EVERGREEN INVESTMENT TRUST, N-30D, 1997-03-13

EVERGREEN INVESTMENT TRUST
N-30D, 1997-03-13

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<PAGE>
Evergreen
Income Funds

(four photos of historical significance appear here)

Semiannual
Report
December 31, 1996

Evergreen Keystone
(logo) FUNDS (logo)
<PAGE>
EVERGREEN INCOME FUNDS

TABLE OF CONTENTS

<TABLE>
<C> <S> <C>
(photo of certificates appears here)
Economic Overview......................................................... 1
INTERMEDIATE-TERM A Report From Your Portfolio Manager...................................... 3
BOND FUND Statement of Investments.................................................. 4
Statement of Assets and Liabilities....................................... 6
Statement of Operations................................................... 7
Statement of Changes in Net Assets........................................ 8
Financial Highlights...................................................... 9
(photo of monument appears here)
INTERMEDIATE-TERM A Report From Your Portfolio Manager...................................... 11
GOVERNMENT Statement of Investments.................................................. 12
SECURITIES FUND Statement of Assets and Liabilities....................................... 13
Statement of Operations................................................... 14
Statement of Changes in Net Assets........................................ 15
Financial Highlights...................................................... 16
(photo of Lincoln SHORT-INTERMEDIATE A Report From Your Portfolio Manager....................................... 18
Memorial appears here) BOND FUND Statement of Investments.................................................. 19
Statement of Assets and Liabilities....................................... 22
Statement of Operations................................................... 23
Statement of Changes in Net Assets........................................ 24
Financial Highlights...................................................... 25

(photo of Capitol U.S. GOVERNMENT A Report From Your Portfolio Manager...................................... 28
appears here) FUND Statement of Investments.................................................. 29
Statement of Assets and Liabilities....................................... 30
Statement of Operations................................................... 31
Statement of Changes in Net Assets........................................ 32
Financial Highlights...................................................... 33
Combined Notes to Financial Statements.................................... 35
Trustees and Officers.........................................Inside Back Cover
</TABLE>

<PAGE>
EVERGREEN INCOME FUNDS

ECONOMIC OVERVIEW
BY STEPHEN A. LIEBER, CHAIRMAN
EVERGREEN ASSET MANAGEMENT CORP.

President Clinton's Inaugural Address listed many of (photo of Stephen
his hopes for the future of our nation. One of these A. Lieber)
hopes, "a nation that balances its budget but never
loses the balance of its values" speaks to a central
theme of the investment
markets as we enter 1997. The hope of investors is for sustained healthy growth,
with the long-range promise of building a nation economically strong enough to
meet the challenges of supporting an increasingly elderly and retired
population. Optimism, reflected in consumer surveys and business surveys, is
high at the start of the year, as 1996 proved to provide a stronger and better
balanced economy than had been widely anticipated at the beginning of the year.
Even in the fourth quarter, expectations of a slowdown were not realized, as
growth in that period was apparently at about a 3.5% annual rate, up from the
2.1% Gross Domestic Product gain in the third quarter. Industrial output rose at
an estimated 0.8% per month in the fourth quarter, while the core inflation rate
of the Producers Price Index, as well as the Consumers Price Index, rose at a
rate of only 0.1% per month. Thus, the core inflation rate was contained at just
2.6% in 1996, down from 3.0% in 1995. From the consumers' point of view, apart
from a spurt in food and energy prices at year-end, prices of general
merchandise were indicated to be somewhat lowered by a combination of widespread
discounting and increased imports, made cheaper by the rise of the dollar.

A healthy employment situation encouraged the confidence of the American
consumer and industry throughout the year. The greatest concern, in contrast to
normal uncertainties over employment, was that the slack in the economy was
diminishing, so that the cost of labor might be raised and, thus, stimulate
inflation. During the summer, the unemployment total was but 5.1% of the work
force and, at year-end, had increased very moderately to 5.3%. With
manufacturers reluctant to add to staff, hours worked increased by 3.2%. These
positive factors did not strain the nation's economic potential because
manufacturing capacity was indicated to be increasing month by month, with the
year-over-year gain in December, 4.5%. The lack of inflationary pressures was
particularly impressive given the extraordinary short-term impacts on purchasing
power from the price of oil which rose 40% during the year, and weather-related
agricultural developments which increased the price of food. Doubtless adding to
demand was the so-called wealth effect, induced by yet another significantly
rising stock market, and an ever broader participation by American families in
its investments. The wealth effect was manifested in higher year-end demand for
luxury goods, whose retailers and vendors often showed outstanding sales
results.

Looking ahead in 1997, there is a widespread expectation that the economy
will reflect the improved consumer and industrial sentiment, but that it will
have less external stimulus than it had at the beginning of 1996. In contrast
with the monetary stimulus provided by last January's reduction in the Federal
funds rate, there is virtually no expectation at this time that the Federal
Reserve will soon reduce interest rates, and considerable concern that if the
economy sustains its strength, it may well increase rates, thus creating a
dragging force on the economy. Improvement in the balance of payments as a
stimulus is not expected, as exports are already slowing as a result of the 6%
increase of the dollar in 1996, which, in turn, is bringing in more cheaper
imports to compete with American manufacturers. Credit ease for the consumer is
not expected after several months of larger-than-normal credit card losses
reported by the banking and financial industries. In fact, credit in this
consumer area is tightening, with an estimated decline of 15% in the number of
credit card solicitations by banks in the fourth quarter, and a more than 40%
increase in credit card write-offs. Finally, borrowing costs are almost one full
percent higher than they were a year ago when the Federal Reserve reduced the
federal funds rate.

<PAGE>
EVERGREEN INCOME FUNDS

ECONOMIC OVERVIEW -- (CONTINUED)

Investors are challenged by the fact that prices of stocks have increased
over the past year as corporate profitability rose, and optimism over future
profit rates was well sustained. Today's consensus expectations for corporate
profits is for an increase of up to 10% in 1997. If price pressures continue
from international competition, if domestic productivity and technology drives
prices down in many sectors of growing production, as has been the case, and
sales volumes grow at single digits or less, these profits expectations are
unlikely to be met. In contrast, those companies which produced the products or
services which will be the growth leaders of 1997, have high promise of
achieving new levels of profitability and sustaining long-term growth trends.
They will be the focus of investment. Companies driving for higher profitability
and stronger returns on invested capital through restructuring and reallocation
of assets, should become more prominent in the investment spectrum as they
enhance their profits outlook through these efficiencies. Another class of
promising investments is the specialty business, especially smaller
entrepreneurial and innovative ones where growth rates can be enhanced through
the synergies of merger and acquisition with larger entities. Given the very
strong cash reserves built up through this recent period of high corporate
profitability, we anticipate an acceleration of the merger and acquisition drive
by large companies looking for broader or new lines of business growth. Many
companies which find excess of liquid capital in terms of their near-term
business opportunities, may well choose to continue the recent pattern of
accelerating corporate stock buy-backs, with the aim of increasing the profits
available to continuing shareholders. In summary, there should be powerful
forces providing selective opportunities for sustained and important profit
gains for many corporations.

The savings rate of the American people had generally remained modest, but an
increasing portion is moving into the equity markets. With the advantages of
tax-deferred programs, ranging from IRAs to 401(k)s, and the shift of retirement
plans into equity-related programs, the use of mutual funds has become the
predominant mode of investment saving for individuals. In a benign environment,
such trends could well be expected to continue. Interruptions are only likely to
come through major and, often sudden, market adversities caused by unexpected
problems in the short run, and in the longer run, only from the recurrence of
inflation and significant rises in the income available from fixed income
investment alternatives.

The U.S. economic horizon looks clear and healthy at this time. It may well
be further encouraged by a decline in interest rates which could occur if growth
remains moderate, inflation well-controlled, and investors gain confidence that
cooperation between the Administration and the Congress will address their
long-term budget fears. Thus, we can conclude as we did a year ago that, "the
real return driven demand in a low inflation environment should support new
opportunities in both bonds and equities".

<PAGE>
EVERGREEN INTERMEDIATE-TERM BOND FUND
(photo of certificates)

A REPORT FROM YOUR
PORTFOLIO MANAGER
BRUCE BESECKER

We are pleased to present the Semiannual Report for Evergreen (photo of
Intermediate-Term Bond Fund for the period ended December 31, Bruce Besecker)
1996. The Fund's total return (Class Y, no-load shares) for this
six-month period was 4.33%. This return exceeded that for the
Lipper Intermediate U.S. Government Funds average of the 129
intermediate U.S. Government funds tracked by Lipper Analytical
Services during that time**. The six-month total return at net
asset value for the Fund's Class A shares was 4.31%*.
The bond market rebounded during the second half of 1996 in
time to recover losses from its dismal first-half performance. Bond
investors reacted favorably to a couple of themes which permeated the economy as
the year progressed. Emerging data throughout the final half of the year painted
a picture of an economy growing at a healthy, yet moderating pace. This news was
received favorably by investors and, in part, fueled the second-half bond market
rally. Although growth of the Gross Domestic Product in the second half of 1996
continued its impressive pace, our estimate for the coming quarters is for
growth in a more moderate 1.0% to 2.0% range. Consistent with a fairly stable
environment which contains neither rapid inflation nor a slowdown in the
economic growth rate, the Federal Reserve remained on the sidelines for the
entire period. Indicators suggested that the environment of low inflation and
low interest rates, which the markets enjoy currently, should continue for the
foreseeable future and could further aid a recovering bond market. The yield for
the benchmark thirty-year treasury bond, which mirrored the market's rebound,
jumped as high as 7.2% in July before settling back to 6.6% at December 31. The
market stumbled slightly in December as rates jumped, but when the smoke
cleared, investors were rewarded as the market provided solid returns for the
six-month period.
Evergreen Intermediate-Term Bond Fund performed nicely with the recovering
bond market, with a 4.3% total return for the six months under review. Activity
in the Fund was light during the period. Our mortgage and corporate exposure
remained essentially unchanged. Most significant portfolio adjustments were made
in Treasury securities.
Looking forward, we will seek to continue modestly lengthening the duration
of the Fund as we are optimistic that the bond market's rally will persist as
interest rates continue to decline. In addition, the Fund will seize any
opportunities presented to increase the yield; specifically, by adding
attractive mortgage holdings. We believe our portfolio structure should reward
investors as our Fund is well positioned to thrive in the current economic
environment as we enter the second half of the fiscal year.
Thank you for your investment in Evergreen Intermediate-Term Bond Fund.

FIGURES REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS.

0.92% IS THE SIX-MONTH TOTAL RETURN ENDED 12/31/96 FOR THE FUND'S CLASS A
SHARES WITH THE MAXIMUM 3.25% FRONT-END SALES CHARGE. THE FUND ALSO OFFERS
CLASS B SHARES WHICH ARE SUBJECT TO A MAXIMUM 5% CONTINGENT DEFERRED SALES
CHARGE, AND CLASS C SHARES ARE SUBJECT TO A 1% CONTINGENT DEFERRED SALES
CHARGE WITHIN THE FIRST YEAR OF PURCHASE. PERFORMANCE FOR THESE CLASSES OF
SHARES MAY BE DIFFERENT.

** SOURCE: LANA (LIPPER ANALYTICAL NEW APPLICATIONS) LIPPER ANALYTICAL SERVICES
INC., IS AN INDEPENDENT MUTUAL FUNDS PERFORMANCE MONITOR. LIPPER AVERAGE DOES
NOT INCLUDE SALES CHARGES, AND IF INCLUDED PERFORMANCE MAY BE LOWER.

<PAGE>
EVERGREEN INTERMEDIATE-TERM BOND FUND
STATEMENT OF INVESTMENTS
(photo of certificates)

DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
<C> <S> <C>
CORPORATE BONDS -- 13.5%
BANKS -- 3.3%
$ 500 Cenfed Financial Corp.,
11.17%, 12/15/01, 144A............... $ 550,000
3,000 Comerica, Inc.,
7.125%, 12/1/13...................... 2,863,416
2,000 NationsBank Corp.,
8.125%, 6/15/02...................... 2,122,938
5,536,354
FINANCE & INSURANCE -- 4.1%
2,500 General Electric Capital Corp.,
6.29%, 12/15/07...................... 2,501,547
1,000 Goldman Sachs Group L.P.,
6.375%, 6/15/00, 144A................ 994,026
1,500 Grand Metropolitan Investment Corp.,
6.50%, 9/15/99....................... 1,508,099
800 Harris Bancorp.,
9.375%, 6/1/01....................... 880,256
1,000 KFW International Finance,
8.85%, 6/15/99....................... 1,058,897
6,942,825
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES -- 3.0%
2,000 Baxter International, Inc.,
9.25%, 12/15/99...................... 2,149,086
600 Deere & Co.,
8.95%, 6/15/19....................... 670,458
2,000 Jet Equipment Trust,
9.41%, 6/15/10, 144A................. 2,218,466
5,038,010
UTILITIES -- ELECTRIC -- 1.4%
2,000 Carolina Power & Light Co.,
8.625%, 9/15/21...................... 2,269,404
UTILITIES -- TELEPHONE -- 1.7%
3,100 ALLTEL Corp.,
6.50%, 11/1/13....................... 2,848,664
TOTAL CORPORATE BONDS
(COST $22,234,530).............. 22,635,257
MORTGAGE BACKED SECURITIES -- 10.9%
Federal Home Loan Mortgage Corp.,
2,177 7.50%, 5/1/09........................ 2,210,890
1,278 8.00%, 10/1/25....................... 1,305,704
Government National Mortgage Assn.,
2,429 6.50%, 10/15/23-3/15/26.............. 2,320,763
2,524 7.00%, 2/15/26-3/15/26............... 2,471,819

