
Total Asset-Backed Securities (cost
$81,123,623)............................... 79,724,569
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 10.0% (S)
FHLMC, Ser. 1997, Class 1991-PA, 6.00%,
03/15/2014................................... AAA 419,101 418,160
FNMA:
Ser. 1992, Class G44H, 8.00%, 11/25/2006..... AAA 2,100,000 2,116,412
Ser. 1998-W8, Class A4, 6.02%, 09/25/2028.... AAA 3,000,000 2,870,625
Blackrock Capital Fin., L.P., Ser. 1997-C1,
Class D, 7.15%, 10/25/2026 144A.............. NA 3,250,000 3,165,289
Carco Auto Loan Master Trust, Ser. 1997-1,
Class A, 6.69%, 08/15/2004................... AAA 2,037,890 2,031,582
Chase Mtge. Fin. Trust:
Ser. 1999-S3, Class B, 6.25%, 03/25/2014..... NA 380,297 352,933
Ser. 1999-S3, Class M, 6.25%, 03/25/2014..... NA 1,199,231 1,108,923
Citicorp Mtge. Securities, Inc., Ser. 1992-18,
Class A1, Step Bond, 7.45%,11/25/2022 +...... AAA 5,637,737 5,803,627
CMC Securities Corp., Ser. 1993-D, Class D3,
10.00%, 07/25/2023........................... AAA 157,253 157,445
DLJ Mtge. Acceptance Corp., Ser. 1991-3, Class
A1, Step Bond, 7.08%,02/20/2021 +............ AA+ 1,848,211 1,843,982
Glendale Federal Bank:
Ser. 1990-1, Class A, 7.58%, 10/25/2029...... AA+ 3,760,380 3,759,028
Ser. 1990-3, Class A1, 7.90%, 03/25/2030..... AA 1,705,623 1,705,409
Iroquois Trust, Ser. 1997-3, Class A, 6.68%,
11/10/2003 144A.............................. AAA 1,632,868 1,626,377
Prudential Home Mtge. Securities, Ser. 1993-
39, Class A8, 6.50%,10/25/2008............... AAA 3,096,946 3,044,871
Prudential Securities Secd. Financing Corp.,
Ser. 1998-C1, Class A1A1, 6.11%, 11/15/2002.. AAA 2,521,945 2,501,832
</TABLE>

29
<PAGE>

EVERGREEN (formerly,
Short-Duration Income Fund Evergreen
Schedule of Investments (continued) Short-
June 30, 2000 Intermediate
Bond Fund)

<TABLE>
<CAPTION>
Credit Principal
Rating/\ Amount Value
<S> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS - continued
RMF Commercial Mtge., Ser. 1997-1, Class A1, 6.38%, 01/15/2019
144A........................................................... NR $ 2,260,203 $ 2,215,598
Saxon Mtge. Securities Corp.:
Ser. 1993- 8A, Class 1A2, 7.375%, 09/25/2023................... AAA 520,066 518,477
Ser. 1995-1, Class A1, 8.18%, 04/25/2025....................... AAA 2,414,152 2,451,442
-----------
Total Collateralized Mortgage Obligations (cost $37,867,933).. 37,692,012
-----------
CORPORATE BONDS - 20.8%
CONSUMER DISCRETIONARY - 3.4%
Food Products - 0.4%
Shoppers Food Warehouse Corp., 9.75%, 06/15/2004................ BBB+ 1,500,000 1,573,890
-----------
Hotels, Restaurants & Leisure - 0.3%
Casino Magic Louisiana Corp., Ser. B, 13.00%, 08/15/2003........ B+ 1,000,000 1,065,000
-----------
Leisure Equipment & Products - 0.2%
CSC Holdings, Inc., 9.875%, 05/15/2006.......................... BB- 750,000 768,750
-----------
Media - 1.2%
Telewest Communications, Plc, Step Bond,
0.00%, 10/01/2007 +............................................ B+ 500,000 476,250
Times Mirror Co., 7.45%, 10/15/2009............................. A 4,000,000 3,959,240
-----------
4,435,490
-----------
Multi-line Retail - 1.3%
K-Mart Corp., 8.375%, 12/01/2004................................ BB+ 375,000 358,267
Wal-Mart Stores, Inc., 6.15%, 08/10/2001 #...................... AA 4,850,000 4,804,696
-----------
5,162,963
-----------
ENERGY - 1.5%
Oil & Gas - 1.5%
Eott Energy Partners LP, 11.00%, 10/01/2009..................... BB 500,000 510,000
Exxon Capital Corp., 6.125%, 09/08/2008......................... AAA 5,000,000 4,684,225
Pride Petroleum Svcs., Inc., 9.375%, 05/01/2007................. BB 550,000 551,375
-----------
5,745,600
-----------
FINANCIALS - 9.9%
Banks - 3.2%
BB&T Corp., 6.375%, 06/30/2005.................................. BBB+ 3,000,000 2,849,469
First Security Corp., 6.40%, 02/10/2003......................... BBB+ 5,000,000 4,870,160
Security Pacific Corp., 10.45%, 05/08/2001...................... A 500,000 511,417
Structured Asset Securities Corp., Ser. 1990-1, Class 1, 7.56%,
04/01/2020..................................................... AAA 3,729,114 3,737,558
-----------
11,968,604
-----------
Diversified Financials - 5.7%
American Express Credit Corp., Step Bond, 6.25%, 08/10/2005 +... A+ 2,000,000 1,974,194
Associates Corp., NA, 5.75%, 11/01/2003......................... A+ 4,000,000 3,782,040
</TABLE>

30
<PAGE>

EVERGREEN (formerly,
Short-Duration Income Fund Evergreen
Schedule of Investments (continued) Short-
June 30, 2000 Intermediate
Bond Fund)

