<PAGE>
Semiannual
Report
as of December 31, 1999
Evergreen Short and Intermediate Term Bond Funds
[MUTUAL FUND SERVICE AWARD SEAL]
[LOGO OF EVERGREEN FUNDS]
<PAGE>
Table of Contents
Letter to Shareholders .................................................. 1
Evergreen Capital Preservation and Income Fund
Fund at a Glance ..................................................... 2
Portfolio Manager Interview .......................................... 3
Evergreen Intermediate Term Bond Fund
Fund at a Glance ..................................................... 5
Portfolio Manager Interview .......................................... 6
Evergreen Short-Intermediate Bond Fund
Fund at a Glance ..................................................... 8
Portfolio Manager Interview .......................................... 9
Financial Highlights
Evergreen Capital Preservation and Income Fund ....................... 11
Evergreen Intermediate Term Bond Fund ................................ 13
Evergreen Short-Intermediate Bond Fund ............................... 15
Schedule of Investments
Evergreen Capital Preservation and Income Fund ....................... 17
Evergreen Intermediate Term Bond Fund ................................ 19
Evergreen Short-Intermediate Bond Fund ............................... 25
Statements of Assets and Liabilities .................................... 29
Statements of Operations ................................................ 30
Statements of Changes in Net Assets ..................................... 31
Combined Notes to Financial Statements .................................. 33
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 semiannual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.
Mutual Funds: ARE NOT FDIC INSURED May lose value . Not bank guaranteed
Evergreen Distributor, Inc.
Evergreen Funds(SM) is a Service Mark of Evergreen Investment Services, Inc.
<PAGE>
Letter to Shareholders
----------------------
January 2000
[PHOTO]
William M. Ennis
President and CEO
Dear Shareholders,
We are pleased to provide the Evergreen Short and Intermediate Term Bond Funds
semiannual report, which covers the six-month period ended December 31, 1999.
Uncertainty over Interest Rates Influences the Markets
The last year has been a difficult environment for fixed-income investors. After
the Federal Reserve Board lowered interest rates three times in 1998 in an
attempt to insulate the U.S. economy from global economic turmoil, it reversed
course halfway through 1999 and raised interest rates three times during the
fiscal period because of concerns about an overheated U.S. economy. Amidst the
volatility, the yield on the bellwether 30-year Treasury bond rose from 5.09% in
December of 1998 to 6.48% by December 31, 1999, the end of the fiscal period.
The Federal Reserve Bank's "tightening bias" leads many to anticipate further
interest rate increases in order to stem even the slightest inflationary
pressure. We believe that the economy is still fundamentally strong, and that
inflation will stay contained, producing only moderate upward pressure on
interest rates. We believe bonds are relatively attractive over the long term
compared to other asset classes, particularly because "real" interest rates are
high by historical standards.
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
1999 tax information, an investment education center, interactive calculators to
assist your investment planning and general information about Evergreen Funds.
We believe that sound investing is about taking steps to meet your long-term
financial needs and goals. We remind you to take advantage of your financial
advisor's expertise to develop and refine a financial plan that will enable you
to meet your objectives. Evergreen Funds offers a broad mix of stock, bond and
money market funds that should make it simple for you to choose the most
appropriate for your portfolio.
We would like to thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/ William M. Ennis
William M. Ennis
President and CEO
Evergreen Investment Company
1
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
Fund at a Glance as of December 31, 1999
As we enter 2000, economic growth continues to be very strong and many observers
expect that the Federal Reserve Board may continue to raise short-term interest
rates and tighten the money supply to restrain growth and avoid inflation.
Portfolio Management
- --------------------
[PHOTO]
Gary E. Pzegeo, CFA
Tenure: April 1997
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE 1
- --------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 12/31/1999.
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
1 Source: 2000 Morningstar, Inc.
2 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than 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.
Historical performance shown for Classes A, C and Y prior to their inception is
based on the performance of Class B, the original class offered. These
historical returns for Classes A and Y have not been adjusted to eliminate the
effect of the higher 12b-1 fees applicable to Class B. The fund currently incurs
12b-1 expenses of 0.18% for Class A. This rate is based on 0.25% assessed on
assets prior to 1/1/1997 and 0.10% assessed on new assets from 1/1/1997. Classes
B and C each incur 12b-1 expenses of 1.00%. Class Y does not pay a 12b-1 fee. If
these fees had been reflected, returns for Classes A and 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.
- --------------------------------------------------------------------------------
Performance and Returns 2
- --------------------------------------------------------------------------------
Portfolio Inception Date: 7/1/1991 Class A Class B Class C Class Y
Class Inception Date 12/30/1994 7/1/1991 2/1/1993 10/29/1999
- -------------------------------------------------------------------------------
Average Annual Returns*
- -------------------------------------------------------------------------------
6 months with sales charge -1.78% -3.88% -0.91% n/a
- -------------------------------------------------------------------------------
6 months w/o sales charge 1.48% 1.06% 1.06% 1.24%
- -------------------------------------------------------------------------------
1 year with sales charge 0.82% -1.73% 1.34% n/a
- -------------------------------------------------------------------------------
1 year w/o sales charge 4.16% 3.20% 3.31% 3.38%
- -------------------------------------------------------------------------------
3 years 3.84% 3.23% 4.17% 4.19%
- -------------------------------------------------------------------------------
5 years 5.22% 4.80% 5.16% 5.17%
- -------------------------------------------------------------------------------
Since Portfolio Inception 4.34% 4.29% 4.29% 4.31%
- -------------------------------------------------------------------------------
Maximum Sales Charge 3.25% 5.00% 2.00% n/a
Front End CDSC CDSC
- -------------------------------------------------------------------------------
30-day SEC Yield 4.81% 4.14% 4.14% 5.43%
- -------------------------------------------------------------------------------
Distributions per share
for the period** $ 0.26 $ 0.22 $ 0.22 $0.09
- -------------------------------------------------------------------------------
*Adjusted for maximum applicable sales charge, unless otherwise noted.
**For Class Y, period is from the class inception on October 29, 1999 through
December 31, 1999. For Classes A, B and C, for the twelve-month period ending
December 31, 1999.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[CHART]
CPI SB 6-Month T-Bill Evergreen Cap Presv & Inc B
7/31/91 10,000 10,049 10,000
12/30/91 10,125 10,232 10,357
12/30/92 10,419 10,639 10,593
12/30/93 10,705 10,985 11,035
12/30/94 10,991 11,464 11,049
12/30/95 11,270 12,150 11,887
12/30/96 11,645 12,804 12,565
12/30/97 11,843 13,499 13,277
12/30/98 12,034 14,212 13,749
12/30/99 12,364 14,891 14,189
Comparison of a $10,000 investment in Evergreen Capital Preservation and Income
Fund, Class B Shares, versus a similar investment in a 6-Month Treasury Bill and
the Consumer Price Index (CPI).
The 6-Month Treasury Bill is an unmanaged market index and does not include
transaction costs associated with buying and selling securities nor any
management fees. The CPI is a commonly used measure of inflation and does not
represent an investment return. It is not possible to invest directly in an
index.
U.S. Government guarantees apply only to the underlying securities of the Fund's
portfolio and not to the Fund's shares.
2
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
Portfolio Manager Interview
How did the Fund perform?
For the six-month period ended December 31, 1999, the Evergreen Capital
Preservation and Income Fund Class A shares had a total return of 1.48%, before
the deduction of any applicable sales charges. During the same six-month period,
the average return of adjustable rate mortgage funds was 1.94%, according to
Lipper Inc., an independent monitor of mutual fund performance, while the
six-month Treasury Bill had a return of 2.52%.
The Fund's return marginally lagged the average performance of its Lipper
classification during an extremely challenging period in which more aggressive
strategies tended to have a performance advantage over the higher-quality
strategy employed by the Fund. The Fund continues to have above-average
performance for the three-and five-year periods and Class A shares have
maintained a four-star rating, the second-highest rating from Morningstar, an
independent mutual fund information agency.
Portfolio
Characteristics
---------------
Total Net Assets $ 35,448,092
---------------------------------------------------
Average Credit Quality AAA
---------------------------------------------------
Average Maturity 5.0 years
---------------------------------------------------
Average Duration 1.7 years
---------------------------------------------------
What was the investment environment like during the six months?
The final six months of 1999 comprised a very difficult period for bond market
investors overall, although adjustable rate mortgage portfolios tended to
weather the storm of rising interest rates better than portfolios of long-term
bonds. In general, it was a period of rising interest rates and falling bond
prices. The yield on the 10-year Treasury, for example, rose from 5.88% to 6.44%
during the six-month period as evidence of continued economic growth fueled
fears that inflation might become a problem. The Federal Reserve Board raised
short-term rates once just before the six-month period and then twice more
during the six months ended December 31, 1999.
The backdrop of rising interest rates created a very difficult environment for
investors in U.S. Treasury and high-grade corporate bonds. Investors in mortgage
securities, however, were not hurt as much and adjustable rate mortgages tended
to do somewhat better than mortgages in general. The Lehman Brothers Adjustable
Rate Index, for example, had a total return of 2.5% during the six months,
helped by improving performance of some lower quality adjustable rate securities
that this Fund tends to avoid.
3
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
Portfolio Manager Interview
What were your principal strategies during the period?
We maintained an emphasis on mature, high quality, adjustable rate mortgage
securities (ARMs) whose interest rates typically reset once a year. We
de-emphasized fixed-rate securities during a time of rising interest rates.
Asset Allocation
(based on 12/31/1999 net assets)
ARMs 65.3%
U.S. Treasury Obligations 9.0%
Fixed-Rate Mortgage Securities 7.2%
Asset-Backed Securities 6.8%
Collateralized Mortgage Obligations 6.0%
Other Investments and Other Assets and Liabilities, net 5.7%
During the period, the core adjustable rate securities that we emphasize were in
relatively short supply and the cash reserves in the portfolio tended to build
up. To generate as much income as is reasonable within the conservative
structure of the Fund, we invested in some hybrid ARMs, including adjustable
GNMA securities.
While the overwhelming majority of securities in the portfolio were issued by
the government or government agencies, about 11.2% of net assets were invested
in AAA-rated non-government securities, predominately fixed-rate, asset-backed
securities. These offered a yield premium that helped support the Fund's
dividend distributions. The Fund's duration on December 31, 1999 was 1.7 years,
marginally higher than the 1.2 years at the start of the period on July 1.
What is your outlook?
As we enter 2000, economic growth continues to be very strong and many observers
expect that the Federal Reserve Board may continue to raise short-term interest
rates and tighten the money supply to restrain growth and avoid inflation. In
this rising interest rate environment, the types of adjustable rate mortgages
that we emphasize should do relatively well. We tend to invest in older
securities that reset their interest rates once a year and that are not likely
to have their rate increases impeded by interest rate caps. As a result, the
interest paid by these adjustable rate mortgages should continue to rise. This
is an environment in which the securities that we emphasize should perform
better than fixed-rate government securities, which suffer price loss as
interest rates rise.
4
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Fund at a Glance as of December 31, 1999
We believe that the Fund is well positioned, with a relatively high quality
portfolio of securities and an emphasis on corporate bonds that offer strong
long-term value.
Portfolio Management
- --------------------
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 12/31/1999.
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
1 Source: 2000 Morningstar, Inc.
2 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than 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.
Historical performance shown for Classes B, C and Y prior to their inception is
based on the performance of Class A, the original class offered. These
historical returns for Classes B and C have not been adjusted to reflect the
effect of each Class' 12b-1 fees. These fees for Class A are 0.25%, for Class B
are 1.00% and for Class C are 1.00%. If these fees had been reflected, returns
would have been lower. The historical returns for Class Y have been adjusted to
reflect the elimination of the 0.25% 12b-1 fee applicable to Class A. Class Y
does not pay a 12b-1 fee. If these fees had not been eliminated, returns for
Class Y would have been lower.
The advisor is waiving a portion of its advisory fee. Had the fee not been
waived, returns would have been lower.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Returns*
- ----------------------------------------------------------------------------------------
6 months with sales charge -3.44% -5.40% -2.51% n/a
- ----------------------------------------------------------------------------------------
6 months w/o sales charge -0.21% -0.59% -0.59% -0.08%
- ----------------------------------------------------------------------------------------
1 year with sales charge -5.61% -7.91% -5.07% n/a
- ----------------------------------------------------------------------------------------
1 year w/o sales charge -2.40% -3.35% -3.24% -2.16%
- ----------------------------------------------------------------------------------------
3 years 3.03% 2.48% 3.36% 4.43%
- ----------------------------------------------------------------------------------------
5 years 5.60% 5.15% 5.47% 6.56%
- ----------------------------------------------------------------------------------------
10 years 6.39% 6.17% 6.17% 7.06%
- ----------------------------------------------------------------------------------------
Since Portfolio Inception 5.73% 5.57% 5.57% 6.43%
- ----------------------------------------------------------------------------------------
Maximum Sales Charge 3.25% 5.00% 2.00% n/a
Front End CDSC CDSC
- ----------------------------------------------------------------------------------------
30-day SEC Yield 6.22% 5.67% 5.67% 6.69%
- ----------------------------------------------------------------------------------------
6-month distributions per share $ 0.31 $0.28 $ 0.28 $ 0.32
- ----------------------------------------------------------------------------------------
</TABLE>
*Adjusted for maximum applicable sales charge, unless otherwise noted.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[CHART]
Evergreen Interm BD A CPI Lehman Brothers
12/31/89 9,672 10,000 10,000
12/31/90 10,242 10,611 10,916
12/31/91 11,960 10,936 12,511
12/31/92 12,933 11,253 13,409
12/31/93 14,135 11,562 14,587
12/31/94 13,678 11,872 14,306
12/31/95 15,656 12,173 16,499
12/31/96 16,428 12,577 17,167
12/31/97 17,820 12,791 18,518
12/31/98 19,026 12,998 20,078
12/31/99 18,568 13,354 20,157
Comparison of a $10,000 investment in Evergreen Intermediate Term Bond Fund,
Class A Shares, versus a similar investment in the Lehman Brothers Intermediate
Government/Corporate Bond Index (LBIGCBI) and the Consumer Price Index (CPI).
The LBIGCBI is an unmanaged index and does not include transaction costs
associated with buying and selling securities nor any management fees. The CPI
is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
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.
Foreign investments may contain more risk due to the inherent risks associated
with changing political climates, foreign market instability and foreign
currency fluctuations.
5
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Portfolio Manager Interview
How did the Fund perform?
For the six-month period ended December 31, 1999, the Evergreen Intermediate
Term Bond Fund Class A shares had a total return of -0.21%, before the deduction
of any applicable sales charges. During the same six-month period, the average
return of intermediate-term, investment grade bond funds was 0.30%, according to
Lipper Inc., an independent monitor of mutual fund performance, while the Lehman
Brothers Intermediate Government/Corporate Bond Index had a return of 0.98%.
The six-month period featured a very difficult investment climate for
intermediate term bonds, as rising interest rates drove down bond prices and a
heavy new supply of corporate bond issues exceeded demand and undercut the
performance of corporate securities.
Portfolio
Characteristics
---------------
Total Net Assets $149,801,253
------------------------------------------------------
Average Credit Quality AA-
------------------------------------------------------
Effective Maturity 7.6 years
------------------------------------------------------
Average Duration 5.1 years
------------------------------------------------------
What was the investment environment like during the six months ended December
31, 1999?
We began the second half of 1999 with continued strong economic growth. The U.S.
Federal Reserve had just raised short-term interest rates (on June 30) to take
out some of the liquidity that had been injected into the system during the
Asian economic crisis and the Russian bond default of the previous two years.
The Federal Reserve later raised rates two more times, in August and November.
The problems for bond investors caused by rising interest rates and declining
bond prices were compounded by a very large issuance of a new supply of
corporate bonds in July and August. Companies attempted to complete their
corporate financing before dealing with the uncertainties related to the feared
"Y2K" computer problems as we entered 2000, therefore the supply of new
intermediate-term corporate bonds was especially heavy.
The worst effects were felt in the summer months, and by the end of August the
flow of new corporate bonds began to slow as the cost of money became too high.
What followed was a recovery in corporate bonds during the final quarter of
1999--a period in which the Fund's performance improved markedly.