<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
<C> <S> <C>
MORTGAGE BACKED SECURITIES -- CONTINUED
Government National Mortgage Assn., -- continued
$ 3,809 7.50%, 9/15/23-3/15/26............... $ 3,816,936
3,320 8.00%, 10/15/24...................... 3,390,121
1,336 9.00%, 4/15/20-8/15/21............... 1,409,922
651 9.50%, 2/15/21....................... 704,507
642 Paine Webber Trust P-3,
9.00%, 10/1/12....................... 649,073
TOTAL MORTGAGE BACKED SECURITIES
(COST $18,178,065).............. 18,279,735
U.S. AGENCY OBLIGATIONS -- 3.6%
2,500 Farm Credit Systems Financial
Assistance Co.,
8.80%, 6/10/05....................... 2,848,068
3,000 Federal Home Loan Bank,
7.70%, 9/20/04....................... 3,199,311
TOTAL U. S. AGENCY OBLIGATIONS
(COST $5,651,434)............... 6,047,379
U.S. TREASURY OBLIGATIONS -- 59.9%
U.S. Treasury Bonds,
5,000 6.875%, 8/15/25...................... 5,096,875
5,500 7.50%, 11/15/16...................... 5,953,750
1,400 8.75%, 5/15/17....................... 1,707,562
3,950 8.875%, 8/15/17...................... 4,877,014
U.S. Treasury Notes,
1,400 5.125%, 12/31/98..................... 1,377,250
8,000 5.625%, 8/31/97...................... 7,990,000
1,500 5.75%, 8/15/03....................... 1,455,468
15,000 5.875%, 2/15/04...................... 14,610,930
5,000 5.875%, 11/15/05..................... 4,825,000
6,100 6.375%, 1/15/99...................... 6,159,091
9,000 6.375%, 8/15/02...................... 9,061,875
16,575 6.50%, 5/15/05....................... 16,699,312
8,500 6.75%, 4/30/00....................... 8,664,688
10,100 6.875%, 7/31/99...................... 10,308,312
1,600 8.25%, 7/15/98....................... 1,654,499
TOTAL U. S. TREASURY OBLIGATIONS
(COST $99,752,488).............. 100,441,626
YANKEE OBLIGATIONS -- 8.2%
3,000 Hydro-Quebec,
8.00%, 2/1/13........................ 3,202,407
3,500 Japan Finance Corp. Municipal
Enterprises,
6.85%, 4/15/06....................... 3,525,739
</TABLE>

<PAGE>
EVERGREEN INTERMEDIATE-TERM BOND FUND
STATEMENT OF INVESTMENTS -- (CONTINUED)
(photo of certificates)

DECEMBER 31, 1996
(UNAUDITED)

PRINCIPAL
AMOUNT
(000) VALUE

YANKEE OBLIGATIONS -- CONTINUED
<TABLE>
<C> <S> <C>
$ 2,000 Manitoba Province (Canada),
8.00%, 4/15/02....................... $ 2,132,658
800 Petro Canada Ltd.,
8.60%, 1/15/10....................... 917,759
Svenska Handelsbanken,
2,000 8.125%, 8/15/07...................... 2,139,970
1,000 8.35%, 7/15/04....................... 1,081,544
700 Westpac Banking,
9.125%, 8/15/01...................... 767,533
TOTAL YANKEE OBLIGATIONS
(COST $12,921,110).............. 13,767,610
REPURCHASE AGREEMENT -- 2.4%
4,034 Donaldson, Lufkin & Jenrette
Securities Corp., 6.50% dated
12/31/96, due 1/2/97, -- collaterized
by $4,055,000 U.S. Treasury Notes,
6.50%, 4/30/97; value, including
accrued interest $4,115,026
(COST $4,034,162).................... 4,034,162
</TABLE>

<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS --
(COST $162,771,789)........ 98.5 % 165,205,769
OTHER ASSETS AND
LIABILITIES -- NET......... 1.5 2,507,800
NET ASSETS --................ 100.0 % $167,713,569
</TABLE>

Rule 144A securities are restricted as to resale to qualified institutional
investors.

See accompanying notes to financial statements.

<PAGE>
EVERGREEN INTERMEDIATE-TERM BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
(photo of certificates)
DECEMBER 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $162,771,789)........................................................... $165,205,769
Interest receivable........................................................................................... 2,598,887
Receivable for Fund shares sold............................................................................... 412,019
Other assets.................................................................................................. 12,246
Total assets............................................................................................... 168,228,921
LIABILITIES:
Payable for Fund shares purchased............................................................................. 304,291
Accrued expenses and other liabilities........................................................................ 125,145
Accrued advisory fee.......................................................................................... 77,286
Accrued administration fee.................................................................................... 7,560
Distribution fee payable...................................................................................... 1,070
Total liabilities.......................................................................................... 515,352
NET ASSETS....................................................................................................... $167,713,569
NET ASSETS CONSIST OF:
Paid-in capital............................................................................................... $168,846,430
Undistributed net investment income........................................................................... 120,662
Accumulated net realized loss on investment transactions...................................................... (3,687,503)
Net unrealized appreciation of investments.................................................................... 2,433,980
Net assets................................................................................................. $167,713,569
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($3,133,305 divided by 306,302 shares of beneficial interest outstanding)......................... $ 10.23
Sales charge -- 3.25% of offering price.......................................................................... .34
Maximum offering price..................................................................................... $ 10.57
Class B Shares ($786,272 divided by 76,896 shares of beneficial interest outstanding)............................ $ 10.23
Class C Shares ($25,851 divided by 2,527 shares of beneficial interest outstanding).............................. $ 10.23
Class Y Shares ($163,768,141 divided by 16,009,340 shares of beneficial interest outstanding).................... $ 10.23
</TABLE>

See accompanying notes to financial statements.

<PAGE>
EVERGREEN INTERMEDIATE-TERM BOND FUND
STATEMENT OF OPERATIONS
(photo of certificates)
SIX MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $5,062).............................................. $5,623,609
EXPENSES:
Advisory fee....................................................................................... $502,880
Administrative personnel and services fees......................................................... 39,199
Distribution fee -- Class A Shares................................................................. 3,192
Distribution fee -- Class B Shares................................................................. 2,188
Shareholder services fee -- Class B Shares......................................................... 729
Distribution fee -- Class C Shares................................................................. 96
Shareholders services fee -- Class C Shares........................................................ 32
Registration and filing fees....................................................................... 62,795
Custodian fee...................................................................................... 42,451
Transfer agent fee................................................................................. 31,948
Reports and notices to shareholders................................................................ 30,351
Professional fees.................................................................................. 20,726
Amortization of organization expenses.............................................................. 1,497
Insurance.......................................................................................... 1,296
Trustees' fees and expenses........................................................................ 1,296
Miscellaneous...................................................................................... 1,175
741,851
Less: Advisory fee waiver and expense reimbursements............................................... (64,044)
Net expenses.................................................................................... 677,807
Net investment income................................................................................. 4,945,802
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investment transactions....................................................... (784,764)
Net change in unrealized appreciation (depreciation) of investments................................ 2,933,924
Net gain on investments............................................................................... 2,149,160
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................................. $7,094,962
</TABLE>

See accompanying notes to financial statements.

<PAGE>
EVERGREEN INTERMEDIATE-TERM BOND FUND
(photo of certificates)
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
SIX MONTHS
ENDED TEN MONTHS
DECEMBER 31, 1996 ENDED
(UNAUDITED) JUNE 30, 1996*
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................................................. $ 4,945,802 $ 5,797,073
Net realized gain (loss) on investment transactions................................... (784,764) 314,598
Net change in unrealized appreciation (depreciation) of investments................... 2,933,924 (3,327,986)
Net increase in net assets resulting from operations............................... 7,094,962 2,783,685
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A Shares........................................................................ (88,650) (35,386)
Class B Shares........................................................................ (14,350) (2,841)
Class C Shares........................................................................ (624) (169)
Class Y Shares........................................................................ (4,809,108) (5,670,902)
Total distributions to shareholders................................................ (4,912,732) (5,709,298)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold............................................................. 23,414,562 38,531,458
Proceeds from shares issued in acquisition of Evergreen Managed Bond Fund............. -- 79,773,557
Proceeds from reinvestment of distributions........................................... 3,538,200 4,544,198
Payment for shares redeemed........................................................... (22,604,907) (54,860,961)
Net increase resulting from Fund share transactions................................ 4,347,855 67,988,252
Net increase in net assets...................................................... 6,530,085 65,062,639
NET ASSETS:
Beginning of period................................................................... 161,183,484 96,120,845
End of period (including undistributed net investment income of $120,662 and $87,592,
respectively)....................................................................... $ 167,713,569 $ 161,183,484
</TABLE>

* The Fund changed its fiscal year end from August 31 to June 30, resulting in a
ten-month period.

See accompanying notes to financial statements.

<PAGE>
EVERGREEN INTERMEDIATE-TERM BOND FUND
CLASS A, B AND C SHARES
FINANCIAL HIGHLIGHTS
(photo of certificates)
<TABLE>
<CAPTION>
CLASS C
CLASS A SHARES CLASS B SHARES SHARES
SIX MONTHS TEN MAY 2, SIX MONTHS JANUARY 30, SIX MONTHS
ENDED MONTHS 1995* ENDED 1996* ENDED
DECEMBER 31, ENDED THROUGH DECEMBER 31, THROUGH DECEMBER 31,
1996 JUNE 30, AUGUST 31, 1996 JUNE 30, 1996
(UNAUDITED) 1996# 1995 (UNAUDITED) 1996# (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........... $10.10 $10.30 $9.98 $10.10 $10.68 $10.10
Income (loss) from investment operations:
Net investment income........................ .30 .48 .18 .25 .20 .25
Net realized and unrealized gain (loss) on
investments................................ .13 (.20) .33 .13 (.58) .13
Total from investment operations........... .43 .28 .51 .38 (.38) .38
Less distributions to shareholders from net
investment income............................ (.30) (.48) (.19) (.25) (.20) (.25)
Net asset value, end of period................. $10.23 $10.10 $10.30 $10.23 $10.10 $10.23
TOTAL RETURN+.................................. 4.3% 2.7% 5.2% 3.8% (3.5%) 3.8%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)...... $3,133 $2,943 $160 $786 $402 $26
Ratios to average net assets:
Expenses**................................... .84% .82% .80% 1.81% 1.80% 1.80%
Net investment income**...................... 5.87% 6.30% 5.53% 4.93% 5.18% 4.91%
Portfolio turnover rate........................ 38% 52% 73% 38% 52% 38%

APRIL 29,
1996*
THROUGH
JUNE 30,
1996#
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period........... $10.15
Income (loss) from investment operations:
Net investment income........................ .08
Net realized and unrealized gain (loss) on
investments................................ (.05)
Total from investment operations........... .03
Less distributions to shareholders from net
investment income............................ (.08)
Net asset value, end of period................. $10.10
TOTAL RETURN+.................................. .3%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)...... $25
Ratios to average net assets:
Expenses**................................... 1.80%
Net investment income**...................... 5.30%
Portfolio turnover rate........................ 52%
</TABLE>

* Commencement of class operations.

# The Fund changed its fiscal year end from August 31 to June 30.

+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.

** Annualized and net of expense waivers and reimbursements. If the Fund had
borne all expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net assets
would have been the following:
<TABLE>
<CAPTION>
CLASS C
CLASS A SHARES CLASS B SHARES SHARES
SIX MONTHS TEN MAY 2, SIX MONTHS JANUARY 30, SIX MONTHS
ENDED MONTHS 1995* ENDED 1996* ENDED
DECEMBER 31, ENDED THROUGH DECEMBER 31, THROUGH DECEMBER 31,
1996 JUNE 30, AUGUST 31, 1996 JUNE 30, 1996
(UNAUDITED) 1996# 1995 (UNAUDITED) 1996# (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Expenses....................................... 1.16% 1.10% 1.38% 1.96% 1.89% 1.95%
Net investment income.......................... 5.55% 6.02% 4.95% 4.78% 5.09% 4.76%

APRIL 29,
1996*
THROUGH
JUNE 30,
1996#
<S> <C>
Expenses....................................... 1.88%
Net investment income.......................... 5.22%
</TABLE>

See accompanying notes to financial statements.

<PAGE>
EVERGREEN INTERMEDIATE-TERM BOND FUND
CLASS Y SHARES
(photo of certificates)
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
SIX MONTHS TEN
ENDED MONTHS
DECEMBER 31, ENDED
1996 JUNE 30, YEAR ENDED AUGUST 31,
(UNAUDITED) 1996# 1995 1994 1993
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................................ $10.10 $10.29 $9.93 $10.99 $10.56
Income (loss) from investment operations:
Net investment income............................................. .30 .48 .56 .55 .63
Net realized and unrealized gain (loss) on investments............ .13 (.19) .40 (.86) .66
Total from investment operations................................ .43 .29 .96 (.31) 1.29
Less distributions to shareholders from:
Net investment income............................................. (.30) (.48) (.56) (.55) (.64)
Net realized gains................................................ -- -- (.04) (.20) (.22)
Total distributions............................................. (.30) (.48) (.60) (.75) (.86)
Net asset value, end of period...................................... $10.23 $10.10 $10.29 $9.93 $10.99
TOTAL RETURN+....................................................... 4.3% 2.8% 10.1% (2.9%) 12.9%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)........................... $163,768 $157,814 $95,961 $91,724 $86,892
Ratios to average net assets:
Expenses**........................................................ .80%++ .80%++ .69% .55% .55%
Net investment income**........................................... 5.91%++ 5.75%++ 5.63% 5.32% 5.93%
Portfolio turnover rate............................................. 38% 52% 73% 69% 49%

<CAPTION>
NOVEMBER 1,
1991*
THROUGH
AUGUST 31,
1992
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period................................ $10.00
Income (loss) from investment operations:
Net investment income............................................. .55
Net realized and unrealized gain (loss) on investments............ .55
Total from investment operations................................ 1.10
Less distributions to shareholders from:
Net investment income............................................. (.54)
Net realized gains................................................ --
Total distributions............................................. (.54)
Net asset value, end of period...................................... $10.56
TOTAL RETURN+....................................................... 11.3%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)........................... $66,695
Ratios to average net assets:
Expenses**........................................................ .55%++
Net investment income**........................................... 6.49%++
Portfolio turnover rate............................................. 65%
</TABLE>

* Commencement of class operations.

# The Fund changed its fiscal year end from August 31 to June 30.

+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.

++ Annualized.

** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:
<TABLE>
<CAPTION>
CLASS Y SHARES
SIX MONTHS TEN
ENDED MONTHS
DECEMBER 31, ENDED
1996 JUNE 30, YEAR ENDED AUGUST 31,
(UNAUDITED) 1996# 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Expenses............................................................. .95% .87% .83% .83% .83%
Net investment income................................................ 5.76% 5.68% 5.49% 5.04% 5.65%

NOVEMBER 1,
1991*
THROUGH
AUGUST 31,
1992
<S> <C>
Expenses............................................................. .86%
Net investment income................................................ 6.18%
</TABLE>

See accompanying notes to financial statements.