<TABLE>
<CAPTION>
Credit Principal
Rating/\ Amount Value
<S> <C> <C> <C>
CORPORATE BONDS - continued
FINANCIALS - continued
Diversified Financials - continued
Duke Capital Corp., Ser. A, 6.25%,
07/15/2005.................................. A $ 1,500,000 $ 1,423,464
ERAC USA Fin. Co., 7.95%, 12/15/2009 144A.... BBB+ 4,000,000 3,893,980
General Mtrs. Acceptance Corp., 6.875%,
07/15/2001.................................. A 2,250,000 2,241,104
LG&E Capital Corp., 5.75%, 11/01/2001 144A... BBB+ 5,000,000 4,841,290
Salomon, Inc.:
7.25%, 05/01/2001........................... A 2,250,000 2,249,185
7.30%, 05/15/2002........................... A 1,000,000 998,969
-----------
21,404,226
-----------
Insurance - 1.0%
Associated P & C Holdings, Inc., 6.75%,
07/15/2003 144A............................. BBB 3,000,000 2,890,281
Horace Mann Educators Corp., 6.625%,
01/15/2006.................................. A- 1,000,000 946,023
-----------
3,836,304
-----------
HEALTH CARE - 0.1%
Health Care Providers & Services - 0.1%
Tenet Healthcare Corp., 8.625%, 01/15/2007... BB- 500,000 480,000
-----------
INDUSTRIALS - 2.5%
Commercial Services & Supplies - 0.6%
Adelphia Communications Corp., 7.50%,
01/15/2004.................................. B+ 1,000,000 920,000
Century Communications Corp., 9.50%,
08/15/2000.................................. BB- 1,207,000 1,214,181
-----------
2,134,181
-----------
Electrical Equipment - 0.7%
Virginia Elec. & Pwr. Co., 6.30%,
06/21/2001.................................. A- 2,700,000 2,674,755
-----------
Machinery - 1.2%
Case Corp., Ser. B, 6.25%, 12/01/2003........ BBB 5,000,000 4,698,880
-----------
INFORMATION TECHNOLOGY - 0.7%
Computers & Peripherals - 0.5%
Sun Microsystems Inc., 7.00%, 08/15/2002..... BBB+ 2,000,000 1,989,990
-----------
Semiconductor Equipment & Products - 0.2%
Amkor Technology, Inc., 9.25%, 05/01/2006.... BB- 600,000 594,750
-----------
TELECOMMUNICATION SERVICES - 0.9%
Diversified Telecommunication Services - 0.9%
Allegiance Telecom, Inc., 12.875%,
05/15/2008.................................. B 350,000 380,625
Level 3 Communications, Inc., 11.00%,
03/15/2008 144A............................. B 1,000,000 995,000
Worldcom, Inc., 6.125%, 08/15/2001........... A- 2,000,000 1,975,184
-----------
3,350,809
-----------
UTILITIES - 1.8%
Electric Utilities - 1.0%
FPL Group Capital, Inc., 7.375%, 06/01/2009.. A+ 4,000,000 3,901,028
-----------
</TABLE>

31
<PAGE>

EVERGREEN (formerly,
Short-Duration Income Fund Evergreen
Schedule of Investments (continued) Short-
June 30, 2000 Intermediate
Bond Fund)

<TABLE>
<CAPTION>
Credit Principal
Rating/\ Amount Value
<S> <C> <C> <C>
CORPORATE BONDS - continued
UTILITIES - continued
Gas Utilities - 0.8%
Williams Gas Pipelines Co., 7.375%,
11/15/2006 144A............................ BBB $ 3,000,000 $ 2,946,945
------------
Total Corporate Bonds (cost $80,584,699).. 78,732,165
------------
MORTGAGE-BACKED SECURITIES - 37.6%
FHA Reilly Debenture, 6.25%, 11/24/2008..... AAA 2,821,342 2,538,672
FHLB:
5.47%, 02/19/2004.......................... AAA 2,824,814 2,701,415
6.04%, 04/28/2003.......................... AAA 383,887 382,601
6.07%, 08/28/2008.......................... AAA 4,105,000 3,779,904
6.54%, 12/12/2007.......................... AAA 3,300,000 3,135,026
FHLMC:
6.00%, 06/01/2006.......................... AAA 8,748,263 8,399,470
7.00%, 03/15/2010.......................... AAA 26,150,000 25,974,742
7.24%, 05/01/2014.......................... AAA 3,532,797 3,533,638
10.50%, 09/01/2015......................... AAA 89,681 96,068
FNMA:
6.00%, 11/01/2008.......................... AAA 2,304,410 2,202,440
6.625%, 09/15/2009......................... AAA 15,614,000 15,083,577
7.00%, 10/01/2006-08/01/2029............... AAA 29,428,995 28,851,129
7.15%, 06/01/2029.......................... AAA 3,499,005 3,534,961
8.00%, 10/01/2014-11/01/2014............... AAA 9,252,235 9,354,380
8.50%, 07/01/2012-02/01/2028............... AAA 11,557,484 11,829,301
10.00%, 06/01/2005......................... AAA 77,556 80,064
11.00%, TBA ............................... AAA 3,644,967 3,958,181
GNMA:
6.00%, 11/15/2013-12/15/2013............... AAA 3,994,289 3,822,056
6.75%, 07/20/2022-09/20/2023............... AAA 2,946,987 2,959,635
7.00%, 12/15/2008.......................... AAA 725,142 720,903
7.125%, 10/20/2022-12/20/2022.............. AAA 3,575,436 3,583,328
8.05%, 06/15/2019-10/15/2020............... AAA 5,237,679 5,288,370
------------
Total Mortgage-Backed Securities (cost
$144,971,797)............................ 141,809,861
------------
U.S. TREASURY OBLIGATIONS - 2.5%
U.S. Treasury Notes:
4.75%, 11/15/2008.......................... AAA 3,483,000 3,164,090
6.125%, 08/15/2007......................... AAA 1,300,000 1,292,687
6.50%, 02/15/2010.......................... AAA 5,000,000 5,171,875
------------
Total U.S. Treasury Obligations (cost
$9,379,183).............................. 9,628,652
------------
YANKEE OBLIGATIONS-CORPORATE - 4.9%
CONSUMER DISCRETIONARY - 0.5%
Media - 0.5%
Rogers Cablesystems Ltd., Ser. B,
10.00%, 03/15/2005......................... BB+ 1,700,000 1,746,750
------------
</TABLE>

32
<PAGE>

EVERGREEN (formerly,
Short-Duration Income Fund Evergreen
Schedule of Investments (continued) Short-
June 30, 2000 Intermediate
Bond Fund)

<TABLE>
<CAPTION>
Credit Principal
Rating/\ Amount Value
<S> <C> <C> <C>
YANKEE OBLIGATIONS-CORPORATE - continued
FINANCIALS - 3.1%
Banks - 1.6%
Natl. Bank of Canada, Ser. B, 8.125%,
08/15/2004.................................. A- $ 6,000,000 $ 6,138,036
------------
Diversified Financials - 1.5%
Ford Capital BV, 9.875%, 05/15/2002.......... A 2,525,000 2,632,876
Principal Finl. Group, Australia, 8.20%,
08/15/2009 144A............................. A 3,000,000 2,952,588
------------
5,585,464
------------
TELECOMMUNICATION SERVICES - 1.3%
Diversified Telecommunication Services - 0.2%
Clearnet Communications, Inc., Sr. Disc.
Notes, Step Bond, 0.00%,12/15/2005 +........ B 850,000 881,875
------------
Wireless Telecommunications Services - 1.1%
Vodafone Airtouch, Plc, 7.75%, 02/15/2010.... A- 4,000,000 3,972,436
------------
Total Yankee Obligations-Corporate
(cost $18,790,027)........................ 18,324,561
------------
YANKEE OBLIGATIONS-GOVERNMENT - 1.1%
Ontario, Canada, 7.75%, 06/04/2002 (cost
$4,106,982)................................. AA- 4,000,000 4,041,136
------------
SHORT-TERM INVESTMENTS - 1.5%
REPURCHASE AGREEMENTS - 1.2%
Dresdner Bank AG
6.40%, dated 6/30/2000, maturing 7/3/2000,
maturity value $4,414,195 (cost $4,411,842)
(3)......................................... 4,411,842 4,411,842
------------
<CAPTION>
Shares Value
<S> <C> <C> <C>
MUTUAL FUND SHARES - 0.3%
Navigator Prime Portfolio (cost $1,323,920)
##.......................................... 1,323,920 1,323,920
------------
Total Short-Term Investments (cost
$5,735,762)............................... 5,735,762
------------
Total Investments - (cost $382,560,006) - 99.5%.................... 375,688,718
Other Assets and Liabilities - 0.5%................................ 1,903,313
------------
Net Assets - 100.0%................................................ $377,592,031
============
</TABLE>

See Combined Notes to Schedules of Investments.