Over the six-month period, the effects of rising rates and declining prices hit
intermediate-term bonds harder than they hit longer-term bonds, as the
differences between the yields of long-term bonds and intermediate-term bonds
narrowed. For example, during the six months, the yield on a 30-year Treasury
rose by .50%, but the yield on a five-year Treasury rose by .70%.
6
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Portfolio Manager Interview
Credit Quality
Allocation
----------
(based on 12/31/1999 portfolio assets)
U.S. Government/AAA 35.1%
--------------------------------------------------------
AA 9.3%
--------------------------------------------------------
A 22.7%
--------------------------------------------------------
BBB 17.8%
--------------------------------------------------------
BB 5.6%
--------------------------------------------------------
B 9.5%
--------------------------------------------------------
What were your strategies in this environment?
We maintained an emphasis on corporate bonds. At the end of 1999, bonds issued
by industrial companies, financial companies and utilities accounted for 47% of
net assets. We believed, and continue to believe, that corporate securities were
fundamentally sound in a growing economy. We saw extremely attractive long-term
values in the corporate sector. As the market conditions improved in late 1999,
we upgraded the overall credit quality of the portfolio by selling some high
yield issues and investing in higher-grade corporate securities, commercial
mortgage-backed securities, and U.S. Treasury securities. We believed that in a
period of recovery in the bond market, the higher quality sectors should improve
first. During the six-month period, average credit quality in the portfolio rose
from A+ to AA-. The high yield bond allocation fell from 18% of net assets to
15% during the period.
We also decreased the interest rate sensitivity--or vulnerability to rising
interest rates. During the six months, the effective maturity of the portfolio
declined slightly from 7.7 years to 7.6 years, while average duration declined
from 5.4 years to 5.1 years.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(as a percentage of 12/31/1999 assets)
[CHART]
Corporate Notes/Bonds -- 47.4%
CMO & Mortgage-Backed Securities -- 15.4%
U.S. Treasury Obligations -- 14.7%
Yankee Obligations -- 9.3%
Asset-Backed Securities -- 7.3%
Foreign Bonds -- 3.7%
Other Investments and Other Assets and Liabilities, net -- 2.2%
What is your outlook for intermediate term bonds?
We are cautious about interest rates. Economic growth is still robust and the
U.S. Federal Reserve has given many signals that it may raise short-term rates
further to rein in overconfidence by the American consumer and to pre-empt
inflation. While we believe the Federal Reserve has the flexibility to raise
rates without jeopardizing the economic expansion, the reaction of the stock
market to further rate increases does create some uncertainty. If the Federal
Reserve were to raise rates appreciably, corporate profits could be squeezed and
this could hurt corporate bond prices as well as stock prices. We believe that
the Fund is well positioned, with a relatively high quality portfolio of
securities and an emphasis on corporate bonds that offer strong long-term value.
7
<PAGE>
EVERGREEN
Short-Intermediate Bond Fund
Fund at a Glance as of December 31, 1999
To keep the U.S. economy healthy, the Federal Reserve Board had aggressively
eased monetary conditions in late 1998 and as a result, interest rates fell to
levels that were near 30-year lows.
Portfolio Management
- --------------------
[PHOTO]
P. Michael Jones, CFA
Tenure: June 1999
- --------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE 1
- --------------------------------------------------------------------------------
[STYLE BOX]
Morningstar's Style Box is based on a portfolio date as of 12/31/1999.
The Fixed-Income Style Box placement is based on a fund's average effective
maturity or duration and the average credit rating of the bond portfolio.
1 Source: 2000 Morningstar, Inc.
2 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than 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.
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. The 12b-1 fees for Class A are 0.25%, for
Class B are 1.00% and for Class C are 1.00%. Class Y does not pay a 12b-1 fee.
If these fees had 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.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
PERFORMANCE AND RETURNS 2
- ---------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average Annual Returns*
- ---------------------------------------------------------------------------------------------
6 months with sales charge -2.23% -4.22% -1.28% n/a
- ---------------------------------------------------------------------------------------------
6 months w/o sales charge 1.11% 0.68% 0.68% 1.19%
- ---------------------------------------------------------------------------------------------
1 year with sales charge -2.67% -4.98% -2.12% n/a
- ---------------------------------------------------------------------------------------------
1 year w/o sales charge 0.64% -0.23% -0.22% 0.77%
- ---------------------------------------------------------------------------------------------
3 years 3.58% 2.91% 3.81% 4.87%
- ---------------------------------------------------------------------------------------------
5 years 5.65% 5.10% 5.38% 6.47%
- ---------------------------------------------------------------------------------------------
Since Portfolio Inception 6.57% 6.34% 6.45% 7.02%
- ---------------------------------------------------------------------------------------------
Maximum Sales Charge 3.25% 5.00% 2.00% n/a
Front End CDSC CDSC
- ---------------------------------------------------------------------------------------------
30-day SEC Yield 5.82% 5.26% 5.28% 6.29%
- ---------------------------------------------------------------------------------------------
6-month distributions per share $0.29 $0.25 $0.25 $0.29
- ---------------------------------------------------------------------------------------------
</TABLE>
*Adjusted for maximum applicable sales charge, unless otherwise noted.
- --------------------------------------------------------------------------------
LONG TERM GROWTH
- --------------------------------------------------------------------------------
[CHART]
Ev Short Interm Bond A CPI Lehman Brothers
12/31/89 9,678 10,000 10,000
12/31/90 10,451 10,611 10,916
12/31/91 11,891 10,936 12,511
12/31/92 12,651 11,253 13,409
12/31/93 13,554 11,562 14,587
12/31/94 13,205 11,872 14,306
12/31/95 15,049 12,173 16,499
12/31/96 15,648 12,577 17,167
12/31/97 16,591 12,791 18,518
12/31/98 17,849 12,998 20,078
12/31/99 17,963 13,354 20,157
Comparison of a $10,000 investment in Evergreen Short-Intermediate Bond Fund,
Class A Shares, versus a similar investment in the Lehman Brothers Intermediate
Government/Corporate Bond Index (LBIGCBI) and the Consumer Price Index (CPI).
The LBIGCBI is an unmanaged index and does not include transaction costs
associated with buying and selling securities nor any management fees. The CPI
is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.
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.
8
<PAGE>
EVERGREEN
Short-Intermediate Bond Fund
Portfolio Manager Interview
How did the Fund perform during the six-month period?
Evergreen Short-Intermediate Bond Fund Class A shares returned 1.11% for the
six-month period ended December 31, 1999, outpacing its benchmark, the Lehman
Brothers Intermediate Government/Corporate Bond Index, which rose 0.98%, before
the deduction of any applicable sales charge. During the six months, the
interest rate environment severely limited returns in the fixed-income markets.
Interest rates rose the entire period, forcing bond prices lower. The yield on
the 5-year U.S. Treasury note rose from 5.65% on June 30, 1999 to 6.34% on
December 31, 1999, returning 0.34%.
Portfolio
Characteristics
---------------
Total Net Assets $ 339,347,165
------------------------------------------------------
Average Credit Quality AA
------------------------------------------------------
Effective Maturity 4.6 years
------------------------------------------------------
Average Duration 3.3 years
------------------------------------------------------
What was the market environment like during the past six months?
Rising interest rates--and the resulting price declines for bonds--distinguished
1999 as the second worst year for bond investors since 1973. Only in 1994 did
bond prices slide even further. The environment was shaped by a dramatic change
in investment conditions from those that existed in late 1998 and early 1999 to
later in the year, with the last six months of 1999 racking up the steepest
declines.
At the beginning of 1999, world financial markets had just begun to recover from
the global market crisis that occurred in the fall of 1998. Many analysts
expected the lingering effects of the crisis and fragile foreign economies to
depress U.S. economic growth in 1999. To keep the U.S. economy healthy, the
Federal Reserve Board had aggressively eased monetary conditions in late 1998
and as a result, interest rates fell to levels that were near 30-year lows.
By spring of 1999, however, economic growth still showed no signs of slowing and
global equity markets were back at record highs. Commodity prices also
rose--particularly oil prices--which soared from $10.00 a barrel in March to
nearly $25.00 by the end of the year. Investors' outlook reversed course.
Expectations of excessive growth and rekindled inflation replaced concerns about
weak global economies. Investors pushed interest rates higher and bond prices
lower, reflecting the changing market conditions; and the Federal Reserve raised
its benchmark federal funds rate three times.
Initially, the Fed's efforts to cool inflationary pressures were successful.
Equity prices stalled--dampening the "wealth effect" that had helped fuel heavy
consumer spending--and the economy slowed to 1.90% in the year's second quarter
from its 5.9% annualized pace as 1998 drew to a close. In the final months of
1999, however, the Fed not only failed to continue tightening, but effectively
reversed its earlier tightening moves by flooding the financial system with
liquidity.
We believe the Fed provided excess liquidity so that consumers and businesses
could prepare for Y2K--accumulating cash and inventory reserves in anticipation
of possible Y2K disruptions. Instead of prudently building cash balances,
however, consumers used their new liquidity to aggressively bid up stock prices
and go on a holiday buying binge. The Fed's overestimation of Y2K liquidity
needs inadvertently rekindled the equity speculation and consumer frenzy that
the interest rate hikes had cooled in the summer and fall. Interest rates rose
sharply as 1999 came to a close, reflecting investors' concerns about the
effects that the Fed's accommodative policy in the fourth quarter would have on
future inflation.
9
<PAGE>
EVERGREEN
Short-Intermediate Bond Fund
Portfolio Manager Interview
- --------------------------------------------------------------------------------
PORTFOLIO MATURITY
- --------------------------------------------------------------------------------
(as a percentage of 12/31/1999 portfolio assets)
[CHART]
Less than 1 year -- 4.0%
1 - 5 Years -- 33.0%
5 - 10 Years -- 28.2%
10 - 20 Years -- 14.8%
20 - 30 Years -- 20.0%
How did your investment strategy impact performance?
Three main strategies contributed to the Fund's performance, over the past six
months: managing interest rate risk, asset-allocation and emphasizing income.
First, we adjusted the Fund's duration, accurately anticipating rising rates and
changes in the yield curve, and selected securities accordingly. Duration, which
is expressed in years, measures a fund's sensitivity to changes in interest
rates. Shortening duration reduces a fund's sensitivity and lengthening duration
increases sensitivity to interest rate changes.
We also made two major adjustments in the Fund's mortgage-backed securities and
corporate bond allocations. After having built-up holdings at the end of 1998,
we reduced the Fund's position in both these sectors in June 1999.
Mortgage-backed securities and corporate bonds had experienced substantial price
appreciation in the first half of the year, outperforming U.S. Treasuries. We
particularly focused on lightening up on those securities that were less liquid.
This strategy worked well. During the summer, mortgage-backed securities and
corporate bonds underperformed U.S. Treasuries. We rebuilt the positions in
mortgage-backed securities and corporate bonds in late summer and early fall,
securing the higher yield advantages they offered. Again, the strategy benefited
performance, as mortgage-backed securities and corporate bonds outperformed U.S.
Treasuries in the final quarter of 1999. In addition to generating attractive
price appreciation, these positions enhanced the Fund's income.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(as a percentage of 12/31/1999 portfolio assets)
[CHART]
Government/Agency -- 40.0%
AAA -- 28.0%
AA -- 3.4%
A -- 19.5%
BBB -- 9.1%
What is your outlook?
Our outlook for 2000 is contingent upon the Fed's actions early in the year. If
the Fed moves aggressively to drain excess liquidity with a substantial increase
in short-term interest rates, we may be near the peak in interest rates. In our
opinion, a bold move by the Fed would reinforce market sentiment that
technology-driven disinflation could continue in the years ahead. Further, the
slower economic growth caused by the Fed's aggressive action could ignite an
explosive bond rally in the second half of the year.
Alternatively, a cautious move at the Federal Open Market Committee meeting in
February would most likely be viewed by investors as a green light for stock
market speculation and consumer spending. Additionally, we would expect economic
growth to keep accelerating and inflationary pressures to continue to build,
with interest rates heading higher and bond prices lower.
We do not expect such an outcome. Based on their December policy statement, the
Fed is fully aware of the inflationary risks imbedded in the economy. Also,
Chairman Greenspan's recent nomination for another term should alleviate
political concerns over Fed policy decisions. Finally, we believe the Fed would
rather tighten monetary policy early, in light of the November elections. All of
these factors suggest that the Fed will move quickly and aggressively in the
months ahead, setting the stage for bonds to improve markedly as the year
progresses.
10
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended June Year Ended
Six Months Ended 30, September 30,
December 31, 1999 ---------------- Period Ended -----------------
(Unaudited) 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 0.26 0.53 0.57 0.46 0.61 0.46
Net realized and
unrealized gains or
losses on securities (0.12) (0.08) (0.07) 0.03 0.01 0.14
------- ------- ------- ------- ------- -------
Total from investment
operations 0.14 0.45 0.50 0.49 0.62 0.60
------- ------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.26) (0.53) (0.57) (0.43) (0.53) (0.43)
Returns of capital 0 0 0 0 (0.03) 0
------- ------- ------- ------- ------- -------
Total distributions (0.26) (0.53) (0.57) (0.43) (0.56) (0.43)
------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 9.53 $ 9.65 $ 9.73 $ 9.80 $ 9.74 $ 9.68
------- ------- ------- ------- ------- -------
Total return* 1.48% 4.80% 5.24% 5.12% 6.56% 6.36%
Ratios and supplemental
data
Net assets, end of
period (thousands) $16,849 $18,149 $18,022 $15,751 $22,684 $19,293
Ratios to average net
assets
Expenses++ 0.83%+ 0.85% 0.87% 0.92%+ 0.91% 0.86%+
Net investment income 5.36%+ 5.53% 5.77% 6.24%+ 6.31% 6.37%+
Portfolio turnover rate 16% 41% 88% 52% 74% 67%
</TABLE>
<TABLE>
<CAPTION>
Year Ended June
Six Months Ended 30, Year Ended September 30,
December 31, 1999 # ---------------- Period Ended ----------------------------
(Unaudited) 1999 # 1998 June 30, 1997 (a) 1996 # 1995 1994
<S> <C> <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 $ 9.91
------- ------- ------- ------- -------- -------- --------
Income from investment
operations
Net investment income 0.22 0.46 0.49 0.39 0.55 0.52 0.47
Net realized and
unrealized gains or
losses on securities (0.12) (0.09) (0.07) 0.04 0.01 0.03 (0.41)
------- ------- ------- ------- -------- -------- --------
Total from investment
operations 0.10 0.37 0.42 0.43 0.56 0.55 0.06
------- ------- ------- ------- -------- -------- --------
Distributions to
shareholders from
Net investment income (0.22) (0.46) (0.49) (0.37) (0.46) (0.49) (0.35)
Returns of capital 0 0 0 0 (0.03) 0 0
------- ------- ------- ------- -------- -------- --------
Total distributions (0.22) (0.46) (0.49) (0.37) (0.49) (0.49) (0.35)
------- ------- ------- ------- -------- -------- --------
Net asset value, end of
period $ 9.53 $ 9.65 $ 9.74 $ 9.81 $ 9.75 $ 9.68 $ 9.62
------- ------- ------- ------- -------- -------- --------
Total return* 1.06% 3.86% 4.42% 4.53% 5.90% 5.81% 0.58%
Ratios and supplemental
data
Net assets, end of
period (thousands) $14,807 $15,618 $26,056 $32,694 $ 44,096 $ 62,998 $ 95,761
Ratios to average net
assets
Expenses++ 1.65%+ 1.65% 1.65% 1.67%+ 1.63% 1.53% 1.50%
Net investment income 4.54%+ 4.72% 5.07% 5.52%+ 5.63% 5.46% 4.05%
Portfolio turnover rate 16% 41% 88% 52% 74% 67% 34%
</TABLE>
(a) For the nine months ended June 30, 1997. The Fund changed its fiscal year
end from September 30 to June 30, effective June 30, 1997.
(b) For the period from December 30, 1994 (commencement of class operations) to
September 30, 1995.
* Excluding applicable sales charges.
+ Annualized.
++ The ratio of expenses to average net assets excludes expense reductions and
includes fee waivers.
# Net investment income is based on average shares outstanding during the pe-
riod.