<PAGE>
EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND
(photo of monument)
A REPORT FROM YOUR
PORTFOLIO MANAGER
L. ROBERT CHESHIRE

We are pleased to present the Semiannual Report for Evergreen (photo of
Intermediate-Term Government Securities Fund. The Fund's total (L. Robert
return (Class Y, no-load shares) for the six-month period ended Cheshire)
December 31, 1996, was 3.71%*. This return exceeded that for the
Lipper Short-Intermediate U.S. Government Funds average of the
96 short-intermediate government funds tracked by Lipper
Analytical Services during that time**. The six-month total
return at net asset value for the Fund's Class A shares was
3.69%*.
In our 1996 Annual Report in June, we wrote that "we expect a
better environment for the fixed income markets over the next
six months". Six months later, we are pleased to report that the market indeed
rallied during the latter half of calendar 1996 and provided investors with
above-average returns. Several positive economic components contributed to the
bond market's recovery. Mini-cycles in our economy have replaced the more
extreme fluctuations in the past, and have resulted in more stable inflation and
interest rates. Additionally, as the final half of the year wore on, investors'
fears of an overly rapid economic expansion were calmed as data surfaced which
forecasted a healthy, yet slower growth rate. Although fourth quarter Gross
Domestic Product was up 4.7%, projections for the coming quarters are in the
more modest 1.0% to 2.0% range. An environment of low inflation and steady
growth resulted in an uneventful half for the Federal Reserve as they neither
raised nor lowered interest rates. Mirroring the second-half rally, the yield
for the benchmark thirty-year U.S. Treasury Bond, jumped as high as 7.2% in July
then declined to the 6.3% range before settling back to 6.6% by December 31.
We look for the bond market to continue its healthy recovery in 1997. As we
anticipate a slower economy to carry through the first half, we believe interest
rates should stabilize or decline. Looking ahead, our strategy for the Fund is
to moderately shift toward a more neutral stance in relation to its benchmark
index. In doing so, we also look to increase the Fund's yield-to-maturity. In
order to seek a higher yield, the Fund will strive to increase its
mortgage-backed holdings with securities in that sector which also minimize
prepayment risk. Due to the market's current uncertainty, we will wait for
developments to surface before making any significant changes in the portfolio.
For now, a neutral weighting should help protect the Fund's investors from any
turbulent fluctuations in the market.
Thank you for your investment in Evergreen Intermediate-Term Government
Securities Fund.

FIGURES REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS.

0.32% IS THE SIX-MONTH TOTAL RETURN ENDED 12/31/96 FOR THE FUND'S CLASS A
SHARES WITH THE MAXIMUM 3.25% FRONT-END SALES CHARGE. THE FUND ALSO OFFERS
CLASS B SHARES WHICH ARE SUBJECT TO A MAXIMUM 5% CONTINGENT DEFERRED SALES
CHARGE, AND CLASS C SHARES WHICH ARE SUBJECT TO A 1% CONTINGENT DEFERRED
SALES CHARGE WITHIN THE FIRST YEAR OF PURCHASE. PERFORMANCE FOR THESE CLASSES
OF SHARES MAY BE DIFFERENT.

<PAGE>
EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND
STATEMENT OF INVESTMENTS
(photo of monument)
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
<C> <S> <C>
MORTGAGE BACKED SECURITIES -- 17.0%
$ 5,000 Federal Home Loan Mortgage Corp.,
5.60%, 2/15/13........................ $ 4,969,095
4,686 Federal Home Loan Mortgage Corp. Gold,
9.00%, 1/1/17......................... 5,013,581
3,843 Federal National Mortgage Assn.,
7.00%, 3/1/24......................... 3,778,449
1,000 U.S. Department of Veteran Affairs,
7.00%, 5/15/12........................ 1,000,313
TOTAL MORTGAGE BACKED SECURITIES
(COST $14,652,601)............... 14,761,438
U. S. AGENCY OBLIGATIONS -- 8.7%
1,300 Federal Home Loan Bank,
8.60%, 1/25/00........................ 1,387,603
Federal National Mortgage Assn.,
2,000 7.50%, 2/11/02........................ 2,094,750
2,000 7.875%, 2/24/05....................... 2,157,046
2,000 Tennessee Valley Authority,
6.375%, 6/15/05....................... 1,966,058
TOTAL U. S. AGENCY OBLIGATIONS
(COST $7,360,505)................ 7,605,457
U. S. TREASURY NOTES -- 70.8%
7,000 5.50%, 2/28/99........................ 6,940,934
5,500 6.00%, 8/31/97........................ 5,506,875
3,400 6.00%, 9/30/98........................ 3,405,311
4,000 6.375%, 7/15/99....................... 4,038,748
2,000 6.50%, 5/15/97........................ 2,006,874
3,000 6.50%, 4/30/99........................ 3,035,625
4,500 6.50%, 5/15/05........................ 4,533,750
4,000 6.625%, 6/30/01....................... 4,065,000

<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
<C> <S> <C>
U. S. TREASURY NOTES -- CONTINUED
$ 3,000 6.75%, 4/30/00........................ $ 3,058,125
3,000 7.25%, 2/15/98........................ 3,041,250
2,000 7.25%, 5/15/04........................ 2,105,624
4,100 7.50%, 10/31/99....................... 4,253,750
2,000 7.50%, 11/15/01....................... 2,106,250
2,000 7.50%, 5/15/02........................ 2,115,624
3,250 7.50%, 2/15/05........................ 3,477,500
1,700 7.875%, 4/15/98....................... 1,740,375
3,500 7.875%, 11/15/04...................... 3,820,467
1,000 8.00%, 1/15/97........................ 1,000,625
1,300 8.50%, 11/15/00....................... 1,404,405
TOTAL U. S. TREASURY NOTES
(COST $61,316,890)............... 61,657,112
REPURCHASE AGREEMENT -- 2.2%
1,938 Donaldson, Lufkin & Jenrette
Securities Corp., 6.50% dated
12/31/96, due 1/2/97,
-- collateralized by $1,141,000 U.S.
Treasury Notes, 6.50%, 4/30/97 and
$756,000 U.S. Treasury Notes, 8.00%,
5/15/01; value including accrued
interest $1,977,768
(COST $1,938,352)................ 1,938,352
</TABLE>

<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS --
(COST $85,268,348)....... 98.7% 85,962,359
OTHER ASSETS AND
LIABILITIES -- NET....... 1.3 1,114,340
NET ASSETS --............ 100.0% $87,076,699
</TABLE>

See accompanying notes to financial statements.

<PAGE>
EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
(photo of monument)
DECEMBER 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $85,268,348)............................................................. $85,962,359
Interest receivable............................................................................................ 1,192,346
Other assets................................................................................................... 39,508
Receivable for Fund shares sold................................................................................ 4,028
Total assets............................................................................................. 87,198,241
LIABILITIES:
Due to custodian bank.......................................................................................... 1,083
Accrued expenses and other liabilities......................................................................... 54,526
Accrued advisory fee........................................................................................... 37,021
Payable for Fund shares repurchased............................................................................ 25,381
Accrued administration fee..................................................................................... 2,825
Distribution fee payable....................................................................................... 706
Total liabilities........................................................................................ 121,542
NET ASSETS........................................................................................................ $87,076,699
NET ASSETS CONSIST OF:
Paid-in capital................................................................................................ $88,190,497
Undistributed net investment income............................................................................ 60,455
Accumulated net realized loss on investment transactions....................................................... (1,868,264)
Net unrealized appreciation of investments..................................................................... 694,011
Net assets............................................................................................... $87,076,699
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($598,703 divided by 59,370 shares of beneficial interest outstanding).......................... $ 10.08
Sales charge -- 3.25% of offering price........................................................................ .34
Maximum offering price................................................................................... $ 10.42
Class B Shares ($665,421 divided by 66,009 shares of beneficial interest outstanding).......................... $ 10.08
Class C Shares ($31,382 divided by 3,113 shares of beneficial interest outstanding)............................ $ 10.08
Class Y Shares ($85,781,193 divided by 8,506,055 shares of beneficial interest outstanding).................... $ 10.08
</TABLE>

See accompanying notes to financial statements.

<PAGE>
EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND
STATEMENT OF OPERATIONS
(photo of monument)
SIX MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest.......................................................................................... $ 2,808,484
EXPENSES:
Advisory fee...................................................................................... $265,958
Administrative personnel and services fees........................................................ 20,526
Distribution fee -- Class A Shares................................................................ 1,326
Distribution fee -- Class B Shares................................................................ 1,955
Shareholder services fee -- Class B Shares........................................................ 652
Distribution fee -- Class C Shares................................................................ 122
Shareholder services fee -- Class C Shares........................................................ 41
Registration and filing fees...................................................................... 47,661
Custodian fee..................................................................................... 25,356
Transfer agent fee................................................................................ 17,730
Professional fees................................................................................. 15,252
Reports and notices to shareholders............................................................... 4,766
Amortization of organization expenses............................................................. 1,351
Insurance......................................................................................... 953
Trustees' fees and expenses....................................................................... 953
Miscellaneous..................................................................................... 953
405,555
Less: Advisory fee waiver and expense reimbursements.............................................. (47,031)
Net expenses................................................................................... 358,524
Net investment income................................................................................ 2,449,960
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investment transactions...................................................... 313,097
Net increase in unrealized appreciation of investments............................................ 442,982
Net gain on investments.............................................................................. 756,079
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................. $ 3,206,039
</TABLE>

See accompanying notes to financial statements.

<PAGE>
EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND
(photo of monument)
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, TEN MONTHS
1996 ENDED
(UNAUDITED) JUNE 30, 1996*
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.................................................................... $ 2,449,960 $ 4,606,598
Net realized gain on investment transactions............................................. 313,097 11,468
Net change in unrealized appreciation (depreciation) of investments...................... 442,982 (1,507,190)
Net increase in net assets resulting from operations.................................. 3,206,039 3,110,876
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A Shares........................................................................... (15,514) (23,774)
Class B Shares........................................................................... (11,711) (2,363)
Class C Shares........................................................................... (756) (255)
Class Y Shares........................................................................... (2,378,856) (4,562,840)
Total distributions to shareholders................................................... (2,406,837) (4,589,232)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold................................................................ 5,756,681 13,828,502
Proceeds from reinvestment of distributions.............................................. 2,543,029 4,095,518
Payment for shares redeemed.............................................................. (9,915,604) (34,626,524)
Net decrease resulting from Fund share transactions................................... (1,615,894) (16,702,504)
Net decrease in net assets......................................................... (816,692) (18,180,860)
NET ASSETS:
Beginning of period...................................................................... 87,893,391 106,074,251
End of period (including undistributed net investment income of
$60,455 and $17,332, respectively).................................................... $ 87,076,699 $ 87,893,391
</TABLE>

* The Fund changed its fiscal year end from August 31 to June 30, resulting in a
ten-month period.

See accompanying notes to financial statements.

<PAGE>
EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND -- CLASS A, B AND C SHARES
(photo of monument)
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
SIX SIX
MONTHS TEN MAY 2, MONTHS FEBRUARY 9,
ENDED MONTHS 1995* ENDED 1996*
DECEMBER 31, ENDED THROUGH DECEMBER 31, THROUGH
1996 JUNE 30, AUGUST 31, 1996 JUNE 30,
(UNAUDITED) 1996# 1995 (UNAUDITED) 1996#
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.................. $9.99 $10.15 $9.95 $9.99 $10.38
Income (loss) from investment operations:
Net investment income............................... .28 .46 .19 .23 .18
Net realized and unrealized gain (loss) on
investments....................................... .08 (.16) .20 .09 (.39)
Total from investment operations.................. .36 .30 .39 .32 (.21)
Less distributions to shareholders from net
investment income................................... (.27) (.46) (.19) (.23) (.18)
Net asset value, end of period........................ $10.08 $9.99 $10.15 $10.08 $9.99
TOTAL RETURN+......................................... 3.7% 3.0% 3.9% 3.2% (2.0%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............. $599 $497 $9 $665 $359
Ratios to average net assets:
Expenses**.......................................... .84% .81% .80% 1.81% 1.80%
Net investment income**............................. 5.50% 5.49% 5.42% 4.56% 4.62%
Portfolio turnover rate............................... 29% 28% 45% 29% 28%

<CAPTION>
CLASS C SHARES
SIX
MONTHS APRIL 10
ENDED 1996*
DECEMBER 31, THROUGH
1996 JUNE 30,
(UNAUDITED) 1996#
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.................. $9.99 $10.01
Income (loss) from investment operations:
Net investment income............................... .22 .11
Net realized and unrealized gain (loss) on
investments....................................... .10 (.02)
Total from investment operations.................. .32 .09
Less distributions to shareholders from net
investment income................................... (.23) (.11)
Net asset value, end of period........................ $10.08 $9.99
TOTAL RETURN+......................................... 3.2% .9%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............. $31 $32
Ratios to average net assets:
Expenses**.......................................... 1.80% 1.80%
Net investment income**............................. 4.53% 4.47%
Portfolio turnover rate............................... 29% 28%
</TABLE>

* Commencement of class operations.

# The Fund changed its fiscal year end from August 31 to June 30.

+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.

** Annualized and net of expense waivers and reimbursements. If the Fund had
borne all expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net assets
would have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
SIX SIX
MONTHS TEN MAY 2, MONTHS FEBRUARY 9,
ENDED MONTHS 1995* ENDED 1996*
DECEMBER 31, ENDED THROUGH DECEMBER 31, THROUGH
1996 JUNE 30, AUGUST 31, 1996 JUNE 30,
(UNAUDITED) 1996# 1995 (UNAUDITED) 1996#
<S> <C> <C> <C> <C> <C>
Expenses.............................................. 1.47% 1.06% 1.34% 2.01% 1.91%
Net investment income................................. 4.87% 5.24% 4.88% 4.36% 4.51%

<CAPTION>
CLASS C SHARES
SIX
MONTHS APRIL 10
ENDED 1996*
DECEMBER 31, THROUGH
1996 JUNE 30,
(UNAUDITED) 1996#
<S> <C> <C>
Expenses.............................................. 2.00% 1.91%
Net investment income................................. 4.33% 4.36%
</TABLE>

See accompanying notes to financial statements.