33
<PAGE>

Combined Notes to Schedules of Investments
June 30, 2000

144A Security that may be sold to qualified institutional buyers under Rule
144A of the Securities Act of 1933, as amended. This security has been
determined to be liquid under guidelines established by the Board of
Trustees.
(S) The average maturity may be shorter than the stated maturity due to
accelerated interim principal payments.
+ 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
recognize interest income daily for the bond. This rate is based on total
expected 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.
. Security which has defaulted on payment of interest and/or principal.
# All or a portion of this security is on loan.
## Represents investment of cash collateral received for securities on loan.
[_] No market quotation available. Valued at fair value as determined in good
faith under procedures established by the Board of Trustees.
(1) The repurchase agreement is fully collateralized by $1,045,000 FNMA, 5.94%,
9/04/2001; value including accrued interest is $1,054,144.
(2) The repurchase agreement is fully collateralized by $12,715,000 FNMA,
6.00%, 9/24/2001; value including accrued interest is $12,794,469.
(3) The repurchase agreement is fully collateralized by $801,000, U.S. Treasury
Bills, 11/16/2000 to 5/31/2001; value including accrued interest is
$771,940 and $3,079,000 U.S. Treasury Bonds, 6.00% to 12.50%, 8/15/2014 to
2/15/2026; value including accrued interest is $3,732,201.
/\ Credit ratings are unaudited and rated by Moody's Investors Service where
Standard and Poor's ratings are not available.

Summary of Abbreviations:
DKK Danish Krone
FHA Federal Housing Authority
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
NA Not Available
NR Not Rated
TBA To Be Announced

See Combined Notes to Financial Statements.

34
<PAGE>

EVERGREEN
Short and Intermediate Term Bond Funds
Statements of Assets and Liabilities
June 30, 2000

<TABLE>
<CAPTION>
Capital Intermediate
Preservation Bond Short-Duration
Fund Fund Fund
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Identified cost of securities....... $36,955,007 $173,423,329 $382,560,006
Net unrealized losses on
securities......................... (320,209) (4,482,606) (6,871,288)
---------------------------------------------------------------------------------
Market value of securities.......... 36,634,798 168,940,723 375,688,718
Cash................................ 850 168 0
Receivable for securities sold...... 0 2,100,307 9,223
Principal paydown receivable........ 95,930 9,149 8,673
Receivable for Fund shares sold..... 76,382 114,119 870,930
Interest receivable................. 308,485 2,586,803 4,534,644
Receivable for closed forward
foreign currency exchange
contracts.......................... 0 14,880 0
Receivable from investment advisor.. 9,903 3,562 0
Prepaid expenses and other assets... 11,549 20,712 104,753
---------------------------------------------------------------------------------
Total assets........................ 37,137,897 173,790,423 381,216,941
---------------------------------------------------------------------------------
Liabilities
Distributions payable............... 68,188 352,674 648,190
Payable for securities purchased.... 0 12,055,359 0
Payable for Fund shares redeemed.... 360,156 105,698 1,400,870
Payable for securities on loan...... 0 2,139,670 1,323,920
Advisory fee payable................ 0 0 12,996
Distribution Plan expenses payable.. 1,241 3,681 5,492
Due to other related parties........ 303 1,297 3,094
Accrued expenses and other
liabilities........................ 5,576 30,205 230,348
---------------------------------------------------------------------------------
Total liabilities................... 435,464 14,688,584 3,624,910
---------------------------------------------------------------------------------
Net assets........................... $36,702,433 $159,101,839 $377,592,031
---------------------------------------------------------------------------------
Net assets represented by
Paid-in capital..................... $44,222,647 $206,733,721 $417,380,609
Overdistributed net investment
income............................. (31,377) (658,328) (544,702)
Accumulated net realized losses on
securities and foreign currency
related transactions............... (7,168,628) (42,491,780) (32,372,588)
Net unrealized losses on securities
and foreign currency related
transactions....................... (320,209) (4,481,774) (6,871,288)
---------------------------------------------------------------------------------
Total net assets..................... $36,702,433 $159,101,839 $377,592,031
---------------------------------------------------------------------------------
Net assets consists of
Class A............................. $27,371,408 $ 90,509,249 $ 86,497,512
Class B............................. 5,372,499 17,718,524 15,484,921
Class C............................. 3,958,526 4,679,561 30,330,437
Class Y............................. 0 46,194,505 245,279,161
---------------------------------------------------------------------------------
Total net assets..................... $36,702,433 $159,101,839 $377,592,031
---------------------------------------------------------------------------------
Shares outstanding
Class A............................. 2,862,395 10,896,891 9,168,446
Class B............................. 561,824 2,133,291 1,641,226
Class C............................. 413,972 563,411 3,214,701
Class Y............................. 0 5,561,764 26,000,159
---------------------------------------------------------------------------------
Net asset value per share
Class A............................. $ 9.56 $ 8.31 $ 9.43
---------------------------------------------------------------------------------
Class A - Offering price (based on
sales charge of 3.25%)............. $ 9.88 $ 8.59 $ 9.75
---------------------------------------------------------------------------------
Class B............................. $ 9.56 $ 8.31 $ 9.43
---------------------------------------------------------------------------------
Class C............................. $ 9.56 $ 8.31 $ 9.43
---------------------------------------------------------------------------------
Class Y............................. -- $ 8.31 $ 9.43
---------------------------------------------------------------------------------
</TABLE>

See Combined Notes to Financial Statements.

35
<PAGE>

EVERGREEN
Short and Intermediate Term Bond Funds
Statements of Operations
Year Ended June 30, 2000