See Combined Notes to Financial Statements.
11
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
Six Months Ended Year Ended June 30, September 30,
December 31, 1999 # -------------------- Period Ended ----------------------
(Unaudited) 1999 # 1998 June 30, 1997 (a) 1996 # 1995 1994
<S> <C> <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 $ 9.90
------ --------- --------- ------ ------ ------ ------
Income from investment
operations
Net investment income 0.22 0.46 0.49 0.40 0.54 0.52 0.40
Net realized and
unrealized gains or
losses on securities (0.12) (0.09) (0.06) 0.03 0.02 0.04 (0.35)
------ --------- --------- ------ ------ ------ ------
Total from investment
operations 0.10 0.37 0.43 0.43 0.56 0.56 0.05
------ --------- --------- ------ ------ ------ ------
Distributions to
shareholders from
Net investment income (0.22) (0.46) (0.49) (0.37) (0.46) (0.49) (0.35)
Returns of capital 0 0 0 0 (0.03) 0 0
------ --------- --------- ------ ------ ------ ------
Total distributions (0.22) (0.46) (0.49) (0.37) (0.49) (0.49) (0.35)
------ --------- --------- ------ ------ ------ ------
Net asset value, end of
period $ 9.53 $ 9.65 $ 9.74 $ 9.80 $ 9.74 $ 9.67 $ 9.60
------ --------- --------- ------ ------ ------ ------
Total return* 1.06% 3.86% 4.53% 4.53% 5.91% 5.93% 0.48%
Ratios and supplemental
data
Net assets, end of
period (thousands) $3,791 $ 3,928 $ 3,972 $4,105 $4,152 $2,755 $2,874
Ratios to average net
assets
Expenses++ 1.66%+ 1.65% 1.65% 1.67%+ 1.64% 1.53% 1.50%
Net investment income 4.56%+ 4.72% 5.05% 5.53%+ 5.60% 5.51% 4.08%
Portfolio turnover rate 16% 41% 88% 52% 74% 67% 34%
</TABLE>
<TABLE>
<CAPTION>
Period Ended
December 31, 1999 (b)
(Unaudited)
<S> <C>
CLASS Y SHARES
Net asset value, beginning of period $ 9.58
------
Income from investment operations
Net investment income 0.09
Net realized and unrealized gains or losses on
securities (0.05)
------
Total from investment operations 0.04
------
Distributions to shareholders from net investment
income (0.09)
------
Net asset value, end of period $ 9.53
------
Total return 0.44%
Ratios and supplemental data
Net assets, end of period (thousands) $ 1
Ratios to average net assets
Expenses++ 0.66%+
Net investment income 5.71%+
Portfolio turnover rate 16%
</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 October 29, 1999 (commencement of class operations) to
December 31, 1999.
* Excluding applicable sales charges.
+ Annualized.
++ The ratio of expenses to average net assets excludes expense reductions and
includes fee waivers.
# Net investment income is based on average shares outstanding during the pe-
riod.
See Combined Notes to Financial Statements.
12
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30, Year Ended July 31,
December 31, 1999 --------------------- Period Ended -------------------------
(Unaudited) 1999 1998 # June 30, 1997 (a) 1996 1995 1994 #
<S> <C> <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 $ 9.46
------- --------- --------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.27 0.53 0.57 0.54 0.59 0.63 0.57
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.29) (0.42) 0.20 0.18 (0.16) 0.02 (0.59)
------- --------- --------- ------- ------- ------- -------
Total from investment
operations (0.02) 0.11 0.77 0.72 0.43 0.65 (0.02)
------- --------- --------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.31) (0.53) (0.62) (0.52) (0.58) (0.61) (0.59)
Returns of capital 0 0 0 0 0 0 (0.01)
------- --------- --------- ------- ------- ------- -------
Total distributions (0.31) (0.53) (0.62) (0.52) (0.58) (0.61) (0.60)
------- --------- --------- ------- ------- ------- -------
Net asset value, end of
period $ 8.33 $ 8.66 $ 9.08 $ 8.93 $ 8.73 $ 8.88 $ 8.84
------- --------- --------- ------- ------- ------- -------
Total return* (0.21%) 1.17% 8.82% 8.40% 4.95% 7.76% (0.29%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $89,314 $ 107,714 $ 123,723 $10,341 $12,958 $14,558 $16,036
Ratios to average net
assets
Expenses++ 1.16%+ 1.10% 1.11% 1.12%+ 1.10% 1.00% 1.00%
Net investment income 6.04%+ 5.90% 6.00% 6.43%+ 6.57% 7.13% 6.81%
Portfolio turnover rate 76% 170% 331% 179% 231% 149% 280%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30, Year Ended July 31,
December 31, 1999 --------------------- Period Ended -------------------------
(Unaudited) 1999 1998 # June 30, 1997 (a) 1996 1995 1994 #
<S> <C> <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 $ 9.47
------ --------- --------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.23 0.47 0.48 0.47 0.52 0.56 0.49
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.28) (0.43) 0.21 0.20 (0.16) 0.02 (0.58)
------ --------- --------- ------- ------- ------- -------
Total from investment
operations (0.05) 0.04 0.69 0.67 0.36 0.58 (0.09)
------ --------- --------- ------- ------- ------- -------
Distributions to
shareholders from
Net investment income (0.28) (0.47) (0.55) (0.46) (0.51) (0.54) (0.52)
Returns of capital 0 0 0 0 0 0 (0.01)
------ --------- --------- ------- ------- ------- -------
Total distribution (0.28) (0.47) (0.55) (0.46) (0.51) (0.54) (0.53)
------ --------- --------- ------- ------- ------- -------
Net asset value, end of
period $ 8.33 $ 8.66 $ 9.09 $ 8.95 $ 8.74 $ 8.89 $ 8.85
------ --------- --------- ------- ------- ------- -------
Total return* (0.59%) 0.31% 7.89% 7.81% 4.10% 6.87% (1.05%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $9,576 $ 11,100 $ 10,763 $11,368 $16,034 $17,985 $17,819
Ratios to average net
assets
Expenses++ 1.91%+ 1.85% 1.86% 1.87%+ 1.85% 1.75% 1.75%
Net investment income 5.29%+ 5.15% 5.28% 5.68%+ 5.82% 6.38% 5.48%
Portfolio turnover rate 76% 170% 331% 179% 231% 149% 280%
</TABLE>
(a) For the eleven months ended June 30, 1997. The Fund changed its fiscal year
end from July 31 to June 30, effective June 30, 1997.
* Excluding applicable sales charges.
+ Annualized.
++ The ratio of expenses to average net assets excludes expense reductions and
includes fee waivers.
# Net investment income is based on average shares outstanding during the pe-
riod.
See Combined Notes to Financial Statements.
13
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30, Year Ended July 31,
December 31, 1999 -------------------- Period Ended ------------------------
(Unaudited) 1999 # 1998 # June 30, 1997 (a) 1996 1995 1994 #
<S> <C> <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 $ 9.46
------ --------- --------- ------ ------ ------- -------
Income from investment
operations
Net investment income 0.23 0.47 0.49 0.46 0.52 0.55 0.49
Net realized and
unrealized gains or
losses on securities
and foreign currency
related transactions (0.28) (0.43) 0.21 0.20 (0.16) 0.03 (0.57)
------ --------- --------- ------ ------ ------- -------
Total from investment
operations (0.05) 0.04 0.70 0.66 0.36 0.58 (0.08)
------ --------- --------- ------ ------ ------- -------
Distributions to
shareholders from
Net investment income (0.28) (0.47) (0.55) (0.46) (0.51) (0.54) (0.52)
Returns of capital 0 0 0 0 0 0 (0.01)
------ --------- --------- ------ ------ ------- -------
Total distributions (0.28) (0.47) (0.55) (0.46) (0.51) (0.54) (0.53)
------ --------- --------- ------ ------ ------- -------
Net asset value, end of
period $ 8.33 $ 8.66 $ 9.09 $ 8.94 $ 8.74 $ 8.89 $ 8.85
------ --------- --------- ------ ------ ------- -------
Total return* (0.59%) 0.31% 8.01% 7.70% 4.10% 6.87% (0.95%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $4,149 $ 4,718 $ 5,439 $7,259 $9,084 $10,185 $13,086
Ratios to average net
assets
Expenses++ 1.91%+ 1.85% 1.86% 1.87%+ 1.85% 1.75% 1.75%
Net investment income 5.29%+ 5.15% 5.26% 5.68%+ 5.82% 6.37% 5.44%
Portfolio turnover rate 76% 170% 331% 179% 231% 149% 280%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1999 Year Ended Period Ended
(Unaudited) June 30, 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 0.27 0.56 0.24
Net realized and
unrealized gains or
losses on securities and
foreign currency related
transactions (0.28) (0.42) (0.01)
------- ------- -------
Total from investment
operations (0.01) 0.14 0.23
------- ------- -------
Distributions to
shareholders from net
investment income (0.32) (0.56) (0.24)
------- ------- -------
Net asset value, end of
period $ 8.33 $ 8.66 $ 9.08
------- ------- -------
Total return (0.08%) 1.43% 2.58%
Ratios and supplemental
data
Net assets, end of period
(thousands) $46,762 $54,766 $63,721
Ratios to average net
assets
Expenses++ 0.91%+ 0.85% 0.86%+
Net investment income 6.29%+ 6.15% 6.23%+
Portfolio turnover rate 76% 170% 331%
</TABLE>
(a) For the eleven months ended June 30, 1997. The Fund changed its fiscal year
end from July 31 to June 30, effective June 30, 1997.
(b) For the period from January 26, 1998 (commencement of class operations) to
June 30, 1998.
* Excluding applicable sales charges.
+ Annualized.
++ The ratio of expenses to average net assets excludes expense reductions and
includes fee waivers.
# Net investment income is based on average shares outstanding during the pe-
riod.
See Combined Notes to Financial Statements.
14
<PAGE>
EVERGREEN
Short Intermediate Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 ---------------------------------- Period Ended Year Ended
(Unaudited) 1999 1998 1997 1996 June 30, 1995 (a) December 31, 1994
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Net asset value,
beginning of period $ 9.68 $ 9.90 $ 9.83 $ 9.82 $ 10.02 $ 9.52 $ 10.42
------- ------- ------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.28 0.57 0.61 0.63 0.63 0.32 0.65
Net realized and
unrealized gains or
losses on securities (0.17) (0.22) 0.07 0.02 (0.19) 0.50 (0.91)
------- ------- ------- ------- ------- ------- -------
Total from investment
operations 0.11 0.35 0.68 0.65 0.44 0.82 (0.26)
------- ------- ------- ------- ------- ------- -------
Distributions to
shareholders from net
investment income (0.29) (0.57) (0.61) (0.64) (0.64) (0.32) (0.64)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 9.50 $ 9.68 $ 9.90 $ 9.83 $ 9.82 $ 10.02 $ 9.52
------- ------- ------- ------- ------- ------- -------
Total return* 1.11% 3.59% 7.08% 6.77% 4.45% 8.77% (2.57%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $19,456 $19,127 $16,848 $17,703 $18,630 $18,898 $19,127
Ratios to average net
assets
Expenses++ 0.82%+ 0.82% 0.80% 0.72% 0.79% 0.77%+ 0.75%
Net investment income 5.86%+ 5.78% 6.14% 6.37% 6.35% 6.58%+ 6.46%
Portfolio turnover rate 87% 50% 68% 45% 76% 34% 48%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 ---------------------------------- Period Ended Year Ended
(Unaudited) 1999 1998 1997 1996 June 30, 1995 (a) December 31, 1994
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Net asset value,
beginning of period $ 9.70 $ 9.92 $ 9.85 $ 9.84 $ 10.04 $ 9.54 $ 10.44
------- ------- ------- ------- ------- ------- -------
Income from investment
operations
Net investment income 0.24 0.49 0.52 0.54 0.55 0.28 0.58
Net realized and
unrealized gains or
losses on securities (0.17) (0.23) 0.07 0.01 (0.19) 0.50 (0.92)
------- ------- ------- ------- ------- ------- -------
Total from investment
operations 0.07 0.26 0.59 0.55 0.36 0.78 (0.34)
------- ------- ------- ------- ------- ------- -------
Distributions to
shareholders from net
investment income (0.25) (0.48) (0.52) (0.54) (0.56) (0.28) (0.56)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 9.52 $ 9.70 $ 9.92 $ 9.85 $ 9.84 $ 10.04 $ 9.54
------- ------- ------- ------- ------- ------- -------
Total return* 0.68% 2.66% 6.11% 5.78% 3.62% 8.31% (3.33%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $19,721 $22,553 $22,689 $22,237 $21,006 $17,366 $17,625
Ratios to average net
assets
Expenses++ 1.65%+ 1.72% 1.70% 1.62% 1.69% 1.67%+ 1.50%
Net investment income 5.04%+ 4.87% 5.23% 5.48% 5.45% 5.68%+ 5.75%
Portfolio turnover rate 87% 50% 68% 45% 76% 34% 48%
</TABLE>
(a) For the six months ended June 30, 1995. The Fund changed its fiscal year
end from December 31 to June 30, effective June 30, 1995.
* Excluding applicable sales charges.
+ Annualized.
++ The ratio of expenses to average net assets excludes expense reductions and
includes fee waivers.
See Combined Notes to Financial Statements.
15
<PAGE>
EVERGREEN
Short-Intermediate Bond Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 ------------------------------ Period Ended Period Ended
(Unaudited) 1999 1998 1997 1996 June 30, 1995 (a) December 31, 1994 (b)
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
Net asset value,
beginning of period $ 9.70 $ 9.92 $ 9.85 $ 9.84 $10.05 $ 9.55 $ 9.85
------ ------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income 0.25 0.49 0.52 0.54 0.55 0.26 0.18
Net realized and
unrealized gains or
losses on securities (0.18) (0.23) 0.07 0.01 (0.20) 0.50 (0.30)
------ ------ ------ ------ ------ ------ ------
Total from investment
operations 0.07 0.26 0.59 0.55 0.35 0.76 (0.12)
------ ------ ------ ------ ------ ------ ------
Distributions to
shareholders from net
investment income (0.25) (0.48) (0.52) (0.54) (0.56) (0.26) (0.18)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period $ 9.52 $ 9.70 $ 9.92 $ 9.85 $ 9.84 $10.05 $ 9.55
------ ------ ------ ------ ------ ------ ------
Total return* 0.68% 2.66% 6.11% 5.77% 3.51% 8.23% (1.27%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $1,788 $1,360 $1,143 $1,029 $1,155 $ 527 $ 512
Ratios to average net
assets
Expenses++ 1.65%+ 1.72% 1.70% 1.62% 1.69% 1.67%+ 1.65%+
Net investment income 5.04%+ 4.87% 5.25% 5.47% 5.46% 5.69%+ 5.87%+
Portfolio turnover rate 87% 50% 68% 45% 76% 34% 48%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1999 -------------------------------------- Period Ended Year Ended
(Unaudited) 1999 1998 1997 1996 June 30, 1995 (a) December 31, 1994
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS Y SHARES
Net asset value,
beginning of period $ 9.68 $ 9.90 $ 9.83 $ 9.82 $ 10.02 $ 9.52 $ 10.43
-------- -------- -------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.29 0.58 0.62 0.64 0.64 0.33 0.65
Net realized and
unrealized gains or
losses on securities (0.18) (0.22) 0.07 0.02 (0.19) 0.49 (0.91)
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations 0.11 0.36 0.69 0.66 0.45 0.82 (0.26)
-------- -------- -------- -------- -------- -------- --------
Distributions to
shareholders from net
investment income (0.29) (0.58) (0.62) (0.65) (0.65) (0.32) (0.65)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 9.50 $ 9.68 $ 9.90 $ 9.83 $ 9.82 $ 10.02 $ 9.52
-------- -------- -------- -------- -------- -------- --------
Total return 1.19% 3.69% 7.19% 6.88% 4.63% 8.80% (2.55%)
Ratios and supplemental
data
Net assets, end of
period (thousands) $298,382 $335,175 $348,358 $357,706 $352,095 $347,050 $345,025
Ratios to average net
assets
Expenses++ 0.65%+ 0.72% 0.70% 0.62% 0.69% 0.67%+ 0.65%
Net investment income 6.04%+ 5.88% 6.25% 6.48% 6.45% 6.68%+ 6.56%
Portfolio turnover rate 87% 50% 68% 45% 76% 34% 48%
</TABLE>
(a) For the six months ended June 30, 1995. The Fund changed its fiscal year
end from December 31 to June 30, effective June 30, 1995.