<PAGE>
EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND -- CLASS Y SHARES
(photo of monument)
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
SIX
MONTHS TEN
ENDED MONTHS
DECEMBER 31, ENDED
1996 JUNE 30, YEAR ENDED AUGUST 31,
(UNAUDITED) 1996# 1995 1994 1993
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................................ $9.99 $10.15 $9.92 $10.61 $10.41
Income (loss) from investment operations:
Net investment income............................................. .28 .46 .55 .54 .57
Net realized and unrealized gain (loss) on investments............ .09 (.16) .23 (.64) .24
Total from investment operations................................ .37 .30 .78 (.10) .81
Less distributions to shareholders from:
Net investment income............................................. (.28) (.46) (.55) (.54) (.58)
Net realized gains................................................ -- -- -- (.05) (.03)
Total distributions............................................. (.28) (.46) (.55) (.59) (.61)
Net asset value, end of period...................................... $10.08 $9.99 $10.15 $9.92 $10.61
TOTAL RETURN+....................................................... 3.7% 3.0% 8.2% (1.0%) 8.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)........................... $85,781 $87,004 $106,066 $106,448 $119,172
Ratios to average net assets:
Expenses**........................................................ .80%++ .80%++ .70% .55% .55%
Net investment income**........................................... 5.53%++ 5.47%++ 5.54% 5.22% 5.48%
Portfolio turnover rate............................................. 29% 28% 45% 45% 31%

NOVEMBER 1,
1991*
THROUGH
AUGUST 31,
1992
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period................................ $10.00
Income (loss) from investment operations:
Net investment income............................................. .48
Net realized and unrealized gain (loss) on investments............ .40
Total from investment operations................................ .88
Less distributions to shareholders from:
Net investment income............................................. (.47)
Net realized gains................................................ --
Total distributions............................................. (.47)
Net asset value, end of period...................................... $10.41
TOTAL RETURN+....................................................... 9.1%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)........................... $87,648
Ratios to average net assets:
Expenses**........................................................ .55%++
Net investment income**........................................... 5.68%++
Portfolio turnover rate............................................. 47%
</TABLE>

* Commencement of class operations.

# The Fund changed its fiscal year end from August 31 to June 30.

+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.

++ Annualized.

** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:
<TABLE>
<CAPTION>
CLASS Y SHARES
SIX
MONTHS TEN
ENDED MONTHS
DECEMBER 31, ENDED
1996 JUNE 30, YEAR ENDED AUGUST 31,
(UNAUDITED) 1996# 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Expenses.............................................................. 1.01% .87% .84% .82% .83%
Net investment income................................................. 5.32% 5.40% 5.40% 4.95% 5.20%

NOVEMBER 1,
1991*
THROUGH
AUGUST 31,
1992
<S> <C>
Expenses.............................................................. .86%
Net investment income................................................. 5.37%
</TABLE>

See accompanying notes to financial statements.

<PAGE>
EVERGREEN SHORT -- INTERMEDIATE BOND FUND

(photo of Lincoln Memorial)

A REPORT FROM YOUR
PORTFOLIO MANAGER
TOM ELLIS

We are pleased to present the Semiannual Report for the (photo of
Evergreen Short-Intermediate Bond Fund for the six months Tom Ellis)
ended December 31, 1996. The Fund's total return (Class Y,
no-load shares) for this period was 4.30%*, which exceeded the
return for the Lipper Short-Intermediate Investment Grade
Funds average of the 78 short-intermediate investment grade
funds tracked by Lipper Analytical Services during that
time**. The six-month total return at net asset value for the
Fund's Class A shares was 4.25%*.
In our Annual Report to you six months ago, we stated our belief that "the
market is overreacting...(and) we remain positive on the bond market
as we look toward the end of calendar year 1996". Six months later, we are
pleased to report that the bond market finally settled down during the second
half of 1996 and recaptured losses from a difficult first-half. Poor first-half
performance was largely driven by concerns over a rapidly expanding economy and
the potential of higher interest rates. Indicators which emerged throughout the
final six months painted a picture of a healthy, yet moderating economy, and
bonds advanced nicely as interest rates continued their steady decline. Full
employment with low inflation and steady growth buoyed bond investors and,
consistent with this fairly stable environment, the Federal Reserve stayed on
the sidelines throughout the entire six-month period. The rally stumbled briefly
in December as rates jumped, but when the smoke cleared, bond investors were
rewarded with solid returns. During this same period, the yield for the
benchmark thirty-year U.S. Treasury bond jumped as high as 7.2% in July before
settling back to 6.6% by December 31.
Our optimistic outlook and strategic weightings in the Fund paid off as we
recovered some earlier losses to post a positive total return in the fiscal
first half. Portfolio duration was kept near that of the benchmark index to
hedge any turbulent interest rate fluctuations. We decreased exposure to
corporate bonds during the fourth quarter as yield spreads have continued to
narrow. Conversely, we have increased our exposure to mortgage-backed securities
as we feel they currently possess better value. Throughout the six-month period,
returns were enhanced by asset-backed securities such as home-equity loans which
continued to be excellent performers. Lastly, we continued to increase the
callable agencies in the portfolio which have performed well in the current
market environment which has been range-bound all year.
Thank you for your investment in Evergreen Short-Intermediate Bond Fund.

FIGURES REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS.

* PERFORMANCE FIGURES INCLUDE REINVESTMENT OF INCOME DIVIDEND AND CAPITAL GAIN
DISTRIBUTIONS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE.
INVESTORS' SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.
CLASS A SHARES ARE SUBJECT TO A MAXIMUM 3.25% FRONT-END SALES CHARGE WHICH IS
NOT REFLECTED IN THE PERFORMANCE FIGURE ABOVE.
0.91% IS THE SIX-MONTH TOTAL RETURN ENDED 12/31/96 FOR THE FUND'S CLASS A
SHARES WITH THE MAXIMUM 3.25% FRONT-END SALES CHARGE.
THE FUND ALSO OFFERS CLASS B SHARES WHICH ARE SUBJECT TO A MAXIMUM 5%
CONTINGENT DEFERRED SALES CHARGE, AND CLASS C SHARES WHICH ARE SUBJECT TO A
1% CONTINGENT DEFERRED SALES CHARGE WITHIN THE FIRST YEAR OF PURCHASE.
PERFORMANCE FOR THESE CLASSES OF SHARES MAY BE DIFFERENT.
** SOURCE: LANA (LIPPER ANALYTICAL NEW APPLICATIONS) LIPPER ANALYTICAL SERVICES
INC., IS AN INDEPENDENT MUTUAL FUNDS PERFORMANCE MONITOR. LIPPER AVERAGE DOES
NOT INCLUDE SALES CHARGES, AND IF INCLUDED PERFORMANCE MAY BE LOWER.

<PAGE>
EVERGREEN SHORT -- INTERMEDIATE BOND FUND
STATEMENT OF INVESTMENTS
(photo of Lincoln Memorial)
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
<C> <S> <C>
ASSET-BACKED SECURITIES -- 11.8%
$ 5,095 Advanta Home Equity Loan Trust,
7.20%, 11/25/08.................. $ 5,164,956
685 Bank of West Trust,
9.50%, 2/15/05................... 693,063
1,750 Case Equipment Loan Trust,
6.45%, 9/15/02................... 1,727,460
117 CIT Group Holdings, Inc.,
4.70%, 6/15/18................... 117,165
2,000 EQCC Home Equity Loan Trust,
5.82%, 9/15/09................... 1,974,900
3,926 FCC Grantor Trust,
9.00%, 7/15/97................... 3,953,157
2,927 First Bank Auto Receivable,
8.30%, 1/15/00................... 2,986,613
4,626 First Security Auto Grantor
Trust,
6.25%, 1/15/01................... 4,657,480
1,123 Fleet Financial Home Equity
Trust,
6.70%, 1/16/06 - 10/16/06........ 1,128,972
7,390 Fleetwood Credit Grantor Trust,
4.95%, 8/15/08................... 7,242,843
7,500 Household Affinity Credit Card
Master Trust,
7.20%, 12/15/99.................. 7,606,275
646 Jayhawk Funding Trust I,
5.925%, 9/15/99, 144A............ 646,783
1,483 SCFC Recreational Vehicle Loan
Trust,
7.25%, 9/15/06................... 1,492,191
Western Financial Grantor Trust,
6,301 5.875%, 3/1/02................... 6,292,092
2,863 6.20%, 2/1/02.................... 2,872,237
TOTAL ASSET-BACKED SECURITIES
(COST $48,483,549).......... 48,556,187
CORPORATE BONDS -- 27.0%
BANKS -- 6.9%
3,400 Abbey National Plc,
6.69%, 10/17/05.................. 3,379,304
3,350 Amsouth Bancorporation,
6.75%, 11/1/25................... 3,299,435
3,000 Cenfed Financial Corp.,
11.17%, 12/15/01, 144A........... 3,300,000
First Chicago Corp.,
4,000 9.00%, 6/15/99................... 4,240,628
2,000 9.20%, 12/17/01.................. 2,212,448
5,000 First Security Corp.,
6.40%, 2/10/03................... 4,866,795
6,000 National Bank of Canada,
8.125%, 8/15/04.................. 6,383,310
500 Security Pacific Corp.,
10.45%, 5/8/01................... 568,874
28,250,794

<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
<C> <S> <C>
CORPORATE BONDS -- CONTINUED
ENERGY -- .5%
$ 2,000 Ras Laffan Liquefied Natural Gas,
7.628%, 9/15/06, 144A............ $ 2,018,446
FINANCE & INSURANCE -- 18.1%
2,000 American Express Credit Corp.,
6.25%, 8/10/05................... 1,986,562
3,000 Associated P&C Holdings, Inc.,
6.75%, 7/15/03, 144A............. 2,912,439
3,000 Bear Stearns Co., Inc.,
7.625%, 4/15/00.................. 3,097,611
10,000 Chrysler Buildings,
9.125%, 5/1/99................... 10,524,430
1,000 Horace Mann Educators Corp.,
6.625%, 1/15/06.................. 964,923
5,250 Household Finance Corp.,
6.70%, 6/15/02................... 5,242,199
Lehman Brothers Holdings, Inc.,
5,000 6.625%, 11/15/00................. 4,967,490
2,500 6.84%, 10/7/99................... 2,514,340
5,000 8.875%, 3/1/02................... 5,391,920
Metropolitan Life Insurance Co.,
5,000 6.30%, 11/1/03, 144A............. 4,840,985
5,000 7.00%, 11/1/05, 144A............. 4,970,155
5,000 Money Store, Inc.,
7.88%, 9/15/00................... 5,107,950
1,000 Morgan Stanley Group, Inc.,
9.40%, 3/5/98.................... 1,038,210
6,000 Progressive Corp., Ohio,
6.60%, 1/15/04................... 5,863,518
Salomon Brothers, Inc.,
1,800 8.57%, 3/10/97................... 1,808,786
9,000 9.01%, 5/1/97.................... 9,091,755
4,000 Traveler's Group, Inc.,
6.875%, 6/1/25................... 4,016,068
74,339,341
INDUSTRIAL SPECIALTY PRODUCTS &
SERVICES -- 1.3%
5,000 Boral Limited Australia Co.,
7.90%, 11/19/99, 144A............ 5,192,225
SOVEREIGN GOVERNMENT -- .2%
900 New Brunswick Province CDA,
7.125%, 10/1/02.................. 923,597
TOTAL CORPORATE BONDS
(COST $111,408,473)......... 110,724,403
</TABLE>

<PAGE>
EVERGREEN SHORT -- INTERMEDIATE BOND FUND
STATEMENT OF INVESTMENTS -- (CONTINUED)

(photo of Lincoln Memorial)
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
<C> <S> <C>
MORTGAGE BACKED SECURITIES -- 26.8%
AFC Home Equity Loan Trust,
$ 1,036 6.60%, 10/26/26.................. $ 1,039,515
404 8.05%, 4/27/26................... 409,046
3,150 Chase Commercial Mortgage
Security Corp.,
6.90%, 12/31/99.................. 3,095,859
3,356 CMC Securities Corp.,
10.00%, 7/25/23.................. 3,559,344
Federal Home Loan Mortgage Corp.,
1,913 6.75%, 2/15/04................... 1,921,804
4,000 6.80%, 10/15/05.................. 4,033,240
10,000 7.40%, 10/15/05.................. 10,145,560
437 10.50%, 9/1/15................... 482,834
Federal Housing Administration-
Puttable Project Loans,
4,044 GMAC 56,
7.43%, 11/1/22................... 4,115,858
6,327 Merrill Lynch 199,
8.43%, 2/1/20.................... 6,644,364
2,980 Reilly 18,
6.875%, 4/1/15................... 2,979,565
1,582 Reilly 55,
7.43%, 3/1/24.................... 1,610,878
10,389 Reilly 64,
7.43%, 1/1/24.................... 10,554,214
5,372 USGI E1,
7.43%, 7/1/22.................... 5,466,196
Federal National Mortgage Assn.,
3,726 6.23%, 12/25/25.................. 3,738,720
2,100 8.00%, 11/25/06.................. 2,167,177
9,000 8.10%, 4/25/25................... 9,293,238
39 14.00%, 6/1/11................... 45,499
1,934 GCC Second Mortgage Trust,
10.00%, 7/15/05.................. 2,010,490
5,829 Government National Mortgage
Assn.,
7.50%, 11/20/08.................. 5,920,739
4,000 Kidder Peabody Acceptance Corp.,
1994-C1A
6.65%, 2/1/06.................... 4,013,125
2,500 Potomac Gurnee Finance Corp.,
7.003%, 12/21/26................. 2,505,078
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
<C> <S> <C>
Prudential Home Mortgage
Securities,
$ 7,973 6.30%, 5/25/99................... $ 7,966,083
4,789 6.50%, 10/25/08.................. 4,650,722
4,727 Prudential Securities Secured
Financing Corp.,
8.12%, 2/17/25................... 4,905,886
62 Resolution Trust Corp.,
7.00%, 2/15/04................... 62,324
6,798 Saxon Mortgage Securities Corp.,
7.375%, 9/25/23.................. 6,855,113
TOTAL MORTGAGE BACKED
SECURITIES
(COST $109,082,759)......... 110,192,471
U.S. AGENCY OBLIGATIONS -- 11.6%
Federal Home Loan Banks,
9,275 6.075%, 7/2/97................... 9,278,478
3,000 6.80%, 8/2/00.................... 3,003,408
6,000 7.045%, 8/13/01.................. 6,023,004
4,850 7.125%, 7/2/99................... 4,856,771
Federal Home Loan Mortgage Corp.,
2,000 6.97%, 6/16/05................... 1,988,226
2,945 7.30%, 7/30/01................... 2,972,753
2,200 7.99%, 3/23/05................... 2,238,016
Federal National Mortgage Assn.,
1,500 5.30%, 8/25/98................... 1,486,956
500 6.00%, 12/15/00.................. 493,395
7,500 6.64%, 6/19/00................... 7,559,857
5,000 7.11%, 8/7/01.................... 5,040,455
2,500 7.65%, 5/4/05.................... 2,548,298
TOTAL U.S. AGENCY OBLIGATIONS
(COST $47,388,072).......... 47,489,617
U.S. TREASURY OBLIGATIONS -- 19.8%
U.S. Treasury Notes,
7,000 5.75%, 8/15/03................... 6,792,184
2,000 6.375%, 9/30/01.................. 2,011,874
20,500 6.50%, 8/15/05................... 20,647,334
2,075 6.50%, 10/15/06.................. 2,087,319
2,000 6.875%, 5/15/06.................. 2,062,500
14,980 7.00%, 7/15/06................... 15,569,837
2,000 7.125%, 9/30/99.................. 2,055,000
11,000 7.75%, 11/30/99.................. 11,491,557
17,400 8.875%, 2/15/99.................. 18,411,375
TOTAL U.S. TREASURY OBLIGATIONS
(COST $81,927,487).......... 81,128,980
</TABLE>

<PAGE>
EVERGREEN SHORT -- INTERMEDIATE BOND FUND
STATEMENT OF INVESTMENTS -- (CONTINUED)
(photo of Lincoln Memorial)
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
<C> <S> <C>
REPURCHASE AGREEMENT -- .7%
$ 3,033 Donaldson, Lufkin & Jenrette
Securities Corp., 6.50% dated
12/31/96, due 1/2/97 --
collateralized by $3,049,000 U.S.
Treasury Notes, 6.50%, 4/30/97;
value, including accrued interest
$3,094,134
(COST $3,033,068)................ $ 3,033,068
</TABLE>

<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS --
(COST $401,323,408)..... 97.7 % 401,124,726
OTHER ASSETS AND
LIABILITIES -- NET...... 2.3 9,648,042
NET ASSETS --............. 100.0 % $410,772,768
</TABLE>

Rule 144A securities are restricted as to resale to qualified institutional
investors.