<TABLE>
<CAPTION>
Capital Intermediate
Preservation Bond Short-Duration
Fund Fund Fund
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income
Interest.......................... $2,373,128 $11,716,168 $25,246,980
-------------------------------------------------------------------------------
Expenses
Advisory fee...................... 214,071 938,209 1,707,098
Distribution Plan expenses........ 188,913 406,675 394,202
Administrative services fees...... 20,593 84,324 228,289
Transfer agent fee................ 80,657 316,661 365,377
Trustees' fees and expenses....... 236 1,853 13,701
Printing and postage expenses..... 5,919 18,467 21,482
Custodian fee..................... 11,753 45,758 92,449
Registration and filing fees...... 25,681 45,967 8,271
Professional fees................. 11,138 26,500 17,849
Interest expense.................. 749 7,745 31,981
Other............................. 679 41,506 13,109
-------------------------------------------------------------------------------
Total expenses.................. 560,389 1,933,665 2,893,808
Less: Expense reductions........ (1,519) (6,479) (23,894)
Fee waivers................. (131,282) (55,085) 0
-------------------------------------------------------------------------------
Net expenses...................... 427,588 1,872,101 2,869,914
-------------------------------------------------------------------------------
Net investment income.............. 1,945,540 9,844,067 22,377,066
-------------------------------------------------------------------------------
Net realized and unrealized gains
or losses on securities, futures
contracts and foreign currency
related transactions
Net realized gains or losses on:
Securities........................ (208,892) (8,438,127) (8,922,084)
Futures contracts................. 0 0 (230,880)
Foreign currency related
transactions..................... 0 786,492 0
-------------------------------------------------------------------------------
Net realized losses on securities,
futures contracts and foreign
currency related transactions..... (208,892) (7,651,635) (9,152,964)
-------------------------------------------------------------------------------
Net change in unrealized gains or
losses on securities and foreign
currency related transactions..... (133,489) 1,687,681 (314,458)
-------------------------------------------------------------------------------
Net realized and unrealized losses
on securities, futures contracts
and foreign currency related
transactions...................... (342,381) (5,963,954) (9,467,422)
-------------------------------------------------------------------------------
Net increase in net assets
resulting from operations......... $1,603,159 $ 3,880,113 $12,909,644
-------------------------------------------------------------------------------
</TABLE>

See Combined Notes to Financial Statements.

36
<PAGE>

EVERGREEN
Short and Intermediate Term Bond Funds
Statements of Changes in Net Assets
Year Ended June 30, 2000

<TABLE>
<CAPTION>
Capital Intermediate
Preservation Bond Short-Duration
Fund Fund Fund
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income.............. $ 1,945,540 $ 9,844,067 $ 22,377,066
Net realized losses on securities,
futures contracts and foreign
currency related transactions..... (208,892) (7,651,635) (9,152,964)
Net change in unrealized losses on
securities and foreign currency
related transactions.............. (133,489) 1,687,681 (314,458)
---------------------------------------------------------------------------------
Net increase in net assets
resulting from operations........ 1,603,159 3,880,113 12,909,644
---------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income
Class A............................ (1,227,418) (6,322,583) (2,425,350)
Class B............................ (514,076) (740,140) (989,433)
Class C............................ (182,625) (270,828) (563,676)
Class Y............................ 0 (3,453,200) (18,388,282)
---------------------------------------------------------------------------------
Total distributions to
shareholders...................... (1,924,119) (10,786,751) (22,366,741)
---------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold.......... 14,487,317 23,389,665 96,833,785
Net asset value of shares issued in
reinvestment of distributions..... 1,236,415 6,627,806 13,440,174
Net asset value of shares issued in
acquisitions...................... 0 28,487,171 103,128,210
Payment for shares redeemed........ (16,395,050) (70,794,526) (204,568,849)
---------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from capital
share transactions................. (671,318) (12,289,884) 8,833,320
---------------------------------------------------------------------------------
Total decrease in net assets.. (992,278) (19,196,522) (623,777)
Net assets
Beginning of period................ 37,694,711 178,298,361 378,215,808
---------------------------------------------------------------------------------
End of period...................... $ 36,702,433 $159,101,839 $377,592,031
---------------------------------------------------------------------------------
Overdistributed net investment
income............................. $ (31,377) $ (658,328) $ (544,702)
---------------------------------------------------------------------------------
</TABLE>

See Combined Notes to Financial Statements.

37
<PAGE>

EVERGREEN
Short and Intermediate Term Bond Funds
Statements of Changes in Net Assets
Year Ended June 30, 1999

<TABLE>
<CAPTION>
Capital Intermediate
Preservation Bond Short-Duration
Fund Fund Fund
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income.............. $ 2,176,911 $ 11,499,234 $ 23,088,763
Net realized losses on securities
and foreign currency related
transactions...................... (156,057) (905,691) (2,451,611)
Net change in unrealized losses on
securities and foreign currency
related transactions.............. (253,950) (7,880,924) (6,391,909)
--------------------------------------------------------------------------------
Net increase in net assets
resulting from operations........ 1,766,904 2,712,619 14,245,243
--------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income
Class A........................... (992,050) (7,002,863) (1,112,528)
Class B........................... (989,694) (581,636) (1,161,465)
Class C........................... (195,983) (269,865) (69,077)
Class Y........................... 0 (3,653,526) (20,759,994)
--------------------------------------------------------------------------------
Total distributions to
shareholders..................... (2,177,727) (11,507,890) (23,103,064)
--------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold.......... 19,176,521 38,089,130 156,664,560
Net asset value of shares issued
in reinvestment of
distributions..................... 1,552,138 7,492,305 13,089,270
Payment for shares redeemed........ (30,673,318) (62,133,153) (171,695,268)
--------------------------------------------------------------------------------
Net decrease in net assets
resulting from capital share
transactions..................... (9,944,659) (16,551,718) (1,941,438)
--------------------------------------------------------------------------------
Total decrease in net assets..... (10,355,482) (25,346,989) (10,799,259)
Net assets
Beginning of period............... 48,050,193 203,645,350 389,015,067
--------------------------------------------------------------------------------
End of period...................... $ 37,694,711 $178,298,361 $ 378,215,808
--------------------------------------------------------------------------------
Undistributed (overdistributed) net
investment income................. $ (59,566) $ 959,253 $ (460,508)
--------------------------------------------------------------------------------
</TABLE>

See Combined Notes to Financial Statements.

38
<PAGE>

Combined Notes to Financial Statements

1. ORGANIZATION

The Evergreen Short and Intermediate Term Bond Funds consist of Evergreen Capi-
tal Preservation and Income Fund ("Capital Preservation Fund"), Evergreen In-
termediate Term Bond Fund ("Intermediate Bond Fund") and Evergreen Short-Dura-
tion Income Fund (formerly, Evergreen Short-Intermediate Bond Fund) ("Short-Du-
ration Fund"), (collectively, the "Funds"). Each Fund is a diversified series
of Evergreen Fixed Income Trust (the "Trust"), a Delaware business trust orga-
nized on September 18, 1997. The Trust is an open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act").

The Funds offer Class A, Class B, Class C and/or Class Y shares. Class A shares
are sold with a maximum front-end sales charge of 3.25%. Class B and Class C
shares are sold without a front-end sales charge, but pay a higher ongoing dis-
tribution fee than Class A. Class B shares are sold subject to a contingent de-
ferred sales charge that is payable upon redemption and decreases depending on
how long the shares have been held. Class B shares purchased after January 1,
1997 will automatically convert to Class A shares after seven years. Class B
shares purchased prior to January 1, 1997 retain their existing conversion
rights. Class C shares are sold subject to a 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 Febru-
ary 1, 2000 follow the contingent deferred sales charge schedule at the time
the shares were initially purchased. Class Y shares are sold only to investment
advisory clients of First Union Corporation ("First Union") and its affiliates,
certain institutional investors or Class Y shareholders of record of certain
other funds managed by First Union and its affiliates as of December 30, 1994.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently fol-
lowed by the Funds in the preparation of their financial statements. The poli-
cies are in conformity with generally accepted accounting principles, which re-
quire management to make estimates and assumptions that affect amounts reported
herein. Actual results could differ from these estimates.