(b) For the period from September 6, 1994 (commencement of class operations) to
December 31, 1994.
* Excluding applicable sales charges.
+ Annualized.
++ The ratio of expenses to average net assets excludes expense reductions and
includes fee waivers.
See Combined Notes to Financial Statements.
16
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
Schedule of Investments
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ADJUSTABLE RATE MORTGAGE SECURITIES - 65.3% (a)
FHLMC - 20.9%
$ 413,319 (Est. Maturity 2002),
7.03%, 10/1/2021...................................... $ 422,552
564,838 (Est. Maturity 2003),
6.70%, 3/1/2021....................................... 570,430
640,326 (Est. Maturity 2003),
6.74%, 7/1/2030....................................... 652,633
722,022 (Est. Maturity 2003),
6.99%, 11/1/2021...................................... 736,011
719,625 (Est. Maturity 2003),
7.14%, 9/1/2017....................................... 739,415
1,461,353 (Est. Maturity 2004),
6.59%, 6/1/2016....................................... 1,473,234
1,037,743 (Est. Maturity 2004),
6.63%, 1/1/2022....................................... 1,066,929
548,128 (Est. Maturity 2004),
6.92%, 4/1/2022....................................... 560,806
788,062 (Est. Maturity 2006),
6.85%, 3/1/2019....................................... 810,719
29,622 (Est. Maturity 2010),
7.30%, 5/1/2019....................................... 29,886
42,167 (Est. Maturity 2011),
6.86%, 5/1/2020....................................... 42,648
318,706 (Est. Maturity 2012),
7.40%, 4/1/2020....................................... 319,223
-----------
7,424,486
-----------
FNMA - 43.4%
126,866 (Est. Maturity 2002),
6.45%, 1/1/2022....................................... 129,383
220,075 (Est. Maturity 2002),
6.793%, 10/1/2016..................................... 221,389
858,224 (Est. Maturity 2003),
6.067%, 5/1/2036...................................... 853,396
158,322 (Est. Maturity 2003),
6.46%, 3/1/2019....................................... 161,018
1,184,525 (Est. Maturity 2003),
6.571%, 5/1/2022...................................... 1,212,290
318,922 (Est. Maturity 2003),
6.625%, 8/1/2015...................................... 319,359
196,949 (Est. Maturity 2003),
6.648%, 6/1/2019...................................... 200,364
194,344 (Est. Maturity 2003),
6.758%, 12/1/2022..................................... 197,502
1,517,710 (Est. Maturity 2003)
6.84%, 11/1/2017 - 1/1/2031........................... 1,559,611
1,258,839 (Est. Maturity 2004),
5.936%, 11/1/2028..................................... 1,212,425
213,365 (Est. Maturity 2004),
6.249%, 3/1/2015...................................... 215,766
319,834 (Est. Maturity 2004),
6.558%, 7/1/2027...................................... 326,531
225,211 (Est. Maturity 2004),
6.704%, 10/1/2017..................................... 228,659
286,288 (Est. Maturity 2004),
6.725%, 7/1/2020...................................... 295,189
2,131,045 (Est. Maturity 2004),
6.759%, 9/1/2021...................................... 2,184,662
80,984 (Est. Maturity 2004),
6.853%, 2/1/2017...................................... 80,991
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ADJUSTABLE RATE MORTGAGE SECURITIES - continued
FNMA - continued
$ 995,698 (Est. Maturity 2004),
6.902%, 9/1/2018..................................... $ 1,030,707
1,463,040 (Est. Maturity 2004),
6.965%, 8/1/2027..................................... 1,499,616
1,074,081 (Est. Maturity 2004),
7.347%, 12/1/2023.................................... 1,094,703
555,559 (Est. Maturity 2005),
6.726%, 11/1/2018.................................... 565,281
213,022 (Est. Maturity 2005),
6.875%, 6/1/2018..................................... 217,583
434,613 (Est. Maturity 2006),
6.756%, 1/1/2022..................................... 447,651
139,094 (Est. Maturity 2006),
7.094%, 7/1/2019..................................... 140,115
994,482 (Est. Maturity 2011),
5.795%, 4/1/2038..................................... 988,888
-----------
15,383,079
-----------
GNMA - 1.0%
238,227 (Est. Maturity 2003),
6.125%, 10/20/2027................................... 241,391
100,737 (Est. Maturity 2005),
6.375%, 6/20/2022.................................... 101,429
-----------
342,820
-----------
Total Adjustable Rate Mortgage Securities
(cost $23,418,942)................................... 23,150,385
-----------
ASSET-BACKED SECURITIES - 6.8% (a)
688,139 Carco Auto Loan Master Trust,
Ser. 1997-1, Class A,
(Est. Maturity 2002),
6.689%, 8/15/2004................................... 689,061
916,559 CoreStates Home Equity Trust,
Ser. 1994-1, Class A,
(Est. Maturity 2003),
6.65%, 5/15/2009.................................... 906,588
500,000 Delta Funding Home Equity Loan Trust, Ser. 1997-1,
Class A5,
(Est. Maturity 2006),
7.74%, 4/25/2029.................................... 499,183
303,946 Merrill Lynch Mtge. Investors, Inc.,
Ser. 1992-B, Class B,
(Est. Maturity 2000),
8.50%, 4/15/2012.................................... 303,374
-----------
Total Asset-Backed Securities
(cost $2,423,571)................................... 2,398,206
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 6.0% (a)
548,573 FHLMC
Ser. 20, Class F,
(Est. Maturity 2004),
5.739%, 7/1/2029.................................... 535,629
1,000,000 Mellon Residential Funding Corp., Ser.1999-TBC1,
Class A3,
(Est. Maturity 2011),
6.11%, 1/25/2029.................................... 952,746
649,761 Nomura Depositor Trust,
Ser. 1998-ST1, Class A1,
(Est. Maturity 2003),
5.686%, 1/15/2003................................... 643,280
-----------
Total Collateralized Mortgage Obligations
(cost $2,199,584)................................... 2,131,655
-----------
</TABLE>
17
<PAGE>
EVERGREEN
Capital Preservation and Income Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
FIXED RATE MORTGAGE SECURITIES - 7.2%
FHLMC - 2.1%
$ 500,000 6.25%, 7/15/2004...................................... $ 489,029
250,545 10.50%, 4/1/2004 - 10/1/2005.......................... 256,543
-----------
745,572
-----------
FNMA - 1.4%
124,137 9.50%, 4/15/2005...................................... 124,990
344,791 11.00%, 1/1/2016 - 1/1/2018........................... 373,890
-----------
498,880
-----------
GNMA - 3.7%
1,277,892 10.25%, 11/15/2029.................................... 1,293,610
-----------
Total Fixed Rate Mortgage Securities
(cost $2,619,036).................................... 2,538,062
-----------
U.S. TREASURY OBLIGATIONS - 9.0%
U.S. Treasury Notes:
600,000 4.50%, 1/31/2001...................................... 589,968
600,000 4.75%, 2/15/2004...................................... 565,968
2,075,000 5.50%, 8/31/2001 - 5/31/2003.......................... 2,038,949
-----------
Total U.S. Treasury Obligations
(cost $3,262,567).................................... 3,194,885
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENTS - 4.9% (b)
$1,603,000 Evergreen Joint Repurchase Agreement 3.10%, dated
12/31/1999,
maturing 1/03/2000, maturity value $1,603,414 ...... $ 1,603,000
152,000 State Street Bank & Trust Co.
3.25%, dated 12/31/1999,
maturing 1/03/2000, maturity
value $152,041 ..................................... 152,000
-----------
Total Repurchase Agreements
(cost $1,755,000)................................... 1,755,000
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $35,678,700)............................ 99.2% 35,168,193
Other Assets and
Liabilities - net............................. 0.8 279,899
----- -----------
Net Assets..................................... 100.0% $35,448,092
===== ===========
</TABLE>
(a) The estimated maturity of collateralized mortgage obligations, an adjust-
able rate mortgage security or an asset-backed security is based on current
and projected prepayment rates. Changes in interest rates can cause the es-
timated maturity to differ from the listed date.
(b) The repurchase agreements are fully collateralized by U.S. Government
and/or agency obligations based on market prices plus accrued interest at
December 31, 1999.
Summary of Abbreviations
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
See Combined Notes to Financial Statements.
18
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - 7.3% (a)
$2,000,000 American Express Credit Account, Ser. 1999-1, Class
B, (Est. Maturity 2004), 5.85%, 11/15/2006......... $ 1,908,030
1,000,000 California Infrastructure PG&E, Ser. 1997-1, Class
A4, (Est. Maturity 2000), 6.16%, 6/25/2003......... 993,915
2,500,000 Contimortgage Home Equity Loan Trust, Ser. 1998-1,
Class A6, (Est. Maturity 2003), 6.58%, 12/15/2018.. 2,441,613
CoreStates Home Equity Loan Trust:
605,964 Ser. 1994-1, Class A, (Est. Maturity 2000),
6.65%, 5/15/2009.................................... 603,095
1,000,000 Ser. 1996-1, Class A4, (Est. Maturity 2002),
7.00%, 6/15/2012.................................... 997,405
1,000,000 Southern Pacific Secd. Assets Corp., Ser. 1996-3,
Class A4, (Est. Maturity 2002), 7.60%, 10/25/2027.. 1,004,865
3,000,000 WFS Financial Owner Trust, Ser. 1997-C,
(Est. Maturity 2001), 6.30%, 3/20/2005............. 2,967,187
------------
Total Asset-Backed Securities (cost $11,140,740).... 10,916,110
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 7.3% (a)
500,000 Chase Comml. Mtge. Securities Corp., Ser. 1999-2,
Class B, (Est. Maturity 2009),
7.34%, 11/15/2009.................................. 487,500
680,845 Criimi Mae Finl. Corp., Ser. 1, Class A, (Est.
Maturity 2004), 7.00%, 1/1/2033.................... 628,931
DLJ Commercial Mtge. Corp.:
2,000,000 Ser. 1999-CG1, Class A3, (Est. Maturity 2009),
6.77%, 2/10/2009.................................... 1,860,330
1,000,000 Ser. 1999-CG1, Class B1, (Est. Maturity 2009),
7.27%, 2/10/2009.................................... 928,335
1,000,000 FNMA, Ser. 1993-248, Class SA, (Est. Maturity 2004),
3.57%, 8/25/2023 (d)(g)............................ 830,000
Morgan Stanley Capital I, Inc.:
700,000 Ser. 1997-C1, Class B, (Est. Maturity 2007),
7.69%, 1/15/2007.................................... 697,742
650,000 Ser. 1998-HF2, Class B,
(Est. Maturity 2008),
6.92%, 11/15/2030................................... 625,323
700,000 Ser. 1999-LIFE, Class A2,
(Est. Maturity 2009),
7.11%, 7/15/2009.................................... 681,629
750,000 PNC Mtge. Acceptance Corp.,
Ser. 1999-CM1, Class B1,
(Est. Maturity 2009),
8.16%, 11/10/2009.................................. 724,251
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS - continued
PNC Mtge. Securities Corp.:
$ 386,787 Ser. 1997-4, Class 2PP1, (Est. Maturity 2000),
7.50%, 7/25/2027.................................... $ 385,725
655,807 Ser. 1999-5, Class CB3, (Est. Maturity 2010),
6.89%, 7/25/2029.................................... 588,997
698,043 Ser. 1999-8, Class CB3, (Est. Maturity 2013),
7.35%, 9/25/2029.................................... 646,344
1,164,520 Residential Funding Mtge. Securities I, Inc., Ser.
1999-S2, Class M1, (Est. Maturity 2011),
6.50%, 1/25/2029................................... 1,038,769
Resolution Trust Corp.:
379,887 Ser. 1992-3, Class A2, (Est. Maturity 2000),
6.51%, 9/25/2019.................................... 378,727
437,664 Ser. 1992-3, Class A3, (Est. Maturity 2001),
6.70%, 5/21/2021.................................... 436,318
12,322 Ser. 1995-1, Class A2C, (Est. Maturity 2000),
7.50%, 10/25/2028................................... 12,322
------------
Total Collateralized Mortgage Obligations (cost
$11,249,978)....................................... 10,951,243
------------
CORPORATE BONDS - 47.4%
Advertising & Related Services - 0.3%
250,000 Lamar Media Corp., Sr. Sub. Notes,
9.625%, 12/1/2006.................................. 256,250
250,000 Outdoor Systems, Inc., Sr. Sub. Notes,
8.875%, 6/15/2007.................................. 256,875
------------
513,125
------------
Aerospace & Defense - 1.3%
1,000,000 Lockheed Martin Corp., Notes,
7.95%, 12/1/2005................................... 993,709
1,000,000 Raytheon Co., Sr. Notes,
6.15%, 11/1/2008................................... 889,707
------------
1,883,416
------------
Automotive Equipment & Manufacturing - 0.6%
200,000 Eagle Picher Inds., Inc., Sr. Sub. Notes,
9.375%, 3/1/2008................................... 175,000
250,000 Federal Mogul Corp., Sr. Sub. Notes,
7.50%, 1/15/2009................................... 223,040
250,000 Hayes Wheels Int'l., Inc.,
Sr. Sub. Notes, Ser. B,
9.125%, 7/15/2007.................................. 245,625
250,000 Mark IV Inds., Inc., Sr. Sub. Notes,
7.50%, 9/1/2007.................................... 226,243
------------
869,908
------------
Banks - 7.5%
1,000,000 Amsouth Bancorp., Sub. Deb., 6.75%, 11/1/2025....... 961,317
2,500,000 Bank One Texas, N.A., Sub. Notes, 6.25%, 2/15/2008
(f)................................................ 2,316,512
</TABLE>
19
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Banks - continued
$1,250,000 Chase Manhattan Corp., Sub. Notes, 9.375%,
7/1/2001....................................... $ 1,292,909
800,000 Harris BankCorp., Sub. Notes, 9.375%, 6/1/2001.. 825,389
2,000,000 Mellon Finl. Co., Sr. Notes, 5.75%, 11/15/2003.. 1,901,576
2,000,000 NationsBank Corp., Sub. Notes,
8.125%, 6/15/2002.............................. 2,047,372
2,000,000 Suntrust Banks, Inc., Sr. Deb.,
6.00%, 1/15/2028............................... 1,813,480
------------
11,158,555
------------
Building, Construction & Furnishings - 0.9%
250,000 American Standard, Inc., Sr. Notes, 7.375%,
2/1/2008....................................... 230,625
450,000 MDC Holdings, Inc., Sr. Notes,
8.375%, 2/1/2008............................... 416,250
250,000 Nortek, Inc., Sr. Notes, Ser. B,
8.875%, 8/1/2008............................... 238,750
500,000 Standard Pacific Corp., Sr. Notes,
8.50%, 4/1/2009................................ 475,000
------------
1,360,625
------------
Cable/Other Video Distribution - 0.3%
250,000 Adelphia Communications Corp., Sr. Notes, Ser.