See accompanying notes to financial statements.

<PAGE>
EVERGREEN SHORT -- INTERMEDIATE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES

(photo of Lincoln Memorial)
DECEMBER 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (identified cost $401,323,408)........................................................... $401,124,726
Interest receivable........................................................................................... 6,040,920
Receivable for Fund shares sold............................................................................... 5,048,569
Prepaid expenses.............................................................................................. 22,569
Total assets............................................................................................ 412,236,784
LIABILITIES:
Payable for Fund shares repurchased........................................................................... 1,126,460
Accrued advisory fee.......................................................................................... 174,542
Accrued expenses.............................................................................................. 126,906
Distribution fee payable...................................................................................... 19,924
Accrued administration fee.................................................................................... 16,184
Total liabilities....................................................................................... 1,464,016
NET ASSETS....................................................................................................... $410,772,768
NET ASSETS CONSIST OF:
Paid-in capital............................................................................................... $425,489,970
Undistributed net investment income........................................................................... 36,907
Accumulated net realized loss on investment transactions...................................................... (14,555,427)
Net unrealized depreciation of investments.................................................................... (198,682)
Net assets................................................................................................. $410,772,768
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($19,890,850 divided by 2,006,031 shares of beneficial interest outstanding)................... $ 9.92
Sales charge -- 3.25% of offering price....................................................................... .33
Maximum offering price.................................................................................. $ 10.25
Class B Shares ($22,683,150 divided by 2,284,440 shares of beneficial interest outstanding)................... $ 9.93
Class C Shares ($1,116,408 divided by 112,425 shares of beneficial interest outstanding)...................... $ 9.93
Class Y Shares ($367,082,360 divided by 37,034,055 shares of beneficial interest outstanding)................. $ 9.91
</TABLE>

See accompanying notes to financial statements.

<PAGE>
EVERGREEN SHORT -- INTERMEDIATE BOND FUND
STATEMENT OF OPERATIONS
(photo of Lincoln Memorial)
SIX MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest....................................................................................... $14,087,204
EXPENSES:
Advisory fee................................................................................... $1,001,093
Administrative personnel and services fees..................................................... 92,663
Distribution fee -- Class A Shares............................................................. 9,702
Distribution fee -- Class B Shares............................................................. 82,609
Shareholder services fee -- Class B Shares..................................................... 27,536
Distribution fee -- Class C Shares............................................................. 3,952
Shareholder services fee -- Class C Shares..................................................... 1,317
Custodian fee.................................................................................. 42,046
Transfer agent fee............................................................................. 30,033
Registration and filing fees................................................................... 28,031
Reports and notices to shareholders............................................................ 24,026
Professional fees.............................................................................. 8,009
Insurance...................................................................................... 6,007
Trustees' fees and expenses.................................................................... 2,002
Miscellaneous.................................................................................. 8,009
Total expenses........................................................................... 1,367,035
Net investment income............................................................................. 12,720,169
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investment transactions................................................... (565,002)
Net change in unrealized depreciation of investments........................................... 4,315,104
Net gain on investments........................................................................... 3,750,102
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............................................. $16,470,271
</TABLE>

See accompanying notes to financial statements.

<PAGE>

EVERGREEN SHORT -- INTERMEDIATE BOND FUND
(photo of Lincoln Memorial)
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<S> <C> <C>
SIX MONTHS
ENDED YEAR
DECEMBER 31, ENDED
1996 JUNE 30,
(UNAUDITED) 1996
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income..................................................................... $ 12,720,169 $ 24,943,586
Net realized loss on investments.......................................................... (565,002) (4,715,061)
Net change in unrealized depreciation of investments...................................... 4,315,104 (2,841,758)
Net increase in net assets resulting from operations................................... 16,470,271 17,386,767
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A Shares............................................................................ (617,959) (1,165,625)
Class B Shares............................................................................ (600,378) (1,059,184)
Class C Shares............................................................................ (29,112) (49,329)
Class Y Shares............................................................................ (11,534,186) (23,005,091)
Total distributions to shareholders.................................................... (12,781,635) (25,279,229)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold................................................................. 60,437,269 170,338,605
Proceeds from reinvestment of distributions............................................... 8,146,682 18,879,027
Payment for shares redeemed............................................................... (54,386,268) (172,279,164)
Net increase resulting from Fund share transactions.................................... 14,197,683 16,938,468
Net increase in net assets.......................................................... 17,886,319 9,046,006
NET ASSETS:
Beginning of period....................................................................... 392,886,449 383,840,443
End of period (including undistributed net investment income of
$36,907 and $98,373, respectively)..................................................... $410,772,768 $392,886,449
</TABLE>

See accompanying notes to financial statements.

<PAGE>

EVERGREEN SHORT -- INTERMEDIATE BOND FUND --
CLASS A SHARES

(photo of Lincoln Memorial)
FINANCIAL HIGHLIGHTS

<TABLE>
<S> <C> <C> <C> <C>
SIX MONTHS YEAR
ENDED YEAR SIX MONTHS ENDED
DECEMBER 31, ENDED ENDED DECEMBER
1996 JUNE 30, JUNE 30, 31,
(UNAUDITED) 1996 1995# 1994
PER SHARE DATA:
Net asset value, beginning of period........................................ $9.82 $10.02 $9.52 $10.42
Income (loss) from investment operations:
Net investment income..................................................... .31 .63 .32 .65
Net realized and unrealized gain (loss) on investments.................... .11 (.19 ) .50 (.91)
Total from investment operations........................................ .42 .44 .82 (.26)
Less distributions to shareholders from:
Net investment income..................................................... (.32 ) (.64 ) (.32 ) (.64)
Net realized gains........................................................ -- -- -- --
Total distributions..................................................... (.32 ) (.64 ) (.32 ) (.64)
Net asset value, end of period.............................................. $9.92 $9.82 $10.02 $9.52
TOTAL RETURN+............................................................... 4.3% 4.5% 8.8% (2.6%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................................... $ 19,891 $18,630 $ 18,898 $19,127
Ratios to average net assets:
Expenses.................................................................. .72% ++ .79% .77% ++ .75%
Net investment income..................................................... 6.32% ++ 6.35% 6.58% ++ 6.46%
Portfolio turnover rate..................................................... 15% 76% 34% 48%

<CAPTION>
1993 1992
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........................................ $10.41 $10.54
Income (loss) from investment operations:
Net investment income..................................................... .65 .71
Net realized and unrealized gain (loss) on investments.................... .19 (.06)
Total from investment operations........................................ .84 .65
Less distributions to shareholders from:
Net investment income..................................................... (.65) (.67)
Net realized gains........................................................ (.18) (.11)
Total distributions..................................................... (.83) (.78)
Net asset value, end of period.............................................. $10.42 $10.41
TOTAL RETURN+............................................................... 8.3% 6.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................................... $22,865 $21,488
Ratios to average net assets:
Expenses.................................................................. .93% .90%
Net investment income..................................................... 6.15% 6.79%
Portfolio turnover rate..................................................... 73% 66%

</TABLE>

# The Fund changed its fiscal year end from December 31 to June 30.

+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.

++ Annualized.

See accompanying notes to financial statements.

<PAGE>
EVERGREEN SHORT -- INTERMEDIATE BOND FUND --
CLASS B AND CLASS C SHARES

(photo of Lincoln Memorial)
FINANCIAL HIGHLIGHTS

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES CLASS C SHARES
SIX MONTHS JANUARY 25, SIX MONTHS
ENDED YEAR SIX MONTHS 1993* ENDED YEAR SIX MONTHS
DECEMBER 31, ENDED ENDED YEAR ENDED THROUGH DECEMBER 31, ENDED ENDED
1996 JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, 1996 JUNE 30, JUNE 30,
(UNAUDITED) 1996 1995# 1994 1993 (UNAUDITED) 1996 1995#
PER SHARE DATA:
Net asset value, beginning of
period......................... $9.84 $10.04 $9.54 $10.44 $10.57 $9.84 $10.05 $9.55
Income (loss) from investment
operations:
Net investment income.......... .27 .55 .28 .58 .58 .27 .55 .26
Net realized and unrealized
gain (loss) on investments... .09 (.19 ) .50 (.92 ) .05 .09 (.20 ) .50
Total from investment
operations................. .36 .36 .78 (.34 ) .63 .36 .35 .76
Less distributions to
shareholders from:
Net investment income.......... (.27 ) (.56 ) (.28 ) (.56 ) (.58 ) (.27 ) (.56 ) (.26 )
Net realized gains............. -- -- -- -- (.18 ) -- -- --
Total distributions.......... (.27 ) (.56 ) (.28 ) (.56 ) (.76 ) (.27 ) (.56 ) (.26 )
Net asset value, end of period... $9.93 $9.84 $10.04 $9.54 $10.44 $9.93 $9.84 $10.05
TOTAL RETURN+.................... 3.7% 3.6% 8.3% (3.3% ) 6.1% 3.7% 3.5% 8.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)....................... $ 22,683 $21,006 $ 17,366 $ 17,625 $ 8,876 $ 1,116 $ 1,155 $527
Ratios to average net assets:
Expenses....................... 1.62% ++ 1.69% 1.67% ++ 1.50% 1.57% ++ 1.62% ++ 1.69% 1.67%++
Net investment income.......... 5.42% ++ 5.45% 5.68% ++ 5.75% 5.42% ++ 5.40% ++ 5.46% 5.69%++
Portfolio turnover rate.......... 15% 76% 34% 48% 73% 15% 76% 34%

<CAPTION>
SEPTEMBER 6,
1994*
THROUGH
DECEMBER 31,
1994
<S> <C>
PER SHARE DATA:
Net asset value, beginning of
period......................... $9.85
Income (loss) from investment
operations:
Net investment income.......... .18
Net realized and unrealized
gain (loss) on investments... (.30)
Total from investment
operations................. (.12)
Less distributions to
shareholders from:
Net investment income.......... (.18)
Net realized gains............. --
Total distributions.......... (.18)
Net asset value, end of period... $9.55
TOTAL RETURN+.................... (1.3%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)....................... $512
Ratios to average net assets:
Expenses....................... 1.65% ++
Net investment income.......... 5.87% ++
Portfolio turnover rate.......... 48%

</TABLE>

# The Fund changed its fiscal year end from December 31 to June 30.

* Commencement of class operations.

+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charges are not
reflected.

++ Annualized.

See accompanying notes to financial statements.

<PAGE>
EVERGREEN SHORT -- INTERMEDIATE BOND FUND --
CLASS Y SHARES
(photo of Lincoln Memorial)
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR SIX MONTHS
DECEMBER 31, ENDED ENDED YEAR ENDED
1996 JUNE 30, JUNE 30, DECEMBER 31,
(UNAUDITED) 1996 1995# 1994 1993
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period......................................... $9.82 $10.02 $9.52 $10.43 $10.41
Income (loss) from investment operations:
Net investment income...................................................... .32 .64 .33 .65 .69
Net realized and unrealized gain (loss) on investments..................... .09 (.19) .49 (.91) .19
Total from investment operations......................................... .41 .45 .82 (.26) .88
Less distributions to shareholders from:
Net investment income...................................................... (.32 ) (.65) (.32 ) (.65) (.68)
Net realized gains......................................................... -- -- -- -- (.18)
Total distributions...................................................... (.32 ) (.65) (.32 ) (.65) (.86)
Net asset value, end of period............................................... $9.91 $9.82 $10.02 $9.52 $10.43
TOTAL RETURN+................................................................ 4.3% 4.6% 8.8% (2.6%) 8.7%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).................................... $ 367,082 $352,095 $ 347,050 $345,025 $376,445
Ratios to average net assets:
Expenses................................................................... .62% ++ .69% .67% ++ .65% .66%
Net investment income...................................................... 6.42% ++ 6.45% 6.68% ++ 6.56% 6.41%
Portfolio turnover rate...................................................... 15% 76% 34% 48% 73%

<CAPTION>
1992
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period......................................... $10.54
Income (loss) from investment operations:
Net investment income...................................................... .70
Net realized and unrealized gain (loss) on investments..................... (.02)
Total from investment operations......................................... .68
Less distributions to shareholders from:
Net investment income...................................................... (.70)
Net realized gains......................................................... (.11)
Total distributions...................................................... (.81)
Net asset value, end of period............................................... $10.41
TOTAL RETURN+................................................................ 6.6%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).................................... $324,068
Ratios to average net assets:
Expenses................................................................... .69%
Net investment income...................................................... 6.67%
Portfolio turnover rate...................................................... 66%

</TABLE>

# The Fund changed its fiscal year end from December 31 to June 30.

+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.

++ Annualized.

See accompanying notes to financial statements.