A. Valuation of Securities
Corporate bonds, U.S. government obligations, mortgage and other asset-backed
securities and other fixed-income securities are valued at prices provided by
an independent pricing service. In determining a price for normal institution-
al-size transactions, the pricing service uses methods based on market transac-
tions for comparable securities and analysis of various relationships between
similar securities which are generally recognized by institutional traders. Se-
curities for which valuations are not available from an independent pricing
service may be valued by brokers which use prices provided by market makers or
estimates of market value obtained from yield data relating to investments or
securities with similar characteristics. Otherwise, securities for which valua-
tions are not readily available from an independent pricing service (including
restricted securities) are valued at fair value as determined in good faith ac-
cording to procedures established by the Board of Trustees.

Short-term investments with remaining maturities of 60 days or less are carried
at amortized cost, which approximates market value.

Mutual fund shares held in a fund are valued at the net asset value of each mu-
tual fund.

B. Repurchase Agreements
Each Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held in a segregated account by the custodian on
the Fund's behalf. Collateral for certain tri-party repurchase agreements is
held at the counterparty's custodian in a segregated account for the benefit of
the Fund and the counterparty. Each Fund monitors the adequacy of the collat-
eral daily and will require the seller to provide additional collateral in the
event the market value of the securities pledged falls below the carrying value
of the repurchase agreement, including accrued interest. Each Fund will only
enter into repurchase

39
<PAGE>

Combined Notes to Financial Statements (continued)

agreements with banks and other financial institutions, which are deemed by the
investment advisor to be creditworthy pursuant to guidelines established by the
Board of Trustees.

Pursuant to an exemptive order issued by the Securities and Exchange Commis-
sion, the 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, the Funds may enter into reverse repurchase
agreements with qualified third-party broker-dealers. Interest on the value of
reverse repurchase agreements is based upon competitive market rates at the
time of issuance. At the time the Fund enters into a reverse repurchase agree-
ment, it will establish and maintain a segregated account with the custodian
containing qualifying assets having a value not less than the repurchase price,
including accrued interest. If the counterparty to the transaction is rendered
insolvent, the ultimate realization of the securities to be repurchased by the
Fund may be delayed or limited.

D. Foreign Currency
The books and records of the Funds are maintained in United States (U.S.) dol-
lars. Foreign currency amounts are translated into U.S. dollars as follows:
market value of investments, other assets and liabilities at the daily rate of
exchange; purchases and sales of investments and income and expenses at the
rate of exchange prevailing on the respective dates of such transactions. Net
unrealized foreign exchange gain (loss) resulting from changes in foreign cur-
rency exchange rates is a component of net unrealized gains or losses on secu-
rities and foreign currency related transactions. Net realized foreign currency
gain or loss on foreign currency related transactions includes foreign currency
gains and losses between trade date and settlement date on investment securi-
ties transactions, foreign currency related transactions and the difference be-
tween the amounts of interest and dividends recorded on the books of the Fund
and the amount actually received. The portion of foreign currency gains or
losses related to fluctuations in exchange rates between the initial purchase
trade date and subsequent sale trade date is included in realized gain or loss
on securities.

E. 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
The Funds may enter into forward foreign currency exchange contracts ("forward
contracts") to settle portfolio purchases and sales of securities denominated
in a foreign currency and to hedge certain foreign currency assets or liabili-
ties. Forward contracts are recorded at the forward rate and marked-to-market
daily. Realized gains and losses arising from such transactions are included in
net realized gain or loss on foreign currency related transactions. The Fund
bears the risk of an unfavorable change in the foreign currency exchange rate
underlying the forward contract and is subject to the credit risk that the
other party will not fulfill their obligations under the contract. Forward con-
tracts involve elements of market risk in excess of the amount reflected in the
Statements of Assets and Liabilities.

40
<PAGE>

Combined Notes to Financial Statements (continued)

G. When-issued and Delayed Delivery Transactions
The Funds record when-issued or delayed delivery transactions on the trade date
and will segregate with the custodian qualifying assets having a value suffi-
cient to make payment for the securities purchased. Securities purchased on a
when-issued or delayed delivery basis are marked-to-market daily and the Fund
begins earning interest on the settlement date. Losses may arise due to changes
in the market value of the underlying securities or if the counterparty does
not perform under the contract.

H. 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.
Each Funds' investment adviser 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.

I. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts and amortization of premiums. Foreign income and capital gains re-
alized on some foreign securities may be subject to foreign taxes, which are
accrued as applicable.

J. Federal Taxes
The Funds have qualified and intend to continue to qualify as regulated invest-
ment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Funds will not incur any federal income tax liability since
they are expected to distribute all of their net investment company taxable in-
come 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.

K. 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. To the extent that realized capital gains can be offset by
capital loss carryovers, it is each Fund's policy not to distribute such gains.
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. Reclassifications have been made to the Fund's components
of net assets to reflect income and gains available for distribution (or avail-
able capital loss carryovers, as applicable) under income tax regulations. The
primary permanent differences causing such reclassifications are due to capital
loss carryforwards assumed as a result of acquisitions. During the year ended
June 30, 2000, the differences for the Intermediate Bond Fund amounted to
$14,815,765.

Certain distributions paid during previous years have been reclassified to con-
form to current year presentation.

L. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the rela-
tive net assets of each class. Currently, class specific expenses are limited
to expenses incurred under the Distribution Plans for each class.

41
<PAGE>

Combined Notes to Financial Statements (continued)

3. INVESTMENT ADVISORY AGREEMENT 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
the Capital Preservation Fund and Intermediate Bond Fund. FUNB is a subsidiary
of First Union Corporation ("First Union"). In return for providing investment
management and administrative services to the Capital Preservation Fund and In-
termediate Bond Fund, the Funds pay EIMC a management fee that is computed and
paid daily. The management fee is computed daily at an annual rate of 2.00% of
each Fund's gross investment income plus an amount determined by applying per-
centage 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 Funds paid EIMC an advisory fee that was calculated daily at an an-
nual rate of 2.00% of each Fund's gross investment income plus an amount deter-
mined 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 is the investment advisor to the Short-Duration Fund and is paid a manage-
ment fee that is computed and paid daily at an annual rate of 0.42% of the
Fund's average daily net assets. Prior to January 3, 2000, Short-Duration Fund
paid an advisory fee that was calculated daily at an annual rate of 0.50% of
the average daily net assets of the Fund.

During the year ended June 30, 2000, the amount of investment advisory fees
waived or expenses reimbursed by each Fund and the impact on each Fund's ex-
pense ratio represented as a percentage of its average net assets were as fol-
lows:

<TABLE>
<CAPTION>
Fees % of Average
Waived Net Assets
---------------------
<S> <C> <C>
Capital Preservation Fund................. $131,282 0.36%
Intermediate Bond Fund.................... 55,085 0.03
</TABLE>

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 May 1, 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 Trustees re-
ceive no compensation directly from the Funds.