B,
9.875%, 3/1/2007............................... 255,000
250,000 Charter Communications Holdings LLC, Sr. Notes,
8.625%, 4/1/2009............................... 232,187
------------
487,187
------------
Chemical & Agricultural Products - 2.6%
1,164,000 Dow Chemical Co., Deb., 8.625%, 4/1/2006........ 1,228,843
250,000 Huntsman ICI Chemicals, Inc., Sr. Sub. Notes,
10.125%, 7/1/2009 (b).......................... 260,000
400,000 Lyondell Chemical Co., Sr. Sub. Notes, 10.875%,
5/1/2009....................................... 414,000
1,700,000 Rohm & Haas Co., Sr. Notes, 7.40%, 7/15/2009
(f)............................................ 1,690,029
250,000 Scotts Co., Sr. Sub. Notes, 8.625%, 1/15/2009
(b)............................................ 243,750
------------
3,836,622
------------
Communication Systems & Services - 2.5%
2,600,000 Bell Telephone Co. of PA, Deb.,
8.35%, 12/15/2030.............................. 2,760,745
1,000,000 LCI Int'l., Inc., Sr. Notes, 7.25%, 6/15/2007... 961,007
------------
3,721,752
------------
Consumer Products & Services - 0.2%
250,000 Playtex Family Products Corp., Sr. Sub. Notes,
9.00%, 12/15/2003 (f).......................... 248,750
------------
Environmental Services - 1.1%
675,138 Oslo Seismic Services, Inc., 1st. Mtge. Notes,
8.28%, 6/1/2011................................ 672,480
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Environmental Services - continued
$1,000,000 Republic Services, Inc., Notes,
6.625%, 5/15/2004................................ $ 932,838
------------
1,605,318
------------
Finance & Insurance - 4.0%
2,250,000 Donaldson Lufkin & Jenrette, Sr. Notes,
5.875%, 4/1/2002................................. 2,185,191
Ford Motor Credit Co.:
950,000 Notes,
7.375%, 10/28/2009................................ 939,761
1,000,000 Sr. Notes,
5.75%, 2/23/2004.................................. 948,206
2,000,000 Prudential Insurance Corp., Notes, 7.125%,
7/1/2007 (b)..................................... 1,914,576
------------
5,987,734
------------
Food & Beverage Products - 1.2%
250,000 Aurora Foods, Inc., Sr. Sub. Notes, Ser. B,
9.875%, 2/15/2007................................ 254,688
1,164,000 General Mills, Inc., MTN, Ser. B,
9.00%, 12/20/2002................................ 1,225,864
250,000 Sun World International, Inc., 1st. Mtge. Notes,
Series B,
11.25%, 4/15/2004................................ 256,250
------------
1,736,802
------------
Forest Products - 0.6%
1,000,000 Westvaco Corp., Notes, 7.10%, 11/15/2009.......... 960,211
------------
Gaming - 1.5%
250,000 Boyd Gaming Corp., Sr. Sub. Notes, 9.50%,
7/15/2007........................................ 248,750
500,000 Hollywood Park, Inc., Sr. Sub. Notes, Ser. B,
9.25%, 2/15/2007................................. 498,125
250,000 Horseshoe Gaming Holdings, Sr. Notes,
8.625%, 5/15/2009................................ 240,000
250,000 Isle of Capri Casinos, Inc., Sr. Sub. Notes,
8.75%, 4/15/2009................................. 231,250
250,000 Mohegan Tribal Gaming Auth., Sr. Notes,
8.125%, 1/1/2006................................. 243,750
Station Casinos, Inc., Sr. Sub. Notes:
250,000 8.875%, 12/1/2008................................. 239,375
500,000 9.75%, 4/15/2007.................................. 505,000
------------
2,206,250
------------
Healthcare Products & Services - 0.8%
1,164,000 Baxter Int'l., Inc., Notes, 7.25%, 2/15/2008...... 1,140,384
------------
Information Services & Technology - 0.6%
1,000,000 IBM Corp., MTN,
5.50%, 1/15/2009................................. 887,323
------------
Iron & Steel - 1.0%
250,000 AK Steel Corp., Sr. Notes, 7.875%, 2/15/2009...... 237,500
</TABLE>
20
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Iron & Steel - continued
$ 250,000 National Steel Corp., 1st. Mtge. Notes, Ser. D,
9.875%, 3/1/2009................................... $ 258,750
750,000 Wheeling Pittsburg Corp., Sr. Notes,
9.375%, 11/15/2003................................. 786,301
250,000 WHX Corp., Sr. Notes, 10.50%, 4/15/2005............. 245,625
------------
1,528,176
------------
Lease Rental Obligations - 0.3%
250,000 Budget Group, Inc., Sr. Notes,
9.125%, 4/1/2006 (f)............................... 233,750
250,000 United Rentals, Inc., Sr. Sub. Notes, Ser. B,
9.25%, 1/15/2009................................... 241,250
------------
475,000
------------
Leisure & Tourism - 0.4%
HMH Properties, Inc.:
250,000 Sr. Notes, Ser. B, 7.875%, 8/1/2008................. 224,062
250,000 Sr. Notes, Ser. C, 8.45%, 12/1/2008................. 232,500
150,000 Outboard Marine Corp., Ser. B, 10.75%, 6/1/2008..... 114,750
------------
571,312
------------
Manufacturing - Distributing - 0.2%
250,000 Holley Performance Products, Inc., Sr. Notes,
12.25%, 9/15/2007 (b).............................. 240,000
75,000 Owens Illinois, Inc., Sr. Notes, 7.35%, 5/15/2008... 67,785
------------
307,785
------------
Natural Gas - 1.0%
1,500,000 Williams Gas Pipelines Co., Sr. Notes,
7.375%, 11/15/2006 (b)............................. 1,464,765
------------
Oil/Energy - 2.2%
250,000 Calpine Corp., Sr. Notes, 7.75%, 4/15/2009.......... 237,500
250,000 Cross Timbers Oil Co.,
Sr. Sub. Notes, Ser. B,
8.75%, 11/1/2009 (f)............................... 240,000
250,000 Giant Industries, Inc., Sr. Sub. Notes, 9.00%,
9/1/2007........................................... 225,000
400,000 Nationsrent, Inc., Sr. Sub. Notes, 10.375%,
12/15/2008......................................... 396,000
250,000 Nuevo Energy Co., Sr. Sub. Notes, 9.50%, 6/1/2008
(b)................................................ 249,375
250,000 Ocean Energy, Inc., Sr. Sub. Notes, Ser. B,
8.375%, 7/1/2008................................... 241,250
250,000 P&L Coal Holdings Corp., Sr. Sub. Notes, Ser. B,
9.625%, 5/15/2008.................................. 247,500
250,000 Triton Energy Ltd., Sr. Notes, 8.75%, 4/15/2002..... 251,875
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Oil/Energy - continued
$1,000,000 Union Pacific Resources
Group, Inc., Notes,
7.30%, 4/15/2009................................... $ 957,607
250,000 Western Gas Resources, Inc., Sr. Sub. Notes,
10.00%, 6/15/2009.................................. 257,500
------------
3,303,607
------------
Paper & Packaging - 0.2%
250,000 Packaging Corp. of America, Sr. Sub. Notes,
9.625%, 4/1/2009................................... 256,563
------------
Printing, Publishing, Broadcasting & Entertainment -
1.9%
250,000 Ackerley Group, Inc.,
Sr. Sub. Notes, Ser. B,
9.00%, 1/15/2009................................... 245,000
250,000 American Lawyer Media, Inc.,
Sr. Sub. Notes, Ser. B,
9.75%, 12/15/2007.................................. 243,750
250,000 Echostar DBS Corp., Sr. Notes, 9.375%, 2/1/2009..... 252,500
250,000 Hollinger Int'l. Publishing, Inc.,
Sr. Sub. Notes,
9.25%, 2/1/2006.................................... 248,750
400,000 K III Communications Corp.,
Sr. Sub. Notes, Ser. B,
8.50%, 2/1/2006.................................... 396,000
200,000 Sinclair Broadcast Group, Inc.,
Sr. Sub. Notes,
10.00%, 9/30/2005.................................. 199,000
1,000,000 Time Warner, Inc., Notes, 9.625%, 5/1/2002.......... 1,053,163
250,000 TV Guide, Inc., Sr. Sub. Notes, 8.125%, 3/1/2009.... 250,625
------------
2,888,788
------------
Real Estate - 0.5%
850,000 EOP Operating, Ltd., Sr. Notes, 6.375%, 2/15/2003... 819,332
------------
Retailing & Wholesale - 3.0%
250,000 Ames Department Stores, Inc., Sr. Notes,
10.00%, 4/15/2006.................................. 246,250
3,000,000 CVS Corp., Notes, 5.50%, 2/15/2004 (b).............. 2,799,324
250,000 Jo Ann Stores, Inc., Sr. Sub. Notes, 10.375%,
5/1/2007........................................... 237,500
250,000 Michaels Stores, Inc., Sr. Notes, 10.875%,
6/15/2006.......................................... 266,250
1,000,000 Safeway, Inc., Sr. Notes, 7.50%, 9/15/2009 (f)...... 989,172
------------
4,538,496
------------
Telecommunication Services & Equipment - 4.9%
250,000 Bresnan Communications Group, Sr. Notes, Ser. B,
8.00%, 2/1/2009.................................... 252,812
</TABLE>
21
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments(continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Telecommunication Services & Equipment - continued
$ 250,000 Global Crossing Holdings Ltd., Sr. Notes, 9.125%,
11/15/2006......................................... $ 248,438
1,800,000 GTE Corp., Deb.,
6.36%, 4/15/2006................................... 1,708,245
250,000 Hyperion Telecommunications, Inc., Sr. Secd. Notes,
Ser. B, 12.25%, 9/1/2004........................... 270,625
350,000 Intermedia Communications, Inc., Sr. Disc. Notes,
Step Bond, Ser. B, (Eff. Yield 11.08%) (c),
0.00%, 7/15/2007................................... 260,750
500,000 Jordan Telecommunication Products, Sr. Notes, Ser.
B,
9.875%, 8/1/2007................................... 540,000
1,000,000 Lucent Technologies, Inc., Notes, 5.50%, 11/15/2008
(f)................................................ 890,170
1,000,000 MCI Worldcom, Inc., Notes, 6.125%, 4/15/2002........ 976,833
500,000 McLeod USA, Inc., Sr. Disc. Notes, Step Bond, (Eff.
Yield 10.30%) (c), 0.00%, 3/1/2007................. 412,500
250,000 Metromedia Fiber Network, Inc., Sr. Notes, Ser. B,
10.00%, 11/15/2008................................. 256,875
250,000 Nextel Communications, Inc., Sr. Disc. Notes,
9.75%, 8/15/2004................................... 258,750
250,000 Nextlink Communications, Inc., Sr. Notes,
12.50%, 4/15/2006.................................. 270,625
Price Communications Wireless, Inc.:
250,000 Sr. Notes, Ser. B, 9.125%, 12/15/2006............... 254,375
250,000 Sr. Sub. Notes,
11.75%, 7/15/2007................................... 273,750
250,000 Voicestream Wire Co., Sr. Notes, 10.375%, 11/15/2009
(b)................................................ 258,750
250,000 Williams Communications Group, Inc., Sr. Notes,
10.875%, 10/1/2009................................. 262,500
------------
7,395,998
------------
Textile & Apparel - 0.3%
250,000 Polymer Group, Inc.,
Sr. Sub. Notes, Ser. B, 9.00%, 7/1/2007............ 243,750
250,000 Westpoint Stevens, Inc., Sr. Notes, 7.875%,
6/15/2005.......................................... 230,000
------------
473,750
------------
Transportation - 1.7%
780,000 Burlington Northern Santa Fe Corp., Notes,
6.125%, 3/15/2009 (f).............................. 704,275
1,000,000 Continental Airlines, Inc., Passthru Certificates,
Ser. 1999-1, Class B,
6.795%, 2/2/2020................................... 915,365
1,000,000 Union Pacific Corp., Notes, 7.375%, 9/15/2009 (f)... 976,924
------------
2,596,564
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Utilities - 3.8%
$ 250,000 AES Corp., Sr. Sub. Notes, 8.50%, 11/1/2007......... $ 235,000
3,000,000 Commonwealth Edison Co.,
1st. Mtge. Notes,
8.00%, 5/15/2008................................... 3,069,483
600,000 El Paso Energy Corp., Sr. Notes, 6.75%, 5/15/2009... 561,562
1,500,000 LSP Energy LP, Sr. Secd. Notes, 7.164%, 6/30/2013
(b)................................................ 1,403,048
500,000 National Rural Util. Corp., Collateral Trust, 5.00%,
10/1/2002.......................................... 477,887
------------
5,746,980
------------
Total Corporate Bonds (cost $74,195,449)............ 70,971,078
------------
FOREIGN BONDS (NON U.S. DOLLARS) - 3.7%
Banks - 1.7%
10,604,000 Nykredit,
DKK 6.00%, 10/1/2029.................................... 1,335,384
9,429,000 Realkredit Danmark,
DKK 6.00%, 10/1/2029.................................... 1,187,797
------------
2,523,181
------------
Government - 2.0%
20,470,000 Kingdom of Denmark,
DKK 8.00%, 5/15/2003.................................... 3,008,624
------------
Total Foreign Bonds (Non U.S. Dollars) (cost
$6,081,222)........................................ 5,531,805
------------
MORTGAGE-BACKED SECURITIES - 8.1%
FNMA:
$9,050,962 6.50%, 10/1/2028-5/1/2029........................... 8,548,502
3,308,490 7.00%, 7/1/2028-8/1/2029............................ 3,206,610
418,680 8.00%, 11/1/2029.................................... 422,343
------------
Total Mortgage-Backed Securities
(cost $12,710,288)................................. 12,177,455
------------
U. S. TREASURY OBLIGATIONS - 14.7%
7,420,000 U.S. Treasury Notes,
6.00%, 8/15/2004-8/15/2009......................... 7,275,135
27,475,000 U.S. Treasury STRIPs, (Eff. Yield 6.30%) (c)
0.00%, 5/15/2009................................... 14,701,158
------------
Total U. S. Treasury Obligations
(cost $22,827,201)................................. 21,976,293
------------
YANKEE OBLIGATIONS - 9.3%
Banks - 1.6%
675,000 Bayerische Landesbank Girozen, New York, Sr. Notes,
Ser. D, 6.20%, 2/9/2006............................ 633,007
1,000,000 Svenska Handelsbanken, Sr. Sub. Notes, 8.35%,
7/15/2004.......................................... 1,038,589
700,000 Westpac Banking Corp., Sub. Deb., 9.125%,
8/15/2001.......................................... 720,217
------------
2,391,813
------------
</TABLE>
22
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments(continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
YANKEE OBLIGATIONS - continued
Cable/Other Video Distribution - 0.3%
$ 250,000 Imax Corp., Sr. Notes,
7.875%, 12/1/2005................................ $ 237,500
125,000 Telewest Communications PLC, Sr. Deb.,
9.625%, 10/1/2006................................ 126,875
------------
364,375
------------
Forest Products - 0.2%
250,000 Tembec Inds., Inc.,
8.625%, 6/30/2009................................ 250,625
------------
Government - 1.3%
2,000,000 Manitoba Province, Canada,
Deb., Ser. CQ,
8.00%, 4/15/2002................................. 2,004,980
------------
Metals & Mining - 0.1%
250,000 Bulong Operation Property Ltd.,
Sr. Notes,
12.50%, 12/15/2008............................... 205,000
------------
Oil/Energy - 2.1%
250,000 Gulf Canada Resources Ltd., Sr. Notes, 8.35%,
8/1/2006......................................... 246,875
1,000,000 Petroleum GEO Svcs., Notes, 7.50%, 3/31/2007...... 977,553
2,000,000 YPF Sociedad Anonima, Sr. Notes, 7.25%,
3/15/2003........................................ 1,943,390
------------
3,167,818
------------
Paper & Packaging - 0.4%
250,000 Domtar, Inc., Notes,
8.75%, 8/1/2006.................................. 256,250
250,000 Norampac, Inc., Sr. Notes, 9.50%, 2/1/2008........ 255,625
------------
511,875
------------
Telecommunication Services & Equipment - 1.2%
2,000,000 Nippon Telegraph and Telephone Corp., Notes,
6.00%, 3/25/2008................................. 1,849,030
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
YANKEE OBLIGATIONS - continued
Utilities - 2.1%
$1,500,000 TXU Eastern Funding Co., 6.75%, 5/15/2009........... $ 1,375,105
2,000,000 Yorkshire Power Fin. Ltd.,
Sr. Notes, Ser. B,
6.50%, 2/25/2008................................... 1,799,118
------------
3,174,223
------------
Total Yankee Obligations (cost $14,532,998)......... 13,919,739
------------
<CAPTION>
Shares Value
<C> <S> <C>
MUTUAL FUND SHARES - 3.6%
5,441,200 Navigator Prime Portfolio (cost $5,441,200) (h)..... 5,441,200
------------
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENTS - 1.0% (e)
$1,408,000 Evergreen Joint Repurchase Agreement, 3.10%, dated
12/31/1999, maturing 1/3/2000, maturity value
$1,408,364 ........................................ 1,408,000
130,000 State Street Repurchase Agreement, 3.25%, dated
12/31/1999, maturing 1/3/2000, maturity
value $130,035..................................... 130,000
------------
Total Repurchase Agreements (cost $1,538,000)....... 1,538,000
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments - (cost $159,717,076)..... 102.4% 153,422,923
Other Assets and Liabilities - net........... (2.4) (3,621,670)
----- ------------
Net Assets................................... 100.0% $149,801,253
===== ============
</TABLE>
23
<PAGE>
EVERGREEN
Intermediate Term Bond Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
(a) The estimated maturity of collaterized mortgage obligations or an asset-
backed security is based on current and projected prepayment rates. Changes
in interest rates can cause the estimated maturity to differ from the
listed dates.