27
<PAGE>
EVERGREEN U.S. GOVERNMENT FUND
(photo of Capitol)

A REPORT FROM YOUR
PORTFOLIO MANAGER
ROLLIN WILLIAMS

We are pleased to present the Semiannual Report for
Evergreen U.S. Government Fund for the six months ended (photo of Rollin
December 31, 1996. The Fund's total return (Class Y, no-load Williams)
shares) for this period was 4.68%*, which exceeds the return
for the Lipper General U.S. Government Funds average of the
174 U.S. Government funds tracked by Lipper Analytical
Services during that period**. The six-month total return at
net asset value for the Fund's Class A shares was 4.55%*.
During the period from June 30, 1996, through December 31,
interest rates fluctuated rather dramatically. The yield on
the benchmark thirty-year treasury bond
jumped as high as 7.2% in July and dipped to the 6.3% range
before settling at 6.6% on December 31.
The bond market rebounded from a disappointing performance in the first half
of the calendar year and recovered nicely throughout the final six months. Even
a slight bump in December couldn't ruin its steady advance as investors were
rewarded with positive returns for the six-month period. Favorable signals from
the economy throughout the fiscal first half confirmed our projection of six
months ago that "the economy should slow as the year progresses". Fears that the
economy was growing at a dangerous pace early in the year subsided as economic
data emerged suggesting that growth was moderating to a modest, yet healthy
pace. Coming off a very strong Gross Domestic Product growth rate, projections
for the coming quarters are in the more modest 1.0% to 2.0% range. The stable
economic environment transformed the Federal Reserve into passive onlookers as
they neither raised nor lowered interest rates during the final six months of
1996.
The Fund had limited activity during its second fiscal quarter. Purchases
included thirty-year, 6.50%, Federated Home Loan Mortgage-Backed Securities. To
fund these purchases, a number of short-term treasuries were sold. These moves
sought to enhance the Fund in three ways: increase the yield, lengthen the
duration, and increase the exposure to mortgage-backed securities. The lower
coupon helps to provides protection from prepayment risk. Looking forward, we
believe the Fund is positioned well for the coming quarter, and no significant
changes are anticipated. The overall strategy of the Fund continues to be to
seek to provide investors with a high quality portfolio that has attractive
income characteristics without the use of toxic or exotic derivative securities.
Thank you for your investment in Evergreen U.S. Government Fund.

FIGURES REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS.

* PERFORMANCE FIGURES INCLUDE REINVESTMENT OF INCOME DIVIDEND AND CAPITAL GAIN
DISTRIBUTIONS.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE. INVESTORS' SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
CLASS A SHARES ARE SUBJECT TO A MAXIMUM 4.75% FRONT-END SALES CHARGE WHICH IS
NOT REFLECTED IN THE PERFORMANCE FIGURE ABOVE.
-.42% IS THE SIX-MONTH TOTAL RETURN ENDED 12/31/96 FOR THE FUND'S CLASS A
SHARES WITH THE MAXIMUM 4.75% FRONT-END SALES CHARGE.
THE FUND ALSO OFFERS CLASS B SHARES WHICH ARE SUBJECT TO A MAXIMUM 5%
CONTINGENT DEFERRED SALES CHARGE, AND CLASS C SHARES WHICH ARE SUBJECT TO A
1% CONTINGENT DEFERRED SALES CHARGE WITHIN THE FIRST YEAR OF PURCHASE.
PERFORMANCE FOR THESE CLASSES OF SHARES MAY BE DIFFERENT.
** SOURCE: LANA (LIPPER ANALYTICAL NEW APPLICATIONS) LIPPER ANALYTICAL SERVICES
INC., IS AN INDEPENDENT MUTUAL FUNDS PERFORMANCE MONITOR. LIPPER AVERAGE DOES
NOT INCLUDE SALES CHARGES, AND IF INCLUDED PERFORMANCE MAY BE LOWER.

<PAGE>
EVERGREEN U.S. GOVERNMENT FUND
STATEMENT OF INVESTMENTS
(photo of Capitol)
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
<C> <S> <C>
MORTGAGE BACKED SECURITIES -- 53.2%
FEDERAL HOME LOAN MORTGAGE CORP. -- 11.4%
$ 15,000 6.50%, 4/1/26........................ $ 14,363,682
5,755 8.00%, 7/1/17 - 4/1/22............... 5,922,744
4,059 8.50%, 2/1/17 - 1/1/17............... 4,236,883
3,801 9.00%, 11/1/19 - 4/1/21.............. 4,064,017
1,463 9.50%, 9/1/20........................ 1,583,182
2,247 10.00%, 12/1/19 - 8/1/21............. 2,464,034
1,883 10.50%, 12/1/19...................... 2,081,124
34,715,666
FEDERAL NATIONAL MORTGAGE ASSN. -- 16.5%
5,115 6.50%, 1/1/24........................ 4,886,866
18,215 7.00%, 8/1/25 - 9/1/25............... 17,844,749
12,568 7.50%, 7/1/23 - 7/1/25............... 12,580,108
12,348 8.00%, 8/1/25........................ 12,597,976
1,903 9.50%, 6/1/22........................ 2,055,373
49,965,072
GOVERNMENT NATIONAL MORTGAGE ASSN. -- 25.3%
15,323 7.00%, 12/15/22 - 11/15/23........... 15,011,886
11,141 7.50%, 2/15/22 - 3/15/23............. 11,162,249
21,725 8.00%, 2/15/23 - 8/15/24............. 22,270,032
12,362 8.50%, 12/15/21 - 7/15/24............ 12,856,954
6,191 9.00%, 1/15/20 - 6/15/21............. 6,531,802
6,709 9.50%, 1/15/19 - 2/15/21............. 7,256,314
1,457 10.00%, 12/15/18..................... 1,599,547
76,688,784
TOTAL MORTGAGE BACKED SECURITIES
(COST $162,566,794)............. 161,369,522

<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
<C> <S> <C>
U. S. TREASURY OBLIGATIONS -- 45.1%
U.S. TREASURY BONDS -- 22.7%
$ 17,930 8.125%, 8/15/19...................... $ 20,725,950
8,100 8.50%, 2/15/20....................... 9,722,527
3,650 8.75%, 11/15/08...................... 4,100,545
3,080 8.75%, 8/15/20....................... 3,793,211
14,010 8.875%, 8/15/17...................... 17,297,965
10,300 9.25%, 2/15/16....................... 13,071,339
68,711,537
U.S. TREASURY NOTES -- 22.4%
12,000 7.75%, 11/30/99...................... 12,536,244
9,800 7.75%, 1/31/00....................... 10,259,375
21,500 7.875%, 11/15/99..................... 22,534,687
8,050 8.25%, 7/15/98....................... 8,324,199
13,700 9.25%, 8/15/98....................... 14,393,563
68,048,068
TOTAL U. S. TREASURY OBLIGATIONS
(COST $142,348,034)............. 136,759,605
REPURCHASE AGREEMENT -- .6%
1,868 Donaldson, Lufkin & Jenrette
Securities Corp., 6.50% dated
12/31/96, due 1/2/97, --
collateralized by $1,759,000 U.S.
Treasury Notes, 8.00%, due 5/15/01;
value, including accrued interest
$1,906,836
(COST $1,868,175)............... 1,868,175
</TABLE>

<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS --
(COST $306,783,003).... 98.9% 299,997,302
OTHER ASSETS AND
LIABILITIES -- NET... 1.1 3,367,285
NET ASSETS............. 100.0% $303,364,587
</TABLE>

See accompanying notes to financial statements.

<PAGE>
EVERGREEN U.S. GOVERNMENT FUND
STATEMENT OF ASSETS AND LIABILITIES
(photo of Capitol)
DECEMBER 31, 1996
(UNAUDITED)

<TABLE>
<S> <C>
ASSETS:
Investments at value (identified cost $306,783,003)........................................................... $299,997,302
Interest receivable........................................................................................... 4,418,903
Receivable for Fund shares sold............................................................................... 155,949
Prepaid expenses.............................................................................................. 20,910
Total assets............................................................................................ 304,593,064
LIABILITIES:
Distributions payable......................................................................................... 488,668
Payable for Fund shares repurchased........................................................................... 335,834
Accrued expenses.............................................................................................. 151,151
Accrued advisory fee.......................................................................................... 127,405
Distribution fee payable...................................................................................... 112,391
Payable for administration fee................................................................................ 13,028
Total liabilities....................................................................................... 1,228,477
NET ASSETS....................................................................................................... $303,364,587
NET ASSETS CONSIST OF:
Paid-in capital............................................................................................... $326,001,924
Accumulated net realized loss on investment transactions...................................................... (15,851,636)
Net unrealized depreciation of investments.................................................................... (6,785,701)
Net assets.............................................................................................. $303,364,587
CALCULATION OF NET ASSET VALUE AND MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares ($18,986,757 divided by 1,993,236 shares of beneficial interest outstanding)................... $ 9.53
Sales charge -- 4.75% of offering price....................................................................... .48
Maximum offering price..................................................................................... $ 10.01
Class B Shares ($155,899,972 divided by 16,366,013 shares of beneficial interest outstanding)................. $ 9.53
Class C Shares ($712,588 divided by 74,810 shares of beneficial interest outstanding)......................... $ 9.53
Class Y Shares ($127,765,270 divided by 13,412,292 shares of beneficial interest outstanding)................. $ 9.53
</TABLE>

See accompanying notes to financial statements.

<PAGE>
EVERGREEN U.S. GOVERNMENT FUND
STATEMENT OF OPERATIONS
(photo of Capitol)
SIX MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest......................................................................................... $11,634,902
EXPENSES:
Advisory fee..................................................................................... $772,308
Administrative personnel and services fees....................................................... 71,525
Distribution fee -- Class A Shares............................................................... 24,744
Distribution fee -- Class B Shares............................................................... 607,145
Shareholder services fee -- Class B Shares....................................................... 202,382
Distribution fee -- Class C Shares............................................................... 2,842
Shareholder services fee -- Class C Shares....................................................... 947
Transfer agent fee............................................................................... 108,190
Custodian fee.................................................................................... 69,961
Registration and filing fees..................................................................... 33,359
Reports and notices to shareholders.............................................................. 28,307
Professional fees................................................................................ 22,729
Trustees' fees and expenses...................................................................... 3,787
Miscellaneous.................................................................................... 16,142
Total expenses............................................................................. 1,964,368
Net investment income............................................................................... 9,670,534
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investment transactions..................................................... (1,535,542)
Net decrease in unrealized depreciation of investments........................................... 4,912,115
Net gain on investments............................................................................. 3,376,573
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................ $13,047,107
</TABLE>

See accompanying notes to financial statements.

<PAGE>
EVERGREEN U.S. GOVERNMENT FUND
(photo of Capitol)
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
DECEMBER 31, ENDED
1996 JUNE 30,
(UNAUDITED) 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income..................................................................... $ 9,670,534 $ 18,766,488
Net realized loss on investments.......................................................... (1,535,542) (3,731,984)
Net change in unrealized depreciation of investments...................................... 4,912,115 (3,860,415)
Net increase in net assets resulting from operations................................... 13,047,107 11,174,089
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A Shares............................................................................ (648,707) (1,406,673)
Class B Shares............................................................................ (4,698,473) (10,727,964)
Class C Shares............................................................................ (22,000) (28,511)
Class Y Shares............................................................................ (4,301,354) (6,603,340)
Total distributions to shareholders.................................................... (9,670,534) (18,766,488)
FUND SHARE TRANSACTIONS:
Proceeds from shares sold................................................................. 14,615,215 138,179,343
Proceeds from shares issued in acquisition of Evergreen U.S. Government Securities Fund... -- 5,739,713
Proceeds from reinvestment of distributions............................................... 6,496,044 11,871,813
Payment for shares redeemed............................................................... (29,673,989) (71,866,685)
Net increase (decrease) resulting from Fund share transactions......................... (8,562,730) 83,924,184
Net increase (decrease) in net assets............................................... (5,186,157) 76,331,785
NET ASSETS:
Beginning of period....................................................................... 308,550,744 232,218,959
End of period............................................................................. $303,364,587 $308,550,744
</TABLE>

See accompanying notes to financial statements.

<PAGE>
EVERGREEN U.S. GOVERNMENT FUND --
CLASS A AND CLASS B SHARES
(photo of Capitol)
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
SIX MONTHS JANUARY 11, SIX MONTHS
ENDED YEAR SIX MONTHS 1993* ENDED YEAR SIX MONTHS
DECEMBER 31, ENDED ENDED YEAR ENDED THROUGH DECEMBER 31, ENDED ENDED
1996 JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, 1996 JUNE 30, JUNE 30,
(UNAUDITED) 1996 1995# 1994 1993 (UNAUDITED) 1996 1995#
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period......................... $9.42 $9.65 $9.07 $10.05 $10.00 $9.42 $9.65 $9.07
Income (loss) from investment
operations:
Net investment income.......... .31 .63 .33 .66 .68 .28 .56 .29
Net realized and unrealized
gain (loss) on investments... .11 (.23) .58 (.98) .05 .11 (.23) .58
Total from investment
operations................. .42 .40 .91 (.32) .73 .39 .33 .87
Less distributions to
shareholders from net
investment income.............. (.31) (.63) (.33) (.66) (.68) (.28) (.56) (.29)
Net asset value, end of period... $9.53 $9.42 $9.65 $9.07 $10.05 $9.53 $9.42 $9.65
TOTAL RETURN+.................... 4.6% 4.3% 10.2% (3.2%) 7.4% 4.2% 3.5% 9.8%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)....................... $18,987 $20,345 $22,445 $23,706 $38,851 $155,900 $165,988 $192,490
Ratios to average net assets:
Expenses....................... .98%++ .99% 1.04%++** .96%** .68%++** 1.73%++ 1.74% 1.79%++**
Net investment income.......... 6.55%++ 6.61% 7.07%++** 6.97%** 6.93%++** 5.80%++ 5.85% 6.32%++**
Portfolio turnover rate.......... 5% 23% 0% 19% 39% 5% 23% 0%

JANUARY 11,
1993*
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1994 1993
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period......................... $10.05 $10.00
Income (loss) from investment
operations:
Net investment income.......... .61 .63
Net realized and unrealized
gain (loss) on investments... (.98) .05
Total from investment
operations................. (.37) .68
Less distributions to
shareholders from net
investment income.............. (.61) (.63)
Net asset value, end of period... $9.07 $10.05
TOTAL RETURN+.................... (3.8%) 6.9%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)....................... $195,571 $236,696
Ratios to average net assets:
Expenses....................... 1.54%** 1.19%++**
Net investment income.......... 6.42%** 6.44%++**
Portfolio turnover rate.......... 19% 39%
</TABLE>

# The Fund changed its fiscal year end from December 31 to June 30.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
JANUARY 11,
SIX MONTHS 1993* SIX MONTHS
ENDED YEAR ENDED THROUGH ENDED YEAR ENDED
JUNE 30, DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31,
1995# 1994 1993 1995# 1994
<S> <C> <C> <C> <C> <C>
Expenses............................................. 1.05% 1.00% .99% 1.80% 1.58%
Net investment income................................ 7.06% 6.93% 6.62% 6.31% 6.38%

JANUARY 11,
1993*
THROUGH
DECEMBER 31,
1993
<S> <C>
Expenses............................................. 1.50%
Net investment income................................ 6.13%
</TABLE>

See accompanying notes to financial statements.