For its services, the Capital Preservation Fund and Intermediate Bond Fund pay
the administrator a fee at the annual rate of 0.10% of each Fund's average
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 reim-
bursed EIMC for providing certain administration and accounting expenses which
amounted to $2,687 and $7,187, respectively for Capital Preservation Fund and
Intermediate Bond Fund. The sub-administration fee was paid by the investment
advisor until the sub-administration agreement with BISYS was terminated on
April 30, 2000.

For its services, the Short-Duration Fund pays the administrator a fee at the
annual rate of 0.10% of the Fund's average daily net assets. The sub-adminis-
trator was paid by the administrator out of its fees until the sub-
administration agreement with BISYS was terminated on April 30, 2000. Prior to
January 3, 2000, the administrator and sub-administrator for the Fund were en-
titled to an annual fee based on the average daily net assets of the funds ad-
ministered by EIS for which First Union or its investment advisory subsidiaries
are also the investment advisors. The administration fee 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. 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 aver-
age daily net assets of the Fund.

During the year ended June 30, 2000, the Short-Duration Fund paid or accrued to
EIS $215,804 and $12,485, respectively, for administrative and sub-administra-
tive services.

Evergreen Service Company ("ESC"), an indirect, wholly owned subsidiary of
FUNB, is the transfer and dividend disbursing agent for the Funds.

42
<PAGE>

Combined Notes to Financial Statements (continued)

4. DISTRIBUTION PLANS

Evergreen Distributor, Inc. ("EDI"), a wholly owned subsidiary of BISYS, serves
as principal underwriter to the Funds.

Each Fund has adopted Distribution Plans, as allowed by Rule 12b-1 of the 1940
Act, for each class of shares, except Class Y. Distribution plans permit a Fund
to compensate its principal underwriter for costs related to selling shares of
the Fund and for various other services. These costs, which consist primarily
of commissions and service fees to broker-dealers who sell shares of the Fund,
are paid by the Fund through "Distribution Plan expenses". Under the Distribu-
tion Plans, Class A incurs distribution 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. For Capital Preservation Fund, Class A shares purchased prior to
January 1, 1997 incur distribution fees at an annual rate of 0.10%. Prior to
October 7, 1999 Short-Duration Fund incurred distribution fees equal to 0.10%
of the average daily net assets of Class A. 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 June 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>
Capital Preservation Fund........... $ 40,767 $109,913 $ 38,233
Intermediate Bond Fund.............. 235,504 125,659 45,512
Short-Duration Fund................. 93,405 192,955 107,842
</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 March 17, 2000, Intermediate Bond Fund
acquired substantially all the assets and assumed certain liabilities of Davis
Intermediate Investment Grade Bond Fund, in an exchange for Class A, Class B,
Class C and Class Y shares of Intermediate Bond Fund.

Effective on the close of business on March 10, 2000, Short-Duration Fund (for-
merly Evergreen Short Intermediate Bond Fund) acquired substantially all of the
assets and assumed certain liabilities of Evergreen Short-Duration Income Fund
(formerly Mentor Short-Duration Income Fund), in an exchange for Class A, Class
C and Class Y shares of Short-Duration Fund. Upon completion of the acquisi-
tion, Evergreen Short Intermediate Bond Fund changed its name to Evergreen
Short-Duration Income Fund.

These acquisitions were accomplished by a tax-free exchange of the respective
shares of each Fund. The value of assets acquired, number of shares issued,
unrealized appreciation (depreciation) acquired and the aggregate net assets of
each Fund immediately after the acquisition were as follows:

<TABLE>
<CAPTION>
Value of Net Number of Unrealized Net Assets
Acquiring Fund Acquired Fund Assets Acquired Shares Issued Depreciation After Acquisition
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------
Intermediate Bond Fund Davis Intermediate
Investment Grade
Bond Fund $ 28,487,171 $ 3,417,823 $(1,866,078) $171,176,701
Short-Duration Fund Evergreen Short-Duration
(formerly Evergreen Income Fund
Short-Intermediate (formerly Mentor Short-Duration
Bond Fund) Income Fund) 103,128,210 10,929,688 (2,175,795) 428,047,109
</TABLE>

43
<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/or Class Y. Transactions in shares
of the Funds were as follows:

Capital Preservation Fund*

<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------
2000 1999
------------------------ ------------------------
Shares Amount Shares Amount
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............... 938,483 $ 8,976,432 1,254,468 $ 12,119,775
Automatic conversion of
Class B shares to Class A
shares................... 826,779 7,888,267 0 0
Shares issued in
reinvestment of
distributions............ 81,008 775,344 73,376 709,511
Shares redeemed........... (865,404) (8,280,450) (1,297,623) (12,552,673)
-------------------------------------------------------------------------------
Net increase.............. 980,866 9,359,593 30,221 276,613
-------------------------------------------------------------------------------
Class B
Shares sold............... 298,306 2,855,271 501,298 4,841,798
Shares issued in
reinvestment of
distributions............ 36,425 348,732 69,855 676,249
Automatic conversion of
Class B shares to Class A
shares................... (826,779) (7,888,267) 0 0
Shares redeemed........... (565,236) (5,409,739) (1,626,086) (15,731,870)
-------------------------------------------------------------------------------
Net decrease.............. (1,057,284) (10,094,003) (1,054,933) (10,213,823)
-------------------------------------------------------------------------------
Class C
Shares sold............... 277,659 2,655,614 229,112 2,214,948
Shares issued in
reinvestment of
distributions............ 11,735 112,339 17,206 166,378
Shares redeemed........... (282,637) (2,704,861) (247,073) (2,388,775)
-------------------------------------------------------------------------------
Net increase (decrease)... 6,757 63,092 (755) (7,449)
-------------------------------------------------------------------------------
Net decrease.............. $ (671,318) $ (9,944,659)
-------------------------------------------------------------------------------
</TABLE>
* During the year ended June 30, 2000, Capital Preservation Fund commenced op-
erations of its Class Y shares on October 29, 1999 with the sale of 104
shares at $9.58 per share. These shares were fully redeemed on April 10,
2000. During this period, Class Y shares of Capital Preservation Fund earned
$0.245 in income distributions generating a cummulative return of 2.54%.