(b) Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to Section 4(2) of the Securities
Act of 1933, as amended. These securities have been determined to be liquid
under guidelines established by the Board of Trustees.
(c) Effective yield (calculated at the date of purchase) is the yield at which
the bond accretes on an annual basis until maturity date.
(d) Inverse floater, resets monthly.
(e) The repurchase agreements are fully collaterized by U.S. Government and/or
agency obligations based on market prices plus accrued interest at December
31, 1999.
(f) All or a portion of this security is currently on loan. (See Note 6)
(g) No market quotation available. Valued at fair value as determined in good
faith under procedures established by the Fund's Board of Trustees.
(h) Represents investment of cash collateral received for securities on loan.
(See Note 6)
Summary of Abbreviations
DKK Danish Krone
FNMA Federal National Mortgage Association
MTN Medium Term Note
STRIPs Separately Traded Registered Interest and Principal Securities
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward Foreign Currency Exchange Contracts to Sell:
<TABLE>
<CAPTION>
U.S. $ Value at
Exchange Contracts to December 31, In Exchange Unrealized
Date Deliver 1999 for U.S. $ Gain
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/20/2000 5,500,000 Euro Dollars $5,548,578 $6,011,995 $463,417
</TABLE>
See Combined Notes to Financial Statements.
24
<PAGE>
EVERGREEN
Short Intermediate Bond Fund
Schedule of Investments
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - 20.1% (c)
$ 2,002,180 Advanta Home Equity Loan Trust,
Ser. 1992-4, Class A1,
(Est. Maturity 2001),
7.20%, 11/25/2008................................... $ 1,994,722
3,700,000 American Express Credit Account Master Trust,
Ser. 1999-2, Class A,
(Est. Maturity 2004),
5.95%, 12/15/2006................................... 3,563,710
Amresco Residential Securities Mtge. Loan Trust:
405,452 Ser. 1998-2, Class A1,
(Est. Maturity 2000),
6.50%, 12/25/2015.................................... 403,909
3,450,000 Ser. 1998-2, Class A2,
(Est. Maturity 2001),
6.245%, 4/25/2022.................................... 3,423,349
46,080 Associates Manufactured Housing, Ser. 1997-1, Class
A3,
(Est. Maturity 2000),
6.60%, 6/15/2028.................................... 46,112
4,000,000 BankBoston Home Equity Loan Trust, Ser. 1998-2, Class
A3,
(Est. Maturity 2002),
6.01%, 6/25/2013.................................... 3,910,700
2,200,000 Capital Auto Receivables Asset,
Ser. 1999-2, Class A4,
(Est. Maturity 2002),
6.30%, 5/15/2004.................................... 2,183,973
1,463,532 Contimortgage Home Equity Loan Trust,
Ser. 1996-1, Class A5,
(Est. Maturity 2000),
6.15%, 3/15/2011.................................... 1,458,344
3,750,000 Discover Card Master Trust I,
Ser. 1998-7, Class A,
(Est. Maturity 2004),
5.60%, 5/16/2006.................................... 3,574,219
5,495,999 Empire Funding Home Loan Owner Trust,
Ser. 1998-1, Class A4,
(Est. Maturity 2002),
6.64%, 12/25/2012................................... 5,393,966
3,851,250 EQCC Home Equity Loan Trust,
Ser. 1998-2, Class A6F,
(Est. Maturity 2003),
6.159%, 4/15/2008................................... 3,720,558
2,700,000 First USA Credit Card Master Trust, Ser. 1998-9,
Class A,
(Est. Maturity 2004),
5.28%, 9/18/2006.................................... 2,545,385
2,956,775 Fleetwood Credit Corp. Grantor Trust, Ser. 1993-B,
Class A,
(Est. Maturity 2000),
4.95%, 8/15/2008.................................... 2,870,718
2,800,000 Ford Credit Auto Owner Trust,
Ser. 1999-C, Class A4,
(Est. Maturity 2002),
6.08%, 9/16/2002.................................... 2,776,354
2,880,000 Franklin Auto Trust,
Ser. 1999-1, Class A2,
(Est. Maturity 2002),
6.05%, 12/15/2006................................... 2,828,606
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
ASSET-BACKED SECURITIES - continued
$ 2,660,000 HFC Home Equity Loan Trust,
Ser. 1999-1, Class A2,
(Est. Maturity 2002),
6.95%, 10/20/2023................................. $ 2,660,000
Key Auto Finance Trust:
3,275,000 Ser. 1999-1, Class A3,
(Est. Maturity 2001),
5.63%, 7/15/2003................................... 3,232,474
4,000,000 Ser. 1999-1, Class A4,
(Est. Maturity 2003),
5.83%, 1/15/2007................................... 3,904,100
4,745,228 Life Fin'l. Home Loan Owner Trust, Ser. 1997-3,
Class A2,
(Est. Maturity 2001),
6.79%, 10/25/2011................................. 4,720,434
2,106,869 Prudential Securities Secd. Financing Corp.,
Ser. 1994-4, Class A1,
(Est. Maturity 2003),
8.12%, 2/15/2025.................................. 2,149,164
2,500,000 Southern Pacific Secd. Assets Corp., Ser. 1998-1,
Class A6,
(Est. Maturity 2006),
7.08%, 3/25/2028.................................. 2,387,913
Western Fin'l. Grantor Trust:
260,646 Ser. 1995-4, Class A2,
(Est. Maturity 2000),
6.20%, 2/1/2002.................................... 260,819
676,277 Ser. 1995-5, Class A2,
(Est. Maturity 2000),
5.875%, 3/1/2002................................... 675,773
WFS Financial Owner Trust:
4,500,000 Ser. 1997-D, Class A4,
(Est. Maturity 2001),
6.25%, 3/20/2003................................... 4,490,212
2,250,000 Ser. 1999-C, Class A2,
(Est. Maturity 2002),
6.92%, 1/20/2004................................... 2,243,756
718,965 Xerox Rental Equipment Trust,
Ser. 1996-A,
(Est. Maturity 2001),
6.20%, 12/26/2005 (a)............................. 717,393
------------
Total Asset-Backed Securities (cost $68,554,613)... 68,136,663
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 7.0% (c)
3,250,000 Blackrock Capital Fin., LP,
Ser. 1997-C1, Class D,
(Est. Maturity 2002),
7.15%, 10/25/2026................................. 3,192,150
2,525,281 Carco Auto Loan Master Trust,
Ser. 1997-1, Class A,
(Est. Maturity 2002),
6.689%, 8/15/2004................................. 2,524,309
267,851 CMC Securities Corp.,
Ser. 1993-D, Class D3,
(Est. Maturity 2000),
10.00%, 7/25/2023................................. 270,004
FHLMC:
955,377 Ser. 1546, Class D,
(Est. Maturity 2000),
5.75%, 10/15/2016.................................. 953,204
</TABLE>
25
<PAGE>
EVERGREEN
Short-Intermediate Bond Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS - continued
FHLMC - continued
$ 1,629,571 Ser. 1991, Class PA,
(Est. Maturity 2000),
6.00%, 3/15/2014................................... $ 1,625,554
3,000,000 FNMA, REMIC,
Ser. 1998-W8, Class A4,
(Est. Maturity 2000),
6.02%, 9/25/2028.................................. 2,845,665
2,207,112 Iroquois Trust,
Indexed Amortization Note,
Ser. 1997-3, Class A,
(Est. Maturity 2001),
6.68%, 11/10/2003 (a)............................. 2,200,877
3,322,312 Prudential Home Mtge. Securities, Ser. 1993-39,
Class A8,
(Est. Maturity 2002),
6.50%, 10/25/2008................................. 3,271,763
3,647,712 Prudential Securities Secd.
Financing Corp.,
Ser. 1998-C1, Class A1,
(Est. Maturity 2002),
6.105%, 11/15/2002................................ 3,591,300
2,345,172 RMF Commercial Mtge.,
Ser. 1997-1, Class A,
(Est. Maturity 2001),
6.38%, 1/15/2019 (a).............................. 2,334,935
814,666 Saxon Mtge. Securities Corp.,
Ser. 1993-8A, Class 1A2,
(Est. Maturity 2000),
7.375%, 9/25/2023................................. 813,928
------------
Total Collateralized Mortgage Obligations
(cost $23,833,038)................................ 23,623,689
------------
CORPORATE BONDS - 26.5%
Airlines - 1.3%
4,900,093 US Airways, Inc.,
Ser. 1998-1, Class B,
7.35%, 1/30/2018.................................. 4,598,615
------------
Banks - 3.0%
2,000,000 Bank One First Chicago NBD Corp., MTN, Ser. E,
9.20%, 12/17/2001................................. 2,082,446
3,000,000 BB&T Corp., Sub. Notes,
6.375%, 6/30/2005................................. 2,823,375
5,000,000 First Security Corp., MTN,
6.40%, 2/10/2003.................................. 4,869,805
500,000 Security Pacific Corp., Notes,
10.45%, 5/8/2001.................................. 520,472
------------
10,296,098
------------
Electrical Equipment &
Services - 1.2%
4,000,000 FPL Group Capital, Inc., Debs., 7.375%, 6/1/2009... 3,935,496
------------
Finance & Insurance - 9.8%
2,000,000 American Express Credit Corp.,
Step Bond (Eff. Yield 6.72%), (b)
6.25%, 8/10/2000 ................................. 1,956,518
3,000,000 Associated P&C Holdings, Inc.,
Gtd. Sr. Notes,
6.75%, 7/15/2003 (a).............................. 2,864,895
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Finance & Insurance - continued
$ 4,000,000 Associates Corp., N.A.,
Sr. Notes,
5.75%, 11/1/2003.................................. $ 3,811,696
3,000,000 Bear Stearns Co., Inc.,
Sr. Notes,
7.625%, 4/15/2000................................. 3,010,032
1,500,000 Duke Capital Corp.,
Sr. Notes, Ser. A,
6.25%, 7/15/2005.................................. 1,420,904
4,000,000 ERAC USA Finance Co., Notes,
7.95%, 12/15/2009 (a)............................. 3,970,208
4,000,000 Ford Motor Credit Co., Notes, 7.375%, 10/28/2009... 3,956,888
4,000,000 Heller Financial, Inc., Notes,
7.375%, 11/1/2009 (a)............................. 3,895,456
1,000,000 Horace Mann Educators Corp.,
Sr. Notes,
6.625%, 1/15/2006................................. 935,188
2,500,000 Household Finance Corp., Notes, 7.20%, 7/15/2006... 2,459,887
5,000,000 Lehman Brothers Holdings, Inc.,
Sr. Notes,
8.875%, 3/1/2002.................................. 5,150,500
------------
33,432,172
------------
Food & Beverage Products - 1.1%
4,000,000 Kroger Co., Sr. Notes, Ser. B,
7.25%, 6/1/2009................................... 3,839,484
------------
Information Services &
Technology - 1.2%
4,000,000 Sun Microsystems, Inc., Sr. Notes,
7.65%, 8/15/2009.................................. 4,013,308
------------
Machinery - Diversified - 1.4%
5,000,000 Case Corp., Notes, Ser. B,
6.25%, 12/1/2003.................................. 4,802,485
------------
Natural Gas - 0.9%
3,000,000 Williams Gas Pipelines Central,
Sr. Notes,
7.375%, 11/15/2006 (a)............................ 2,929,530
------------
Printing, Publishing, Broadcasting &
Entertainment - 1.2%
4,000,000 Times Mirror Co., Notes,
7.45%, 10/15/2009................................. 3,939,948
------------
Retailing & Wholesale - 1.0%
3,600,000 Wal-Mart Stores, Inc., Sr. Notes,
6.15%, 8/10/2001.................................. 3,575,178
------------
Telecommunication Services & Equipment - 0.6%
2,000,000 Worldcom, Inc., Sr. Notes,
6.125%, 8/15/2001................................. 1,979,084
------------
Transportation - 0.7%
2,388,497 Continental Airlines, Inc.,
7.461%, 4/1/2013.................................. 2,294,474
------------
</TABLE>
26
<PAGE>
EVERGREEN
Short Intermediate Bond Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Utilities - Electric - 3.1%
$ 3,000,000 Alabama Power Co.,
Sr. Warrants,
7.125%, 8/15/2004.................................. $ 2,982,945
5,000,000 LG&E Capital Corp., MTN,
5.75%, 11/1/2001 (a)............................... 4,834,470
2,700,000 Virginia Elec. & Pwr. Co., MTN, 6.30%, 6/21/2001.... 2,673,027
------------
10,490,442
------------
Total Corporate Bonds (cost $92,080,767)............ 90,126,314
------------
MORTGAGE-BACKED SECURITIES - 29.9% (c)
2,808,952 FHA-Puttable Proj. Loans,
Reilly 18, (Est. Maturity 2000),
6.00%, 4/1/2015.................................... 2,780,862
------------
2,891,227 FHLB,
(Est. Maturity 2000),
5.467%, 2/19/2004.................................. 2,797,754
------------
FHLMC:
2,000,000 (Est. Maturity 2000),
6.97%, 6/16/2005.................................... 1,961,596
91,004 (Est. Maturity 2000),
10.50%, 9/1/2015.................................... 98,034
20,183,119 (Est. Maturity 2006),
6.50%, 9/1/2006..................................... 19,831,933
------------
21,891,563
------------
FNMA:
14,000,000 (Est. Maturity 2000),
6.50%, 8/15/2004.................................... 13,819,974
18,050 (Est. Maturity 2003),
14.00%, 6/1/2011.................................... 20,138
2,501,816 (Est. Maturity 2004),
6.00%, 11/1/2008.................................... 2,429,213
9,983,221 (Est. Maturity 2004),
7.00%, 1/1/2011 - 10/1/2011......................... 9,896,884
1,304,335 (Est. Maturity 2004),
8.50%, 7/1/2012..................................... 1,350,769
4,061,417 (Est. Maturity 2004),
11.00%, 2/15/2025................................... 4,463,310
9,898,867 (Est. Maturity 2005),
7.00%, 10/1/2005 - 4/1/2012......................... 9,830,498
2,516,106 (Est. Maturity 2005),
8.50%, 8/1/2022..................................... 2,601,352
8,614,734 (Est. Maturity 2006),
8.50%, 7/1/2022 - 9/1/2026.......................... 8,879,501
565,404 (Est. Maturity 2007),
8.50%, 7/1/2022 - 2/1/2028.......................... 580,579
6,473,717 (Est. Maturity 2009),
7.00%, 8/1/2029..................................... 6,263,968
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MORTGAGE-BACKED SECURITIES - continued
FNMA - continued
$ 2,100,000 REMIC Trust, Ser. 1992, Class G44H,
(Est. Maturity 2000),
8.00%, 11/25/2006.................................. $ 2,122,899
6,091,245 Ser. 1995-W1, Class A6,
(Est. Maturity 2001),
8.10%, 4/25/2025................................... 6,152,636
------------
68,411,721
------------
5,651,252 GNMA,
(Est. Maturity 2006),
8.05%, 6/15/2019 - 10/15/2020..................... 5,751,757
------------
Total Mortgage-Backed Securities
(cost $102,943,483)............................... 101,633,657
------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 8.1%
20,614,000 FNMA,
6.625%, 9/15/2009................................. 20,033,798
------------
FHLB:
417,029 6.04%, 4/28/2003................................... 416,136
4,105,000 6.07%, 8/28/2008................................... 3,778,542
3,300,000 6.54%, 12/12/2007.................................. 3,130,945
------------
7,325,623
------------
Total U.S. Government & Agency Obligations
(cost $28,593,847)................................ 27,359,421
------------
YANKEE OBLIGATIONS - 3.9%
Banks - 1.8%
6,000,000 National Bank of Canada,
Sub. Notes, Ser. B,
8.125%, 8/15/2004................................. 6,163,470
------------
Finance & Insurance - 0.9%
3,000,000 Principal Finl. Group, Australia,
Gtd. Sr. Notes,
8.20%, 8/15/2009 (a).............................. 3,037,026
------------
Government - 1.2%
4,000,000 Ontario (Province of), Canada, 7.75%, 6/4/2002..... 4,068,800
------------
Total Yankee Obligations
(cost $13,639,258)................................ 13,269,296
------------
REPURCHASE AGREEMENT - 3.6%
12,285,847 State Street Bank & Trust Co., 3.25%, dated
12/31/1999,
maturing 1/3/2000, maturity value $12,289,174
(cost $12,285,847) (d)............................ 12,285,847
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $341,930,853)......................... 99.1% 336,434,887
Other Assets and Liabilities - net........... 0.9 2,912,278
----- ------------
Net Assets................................... 100.0% $339,347,165
===== ============
</TABLE>
27
<PAGE>
EVERGREEN
Short-Intermediate Bond Fund
Schedule of Investments (continued)
December 31, 1999 (Unaudited)
(a) Securities that may be sold to qualified institutional buyers under
Rule 144A or securities offered pursuant to Section 4(2) of the Secu-
rities Act of 1933, as amended. These securities have been determined
to be liquid under guidelines established by the Board of Trustees.