<PAGE>
EVERGREEN U.S. GOVERNMENT FUND --
CLASS C AND CLASS Y SHARES
(photo of Capitol)
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
CLASS C SHARES CLASS Y SHARES
SIX MONTHS SEPTEMBER 2, SIX MONTHS
ENDED YEAR SIX MONTHS 1994* ENDED YEAR SIX MONTHS
DECEMBER 31, ENDED ENDED THROUGH DECEMBER 31, ENDED ENDED
1996 JUNE 30, JUNE 30, DECEMBER 31, 1996 JUNE 30, JUNE 30,
(UNAUDITED) 1996 1995# 1994 (UNAUDITED) 1996 1995#
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period........................ $9.42 $9.65 $9.07 $9.39 $9.42 $9.65 $9.07
Income (loss) from investment
operations:
Net investment income......... .28 .56 .29 .20 .32 .66 .34
Net realized and unrealized
gain (loss) on
investments................. .11 (.23) .58 (.32) .11 (.23) .58
Total from investment
operations................ .39 .33 .87 (.12) .43 .43 .92
Less distributions to
shareholders from net
investment income............. (.28) (.56) (.29) (.20) (.32) (.66) (.34)
Net asset value, end of
period........................ $9.53 $9.42 $9.65 $9.07 $9.53 $9.42 $9.65
TOTAL RETURN+................... 4.2% 3.5% 9.8% (1.3%) 4.7% 4.5% 10.3%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)...................... $713 $649 $350 $266 $127,765 $121,569 $16,934
Ratios to average net assets:
Expenses...................... 1.73%++ 1.74% 1.79%++** 1.71%++** .73%++ .74% .79%++**
Net investment income......... 5.81%++ 5.87% 6.36%++** 6.70%++** 6.80%++ 6.86% 7.31%++**
Portoflio turnover rate......... 5% 23% 0% 19% 5% 23% 0%

SEPTEMBER 2,
1993*
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1994 1993
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period........................ $10.05 $10.25
Income (loss) from investment
operations:
Net investment income......... .69 .25
Net realized and unrealized
gain (loss) on
investments................. (.98) (.20)
Total from investment
operations................ (.29) .05
Less distributions to
shareholders from net
investment income............. (.69) (.25)
Net asset value, end of
period........................ $9.07 $10.05
TOTAL RETURN+................... (2.9%) .5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)...................... $15,595 $14,486
Ratios to average net assets:
Expenses...................... .71%** .48%++**
Net investment income......... 7.27%** 7.20%++**
Portoflio turnover rate......... 19% 39%
</TABLE>

# The Fund changed its fiscal year end from December 31 to June 30.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charges are not
reflected.
++ Annualized.
** Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:
<TABLE>
<CAPTION>
CLASS C SHARES CLASS Y SHARES
SEPTEMBER 2,
SIX MONTHS 1994* SIX MONTHS
ENDED THROUGH ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1995# 1994 1995# 1994
<S> <C> <C> <C> <C>
Expenses....................................................... 1.80% 1.75% .80% .75%
Net investment income.......................................... 6.34% 6.66% 7.30% 7.23%

SEPTEMBER 2,
1993*
THROUGH
DECEMBER 31,
1993
<S> <C>
Expenses....................................................... .79%
Net investment income.......................................... 6.89%
</TABLE>

See accompanying notes to financial statements.

34
<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- ORGANIZATION AND NATURE OF OPERATIONS

The Evergreen Income Funds (the "Funds") are each a separate series of
open-end management companies registered under the Investment Company Act of
1940, as amended (the "Act"). The Evergreen Income Funds consist of Evergreen
Intermediate-Term Bond Fund ("Intermediate-Term Bond"), Evergreen
Intermediate-Term Government Securities Fund ("Intermediate-Term Government"),
Evergreen Short-Intermediate Bond Fund ("Short-Intermediate") and Evergreen U.S.
Government Fund ("U.S. Government"), collectively referred to as the Funds.

The investment objective of Intermediate-Term Bond is to maximize current
yield consistent with the preservation of capital. The investment objective of
Intermediate-Term Government is to preserve principal value and maintain a high
degree of liquidity while providing current income. Short-Intermediate's
investment objective is to attain a high level of current income, with capital
growth as a secondary objective, through investment in a broad range of
investment grade debt securities. U.S. Government's investment objective is to
achieve a high level of current income consistent with stability of principal.

Effective at the close of business on July 7, 1995, U.S. Government
acquired substantially all of the net assets of Evergreen U.S. Government
Securities Fund through the issuance of 590,505 of its Class Y shares in
exchange for Evergreen U.S. Government Securities Fund's net assets valued at
$5,739,713. The aggregate net assets immediately after the acquisition was
$233,475,732. The acquired net assets, in this non-taxable transaction,
consisted primarily of portfolio securities with unrealized appreciation of
$24,133.

Effective January 1, 1996, First Union Corporation, the corporate parent of
First Union National Bank of North Carolina ("First Union"), each Fund's current
investment adviser, consummated a merger (the "Bank Merger") with First Fidelity
Bancorporation, the corporate parent of First Fidelity Bank, N.A. ("FFB"),
Intermediate-Term Bond and Intermediate-Term Government's prior investment
adviser. Effective January 19, 1996, each of the FFB Lexicon Funds, open-end
management investment companies registered under the Act, including FFB Lexicon
Fixed Income Fund and FFB Lexicon Intermediate-Term Government Securities Fund
(the "Lexicon Funds"), joined the Evergreen Funds (the "Fund Combinations").FFB
Lexicon Fixed Income Fund was renamed Evergreen Intermediate-Term Bond Fund. FFB
Lexicon Intermediate-Term Government Securities Fund was renamed Evergreen
Intermediate-Term Government Securities Fund. Shares of each of the Lexicon
Fund's class previously known as the Institutional Class were redesignated as
each respective Fund's Class Y Shares. Shares of each of the Lexicon Fund's
class previously known as the Investor Class were redesignated as each
respective Fund's Class A Shares. See Note 5 for a description of each of the
classes.

Effective at the close of business on February 29, 1996, Intermediate-Term
Bond acquired substantially all of the net assets of Evergreen Managed Bond Fund
through the issuance of 7,674,423 of its Class Y shares in exchange for Managed
Bond's net assets valued at $79,773,557. The aggregate net assets immediately
after the acquisition was $158,097,520. The acquired net assets, in this
non-taxable transaction, consisted primarily of portfolio securities with
unrealized appreciation of $1,789,417.

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. These policies are
in conformity with generally accepted accounting principles.

SECURITY VALUATIONS -- U.S. government obligations are valued at the mean
between the over-the-counter bid and ask price as furnished by an independent
pricing service. Corporate bonds (and other fixed income and asset-backed
securities) are valued at the last sale price reported on national securities
exchanges on that day, if available. Otherwise, corporate bonds

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- continued
and asset-backed securities are valued at the mean between the over-the-counter
bid and ask price provided by an independent pricing service. Short-term
securities when purchased with remaining maturities of sixty days or less are
stated at amortized cost which approximates market value.

SECURITY TRANSACTIONS -- Security transactions are accounted for on the
date purchased or sold. Net realized gains or losses are determined on the
identified cost basis.

INVESTMENT INCOME AND EXPENSES -- Interest income and expenses are accrued
daily. Premiums and discounts paid on securities are amortized or accreted into
interest income as required by the Internal Revenue Code, as amended, (the
"Code").

REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the Federal Reserve Bank and are designated as being held
on each Fund's behalf by its custodian under a book-entry system. Each Fund
monitors the adequacy of the collateral on a daily basis and can require the
seller to provide additional collateral in the event the market value of the
securities pledged falls below the carrying value of the repurchase agreement,
including accrued interest. Each Fund will only enter into repurchase agreements
with banks and other financial institutions which are deemed by the investment
adviser to be creditworthy pursuant to guidelines established by the Trustees.

DIVIDENDS TO SHAREHOLDERS -- Dividends from net investment income for U.S.
Government are declared daily and paid monthly. Dividends from net investment
income are declared and paid monthly for Intermediate-Term Bond, Intermediate-
Term Government and Short-Intermediate. Dividends from net realized capital
gains on investments, if any, will be distributed at least annually. Income
distributions and capital gain distributions are determined in accordance with
income tax regulations which may differ from the amounts available under
generally accepted accounting principles. To the extent these differences are
permanent in nature, such amounts are reclassified within the components of net
assets.

ALLOCATION OF EXPENSES -- Expenses specifically indentifiable to a class of
shares are charged to that class. Expenses common to a Trust as a whole are
allocated to the funds in that Trust. Investment income, net of expenses (other
than class specific expenses) and realized and unrealized gains and losses are
allocated daily to each class of shares based upon the relative proportion of
net assets of each class.

INCOME TAXES -- It is each Fund's policy to meet the requirements of the
Code applicable to regulated investment companies and to distribute
substantially all of its taxable net income to its shareholders. Accordingly, no
provisions for Federal income or excise taxes are necessary. 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. Capital losses incurred after
October 31 within each Funds fiscal year are deemed to arise on the first
business day of the following fiscal year for tax purposes.

At June 30, 1996, each Fund's most recent fiscal year end, the Funds had
capital loss carryforwards as follows:

<TABLE>
<CAPTION>
EXPIRATION
2001 2002 2003 2004
<S> <C> <C> <C> <C>
Intermediate-Term Bond $1,440,454 $ 788,954 $117,850 $ 211,288
Intermediate-Term Government -- -- 955,860 1,140,365
Short Intermediate -- 6,020,616 -- 3,372,152
U.S. Government 1,978,402 6,521,597 -- 2,973,341
</TABLE>

At June 30, 1996, Short Intermediate and U.S. Government had post October
loss deferrals of $3,921,854 and $2,842,754, respectively.

WHEN ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Funds record
when-issued or delayed delivery transactions on the trade date and maintain
security positions such that sufficient liquid assets will be available to make
payment for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis are marked to market daily and begin earning interest on
the settlement date.

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- continued
DEFERRED ORGANIZATIONAL EXPENSES -- The costs incurred with respect to
Intermediate-Term Bond's and Intermediate-Term Government's organization have
been deferred and are being amortized using the straight-line method not to
exceed a period of 60 months from each Fund's commencement of operations.

USE OF ESTIMATES -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.

NOTE 3 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY AGREEMENT -- First Union is each Fund's investment
adviser and is entitled to receive an annual fee based on each Fund's average
daily net assets as follows:

<TABLE>
<S> <C>
Intermediate-Term Bond.................. .60%
Intermediate-Term Government............ .60%
Short Intermediate...................... .50%
U.S. Government......................... .50%
</TABLE>

For Intermediate-Term Bond and Intermediate-Term Government, First Union
voluntarily waived $61,436 and $45,816, respectively, of its advisory fee for
the six-month period ended December 31, 1996. First Union may modify or
terminate these voluntary waivers at any time.

ADMINISTRATIVE AGREEMENT -- Evergreen Asset Management Corp. ("Evergreen
Asset"), a wholly owned subsidiary of First Union, is each Fund's administrator
and Furman Selz LLC ("Furman Selz") was sub-administrator through December 31,
1996. As sub-administrator, Furman Selz provided the officers for the Funds.
Evergreen Asset's and Furman Selz' fees were based on the average daily net
assets of all of the funds administered by Evergreen Asset for which either
First Union or Evergreen Asset was also the investment adviser. This fee was
calculated at the following annual rates:
<TABLE>
<CAPTION>
ADMINISTRATION FEE AVERAGE DAILY NET ASSETS
<S> <C>
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% in excess of $30 billion

SUB-ADMINISTRATION FEE AVERAGE DAILY NET ASSETS
<S> <C>
0.0100% on the first $7 billion
0.0075% on the next $3 billion
0.0050% on the next $15 billion
0.0040% in excess of $25 billion
</TABLE>

At December 31, 1996, net assets for which Evergreen Asset was the
administrator for which either Evergreen Asset or First Union was the investment
adviser totalled approximately $17.0 billion.

Effective January 1, 1997, Bisys Group, Inc. ("Bisys") acquired Furman
Selz' mutual fund unit and accordingly, Bisys Fund Services became
sub-administrator. The administration fee structure has remained unchanged.

PLANS OF DISTRIBUTION AND SHAREHOLDER SERVICING -- The Funds have adopted
distribution plans ("Plans") pursuant to Rule 12b-1 under the Act for their
Class A, Class B and Class C shares. Under the terms of the Plans, each Fund may
incur distribution-related expenses which may not exceed an annual rate of .75
of 1% of the average daily net assets attributable to

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS

NOTE 3 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES -- continued
the Class A, Class B, and Class C shares of Short Intermediate and U.S.
Government, .50 of 1% of the average daily net assets of the Class A shares of
Intermediate-Term Bond and Intermediate-Term Government and 1% of the average
daily net assets of Class B and C shares of Intermediate-Term Bond and
Intermediate-Term Government. Payments under the Plans adopted with respect to
Class A shares are currently voluntarily limited to, (as a percentage of average
daily net assets attributable to Class A shares), .10 of 1% for
Short-Intermediate and .25 of 1% for Intermediate-Term Bond, Intermediate-Term
Government and U.S. Government. The Plans provide that a portion of the fee
payable for Class B and Class C shares may constitute a shareholder servicing
fee to be used for providing ongoing personal services and/or the maintenance of
shareholder accounts. Short-Intermediate and U.S. Government have also adopted a
shareholder service plan with respect to their Class B and Class C shares which
permits each of these Funds to incur a fee of up to .25 of 1% of the average
daily net assets attributable to the Class B and Class C shares for ongoing
personal services and/or the maintenance of shareholder accounts.

Each Fund has entered into a distribution agreement with Evergreen Keystone
Distributor, Inc. ("EKD") (formerly Evergreen Funds Distributor, Inc.), a
subsidiary of Furman Selz. Under their agreements, each Fund will compensate EKD
for its services at a rate which may not exceed an annual rate of .25 of 1% of
its average daily net assets attributable to Class A shares, Short-Intermediate
and U.S. Government will compensate EKD at an annual rate of .75 of 1% of its
average daily net assets attributable to their Class B and Class C shares and
Intermediate-Term Bond and Intermediate-Term Government will compensate EKD at
an annual rate of 1% of its average daily net assets. The distribution
agreements provide that EKD will use the distribution fees to promote sale of
shares of the Funds. A portion of Intermediate-Term Bond's and Intermediate-Term
Government's fees up to .25 of 1% of average daily net assets constitutes a
shareholder services fee. For the six-month period ended December 31, 1996, EKD
voluntarily limited its Class A distribution fees for Intermediate-Term Bond,
Intermediate-Term Government and Short-Intermediate to .04 of 1%, .04 of 1% and
.10 of 1% of average daily net assets, respectively.