Intermediate Bond Fund

<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------
2000 1999
------------------------ ------------------------
Shares Amount Shares Amount
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold................ 1,341,951 $ 11,236,195 2,341,785 $ 21,107,529
Automatic conversion of
Class B shares to Class A
shares.................... 65,074 538,182 0 0
Shares issued in
reinvestment of
distributions............. 612,507 5,132,151 656,382 5,911,817
Shares issued in
acquisition of Davis
Intermediate Investment
Grade Bond Fund........... 1,359,200 11,328,791 0 0
Shares redeemed............ (4,918,634) (41,358,248) (4,185,680) (37,633,504)
-------------------------------------------------------------------------------
Net decrease............... (1,539,902) (13,122,929) (1,187,513) (10,614,158)
-------------------------------------------------------------------------------
Class B
Shares sold................ 151,740 1,289,489 487,096 4,402,183
Shares issued in
reinvestment of
distributions............. 43,632 365,159 36,260 326,694
Shares issued in
acquisition of Davis
Intermediate Investment
Grade Bond Fund........... 1,407,439 11,730,846 0 0
Automatic conversion of
Class B shares to Class A
shares.................... (65,074) (538,182) 0 0
Shares redeemed............ (686,107) (5,744,661) (425,314) (3,846,878)
-------------------------------------------------------------------------------
Net increase............... 851,630 7,102,651 98,042 881,999
-------------------------------------------------------------------------------
Class C
Shares sold................ 113,576 956,714 110,653 1,004,240
Shares issued in
reinvestment of
distributions............. 17,738 148,738 20,784 187,535
Shares issued in
acquisition of Davis
Intermediate Investment
Grade Bond Fund........... 207,081 1,726,006 0 0
Shares redeemed............ (319,789) (2,678,266) (184,849) (1,673,579)
-------------------------------------------------------------------------------
Net increase (decrease).... 18,606 153,192 (53,412) (481,804)
-------------------------------------------------------------------------------
Class Y
Shares sold................ 1,176,959 9,907,267 1,284,724 11,575,178
Shares issued in
reinvestment of
distributions............. 117,187 981,758 118,332 1,066,259
Shares issued in
acquisition of Davis
Intermediate Investment
Grade Bond Fund........... 444,103 3,701,528 0 0
Shares redeemed............ (2,499,868) (21,013,351) (2,096,933) (18,979,192)
-------------------------------------------------------------------------------
Net decrease............... (761,619) (6,422,798) (693,877) (6,337,755)
-------------------------------------------------------------------------------
Net decrease............... $(12,289,884) $(16,551,718)
-------------------------------------------------------------------------------
</TABLE>

44
<PAGE>

Combined Notes to Financial Statements (continued)

Short-Duration Fund

<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------
2000 1999
-------------------------- --------------------------
Shares Amount Shares Amount
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............. 2,858,106 $ 27,120,203 1,565,164 $ 15,513,691
Shares issued in
reinvestment of
distributions.......... 204,730 1,932,628 85,182 844,657
Automatic conversion of
Class B shares to Class
A shares............... 97,215 917,923 0 0
Shares issued in
acquisition of
Evergreen Short-
Duration Income Fund
(formerly Mentor Short-
Duration Income Fund).. 7,467,765 70,415,515 0 0
Shares redeemed......... (3,435,000) (32,505,607) (1,377,037) (13,580,265)
---------------------------------------------------------------------------------
Net increase............ 7,192,816 67,880,662 273,309 2,778,083
---------------------------------------------------------------------------------
Class B
Shares sold............. 607,485 5,811,249 1,844,479 18,346,490
Shares issued in
reinvestment of
distributions.......... 72,126 686,690 83,118 826,279
Automatic conversion of
Class B shares to Class
A shares............... (97,215) (917,923) 0 0
Shares redeemed......... (1,265,791) (12,101,175) (1,890,855) (18,756,863)
---------------------------------------------------------------------------------
Net increase
(decrease)............. (683,395) (6,521,159) 36,742 415,906
---------------------------------------------------------------------------------
Class C
Shares sold............. 400,664 3,716,479 65,400 652,800
Shares issued in
reinvestment of
distributions.......... 43,765 412,037 6,017 59,815
Shares issued in
acquisition of
Evergreen Short-
Duration Income Fund
(formerly Mentor Short-
Duration Income Fund).. 3,461,806 32,711,591 0 0
Shares redeemed......... (831,756) (7,837,121) (46,468) (460,730)
---------------------------------------------------------------------------------
Net increase............ 3,074,479 29,002,986 24,949 251,885
---------------------------------------------------------------------------------
Class Y
Shares sold............. 6,329,806 60,185,854 12,293,584 122,151,579
Shares issued in
reinvestment of
distributions.......... 1,095,709 10,408,819 1,145,478 11,358,519
Shares issued in
acquisition of
Evergreen Short-
Duration Income Fund
(formerly Mentor Short-
Duration Income Fund).. 117 1,104 0 0
Shares redeemed......... (16,044,166) (152,124,946) (14,015,864) (138,897,410)
---------------------------------------------------------------------------------
Net decrease............ (8,618,534) (81,529,169) (576,802) (5,387,312)
---------------------------------------------------------------------------------
Net increase
(decrease)............. $ 8,833,320 $ (1,941,438)
---------------------------------------------------------------------------------
</TABLE>

7. SECURITIES TRANSACTIONS

Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the year ended June 30, 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>
Capital
Preservation
Fund........... $ 16,173,145 $ 0 $ 17,163,284 $ 0
Intermediate
Bond Fund...... 165,112,498 99,069,002 132,200,437 143,673,948
Short-Duration
Fund........... 264,457,338 277,805,176 322,771,946 190,941,619
</TABLE>

During the year ended June 30, 2000, the Funds entered into reverse repurchase
agreements as follows:

<TABLE>
<CAPTION>
Interest Expense
Average Daily as a % Weighted Maximum
Balance Interest of Average Average Amount
Outstanding Expense Net Assets Interest Rate Outstanding*
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital
Preservation
Fund........... $ 12,740 $ 749 0.00% 5.75% $ 469,499
Intermediate
Bond Fund...... 187,907 7,745 0.00 3.68 4,053,488
Short-Duration
Fund........... 611,948 31,981 0.01 5.18 7,010,217
</TABLE>
-------
* The maximum amount outstanding under reverse
repurchase agreements includes accrued inter-
est.

At June 30, 2000, there were no reverse repurchase agreements outstanding.

The Intermediate Bond Fund and Short-Duration Fund loaned securities during the
year ended June 30, 2000 to certain brokers who paid the Fund a negotiated
lenders' fee. These fees are included in interest income. At June 30, 2000, the
value of securities on loan and the value of collateral for the Intermediate
Bond Fund amounted to $2,108,685 and $2,139,670, respectively. At June 30,
2000, the value of securities on loan and the value of collateral for the
Short-Duration Fund amounted to $1,293,291 and $1,323,920, respectively. During
the year ended June 30, 2000, the Intermediate Bond Fund earned $10,859 in in-
come from securities lending.

45
<PAGE>

Combined Notes to Financial Statements (continued)

On June 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
Tax Cost Appreciation Depreciation Depreciation
----------------------------------------------------
<S> <C> <C> <C> <C>
Capital
Preservation
Fund........... $ 36,962,797 $ 93,289 $ (421,288) $ (327,999)
Intermediate
Bond Fund...... 173,455,361 958,821 (5,473,459) (4,514,638)
Short-Duration
Fund........... 382,581,839 692,903 (7,586,024) (6,893,121)
</TABLE>

As of June 30, 2000, the Funds had capital loss carryovers for federal income
tax purposes as follows:

<TABLE>
<CAPTION>
Capital Expiration
Loss ---------------------------------------------------------------------------------------
Carryover 2001 2002 2003 2004 2005 2006 2007 2008
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------
Capital
Preservation
Fund.............. $ 7,007,478 $5,685,347 $ 197,484 $641,839 $ 253,605 $ 0 $ 0 $ 34,064 $ 195,139
Intermediate Bond
Fund.............. 38,032,293 2,688,181 12,230,490 987,672 810,693 1,200,359 2,734,934 0 17,379,964
Short-Duration
Fund.............. 27,773,652 0 6,020,616 0 4,048,695 4,374,000 1,742,698 4,597,715 6,989,928
</TABLE>