(b) Effective yield (calculated at the date of purchase) is the yield at
which the bond accretes on an annual basis until maturity date.
(c) The estimated maturity of a collateralized mortgage obligation or an
asset-backed security is based on current and projected prepayment
rates. Changes in interest rates can cause the estimated maturity to
differ from the listed date.
(d) The repurchase agreement is fully collateralized by U.S. Government
and/or agency obligations based on market prices plus accrued inter-
est at December 31, 1999.
Summary of Abbreviations
<TABLE>
<C> <S>
FHA Federal Housing Authority
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
MTN Medium Term Note
REMIC Real Estate Mortgage Investment Conduit
</TABLE>
See Combined Notes to Financial Statements.
28
<PAGE>
EVERGREEN
Short and Intermediate Term Bond Funds
Statements of Assets and Liabilities
December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Capital Intermediate Short
Preservation Bond Intermediate
Fund Fund Fund
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Identified cost of securities........ $35,678,700 $159,717,076 $341,930,853
Net unrealized gains or losses on
securities.......................... (510,507) (6,294,153) (5,495,966)
- ---------------------------------------------------------------------------------
Market value of securities........... 35,168,193 153,422,923 336,434,887
Receivable for securities sold....... 101,259 0 0
Receivable for Fund shares sold...... 88,257 50,984 45,124
Interest receivable.................. 272,616 2,220,945 4,214,238
Unrealized gains on forward foreign
currency exchange contracts......... 0 463,417 0
Prepaid expenses and other assets.... 25,910 20,293 27,157
- ---------------------------------------------------------------------------------
Total assets........................ 35,656,235 156,178,562 340,721,406
- ---------------------------------------------------------------------------------
Liabilities
Distributions payable................ 61,302 609,496 667,364
Payable for Fund shares redeemed..... 121,376 138,741 472,582
Payable for securities on loan....... 0 5,441,200 0
Advisory fee payable................. 8,068 71,067 148,745
Distribution Plan expenses payable... 10,185 4,190 2,459
Due to other related parties......... 0 0 6,722
Accrued expenses and other
liabilities......................... 7,212 112,615 76,369
- ---------------------------------------------------------------------------------
Total liabilities................... 208,143 6,377,309 1,374,241
- ---------------------------------------------------------------------------------
Net assets........................... $35,448,092 $149,801,253 $339,347,165
- ---------------------------------------------------------------------------------
Net assets represented by
Paid-in capital...................... $43,089,005 $176,047,362 $370,327,617
Undistributed (overdistributed) net
investment income................... (79,129) 3,384 (548,478)
Accumulated net realized losses on
securities and foreign currency
related transactions................ (7,051,277) (20,411,319) (24,936,008)
Net unrealized gains or losses on
securities and foreign currency
related transactions................ (510,507) (5,838,174) (5,495,966)
- ---------------------------------------------------------------------------------
Total net assets..................... $35,448,092 $149,801,253 $339,347,165
- ---------------------------------------------------------------------------------
Net assets consists of
Class A.............................. $16,849,240 $ 89,313,646 $ 19,456,203
Class B.............................. 14,807,011 9,576,338 19,720,892
Class C.............................. 3,790,840 4,149,064 1,787,903
Class Y.............................. 1,001 46,762,205 298,382,167
- ---------------------------------------------------------------------------------
Total net assets..................... $35,448,092 $149,801,253 $339,347,165
- ---------------------------------------------------------------------------------
Shares outstanding
Class A.............................. 1,768,017 10,715,738 2,048,829
Class B.............................. 1,553,658 1,148,959 2,072,451
Class C.............................. 397,772 497,789 187,898
Class Y.............................. 105 5,610,426 31,420,328
- ---------------------------------------------------------------------------------
Net asset value per share
Class A.............................. $ 9.53 $ 8.33 $ 9.50
- ---------------------------------------------------------------------------------
Class A--Offering price (based on
sales charge of 3.25%).............. $ 9.85 $ 8.61 $ 9.82
- ---------------------------------------------------------------------------------
Class B.............................. $ 9.53 $ 8.33 $ 9.52
- ---------------------------------------------------------------------------------
Class C.............................. $ 9.53 $ 8.33 $ 9.52
- ---------------------------------------------------------------------------------
Class Y.............................. $ 9.53 $ 8.33 $ 9.50
- ---------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
29
<PAGE>
EVERGREEN
Short and Intermediate Term Bond Funds
Statements of Operations
Six Months Ended December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Capital Intermediate Short
Preservation Bond Intermediate
Fund Fund Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income
Interest.............................. $1,148,060 $ 5,976,771 $12,228,175
- --------------------------------------------------------------------------------
Expenses
Advisory fee.......................... 115,568 518,476 915,625
Distribution Plan expenses............ 112,104 198,374 130,933
Administrative services fees.......... 2,687 7,187 41,635
Transfer agent fee.................... 39,548 142,375 104,657
Trustees' fees and expenses........... 370 1,676 3,847
Printing and postage expenses......... 6,400 12,033 18,557
Custodian fee......................... 6,084 27,328 56,929
Registration and filing fees.......... 5,098 40,567 12,906
Professional fees..................... 9,400 8,467 8,902
Other................................. 1,220 23,587 29,236
- --------------------------------------------------------------------------------
Total expenses....................... 298,479 980,070 1,323,227
Less: Fee waivers..................... (65,127) (29,241) 0
Expense reductions.................. (787) (2,950) (14,386)
- --------------------------------------------------------------------------------
Net expenses......................... 232,565 947,879 1,308,841
- --------------------------------------------------------------------------------
Net investment income................. 915,495 5,028,892 10,919,334
- --------------------------------------------------------------------------------
Net realized and unrealized gains or
losses on securities and foreign
currency related transactions
Net realized gains or losses on:
Securities........................... (98,309) (3,725,416) (5,790,184)
Foreign currency related
transactions........................ 0 (21,442) 0
- --------------------------------------------------------------------------------
Net realized gains or losses on
securities and foreign currency
related transactions................. (98,309) (3,746,858) (5,790,184)
- --------------------------------------------------------------------------------
Net change in unrealized gains or
losses on securities and foreign
currency related transactions........ (323,787) (1,534,797) (1,114,931)
- --------------------------------------------------------------------------------
Net realized and unrealized gains or
losses on securities and foreign
currency related transactions........ (422,096) (5,281,655) (6,905,115)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations............ $ 493,399 $ (252,763) $ 4,014,219
- --------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
30
<PAGE>
EVERGREEN
Short and Intermediate Term Bond Funds
Statements of Changes in Net Assets
Six Months Ended December 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Capital Intermediate Short
Preservation Bond Intermediate
Fund Fund Fund
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income................ $ 915,495 $ 5,028,892 $ 10,919,334
Net realized gains or losses on
securities and foreign currency
related transactions................ (98,309) (3,746,858) (5,790,184)
Net change in unrealized gains or
losses on securities and foreign
currency related transactions....... (323,787) (1,534,797) (1,114,931)
- ----------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations... 493,399 (252,763) 4,014,219
- ----------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income
Class A............................. (489,133) (3,527,036) (591,436)
Class B............................. (356,752) (344,200) (548,831)
Class C............................. (89,163) (145,602) (33,972)
Class Y............................. (10) (1,967,923) (9,833,065)
- ----------------------------------------------------------------------------------
Total distributions to
shareholders....................... (935,058) (5,984,761) (11,007,304)
- ----------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold............ 6,709,677 10,297,523 45,570,477
Net asset value of shares issued in
reinvestment of distributions....... 624,372 3,782,104 6,429,632
Payment for shares redeemed.......... (9,139,009) (36,339,211) (83,875,667)
- ----------------------------------------------------------------------------------
Net decrease in net assets resulting
from capital share transactions.... (1,804,960) (22,259,584) (31,875,558)
- ----------------------------------------------------------------------------------
Total decrease in net assets........ (2,246,619) (28,497,108) (38,868,643)
Net assets
Beginning of period.................. 37,694,711 178,298,361 378,215,808
- ----------------------------------------------------------------------------------
End of period........................ $35,448,092 $149,801,253 $339,347,165
- ----------------------------------------------------------------------------------
Undistributed (overdistributed) net
investment income................... $ (79,129) $ 3,384 $ (548,478)
- ----------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
31
<PAGE>
EVERGREEN
Short and Intermediate Term Bond Funds
Statements of Changes in Net Assets
Year Ended June 30, 1999
<TABLE>
<CAPTION>
Capital Intermediate Short
Preservation Bond Intermediate
Fund Fund Fund
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income.............. $ 2,176,911 $ 11,499,234 $ 23,088,763
Net realized gains or losses on
securities and foreign currency
related transactions.............. (156,057) (905,691) (2,451,611)
Net change in unrealized gains or
losses on securities and foreign
currency related transactions..... (253,950) (7,880,924) (6,391,909)
- ---------------------------------------------------------------------------------
Net increase in net assets
resulting from operations........ 1,766,904 2,712,619 14,245,243
- ---------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income
Class A........................... (992,050) (7,002,863) (1,112,528)
Class B........................... (989,694) (581,636) (1,161,465)
Class C........................... (195,983) (269,865) (69,077)
Class Y........................... 0 (3,653,526) (20,759,994)
- ---------------------------------------------------------------------------------
Total distributions to
shareholders..................... (2,177,727) (11,507,890) (23,103,064)
- ---------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold.......... 19,176,521 38,089,130 156,664,560
Net asset value of shares issued in
reinvestment of distributions..... 1,552,138 7,492,305 13,089,270
Payment for shares redeemed........ (30,673,318) (62,133,153) (171,695,268)
- ---------------------------------------------------------------------------------
Net decrease in net assets
resulting from capital share
transactions..................... (9,944,659) (16,551,718) (1,941,438)
- ---------------------------------------------------------------------------------
Total decrease in net assets...... (10,355,482) (25,346,989) (10,799,259)
Net assets
Beginning of period................ 48,050,193 203,645,350 389,015,067
- ---------------------------------------------------------------------------------
End of period...................... $ 37,694,711 $178,298,361 $ 378,215,808
- ---------------------------------------------------------------------------------
Undistributed (overdistributed) net
investment income................. $ (59,566) $ 959,253 $ (460,508)
- ---------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
32
<PAGE>
Combined Notes to Financial Statements (Unaudited)
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 Inter-
mediate Bond Fund ("Short Intermediate Fund"), (collectively, the "Funds").
Each Fund is a diversified series of Evergreen Fixed Income Trust (the
"Trust"), a Delaware business trust organized on September 18, 1997. The Trust
is an open-end management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act").
The Funds offer Class A, Class B, Class C and 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 follow the conversion rights at the
time the shares were purchased. Class C shares are sold subject to a contingent
deferred sales charge payable on shares redeemed within one year after the
month of purchase. Class Y shares are sold at net asset value and are not sub-
ject to contingent deferred sales charges or distribution fees. Class Y shares
are sold only to investment advisory clients of First Union Corporation ("First
Union") and its affiliates, certain institutional investors or Class Y share-
holders of record of certain other funds managed by First Union and its affili-
ates 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 market
quotations are not readily available, including restricted securities, are val-
ued at fair value as determined in good faith according to procedures approved
by the Board of Trustees.
Mutual fund shares are valued at the net asset value of each mutual fund.
Short-term investments with remaining maturities of 60 days or less are carried
at amortized cost, which approximates market value.
B. Repurchase Agreements
Each Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held in a segregated account by the custodian on
the Fund's behalf. Each Fund monitors the adequacy of the collateral daily and
will require the seller to provide additional collateral in the event the mar-
ket value of the securities pledged falls below the carrying value of the re-
purchase agreement, including accrued interest. Each Fund will only enter into
repurchase agreements with banks and other financial institutions, which are
deemed by the investment advisor to be creditworthy pursuant to guidelines es-
tablished by the Board of Trustees.
Pursuant to an exemptive order issued by the Securities and Exchange Commis-
sion, the Capital Preservation Fund and Intermediate Bond Fund, along with cer-
tain other funds managed by Evergreen Investment Management Company ("EIMC"), a
subsidiary of First Union, may transfer uninvested cash balances into a joint
33
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
trading account. These balances are invested in one or more repurchase agree-
ments that are fully collateralized by U.S. Treasury and/or federal agency ob-
ligations.
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. Forward Foreign Currency Exchange Contracts
The Funds may enter into forward foreign currency exchange contracts ("forward
contracts") to settle portfolio purchases and sales of securities denominated
in a foreign currency and to hedge certain foreign currency assets or liabili-
ties. Forward contracts are recorded at the forward rate and marked-to-market
daily. Realized gains and losses arising from such transactions are included in
net realized gain or loss on foreign currency related transactions. The Fund
bears the risk of an unfavorable change in the foreign currency exchange rate
underlying the forward contract and is subject to the credit risk that the
other party will not fulfill their obligations under the contract. Forward con-
tracts involve elements of market risk in excess of the amount reflected in the
Statement of Assets and Liabilities.
F. Securities Lending
In order to generate income and to offset expenses, the Funds may lend portfo-
lio securities to brokers, dealers and other financial organizations. The
Funds' investment advisors will monitor the creditworthiness of such borrowers.
Loans of securities may not exceed 33 1/3% of a Fund's total assets and will be
collateralized by cash, letters of credit or U.S. Government securities that
are maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities, including accrued interest. The Fund
monitors the adequacy of the collateral daily and will require the borrower to
provide additional collateral in the event the value of the collateral falls
below 100% of the market value of the securities on loan. While such securities
are on loan, the borrower will pay a Fund any income accruing thereon, and the
Fund may invest any cash collateral received in portfolio securities, thereby
increasing its return. A Fund will have the right to call any such loan and ob-
tain the securities loaned at any time on five days' notice. Any gain or loss
in the market price of the loaned securities, which occurs during the term of
the loan, would affect a Fund and its investors. A Fund may pay fees in connec-
tion with such loans.
G. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts 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.
34
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
H. Federal Taxes
The Funds have qualified and intend to continue to qualify as regulated invest-
ment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Funds will not incur any federal income tax liability since
they are expected to distribute all of their net investment company taxable in-
come and net capital gains, if any, to their shareholders. The Funds also in-
tend to avoid any excise tax liability by making the required distributions un-
der the Code. Accordingly, no provision for federal taxes is required. To the
extent that realized capital gains can be offset by capital loss carryforwards,
it is each Fund's policy not to distribute such gains.
I. Distributions
Distributions from net investment income for the Funds are declared daily and
paid monthly. Distributions from net realized capital gains, if any, are paid
at least annually. Distributions to shareholders are recorded at the close of
business on the ex-dividend date.