Short Intermediate and U.S. Government have entered into a Shareholder
Services agreement with First Union Brokerage Services ("FUBS"), an affiliate of
First Union, whereby they will compensate FUBS up to an annual rate of .25 of 1%
of its Class B and Class C shares average daily net assets for certain services
provided to shareholders and/or maintenance of shareholder accounts.

With the acquisition of Furman Selz' mutual fund unit by Bisys effective
January 1, 1997, EKD became a subsidiary of Bisys.

EKD has advised the Funds that it has retained the following amounts from
front-end sales charges resulting from sales of Class A shares during the
six-month period ended December 31, 1996:

<TABLE>
<CAPTION>
FRONT-END
SALES CHARGES
<S> <C>
Intermediate-Term Bond.................... $ 209
Intermediate-Term Government.............. 281
Short-Intermediate........................ 4,968
U.S. Government........................... 2,292
</TABLE>

ORGANIZATIONAL EXPENSES -- U.S. Government's organizational expenses were
borne initially by a prior administrator. As a result of the change in the
administration agreement, First Union purchased the remaining unreimbursed
initial organizational expenses from the prior administrator. U.S. Government
will reimburse First Union during the five-year period following its
commencement of operations. Pursuant to these arrangements, as of and for the
six-month period ended December 31, 1996, U.S. Government has paid and has a
remaining liability of $11,688 and $16,697, respectively.

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS

NOTE 3 -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES -- continued
OTHER SERVICES WITH AFFILIATES -- State Street Bank & Trust Company ("State
Street") is the transfer agent, dividend disbursing agent and shareholder
servicing agent for the Funds. For certain accounts in Intermediate-Term Bond,
Short Intermediate and U.S. Government, First Union has been sub-contracted by
State Street to maintain shareholder sub-account records, take fund purchase and
redemption orders and answer inquiries. For each account, First Union is
entitled to a monthly fee which totaled $14,245, $80,228, and $53,131 for
Intermediate-Term Bond, Short Intermediate and U.S. Government, respectively,
for the six months ended December 31, 1996.

NOTE 4 -- INVESTMENT TRANSACTIONS

The cost of purchases and proceeds from sales of investments, excluding
short-term securities, for the six-month period ended December 31, 1996 were as
follows:

<TABLE>
<CAPTION>
PURCHASES SALES
U.S. GOVERNMENT OTHER U.S. GOVERNMENT OTHER
<S> <C> <C> <C> <C>
Intermediate-Term Bond.................................... $63,011,061 $ 3,410,225 $55,942,786 $ 3,740,869
Intermediate-Term Government.............................. 24,874,628 -- 25,734,891 957,762
Short-Intermediate........................................ 59,121,027 32,634,255 23,815,449 33,263,282
U.S. Government........................................... 14,549,997 -- 23,454,555 --
</TABLE>

On December 31, 1996, the composition of unrealized appreciation and
depreciation of investment securities based on the aggregate cost of investments
for federal tax purposes was as follows:

<TABLE>
<CAPTION>
APPRECIATION DEPRECIATION NET TAX COST
<S> <C> <C> <C> <C>
Intermediate-Term Bond.............................................. $3,847,829 $1,579,551 $2,268,278 $162,937,491
Intermediate-Term Government........................................ 984,901 375,447 609,454 85,352,905
Short-Intermediate.................................................. 5,142,341 5,358,601 (216,260) 401,340,986
U.S. Government..................................................... 1,047,337 7,833,038 (6,785,701) 306,783,003
</TABLE>

NOTE 5 -- SHARES OF BENEFICIAL INTEREST

The Funds have an unlimited number of $0.0001 par shares authorized. Each
of the funds are divided into four classes which are designated Class A, Class
B, Class C and Class Y shares. Class A shares are offered with a front-end sales
charge of up to 3.25% for Intermediate-Term Bond, Intermediate-Term Government
and Short-Intermediate and up to 4.75% for U.S. Government. Class B shares are
offered with a contingent deferred sales charge payable when shares are redeemed
which would decline from 5% to zero depending on the period of time the shares
are held. Class B shares will automatically convert to Class A shares seven
years after the date of purchase. Class C shares are sold with a contingent
deferred sales charge of 1% for shares redeemed during the first year after
purchase. Class Y shares are sold without a sales charge and are available only
to investment advisory clients of First Union and its affiliates, certain
institutional investors and Class Y shareholders of record of other funds
managed by First Union and its affiliates as of December 30, 1994. All classes
have identical voting, dividend, liquidation and other rights, except that
certain classes bear different distribution expenses (see Note 3) and have
exclusive voting rights with respect to their distribution plan.

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS

NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- continued
Transactions in shares of beneficial interest were as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1996 TEN MONTHS ENDED
(UNAUDITED) JUNE 30, 1996*
INTERMEDIATE-TERM BOND SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A
Shares sold......................................................... 44,808 $ 456,239 292,734 $ 2,962,857
Shares issued on reinvestment of distributions...................... 8,696 88,265 3,368 34,080
Shares redeemed..................................................... (38,547) (392,639) (20,323) (206,789)
Net increase........................................................ 14,957 151,865 275,779 2,790,148
CLASS B
Shares sold......................................................... 37,854 385,431 40,844 415,640
Shares issued on reinvestment of distributions...................... 876 8,904 228 2,296
Shares redeemed..................................................... (1,662) (16,881) (1,244) (12,553)
Net increase........................................................ 37,068 377,454 39,828 405,383
CLASS C
Shares sold......................................................... -- -- 2,450 24,797
Shares issued on reinvestment of distributions...................... 60 623 16 167
Net increase........................................................ 60 623 2,466 24,964
CLASS Y
Shares sold......................................................... 2,222,641 22,572,892 3,399,442 35,128,164
Shares issued in acquisition of Evergreen Managed Bond Fund......... -- -- 7,674,423 79,773,557
Shares issued on reinvestment of distributions...................... 339,194 3,440,408 438,427 4,507,655
Shares redeemed..................................................... (2,177,340) (22,195,387) (5,208,789) (54,641,619)
Net increase........................................................ 384,495 3,817,913 6,303,503 64,767,757
Total net increase resulting from Fund
share transactions................................................ 436,580 $ 4,347,855 6,621,576 $ 67,988,252
</TABLE>

* For Class B Shares, the Fund share transaction activity reflects the period
January 30, 1996 (commencement of class operations) to June 30, 1996. For
Class C Shares, the Fund share transaction activity reflects the period April
29, 1996 (commencement of class operations) to June 30, 1996.

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS

NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- continued

<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1996 TEN MONTHS ENDED
(UNAUDITED) JUNE 30, 1996*
INTERMEDIATE-TERM GOVERNMENT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A
Shares sold............................................................ 10,568 $ 105,314 64,791 $ 663,129
Shares issued on reinvestment of distributions......................... 1,169 12,052 1,503 15,239
Shares redeemed........................................................ (2,157) (21,801) (17,382) (175,816)
Net increase........................................................... 9,580 95,565 48,912 502,552
CLASS B
Shares sold............................................................ 29,530 295,565 35,925 359,696
Shares issued on reinvestment of distributions......................... 593 6,116 67 666
Shares redeemed........................................................ (104) (1,053) (2) (23)
Net increase........................................................... 30,019 300,628 35,990 360,339
CLASS C
Shares sold............................................................ 1,718 17,173 3,551 35,538
Shares issued on reinvestment of distributions......................... 55 696 26 254
Shares redeemed........................................................ (1,913) (19,197) (324) (3,205)
Net increase (decrease)................................................ (140) (1,328) 3,253 32,587
CLASS Y
Shares sold............................................................ 569,305 5,338,629 1,257,974 12,770,139
Shares issued on reinvestment of distributions......................... 207,196 2,524,165 402,054 4,079,359
Shares redeemed........................................................ (980,110) (9,873,553) (3,404,763) (34,447,480)
Net decrease........................................................... (203,609) (2,010,759) (1,744,735) (17,597,982)
Total net decrease resulting from Fund
share transactions................................................... (164,150) ($1,615,894) (1,656,580) ($16,702,504)
</TABLE>

* For Class B Shares, the Fund share transaction activity reflects the period
February 9, 1996 (commencement of class operations) to June 30, 1996. For
Class C Shares, the Fund share transaction activity reflects the period April
10, 1996 (commencement of class operations) to June 30, 1996.

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS

NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- continued

<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1996 YEAR ENDED
(UNAUDITED) JUNE 30, 1996
SHORT-INTERMEDIATE SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A
Shares sold..................................................... 331,347 $ 3,286,067 417,422 $ 4,161,754
Shares issued on reinvestment of distributions.................. 47,574 468,795 91,045 906,558
Shares redeemed................................................. (269,901) (2,673,493) (498,266) (4,979,754)
Net increase.................................................. 109,020 1,081,369 10,201 88,558
CLASS B
Shares sold..................................................... 299,763 2,960,585 844,991 8,456,439
Shares issued on reinvestment of distributions.................. 42,954 423,948 74,101 739,247
Shares redeemed................................................. (193,875) (1,915,176) (512,788) (5,128,366)
Net increase.................................................. 148,842 1,469,357 406,304 4,067,320
CLASS C
Shares sold..................................................... 23,280 232,354 94,089 944,432
Shares issued on reinvestment of distributions.................. 2,199 21,713 3,083 30,731
Shares redeemed................................................. (30,373) (300,440) (32,296) (321,263)
Net increase (decrease)....................................... (4,894) (46,373) 64,876 653,900
CLASS Y
Shares sold..................................................... 5,459,795 53,958,263 15,667,603 156,775,980
Shares issued on reinvestment of distributions.................. 734,989 7,232,226 1,726,865 17,202,491
Shares redeemed................................................. (5,018,608) (49,497,159) (16,165,702) (161,849,781)
Net increase.................................................. 1,176,176 11,693,330 1,228,766 12,128,690
Total net increase resulting from Fund
share transactions............................................ 1,429,144 $ 14,197,683 1,710,147 $ 16,938,468
</TABLE>

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS

NOTE 5 -- SHARES OF BENEFICIAL INTEREST -- continued

<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1996 YEAR ENDED
(UNAUDITED) JUNE 30, 1996
U.S. GOVERNMENT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A
Shares sold........................................................ 74,664 $ 707,976 786,564 $ 7,560,325
Shares issued on reinvestment of distributions..................... 36,835 349,011 78,565 755,991
Shares redeemed.................................................... (277,315) (2,626,266) (1,032,918) (9,892,163)
Net decrease..................................................... (165,816) (1,569,279) (167,789) (1,575,847)
CLASS B
Shares sold........................................................ 505,154 4,785,735 1,702,353 16,401,640
Shares issued on reinvestment of distributions..................... 242,605 2,298,899 533,686 5,138,748
Shares redeemed.................................................... (1,996,853) (18,926,307) (4,576,583) (43,960,576)
Net decrease..................................................... (1,249,094) (11,841,673) (2,340,544) (22,420,188)
CLASS C
Shares sold........................................................ 25,861 242,940 43,395 420,990
Shares issued on reinvestment of distributions..................... 905 8,567 1,437 13,783
Shares redeemed.................................................... (20,874) (196,610) (12,168) (117,297)
Net increase..................................................... 5,892 54,897 32,664 317,476
CLASS Y
Shares sold........................................................ 940,916 8,878,564 11,801,163 113,796,388
Shares issued in acquisition of Evergreen U.S. Government
Securities Fund.................................................. 590,505 5,739,713
Shares issued on reinvestment of distributions..................... 405,107 3,839,567 620,463 5,963,291
Shares redeemed.................................................... (834,936) (7,924,806) (1,866,525) (17,896,649)
Net increase..................................................... 511,087 4,793,325 11,145,606 107,602,743
Total net increase (decrease) resulting from Fund
share transactions............................................... (897,931) ($ 8,562,730) 8,669,937 $ 83,924,184
</TABLE>

<PAGE>
COMBINED NOTES TO FINANCIAL STATEMENTS

NOTE 6 -- FINANCING AGREEMENT

Effective July 3, 1996, a financing agreement was put in place with all of
the Evergreen Funds and State Street. Under this agreement, State Street
provided an unsecured line of credit facility, in the aggregate amount of $100
million ($50 million committed and $50 million uncommitted), to be accessed by
the Funds for temporary or emergency purposes only and is subject to each
participating Fund's borrowing restrictions. Effective October 31, 1996, a new
financing agreement was put in place with all of the Evergreen Funds and State
Street, Societe Generale and ABN AMRO Bank N.V. (collectively, the "Banks").
Under this agreement, the Banks provide an unsecured credit facility in the
aggregate amount of $225 million ($112.5 million committed and $112.5 million
uncommitted) allocated evenly between the Banks. Borrowings under these
facilities bear interest at .75% per annum above the Federal Funds rate. A
commitment fee of .10% per annum will be incurred on the unused portion of the
committed facility which would be allocated to all participating funds.

The Funds has no borrowings under the financing agreements during the
six-month period ended December 31, 1996.

NOTE 7 -- DEFERRED TRUSTEE'S FEES

Each Trustee may defer any or all compensation related to performance of
duties as a Trustee of the Funds. Each Trustee's deferred balances are allocated
to deferral accounts which are included in the accrued expenses for each 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 each Fund's Trustee's fees and expenses.
Trustees will be paid either in one lump sum or in quarterly installments for up
to ten years at their election, not earlier than either the year in which the
Trustee ceases to be a member of the Trustees or January 1, 2000. As of December
31, 1996, the value of the Trustees' deferral accounts was $2,908, $2,900,
$10,079 and $7,463 for Intermediate-Term Bond, Intermediate-Term Government,
Short Intermediate and U.S. Government, respectively.

44
<PAGE>
TRUSTEES AND OFFICERS

TRUSTEES:

Laurence B. Ashkin*

Foster Bam*

James S. Howell, Chairman

Robert J. Jefferies*+

Gerald M. McDonnell

Thomas L. McVerry

William W. Pettit

Russell A. Salton, III M.D.

Michael S. Scofield

OFFICERS:

John J. Pileggi
President and Treasurer

George O. Martinez
Secretary

Sheryl Hirschfeld
Assistant Secretary

Stephen W. St. Clair
Assistant Treasurer

*Trustees for Intermediate-Term Bond and Intermediate-Term Government only.

+Trustee Emeritus.

<PAGE>
This brochure must be preceeded 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.

NOT May lose value
FDIC No bank guarantee
INSURED

Evergreen Keystone Distributor, Inc.

540391
46811 2/97