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 June
30, 2000, the Funds have incurred and elected to defer post-October losses as
follows:

<TABLE>
<CAPTION>
Capital Currency
Losses Losses
-------------------
<S> <C> <C>
Capital Preservation Fund................... $ 153,360 $ 0
Intermediate Bond Fund...................... 4,427,455 603,275
Short-Duration Fund......................... 4,577,105 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 on each Fund's expense ratio represented as
a percentage of its average net assets were as follows:

<TABLE>
<CAPTION>
Total
Expense
Reductions % of Average
Received Net Assets
-----------------------
<S> <C> <C>
Capital Preservation Fund............... $ 1,519 0.00%
Intermediate Bond Fund.................. 6,479 0.00
Short-Duration Fund..................... 23,894 0.01
</TABLE>

9. DEFERRED TRUSTEES' FEES

Each Independent Trustee of each Fund may defer any or all compensation related
to performance of their duties as Trustees. The Trustees' deferred balances are
allocated to deferral accounts, which are included in the accrued expenses for
the Fund. The investment performance of the deferral accounts are based on the
investment performance of certain Evergreen Funds. Any gains earned or losses
incurred in the deferral accounts are 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

46
<PAGE>

Combined Notes to Financial Statements(continued)

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 tem-
porary 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 its assistance in arranging this financing agreement,
First Union Capital Markets Corp. was paid a one-time arrangement fee of
$250,000. State Street serves as paying agent for the funds and as paying agent
is entitled to a fee of $20,000 per annum which is allocated to all the funds

During the year ended June 30, 2000, the Funds had no borrowings under these
agreements.

11. SUBSEQUENT EVENT

Effective as of the close of business on July 21, 2000, the net assets and lia-
bilities of Capital Preservation Fund were acquired by the Evergreen Select Ad-
justable Rate Fund ("Select Adjustable Rate Fund"), an open-end management in-
vestment company registered under the 1940 Act in an exchange of shares. The
net assets of Capital Preservation Fund were acquired through a tax-free ex-
change for 2,864,628 Class A shares, 553,117 Class B shares and 393,719 Class C
shares of Select Adjustable Rate Fund. The net assets of Capital Preservation
Fund immediately before the acquisition were $36,327,117. The aggregate net as-
sets of Select Adjustable Rate Fund after the acquisition were $82,722,541.

47
<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 Capital Preservation and In-
come Fund, Evergreen Intermediate Term Bond Fund and Evergreen Short-Duration
Income Fund (formerly Evergreen Short-Intermediate Bond Fund), each a portfolio
of Evergreen Fixed Income Trust, as of June 30, 2000, and the related state-
ments of operations for the year then ended, the statements of changes in net
assets for each of the years in the two-year period then ended and financial
highlights for each of the years or periods in the five-year period then ended.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

We conducted our audits in accordance with 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 June 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 Capital Preservation and Income Fund, Evergreen Intermediate Term Bond
Fund and Evergreen Short-Duration Income Fund, as of June 30, 2000, the results
of their operations, changes in their net assets and financial highlights for
each of the years or periods described above in conformity with accounting
principles generally accepted in the United States of America.

/s/KPMG LLP

Boston, Massachusetts
August 11, 2000

48
<PAGE>

Additional Information (Unaudited)

SPECIAL MEETING OF SHAREHOLDERS

On July 14, 2000, a Special Meeting of Shareholders for Evergreen Capital Pres-
ervation and Income Fund was held to consider a number of proposals. On April
28, 2000, the record date for the meeting, net assets of $12,632,201 were voted
out of an eligible $35,181,922.

1. To approve an Agreement and Plan or Reorganization whereby Evergreen Select
Adjustable Rate Fund, a series of Evergreen Select Fixed Income Trust, will
(i) acquire all of the assets of Capital Preservation and Income Fund in
exchange for shares of Evergreen Select Adjustable Rate Fund; and (ii)
assume the identified liabilities of Evergreen Capital Preservation and
Income Fund.

<TABLE>
<CAPTION>
% of Record % of
Date Net Net
Net Assets Assets Assets
Voted Outstanding Voted
<S> <C> <C> <C>
-------------------------------
Affirmative................... $11,193,615 31.816% 88.612%
Against....................... 636,668 1.810 5.040
Abstain....................... 801,918 2.279 6.348
----------- ------ -------
Total........................ $12,632,201 35.905% 100.000%
----------- ------ -------
</TABLE>

2. To consider and vote upon such other matters as may properly come before
said meeting or any adjournments thereof.

<TABLE>
<CAPTION>
% of Record % of
Date Net Net
Net Assets Assets Assets
Voted Outstanding Voted
<S> <C> <C> <C>
-------------------------------
Affirmative................... $11,237,425 31.941% 88.959%
Against....................... 525,174 1.493 4.157
Abstain....................... 869,602 2.471 6.884
----------- ------ -------
Total........................ $12,632,201 35.905% 100.000%
----------- ------ -------
</TABLE>

<PAGE>

Evergreen Funds

Money Market
Florida Municipal Money Market Fund
Money Market Fund
Municipal Money Market Fund
New Jersey Municipal Money Market Fund
Pennsylvania Municipal Money Market Fund
Treasury Money Market Fund
U.S. Government Money Market Fund

Tax Advantaged
Connecticut Municipal Bond Fund
Florida High Income Municipal Bond Fund
Florida Municipal Bond Fund
Georgia Municipal Bond Fund
High Grade Municipal Bond Fund
Maryland Municipal Bond Fund
Municipal Bond Fund
New Jersey Municipal Bond Fund
North Carolina Municipal Bond Fund
Pennsylvania Municipal Bond Fund
Short-Intermediate Municipal Fund
South Carolina Municipal Bond Fund
Tax-Free High Income Fund
Virginia Municipal Bond Fund

Income
Diversified Bond Fund
High Yield Bond Fund
Intermediate Term Bond Fund
Quality Income Fund
Select Adjustable Rate Fund
Short-Duration Income Fund
Strategic Income Fund
U.S. Government Fund

Balanced
Balanced Fund
Foundation Fund
Tax Strategic Foundation Fund

Growth & Income
Blue Chip Fund
Equity Income Fund
Growth and Income Fund
Equity Index Fund
Small Cap Value Fund
Utility Fund
Value Fund

Domestic Growth
Aggressive Growth Fund
Capital Growth Fund
Evergreen Fund
Growth Fund
Masters Fund
Omega Fund
Special Equity Fund
Small Company Growth Fund
Stock Selector Fund
Large Company Growth Fund
Tax Strategic Equity Fund

Global International
Emerging Markets Growth Fund
Global Leaders Fund
Global Opportunities Fund
International Growth Fund
Latin America Fund
Perpetual Global Fund
Perpetual International Fund
Precious Metals Fund

Sector Funds
Health Care Fund
Technology Fund

Express Line
800.346.3858

Investor Services
800.343.2898

www.evergreen-funds.com

541496 8/2000

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