Income and capital gains distributions to shareholders are determined in accor-
dance with income tax regulations, which may differ from generally accepted ac-
counting principles.
Certain distributions paid during previous years have been reclassified to con-
form to current year presentation.
J. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the rela-
tive net assets of each class. Currently, class specific expenses are limited
to expenses incurred under the Distribution Plans for each class.
3. INVESTMENT ADVISORY AGREEMENTS AND OTHER AFFILIATED TRANSACTIONS
EIMC is the investment advisor for Capital Preservation Fund and Intermediate
Bond Fund. In return for providing investment advisory and administrative serv-
ices to the Funds, the Funds pay EIMC an advisory fee that is calculated daily
and paid monthly at an annual rate of 2.00% of each Fund's gross investment in-
come plus an amount determined by applying percentage rates, starting at 0.50%
and declining to 0.25% per annum as net assets increased, to the average daily
net assets of each Fund.
First Union National Bank ("FUNB"), a subsidiary of First Union, serves as the
investment advisor to the Short Intermediate Fund, was paid an advisory fee
that is calculated daily and paid monthly at an annual rate of 0.50% of the av-
erage daily net assets of the Fund.
During the six months ended December 31, 1999, the amount of investment advi-
sory fees waived by each investment advisor 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.................. $65,127 0.35%
Intermediate Bond Fund..................... 29,241 0.04%
</TABLE>
Evergreen Investment Services ("EIS"), a subsidiary of First Union, serves as
the administrator and The BISYS Group, Inc. ("BISYS") serves as the sub-admin-
istrator to the Funds. As administrator, EIS provides the Funds with facili-
ties, equipment and personnel. As sub-administrator to the Funds, BISYS pro-
vides the officers of the Funds. Officers of the Funds and affiliated Trustees
receive no compensation directly from the Funds.
The administrator and sub-administrator for the Short Intermediate Fund are en-
titled to an annual fee based on the average daily net assets of the funds ad-
ministered by EIS for which First Union or its investment advisory subsidiaries
are also the investment advisors. The administration fee is calculated by ap-
plying percentage rates, which start at 0.05% and decline to 0.01% per annum as
net assets increase, to the average daily net assets of the Fund. The sub-ad-
ministration fee is calculated by applying percentage rates, which start at
0.01% and decline to 0.004% per annum as net assets increase, to the average
daily net assets of the Fund. During the six months ended December 31, 1999,
the Short Intermediate Fund paid or accrued $32,630 and $9,005 for administra-
tive and sub-administrative services, respectively.
35
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
For the Capital Preservation Fund and Intermediate Bond Fund, the administra-
tion and sub-administration fee is paid by the investment advisor and is not a
fund expense.
During the six months ended December 31, 1999, the Capital Preservation Fund
and Intermediate Bond Fund reimbursed EIMC for certain administration and ac-
counting expenses of $2,687 and $7,187, respectively.
Evergreen Service Company ("ESC"), an indirect, wholly owned subsidiary of
First Union, serves as the transfer and dividend disbursing agent for the
Funds.
4. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI"), a wholly owned subsidiary of BISYS, serves
as principal underwriter to the Funds.
Each Fund has adopted Distribution Plans, as allowed by Rule 12b-1 of the 1940
Act, for each class of shares, except Class Y. Distribution plans permit a Fund
to compensate its principal underwriter for costs related to selling shares of
the Fund and for various other services. These costs, which consist primarily
of commissions and service fees to broker-dealers who sell shares of the Fund,
are paid by the Fund through "Distribution Plan expenses". Under the Distribu-
tion Plans, Class A incurs distributions fees equal to 0.25% of the average
daily net 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 0.25%. Class A
shares purchased on or after January 1, 1997, incur distribution fees at an an-
nual rate of 0.10%. Prior to October 7, 1999, Short Intermediate Fund incurred
distribution fees equal to 0.10% of the average daily net assets of Class A.
Class B and Class C incur distribution fees equal to 1.00% of the average daily
net assets of each class. Of this amount, 0.25% of the distribution fees in-
curred is used to pay for shareholder service fees and 0.75% is used to pay for
distribution related costs. Distribution Plan expenses are calculated daily and
paid at least quarterly.
During the six months ended December 31, 1999, amounts paid or accrued to EDI
pursuant to each Fund's Class A, Class B and Class C Distribution Plans were as
follows:
<TABLE>
<CAPTION>
Class A Class B Class C
---------------------------
<S> <C> <C> <C>
Capital Preservation Fund............ $ 16,073 $ 76,883 $19,148
Intermediate Bond Fund............... 122,520 53,301 22,553
Short Intermediate Fund.............. 16,509 107,761 6,663
</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.
36
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
5. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with $0.001
par value authorized. Shares of beneficial interest of the Funds are currently
divided into Class A, Class B, Class C and Class Y. Transactions in shares of
the Funds were as follows:
Capital Preservation Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1999 June 30, 1999
--------------------- ------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold.................. 254,916 $ 2,445,455 1,254,468 $ 12,119,775
Shares issued in reinvestment
of distributions............ 32,772 314,060 73,376 709,511
Shares redeemed.............. (401,200) (3,845,944) (1,297,623) (12,552,673)
- -------------------------------------------------------------------------------
Net increase (decrease)...... (113,512) $(1,086,429) 30,221 $ 276,613
- -------------------------------------------------------------------------------
Class B
Shares sold.................. 234,627 $ 2,248,022 501,298 $ 4,841,798
Shares issued in reinvestment
of distributions............ 26,129 250,305 69,855 676,249
Shares redeemed.............. (326,206) (3,125,977) (1,626,086) (15,731,870)
- -------------------------------------------------------------------------------
Net decrease................. (65,450) $ (627,650) (1,054,933) $(10,213,823)
- -------------------------------------------------------------------------------
Class C
Shares sold.................. 210,675 $ 2,015,200 229,112 $ 2,214,948
Shares issued in reinvestment
of distributions............ 6,261 59,997 17,206 166,378
Shares redeemed.............. (226,379) (2,167,088) (247,073) (2,388,775)
- -------------------------------------------------------------------------------
Net decrease................. (9,443) $ (91,891) (755) $ (7,449)
- -------------------------------------------------------------------------------
<CAPTION>
October 29, 1999
(Commencement of
Class Operations) to
December 31, 1999
---------------------
Shares Amount
- ----------------------------------------------------
<S> <C> <C>
Class Y
Shares sold.................. 104 $ 1,000
Shares issued in reinvestment
of distributions............ 1 10
Shares redeemed.............. 0 0
- ----------------------------------------------------
Net increase................. 105 $ 1,010
- ----------------------------------------------------
</TABLE>
37
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
Intermediate Bond Fund
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1999 June 30, 1999
------------------------ --------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............. 480,450 $ 4,096,848 2,341,785 $ 21,107,529
Shares issued in
reinvestment of
distributions.......... 347,852 2,942,500 656,382 5,911,817
Shares redeemed......... (2,549,357) (21,747,050) (4,185,680) (37,633,504)
- ------------------------------------------------------------------------------
Net decrease............ (1,721,055) $(14,707,702) (1,187,513) $ (10,614,158)
- ------------------------------------------------------------------------------
Class B
Shares sold............. 102,945 $ 885,835 487,096 $ 4,402,183
Shares issued in
reinvestment of
distributions.......... 23,041 194,835 36,260 326,694
Shares redeemed......... (258,688) (2,205,939) (425,314) (3,846,878)
- ------------------------------------------------------------------------------
Net increase
(decrease)............. (132,702) $ (1,125,269) 98,042 $ 881,999
- ------------------------------------------------------------------------------
Class C
Shares sold............. 58,143 $ 496,804 110,653 $ 1,004,240
Shares issued in
reinvestment of
distributions.......... 10,282 87,063 20,784 187,535
Shares redeemed......... (115,441) (984,344) (184,849) (1,673,579)
- ------------------------------------------------------------------------------
Net decrease............ (47,016) $ (400,477) (53,412) $ (481,804)
- ------------------------------------------------------------------------------
Class Y
Shares sold............. 562,806 $ 4,818,036 1,284,724 $ 11,575,178
Shares issued in
reinvestment of
distributions.......... 65,938 557,706 118,332 1,066,259
Shares redeemed......... (1,341,701) (11,401,878) (2,096,933) (18,979,192)
- ------------------------------------------------------------------------------
Net decrease............ (712,957) $ (6,026,136) (693,877) $ (6,337,755)
- ------------------------------------------------------------------------------
Short Intermediate Fund
<CAPTION>
Six Months Ended Year Ended
December 31, 1999 June 30, 1999
------------------------ --------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold............. 1,088,900 $ 10,472,277 1,565,164 $ 15,513,691
Shares issued in
reinvestment of
distributions.......... 47,025 450,684 85,182 844,657
Shares redeemed......... (1,062,726) (10,211,894) (1,377,037) (13,580,265)
- ------------------------------------------------------------------------------
Net increase............ 73,199 $ 711,067 273,309 $ 2,778,083
- ------------------------------------------------------------------------------
Class B
Shares sold............. 555,389 $ 5,351,640 1,844,479 $ 18,346,490
Shares issued in
reinvestment of
distributions.......... 40,104 385,181 83,118 826,279
Shares redeemed......... (847,663) (8,158,238) (1,890,855) (18,756,863)
- ------------------------------------------------------------------------------
Net increase
(decrease)............. (252,170) $ (2,421,417) 36,742 $ 415,906
- ------------------------------------------------------------------------------
Class C
Shares sold............. 90,962 $ 870,236 65,400 $ 652,800
Shares issued in
reinvestment of
distributions.......... 2,675 25,711 6,017 59,815
Shares redeemed......... (45,961) (442,381) (46,468) (460,730)
- ------------------------------------------------------------------------------
Net increase............ 47,676 $ 453,566 24,949 $ 251,885
- ------------------------------------------------------------------------------
Class Y
Shares sold............. 3,008,079 $ 28,876,324 12,293,584 $ 122,151,579
Shares issued in
reinvestment of
distributions.......... 581,014 5,568,056 1,145,478 11,358,519
Shares redeemed......... (6,787,458) (65,063,154) (14,015,864) (138,897,410)
- ------------------------------------------------------------------------------
Net decrease............ (3,198,365) $(30,618,774) (576,802) $ (5,387,312)
- ------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
6. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the six months ended December 31,
1999:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
----------------------------------- -----------------------------------
U.S. Government Non-U.S. Government U.S. Government Non-U.S. Government
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Preservation
Fund................... $ 2,497,110 $ 3,164,208 $ 1,236,328 $ 7,355,488
Intermediate Bond Fund.. 78,989,192 44,189,845 73,463,059 71,615,867
Short Intermediate
Fund................... 178,991,338 128,402,427 224,348,946 125,002,176
</TABLE>
The average daily balance of reverse repurchase agreements outstanding for the
Short Intermediate Fund during the six months ended December 31, 1999 was ap-
proximately $1,223,896 at a weighted average interest rate of 5.18%. The maxi-
mum amount outstanding under reverse repurchase agreements during the six
months ended December 31, 1999 for the Short Intermediate Fund was $7,010,217.
During the six months ended December 31, 1999, the Short Intermediate Fund in-
curred an interest expense of $31,981 related to reverse repurchase agreements.
The Intermediate Bond Fund loaned securities during the six months ended Decem-
ber 31, 1999 to certain brokers who paid the Fund a negotiated lenders' fee.
These fees are included in interest income. At December 31, 1999, the value of
securities on loan and the value of collateral (including accrued interest)
amounted to $5,292,080 and $5,441,200, respectively. During the six months
ended December 31, 1999, the Intermediate Bond Fund earned $5,935 in income
from securities lending.
As of June 30, 1999, the Funds had capital loss carryovers for federal income
tax purposes as follows:
<TABLE>
<CAPTION>
Expiration
Capital Loss -----------------------------------------------------------------------------------
Carryover 2000 2001 2002 2003 2004 2005 2006 2007
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Preservation
Fund................. $ 6,812,000 $ 0 $5,685,000 $ 197,000 $642,000 $ 254,000 $ 0 $ 0 $ 34,000
Intermediate Bond
Fund................. 14,296,000 417,000 2,688,000 8,725,000 907,000 358,000 1,201,000 0 0
Short Intermediate
Fund................. 18,087,000 0 0 6,021,000 0 4,049,000 4,374,000 1,743,000 1,901,000
</TABLE>
The capital loss carryovers include $2,185,000 and $11,560,000 that were ac-
quired through fund mergers by Capital Preservation Fund and Intermediate Bond
Fund, respectively. The Funds' ability to offset future realized gains against
these capital loss carryovers is limited in accordance with federal tax regula-
tions.
7. 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 % of Average
Reductions Net Assets
--------------------------
<S> <C> <C>
Capital Preservation Fund............... $ 787 0.00%
Intermediate Bond Fund.................. 2,950 0.00%
Short Intermediate Fund................. 14,386 0.01%
</TABLE>
8. 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 accounts will be paid
either in one lump sum or in quarterly installments for up to ten years.
39
<PAGE>
Combined Notes to Financial Statements (Unaudited) (continued)
9. FINANCING AGREEMENTS
Certain Evergreen Funds and State Street Bank and Trust Company ("State
Street") and a group of banks (collectively, the "Banks") entered into a fi-
nancing agreement dated December 22, 1997, as amended on November 20, 1998. Un-
der this agreement, the Banks provided an unsecured credit facility in the ag-
gregate amount of $400 million ($275 million committed and $125 million uncom-
mitted). The credit facility was allocated, under the terms of the financing
agreement, among the Banks. The credit facility was accessed by the Funds for
temporary or emergency purposes only and was subject to each Fund's borrowing
restrictions. Borrowings under this facility bore interest at 0.50% per annum
above the Federal Funds rate. A commitment fee of 0.065% per annum was incurred
on the unused portion of the committed facility, which was allocated to all
funds. For its assistance in arranging this financing agreement, the Capital
Market Group of First Union was paid a one-time arrangement fee of $27,500.
State Street served as administrative agent for the Banks, and as administra-
tive agent was entitled to a fee of $20,000 per annum which was allocated to
all of the funds.
This agreement was amended and renewed on December 22, 1998. The amended fi-
nancing agreement became effective on December 22, 1998 among all of the Ever-
green Funds, State Street and The Bank of New York ("BONY"). Under this agree-
ment, State Street and BONY provided an unsecured credit facility in the aggre-
gate amount of $150 million ($125 million committed and $25 million uncommit-
ted). The remaining terms and conditions of the agreement were unaffected. This
agreement was terminated on July 27, 1999.
On July 27, 1999, all of the Evergreen Funds and a group of banks (the "Lend-
ers") entered into a credit agreement. Under this agreement, the Lenders pro-
vide an unsecured revolving credit commitment in the aggregate amount of $1.050
billion. The credit facility is allocated, under the terms of the financing
agreement, among the Lenders. The credit facility is accessed by the Funds for
temporary or emergency purposes to fund the redemption of their shares or as
general working capital as permitted by each Fund's borrowing restrictions.
Borrowings under this facility bear interest at 0.75% per annum above the Fed-
eral Funds rate (1.50% per annum above the Federal Funds rate during the period
from and including December 1, 1999 through and including January 31, 2000). A
commitment fee of 0.10% per annum is incurred on the average daily unused por-
tion of the revolving credit commitment. The commitment fee is allocated to all
funds. For its assistance in arranging this financing agreement, First Union
Capital Markets Corp. was paid a one-time arrangement fee of $250,000. State
Street serves as paying agent for the funds and as paying agent is entitled to
a fee of $20,000 per annum which is allocated to all the funds.
The Funds did not borrow under these agreements during the six months ended De-
cember 31,1999.
10. SUBSEQUENT EVENT
Effective February 1, 2000, the maximum deferred sales charge for Class C
shares is changed to 2.00%. Class C shareholders purchased on or after February
1, 2000 are subject to a 2.00% contingent deferred sales charge if such shares
are redeemed within one year after the month of purchase and a 1.00% contingent
deferred sales charge if such shares are redeemed within two years after the
month of purchase. Class C shares purchased prior to February 1, 2000 follow
the contingent deferred sales charge schedule at the time the shares were ini-
tially purchased.
40
<PAGE>
Evergreen Funds
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Income
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